Overnight borrowing, interest rates and extreme value theory

We examine the dynamics of extreme values of overnight borrowing rates in an inter-bank money market before a financial crisis during which overnight borrowing rates rocketed up to (simple annual) 4000 percent. It is shown that the generalized Pareto distribution fits well to the extreme values of the interest rate distribution. We also provide predictions of extreme overnight borrowing rates using pre-crisis data. The examination of tails (extreme values) provides answers to such issues as to what are the extreme movements to be expected in financial markets; is there a possibility for even larger movements and, are there theoretical processes that can model the type of fat-tails in the observed data? The answers to such questions are essential for proper management of financial exposures and laying ground for regulations.     

Financialization and Vested Interests: Self-Regulation vs. Financial Stability as a Public Good

I propose an institutionalist analysis of financialization through the lens of Thorstein Veblen, built on some peculiar characteristics of money and related financial instruments in a market-based capitalist economy. Following the case of the overcapitalization of farmlands, studied by Veblen (1919), I argue that modern capitalism is a financialized society dominated by vested interests that rely on financial liberalization-led speculative overcapitalization, often leading to a perverse accumulation process and resulting in systemic catastrophes. Consequently, one of the major constituent institutions of liberal finance, market-dependent selfregulation, proves unable to deal with society-level issues like financial stability. This latter issue must be handled at a systemic level, as a public good. Therefore, specific public regulation and action mechanisms must be designed to maintain society (and dominant vested-interests) within some viability limits to ensure a smooth functioning of the economy.     

The impacts of student and life satisfaction on tourism students’ perceived sense of belonging

This study explores how tourism students’ satisfaction with their lives and academics affect their sense of belonging within their school communities. The primary supporting research was conducted using a questionnaire, which 285 students in Akdeniz University’s Faculty of Tourism answered. The mean scores of the two scales (life satisfaction and sense of belonging) and the dimensions of student satisfaction were used to conduct multiple regression analysis. The results suggest that two aspects of student life (teaching staff and school management vs. student support and counseling) and life satisfaction had a direct correlation with students’ sense of belonging.     

Spillover effects on government bond yields in euro zone. Does full financial integration exist in European government bond markets?

This paper examines the time varying nature of European government bond market integration by employing multivariate GARCH models. We state that unlike other bond markets, in euro markets the default(credit) risk factor and other macroeconomic and fiscal indicators are not able to explain the sovereign bond yields after the beginning of monetary union. This fact might be counted as a signal for perfect financial integration. However, we also find that the global shocks affect Germany and the rest of euro bond markets in various levels, creating particular discrepancies in asset prices even we take into account the market specific factors. Different level responses of each euro market to the global shocks reveal that euro bond markets are not fully integrated with each other unlike the recent literature claimed. Besides, we explore that the global factors are effective for the volatility of yield differentials among euro government bonds.     

An optimization approach for brass casting blending problem under aletory and epistemic uncertainties

A critical process in brass casting is the determination of the materials and their quantities to be added into the blend. The reason of being critical is the uncertainty about metal percentages in scrap raw materials. In this paper, the aleatory and epistemic uncertainties, which are modeled by using probability and possibility theory, respectively, have been handled simultaneously in a blending optimization problem for brass casting and a solution approach that transforms the possibilistic uncertainties into probabilistic ones is proposed. A numerical example is performed by the data supplied from MKE brass factory in Turkey. The results of the example have showed that the proposed approach can be effectively used for solving blending problem including aleatory and epistemic uncertainties in brass casting and other scrap based production process.     

The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience

This paper evaluates the developments in the Turkish economy in light of the Central Bank of Turkey’s (CBT) policies during a recent period of floating exchange rate system (March 2001–July 2003). It is found that the CBT was effective in containing volatility and reducing the average inflation rate while there was a strong recovery of output. However, there are accumulated risks in the economy. Particularly, the extreme appreciation of the Turkish lira during this period and the record level of real interest rates give the impression that the current state of the economy is fragile. Unless the government accelerates the structural reform process and pursues sound fiscal policies to reduce the public sector borrowing requirement and the debt ratio, an adverse shock to the system may trigger a reversal of fortune.     

Stabilizing Endogenous Instability: Proposals for An Institutionalist Reform of Financial Regulation

A major and persistent question behind economic theories and related policies is whether the market can self-regulate without any restrictive exogenous intervention or whether regular and binding public regulation is necessary for ensuring the reproduction of the economic system in a sustainable way over time. This article considers this question with regard to the working of financial markets in a liberalized environment. Drawing upon an institutionalist stance, the article shows why the operation of a financialized capitalist economy usually leads to systemic imbalances and crises. The article then suggests an alternative framework for a consistent financial regulation that could prevent market actors from developing short-sighted strategies and gambling on macro stability.     

GOVERNANCE INSTITUTIONS AND PRIVATE INVESTMENT: AN APPLICATION TO THE MIDDLE EAST AND NORTH AFRICA

This paper addresses the issue of the low level of private investment in the Middle East and North Africa (MENA) region, with special emphasis on the role of governance. Based on the existing published reports, we categorize what types of governance institutions are more detrimental to entrepreneurial investments. We then estimate a simultaneous model of private investment and governance quality where economic policies concurrently explain both variables. Our empirical results show that governance plays a significant role in private investment decisions. This result is particularly true in the case of “administrative quality” in the form of control of corruption, bureaucratic quality, investment‐friendly profile of administration, law and order, as well as for “political stability.” Evidence in favor of “public accountability” is also found. Our estimations also stress that structural reforms like financial development, trade openness, and human development affect private‐investment decisions directly, and/or through their positive effect on governance.