Working Paper Series
WORKING PAPER SERIES IN ECONOMICS, BUSINESS AND FINANCE
WORKING PAPERS / OCTOBER 2009
INVESTMENT UNDER UNCERTAINTY AND FINANCIAL CRISIS
-A COMPARISON OF ADJUSTMENT COST IN FOREIGN AND DOMESTIC FIRMS IN TURKEY
Camilla Jensen
Kadir Has University, Istanbul, Turkey
Abstract
The objective of the paper is to test the stability hypothesis – that foreign investors are relatively more insulated from uncertainty and how it spills over on their investment adjustment cost. The Q model (implying that investments are explained by the fundamental value of the firm) is implemented with reasonable success for firm level panels in Turkey. Robustness of the results and despite the general obstacle that inflation poses on the study is increased by applying different datasets with different time horizons, different measures of investment and profitability and different problems of attrition. The general finding of the study is that the stability hypothesis is confirmed. The difference in adjustment cost across domestic and foreign owned firms is particularly affected by uncertainty measures whereas the general adjustment cost difference is estimated to be small. In periods of high uncertainty it is found that the decline in the growth of the investment rate for domestic firms is at least twice as high compared to the decline in the growth of the investment rate among foreign held firms.
Keywords
Foreign direct investment, private investment, uncertainty, Q model, firm-level panel data.
Financialization and Regulation: The Fate of Basle 2 and the Future of International Convergence of Capital Measurement Standards
Sedat Aybar
Department of Economics, Kadir Has University, Istanbul
ABSTRACT
This paper critically evaluates recent attempts to regulate international banking sector. Here it is argued that the attempts to draw up a regulatory framework for the banking sector has been dominated by intra-capitalist rivalries and the views derived from the practices of anglo-saxon banks. Hence, Basle 2 is explored from the prism of conflicting interests of capitalists which has become more rampant at the age of financialization and globalization. Here its viability in determining capital adequacy ratio is also questioned. Primarily it is shown that a legal set-up proposed in Basle 2 could not resolve the conflict of interest between competing capitalisms and their institutions because of flaws in its founding theoretical principles. It is argued that Basle 2 and risk management techniques dressed in mathematical equations is highly ideological. The paper traces evidence for this claim at the roots of current global economic meltdown. It is further argued in this paper that because of the nature of financial system and the essence of risk in a capitalist economy, regulatory arrangements within the framework of recent liberalization, globalization and financialization, particularly those claiming to develop international standards to measure risk are destined to fail.
Key words: Financialization, risk management, banking, regulation, Basle 2, globalization, competition.
Trade in Tourism Services: Explaining Tourism Trade and The Impact of The GATS on The Gains From Trade
WP/0001/09
Camilla Jensen and Jie Zhang
Kadir Has University and Research Center of Bornholm
Abstract:
The objective of the research is two fold. To test a model explaining tourism trade derived from a model of monopolistic competition in international trade. Secondly, to estimate the impact that liberalisation in services under the GATS has on tourism receipts.
A standard model of monopolistic competition with international tradel is adapted to analyse absolute and comparative advantage in a cross-country perspective. Testing the model using a dynamic panel approach confirms the relevance of supply side factors such as price competitiveness of the destination, tourism infrastructure and the provision of safety. Model tests also confirm the relevance of other conventional explanatory factors of trade in services such as GDP and Internet usage.
A secondary objective is to discuss and analyse the welfare gains from trade under the GATS. The revenue (receipt) effect is decomposed into a volume (arrival) and price effect. Results suggest that liberalisers under the GATS gained especially from a volume effect with average higher growth rates in the number of arrivals. Similarly there is found to be a significant difference on the average price per tourist from being a liberaliser or non-liberaliser.
JEL Codes: F12, F13, F14, L83
