Small and Medium Enterprise Financing in Transition Economies

This paper studies the financing status of small and medium enterprises (SMEs) in transition economies. Factors causing financing obstacles are indentified and further analyzed to determine their influence over financing patterns. Bank regulatory practices relevant to SMEs’ access to bank loans and their influence over loan structures are identified. This study contributes to the existing body of knowledge by exploring the impact of specific bank regulatory practices on credit lending to SMEs in transition economies.     

Financial Globalization and Banking Crises in Emerging Markets

Bank crises in emerging economies have been a feature of the recent global crisis, and their incidence has increased in the post-Bretton Woods era. This paper investigates the impact of financial globalization on the incidence of systemic bank crises in 20 emerging markets over the years 1976–2002 using measures of de facto and de jure financial openness. An increase in foreign debt liabilities contributes to an increase in the incidence of crises, but foreign direct investment and portfolio equity liabilities have the opposite effect. A more liberal de jure capital regime lowers the incidence of banking crises, while a regime of fixed exchange rates increases their frequency. The results of the econometric analysis is consistent with the experience of East European and central Asian emerging markets, which attracted a relatively large proportion of capital flows in the form of debt in recent years and have been particularly hard hit by the global financial crisis.     

Inflation and Welfare in Latin America

This paper follows Bailey (J Polit Econ 64:93–110, 1956) and Lucas (Econometrica 68:247–274, 2000) and estimates the welfare cost of inflation for 17 Latin American economies. We use annual data, from 1955 to 2000, and recent advances in the field of applied econometrics to estimate the inflation rate elasticity of money demand and report significantly high and differential welfare cost estimates for these economies.     

The International Reserves Issue in the EMU

This paper examines the effects of the Economic and Monetary Union on demand for foreign reserves. The traditional theory on demand for international reserves assigns a pivotal role to imports. However, in a currency union part of imports are settled in the common currency, leaving no incentive for keeping foreign reserves. Moreover, the pooling of the demand for reserves in the currency union and an increasing role of a currency as an international reserve currency may also influence, among other things, the union demand for reserves. Based on estimated demand functions for reserves it is shown that the Economic and Monetary Union has reduced the demand for reserves substantially. It is argued that an enlargement with new member countries of the European Union will result in further savings of reserves. A simple calculation at the end of the paper illustrates the welfare gain associated with the reduced need of reserves in the Economic and Monetary Union.     

Does Foreign Direct Investment Induce Domestic Mergers?

This paper examines the impact of foreign firm entry on the industry consolidation process in a host country that operates through mergers and exits of incumbent firms. Using a three-stage oligopolistic model, the paper shows that foreign direct investment (FDI) may trigger consolidation via a merger since the approval of a domestic merger by the antitrust authority is more likely in the case a foreign firm enters via FDI and a firm’s incentive for a domestic merger is greater and that, in turn, the possibility to merge and become more efficient modifies the outcome of the game by making FDI compared to exports less likely.     

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