Worldwide Financial Crisis Research Articles

Protecting the right of privacy

The backdrop to encroachments on privacy is the end of secrecy from taxing authorities, combating financial crimes, concerted tax enforcement efforts and the 2008 world-wide financial crisis. In response to the financial crisis, governments have enacted information exchange agreements, FATCA and CRS. While CRS may prove the most obvious threats to privacy, other equally real threats to privacy are encroachments on attorney–client privilege, the irresponsible use of “sham” trusts, governmental efforts at trust registration, and the internet itself. There are, however, deeply imbedded in our legal systems, many protections of privacy, such as: taxpayer secrecy by taxing authorities, the ability to seal court proceedings, causes of action for invasions of privacy, protection of patents, copyrights, trademarks and trade secrets, and the right of publicity, particularly after death.

Book Review Resilience, Crisis and Innovation Dynamics. New Horizons in Regional Science series

Stemming from ecology studies, the interdisciplinary concept of resilience has been gaining significance and notoriety towards the understanding of socioeconomic systems, reverberating the prevailing feelings of uncertainty and insecurity. Emanated from the extent, the depth and the duration of the recent (i.e. erupted in years 2007-8) world-wide financial and economic crisis, the prevalence of such feelings – and thus, the emergence of the concept of resilience – is no surprise. Indeed, the crisis has exposed the highly engaged with globally footloose activities, socioeconomic systems to exogenous disturbances (shocks) and resilience is, precisely, interwoven with the capacity of socioeconomic systems to move through multiple equilibria. Particularly, under such an evolutionary perspective, resilience may point to the capacity of socioeconomic systems, not only to respond successfully to short-term disturbances, but also to sustain long-term development.

Time and frequency dynamics of connectedness between renewable energy stocks and crude oil prices

This paper examines the time and frequency dynamics of connectedness among stock prices of U.S. clean energy companies, crude oil prices and a number of key financial variables using the methodology developed by Barunik and Krehlik (2018). This approach allows measuring the dynamics of return and volatility connectedness over time and across frequencies simultaneously. The empirical results show that most of return and volatility connectedness is generated in the very short-term, i.e. movements up to five days, while the long-term plays a minor role. Our analysis further reveals a greater degree of interconnectedness across crude oil and financial markets since the onset of the U.S. subprime mortgage crisis in summer of 2007, consistent with the view of a global re-pricing of risk triggered by the recent worldwide financial crisis. Crude oil prices do not appear as a key driver of the stock market performance of renewable energy companies in the short-term or the long-term, which suggests a decoupling of the alternative energy industry from the traditional energy market. Moreover, crude oil prices are a net receiver of financial shocks, supporting the financialization of the commodity markets since the early 2000s. In addition, a significant pairwise connectedness is found, mainly in the short-term, between clean energy and technology stock prices, indicating that these two types of stocks are perceived by investors as similar assets. These results can have important practical implications for investors and policy makers with different time horizons.

Dynamic topology and allometric scaling behavior on the Vietnamese stock market

The impact of the Vietnamese financial crisis during 2011–2012 into the stock market was revealed by a structural change of the minimum spanning tree (MST) constructed from the daily stock price. We found that the MST has a star-like structure during this period, similar to that of the German market during the worldwide financial crisis of 2007–2008 (M. Wiliski et al., 2013), and a hierarchical scale-free structure for the rest of time. In addition, we investigate the market from a complex network perspective by analyzing the allometric scaling behavior. We found that all networks have the allometric scaling property, with exponent η ranging from 1.213±0.013 during the financial instability period to about 1.357±0.011 in normal time. These values correspond to a complex “dimension” of the financial market of between 3 and 5, which need to be further investigated in the future.

Does American Stock Market React Differently to Expected Versus Surprise Ratings During Crisis Period? The Case of the 2008 Worldwide Financial Crisis

We study the rating impact on American stock market during crisis period by distinguishing expected versus surprise announcements. If unexpected ratings generate stronger reaction than expected ones, which means that rating agencies maintain credibility and influence on investors’ decisions. Otherwise, they have to revise their methodologies and procedures in order to recover place on financial markets. Results show that during crisis period market reaction to bad and neutral expected rating announcements is negative and more accentuated than reaction to surprise announcements; on contrary to good news that produce a short positive impact when they are unexpected and are not perceived by the market otherwise. Results reflect once more market distrust to rating agencies and faith loss towards announcements.

Optimization in curbing risk contagion among financial institutes

Financial institutions are interconnected by holding debt claims against each other. A default bank may cause its creditors to default, and the risk may be further propagated to up-stream institutes (risk contagion). Such interconnection is a key contributing factor to the past worldwide financial crisis. We show that a good mechanism of default liquidation may improve the total wealth of the financial system and therefore may curb the risk contagion. We formulate this problem as a nonlinear optimization problem with constraints and propose an optimal liquidation policy to minimize the system’s loss. We show that the problem resembles a Markov decision problem (MDP) and therefore we can apply the direct-comparison based optimization approach to solve this problem. Higher order directional derivatives and some optimality properties are obtained. Furthermore, we derive an iterative algorithm which combines both the policy iteration and the gradient based approach to find a local optimal policy, and under some conditions, a global optimal policy. Our work provides a new direction in curbing the risk contagion in financial networks; and it illustrates the advantages of the direct-comparison based approach, originated in the field of discrete event dynamic system, in nonlinear optimization problems.

Academic capitalism and the entrepreneurial university: some perspectives from the Americas

Since the Worldwide Financial Crisis of 2008, higher education institutions around the world have been forced to change their financial practices to focus on the bottom line. One such approach is academic capitalism, the heart of which is the entrepreneurial university which views faculty members as producers of capital (not educators), students as consumers (not learners), and business/industry, accreditors, and NGOs as valued business partners. This article defines academic capitalism, reviews the research literature, presents perspectives of academic capitalism in the Americas and discusses the implications of academic capitalism for Latin America. The article ends using anthropophagi to assess what is useful about academic capitalism for Brazil.

Mismeasuring Our Lives: The Case Against Usefulness, Popularity, and the Desire to Influence Others

Early in 2008, in the early throes of the coming worldwide financial crisis, former French President Nicolas Sarkozy established a commission, led by Nobel laureates Joseph Stiglitz and Amartya Sen and French economist Jean-Paul Fitoussi, to study whether Gross Domestic Product (GDP) is a valid measure of social and economic progress. In the Commission’s report, Mismeasuring Our Lives: Why GDP Doesn’t Add Up (Stiglitz, Sen, & Fitoussi, 2010), a new, alternative set of measures was proposed. This essay revisits the question of how we should measure the things that matter, at a time when we continue to mismeasure our lives, as we hold fast to the outworn myths of usefulness, popularity, and the desire to influence others. Three central, unquestioned presumptions have come to govern much of contemporary society, education, and the professions. They are: the high value placed on usefulness, on the passion to achieve popularity, and on the desire to influence others. In this essay, the psychologist-philosopher author makes the case against these presumptions, presumptions which lead to exclusionary commitments that stand in the way of human cultural development.

Država, institucionalna infrastruktura i tranzicioni inženjering u Republici Srbiji

Radical changes in the transition should enable the restructuring of the economy and financial markets, involvement in European and worldwide integration streams, influx of capital and creation of a favorable business environment. The creation of market infrastructure demands time and cannot, except in specific segments, be created by decrees. The implementation of changes in the economical and institutional environment has to be a sensibly channeled process. Apart from the reconstruction of the existing institutions, new institutions have to be created and substantial changes of their functioning have to be implemented. The underlying assumptions in the process of establishment of the goals and means of transforming the Serbian economy are the norms of a liberal market economy and the demands for an integral market and the universal action of market mechanisms. Thereby, a critical standpoint and selectiveness in the choice of methods for the creation of the transition, especially in the case of an installation of liberalism norms, must exist. The worldwide financial crisis points out the significant limitations of neoliberalism. The role of interventionism through state is more significant.

Przedsiębiorczość nierolnicza wśród mieszkańców obszarów wiejskich gminy Piotrków Kujawski

Na podstawie badania przeprowadzonego w maju i czerwcu 2015 roku wykaza­no, że z zarejestrowanych 131 podmiotów gospodarczych na podstawie rejestru działalności gospodarczej w analizowanej gminie 21 firm zawiesiło czasowo działalność. Z grupy 110 podmiotów aktywnie prowadzących działalność gospodarczą wybrano 50 przedsiębiorców, wśród których przeprowadzono sondaż. Dzięki badaniom stwierdzono, że przemiany zapo­czątkowane w 1989 roku oraz przystąpienie Polski do Unii Europejskiej (UE) w 2004 roku spowodowały największy przyrost liczby podmiotów gospodarczych w gminie Piotrków Kujawski. Najwięcej firm wyrejestrowywano w roku 2011, po pojawieniu się globalnego kryzysu finansowego i gospodarczego. Najczęstszym profilem prowadzonej działalności w gminie Piotrków Kujawski była działalność usługowa (usługi remontowo-budowlane) oraz handlowa (autokomisy oraz sklepy z artykułami spożywczymi i spożywczo-przemysłowymi). Do najważniejszych czynników prorozwojowych respondenci zaliczali: obniżenie podatków oraz oprocentowania kredytów, a także rozwój infrastruktury. Wśród największych trudności badani wymieniali: zbyt wysokie podatki lokalne, niską opłacalność przedsiębiorstwa oraz zbyt wysokie standardy nakładane przez UE.

The Situation of Young Mothers in Changing Social and Economic Circumstances in Some Eastern European Countries

Abstract In 2011, we conducted a comparative research study in the V4 countries and in Romania among young mothers who had given birth in the past up to three years prior. In consolidated historical periods, sweeping changes seldom occur over five years. However, noticing how the worldwide financial and economic crisis of 2007-2011 had a varying impact on the countries of the Eastern European region, we became interested in discovering how the social and economic changes influenced the working status of some young mothers and their health-related customs, including their physical activity, back pain, and smoking habits. In 2016, we had the chance to repeat the essence of the previous research in Hungary, Romania, and the Slovak Republic. The objective of this paper is to present the major results of the second study and compare them with the findings of our previous investigation. The methods used in the present research were borrowed from the previous one; the findings of the two investigations can thus be fairly compared. The results are presented according to the following sub-topics: the young mothers’ working status, use of childcare frequency of physical activity, presence of back pain, and smoking habits. In conclusion, it is stated that the relevant changes in the young mothers’ social and economic environment serve as a fair explanation for their changing situations in the studied countries.

An Iterative Approach to Reduce Systemic Risk among Financial Institutes

Financial institutions are interconnected by holding debt claims against each other. The interconnection is a key contributing factor to the past worldwide financial crisis. A default bank may cause its creditors to default, and the risk may be further propagated to up-stream institutes. We study how the mechanism of default liquidation affects the total wealth of the financial system and curbs the risk contagion. We formulate this problem as a nonlinear optimization problem with equilibrium constraints and propose an optimal liquidation policy to minimize the system’s loss without changing the partition of default and non-default banks. We show that the optimization problem resembles a Markov decision problem (MDP) and therefore we can apply the direct-comparison based optimization approach to solve this problem. We derive an iteration algorithm which combines both the policy iteration and the gradient based approach. Our work provides a new direction in curbing the risk contagion in financial networks; and it illustrates the advantages of the direct-comparison based approach, which originated in the field of discrete event dynamic system, in nonlinear optimization problems.

Internationalization strategies of emerging market banks: Challenges and opportunities

The greatly improved economic fundamentals of the major emerging economies over the last decade have propelled several emerging banks into the ranks of the world’s largest. Despite their importance in the global economy, the internationalization of emerging market banks remains an understudied phenomenon. This article examines factors that may influence the internationalization strategies of emerging market banks in the private banking sector, both when going abroad (take-off) and upon arrival in a host country (landing). The private banking sector is of significant interest given its importance in many leading financial centers around the world while undergoing major transformation due to the worldwide financial crisis, several recent scandals, and a fast-changing regulatory environment. We highlight the internationalization strategies of two banks from emerging countries, China and Brazil, and their experience in Switzerland’s traditional private banking sector. These two cases highlight factors that may influence successful internationalization such as prior industry experience, existing client base, entry strategy, ownership type, and the liability of foreignness. Our findings offer valuable implications for managers from other emerging economies by providing a better understanding of how emerging market banks expand internationally.

Users' satisfaction evolution of a metropolitan transit system in a context of economic downturn

ABSTRACTAs the worldwide financial crisis is directly connected to the transport sector, public transport systems become a central player to support economic recovery. Transit services are facing a number of challenges as a consequence of this severe crisis. However, each attribute characterizing transit services has evolved in a different manner, thereby raising some chances and opportunities at some specific areas. This study investigates the evolution of service quality on a metropolitan transit system under economic crisis conditions. We used data from three customer satisfaction surveys (2008, 2011, and 2014) conducted at the bus transit service of the metropolitan area of Granada (Spain). Principal component analysis (PCA) and structural equation modeling (SEM) approaches were applied. PCA results show that the attributes describing the service were grouped into two levels of dimensions according to their impact on users' overall satisfaction (Transport Service Factors and Comfort and Convenience Factors). Subsequently, following a competing model strategy, the existing relationships between users' satisfaction and perception of service quality dimensions were ascertained. Finally, three SEMs were calibrated, one for each year under study, and were subjected to a multigroup analysis to test for equivalence among the three models. The outcomes show that fare of the ticket has lost importance as the financial crisis has become more noticeable and that Transport Service Factors had lower influence and users' satisfaction in 2011, when downturn was more intense.

Fundações Americanas e a era da Filantropia Global: como o Brasil está longe na corrida por fomento

This article examines U.S. private foundation giving to non-governmental organizations (NGOs) and educational institutions in Brazil during and after the global recession (2006-2012). Using a national database of grants, the authors identify the U.S. private foundations that give the most money to Brazil, name the causes that receive the most international support, and identify how foundation giving in Brazil has been impacted by the worldwide financial crisis. The sections of the article describe the history of funding to education, the research literature on global philanthropy, the methodology for the study, the results, and recommendations to Brazilian scholars on how to more effectively pursue grants.

Marking-to-Market, Commonality in Liquidity, and Government Guarantee Effect

Based on market prices and other market inputs to value assets and liabilities, adopting fair-value measurement creates many unpredictable economic consequences, such as amplifying the vicious cycle of falling prices during a worldwide financial crisis. This article investigates whether marking-to-market disclosure affects the commonality in liquidity. Commonality in liquidity is defined as the sensitivity of stock liquidity to the variation in market liquidity. My study indicates that marking-to-market disclosure is associated with higher commonality in liquidity. In addition, I find that higher commonality in liquidity is associated with lower stock liquidity. I also find that a positive association between commonality in liquidity and stock illiquidity is mitigated by the effect of a government guarantee.

Generating Trading Rules for Stock Markets Using Robust Genetic Network Programming and Portfolio Beta

In this paper, Robust Genetic Network Programming (R-GNP) for generating trading rules for stocks is described. R-GNP is a new evolutionary algorithm, where solutions are represented using graph structures. It has been clarified that R-GNP works well especially in dynamic environments. In the proposed hybrid model, R-GNP is applied to generating stock trading rules with variance of fitness values. The unique point is that the generalization ability of R-GNP is improved by using the robust fitness function, which consists of the fitness functions with the original data and a good number of correlated data. Generally speaking, the hybrid intelligent system consists of three steps: priority selection by the portfolio β, optimization by the Genetic Relation Algorithm (GRA), and stock trading by R-GNP. In the simulations, the trading model is trained using the stock prices of 10 brands on the Tokyo Stock Exchange, and then the generalization ability is tested. From the simulation results, it is clarified that the trading rules created by the proposed R-GNP model obtain much higher profits than the traditional methods even in the world-wide financial crisis of 2007. Hence, its effectiveness has been confirmed.

Productivity growth and environmental efficiency of the nonferrous metals industry: an empirical study of China

This study intends to provide an insight into China's nonferrous metals industry production based on the analysis of the environmental efficiency, the Malmquist productivity index (MPI), and the Malmquist–Luenberger productivity index (MLPI). The empirical experiment based on the annual data of 27 regions (including provinces, autonomous regions and municipalities) of China during 2003–2009 shows the following results. First, the industry's environmental efficiency in the east area is mostly higher than that of the other area. Second, the industry's average annual change of MPI and MLPI in China were 4.4% and 0.9%, respectively. This indicated that the total factor productivity growth of the industry was overestimated if undesirable outputs were ignored. Third, the industry's productivity was mainly affected through technological advances rather than endogenous factors such as improvements in managerial practices. Finally, during the worldwide financial crisis occurred in 2008, the industry's MLPIs exceeded the MPIs in most regions through measures such as adjustment of the product structure and elimination of backward production capacity.

Dynamic bifurcations on financial markets

We provide evidence that catastrophic bifurcation breakdowns or transitions, preceded by early warning signs such as flickering phenomena, are present on notoriously unpredictable financial markets. For this we construct robust indicators of catastrophic dynamical slowing down and apply these to identify hallmarks of dynamical catastrophic bifurcation transitions. This is done using daily closing index records for the representative examples of financial markets of small and mid to large capitalisations experiencing a speculative bubble induced by the worldwide financial crisis of 2007-08.

The role of Japanese FDI in China

We quantify the impacts of a sharp fall of Japanese foreign direct investment (FDI) to China that occurred after the worldwide financial crisis in 2009 using a three-region (Japan, China, and the rest of the world) recursive dynamic computable general equilibrium model with multinational enterprises (MNEs). The FDI fall would reduce exports and production of Japanese MNE affiliates in China and depreciate the Renminbi. This latter effect would favor Chinese manufacturing, but China, would not be a gainer, because it would experience a contraction in its service sector, which would exceed the gains in manufacturing.