Foreign Speculation Research Articles

Heterogeneous traders, house prices and healthy urban housing market: A DSGE model based on behavioral economics

A healthy urban housing market should be characterized by relative stability, which is reflected in reasonable fluctuations in housing prices. However, house prices in China have experienced rapid and prolonged growth of approximately twice that of people's disposable income since 2004. This growth can be attributed to the heterogeneous trading behaviors of value investors and domestic and foreign speculators. By constructing a Dynamic Stochastic General Equilibrium (DSGE) model based on the theory of behavioral economics, this study explores how fundamental and speculative investments affect housing prices and economic fluctuations in a market with heterogeneous traders. The devising of optimal macro-control policy is also discussed. Results show that speculators in the housing market explain the rapid rise and slow decline of house prices, which negatively affects a healthy housing market and its output. Excessive substitution effect between consumption and housing purchase resulting from the real estate boom also negatively affects the final output. The simulation experiments of policy intervention show that the combination of exchange rate regulation and property tax contributes to the stability of the housing market and macro-economy as a mix of short- and long-term policies. This paper holds that to ensure the economy's sustainable development in the new era, the central bank should implement market-oriented reforms of the exchange rate and lay out the landing of property tax properly.

Greek Bailouts: Debunking the 'Foreign Banks' Myth

If there is one indelibly recurring myth surrounding the infamous bailout loans received by Greece for the last seven years it's that the money went overwhelmingly to foreign bankers (who owned allegedly massive Greek government bond portfolios). This ever so popular argument attempts to fan the flames of social discontent by complaining that it was powerful politically-connected big international financiers, and not average vulnerable Greeks, who directly and truly benefited from the rescue programs. In that sense, the gargantuan emergency lending put together by the Eurozone and the IMF would have been a de facto transfer of global taxpayer money to the largest international banks. Foreign speculators got the cash while Greece was left to starve in a sea of untold austerity, would go the story. There is only one problem with this tale: it's not true. Hard cold data, even when suffering from the perils of estimation, dictates that in fact the least amount of bailout money would have gone to private foreign creditors. Much more money went to the Greeks and to the Eurozone-IMF themselves. The truth of the matter is that the bailouts have overwhelmingly been used to assist institutions, people, and the state in Greece. Foreign bankers got some (mostly, initial) value but were left nursing huge losses in the end.

On inflation targeting

The article discusses the fundamental issues of monetary policy in the context of implemented by the Bank of Russia transition to inflation targeting. It is shown that the result of the actions of the monetary authorities was the growth of inflation, worsening management of the financial market, falling investment and business activity, loss of control over the main macroeconomic indicators. It is revealed that “inflation targeting” actually refers to limiting the tools of monetary policy to manipulations by the key rate. It is proved that in conditions of free international movement of capital this approach does not achieve the inflation target due to supercritical dependence of the money market on foreign speculators. The necessity of a systematic approach to monetary policy with a set of control parameters corresponding to the complexity of monetary circulation is underlined.

On the inherent instability of international financial markets

We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators ...

On the inherent instability of international financial markets: natural nonlinear interactions between stock and foreign exchange markets

We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators in each of the two stock markets which rely either on linear technical or linear fundamental trading strategies to determine their orders. Since foreign stock market speculators require foreign currency to conduct their trades, all three markets are connected. Our setup entails a natural nonlinearity which may cause persistent endogenous price dynamics. Moreover, we analytically show that market interactions can destabilize the model’s fundamental steady state.

The role of pension funds in the financialisation of the Icelandic economy

This article explores the decisive role of pension funds in the neoliberal restructuring of the Icelandic economy, arguing that, through their involvement in the pension-fund industry, the labour unions contributed to laying the foundations for Iceland’s economic financialisation. The socioeconomic stability provided by the labour organisations was the crucial element upon which the new financial regime of accumulation relied, enhancing the national economic ‘credibility’ that helped the internal market to attract foreign speculators as well as gaining access to loans from international market. I begin by examining how the structural crisis of the Icelandic economy produced an explosion of inflation and industrial conflict in the late-1980s. I then retrace the way the implementation of a neo-corporatist pattern enabled lower inflation and stabilisation of the currency. Finally, I analyse the way in which the involvement of the Icelandic trade unions in the financial mechanisms through the pension industry generated a degree of identification with pro-market governmental policy on the part of union leaders, encouraging them to tailor their own strategies accordingly. My conclusion is that Icelandic unions’ consensus concerning the ‘stabilisation programme’ implemented by the neoliberal coalitions relies on their embeddedness into the financial structures of the national economy through occupational pension funds.

Human Interest and Humane Governance in Iraq: Humanitarian War and the Baghdad Zoo

This article argues that the story of the Baghdad zoo in the Iraq war and the ‘human interest’ it attracted are important for the analysis of warfare and humanitarian intervention. The activities at the zoo are notable precisely because they provide a specific site through which to analyse the increasing entanglements between war and humanitarianism, and practices associated with civil–military cooperation. The recovery and reconstruction efforts at the Baghdad zoo brought together a diverse, ad hoc assemblage of civilian, military, local and international actors around a common problem: how to turn a symbol of the tyranny and ‘backwardness’ of the Hussein regime into a space that would foster liberal humane values amongst the Iraqi population. The activities at the zoo thus tell us much about the kind of warfare that not only involves lethal force, but also fosters civilian and military action in reforming a carceral and leisure institution. They also reveal a broader aspiration of reforming the whole Iraqi population around an idea of humane governance, while providing a potentially profitable investment opportunity for foreign speculators.

Foreign Portfolio Flows and the Trading Environment

We show that the impact of foreign investors' portfolio flows on the domestic equity market depends crucially on the costs and ease of access to trading domestic securities. We examine all foreign portfolio flows in two long sub-samples where trading costs and market access are substantially different. When the domestic equity market becomes easier and less costly to trade in, an increase in foreign portfolio flows reduces the cost of equity capital consistent with risk sharing arguments, and increases liquidity. Conversely in the regime of high entry costs, foreign portfolio flows appear to be speculative, increasing the cost of equity capital and reducing liquidity. The results have important implications for the debate regarding efforts to reduce foreign speculation through increasing transaction costs.

Frank O. Mora and Jerry W. Cooney.Paraguay and the United States: Distant Allies.:Paraguay and the United States: Distant Allies.(The United States and the Americas.)

This book is a long-awaited addition to the literature about an understudied country at the heart of Latin America. Frank O. Mora, a specialist in international studies, and Jerry W. Cooney, a historian, study the developing dialectic between the nations since Paraguay's independence. Their argument is that relations with the United States varied over time depending on U. S. attention to the Southern Cone and Paraguayan desires to capitalize on its northern neighbor's interest in the region. International events affected relations between these nations, but circumstances as seemingly insignificant as diplomats and their behaviors also made their interaction fluctuate. This book is packed with details that have previously not been readily available; despite having a specific focus, it informs continental developments. Scholars of political science, history, and Latin American studies will find it a useful teaching tool. At first glance, one might expect the relationship between Paraguay and the United States to have been one-sided, given the disproportionate power balance. Diplomats altered the relationship. Edward Hopkins, U. S. representative in the Southern Cone in 1845, mixed diplomacy with personal gain at a time when U. S. foreign policy was linked to commercial interests. Paraguay tried unsuccessfully to secure U. S. support during its war with Brazil and Argentina (1865–1869), and its disastrous defeat led to foreign speculation through ranching. By 1900, the United States sought to use Paraguay as a buffer state between Brazil and Argentina. American speculator Percival Farquhar built a syndicate of railroads, ranches, and packing companies to cut a rail route from Brazil through Paraguay to the Chilean coast. After purchasing a controlling interest in Paraguay's railways in 1910, Farquhar supported the Radical faction that took power in 1912 after a bloody revolt. The World War I economic slump ended the rail attempt and allowed Argentine and U. S. cattle barons to claim much of Paraguay's land for ranching.

Pegs, Risk Management, and Financial Crises

The paper builds a simple, micro-founded model of exchange rate management, speculative attacks, and exchange rate determination. The country can pick an ambitious peg in an attempt to signal a strong currency and thereby attract foreign capital or boost future re-election prospects. The peg, however, triggers speculative attacks that the country must withstand for the signal to remain credible. Maintaining the peg is costly to a country with an overvalued currency as it must sell the foreign currency at an unfavorable rate. We show that speculative activities can exhibit strategic complementarity or substitutability. We then relate the peg's ambition and the size of the ensuing speculative attack to the market's prior beliefs about the strength of the currency, the ability of foreign speculators to short sell the currency, domestic politics, and the initial debt composition. Finally, the model predicts that pegs and features of original sin emerge concurrently. Country hedging is endogenously incomplete as letting the residents hedge is a clear admission that the currency is overvalued by the market and makes any complementary attempt at exchange rate management futile. Similarly, we show that a peg may make domestic borrowers eager to issue short-term liabilities so as to provide foreign investors with an advantageous exit option. Furthermore, the government does not incentivize firms to lengthen the maturity structure even when it wants to because doing so would again be an open admission of a future depreciation.

Foreign Speculators and Emerging Equity Markets

Foreign Speculators and Emerging Equity Markets

Foreign Speculators and Emerging Equity Markets

A number of countries have delayed the opening of their capital markets international investment because of reservations about the impact of foreign speculators on both expected returns and volatility. We propose a cross-sectional time-series model that attempts to assess the impact of liberalizations, in the form of the offering of depositary receipts country funds and other financial instruments, in an extranational and volatility in emerging equity markets. We also examine the impact of capital market liberalizations on the correlation of emerging equity returns and the world return. Our empirical approach designed control for other economic events which might confound the impact of foreign speculators on local equity markets. Whatever the empirical specification the cost of capital always decreases after a capital liberalization but the effect is economically and statistically weak. The effects on volatility and correlation are less robust.

Foreign Speculators and Emerging Equity Markets

We propose a cross‐sectional time‐series model to assess the impact of market liberalizations in emerging equity markets on the cost of capital, volatility, beta, and correlation with world market returns. Liberalizations are defined by regulatory changes, the introduction of depositary receipts and country funds, and structural breaks in equity capital flows to the emerging markets. We control for other economic events that might confound the impact of foreign speculators on local equity markets. Across a range of specifications, the cost of capital always decreases after a capital market liberalization with the effect varying between 5 and 75 basis points.

Modelling the risk premium in the black-market zloty-dollar exchange rate

This paper tests for the presence of nonlinear dependence in the black-market Polish zloty-dollar exchange rate. Using the GARCH-M model, we illustrate use of the Marquardt (Journal of the Society of Industrial and Applied Mathematics, 2, 1963) alternative to the Berndt (Annals of Economical Social Measurement, 4, 1974) iterative nonlinear algorithm for the estimation of such models, and discrimination between estimated models on the basis of the Brock and Potter (Handbook of Statistics, 11, 1993) test for so conditional variance misspecification. We find evidence of a time-varying risk premium such that foreign speculators are compensated for increased exchange rate risk by appreciation which increases the dollar value of zloty holdings, and which is able to account for all of the apparent nonlinearity in the zloty.

Thailand in 1997: Financial Crisis and Constitutional Reform

The Economy After a decade of spectacular performance, with per capita GNP growth averaging more than 8%, Thailand's overheated economy began to slow down in 1996. A considerably steeper downturn was anticipated for 1997. Not even the worst-case scenario, however, came close to predicting the meltdown that occurred. Macroeconomic projections for 1997 released by the Finance Ministry and the Bank of Thailand in November estimated real GDP growth at 0.6%, consumer price index inflation at 10%, and an external debt of US$94.9 billion, or 58.6% of GDP. Short-term debts, defined as those maturing in the next 12 months, amounted to US$39 billion, about half consisting of loans from Japanese banks. The Stock Exchange of Thailand (SET), mirroring the condition of the economy, fell steadily from 816.79 points on December 20, 1996, to 385.25 points on December 19, 1997, a loss of more than half its value and near nine-year low. The Thai baht, finally allowed to float on July 2 after costly attempts to defend it against a number of concentrated attacks by foreign speculators, promptly dropped 20% in value. The baht continued its decline to an all-time low; by mid-December, it had depreciated by roughly 77% of the fixed rate prior to the July 2 flotation.

Le développement du tourisme en Bulgarie

Abstract. Bulgarian tourism which knows a fast development, shows through its problems as well as through its orientations the role this industry can play in a socialist country. The growth of big international tourism reaches especially the Black Sea coast (Varna and Bourgas); it goes with the huge development of national tourism, already more dispersed. «Welfare-orientated» tourism (rest, health, spas), holidays and camping, week-end tourism especially from the cities to the nearest mountains... This double recent mutation leads to the problems of regional diversification, the creation and the modernization of varied equipments, still insufficient. The new programs are also to slow down the relative abandonment of mountainous regions to poor resources as in southern Rhodope). Thus tourism takes in socialist development policy role which is neither casual, nor incommensurate, according to the actual needs of the national economy. It expresses by its very problems the positive social evolution experienced by whole people instead of the desorderly intrusion of foreign speculation in an under-developed country.

Menace of the Money Power—II

Hitler’s revolt was not mild. It challenged the entire concept of international lending, and established as the basis of trade the mutual exchange of goods, without recourse to the usurers. There had been pioneers before Hitler. Kemal Ataturk had carried through the reconstruction of Turkey without borrowing a penny from abroad. Mussolini had safeguarded Italian currency against foreign speculators and striven as far as possible to build up for his people a self-contained economy. He was to have successors in Spain and Portugal. After the emergence of Hitler, however, it became clear that the international financial system was in mortal danger and that only by another war could it ever regain control over its vast empire—the empire built and maintained by debt. As it happened, Hitler was only too happy to oblige, and war came. War would have come in any case. As Josef Stalin has put on record: ‘It would be incorrect to think that the war arose accidentally or as the result of the fault of some of the statesmen. Although those faults did exist, the war arose in reality as the inevitable result of the development of the world economic and political forces on the basis of monopoly capitalism.’

Resources of Servia and Bosnia

THE small extent of country upon which the eyes of Europe are now centred lies too far out of the beaten tracks of travellers for much to be generally known as to its capabilities or natural resources; nevertheless the country is described in the few existing works as being very fertile, and the soil might be made much more productive were it not for the idle and dirty habits of the people. In these days of “Special Correspondents,” the breaking out of a war, even in the remotest parts of the world, is a signal for the dispatch of men of observation, whose duty it is to chronicle the movements of the opposing parties, and, in some cases—we wish it were more often so—to give us glimpses into the habits of the people and the natural features of the country. Thus, we may in the course of a few weeks learn from the public press more about these matters in connection with the small districts now at war with Turkey than we are able to gain from books. The mines of Servia and the forests of Bosnia are two of the principal sources of revenue to the countries. Both iron and copper can be obtained, not only in large quantities, but also of excellent quality. The best Bosnian iron resembles that of Sweden, and is largely used in the manufactories of Gratz, in Styria; quantities also pass into Dalmatia and Servia. These mines are mostly worked by English companies under concessions from the authorities. In the forests are several species of oak, including the evergreen, or Holm Oak (Quercus Ilex), the Turkey Oak (Q, Cerris), Q. Ægilops, Q. infectoria, and others. The first two are of little or no use economically, except perhaps, for their woods, and these are not so highly valued as those of other species; the Q. Ægilops, however, which produces large acorcs seated in very large cups, is valuable for the sake of these cups, which contain a large quantity of tannin, and are extensively used by tanners and dyers, being imported to a considerable extent from the Levant under the name of Valonia. Q. infectoria is also a valuable species, producing, most abundantly, the large shining brown galls known as Mecca galls, used for dyeing purposes, in the manufacture of ink, and in the preparation of tannic and gallic acids. The principal value of the oaks in Bosnia seems to be in their timber, the staple use of which is in the manufacture of staves for casks, immense quantities of which are exported. Amongst the pines occurring in the forests are Pinus Laricto. P. maritima, P. halepensis, and others, as well as the Scots Fir, P. sylvestris. Besides these are other forest trees of more or less value, so that if the forests were properly worked, they would not fail to prove of great value. At present, however, the right of cutting timber is held chiefly by foreign speculators, and has proved a source of wealth to many Austrians and Frenchmen who have embarked in it.

On the Discovery of new Gold-deposits in the District of Esmeraldas, Ecuador

Within the last few weeks unworked and hitherto unknown gold-deposits have been discovered in the district of Esmeraldas; and I am informed by the President, who has received specimens of the gold of a very pure quality, that it is the intention of the Government to send a scientific Commission, at the head of which will be Dr. Jameson, a British subject who has been many years in Quito, to report upon the probable yield of the gold-district. Should this survey prove satisfactory, as anticipated, I am informed that the Government of this Republic will be prepared to enter into engagements with foreign speculators and capitalists.