DOCSLIB.ORG

Searching for Alpha Consistency in Emerging Market Equities

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Searching for Alpha Consistency in Emerging Market Equities Searching for Alpha Consistency in Emerging Market Equities Gaurav Mallik Chief Portfolio Strategist Adhi Mallik, CFA Investment Product Manager Searching for Alpha Consistency in Emerging Market Equities In Brief • Despite recent headwinds related to country-specific • Investors looking to capitalize on the active economies and trade wars, emerging markets opportunities available in emerging markets continue to be a source of alpha for investors. should consider active managers with a proven track • The success of emerging markets in the past has been record of selecting stocks from a broad universe. based on themes. The major theme for growth going • Investors that are seeking a more representative forward is firmly based on the rise of the middle class exposure to China should consider allocating and rising consumption in these markets. to managers with a more unified approach to • Index replication is challenging due to liquidity the region. constraints and high trading costs, making skillful delivery of index exposure hard to find. State Street Global Advisors 2 Searching for Alpha Consistency in Emerging Market Equities Currency woes in Turkey. Political and economic Abandoning emerging markets now would mean stresses in South Africa. The potential for globally- ignoring a strong track record of growth. In fact, disruptive trade wars. These and other recent since early 2005 emerging economies have been the developments have caused investor sentiment to sour sole driver of Gross Domestic Product (GDP) growth on emerging markets. Many institutional investors globally. In every quarter over the past twelve years, understandably are considering their overall allocation emerging markets have made a contribution to overall to emerging markets with a heightened sense of global growth in excess of 50%, averaging 63% in urgency in light of these events. As investors consider the seven years since the global financial crisis. And their options, we are encouraging a measured response recent troubles in select countries — like domestically to recent volatility. Decreasing allocations to emerging generated credit and housing bubbles, debt overhang, markets — or choosing not to invest in the region at low level of foreign currency reserves, or reliance on all — may not lead to favorable investment outcomes hot money flows — should not color investor sentiment over the long-term. In fact, what may be productive for emerging markets as a whole. It is important to look is to review the overall emerging market equity at a spectrum of metrics instead of relying on any allocation and determine what is driving the risk and one measure; strong economic fundamentals coupled return of the portfolio. As we will address in further with important demographic and consumption detail, adopting a beta exposure is not a simple decision shifts are poised to continue propelling growth in due to the associated trading costs and liquidity emerging markets. constraints, nor can all active managers be treated State Street’s research indicates that emerging markets equally as the number of products beating the index will provide higher risk-adjusted returns over the next continues to drop. ten years and beyond (See Figure 1). Figure 1: Over the Next 10 Years, Emerging Markets are Likely to Provide Higher Risk-adjusted Returns Compared to Developed Markets Expected return and volatility in equities over the next 10-plus years — emerging markets versus developed markets Emerging-market Equities Developed-market Equities Expected Return (%) 9.2 6.3 Expected Volatility (%) 21.2 14.4 Expected Return/Vol 0.42 0.39 Source: State Street Global Advisors as of June 30, 2018. The growth of emerging markets over the past several decades can be traced to broad themes that have evolved substantially over time: Emerging-markets Growth Theme Start date End date Annualized Return (%) Cumulative Return (%) Developed-markets offshoring January 29, 1988 July 31, 1997 21.65 554.15 Rebound after Russian default August 31, 1998 March 31, 2000 57.79 113.86 Commodities March 31, 2003 October 31, 2007 44.61 459.18 Debt February 27, 2009 March 31, 2011 51.70 146.67 Earnings Growth (as measured by earnings per share) February 29, 2016 December 29, 2017 29.71 64.64 Source: State Street Global Advisors. State Street Global Advisors 3 Searching for Alpha Consistency in Emerging Market Equities Offshoring from developed markets spurred the initial strong and consistent across the category as a whole; wave growth in these markets in the late 1980s and equity returns in emerging markets have also been early 1990s. Most recently earnings growth fueled by consistently strong compared with the equity market growing consumer consumption has been the most as a whole in recent decades (see Figure 2). We believe prominent theme in emerging markets. Although investors should expect this theme to continue in a few emerging economies are currently teetering the future. close to a recession, earnings growth has remained Figure 2: Equity Returns in Emerging Markets Have Been Consistently Strong Compared with the Market as a Whole in Recent Decades Cumulative index returns for the MSCI Emerging Markets and MSCI World indices Cumulative Returns (%) 3,000 2,500 2,000 1,500 1,000 500 0 Mar Dec Oct Aug May Mar Jan Nov Sep 1988 1991 1995 1999 2003 2007 2011 2014 2018 — SI rl — SI Source: FactSet; as of June 30, 2018. Returns reported in USD. State Street Global Advisors 4 Searching for Alpha Consistency in Emerging Market Equities THE EVOLUTION OF THE EMERGING-MARKET OPPORTUNITY SET To understand the dynamics currently playing out Country Trends in emerging markets, it’s important to consider the At the index’s inception nearly 30 years ago, Malaysia historical economic performance of the countries firmly ranked at the top of index with the highest that constitute the overall marketplace. Over level of market capitalization in seven out of the nine the years, opportunities in emerging markets subsequent years leading up to the Asian Financial have shifted dramatically as a direct result of the Crisis. During the onset of the Asian Financial Crisis, performance of underlying country economies. however, Malaysia observed a vast devaluation in The MSCI Emerging Market index can be used as a the ringgit that led to currency controls and a ban on proxy to illustrate the major changes in the emerging- foreigners’ trading in its securities. These currency and markets opportunity set since the inception of the capital controls abruptly ended Malaysia’s reign atop index in 1988 (See Figure 3). Figure 3: In Recent Years, Asian Equities, Led by China, Have Come to Dominate the MSCI Emerging Markets Index by Weighted Representation MSCI Emerging Markets Index — Shift in weighted representation by country 1988 1997 2007 2017 Inception of the MSCI Asian Financial Crisis of 1997, China leads the index in China is firmly established as the Emerging Markets Index; Malaysia goes from the top to the representation for the first time. leader in representation. The top five Malaysia firmly leads in bottom of company representation; countries — all Asian — make up the company representation. Latin American countries emerge largest percentage of the index since as leaders. the Asian Financial crisis. 10 Countries 27 Countries 24 Countries 24 Countries Largest Country Weights (%) Largest Country Weights (%) Largest Country Weights (%) Largest Country Weights (%) Malaysia 29.5 Brazil 16.6 China 15.9 China 29.7 Brazil 25.5 Mexico 13.2 Korea 14.3 Korea 15.4 Mexico 10.0 South Africa 10.3 Brazil 13.4 Taiwan 11.3 Thailand 9.9 Taiwan 9.3 Russia 10.1 India 8.8 Chile 7.8 India 6.5 Taiwan 9.9 South Africa 7.1 Top 5 Total 82.7 Top 5 Total 55.9 Top 5 Total 63.6 Top 5 Total 72.3 Source: MSCI, FactSet, State Street Global Advisors. As of December 31, 2017. State Street Global Advisors 5 Searching for Alpha Consistency in Emerging Market Equities the emerging markets landscape. Malaysia’s equity A large part of the evolution has been driven by markets observed a loss of 69% in 1997; it was removed demographic change. Over the past 10 years, the rising from the index in 1998. consumer class in emerging countries underpinned the shift from the energy and materials sector to Next a Latin-American led narrative emerged, with the technology and consumer discretionary sectors. Brazil and Mexico making up nearly a third of the Deepening bifurcation in population growth trends weight in the index by 1998. At that time, China between developed and emerging markets promises to made up less than 1% of the overall index. Since accelerate that trend. As the working-age population then, Asia has emerged as the dominant force among in less-developed countries increasingly outstrips that emerging markets — and China is the undisputed of developed markets, consumer-driven growth will leader in the region, with twice the weight in the increasingly shift to emerging markets. MSCI Emerging Markets Index compared to the nearest runner-up, Korea. Figure 4: Commodities Have Given Way to the Technology and Consumer Discretionary Sectors in Emerging Markets Sector Trends Evolution in sectors in MSCI Emerging Markets Index, by sector weight At the sector level, the opportunity set in emerging- markets sectors has meaningfully expanded in Index Weight (%) 30 27.7 recent years. Historically, emerging markets have been known for their commodity-driven industries, 25 18.0 reflected in the heavy energy- and materials- 20 14.7 sector weights in the index in 2007. In recent years, 15 10.1 10.2 however, the information technology and consumer 10 6.8 7.4 discretionary have come to the fore in emerging 4.9 5 markets, as evidenced by sector weighting in the 0 Energy Materials Technology Consumer MSCI Emerging Markets Index. (See Figure 4).
Load more

Recommended publications
  • Brics Versus Mortar? Winning at M&A in Emerging Markets
    BRICs Versus Mortar? WINNING AT M&A IN EMERGING MARKETS The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for- profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 78 offices in 43 countries. For more information, please visit bcg.com. BRICs VeRsus MoRtaR? WINNING AT M&A IN EMERGING MARKETS JENS KENGELBACH DOminiC C. Klemmer AlexAnDer Roos August 2013 | The Boston Consulting Group Contents 3 EXECUTIVE SUMMARY 8 THE GLOBAL M&A MARKET ReMAINS IN A DEEP FREEZE Disappointing Results for Public-to-Public Deals Emerging Markets Claim a Growing Share of Deal Flow Key Investing Themes 13 LEARNING FROM EXPERIENCE AND MANAGING COMPLEXITY: THE KEYS TO SUPERIOR ReTURNS Serial Acquirers Reap the Rewards of Experience The Virtue of Simplicity 17 A TOUR OF THE BRIC COUNTRIES Brazil Looks to the North Russia Seeks Technology, Resources—and Stability India Aims at Targets of Opportunity China Hunts for Management Know-How—and Access to the Global Business Arena 31 EMERGING THEMES AND ReCOMMENDATIONS 34 Appendix: Selected trAnSActionS, 2012 And 2013 36 FOR FURTHER ReADING 37 NOTE TO THE ReADER 2 | BRICs Versus Mortar? exeCutIVe suMMaRy espite the current worldwide lull in mergers and acquisitions, there’s Dnot much argument that emerging markets will remain a hotbed of M&A activity for some time to come.
    [Show full text]
  • How Important Are Spillovers from Major Emerging Markets?
    WPS8093 Policy Research Working Paper 8093 Public Disclosure Authorized How Important are Spillovers from Major Emerging Markets? Public Disclosure Authorized Raju Huidrom M. Ayhan Kose Franziska L. Ohnsorge Public Disclosure Authorized Public Disclosure Authorized Development Economics Development Prospects Group June 2017 Policy Research Working Paper 8093 Abstract The seven largest emerging market economies—China, a 1 percentage point increase in EM7 growth is associ- India, Brazil, Russia, Mexico, Indonesia, and Turkey—con- ated with a 0.9 percentage point increase in growth in stituted more than one-quarter of global output and more other emerging and frontier markets and a 0.6 percentage than half of global output growth during 2010–15. These point increase in world growth at the end of three years. emerging markets, called EM7, are also closely integrated Second, sizeable as they are, spillovers from EM7 are still with other countries, especially with other emerging and smaller than those from G7 countries (Group of Seven of frontier markets. Given their size and integration, growth advanced economies). Specifically, growth in other emerg- in EM7 could have significant cross-border spillovers. The ing and frontier markets, and the global economy would authors provide empirical estimates of these spillovers increase by one-half to three times more due to a simi- using a Bayesian vector autoregression model. They report larly sized increase in G7 growth. Third, among the EM7, three main results. First, spillovers from EM7 are sizeable: spillovers from China are the largest and permeate globally. This paper is a product of the Development Prospects Group, Development Economics.
    [Show full text]
  • Future of Consumption in Fast-Growth Consumer Markets: ASEAN
    Insight Report Future of Consumption in Fast-Growth Consumer Markets: ASEAN A report by the World Economic Forum’s Platform on Shaping the Future of Consumption Prepared in collaboration with Bain & Company June 2020 Contents 4 Preface 5 Executive summary 7 Introduction 7 – The ASEAN macro-context 7 – Four mega-forces will drive the future of consumption in ASEAN 11 Eight consumption themes to 2030, some accelerated due to COVID-19 12 – Consumer spending will double, driven by ASEAN’s middle-class boom 13 – Boundaries of premium and value shopping will blur 13 – Digital ubiquity will become the new normal 13 – Technology-enabled platforms will tear down socio-economic walls 15 – Local and regional competitive winds will prevail 15 – Shoppers will move beyond omni-channel to expect retail omni-presence 17 – Convenience will be the new currency 17 – Health of people and the planet will be non- negotiable 19 Business capabilities required for the firm of the future 19 – Reset vision, mission and goals 19 – Realign offerings to the new ASEAN consumer 19 – Reframe consumer engagement 20 – Restructure route-to-market and win at point of sale 21 – Rethink supply chains as a priority 21 – Reimagine operating model and talent 23 – Re-envision the role of sustainability 24 Critical societal challenges and calls to action World Economic Forum 24 – Create trade and investor-friendly reforms 91-93 route de la Capite CH-1223 Cologny/Geneva 24 – Invest in socio-economic inclusion Switzerland Tel.: +41 (0)22 869 1212 26 – Upgrade infrastructure for a connected and Fax: +41 (0)22 786 2744 Email: [email protected] sustainable future www.weforum.org 27 Conclusion © 2020 World Economic Forum.
    [Show full text]
  • Emerging Market Multinationals: a Decolonial Perspective
    Emerging markets multinationals: the presence of the state and state owned enterprises Abstract: In this article we argue that we should go beyond the dominant idea that the extension of traditional Euro-American theorizing is enough for a proper explanation of the internationalization of EMNC. The author of this article argues that we should take a decolonial turn instead, and direct our theorizing at the borders of the South. By embracing theories and knowledge that relate more specifically to the region, we can provide a better understanding of the internationalization of MNC not only from the North, but also from the South. Accordingly, we consider that history, geography and politics should be brought back into the theoretical debate from a specific locus of theorizing. A decolonial perspective from the South shows that a major issue involving the role of government and state companies, which are more obviously important in the South, but no less important in the North, remains largely overlooked or misrepresented. Key words: decolonial perspective; emerging market multinationals; state owned enterprises Introduction Emerging markets multinationals (EMNC) were first studied by authors from the North in the early 1980s during the Cold War period when they were still called Third World multinationals (Wells, 1983; Lall, 1983). Decades marked by a sound belief that Multinational Corporations (MNC) are a solely Euro-American institution, have resulted in a great deal of mobilization of Euro-American theories, frameworks and concepts to explain the internationalization path of MNC from the so-called emerging economies (Dunning, Kim and Park, 2008; Johanson and Vahlne, 2009; Rugman, 2009), at the expense of other knowledges and proper understanding.
    [Show full text]
  • Emerging Global Markets: a Five-Country Comparative Study Frank Cost
    Rochester Institute of Technology RIT Scholar Works Books 2007 Emerging global markets: A Five-country comparative study Frank Cost Stanley Widrick Follow this and additional works at: http://scholarworks.rit.edu/books Recommended Citation Cost, Frank and Widrick, Stanley, "Emerging global markets: A Five-country comparative study" (2007). Accessed from http://scholarworks.rit.edu/books/9 This Full-Length Book is brought to you for free and open access by RIT Scholar Works. It has been accepted for inclusion in Books by an authorized administrator of RIT Scholar Works. For more information, please contact [email protected]. Emerging Global Print Markets: A Five-Country Comparative Study By Stanley Widrick, Ph.D. Senior Associate Dean E. Philip Saunders College of Business Rochester Institute of Technology Frank Cost Associate Dean College of Imaging Arts and Sciences Rochester Institute of Technology A Research Monograph of the Printing Industry Center at RIT No. PICRM-2006-06 Emerging Global Print Markets: A Five-Country Comparative Study Part A By Stanley Widrick, Ph.D. Senior Associate Dean E. Philip Saunders College of Business Rochester Institute of Technology Frank Cost Associate Dean College of Imaging Arts and Sciences Rochester Institute of Technology A Research Monograph of the Printing Industry Center at RIT Rochester, NY October 2007 PICRM-2006-06 © 2007 Printing Industry Center at RIT— All rights reserved. i With Thanks The research agenda of the Printing Industry Center at RIT and the publication of research findings are supported by the following organizations: bc ii Widrick & Cost (PICRM-2006-06) Table of Contents Table of Contents Acknowledgements ......................................................................................................
    [Show full text]
  • REGIONAL INTEGRATION and EMERGING MARKETS
    REGIONAL INTEGRATION and EMERGING MARKETS Tie South African Institute of International Affairs SOUTH AFRICA AND SOUTHERN AFRICA REGIONAL INTEGRATION AND EMERGING MARKETS edited by Antoinette Handley & Greg Mills with the assistance of Laurie Boulden ©SAIIA, 1998 All rights are reserved While copyright in the volume as a whole is vested in the South African Institute of International Affiars, copyright in the text rests with the authors, and no chapter may be reproduced in whole or in part without the express permission, in writing, of both authors and publisher. It should be noted that any opinions expressed are the reponsibility of the individual authors and not the SAIIA or any of the funders. ISBN: 1-874-890-76-5 First published by the SAIIA, January 1998 (Printed by Print Inc.) This publication is the result of a conference sponsored by: The Brazilian Embassy The British Council Eskom Friedrich-Naumann-Stiftung The Royal Netherlands Embassy The Standard Bank of SA Limited Cover designed by Brian Robertson Contents Notes on the Contributors vii Foreword viii Jack Spence Preface ix Greg Mills Part One: Regionalism in Africa Chapter 1: Introduction 1 Antoinette Handlev Chapter 2: Regional Integration in Africa: Lessons and Experiences 17 Christopher Ctapham Chapter 3: Developing Nations, Regional Integration and Globalism 29 Jeffrey Herbst Part Two: The Specifics of Regional Co-Operation in Southern Africa Chapter 4: South Africa and Southern Africa 40 Rob Davies Chapter 5: Financial Co-Operation in SADC 51 Timothy Thahane Chapter 6:
    [Show full text]
  • The Case for Investment in New Emerging Markets - Africa & Middle East Strong 10Yrs Returns and Attractive Entry Point
    The Case for Investment in New Emerging Markets - Africa & Middle East Strong 10yrs returns and attractive entry point 10 Year Annualized Euro Returns (%) Current value vs. 5 Year high (%) Emerging Markets 8% Emerging Markets -24% World -5% World -51% Dubai* 5% Dubai* -81% Nigeria 6% Saudi Arabia -74% Saudi Arabia 8% Nigeria -74% Ghana 6% Ghana -65% Abu Dhabi* 5% Abu Dhabi* -63% Kuwait 13% Kenya -57% Kenya 0% Qatar -55% Qatar 15% Kuwait -54% Egypt 10% Botswana -49% Oman 6% Oman -43% Botswana 10% Egypt -35% Morocco 4% South Africa -29% South Africa 7% Mauritius -27% Mauritius 9% Morocco -24% Tunisia 9% Tunisia 0% 2 -10% -5% 0% 5% 10% 15% 20% -100% -80% -60% -40% -20% 0% Source: Bloomberg; MSCI World; Silk Invest Note: Values of End November 2009; *Values for UAE are based on 2001 data Salt trading predated all other forms of trade 3 Early trading routes 4 Now the trading routes are re-establishing themselves o It is Silk Invest’s view that the barriers of trade are coming down and that new trading routes are being re- established. o Over time, these will redistribute purchasing power based more on population and resources. 5 The story is not just oil o OPEC producers have around two-thirds of the world’s oil reserves. o Majority of these oil reserves are located in Saudi Arabia, Iran, Iraq Nigeria and 6 Kuwait We are returning to a world where population correlates to GDP. 100% 5% 9% 8% 4% 9% 90% 2% 16% 9% 2% 8% 7% 80% 8% 12% 23% 21% 70% 10% 60% 27% 19% 50% 61% 40% 50% 57% 26% 30% 37% 20% 17% 10% 22% 14% 7% 6% 7% 0% 1000 A.D.
    [Show full text]
  • Impact on and Responses of Emerging Markets to the Financial Crisis
    Impact On and Responses of Emerging Markets to the Financial Crisis Final Report EMERGING MARKETS COMMITTEE OF THE INTERNATIONAL ORGANIZATION OF SECURITIES COMMISSIONS September 2009 TABLE OF CONTENTS EXECUTIVE SUMMARY 4 CHAPTER 1: BACKGROUND, MOTIVATION AND APPROACH 6 Background and Motivation 6 Approach of the survey 7 Permanent Questions 8 Topical questions 8 Summary of Respondents 9 CHAPTER 2: CONCLUSIONS AND RECOMMENDATIONS 10 Conclusions 10 General Conclusions 10 Areas for Further Inquiry 13 Context of the Ongoing G-20 Process 15 Recommendations 15 CHAPTER 3: SUMMARY OF SURVEY RESULTS 18 Introduction 18 Approach to setting out responses 18 Key Regulatory and Supervisory issues before the onset of 25 widespread global financial turbulence Key Regulatory and Supervisory issues after global turbulence became more 30 pronounced Sources of instability 34 Measures undertaken to address instability 35 Additional Information and Comments Received 37 CHAPTER 4: ANALYSIS OF SURVEY RESULTS 38 Sustained focus on systemic risk issues 39 Increasing emphasis on regulatory approach and capacity 41 Increased focus on business conduct of market participants 43 Continued market development efforts 43 Macroeconomic risks to markets 44 Regulators have acted more proactively in combating the crisis 48 APPENDIX 51 Appendix 1: Detailed Survey Results 51 Appendix 2: EMC Chairman‘s Task Force on Financial Crisis 73 Appendix 3: The Core Task Force Team 77 Appendix 4: GDP and market capitalization data for the Sample jurisdictions 78 Appendix 5: The Survey Questionnaire 81 Appendix 6: Mandate 84 Appendix 7: Feedback statement on the public comments received on the 87 Consultation Report 1 LIST OF TABLES AND FIGURES Table 1 Sample jurisdictions .............................................................................................
    [Show full text]
  • The Changing Nature of Emerging Markets
    TEMPLETON EMERGING MARKETS INVESTMENT TRUST THE CHANGING NATURE OF EMERGING MARKETS TEMPLETON EMERGING MARKETS INVESTMENT TRUST YEARS 30 YOUNG EMERGING MARKET PIONEERS FOREWORD The emerging markets asset class has changed considerably over emerging market opportunities has never been more important. the last 30 years and the investment opportunity that we invest in With a turbulent domestic environment, the differences that exist on behalf of our clients is currently of a standard we have not seen between emerging market countries and the evolving nature of these at any time previously. Yet outdated perceptions about emerging economies mean that navigating the investment opportunities can markets still persist and, as a result, we believe that there is a be complex. With many years of investment experience in emerging risk that investors may miss out on some of the fastest growing markets, we have helped our investors to prosper through economic opportunities in the world today. highs and lows. We attribute this to the depth of independent company research and local knowledge from our on-the-ground These are not the emerging markets that the UK first saw in the resources, overlaid with a global perspective that helps us assess the 1980s and 1990s when the story was very much about producing best relative opportunities around the world. cheaply and selling abroad. And there are a number of key reasons for the changes we have witnessed over the last 30 years. We believe that the current opportunity within emerging markets is substantial and this is borne out in the findings of this report. The first of these is down to policymakers, who have deliberately With many emerging market companies not constrained by legacy changed economic policy to make these economies much more infrastructures, in the way many developed market companies are, resilient during times of stress.
    [Show full text]
  • Currency Crises in Emerging-Market Economies: Causes, Consequences and Policy Lessons
    N o . 51 Marek D¹browski (ed.) Currency Crises in Emerging-Market Economies: Causes, Consequences and Policy Lessons with contribution from Ma³gorzata Antczak, Rafa³ Antczak, Monika B³aszkiewicz, Georgy Ganev, Ma³gorzata Jakubiak, Ma³gorzata Markiewicz, Wojciech Paczyñski, Artur Radziwi³³, £ukasz Rawdanowicz, Marcin Sasin, Joanna Siwiñska, Mateusz Szczurek, and Magdalena Tomczyñska and editorial support of Wojciech Paczyñski W a r s a w , 20 0 2 Summary Report from the research project on "Analysis of Causes and Course of Currency Crises in Asian, Latin American and CEE Countries: Lessons for Poland and Other Transition Countries", grant No. 0144/H02/99/17 of the State Committee for Scientific Research (KBN). The publication was financed by Rabobank Polska S.A. Key words: currency crisis, financial crisis, contagion, emer- ging markets, transition economies, exchange rates, mone- tary policy, fiscal policy, balance of payments, debt, devalua- tion. DTP: CeDeWu Sp. z o.o. Graphic Design – Agnieszka Natalia Bury Warsaw 2002 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without prior permission in writing from the author and the European Commission. ISSN 1506-1647 ISBN 83-7178-285-3 Publisher: CASE – Center for Social and Economic Research ul. Sienkiewicza 12, 00-944 Warsaw, Poland e-mail: [email protected] http://www.case.com.pl Currency Crises in Emerging-Market Economies ... Contents Abstract . .7 1. Introduction . .9 2. Definition of Currency Crisis and its Empirical Exemplification . .12 3. Theoretical Models of Currency Crises . .17 3.1. First-generation Models .
    [Show full text]
  • States, Markets and Governance for Emerging Market Economies: Private Interests, the Public Good and the Legitimacy of the Development Process
    States, markets and governance for emerging market economies: private interests, the public good and the legitimacy of the development process GEOFFREY R. D. UNDERHILL The words ‘states, markets and governance’ surely draw together the great issues of our times in this apparently ‘global’ era. Despite the unprecedented pros- perity of a range of developed economies and the considerable success of some emerging market countries, a recurrent frisson of doubt regularly shakes the collective consciousness when the issue of governance and the global market is raised. Frequent financial crises in the developing world are not the only reason, nor is the growing inequality which has accompanied the market integration process. Corporate scandals in the US and the threat of global recession have hardly helped the situation. Unease is perhaps particularly prevalent when one invokes the issue of democratic accountability and observes the tension between global market integration and the resolutely national forms of governance which, for the most part, prevail. The rioters of Genoa, Stockholm, Quebec, Prague and Seattle (the list will no doubt become longer) are no longer needed to keep the issue on the public agenda. The past 20 years of liberal market reforms across a range of societies have wrought changes which make many nostalgic for past certainties which probably never were. This article is based on the premise that how ‘we’ as a society think about states, markets and governance affects what we believe ‘we’ can do about or with them. The clear implication is that, if much thinking about states and markets is flawed, as here I argue that it is, then it is highly likely that policy- makers (among others) will make mistakes in their responses to the undoubted pressures of change.
    [Show full text]
  • The Wave of Foreign Investment in Sub-Saharan Africa Amarildo
    Barbosa • 29 Modern Colonialism in African Education: The Wave of Foreign Investment in Sub-Saharan Africa Amarildo Barbosa Many African scholars feel that there is a need for a re-focusing of goals and purpose among universities in Sub-Saharan Africa. Because of the low retention rate of graduates, who continue to emigrate and work outside of Africa, scholars often view African higher education as a loss of investment. A current educational objective in Sub-Saha- ran Africa is creating a new generation of African universities that are focused on community development projects and programs aimed at aiding problems related to civil works. With significant financial assistance from foreign investors, however, African universities must be wary of the control external parties will have over internal matters. As a continent long enduring the effects of colonialism, Africa and its edu- cational leaders must be intentional about ensuring that the primary beneficiaries of this developmental process are the African countries affected and those who study, work, and live there. How is Africa factored into the globalizing world economy? Commerce and edu- cation play significant roles as nations on every continent become contributors to the global economy. This has created an interdependence of industries. A consequence of that interdependence is the domino effect felt when a particular industry in one nation collapses. For instance, the struggles of the oil industry, stemming from one region of the world, had dramatic effects on various con- tinents, as evidenced by the fluctuations of gas prices in the United States and elsewhere. As the world economy continues the trend of globalization, revolving around trade, importation, and exportation of goods to and from various coun- tries, new markets will emerge and display the potential of a promising future.
    [Show full text]