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Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
Professor Alejandro Diaz-Bautista,  2011 Global Financial Crisis
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Professor Alejandro Diaz-Bautista, 2011 Global Financial Crisis

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“Contagion Effects during the 2011 Global Financial Crisis. Emerging Economies vs. Advanced Economies".

“Contagion Effects during the 2011 Global Financial Crisis. Emerging Economies vs. Advanced Economies".

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  • Capitalism and Schitzophrenia – Gilles Deleuze and Felix Guattari
  • Manias, Panics, and Crashes, by Kindleberger and Aliber, p. 9
  • Transcript

    • 1. “ Contagion Effects during the 2011 Global Financial Crisis. Emerging Economies vs. Advanced Economies" Alejandro Díaz-Bautista, Ph.D. Professor of Economics and Researcher [email_address] http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691 Global Economic and Financial Series Presentation Transcript August 15, 2011
    • 2. Economic Crisis
      • A situation in which the economy of a country experiences a sudden downturn brought on by a financial crisis. An economy facing an economic crisis will most likely experience a falling GDP, a drying up of liquidity and rising/falling prices due to inflation/deflation. An economic crisis can take the form of a recession or a depression. Also called real economic crisis.
    • 3. Financial Contagion
      • Financial contagion refers to a scenario in which small shocks, which initially affect only a few financial institutions or a particular region of an economy, spread to the rest of financial sectors and other countries whose economies were previously healthy, in a manner similar to the transmission of a medical disease.
      • The definition of the term contagion remains highly controversial (see Forbes and Rigobon 2002). A relatively agnostic proposition derives from the asset pricing literature and defines contagion as co-movements of equity returns above and beyond what can be explained by fundamentals.
    • 4. Financial Contagion
      • Financial contagion happens at both the international level and the domestic level.
      • At the domestic level, usually the failure of a domestic bank or financial intermediary triggers transmission when it defaults on interbank liabilities and sells assets in a fire sale, thereby undermining confidence in similar banks.
      • An example of this phenomenon is the failure of Lehman Brothers and the subsequent turmoil in the United States financial markets.
      • International financial contagion, which happens in both advanced economies and developing economies, is the transmission of financial crisis across financial markets for direct or indirect economies. However, under today's financial system, with large volume of cash flow, such as hedge fund and cross-regional operation of large banks, financial contagion usually happens simultaneously both among domestic institutions and across countries. The cause of financial contagion usually is beyond the explanation of real economy.
    • 5. Financial Contagion
      • While there was a period of systemic crisis in emerging countries in the early 1980s, both academia and policy circles did not analyze the crisis from a systematic point of view.
      • Even when Latin American countries fell like dominoes with successive devaluations and depreciations, banking crises and deep recessions, much of the blame was placed on poor domestic policies and high real interest rates in the United States, with little attention focusing on the possibility that financial crises could be spreading and contagious.
    • 6. Financial Contagion
      • The term “contagion” was first introduced in July 1997, when the currency crisis in Thailand quickly spread throughout East Asia and then on to Russia and Brazil. Even developed markets in North America and Europe were affected, as the relative prices of financial instruments shifted and caused the collapse of Long-Term Capital Management (LTCM), a large U.S. hedge fund.
      • The financial crisis beginning from Thailand with the collapse of the Thai baht spread to Indonesia, the Philippines, Malaysia, South Korea and Hong Kong in less than 2 months. After that episode, economists realized the importance of financial contagion and produced a large volume of researches on it.
    • 7. Financial Contagion
      • A branch of research emphasizes contagious currency crises, relating such crises to various monetary and financial sector vulnerabilities and trade factors. These studies often look for the underlying causes behind a simultaneous set of speculative attacks. For instance, Goldfajn and Valdés (1997) find that the intermediaries' role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis, which resemble the observed cycle in capital flows: large inflows, crisis and abrupt outflows.
      • Kaminsky and Reinhart (2000) document the evidence that trade links in goods and services and exposure to a common creditor can explain earlier crises clusters, not only the debt crisis of the early 1980s and 1990s, but also the observed historical pattern of contagion.
    • 8. Financial Contagion
      • The second branch of literature explains contagion transmission as a result of linkages among financial institutions. Alen and Gale (2000) and Lagunoff and Schreft (2001) analyze financial contagion as a result of linkages among financial intermediaries. The former provide a general equilibrium model to explain a small liquidity preference shock in one region can spread by contagion throughout the economy and the possibility of contagion depends strongly on the completeness of the structure of interregional claims. The latter proposed a dynamic stochastic game-theoretic model of financial fragility, through which they explain interrelated portfolios and payment commitments forge financial linkages among agents and thus make two related types of financial crisis can occur in response. Van Rijckeghem and Weder (2000) present evidence that spillovers through bank lending contributed to the transmission of currency crises during the recent episodes of financial instability in emerging markets.
    • 9. Financial Contagion
      • In an era of rapid financial globalization, Gai and Kapadia (2010) prove that while high connectivity may increase the spread of financial contagion and adverse aggregate shocks and liquidity risk also amplify the likelihood and extent of financial contagion.
    • 10. Financial Contagion
      • A third branch of literature emphasizes financial contagion among financial markets. It tries to explain contagion through a correlated information or a correlated liquidity shock channel. Under the correlated information channel, price changes in one market are perceived as having implications for the values of assets in other markets, causing their prices to change as well, as in King and Wadhwani (1990). Calvo (1999) argues for correlated liquidity shock channel meaning that when some market participants need to liquidate and withdrawal some of their assets to obtain cash, perhaps after experiencing an unexpected loss in another country and need to restore capital adequacy ratios. This behavior will effectively transmit the shock.
    • 11. Financial Contagion
      • Some explanations for financial contagion, come after the Russian default in 1998, which are based on changes in investor “psychology”, “attitude” and “behavior”.
      • This stream of research date back to early studies of crowd psychology of Mackay (1841) and classical early models of disease diffusion were applied to financial markets by Shiller (1984).
      • Eichengreen, Hale and Mody (2008) focus on the transmission of recent crises through the market for developing country debt. They find the impact of changes in market sentiment tends to be limited to the original region. They also find market sentiments can more influence prices but less on quantities in Latin America, compared with Asian countries.
    • 12. Financial Contagion
      • Besides, there are some researches on geographic factors driving the contagion. De Gregorio and Valdes (2008) examine how the 1982 debt crisis, the 1994 Mexican crisis, and the 1997 Asian crisis spread to a sample of twenty other countries. They find that a neighborhood effect is the strongest determinant of which countries suffer from contagion. Trade links and pre-crisis growth similarities are also important, although to a lesser extent than the neighborhood effect.
    • 13. Bubbles
      • An economic or financial bubble is characterized by “trade in high volumes at prices that are considerably at variance with intrinsic values.”
    • 14. Top Ten Bubbles
      • 1. Dutch Tulip Mania, 1636.
      • 2. South Sea Bubble, 1720.
      • 3. Mississippi Bubble, 1720.
      • 4. Late 1920s – Stock Market Bubble, 1927-1929.
      • 5. Bank Loans to Mexico & other developing. countries, 1970s.
      • 6. Real Estate and Stocks in Japan, 1985.
      • 7. Real Estate and Stocks in Scandinavia, 1985-1999.
      • 8. Real Estate and Stocks in Thailand, Malaysia, Indonesia and other Asian Countries, 1992-1997.
      • 9. Foreign Investment in Mexico, 1990-3
      • 10. OTC Stocks ,Technology, in US, 1995 – 2000.
    • 15. Panics
      • A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent. As a bank run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy (or positive feedback); as more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.
      • A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time. A systemic banking crisis is one where all or almost all of the banking capital in a country is wiped out. The resulting chain of bankruptcies can cause a long economic recession.
    • 16. Top Bank Panics
      • 18th century
      • Panic of 1792.
      • Panic of 1796–1797.
      • 19th century
      • Panic of 1819, a U.S. recession with bank failures; culmination of U.S.'s first boom-to-bust economic cycle
      • Panic of 1825, a pervasive British recession in which many banks failed, nearly including the Bank of England
      • Panic of 1837, a U.S. recession with bank failures, followed by a 5-year depression
      • Panic of 1847
      • Panic of 1857, a U.S. recession with bank failures
      • Panic of 1866
      • Panic of 1873, a U.S. recession with bank failures, followed by a 4-year depression
      • Panic of 1884
      • Panic of 1890
      • Panic of 1893, a U.S. recession with bank failures
      • 20th century
      • Panic of 1907, a U.S. economic recession with bank failures.
    • 17. Crashes
      • A stock market crash is a sudden dramatic decline of stock prices across a significant cross-section of a stock market resulting in a significant loss of paper wealth. Crashes are driven by panic as much as by underlying economic factors. They often follow speculative bubbles.
      • Stock market crashes are social phenomena where external economic events combine with crowd behavior and psychology in a positive feedback loop where selling by some market participants drives more market participants to sell.
      • Crashes usually occur under the following conditions: a prolonged period of rising stock prices and excessive economic optimism, a market where P/E ratios exceed long-term averages, and extensive use of margin debt and leverage by market participants.
      • There is no numerically specific definition of a stock market crash but the term commonly applies to steep double-digit percentage losses in a stock market index over a period of days. Crashes are distinguished by panic selling and abrupt, dramatic prices declines.
    • 18. Important Crashes
      • Paris Bourse, January 19, 1882
      • Wall Street 1929
        • Black Thursday - October 24, 1929
        • Black Monday - October 28, 1929
        • Black Tuesday - October 29, 1929
      • 1973-4 UK stock market crash
      • October 19, 1987
      • Friday the 13th Mini-Crash, October 13, 1989
      • Asian Contagion Mini-Crash, October 27, 1997
      • Dot-com Bubble and Crash, peak, March 10, 2000
      • Flash Crash – May 6, 2010.
    • 19. Crash of 1929: Black Monday
    • 20. Crash of 1929
    • 21. Post WW II: Boom
    • 22. Top Banking Crises
      • 18th Century
      • Crisis of 1772–1773 in London and Amsterdam, begun by the collapse of the bankers Neal, James, Fordyce and Down.
      • 19th Century
      • Australian banking crisis of 1893
      • 20th century
      • Panic of 1907, a U.S. economic recession with bank failures
      • Great Depression, the worst systemic banking crisis of the 20th century
      • Secondary banking crisis of 1973–1975 in the UK
      • Savings and loan crisis of the 1980s and 1990s in the U.S.
      • Finnish banking crisis of 1990s
      • Swedish banking crisis (1990s)
      • 1997 Asian financial crisis
      • 1998 Russian financial crisis
      • Argentine economic crisis (1999–2002)
      • 21st century
      • 2002 Uruguay banking crisis
      • Financial crisis of 2007–2010, including:
      • Subprime mortgage crisis in the U.S. starting in 2007
      • 2008 United Kingdom bank rescue package
      • 2008–2009 Belgian financial crisis
      • 2008–2009 Icelandic financial crisis
      • 2008–2010 Irish banking crisis
      • 2008–2009 Russian financial crisis
      • 2008–2009 Spanish financial crisis
      • 2008–2009 Ukrainian financial crisis
    • 23. Crash of 1987: Black Monday
      • Black Monday refers to Monday, 19 October, 1987, when stock markets around the world crashed, shedding a huge value in a very short time. The crash began in Hong Kong, spread west through international time zones to Europe, hitting the United States after other markets had already declined by a significant margin.
      • The Dow Jones Industrial Average dropped by 508 points to 1738.74 (22.61%).
      • By the end of October, stock markets in Hong Kong had fallen 45.5%, Australia 41.8%, Spain 31%, the United Kingdom 26.4%, the United States 22.68%, and Canada 22.5%.
      • New Zealand’s market was hit especially hard, falling about 60% from its 1987 peak, and taking several years to recover.
    • 24. Important Events in the 1990s
      • January 1990 – Crash of Japan leads to the yen carry trade.
      • September 1992 – Sterling’s Black Monday spurs foreign exchange as an asset class.
      • 1994-1995 – Economic and Financial Crisis in Mexico. Tequila Crisis.
      • December 1996 – Alan Greenspan warns against “irrational exuberance”.
      • 1997 – Asian financial crisis prompts Asian countries to build up reserves of dollars.
    • 25. Tequila Crisis
      • The 1994 Economic Crisis in Mexico, widely known as the Mexican peso crisis, was caused by the sudden devaluation of the Mexican peso in December 1994.
      • The impact of the Mexican economic crisis on the Southern Cone and Brazil was labeled the Tequila Effect.
    • 26. Tequila Crisis
      • Some country-risk issues precipitating the Tequila crisis:
      • The EZLN's violent uprising in Chiapas in 1994 along with the assassination of Presidential candidate Luis Donaldo Colosio made the nation's political future look less certain to investors, who then started placing a larger risk premium on Mexican assets.
      • Mexico had a fixed exchange rate system that accepted pesos during the reaction of investors to a higher perceived country risk premium and paid out dollars. However, Mexico lacked sufficient foreign reserves to maintain the fixed exchange rate and was running out of dollars at the end of 1994. The peso then had to be allowed to devalue despite the government's previous assurances to the contrary, thereby scaring investors away and further raising its risk profile.
      • When the government tried to roll over some of its debt that was coming due, investors were unwilling to buy the debt and default became one of few options.
      • A crisis of confidence damaged the banking system, which in turn fed a vicious cycle further affecting investor confidence.[
    • 27. 1997 Asian financial crisis
      • The Asian financial crisis was a period of financial crisis that gripped much of Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion.
      • The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and other asset prices, and a precipitous rise in private debt.
      • Indonesia, South Korea and Thailand were the countries most affected by the crisis. Hong Kong, Malaysia, Laos and the Philippines were also hurt by the slump. The People's Republic of China, India, Taiwan, Singapore, Brunei and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.
    • 28. Currency crisis
      • A currency crisis, which is also called a balance-of-payments crisis, is a speculative attack in the foreign exchange market. It occurs when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange or a store of value. Currency crises usually affect fixed exchange rate regimes, rather than floating regimes.
      • A currency crisis is a type of financial crisis, and is often associated with a real economic crisis. Currency crises can be especially destructive to small open economies or bigger, but not sufficiently stable ones. Governments often take on the role of fending off such attacks by satisfying the excess demand for a given currency using the country's own currency reserves or its foreign reserves (usually in the United States dollar, Euro or Pound sterling).
      • Recessions attributed to currency crises include the 1994 economic crisis in Mexico, 1997 Asian Financial Crisis, 1998 Russian financial crisis, and the Argentine economic crisis (1999-2002).
    • 29. Financial Events during the 1990s
      • March 1998 – Citigroup and Bank of America mergers create banks that are “too big to fail”.
      • August 1998 – Russia defaults on debt and Long-Term Capital Management melts down.
    • 30. Economic Crisis
      • Economic crisis - a long-term economic state characterized by unemployment and low prices and low levels of trade and investment.
      • In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators like production, as measured by Gross Domestic Product (GDP), employment, investment spending, capacity utilization, household incomes, business profits fall during recessions, while bankruptcies and the unemployment rate rise.
      • Recessions generally occur when there is a widespread drop in spending often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.
    • 31. Economic and Social Effects
      • The living standards of people dependent on wages and salaries are more affected by recessions than those who rely on fixed incomes.
      • The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being.
    • 32. Recessions
      • Recessions have psychological and confidence aspects. For example, if the expectation develops that economic activity will slow, firms may decide to reduce employment levels and save money rather than invest.
      • Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession. Consumer confidence is one measure used to evaluate economic sentiment.
      • The term "Animal Spirits" has been used to describe the psychological factors underlying economic activity.
    • 33. Recessions in the United States
      • In the United States the unofficial beginning and ending dates of national recessions have been defined by an American private nonprofit research organization known as the National Bureau of Economic Research (NBER).
      • The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production, and wholesale-retail sales".
      • There have been as many as 47 recessions in the United States since 1790 (although economists and historians dispute certain 19th-century recessions). These downturns are driven by changes in the government's regulatory, fiscal, trade and monetary policies. Cycles in agriculture, consumption, and business investment, and the health of the banking industry also contribute to these declines. U.S. recessions have increasingly affected economies on a worldwide scale, especially as countries' economies become more interdependent.
    • 34. Post World War II Recessions
    • 35. Economic Recessions: Peak to Trough
    • 36. Recessions in the United States
      • According to economists, since 1854, the U.S. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion.
      • However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more, and four periods considered recessions:
      • July 1981 – November 1982: 14 months
      • July 1990 – March 1991: 8 months
      • March 2001 – November 2001: 8 months
      • December 2007 – June 2009: 18 months
      • For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. While the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.
    • 37. Financial Crisis 2007-2009
      • June 7, 2007 – Ten-year Treasury yields hit 5.05 percent.
      • June 19, 2007 – Bear Sterns Hedge Fund appeals for help.
      • August 3, 2007 – Jim Cramer declares “Armageddon” in the credit markets.
      • August 7-9, 2007 – Big quant hedge funds suffer unprecedented losses.
      • August 9, 2007 – European Central Bank intervenes after BNP Paribas money fund closes.
    • 38. Financial Crisis 2007 – 2009
      • August 17, 2007 – Federal Reserve cuts rates after Countrywide Financial funding crisis.
      • September 13, 2007 – The run on Northern Rock.
      • October 31, 2007 – World stock markets peak.
      • November 1, 2007 – Fear of losses at Citigroup prompts a sell-off.
      • March 16, 2008 – Bear Stearns rescued by JP Morgan.
      • July 14, 2008 – Oil and the dollar rebound – the end of the decoupling trade.
      • September 7, 2008 – Fannie Mae and Freddie Mac nationalized.
    • 39. Financial Crisis 2007 – 2009
      • September 15, 2008 – Lehman Brothers goes bankrupt.
      • September 18, 2008 – AIG is rescued, Reserve Fund breaks the buck, money market panics.
      • September 29, 2008 – Congress votes down the TARP bailout package.
      • October 6-10, 2008 – Global correlated crash.
      • October 24, 2008 – Emerging markets hit bottom as China rolls out stimulus package.
    • 40. Late 2000’s financial crisis
      • The US subprime mortgage crisis was one of the first indicators of the late 2000’s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages.
      • Approximately 80% of U.S. mortgages issued to subprime borrowers were adjustable-rate mortgages. After U.S. house sales prices peaked in mid-2006 and began their steep decline forthwith, refinancing became more difficult. As adjustable-rate mortgages began to reset at higher interest rates, mortgage delinquencies soared.
    • 41. Late 2000’s financial crisis
      • Securities backed with mortgages, including subprime mortgages, widely held by financial firms, lost most of their value.
      • Global investors drastically reduced purchases of mortgage-backed debt and other securities as part of a decline in the capacity and willingness of the private financial system to support lending.
      • Concerns about the soundness of U.S. credit and financial markets led to tightening credit around the world and slowing economic growth in the U.S. and Europe.
    • 42. Global crisis of 2007-2009
      • The collapse of global equity markets between August 2007 and March 2009 has been part of the most severe global crisis since the Great Depression. While the crisis initially had its origin in the US in a relatively small market segment, the subprime mortgage market, it rapidly spread across virtually all economies, with many countries experiencing even sharper equity market crashes than the US.
    • 43. Components of Real GDP since 2007
    • 44. Constancy of the long-run economic growth trend in the United States
    • 45. The United States debt-ceiling crisis 2011
      • The United States debt-ceiling crisis can be considered a financial crisis in 2011 that resulted when the United States mentioned it would be unable to continue spending appropriated funds on time unless the debt ceiling was increased.
      • The Obama administration claimed that, without this increase, the U.S. treasury would default on the interest and/or principal of U.S. Treasury securities.
      • The crisis arose because the increase in the debt ceiling required approval of both houses of Congress, which initially could not agree on how the situation was to be resolved.
    • 46. U.S. Debt Ceiling
    • 47. U.S. GDP and Government Spending
    • 48. Default on Debt
      • Former Treasury Secretary Lawrence Summers warned in July 2011 that the consequences of such a default would be higher borrowing costs for the US government (as much as one percent or $150 billion/year in additional interest costs) and the equivalent of bank runs on the money markets and other financial markets, potentially as severe as those of September 2008.
      • In January 2011 Treasury Secretary Timothy Geithner warned that "failure to raise the limit would precipitate a default by the United States. Default would effectively impose a significant and long-lasting tax on all Americans and all American businesses and could lead to the loss of millions of American jobs. Even a very short-term or limited default would have catastrophic economic consequences that would last for decades."
    • 49. US debt from 1940 to 2010.
    • 50. The US debt
      • The national debt rose $238 billion (or about 60% of the new debt ceiling) on August 3, the largest one day increase in the history of the United States.
      • The US debt surpassed 100 percent of gross domestic product for the first time since World War II.
      • According to the International Monetary Fund, US joined a group of countries whose public debt exceeds GDP, including Japan (229 percent), Greece (152 percent), Jamaica (137 percent), Lebanon (134 percent), Italy (120 percent), Ireland (114 percent) and Iceland (103 percent).
      • The NASDAQ, ASX and S&P 100 lost up to four percent in value, the largest drop after that which occurred in July 2009, during the global financial crisis.
      • The commodities market also took losses with average spot crude oil market prices falling below $US86 a barrel. The price of gold fell as deepening losses on Wall Street prompted investors to sell.
    • 51. AAA rating downgrade
      • On August 5, 2011, Standard & Poor's credit rating agency downgraded the long-term credit rating of the United States government for the first time in its history from AAA to AA+.
      • The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.
      • A week later, S&P senior director Joydeep Mukherji said that one factor was that numerous American politicians expressed skepticism about the serious consequences of a default, an attitude that he said was "not common" among countries with a AAA rating. The other two major credit rating agencies, Moody's and Fitch, continued to rate the federal government's bonds as AAA.
    • 52. AAA rating downgrade
    • 53. Fitch reaffirms AAA rating for U.S.
      • Fitch Ratings on Tuesday reaffirmed its AAA credit rating for the United States and said it did not anticipate a downgrade in the near future.
      • Fitch, one of the three major credit rating companies, said the outlook for the U.S. rating was stable because the recent deal to raise the debt ceiling and cut the budget deficit showed the nation's political leaders could do what's necessary to reduce the nation's soaring debt.
      • The debt-ceiling deal signed by President Obama last week "was a significant positive development that provided a substantive and necessary increase in the federal debt ceiling. It also signaled that there is the political commitment to place U.S. public finances on a sustainable path consistent with the U.S. sovereign rating remaining ‘AAA’.
      • Fitch has the most positive outlook on the U.S. of the major credit rating companies. Standard & Poor's downgraded the U.S. long-term debt to AA+ this month after deciding the planned $2.1 trillion to $2.4 trillion budget cuts over the next decade were not enough to stabilize the nation's rising debt.
      • Moody's Investor Services, like Fitch, retained its AAA rating for the U.S. this month, but changed its outlook to negative. That means there's a risk of a downgrade.
    • 54. Fitch reaffirms AAA rating for U.S.
      • The budget cuts in the deal were enough to stabilize the U.S. debt burden at about 85% of total economic output by the middle of the decade.
      • While that would be "substantially higher" than any other AAA-rated company, Fitch said the U.S. benefits from the dollar and U.S. Treasury securities both being global benchmarks.
      • Fitch warned that the country "is at the limit of the level of government indebtedness that would be consistent with the U.S. retaining its ‘AAA’ status despite its underlying strengths."
      • And the company said a downgrade could come if the special congressional "super committee" charged with finding $1.5 trillion in budget cuts isn't able to reach an agreement. Even though there would be $1.2 trillion in automatic spending cuts if the committee can't agree.
      • "In the event that the Joint Select Committee is unable to reach an agreement that can secure support from Congress and the administration, Fitch would be less confident that credible and timely deficit-reduction strategy necessary to underpin the U.S. ‘AAA’ sovereign rating and stable outlook will be forthcoming despite the ($1.2 trillion ) of automatic cuts that would follow."
    • 55. European sovereign debt crisis
      • On 27 April 2010, the Greek debt rating was decreased to the upper levels of 'junk' status by Standard & Poor's amidst hints of default by the Greek government. Yields on Greek government two-year bonds rose to 15.3% following the downgrading.
      • Some analysts continue to question Greece's ability to refinance its debt. Standard & Poor's estimates that in the event of default investors would fail to get 30–50% of their money back. Stock markets worldwide declined in response to this announcement.
      • On 3 May 2010, the European Central Bank suspended its minimum threshold for Greek debt "until further notice", meaning the bonds will remain eligible as collateral even with junk status. The decision will guarantee Greek banks' access to cheap central bank funding, and analysts said it should also help increase Greek bonds' attractiveness to investors. Following the introduction of these measures the yield on Greek 10-year bonds fell to 8.5%, 550 basis points above German yields, down from 800 basis points earlier. As of 26 November 2010, Greek 10-year bonds were trading at an effective yield of 11.8%.
    • 56. European sovereign debt crisis
      • From late 2009, fears of a sovereign debt crisis developed among fiscally conservative investors concerning some European states, with the situation becoming particularly tense in early 2010. This included euro zone members Greece, Ireland and Portugal and also some EU countries outside the area.
    • 57. European sovereign debt crisis
      • Iceland, the country which experienced the largest crisis in 2008 when its entire international banking system collapsed has emerged less affected by the sovereign debt crisis as the government was unable to bail the banks out.
      • In the EU, especially in countries where sovereign debts have increased sharply due to bank bailouts, a crisis of confidence has emerged with the widening of bond yield spreads and risk insurance on credit default swaps between these countries and other EU members, most importantly Germany.
    • 58. European sovereign debt crisis
      • While the sovereign debt increases have been most pronounced in only a few euro zone countries they have become a perceived problem for the area as a whole.
      • In May 2011, the crisis resurfaced, concerning mostly the refinancing of Greek public debts.
      • The Greek people generally reject the austerity measures and have expressed their dissatisfaction with protests. In late June 2011, the crisis situation was again brought under control with the Greek government managing to pass a package of new austerity measures and EU leaders pledging funds to support the country.
      • Concern about rising government deficits and debt levels across the globe together with a wave of downgrading of European government debt created alarm in financial markets.
      • On 9 May 2010, Europe's Finance Ministers approved a comprehensive rescue package worth €750 Billion (then almost a trillion dollars) aimed at ensuring financial stability across Europe by creating the European Financial Stability Facility (EFSF).
    • 59. European sovereign debt crisis
      • In 2010 the debt crisis was mostly centered on events in Greece, where the cost of financing government debt was rising. On 2 May 2010, the eurozone countries and the International Monetary Fund agreed to a €110 billion loan for Greece, conditional on the implementation of harsh austerity measures. The Greek bail-out was followed by a €85 billion rescue package for Ireland in November, and a €78 billion bail-out for Portugal in May 2011.
      • This was the first eurozone crisis since its creation in 1999.
      • The sovereign debt crisis that is unfolding is a fiscal crisis of the western world.
    • 60. Debt to GDP ratios for EU countries
    • 61. Runaway Debt in Europe
    • 62.  
    • 63.  
    • 64. Public Debt as Percent of GDP
    • 65. Debt and Debt/GDP by country
    • 66. Total Public Debt vs. Fiscal Balance as a Percentage of GDP
    • 67. Stock Indexes 2011
    • 68. Equity Risk Premium 2011
    • 69. Currencies and Gold
    • 70. Peso Depreciated during August 2011
      • Mexico’s foreign currency exchange and stock lost ground due to a spike in risk aversion after the release of weak data in the United States.
      • That while private sector employers in the U.S. created more jobs in July than expected, service sector activity slowed unexpectedly to its lowest level since February 2010. The news added to the growing concerns that the efforts of the world’s largest economy to reduce spending will affect their growth, hitting the willingness of investors to acquire assets that are considered risky.
    • 71. Peso Dollar Exchange Rate July – August 2011
    • 72. Global Market Volatility in August 2011
      • Global markets seem to have entered another period of instability, which is reminiscent of the traumatic events of 2007-2009.
      • There is no doubt that if the developed world does enter another period of recession that there will be a cyclical impact on emerging market economies, particularly in the commodities, IT and industrial sectors.
      • Domestic growth may slow, but, with many emerging economies operating at or near full capacity, that would not be a disaster. Potentially more disruptive would be a sovereign default by a major country, with Italy and Spain being the obvious candidates.
      • In the long-term the Euro members must either become more fiscally integrated or they will have to go their separate ways. However, neither eventuality appears to be imminent.
    • 73. Global Market Volatility in August 2011
      • Unfortunately, all of the world’s economies, including the emerging markets, will be affected to a greater or lesser degree by the 2011 crisis, and therefore the challenge is to mitigate the degree of economic and financial impact.
    • 74. Opportunities in Emerging Markets
      • The strong fiscal positions and relatively low levels of debt in most emerging market countries stand in stark contrast with the industrialized countries.
      • Some Emerging Markets have a banking system with little exposure to potential problems in Europe and generally have high levels of core tier capital, so their financial systems should not be significantly disrupted if there is a default.
      • The economic case for emerging markets remains fundamentally strong, there is no escaping that in the short-term the degree of correlation between all equity markets remains high.
    • 75. Infrastructure Investment in Emerging Economies
    • 76. Opportunities in Emerging Markets
    • 77. Shifting GDP Growth in Emerging Markets vs. Developed Economies
    • 78. Opportunities in Emerging Markets
    • 79. Opportunities in Emerging Markets
    • 80. Mexico’s Economic Growth in 2011
      • Mexico tried to reassure investors that a global markets rout would not spark an economic crisis even as recession fears in the United States, its key trading partner, pounded Mexico's currency and stocks.
      • The debt crises in the United States and Europe have given Mexican debt the allure of a safe haven as Mexico's public finances are in comparatively better shape.
      • A U.S. recession would undermine Mexican exports of everything from cars and refrigerators to electronics and could force Mexican policy makers to relax monetary policy.
      • A confirmation that there could be a recession in the U.S. or a sharp deceleration in America, would cause interest rates in Mexico to go down and we should expect the peso to depreciate more.
      • Mexico is the only major Latin American economy to have not tightened borrowing costs in the last year.
    • 81. Mexico’s Economic Growth in 2011
      • Mexico is Latin America's second biggest economy. After lagging way behind other Latin American economies, it has in recent months seen a combination of solid growth and low inflation, but it is dependent on the United States, which buys around 80 percent of its exports.
      • Mexico’s outlook is for an economic expansion of around 4.3 percent this year and that he expects similar growth in 2012.
    • 82. Mexico’s countercyclical stimulus’ measures
      • Mexico has $130 billion in foreign-exchange reserves, as well as a more than $70 billion line of credit with the International Montetary Fund.
      • That means that Mexico has more than $200 billion to ensure it can respond in an orderly fashion to any external financial markets shock.
      • Mexico will remain committed to responsible policies and a long-term vision and will apply ‘countercyclical stimulus’ measures consistent with an approved 2011 budget deficit equal to 0.5 percent of GDP and public-sector spending growth of 6.1 percent.
    • 83. Mexico’s Economic Growth in 2011
      • Mexico should approve five structural reforms to boost the country’s economic growth and development.
      • Mexico has the need for a second generation energy reform, a fiscal reform, labor reform, education reform and competitiveness reform.
    • 84. Mexico Sells $1 Billion of 100-Year Bonds
      • During August 2011, Mexico sold $1 billion worth of 100- year bonds overseas, taking advantage of a plunge in benchmark U.S. borrowing costs to bring back a record-long maturity it unveiled a year ago.
      • The government sold the bonds due 2110 to yield 5.96 percent, or 242 basis points above 30-year U.S. Treasuries. Mexico first sold the securities in October, issuing $1 billion at a yield of 6.1 percent to become the only Latin American country with dollar bonds of that maturity.
      • Yields on the Mexican bonds have declined 16 basis points, or 0.16 percentage point, in the past month to 5.95 percent in the secondary market, tracking a tumble in U.S. Treasury yields that was sparked by concern the global economic expansion is faltering. Thirty-year Treasury yields have dropped 67 basis points during the past month to 3.54 percent, the lowest in almost a year.
      • Mexico’s foreign debt is rated BBB by Standard & Poor’s and Fitch Ratings, the second-lowest investment-grade ranking.
      • The sale is Mexico’s third this year in international markets. The country has raised $2 billion of debt overseas this year, compared with $4.1 billion in the year-earlier period, according to data compiled by Bloomberg.
    • 85. Global FDI Flows 2011
      • Global FDI inflows likely to be $1.6 trillion in 2011.
      • Foreign direct investments worldwide are projected to return to pre-crisis 2008 levels this year, with inflows expected to be up to USD 1.6 trillion.
      • Recovery of FDI inflows would continue this year while pegging the amount at around USD 1.4 trillion to USD 1.6 trillion.
      • Brought down by the 2008 financial meltdown and its ripple effects, FDI worldwide tumbled to just USD 1.19 trillion in 2009. Last year, the inflows were slightly better at USD 1.24 trillion.
    • 86. Global FDI Inflows 2010
    • 87. Real GDP Growth: Emerging and Developing Economies vs. Advanced economies
    • 88. Average Real GDP Growth during 2010 - 2011
    • 89. International Economic Policy Implications
      • Financial contagion is one of the main causes of financial regulation.
      • How to make domestic financial regulation and plan the international financial architecture to prevent financial contagion become the top priority for both domestic financial regulators and international society, especially when the global economy are being under challenge from the US Subprime mortgage crisis and European sovereign debt crisis.
    • 90. Conclusions
      • European Union leaders have made two major proposals for ensuring fiscal stability in the long term.
      • The first proposal is the creation of the European Financial Stability Facility.
      • The second is a single authority responsible for tax policy oversight and government spending coordination of EU member countries, temporarily called the European Treasury.
      • The stability facility is financially backed by the EU and the IMF.
    • 91. Conclusions
      • The European Parliament, the European Council, and especially the European Commission, can all provide some support for the treasury while it is still being built.
      • Strong European Commission oversight in the fields of taxation and budgetary policy and the enforcement mechanisms that go with it have sometimes been described as potential infringements on the sovereignty of eurozone member states.
    • 92. Conclusions
      • With unemployment holding above 9 percent, there is little incentive to raise wages, and that means there's less money being spent.
      • The uncertainty is also freezing much of the all important housing market, as prospective buyers and sellers wait to see if prices will stabilize or whether mortgage interest rates will change.
      • Uncertainty and lack of confidence are rooted in fear. Fear and panic should never be injected into the economy.
      • US sovereign liabilities, both the dollar and Treasury securities, remain the global benchmark and accordingly the US credit profile benefits from unparalleled financing flexibility and enhanced debt tolerance, even relative to other large ‘AAA’-rated sovereigns.
    • 93. Conclusions
      • The US economy remains one of the most productive in the world, reflected in levels of income per head that are substantially higher than the ‘AAA’ median and other major ‘AAA’ sovereigns.
      • The institutional, legal and financial infrastructure supports business growth and innovation and Fitch continues to forecast that the US economy (and tax base) will, over the medium term, be one of the most dynamic amongst its high-grade and ‘AAA’ peers and support the stabilization and eventual reduction in government indebtedness.
      • The US long term economic growth will be of at least 2.25% a year.
    • 94. Conclusions
      • A main finding emerges from the analysis of the determinants of contagion, which turn out to be mainly the strength of countries’ fundamentals and the quality of their institutions.
      • Countries with poor macroeconomic fundamentals, high sovereign risk, and poor institutions experienced by far the largest equity market declines and are most severely affected by contagion.
      • The fact that domestic fundamentals played such a key role in the transmission of a crisis is reminiscent of the old “wake-up call” hypothesis, whereby a crisis initially restricted to one market segment or country provides new information that prompts investors to reassess the vulnerability of other market segments or countries, ultimately spreading the crisis across markets and borders around the world.
    • 95. “ Contagion Effects during the 2011 Global Financial Crisis. Emerging Economies vs. Advanced Economies" Alejandro Díaz-Bautista, Ph.D. Professor of Economics and Researcher [email_address] http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691 Global Economic and Financial Series Presentation Transcript August 15, 2011
    • 96. References
      • Kaminsky, Graciela L., and Carmen M. Reinhart, (2000), On crises, contagion, and confusion, Journal of International Economics 51, 145-168.
      • Claessens, Stijn and Kristin Forbes, (2009), International Financial Contagion: An overview of the Issues, Springer.
      • Laura E. Kodres and Matthew Pritsker. (2002), A rational expectations model of financial contagion. The Journal of Finance, 57(2):pp. 769–799.
      • Goldfajn, Ilan, and Rodrigo Valdés, (1997), Capital flows and the twin crises: The role of liquidity, IMF Working Paper No. 97/87, International Monetary Fund, Washington, DC.
      • Kaminsky, Graciela L., and Carmen M. Reinhart, (2000), On crises, contagion, and confusion, Journal of International Economics 51, 145-168.
      • Allen, Franklin and Douglas Gale, (2000), Journal of Political Economy, Vol. 108, No.1, pp.1-11.
      • Lagunoff, Roger D., and Stacey L. Schreft, (2001), A model of financial fragility, Journal of Economic Theory 99, 220-264.
      • Van Rijckeghem, Caroline, and Beatrice Weder, (2003), Spillovers through banking centers: A panel data analysis, Journal of International Money and Finance, 483–509.
      • King, Mervyn A., and Sushil Wadhwani, (1990), Transmission of volatility between stock markets, Review of Financial Studies 3, 5-33.
    • 97. References
      • Calvo, Guillermo A., (1999), Contagion in emerging markets: When Wall Street is a carrier, Working paper, University of Maryland.
      • Mackay, C. (1841). Extraordinary Popular Delusions and the Madness of Crowds. London: Bentley.
      • Shiller, R.J. (1984). Stock prices and social dynamics. Brookings Papers on Economic Activity 1984(2), 457–98.
      • Kirman, A. (1993). Ants, rationality, and recruitment. Quarterly Journal of Economics 108, 137–56.
      • Eichengreen, Hale and Mody, (2006), “Flight to Quality: Investor Risk Tolerance and the Spread of Emerging Maket Crises”, in International Financial Contagion: An overview of the Issues and the Book by Claessens, Stijn and Kristin Forbes.
      • De Gregorio and Valdes, (2008), “Crisis Transmission: Evidence from the Debt, Tequila, and Asian Flu Crises”, working paper.
    • 98. References
      • R. Chang and A. Velasco (2001), 'A model of currency crises in emerging markets'. Quarterly Journal of Economics 116 (2), pp. 489-517
      • De Gregorio and Valdes, (2008), “Crisis Transmission: Evidence from the Debt, Tequila, and Asian Flu Crises”, working paper.
      • Kristin J. Forbes and Roberto Rigobon, (2002), No Contagion, Only Interdependence: Measuring Stock Market Comovements, The Journal of Finance, Vol. 57, No. 5, pp 2223-2261.
      • Pesaran, M.H. and Pick, A. (2007). Econometric issues in the analysis of contagion. Journal of Economic Dynamics and Control 31, 1245–77.
      • Kristin J. Forbes and Roberto Rigobon, (2002), No Contagion, Only Interdependence: Measuring Stock Market Comovements, The Journal of Finance, Vol. 57, No. 5, pp 2223-2261.
      • Bekaert, G, M Ehrmann, M Fratzscher, and A Mehl (2011), “Global crises and equity market contagion”, NBER Working Paper, No. 17121.
    • 99. References
      • Diaz Bautista, Alejandro (2005), “Regional Growth and Development, Clusters and FDI in Mexico”, prepared for the conference “ Desarrollo Regional y Competitividad”, organized by the Presidency of Mexico with Centro de Investigación y Docencia Económicas, A.C. (CIDE), September, 2005.
      • Díaz Bautista, Alejandro (2005), “The Impact of Economies of Agglomeration, Clusters and networking in medium-sized Mexican Telecommunication firms”, Chapter in the Book “Industrial Development and Labor Markets in the United States–Mexico Border”, UCLA Latin American Center Publications (2005), University of California, Los Angeles (UCLA).
      • Díaz Bautista, Alejandro (2006), “An economic growth model of institutions, economic integration and foreign direct investment of Mexico with the United States”, Un modelo de crecimiento económico considerando a las instituciones, integración económica e inversión extranjera directa de México con los Estados Unidos”, Revista Convergencia, Revista de Ciencias Sociales, num. 41, ISSN 1405-1435, Nº. 41, pags. 117-139, mayo – agosto de 2006.
      • Díaz Bautista, Alejandro (2006), “Foreign Direct Investment and Regional Economic Growth considering the Distance to the Northern Border of Mexico” in Analisis Economico, UAM, Number 46, Vol. XXI, 2006.FDI and Regional Economic Growth.
      • Díaz Bautista, Alejandro (2011), Regional Economic Growth and North American Economic Integration. Forthcoming .

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