Browsing by Subject "Financial crisis"

Now showing 1 - 15 of 15

Open Access
An alternative look at balance-of-payments puzzle : structural decomposition of accounts of 16 emerging markets
(2006) Şahbaz, Ahmet Ussal
The empricial evidence on pro-growth effect of capital account liberalization is inconclusive. I argue that, after liberalization, the link between structural finance needs of developing countries and debt flows lost its importance. Instead, the flight of resident capital and unproductive reserve accumulation have created new financing needs, limiting the augmentation of saving pools of developing countries and hence growth. I build four new components from balance-of-payments account that make it possible to track the new financing patterns. I investigate relationship between these components for 15 emerging market countries. I also make a case study for Turkey using vector autoregression technique to establish a causality link between dynamics of the new structural aggregates.
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Downside risk in Dow Jones Islamic equity indices: Precious metals and portfolio diversification before and after the COVID-19 bear market
(Elsevier, 2021-07-31) Ali, F.; Jiang, Y.; Şensoy, Ahmet
Besides great turmoil in financial markets, the COVID-19 pandemic also disrupted the global supply chain, putting the precious metal market into great uncertainty. In this study, we revisit the diversifying role of precious metals – gold, silver, and platinum – for six Dow Jones Islamic (DJI) equity index portfolios using a battery of tests: dynamic conditional correlations (DCCs), four-moment modified value at risk (VaR) and conditional VaR, and global minimum-variance (GMV) portfolio approach. Our empirical results exhibit drastically increased DCCs between sample assets during the COVID period; however, pairing gold with any of the DJI equity indices (except for the Asia-Pacific region) decreases the downside risk of these portfolios. Other precious metals (silver and platinum) do not provide such benefits. Furthermore, we find that a higher allocation of wealth in DJI Japanese equities and gold is required to achieve a GMV portfolio in the post-COVID-19 era, implying higher transaction (hedging) costs to rebalance portfolios (weights) accordingly. Our out-of-sample tests examining the global financial crisis, European debt crisis, and extended sample (2000–2020) periods yield similar findings as gold glitters across all market conditions. Overall, our findings provide notable practical implications for both domestic and international investors.
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Financial crisis and changes in determinants of risk and return: an empirical investigation of an emerging market (ISE)
(Multinational Finance Society, 1999) Muradoglu, G.; Berument, Hakan; Metin, K.
This paper examines how determinants of volatility and stock returns change with financial crisis. The contributions of the paper are twofold. First, using a GARCH-M framework, risk and return are jointly modeled by using macroeconomic variables both in the variance and the mean equations. The conditional variance equation is specified by including macro-economic variables, a relevant information set for emerging economies, that is often overlooked in various GARCH specifications. Second, determinants of risk and return are investigated before during and after a major financial crisis at ISE. We show that, both the determinants of risk and the risk-return relationship change as the economy switches from one regime to the other.
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Foreign banks, financial crises and macroeconomic fluctuations
(Blackwell Publishing Ltd, 2016) Önder, Z.; Özyıldırım, S.
Understanding the implications of increased foreign bank presence is especially compelling in periods of financial crisis. In this paper, we explore this issue by examining the relationship between the involvement of foreign banks in the banking systems and the volatility of key macroeconomic variables in normal and crisis periods. Using a sample of 20 Emerging European countries from 1998 to 2013, we find that an increase in the assets of foreign banks in the banking system reduces output and consumption growth volatility in general but does not significantly affect the volatility of investments. However, these banks were found to play a significant role in increasing output, consumption and investment volatility in 2009. Our findings suggest that foreign banks’ harmful impact during the global crisis was only temporary and that they seem to help Emerging European countries stabilize macroeconomic volatility in normal times and after the global crisis.
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Hegemony and crisis in global political economy: the importance of legitimacy
(T.C. Dışişleri Bakanlığı Stratejik Araştırmalar Merkezi, 2013) İpek, Pınar
This study examines the importance of legitimacy in hegemony through the changes and continuities in the structures of global political economy. It is argued that a statecentric approach to hegemony is insufficient, and that the legitimacy of or consent for dominant neoliberal ideas and norms have been undermined by the structural problems and ongoing transformations in the global political economy.
Open Access
Investor reactions to major events in the sub-prime mortgage crisis
(Elsevier, 2022-06) Günsür, Başak Tanyeri
We investigate how investor perceptions about the financial health of twenty-seven bank holding companies that controlled eighty percent of US banking assets at year-end 2006 changed during major events leading to the collapse of Lehman Brothers. We use the event study method to investigate whether and to what extent investors priced major events before the Lehman bankruptcy. Abnormal returns on the event days range from -9.25 to 4.80%. When the Federal Reserve Bank of New York is authorized to lend to Fannie Mae and Freddie Mac on 13 July 2008, sample bank holding companies average the lowest abnormal returns of -9.25. When the Federal Housing Agency places Fannie Mae and Freddie Mac under government conservatorship on 7 September 2008, abnormal returns average the highest at 4.80. The significant abnormal returns indicate that investors price the information released in the pre-crisis events.
Open Access
Is gold a hedge or a safe-haven asset in the COVID–19 crisis?
(Elsevier BV, 2021-09) Akhtaruzzaman, M.; Boubaker, S.; Lucey, B. M.; Şensoy, Ahmet
This study examines the role of gold as a hedge or safe-haven asset in different phases of the COVID-19 pandemic crisis, corresponding to the timing of fiscal and monetary stimuli to support the weakened economy. Using high-frequency data, the results show that gold served as a safe-haven asset for stock markets during Phase I (December 31, 2019–March 16, 2020) of the pandemic. However, gold lost its safe-haven role during Phase II (March 17−April 24, 2020). The optimal weights of gold in S&P 500, Euro Stoxx 50, Nikkei 225, and WTI crude oil portfolios significantly increased during Phase II, suggesting that investors expanded investment in gold as a ‘flight-to-safety asset’ during the crisis. Further, hedging costs increased significantly during Phase II. These findings provide insight for individual and institutional investors and guidance to policymakers, regulators, and media on how gold evolved as a hedge and safe-haven asset in different phases of the pandemic.
Open Access
Macroeconomics and the term structure
(American Economic Association, 2012) Gürkaynak, R. S.; Wright, J. H.
This paper provides an overview of the analysis of the term structure of interest rates with a special emphasis on recent developments at the intersection of macroeconomics and finance. The topic is important to investors and also to policymakers, who wish to extract macroeconomic expectations from longer-term interest rates, and take actions to influence those rates. The simplest model of the term structure is the expectations hypothesis, which posits that long-term interest rates are expectations of future average short-term rates. In this paper, we show that many features of the configuration of interest rates are puzzling from the perspective of the expectations hypothesis. We review models that explain these anomalies using time-varying risk premia. Although the quest for the fundamental macroeconomic explanations of these risk premia is ongoing, inflation uncertainty seems to play a large role. Finally, while modern finance theory prices bonds and other assets in a single unified framework, we also consider an earlier approach based on segmented markets. Market segmentation seems important to understand the term structure of interest rates during the recent financial crisis.
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The minimal conditions for a financial crisis: a multiregional intertemporal CGE model of the Asian crisis
(Pergamon Press, 2000) Adelman, I.; Yeldan, E.
The globalization of world capitalism constrains the ability of the developmental state to pursue an independent industrialization and foreign trade strategy. We use an intertemporal, multiregion CGE model, to study the fundamental reasons for a financial crisis. We find that we can create a realistic crisis in the Asia region when capital markets are open and there is an unexpected rise in the risk premium of the Asia region. When capital markets are closed and the state retains all its policy instruments, the Asia region not only avoids a crisis but increases its rate of growth. (C) 2000 Published by Elsevier Science Ltd. All rights reserved.
Open Access
Optimal versus adequate level of international reserves: evidence for Turkey
(Routledge, 2005) Ozyildirim, S.; Yaman, B.
The determination of international reserve balance for emerging economies is part of the efforts to strengthen the immunity of these economies to crises. However, there is still evidence on crises even for the countries with large foreign reserves. It has usually been experienced that the countries with greatest need for reserves economize more than others on their holdings since they might underestimate the cost of crisis. In this study, the official international reserves of Turkey are tested against optimality and adequacy. During 1988-2002, the actual reserves fell short of both the optimal and the adequate levels. They are only optimal when the expected cumulative contraction is about 5.2% of real GDP under crisis. However, early evidence from emerging economies and Turkey show that crises hit more heavily. Hence, it is found that the current financial structure in Turkey such as the absence of capital controls and a highly dollarized banking system necessitates more foreign reserves for preventing any future economic and/or financial shocks.
Open Access
Regulatory changes and long-run relationships of the EMU sovereign debt markets: implications for future policy framework
(Elsevier, 2020) Yıldırım, E.; Corbet, S.; Nguyen, D. K.; Şensoy, Ahmet
We estimate the time-varying long-run correlations of European sovereign bond markets to identify specific effects that are attributed to changing European regulatory and political dynamics over the last twenty years. Our empirical results from using the DCC-MIDAS methodology indicate that regulatory changes in Europe have created significant and negative impact on the long-run correlations within the month where the regulation is decided to be taken into action. This impact still remains in the following months and robust with respect to the trend component of the long-run correlations. A direct implication is that the more regulations the EU attempts to put in place, the lower the long-run convergence process of sovereign bond markets is. We then analyse the structural shifts in the long-run correlation dynamics with penalized contrasts methodology and try to find out the reasons of these severe changes. Accordingly, some of the structural shifts overlap with the dates of a limited number of regulatory changes, in addition to the major global economic and political events.
Open Access
Relationship between financial crisis and foreign direct investment in developing countries using semiparametric regression approach
(Taylor & Francis, 2010) Ucal, M.; Özcan, K. M.; Bilgin, M. H.; Mungo J.
This paper analyzes whether and to what extent the inflow of FDI is affected before and after the occurence of a financial crisis in developing countries. The paper uses a semiparametric Generalized Partial Linear Models (GPLM) regression approach to check the appropriateness and effectiveness of financial crisis in the FDI regression model. The results indicate that FDI inflows decrease in the years after a financial crisis and an upturn in FDI inflows the year before a financial crisis hit the country.
Open Access
The sign switch effect of macroeconomic news in foreign exchange markets
(Elsevier Ltd, 2016) Ben Omrane, Walid; Savaşer, Tanseli
We examine an unusual episode in the behavior of the euro, pound and yen exchange rate markets when the dollar appreciated (depreciated) against the three major currencies, in response to unfavorable (favorable) US growth news during the global financial crisis. Contrary to the previous findings, we show that, for each currency pair, only a small subset (about a third) of the most significant macro news effects reversed sign, primarily announcements regarding consumption, credit, labor and housing markets. Our results reveal that announcement chronology within a month matters, in that specifically the earliest releases within an indicator category exhibit sign asymmetry.
Open Access
Sources of volatility in stock returns in emerging markets
(Routledge, 2005) Caner, S.; Önder, Z.
In this study, the short-term fluctuations in the monthly returns on composite indexes of 17 emerging markets affected by the financial crises in the late 1990s and 2000 are decomposed with vector autoregressive estimates. The results are compared to the behaviour of variation in returns in developed markets. Three different models are estimated for each market. Due to first order autocorrelations, lagged returns contribute significantly to return volatility in emerging markets. Decomposition of variances indicates that dividend yield and interest rate are determining factors of volatility, but at varying degrees in different emerging markets. However, the role of dividend yield is not as strong as it is in the developed markets as efficient markets hypothesis would imply. In some cases, exchange rates significantly influence market volatility. Fluctuations in the world portfolio return have a small effect on return volatility in national markets. However, there are significant differences across all emerging markets that point to differences in market structures and particular conditions in each country. Significant contributions of interest rates, exchange rates and inflation imply the role of monetary and fiscal policy as precedents of financial crises.
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Türk Ticaret Bankası'nın iflası
(Bilkent University, 2023) Ayan, Ebru; İşler, Amine Berra; Odabaş, Berke; Çağan, Berkan Egem
Following the 2001 financial crisis, efforts were made to strengthen and regulate the Turkish banking industry in order to make it more stable and reliable in international financial markets. Banks played an important role in facilitating economic growth by stimulating private-sector lending and investment. The 2001 financial crisis, on the otherhand, resulted in the demise of large banks and emphasized the need for tougher regulation sand improved risk management. Türk Ticaret Bankası (TTB) was one of the banks that had problem sand had to be liquidated. This article looked at the cause sand implications of TTB's bankruptcy.