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GLOBAL FINANCIAL CRISIS AND IMPLICATIONS FOR DEVELOPING COUNTRIES

GLOBAL FINANCIAL CRISIS AND IMPLICATIONS FOR DEVELOPING COUNTRIES

Remittances from host countries are expected to be decline in response to the global slowdown but the impact on flows to recipient countries will depend significantly on exchange rates. In 28 countries, remittances to developing countries were larger than revenues from the most important commodity export, and in 36 countries they were larger than private and public capital inflows. They are also a powerful poverty reduction mechanism. For example, in Nicaragua remittances reduce poverty incidence by four percentage points on average, and five percentage points in urban areas. In Albania, households with migrants to Italy and Greece have an incidence of poverty that is half the national rate (i.e., 15 and 19 percent compared to an average of 32 percent). Remittance flows from host to developing countries, which reached an estimated $295 billion in 2008, began slowing in the second half of 2008 and are projected to slow sharply in 2009. The global slowdown is also expected to lead to a sharp reduction in employment opportunities in the developed world, especially in sectors with a high concentration of migrants (e.g., construction, retail, catering). This, plus lower oil revenues in Gulf countries, will lead to a decline in migrant earnings. However, the large exchange rate fluctuations of recent weeks have dwarfed the expected changes in remittances denominated in host-country currencies. As a result, changes in the local currency value of remittances will likely vary widely by country. Overall, remittance flows into developing countries are expected to decline from 2.0 to 1.7 percent of recipient country GDP.
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The global financial crisis: Realities and implications for the Nigerian capital market

The global financial crisis: Realities and implications for the Nigerian capital market

Global Financial Crisis and the Nigerian Stock Market: The financial crisis ravaging the global economy is naturally a serious cause for concern to policy makers. Developed economies like USA, Germany, England among other were injecting liquidity into the stock market to safeguard the financial system from crashing. The immediate past governor of Central Bank of Nigeria was busy campaigning that Nigerian investor should not panick, and that the Nigerian financial system is insulated from the global financial crisis. The immediate past governor of Central Bank’s position deceived most Nigerian and also afforded foreign investors the opportunity to exit the market at its prime. The immediate past governor of Central Bank of Nigeria also showed little of understanding of the crisis when he argues that “the world economy may not survive the crisis, as it is the beginning of a long period of economic instability that requires policy makers to create an inclusive and responsive global capitalism” (Soludo, 2009). He argued that from the cost of government interventions around the world, other indirect costs of the crisis could run into several trillions of Dollars in income lost, millions of people plunged into poverty for a generation, especially developing countries.
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Market risk of developed and developing countries during the global financial crisis

Market risk of developed and developing countries during the global financial crisis

performances of VaR for Colombia, Israel, Mexico, Poland and Russia. Several developing countries including Korea, Malaysia, Morocco, Peru, Philippines, Thailand and Turkey have no rejections. It is possible to say that VaR has some value as measure of risk for Indonesia and for emerging market giants China, Brazil, and India. Table 2, Panel B reports the number of rejections and non-rejections for Kupiec test. Number of non-rejections is much larger than the number of rejections. A comparison of Panels B in Tables 1 and 2 clearly reveals that there was decoupling between emerging and developed countries in terms of market risk during the global financial crisis.
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Software Exports and Developing Countries : Implications for Argentina

Software Exports and Developing Countries : Implications for Argentina

Software Exports and Developing Countries : Implications for.. Argentina.[r]

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Global financial crisis and foreign development assistance shocks in least developing countries

Global financial crisis and foreign development assistance shocks in least developing countries

Arellano and Bond (1991) difference GMM estimation results, considering all lags, are presented in columns 2 of Table 4.3. The results suggest that the exogenous component of the global financial crisis exerts a large negative impact on OECD-DAC EU ODA flows although most of the coefficients are not statistically significant. In column 3, we considered all lags with year dummy to control for any shocks that are common for all countries. Comparing the column 2 and 3 coefficients, the results are not significantly different. Thus, we use 2SLS estimator considering all lags (column 4) and coefficients are now showing more statistically significant results. Although the Sargan test supports the validity of our estimation, the Arellano-Bond AR (2) test rejects the null hypothesis and implies that there is second order serial correlation, which is not desirable. Next, we consider all lags with year dummy (column 5) and employed 2SLS. The coefficients of the lagged dependent variables is showing large negative effects (-0.914) including other variables. The negative lagged value of the dependent variable suggests that there is no dynamic effect. Furthermore, to get more consistent results we estimate AB-GMM considering maximum one lag (column 6) and maximum one lag with year dummy (column 7). The coefficients values are almost identical and statistically insignificant.
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Globalization, financial crisis and contagion: time dynamic evidence from financial markets of developing countries

Globalization, financial crisis and contagion: time dynamic evidence from financial markets of developing countries

Financial integration among economies has the benefit of improving allocation efficiency and diversifying risk. However the recent global financial crisis, considered as the worst since the Great Depression has re-ignited the fierce debate about the merits of financial globalization and its implications for growth especially in developing countries. This paper examines whether equity markets in emerging countries were vulnerable to contagion during the recent financial meltdown. Findings show: (1) with the exceptions of India and Dhaka, Asian markets were worst hit; (2) but for Peru, Venezuela and Columbia, Latin American countries were least affected; (3) Africa and Middle East emerging markets were averagely contaminated with the exceptions of Kenya, Namibia, Nigeria, Morocco, Dubai, Jordan, Israel, Oman, Saudi Arabia and Lebanon. Results have two important policy implications. Firstly, we confirm that Latin America was most prepared to brace the financial crisis, implying their fiscal and monetary policies are desirous of examination and imitation. Secondly, we have confirmed that strategic opening of the current and capital accounts based on empirical evidence for a given region/country as practiced by India is a caution against global economic and financial shocks.
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Global imbalances and the financial crisis

Global imbalances and the financial crisis

Global imbalances have shrunk dramatically as global trade collapsed after the financial crisis. However, Baldwin and Taglioni (2009) argue that they are likely to return when global demand picks up. As mentioned, global imbalances are not necessarily undesirable. Households want to smooth their consumption across states of nature and over time and current and financial account imbalances are ways to accomplish this. Countries experiencing temporary bad shocks should run deficits; countries experiencing temporary good shocks should run surpluses. Countries in an early stage of development should borrow from countries in a later stage of development. The past imbalances, however, were caused by distortions and were clearly undesirable; the developing world should not be, year after year, lending to advanced economies. While factors that resulted in global imbalances did not, on their own, cause the global financial crisis, a re-emergence of the previous imbalances would be disturbing. Any solution must involve advanced economies cooperating with developing countries, especially China and those in the Middle East. 4.2.2 The G-20 Summit in Pittsburgh
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Globalization, financial crisis and contagion: time dynamic evidence from financial markets of developing countries

Globalization, financial crisis and contagion: time dynamic evidence from financial markets of developing countries

Financial integration among economies has the benefit of improving allocative efficiency and diversifying risk. However the recent global financial crisis, considered as the worst since the Great Depression has re-ignited the fierce debate about the merits of financial globalization and its implications for growth especially in developing countries. This paper examines whether equity markets in emerging countries were vulnerable to contagion during the recent financial meltdown. Findings show: (1) with the exception of India, Asian markets were worst hit; (2) but for Peru, Venezuela and Columbia, Latin American countries were least affected; (3) Africa and Middle East emerging markets were averagely contaminated with the exception of Kenya, Morocco, Dubai, Jordan and Lebanon. As a policy implication, India’s step-wise financial liberalization approach should be emulated. Lessons from Latin American fiscal and monetary policies should be learned and/or revised.
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Effects of global financial crisis on funding for health development in nineteen countries of the WHO African Region

Effects of global financial crisis on funding for health development in nineteen countries of the WHO African Region

Africa (RC), entitled “ The global financial crisis: implications for the health sector in the African Region ” , was an excerpt from this background paper. The RC paper was written by JMK, BMN and CNM. We greatly appreciate the suggestions of both the AFRO Regional Committee Documents Review Committee and the Management Development Committee. We are immensely grateful to Dr Luis Gomes Sambo for creating an enabling working atmosphere at the Regional Office and for underscoring the need to undertake the survey reported in this paper. English language editorial support provided by Ms Kellen Kebaara is greatly appreciated. Jehovah Jireh provided invaluable support at all stages of the study reported in this paper. This article contains the views of the authors only and does not represent the decisions or the stated policies of the World Health Organization. Authors ’ contributions
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Capital Flows and Policy Reforms in Turkey After the Crises

Capital Flows and Policy Reforms in Turkey After the Crises

Capital flows are a key aspect of the global monetary system and have increased significantly in recent years. Capital flows can have substantial benefits for countries, including by enhancing efficiency, promoting financial sector competitiveness, and facilitating greater productive investment and consumption smoothing. Capital flows can also carry some risks; their size and volatility can also cause policy challenges and they can reduce discipline in financial markets and public finances, tighten financing constraints by restricting the availability of foreign capital. The global financial crisis has caused the swings of capital flows in financial markets and lead to policy reforms in developing countries. The aim of the study is to analyze the capital flows and policy reforms in Turkey after global financial crises.
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Comparing The South African Stock Markets Response To Two Periods Of Distinct Instability The 1997-98 East Asian And Russian Crisis And The Recent Global Financial Crisis

Comparing The South African Stock Markets Response To Two Periods Of Distinct Instability The 1997-98 East Asian And Russian Crisis And The Recent Global Financial Crisis

During the second crisis period, Germany, the US, Brazil, the UK, Hungary, and Australia played the dominant parts. Given that the crisis originated in the US, and given the consequent impact on the real economies of Europe, it is not surprising that the developing countries were the most dominant sources of volatility. Hungary, as an advanced emerging market, features again. The strong impact of Brazil and Australia (in the second crisis) can most likely be attributed to the fact that these stock markets, like South Africa, are dominated by resource (commodity-producing) companies. This provides supporting evidence to the hypothesis that commodity-producing countries were hit particularly hard during the second part of the global financial crisis. Volatility linkages with Germany, particularly in the second crisis period, can be explained by Germany’s role as South Africa’s main trading partner in Europe. Uncertainty or volatility on the German stock market is likely to enhance uncertainty on the South African market. Volatility co-movement between South Africa and China, and India and Russia respectively is not that high. Despite being part of the BRICS grouping, South Africa is more prone to share periods of high volatility with the developed markets of Germany, US, and UK and fellow advanced emerging markets of Brazil and Hungary.
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THE GLOBAL FINANCIAL CRISIS: AN ANALYSIS OF CONTAGION EFFECTS TO SELECTED MENA COUNTRIES

THE GLOBAL FINANCIAL CRISIS: AN ANALYSIS OF CONTAGION EFFECTS TO SELECTED MENA COUNTRIES

The incidence of financial crises over the past decade has ignited research into the nature of the spread of financial crises across borders, with the conduit of ‘contagion’ an important focus. Contagion is defined as an increase of common movements in a set of financial asset markets in a particular period of time (a crisis period) compared to those existing in a benchmark (non- crisis) period. The aim of this paper is to investigate the contagion effects from US to five MENA stock markets namely, Bahrain, Kuwait, Egypt, Morocco and Tunisia before and during global financial crisis (2007-2009). The methodology is based on the vector autoregressive regression (VAR) model and the Granger causality test. Results show a "pure contagion" phenomenon between some markets during the 2008 financial crisis. Furthermore, the causality effect is more pronounced in crisis than calm period.
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Firm’s Finance and Influence of Global Financial Crisis in the Selected European Countries

Firm’s Finance and Influence of Global Financial Crisis in the Selected European Countries

during the crisis, because large enterprises usually has access to the capital market or they have long-term relationship with big banks. The most common reasons for non-assingment a bank loans are, for example, insufficient collateral, insufficient creditworthiness, unsatisfactory credit history, high risk premium but also high transaction costs (IFC, 2009). During and after the crisis is needed to facilitate to SME access to extraneous sources and not limit it, because these financial funds are necessary for creation new jobs and economic growth in countries affected crisis (Ardic, Mylenko and Saltane et al., 2011).
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Iran and the Global Financial Crisis

Iran and the Global Financial Crisis

considerable room for using the surpluses accumulated during the oil boom to support economic activity in the event of continued weakness. The majority of oil revenues have been spent on subsidized lending, massive bank credits, imprudent social spending, substantial imports, aids to other countries, and huge energy and food subsidies. ‎ 3 For years governments in Iran have depleted

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Global financial crisis

Global financial crisis

Instead of taking the responsibility for the crisis, and withdraw from the market, the USA and other countries did the opposite, and they only dived further in the market economy, thereby transferring hundreds of billions of taxpayers’ money. Governments would have to allow the market to do its own job, by resettling resources from non-productive or inefficient sectors, like the part of the banking sector that dealt with the real estate loans, to more productive sectors. Therefore, the market should have been given a change to normalize relations between savings, borrowing and productivity. Instead of allowing the healthy shearing the market would have undertaken on the rotten branches of economy, governments are only extending (and not cutting) rotten branches’ lives 20 .
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Capital mobility in the panel GMM framework: Evidence from EU members

Capital mobility in the panel GMM framework: Evidence from EU members

This paper examines the level of capital mobility in European Union members using the generalized method of moments (GMM) estimation technique developed by Hansen (1982). This study investigates the validity of the Feldstein-Horioka puzzle within the GMM framework and the impact of the global financial crisis on the level of capital mobility in EU members. In general, the world countries with time have a tendency to a higher level of capital market openness. According to Feldstein and Horioka (1980), a higher saving- investment correlation is related to lower capital mobility. In this paper, panel data for 27 European countries were used for the period of 1995-2013 on the quarterly basis. The empirical results provide evidence of high capital mobility in EU members, obtaining a low value of a saving retention coefficient. The results of estimations indicate significant dependence of investments on its past values. It is found that the global financial crisis had a deeply negative impact on investment rates during the first three quarters of 2008, followed by a recovery in the last quarter. The empirical results indicate that the level of capital mobility increased in the first three quarters and decreased in the fourth quarter of 2008 compared to estimations without dummies. Thus increase in investments and decrease in the international capital mobility level of European countries in the last quarter of 2008 indicate a relative increase in domestic capital flows, taking into account high risk in the international market.
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Constructing Global Governance of Global Finance: Towards a Hybrid Global Financial Architecture

Constructing Global Governance of Global Finance: Towards a Hybrid Global Financial Architecture

The Asian crisis showed that, the composition of capital flows matters. The fact that there were sudden reversals of capital flows during 1997 and 1998 led many to believe that most capital flows in the region were of portfolio investment type. Reversals of such capital can strain the region’s financial system sufficiently to cause or exacerbate its collapse 21 . However, while it is true that portfolio investment was on the rise, data indicate that foreign direct investment (FDI) remained the largest in all Asian crisis countries. In all Asian crisis countries foreign debts increased persistently until the onset of the crisis. These were debts of the private sector from foreign private lenders.Regional monitoring with the help of a theory such as the one proposed here could have caught the problem and a regionally, ultimately globally, coordinated solution could be attempted. But this was never a possibility under the then existing circumstances. We now know that financial and balance-of-payments crises became interlinked precisely because of the existence of foreign-currency-denominated liabilities (foreign debt) in the domestic financial system 22 . This hindsight can be used to develop RFAs in Asia, Latin America and a few other regions.
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The Global Financial Crisis and Equity Markets in Middle East Oil Exporting Countries

The Global Financial Crisis and Equity Markets in Middle East Oil Exporting Countries

these events was crude oil price fall from $120 per oil barrel before the crisis to about $70 per barrel through the whole period after the crisis. The other event, which even more important than the oil market effect, was Dubai debt crisis in 2009, which sent waves of shocks to the markets in the region. Both these events are linked with the global crisis in away, or another, therefore they cannot be considered as separate crisis. Thus, taking the date of Lehman investment bank failure (15/August/2008) as a distinctive date between pre and post crisis sample periods, results in table (3) present VaR and ES values for each of the two eras,. Estimated risk values of VaR and ES indicate the percentage of a portfolio value that can be lost when an asset held for a single day with a probability of 5 percent (or 95% confidence level) 8 . Both risk measures indicate the impact on GCC markets differ from one market to another, reflecting differences in the degree of openness of each capital market to international capital markets and foreign investments. Based on the expected shortfall (ES) values, it is evident that Dubai financial market was the most affected by the global financial crisis as portfolio losses increased from 18 percent at the pre-crisis era to 42 per cent at the post- crisis period. It is not a surprise to have such high level of risk for Dubai financial market which also hardly hit by Dubai debt crisis in October 2009. Share prices in Dubai financial market plummeted amid fears that Dubai World, a giant conglomerate owned by Dubai government, asked its creditors for debt rescheduling. It is also indicated in the table, in the normal situations (before the crisis) Saudi market is the riskiest in the group, as portfolio loss can reach up to 16 per cent in every 20 days (VaR at 5% significance level). However, Kuwait stock market is the least
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Forbes and Rigobon’s method of contagion analysis with endogenously defined crisis periods – an application to some of Eurozone’s stock markets

Forbes and Rigobon’s method of contagion analysis with endogenously defined crisis periods – an application to some of Eurozone’s stock markets

The existent literature provides numerous definitions and statistical methods for analysis of contagion in the financial markets. The definition of shift contagion of Forbes and Rigobon (2001) and their adjusted correlation analysis (Forbes and Rigobon, 2002) have gained a lot of attention but the later faces the problem of ad hoc determination of the crisis periods and the issue of volatility adjustment. The aim of this paper is to elaborate the weaknesses of the method of Forbes and Rigobon and to provide a modification of their test that addresses these issues. To achieve this, a moving-window approach of Forbes and Rigobon’s (2002) method is proposed, by splitting the moving-windows into two equally sized sub- windows. We then apply the modified method to examine whether there was a (shift) contagion in the stock markets of five Eurozone countries (namely France, Germany, Ireland, Italy, and Spain) in the time period from December 2003 to January 2012. We found that shift contagion has played an important role in the propagation of shocks in the investigated stock markets during the crises. The start of the Greece’s debt crisis in May 2010 coincided with contagion from the Ireland’s, Italy’s, and Spain’s stock markets to the stock markets of France and Germany. Similar episodes of contagion were indentified around the Middle East financial crisis, at the end of 2006 and the start of 2007. The global financial crisis coincided with contagion from the Italy’s and Spain’s to the German stock market, while the Ireland’s debt crisis with contagion from the Ireland’s to the German stock market.
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IMPACT OF GLOBAL FINANCIAL CRISIS ON BUSINESS CYCLES IN DEVELOPING ASIA AND THE DECOUPLING HYPOTHESIS

IMPACT OF GLOBAL FINANCIAL CRISIS ON BUSINESS CYCLES IN DEVELOPING ASIA AND THE DECOUPLING HYPOTHESIS

fter many years of impressive growth the world economy has experienced an equally important downturn that started in the third quarter of year 2008. The crisis was initiated by the financial meltdown in the US based sub prime lending market which later on led to the global financial crisis and the consequent economic crisis in the developed world. Initially many economists were optimistic that the growth in the developing and emerging economies of East Asia would be decoupled from the difficulties faced by the developed economies and the region would continue to move ahead as an autonomous growth pole. Such a view of number of economists was based on ample researches that have talked about some sort of decoupling of these emerging economies from the industrial world. Kose et. al (2008) observed that though there was substantial convergence of business cycles among the industrial economies and among Emerging Market Economies, but there has also been a concomitant divergence or decoupling of business cycles between these two groups of countries during the globalization period. They further suggested that even the existence of large spillover effects across financial markets need not necessarily imply real spillovers of similar magnitude. Rather the changing relative importance of global factors and group specific factors must be considered relevant in assessing the likely impact of such spillover effects. Pula and Peltonen (2009) though could not find any evidence of decoupling, but has calculated that emerging Asia is less “coupled” with the rest of the world than what is suggested by trade data. Fidrmuc and Korhonen (2009) have shown that in the last two decades the business cycles in the large emerging Asian economies and the developed economies have been quite different. Many developed countries have shown low or even negative
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