Financial Contraction Research Articles

NAVIGATING MARKET DYNAMICS: A LONGITUDINAL STUDY OF ROMANIA'S LEADING PRINTING FIRMS

In an era marked by rapid digital transformation, economic uncertainties, and the disruptive impact of the COVID-19 pandemic, understanding the mechanisms that contribute to organizational resilience is crucial for both academic inquiry and practical management. This longitudinal study scrutinizes the financial performance of all Romanian printing firms employing five or more individuals, spanning a four-year timeframe from 2019 to 2022. Situated within the overarching theoretical construct of organizational resilience, the research aims to evaluate how these firms have navigated the complexities of economic oscillations and sectoral digital transformation. Employing comprehensive statistical analyses, the study uncovers patterns of financial contraction and subsequent recovery, notably influenced by the disruptive events of the COVID-19 pandemic. Counter-cyclical profit dynamics and the relative stability of employee numbers are among the key findings. These results expand the understanding of financial resilience in the Romanian printing industry and offer nuanced insights for both academics and practitioners, particularly in the context of significant disruptive events like global pandemics

COVİD-19 PANDEMİSİ DÖNEMİNDE İMALAT SANAYİNDE E-PAZARLAMA YÖNELİMİ: CİRONUN DÜZENLEYİCİLİK ROLÜ

E-pazarlama yönelimi dijital çözümlerin pazarlama faaliyetlerine entegre olduğu yeni dönem pazarlama anlayışıdır. Bu bütünleşik pazarlama anlayışı Covid-19 pandemi döneminde pek çok işletme için tercih edilen bir yaklaşım olmuştur. E-pazarlama aktivitelerinin maliyet avantajı ve erişim kolaylığı ile pandemi krizinde ortaya çıkan finansal daralmaya çözüm sunabileceği düşünülmektedir. Bu amaçla çalışmada Ankara ili OSTİM Organize Sanayi Bölgesinde faaliyet gösteren 100 firmanın Covid-19 pandemi süreci ile birlikte e-pazarlama faaliyetlerine yönelimi incelenmiştir. Aynı zamanda e-pazarlama yöneliminin firmaların karlılığı üzerindeki etkisi ve firma cirolarının bu ilişkideki rolü araştırılmıştır. Bu kapsamda firmalardan anket yöntemiyle kesitsel olarak veri toplanarak nicel analizler gerçekleştirilmiştir. Elde edilen bulgulara göre e-pazarlama yönelimi ve kârlılık arasında pozitif ve anlamlı bir ilişki görülürken; cironun bu ilişki üzerinde düzenleyicilik rolü olduğu ortaya çıkmıştır. Düşük ciroya sahip firmalarda e-pazarlama yöneliminin etkisi daha yüksek iken; yüksek cirolu firmalar da bu etki daha düşük seviyededir. Çalışma ile ortaya konan dikkat çekici sonuçların hem alan araştırmacıları hem de pazarlama yöneticilerine katkı sunması arzu edilmektedir.

The New Industrial Strategy in a Context of Financial Contraction in Algeria

Industrial development has gained a position of strength in the successive debates on the realization of economic development projects, accentuated by exceptional progress of new technologies, such as innovation, creativity and entrepreneurship, with a tremendous growth of more innovative companies in terms of production, service delivery or simply concentrated on resell. One can, of course, invoke innumerable theoretical and literary arguments about the contribution of the industrial sector in the economic growth, starting from the works and approaches of the classics and neo-classics, particularly the most contemporary ones, like Rosenstein-Rodan, Myrdal, Nurkse, Hirschman, and many others, as long as the debate focused on the means and instruments to benefit States, provided that it is well managed. Algeria has been well engaged in the implementation of an industrialization strategy, through some programs and projects of revival of the industrial apparatus, in particular the model, globally recognized,” industrializing industries” in order to find alternatives for import substitution and the establishment of an industrial platform capable of raising the level of economic development upwards, and above. Indeed, industrial policy has become hostage of energy and hydrocarbon policy, as long as all investments and efforts have been made and directed in the promotion of the extractive industries, since the oil markets have created opportunities an for financing economic projects, leaving behind other components of the industrial sector, especially manufacturing industries. Taking this into account and in another effort to break away from the grip of the oil sector, the Algerian State turned to a new industrial policy and strategy, which will be more interested in the promotion of manufacturing industries, but this becomes relatively complicated and delicate, in view of the deterioration of public revenues and the possibility of drying up of revenues, as a consequence of the fall in oil prices, leaving, thus, puzzled economic decision-makers on the appropriate means of financing and accompanying this step. We will try, through this paper, to examine the planned and tracked modalities for such a large project, given the economic and financial context, which calls for greater prudence and the rationalization of public expenditures and their targeting.

What provides the micro-foundation of monetary policies in the absence of mature economic institutions?

In the absence of mature economic institutions, what provides the micro-foundation of monetary policies? Taking corporate financing of China's firms as a representative example, first, our data suggest that financial access of firms becomes indeed squeezed as the monetary policies require. Then we confirm that government intervention leads firms' financial access to become difficult since the financial contraction policies. We also provide evidence that government intervention indeed promotes severity of access to finance. These evidences confirm that government intervention squeezes financial access after central government's financial contraction policies and that government intervention functions to support the implementation of monetary policies. Therefore, this paper shows that government intervention provides micro-foundation of the monetary policies in the absence of mature economic institutions.

Network Analysis of Multivariate Transfer Entropy of Cryptocurrencies in Times of Turbulence.

We investigate the effects of the recent financial turbulence of 2020 on the market of cryptocurrencies taking into account the hourly price and volume of transactions from December 2019 to April 2020. The data were subdivided into time frames and analyzed the directed network generated by the estimation of the multivariate transfer entropy. The approach followed here is based on a greedy algorithm and multiple hypothesis testing. Then, we explored the clustering coefficient and the degree distributions of nodes for each subperiod. It is found the clustering coefficient increases dramatically in March and coincides with the most severe fall of the recent worldwide stock markets crash. Further, the log-likelihood in all cases bent over a power law distribution, with a higher estimated power during the period of major financial contraction. Our results suggest the financial turbulence induce a higher flow of information on the cryptocurrency market in the sense of a higher clustering coefficient and complexity of the network. Hence, the complex properties of the multivariate transfer entropy network may provide early warning signals of increasing systematic risk in turbulence times of the cryptocurrency markets.

Nigeria's Post Covid-19 Economic Outlook

Nigeria's Post Covid-19 Economic Outlook

Unlocking Liquidity in Nigeria

We lay out what Nigeria could do to get the economic, fiscal, and financial narratives back to positive. It is indeed very surprising how Nigeria’s impressively positive economic narrative from 1999 to 2014 has given way to an unflattering post-2014 narrative in which the economic terrain is about recession, inflation, unemployment, poverty, restiveness, and insecurity; the financial terrain is about foreign exchange rationing, devaluation, multiple exchange rates, low loan-deposit ratio, and high interest rates; while the fiscal terrain is about low revenue, low capital spending, large deficits, high debt service, rising debt, and concerns about solvency/bankruptcy. With huge windfalls from the commodity price surge from 1999 to 2014, Nigeria enjoyed economic expansion- growth accelerated and commercial services, led by telecommunications and information services, outgrew agriculture and oil- that saw Nigeria’s rank rise phenomenally from the 52nd to 22nd economy in the world; financial expansion- deepening of banks, bonds and equity markets, as well as government revenue and spending; and stability- single digit inflation and interest rates, and a strong exchange rate; and, a marked reduction in misery- falling unemployment and poverty rates. With shortfalls replacing windfalls since the crash of commodity prices in July 2014, Nigeria’s economy has endured economic contraction- growth reversal, recession, and a sluggish recovery to now rank as 30th economy in the world; financial contraction- especially bank deposits, equity market capitalization, and foreign exchange supply, as well as government revenue and spending, and instability- the Naira lost about two thirds of its value against US dollar, while inflation and interest rates jumped into double digits; with the growing misery reflected in growing number of unemployed, poor, and disenchanted. We present data that reveals that the common thread between the two eras is the quantum of external liquidity at the country’s disposal. External liquidity surge from windfalls fuelled the era of expansion and stability, just as external liquidity shortages from shortfalls inflicted contraction and instability. We show that unfolding global realities now mean that Nigeria could easily adopt policies to raise external liquidity thresholds enough to switch from contraction to expansion. Global liquidity glut has seen a doubling of long-term capital inflows to developing countries in the last decade and Nigeria is very well-placed to strategically reposition itself to get a fair share of that. Despite negative external income shock, domestically, Nigeria remains prodigiously asset rich. Nigeria’s large population spread in scores of urban centres and past oil booms combine to bequeath her with valuable public assets. However, while Nigeria’s economic, fiscal and financial struggles resulting from the decline in income have been conspicuous in news headlines, the solutions that the value of assets owned by Nigeria could unleash have been less so. We draw attention to the hidden value in vast assets owned by Nigeria, make a case for unlocking massive domestic and external liquidity required to arrest the economic, fiscal and financial crisis from them, and articulate four ways of doing so. We show that Nigeria could adopt the following options to raise domestic and external liquidity thresholds: (i.) Securitize equity holdings in NLNG and other oil and gas Joint Ventures to shore up foreign reserve threshold, while giving Nigerians at home and in diaspora opportunities to invest in the assets and earn some of the dividends. (ii.) Privatize to attract brownfield FDI by converting all wholly owned corporate assets to securitizable Joint Ventures stakes in which government owns up to 49 percent and foreign investors own up to 51 percent. (iii.) Liberalize to attract greenfield FDI by breaking government monopoly in all infrastructure sectors to encourage entry of foreign investors who could operate in parallel to the Joint Ventures. (iv.) Commercialize idle or under-utilized state-owned lands and built structures by relocating uneconomic activities from prime locations and repurposing them for leasing to open new streams of non-tax revenue. Doing these will change Nigeria’s economic, fiscal and financial narratives by unlocking the liquidity Nigeria needs to strengthen the Naira, rejuvenate fiscal, financial and foreign exchange streams, rebuild infrastructure, diversify and accelerate growth, eradicate poverty and unemployment, and lay the foundations for shared prosperity. Leading developing countries adopt different combinations of these four options to fuel their transformation.

Trade Finance and Trade Collapse during the Global Financial Crisis: Evidence from the Republic of Korea

(ProQuest: ... denotes formulae omitted.)I. IntroductionAs soon as the Global Financial Crisis of 2008-09 broke out, economists, policy makers and the leaders of the world economy expressed concerns about the adverse effects of financial contraction on world trade, and called for coordinated efforts to prevent a drying-up of trade finance. The G-20 quickly convened and agreed on the need to expand trade finance liquidity, and national governments and international agencies set up programs to supply additional liquidity to finance trade transactions.Despite these efforts, world trade volume contracted 10.7 percent during 2009, while world GDP contracted 0.6 percent according to the International Monetary Fund (2010). The disproportionately large contraction of trade during the Global Financial Crisis is named the Great Trade Collapse, and many studies attempt to offer explanations. Now there seems to have developed a consensus that most of the fall in trade can be explained by demand contraction caused by the Global Financial Crisis. The recession hit especially hard the demand for consumer durables, manufactured intermediate goods and capital goods, and world trade is concentrated on these kinds of goods.1 However, some observers still find this observation inadequate for explaining trade collapse far larger than GDP contraction. The fall in trade is bigger than most econometric and CGE models would predict, and they argue that there must be supply-side causes, such as a shortage of trade finance or a breakdown of supply chains.Now we have a large body of literature that examines the role of trade finance during the trade collapse of 2009. Many econometric studies present evidence that trade finance played a significant role in causing trade collapse (Amiti and Weinstein, 2011, Chor and Manova, 2012 and Bricongne et ah, 2012), while there are others that disagree (Levchenko, Lewis and Tesar, 2010 and Behrens, Corcos and Mion, 2010). In contrast, informal studies using survey results or direct data on trade finance tend to find the limited role of trade finance in the Great Trade Collapse. For example, many chapters summarized in the World Bank volume edited by Chauffour and Malouche (2011) express this kind of skepticism. We need more country-based studies to obtain a comprehensive picture on the role of trade finance in the trade collapse.This paper examines the role of trade finance in the trade collapse of 2009 from the perspective of the Korean economy. We use two approaches. Firstly, we make a casual observation on aggregate data to find an indication that trade finance affected trade volume during the crisis. Korea has relatively rich data on trade finance and trade credit. The Bank of Korea publishes aggregate data on foreign trade loans, which are loans extended by commercial banks to exporters for the purpose of providing working capital. The Bank also publishes aggregate data on cross-border accounts receivable and payable of private firms, allowing us to track the volume of inter-firm trade credit. The Financial Supervisory Service of Korea reports two sets of data on trade finance: documentary bills purchased by commercial banks and domestic import usances. We find that the aggregate data do not strongly support the view that trade finance played an active role in causing the trade collapse. The measures of trade finance and the value of trade concurrently dropped, but the ratio of trade finance over trade was stable, and in some cases increased during the crisis period. The aggregate data are consistent with the hypothesis that trade collapse caused trade finance contraction, rather than the other way round.The second approach of this paper is an econometric examination using firm-level data. Using quarterly data on listed firms in Korea, we conduct panel estimations to test whether exporters with more dependence on external finance or with more reliance on inter-firm trade credit were more vulnerable to the crisis. …

Effectiveness of volatility models in option pricing: evidence from recent financial upheavals

Purpose – The purpose of this paper is to explore the forecasting effectiveness of Black-Scholes (BS) focussing parity analysis of time series econometric and implied volatility (IV) numerical techniques. Design/methodology/approach – To analyze the comparative competitiveness of econometric time series and IV models this paper consolidated the study with their inter-relations leading toward multilayered moneyness-maturity correlation of model and market option prices, thoroughly determined the moneyness-maturity combinations of error metrics of Nifty index options. Findings – Out of six models tested and critically examined here, the paper procures only a single model, IV, which best caters to the requirements of option traders and as a result the paper ended up that only IV supports to multifarious moneyness-maturity dimension of option pricing of Nifty index options. The analysis also confirms that the standard VIX is not a reliable tool for determining the base price of Nifty index options (via BS). As the IV landmarks during the most dynamic phase of Indian capital market which is a touchstone to justify the quality of any model, the paper can deduce that IV could continue to perform in hardships of financial contraction par smoothly and effectively. Practical implications – The final outcome of this research which ended successfully in exploring a dominant model, guided successfully through the most volatile period of Indian economy can be used to safe guard investor's faith and to figure a design which could compete on the canvass of option pricing. Originality/value – As equity market is always subject to highly unpredictable conditions and may keep on experiencing it through all times to come, the unified objective of research is to find out the most impeccable volatility model to meet out the requirements of option practitioners, specifically contributing upto the satisfaction and expected results during tumultuous period.

Shedding Light on Microfinance Equity Valuation: Past and Present

Micro-finance institutions (MFIs) will certainly be affected by the financial crisis ricocheting across the globe, but the authors believe that the sector is fundamentally sound. Larger institutions, especially those with diversified funding sources, such as retail deposits, are best positioned to manage the effects of economic and financial contraction. Valuations may change, but the authors believe the long-term outlook for equity investment in microfinance is positive. Private equity valuations for MFIs have varied widely over the past few years. Investors should not value MFIs the same way they value traditional banks. The authors highlight five characteristics that differentiate MFIs from traditional banks, and justify a slightly different valuation approach: a double bottom line that aims for social and financial returns, excellent asset quality, high net interest margins (NIMs), high operating costs, and longer term funding available from developmental investors.

Credit Crunch? An Empirical Test of Cyclical Credit Policy

In this paper we test the hypothesis that credit policies are pro-cyclical. Our approach is based on a stochastic frontier analysis of borrower data, as in Chen and Wang (2008). We extend the applicability of the approach, and propose a novel test specification which is informative of many types of pro-cyclicality. The analysis of representative samples of household borrowers during a huge cycle and its aftermath yields evidence of time-varying credit policy. We find that the focus of credit policy changed from collateral to current income during the cycle. Instead of a credit crunch, ie, an overall tightening of credit during the economic and financial contraction, we find a tightening of credit limits with respect to a minority of borrowers and an easing for the majority. In the course of the post-crisis period, credit policy became more lenient. Both the level of credit limits and the ‘tailoring’ of limits to group-specific characteristics of households increased. A reduction in the idiosyncratic variance of limits suggest that banks have become more consistent in their credit policies.

Bankruptcy or Bailouts?

The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution's default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many as the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad hoc rescue lending to avoid bankruptcy has been the preferred solution. In this Article, we seek to provide the first careful assessment of the belief that governmental rescues are preferable to bankruptcy. While the interaction of financial firms, systemic risk, and Chapter 11 is complex, our analysis suggests that the widespread belief that bankruptcy should not be used to resolve the distress of financial firms is misguided, and that it has had serious costs in the recent crisis. Although bankruptcy is not always the optimal response to financial distress, it is more effective than is generally realized. In Parts I and II of the Article, we describe the principal problems created by financial distress - debt overhang and creditor runs - and the mechanisms bankruptcy provides for addressing these problems. We then provide historical context in Part III, looking to Drexel Burnham's bankruptcy in 1990 for further lessons about the efficacy of bankruptcy. In Part IV, we turn to firm-specific bailouts, describing this strategy's benefits and the distortions it causes. We then shift our focus back to bankruptcy, considering the (legitimate) concern that it may not adequately counteract systemic risk in Part V, and exploring its treatment of derivatives, one of the chief new habitats of systemic risk, in Part VI. Part VII is a brief conclusion.

Credit channel of monetary policy in Japan: resolving the supply versus demand puzzle

The credit view is that a monetary tightening affects the real economy by shifting the supply schedule of bank credit left. While bank credit typically contracts following a monetary tightening, the financial contraction does not necessarily mean a shift of the supply schedule. Testing the credit view requires the identification of the shifts of the demand and supply schedules of credit. Using an original approach, this study shows that the credit view is supported for Japan. The credit view is, however, composed of two different views, namely the lending view and the balance-sheet view. While the balance-sheet view implies that the cutback of lending has no impact on the real economy, the lending view implies independent impacts of the cutback. Given the acceptance of the credit view, this study further attempts to test the balance-sheet view against the lending view.

Toward a Constructivist Framework for Guiding Change and Innovation in Higher Education

Introduction The authors of Exploiting Information Systems in Higher Education: An Issues Paper (JISC, 1995) identify several trends that will characterize higher education in the next decade: greater competition for funds and students; more efficient management; possibly fewer institutions, some very specialized; more demanding students who will want flexible teaching patterns to enhance their career prospects; more challenging learning and research programs; and closer integration at regional and local levels while networking internationally. For many countries, central to the vision of higher education in the millennium is the expectation that it can make a distinctive contribution to the development of a learning society, not only by nurturing notions such as lifelong learning but also by enhancing their capacity to meet international standards as these relate to teaching, scholarship, and research (National Committee, 1997, p. 7). Few would argue that these new directions require fundamental rethinking about the purpose and structure of higher education, because universities in many English-speaking countries are being transformed from sheltered institutions of the pre-modern to public service organisations in a modern (or, some would suggest) post-modern world (Robertson, 1994, p. 313). The dilemma for higher education institutions is exacerbated, for they are experiencing relative financial contraction with increase in demand. Davies (1997) notes that this situation to be the dominant one at present in the United States, United Kingdom, most of Western Europe (apart from perhaps to a lesser extent, Germany and France), certainly in Eastern Europe (in the development of the market, post-Communist economy) and in Australia (pp. 131-132). Yet, while the keys, in broad terms, to effecting successful change, well synthesized by Kirkpatrick (1985) over a decade ago, continue to be empathy, communication, and participation, in actual practice these attributes are frequently found wanting. Too often new approaches are introduced by executive fiat or through a centralist management strategy, or at worst through ad hoc and hurried planning interventions in response to years of benign neglect. It seems a rarity indeed for academics to genuinely feel that they are part of a meaningful, participatory decision-making process that values their experience or even their instinct for seeing potential pitfalls. Berman and McLaughlin (1978) in a four-year study of close to three hundred projects underscored the importance of effective involvement and change strategies in education, noting that these spell the difference between success or failure, almost independently of the type of innovation or educational method involved; moreover, they could determine whether teachers would assimilate and continue using project methods or allow them to fall into disuse (p. vii). Academic Culture and Decision-Making Organizational change and diffusion of innovation in higher education have been the subject of numerous analyses in recent years, many focusing on the cultural realities of academic leadership and decision making (see also Baldridge & Riley, 1977; Masland, 1985). Although there is recognition that the inner workings of an institution are governed to a large measure by external factors, most notably the magnitude of the grants provided by government and conditions under which these are supplied (Davies, 1997, p. 132; see also Leslie's, 1995, discussion of Resource Dependency Theory), there are good reasons for focusing on the building and management of institutional culture(s): A healthy culture can promote identification (who we are), legitimation (why we need to do) communication (with whom we talk), coordination (with whom we work) and development (what are the dominant perspectives and tasks). (Davies, 1997, p. 135) Birnbaum (1988) identifies four kinds of institutional cultures (collegial, bureaucratic, political, and anarchical), each illustrating different hypotheses regarding the nature of organizational life and change. …

New Technology and Traditional Sources

Financial constraints have caused many libraries to reevaluate their collection development policies, while new electronic resources are changing the needs and expectations of library patrons. The effect that the interaction of financial contraction and electronic expansion has had on library collections and the suggestions and possibilities offered by new technologies are examined.

Financial Regulation: Comment on Kareken

The rapidly evolving character of the financial system is raising again the question, What, if anything, is its regulation supposed to accomplish? I also start from John H. Kareken's (in this issue) premise that we want to guarantee the availability of transactions balances in order to prevent the economic externalities of monetary contraction and as a public service to protect the average unsophisticated user of money from losses. Let me trace in these comments where this premise takes me. I come out pretty much the same as Kareken does on the issues. I do see the possibility of serious trouble brewing. Most of the operational problems with the monetary system lie, as is widely agreed, with fractional reserves. Because of the practice by banks of paying on demand or short notice, their lack of liquidity becomes a much more important and common occurrence than it is for other businesses. Depositors never know whether illiquidity means insolvency, and in any event they want to avoid the inconvenience of immobilized funds. Hence, if the liquidity of a depository institution is suspect, customers will withdraw their funds post haste since many safe alternatives exist. These institutions are therefore particularly vulnerable to runs, which can turn moderate illiquidity into the extreme case of being unable to pay. Unfortunately, runs easily spread to other institutions that may initially be liquid by ordinary standards but will be put in danger. The result is financial stringency and economic contraction. It is, therefore, not only the losses of isolated failures that concern the authorities but also the spread of a fear-motivated run for safety into government securities and currency or other safe havens. Past a threshold, runs are part of an unstable dynamics, the contractionary consequences of which were perfectly clear to early commentators on panics. The banking system had to suspend conversion of deposits into currency. Banks called loans, and the entire economy became illiquid.