Financial Crises: Lessons from History for Today

Cataloged from PDF version of article.Making use of the propensity score matching method, we match earlier crises (pre-2007) with currently ongoing crises (post-2007). The old and new crises are matched in three dimensions: the global setting in which they occurred, the structure of the economy and the domestic vulnerabilities in the pre-crisis period. Our findings suggest that the euro periphery crises share sufficient commonalities with earlier crises in their pre-crisis domestic vulnerabilities. The study points to two important conclusions. First, the euro periphery crises are composed of unique country experiences; hence, it will not be easily resolved with a 'one-size-fits-all' set of economic policies. Secondly, while each banking crisis has its inherent uniqueness, each crisis also shares sufficient commonalities with one or more of the Asian-5 1996/97 crises, the Nordic banking crisis of the early 1990s or the Japanese banking crisis of the 1990s. Thus, the extensive knowledge accumulated through these former banking crises can help in designing recovery policies

Is environmental efficiency trade inducing or trade hindering?

Cataloged from PDF version of article.Global efforts to identify strategies for sustainable economic growth and development underline the need for understanding important links between environmental policies and international trade. In this paper, by constructing an environmental efficiency index for 111 countries from 1980 to 2009, we are able to empirically test for one such link. An improvement in the environmental efficiency index in terms of carbon dioxide emissions reflects a decrease in the cost of efforts to mitigate the environmental costs associated with growth. Countries that improve their environmental efficiency are found to experience strong international trade effects, both through increased exports and increased imports. While the positive link between efficiency improvements and exports is supportive of the Porter hypothesis, the positive link between efficiency improvements and imports is supportive of strong positive income effects on account of environmental efforts. These results, which are robust to alternative estimation strategies, lend strong support to global efforts to improve countries' environmental efficiencies. © 2014 Elsevier B.V

Foreign direct investment and inflation

Multinational enterprises (MNEs) are able to shift investments between home and host countries to minimize the negative effects of changes in the macroeconomic environment. This article formalizes a model that allows studying this investment-smoothing behavior of MNEs facing inflation taxes in both the home and the host country. The MNE is allowed to invest in two economies, home and host, and to finance its foreign direct investment (FDI) either through domestic or foreign sources. The investment smoothing by the MNE is studied for cases of both vertical and horizontal FDI. The results suggest FDI is used as a hedging tool, mitigating the effects of inflation taxes even if there are no formal hedging mechanisms. The investment-smoothing reaction of MNEs depends on the reason for investment, the financing sources of FDI, and the substitutability between factors of production. Finally, this investmentsmoothing possibility (FDI) reduces the real negative effects of inflation

Financial crises: Lessons from history for today

Making use of the propensity score matching method, we match earlier crises (pre-2007) with currently ongoing crises (post-2007). The old and new crises are matched in three dimensions: the global setting in which they occurred, the structure of the economy and the domestic vulnerabilities in the pre-crisis period. Our findings suggest that the euro periphery crises share sufficient commonalities with earlier crises in their pre-crisis domestic vulnerabilities. The study points to two important conclusions. First, the euro periphery crises are composed of unique country experiences; hence, it will not be easily resolved with a 'one-size-fits-all' set of economic policies. Secondly, while each banking crisis has its inherent uniqueness, each crisis also shares sufficient commonalities with one or more of the Asian-5 1996/97 crises, the Nordic banking crisis of the early 1990s or the Japanese banking crisis of the 1990s. Thus, the extensive knowledge accumulated through these former banking crises can help in designing recovery policies. © CEPR, CES, MSH, 2014

FDI, productivity and financial development

This paper examines the effect of foreign direct investment (FDI) on growth by focusing on the complementarities between FDI inflows and financial markets. In our earlier work, we found that FDI is beneficial for growth only if the host country has well-developed financial institutions. In this paper, we investigate whether this effect operates through factor accumulation and/or improvements in total factor productivity (TFP). Factor accumulation - physical and human capital - does not seem to be the main channel through which countries benefit from FDI. Instead, we find that countries with well-developed financial markets gain significantly from FDI via TFP improvements. These results are consistent with the recent findings in the growth literature that shows the important role of TFP over factors in explaining cross-country income differences. © 2009 The Authors Journal compilation © 2009 Blackwell Publishing Ltd

The Characteristics of Domestic Firms: Materializing Productivity Spillovers from FDI

Using detailed firm-level data from Turkey, for 1991–2001, we analyze the importance of domestic firm capabilities in allowing for productivity spillovers from foreign direct investment. The absorptive capacities we investigate are technology gap, export status, and human capital of domestic firms. The study contributes to the literature by offering an alternative measure of human capital that would be more relevant in a country where there are labor market imperfections. The results provide supporting evidence for the role played by the human capital of domestic firms, i.e., the ratio of skilled, in realizing mainly horizontal spillovers. Copyright © Taylor & Francis Group, LLC

Exploring break-points and interaction effects among predictors of the international digital divide

Cataloged from PDF version of article.The deepening of the digital divide between countries has prompted international organizations and governments to work together toward reducing the problem over the next 15 years. However, such efforts will likely succeed only if they are based on a firm grasp of the divide's underlying causes. In this paper we report the results of a comprehensive analysis of the determinants of the international digital divide. Our results confirm many findings of past research, but also extend existing knowledge in important ways. By employing Multivariate Adaptive Regression Splines (MARS), we discover non-linearities and interaction effects among the predictors. We then articulate significant policy implications based upon these findings

Is environmental efficiency trade inducing or trade hindering?

Global efforts to identify strategies for sustainable economic growth and development underline the need for understanding important links between environmental policies and international trade. In this paper, by constructing an environmental efficiency index for 111 countries from 1980 to 2009, we are able to empirically test for one such link. An improvement in the environmental efficiency index in terms of carbon dioxide emissions reflects a decrease in the cost of efforts to mitigate the environmental costs associated with growth. Countries that improve their environmental efficiency are found to experience strong international trade effects, both through increased exports and increased imports. While the positive link between efficiency improvements and exports is supportive of the Porter hypothesis, the positive link between efficiency improvements and imports is supportive of strong positive income effects on account of environmental efforts. These results, which are robust to alternative estimation strategies, lend strong support to global efforts to improve countries' environmental efficiencies. © 2014 Elsevier B.V

Measuring the international digital divide: an application of Kohonen self-organising maps

With the help of a Kohonen self-organising algorithm, this paper presents a mapping and analysis of the global digital divide along with its main drivers. Several broad groups and subgroups are identified, consisting of countries that are similar in their digital development and in a number of other attributes. We find that the digital divide seems to occur synchronously with divisions in income, social, demographic and infrastructure measures. By examining a large dataset of 160 countries over a short period of three years, we find evidence of both convergence and divergence among the countries over time. We expect these findings to inform the ongoing debate on drivers of the International Digital Divide (IDD). In addition, this paper provides a novel visualisation of the digital divide and its predictors on a two-dimensional grid. Extensions of this work, with the availability of more years of data, could investigate the potential convergence of countries to particular patterns of digital development. © 2007 Inderscience Enterprises Ltd

Understanding Eurasian convergence: Application of kohonen self-organizing maps

Kohonen self-organizing maps (SOMs) are employed to examine economic and social convergence of Eurasian countries based on a set of twenty-eight socio-economic measures. A core of European Union states is identified that provides a benchmark against which convergence of post-socialist transition economies may be judged. The Central European Visegrád countries and Baltics show the greatest economic convergence to Western Europe, while other states form clusters that lag behind. Initial conditions on the social dimension can either facilitate or constrain economic convergence, as discovered in Central Europe vis-à-vis the Central Asian Republics. Disquiet in the convergence literature is resolved by providing an analysis of the Eurasian states over time. Copyright © 2006 JMASM, Inc