Showing papers in "Emerging Markets Finance and Trade in 2005"
TL;DR: In this article, empirical evidence indicates that black market premium, interest rate differential, inflation rate, growth, home and host country income levels, and periods of military administration in Turkey have significantly affected workers' remittance flows.
Abstract: Workers' remittance flows to Turkey have dramatically increased since the 1960s, constituting a significant proportion of imports. The empirical evidence in this paper indicates that black market premium, interest rate differential, inflation rate, growth, home and host country income levels, and periods of military administration in Turkey have significantly affected these flows. Among them, the negatively significant effects of the black market premium, inflation, and a dummy for periods of military administration point at the importance of sound exchange rate policies and economic and political stability in attracting remittance flows. In addition, both investment and consumption-smoothing motives are observed, though the former of which appears more prevalent after the 1980s.
152 citations
TL;DR: In this article, the authors compared the relationship between distribution, growth, accumulation, and employment in Turkey and South Korea by means of a post-Keynesian open economy model, which includes a demand-driven labor market and a reserve army effect in the Marxian sense.
Abstract: The aim of the paper is to compare the relationship between distribution, growth, accumulation, and employment in Turkey and in South Korea. These countries represent two different cases of export-oriented growth. The results of the structural adjustment experiences of both countries are in striking contrast to orthodox theory; however, they also present counterexamples to each other in terms of policies of economic integration. The paper tests whether accumulation and employment are profit-led in these two countries by means of a post-Keynesian open economy model, which includes a demand-driven labor market and a reserve army effect in the Marxian sense. The model is estimated in a structural vector autoregression (SVAR) form in order to capture the complex simultaneous interaction between distribution, accumulation, growth, and employment within a systems approach. This model, and the method of estimation, are the two innovations of this paper in addressing the crucial policy issues related with structu...
81 citations
TL;DR: In this paper, the causal relationship between stock prices and volume figures for stock markets in Czech Republic, Hungary, Poland, Russia, and Turkey was explored, and the results showed that stock prices were correlated with volume figures.
Abstract: This paper explores the causal relationship between stock prices and volume figures for stock markets in the Czech Republic, Hungary, Poland, Russia, and Turkey. Prior to running causality tests, t...
75 citations
TL;DR: In this paper, the authors investigate the impact of the presence of multinational corporations (MNCs) in the host country on the productivity of local firms, by way of technology diffusion and competition.
Abstract: It is now stylized that the importance of foreign direct investment for developing countries and emerging markets arises from the impact of the presence of multinational corporations (MNCs) in the host country on the productivity of local firms, by way of technology diffusion and competition. There is also general agreement that the extent of technology transfer by an MNC to a developing country affiliate depends on the extent of its control on the local affiliate and that, in turn, the extent of this control depends on the mode of entry of the MNC into the host country. However, the existing literature is based on the experience of developed countries and as such does not contribute to the literature on development economics. This article addresses this lacuna using unique firm-level data from South Africa and Egypt. Our results indicate that the determinants of entry mode choice not only differ between developed and developing countries, but also among developing countries. They also bring into question the role of MNCs in fostering productivity growth in developing countries.
75 citations
TL;DR: This paper examined the dividend behavior of Indian corporate firms in an emerging market (India), identifying characteristics of dividend payers and nonpayers from 1991 to 2001, and found that the percentage of companies paying dividends declined, from over 57 percent in 1991 to 32 percent in 2001 and that only a few firms paid regular dividends.
Abstract: This study examines the dividend behavior of Indian corporate firms in an emerging market (India), identifying characteristics of dividend payers and nonpayers from 1991 to 2001. Dividend trends for a large sample of stocks traded on Indian markets indicate that the percentage of companies paying dividends declined, from over 57 percent in 1991 to 32 percent in 2001, and that only a few firms paid regular dividends. Even though regular payers consistently paid higher dividends than did other firms, on average, Indian firms became less likely to pay dividends by the close of the century. Dividend-paying companies were likely to be larger and more profitable than nonpaying companies, though growth opportunities do not seem to have significantly influenced the dividend policies of Indian firms.
64 citations
TL;DR: In this paper, the authors examined the macroeconomic performance of 25 transition economies using a comparable data set and found that transition to a market-based economy increased economic efficiency, technical progress, and total factor productivity.
Abstract: The paper examines the macroeconomic performance of 25 transition economies using a comparable data set. In order to see whether transition to a market-based economy increased economic efficiency, technical progress, and total factor productivity (TFP), we estimate efficiency measures for Eastern European and Baltic countries and the republics of the former Soviet Union using stochastic frontier analysis (SFA) and data envelopment analysis as a confirmatory analysis. According to the SFA estimates, the average annual efficiency level for the 25 transition economies is 0.548, and the average annual rate of growth in technical efficiency is 1.8 percent for the 1991-2000 period. The average annual technical change in transition economies is -4.3 percent for the period examined. That is, there is no technological progress, but over the period there has been a technological regress. The sum of the rate of change in technical efficiency and technical change implies a 2.5 percent decline in the average annual TF...
57 citations
TL;DR: In this paper, the authors examined the interaction between ownership structure and firm value in the following ways: identity and ownership concentration of outside blockholders controlling at least 5 percent of total equity of the firm, and found a significant curvilinear relationship between firm value and the fraction of voting rights owned by insiders.
Abstract: This paper contributes to understanding corporate governance issues in emerging economies by examining how blockholders influence firm value. Using a much disaggregated and uniform database from the Indian corporate sector for the year 2001, we examine the interaction between ownership structure and firm value in the following ways. Unlike most existing research, which studies the aggregate level of ownership, we include a wider set of mechanisms, such as identity and ownership concentration of outside blockholders controlling at least 5 percent of total equity of the firm. We analyze the role played by these shareholders with substantial voting power in situations when equity holding is less compared to the more concentrated holdings of promoters. We also attempt to see if these investors coordinate among themselves to constrain insiders from expropriating corporate resources. We find a significant curvilinear relationship between firm value and the fraction of voting rights owned by insiders. The curve ...
52 citations
TL;DR: In this article, the authors tried to identify the factors explaining underpricing of initial public offerings (IPOs) in an emerging economy, India, using 1,842 companies that got listed on the Bombay Stock Exchange from 1993 to 2001.
Abstract: This paper attempts to identify the factors explaining underpricing of initial public offerings (IPOs) in an emerging economy, India, using 1,842 companies that got listed on the Bombay Stock Exchange from 1993 to 2001. It is found that uncertainty played a role in perverse underpricing in the Indian primary market. IPOs with a large issue size and those that went for seasoned offerings had less underpricing. Contrary to the international evidence, underpricing was less during the high volume (hot) period compared to the slump period in the Indian IPO market. During the hot period, new issues belonging to business groups underpriced more than their stand-alone counterparts did. Small issues belonging to private stand-alone firms had less underpricing during the hot period and did not come to the market subsequently to raise funds. Large issues belonging to the business groups, on the other hand, underpriced more and subsequently raised funds from the market. These results support the predictions of signal...
48 citations
TL;DR: In this paper, a comparison of revealed comparative advantages for six regions (Organization for Economic Cooperation and Development [OECD] north and south, south, South and East Asia, Latin America, Central and Eastern Europe) and four skill types (from low-to high-skill-intensive industries) over the years 1981 to 1997 draws a clear picture of differentiation in industrial trade patterns, which has changed quantitatively but not qualitatively over time.
Abstract: The comparison of revealed comparative advantages for six regions (Organization for Economic Cooperation and Development [OECD] north and south, South and East Asia, Latin America, Central and Eastern Europe) and four skill types (from low- to high-skill-intensive industries) over the years 1981 to 1997 draws a clear picture of differentiation in industrial trade patterns, which has changed quantitatively but not qualitatively over time There is a clear distinction between the trade patterns of advanced OECD countries and all other regions in the sample with respect to skill intensity of export industries Two related trends dominate the picture: a trend toward convergence and a trend toward despecialization Although similar to what has been previously observed for relatively homogenous groups of countries, it is surprising to also find these trends in this larger and more heterogeneous sample
47 citations
TL;DR: In this paper, a composite leading indicator (CLI) for Turkish economic activity that would crucially provide earlier signals of turning points between economic expansions and slowdowns was constructed. But the authors did not consider the effect of seasonal, irregular, and trend components.
Abstract: The aim of this paper is to construct a composite leading indicator (CLI) for Turkish economic activity that would crucially provide earlier signals of turning points between economic expansions and slowdowns. First, for this analysis, the index of industrial production is selected as an indicator for economic activity. Second, a group of variables that perform well both in forecasting and in tracking cyclical developments of economic activity is selected from a broad set of economic indicators related to industrial production. While constructing the CLI, a growth cycle approach is used. The resulting cyclical patterns of the series are obtained by eliminating seasonal, irregular, and trend components via TRAMO/SEATS programs and Hodrick-Prescott filter. The selection of the component series is based on theoretical economic significance and their leading performance at cyclical turning points. From the selected series, different CLIs are constructed, and that with the best performance is chosen as the CLI...
31 citations
TL;DR: In this paper, the authors examined the cost efficiency and scale economies of banks operating in Poland and the Czech Republic during the period from 1995 to 2000 and found that Polish banks are, on average, more efficient than Czech banks.
Abstract: This paper examines the cost efficiency and scale economies of banks operating in Poland and the Czech Republic during the period from 1995 to 2000 A common cost frontier with country-specific environmental variables is estimated for a panel of fifty-four banks A stochastic frontier model is used to estimate the cost efficiency and economies of scale The results show the importance of environmental variables in the definition and specification of the common frontier It is found that Polish banks are, on average, more efficient than Czech banks The results further suggest that foreign banks operating in the Czech banking sector have significantly higher efficiency levels than those of domestic banks Finally, there is evidence of significant economies of scale for small and medium-sized banks, but diseconomies of scale for large-sized banks
TL;DR: In this paper, a dynamic valuation model that motivates controlling stockholders to convert their non-floatable shares to floatable shares is presented, and issues on how to improve future corporate governance in China are discussed.
Abstract: This study explains the conflict of interest between the majority stockholders, who have nonfloatable shares, and the minority stockholders, who have floatable shares in China's stock market. The growth of the Chinese financial markets is seriously constrained given the market segmentation of the two classes of stocks. This study provides a dynamic valuation model that motivates controlling stockholders to convert their nonfloatable shares to floatable shares and illustrates how a security design is able to float these shares. Issues on how to improve future corporate governance in China are also discussed.
TL;DR: In this article, the authors used monthly data from eight developing Asian countries over a thirty-one-year period and found that the domestic price and the foreign price are not weakly exogenous in many countries.
Abstract: Testing purchasing power parity (PPP) in the black market has increased in recent years due to the apparent puzzle in the literature by which PPP is largely rejected in flexible exchange rate regimes Many studies of PPP suffer from the problem of imposing symmetry and proportionality restriction and fail to address the issues of stationarity and exogeneity We address these issues in this paper by using monthly data from eight developing Asian countries over a thirty-one-year period Even though the variables are cointegrated in a Johansen-Juselius framework, it is found that the domestic price and the foreign price are not weakly exogenous in many countries, and a direct test provides the rejection of the PPP hypothesis
TL;DR: In this article, the authors investigated the relationship between domestic macroeconomic variables and stock excess returns to evaluate the effects of macroeconomic variable on excess returns and assess market efficiency in the Southeast Asian economies prior to the 1997 Asian crisis.
Abstract: This paper investigates the relationship between domestic macroeconomic variables and stock excess returns to evaluate the effects of macroeconomic variables on excess returns and assess market efficiency in the Southeast Asian economies prior to the 1997 Asian crisis. Based on various tests, monthly stock excess returns are best specified by autoregressive conditional heteroskedasticity-type models. The null hypothesis of a martingale process is rejected, and some macroeconomic variables are identified that seem to have a certain predictive power for excess returns. Moreover, it appears that Asian monetary authorities seem to have had a credibility problem in keeping inflation within a target range. The lack of credibility and transparency may have contributed to the 1997 crisis.
TL;DR: In this article, the authors test the expectations hypothesis (EH) for the short end of the Polish interbank term structure and find that the actual yield spread is an unbiased predictor of the perfect foresight spread.
Abstract: This paper tests the expectations hypothesis (EH) for the short end of the Polish interbank term structure. Employing daily data, the hypothesis that the actual yield spread is an unbiased predictor of the perfect foresight spread is tested. Additionally, Johansen's FIML procedure is used in order to explore the dynamic comovement of yields across the term structure and also test the parameter restrictions imposed by the EH. The empirical findings provide some evidence in favor of the EH. In particular, there is evidence that all yields share a common stochastic trend. Furthermore, at the margin, the EH restrictions imposed on the cointegration space are not rejected. On balance, one might conclude that the EH is not grossly at variance with the data.
TL;DR: In this article, the authors explore mechanisms linking trade and restructuring in Central and Eastern European (CEE) countries through learning and industrial upgrading, and show that trade-based learning mechanisms have strong effects on differences in industrial upgrading between CEE economies.
Abstract: This paper explores mechanisms linking trade and restructuring in Central and Eastern European (CEE) countries through learning and industrial upgrading. These are reflected in changes in the composition of trade through changes in the relative shares of particular products and clusters in exports (scale), and in the number of products exported (scope). An analysis of export clusters shows the decreasing importance of commodities (homogeneous resource-based goods) and a shift toward technology and labor-intensive products to be a common trend. However, differences between the countries are strong with respect to changes in both scale and scope in technology and labor-intensive activities. These differences show that trade-based learning mechanisms have strong effects on differences in industrial upgrading between CEE economies.
TL;DR: In this article, a systematic approach to studying predictability and nonlinear dependence in the context of the Indian stock market, one of the most important emerging stock markets in the world, is proposed.
Abstract: This paper suggests a systematic approach to studying predictability and nonlinear dependence in the context of the Indian stock market, one of the most important emerging stock markets in the world The proposed approach considers nonlinear dependence in returns and envisages appropriate specification of both the conditional first- and second-order moments, so that final conclusions are free from any probable statistical consequences of misspecification To this end, a number of rigorous tests are applied on the returns, based on four major daily indices of the Indian stock market It is found that the Indian stock market is predictable, and this observed lack of efficiency is due to serial correlation, nonlinear dependence, day-of-the week effects, parameter instability, conditional heteroskedasticity (GARCH), daily-level seasonality in volatility, the short-term interest rate (in some subperiods of some indices), and some dynamics in the higher-order moments
TL;DR: In this paper, the authors focus on return spillovers in stock markets at different time scales using wavelet analysis and find evidence of price spillovers from the G7 countries to Europe, Eastern Europe and the Middle East, emerging Asia, Europe, Latin America, and North America.
Abstract: This paper focuses on return spillovers in stock markets at different time scales using wavelet analysis. We look at eight stock indices that comprise the G7 countries, emerging Asia, Western Europe, Eastern Europe and the Middle East, the emerging Far East, Latin America, North America, and the Pacific region for the period 1990-2002. Our estimation results show evidence of price spillovers from the G7 countries to Europe, Eastern Europe and the Middle East, emerging Asia, Europe, Latin America, and North America. However, price spillovers from these regions to the G7 countries are weaker at different time scales. Similarly, we find price spillovers from North America to Latin America, emerging Asia, the emerging Far East, and the Pacific region, and from both Europe and Latin America to North America. Our results are robust to the existence of asymmetric generalized autoregressive conditional heteroskedasticity (GARCH) effects and serial correlation in returns. We believe that our findings are potentially relevant to portfolio risk management.
TL;DR: In this paper, the most important determinants of commercial/official arrears and reschedulings are the debt-to-GDP ratio, inflation, trade liberalization, and the variability of GNP per capita growth.
Abstract: The global financial unrest over the last decade has shifted the attention of banking regulators (Basel II, 2001) in estimating default probabilities for a variety of borrowers. Within a binary choice panel data framework, the current study analyzes various models and cross-examines their performance in identifying financial crises in emerging markets. Using financial ratios, macroeconomic variables, and international factors, the paper identifies a set of warning indicators and discriminates among the three estimators employed. The most important determinants of commercial/official arrears and reschedulings are the debt-to-GDP ratio, inflation, trade liberalization, and the variability of GNP per capita growth. In addition to that, changes in financial flows from foreign investors do affect default frequencies, while external developments are found to be insignificant. Cross-modeling comparison indicates the presence of different exogenous risk factors, depending on the approach employed. Further analysi...
TL;DR: In this article, the authors study the fundamental macroeconomic determinants of both the inflation-based and the tradable price-based real effective exchange rate in five acceding countries from Central and Eastern Europe, that is, the Czech Republic, Hungary, Poland, Slovakia, and Slovenia.
Abstract: In this article, we study the fundamental macroeconomic determinants of both the inflation-based (i.e., CPI) and the tradable price-based (i.e., PPI) real effective exchange rate in five acceding countries from Central and Eastern Europe, that is, the Czech Republic, Hungary, Poland, Slovakia, and Slovenia. The article is based on the combination of two approaches widely used for transition economies, namely, the behavioral equilibrium exchange rate and the structural vector autoregression. Indeed, a cointegration approach is adopted, and an estimated vector error correction model attempts to connect in a structural way the real effective exchange rate to labor productivity, the relative price of nontradable goods, public deficit, and the current account position. Impulse-response functions are subsequently employed to investigate how shocks in the underlying fundamentals impact on the effective real exchange rates.
TL;DR: In this article, the existence of a bank lending channel in Chile is investigated and the authors find that banks respond asymmetrically to monetary shocks depending upon their own characteristics, and that monetary shocks alter loan portfolio decisions in the aggregate.
Abstract: This paper considers the existence of a bank lending channel in Chile. Toward that, we collect a data sample of nineteen banks that operated in Chile over January 1999- December 2002. In that period, banks primarily offered loans to firms in the manufacturing and the financial-services sectors (representing 13 and 26 percent of total loans, respectively), and to households through consumption and mortgage loans (at 9 and 10 percent of total loans, respectively). Our estimation results support the existence of a bank lending channel. We find that banks respond asymmetrically to monetary shocks depending upon their own characteristics, and that monetary shocks alter loan portfolio decisions in the aggregate.
TL;DR: In this paper, the authors examined the risk, return, securities selection, and market timing performance of China's securities investment funds (SIFs), in comparison with the US SIFs.
Abstract: Using daily data from May 2000 to January 2004, this study examines the risk, return, securities selection, and market timing performance of China's securities investment funds (SIFs), in compariso
TL;DR: In this article, the difference between T-bill returns and common stock returns in Turkey was examined and it was observed that there is a bond premium in Turkey unlike the equity premia in developed countries.
Abstract: In this paper we examine the difference between T-bill returns and common stock returns in Turkey. We observe that there is a bond premium in Turkey unlike the equity premia in developed countries. As an attempt to explain this surprising observation, we incorporate inflation risk and default risk to the Mehra and Presscott (1985) dynamic asset-pricing model. Calibration with reasonable parameter values indicates that the inflation risk alone is not sufficient to explain the observed bond premium. However, by allowing for the presence of a perceived default probability, we can explain the observed bond premium on Turkish T-bills over Turkish common stocks.
TL;DR: In this article, the effects of international capital inflows on the Turkish economy were investigated and it was argued that increased consumption demand results in an increase in the relative prices of nontradable sectors with respect to tradable sectors.
Abstract: The main objective of this study is to investigate the effects of international capital inflows on the Turkish economy. Capital inflows, it is argued, can trigger both private consumption and investment expenditures. Increased consumption demand results in an increase in the relative prices of nontradable sectors with respect to tradable sectors. This eventually leads to a change in the composition of investments in favor of nontradable at the expense of tradable sectors. Increased investment in nontradable sectors does not contribute to the foreign exchange earning capacity of a country, and, given such, a country eventually becomes more vulnerable to currency shock. This can trigger major problems, such as significant capital outflows, large current account deficits, currency crisis, and economic contraction.
TL;DR: In this article, the authors examined the efficiency of the Amman Stock Exchange (ASE) vis-a-vis the date of its automation and found that the moved to electronic trading system had no significant impact on the ASE's efficiency.
Abstract: Realizing the benefits of stock markets in real economies, the Jordanian capital market--the Amman Stock Exchange (ASE)--was established in 1978. After more than two decades, the manual trading system of the market was replaced by a computerized trading mechanism on March 27, 2000. The primary objective of the new system is to offer investors more protection and transparency. This paper examines the efficiency of the ASE vis-a-vis the date of its automation. Based on a multifactor model with time-varying coefficients, the results show that the moved to electronic trading system had no significant impact on the ASE's efficiency. For volatility, however, we found evidence that suggests there was an increase in volatility after the introduction of automated trading.
TL;DR: In this paper, the authors study the establishment and development of the most successful futures market in China and document the evolution of the market microstructures and the attempts by the Zhengzhou Commodity Exchange's management to improve the performance of the futures market.
Abstract: We study the establishment and development of the most successful futures market in China. We document the evolution of the market microstructures and the attempts by the Zhengzhou Commodity Exchange's management to improve the performance of the futures market. Our finding suggests that if other former centrally planned economies want to establish futures markets, they must think carefully not only of the design and microstructure of the futures market, but they also have to choose carefully what contracts to offer.
TL;DR: In this paper, the development of an Asian bond market, which serves as a bridge to establish financial cooperation in the region, is discussed and examines the issues of currency denomination and role that China may play in the establishment of the bond market.
Abstract: This paper discusses and examines the development of an Asian bond market, which serves as a bridge to establish financial cooperation in the region. The issues of currency denomination are discussed. In addition, the role that China may play in the establishment of the bond market is presented and analyzed. It is argued that cooperation between China and Hong Kong is desirable to further enhance the development of the market.
TL;DR: In this paper, a vector autoregressive analysis was used to analyze the relationship between deficit and debt rates and shed light on their future values for the Chinese economy. But, the analysis was limited to the case of China.
Abstract: This study examines the government fiscal deficit and debt rates in China. We utilize a theoretical framework to develop the government budget identity and the public deficit-debt models. This approach gives a theoretical basis to analyze the fiscal deficit and debt rates in China. Using a vector autoregressive analysis, the study empirically investigates the relationship between deficit and debt rates and sheds light on their future values for the Chinese economy.