Impact Of Financial Crisis Research Articles

Crude oil market and global financial crisis - structural break and market volatility analysis

This research paper aims to analyse the impact of the recent global financial crisis on the volatility of crude spot market in India. The data has been collected for the period 2005 to 2014 from Multi Commodity Exchange, India. This paper first uses Ramsay RESET test to check the linearity of the relationship between spot and futures natural log returns. For structural break analysis, tests like Chow test, Chow forecast test, recursive estimates of CUSUM test and CUSUM of squares test have been performed on the monthly data of spot and futures price return series. No evidence of structural break was found in any test except CUSUM of squares test. Using EGARCH model with a dummy, we found that there was no effect of the global financial crisis on the volatility of crude spot market. The possible reason for the volatility of crude in 2008 could be financialisation of commodity exchanges and excessive speculation in crude oil futures.

Assessing a Currency Substitution Persistency in the Western Balkan Region

The study aims to examine the euroization phenomenon in seven Western Balkan countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Romania, Serbia and Macedonia) between 2000 and 2015 and a number of –specific challenges faced by the region. More precisely, the paper analyzes the impact of the latest global financial crisis on the extent of currency substitution persistency by exploring the trends before, in wake of the financial crisis, and after the financial crisis. The study employed several indicators as a proxy variable for measuring of the overall level of currency substitution or euroization and cross country analysis in selected countries (liability euroization,credit euroization and deposit euroization and asset substitution- overall euroization index). Finally, the study found that deposit euroisation, credit euroization, and liabilities euroization in seven Western Balkan countries is still high with relatively high degree of heterogeneity. In some countries of the Western Balkan region the process of euroisation was further intensified in spite of the consequences of the latest global financial crises, while in the other ones the crisis years were marked by the trend of de-euroisation. In overall, this study does not find any significant evidence on significantly increases or decreases in currency substitution at the region sub-samples. Finally,Student t-test results indicate that there is no significant difference in means of before, in wake and after the financial crises at level of Western Balkan region.

Bank capital, profitability and risk in BRICS banking industry

This paper analyses the relationship between bank capital, risk and profitability for the BRICS banking industry data from 2004 to 2012. We use a dynamic panel data model based on two-step GMM estimation procedure. For the sake of analysis, we differentiate between before and after crisis periods in order to highlight the impact of financial crisis on clearing up the above relationship. The main empirical results are summarised as follows: 1) capital and risk are significantly and negatively related, while capital and profitability are significantly and positively linked; 2) bank capital has the greatest positive impact on ROE measure of profitability for investment banks; 3) BRICS investment banks are likely associated with a more sound financial supervision and technology; 4) regulatory quality and institutional developments are dependent upon differences in profitability and risk; 5) Results also provide evidence that financial crisis affects considerably the relationship between capital, risk and profitability.

The short- and long-run impacts of financial crises on youth unemployment in OECD countries

ABSTRACTThe impact of financial crises on the youth unemployment rate (YUR), compared to the total unemployment rate (UR), is estimated for a panel of OECD countries over the period 1981–2009, using bias-corrected dynamic panel data estimators of short- and long-run coefficients. Both YUR and UR are found highly persistent. Also, short- and long-run effects of financial crises on YUR are significantly large, respectively, some 1.9 and 1.5–1.7 times higher than the short- and long-run effects on UR. Similar results are found for the unemployment impacts of GDP growth lagged 1 year and institutional variables. These results are robust to various dynamic specifications.

Greece Financial Crises and Sukuk Markets: Experience From Gulf Countries

Many studies have been carried out to investigate the impact of recent European financial crises on the performance of financial instruments in other regions. Nevertheless, there have been insufficient studies explaining such impact on Islamic financial instrument. In particular, whether Greece Financial crises have affected performance of Sukuk traded in Gulf Markets needs to be answered. This study is aimed at empirically investigating the causality of credit and liquidity risk on Sukuk Markets in Gulf economies in the period of Greece Financial Crises. We analyzed the Sukuk data by employing Granger casuality test, with all the associated vector autoregression model procedures. Our findings show that Bahrain sukuk market is cointegrated with those of Qatar and UAE in the full period observation. Meanwhile, during the crisis, Qatar Sukuk market is cointegrated with those of UAE Bahrain. We also find that Bahrain Sukuk triggers market shock in both Qatar and UAE Sukuk markets. Bahrain consistently causes changes in price and spread of UAE Sukuk, both in the context of the full period and the during-crisis period. DOI: 10.15408/aiq.v9i1.3733

Var — analysis of global financial economic crisis impact on public budget and unemployment: evidence from the economy of the Kyrgyz republic

The Global financial crisis hit the economy of the Kyrgyz Republic by the third wave of its transmission in the early of 2009. The article examines the impact of the Global financial economic crisis on the public budget and unemployment of the Kyrgyz Republic. We analyzed the transmission of the crisis on the public budget firstly and its effect on unemployment level by using the vector autoregression approach (VAR) and quarterly data for 2005–2013 within the framework of IS-LM model for small open economies with floating exchange rate. There is an inverse relationship between the public budget and remittances inflow, liquidity level, volume of deposits, and exchange rate. As a result of the study, the fall in remittances inflows, liquidity level of the banking system, depreciation of the national currency lead to an increase in public revenue. Therefore, the increase in public spending during the crisis period, with the aim of unemployment reduction, may be considered as a crucial policy. The study result allows to policy-makers to exactly know what channels of transmission mechanism transfer the Global crisis on the public budget and its effect on unemployment level of the republic in order to undertake anticrisis macroeconomic policy. The final result of the study indicates that the increase of unemployment level by 1 % requires the increase of public spending by 0.63 %.

Research on Financing Constraints and Corporate Value Under Financial Crisis Shock

Since the difference between internal and external financing costs, enterprises are facing financing constraints. Outbreak of financial crisis affected the degree of financing constraints, then influenced corporate value. This paper uses financial data of Chinese listed manufacturing enterprises from 2005 to 2013, builds a model of financing constraints index with logistic regression and a model of financing constraints-corporate value with panel regression method to assess the impact of financial crisis on financing constraints and corporate value. The findings are shown as follow: (1) Reducing asset-liability ratio, increasing liquidity ratio, enterprise scale and return on equity will improve financing constraints. (2) Loosening financing constraints, decreasing asset-liability ratio, increasing gross profit margin, enterprise scale and earnings per share will promote corporate value. (3) Shock of financial crisis affects financing constraints significantly. (4) Outbreak of financial crisis deepens the degree of financing constraints, then reduces corporate value significantly.

Profitability of Momentum Strategies in Malaysia

This paper examines the profitability of momentum strategies within the Malaysian stock market. Its also investigates relationship between stock returns and past trading volume. The study finds weak but insignificant evidence of momentum returns for Malaysian equities which is pervasive across different combinations of formation and holding periods with a maximum average return of 1.76 % per quarter. A clear reversal pattern with greater volatility is observed when non-overlapping portfolios are used. The study also finds that momentum return is more pronounced among stocks with low trading volume which contradicts previous studies. The impact of Asian financial crisis on momentum return is marginal and trend in the stock returns remains relatively unchanged.

Economic and financial crises and changes in corporate governance in Russia (Part 2)

Motivation: Favourable conditions for the development of corporate governance in Russia emerged at the beginning of the 90s, together with the commencement of economic and political transformation. At the beginning, one of the main factors connected with building and developing a corporate governance system was the process of privatization of state-owned enterprises. In the subsequent years, more factors emerged, such as: further economic reforms, political transformations, corporate legislation as well as financial and economic crises. Aim: The article’s main thrust is to evaluate the impact of economic and financial crisis of 2008 and the posible impact of actual crisis on the evolution of selected internally and externally mechanisms of corporate governance in Russia. Results: The article uses theoretical analysis method based on a survey of literature and statistical data (especially from Russian Federal Statistics Service). The authors assume that the 2008 crisis caused less significant changes in the process of the evolution of corporate governance system in Russia (in comparison with 1998 crisis). The crisis of 2008 resulted mainly in the increase in the state’s role, either as the owner as well as participant of the external corporate governance mechanisms. The impact of the current crisis on the corporate governance is possible because of restrictions in the access to foreign financial markets for big companies and the increase of dependence on financial support from the state.

Economic and financial crises and changes in corporate governance in Russia (Part 1)

Motivation: Favorable conditions for the development of corporate governance in Russia emerged at the beginning of the 90s, together with the commencement of economic and political transformation. At the beginning, one of the main factors connected with building and developing a corporate governance system was the process of privatization of state-owned enterprises and main market reforms. In the subsequent years, more factors emerged, such as: further economic reforms, political transformations, adequate corporate legislation as well as financial and economic crises. Aim: The article’s main thrust is to evaluate the impact of financial crisis of 1998 on the evolution of selected internally and externally mechanisms of corporate governance in Russia. Results: The article uses theoretical analysis method based on a survey of literature and statistical data (especially from Russian Federal Statistics Service). The authors assume that the financial crisis of 1998 was a turning-point in the process of the evolution of corporate governance system in Russia. The crisis gave rise to new process of redistribution and consolidation of the ownership, caused significant changes in ownership structure and the process of building the new type of business groups (holdings). It caused the significant development of the corporate control market (mergers and acquisitions) as well as changes in the bankruptcy law.

Health outcomes during the 2008 financial crisis in Europe: systematic literature review

Objective To systematically identify, critically appraise, and synthesise empirical studies about the impact of the 2008 financial crisis in Europe on health outcomes.Design Systematic literature review.Data sources Structural searches of...

The Dollar Trap:How the US Dollar Tightened Its Grip on Global Finance

Which are the factors due to which the dollar's role as a unit of account and medium of trade might erode over time? What will be the impact of the present global financial crisis and technological developments on the dollar? What roles do foreign investors play in the consumption pattern of U.S. government and households? How does the conflict and/or cooperation amongst the different economies affect the global configuration of reserve currencies?.

A Projection for the Turkish Economy in 2023 with a Bayesian Approach

Turkish economy has almost experienced a continuous growth process since the first quarter of the year 2002, except for the year 2009 in which the impact of global financial crisis was felt. As a result of this growth period, Turkey has become the 17th largest economy in the world and has set big targets as to join one of the largest 10 economies in the world. In this study, we investigate whether Turkey would be able to meet its 2023 targets or not if the trends and dynamics that have been experienced during the last decade continue. Specifically, we will examine if Turkey’s exports will reach 500 billion US dollars, Turkey’s GDP will reach 2 trillion US dollars, and Turkey’s GDP per capita will reach 25 thousand US dollars. Furthermore, the path that Turkey’s macroeconomic indicators should follow in coming years and the different applicable scenarios in order to reach these 2023 economic targets will be studied. The results of this study show that those 2023 targets will not be met. So if Turkey is serious and insistent on these targets, this study may be a warning to policymakers to take the necessary measures when there is still enough time and opportunity.

The Impact of Financial Crises on the Finance–Growth Relationship: A European Perspective

Rousseau and Wachtel (2011) (Rousseau, P., Wachtel, P., 2011, ‘What is Happening to the Impact of Financial Deepening on Economic Growth?’ Economic Inquiry, 49(1), pp. 276–288) find a weakening effect of bank finance on growth for more recent periods in replicating King and Levine () (King, R. G., Levine, R., 1993, ‘Finance and Growth: Schumpeter Might Be Right’, The Quarterly Journal of Economics, 108, pp. 717–737) in a heterogeneous sample up to 2004. We contribute by re‐examining this finding for a focused set of 26 European countries up to 2009. In the second step, we introduce an aggregated finance variable into the model which accounts for aggregate credit, bond and stock markets. We reconfirm a weakening effect of finance on growth, which is persistent even when dummy variables are added to control for financial crises. The development of European financial markets seems to have not only decoupled from the real sector but also to exert an inverted impact on growth. We attribute our finding to structural change between bank‐ and market‐driven setup, threshold effects and the procyclical nature of financial markets.

Modeling volatility on the Karachi Stock Exchange, Pakistan

Purpose The current paper aims to fill a gap in the literature by analyzing the nature of volatility on the Karachi Stock Exchange (KSE) 100 index of the KSE, and develop an understanding as to which model is most suitable for measuring volatility among those used. The study contributes significantly to the literature as, compared with the limited previous studies of Pakistan undertaken in the past, it covers three types of data (i.e. daily, weekly and monthly) for the whole period from the introduction of the KSE 100 index on November 2, 1991 to December 31, 2013. In addition, to analyze the impact of global financial crises upon volatility, the data have been divided into pre-crisis (1991-2007) and post-crisis (2008-2013) periods. Design/methodology/approach This study has used an advanced set of volatility models such as autoregressive conditional heteroskedasticity [ARCH (1)], generalized autoregressive conditional heteroskedasticity [GARCH (1, 1)], GARCH in mean [GARCH-M (1, 1)], exponential GARCH [E-GARCH (1, 1)], threshold GARCH [T-GARCH (1, 1)], power GARCH [P-GARCH (1, 1)] and also a simple exponentially weighted moving average (EWMA) model. Findings The results reveal that daily, weekly and monthly return series show non-normal distribution, stationarity and volatility clustering. However, the heteroskedasticity is absent only in the monthly returns making only the EWMA model usable to measure the volatility level in the monthly series. The P-GARCH (1, 1) model proved to be a better model for modeling volatility in the case of daily returns, while the GARCH (1, 1) model proved to be the most appropriate for weekly data based on the Schwarz information criterion (SIC) and log likelihood (LL) functionality. The study shows high persistence of volatility, a mean reverting process and an absence of a risk premium in the KSE market with an insignificant leverage effect only in the case of weekly returns. However, a significant leverage effect is reported regarding the daily series of the KSE 100 index. In addition, to analyze the impact of global financial crises upon volatility, the findings show that the subperiods demonstrated a slightly low volatility and the global economic crisis did not cause a rise in volatility levels. Originality/value Previously, the literature about volatility modeling in Pakistan’s markets has been limited to a few models of relatively small sample size. The current thesis has attempted to overcome these limitations and used diverse models for three types of data series (daily, weekly and monthly). In addition, the Pakistani economy has been beset by turmoil throughout its history, experiencing a range of shocks from the mild to the extreme. This paper has measured the impact of those shocks upon the volatility levels of the KSE.

Determinants of Jordanian Investors Decisions in the Context of the 2007/2008 Financial Crisis

Due to the importance of interest rates and the ratio of market-to-book value; the review of literature has shown researcher have drawn massive attention to examine the role of such these ratios in shaping investors decisions. For instance, since investors always aim to maximize their wealth, it seems to be logically that the higher rates of interest encourage them to deposit their funds into the banks, otherwise in the stock markets as they assumed to be more profitable investment opportunities. On the other hand since the ratio of market-to-book value was recommended by literature as a good indicator for valuing the value of securities; rational investors are supposed to invest in stock markets when the prices are undervalued or to deposit into the banks when the prices are overvalued, whereas the latter opportunity is assumed to be more profitable. However, since the previous studies acknowledge that there is a highly ignorance to measure the role of these ratios in shaping the decisions of Jordanian investors; this current study employs the technique of multiple regression to investigate the effect of the fluctuations in time deposit interest rates and the average ratio of Market-to-book value on the decisions of Jordanian investors as measured by the liquidity of both the Jordanian commercial banks and the Amman stock exchange. In addition, since the economy of Jordanian such as other economies it is affected by the impact of the latest global financial crisis, the study period split into three stages to compare the effect of these independent factors on the decisions of Jordanian investors.

Commonality in Liquidity: The Impact of Financial Crisis and Regulation NMS

Following the liquidity dry-ups witnessed during the 2007-09 financial crisis, many studies highlighted the relation between market downturns and increased co-movements in liquidity. This study examines whether the mid-2007 implementation of Regulation National Market System (Reg NMS) played a contributing role in driving equity liquidity co-movements, and whether its impact has been confounded with that of the recent crisis. Results from a dynamic factor model approach confirm the recent crisis's impact on increasing co-movements within bid-ask spreads, and additionally demonstrate that Reg NMS contributed to structural changes in commonality within dollar volumes even prior to the crisis.

The Impact of Financial Crisis and Low Inflation Environment on Short-Term Inflation Expectations in Poland

To what extent financial crisis whose sharp phase begun in 2008 and low inflation environment that started in 2013 affect inflation expectations in Poland? Have inflation expectations of the private sector become more forward-looking? Is monetary policy still able to influence expectations as compared with the pre-crisis period? Those are the main questions addressed in this paper. To answer them we analyse survey-based measures of inflation expectations of consumers, enterprises and financial sector analysts. Estimation of simple and extended hybrid models of inflation expectations combined with verification of orthogonality of expectational errors with respect to available information leads us to the conclusion that since 2008 inflation expectations of enterprises and financial sector analysts have become more forward-looking, better exploiting available information and more sensitive to interest rate changes and developments in the real economy. At the same time formation of consumer inflation expectations has not been affected significantly.

An analysis on the correlation structure between equity risk premium and volatility

This paper explores the variation and interactions between stock volatility indicators and the market price of risk through a bivariate model. The result reveals that the daily risk premiums of the two indicators follow similar patterns and the GARCH (1, 1) indicator is the most consistent to the predication. For the selected samples, we don’t find strong evidence of leverage and volatility feedback effects. However, when the impact of financial crisis on volatility is taken into account, we find apparent leverage and volatility feedback effects for both volatility indicators after re-sampling, which implies that there exist asymmetric effects in Chinese stock market.

Social welfare policies during global financial crisis: an example of social inclusion in Taiwan

In order to cope with the impact of global financial crisis in 2008, Taiwan’s Government initiated many short-term measures for supporting the near-poor families which were not covered by social assistance. Also, for increasing the chance of employment for college graduates during this economic recession, the government promoted a scheme involving one-year internships in various industries with payment provided by the government. These measures aimed to prevent people falling into welfare dependency and social exclusion. The paper briefly depicts the demographic trends and family changes in Taiwan and then introduces aforementioned measures and the outcomes for further discussion.