Browsing by Subject "Global financial crisis"
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Item Open Access Effect of growth and medium of growth on resilience to global financial crisis(Bilkent University, 2022-12) Bulut, EmreThis dissertation comprises three chapters about investor reactions to significant events and the growth strategy of large banks in the global financial crisis. The first chapter focuses on the subprime mortgage phase of the crisis. We examine whether investors significantly reacted to events until Lehman Brothers’ collapse. We use the event study methodology to calculate abnormal returns of large banks in the sample. We find that investors reacted significantly to the events. As the crisis approaches, investors’ reaction becomes more significant. Results suggest that Lehman Brothers’ collapse is not a cause but a result of the crisis. The second chapter investigates the effect of the growth strategy of large banks on investor reactions to significant events during the global financial crisis. We construct a growth index decomposing into the merger index and organic growth index. Using the event study methodology, we find abnormal returns of the large sample banks. Applying cross-sectional event-specific and pooled OLS regressions, we analyze cross-sectional variations of investor reactions to significant events. Results indicate that investors significantly reacted to the growth strategy of large banks after the Lehman Brothers’ collapse but not before. The third chapter examines investor reactions in Europe to major events until the Lehman Brothers’ collapse. We calculate the abnormal returns of fifty-four banks across sixteen countries in Europe with the event study methodology. Our findings show that investors react significantly to the events as the Lehman Brothers’ failure comes closer. Hence the Lehman Brothers’ bankruptcy is a major turning point during the crisis.Item Open Access Exchange rate volatility response to macroeconomic news during the global financial crisis(Elsevier Inc., 2017) Ben Omrane, Walid; Savaşer, TanseliWe investigate the volatility reaction to macroeconomic news in major currency markets during the recent global financial crisis. We first present an alternative method for determining the changes in economic states by endogenously estimating crisis thresholds. Second, we assess which macroeconomic indicator gave the earliest warning signal for the upcoming contraction. Third, we investigate whether there is a systematic change in the volatility reaction of exchange rates to news during the crisis period. We find that the estimated logistic transition function based on the housing starts data exhibits the earliest warning signal compared to other indicators. Our results suggest that although volatility response to most news indicators is larger in expansion, currency market reaction to new home sales and Fed funds rate news is larger in the crisis period. We attribute this finding to the context-specific relevance of the housing and credit sectors in the evolution of the global financial crisis.Item Open Access Foreign banks and short-term macroeconomic fluctuations: do financial development and regions matter?(Elsevier, 2019) Önder, Z.; Özyıldırım, SüheylaIn this paper, we investigate the association between bank integration, measured with the share of foreign banks in the banking industry, and macroeconomic volatility in emerging economies. We find a negative and significant relationship between bank integration and short-run fluctuations in output, consumption and investment, controlling for financial development, bank concentration and the real effective exchange rate. However, this relationship is found to be positive at high levels of financial development. We also explore the association at the regional level and show that the presence of foreign banks in Latin America is negatively and significantly correlated with macroeconomic volatility both in normal times and times of crisis. Despite widespread concerns in emerging Europe, which experienced greater financial vulnerability during the global financial crisis, we find no significant association between growth volatilities and bank integration.Item Open Access International trade and letters of credit: A double-edged sword in times of crises(Palgrave Macmillan Ltd., 2022-01-05) Crozet, Matthieu; Demir, Banu; Javorcik, BeataThis study argues that the ability to mitigate risks associated with international trade is particularly important at times of heightened uncertainty, such as the economic crisis caused by the Covid-19 pandemic. Risk mitigation can be achieved through letters of credit (LCs), trade finance instruments providing guarantees to trading partners. As their use varies across products, exports of some products are more resilient than others during times of increased uncertainty. This situation reverses in times of financial crises when distressed banks may limit the supply of LCs. Our analysis using data on US and EU-15 exports during the Covid crisis and the Global Financial Crisis provides empirical support for these hypotheses. © 2021, International Monetary Fund.