Developing economies

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A WIDER NOTION OF CORPORATE GOVERNANCE AND IMPLICATIONS FOR DEVELOPING ECONOMIES

A WIDER NOTION OF CORPORATE GOVERNANCE AND IMPLICATIONS FOR DEVELOPING ECONOMIES

It is contended in this paper that the market-based corporate governance approach should be widened to incorporate the problem of large block-holders and owner-controlled firms and should be generalized to a model of multilateral negotiations and influence-seeking among a number of different stakeholders. In practice such a model should incorporate checks and balances between various stakeholders and outside constraints and must take into account how the political and legal system of a country affects this balance. The broader notion of corporate governance offers hope for understanding better the developing economies in particular where anonymous stock markets are not likely to promote the necessary entrepreneurial activity and corporate restructuring. It suggests that other mechanisms, such as product market competition, peer pressure, or labor market activity, may compensate for this weakness, or more realistically, may be more promising targets for legal or political reform than the stock market. Finally, it highlights some important issues relating to Corporate Governance in India that need to be addressed.
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Food insecurity in developing economies: Cambodian and international evidence

Food insecurity in developing economies: Cambodian and international evidence

particularly in developing economies. Imperfection of labour, credit, capital, and product markets in rural Cambodia are observed and realising this potential issue, I attempted to account for variation in cross-sectional data by including other factors that might affect food production and food security as a result. In this connection, I tested three potential impacts of agricultural land rights security, namely credit access, collateralisation, and revenue-cost ratio (known as input efficiency). Most rural farmers have faced difficulties with expansion of land size and finding off-farm work to earn extra income to support welfare (Han et al., 2008), therefore younger adults in rural Cambodia tend to migrate to other regions, including the city and neighboring countries. Two key points differentiate households with more productive assets, such as land, but less family labour from those with less of these assets but more household farm labour, leading to divergence in credit access from land-based collateralisation and access to farm technology. Where capital market is missing or limited in rural villages, households with larger landholding tends to have better access to lower-cost loans (Han et al., 2008), which would encourage their capital investment in farming. Imperfections in labour market and lack of regulatory support for labour and social insurance has appeared to hinder employment creation (Cho et al., 2012), leading farm and nonfarm labour to seek jobs elsewhere. The labour-rich, land-poor households would tend to seek farm and off-farm labour to compensate for little landholding for crop cultivation. While land- rich, labour-poor households would continue operating on their farmland by investing in more productive inputs and hiring extra labour, they could reap more agricultural revenues than their counterparts. Based on these assumptions of the imperfect labour, credit, and capital markets, and in fact they are factual observations, I employed this variation in cross- sectional data to decompose potential impacts of differing insecurity in land property rights on rice and land productivity and food insecurity of rural rice farmers in Cambodia. In sum, my model specification has responded well to the agricultural household model and imperfect market assumptions postulated by Sadoulet and de Janvry (1995) and other researchers.
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The simple analytics of oligopoly banking in developing economies

The simple analytics of oligopoly banking in developing economies

It has been recognised for quite some time that interest rate spread – the difference between the lending rate and the deposit rate – is quite high in developing economies. The spread has tended to persist in a post-liberalised environment also and it has been documented by several authors; see for instance Chirwa and Mlachila (2004), Moore and Craigwell (2002), and Gelos (2006). In general high bank overhead cost of production, market power 3 and high liquidity levels are seen as key factors driving the persistent spread in the post-reform period. Commercial banks in developing economies also hold a high ratio of liquid assets – excess reserves and domestic government
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External Monetary Constraints Imposed by Developed Economies on Developing Economies: Empirical Evidence from Pakistan

External Monetary Constraints Imposed by Developed Economies on Developing Economies: Empirical Evidence from Pakistan

There is a plethora of studies existing that deals with the monetary policy and central bank independence but there is no serious attempt has yet been made that incorporating the external monetary constraints impact on developing countries. The study in hand is filling this research gap and provide a comprehensive analysis of the external shocks and constraints impacts on Pakistan economy. The problem with the most of the developing economies is that their monetary policy is constrained by the developed economies central banks especially Federal Reserve's Bank USA and ECB. Numerous other reasons like exchange rate stability, the International Monetary Fund’s restrictions due to external debt, and interest rate linkages etc. also restricting the developing countries central banks to work independently. In this research study, we examine the impacts of major external shocks like global oil price shocks, foreign interest rate shocks and global food price shocks on the major macro variables of Pakistan which creating hurdles for the central bank of Pakistan to achieve its monetary objectives independently. For empirical analysis, we used a Structural Vector Autoregressive (SVAR) model along with its extensions of Impulse Response Functions and Generalized Forecast Error Variance Decomposition Analysis. The results stating that the global oil price shocks and global food price shocks have direct impacts on the major macro variables of Pakistan and put inflationary pressure on the Pakistan which making difficult for the central bank to achieve its predetermined dual objective of monetary policy i.e. full employment and stable inflation. Additionally, we examine how the changes in US monetary policy effects Pakistan economy and find that positive foreign interest rate shock has minor impacts on the major macro variables of Pakistan except for the exchange rate and domestic inflation rates which is imposing an external constraint on the monetary policymaking process of Pakistan central bank. In a nutshell, all these external shocks are creating hurdles and imposing monetary constraints on the Pakistan which making difficulties for Pakistani central bank to achieve its monetary policy objectives.
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Essays on Optimal Macroeconomic Stabilization Policy for Developing Economies

Essays on Optimal Macroeconomic Stabilization Policy for Developing Economies

the DSGE model, along with nominal rigidity problems such as nominal price rigidity and financial adjustment costs, to explain the recent trend in the business cycle of developing countries. Many economists view developing economies as financially fragile. However, these regions also have a high level of misallocation of labor demand or, at least, have a relatively sluggish adjustment in employment demand, which is partly explained by strong regulation in the labor market. When many Asian and Latin American countries were hit by the financial crisis in 1998, the International Monetary Fund (IMF) required that these countries implement several legal reformations of their market structure as an essential prerequisite for their help. One IMF requirement was the liberal- ization of the labor market. However, because of cultural and social resistance, this constitutional change took longer than expected, and some have yet to change. This study shows that the misal- location of labor demand has a notable effect on the business cycle of a developing economy, and is related to other frictions such as imperfect international financial market accessibility. Many believe that the imperfect financial market integration is a main cause of global imbalances, as effectively argued by Mendoza and Quadrini (2010) [53]. In addition to the body of literature, it is also important to note that in the special economic circumstance in which a labor market is distorted by a real friction, as depicted in this study, the imperfectly integrated financial market condition can change how external shocks are transmitted to the domestic economy. Therefore, a monetary policy should react to these conditions to find an optimal policy rule.
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Capital controls and exchange rate instability in developing economies

Capital controls and exchange rate instability in developing economies

A large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability. This paper investigates whether legal restrictions on international capital flows are associated with greater currency stability. We employ a comprehensive panel data set of 69 developing economies over the 1975–1997 period, identifying 160 currency crises. We control for macroeconomic, political, and institutional characteristics that influence the probability of a currency crisis, employ alternative measures of restrictions on international payments, and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls. We find evidence that restrictions on capital flows do not effectively insulate economies from currency problems; rather, countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks.
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Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

Infrastructure investing in developing markets poses an additional set of challenges, from sovereign risk to regulatory issues (Table 3). Foreign investors have particular concerns about expropriation risks and poor governance standards. For developing economies, even those with more mature capital markets and stable legal and regulatory systems, achieving the threshold investment grade rating (which many institutional investors require or seek) is a challenge. Estimating usage from a project can be difficult in an unstable economic environment, and political sentiment can turn, driving a popular backlash against privatized national services. Country risk premiums add to the cost of capital, making some projects not economically feasible without significant official-sector subsidies.
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The Importance of Corporate Law: Some Thoughts on Developing Equity Markets in Developing Economies

The Importance of Corporate Law: Some Thoughts on Developing Equity Markets in Developing Economies

Where does this leave us in considering the “law matters thesis” and related corporate law reforms for promoting equity markets in developing economies? One can start to answer this question by asking whether a market-based approach to corporate governance, such as the one in the United States, is feasible for developing countries looking to develop equity markets. In my view, the answer is “no” for a number of reasons. For present purposes, it suffices simply to stress that the U.S. system presupposes the existence of markets and relies on a host of non-law market institutions to protect shareholders in place of demanding legal mandates. When a full complement of such market institutions exists, there is little need for strong laws to protect shareholders. However, developing countries do not yet have the mature market institutions that make a market-based model of governance with weak legal protections guarding shareholders feasible. Indeed, the whole endeavor is to create markets. 10 A related shortcoming is that the standardized contracting and “shared mental model” of governance and business that shape parties’ reasonable expectations in developed markets are often lacking in developing economies. 11
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The Challenge of Economic Growth and Environmental Protection in Developing Economies

The Challenge of Economic Growth and Environmental Protection in Developing Economies

he main objective of the present study is to find out a clear answer to the question raised in developing countries , that whether such developing economies could be able to achieve economic growth as well as protect their environment simultaneously or these economies still suffer from a severe conflict between environmental protection and economic growth. So, different categories of developing countries were selected and distinguished as oil-based and non-oil based countries for the period 2001-2012. The panel data regression analysis of the information collected from countries showed that the variables such as renewable energy, population growth and the size of internet users have negative and significant effects on the CO 2 emission per unit of GDP,
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Developing economies’ participation in global trade in commercial services

Developing economies’ participation in global trade in commercial services

Trade in services are necessary for the balance of payments. Several developing economies have gained from exports of construction, banking, and professional services or from services transactions based on telecommunications networks (such as data processing and entry, and software production). Remittances from nationals residing abroad and the compensation of residents temporarily employed abroad represent important currency revenues, in some countries rivalling export receipts. In addition, international services trade has important implications for capital flows. Thus, openness to services trade may involve larger advantages by assisting the poorest economies to obtain infrastructure services at globally competitive prices. The liberalization of transportation and financial services, for example, is expected to significantly lower costs in merchandise trade. Where countries have opened up to international services transactions, they have increased the efficiency of existing domestic services industries by attracting new capital and giving incentives for restructuring inefficient companies. A quantification of impediments to international services trade is important both to measure potential efficiency gains, and to complement existing measures of the restrictions imposed on merchandise trade. Several studies suggest that gains from trade liberalization will remain tending to elude where key services sectors remain closed to foreign entry. Regulatory measures are harder to quantify than barriers in merchandise trade. A quantification of market access impediments and of discrimination against foreign suppliers suffers not just from the inevitable judgment in assigning weights to individual regulatory measures but also from the paucity of comparable data. The GATS only discloses restrictions where members chose to include a particular sector in their schedules of specific commitments, thereby locking in their policy regime (Mattoo and others, 2001). Outcome-based measures, such as price-cost margins or market shares of foreign service providers, measure economic distortions more accurately, but cannot always unambiguously attribute such distortions to economic regulations. A number of measures indicate that developing and transition economies tend to have more restrictive trade regimes in services sectors than developed countries.
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New Health Technologies and Health Workforce in Developing Economies

New Health Technologies and Health Workforce in Developing Economies

The results shown in the above Table 7 clearly indicate that life expectancy at birth is influenced by technologies. The coefficients of sensitivity are respectively 0.42 and 0.25 for GII and KEI for all countries. For developed economies, the coefficient is 0.18 for both GII and KEI. But, given the estimated standard error for each coefficient, the levels of responses appear to not be different between countries. This implies that developed, developing and all countries exhibit the same coefficient as it is confirmed in Table 8 with the calculated t-statistics. Therefore, only higher levels of the technology index (GII and KEI) determine higher life expectancy at birth in developed economies. With lower levels of technologies, lower life expectancies at birth are observed at the level of developing economies.
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Terms of Trade Effects of Productivity Shocks in Developing Economies

Terms of Trade Effects of Productivity Shocks in Developing Economies

ries is studied with (B.8) under the assumption of homogeneous slopes. Indeed, β is assumed to be common across all economies of the same group, implying that a homo- geneous cointegration relationship between the series is assumed. The assumption of homogeneous slopes in the cointegration equations is made to be consistent with the assumption of homogeneous slopes in the panel VAR model which we use in forecast- ing the effects of an improvement in productivity on the terms of trade in advanced and developing economies, as discussed in section 2.1. Assuming homogeneous slopes in our panel VAR model can be defended by the fact that the models with homoge- neous slopes are shown to have better forecast performance due to their parsimonious representation and does not suffer from parameter estimate instability which occurs in heterogeneous slope models due to estimating several parameters with short time series; see Baltagi (2005, chapter 10).
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Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

Infrastructure investing in developing markets poses an additional set of challenges, from sovereign risk to regulatory issues (Table 3). Foreign investors have particular concerns about expropriation risks and poor governance standards. For developing economies, even those with more mature capital markets and stable legal and regulatory systems, achieving the threshold investment grade rating (which many institutional investors require or seek) is a challenge. Estimating usage from a project can be difficult in an unstable economic environment, and political sentiment can turn, driving a popular backlash against privatized national services. Country risk premiums add to the cost of capital, making some projects not economically feasible without significant official-sector subsidies.
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Terms of Trade Effects of Productivity Shocks in Developing Economies

Terms of Trade Effects of Productivity Shocks in Developing Economies

the Prebisch-Singer hypothesis characterizes labor as organized in advanced economies and as disorganized in developing economies, implying that trade unions in advanced economies have more power to prevent labor shares from declining by securing the sufficient rents from productivity gains accruing to labor. Contrasting with this prediction, labor shares have considerably fallen over the last two decades in advanced economies. This largely result from real median compensation in advanced economies not keeping up with labor produc- tivity, causing a decoupling of wages from productivity growth; see Schwellnus, Kappeler, and Pionnier (2017). As a matter of fact, as compared to developing economies, advanced economies have had a small labor share since 2000 when self-employment income is taken into account; see Guerriero (2012). Conse- quently, there is little evidence that labor in advanced economies benefits more from a given productivity improvement due to being more organized, as argued by the Prebish-Singer hypothesis.
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An institutional analysis of some monetary issues in developing economies

An institutional analysis of some monetary issues in developing economies

At the end of the 50s, when the main countries of Europe gradually started to promote the return of their currencies to convertibility, after gathering important exchange reserves in dollars, the world began the trail back to the point where flows of international financial capital might regain their former pre-war importance in the international economy (Grabbe, 1996). The development of the Euromarket in the following years reinforced and accelerated the trend (Helleiner, 1996), culminating, in the beginning of the 70s, with the dismantling of the exchange rules established in Bretton Woods. After the first movements in this direction made by the United States and the United Kingdom in 1971-73, several countries began to liberalise their finance systems, whether on a strictly domestic level or in terms of the flows in their capital account (Williamson & Mahar, 1998). From that moment on, a similar tendency for an opening up of the financial systems spread over the world, arriving at the developing economies in the end of the 80s. As a matter of fact, in the 90s, the world economy achieved a level of mobility in international financial capital not seen since the beginning of the twentieth century (Obstfeld, 1998).
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Determinants and barriers to bilateral trade A study on developing economies

Determinants and barriers to bilateral trade A study on developing economies

World trade has grown rapidly. Several factors are highlighted by literature as a driving force behind the growth of world trade. Reduction in barriers to trade is one of them. A comprehensive empirical investigation is carried to ascertain the trade reducing and increasing effect of barriers to trade which are also known determinants of trade. The modified gravity model developed in this study analyses the effect of GDP, distance, remittances, FDI, transportation cost, exchange rate, inflation, population, import and export on trade flows. The study revealed that the population, import and transportation cost, distance, Tariff imposed by trading partner, FDI and Population of trading country are the determinants and significantly affect exports of developing economies. Th e study also ascertain that transportation cost, distance, population of trading partner, FDI of both trading countries and remittances of trading partner are the determinants that have major impact on import of developing nations
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Police and Crime Against Firms in Developing Economies

Police and Crime Against Firms in Developing Economies

Economic theory predicts that a rise in police presence will reduce criminal activity. However several studies in the literature have found mixed results. This study adds to the literature by exploring the relationship between the size of police and crime against firms, an important issue especially for developing economies. Using data for about 12,000 firms in 27 developing countries we find that increasing the police force has a negative effect on crime against firms. We also find that several macro-economic factors can weaken or strengthen this negative effect. The results are robust to various sensitivity checks.
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Poverty in Agrarian Developing Economies

Poverty in Agrarian Developing Economies

This study empirically examines the determinants of poverty in agrarian developing economies. According to the 2013 World Development Report: Jobs, in agrarian economies the main ways to reduce poverty and hence improve living standards are increases in productivity in farming and the creation of a dynamic economic milieu in urban areas. As an example, much of Mozambique’s poverty can be found in agriculture. While over four-fifths of its labor force is employed in agriculture, this sectors accounts for only 30 percent of its gross domestic product. Compared to the value added per hour worked in services and in manufacturing, that in agriculture represents only one-seventh and one-twelfth, respectively. Over the last decade, yields have not changed. The use of modern technology is virtually absent and there is minimal access to agricultural extension services, while almost all agricultural workers work on small plots.
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How to build upon sustainable entrepreneurial opportunities in developing economies

How to build upon sustainable entrepreneurial opportunities in developing economies

Second, the management of plastics is a practical issue facing the country. Plastic accounts for 19% of municipal solid waste (MSW) in landfills in T&T (CBCL, 2010; Rajkumar et al., 2011). For an island environment such as T&T, a challenge is posed by disposal sites without adequate environmental protection increasing the level of pollution in surrounding surface and ground water (Beckles et al., 2016), coupled with the inability to establish new landfills due to land availability (Government of Trinidad & Tobago, 2015; Marzolf, Casado Cañeque, Klein, & Loy, 2015). A CE solution may be the only viable long-term one. The results of the MFA are used to identify opportunities for CE interventions that can have positive impacts for developing economies via economic development and entrepreneurial activity, increased employment and revenues, improved economic stability and resilience to external factors, and the development of environmental policy that protects the environment and promotes eco- friendly business activity.
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Determinants of Corporate Profitability in Developing Economies

Determinants of Corporate Profitability in Developing Economies

The study investigates the determinants of corporate profitability in developing economies, with main emphasis on the Nigerian context. The study analyzes the relationship between capital structure, firm size, cash liquidity, financial leverage and corporate profitability. A panel data consisting of forty (40) randomly selected companies, spanning a period of five (5) years was utilized for the study. The ordinary least square regression was used to analyze the existence of relationships among the dependent and independent variables. A positive relationship was found to exist between firm size and corporate profitability, and financial leverage and corporate profitability. Capital structure and cash liquidity exhibited negative relationships with corporate profitability. The study recommended the use of different indices of profitability; as differing results are possible. The study further proposed the inclusion of additional variables in order to improve the stability and explanatory power of the overall model.
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