Global Financial Crisis and Its Ramifications on Capital Markets

The 2008–2009 financial crisis was the largest since Great Depression of the 1930s. Several reasons were asserted on why such a massive crisis happened in the first place. However, most of the explanations put forth were about proximate causes of the crisis and very little attention was given to the underlying and fundamental causes of it. The causes of the global financial crisis were, ostensibly, the formation of a housing bubble and ensuing subprime mortgage crisis in the US economy. However, the true story of the crisis is much more complicated than this. Actually, the fundamental causes, which stemmed from systemic problems in the global economy, paved the way for economic instabilities throughout the world and numerous financial crises occurred from 1980s on. These fundamental causes include (a) failure of transforming economies from extensive-production to intensive-production, (b) the rise of the neoliberalism, (c) ensuing financialization of the world economy and (d) global instabilities witnessed in the neoliberal era.

When 2008–2009 global financial crisis has erupted most of people supposed that it was a temporal process and might be end with financial precautions and macroeconomic solutions. Actually it was quite difficult to forecast that the crisis would spread all around the world and would influence financial, socio-economic and political life of most of the people. Honestly the impact of the crisis’ trace still has not been removed today and it has taken longer than expected. Some of the global economic activities which got slower with the turmoil, could not reach to the levels of pre-crisis even today. This chapter discusses 2008–2009 global financial crisis and its impacts on the global economic activities by investigating crisis history and its economic effects on some sectors and countries by reviewing literature.

Although the financial crisis of 2008–2009 originated in the USA, its effects reverberated throughout the globe. The crises have also had effects on the balance of power among the competing global financial centers. Although developed nations have been able to maintain their general competitive positions for investors, new financial centers began attracting attention. This chapter the post financial crises competitive positions of international financial centers are evaluated on dimensions of “financial development”, “doing business” and “quality of life and cost of living” through cost-benefit analysis using TOPSIS (Technique for Order Preference by Similarity to an Ideal Solution) method. The findings of the study where financial centers of 15 countries were evaluated show that; (1) in regards to financial development the financial centers of developed nations maintain their importance for investors, (2) in regards to doing business the financial centers of Asian nations appear more advantageous, (3) developing nations can compete with developed nations when it comes to “quality of life and cost of living”, (4) Generally, although the financial centers of developed nations can protect their competitive positions the developing nations of Asia are increasing their competitiveness. Financial centers in Europe seem to have lost some of their competitiveness as a result of the global financial crises.

The aim of the paper is to assess the international financial institutions (IFIs) response to the global economic crisis in the European developing countries. In their response to the global crisis, the international financial institutions have increased funds for shock financing as well as significantly reformed their instruments. The Euro area is faced with a new attitude towards the international financial institutions, particularly the International Monetary Fund. With regard to the European developing countries, the research reveals that IFIs expanded its policy lending. The economic outlook includes the rate of economic growth, inflation rate and fiscal deficit. The results of analysis showed that the European developing countries, regarding the economic growth have shown a different rates—from a sharp decline to positive growth. All countries had inflation rate above the average of EU members and fiscal deficits. To prevent future financial crisis in the European developing countries it is necessary to create safety net by EU member countries, then to reform IMF.

The 2008 Global Crisis and the Euro Crisis sparked a long standing debate: the impacts of the relocation of western companies (expat-firms), together with deindustrialization process, towards developing countries on the western economies. However the mentioned trend is recently discussed on the ground of the EU public debt burden and the Euro. The specific problematic is whether the relocation of firms is one of the main reasons for the deteriorated public finance and fiscal discipline of the EU countries. This is analytically evaluated under four eventual scenarios in the framework of the Euro Crisis.

The aim of this chapter is to identify certain shifts in the behaviors of public debt managers in selected developed countries. This study focuses on Canada, France, the United Kingdom, and the United States for the period 1998–2015 in quarterly data. The behaviors are described using a reaction function to cost and risk considerations on the share of short-term debt. We estimated these behaviors using a Kalman Filter-Maximum Likelihood approach. Our results showed that public debt management behaviors in developed countries have changed since 2001 in response to the financial and economic crisis. Nevertheless, the impact of the crisis on the public debt management behavior is heterogeneous across countries. For example, public debt management behavior in France is characterized by cost optimization while public debt management behavior in Canada is less sensitive to interest rates. This study also highlighted that short-term debt is a backup plan when there are problems within the bond market.

The most important element holding possibility to destroy stability in monetary unions is fiscal policies left under monopoly of countries. There have been debt and public finance policies conducted by member states causing sovereign debt crisis triggered by Global Crunch in Eurozone. Therefore, fiscal framework of European Monetary Union is examined in the study. Fiscal rules adopted by Treaty of Maastricht being the founding charter of European Union and additional measures taken due to hinder experienced are assessed besides theoretical foundations of fiscal policies recommended for Monetary Unions. During analysis of the process, it is remarkable that both such rules and measures taken afterwards have followed each other however, that radical changes have not actually occurred. Only restrictions to national policies have been used instead of common policies in the fiscal field to prevent Eurozone member states to deprive fiscal policies: the only tool, which may be used to handle asymmetrical shocks. However, it is observed that sanctions on the implementation of rules adopted for the fiscal field have always been weak and could, from time to time, easily be broken despite the fact that such rules are qualified as binding.

The aim of this paper is to search for the impact of the Eurozone Crisis on Turkish foreign trade. To that end, panel data analysis is used for 15 Eurozone members and for the period of 1995–2011. The main finding of the empirical study is that private sector debt of the Eurozone states has a negative relationship with Turkish trade balance. This paper also presents the establishment of a monitoring mechanisms related to trade and debt and close cooperation of Turkish governmental institutions with EU authorities as policy recommendations.

The global financial crisis was the most severe international economic crisis since the Great Depression. As it was the case after the earlier crises, the financial system was intensely discussed and the regulatory framework was shaped accordingly. The regulatory changes are still in process. The purpose of this chapter is to provide insights into the financial regulations after the financial crisis and to submit some details about the regulatory bodies and changes. This chapter includes a general review of the discussions in the global financial system in the wake of the financial crisis. The regulatory changes in bank capital, the shadow banking system, trading and financial reporting of the financial products and credit rating agencies are briefly described. The criticisms of bank capital regulations are submitted. The effect of both the crises and the regulatory changes are discussed.

The main objective of this chapter is to assess the fiscal sustainability performance of the G-7 countries before, during, and after the global financial crisis. We examine the movement of various socio-economic and fiscal indicators before, during, and after the crisis period in the G-7 countries. We find that the trends of the key fiscal balance indicators clearly reflect the negative effects of the crisis in the G-7 countries. Furthermore, the ageing population and increases in public health expenditure produce an additional fiscal strain. However, Germany has been able to achieve a good financial performance compared with the other G-7 countries.

In this study we propose a model for excessive volatility regulation. The model deals with the control of shocks in capital markets. After describing a transmission mechanism that transfers shocks in a macroeconomic variable, we establish a model how to control the shocks in the framework. Two economies are considered with alternative constellations in coordination of policies. Spillover effects under coordination are less severe, than the spillover effects under Nash equilibrium in the case of comovements of asset volatilities. In other terms, coordination helps to cure the contagious effects, in the case, where two countries are affected by the same spillover effect in the same direction.

In the post modern economic thinking, the real and financial sectors of an economy are found to be interlinked. The magnitude of such a linkage between the real and financial sectors can further be fuelled by the mechanisms of governance of an economy. It is expected that good governance always works as a catalyst for an economy to grow and develop in different aspects. The present study tries to examine how do the World Bank governance indicators influence or get influenced by the chain of interplays between the real and financial sectors measured by the domestic credit to GDP ratio (CGDP) in some selected Asian economies for the period 1997–2014. The results show that, in most cases, there is no such interplay between themselves. The countries where some sorts of causations are observed, like that in India, Japan, Indonesia, Malaysia, governance indicators work a little. In most cases, the demand side approach, that is the CGDP ratios, work as the catalyst to the ways of governing of the selected economies, works significantly. On the other hand, the countries like S. Korea and Bangladesh do not experience any sort of causation; governance indicators do not work at all for them. So, the World Bank generated governance indicators is not general, rather partial in affecting the credit to GDP ratio of the countries.

Emerging economies have experienced a slower economic growth period in the aftermath of the global financial crisis. In this chapter we examine the important external and internal conditions that were effective in causing growth deterioration in emerging economies during the period 2013–2015. We utilize a pooled panel ordinary least squares (OLS) estimation using a sample containing 68 countries. Regarding the external conditions, emerging market economies experienced growth deceleration when (i) the current account deficit increased, (ii) trading partners’ import demand decreased, and (iii) the terms of trade deteriorated. Furthermore, we find that certain internal conditions, such as higher consumer prices, a more expansionary fiscal policy, more government borrowing, lower investment, and lower labor force participation, significantly contributed to the economic growth decline.

Financial crises in the recent past have been transmittable because of the strategic interdependence of the macroeconomic factors. The more is the interdependence among the countries via the exposure to common macroeconomic factors, the higher will be the effect of the contagion. In this present context of globalization, rise of BRICS economies in the global stage demands special attention because BRICS epitomizes a tectonic shift of global economic power away from the developed countries towards the developing world. The formation of BRICS has been essential for achieving sustainable global economic growth. But the question is to what extent is BRICS vulnerable to these contagious shock waves. The present paper in this context analyzes the issue by building up an empirical model which essentially highlights the consequences of financial crises in the new millennium and their impact on BRICS. The spotlight then shifts to the theoretical foundations of the crises. Section 3 draws attention to the economic impacts of these financial crises on BRICS economies. In particular, we highlight the effects of the East Asian crisis during 1997–1998, 2007–2008 US sub-prime mortgage market crisis and the recent Eurozone crisis along with the associated implications. The econometric analysis performed in Sect. 4 marks off the significant factors accountable in this regard. Finally, this paper comes to a close by resolving the fusillade of questions that motivated this topic.

The financial system stability portends the ability of the financial system to resist any unexpected adverse shocks from internal and external contexts and at the same time enable continuous unhindered functioning of the intermediation process. This paper appraises the stability of the financial system in an emerging economy using Nigeria as a base country. Financial stability and macro-prudential quarterly data from 2007 to June 2015 were used to assess the stability of the financial system arising from the effect of the global financial crisis and the recent decline in commodity prices in the international market with its attendant negative effect on the Nigerian mono-cultural economy. The assessment result shows that despite the shocks, Nigeria’s financial system remains resilient and able to absolve all unexpected surprises’ coming from the external context in the study period as the government battles with many intervening variables to get the economy back on track. There is an urgent need to diversify the economy and generate more non-oil revenue as well as maintain continuous consistent monitoring of the financial system to ensure its enduring stability.

This chapter defines business cycles and discusses the causes of business cycle fluctuations in emerging market economies. Both external and domestic factors are sources of business cycle fluctuations in emerging market economies. Business cycle fluctuations are more volatile and recessions are much deeper in emerging markets than in advanced economies. Globalization, increased trade, and financial integration raise business cycle synchronization across countries. However, there is a debate about the decoupling of business cycle fluctuations in emerging markets from advanced countries. There are both supporting and opposing studies to the decoupling hypothesis. The global financial crisis pulled the advanced economies into recession, while on the other hand, emerging market economies were less affected by the crisis because of their increased resilience after the year 2000. Business cycle fluctuations in emerging market economies became less closely tied to cycles in advanced economies.

A financial conditions index (FCI) is an instrument that is developed using some financial variables in order to predict future output and/or inflation. Therefore, some studies in the literature examine the relationship between FCI and output gap/growth to determine whether the FCI is a leading indicator of business cycles. This study aims at investigating the relationship between output gap and FCI for Turkey by utilizing quarterly data covering the period 2005:1–2015:3. In other words, the study examines whether the FCI can be a leading indicator of business cycles in Turkey. For this purpose, the study, first, presents an FCI that has been recently developed for Turkey and reveals that the FCI is able to present the developments in the Turkish economy and in the world. Second, the study employs unit root tests and cointegration tests. The study finally performs vector autoregressive (VAR) analysis and the bootstrap Granger causality test to examine the relationship between FCI and output gap in Turkey. Both VAR analysis and the bootstrap Granger causality test indicate that the FCI has predictive power in forecasting future output gap in Turkey. Based on these findings, this study yields that the FCI in this study can be used as a leading indicator of business cycles in Turkey.

For last one and half of a decade the Indian financial system has been trying to boost up the link between the real and financial sectors by means of the financial inclusion mission. The mission, among others, needs a rising branch expansion supported by rising number of employees in all categories. The present chapter, thus, seeks to test three hypotheses. Hypothesis I seeks to measure the concentration ratios of different classes of employees over the period, 1985–2012 which covers pre and post financial sector reforms in India and pre and post phases of global financial crisis. Hypothesis II seeks to test whether there are any significant changes in the average values of number of employees in all categories and Hypothesis III seeks to link the financial inclusion by means of branch expansion with different categories of bank employees across the branches and population. It is observed that concentration of bank employees in India has gone down after the reform process started affecting the clerical and subordinates staffs. With respect to the second hypothesis, it is inferred that the reform programme, in over all sense, has not benefitted to the bank employees; rather produced a disparity among Clerical and Subordinate Classes with the Officers’ Class. Again financial crisis has badly affected the non officer classes with similar kind of good effect upon the Officers’ Class. Lastly, third hypothesis concludes that branch growth is cointegrated in pair way to three series which are growth of officer per branch, growth of subordinates per branch and growth of population per officer. Hence, financial inclusion mission cannot be made feasible mainly by a corresponding growth in the officer class among the bank employees.

Unusual financial market conditions have affected the flow of capital and debt investment into renewable energy projects all over the world as a result of the 2008 financial crisis. The crisis collapsed trade and financial systems, decreased the movement of capital flows, and caused lower growth and inflation as well as tighter credit, lower profitability, and declining demand. The crisis spilled over from advanced economies to emerging and developing countries and the financial system in the world has deteriorated after the crisis.Financial sector development and sustainability have an important role at the renewable energy financing. Although a well-developed financial sector was said to support economic growth and stability, the crisis reminded that advanced financial systems could pose a threat to all the economy. Policy makers and international regulators have worked to assure financial sustainability, prevent global crises and encourage fair global competition in the markets during and after the crisis.The main purpose of this chapter is to define the meaning of the sustainable financial system and to analyse how the renewable energy investments were affected since the beginning of the crisis in developing countries. In the light of the literature survey, this chapter discusses renewable energy financing with a sustainable financial system following the crisis in developing countries.

The purpose of this chapter is to examine the impact of Russian economy on the trade, foreign direct investment (FDI), and economic growth of Turkey by taking into account the global financial crises that occured in 2008 by analyzing the data both for the pre- and post-crises periods in addition to the whole period. The reason of choosing Russia in this study is its being the first country for Turkey in terms of foreign direct investment as of 2015 and also being one of the major trading partner of Turkey. To this end, the impact of Russian economic performance on the trade, GDP and FDI of Turkey is examined by using quarterly data for the 2002–2015 period. The data that is used in the study is obtained from Global Financial Data and Economic Data Delivery System (EDDS) of Central Bank of the Republic of Turkey. As a model, structural vector autoregressive (SVAR) model which is similar to the model of Cushman and Zha (1997) is used. The impact of the shock given to Russian GDP showed that the effect on the variables has changed when we compare pre- and post-crises periods. The impulse responses show that a shock to Russian GDP increases Turkish export, import and GDP for four periods statistically significantly. When the analysis is carried out for the pre- and post-crises periods, the findings emphasize that the impact of the shock on Turkish exports is positive and statistically significant starting from the first period, after the crises the impact has a statistically significant impact only at the first quarter. The impact of Russian GDP has no statistically significant impact on Turkish import both before and after the crises. When one standard deviation shock is applied to Russian GDP, before the crises it’s statistically significant affect is observed on Turkish GDP starting from the first period for four periods. After the crises the effect is examined only contemporaneously.

The positive impact of export diversification on countries’ economic growth is widely recognized in literature. Moreover, there has been a growing consensus lately on the role of diversification as a protection tool against crises and shocks. In other words, countries with higher export concentrations are thought to be exposed to more susceptibilities and vice versa. Hence, for most developing countries, for which exports performance are vital, understanding the so-called association matters. This study aims at providing evidence for certain emerging economies in that respect and starts with illustrating the performance of the BRICS and MINT economies in terms of product/sector and market diversification in the 2000s. The chapter then investigates the relationship between export concentration and trade collapse for the 2008–2009 global crisis. Conclusions derived by the study show resemblance to certain findings in literature and address to a positive relationship between the level of product concentration and the severity of trade collapse in case of a crisis. Basic calculations on the market diversification, however, do not imply a meaningful relationship for the period in question.

We use panel data techniques to analyze the debt and equity financing strategies of the non-financial firms operating in the G8 countries and the selected emerging economies and compare them with those adopted during the financial crisis of 2007–2008. For this purpose, we analyze corporate financial data of 9952 firms in the G8 and 10,531 firms in the emerging economies over 12 years (2003–2014) to understand the corporate financing strategies in two different business environments. We find an increase in corporate debt financing in the G8 as well as the emerging economies during the period of financial crisis. Specifically, the firms operating in the G8 increased short-term debt financing whereas the firms operating in the emerging economies increased long-term debt financing. We also find institutional factors playing their role significantly but differently during the period of financial crisis.

Aim of this study is to empirically investigate the role of stock market development on economic growth of the emerging markets listed in MSCI Emerging Market Index using annual data over the period from 1995 to 2012. We employ Panel Data Analysis to examine this relationship. The MSCI Emerging Market Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Market Index consists of the following 19 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Morocco, Mexico, Peru, Philippines, Poland, Russia, South Africa, Korea, Thailand, and Turkey. Among the stock market development indicators used in the study, stock market capitalization ratio is used as a proxy for market size while value traded ratio and turnover ratio are used as proxies for market liquidity. The individual indicators of stock market development reveal that the market capitalization and turnover ratios robustly and positively influence the level of economic growth.

The history of financial crises entails numerous successive cases reshaping global economies. Limited scale and scope of individual financial crises has turned into regional after the deregulation process of 1970s. Tequila Crisis, Asian Flu, Russian Crisis, Dotcom Crash and the others have similarities and differences but they were all regional though the Global Financial Crisis has far-reaching effects due to the globalized economic and financial system of today. On one side, in an effort to find a panacea to economic problems, developed economies have made several attempts such as bail-outs, quantitative easing programs, tapering, low or negative interest rates and called the new circumstances as “new normal”. On the other side, many emerging economies are still in a competition among themselves to decouple from their peers positively, while desperately hoping to hear for a delay of a possible hike in US Federal Reserve Bank interest rates. In such an environment, Turkey still gives a promising impression within the league of emerging economies due to her culture of crisis management coming from the past. Turkey has become highly experienced in economic and financial crises since the economy witnessed economic and financial crises successively, especially after the liberalization of capital flows in 1989. With the experience of major crises in years 1994 and 2001, banking sector is restructured from its ashes and became the major strength of the economy. While harmonizing current domestic banking rules with Basel criterion, capital buffer is still the most powerful vehicle in the hands of the banking system. Turkish banking sector announces high profits on the contrary of many European Union countries. But the question arises whether Turkish Banking sector keeps growing at the expense of the real sector growth.

This study aims to shed light on the relationship between liquidity and financial performance in Turkish banking sector by comparing pre and post 2008 financial crisis periods. Throughout this aim, a panel data covering the period of 2001.Q1–2015.Q3 for the state-owned and privately-owned deposit banks in Turkey is analyzed by Breusch and Pagan (The Review of Economic Studies 47:239–253, 1980) and Pesaran (Cambridge Working Papers in Economics, No. 435, 2004) using cross-dependency tests; cross-sectional Augmented Dickey Fuller test of Pesaran (Journal of Applied Econometrics 22:265–312, 2007); panel cointegration test of Westerlund (Journal of Applied Econometrics, 23:193–233, 2008); Augmented Mean Group estimator developed by Eberhardt and Bound (MPRA Paper, No. 17870, 2009) and panel causality test of Dumitrescu and Hurlin (Economic Modelling 29:1450–1460, 2012), respectively. Empirical findings indicate that in both pre and post crisis periods, liquidity has statistically positive effect on financial performance of Turkish banking sector. It can be concluded that the effect of 2008 financial crisis on Turkish banks has not been so severe, in terms of financial performance-liquidity relationship. Another empirical finding of the study is the existence of bi-directional causality relationship between liquidity and financial performance of Turkish banking sector, in both pre and post crisis periods.

Financial investments enable portfolio investors to earn above market returns which do not come without risks. The African frontier markets (FMs) are investigated here and this chapter brings into focus the determinants of portfolio flows into these markets. The number of FEs in African investigated is six and two key financial instruments are used as returns: stock market returns and interest rate spread. Other variables used in the study include reserve liquidity, exchange rates and national income. The method of estimation adopted is the Vector autoregression with Granger causality. The results show that the all the variables are significant with the portfolio inflows. Specifically, portfolio funds are income chasing; the liquidity of reserves is also significant for every country among the FEs to enjoy inflows of portfolio funds, impacting on the exchange rates. Stock market returns is also highly significant in the Granger causality tests. Recommendations made include the increase in productivity to increase income and exports in these economies. In addition, African FEs must reduce interest rate margins to increase real production and encourage bonds markets development and thus attract portfolio investment into the sector rather than to concentrate all attention on the equities market.

An emerging literature in the aftermath of the recent GFC has attempted to investigate whether growing Islamic banking and finance practices add any systemic benefit to the global economic system. This paper explores the issue by examining the determinants of systemic risk for a sample of Islamic banks and financial institutions compared with conventional counterparts. Systemic risk is defined as a function of the stock market capitalization, marginal expected shortfall, leverage ratio, correlation of return, and volatility of return. Our finding shows the impact of market capitalization on reducing the systemic risk of Islamic banks and financial institutions is relatively higher than conventional counterparts. This is consistent with the results of some previous studies on the perceived benefits of Islamic finance practices. However, the influence of leverage ratio and marginal expected shortfall on systemic risk of Islamic banks and financial institutions is not significantly different from the results for banks and financial institutions in the control samples. Overall, our result provides some support for the notion that Islamic banking and finance practices can provide more systemic benefit to the financial system than conventional counterparts.

The aim of this study is to define the determinants of the credit risk of the banks in developing countries after economic crisis. Within this scope, the banking sector of Turkey was tried to analyze. In this study, 23 deposit banks of Turkey were analyzed. Furthermore, annual data of 24 Turkish deposit banks for the period between 2004 and 2014 was tested by probit model. Related data were provided from the Banks Association of Turkey, OECD and World Bank. With respect to credit risk, non-performing loans ratio was used as a dependent variable. On the other hand, nine explanatory variables were included in the model so as to define the determinants of non-performing loans. As a result, it was determined that decrease in industry production index is the most important determinant of the increase in non-performing loans in Turkey.

The objective of this study is to determine which demographical and financial features affect consumer credits risks of Turkish households aftermath the 2008 global financial crisis. Our analyses are built on the data from Turkish Statistical Institute (TURKSTAT) on an unbalanced panel of 13,979 households between the years 2008 and 2012. We apply our estimations on two stages. First we use logistic regressions to detect which features are likely to lead to default. Second we make robustness test with Survival Cox Analysis and evaluate the impacts of these features again. Our verified results show that the features that affect the default are; household income, volatility of the household income, being a home owner, age, education and gender.

This study investigates whether nonlinear relationship resulted from mutual regime switching mechanism exists in the European CDS’s markets during crisis. Multivariate Markov Switching Autoregressive Model that captures the switching mechanism is used. We analyzed the daily CDS spreads of Ireland, Italy, Portugal and Spain those most affected in European Debt Crisis. The data used in this study, belongs to the time period including 2010 and 2014 (1241 observations). The model have got three different regimes as depression, moderate growth and expansion. The results of the tests indicate that (1) CDS markets are governed by a long run relation, (2) volatility have an importance role in determining the regimes, (3) the shocks that applied to Italy and Spain are more effective than others, (4) Portugal is the more affected country between all, (5) the biggest response to the shocks are in the third regime.

The purpose of this study is to analyze and critically review the role of credit rating agencies in financial markets. The remarkable disappointment of top-rated structured finance products in the subprime crisis has placed renewed attention on credit rating agencies. As a result of this development, the ongoing debate about whether market forces provide sufficient control of rating agencies or whether regulation is necessary has been rekindled. The discussion focuses on the argument that the reputation of a credit rating agency is sufficient to discipline them. This essay contributes to this debate by providing a behavioral perspective. The introduction provides a brief historical overview and examines the role of credit rating agencies in financial markets. The second section addresses the role of rating agencies in the subprime crisis by highlighting the conflict of interest problem, ratings quality and regulation. The next section analyzes the effects of US- and EU-based regulations. The main contribution of this paper is made in the last section, which points out the behavioral perspective on credit ratings.

The object of this research is to produce perspective to deal with the challenge that can surpass boundaries and limitations of scientific acceptance of the theory in social sciences and economics. The main spots of activity in Econophysics has been the financial markets, and having to accept the stock market as a complex network of natural events for physicists by navigating through its terabytes of well-defined time series data. The evidence for the fat-tailed distribution of asset price changes has now been established beyond doubt as a truly universal feature of economic souk. Field of Physics consists of theoretical foundations of several types of research, obtained through multi-disciplined instruction that can help make scientific and objective experiments with reference to predictive facts. As a result of this, the required experiments could administrate in different areas.

This chapter discusses the topic of modeling and forecasting volatility in emerging market and presents the strength and weakness of the several high-frequency based approaches available in the literature. We compare the forecasting performance of traditional GARCH with high-frequency based models namely, HAR-RV, HAR-RV-J, and HAR-RV-CJ under the financial crisis and non-financial crisis periods. We extend our study scope by focusing not only on general market index BIST-30, but also on each constituent of market index. Our empirical results indicate that the global financial crisis does not affect the forecasting performance of the models in emerging markets. All high-frequency based volatility forecasting models perform better than the traditional ARCH-class models in both non-crisis and crisis periods. We conclude our paper with the statement that high-frequency based models do not affect the structural break in the underlying process. The best outperforming model among the high-frequency based volatility models for both stable and turmoil period is HAR-RV-CJ model. The empirical findings for the individual stocks are consistent with the general market index ISE-30.

In this study we try to briefly revise the day of the week effect (DOW) and to examine why there are conflicting empirical results through the time. Moreover, we try to add a new-alternative view to the specific area of study, adding a further possible explanation in calendar anomalies field of study. Specifically, we try to examine if investors’ weekday behavior changes depend on the financial trend. For example, let suppose that there are evidence that Mondays are positive returns days, but there are signs for an upcoming financial crisis. Could this general believed practical rule be strong enough in order to be sustainable even during financial crisis period or does it change? In order to analyze this issue providing empirical support, we examine the US stock market and the S&P index for the time period 2000–2013. The results confirm our assumption that the financial trend influences the weekly stock returns’ pattern, which may be an alternative explanation for the conflicting empirical findings that have been documented in the literature up today.

In this study, it is analyzed the existence of day of the week effect in the stock markets of Brazil, India, Indonesia, Turkey and South Africa which are named as fragile five countries (BIITS). To determine this effect in fragile five countries; daily closing price data of basic indices of the stock markets of these countries’ for the period (2 January 2009–31 December 2015) and Kruskal-Wallis test and Wilcoxon rank sum test which are non-parametric statistical analysis methods, are used. The results obtained in this study supports the literature findings that day of the week effect is reducing in developed and emerging markets in the recent years for fragile five countries for the period after the 2008 global financial crisis. The findings indicate that, except Indonesia, day of the week effect doesn’t exist in other four countries’ stock markets. In Indonesia stock market, the lowest return is on Monday, highest return is on Wednesday.

We investigate the risk and return characteristics of 59 emerging and developed stock market indices for the period 1990–2015. The main focus of our analysis is the convergence of emerging capital markets. We apply the standard Capital Asset Pricing Model (CAPM) framework to investigate the positive relationship between risk and return, and also examine the evolution of the CAPM beta. We show that CAPM betas of different stock markets converge to the world average over time. In settings applying different risk measures from beta (volatility, Expected Downside Risk, and Shannon entropy), empirical results confirm the positive relationship between risk and expected return; however, we find that international capital markets still have significant individual characteristics.

This paper examines the performance of export focused companies listed on the Borsa Istanbul trading in the emerging market of Turkey. Using the panel data of stock market prices (1995–2011), we study the performance of companies in different sectors and their return performance in the volatile exchange rate environment and devaluation periods of 1996, 1997, 1998, 1999, 2001 and 2008. The paper investigates sales, market capitalization or asset performances’ statistical significance level, with regard to these companies’ export level. We review the performance of these operational measures in an environment of changing foreign exchange rates. Regression analysis is used to measure the effects of currency devaluation on the companies analyzed. Finally, the study analyzes the export sales of companies by sector following a period of sharp devaluation.

In economics, any production function is composed of capital labor and technology inputs. In the gross domestic product (gdp) growth of an economy labor seems to be an important input. Therefore, a country’s economic growth depends mainly on labor supply. In order to attain economic growth and development, an optimal choice of male and female labor force participation is necessary. Besides cultural and sociological factors, economic, education and health factors are the main issues affecting labor force participation in developing as well as developed countries. The objective of this chapter is to analyze the determinants of female labor force participation which are per capita gross domestic product, unemployment rate, ratio of female to male primary enrollment, ratio of female to male secondary enrollment, ratio of female to male tertiary enrollment, fertility rate and life expectancy of females at birth. The data used in this analysis belongs to World Bank database for G8 countries between 1995 and 2013. The results show that unemployment has a discouraging effect on female labor force participation rate. The gross domestic product and education are found to affect female labor force participation positively.

The main objective of this chapter is to investigate the impact of the 2008–2009 global financial crisis on the employment creation and retention in the South African Platinum Group Metals (PGMs) mining sub-sector. Desk-top literature review and analysis approach was employed for the study. The crisis led to slow-down in platinum demand and price. The slow-down might have resulted from changing consumption behaviour of major platinum consumers such as the US and Euro Zone who were greatly affected by the events of the global crisis. There were massive job losses and inability of the platinum sector to create any new jobs during the crisis as a result of the slow-down of crucial Foreign Direct Investment (FDIs) into the South African economy. Subsequently, standard of living amongst mine-workers dropped and this lead to increased demands of higher wages and other benefits. The wage negotiations became volatile and characterised by antagonisms leading to the fateful events of the Marikana massacre. Government should seek to improve and increase macroeconomic stimulus packages amongst potential investors to encourage inflows of FDIs. Personal bonuses payable to mine bosses should be curtailed during this period of economic volatility to avoid instigating labour unrest and increased demands for benefits.

Since 2008 the Italian nautical industry has gone through a period of uninterrupted crisis with serious consequences both of an economic nature and in terms of loss of jobs. In particular, the sector of pleasure boating has undergone profound upheaval which has essentially affected three areas.The non-renewal of the fleet due to a sharp decrease in new registrations is the first. The second is the inability to modify the port supply and number of berths, given that ports are in fact a stock of long-term real estate. This has resulted in falling prices and a difficult economic and financial situation for port managers. The third concerns boaters, the driving force of nautical tourism, who responded immediately to the general crisis with a change in behaviour, devoting less time and money to boating. This disaffection has been further aggravated by legislation that has proved almost hostile and heavily punitive towards boaters and boating in general.Finally, since 2014–2015 the Italian Government seems to have changed course and has cancelled some vexatious rules (which weakened public finances) thus giving new hope to the shipyards and to boaters: the first challenge will be to bring back on board the 40,000 boaters who have deserted.

Until the year 2008, the segment of boating enjoyed an excellent state of health (AMI-Censis. La sfida della nautica: porti, servizi, tecnologie. Terza indagine sul turismo nautico in Italia, 2008), although even then elements of possible weakness were beginning to emerge (Benevolo. Luci ed ombre del turismo nautico, in Analisi gestionale dei porti turistici nella nautica da diporto, Il caso di Imperia, a cura di Quagli A. pp. 212–253, 2008). Domestic production grew at high rates, port facilities were multiplying and new ports were designed because the offer of berths, at least in many areas of the country, was not able to meet the potential demand.Later the sector went through a period of uninterrupted crisis with heavy economic consequences in terms of loss of employment. Today we are still in the midst of a crisis—possibly at the dawn of a recovery—after a fall that has lasted for more than 7 years and that has affected all economies globally. In the nautical sector it caused a heavy decline, even greater in percentage than the average of other sectors of the economy, given its peculiar characteristics of elasticity. Indeed, the yachting sector has undergone a series of profound changes which have affected the main highways in the industry.In Europe, all variations are negative, with the result that the number of units produced more than halved over the course of the 4 years under analysis; on the other side of the ocean, the United States, by far the largest producer, saw a 34 % decline in the number of boats, amounting to over 250,000 units less.These data are further confirmed in the order book of superyachts. A decline in the number of orders for the third consecutive year in 2011, was followed by a substantial stability from 2012 to 2014 and a little rise in 2015. In the global ranking of boats over 24 m, Italy always comes first, followed by the Netherlands, Turkey, USA, Great Britain, Germany, Taiwan, China, France and New Zealand.However, at European level the Italian yachting industry ranks third in terms of number of boats produced, after France and Poland, and has ranked first worldwide for years in terms of value of production exported. Strictly speaking, the production chain for boats includes the industrial activities for the construction of recreational yachting units and the activities that support its use. This sector, combined with that of the closely related nautical tourism, is a relevant multiplier of employment: 10 new jobs in the nautical sector (industry + tourism) generate 64 new employees in the general economic system, of which about a quarter only in satellite industries.Until the problems related to the public debt of the Eurozone members are not solved, and austerity measures continue, the global industry, and the yachting one in particular, will not see the long-awaited “light at the end the tunnel”. Italy has been deeply affected by this crisis, with serious consequences on this excellent high range hallmark of Italian style, well known all around the world. The people affected by this are not just the affluent, but also skilled workers and the middle class, who, in perspective, could consider the purchase of a small boat as an original and comparatively not overly expensive good to enjoy leisure time in the Mediterranean.The industry’s picture plays in a continuous alternation of light and shade and two aspects appear: on the one hand the importance of boating in terms of an articulate and complex supply chain and of economic loss caused by 7 years of free fall; on the other hand, the fact that the fundamental elements (boats, port facilities, boaters) are not lost and can be retrieved based on adequate policies.

Many advancing economies employ life insurance mechanism to drive capital formation and accumulation. This paper presents observable facts on Nigeria relative to peers, which suggest abysmal life insurance density and penetration; perhaps are responsible for the extremely low capital formation gap. The paper is motivated by the economy’s low savings ratio, hence it hypothesis that capital formation through life insurance mechanism may not develop. Two stage least square (TSLS) method in a recursive system was employed from 1980 to 2013. The result finds that capital formation ratio (Cfr) is positively sensitive to life insurance penetration (LIP), and to a period lag of the problem variable (Cfr(−1)).The outcomes of instrumental variables are in line with a priori, except for interest rate. The dynamic and static ex-post simulations, and ex-ante forecasts evaluation meet the standards. The forecast results fit the expectations of the underlining assumptions, suggesting that on average Cfr can grow by 8 % per annum ceteris paribus. This finding is therefore consistent with financial development theory. It recommends that Pension regulators should step-up compliance of existing statute on compulsory life cover by employers; Insurance regulators should engage public education on life insurance; the federal government should adopt fiscal incentives to attract foreign direct investments in the industry for competitiveness and make policies for mandatory life policy for all adult working citizens.

Originated in the financial sector, the 2008 economic crisis hit severely the financial side of the economy, but also had drastic impacts on the real sector. The companies were seriously affected by the fall in demand and trade on the one hand, and by the difficulties in credit conditions and access to finance on the other hand. As a result, the economic crisis caused a decrease in companies’ revenues and future investments, which hit directly their R&D and innovation efforts. Nevertheless, as Filippetti and Archibugi (2011) make the remark, the impact of this crisis on innovation didn’t spur enough the interest of economists working in the field of innovation studies. Hence, very few studies analyze the relationship between the economic crisis and innovation (Filippetti and Archibugi 2011; Paunov 2012; Archibugi et al. 2013a, b; Izsak et al. 2013; Hausman and Johnston 2014; Makkonen et al. 2014; Amore 2015). Yet, the relationship between innovation and economic development has been known and discussed since Schumpeter’s (1939) seminal work highlighting innovation as a fundamental factor in business cycles.