After 2008 Global Financial Crisis, Short-Term Dynamics of CDS, Bond, and Stock Markets in South Eastern European Economies

Credit risk pricing is perhaps an understudied topic in comparisons to its profound impact on the world’s financial markets and economies. This study uses established price discovery techniques to develop a method of price discovery for credit risk in three financial markets: equity, debt, and credit derivative. This chapter is motivated by the development of credit-related instruments and signals of stock price movements of South-Eastern European countries—Bulgaria, Croatia, Greece, Hungary, Romania, Slovenia, Slovakia, and Turkey—during the recent financial crisis. In this study, the authors evaluate the dynamics of fiscal risk or country risk measured by sovereign Credit Default Swap (CDS), liquidity risk measured bond markets, and stock markets for the monthly based September 2008 – February 2011 period. The study examines monthly data observing 38 months and 8 countries. A panel vector autoregression model is proposed for changes in Long-Term Interest Rate (LTIR), changes in CDS spreads (CDS), and changes in stock index. In conclusion, CDS markets and stock markets are more significant than bond markets in explaining the post-crisis relationship among developing South-Eastern European countries. The analysis displays that long-term monetary policy did not affect CDS premium and stock index level. A strong relationship is found between the CDS spread and stock market. During financial crisis and after the crisis, the correlations among CDS, stock, and bond markets are collapsed by panicked investors’ rapid movement and wild speculators. This risk perception can explain the difference between the finance theory and practices in the market.

Financial Marriage of Convenience between China and the US

Despite growing global concerns regarding the reliability of the American economy in general and the Dollar as a Negotiated Currency in particular, US-shaped regime of international finance will survive the present difficulties. This is mainly due to the fact that China would be predisposed to maintain its backing of the US Dollar, not to harm it, because it staked a massive economic and political capital in that. Beijing has so far persisted in assisting the global value of the US Dollar (sacrificing considerable sums of economic return), which is an apt move to beef up the American domestic market with the intention of keeping Chinese factories busy at all times.

Role of Accounting and Audit in the Recent Financial Crisis

This study aims to assess the role of accounting and auditing in the recent financial crisis. After each crisis, there have been serious discussions concerning the reasons behind those crises. However, no consensus has yet been achieved until now. In this context, the analysis of the relationships among financial crisis, accounting, and auditing is of utmost importance in better evaluating the structural reasons behind the crisis. There are several points that this chapter aims to analyze to indicate the contributions of accounting and auditing to the recent global financial crisis. These points are: impacts of disregarding the main principles of accounting, the wide use of fair value accounting over cost-based accounting, incorrect and misleading financial and audit reports, applications of creative accounting, and lack of transparency and weaknesses of the auditing process. The debates generally concentrate on the use of fair value (mark-to-market) accounting in the financial reports as opposed to the historical cost method. It should be emphasized that accounting is very important as a key mechanism of market economies, because of its crucial role in the functioning of the markets in accordance with the public interest. The chapter concludes with several suggestions by taking the fact into consideration that accounting and auditing systems should be revised for the better protection of interests of the third parties such as investors, potential investors, and the state.

The Effect of Crises on Leadership

Crises can be regarded as the nursery of leadership in a way. They have both created new leaders and have also proved to be a testing ground for the existing leaders, as well as a filter where the inefficient have been eliminated. Man-made crises have been classified as social, economical, and political crises up to recent times. With the development of modern markets, new financial tools have emerged. Those financial tools have the function of regulating the modern economy, but also they have the handicap of propagating their own crises from the economic field to social and political areas. In this context, crises give way to radical changes in the management paradigm. In such an environment, the leadership virtues of the previous paradigm period turn out to be insufficient. Institutions used to survive during the crisis periods by employing their crisis management plans. However, crises gain a permanent nature during the modern times and tactical crisis management becomes insufficient in the new environment. The phenomenon of permanent crisis forces leadership to have some special virtues. Therefore, it becomes necessary to define a new type of leadership, namely “strategic crisis leadership.” The aim of this chapter is to examine the impact of crises on leadership virtues and express reflections on the new type of leadership in the new paradigmal period.

The Economic Crisis

The current chapter shows the gap between the real economy and the financial markets in the United States during the pre-crisis period at the end of 2007, as well as during the subsequent crisis period. The current research chapter also emphasizes the catastrophic effect that financial markets had inside the whole economic system due to this gap. The premise from which this chapter starts can be found in the systems theory and consists in Heinz von Foerster’s theorem. This research has an empirical nature and shows in which way an anomaly within the system can destabilize the entire system, finally resulting in the installation of the crisis period that we are still facing. In order to illustrate this, the authors refer to the evolution of the values of DJIA and real GDP, observed between mid 1940s until 2010 in the United States.

World Energy Outlook and Impact of Oil Prices on Financial Crisis

In this chapter, the correlation of growth in population, economic welfare, and increase in the energy demand is evaluated with examples. The biggest concern of mankind is which sources cover the immense energy demand. It is obvious that fossil fuels are the base energy source, and in order to supply developing energy needs, serious investments are needed in the energy sector. That is why the results of monetary aspects in energy prices and the conditions in leading supplier countries are also evaluated.

Financial Crisis Reveals Systemic Crisis of Official Statistics

The financial crisis of 2008 reveals a significant distortion of the information system and a systemic crisis of the internationally agreed upon National Accounts Approach in Germany. Reports on economic growth and on political key indicators like Gross Domestic Product (GDP) failed, when in 2008 the bankruptcy of the finance system and in 2011 the end of the EURO were to be feared. Comments on the poor statistical results were expressed by the German chancellor Angela Merkel first in 2008. The investigation of the political relevance and reliability of official results reveal distortions and failures that are due to National Accounts and its “toxically infected” database. Positivists like Popper, Carnap, and Friedman criticized for long the tautological bookkeeping approach. Schumpeter puts aggregations to planned economies. The “monetary curtain” of Mises, however, hides the “real economy” and the “bubbles” created by credit financing. Adam Smith might oppose the macro-economic theory of Paul Samuelson and John Meynard Keynes, as they do not differentiate between market production and state and bank services. GDP is a false political reference for monitoring and controlling economic stability. The enterprises, their balances, cash flow, liquidity, and equity are neglected. National assets, like natural resources and property, infrastructure, and logistics and geographical issues are inadequately covered by the present system. Data are poor on the impact of public debt and public ownership on the markets. Data bases are “toxically infected” due to “false response,” “shadow economy,” and “off-shore-hidden-money.” The framework of National Accounts needs revision to improve political relevance and reliability. Investigation is needed to estimate the bias of the database. Audited stocktakings and re-evaluations of accounts and balances are preconditions.

Crisis Effects on the Capital Structure Determinants for Manufacturing Companies

The purpose of the study is to investigate crisis effects on the capital structure determinants for manufacturing companies listed on the Istanbul Stock Exchange Market (ISE) in Turkey for the period 2005-2010. This period is divided into two parts: The period of 2005-2007 is used as pre-crisis period, and the period of 2008-2010 is used as a crisis period. The periods are compared to understand crisis effect on the capital structure determinants. The panel data analysis is used for this study. Short term, long term, and total debt ratios are used as a proxy for the analysis. The sample consists of 138 manufacturing companies in Turkey over the period of 2005-2010. As a result, manufacturing companies’ capital structure is usually determined in accordance with the financial hierarchy theory. During financial crisis, the effects of capital structure determinants deviate from expectations.

Analysis of the Analytical Balance Sheet of Central Bank of Republic of Turkey During 2000 - 2009 Period in terms of Crises

Today, Central Banks’ primary target is to maintain the price stability. In that context, through their monetary policy, they intervene in the money market with different tools. The Analytical Balance Sheet was created upon summing up and offsetting Balance Sheet of the Central Bank of Republic of Turkey (CBRT) in order to represent specific monetary aggregates. By means of that, CBRT aims to make the balance sheet more understandable and simple. In this chapter, firstly the sub items of the Analytical Balance Sheet are explained; secondly, the economic crises of Turkey during 2000-2009 is mentioned; finally, effects of these crises on the CBRT’s Analytical Balance Sheet, changes in monetary aggregates which are Currency Issued, Reserve Money, Monetary Base, and Central Bank’s Money, and in this context structure of the monetary policy of the CBRT in this period is analyzed.

Historically Reading the Concept of Gender by the Dilemma of Heterodox-Orthodox Vision

In this chapter, the authors analyze the concept of gender and its history; they look at the crisis that is caused by this concept in terms of both orthodox economy and the heterodox economy. A wide range of feminist economics arguments are considered. Feminist economics arguments correspond to the points of Antonio Gramsci’s “hegemony” and Louis Althusser’s “ideology.” Starting with both philosophers’ concepts, the authors explicate the dilemma of orthodox-heterodox economics. First, they discuss the vision of heterodox-orthodox economics. Then, they discuss how technology becomes an important part of orthodox economics, and through the aforementioned philosophers, they discuss what would happen in the economic system if this situation changes.