Thresholds in the process of international financial integration

The financial crisis has re-ignited the fierce debate about the merits of financial globalization and its implications for growth, especially for developing countries. The empirical literature has not been able to conclusively establish the presumed growth benefits of financial integration. Indeed, a new literature proposes that the indirect benefits of financial integration may be more important than the traditional financing channel emphasized in previous analyses. A major complication, however, is that there seem to be certain"threshold"levels of financial and institutional development that an economy needs to attain before it can derive the indirect benefits and reduce the risks of financial openness. This paper develops a unified empirical framework for characterizing such threshold conditions. The analysis finds that there are clearly identifiable thresholds in variables such as financial depth and institutional quality -- the cost-benefit trade-off from financial openness improves significantly once these threshold conditions are satisfied. The findings also show that the thresholds are lower for foreign direct investment and portfolio equity liabilities compared with those for debt liabilities.Debt Markets,Economic Theory&Research,Currencies and Exchange Rates,Emerging Markets,Achieving Shared Growth

Growth and Volatility in an Era of Globalization

We extend the analysis in Kose, Prasad, and Terrones (2005) to provide a comprehensive examination of the cross-sectional relationship between growth and macroeconomic volatility over the past four decades. We also document that while there has generally been a negative relationship between volatility and growth during this period, the nature of this relationship has been changing over time and across different country groups. In particular, we detect major shifts in this relationship after trade and financial liberalizations. In addition, our results show that volatility stemming from the main components of domestic demand is negatively associated with economic growth. Copyright 2005, International Monetary Fund

Financial Globalization, Growth and Volatility in Developing Countries

This paper provides a comprehensive assessment of empirical evidence about the impact of financial globalization on growth and volatility in developing countries. The results suggest that it is difficult to establish a robust causal relationship between financial integration and economic growth. Furthermore, there is little evidence that developing countries have been consistently successful in using financial integration to stabilize fluctuations in consumption growth. However, we do find that financial globalization can be beneficial under the right circumstances. Empirically, good institutions and quality of governance are crucial in helping developing countries derive the benefits of globalization. Similarly, macroeconomic stability appears to be an important prerequisite for ensuring that financial globalization is beneficial for developing countries. Finally, countries that employ relatively flexible exchange rate regimes and succeed in maintaining fiscal discipline are more likely to enjoy the potential growth and stabilization benefits of financial globalization.

Financial Globalization: A Reappraisal

The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. We attempt to provide a unified conceptual framework for organizing this vast and growing literature. This framework allows us to provide a fresh synthetic perspective on the macroeconomic effects of financial globalization, both in terms of growth and volatility. Overall, our critical reading of the recent empirical literature is that it lends some qualified support to the view that developing countries can benefit from financial globalization, but with many nuances. On the other hand, there is little systematic evidence to support widely-cited claims that financial globalization by itself leads to deeper and more costly developing country growth crises.

Temporal Resolution of Uncertainty, the Investment Policy of Levered Firms and Corporate Debt Yields

This paper attempts to link the agency literature (concerned with the fact that tensions between bondholders and shareholders may trigger suboptimal investment decisions) with the one dealing with temporal resolution of uncertainty (TRU). We consider here how the speed of resolution of the uncertainty characterizing the firm’s operations affects the risk-shifting behavior of a shareholder-aligned manager. It is assumed that investors are risk neutral and that the return on the risky technology is normally distributed. It is shown that the speed of TRU affects monotonically the extent of risk shifting as well as bond yields, even after optimal contracts mitigating deviations from the first-best investment policy have been written. In particular, the optimal investment-restricting covenant is endogenously characterized. Empirical implications are derived and discussed

EXAMINING OF THE CORRELATION BETWEEN THE FUNCTIONAL MOVEMENT SCREEN AND THE CARDIO FITNESS TEST IN STUDENTS STUDYING IN THE FACULTY OF SPORTS SCIENCES

This study was conducted to examine the correlation between the scores of the Functional Movement Screen (FMS) and the scores of the Cardio Fitness Test (CFT) in students studying in the Faculty of Sports Sciences. The sample group was composed of totally 25 students, including 14 males and 11 females aged between 22-24 years. The Functional Movement Screen (FMS) test battery including seven stations as deep squat, hurdle step, in-line lunge, shoulder mobility, active straight-leg raise, trunk stability, and rotary trunk and the Cardio Fitness Test (CFT) battery including six stations as resting heart rate, heart rate recovery, body flexibility, upper body strength, core strength, and lower body strength were applied to the sample group in different days. It was found that there was a statistically significant positive correlation between the total scores of the Functional Movement Screen (FMS) and the total scores of the Cardio Fitness Test (CFT) (r =0.60, p<0.001). While no statistically significant correlation was found between the lower body total scores of the relevant test batteries, there was a statistically significant positive correlation between the upper extremity total scores (r=0.48, p<0.05). Consequently; the significant correlation found between the Functional Movement Screen test battery, used in posture analysis and posture rehabilitation, and the Cardio Fitness Test formed the opinion that these two tests can be used in the field in combination. It may be recommended to apply this correlation in larger groups and assess the gender and age differences.  Article visualizations

Privatization with Political Constraints: Auctions versus Private Negotiations

This paper investigates the design of privatization mechanisms in emerging market economies characterized by political constraints that limit the set of viable privatization mechanisms. Our objective is to explain the striking diversity of privatization mechanisms observed in practice and the frequent use of an apparently suboptimal privatization mechanism: private negotiations. We develop a simple model wherein privatization is to be carried out by a government agent who plays favorites among bidders and is potentially disciplined by forthcoming elections. We find that it is the degree of political constraints that determines which mechanism is more successful in raising funds. If the political environment is such that the privatization agent himself aims at raising the fair value for the company, then privatization auctions and private negotiations are equally successful in raising public revenues. If, however, political constraints distort the agent’s incentives, then one mechanism outperforms the other. In particular, if the distortion is moderate, then private negotiations can raise more value for a successful enterprise than privatization auctions. In this case the agent may play favorites among the bidders, but to the extent he cares about the price, he will use his bargaining power to negotiate his target price. If, however, the distortion is severe so that the agent lacks sufficient motivation to raise a fair price for the company, then privatization auctions will outperform private egotiations. Even though the agent may play favorites among the bidders, he would not put pressure on the bidders to raise the price during negotiations. In an auction, in contrast, the presence of other bidders, regardless how informed they are, induces competition and places a lower bound on the equilibrium winning bid. We also show that information disclosure laws may have negative welfare implications: they may help the privatization agent to collude with some of the bidders to the disadvantage of non-colluding bidders. Our theory provides further regulatory implications for privatization procedures in emerging market economies