Business Cycles, Informal Economy, and Interest Rates in Emerging Countries

2016 ◽  
Author(s):  
Jaroslav Horvath
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Informal Economy ◽  
Emerging Countries

Spillover effects of financial development on the informal economic activity

2020 ◽  
Vol 13 (3) ◽  
pp. 471-482
Author(s):  
Salih Katircioglu ◽  
Hatice Imamoglu
Keyword(s):  
Interest Rates ◽  
Financial Development ◽  
Informal Economy ◽  
Economic Activity ◽  
Missing Values ◽  
Spillover Effects ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Content Type ◽  
Cointegration Tests

Purpose This study aims to investigate the role and spillover effects of the financial sector on the size of the informal economic activity in Turkey. Design/methodology/approach Time series analysis has been adopted for annual data of the 1970-2017 period. New approaches in unit root and cointegration tests have been used in this study. Estimations have been done via dynamic ordinary least squares and fully modified ordinary least square approaches. Findings Results confirm the existence of a long-run equilibrium relationship between the financial system and informal economic activities in Turkey. At the earlier stages of financial development (FD), informality tends to rise while in further stages, informality tends to decline over time. This study confirms the U-shaped relationship between FD and the informal economy in Turkey. Research limitations/implications This study has used logarithmic values of series in the econometric analysis except for real interest rates because of negative values in some periods. Thus, by using level forms of real interest, missing values would be avoided. Practical implications Increasing efficiency, control and institutional quality, as well as the quality of governance environment, would be useful tools in reducing the size of informality, as this study finds that spillover effects of financial services on the informal economic activity are adverse. Originality/value This study is the first of its kind to the best of the knowledge in the case of Turkey, which estimates the spillover effects of FD on informal economic activity.

scholarly journals Asymmetric Effect in the Relationship between Oil Prices and Activity: An Estimate of the VECM Model for Eight Emerging Countries

2019 ◽  
Vol 9 (2) ◽  
pp. 92
Author(s):  
Mouldi Djelassi ◽  
Mdalla Omrani
Keyword(s):  
Interest Rates ◽  
Oil Prices ◽  
Emerging Countries ◽  
Oil Shocks ◽  
Asymmetric Effect ◽  
Long Run ◽  
The Interest Rate ◽  
Asymmetrical Impact ◽  
The Impact ◽  
The Relationship

In this study, we attempt to study the impact of oil shocks on the economic activity of eight emerging countries with different importing and exporting profiles, targeting and non-targeting inflation and thus verify the hypothesis of non-linearity. To do this, we used the VECM methodology. In addition to oil prices (the linear variation and its volatility, positive and negative movements in prices), we introduced the interest rate and industrial production as a proxy variable of the activity. The result shows that the economies of these countries are generally more sensitive to net increases in oil prices than to their volatility. Thus, the asymmetrical impact is clearly proven in the results especially in the long run. If the rise in oil prices negatively affects production, the decline does not favor its reshuffle. Indeed, if increases in oil prices reduce economic growth, their declines have no expansionary effect. In addition, the distinction between exporting and importing countries is not obvious. Furthermore, the addition of interest rates indicates that the first prefigurations indicate a tightening of interest rates by the central banks of the target and non-target countries selected in our study.

scholarly journals Capital Gains Sensitivity of US BBB-Rated Debt to US Treasury Market: Markov-Switching Analyses

Complexity ◽  
2020 ◽  
Vol 2020 ◽  
pp. 1-13
Author(s):  
Mariya Gubareva ◽  
Ilias Chondrogiannis
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Capital Gains ◽  
Capital Gain ◽  
Bond Yields ◽  
Hedging Strategy ◽  
Treasury Bonds ◽  
Bond Portfolio ◽  
Policy Suggestions ◽  
The Relationship

We reexamine the relationship between credit spreads and interest rates from a capital gain perspective of bond portfolio. Capital gain sensitivity between US BBB-rated bonds and Treasury bonds is weak and positive in normal periods, but strong and negative during recessions. In the upward phase of business cycles, changes in interest rates are fully reflected in the bond yields, leaving spreads unchanged, while in the downward phase, rates and spreads move in opposite directions. This alternation between two distinct regimes reconciles a long-standing division in the literature. We then discuss the efficiency of shorting Treasury bonds as a hedging strategy and policy suggestions.

scholarly journals Interest Rates, Leverage, and Business Cycles in Emerging Economies: The Role of Financial Frictions

2015 ◽  
Vol 7 (3) ◽  
pp. 153-188 ◽  
Author(s):  
Andrés Fernández ◽  
Adam Gulan
Keyword(s):  
Business Cycles ◽  
Interest Rates ◽  
Open Economy ◽  
Emerging Economies ◽  
Financial Frictions ◽  
Small Open Economy ◽  
Financial Data ◽  
Cycle Model ◽  
Business Cycle Model

Countercyclical country interest rates have been shown to be an important characteristic of business cycles in emerging markets. In this paper we provide a microfounded rationale for this pattern by linking interest rate spreads to the dynamics of corporate leverage. For this purpose we embed a financial accelerator into a business cycle model of a small open economy and estimate it on a novel panel dataset for emerging economies that merges macroeconomic and financial data. The model accounts well for the empirically observed countercyclicality of interest rates and leverage, as well as for other stylized facts. (JEL E13, E32, E43, E44, F41, O11)

scholarly journals The Sustainability of External Debts for Turkic Countries

2015 ◽  
Author(s):  
Haluk Egeli ◽  
Pınar Egeli
Keyword(s):  
Financial Markets ◽  
Interest Rates ◽  
Transition Period ◽  
Liquidity Constraints ◽  
External Debt ◽  
Emerging Countries ◽  
Current Position ◽  
Important Place ◽  
Closing The Gap ◽  
Constraint Approach

Resources provided from one country to another country fulfills the function of closing the gap for currency and savings for the country acquiring these resources. Regarding the current position of emerging countries, these two concepts take important place for their development efforts. In this paper, developments in Turkic Countries are analyzed to put forth their external debts' sustainability for the transition period. The model is constructed by using variables with inter temporal budgetary constraints approach. Inter temporal budgetary constraint approach take into consideration external debt as well as interest rates in international financial markets. Panel data techniques are used for empirical analysis and based on the empirical findings for above mentioned countries, comments are made for their liquidity constraints and the sustainability of their external debts.

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