Recent Experiences with Capital Controls : Is There A Lesson for Turkey?

Capital flows in the 1990's and their sudden reversals and the resulting turmoil created in financial markets together with big financial losses, revived the interests in capital controls. There are inherent destabilizing factors in international financial system and Tobin had seen that as early as 1972 when he suggested levying a tax on financial transactions as a way of smoothing out destabilizing factors, even though in its original formulation it was not applied anywhere due to its impracticality. Various capital inflow and outflow control experiences and recent crisis indicated that controls, even though are only second best, can be resorted temporarily, provided that the time gained is productively used for making the necessary adjustments in the inconsistent policy mix that brought about the controls in the first place. In such a context, for countries with high domestic debt like Turkey, where, even the intervention itself can be a source of speculation, an exchange rate band, in which the limits of the band is defended through taxing the violators of the band rather than central bank intervention can be an alternative. Such a strategy would be beneficial if Turkey uses the time to address the structural issues, rather than relaxes under the protective cushion of the tax. This method is advantageous to the sterilized intervention presently used to decrease exchange rate volatility arising from speculative inflows, first because, it will keep the central bank reserves intact, second it will force the violators of the exchange rate band to share the responsibility of their violation. If temporary controls are very carefully coordinated with the appropriate supporting policies, they could replace IMF programs with financial assistance, at least till the new and improved international financial system becomes operational.Capital Controls, Short Term Speculative Inflows, Tobin Tax, Private Sector Involvement

How did they manage the floating crisis?

In this paper, experiences of Korea, Mexico and Brazil after abandoning their fixed exchange rate policies as a result of financial crisis are examined with special emphasis on their monetary policies during the crisis and their handling of banking sector problems. In all cases examined, it was the tight fiscal policy together with tight monetary policy with high interest rate, a credible way of handling the banking sector problems including closing, suspending and buying bad loans together with a considerably high international financial support that helped to bring inflation and devaluation expectations down in a relatively short amount of time. The conclusion of paper will offer some solutions for Turkey. KOREA The financial crisis of 1997 in Korea had a devastating impact on the economy, leading to a recession with GDP (running between 5-10 % before the crisis) falling to negative 5.8 % in 1998 and to increasing unemployment 6.8 % in 1998 from 2 % precrisis level. The capital account liberalization accelerated private sector borrowings (both direct borrowing by the corporate sector and bank borrowing to finance the investments of the corporate sector) which had reached to 33 % of GDP and that was not sustainable given Korea’s economic growth potential. The problem was high portion of short term foreign debt and term mismatch which signaled serious external liquidity problem. By 1996, the ratio of short term external liabilities to official reserves had risen to 280%. Soun

A Multigeneration Diffusion Model for IT-Intensive Game Consoles

The video game industry has attracted more and more attention not only from technology giants such as Microsoft but also from software developers and private investors. Information technology dictates how game console producers compete in the marketplace. Intensive IT competition in each console generation has shifted the market balance. Competitors jockey to position themselves as the first-mover within a generation or to wait and enter the market with cheaper and more advanced technologies. To capture the characteristics of IT-intensive products, we propose a multigeneration diffusion model that captures both cannibalization and competition effects. We apply the model to analyze game console diffusion with real shipment data for three game consoles from two companies: Sony and Microsoft. We analyze two scenarios: one with only Sony¡¯s products, and one with both companies¡¯ products. We find that the cannibalization between Sony¡¯s products is minimal, and Microsoft maintains a strong competitive edge that has challenged Sony¡¯s market position. The results also explain how Sony has maintained its position as the market leader over the last two generations. This research sheds light on the nature of an IT-intensive game console competition between companies and generations

Locating Depots for Capacitated Vehicle Routing

We study a location-routing problem in the context of capacitated vehicle routing. The input is a set of demand locations in a metric space and a fleet of k vehicles each of capacity Q. The objective is to locate k depots, one for each vehicle, and compute routes for the vehicles so that all demands are satisfied and the total cost is minimized. Our main result is a constant-factor approximation algorithm for this problem. To achieve this result, we reduce to the k-median-forest problem, which generalizes both k-median and minimum spanning tree, and which might be of independent interest. We give a (3+c)-approximation algorithm for k-median-forest, which leads to a (12+c)-approximation algorithm for the above location-routing problem, for any constant c>0. The algorithm for k-median-forest is just t-swap local search, and we prove that it has locality gap 3+2/t; this generalizes the corresponding result known for k-median. Finally we consider the "non-uniform" k-median-forest problem which has different cost functions for the MST and k-median parts. We show that the locality gap for this problem is unbounded even under multi-swaps, which contrasts with the uniform case. Nevertheless, we obtain a constant-factor approximation algorithm, using an LP based approach.Comment: 12 pages, 1 figur

What habbo goers do in practice? decomposing attitudinal beliefs

We investigate the impact of Information Technology (IT) outsourcing on firm performance from several dimensions, including changes in labor productivity, improvements in financial and operational performance variables, and stock market valuation of IT outsourcing initiatives as measured by Tobin’s q. While our main objective is to better understand the economics of IT outsourcing, we also aim to contribute to the literature on the business value of IT in general. Our research contributes to the relevant literature from the following perspectives: (i) the change in the performance levels of firms due to IT outsourcing is measured against that of firms not outsourcing at all, (ii) panel data regression model is utilized in order to capture both cross-sectional and time-series differences among firms, (iii) the diversity of IT outsourcing initiatives is explicitly considered in the model, and (iv) a comprehensive data set covering the period between 1984 and 2007 is used.