Financial Integration, Credit Market Imperfections and Consumption Smoothing

Recent empirical research by Kose, Prasad and Terrones (2003) shows that financial integration is associated with higher consumption volatility in developing countries. This paper provides one possible explanation as to how international financial integration can increase consumption volatility in a developing country facing credit market imperfections. I use a two country international real business cycle model where the non-traded sector in the small country faces borrowing constraints due to contract enforceability problems. Financial integration provides households insurance against domestic risks that are amplified by the financial imperfections. If the international risk-sharing opportunities are nonexistent, households can secure themselves only by adjusting their labor effort, which leads to changes in sectorial output and terms of trade. The deterioration of the terms of trade acts as a dampening effect on consumption, causing it to be less volatile under financial autarky relative to financial integrationinternational business cycles, financial integration

Symbolic dynamics and relatively hyperbolic groups

We study the action of a relatively hyperbolic group on its boundary, by methods of symbolic dynamics. Under a condition on the parabolic subgroups, we show that this dynamical system is finitely presented. We give examples where this condition is satisfied, including geometrically finite kleinian groups.Comment: Revision, 16 pages, 1 figur

Developing country capital structures and emerging stock markets

In the developing world financing patterns vary greatly from what we observe in developed countries. In the poorest developing countries firms rely mostly on internal resources and informal credit markets for financing. This paper seeks to investigate the impact of emerging stock markets on the financing patterns of developing country corporations. The focus is to test whether equity markets and banking systems are complements or substituteds in providing financing to corporations. It is possible to answer this question by investigating capital structures of firms across a sample of countries with different levels of stock market development. If equity is substituted for debt financing one would expect countries with less developed stock markets to have higher leverage. However, if the opposite is true and there is complementarity between equity markets and banks, leverage would increase as stock markets become more developed. This paper discusses key properties of debt and equity contracts in financing decisions and reviews the literature on capital structure to identify relevant factors, other than stock market development, that may affect the financing pattern of corporations. It also presents preliminary empirical findings and identifies directions for further research.Economic Theory&Research,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,International Terrorism&Counterterrorism

Creditor country regulations and commercial bank lending to developing countries

Ever since the debt crisis of 1982, commercial banks continue to be reluctant in lending to developing countries. It is often argued that regulatory pressures on commercial banks have also contributed to the banks'reduced exposure to developing countries. This paper explores this possibility, focusing particularly on the effect of the Bank for International Settlement (BIS) risk-related capital adequacy regulations and different practices of country risk provisioning in major creditor countries. The main conclusion of the paper is that the BIS capital adequacy regulations may be somewhat less effective than they appear in accomplishing their main goal of controlling the overall riskiness of the international banking system, but that they may be quite effective in decreasing the size of commercial banks'developing country loan portfolios. The paper also discusses how mandated provisioning rules against developing countries are an additional deterrent to increasing bank lending.Banks&Banking Reform,Financial Intermediation,Banking Law,International Terrorism&Counterterrorism,Economic Theory&Research

"A Regime Switching Analysis of Exchange Rate Pass-through"

We investigate changes in the pricing policies of exporters, including changes in the exchange rate pass-through elasticity, and changes in the elasticities of variables that affect the firm’s markup. We set up a theoretical model of optimal export pricing in order to illustrate how changes in the pass-through elasticity can emerge together with changes in other elasticities in the pricing policy. Based on our theoretical formulation, we empirically study changes in all the elasticities that define the pricing policy as opposed to focusing only on the exchange rate pass-through. In the empirical model, we assume that in every period exporters get to set prices by following either a “high pass-through” or a “low passthrough” pricing policy. The transition from one policy to the other is governed by a Markov process whose transition probabilities depend on economic fundamentals. We estimate the model using data we have collected on 35 lines of imported cars to the US, from seven exporting countries, for the 1980-2004 period. We find that the “low pass-through” regime is characterized by: a low exchange rate pass-through; a low response to misalignments in the firm’s relative price; a low volatility of technology and preference shocks; and a higher duration than the high pass-through regime. Monetary stability and the market structure are significant factors behind the switching of pricing policies. Ceteris paribus, monetary stability measured as the cross-country inflation differential explains abut 22% of the year-to-year variation in the exchange rate pass-through coefficient; when measured by the volatility of the exchange rate, it explains 37%. Market concentration measured by the Herfindahl index explains about 40%.Exchange Rate Pass-through; Markov Regime Switching; Export Pricing

Status of Y=0Y=0 Triplet Higgs with supersymmetry in the light of ∼125\sim 125 GeV Higgs discovery

We study the $Y=0$ triplet extended supersymmetric model in the light of the recent Higgs boson discovery. We calculate full one loop Higgs mass spectrum in this model where the possible doublet-triplet mixing is considered in the charged Higgs sector. This mixing changes the prediction of $\mathcal{B}r(B_s\to X_s \gamma)$ in this model, compared to the MSSM. The constraints from the $\sim 125$ GeV Higgs along with $\mathcal{B}r(B_s\to X_s \gamma)$ are incorporated to find out the allowed parameter space. The lower bounds on the third generation squark masses coming from 125 GeV Higgs are rather week in this scenario compared to most constrained supersymmetric scenarios, e.g. a 200 GeV squark mass is still possible.Comment: 25 pages, 32 figures, JHEP styl

Derivatives Usage in Risk Management By Turkish Non-Financial Firms and Banks: A Comparative Study

The purpose of this study to compare the previous research about how the nonfinancial companies listed in the Istanbul Stock Exchange (ISE) and deposit banks in Turkey have disclosed information regarding the usage of derivatives, and the accounting treatment of these derivatives. The results of these studies indicate that banks and the non-financial companies listed in the ISE-100 Indices, which represent 86 % of the market capitalization, use derivatives mainly for hedging purposes. However, the evidence that they usually prefer reporting their gains/losses arising from these transactions as “held for trading” instead of applying “hedge accounting”, since they could not meet the compulsory criterions described in the IAS 39.Derivative Instruments, IAS 39, IFRS 7, Hedge Accounting,

On Some Algebraic Properties of Semi-Discrete Hyperbolic Type Equations

Nonlinear semi-discrete equations of the form t_x(n+1)=f(t(n), t(n+1), t_x(n)) are studied. An adequate algebraic formulation of the Darboux integrability is discussed and the attempt to adopt this notion to the classification of Darboux integrable chains has been undertaken.Comment: 18 page