Sound Fundamentals Research Articles

A Modern Money Perspective on Financial Crowding-out

The withdrawal of discretionary fiscal stimulus and a renewed emphasis on institutional and ‘self-imposed’ budgetary constraints are evidence that the imperative of fiscal sustainability and sound accounting fundamentals continue to drive fiscal policymaking within many advanced economies. To buttress the urgency for fiscal sustainability, neo-liberals often draw upon financial crowding-out theory. Despite an extensive literature, empirical applications are often misspecified due to their failure to account for different institutional arrangements. However, the policy responses of national governments to the Global Financial Crisis have highlighted the institutional disparities, presenting a unique opportunity for a rigorous empirical investigation. This paper develops panel vector error correction models for both sovereign and non-sovereign economies over the period 1999 to 2010 to examine financial crowding-out. The empirical evidence reveals crowding-out effects in non-sovereign economies, but not within sovereign economies.

Fundamentals of Population Pharmacokinetic Modelling

Population pharmacokinetic modelling is widely used within the field of clinical pharmacology as it helps to define the sources and correlates of pharmacokinetic variability in target patient populations and their impact upon drug disposition; and population pharmacokinetic modelling provides an estimation of drug pharmacokinetic parameters. This method's defined outcome aims to understand how participants in population pharmacokinetic studies are representative of the population as opposed to the healthy volunteers or highly selected patients in traditional pharmacokinetic studies. This review focuses on the fundamentals of population pharmacokinetic modelling and how the results are evaluated and validated. This review defines the common aspects of population pharmacokinetic modelling through a discussion of the literature describing the techniques and placing them in the appropriate context. The concept of validation, as applied to population pharmacokinetic models, is explored focusing on the lack of consensus regarding both terminology and the concept of validation itself. Population pharmacokinetic modelling is a powerful approach where pharmacokinetic variability can be identified in a target patient population receiving a pharmacological agent. Given the lack of consensus on the best approaches in model building and validation, sound fundamentals are required to ensure the selected methodology is suitable for the particular data type and/or patient population. There is a need to further standardize and establish the best approaches in modelling so that any model created can be systematically evaluated and the results relied upon.

RETRACTED: The relationship between financial indicators and human development in Pakistan

Every economy requires a sophisticated and efficient financial system to prosper its development. A healthy financial system may be integral to the sound fundamentals of an economy. The objective of the study is to investigate the impact of financial indicators on human development in Pakistan by using annual data from 1975 to 2010. Data is analyzed by cointegration theory, Granger causality test and variance decomposition, etc. The results reveal that financial development indicators act as an important driver for increase in human capital in Pakistan. Results indicate that causality runs from financial indicators to human capital except credit to private sector (CPS) but not vice versa. Financial indicators are closely associated with economic growth and human development in Pakistan. Variance decomposition analysis shows that among all the financial indicators, broad money supply (M2) has exerted the largest contribution to changes in human capital.

Allocation of information granularity in optimization and decision-making models: Towards building the foundations of Granular Computing

The highly diversified conceptual and algorithmic landscape of Granular Computing calls for the formation of sound fundamentals of the discipline, which cut across the diversity of formal frameworks (fuzzy sets, sets, rough sets) in which information granules are formed and processed. The study addresses this quest by introducing an idea of granular models – generalizations of numeric models that are formed as a result of an optimal allocation (distribution) of information granularity. Information granularity is regarded as a crucial design asset, which helps establish a better rapport of the resulting granular model with the system under modeling. A suite of modeling situations is elaborated on; they offer convincing examples behind the emergence of granular models. Pertinent problems showing how information granularity is distributed throughout the parameters of numeric functions (and resulting in granular mappings) are formulated as optimization tasks. A set of associated information granularity distribution protocols is discussed. We also provide a number of illustrative examples.

Requirements engineering: fundamentals, principles, and techniques

Requirements engineering is the process of eliciting individual stakeholder requirements and needs and developing them into detailed, agreed requirements documented and specified in such a way that they can serve as the basis for all other system development activities. In this textbook, Klaus Pohl provides a comprehensive and well-structured introduction to the fundamentals, principles, and techniques of requirements engineering. He presents approved techniques for eliciting, negotiating and documenting as well as validating, and managing requirements for software-intensive systems. The various aspects of the process and the techniques are illustrated using numerous examples based on his extensive teaching experience and his work in industrial collaborations. His presentation aims at professionals, students, and lecturers in systems and software engineering or business applications development. Professionals such as project managers, software architects, systems analysts, and software engineers will benefit in their daily work from the didactically well-presented combination of validated procedures and industrial experience. Students and lecturers will appreciate the comprehensive description of sound fundamentals, principles, and techniques, which is completed by a huge commented list of references for further reading. Lecturers will find additional teaching material on the books website, www.requirements-book.com.

Next Generation Talent Management-Perceptions

The term “talent management” refers to managing the entire employee lifecycle, from attracting and hiring to promoting and finding a successor upon retirement.clear understanding of the organization’s current and future business strategies. Identification of the key gaps between the talent in place and the talent required to, drive business success A sound talent management plan designed to close the talent gaps. It should also be integrated with strategic and business plans Accurate hiring and promotion decisions .Connection of individual and team goals, to corporate goals, and providing clear expectations and feedback to manage performance. Development of talent to enhance performance in current positions as well as readiness for transition to the next level. A focus not just on the talent strategy, itself, but the elements required for successful, execution. Business impact and workforce effectiveness measurement during and after implementation. Management Leaders are Making Inroads There's no doubt about it - the struggle for top talent has gotten more intense 2009.As a result, more and more leading-edge companies are looking to identify, foster and develop better performance from within. And they're making huge inroads towards winning the war. The Success Stories section of the report will explore several specific examples of these changes at work. India is well known for its entrepreneurial and highly-educated talent base, and is the third largest pool of scientists, engineers and technicians, after the US and Russia. More and more attention is being paid to how it will continue to develop its intellectual and managerial talent and management practices in order to achieve an international standard that will take it into the future. The country’s centuries-old history of entrepreneurship across almost every industry sector has been founded on its people’s sound business fundamentals and passionate commitment to success.

Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Center

The authors study the determinants of the growing migration of stock market activity to international financial centers. They use a sample of 77 countries and document that higher economic growth and more macroeconomic stability help stock market development. Countries with higher income per capita, sounder macroeconomic policies, more efficient legal systems, better shareholder protection, and more open financial markets tend to have larger and more liquid stock markets. The authors show that these factors also drive the degree with which capital raising, listing, and trading have been migrating to international financial centers. As fundamentals improve and technology advances, this migration will likely increase and domestic stock market activity may become too little to support local markets. For many emerging economies, the best policy is to establish sound fundamentals but not necessarily the trading, or even listing of securities locally.

A panel-data analysis of interest rates and dollarization in Brazil

We investigate the role of financial dollarization and systemic risks in the determination of real interest rates in Brazil. In a simple currency-choice portfolio model, we show that a strategy of reducing dollarization, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical panel-based model, involving systemic risk variables, but find that the effect is small after controlling for the risks of dilution and default. We apply our empirical estimates to the case of Brazil - a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are found to be gradually converging to the model's predicted values. The estimation also shows that further reductions in Brazil's real interest rates could be achieved through sound fundamentals that led to investment-grade status rather than financial dollarization.

Returns to Selecting Value Stocks in Australia – The Aby Filters

The development of the Financial Crisis throughout 2008 and into 2009 has caused many fund managers to question their Growth based investment models. Interest appears to again be rekindled in the traditional Value based models, where investment decisions are based on sound company fundamentals rather than abstract future growth expectations. This paper reviews a specific set of value based filters for selecting undervalued stocks which appeared in a series of papers published soon after the 2000 Dot-Com debacle. This paper documents the performance of these filters in the Australian stockmarket.

Cointegration of Indian stock markets with other leading stock markets

Purpose – One of the anxieties of stock market investors is whether the markets operate efficiently, independently and with sound fundamentals. This concern is also held by academics and practitioners for quite some time. However, real market situation tends to exhibit a link as is evident from recent market movements across the world. The purpose of this paper is to examine whether the stock markets in the Indian subcontinent have any link with the major stock markets from China, Singapore, America, and Hong Kong.

Socially responsible investment and the development agenda: peering behind the progressive veil of non-financial benchmarking

One of the most striking trends in global development finance has been the growing role of Western-based, institutional investors. Pension funds in particular have played a leading part in supplying capital to publicly traded corporations in emerging market economies. An important feature of this type of financing has been the trend to make investment conditional not only on sound economic fundamentals, but also on a series of non-financial (or social) risk indicators (eg meeting labour standards and human rights). Despite the significance of non-financial benchmarking, these strategies have not been subjected to critical analysis, especially with regard to their wider impact on the reproduction of the mainstream development paradigm. This article addresses this gap by focusing on the benchmarking strategies of one of the world's largest pension funds: the California Public Employees' Retirement System (Calpers). Calpers's rating instrument, the Permissible Country Index (pci), employs both financial and non-financial risk indicators to screen its investments in 27 emerging markets. I argue that, despite its progressive sheen, the pci not only reproduces but also reinforces neoliberal forms of discipline and exploitation in the global South. It does this through coercive measures, such as divestment (ie removing a country from the pci), as well as through the construction of specific forms of knowledge that act to normalise the expansion and restructuring of spaces of capital in the global South.

Managing Capital Flows in Estonia and Latvia

The three Baltic countries have been able to combine, Estonia since 1992 and Latvia and Lithuania since 1994, (1) a fixed exchange rate, (2) liberalisation of the capital account before having a well-functioning and fully supervised financial system, and (3) very large current account deficits. At the same time they have gone through deep structural and institutional change, which has been even faster than in several other transition economies. How have they been able to manage such a combination of characteristics that would usually be regarded inconsistent? The answer is not in clever management or control of financial markets combined with sound fundamentals. Rather, the Baltic countries have lacked several such markets that might be sources of instability. There are hardly any inter-bank markets. Public debt is absent or relatively very small. After the boomlet of 1997, the Baltic stock exchanges have generally hibernated. Banking crises have been recurrent. Not only are these economies extremely small, their degree of monetisation is very low. There are very few assets and markets for speculative capital flows. Partially, this reflects sound fundamentals, but mostly it is an unintended consequence of policy decisions. One cannot expect the experience to be easily repeated in other countries.

What do bond holdings reveal about international funds' preferences?

International bond funds are important institutional investors in emerging markets and their asset allocation decisions have significant implications for bond market developments and debt management policies in developing countries. This paper studies emerging market bond holdings of international funds and analyzes economic and financial factors affecting their bond preferences. It shows that mutual funds prefer to invest in countries with sound fundamentals and more openness to trade. In addition, they favor bonds with high past returns and yields while averting bonds with high transaction costs and idiosyncratic risks.

Excess Reserves and Macroeconomic Instability

This paper is concerned with international reserves. It makes two main points. Firstly, excess reserves cannot be regarded as a substitute for sound fundamentals because the former may destabilize the economic system in the longer term. Secondly, reserve accumulation financed by public debt can lead to a potential debt crisis in developing countries. Optimal control theory is employed to illustrate the stabilization problem in an economy in which excess reserves are financed by fiscal deficit.

Signaling versus Commitment Strengthening: Exchange Rate Insurance against Currency Attacks

Both empirical and theoretical studies suggest that currency attacks can occur even in a fixed exchange rate regime with sound fundamentals. Can mechanisms be designed to prevent such currency attacks? To address this question, we first need a theory of currency crisis. I argue that such a theory must contain two ingredients: the government's lack of commitment and its preferences being private information; and that a successful mechanism must handle both of the problems. With such a theory in mind, I evaluate the proposal that Chan and Chen (1999) and Merton Miller (1998) made during the Asian economic crisis to defend the Hong Kong dollar and Chinese RMB via the government sale of insurance against devaluation. I argue that the proposal will not perform as well as claimed. As the issuance of insurance makes devaluation more costly, the commitment to peg is strengthened. That the insurance scheme serves as a commitment device renders it an ineffective signaling device: in the game where the government's type is private information, a separating equilibrium does not, in general, exist where only the strong type adopts the insurance scheme. Despite this, I also find that it is never a negative signal: that is, it will never be the case that the weak type adopts the proposal while the strong type does not. Therefore, the potential problem of the Miller proposal can be fixed by giving the government one more dimension of choice. One remedy, for example, is to allow the government to also choose whether to sell the insurance or to give it out for free. The dimensionality critique that is identified above is valid for other unidimensional proposals. The recent path breaking work of Morris and Shin (1998) is employed to tackle the coordination problem among speculators. If the Hong Kong Monetary Authority can provide insurance to the public against HK dollar's devaluation and make it clear to the public that the Authority will suffer a great loss in case HK dollar is devalued afterwards, then the public will be convinced of the Authority's determination ... I also gave a similar suggestion to the Chinese government. (p. 18) I told (Chinese vice) Primer Zhu: '...Issuing this type of insurance is a sure win. If you know your currency will not devalue and still sell devaluation insurance, in the U.S. you will be prosecuted for insider trading. 'I also told him: 'You even do not need to actually issue the guarantee. Merely declaring such an intention will have a very palatable effect.' (p. 21) - Merton Miller (1998b), in a speech delivered in Hong Kong, January 1998

The essentials of financial strength through sound lobbying fundamentals

Successfully managing libraries begins by securing funding and favorable library policies. Whether one reports to a city council, a university board, or a corporate division, securing budget funds – and, for that matter, most other operational resources – is a process of justification, persuasion and commitment. Knowledge of lobbying techniques is useful in promoting library needs to decision makers. Three areas related to lobbying can be of benefit to library managers. These areas are: positioning oneself to be an effective lobbyist; making the most out of the “lobbying meeting”; and the lobbying arena.

Does East Asia Need a New Development Paradigm?

Viewing the twentieth century as a competition of economic models, many observers claim that capitalism proved its superiority in the semifinals of the 1980s. And Frankel and Roubini describe how some claim that the American brand of capitalism beat the Japanese brand of capitalism in the finals of the 1990s. 1 In an opposing view, Stiglitz argues that despite the financial crisis that devastated East Asia, many of the alleged institutional weaknesses blamed for the collapse may well have only played a minute role. 2 East Asia was not any more vulnerable to the crisis than other regions, and East Asia may remain the best model of development the world has seen to date. Stiglitz adds that the East Asian miracle was real and based on a set of sound fundamentals and public policies. 3

The Regional Economic Crisis and Singapore: Implications for Labor Migration

Backed by sound economic fundamentals and policies, the Singapore economy has so far been able to cope relatively well with the economic crisis. However because of its close links with the regional economies, the deepening crisis is expected to result in a significant economic slowdown not seen since the last recession in 1985. The worsening labor market conditions are not expected to lead to massive retrenchment and repatriation of foreign workers because of the policy of retaining workers by performance rather than by their nationality. Irregular migration is an increasing problem and as unemployment rises, the effective regulation and management of foreign labor and migration flows pose a crucial challenge to policy makers in Singapore.

Asean Economic Co‑operation: Adjusting to the Crisis

In 1997, while the Association of Southeast Asian Nations (ASEAN) proudly looked back at its past thirty years of accomplishment in forging regional peace and security, vibrant economic growth, and higher levels of social welfare, a new issue — economic security — confronted the grouping's economies. Rapid growth of over 7 per cent per annum achieved during the past decade, which made ASEAN one of the fastest-growing regions in the world, came to a crashing end because of the financial crisis that hit the region in the second half of the year. ASEAN's economic growth in 1998 is predicted to be the lowest in the last three decades. However, the factors that contributed to rapid economic expansion in ASEAN countries remain strong, and have the potential to return the region's economies back to a sustainable growth path. ASEAN continues to enjoy, for example, high levels of saving, a strong work ethic, low underlying inflation rates, and a dynamic and entrepreneurial private sector. In previous instances of economic slow-downs in the 1980s and 1990s, each ASEAN country was able to come out relatively unscathed after the restructuring of their industrial sectors. Since then, the region's rapid economic growth, particularly in the real sector, has resulted in strong demand for capital to finance economic development. This led to large inflows of both long and short-term capital into the region. The development of strong financial institutions both at the regional level and for each ASEAN member country is of crucial importance in order to cope with such large inflows. The adjustment to the present crisis will therefore be different from previous ones. The crisis is a region-wide phenomenon and calls for a regional solution. It also involves private debts for which the role of the private sector would be crucial. ASEAN Economies Up to the 1990s: An Overview To understand the financial turmoil it is necessary to begin by looking at macroeconomic developments in the region up to the middle of 1997. The sound macroeconomic fundamentals of ASEAN countries defied any suspicion of the dramatic collapse of exchange rates that began in July 1997.

A Brief History and Analysis of Indonesia's Forest Fire Crisis

Two major events of 1997 and 1998-the forest fires and smoke covering Southeast Asia and the worst financial crisis since the beginning of President Suharto's New Order-have made it safe to say that Indonesia has lost its invisibility.2 On the surface, the fires and the crisis seem like unrelated events which each emerged from a series of causes beyond the regime's control. One could be forgiven for thinking that the fires were simply a natural crisis. Obviously, the regime could do nothing to control the periodic warming of ocean currents known as the El Nifio Southern Oscillation (ENSO), which brought extended drought to the country. Similarly, the long-praised sound fundamentals of Indonesia's economy seemed unshakable until (and even after) Thailand's currency crisis led to a parallel currency crisis and investor lack of