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282. EU Enlargement: Costs, Benefits, and Strategies for Central and Eastern European Countries
- Author:
- Marian L. Tupy
- Publication Date:
- 09-2003
- Content Type:
- Working Paper
- Institution:
- The Cato Institute
- Abstract:
- The accession of eight Central and Eastern European countries (CEECs) to the European Union in 2004 will bring some important benefits. The new members will gain from reduced barriers to trade and investment. By 2010, the movement of labor will also be freed. But accession to the EU is neither a necessary nor a sufficient condition for economic growth. The combined effects of market access and economic liberalization, not EU membership, optimize economic growth.
- Topic:
- Emerging Markets and International Political Economy
- Political Geography:
- Europe and Eastern Europe
283. Fundusz Mikro An Experiment In Partnership–Based Microfinance 1998 – 2002.
- Author:
- Witold Szwajkowski
- Publication Date:
- 10-2003
- Content Type:
- Working Paper
- Institution:
- Aspen Institute
- Abstract:
- Fundusz Mikro's evolution has to be understood in the context of Poland's emergence from communism during the 1990s. For businesses, the challenge of that time was not merely to learn new skills, but to unlearn old habits and attitudes while at the same time taking on new ones appropriate to a market economy. Because of this shift, Fundusz Mikro (FM) found that it had to do more than lend money; it had to learn to play a more pro-active role in changing the culture in which business took place. The financial crisis of1998 and the harder economic times since then were an added incentive for FM to adapt its approach, products, and finally its mission.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- Europe and Poland
284. Loans to Japanese Borrowers
- Author:
- David C. Smith
- Publication Date:
- 07-2003
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- This paper examines the characteristics of loans to Japanese borrowers using a relatively unexplored, contract-specific data set. I find that Japanese banks charge less on loans to Japanese borrowers than do foreign banks, holding constant many of the risk characteristics of the borrower. Moreover, Japanese banks vary pricing less across these risks than do foreign banks, suggesting that Japanese banks tend not to distinguish good risks from bad. Taken together, the results suggest that problems at Japanese banks stem from the behavior of the banks themselves, not simply from poor economic conditions. I also document a significant shortening in the maturity structure of Japanese loans in the late 1990s.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- Japan and Israel
285. U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis
- Author:
- Francis E. Warnock and Hali J. Edison
- Publication Date:
- 07-2003
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document, as expected, that at a point in time U.S. portfolios are tilted towards firms that are large, have fewer restrictions on foreign ownership, or are cross-listed on a U.S. exchange. The size of the cross-listing effect is striking. In contrast to the well-documented underweighting of foreign stocks, emerging market equities that are cross-listed on a U.S. exchange are incorporated into U.S. portfolios at full international CAPM weights. Our results suggest that information asymmetries play an important role in equity home bias and that the benefits of international risk sharing are limited to select firms.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- United States
286. Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets
- Author:
- Francis E. Warnock and Hali J. Edison
- Publication Date:
- 07-2003
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- We analyze capital flows to emerging markets in a framework that incorporates two quantitative measures of financial integration, the intensity of capital controls and the extent of cross-border listings, while controlling for traditional global (push) and country-specific (pull) factors. Two important results emerge. First, the cross-listing of an emerging market firm on a U.S. exchange is an important but short-lived capital flows event, suggesting that the cross-listed stock is in effect a new security that U.S. investors quickly bring into their portfolios. Second, the effect of financial liberalization on capital flows is more nuanced than is suggested by event studies: A reduction in capital controls results in increased inflows only when the controls were binding. Among the standard push and pull factors, global factors are important—slack U.S. economic activity is associated with increased flows to emerging markets—and U.S. investors appear to chase expected, but not past, returns.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- United States
287. Was There Front Running During the LTCM Crisis?
- Author:
- Fang Cai
- Publication Date:
- 02-2003
- Content Type:
- Working Paper
- Institution:
- Board of Governors of the Federal Reserve System
- Abstract:
- This paper uses a unique dataset of audit trail transactions to examine the trading behavior of market makers in the Treasury bond futures market when Long-Term Capital Management (LTCM) faced binding margin constraints in 1998. Although identities are concealed in the dataset, I find strong evidence that during the crisis market makers in the aggregate engaged in front running against customer orders from a particular clearing firm (coded “PI7”) that closely match various features of LTCM's trades through Bear Stearns. That is, market makers traded on their own accounts in the same direction as PI7 customers did, but one or two minutes beforehand. Furthermore, a significant percentage of market makers made abnormal profits on most of the trading days during the crisis. Their aggregate abnormal profits, however, were more than offset by abnormal losses realized after the private sector recapitalization of LTCM. Moreover, I show that before the rescue, a market maker's cumulative abnormal profit was positively correlated both to her tie as contra party with PI7 and to the intensity of her front running, but these relationships turned negative after the rescue. The overall evidence suggests that the recapitalization plan effectively relaxed LTCM's binding constraints and therefore reversed the profitability of front running.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- United States
288. 'Oil for the Lamps of China'—Beijing's 21st Century Search for Energy
- Author:
- Bernard D. Cole
- Publication Date:
- 10-2003
- Content Type:
- Working Paper
- Abstract:
- In 1933, Alice Tisdale Hobart, wife of the Standard Oil Company of New Jersey manager in Nanking, published Oil for the Lamps of China. Hobart had traveled widely in China and proved to be a very observant imperialist. Her fictional account of her experiences, not surprisingly, focused on the role played by Western businessmen, especially those engaged in importing and selling petroleum products. One thread that runs through her work is Chinese dependence on foreign sources of energy supplies, which remains the case today. This dependence on foreign- controlled sources means that Beijing's efforts to ensure the availability of energy resources adequate to fuel the nation's economic growth have important national security implications.
- Topic:
- Emerging Markets, Energy Policy, and Environment
- Political Geography:
- China, Beijing, and Asia
289. The Mirage of Exchange Rate Regimes in Emerging Market Countries
- Author:
- Frederic Mishkin and Guillermo Calvo
- Publication Date:
- 11-2003
- Content Type:
- Working Paper
- Institution:
- European Union Studies Center
- Abstract:
- This paper argues that much of the debate on choosing an exchange rate regime misses the boat. It begins by discussing the standard theory of choice between exchange rate regimes, and then explores the weaknesses in this theory, especially when it is applied to emerging market economies. It then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates, and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits. The conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal, financial, and monetary institutions in producing macroeconomic success in emerging market countries. This suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable, and more on these deeper institutional arrangements. A focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
290. An Assessment of the Imapct of Microfinance Services in Uganda
- Author:
- Carolyn Barnes and Gayle Morris
- Publication Date:
- 12-2003
- Content Type:
- Working Paper
- Institution:
- The National Academy of Public Administration
- Abstract:
- Using three microfinance institutions (FINCA , FOCCAS, PRIDE) in Uganda, this paper focuses on the impact of microfiance program participation and profiles the clients who participate in these programs. The research covers clients and a non-client comparison group in rural Mbale district, the capital city of Kampala, and Masaka town and its periphery. The two-staged survey was conducted in late 1997 and repeated during the same months in 1999. The assessment conclude s that microfinance program participation has the following positive characteristics on client microenterprises: addition of new products and services, improved or expanded enterprise sites and markets, reduced costs of inventory purchases, and increases in sales volume. Household-level impacts include: began new enterprise, increased amount spent on durable assets and agricultural inputs, increased amount of cultivated agricultural land, and increased amount of household income from crops. The findings also suggest that microfinance programs help client households reduce their financial vulnerability through diversification of income sources and accumulation of assets.
- Topic:
- Development, Emerging Markets, and Third World
- Political Geography:
- Uganda, Kampala, and Masaka