Uncertainty and Financial Fragility

My thesis analyzes various types of uncertainties and their effects on financial fragility in the context of information asymmetries and bank-run models. When various generations of currency crisis are considered, it is observed that the financial system and fragilities associated with it plays a critical role in more recent crisis episodes. Therefore, focusing on the financial system can possibly lead to a better understanding of how and why these crises took place. The analysis presented here aims to provide some new insights about this topic. In the first chapter I tried to analyze how public borrowing can affect financial fragility when how a private bank finances its lending to the government is private information. I built a simple theoretical model where the government basically borrows from a commercial bank. The objective of the government is to realize borrowing at the lowest possible cost but at the same time it cares about the financial stability. The risk averse commercial bank, on the other hand, maximizes utility by allocating the financing of its lending among a safe and a risky loan where the amount it uses from the safe source considered to be a measure of financial stability. Moral hazard arises as the amount of safe loan used is not observable to the government. Under the assumption that the risk premium is decreasing in income, I show, when the government is not able push the rate down below a certain level, it can trade a rise in borrowing costs with some financial stability. In other words, although pushing the rate down is good both for borrowing costs and financial stability, under asymmetric information, it may be optimal to design a contract with a reward scheme and accept a higher cost for borrowing for a relatively more reliable financial system. This chapter contributes to the literature by identifying a potential moral hazard problem in the process of public borrowing and displays how it can lead to a higher than optimal level of financial fragility when the economic policy gets obsessed with lowering the borrowing costs. The analysis provided is also interesting as it displays an unusual case where the borrower rather than the lender faces issues resulting from asymmetric information. In the second chapter, a bank-run model used to analyze effects of uncertainty on financial fragility in terms of maturity mismatch. I use an extended version of the well-known Diamond & Dybvig model by introducing short term borrowing where the future cost of borrowing is unknown. This creates an additional source of maturity mismatch and the demand deposit contracts are now vulnerable to both depositor and lender panics. The key is when the borrowing and investment decisions are made the total cost of borrowing is unknown but the deposit contract can be written contingent on this cost. This creates different consumption paths for patient and impatient agents and they bear different degrees of interest rate risk. The characterization of the contract shows interest risk is mainly borne by early consumers particularly for higher roll over costs. In times of crisis the most liquid funds are the ones that are used first and hence consumers who need urgent liquidity suffers most. The main contribution of this part is that, it combines a bank run model with aggregate uncertainty with short-term borrowing. It also sheds some light on the dynamics of financial problems in developing countries. The last chapter analyzes risk sharing under private banking. Once again a version of Diamond & Dybvig framework is used. Instead of assuming a banking structure where consumers form a union to achieve optimal risk sharing, I consider a private bank that maximizes profits. I analyze the deposit contract under different assumptions about how the bank and the depositors consider the probability of a bank run. The original Diamond & Dybvig model, implicitly assumes the probability of a bank-run is sufficiently small to ensure participation. With a private bank, I allow partial participation and optimizing depositors automatically establish individual rationality. This leads to a supply of deposits (or demand for risk sharing function) which varies along with the payments offered in the contract. Therefore, the bank faces a trade-off between the rates it offer and the amount of deposits it can attract. This basically leads a new set of equilibrium contracts to come out which are not possible under standard risk sharing. Depending on the risk averseness of the consumers these alternative contracts produce different levels of financial fragility. This last chapter contributes to the literature by considering the possible risk sharing contracts under a profit maximizing monopolistic commercial bank. It also briefly discusses how this may effect financial fragility

Exchange Rate Pass-Through in Turkey : Has it Changed and to What Extent?

This study analyses the impact of exchange rates on domestic prices in Turkey. We seek to demonstrate the variations (if any) in the exchange rate pass-through across different exchange rate regimes, identify the determinants of this change, and characterize the degree and extent of pass-through across different sub-sectors. Our empirical results reveal that the pass-through of exchange rates to domestic prices has declined in the post-2001 period in comparison with the earlier episodes –thanks to a decline in the “indexation” behavior. These findings suggest that switching to floating exchange rate regime and implementing an ambitious disinflation policy have contributed, to a large extent, to the reduction in the pass-through. Nevertheless, the impact of exchange rate on inflation, especially in the traded good is still notable, pointing out that the effect of nominal exchange rate movement on relative prices have increased in the float period.Exchange rate pass-through, Time-varying parameters, Seemingly unrelated regressions, Disinflation, Floating exchange rate regime

Thresholds, musics and liminality: professional Rom musicians and their liminal roles in nuptial rites of Bergama regionEşikler, müzikler ve liminalite: profesyonel Roman müzisyenler ve Bergama yöresi evlilik ritüellerindeki liminal rolleri

Three days lasting nuptial rites as examples of rites of passage take on a new significance with the contributions of professional musicians in Bergama’s surrounding country-side like elsewhere in Turkey. These musicians living in Bergama are often ‘Roma’. Leading the profession of musicianship up until today, these local musicians provide basically two different kinds of musical service: to encode certain stages with certain tunes over the course of the ritual and to guide the transition. As a female-centered activity, the core of the marriage ritual is a process of liminality in which the bride enters a new phase in her life by the help of the other women around (aunts, musicians, etc.). Unlike the relationship between the male musicians and the groom, female Rom musicians locally named ‘dümbekçiler’ stand by the bride in almost all stages of this transition and guide her to cross the inner tresholds of the ritual properly. This article aims to contribute to the understanding of the ‘liminal’ roles of the male and female Rom musicians in their company consequently to the bride, the groom and all the other members of communitas during the ritual process. ÖzetGeçiş ritüellerinin (rites of passage) üç güne yayılan bir örneği olan evlilik ritüelleri, bugün Türkiye’nin pek çok yerinde olduğu gibi Bergama kırsalında da profesyonel müzisyenlerin katkılarıyla anlam kazanır. Bergama özelinde bu müzisyenler, büyük çoğunlukla bölgede yaşayan ‘Roman’lardır. Müzisyenlik mesleğini geçmişten günümüze profesyonel olarak sürdüren bu yerel müzisyenler, ritüel kapsamında temelde iki farklı müzik hizmeti sunarlar: Ritüel akışı boyunca belirli aşamaları belirli havalarla kodlamak ve geçişe rehberlik etmek. Kadın merkezli bir etkinlik olan evlilik ritüeli özünde gelinin; çevresindeki diğer kadınların (yengeler, müzisyenler vb.) yardımıyla yaşamının yeni bir evresine adım atmaya hazırlandığı bir eşiksellik (liminality) sürecidir. Yörede ‘dümbekçiler’ olarak adlandırılan Roman kadın müzisyenler bu süreçte, erkek müzisyenlerin damatla kurduğu ilişkiden farklı olarak hemen her aşamada gelinin yanında bulunarak ritüel içi eşikleri uygun bir biçimde geçmede ona rehberlik de ederler. Bu makale erkek ve kadın Roman müzisyenlerin ritüel süreci boyunca, başta gelin olmak üzere damada ve diğer tüm komünitas üyelerine eşlik ederken sergiledikleri ‘liminal’ rollerin anlaşılmasına katkı sunmayı amaçlar

Türkiyede döviz kurları, kamu fiyatları ve enflasyon.

M.S. - Master of Scienc

Uncertainty and financial fragility

My thesis analyzes various types of uncertainties and their effects on financial fragility in the context of information asymmetries and bank-run models. When various generations of currency crisis are considered, it is observed that the financial system and fragilities associated with it plays a critical role in more recent crisis episodes. Therefore, focusing on the financial system can possibly lead to a better understanding of how and why these crises took place. The analysis presented here aims to provide some new insights about this topic. In the first chapter I tried to analyze how public borrowing can affect financial fragility when how a private bank finances its lending to the government is private information. I built a simple theoretical model where the government basically borrows from a commercial bank. The objective of the government is to realize borrowing at the lowest possible cost but at the same time it cares about the financial stability. The risk averse commercial bank, on the other hand, maximizes utility by allocating the financing of its lending among a safe and a risky loan where the amount it uses from the safe source considered to be a measure of financial stability. Moral hazard arises as the amount of safe loan used is not observable to the government. Under the assumption that the risk premium is decreasing in income, I show, when the government is not able push the rate down below a certain level, it can trade a rise in borrowing costs with some financial stability. In other words, although pushing the rate down is good both for borrowing costs and financial stability, under asymmetric information, it may be optimal to design a contract with a reward scheme and accept a higher cost for borrowing for a relatively more reliable financial system. This chapter contributes to the literature by identifying a potential moral hazard problem in the process of public borrowing and displays how it can lead to a higher than optimal level of financial fragility when the economic policy gets obsessed with lowering the borrowing costs. The analysis provided is also interesting as it displays an unusual case where the borrower rather than the lender faces issues resulting from asymmetric information. In the second chapter, a bank-run model used to analyze effects of uncertainty on financial fragility in terms of maturity mismatch. I use an extended version of the well-known Diamond & Dybvig model by introducing short term borrowing where the future cost of borrowing is unknown. This creates an additional source of maturity mismatch and the demand deposit contracts are now vulnerable to both depositor and lender panics. The key is when the borrowing and investment decisions are made the total cost of borrowing is unknown but the deposit contract can be written contingent on this cost. This creates different consumption paths for patient and impatient agents and they bear different degrees of interest rate risk. The characterization of the contract shows interest risk is mainly borne by early consumers particularly for higher roll over costs. In times of crisis the most liquid funds are the ones that are used first and hence consumers who need urgent liquidity suffers most. The main contribution of this part is that, it combines a bank run model with aggregate uncertainty with short-term borrowing. It also sheds some light on the dynamics of financial problems in developing countries. The last chapter analyzes risk sharing under private banking. Once again a version of Diamond & Dybvig framework is used. Instead of assuming a banking structure where consumers form a union to achieve optimal risk sharing, I consider a private bank that maximizes profits. I analyze the deposit contract under different assumptions about how the bank and the depositors consider the probability of a bank run. The original Diamond & Dybvig model, implicitly assumes the probability of a bank-run is sufficiently small to ensure participation. With a private bank, I allow partial participation and optimizing depositors automatically establish individual rationality. This leads to a supply of deposits (or demand for risk sharing function) which varies along with the payments offered in the contract. Therefore, the bank faces a trade-off between the rates it offer and the amount of deposits it can attract. This basically leads a new set of equilibrium contracts to come out which are not possible under standard risk sharing. Depending on the risk averseness of the consumers these alternative contracts produce different levels of financial fragility. This last chapter contributes to the literature by considering the possible risk sharing contracts under a profit maximizing monopolistic commercial bank. It also briefly discusses how this may effect financial fragility.EThOS - Electronic Theses Online ServiceGBUnited Kingdo

An attitude scale about graduate education: Reliability and validity study

The purpose of this study was to develop a scale to determine prospective teachers’ attitudes towards graduate education. For this reason the draft form with 44 items was applied on 685 prospective teachers being educated at Education Faculty at Mersin University. Exploratory factor analysis studies based on Varimax rotation revealed the scale had a structure with single factor and 4 components called as self-improvement, negative feelings, wishfulness and behavioral representation. Relating to the whole scale, Cronbach alpha reliability parameter was found as .939, and reliability parameters were found as . 909; .850; .835 and .821, respectively. Four components altogether explained 57,171% of the variance. The findings of the analysis done to determine whether any differentiation arose on their attitudes according to gender, department, etc. were accepted as the proof of scale’s validity. The findings revealed this scale was reliable and valid to determine prospective teachers’ attitudes towards graduate education

Critical Social Challenges in the Tourism Industry: Labor, Commodification, and Drugs

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