The Singapore Economic Review

This paper investigates the effectiveness of macroprudential policies introduced by Turkey in late 2010. The unprecedented quantitative easing policies of advanced countries after the global financial crisis have presented serious financial stability concerns for most emerging countries including Turkey. To cope with these challenges, Turkey has devised new policy tools such as asymmetric interest rate corridor and reserve option mechanism. From the perspective of capital flows, the interest rate corridor works mainly through stabilizing supply of foreign funds, and the reserve option mechanism through decreasing the sensitivity of equilibrium exchange rate to shifts in the demand for foreign funds. Using a large panel of 46 countries and employing [Bruno and Shin (2013a). Capital flows, cross-border banking and Global liquidity. Working paper, Princeton university; Bruno and Shin (2013b). Assessing macroprudential policies: Case of Korea. Working paper, Princeton university] methodology, we investigate whether the new policy framework in Turkey has been successful in cushioning the economy from volatile cross-border capital flows from a comparative perspective. The results show that, after controlling for a set of domestic and external variables and relative to a group of advanced and emerging countries, cross-border capital flows to Turkey have been less sensitive to global factors after the implementation of macroprudential policies.

We analyze how the altruism of an International Financial Institution (IFI) towards its Low-Income member Countries (LICs) alters the effectiveness of its loans. We study IFI loans to a credit-constrained LIC. The IFI's repayment policy is determined by the interplay of its concerns for the welfare of the loan recipient and its fiduciary responsibilities to creditor countries. If the IFI is unable to commit to either the size of future loans or the repayment terms on past loans, conditional loans are superior to unconditional loans. Thus, IFI altruism and the inability to commit are sufficient reasons to equip loans with conditions. Conditional loans produce an efficient allocation of resources, so altruism is not a fundamental reason that loans fail to increase welfare.

We investigate how corporate governance influences R&D across 13 emerging markets. We find that superior corporate governance increases corporate R&D spending. These results suggest that corporate governance may influence management's discretion to avoid risky innovative projects. We also find that the link between firm-level governance and corporate R&D is stronger in countries with weaker country-level governance. These results suggest substitutability between firm and country governance in generating innovation activities.

Recent studies in the innovation literature show that Foreign Direct Investment (FDI) enhances innovations in recipient countries through spill-over effects. In this paper we extend the existing literature by incorporating the corruption index in the estimation procedure. Using a cross-country analysis from the Europe and Central Asia (ECA) region, covering 57 countries over the period of 1995–2010, we find no evidence of FDI spill-over effects on innovations, when corruption is endogenously modelled in the regression. Interestingly, we find that corruption and expenditure on education sector are positively related to the number of patents applications, suggesting anti-corruption programs encourage innovations that promote economic growth. Our study shed light on the national innovations and anti-corruption programs.

This paper applies a conditional jump model that was proposed by Chan and Maheu (2002) to examine the stock market dynamics of Mexico, Indonesia, South Korea, and Turkey (MIST). We find that the conditional jump intensity parameter estimates are statistically significant and change dramatically between two sample periods. We show that a high probability of jumps today predicts a high probability of jumps in the next period. The impact of a previous shock to the next period's jump intensity is found to be higher in Turkey compared to other MIST countries. Contrary to the previous literature, we discover that after a stock market crash, it is more likely to see a negative jump (drop) again in the stock exchanges of Mexico and Indonesia. Only in Turkey, it is more likely to see a positive jump after market crashes.

We employ an asset pricing framework with varying estimation lengths to show that there has been an increasing degree of integration between Asian and international stock markets, but very little with Japan. This finding is consistent with prior studies and highlights the impact of recent regulatory and economic reform undertaken throughout the region. Our results show that instability in the asset variance structure underpins the observed varying degrees of financial market integration. In particular, modeling integration using shorter estimation periods helps explain the time varying nature of financial market integration and the benefits that may accrue to international and domestic investors.

We look at market discipline in the Islamic deposit market of Turkey for the period after the 2000 crisis. We find support for quantity based disciplining of Islamic banks through the capital ratio. The evidence for price disciplining is, however, less convincing. In addition, we also look at the effect of the deposit insurance reform in which the dual deposit insurance was revised and all banks were put under the same deposit insurance company in December 2005. We observe that the reform increased quantity based disciplining in the Turkish Islamic deposit market.

This paper explores the dynamic relationships between renewable energy consumption and a number of institutional and political factors for a group of countries from Europe, Asia and Latin America spanning the period 1995–2011. The paper employs the methodology of long and short-run panel causality approach as well as the methodology of the panel Error Correction model. The empirical findings provide strong evidence that, after controlling the economic environment, both political and institutional factors exert a strong and statistically significant effect on renewable energy consumption. These findings are expected to have serious implications for policies related to clean energy.

This paper analyzes the impact of volatility in the world energy price on aggregate economic activity in an unbalanced panel data framework for 10 developing Asian countries: Bangladesh, PR China, India, Indonesia, Malaysia, Pakistan, the Philippines, Thailand, Turkey and Vietnam. We use both the realized volatility and the generalized autoregressive conditional heteroskedasticity models to measure the volatility in the world energy price. Empirical findings from dynamic panel data estimations show that the volatility in world energy price is negatively associated with the aggregate economic activity. Using the common correlated effects panel estimation techniques, we also systematically examine uncertain transmission channel of the world energy price volatility on the aggregate economic activity in each economy and obtain the most impressive negative effects in Turkey, PR China and India, respectively.