Crisis Intervention Issues Essay Example for Free

Crisis Intervention Issues Essay Counselors and other individuals in the helping profession play an important role in times of individual crisis such as violent crimes or mass crisis such as large-scale disaster situations by facilitating the diagnosis and treatment of pyschosocial disorders among populations that have been directly or indirectly traumatized by critical events. Gladding (2008, p. 246) notes that crisis counselling often involves incidents where there is a sense of loss or grief, and is therefore aimed at helping clients to regain a sense of normalcy in order to move on with their lives. However, there are instances when counselors are adversely affected by their work with traumatized clients. Sexton (1999, p. 393) notes that counselors and therapists who are constantly exposed to â€Å"reports of trauma, horror, human cruelty, and extreme loss† become vulnerable to experiencing the â€Å"feelings of fear, pain and suffering similar to their clients† that ultimately affects their ability to provide counselling services. Among the issues that counselors face in the course of their crisis intervention efforts is the risk of countertransference and vicarious traumatization. Countertransference refers to the counselors’ tendency to either avoid empathy or to overly identify with the client as a form of defense mechanim. Avoidance reactions are often manifested through the counselor’s â€Å"denial, minimisation, distortion, counter phobic reactions, detachment and disengagement from an emphatic stance† (Ibid, p. 394). In contrast, over-identification often leads into the overinvolvement of the counselor with the client’s experiences to the point that the counselor may feel idealize the client’s experiences and feel guilt for not being able to extend more help to the client (Ibid). Consequently, countertransference often impedes the therapeutic relationship as the counselor’s fails to feel empathy for the client. Empathy is particularly important in crisis intervention as it enables the counselor to correctly assess the client situation and support the client with definitive action plans for recovery (Gladding 2008, p. 248). Without empathy, client welfare is compromised by the inability of the counselor to identify the client’s problems from the client’s perspective, which could lead to incorrect or inadequate support and action from the counselor. Meanwhile, vicarious traumatization among counselors occurs as a result of the â€Å"accumulation of experiences across many therapy situations† (Sexton 1999, p. 395). Vicarious traumatization not only impacts the counselor’s helping relationships but also extends to other areas of his or her professional and personal life. The effects of vicarious traumatization include the development of anxiety and post-traumatic syndrome disorder (PTSD) symptoms and other psychosocial disorders by the counselor. Unfortunately, majority of counselors are vulnerable to the risk of vicarious traumatization (Ibid, p. 396). Hence, those who work in the midst of large-scale crises events are clearly at a greater risk due to the scale of horror, loss, and cruelty that they are exposed to through indirect and direct experiences of their clients and themselves. Hence, the vicarious traumatization of counselors not only hinders them from functioning effectively in helping relationships but renders them unable to continue their relationships with clients as they become individuals in need of therapy and counselling themselves. On the other hand, there are ways of reducing the risks of countertransference and vicarious traumatization. Sexton (1999, p. 396) note that counselors must engage in constant self-examination for the symptoms of crisis intervention issues in order to identify and resolve problems early by themselves or with the help of other counselling professionals. This ensures the counsellor’s assurance of his/her own psychosocial health which is important in safeguarding client well-being and interests. Thus, it is important for counselors and other helping professionals to be aware of the proper handling of crisis intervention issues they may confront while in the process of helping others recover and rebuild their lives after a traumatic incident. Works Cited: Gladding, S. T. (2008). Counselling: a comprehensive profession. New Jersey: Merrill-Prentice Hall/Pearson. Sexton, L. (1999). Vicarious traumatisation of counsellors and effects on their workplaces. British Journal of Guidance and Counselling, 27(3):393-403.

Crisis Intervention Issues Essay Example for Free

Crisis Intervention Issues Essay Counselors and other individuals in the helping profession play an important role in times of individual crisis such as violent crimes or mass crisis such as large-scale disaster situations by facilitating the diagnosis and treatment of pyschosocial disorders among populations that have been directly or indirectly traumatized by critical events. Gladding (2008, p. 246) notes that crisis counselling often involves incidents where there is a sense of loss or grief, and is therefore aimed at helping clients to regain a sense of normalcy in order to move on with their lives. However, there are instances when counselors are adversely affected by their work with traumatized clients. Sexton (1999, p. 393) notes that counselors and therapists who are constantly exposed to â€Å"reports of trauma, horror, human cruelty, and extreme loss† become vulnerable to experiencing the â€Å"feelings of fear, pain and suffering similar to their clients† that ultimately affects their ability to provide counselling services. Among the issues that counselors face in the course of their crisis intervention efforts is the risk of countertransference and vicarious traumatization. Countertransference refers to the counselors’ tendency to either avoid empathy or to overly identify with the client as a form of defense mechanim. Avoidance reactions are often manifested through the counselor’s â€Å"denial, minimisation, distortion, counter phobic reactions, detachment and disengagement from an emphatic stance† (Ibid, p. 394). In contrast, over-identification often leads into the overinvolvement of the counselor with the client’s experiences to the point that the counselor may feel idealize the client’s experiences and feel guilt for not being able to extend more help to the client (Ibid). Consequently, countertransference often impedes the therapeutic relationship as the counselor’s fails to feel empathy for the client. Empathy is particularly important in crisis intervention as it enables the counselor to correctly assess the client situation and support the client with definitive action plans for recovery (Gladding 2008, p. 248). Without empathy, client welfare is compromised by the inability of the counselor to identify the client’s problems from the client’s perspective, which could lead to incorrect or inadequate support and action from the counselor. Meanwhile, vicarious traumatization among counselors occurs as a result of the â€Å"accumulation of experiences across many therapy situations† (Sexton 1999, p. 395). Vicarious traumatization not only impacts the counselor’s helping relationships but also extends to other areas of his or her professional and personal life. The effects of vicarious traumatization include the development of anxiety and post-traumatic syndrome disorder (PTSD) symptoms and other psychosocial disorders by the counselor. Unfortunately, majority of counselors are vulnerable to the risk of vicarious traumatization (Ibid, p. 396). Hence, those who work in the midst of large-scale crises events are clearly at a greater risk due to the scale of horror, loss, and cruelty that they are exposed to through indirect and direct experiences of their clients and themselves. Hence, the vicarious traumatization of counselors not only hinders them from functioning effectively in helping relationships but renders them unable to continue their relationships with clients as they become individuals in need of therapy and counselling themselves. On the other hand, there are ways of reducing the risks of countertransference and vicarious traumatization. Sexton (1999, p. 396) note that counselors must engage in constant self-examination for the symptoms of crisis intervention issues in order to identify and resolve problems early by themselves or with the help of other counselling professionals. This ensures the counsellor’s assurance of his/her own psychosocial health which is important in safeguarding client well-being and interests. Thus, it is important for counselors and other helping professionals to be aware of the proper handling of crisis intervention issues they may confront while in the process of helping others recover and rebuild their lives after a traumatic incident. Works Cited: Gladding, S. T. (2008). Counselling: a comprehensive profession. New Jersey: Merrill-Prentice Hall/Pearson. Sexton, L. (1999). Vicarious traumatisation of counsellors and effects on their workplaces. British Journal of Guidance and Counselling, 27(3):393-403.

Benefits of Financial Liberalisation

Benefits of Financial Liberalisation A EUROPEAN POLICY ABSTRACT: This paper extends to test if the short and in the long run. Weak indica- the same short-run increase in cyclical tions are found that this may happen par- volatility arising from financial integration tially due to the anchoring of expectations is observed in this specific sample of â€Å"emerg-provided by the EU Accession, and to the ing markets. This work finds signs that, more robust institutional framework contrary to other emerging markets, this imposed by this process onto the countries in does not happen: for the future Member question. States, financial integration, similarly to the KEY WORDS: Enlargement, European outcome observed in mature market Union, financial liberalization, booms, 81 economies, reduces cyclical volatility both in busts, cycles, volatility. 1. INTRODUCTION Financial and capital flows liberalization can play a fundamental role in increasing growth and welfare. Typically, emerging or developing economies seek foreign savings to solve the inter-temporal savings-investment problem. On the other hand, current account surplus countries seek opportunities to invest their savings. To the extent that capital flows from surplus to deficit countries are well intermediated and, therefore, put to the most productive use, they increase welfare. Liberalization can, however, also be dangerous, as has been witnessed in many past and recent financial, currency and banking crises. It can make countries more vulnerable to exogenous shocks. In particular, if serious macroeconomic imbalances exist in a recipient country, and if the financial sector is weak, be it in terms of risk management, prudential regulation and supervision, large capital flows can easily lead to serious financial, banking or currency crises. A number of recent crises, like those in Ea st Asia, Mexico, Russia, Brazil and Turkey (described, for example, in IMF (2001)), and, to some extent, the Argentinean episode of late 2001, early 2002, have demonstrated the potential risks associated with financial and capital flows liberalization. Central and Eastern Europe has a somewhat different experience, when compared to other emerging regions, concerning the financial liberalization process, as the process there seems to have been much less crisis-prone than in, for instance, Asia or Latin America. This maybe, at least partially, because the current high degree of external and financial liberalization in the Central Eastern European countries (CEECs), beyond questions of economic allocative efficiency, must be understood in terms of the process of Accession to the European Union. The EU integration process implies legally binding, sweeping liberalization measures-not only capital account liberalization, but investment by EU firms in the domestic financial services, and the maintenance of a competitive domestic environment, giving this financial liberalization process strong external incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated regulatory and supervis ory structure, again based on EU standards. This whole process happened also with the EUs technical and financial support, through specific programs-like the PHARE one, for these so-called Accession, and the TACIS, for the former Soviet Union ones- and direct assistance from EU institutions, like the European Commission, the European Parliament and the European Central Bank (also, on a very early stage of the transition process, the influence of the IMF in setting up policies and institutions in several countries in the region-an intervention widely considered to haven been successful-was important: see Hallerberg et al., 2002). Additionally, EU membership seems to act as an anchor to market expectations (see Vinhas de Souza and Hà ¶lscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the observed devastating effects in both Asia and Latin America (even a major event, like the Russian collapse of 1998, had very reduced regional side effects). Several regional episodes of financial systems instability did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), but none with the prolonged negative consequences observed in other region (which was also due to the effective national policy actions undertaken after those episodes). This studys main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from now on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania , Slovakia and Slovenia). In their original work, KS build an extensive database of external and financial liberalization, which includes both developed countries and countries from emerging regions (but not from Eastern Europe). With that, they create different indexes of liberalization (capital account, banking and stock markets: see Table I below) and using them individually and in an aggregate fashion, test for the effects and causality of this process on financial and real volatility, for the existence of differences between regions, and for the effects of the ordering of the liberalization process. One underlying hypotheses of this work is that the existing regulatory and institutional framework in Eastern Europe, plus a more sustainable set of macro policies, played an important role in enabling liberalization to largely deliver the welfare enhancing outcomes that it is supposed to. Such an â€Å"anchoring role of the European Union in the CEECs, through the process of EU membership, and through the effective imposition of international standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the United States, or by some regional sub-grouping, like Mercosur, may also be welfare enhancing for other â€Å"emerging regions. 2. CAPITAL ACCOUNT The achieving of capital account liberalization happened rather swiftly in most of the countries in our sample: by the mid 1990s, all bar Bulgaria and Romania had been declared Article VIII compliant (for those two countries, this happened in 1998: see Table II below). One of the main driving forces behind this was the process of European Integration, for which external liberalization is a pre-requisite: in the early to mid-1990s, all the countries had signed Association Agreements with the European Union (frequently preceded by trade liberalization agreements with the EU, also called â€Å"Europe trade agreements, usually with years given to the countries to prepare for their full implementation) and formally applied for EU membership. Another additional factor supporting liberalization was IMF and OECD membership: four of the larger countries in our sample became OECD members during the second half of the 1990s. Another factor to be considered, is the endogenous decision process to liberalize in a sustainable fashion. 3. BANKING SECTOR Financial integration, in the form of the opening up the banking sector to foreign banks, is seen as being positive, on a micro level, as foreign banks are usually better capitalized and more efficient than their domestic counterparts (of course, the domestic banking sector eventually catches-up: for an indication of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that foreign banks do not contract either their credit supply nor their deposit base, in helping to smooth the cycle (see de Haas and Lelyveld, 2003: they find some indication that this is linked to the better capitalization base and prudential ratios, as better capitalized domestic banks behave similarly to foreign banks). Given the bank-centered nature of virtually all the financial systems of the future Member States, this is particularly important for them. In most of the member states, the initial stage of the creation of the two-tier banking system, modeled on the Western European â€Å"universal bank system, was characterized by rather liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking sector: see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Sà ¶rg et al., 2003). This caused a mushrooming of new banks in those countries in the early 1990s. Parallel to this, a series of banking crises, of varied proportions, affected most of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command economy period (the political need to support state-owned, inefficient industries, with the consequent accumulation of bad loans and also the financing of budget deficits), macroeconomic instability, risky expansion and investment strategies and also sheer inexperience, both from the investor s and from regulators. Progressively, the re-capitalization, privatization and internationalization of the banking system (mostly into the hands of EU financial conglomerates), coupled with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems. Two of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other smaller banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of â€Å"financial sector distress in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The initial proliferation of banks was, quite naturally, followed by a process of consolidation and strengthening-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 currently, while Hungary had 33 banks in 2002, showing only a very slight decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 8 1 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone). This consolidation process was frequently led by foreign companies, which now hold the majority of the assets of the banking system in virtually all of them-contrary to the situation in the current EU Member States-bar Slovenia. This process now has a component of regional expansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Sà ¶rg et al., 2003, ibid). The share of banking assets to GDP, nevertheless, is still far below the Euro area average (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, especially in the Balti c republics: with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and close to 5% in Latvia (Latvia, with its close trading ties to Russia, has a particular strategy of selling itself as a stable financial services center to CIS depositors: see IMF, 2003(b), ibid). The supervision system has also substantially improved, and, following recent international-and EU- best practice, is now centered in independent universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., estimate that the formal regulatory environment for the Czech Republic, Hungary and Poland is actually above the EU, and that its actual enforcement level is at its average;Liive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002). 3.1 BANKING CRISES IN EASTERN EUROPE The Baltic bank crises were, to different degrees, linked to liquidity difficulties related tolerations with Russia (in the November 1992 Estonian case, by the freezing of assets held by some Estonian banks in their former Moscow headquarters, while the Latvian and Lithuanian episodes of, respectively, March and December 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose export commodities, at that time, were still below world price levels) and regulatory tightening (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the country to hyperinflation (reaching over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to inadequate real sector reform, with state-owned, loss making enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector: those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the largest state bank, the State Savings Bank -SSB). Periodic foreign exchange crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close insolvent banks), and a tightening of policy actually led to more bank runs. A caretaker government in February 1997 (before a newly elected government took power in May) paved the way to longer lasting reform and the implementation of t he CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilateral institutionsamely, (namely the IMF). 4. STOCK MARKETS The existence of stock markets is assumed to be beneficial for economic performance. In principle, it provides a way for companies to raise capital at lower costs than through simple banking intermediation, and because it is not as restricted a source of capital as internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based governance in the US and the EU, and the shift towards a more regulated environment) assumed to provide better governance for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with stock markets playing marginal roles in most of them (and, in some, a very marginal role: in Bulgaria, Slovakia and Romania, their average market capitalization in GDP terms is below 5%: see Figure I below). All of these countries had (re-)established stock markets by the mid-90s (see Table III above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of voucher certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial Public Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher-driven privatization, the initial large number of investors and traded stocks in those stock markets was soon concentrated in a rather limited number of institutional investors-domestic and foreign- and â€Å"blue chip stocks. In the IPO-driven markets, the number of stocks and investors actually tended to increase with time, albeit from a rather concentrated base. Even in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU average (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slovenia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in several years. Also, the average market turnover is equally below the one observed in comparable EU economies. Similarly to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources. This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets: the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the ongoing efforts of the Lamfalussy Committee towards a single European market for securities: according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approval), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each individual country to have its own separate stock market. One must also recall that the current national stock markets in the mature developed economies are themselves the result of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgari a in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some mature markets, like Germany and the US. Nevertheless, the observed tendency of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania). All the specific questions described above concerning the way those stock exchanges were founded and their later developments, plus their relative smallness and shallowness, affect the dynamics of their stock market indexes (SMI), and are clearly reflected by them (as one may see in Figure II, below). This, coupled with the rather limited duration of the series, may affect their adequacy as proxies of financial cycles. Source: Datastream, modified by the authors. The price indexes here were converted to US Dollars and re-based to a common reference period were they equal 100, May of 1998. The country codings are as described in the Annexes. 5. ESTIMATED INDEXES The construction of the index for this new sample of countries was the core of this work. A comprehensive effort was done to crosscheck the information collected from papers and publications with national sources. Below we present the estimated monthly index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written about the individual countries and the region. This is an index that falls with liberalization, where maximum liberalization equals one and minimum three (in this sense, one could actually see it as an index of financial repression). As an additional robustness check, the year-end value of the index here constructed was regressed on the combined EBRDs yearly indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35. As one may see from Figure III above, the process of integration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the â€Å"Full Liberalization Index in the early 1990s do not indicate reversals: the merely reflect the entry into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they â€Å"enter the world as highly closed economies, but those countries introduced liberalization reforms almost immediately from the start. After this, a slight increasing trend, that does reflect a mild liberalization reversal, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed. Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the collapse of the Czech monetary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly dependent of imported energy sources) seems to have driven these mild liberalization reversals. Comparing the Full Index constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, but both the â€Å"entry of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the emerging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, but it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs â€Å"leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy institutions and instruments (see Vinhas de Souza and Hà ¶lscher, 2001): a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of mature, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spikes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was essentially driven by the Financial Sector liberal ization component. As will become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s. Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account restrictions) and ACs set (financial sector): see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower. One could, in principle, aggregate the countries in our sample in three different groups: rapid liberalizers (the ones that followed a â€Å"big bang early approach, without major reversals: Bulgaria, Estonia, Latvia, Lithuania), consistent liberalizers (the ones that followed a more delayed path, but also without major roll backs: the Czech Republic, Hungary, Poland) and cautious liberalizers (the ones whose liberalization path was either openly inconsistent or downright mistrustful: Romania, Slovakia, Slovenia). 5.1 COUNTRY-BY-COUNTRY LIBERALIZATION PATH. In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restrictive measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-)constitution of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard peg and the potential gains with interest rate differentials. After the peg was replaced by the current float regime, this restriction i s duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of any liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the late 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003: resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the f inancial sector liberalization is observed from early 1998, also resulting from the experienced banking crisis: reserve requirements on deposits on foreign accounts by non-resident are introduced; In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time; In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and cautious one: at the end of the sample, it has the highest (i.e., less liberalized) score for the â€Å"Full Index of all countries in the sample: 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other â€Å"Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversals are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the entry in effect of the EU Association Agreement, across-the-board further (re)liberalization measures have been introduced. 6. FINANCIAL CYCLES AND LIBERALIZATION The financial cycle coding which is used by KS defines cycles as a at least twelve month-long strictly downwards (upwards) movement, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. Beyond that, these series have a rather limited time extension (our sample covers the 01:1990-06:2003 period). Adapting KS criteria to the limited time dimension of our sample, we use a less stringent definition of â€Å"cycle, the same algorithm as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of these 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration. 7. CONCLUSION The main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally planned economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study: in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and common shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the extension of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results diverge from KS, as in their work â€Å"emerging markets experience a relative short run increase in the amplitude of downward cycles. Another noteworthy feature is that only minor liberalization rever sals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by â€Å"contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the importance of institutions and of the EU Accession, this papers initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyzed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process. Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the majority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility. Benefits of Financial Liberalisation Benefits of Financial Liberalisation A EUROPEAN POLICY ABSTRACT: This paper extends to test if the short and in the long run. Weak indica- the same short-run increase in cyclical tions are found that this may happen par- volatility arising from financial integration tially due to the anchoring of expectations is observed in this specific sample of â€Å"emerg-provided by the EU Accession, and to the ing markets. This work finds signs that, more robust institutional framework contrary to other emerging markets, this imposed by this process onto the countries in does not happen: for the future Member question. States, financial integration, similarly to the KEY WORDS: Enlargement, European outcome observed in mature market Union, financial liberalization, booms, 81 economies, reduces cyclical volatility both in busts, cycles, volatility. 1. INTRODUCTION Financial and capital flows liberalization can play a fundamental role in increasing growth and welfare. Typically, emerging or developing economies seek foreign savings to solve the inter-temporal savings-investment problem. On the other hand, current account surplus countries seek opportunities to invest their savings. To the extent that capital flows from surplus to deficit countries are well intermediated and, therefore, put to the most productive use, they increase welfare. Liberalization can, however, also be dangerous, as has been witnessed in many past and recent financial, currency and banking crises. It can make countries more vulnerable to exogenous shocks. In particular, if serious macroeconomic imbalances exist in a recipient country, and if the financial sector is weak, be it in terms of risk management, prudential regulation and supervision, large capital flows can easily lead to serious financial, banking or currency crises. A number of recent crises, like those in Ea st Asia, Mexico, Russia, Brazil and Turkey (described, for example, in IMF (2001)), and, to some extent, the Argentinean episode of late 2001, early 2002, have demonstrated the potential risks associated with financial and capital flows liberalization. Central and Eastern Europe has a somewhat different experience, when compared to other emerging regions, concerning the financial liberalization process, as the process there seems to have been much less crisis-prone than in, for instance, Asia or Latin America. This maybe, at least partially, because the current high degree of external and financial liberalization in the Central Eastern European countries (CEECs), beyond questions of economic allocative efficiency, must be understood in terms of the process of Accession to the European Union. The EU integration process implies legally binding, sweeping liberalization measures-not only capital account liberalization, but investment by EU firms in the domestic financial services, and the maintenance of a competitive domestic environment, giving this financial liberalization process strong external incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated regulatory and supervis ory structure, again based on EU standards. This whole process happened also with the EUs technical and financial support, through specific programs-like the PHARE one, for these so-called Accession, and the TACIS, for the former Soviet Union ones- and direct assistance from EU institutions, like the European Commission, the European Parliament and the European Central Bank (also, on a very early stage of the transition process, the influence of the IMF in setting up policies and institutions in several countries in the region-an intervention widely considered to haven been successful-was important: see Hallerberg et al., 2002). Additionally, EU membership seems to act as an anchor to market expectations (see Vinhas de Souza and Hà ¶lscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the observed devastating effects in both Asia and Latin America (even a major event, like the Russian collapse of 1998, had very reduced regional side effects). Several regional episodes of financial systems instability did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), but none with the prolonged negative consequences observed in other region (which was also due to the effective national policy actions undertaken after those episodes). This studys main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from now on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania , Slovakia and Slovenia). In their original work, KS build an extensive database of external and financial liberalization, which includes both developed countries and countries from emerging regions (but not from Eastern Europe). With that, they create different indexes of liberalization (capital account, banking and stock markets: see Table I below) and using them individually and in an aggregate fashion, test for the effects and causality of this process on financial and real volatility, for the existence of differences between regions, and for the effects of the ordering of the liberalization process. One underlying hypotheses of this work is that the existing regulatory and institutional framework in Eastern Europe, plus a more sustainable set of macro policies, played an important role in enabling liberalization to largely deliver the welfare enhancing outcomes that it is supposed to. Such an â€Å"anchoring role of the European Union in the CEECs, through the process of EU membership, and through the effective imposition of international standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the United States, or by some regional sub-grouping, like Mercosur, may also be welfare enhancing for other â€Å"emerging regions. 2. CAPITAL ACCOUNT The achieving of capital account liberalization happened rather swiftly in most of the countries in our sample: by the mid 1990s, all bar Bulgaria and Romania had been declared Article VIII compliant (for those two countries, this happened in 1998: see Table II below). One of the main driving forces behind this was the process of European Integration, for which external liberalization is a pre-requisite: in the early to mid-1990s, all the countries had signed Association Agreements with the European Union (frequently preceded by trade liberalization agreements with the EU, also called â€Å"Europe trade agreements, usually with years given to the countries to prepare for their full implementation) and formally applied for EU membership. Another additional factor supporting liberalization was IMF and OECD membership: four of the larger countries in our sample became OECD members during the second half of the 1990s. Another factor to be considered, is the endogenous decision process to liberalize in a sustainable fashion. 3. BANKING SECTOR Financial integration, in the form of the opening up the banking sector to foreign banks, is seen as being positive, on a micro level, as foreign banks are usually better capitalized and more efficient than their domestic counterparts (of course, the domestic banking sector eventually catches-up: for an indication of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that foreign banks do not contract either their credit supply nor their deposit base, in helping to smooth the cycle (see de Haas and Lelyveld, 2003: they find some indication that this is linked to the better capitalization base and prudential ratios, as better capitalized domestic banks behave similarly to foreign banks). Given the bank-centered nature of virtually all the financial systems of the future Member States, this is particularly important for them. In most of the member states, the initial stage of the creation of the two-tier banking system, modeled on the Western European â€Å"universal bank system, was characterized by rather liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking sector: see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Sà ¶rg et al., 2003). This caused a mushrooming of new banks in those countries in the early 1990s. Parallel to this, a series of banking crises, of varied proportions, affected most of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command economy period (the political need to support state-owned, inefficient industries, with the consequent accumulation of bad loans and also the financing of budget deficits), macroeconomic instability, risky expansion and investment strategies and also sheer inexperience, both from the investor s and from regulators. Progressively, the re-capitalization, privatization and internationalization of the banking system (mostly into the hands of EU financial conglomerates), coupled with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems. Two of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other smaller banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of â€Å"financial sector distress in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The initial proliferation of banks was, quite naturally, followed by a process of consolidation and strengthening-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 currently, while Hungary had 33 banks in 2002, showing only a very slight decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 8 1 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone). This consolidation process was frequently led by foreign companies, which now hold the majority of the assets of the banking system in virtually all of them-contrary to the situation in the current EU Member States-bar Slovenia. This process now has a component of regional expansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Sà ¶rg et al., 2003, ibid). The share of banking assets to GDP, nevertheless, is still far below the Euro area average (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, especially in the Balti c republics: with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and close to 5% in Latvia (Latvia, with its close trading ties to Russia, has a particular strategy of selling itself as a stable financial services center to CIS depositors: see IMF, 2003(b), ibid). The supervision system has also substantially improved, and, following recent international-and EU- best practice, is now centered in independent universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., estimate that the formal regulatory environment for the Czech Republic, Hungary and Poland is actually above the EU, and that its actual enforcement level is at its average;Liive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002). 3.1 BANKING CRISES IN EASTERN EUROPE The Baltic bank crises were, to different degrees, linked to liquidity difficulties related tolerations with Russia (in the November 1992 Estonian case, by the freezing of assets held by some Estonian banks in their former Moscow headquarters, while the Latvian and Lithuanian episodes of, respectively, March and December 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose export commodities, at that time, were still below world price levels) and regulatory tightening (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the country to hyperinflation (reaching over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to inadequate real sector reform, with state-owned, loss making enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector: those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the largest state bank, the State Savings Bank -SSB). Periodic foreign exchange crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close insolvent banks), and a tightening of policy actually led to more bank runs. A caretaker government in February 1997 (before a newly elected government took power in May) paved the way to longer lasting reform and the implementation of t he CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilateral institutionsamely, (namely the IMF). 4. STOCK MARKETS The existence of stock markets is assumed to be beneficial for economic performance. In principle, it provides a way for companies to raise capital at lower costs than through simple banking intermediation, and because it is not as restricted a source of capital as internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based governance in the US and the EU, and the shift towards a more regulated environment) assumed to provide better governance for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with stock markets playing marginal roles in most of them (and, in some, a very marginal role: in Bulgaria, Slovakia and Romania, their average market capitalization in GDP terms is below 5%: see Figure I below). All of these countries had (re-)established stock markets by the mid-90s (see Table III above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of voucher certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial Public Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher-driven privatization, the initial large number of investors and traded stocks in those stock markets was soon concentrated in a rather limited number of institutional investors-domestic and foreign- and â€Å"blue chip stocks. In the IPO-driven markets, the number of stocks and investors actually tended to increase with time, albeit from a rather concentrated base. Even in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU average (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slovenia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in several years. Also, the average market turnover is equally below the one observed in comparable EU economies. Similarly to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources. This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets: the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the ongoing efforts of the Lamfalussy Committee towards a single European market for securities: according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approval), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each individual country to have its own separate stock market. One must also recall that the current national stock markets in the mature developed economies are themselves the result of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgari a in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some mature markets, like Germany and the US. Nevertheless, the observed tendency of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania). All the specific questions described above concerning the way those stock exchanges were founded and their later developments, plus their relative smallness and shallowness, affect the dynamics of their stock market indexes (SMI), and are clearly reflected by them (as one may see in Figure II, below). This, coupled with the rather limited duration of the series, may affect their adequacy as proxies of financial cycles. Source: Datastream, modified by the authors. The price indexes here were converted to US Dollars and re-based to a common reference period were they equal 100, May of 1998. The country codings are as described in the Annexes. 5. ESTIMATED INDEXES The construction of the index for this new sample of countries was the core of this work. A comprehensive effort was done to crosscheck the information collected from papers and publications with national sources. Below we present the estimated monthly index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written about the individual countries and the region. This is an index that falls with liberalization, where maximum liberalization equals one and minimum three (in this sense, one could actually see it as an index of financial repression). As an additional robustness check, the year-end value of the index here constructed was regressed on the combined EBRDs yearly indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35. As one may see from Figure III above, the process of integration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the â€Å"Full Liberalization Index in the early 1990s do not indicate reversals: the merely reflect the entry into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they â€Å"enter the world as highly closed economies, but those countries introduced liberalization reforms almost immediately from the start. After this, a slight increasing trend, that does reflect a mild liberalization reversal, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed. Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the collapse of the Czech monetary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly dependent of imported energy sources) seems to have driven these mild liberalization reversals. Comparing the Full Index constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, but both the â€Å"entry of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the emerging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, but it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs â€Å"leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy institutions and instruments (see Vinhas de Souza and Hà ¶lscher, 2001): a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of mature, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spikes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was essentially driven by the Financial Sector liberal ization component. As will become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s. Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account restrictions) and ACs set (financial sector): see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower. One could, in principle, aggregate the countries in our sample in three different groups: rapid liberalizers (the ones that followed a â€Å"big bang early approach, without major reversals: Bulgaria, Estonia, Latvia, Lithuania), consistent liberalizers (the ones that followed a more delayed path, but also without major roll backs: the Czech Republic, Hungary, Poland) and cautious liberalizers (the ones whose liberalization path was either openly inconsistent or downright mistrustful: Romania, Slovakia, Slovenia). 5.1 COUNTRY-BY-COUNTRY LIBERALIZATION PATH. In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restrictive measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-)constitution of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard peg and the potential gains with interest rate differentials. After the peg was replaced by the current float regime, this restriction i s duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of any liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the late 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003: resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the f inancial sector liberalization is observed from early 1998, also resulting from the experienced banking crisis: reserve requirements on deposits on foreign accounts by non-resident are introduced; In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time; In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and cautious one: at the end of the sample, it has the highest (i.e., less liberalized) score for the â€Å"Full Index of all countries in the sample: 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other â€Å"Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversals are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the entry in effect of the EU Association Agreement, across-the-board further (re)liberalization measures have been introduced. 6. FINANCIAL CYCLES AND LIBERALIZATION The financial cycle coding which is used by KS defines cycles as a at least twelve month-long strictly downwards (upwards) movement, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. Beyond that, these series have a rather limited time extension (our sample covers the 01:1990-06:2003 period). Adapting KS criteria to the limited time dimension of our sample, we use a less stringent definition of â€Å"cycle, the same algorithm as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of these 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration. 7. CONCLUSION The main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally planned economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study: in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and common shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the extension of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results diverge from KS, as in their work â€Å"emerging markets experience a relative short run increase in the amplitude of downward cycles. Another noteworthy feature is that only minor liberalization rever sals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by â€Å"contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the importance of institutions and of the EU Accession, this papers initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyzed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process. Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the majority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility.

Fitzgeralds Use of Language in The Great Gatsby Essays -- essays rese

In the novel The Great Gatsby, Fitzgerald uses tone, diction, syntax and imagery to voice Nick's perception of the world around him. In this passage his use of language is used repetitively to convey Jordan Baker, Daisy and Tom Buchanan's lives. On the outside it may look like they all are living a perfect and ideal life, however Fitzgerald's illuminating use of language highlights how far from perfect their lives truly are. When he first walks in Nick judges Tom and Daisy's lives based on the appearance of the house, perfect and romanticized, yet he soon learns that this first impression is an overstatement. Nick's use of diction such as 'fragilely bound' (12) and 'French windows' (12) connote that their lives may look perfect on the outside but in reality they're brittle on the inside, since the words fragile and French suggest that their lives are breakable. His choice of diction also suggests an impersonal feel to the house, as if the people inside it are living a bland and dull life. As Nick walks farther in he compares the 'frosted wedding cake of the ceiling' to the 'wine- colored rug' implying both Purity and corruption. He views the cake-ceiling as pure since wedding cakes denote the meaning of innocence and purity but compares the innocence with wine which suggests corruption and impurity. Again, this comparison shows that Tom and Daisy's lives look pure as cake, however in reality their life i s as corrupted as wine. Upon meeting Daisy and Jordan, Nick perceives them as if they are ?buoyed up as though upon an anchored balloon.? (12) Suggesting that something is weighing them both down but they both want to be free from their oppressions of their societies-they want to be carefree. Nick?s choice of diction like ?boom,... ...h he goes from idealism to reality. By the end of the evening Nick discovers the true personalities of the characters. This paragraph shows a whole new meaning of the color white, in this passage white implies impurity and ?absence of all desire.? (17) Before, however, it implied elegance, innocence and joy. Nick senses that to the Buchanan?s the evening had no great importance, he believes that it would be ?casually put away? (17) and be forgotten. Nick also perceives the woman to be tools of entertainment for the men. In conclusion, Fitzgerald?s use of language connotes the reality of Jordan Baker, Daisy and Tom Buchanan? lives. His use of diction, imagery and syntax suggests how their lives have no excitement and desire. Nick views them as white- dull and bland. Therefore, by using diction, imagery and syntax, Nick shows how imperfect their lives truly are.

Animal Farm, by George Orwell :: Animal Farm Essays

â€Å"All animals are equal, but some animals are more equal.† This statement is true when pertaining to George Orwell’s Animal Farm. The first half of this quote embodies some of the fundamental ideals of the animalist visionary Old Major. The second half signifies the ideas after being doctored to meet the pig’s wants and needs. The pigs of Animal Farm used their relatively high intelligence to their advantage. In chapter 6, the pigs clearly altered the â€Å"seven commandments† to say â€Å"No animal shall sleep in a bed with sheets,† (p.79). This allowed them to take up residence in Mr. Jones’s house, a privilege only granted to them. The pig’s ability to read and write, and other animals’ lack of such knowledge widens the gap of â€Å"equality† between the species of Animal Farm. The pigs do many things that may seem unfair or unjust to the other animals. The pigs selfishly mixed milk and apples with their mash and on a separate occasion saw it fit for themselves to sleep in beds. Pigs like Napoleon used Squealer to justify their actions. His sophisticated diction confuses the animals, but at the same time convinces them that what the pigs do is in their favor. He proposed that theses things were â€Å"†¦ absolutely necessary to the well being of a pig.† The animals lack the ability to disagree or form arguments against the pigs, so they are free to selfishly increase their â€Å"equality,† unopposed. Napoleon, the chief pig, eventually used force to carry out his orders in Animal Farm. His attack dogs drove Snowball away, and inspired the fear necessary to gain total control of the Farm, as these beasts left the animals â€Å"†¦ too amazed and frightened to speak.† His foresight to train these dogs, and his use of force, slowly move Animal Farm away from its original utopian equality and more towards Napoleon’s totalitarian ideas.   Ã‚  Ã‚  Ã‚  Ã‚  The cunning of pigs like Napoleon allowed them to begin what seems to be an underhanded attempt to take over Animal Farm.

Free Glass Menagerie Essays: The Destruction of Laura :: Glass Menagerie essays

The Destruction of Laura in The Glass Menagerie In Tennessee William's play, The Glass Menagerie, the character of Laura is like a fragile piece of glass. The play is based around a fragile family and their difficulties coping with life. Laura unable to survive in the outside world - retreating into their apartment and her glass collection and victrola. There is one specific time when she appears to be progressing when Jim is there and she is feeling comfortable with being around him. This stands out because in all other scenes of the play Laura has never been able to even consider conversation with a "Gentleman Caller." Laura's mother and brother shared some of her fragile tendencies. Amanda, Laura's mother, continually lives in the past. Her reflection of her teenage years continually haunts Laura. To the point where she forces her to see a "Gentleman Caller" it is then that Tom reminds his mother not to "expect to much of Laura" she is unlike other girls. But Laura's mother has not allowed herself nor the rest of the family to see Laura as different from other girls. Amanda continually lives in the past when she was young a pretty and lived on the plantation. Laura must feel she can never live up to her mothers expectations. Her mother continually reminds her of her differences throughout the play. Every time the family comes to a confrontation someone retreats to the past and reflects on life as it was back then, not dealing with life as it is for them today. Tom, assuming the macho role of the man of the house, babies and shelters Laura from the outside world. His mother reminds him that he is to feel a responsibility for his sister. He carries this burden throughout the play. His mother knows if it were not for his sisters needs he would have been long gone. Laura must pickup on some of this, she is so sensitive she must sense Toms feeling of being trapped. Tom dreams of going away to learn of the world, Laura is aware of this and she is frightened of what may become of them if he were to leave. Laura feels she will never find someone that will take care of her. This is very upsetting because it is obvious that it is very important to everyone in the family.

Disolving stress living The Present

Stress is the emotional, mental and physical response to the ever changing environment; in an attempt to adapt to the new outer circumstances, the person produces stress. Stress itself is not good neither bad, since our bodies are designed to produce stress. I keep us alert and active. The problem starts when we cross the limit of disturbance and make it chronic; this is when we feel stress about situations that don’t require such an alterative state of mind.Stress is present in our society, especially in the big cities and capitals where is aggravated by the noise, traffic and long distances. Stress can be cause by anything that requires a person to adjust to a new situation and this depend on how every person takes an event, since every human being is unique, there are so many ways of experiencing stress and the causes that can produce it. In a certain way, stress is necessary to live, but if not controlled; it can disturb seriously the person who suffers it.Young women face higher risks of stress, especially the working ones but it seems the damaging effects of stress on them is minimised by the fact that they speak out about it; on the contrary, men seem to keep it for themselves. Lately it seems stress is starting to affect even children and teenagers; some suggest they may be â€Å"learning† it from their parents. Also, White race seems more sensitive to stress than Black and Asian race and the more educated is a person, the more stress can experience. For stress management has nothing to do with intellectual learning but experimental, is an attitude towards life.Maybe the reason is that the most educated have a very high sense of must, while the non- educated is not aware of the opportunities that is missing (not involved in the rat race). Personally, what I learnt about stress is that is almost impossible to get rid of it by itself, is necessary to apply consciousness in order to become calmer, quieter, try to live the moment and not live in the future nor in the past but let life just to unfold itself, day by day, and solve the issues that the moment brings, when they come to light (not try to solve them in mind before they happen).In order to review the literature on stress and describe both the processes and sources of stress, as well as methods for coping, a literature search was conducted which identified 3 studies that were relevant to the questions in this paper, one of them about the work related stress, another on relation between mindfulness and stress and another on relation between breast cancer and stress. RESULTS Stress could be then thought of as an exaggerated reaction of the body that acts upon an external circumstance on a non proportional way.It causes emotional suffering to the person who carries it and it can even develop in depression. The physiological reactions are nervousness physical upsetting, tiredness, etc.. Therefore, meditation proves very successful in the treatment of stress. Also, a realistic view of life can help, avoiding living on desires or sheer of imagination. Also Bach flowers may help without having to suffer any side effects.