The next in a series of open research seminars was held at the National Bank of Ukraine on 8 August 2017. The seminar was conducted by Dr. Inessa Love, professor of economics at the University of Hawaii at Manoa and an internationally renowned researcher, who has published papers in several leading journals in economics, including the Journal of Financial Economics, the Journal of Development Economics, the Economic Letters and other international economic journals.
During the seminar, Dr. Inessa Love covered the applications and use of Panel Vector Autoregressive (PVAR) models, highlighted their advantages and presented a new package of PVAR programs for STATA, one of the most popular econometric software (Estimation of panel vector autoregression in Stata). Dr. Inessa Love also presented the results of her research conducted using PVAR models, provided some examples to illustrate the applications of the PVAR package of programs, explained the rationale behind the imposition of constraints and highlighted the peculiarities of panel VAR model estimation in economic research.
In particular, in the paper entitled "Financial Development and Dynamic Investment Behavior: Evidence from Panel VAR", by using orthogonalized impulse-response functions the researchers were able to separate the ‘fundamental factors’ (such as marginal profitability of investment) from the ‘financial factors’ (such as availability of internal finance) that influence the level of investment. The researchers find that the impact of financial factors on investment, which indicates the severity of financing constraints, is significantly larger in countries with less developed financial systems.
The findings of the paper entitled "The Impact of Funding Models and Foreign Bank Ownership on Bank Credit Growth: Is Central and Eastern Europe different?" also aroused a keen interest among the seminar participants. By using PVAR the researchers find that domestic private credit growth is highly sensitive to cross-border funding shocks and this relationship is significantly stronger in Central and Eastern Europe, a region with considerably stronger foreign presence.
In her speech, Dr. Inessa Love also touched on the use of PVAR models to investigate macro-financial linkages and assess the impact of macroeconomic shocks on banks’ loan portfolio quality using her research paper entitled "Macro-Financial Linkages in Egypt: A Panel Analysis of Economic Shocks and Loan Portfolio Quality". The authors find that a positive shock to capital inflows and growth in gross domestic product improves banks’ loan portfolio quality. However, higher lending rates may adversely affect banks’ profitability, an increase in provisioning levels, and hence to a drop in portfolio quality.
The video of the seminar is available at the following link.
We invite potential contributors to participate in the upcoming seminars and present the findings of their research studies. To this end, please send your submissions (CV, abstract, with an indication of a suitable date for the seminar to take place. Please send your proposals to the Research Division of the Monetary Policy and Economic Analysis Department for consideration via e-mail to: [email protected]