Amir Arjomandi

Examining the nature of the relationship between Tapis crude oil and Singapore petrol prices

Fuel prices play a crucial role in the supply side of many economies across the globe. Hence, it is important to ensure that fuel pricing is efficient and free from any asymmetric behaviour. This paper examines the long- and short-run relationships between the price of unleaded petrol in Singapore (Mogas95) and the price of Tapis crude oil using 4,929 daily observations (4 June 1993-25 April 2012). As expected, we found that these two key energy indicators are cointegrated. We then developed a modelling framework that allowed us to test for adjustment asymmetries that distinguish between the size and sign of disequilibria, proxied by three different error correction terms. We found no significant evidence of any asymmetric pricing behaviour and market inefficiency. However, our results revealed a significant weekly cyclical pattern, with petrol being more expensive on Thursdays/Fridays than the rest of the week.

Testing for differences in technical efficiency among groups within an industry

ABSTRACT This study generalizes the test performed by Simar and Zelenyuk (2007) to examine differences in the technical efficiency among groups within an industry (where ). For this purpose, the groups are divided into pairs and each group is compared with all other groups. The groups can then be classified into three cohorts: those performing better, equally and worse, relative to the benchmark group. For illustration purposes, annual data for Vietnamese banks covering the period 2005‒2012 is used.

Banks’ efficiency and credit risk analysis using by-production approach: the case of Iranian banks

ABSTRACT This article uses a by-production approach that integrates credit risk to monitor bank efficiency. The method overcomes the possible misspecification issues of the commonly assumed weak disposability (WDA) of undesirable outputs. In addition, our measure extends the classic by-production approach by including statistical aspects through subsampling techniques. We have also provided an algorithm to correct related infeasibilities. Using this approach, we investigate the performance of Iranian banks and credit risk management in the sector for the period 1998–2012. Non-performing loans (NPLs) have been used as an undesirable output and proxy for credit risk in our models. Based on our empirical results, although the banks generally exhibited efficiency improvements over time, their credit risk performance deteriorated considerably after the regulatory changes introduced in 2005. These findings confirm that credit quality can be monitored more actively across Iranian banks.

Downward stickiness of interest rates in the Australian credit card market

This paper measures the full extent of downward stickiness in credit card interest rates by testing for the amount and adjustment asymmetries. We found that lenders behave asymmetrically in response to changes in the Reserve Bank of Australias (RBA) cash rate. The RBAs rate rises are passed on to borrowers much faster than rate cuts and the aggregate credit card interest rate showed a very resilient degree of downward rigidity. Overall, based on the estimated short-run dynamic model, banks immediately pass on 112% of any RBAs rate rises, but only 53.7% of any rate cut. In other words, the short-run effects of rate cuts were not only less than half of the rate rises but also were delayed on average by two months. As far as changes in the credit card interest rate are concerned, an expansionary monetary policy is thus less effective than a contractionary policy.

Bank ownership and efficiency in post-conflict era: evidence from Sri Lanka

This paper aims to explore the changes in efficiency of state-owned, domestic private and foreign banks in Sri Lanka after the ending of the 26 year long armed-conflict between the government and ethnic Tamil rebels in 2009. (The Liberation Tigers for Tamil Eelam (LTTE) fought for a separate state called “Tamil Eelam” from 1983 to 2009. Government forces defeated the LTTE rebels in mid-2009 through military operations and capturing all the land belonging to their de facto state for more than a decade.) Data Envelopment Analysis (DEA) along with the bootstrap simulation technique is employed to derive bank-wise efficiency scores. Two approaches, namely the intermediation and operating approaches, are used to measure the efficiency of banks and to analyse banking performance from multiple perspectives. The results show that, under the intermediation approach, in general state-owned banks were less efficient than domestic private banks in 2009 and 2010, but the relative efficiency of state-owned banks improved in 2011 and 2012 surpassing both domestic private and foreign banks. In contrast our results reveal that under the profit-oriented operating approach, state-owned and foreign banks show superior average efficiency than domestic private banks. The findings reflect the strong positioning of state-owned banks, in line with the post-conflict economic expansion of Sri Lanka, in providing efficient banking services.

Does the interest rate for business loans respond asymmetrically to changes in the cash rate

This article examines the dynamic relationship between the Reserve Bank of Australias (RBAs) cash rate and the variable interest rate for lending to small businesses. The relationship is evaluated via an asymmetric GARCH model using monthly data spanning from August 1990 to October 2012. Our results show that a 1 percentage point increase in the cash rate results in an instantaneous 1.086 percentage point rise in the variable rate for small businesses, whereas an equivalent 1 percentage point cut only leads to a 0.862 percentage point fall with a delay of up to 2 months. This outcome has obvious implications for the RBAs monetary policy transmission mechanism and the effectiveness of the expansionary policy versus contractionary policy.