scholarly journals Credits, Crises, and Capital Controls: A Microeconomic Analysis

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
Zvika Neeman ◽  
Gerhard Oskar Orosel
Keyword(s):  
Foreign Investment ◽  
Currency Crises ◽  
Emerging Market ◽  
Currency Crisis ◽  
Capital Controls ◽  
Foreign Banks ◽  
Economic Risk ◽  
Its Analysis ◽  
Microeconomic Analysis ◽  
Project Risks

Abstract We analyze the behavior of foreign banks who sequentially provide credit to finance projects in an emerging market. The foreign banks are exposed to both project-risks and the macro-economic risk of a currency crisis, and there are no bailout guarantees. Nevertheless, we show that it is often the case that banks provide too much credit too easily and that this behavior may precipitate the onset of a currency crisis. We demonstrate how the imposition of capital controls in the form of taxes and subsidies on foreign investment may improve the situation. Whereas most of the literature on currency crises focuses its analysis on debtor countries and thus on the borrowers' side, our paper illustrates that the lenders' side also deserves attention.

Modeling Country-Specific Risks in Foreign investment Using an Expert-Driven System

2003 ◽  
Vol 4 (1) ◽  
pp. 105-123
Author(s):  
Aboubaker Seddik Meziani
Keyword(s):  
Financial Markets ◽  
Foreign Investment ◽  
Capital Controls ◽  
Country Risk ◽  
Analytic Hierarchy ◽  
Breach Of Contract ◽  
National Market ◽  
Driven System ◽  
Hierarchy Process ◽  
Country Specific

Assuming that regulatory obstacles such as capital controls, breach of contract, and other market imperfections are still predominant even in today’s increasingly integrated financial markets, this study demonstrates application of the analytic hierarchy process (AHP) to effectively assess country-specific risks to cross-border investments. The AHP is an expert-driven system that has been applied to numerous fields but has yet to be applied to the assessment and management of country-risk exposure. This study shows that it is also capable of selecting an optimal host country (OHC) for a foreign investment, herein a national market where country-specific risks are least likely to adversely affect its return.

Most Speculative Attacks Do Not Succeed: Currency Crises and Currency Crashes

2018 ◽  
Vol 09 (01n02) ◽  
pp. 1850001 ◽  
Author(s):  
Hassan Almahmood ◽  
Munif Al Munyif ◽  
Thomas D. Willett
Keyword(s):  
Exchange Rates ◽  
Interest Rates ◽  
Currency Crises ◽  
Emerging Market ◽  
Exchange Market ◽  
Speculative Attacks ◽  
Considerable Research ◽  
Different Types ◽  
Almost All ◽  
Market Pressure

While there has been considerable research on currency crises, relatively little attention has been given to whether they are successful or not. We investigate this question for a set of 32 emerging market economies for the period 1980–2014. In the literature, many different measures of currency crises have been used, but almost all use some variants of exchange market pressure indices that look at changes in exchange rates, international reserves, and often also interest rates. These vary mainly in their specific specifications such as how to weigh the different variables. Therefore, to check the robustness of our results we use six different specifications. A second type of measure is also sometimes used. These focus only on large depreciations of exchange rates. While often called measures of currency crises they are really only measures of currency crashes. We thus take this approach as a measure of successful attacks. Using a wider range of thresholds than studies such as Lavean and Valencia’s, a well-known dataset of different types of financial crises, we still find that the vast majority of speculative attacks are not successful.

scholarly journals Return Levels Approach and Periods of Currency Crises

2018 ◽  
Vol 10 (3) ◽  
pp. 77
Author(s):  
Mouridi HAMIDOU ◽  
Joseph Mung'atu ◽  
George Orwa
Keyword(s):  
Currency Crises ◽  
Currency Crisis ◽  
Value Theory ◽  
Extreme Value ◽  
Return Level ◽  
Sample Mean ◽  
New Approach ◽  
Gev Distribution ◽  
Return Levels ◽  
Block Maxima

Dating and observing currency crisis periods lie at the heart of much international researchers. This is due to the lack of agreement in one research methodology. Until today, there does not exist a single theory or specific international policy regulation that can explain this phenomenon in global. To identify the periods of currency crisis, many methods have been brought out. Literature first employed a combination of sample mean and standard deviation. Some recent studies have attempted to use extreme value theory (EVT). Although these procedures have been more criticized in most of the literature. These drawbacks of existing approaches give rise to a new approach which is the main goal of this research. The main purpose of this study is to employ return levels technique to date currency crisis periods. The study will discuss only one method the block maxima approach. The stress losses i.e the generalized extreme value (GEV) distribution will be fitted to the annual block maxima to estimate the T-year return levels of extreme exchange market pressure index (EMPI). The parameters of the GEV distribution are estimated using the ML estimator method. Beside, a detailed procedure of the new approach is implemented. A comparison study between our identification approach and the existing conventional approach in the most literature is also conducted. We further illustrate the method by an empirical study on identifying periods of currency crisis of Kenya as case study. For practical implement the study focuses only on one single currency crisis model known as the alternative EMP index model for the intent of arbitrating the performance among various techniques. Results suggest that our new approach (RLDT) is performing better than the conventional method when the return period is considered big. Nonetheless, our technique appears to dominate the existing conventional approaches. This paper covers only a small area of this growing field of research. Hopefully, our investigations to contribute to these efforts by showing that return level dating technique derived from stress-losses model may have a place in the toolbox of economists looking for more accurate techniques in predicting currency crises.

scholarly journals How outward investment from emerging markets affects economic development at home: using the eclectic paradigm to synthesize two IB literatures

2020 ◽  
Vol 28 (4) ◽  
pp. 463-482
Author(s):  
Guus Hendriks
Keyword(s):  
Economic Development ◽  
International Business ◽  
Foreign Investment ◽  
Research Agenda ◽  
Emerging Market ◽  
The Other ◽  
Content Type ◽  
Important Policy ◽  
Eclectic Paradigm ◽  
Development Outcomes

Purpose This paper aims to use the eclectic paradigm as a broad organizing framework to bring together two somewhat parallel international business (IB) literatures, one on the development effects of multinational enterprise activity and the other on the internationalization of emerging market multinationals (EMNEs). The author does so to better understand how outward foreign investment shapes economic development in firms’ home countries. Design/methodology/approach Considering that the characteristics of foreign investment by EMNEs likely differ from that of their developed economy counterparts and that such characteristics may have unique development consequences, the author revisits one of IB’s overarching theories to rethink how ownership, location and internalization advantages take shape and stimulate diverse development outcomes. Findings My narrative review and conceptual analysis indicate that the eclectic paradigm is a valuable framework that can be used to shed light on underexplored phenomena and thereby inform important policy debates. The analysis suggests that unique characteristics of EMNE investment simultaneously have positive and negative development consequences in their home countries. Practical implications The author sets out a research agenda that revolves around six propositions that separately relate one of these three distinct characteristics of EMNE investment to two development outcomes, namely, spillovers and direct effects on home-country employment. My propositions suggest that important policy dilemmas potentially apply, in that each of the three characteristics positively affects one of the aspects of development, but negatively the other. Originality/value My research agenda presents international business scholars with new opportunities to build on a history of policymaking impact, now geared toward resolving society’s grand challenge of underdevelopment.

scholarly journals CORPORATE GOVERNANCE IN EMERGING MARKET ECONOMIES: THE THEORY BEHIND CORPORATE GOVERNANCE AND ITS PRACTICAL APPLICATION IN THE BRICS COUNTRIES –ANALYSIS OF THE BRAZIL EXAMPLE

2020 ◽  
Vol 5 (8) ◽  
pp. 38-46
Author(s):  
Margarita Khoteeva ◽  
Daria Khoteeva
Keyword(s):  
Corporate Governance ◽  
Foreign Investment ◽  
Capital Investment ◽  
Foreign Capital ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Practical Application ◽  
Market Economies ◽  
Brics Countries

This article examines the role of corporate governance regulations in the emerging market economies giving a critical analysis of the example of a BRICs country - Brazil. The article presents a study of the theoretical aspects of corporate governance regulations, how they work and what effect they have on the economy of a developing country. The study is motivated by the question how corporate governance can benefit foreign investment into an emerging market country. The findings of the study are illustrated by the Brazilian example of how the corporate governance regulations were introduced into company practice in the country and what effect they had on the economic situation. This analysed example shows what problems were identified in the process and various ways to overcome them to provide more confidence to the foreign capital investment into the country.

scholarly journals Pension fund regulation: Unintended consequences of foreign investment restrictions in an emerging market economy

2016 ◽  
Vol 6 (4) ◽  
pp. 485-493
Author(s):  
Coert Frederik Erasmus ◽  
Johan van Huyssteen
Keyword(s):  
Foreign Investment ◽  
Pension Fund ◽  
Emerging Market ◽  
Unintended Consequences ◽  
Foreign Asset ◽  
Retirement Savings ◽  
Investment Allocation ◽  
Developed Markets ◽  
Investment Returns ◽  
Provident Fund

Retirement savings allow investors to earn income after retirement by saving while being part of the workforce. Retirement savings comprise the largest portion of retirement savings and should be safeguarded by effective regulation. To safeguard retirement savings, exposure to foreign asset investments is limited. However, in an emerging economy, limiting foreign asset investments, especially investment in developed markets, could hamper the potential investment returns due to the translation risk. To assess the effect of translation risk, a preservation provident fund was used in the present study to determine whether the returns of this preservation provident fund would be adversely affected by investment allocation regulation. The findings indicated how the translation effect affected the preservation provident fund, illustrating the adverse unintended consequences of investment regulation in emerging market economies. Consequently, regulators should reconsider the maximum allowed foreign asset investment in pension fund regulations to enhance investment returns from foreign asset investments

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