Financial Markets in The Global Perspective: North & South America
Abstract
The paper presents a critique of financial concepts in the global financial markets. The key concepts includes Equity and Debt Financing, Risk of a financial crisis and the economy: Minsky’s theory of financial fragility, with reference to hedge, speculative and Ponzi balance sheets. Information Asymmetry: Adverse Selection and Moral Hazard in the Context of the Financial Services Industry, Weakened banking sector (extremely low bank capital), rising interest rates and asymmetric information and the onset of a currency and financial crisis. Elaborate illustrations are also presented to aid the contextualization of the global financial markets.
Keywords: Financial Markets, Equity, Debt, Hedge Funds, Information Asymmetry, Currency Devaluation.
References
Akerlof, G. A. (1970). The Market for" Lemons": Quality Uncertainty and the Market Mechanism, 84Q. J. ECON, 488, 489-90.
Apergis, N., Fafaliou, I., & Stefanitsis, M. (2016). Asymmetric information and employment: evidence from the US banking sector. The Journal of Economic Asymmetries, 14, 199-210.
Balafoutas, L., Kerschbamer, R., & Sutter, M. (2017). Second‐degree moral hazard in a real‐world credence goods market. The Economic Journal, 127(599), 1-18.
Belo, F., Lin, X., & Yang, F. (2019). External equity financing shocks, financial flows, and asset prices. The Review of Financial Studies, 32(9), 3500-3543.
Bergin, P. R., & Corsetti, G. (2019). Beyond competitive devaluations: The monetary dimensions of comparative advantage (No. w25765). National Bureau of Economic Research.
Berkmen, S. P., Gelos, G., Rennhack, R., & Walsh, J. P. (2012). The global financial crisis: Explaining cross-country differences in the output impact. Journal of International Money and Finance, 31(1), 42-59.
Betz, T., & Kerner, A. (2016). Real exchange rate overvaluation and WTO dispute initiation in developing countries. International Organization, 70(4), 797-821.
Boateng, A., Asongu, S., Akamavi, R., & Tchamyou, V. (2018). Information asymmetry and market power in the African banking industry. Journal of Multinational Financial Management, 44, 69-83.
Claessens, S., & Van Horen, N. (2015). The impact of the global financial crisis on banking globalization. IMF Economic Review, 63(4), 868-918.
Covas, F., & Den Haan, W. J. (2011). The cyclical behavior of debt and equity finance. American Economic Review, 101(2), 877-99.
Covas, F., & Den Haan, W. J. (2012). The role of debt and equity finance over the business cycle. The Economic Journal, 122(565), 1262-1286.
Crawford, G. S., Pavanini, N., & Schivardi, F. (2018). Asymmetric information and imperfect competition in lending markets. American Economic Review, 108(7), 1659-1701.
Fu, H., Yang, J., & An, Y. (2019). Contracts for venture capital financing with double-sided moral hazard. Small Business Economics, 53(1), 129-144.
Hébert, B. (2018). Moral hazard and the optimality of debt. The Review of Economic Studies, 85(4), 2214-2252.
Iqbal, B. A. (2010). Global Financial Crisis: Causes, Emerging Trends and Strategy. IBA Business Review, 5(2).
Itoh, H. (2016). Moral Hazard and Other-Regarding Preferences. In Behavioral Interactions, Markets, and Economic Dynamics (pp. 483-517). Springer, Tokyo.
Jacoby, H. G., & Skoufias, E. (2017). Risk, financial markets, and human capital in a developing country. The Review of Economic Studies, 64(3), 311-335.
Klein, T. J., Lambertz, C., & Stahl, K. O. (2016). Market transparency, adverse selection, and moral hazard. Journal of Political Economy, 124(6), 1677-1713.
Kodongo, O. (2018). Financial regulations, financial literacy, and financial inclusion: Insights from Kenya. Emerging Markets Finance and Trade, 54(12), 2851-2873.
Kohler, K. (2017). Currency devaluations, aggregate demand, and debt dynamics in economies with foreign currency liabilities. Journal of Post Keynesian Economics, 40(4), 487-511.
Minsky, Hyman P. (1974). "Our Financial System is Fragile". Ocala Star Banner. p. 5A.
Minsky, Hyman P. (1992). "The Financial Instability Hypothesis" (PDF). Working Paper No. 74: 6–8.
Mishkin, F. S. (1996). Understanding financial crises: a developing country perspective (No. w5600). National Bureau of Economic Research.
Mugwe, M. W., & Oliweny, T. (2015). The Effect of credit information sharing on the performance of commercial banks in Kenya. International Journal of Business and Commerce, 5(3), 41-63.
Nasieku, T., & Ngugi, R. W. (2016). Credit Information Sharing and Credit Risk Reduction in Kenya Commercial Banks. Journal of social science research, 10(1), 1941-1949.
Okaro, C. S. (2017). Currency Devaluation and Nigerian Economic Growth (2000-2015). NG-Journal of Social Development, 417(5306), 1-13.
Omar, O. A., Sell, D., & Rover, A. J. (2017). The Information Asymmetry Aspect of Agency Theory in Business Compliance Contexts: A Systematic Review. In Congresso Internacional de Conhecimento e Inovação–Ciki (Vol. 1, No. 1).
Riles, A. (2011). Collateral knowledge: Legal reasoning in the global financial markets. University of Chicago Press.
Rudd, K. (2010). The global financial crisis. Monthly, (Feb 2010), 20.
Saibene, G., & Sicouri, S. (2012). Effects of currency devaluations on the economic growth in developing countries: the role of foreign currency-denominated debt. Atlantic Economic Journal, 40(2), 191-209.
Styrin, K. (2015). X-inefficiency, moral hazard, and bank failures. Economic Education and Research Consortium, Russia and CIS, Final Report, Moscow.
Uchida, H., Uesugi, I., & Iwaki, H. (2017). Adverse Selection versus Moral Hazard in Financial Contracting: Evidence from collateralized and non-collateralized loans. Research Institute of Economy, Trade and Industry (RIETI).
Valdez, S., & Molyneux, P. (2013). An Introduction to Global Financial Markets: Palgrave Macmillan. UK
