Emerging Markets Project

Emerging Markets

The contemporary world economy gets its support from the phenomenon of the emerging markets and its consequential development of emerging markets multinationals (MNCs) (Sinkovics, et al. 167). The new re-engineering of the modern economic and political order is as a result of the state of international emerging markets that is much conspicuous in the recent past. According to the international business, the term emerging markets get referred to nations that are in constant motion and also have the capability of gaining a significant economic and political power (Cavusgil, Tamer, et al. 40).

The emerging economies showed the ability to endure a recession that bypasses even the major economies during the Financial Crisis that the world faced at the primary stages of the new millennium. They include the best emerging 20 (E20) countries selected based on their recorded GDP, the population, and the overall influence on both regional and international trade (Cavusgil, Tamer, et al. 46). For example, the E20 consists of Brazil, Chile, China, Argentine, Poland, Colombia, Saudi Arabia, South Africa, Malaysia, Mexico, Thailand, Russia, Philippines, Republic of Korea, South Africa, Turkey, Indonesia, India, Nigeria, and Iran. This report aims at examining the emerging markets from the E20’s enhanced economic growth, the ever-growing influence across the world economies, and increased technological advancements.

Emerging Markets and Economic Growth

The E20 savings are known to be dominated by a substantial and rapidly growing number of people. According to world census conducted recently, emerging markets population account for 50% of the total four billion estimated world population. For example, in a comparative perspective, 18% of the world’s population stays in OECD nations; an approximated 11% lives across the G7 countries which also recorded yearly population growth of a rate of 0.0051 of the total population (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). On the hand, E20 nations are also prone to an increase in annual population by 0.01 (Sinkovics, et al. 169).

Also, demographically, emerging markets consist of a community of the young generation who are at their prime ages. Even though the youths are demanding regarding the money allocated to the education and higher learning institutions, they act like a source of wealth to a country. For example, a learned young generation provides skilled and advanced technical know-how to their economy, the source of cheap labor to the available industries, and a potential market for the ready manufactured goods and services. Conversely, in the United States, Japan, and Europe the majority comprises of working age population. 

A nation with working age as the majority is at crossroads since the working age has the capability of ether impact the economy positively or negative (Cuervo-Cazurra, Alvaro, and Ravi Ramamurti 230). For instance, a country with a majority of working age must have implemented a beneficial education and healthcare system because the working class is aging very fast and the possibility of an increased dependency ratio. However, some of the E20 countries showcased an age structure that consists of a rapidly aging population such as China and Korea. Nevertheless, E20 states still well placed to have a productive working force that other developed economies (Cuervo, Alvaro, and Ravi 230).

Integration into the international Markets

With the high population in E20 countries, there are readily available markets for the produced goods and services (Hill, Charles, et al. 77). According to world consumer research conducted in 2010, the United States and Europe take the lead in the world consumer market. However, there is the likelihood that Asia will overtake them by 2030 due to rapidly growing emerging economies. The recent paradigm shift indicates how emerging economies are gaining firm ground across the international market arenas.

E20 countries learned a lot of world market influence between the early year 2000 and 2015 by a margin increase of approximately 6%. However, E20 nations have suffered currency volatility for not less than twenty years, which was worth declared a crisis among them. For example, Mexico, Asia, Russia, Argentina, and Brazil were the witnessed victims in the late 1990s. Fortunately, the emerging markets with the firm ground established in the contemporary international economy have the upper hand to maintain their positions (Hill, Charles, et al. 79). 

Furthermore, the emerging markets have increased their total exports to the world markets averagely 20% and that some countries stand as major commodities exporters. Emerging countries are the majority of the states with the most significant manufacturing products applying the advanced technology. For instance, China, Korea, and Malaysia use the highest technology in manufacturing their exports and that they also enjoy the lion’s share of FDI, therefore raising their international investments. The economic growth resulted in a well-consolidated world economy that boosted technology and innovation knowledge (Brannen, Rebecca and Susanne 141).

Technological Advancement in Emerging Markets

Growth and development of a nation must get measured by the level of technology and innovation present. Initially, high technology and innovation was only a reserve for the developed countries. However, in the current days, emerging economies have concentrated their efforts to improve their technological know-how through boosting research and development sector by providing resources and human capacity by embracing the right education system (Hill, Charles, et al. 79).  For instance, innovation improvements have greatly addressed the local problems to match the general atmospheres in the already developed countries.

Innovative cultures in emerging economies contributed to the development of new technology in the banking industry, telecommunication, and to the overall savings which not only benefited the locals but also spread to the rest of the world (Peng, Mike, and Sergey 12). Therefore, the emerging markets end up pioneers of some world innovations and technological advancements.

Emerging Markets Project
Emerging Markets Project

The E20 countries paid much attention in research and development funding both public and private sectors of the economy. Research and development are significant indicators of technology and innovation in any economy of the world (Peng, Mike, and Sergey 19). For instance, Korea and China are the leading nations which took more significant strides in R&D followed by Turkey and Malaysia.

Moreover, the emerging economies witnessed to embrace the right education system that promote innovative talents and that they use the most significant art of public expenditure on education. For example, Argentina, Mexico, South Africa, Malaysia, and Brazil were among the emerging nations with the highest education allocation. The E20 countries take education seriously since it is the critical factor that influences the full and sustainable economic growth.

Globalization

The emergence of interconnectivity of world nations through cooperation laid a firm ground for the emerging economies (Brannen, Rebecca and Susanne 139). The world’s economic and political order experienced a paradigm shift where countries were aiming to form multilateral cooperation resulting into formation of world developmental institutions like development bank and Asian Infrastructure Investment Bank and International Monetary Fund. The establishment of the last global institutions facilitated the emerging market’s contribution in global affairs, international trade, and investment (Brannen, Rebecca and Susanne 141).

Conclusion

The emerging economies managed to transform the global economy by constant and robust economic growth and the trend seeming to continue because of some reasons identified by this report. First, the emerging economies have both principal actors and regional powers than developed nations. Second, the majority of the emerging markets anchored the economic development on the right pillars such as technology and innovation.

Finally, these emerging economies enjoyed the current world readiness for international cooperation. Despite the possible challenges that particular emerging economy shall experience, there rise in general marked a milestone in the global landscape.

Work Cited

Brannen, Mary Yoko, Rebecca Piekkari, and Susanne Tietze. “The multifaceted role of language in international business: Unpacking the forms, functions and features of a critical challenge to MNC theory and performance.” Language in International Business. Palgrave Macmillan, Cham, 2017. 139-162.

Cavusgil, S. Tamer, et al. International business. Pearson Australia, 2014.

Cuervo-Cazurra, Alvaro, and Ravi Ramamurti, eds. Understanding multinationals from emerging markets. Cambridge University Press, 2014.

Hill, Charles, et al. Global Business Today Asia-Pacific Perspective. McGraw-Hill Education, 2017.

Peng, Mike W., and Sergey Lebedev. “Intra-national business (IB).” (2017): 241-245.

Sinkovics, Rudolf R., et al. “Rising powers from emerging markets? The changing face of international business.” 0969-5931 23.4 (2014): 675-679.

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Currency Crisis Cause and Resolution

Currency Crisis

Currency crises are rapid and unpredictable decline in the value of the currency of a nation. The crises are often more severe if the country involved uses a fixed exchange rate than if the country has a flexible exchange rate since the monetary authority will be forced to abandon the fixed rate. Currency crises usually increase by selling pressure of a currency and can only be remedied through devaluation or establishing a new exchange rate at a sufficiently depreciated level. Several countries have experienced currency crises which are caused by different factors. One of the most severe currency crisis occurred in Mexico between 1994 and 1995. The crises led to huge massive economic crises that forced the Mexican government to seek assistance from the United States and the International Monetary Fund (IMF) (Carbaugh, 2016). The essay herein will, therefore, examine the sources of currency crises in Mexico and the specific resolution and also including some other countries that have experienced currency crisis such as Russia and Turkey.

Mexico Currency Crisis (1994-1995)

Before the 1994 Mexico currency crises, the central bank of Mexico maintained the value of peso within a depreciated band of four percent every year against the U.S. dollar. In 1994, the Central bank decided to issue debt that is linked to the US dollar as a way to reduce interest rates on debts. The debts kept rising until it exceeded the central bank’s falling foreign exchange reserves which led to the currency crises. Despite the government responding by devaluing the currency by 15 percent, the crises continued until 1995. The continued selling pressure on the currency forced the monetary authorities to withdraw support in foreign exchange markets as foreign reserves of the Bank of Mexico fell. Although the severity of the Mexican currency crisis in 1994 was unprecedented, Mexico’s history on exchange rate policy has been characterized by the duration of both fixed exchange rate and flexible exchange rates (Ötker et al., 1995). The devaluation registered by Mexico is the largest depreciation of the currency of a country within one year.

When the currency crises occurred, there was little information about the possibility of its occurrence. The crises were somehow similar to the debt crisis that occurred between 1982 and 1983. Several assessments have been conducted to establish the main cause of the situation, and most of them reveal that it was contributed by the exchange rate policy of Mexican monetary authorities. The other cause identified through the assessment is the excessive use of short maturity tesobonos for deficit financing. Tesobonos is a peso-dominated bond which is issued by the government of Mexico and the coupons associated with it are indexed to the United States dollar. The Mexican government issued the tesobonos as a way to convince the international investors to buy Mexican debt that is exempted from risks associated with currency exchange. The investors are therefore immune to the effects of changes in the dollar value of the peso between the period of purchase and redemption. The risk associated with the change of currency is therefore carried by the Mexican government and not the investors. For instance, if the value of peso depreciated during the period of purchase and redemption, the Mexican government and the taxpayers would be liable for the losses.

According to the international economic statistics that were available before the crises, the Mexican government had the chance to evade the crises if the monetary authorities had information about the actual state of Mexican reserves. At the beginning of 1994, the Mexican reserves were at around $25 billion, but towards the ends of the year, the reserves had reduced to about $5 billion (Tavlas, 1997). The existing reserves were insufficient to meet the existing financial obligations. Furthermore, a default was considered to be a perilous move for the stability of the international financial markets. The deficit, therefore, led to the currency crisis. The International Monetary Fund (IMF) failed to provide the Mexican authorities with information about the decline in the reserves. Following the crisis, the IMF has resolved to closely monitor the financial reserves of developing countries to avert the occurrence of a currency crisis. The IMF has also resorted to providing early warning indicators to avoid the occurrence of a currency crisis in any nation.

Currency Crisis
Currency Crisis

Mexico has a great deal of the forms of direct capital investment in 1994, but it was not sufficient. The government was receiving massive amounts of money through stock-brokers who were motivated by the quick returns which were about 20 percent annually. The investment bankers and the stock-brokers were ready to exit Mexico as soon as the crisis begun thereby increasing the magnitude of economic damage. The troubles of Mexico extended from insufficient reserves, inability to service the debts, and incapability to generate profits on the equity capital. The crises also contributed to other social and political problems such as the Chiaspas rebellion at the beginning of 1994 (Tavlas, 1997). The political issues made the foreign investors take their money out of Mexico thereby broadening the implications of the crisis. The implications of the crises forced the Mexican government to seek assistance from the International Monetary Fund and the United States government.

According to Gil-Diaz (1998), the currency crisis in Mexico was contributed by the execution of the privation of the public enterprises and the deregulation of the Mexican banking sector. He concluded that the confiscation of the banking sector followed by subsequent privatization in 1991-1992 is the cause of the currency crisis. The Mexican monetary authorities made the deregulation of the banking sector without due consideration about the implications that it would have on the federal reserves. The decision later resulted in an increase in unpaid debts to the banks. The currency was then triggered by the Mexican government in 1994 because of the economic decisions. The crisis was determined by the fragility of the banking system and not the macroeconomic factors as indicators by other researchers. Three years before the crisis, the Mexican peso was overvalued which also resulted in economic pressure. The monetary policy that was passed by the Mexican authorities was inappropriate because the Federal Reserve was raising the interest rate while the Bank of Mexico maintained the existing rates. It, therefore, made the investors leave increasing pressure on the reserves.

The Mexican currency crisis had a regional effect through a contagion in various markets such as Brazil, Argentina, Asia, and Thailand; the effect was referred to as the “Tequila effect.” The crisis affected both the stock market and the foreign exchange market. Only the countries that had high economic fundamentals were exempted from the effects of the crisis. The Mexican government responded to the adverse situation by requesting for loans from different countries and international bodies among them being the United States, the International Monetary Fund, and the Bank for International Settlements. In the end, Mexican government managed to secure a loan totaling to $50billion that was used to meet the financial obligations. However, the move by the government to ask for loans received criticism from some of the European authorities that considered the move to be a moral hazard.

The Mexican government continued to resolve the crisis by implementing a severe adjustment program. Some of the strategies in the program included reducing the public spending, increasing the value added tax from 10 percent to 15 percent, and raising the prices of all the public goods and services. The program worsened the situation in Mexico as the Gross Domestic Product dropped by 6.5 percent and inflation increased by 50 percent. Furthermore, the banking system collapsed thereby forcing the government to use public funds in the rescue. The government also changed the exchange rate from fixed to flexible. Later, a law was passed that would only allow the government budget to be approved if the deficit is zero to prevent further lending. The initiative had positive implications in the GDP because of the increased exports of products to the United States. Through the Banking Fund for the Protection of Savings, the government was able to bail out the banking system that had collapsed.  Years later, the government decided to sell the Mexican banks to the international financial groups. Presently, there is only one Mexican bank as foreign investors own the rest.

One of the international institutions that played a role in rescuing Mexico was the International Monetary Fund. The IMF is responsible for providing loans to nations that are in financial deficit. The loans are usually issued following an agreement between the nation and IMF. The IMF responded to the crisis by providing a loan to the Mexican government through the U.S Treasury as a way to protect the foreign banks and other existing financial institutions. The various government also played a vital role in rescuing the currency crisis among them being the United States and Canada. The U.S. has had a long outstanding relationship with Mexico, and it is also the largest trading partner. Although the Federal Service Bank contributed to the crisis by increasing the interest rate, the United States assisted the Mexican government with loans to end the crisis. On the other hand, Canadian government through the North American Framework Agreement (NAFA) contributed funds beyond what had been collected at the time of occurrence of the crisis.

Russia Currency Crisis (1998)

Russia was severely hit by a currency crisis in 1998 that left both the economic and financial system in crisis. According to Gerry & Li (2002), the financial crisis begun in August 1997 when the Russian government defaulted on its domestic financial and economic systems. The duration was characterized by an increase in inflation, high levels of unemployment, and shanking of the economy. Although the crisis lasted for a short period, Russian who was living in the urban areas were severely hit. Globalization and uncontrolled speculation in the financial markets is one of the leading contributors to a currency crisis in the developing countries. The rise in the amount of capital that is flowing in the international financial systems as a result of globalization has had negative impacts on the economies of different countries. The crisis is caused by failures of certain sectors of the economy in the countries involved which later spreads to other countries through contagion and spill-over effects. For instance, the Asian currency crisis spread through contagion and spillovers to other countries such as Thailand in 1997 and later to Russia in 1998. Therefore, Asia is one of the causes of the Russian crisis although research shows that there is a little linkage between the crises that hit the two countries.

The Russian crisis can also be attributed to both political and economic factors. The Russian government triggered the crisis by selling the GKOs and OFZs which denominated debt instruments and coupon bonds after the fall of USSR. The Russian government then started experiencing problems that had negative implications on both the financial and the economic systems. The Russian government responded by converting the Ruble dominated instruments into US dollar-dominated Eurobonds to alleviate the risks involved. The Russian government continued borrowing from external sources that later raised concerns of its default exposure as foreign investors decided to cut their connection with the Russian debt, equity, and commodity market because of lack of confidence. The withdrawal of investors from Russia economy reduced the government capability to finance the debts thereby causing a currency crisis. According to the reports provided by the Economic Intelligence Unit (1998) in 1998, 30 percent of the Russian expenditure was used to service the short-term debts that the government had secured from other governments and international institutions. Therefore, high levels of debts are one of the causes of a currency crisis in Russia.

Russian Currency crisis was also caused nu the fall in the value of the Rule, weak banking system, and the reduction in the level of the foreign reserves. The Russian government tried to remedy the situation through the Central Bank by pegging the Russian Ruble to the US dollar with a narrow band. Several other studies have been conducted to establish the causes of the Russian financial crisis which had serious consequences to the economic and financial systems of other countries such as Turkey, Ukraine, and Moldova. The devaluation of the Russian Ruble also had negative implications on the Russia banks regarding assets and liabilities. There was also a reduction in the foreign exchange contracts because of the increase in the value of liabilities. Furthermore, the Russian government debts such as bonds and treasury bills that were used assets were reduced to worthless assets because of the defaults. As a result, most banks were closed which made a majority of the Russians to lose their savings. Lastly, the crisis caused political fallouts and frequent demonstrations of workers who were demanding a pay rise (Margolin, 2000).

The Russian currency crisis was resolved after intervention by the International Monetary Fund (IMF) which has the mandate of monitoring the economic and development policies enacted by various nations. The other responsibilities of the international body are to lend money to countries that are experiencing financial challenges and provision of technical assistance regarding research and training to countries that are in need. The IMF intervened in the Russian crisis by lending money that would help the government to escape the financial collapse. Despite the IMF lending money to the Russian government, the situation was already out of control since the money could only be used to take care of the short-term debts but not offer a permanent solution to the difficult situation.

For a country to survive a financial crisis, it requires a plan for the aid to be used in a manner that will help escape the situation. It is an excellent idea for the international body to issue financial aid, but the Russian government was not prepared to use the funds to evade the crisis. The government had lost control of the situation, and therefore it required more than financial aid to help the situations. The Russian government responded by coming up with a plan that would ensure the crisis does not happen again. The funds issued by the IMF were used in rescuing the banking system which plays a vital role in maintaining economic growth in a nation.

Conclusion

A currency crisis is one of the challenges that has been experienced by several countries especially the developing countries. Among the countries that have been affected by currency crisis include Mexico between 1994 and 1995, Russia in 1998, and Thailand in 1997. The crisis has severe implications on the economic and financial systems of an economy. The causes of the crisis vary from one nation to another, for instance, the crisis in Mexico was caused by reducing the level of Federal Reserve while excessive borrowing caused the Russian crisis. Once the countries are caught in such difficult situations, it the responsibility of the international bodies and other government to assist in escaping the situation. International Monetary Fund played a vital role in helping the above-discussed countries escape the harsh implication of currency crisis. The United States and Canada through the North American Framework Agreement (NAFA) assisted Mexico financial aid in helping rescue the situation.

References

Carbaugh, R. (2016). International Economics. Boston, MA: Cengage Learning.

Economist Intelligence Unit (1998). Russia: Country Report. London. pp. 42.

Gery, C. J. & Li, C. A. 2002. Vulnerability to welfare change during economic shocks: evidence from the 1998 Russian Crisis. Working Paper. University of Essex, Department of Economics, Discussion Papers.

Gil-Díaz, F. (1998). The Origin of Mexico’s 1994 Financial Crisis. Cato Journal, 17 (3), pp. 303-313.

Margolin, R. (2000). The Russian Financial Crisis: from craze to crash. The Stern Journal, New York University.

Ötker, I., Pazarbaşioğlu, C., International Monetary Fund, & International Monetary Fund. (1995). Speculative attacks and currency crisis: The Mexican experience. Washington, D.C.: International Monetary Fund, Treasurer’s Dept. and Monetary and Exchange Affairs Dept.

Tavlas, G. S. (1997). The Collapse of Exchange Rate Regimes: Causes, Consequences and Policy Responses. Boston, MA: Springer US.

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Negative Interest Rates

Discuss the macroeconomic effects of negative official interest rates. What relevance, if any, do the macroeconomic models have in explaining this phenomenon and predicting its likely consequences?

The negative interest rate is a recent phenomenon emerged from the global financial crisis in 2008. The negative official interest rate has become worldwide phenomenon and a part of policy initiatives by central banks around the world (Collignon, 2012) to deal with the problems of low rate of economic growth, massive unemployment and disinflation by injecting some easy money in search of some viable solution for economic recovery.

The interest rate is most crucial variable for financial industry as it has widespread effects on share prices, exchange rate and income distribution between exporting firms and consumers. IMF (2012) has mentioned the negative effects on insurance and savings in form of pension funds and financial stability is threatened in case of persistent negative interest rates. This policy can have negative consequences for growth and independence of central banks in the hands of irresponsible government decisions (White, 2012).

Money market suffers as important intermediaries like money market funds could be compelled out of business because of lost profitability that shift the interest of investors to more profitable market oriented business.

The consumers also suffer from negative interest rate in form of high global commodity prices. The reason behind this phenomenon is the changing interest and speculative behaviour of investors into high yielding assets like oil and food. The increased inflation rate results in lower purchasing power of consumers that hindered the economic recovery (Belke et al., 2010).

The negative interest rate dampen saving as it encourage people to spend more rather to save, this has long term negative effects for the people who are dependent on interest income. On the other hand the savings are not properly used for investment because of deteriorating investment efficiency.

The benefit of low interest rate includes the increasing capacity of banks to lend as a major problem the banks faced during the financial crisis was undercapitalization that restricted their capacity to make loans for recovery.

Negative Interest Rates
Negative Interest Rates

The negative interest rate can increase the wealth of households in form of higher asset prices and lower the capital cost for making investments but at the same time it gives rise to additional borrowing that increases the debt levels.

Negative interest rates can be explained in terms of Keynes theory of interest rate and theory of speculative demand for money. According to Keynes the equilibrium interest rate is the rate that equates money supply and money demand. Keynes began by asking “why an individual would hold any money above the needed for transaction and precautionary motives when bonds pay interest and money does not.” Keynes believed that such an additional demand for money exists because of uncertainty about future interest rates and the relationship between changes in the interest rate and the price of bonds. As there is an inverse relation between bond price and interest rate, Keynes speculative demand for money is the money held in anticipation of a fall in bond prices and a rise in interest rates (Froyen, 2005).

Here we observe a phenomenon of liquidity trap. It is the situation at a very low interest rate where the speculative demand for money schedule becomes nearly horizontal as shown in figure.

One implication of negative interest rates could be the liquidity trap which can lead to deep recession with deflation. It can be explained with the help of an example. In the 1990s, the interest rate in Japan was the lowest in the world and in 1998 the interest rate on Japanese six month treasury bills turned slightly negative. In such a situation Japan experienced prolonged recession accompanied by deflation which is the negative inflation rate (Mishkin, 2007). Usually it is believed that the low interest rates are a good thing because they make borrowing cheaper. But the case of Japan shows that low and negative interest rates were a sign that Japanese economy was in real trouble with falling prices and contracting economy.

Secondly, it is not attractive for the lenders to lend below 0%, as that will guarantee a loss, and a bank offering a negative deposit rate will find few takers, as savers will instead hold cash.

Countries like Denmark and Sweden introduced negative interest rates in recent years on temporary basis. In Denmark the purpose of adopting negative interest rate was to limit an unwanted rise in its currency. For this they moved to negative deposit rates. It did not cause any financial meltdown nor did it cause any noticeable change in the interest rate charged by banks for bank loans. Recently, European Central Bank has adopted the negative interest rates of -0.1% on Eurozone banks to encourage them to lend to small firms rather than to hoard cash. It is meant to boost the economy by increasing the lending to consumers and businesses.

Consequences of adopting Negative Interest Rates

  1. This development can have unpredictable consequences. Those consequences may include the possibility that banks will pass on to customers the costs for depositing money with the ECB.
  2. Also the negative return on keeping funds with the central bank might encourage banks to invest in riskier assets to secure a return.
  3. As an alternative investment, banks may increase their purchases of government bonds and it would have potentially serious consequences if banks are holding bonds to such an extent that government borrowing costs are artificially low. If a financial shock occurs, the banks and governments could find themselves so intertwined and interdependent that they drag each other and the economy down.

References

Belke, A., Bordon, I. G., & Hendricks, T. W. (2010) ‘Global Liquidity and Commodity Prices–a Co-integrated VAR Approach for OECD Countries’. Applied Financial Economics, 20(3), 227-242.

Collignon, S. (2012) ‘Fiscal policy Rules and the Sustainability of Public Debt in Europe’. International Economic Review, 53(2), 539-567.

Froyen, R.T. (2005) Macroeconomics: Theories and Policies (8th ed.). Prentice Hall: Upper Saddle River.

International Monetary Fund Staff (2011) ‘Global Financial Stability Report: Durable Financial Stability: Getting There from Here’. International Monetary Fund.

Mishkin, F. S. (2007) The Economics of Money, Banking, and Financial Market. (sixth ed.). Pearson Education.

White, W.R. (2012) ‘Ultra Easy Monetary Policy and the Law of Unintended Consequences; Federal Reserve Bank of Dallas’. Globalization and Monetary Policy Institute.

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Economics Dissertation Topics

Economics Dissertation Topics

Writing an economics dissertation can prove to be a tough task and quality economics dissertation topics are hard to come by. The dissertation in hand allows you to investigate your ability for, and interest in doing economic research. Economics is not the easiest of subjects but it is one of the most interesting. Economics touches nearly every aspect of business and economic theory has been taught for centuries. Economics is seen as the analysis of production, consumption, distribution of wealth and allocation of limited resources to satisfy the needs of people and business. Nowadays, economics extends across national boundaries in the form of international business and global fiscal policy; this is noticeable with the formation of the European Union and flow of international finance.

Your economics dissertation is likely to be the biggest project you undertake at university or college. It can consist of anything between 10,000 to 15,000 words for a typical undergraduate dissertation and will involve in-depth research, time and dedication, you must organize your own time effectively in order to make it a success and set realistic goals. Here we have given a few thoughts and some advice on planning, researching and writing your dissertation. You will see a list of economics dissertation topics further on in this post.

Economics Dissertation Topics
Economics Dissertation Topics

Before you begin your economics dissertation, you must decide on an appropriate economics dissertation topic and title. Your dissertation should focus on a specific issue try to avoid generalizing as you may write a fragmented and disjointed piece of research. The topic should be interesting, something that can uphold in-depth research.

Choosing an economics dissertation topic and getting started

  • What is your topic question?
  • Do you have adequate background research?
  • Stay focused on it

In previous posts, I always stress to keep the research up to date and to engage the reader. There is no real benefit in writing an economics dissertation on outdated theory or defunct policy.

Choose a topic from an area you are familiar and comfortable writing about. Remember that this is a large project that will keep you engaged for most of your final year. It is advisable to revisit topics you have already covered on your degree as this may lead you to elaborate and base your dissertation on a project you have already completed. Writing your economics dissertation will be the ideal opportunity for you to use your intellect, skills, creativity, and economics training.

Economics Dissertation Advice

  • For empirical papers: Where will you get your data? How will it help answer your question?
  • What statistical techniques will you be able to use? Will you be able to identify causation or only correlation?
  • Theory papers typically are not just informal discussions. They tend to involve more mathematics than empirical ones, not less.
  • If you are having trouble understanding a topic, a good place to start is to look in several relevant textbooks to see how they handle it.

Economics is a specialized and scientific subject that involves equations, mathematics, figures and tables, economic theory is often underpinned by statistics and you need to be mindful of this. The field of economics differs vastly from other business subjects such as marketing, strategy and information management. These subject areas tend not to rely heavily on statistics or equations to strengthen findings and recommendations.

Below is a list of economics dissertation topics that will help you

Economics Dissertation – Economic Deflation Concerns in the United Kingdom

Economics Dissertation – Macroeconomic Factors Affecting Exchange Rates

Economics Dissertation – Relationship Between Stock Price And Market Efficiencies

Economics Dissertation – Determinants Of Bank Performance In China

Economics Dissertation – Importance of Economic Integration for Developed Economies

I hope you have benefited from reading this post. Feel free to add comments or suggests that I may have left out. These will be considered and added to this post.

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Multi-Asset Portfolio Dissertation

How The Role Of Property In A Multi-Asset Portfolio Has Been Affected By The Credit Crunch

View This Dissertation Here

The existing literature argues property’s role in a multi-asset portfolio to be a means of risk reduction opposed to a method of returns. However, with the recent credit crunch having an adverse effect on the property market, this study will look into the affect it has had upon property’s role. To reach this finding, a combination of primary and secondary data will be used. The secondary data was obtained through a literature review and the primary data from interviews and a questionnaire. The findings were that the credit crunch has left the UK property in a position where it can offer investors opportunity to make capital gains and a secure income through rents. This has led to property’s role now being mainly focused on returns but still included as a means of risk reduction.

Multi-Asset Portfolio Dissertation
Multi-Asset Portfolio Dissertation

In a multi-asset portfolio an investor will likely include property to diversify and better their overall returns. However, with property values falling, it is likely investors were wishing to pull out of this asset class, cut their losses and venture elsewhere due to their risk adverse attitudes. A negative correlation when comparing property with stocks and bonds makes the later pair appears the way forward. Reason being; they should theoretically be outperforming the current property market rectifying diversification in a multi-asset portfolio. If investors make this decision and reduce the amount of real estate, levels of diversification will decrease, increasing specific risk. The chance of disposing their property is extremely slim however because of property’s liquidity being further extenuated by a market downturn. Property is evidently not offering the attributes investors’ want, yet they are unable to dispose of this unwanted asset. This puts investors in a very difficult situation of being left with a depreciating asset in their multi-asset portfolio. A possible solution to this would be identifying potential emerging markets, such as Latin America and India, which may offer the desired benefits currently unattainable in the UK. So with property still existing among UK fund managers’ portfolios the role it now offers must be determined. This dissertation will be based on three key assumptions namely:

  • Investors’ main reason for including property in a multi-asset portfolio is to reduce risk
  • Due to the poor performance of property in recent years, investors are reducing the property exposure in a portfolio and replacing it with more traditional methods such as bonds
  • Even with the recession being a global problem, certain investors feel there are still benefits from international property investment

The opening chapter of this dissertation has been produced to give readers an understanding of the overall study and what the upcoming chapters will be exploring. Chapter two will be a literature review analysing applicable company publications and academic literature, relating to the use of property within a multi-asset portfolio. It will clarify why various investors wish to include property, its characteristics, alternative assets to invest in and overseas investment. Each of these points will be tackled in their own independent section. The following chapter (three) will exhibit clearly the use of methodologies used throughout the dissertation to find out how the actions of investors has changed towards property during the credit crunch. Within the chapter it will also justify why these research methods were best suited for this field of research. The fourth chapter will bring together the results from the literature review, interviews and online questionnaire, clearly explaining what has been identified.

The final chapter of the dissertation shall be the conclusion. It will summarise the key findings answering the aims and objectives outlined at the start of the paper, identifying how the role of property within a multi-asset portfolio has been affected by the credit crunch. It will also make clear the limitations of the study and recommendations for similar studies in the future.

This research will help support many other studies that have been carried out over the years in regard to property’s role within a multi-asset portfolios. This paper will differ to previous studies, carried out by the like of Bryne and Lee, as it is primarily focusing on an economic downturn opposed to data over long periods with varying market conditions. There is a distinct lack of existing literature on this matter. By shedding light on this aspect, it will give an investor’s insight on how property is best used in a multi-asset portfolio during a struggling market.

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