The Dollar, the Euro and the Role of Emerging Economies

Since the collapse of the Bretton Woods Global International System in 1971, the world economy has experienced significant currency volatility. The major economies of the world have addressed such volatility differently. The European Union (EU) has chosen to follow a monetary union and introduced successfully a new currency. The USA has paid less attention to the fluctuations of the dollar and has pursued an independent monetary policy to promote national economic stability. Japan has seen its currency appreciate significantly. This paper argues that while trade and growth across the globe are doing well, financial developments are intensifying the competition between the US dollar and the euro. We also study the role of emerging economies in this competition between the dollar and the euro

Corruption and Doing Business in Emerging Markets

Corruption is a serious international problem with many damaging effects particularly in emerging market countries. We investigated to what degree overregulation and inadequate legal institutions contributed to corruption of small and medium-sized enterprises (SME) in emerging markets. Unlike other studies, we used data from the World Bank?s Doing Business annual series which provides indicators of the regulatory and legal environments facing SME. We had three major research questions. (1) Which government obstacles to conducting business in the form of overregulation and inadequate legal institutions contribute most to corruption? (2) Which are more closely linked to corruption, excessive regulations or weak legal institutions? (3) Which of the components, from which the World Bank?s indicators are derived, have the largest impact on corruption? We regressed Transparency International?s Corruption Perception Index on the nine World Bank indicators and five control variables for 51 emerging market countries from 2007 to 2015. This study concludes that all five regulation indicators, but only one of four legal indicators, contributed to corruption. While past studies have linked regulation and corruption, our contribution was identifying specifically which of the World Bank?s measures of the regulatory and legal environment cause corruption. In addition, our results also corroborate those of previous studies regarding our five control variables. Policy wise the World Bank has long advocated reducing regulations to improve SME operating efficiency. Our results further support such a policy because of its important additional benefit of reducing corruption and its many toxic effects

Portfolio diversification in extreme environments : are there benefits from adding commodity futures indices?

Diversifying into commodity futures indices to improve risk-return trade-offs had seemed an inviting prospect a couple of decades ago, due to the increasing correlations between equities themselves and the stable low or negative correlations they exhibited with commodities. But there is a view gaining ground now that the benefits of stock portfolio diversification into commodities have died out due to further changes in the correlation matrices, particularly occurring in times of extreme events. This paper readdresses the aforesaid issue for the period 1999-2010, disaggregated into periods so as to bracket bull and bear phases with large changes in returns. Data for the most important equity and commodity indices are used. One interesting finding is that the role of commodities in optimum portfolio diversification may be more relevant in bear phases.peer-reviewe

Does Purchasing Power Parity hold in Thailand?

The main objective of this study is to use disaggregate data between Thailand and its major trading partners to examine the validity of the purchasing power parity (PPP). Bilateral exchange rates between domestic currency (Thai baht) and each currency of major trading partners as well as the relative prices during the period of July 1997 to December 2007 are used to investigate the existence of stationary real exchange rates and cointegration between nominal exchange rates and relative prices. The results from various unit root tests and cointegration test show that PPP does not seem to hold in Thailand

Does Purchasing Power Parity hold in Thailand?

The main objective of this study is to use disaggregate data between Thailand and its major trading partners to examine the validity of the purchasing power parity (PPP). Bilateral exchange rates between domestic currency (Thai baht) and each currency of major trading partners as well as the relative prices during the period of July 1997 to December 2007 are used to investigate the existence of stationary real exchange rates and cointegration between nominal exchange rates and relative prices. The results from various unit root tests and cointegration test show that PPP does not seem to hold in Thailand

Economic crisis in the European periphery: An Assessment of EMU Membership and home Policy Effects Based on the Greek Experience

Our objective in this paper is threefold. First, to identify the major common shocks that hit these countries upon entry into the EMU. Second, taking Greece as our case study, to construct a simple macroeconomic model of the policies Greek governments pursued in the presence of these shocks, and to employ its solution so as to highlight the outcomes that were expected to result. From this endeavor, we find that the policies which were put in place led unavoidably to a severe economic crisis and eventual bankruptcy. Finally, in view of these findings and what happened in 2009,we raise and attempt to answer questions like, for example: How can we explain the policies that were adopted in the advent of monetary union shocks? Could they have been anticipated? And if so, why did they escape the attention of the designers of the Maastricht Treaty? The answer to which we are led by the analysis is that the shocks in all these countries were perceived by their governments as opportunities to hold on to their entrenched positions. That this happened, we conclude, reflects a failure in the mechanisms of economic convergence that were embedded in the Maastricht Treaty as well as in the effectiveness of European Union (EU) institutions that were empowered with their enforcement

Economic crisis in the European periphery: An Assessment of EMU Membership and home Policy Effects Based on the Greek Experience

Our objective in this paper is threefold. First, to identify the major common shocks that hit these countries upon entry into the EMU. Second, taking Greece as our case study, to construct a simple macroeconomic model of the policies Greek governments pursued in the presence of these shocks, and to employ its solution so as to highlight the outcomes that were expected to result. From this endeavor, we find that the policies which were put in place led unavoidably to a severe economic crisis and eventual bankruptcy. Finally, in view of these findings and what happened in 2009,we raise and attempt to answer questions like, for example: How can we explain the policies that were adopted in the advent of monetary union shocks? Could they have been anticipated? And if so, why did they escape the attention of the designers of the Maastricht Treaty? The answer to which we are led by the analysis is that the shocks in all these countries were perceived by their governments as opportunities to hold on to their entrenched positions. That this happened, we conclude, reflects a failure in the mechanisms of economic convergence that were embedded in the Maastricht Treaty as well as in the effectiveness of European Union (EU) institutions that were empowered with their enforcement

Economic Integration and Union Power

The standard utility-maximizing model of the trade union in a closed economy is reformulated for an environment where economic integration is under way or expected to occur soon. In the (European) realistic setting of union-dominated labor markets, domestic wages are shown to be affected by labor market developments abroad. This article provides an explanation of the international transmission of inflation and disinflation Copyright Kluwer Academic Publishers 2002trade union behavior, capital mobility, economic integration,

Government Policies and Micro Lending in Emerging Markets

Although microfinance institutions have expanded rapidly since their inception in 1983, their growth has varied substantially among countries. This study examines the impact of government expenditures, taxes and regulations on the volume of microcredit for 92 emerging market countries for the period 2000-2011. The Index of Economic Freedom data is used as a proxy for government intervention while microcredit is represented alternatively by either the Gross Loan Portfolio Per-Capita or Penetration Index variables. While excessive government intervention could potentially encourage more lending in the informal microfinance markets, our findings suggest that, for both credit variables, the net impact is to reduce microcredit. The variables appearing to be most responsible are business regulations, taxes, and corruption. Tests using subperiods and also with a dynamic version suggest that our model is quite robust

Bank Loan Accommodation

The banking literature occasionally refers to bank loan accommodation, that is, the willingness of commercial banks to make loans at such favorable terms that they suffer a diminution of profits.  Such behavior is explained by a strategy of temporarily reducing profits in order to increase long run gains through the strengthening of customer relations.  This study’s empirical analysis fails to find any evidence to support the accommodation view of bank behavior