Emmanuel Anoruo

This paper tests for the existence of speculative bubbles in the South African-US exchange rate using the sequential ADF procedures. In particular, the paper uses the SADF and GSADF right-tailed unit root tests to explore the existence of explosive bubbles in the South African-US exchange rate for the time period running from January1980 through July 2012. The results provide evidence in support of the existence of explosive bubbles in the nominal rand-dollar exchange rate, the real exchange rate of traded and non-traded goods. The explosive behavior exhibited by the South African rand-US dollar exchange rate can be interpreted as evidence of rational bubbles given that this behavior is driven by the fundamentals including relative prices of traded and non-traded goods.

This study investigates the determinants of the profitability of U.S. banks. Employing quarterly data, this paper further examines the historical and recent trends for all U.S. banks from 1996 to 2019 in the relationship between return and assets (ROA) and other bank internal (or endogenous) profitability contributors such as net interest margin (NIM), loan loss reserves, ratio of non-performing loans to gross loans, and external (or exogenous) macroeconomic variables, such as the 30-year average mortgage rate, Gross Domestic Product (GDP) economic growth rate, unemployment rate, interest rate, inflation rate and openness (i.e., exports + imports/GDP) by using the Generalized Method of Moments (GMM) estimator technique. The results reveal that bank-specific variables, including net interest margin, loan loss reserves and non-performing loans, have a significant impact on bank profitability in the United States. Similarly, the results show that macroeconomic variables, namely the average mortgage rate, economic growth, and unemployment rate, exert significant effects on the U.S. banks’ profitability. The results further indicate that changes in openness are detrimental to bank profitability. The implications are discussed.