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Abstract:
There is ample evidence supporting the relationships between country risk and historical economic data. This study re-appraises these relationships, by analysing risk scores rather than risk outcomes. The work is successful in providing a basic analytical historical economic performance indicator model of overall country risk scoring. Logically, external debt and trade performance are the important explanatory variables. In the process, it is illustrated that existing scoring systems may largely reflect economic rather than non-economic related risk. That is, there may be less room for subjectivity in assessment. Political risk and risk assessment based on opinion may not be, predominantly mirrored in existing scoring systems, even though these systems say there is a significant component of subjectivity. In the unravelling process, this paper raises several other issues, which are currently the subject of further research.

country risk, risk ratings systems, risk scores, external debt, trade performance

Abstract:
This study re-appraises the relationship between international banking risk and primary bank balance sheet and accounts performance indicator data in liquidity, profitability and capitalisation. The investigation arrives at a basic analytical approach to international banking risk scoring. The model does not take non-financial related risk (subjective assessment) into consideration. Therefore its use is limited to overall financial related risk scoring. A performance indicator model of overall international banking risk is established. In this model, liquidity, as measured by a bank's prime asset ratio, is identified as an important short-term risk determinant. Bank capitalisation, as measured by bank net worth divided by total bank assets, is an important determinant of both long-term and overall international banking risk. This lends support to conventional accounting and finance (ratio analysis) theory except that profitability (return on net worth) is not a significant risk determinant.

International Banking Risk, Liquidity, Profitability, Capitaliization, Risk Scores, Risk Ratings

Abstract:
Banks in Australia, as agents of the Central Bank, are key players in the implementation of exchange rate and monetary policies. The purpose of this study is to examine dynamic interactions among, and the long-term equilibrium relationships between, bank stock returns and the key macroeconomic and monetary policy variables in interest rates and exchange rates. The concern is whether or not current economic indicators, as reflected in interest rates and exchange rates, can explain banking stock market returns or vice versa. The statistical models used include regression models, cointegration tests and Granger causality tests from vector autoregressive models. The study finds no evidence that Australia's bank stock market returns form a cointegrating relationship with short- and long-term interest rates and exchange rates over the period of study and thus conclusions may not be drawn relating to long-term rational expectations in the Australian banking market. Evidence is presented that causality runs from bank stock returns to interest rates and exchange rates. This indicates that Australian monetary authorities, over the past decade, appear to have placed strong reliance on the health and performance of the banking and financial sector as they formulate monetary and exchange rate policy settings.

Banking, stock market returns, interest rates, exchange rates, cointegration

Abstract:
Australia is a major exporter of mining and agricultural commodities. These commodities are often invoiced in USD. The purpose of this study is to examine the strength of the relationship between the nominal Australian/United States exchange rate and indexed commodity prices using monthly data between 1986 and 2001. The next issue is whether or not these time series are cointegrated and whether or not uni-directional and/or two-way causality exists. An ordinary least squares regression model on unlagged data was expected to have low and spurious explanatory power, however this picture improves significantly when first difference data are used. It is found that cointegration does not exist in the level data set. However, it is found that the variables exhibit dual causality and negative correlation, with the significantly stronger causality running from commodity prices to AUD/USD exchange rate. This implies exogeneity in commodity prices. That knowledge should assist Australian commodity exporters in making firm-value decisions regarding the hedging of their foreign exchange and commodity price exposures. Because the level data do not exhibit cointegration, it cannot be concluded that long-term and systematic rational properties exist in the Australian exchange and commodity markets. However, when ordinary least squares regressions are applied to the first difference data, greater explanatory power of exchange rates and significant negative correlation is exhibited. Australian foreign exchange market-participants may use commodity price information to adjust their exchange rate expectations in the short-term in a sensible way.

Abstract:
The rhetoric of the Organisation of Petroleum Exporting Countries (OPEC) member spokespersons at their meetings and through the press seems directed towards some form of economic rationalisation of production behaviour of member countries. Though the body of evidence from macroeconomists, in investigating OPEC market structure, is inconclusive in differentiating between cartel and competitive behaviour, their evidence does support strong "cooperation" among OPEC members. This paper investigates OPEC market efficiency rather than market structure. The efficient markets hypothesis at the weak-form level is tested. Regression analysis of level series weekly prices is also undertaken. The study demonstrates that conditions of weak-form efficiency, specifically in rational expectations and price error orthogonality, are violated in OPEC, World (All Countries) and US oil market prices. In addition, using regression and causality analysis it is evident that the driving forces of oil prices emanate from the OPEC market. This suggests that OPEC may manipulate oil supply (and therefore prices) through pre-agreed production levels.

Cartel competetitive behaviour, market efficiency, OPEC, Oil prices

Abstract:
In their present early stages of development, GCC component stock markets are characterised by outstanding returns performance. However, issues relating to foreign investment openness, industry governance and transparency have contributed to thin trading and lack of liquidity particularly in the smaller GCC markets. Change is occurring gradually. However, while oil revenues flow strongly and while there remains a huge pool of petro-dollar assets for repatriation and new funds in strong oil revenues, there seems no immediate pressure for the authorities to implement faster market reform. This study provides evidence that the component stock markets of the GCC are not efficient, even at the weak-form level under the efficient markets hypothesis. In addition, the component markets exhibit substantial interdependence. In light of the degree of interdependence arguments may be presented for amalgamation of the stock exchanges to encourage greater liquidity and efficiency.

GCC, stock markets, investment, market efficiency, liquidity, interdependence

Abstract:
The Gulf Cooperating Countries (GCC), which include Saudi Arabia and Kuwait, dominate other OPEC cartel countries in oil production. The GCC banking industry is the major component of the GCC stock market. The issue arises as to the strength of the relationship between OPEC oil price returns and GCC banking returns. The OPEC oil market and the GCC stock markets cannot be described as efficient. First order serial correlation exists in level series OPEC prices and in the GCC bank returns index values and in the returns of OPEC oil prices and banking index values. Regression models of unlagged price returns and index returns possess marginal explanatory power with a small positive relationship. A vector autoregressive model on lagged data also indicates this. However, the variables are cointegrated on an optimal one period lag. A vector error correction model indicates a stronger relationship between the variables than originally indicated. It appears that positive one-way causality runs significantly from GCC banking returns to OPEC oil price returns. These relationships are supported by impulse response analysis and variance decomposition. Despite lack of market efficiency, the question needs to be asked as to whether or not increased GCC banking returns partially influence the decisions by the OPEC cartel to restrict production and increase prices. The study should be of interest to regional bankers and economists. The findings reconfirm the interdependence and the importance of the banking industry and the oil industry in the GCC economies. The GCC needs to open stock markets to foreign investment and diversify away from oil dependence.

Oil prices, Banking Stocks, OPEC, GCC, causality, impulse response

Abstract:
Whilst most agree that banks need regulation this paper questions the complexity of current regulatory capital guidelines and suggests that banks may be overegulated. A new approach to regulation is put forward after and analysis of important literature in this area. The idea of calulating a benchmark for a banking system before analysing banks within systems is put forward.

Country risk, international banking risk, systematic risk, unsystematic risk, regulatory capital, economic capital, benchmarking

Abstract:
There is no suggestion in the title of this paper that the Bank for International Settlements or any other international body starts formally regulating entire country-banking systems. However, the idea behind this paper is that by benchmarking economic and regulatory capital for international banking systems, regulators will be able to arrive at more realistic levels of capital adequacy for banks within these systems. The rationale behind the idea is that economic risk of countries is closely related to financial risk of their banking systems. This paper presents an alternative approach to dealing with these issues and constructs a model for analysing the performance of different country-banking systems. The paper proposes the use solely of stock market-generated data for the implementation of the model.

Country-banking system, systemic risk, Systematic Risk, interdependence, Regulatory Capital, Economic Capital, performance indicator

Abstract:
The Asian crisis originated in Thailand and systematically spread to the Philippines, Indonesia, Malaysia and South Korea from mid 1997 to 2000. Some of the countries concerned, such and Malaysia and Thailand, have somewhat recovered but others such as South Korea and Indonesia continue to experience major economic problems which are largely related to weaknesses in their banking systems.

This paper demonstrates that risk ratings of banks in the Asian region may be partly estimated by analysing short-term external debt data with a bank size factor included.

It is conjectured that the economic health of these countries will be returned if reforms are taken to ensure the long-term health of banking systems in the countries concerned.

International Banking Risk, risk scores, external debt, bank size

Abstract:
Using a simultaneous equation model initially developed by Shrieves and Dahl (1992) this paper shows that Japanese banks have focused on factors other than those that impact on bank safety levels. This has left Japanese banks in a vulnerable position with respect to levels of non-performing loans and indicates that less attention has been paid to prudent credit risk assessment and management practices. Recent empirical work suggests that Japanese banks are in crisis in terms of their dangerous large burden of non-performing loans. The broad objective of this study is to demonstrate that the attention of any healthy and safe banking system needs to be focused on operating and balance sheet fundamentals. Focus needs to be on maximization of earnings, determination of the appropriate level of financial risk, careful management of expenses and the optimisation of bank size in a deregulated, competitive environment where prudent lending criteria are applied without compromise.

Japanese Banks, European Banks, Bank Safety Levels, Risk-rating, Balance and Operating Performance

Abstract:
Japanenese banks over the past decade appear to have been more concerned with market penetration than with earnings and shareholder wealth maximisation.

This paper reports the results of an analysis of bank safety levels using a cross sectional sample of Japanese and European Banks compared in light of the unacceptably high reported levels of non-performing loans in the Japanese banking sector.

The results confirm that more attention should have been applied to balance sheet fundamentals in Japanese banking. It is conjectured that bank safety levels would have been higher and that the more prudent use of credit risk assessment and management would have avoided balance sheet problems.

Japanese banks, European banks, bank safety levels, risk, balance sheet performance

Abstract:
Historically, the stock and securities markets in the Gulf Cooperating Countries (GCC) have been limited in their capacity to raise international capital. Apart from the fact that many are simply not open to outside investment, they have been regarded as thinly traded, less liquid and less efficient than Western stock markets. Meaningful and comparable stock market data has only been gathered for less than four years. The GCC countries are striving to strengthen and expand their financial markets in relation to their listing, regulatory, trading and settlement procedures, as well as to improve transparency and informational efficiency. The GCC economies have much in common including their growing levels of economic development and trade integration, and also their collective contribution to world oil production. Bahrain has long been regarded as the most open of the GCC economies, but the question arises as to whether or not Bahrain drives the other GCC markets. This study focuses on both short and medium-term relationships using ordinary least squares regressions, vector auto regressive techniques, cointegration tests, pairwise causality, variance decomposition and impulse response analysis of daily indexed share market data to provide evidence of continuing cointegration and interdependence in stock markets in the GCC. Saudi Arabia and Kuwait markets are the major drivers of the other GCC markets.

Stock markets, market efficiency, GCC cointegration, causality

Abstract:
The United Arab Emirates (UAE) is a member of the Gulf Cooperating Countries (GCC) and over recent years has indicated willingness for implementation of the economic reforms necessary for the future evolution of a modern, open stock market. This study uses relative valuation techniques to estimate an intrinsic value for each of the banking, insurance and other services sectors in the UAE. Price to earnings and price to book value ratios for each sector are compared. The methods of comparison show that all sectors are substantially overpriced. It is likely that such overpricing of the services sectors is due to a combination of low expected growth rates of dividends and lack of market efficiency. The thinness of trading and high abnormal returns are probably related. There are numerous problems with relative valuation methods, but even in developing markets such as the UAE, they can represent one more information set for the use of investors (including foreign investors in due course) seeking focus on share value within particular services sectors in the context of portfolio diversification and risk and return relationships.

Stock market, Services sector, UAE, price to earnings, price to book value

Abstract:
The inconclusive nature of the over-reaction hypothesis, combined with an inherent difficulty in isolating specific determinants, has meant that the controversy surrounding this model has been perpetuated within the financial economics literature. It is the objective of this study to examine whether over-reaction is present in the Australian stock market over the period 1980-1997. The results from this study raise new questions about the relevance of the over-reaction hypothesis to the Australian market. The over-reaction hypothesis suggests that if investors over-react then a contrarian strategy of buying losers and selling winners, should earn significant abnormal returns. The results in our study show that winners experience a reversal and losers continue to be losers. Further, this study extends the current literature by examining reversal behaviour at an aggregate industry level and disaggregated sector level. Evidence is found of sector reversal that is time varying. No evidence is found to support persistent over-reaction.

Over-reaction hypothesis, Contrarian, Reversal Behaviour, Risk Premia

Abstract:
Whilst some regional energy markets appear to be integrating, the pricing of natural gas exports in an imperfect global market remains a difficult task. This paper expands a global party to party gas price bargaining model to capture optimally lagged daily price changes of the major competing fuels and daily changes of a global economic indicator in the world stock market price index. Vector autoregressive based tests provide evidence of cointegration. Exogeneity tests show that changes in the daily gas price are primarily driven by changes in the daily oil price. Within this framework it is found that changes in the latter variable are driven significantly by daily changes in global stock price index and coal price index values. This may assist gas producers in both forecasting prices and in their pricing negotiations.

Gas pricing, stock prices, oil prices, economic expectations, benchmark, HH

Abstract:
The over-reaction hypothesis suggests that if investors over-react then a contrarian strategy of buying losers and selling winners, should earn significant abnormal returns. In an Australian study from 1980 to 1997 it is found that there is an inverse relationship between size and observed returns in the Australian market and that change in risk between the formation and test period is insignificant in terms of the over-reaction paradigm. Finally, it is shown that winner portfolios earn considerable returns in January whilst losers earn the bulk of their returns in the non-January months.

Overreaction hypothesis, January Effect, Reversal Behaviour, Risk Premia

Abstract:
Gulf Cooperating Countries (GCC) are in the process of strengthening and expanding financial markets in relation to listing, regulatory, trading and settlement procedures. Along with the opening up of markets to international investment, innovations that should enhance overseas investor interest include the development of meaningful GCC share returns and banking share returns indices. It is clear from almost four years of daily data, that unlagged GCC banking returns and GCC stock market returns are significantly and positively related. Over the longer term, they are also significantly cointegrated. The GCC banking industry is a major component of the GCC share market. Causality tests demonstrate that dual causality exists but stronger causality runs positively from GCC banking returns to GCC stock market returns. GCC banking stock returns are exogenous. The evidence supports the notion that, because of such interdependence it is vital for the economic health of the GCC, that their banking systems remain financially sound. However in order to relieve the mounting pressure on bank debt as oil revenues and repatriated funds dwindle, it is important that the stock markets be opened in due course to outside or non Arab international equity investment.

GCC, banking, stock market returns, cointegration, causality

Abstract:
Telecommunications industrial models are discussed in this paper as a background for the analysis of the stock market efficiency and performance of telecommunications industry in the Gulf Cooperating Countries (GCC). The issue is whether industrial efficiency drives market efficiency or vice versa. Though GCC telecommunications companies are publicly listed, ownership is largely by government, the markets are not fully open to foreign investment and the shares are thinly traded. Serial correlation, cointegration and causality analysis of market data demonstrate a lack of weak and semi-strong form efficiency. It is posited that efficient industrial models involving competitive privatisation and appropriate regulation can only be introduced if the market in telecommunications shares is made more efficient through appropriate macro and micro economic reforms that transcend traditional, cultural and religious factors.

Telecomunications, industry efficiency, market efficiency, serial correlation, causality, cointegration

Abstract:
In Eurobanking, the London Interbank Offered Rate is often assumed to be the reference rate for Eurocurrency loan transactions. A debate continues as to whether or not dominance by London is evident through the movements in interbank offered rates and whether any adverse shocks experienced there are felt through the other major Eurobanking centres of New York and Tokyo. This study finds that in the longer-term New York is the driver of both the London and the Tokyo interbank lending rates. The more important issue is that the interbank offered rates in London, New York and Tokyo show a long-term cointegrating relationship. Whilst Western banking is incestuous in terms of interbank lines of credit, support is nevertheless provided for rational expectations and market efficiency. However, cointegration also constitutes interdependence and in turn shows evidence of systemic risk (the threat of contagion) in these centres is provided. The implications for future research into global financial stability are alluded to in the conclusion.

Eurobanking, interbank offered rates, contagion, financial stability, systemic risk

Abstract:
The GCC markets are the most advanced in economic reforms in the Middle East and have proceeded solidly towards regional integration during the early 2000s. Some of the GCC markets (for example, Bahrain and the UAE) had made solid progress in their expansion, reforms and openness. Over the period there is evidence of cointegration of the UAE market with the other GCC markets in prices. Causality analysis shows the UAE was the major influence over prices in the Saudi Arabian, Kuwait and Qatar markets. The UAE already presents a strong case to be the regional financial centre if development continues strongly.

Informational Efficiency, Cointegration, Causality, Variance Decomposition

Abstract:
In the centre of Ulan Bator, the capitol of Mongolia, stands a statue of Lenin. A silent reminder of past ideology, when dependence of the country was concentrated towards Russia. Approximately six years on in the economic transitional process, the path remains difficult to negotiate. Mongolia lies landlocked between two large nations who, perhaps luckily, are also in transition. The focus today seems more on China, as a potential wealth creating market for Mongolian agricultural products and minerals. It is not just a matter of the trains running on time for the country to develop economically. Certainly infrastructure is vital, so is overseas investment, so is economic reform, but, so is education and the inculcation of the new capitalistic ideology into the hearts and minds of the people. This may well begin, according to Thayer (1997), with the persuasion of the country's nomadic herdsmen, who comprise over half the population of over 2.2 millions, that they need money, and that business and trade is not done most efficiently, by barter.

A starting point in the re-education and reform process has been privatisation. This paper tracks some of the major legislation, reforms, moods and events in this area. The paper commences by providing a background of some of the major developments from 1990 to 1993. It then examines developments to 1996 leaving the remaining sections as a report on the present status and future directions.

Abstract:
Global natural gas markets are neither fully developed nor informationally efficient. Factors other than randomly arriving good and bad news, regarding economic, financial and political risks, affect prices. Despite this constraint, the model in this study is tested for feasibility as a starting point for analysis. It compares time varying risk adjusted gas returns from a benchmark price adjusted by the risk free rate in the exporter country, to country risk ratings in individual markets. The motivation is that gas producers need to determine the contribution of country risks for appropriate export pricing in terms of the risk/return tradeoff.

Natural gas, prices, returns, benchmark, export pricing

Abstract:
Production allocations are analysed in conjunction with an investigation of unlagged and optimally lagged relationships between key daily crude oil price series interacting with OPEC prices. It is found that structural breaks in the interacting series coincide with production allocations meetings which induce oil price increases. This implies cartel behaviour through collusive supply restriction. With crude oil prices at record highs, high inflation in developing countries and the onset of increased systemic risk in global financial markets, the major global players should well remember the impact of OPEC oil supply interference and cartel behaviour of the late 1980s early 1990s on global financial stability.

production allocations, crude oil price series, OPEC, Non-OPEC, US, structural breaks, cointegration, causality, cartel behaviour

Abstract:
This paper provides an analysis of oil pricing and supply through an examination of production allocations in conjunction with an investigation of unlagged and optimally lagged relationships between key daily crude oil price series interacting with OPEC prices. With crude oil prices at record highs, high inflation in developing countries and the onset of increased systemic risk in global financial markets, the major global players should well remember the impact of OPEC oil supply interference and cartel behaviour of the late 1980s early 1990s on global financial stability.

crude oilprices, OPEC, cartel,

Abstract:
Japan is a significant driver of the majority of the Asian region banking markets even though the Japanese banking industry has reported high levels of non-performing loans and will require substantial recapitalisation over the next decade. Regression analysis of unlagged time series price index first differences data and vector autoregressive techniques applied to lagged data illustrate that there are significant positive relationships and long-term cointegrating relationships between Asian region banking systems and the Japanese banking system. In terms of short-run dynamics, causality runs from Japanese banking systems to many of the Asian region markets including Australasia and South Korea. These relationships are confirmed when variance decomposition analysis is undertaken using a single model of lagged data which takes into account the interaction of all markets with each other. There is only a small degree of systemic risk resulting from interdependence over the period of the study. In light of the 1997/98 Asian currency crisis a continued focus on regulation, diversification of bank borrowing and lending and improved lending practices is necessary to avoid the future risk of contagion.

Contagion, integration, interdependence, banking systems, variance decomposition

Abstract:
This paper posits that human behaviour in banking and financial systems is made up of a complex mix of political, social and cultural factors reflected in expert opinion based political risk scores. Market inefficiency is partly a result of anomalies in human behaviour causing information asymmetries, where prices do not instantaneously reflect all available public and private information. The feasibility of re-specification of a basic systemic international banking market model is proposed, using the examples of developed and developing banking systems, on the basis that political risk factors and world banking returns are exogenous in country-banking system returns models. If political risk scores are exogenous in such models, the ratings will provide new information, which will be incorporated into and assist in explaining banking system stock returns for investors and banking regulators. For example, the model would help explain whether political risk ratings lead or lag financial crises.

Political risk, international banking market model, exogeneity, and risks scores

Abstract:
According to recent literature, country and regional banking systems are becoming more concentrated, particularly in developed economies. Banks are growing larger through takeovers and mergers. The drivers of greater bank size appear to be the needs to achieve economies of scale and scope, improvement of financial services synergies and economies of integration. The process continues in an environment where the World Trade Organisation (WTO), central banking authorities and governments are acknowledging the economic and political desirability of liberalising financial services. This paper takes the position that there may also be significant financial and economic costs attached to global banking financial integration. Regression, correlation, cointegration and causality analysis of unlagged and lagged daily bank price and price index first differences data indicates that developed countries and regional banking systems have achieved a high level of global integration. Integration implies interdependence, which in turn implies the existence of systemic risk. International banks can avoid the threat and the costs of systemic risk by adopting or re-focusing on a culture of portfolio diversification of investments and borrowings. Greater involvement by a global banking regulatory authority may be necessary in ensuing years to monitor undiversified systemic interdependence.

Integration, interdependence, price index data, banking systems, bank regulation

Abstract:
This paper provides an historical account of the major developments in economic reform in Mongolia over the period from 1991 to 1998. It discusses the need for reform at the grass roots level in the banking and finance industry while examining key tabulated economics and trade, foreign investment and privatisation data and endeavours to draw conclusions from the trends in that data. In the conclusion, the paper discusses progress towards overall economic reform and reform in the areas of investment, trade and enterprise and more specifically in the banking sector. It is suggested that one of the essential components that will lead to economic stability and growth is much needed microeconomic reform of a banking and financial sector where well over 50% of loans are non-performing. Suggestions are also made as to the directions of future policy and actions to assist in the overall transitional process. The focus should be directed towards the banking and finance industry and include education and training in time proven workable models and practices. The following observations are based on the writer's experience and data collection as part of a four year United Nations Development Program involving training in business education in Ulan Bataar.

Abstract:
The "9/11" terrorist attacks in the USA saw a tragic loss of lives and property. This paper provides evidence that there were also substantial effects on the USA banking system and spillover effects to other country banking systems. Regression and vector autoregressive analysis of political risk modified international banking market models is undertaken using country banking stock price index returns and pure political risk ratings data. Samples of developed and developing country banking systems interacting with the USA and the world banking systems are investigated. Structural breaks in the data, due to the terrorist attacks, are found. Over the full period of the study, the USA banking variable, in combination with the world banking variable, is shown to be exogenous in all of the sampled country banking systems when country political risk probabilities of default combined with country banking returns are taken into account. The interaction of these variables is found greater in magnitude after the terrorist attacks than before. There are implications in these findings for investors in international banking stocks deciding on portfolio diversification and for banking regulators deciding on appropriate levels of economic capital for banks within country banking systems. In essence, the paper suggests that political risk factors and extreme political acts need to be taken into account in analysis of bank stock returns.

terrorist, 9/11, political risk, banking returns, world banking, USA banking, country banking

Abstract:
ABSTRACT


This paper examines oil stock market and oil company stock price data in 30 and 60 day windows either side of OPEC production allocation meetings. The study continues on to investigate cointegration and exogeneity over the full period in the sample. The results justify asking the question as to whether or not oil companies anticipate and use information on the outcomes of these meetings. Do they encourage cartel behaviour? The study concludes that the pricing of crude oil has more to do with the behaviour of oil market protagonists than freely interacting supply and demand forces. This continues to have implications for the health of the global economy and financial system.

stock price, stock market, OPEC, production allocations, cointegration, causality, cartel behaviour, structural break

Abstract:
This paper uses regression and multivariate analysis to examine oil stock market and large oil company stock price data in 30 and 60 day windows either side of OPEC production allocation meetings. The study continues on to investigate cointegration and exogeneity over the full period in the sample. The results justify asking the question as to whether or not oil companies can anticipate the outcomes of production allocation meetings in the OPEC cartel. Do these companies have a surrogate cartel in OPEC? It is put that the pricing of crude oil has more to do with the behaviour of oil market protagonists than supply and demand forces and this has grave implications for the health of the global economy and financial system.

OPEC, anticipation, crude oil returns, regression, production allocation

Abstract:
This paper is motivated by the need to return to a basic political risk indicator and risk valuation model in light of the recent global turbulence in economies and financial markets. A lesson to be learned from the crises of 2008 is that an additional analytical tool utilising country and global stock market indexed data would be useful to provide a broad picture of composite political risk in each country on a daily running basis. It is argued that unsystematic risk is an indicator of country specific factors that relate to political, social, legal and cultural effects. When adjusted for degrees of systemic informational efficiency, this uncomplicated analytical tool could be used, as an adjunct to other indicators, by government and industry risk analysts endeavouring to pre-empt market and political risk problems.

Political risk, market model, risks scores, economic and financial risk

Abstract:
This study supports existing evidence of adverse domestic and international economic and financial spillover effects of extreme political acts. The relationship between the variables in the model is greater after the 9/11 event than before; the effects are greater in developed compared to developing banking systems; and the adverse effects had not dissipated in period of relative stability up to late 2004. In addition, USA political risk-adjusted banking returns together with world-banking system returns add new information in explaining country-banking system political risk-adjusted returns. This evidence should be heeded by risk managers and bank regulators in calculations of capital adequacy benchmarks to mitigate systemic flow-on effects.

9/11, political risk, banking returns, world-banking, USA-banking, country-banking

Abstract:
This paper examines how economic reforms in Mongolia have impacted on international trade for that country. It tracks trade development since the 1991 open market economy decision and provides an outlook for 1997. It captures most of the events, moods and important reform legislation that is trade development related. It looks at trade indicators in conjunction with key economic indicators to endeavour to provide conclusions as to logical future directions of policies. The article is influenced in part by the writer's views after involvement in a United Nations Development Project on business education in Mongolia over a four year period.

Abstract:
This paper tracks the major reforms that have affected foreign investment in Mongolia during its transitional process from 1990 to 1997/98. It attempts to describe the changing moods and attitudes of the country's reformers and legislators over this period. It identifies key economic data and attempts to evaluate this along with data that relate directly to foreign investment and aid. The conclusion indicates possible future directions.

Transition, capitalism, economic reform, foreign investment

Abstract:
The segmentation of European banking markets illustrates the strength and influence of both the United Kingdom and the European Monetary Union markets and describes in part the phases of European banking financial integration. Initially indications of market efficiency at the weak-form level for each segmented market in prices and price first differences are provided. Then unlagged banking price first differences for each segment are regressed against those for the United Kingdom and the European Monetary Union markets using weighted least squares regressions. Indications of systematic and unsystematic risks in each pairwise system are thereby provided. Vector autoregressive, cointegration, causality and impulse response techniques for optimally lagged price first differences provide evidence of cointegration between the segmented European, the United Kingdom and the European Monetary Union markets. It is also evident that exogeneity in each pairwise model lies largely with the European Monetary Union. This in itself represents a strong argument for continuing European financial integration. The United Kingdom is demonstrated to be a powerful banking market. The European Monetary Union banking market would benefit from United Kingdom membership.

Systematic and unsystematic risk, systemic risk, banking markets, integration, interdependence

Abstract:
The paper reconsiders the relationship between international banking risk and economic development. It is shown quite conclusively that the significant explanatory variables of international banking risk scores (when international banking risk is used as a proxy for country risk) are the income elasticity of demand for imports (when the latter is used as an indicator of economic growth and development), the phase of industrialization (based on country per capita income), and certain historical economic and financial variables (external debt levels and international bank size according to total assets). The investigation arrives at a new approach to risk scoring systems and models.

Abstract:
This paper examines the recent status of financial liberation and integration of Latin American banking and the ongoing interdependence of banking systems in Latin America with those in the Eurobanking systems. Correlation and regression analysis of unlagged price index data is firstly undertaken. The analysis then moves to cointegration, impulse response and variance decomposition analysis of lagged first differenced data to examine the short and long-term relationships. There is evidence of interdependence and cointegration between the Latin American banking systems and between the major Eurobanking systems interacting with the major Latin American systems (proxied by banking stock price indices). In the short-term Latin America exogeneity lies primarily with the Brazilian system followed by those with Mexico, Argentina and Chile with minimal contributions by the systems in Peru and Colombia. The evidence of the relationships between the Latin American banking systems and the Eurobanking systems shows that exogeneity lies primarily with the Eurobanking systems of the USA, Canada, the European Monetary Union, the United Kingdom and Japan and the strength of the exogeneity is in the above order. Diversification of cross bank shareholdings, and interbank lines of credit in Eurobanking systems along with continued vigilance in banking regulation primarily in Latin American banking systems is needed to keep the lingering threat of financial contagion at bay.

Contagion, integration, interdependence, Eurobanking systems, Latin American banking systems

Abstract:
This paper examines financial integration, interdependence and exogeneity within and between Latin American banking and Eurobanking systems during a period of relative stability after the oil and debt crises of the 1980s. Significant evidence of cointegration in both long- and short-term relationships is reported. Within Latin America, exogeneity lies mainly with the Brazilian system. Within Eurobanking, the U.S. system is the dominant influence. Between Eurobanking and Latin American banking systems, the U.S. system is the major driving force. With continued interdependence of these banking systems, systemic risk lingers, and vigilance is required in banking supervision.

Abstract:
The United Arab Emirates (UAE) is a member of the Gulf Cooperating Council (GCC) countries and has, over recent years, indicated willingness for implementation of the economic reforms necessary for the future evolution of a modern open stock market. This study uses relative valuation techniques to estimate an intrinsic value for each ¿ the banking, insurance and other services sectors in the UAE. Price to earnings and price to book value ratios for each sector are compared. The methods of comparison show that all sectors are substantially overpriced. It is likely that such overpricing of the services sectors is due to a combination of low expected growth rates of dividends and lack of market efficiency. The thinness of trading and high abnormal returns are probably related. There are numerous problems with relative valuation methods, but even in developing markets such as the UAE, they can represent one more information set for the use of investors (including foreign investors in due course) seeking focus on share value within particular services sectors in the context of portfolio diversification and risk and return relationships.

Abstract:
Several instances of the spreading of financial crises internationally have been observed since World War II. Within the past two decades we have observed the broadly categorised Latin American debt crisis, the Mexican debt crisis, the Asian currency crisis and the Russian banking crisis. The key questions are whether or not these crises have underlying economic or banking and financial causes, consequences and solutions and whether or not systemic crises and their debilitating effects may be prevented or pre-empted. In this largely descriptive paper the work of Sell (2001) is reviewed and commented on. In the conclusion it is agreed that contagion can sometimes be confused with international business cycles. However, the writer feels that rather than model contagion in less developed countries the onus is on the banking sectors in Western economies to pre-empt financial crises by adhering to prudent lending practices, sound credit risk assessment and credit risk management practices and proper country risk identification, conceptualisation and the use of portfolio diversification. If lending behaviour is not improved more rigid prudential supervision is required. Future research directions are also discussed. We move towards the development of market risk adjusted systemic earnings at risk models for individual banking sectors. The purpose to locate an optimal level of systemic economic capital, before further modification of the calculation of the regulatory capital of banks within a system.

currency, debt, banking, crises, lending practice, risk assessment, economic and regulatory capital

Abstract:
The purpose of this paper is to test an international banking risk scoring model by applying it to a sample of international banks in open Islamic economies and to compare the results to those from a sample of banks in Western economies. The underlying objectives are to discover the extent of the importance of country-bank size and bank-country external debt in determining risk scores and to detect differences in the importance of these variables between the two samples. A further objective is to put forward an argument for better practices and governance, greater market and institutional discipline and regulation in international banking at both macro and micro-economic levels. The results of the study indicate that bank-country short-term external debt and country-bank size according to total assets make significant contributions as determinants of international of banking risk scores in key Islamic economies that include Malaysia, Indonesia, and United Arab Emirates. Moreover, in the Western sample the above variables explain a greater part of the variance of international banking risk scores.

International banking risk, risk ratings, Asian crisis, and Asian banks

Abstract:
Over the last two decades, financial crises have tended to occur with increasing frequency. Many of these crises have affected developing countries, often with devastating effects on their growth and development. The recent crisis, which started in mid 1997 in East Asia, and then spread to several parts of the developing world as well as affecting also the developed economies, has illustrated the seriousness of these crises' effects, and the need to improve international mechanism for crisis perception, prevention and management. A brief conclusion based on the literature shows that while the Accord has been an extremely useful tool for the universal comparison of financial institutions, it has been shown to have certain shortcomings and further work on revising capital adequacy requirements will be necessary. This paper also presents an opposite view. Whilst most agree that banks need regulation, the paper questions the complexity of current regulatory capital guidelines and the focus on the possible over-regulation of banks. It suggests the consideration of a new approach of benchmarking economic and regulatory capital for banking systems as a starting point for analysis of capital adequacy of banks within systems, taking into account the interrelationship between country-banking systems' performance and on the basis that there is still the need for a compromise between restoration of banking industry incentive and systemic safety.

International Banking, Economic Capital, Regulatory Capital, Systemic Risk, Systematic Risk, Bank Regulation