Contagion represents a significant change in cross-market linkages precipitated by a crisis and is properly measured only after taking into account the interdependence or extant linkages prevailing between markets. Since it is well known that stock return volatilities and correlations are stochastic in the absence of a crisis, interdependence between markets should reflect the time varying nature of these covariances. We measure contagion in the presence of stochastic interdependence using data on stock indices from South East Asian countries around the July 1997 crisis. Since stock return covariances are observed with error, this suggests casting our model in a state space framework which is estimated using a multivariate Kalman filter. In the presence of stochastic interdependence, we find reliable evidence of contagion between Thailand and Indonesia, Malaysia, and the Philippines but not between Thailand and Hong Kong or Singapore.
{"title":"Contagion in the Presence of Stochastic Interdependence","authors":"C. Ball, W. Torous","doi":"10.2139/ssrn.930640","DOIUrl":"https://doi.org/10.2139/ssrn.930640","url":null,"abstract":"Contagion represents a significant change in cross-market linkages precipitated by a crisis and is properly measured only after taking into account the interdependence or extant linkages prevailing between markets. Since it is well known that stock return volatilities and correlations are stochastic in the absence of a crisis, interdependence between markets should reflect the time varying nature of these covariances. We measure contagion in the presence of stochastic interdependence using data on stock indices from South East Asian countries around the July 1997 crisis. Since stock return covariances are observed with error, this suggests casting our model in a state space framework which is estimated using a multivariate Kalman filter. In the presence of stochastic interdependence, we find reliable evidence of contagion between Thailand and Indonesia, Malaysia, and the Philippines but not between Thailand and Hong Kong or Singapore.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"47 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121083250","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare effects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other.
{"title":"Entry of Foreign Banks and Their Impact on Host Countries","authors":"M. Lehner, Monika Schnitzer","doi":"10.2139/ssrn.915401","DOIUrl":"https://doi.org/10.2139/ssrn.915401","url":null,"abstract":"Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare effects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132460869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper conducts an empirical study by province level data to analyze the relationship between China's human development and economic growth. The results of this study show that improvements of human development are followed by faster economic growth and influences of human capital derived from the improvements on growth can be more significant if there are some complementarily functional conditions, such as trust and fine market mechanism. Moreover, economic growth can also promote human development, especially in the regions with more trust and higher power of market forces. This evidence implies that, in a new development stage, it is necessary to implement a new development strategy that focuses on human development, which can accelerate economic growth and improve development performance of our society.
{"title":"An Empirical Study on the Relationship Between China's Human Development and Economic Growth (1978-2003)","authors":"Pengfei Li, Jianghuai Zheng, Wei Zhang","doi":"10.2139/SSRN.926343","DOIUrl":"https://doi.org/10.2139/SSRN.926343","url":null,"abstract":"This paper conducts an empirical study by province level data to analyze the relationship between China's human development and economic growth. The results of this study show that improvements of human development are followed by faster economic growth and influences of human capital derived from the improvements on growth can be more significant if there are some complementarily functional conditions, such as trust and fine market mechanism. Moreover, economic growth can also promote human development, especially in the regions with more trust and higher power of market forces. This evidence implies that, in a new development stage, it is necessary to implement a new development strategy that focuses on human development, which can accelerate economic growth and improve development performance of our society.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125123743","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Daniel Berkowitz, Johannes Moenius, Katharina Pistor
How does the quality of national institutions that enforce the rule of law influence international trade? Anderson and Marcouiller argue that bad institutions located in the importer's country deter international trade because they enable economic predators to steal and extort rents at the importer's border. We complement this research and show how good institutions located in the exporter's country enhance international trade, in particular, trade in complex products whose characteristics are difficult to fully specify in a contract. We argue that both exporter and importer institutions affect international as well as domestic transaction costs in complex and simple product markets. International transaction costs are a part of the costs of trade. Domestic transaction costs affect complex and simple products differently, thereby changing a country's comparative advantage in producing such goods.We find ample empirical evidence for these predictions: countries that have good institutions tend to export more complex products and import more simple products. Furthermore, institutions have a stronger influence on trade via production costs (comparative advantage) than through international transactions costs. International institutions seem to operate as substitutes for domestic institutions, because good domestic institutions are less important for promoting exports in those countries that have signed the New York Convention. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
{"title":"Trade, Law and Product Complexity","authors":"Daniel Berkowitz, Johannes Moenius, Katharina Pistor","doi":"10.2139/ssrn.315969","DOIUrl":"https://doi.org/10.2139/ssrn.315969","url":null,"abstract":"How does the quality of national institutions that enforce the rule of law influence international trade? Anderson and Marcouiller argue that bad institutions located in the importer's country deter international trade because they enable economic predators to steal and extort rents at the importer's border. We complement this research and show how good institutions located in the exporter's country enhance international trade, in particular, trade in complex products whose characteristics are difficult to fully specify in a contract. We argue that both exporter and importer institutions affect international as well as domestic transaction costs in complex and simple product markets. International transaction costs are a part of the costs of trade. Domestic transaction costs affect complex and simple products differently, thereby changing a country's comparative advantage in producing such goods.We find ample empirical evidence for these predictions: countries that have good institutions tend to export more complex products and import more simple products. Furthermore, institutions have a stronger influence on trade via production costs (comparative advantage) than through international transactions costs. International institutions seem to operate as substitutes for domestic institutions, because good domestic institutions are less important for promoting exports in those countries that have signed the New York Convention. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-06-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123940477","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-06-01DOI: 10.1007/978-3-7908-1923-6_11
R. Freeman
{"title":"Searching for the EU Social Dialogue Model","authors":"R. Freeman","doi":"10.1007/978-3-7908-1923-6_11","DOIUrl":"https://doi.org/10.1007/978-3-7908-1923-6_11","url":null,"abstract":"","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"200 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122159259","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The article investigates the main factors of current account deficits in order to assess the potential excessiveness of current account deficits in selected countries of Eastern Europe and former Soviet Union. According to the simulated benchmark calculated on the basis of selected determinants (in period 1992-2003), the results confirm that the actual current account balances are generally close to their estimated levels in the 2000-2003 period in the transition region. This notion is in line with the intertemporal approach to the current account balance, suggesting that higher external deficits are a natural outcome when permanent domestic output exceeds the current one and when current investments and government consumption exceed their permanent levels. Hence, the results suggest that most countries in Eastern Europe and former Soviet Union are justified in running relatively high current account deficits.
{"title":"The Determinants & Excessiveness of Current Account Deficits in Eastern Europe & the Former Soviet Union","authors":"Aleksander Aristovnik","doi":"10.2139/ssrn.920507","DOIUrl":"https://doi.org/10.2139/ssrn.920507","url":null,"abstract":"The article investigates the main factors of current account deficits in order to assess the potential excessiveness of current account deficits in selected countries of Eastern Europe and former Soviet Union. According to the simulated benchmark calculated on the basis of selected determinants (in period 1992-2003), the results confirm that the actual current account balances are generally close to their estimated levels in the 2000-2003 period in the transition region. This notion is in line with the intertemporal approach to the current account balance, suggesting that higher external deficits are a natural outcome when permanent domestic output exceeds the current one and when current investments and government consumption exceed their permanent levels. Hence, the results suggest that most countries in Eastern Europe and former Soviet Union are justified in running relatively high current account deficits.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"107 12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127985322","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The copula-opinion pooling (COP) approach extends in principle the Black-Litterman methodology to non-normally distributed markets and views. However, the implementations of the COP framework presented so far rely on restrictive quasi-normal assumptions. Here we present a general recipe to implement the COP approach in practice under all possible market and views specifications.
{"title":"Beyond Black-Litterman in Practice: A Five-Step Recipe to Input Views on Non-Normal Markets","authors":"A. Meucci","doi":"10.2139/ssrn.872577","DOIUrl":"https://doi.org/10.2139/ssrn.872577","url":null,"abstract":"The copula-opinion pooling (COP) approach extends in principle the Black-Litterman methodology to non-normally distributed markets and views. However, the implementations of the COP framework presented so far rely on restrictive quasi-normal assumptions. Here we present a general recipe to implement the COP approach in practice under all possible market and views specifications.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130696067","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. The authors use quantitative analysis for 57 countries and discuss specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, they show that banks in countries where the deposit insurer has the responsibility of intervening failed banks and the power to revoke membership in the deposit insurance scheme are more stable and less likely to become insolvent. Involvement of the deposit insurer in bank failure resolution thus dampens the negative effect that deposit insurance has on banks' risk taking.
{"title":"Resolution of Failed Banks by Deposit Insurers: Cross-Country Evidence","authors":"L. Laeven, Thorsten Beck","doi":"10.1596/1813-9450-3920","DOIUrl":"https://doi.org/10.1596/1813-9450-3920","url":null,"abstract":"There is a wide cross-country variation in the institutional structure of bank failure resolution, including the role of the deposit insurer. The authors use quantitative analysis for 57 countries and discuss specific country cases to illustrate this variation. Using data for over 1,700 banks across 57 countries, they show that banks in countries where the deposit insurer has the responsibility of intervening failed banks and the power to revoke membership in the deposit insurance scheme are more stable and less likely to become insolvent. Involvement of the deposit insurer in bank failure resolution thus dampens the negative effect that deposit insurance has on banks' risk taking.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"55 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125466730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2006-05-01DOI: 10.1111/j.1467-9361.2006.00316.x
A. Paloni, M. Zanardi
Is the World Bank's Development Policy Lending likely to enhance ownership and have greater effectiveness than structural adjustment? We specify a dynamic common agency model in which a government considering economic reform faces domestic opposition from interest groups. The dynamic specification, which is original in the context of policy reforms supported by the International Financial Institutions (IFIs), is essential to allow the strength of special interest groups to arise endogenously during the reform process. We show that conditionality may alter the country's political equilibrium and lead to higher social welfare. However, under certain circumstances which depend on country-specific circumstances, conditional assistance could lead to lower social welfare. Thus, for conditionality not to be inconsistent with ownership, its design must be appropriate to the country circumstances and directly affect the domestic political constraint.
{"title":"Development Policy Lending, Conditionality, and Ownership: A Dynamic Agency Model Perspective","authors":"A. Paloni, M. Zanardi","doi":"10.1111/j.1467-9361.2006.00316.x","DOIUrl":"https://doi.org/10.1111/j.1467-9361.2006.00316.x","url":null,"abstract":"Is the World Bank's Development Policy Lending likely to enhance ownership and have greater effectiveness than structural adjustment? We specify a dynamic common agency model in which a government considering economic reform faces domestic opposition from interest groups. The dynamic specification, which is original in the context of policy reforms supported by the International Financial Institutions (IFIs), is essential to allow the strength of special interest groups to arise endogenously during the reform process. We show that conditionality may alter the country's political equilibrium and lead to higher social welfare. However, under certain circumstances which depend on country-specific circumstances, conditional assistance could lead to lower social welfare. Thus, for conditionality not to be inconsistent with ownership, its design must be appropriate to the country circumstances and directly affect the domestic political constraint.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126947654","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explores the dynamics of convergence in Latin American countries and asks whether there are tendencies for converging to different clubs. The analysis shows clear differences between two groups: a large group of low-to-middle income countries and a small group of rich ountries. The club of low-to-middle income countries showed a tendency of spreading out until the mid 1990s and slight convergence afterwards. At the same time, the distance between the rich countries and the low-to-middle income countries faded away over time,particularly during the 1980s. However, during most of the 1990s, when convergence was occurring in the group of low-to-middle income countries, the rich countries started to pull away clearly distancing themselves again as a different club. The study of club behavior is important because the presence of clubs might suggest that there are common factors among groups of countries leading them to develop (and converge) in similar fashion. Identifying such common factors (if they exist) might improve our understanding of why some countries in the region grow faster than others. This is not possible to analyze with traditional growth regressions that employ a single catching up parameter or with a dispersion statistics like the sigma-convergence. Since these methods cannot detect club behavior much less they can analyze the reasons behind their formation.
{"title":"Latin American Clubs: Uncovering Patterns of Convergence","authors":"J. Blyde","doi":"10.2139/ssrn.900124","DOIUrl":"https://doi.org/10.2139/ssrn.900124","url":null,"abstract":"This paper explores the dynamics of convergence in Latin American countries and asks whether there are tendencies for converging to different clubs. The analysis shows clear differences between two groups: a large group of low-to-middle income countries and a small group of rich ountries. The club of low-to-middle income countries showed a tendency of spreading out until the mid 1990s and slight convergence afterwards. At the same time, the distance between the rich countries and the low-to-middle income countries faded away over time,particularly during the 1980s. However, during most of the 1990s, when convergence was occurring in the group of low-to-middle income countries, the rich countries started to pull away clearly distancing themselves again as a different club. The study of club behavior is important because the presence of clubs might suggest that there are common factors among groups of countries leading them to develop (and converge) in similar fashion. Identifying such common factors (if they exist) might improve our understanding of why some countries in the region grow faster than others. This is not possible to analyze with traditional growth regressions that employ a single catching up parameter or with a dispersion statistics like the sigma-convergence. Since these methods cannot detect club behavior much less they can analyze the reasons behind their formation.","PeriodicalId":163698,"journal":{"name":"Institutional & Transition Economics eJournal","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121600594","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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