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1 – 10 of 24The reciprocal method for allocating support department costs is preferred over the direct and step-down methods because it captures all support services provided to other…
Abstract
The reciprocal method for allocating support department costs is preferred over the direct and step-down methods because it captures all support services provided to other departments. However, even as business organizations increase the number of support departments and their costs, the adoption of the reciprocal method has been hindered by mathematical difficulties in solving simultaneous equations. This paper illustrates spreadsheet matrix functions that remove the difficulties associated with the reciprocal method. The algebraic expressions for reciprocated costs commonly presented in accounting textbooks are used to form an equivalent matrix relationship. Then spreadsheet matrix functions easily compute reciprocated costs for support departments from the matrix relationship, and also allocate the reciprocated costs to other departments.
Asim K. Karmakar, Sebak K. Jana and Priyanthi Bagchi
Financial instability and economic crises are closely intertwined. There is no universally accepted definition. The term ‘stability’ or ‘instability’ refers to the behaviour of…
Abstract
Financial instability and economic crises are closely intertwined. There is no universally accepted definition. The term ‘stability’ or ‘instability’ refers to the behaviour of the system rather than to individual institutions. However, one cannot rule out that failure of a single financial institution can trigger significant financial turmoil as was happened in 2007–08 global financial crises. Like unstable equilibrium, instability implies inability to correct itself on its own. Instability, if it persists, turns into a crisis. In the above backdrop, the objective of this chapter is to investigate the financial crises and instability viewed both from economic and international political economy perspectives with a tale of four generation crisis models as it has been evolved over time to explain the phenomenon of different types of crises.
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Jonathan A. Batten, Igor Loncarski and Peter G. Szilagyi
We compare the aggregated international assets and liabilities of banks that report to the Bank for International Settlements (BIS) to establish their gross and net international…
Abstract
We compare the aggregated international assets and liabilities of banks that report to the Bank for International Settlements (BIS) to establish their gross and net international exposures during recent episodes of financial crisis. Initially we consider these positions worldwide and then focus on the cross-border flows within Europe, considered in terms of core and peripheral countries. These gross and net asset–liability positions are both time-varying and respond to crisis periods, through better matching of international assets and liabilities as well as the realignment of asset positions to reduce balance sheet risks. These conclusions are consistent with other studies that utilise international banking flow data, while the European experience highlights the diversity of international position taking. This is due to the complexity of managing risks within the eurozone (EZ) and peripheral countries, and those emerging European countries that retain legacy currencies.
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Bobir Tashbaev, Bunyod Usmonov and Sanjar Omanov
The authors study public debt policy based on the reports for 2011–2022 and examine the factors affecting the public internal and external debt growth rate using several methods…
Abstract
The authors study public debt policy based on the reports for 2011–2022 and examine the factors affecting the public internal and external debt growth rate using several methods. The research results demonstrate that internal and external debts have changed significantly under the influence of socioeconomic factors. The authors provide scientific recommendations and conclude that public debt is one of the vital instruments of the macroeconomic regulation system through the budget-tax policy. The main features of the debt financing system of the budget deficit are considered. It embodies the redistribution system of national income expressed through its activity as a “state debtor agent” to attract funds for financial support for the requirements of specific segments. Debt financing of the country's primary budget deficit affects the consumption, savings, and investment environment and usually depends on various aspects of the economy. During an economic downturn, the government revives aggregate demand by raising gathered funds (via the sale of securities) and funding governmental operations, which has a stimulative impact. To stabilize the national economy in terms of the country's foreign debts, global funds will have the opportunity to “infect” financial resources in exchange for funds. In a period of stable economic development, the activation of the state as a borrower in the financial market will have the character of crowding out private investments. This ultimately shows that public debt has the characteristic of limiting the scientific views of economists regarding state debts.
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This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as the…
Abstract
This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as the emerging market) through the lending channel of global banks’ local branches (i.e., the internal transfer channel). Using novel data of monthly individual foreign bank’s balance sheet in Indonesia, the author finds the evidence that shocks to a parent bank and a home economy are transmitted to a host economy through the foreign banks’ internal capital market. With the Indonesia banks’ capital injections and their difficulty in financing dollar funds without risk premiums since the 1998s crisis, the foreign banks’ dollar lending in Indonesia is a good showcase of internal capital markets. A change in a home stock market index and industrial production appears to have a negative effect on growth rates in foreign currency loans of foreign banks in the host market. On the other hand, high growth rates in the parent bank’s stock price in the home market lead to an increase in foreign banks’ US dollar lending in the host country. This effect does not appear in local currency lending because limited hedging instruments against foreign exchange risk results in immobility of bank capital in the local currency.
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Juan E. Santarcángelo and Juan Manuel Padín
Following a successful debt-renegotiation process in the mid-2000s, Argentina consolidated a path of growth and debt relief. The outbreak of the global financial crisis in…
Abstract
Following a successful debt-renegotiation process in the mid-2000s, Argentina consolidated a path of growth and debt relief. The outbreak of the global financial crisis in 2007–2009 and other domestic imbalances altered the economic scenario. In this context, the authorities tried to return to global financial markets, but legal conflict with vulture funds made that option unpalatable. In 2015, the triumph of a right-wing political coalition restored the dominance of neoliberal economic policies, including the return to debt and equity markets. The subsequent cycle of indebtedness and capital flight faced by Argentina not only unleashed a major crisis but also caused the return of the International Monetary Fund, which granted the largest lending arrangement to a single country in its history. The aims of this chapter are to analyze the winding cycle of debt reduction and overindebtedness experienced by Argentina between 2001 and 2022; to examine the set of structural factors as well as the role of certain domestic and foreign actors; and to consider the long-term effects of external indebtedness and some lessons that can be drawn for other countries in the Global South.
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Konstantinos Drakos, Ekaterini Kyriazidou and Ioannis Polycarpou
This paper seeks to explain the serial persistence as well as the substantial number of zeros characterizing global bilateral investment holdings. We explore the different sources…
Abstract
Purpose
This paper seeks to explain the serial persistence as well as the substantial number of zeros characterizing global bilateral investment holdings. We explore the different sources of serial persistence in the data (unobserved country pair effects, genuine state dependence, and transitory shocks) and examine the crucial factors affecting the decision to invest in a host country.
Methodology
Based on a gravity setup, we consider investment behavior at the extensive (participation) margin and employ dynamic first-order Markov probit models, controlling for unobserved cross-sectional heterogeneity and serial correlation in the transitory error component, in order to explore the sources of persistence. Within this modeling framework we explore the importance of institutional quality of the host country in attracting foreign investment.
Findings
The data support that the strong persistence is driven by true state dependence, implying that past investment experiences strongly impact on the trajectory of future investment holdings. Institutional quality appears to play a significant role to attract foreign investment.
Research implications
The empirical findings suggest that due to the existence of genuine state dependence, inward-investment stimulating policy measures could have a more pronounced effect since they are likely to induce a permanent change to the future trajectory of inward investment.
Originality
Both the substantial number of zeros and the salient persistence characterizing bilateral investment holdings decision have been previously overlooked in the literature. A study modeling jointly the levels and the selection mechanism could prove a fruitful direction for future research.
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Qiheng Han, Junqing Li and Jianbo Zhang
Based on an uncertainty model with an infinite horizon, this chapter analyzes how financial development and monetary policy in two countries can impact international trade and…
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Based on an uncertainty model with an infinite horizon, this chapter analyzes how financial development and monetary policy in two countries can impact international trade and capital flows and influence individual behavior and welfare. Our study shows that differences in capital market development are the major contributing factors for trade imbalance and investment among countries. We also find that monetary policies are important factors affecting the trade balance, consumption, and investment. Countries with one-sided, pegging exchange rate policies tend to buy more bonds and enjoy larger trade surpluses. This effect is closely related to the level of capital market development: in these two countries, at higher stages of development, the effects of idiosyncratic monetary policy on imbalance are amplified.
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Aristidis Bitzenis and Pyrros Papadimitriou
This paper discusses the nominal and real convergence regarding Greece being a country-member of the European Union (EU), and of the Economic and Monetary Union (EMU). We argued…
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This paper discusses the nominal and real convergence regarding Greece being a country-member of the European Union (EU), and of the Economic and Monetary Union (EMU). We argued that nominal convergence is relative to Maastricht criteria when real convergence has been investigated through six different axes: (1) the five Maastricht Criteria, (2) the GDP per capita in PPP prices, (3) the real GDP growth rates, (4) the minimum wages, (5) the HDI index development, and (6) the unemployment rates. We concluded for the case of Greece that by utilizing alternative indicators, such as the Maastricht criteria, and the above criteria only nominal convergence exists while real convergence appears to be a long-term target with many obstacles. In particular, Greece has managed to achieve the criteria proposed by the EMU (Maastricht Criteria) for membership, decisively different levels of unemployment, wages, and GDP growth rate/GDP per capita in PPP prices, and different human development indexes appear for the case of Greece.
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