Journal of Emerging Market Finance

The severity of the effects of global financial crisis resuscitates the need for assessing the macro-financial linkages and measuring financial cycle to prevent the economy from major financial shocks. Our article measures financial cycle by using turning point analysis, spectral analysis and band-pass filter and provides the evidence on the existence of financial cycle in India. We find the length and duration of cycles in financial variables are much greater as compared to the business cycle. While both credit and equity prices drive financial cycles over time, the contribution of house prices has increased since mid-2000s. We find that the expansionary phase of the financial cycle provides an early warning signal about stress build-up in the banking sector and impending depress in the economy.

JEL Codes: C22, E30, E44, E58, G18

The present study examines the relationship between Indian economic policy uncertainty (IEPU) and the different sector volatilities (SVs) of the Indian economy over the period 2006–2021. The relationship is studied using a multi-scale correlation framework, combining wavelet coherence analysis with the Granger causality test. The findings indicate a stronger relationship between the IEPU and SV for all sectors during COVID-19, primarily in the medium term. While IEPU led to SV during the global financial crisis (GFC), the SVs led to the IEPU during the COVID-19. However, the Granger causality test provides evidence that, in the long term, the SVs cause the IEPU while the IEPU leads to SV in the short term. The IT sector is crucial as its volatility leads to IEPU across all scales. These results have substantial implications for policymakers and portfolio managers.

JEL Codes: G10, G17, G32

This article discusses the extent to which central bank independence (CBI) can be used to mitigate the regressive nature of inflation. Using 44 Sub-Saharan African (SSA) countries from the period 1970–2012, the article first examines whether CBI has any influence on inflation by distinguishing between legal independence and governor turnover rates. The evidence shows that CBI helps control inflation, and that inflation generally reduces poverty, and this effect is even stronger, in an environment of low CBI.

JEL Codes: E02, E58, E31, I32