Review of Capital Market in a Small Country: The Case of Slovenia Article by Jochen R Andritzky - Essay Example

Capital Market in a Small Country: The Case of Slovenia’ by Jochen R Andritzky Summary The paper on ‘Capital Market in a Small Country: The Case of Slovenia’ written by Jochen R Andritzky was published in 2007 by the International Monetary Fund as one of its working papers. The paper basically deals with the strategies to develop more developed capital markets in smaller countries. Though the study has dealt with a case study of Slovenia, ideal to be called economically a small country, the paper sets a model for capital market development in smaller countries. The paper with the aid of supporting data and evidences suggests the lack of the development possibilities for a well built capital market backed by local investors in small economies despite the substantial growth of their economy. The data pointed out by the article proves the economic status of Slovenia as an ideal example for this scenario. The paper very well confirms the availability of ample infrastructure in Slovenia so as to develop a mature capital market. The author has urged the need of developing an ‘equity culture’ in the Slovenian market so as to create a promotional economic environment for the growth of a healthy capital market. This in turn needs the liberalization, deregulation and adjustments in the structural issues, supervisory issues and the issues in relation with the implementation of common guidelines in relation with the international capital market. The author demands the capacity building and branding of state owned stakes to develop their status as ones having sellable stocks. Incentives so as to foster financial innovation have to be issued by the government. Further, it has been demanded to develop international collaborations and associations so as to trigger the development of a corporate market. The article also suggests that the regulations on foreign investment and their participation in local trade have to be taken off. These strategies in alignment with administrative reforms have been envisaged by Jochen R Andritzky to promote the development of a capital market. Review & Critique The article is a guideline for individual economies to develop as globally competitive ones. Though the conclusions of the article have been framed in accordance with a case study done on Slovenia, they are applicable for the prospering economies still striving to get into the global scenario. Primarily the international expertise of the author and the organizational profile he owns confirms the credibility of the study. The study has been based on solid scientific investigation strictly based on economic grounds. The paper has well evaluated the background that Slovenia as nation holds, to develop a capital market. The current state of Slovenian economy has been researched based on the analysis of Capital Market size and volume. In addition all aspects of the economy that prevailed in the nation including; Issuer and investment base; Economic infrastructure and the regulatory mechanisms has been very well evaluated. The approach followed in formulating the developmental strategies are also economically and scientifically relevant. However, while taking into account the current global economic scenario of recession, it can be found that the policy of liberalization and deregulation as suggested by the paper has to be reassessed. In the current economic recession which has been declared as the worst ever after the Great Depression by the IMF itself, it can be found that the countries which had a regulated and largely public oriented economies were not badly hit by the economic backlash. On the other side, the highly liberalized capital economies were hit the worst. Thus before implementing the recommendations made by the paper, the governments will have to make proper research and will have to have close monitoring of the capital market in its making. The New Comparative Political economy’ by Peter J. Boettke, Christopher J. Coyne, Peter T. Leeson, Frederic Sautet Summary The article titled ‘The New Comparative Political economy’ written by Peter J. Boettke, Christopher J. Coyne, Peter T. Leeson, Frederic Sautet deals with the changes in the way that the world and its individual political policies are approaching comparative political economy after the collapse of communism in the late 1980s. The paper clearly points out that socialism is in no way an alternative to capitalism. In turn the alternative for any ailing economic systems is the switching between different capitalistic approaches. The institutional approaches of corporate capitalistic economy has been suggested by the authors as the alternatively usable options and but the socialistic economic tools has been entirely denied by the authors as viable options. The conclusions of the study have been framed after careful evaluation in varied level of aspects. The changes in the approach towards economy has been studied through the evaluation of the evolutionary process of economic behavior in accordance with the changing legal, political and social systems as occurred in the studied period. The impact of these economic behaviors on influencing the overall performance of the economy was also carefully assessed by the authors. In a sense, the study is a documentation of the history of developments in comparative economics. The study has also explained the transition process of the general global economy from a socialist one to one based on comparative politics. The basic methodology of the study was through personal interviews of concerned peoples and officials, surveys and participant observations. The article concludes that the basic need in sustainable economic development is not constructing a vibrant economic order, but to have tools helping the formulation of an economic environment wherein the economic actors have full freedom on planning, implementing and the financial sourcing. Review & Critique The study titled ‘The New Comparative Political economy’ written by Peter J. Boettke, Christopher J. Coyne, Peter T. Leeson, Frederic Sautet has in general taken a pro-capitalistic approach. It has suggested that the socialistic approach in economics is no alterative for the capitalistic economic institutions. The key finding of the study with reference to the history of comparative political economy is that the varied forms of capitalistic institutions must play alternatively to construct a healthy economy. The argument made by the authors is that a free and regulation environment free should exist for the economy to flourish in the era of The New Comparative Political economy’. This observation may have found relevance as far as the studied period is concerned. But the results of the study cannot be locally implied in all current economic scenarios. The latest developments in economics as that of the recession, has proved the socialistic and public oriented economies to be more stable that the capitalistic ones. However, it may be true that a liberalized economy may be required to make an economy compete globally in the New era of Comparative Political economy. But time has proved that unmonitored deregulations and liberalization has caused the economies to have detrimental effects. The non-statistical approach of the study also adds complexity to the study. However the nature of the observations made through the surveys has been pointed out as the justification for this approach. ‘Financial and Economic Education Products and Services of Austrian Institutions and Enterprises’ Summary The article titled ‘Financial and Economic Education Products and Services of Austrian Institutions and Enterprises’ searches for the lacunas in the financial and economic education system that exists in Austria. The article primarily has researched upon the need of the promotion of financial education in Austria. For this cause, the author has cited a number of surveys done by different agencies involving populations from different classes of the Austrian society. It has been quoted an extensive survey done by Institute for Research on Qualifications and Training of the Austrian Economy so as to test the then status of knowledge financial and economic basics among 3300 final year students from the Austrian schools. Further the information from the survey commissioned by the ‘The Vienna Economic Chamber’ has also been included so as to analyze the economic knowledge among final year students in secondary school. This involved students from Germany, Czech Republic and Holland along with the Austrian students. A research conducted by The Vienna Chamber of labor’ which analyzed the level of knowledge of the employees and apprentices in Vienna on consumer credits, life insurance policies and mutual funds also has been included in the article. With this background information on the level of financial and economic knowledge in Austria, the author has reviewed the economic and financial education products available in Austria for their quality and reach. This covered a number of institutions and mechanisms which offered extension of economic and financial knowledge. In light of this analysis, the target groups which are left out to be exposed to economic and financial education have been clearly pointed out. The article concludes with practically applicable recommendations so that Austrian population in general has proper economic and financial literacy. Review & Critique The conclusions made by the article titled ‘Financial and Economic Education Products and Services of Austrian Institutions and Enterprises’ has followed a very practical approach in finding the lacunas in the national literacy on economics and finance. The results that has been suggested out of this approach is thus to a large extend is locally applicable. In simpler language, the suggestions made by the author on the measures to be taken so as to enhance public awareness on Finance and Economics can be readily applied in a practical scenario. The study is thus ethically justified. As far as the credibility of the information used is concerned, as the study has adopted research and survey findings from different agencies in the field, the secondary data used can be asserted as of high quality and scientific relevance. Moreover due consideration has been given to include a wide range of population, when the surveys and researches were selected. This justifies the inclusion criteria for the surveys and researches that were considered. It must be noted that the surveys covered high school students, secondary school students, apprentices and professionals. In totality the paper can be critiqued as one with quality and applicability. The paper is an ideal reference material for researchers and on the other side the simplicity in approach would help it be properly understood by common man as well. The conclusion of the paper clearly suggests the lacunas in Austrian Economic and Financial literary and points out measures to fill these gaps. ‘Multi-causal Conflict in Algeria: National Identity, Inequality and Political Islam’ by Cathie Lloyd Summary The article by Cathie Lloyd on ‘Multi-causal Conflict in Algeria: National Identity, Inequality and Political Islam’ deals in detail about the conflicts that the people of Algeria faced in the process of sensing their identities. The author provides a background on the historic relevance of the country dealt with. Algeria has had a particularly turbulent history as it has been colonized by Phoenicians, Romans, Arabs and later Europeans for a long time. Multi-causal conflict in Algeria has taken different forms to make sense of their identities, gain control over their lives and the direction of their society. As per the author, at independence in 1962 the country’s economy was totally shattered and exploited. .Though the Algerian economy placed its total hope in its large reserves of oil and gas, global economic players who extracted Algeria’s natural resources completely ignored the conditions of Algerian people. The neglect of agriculture and other sectors like housing placed strain on the social fabric. The rapid urbanization overcrowded towns and cities. The author poses concern over the imbalance in the social value identification and the economic growth. Another major concern pointed out in the article the social imbalance that was caused as the constitution made Islam as the state religion. This paved way to conflicts on the grounds of religious division as majority of Algerians are Sunnis, divided between a puritanical Islam and the Islam of the mrabtin and the Sufi orders. Women were the first group to suffer from the new puritanical climate. According to the author there are two dimensions to the dynamics behind the growth of inequality in Algerian society. The growing prosperity of elite linked to ruling party and the attempt of the Government to accommodate conservative interest groups. The increasingly tense social and political climate led to industrial unrest, violence and state repression. Algeria witnessed several bloody massacres as well. According to the article Algeria is indeed a boiling pot that can burst out any time as the internal conflicts along with global frictions gain momentum. The economic and global flows increasingly influence the conflicts .Developing a peaceful atmosphere in Algeria must be considered seriously and this is possible only through combined efforts of government, media and the citizens of Algeria. Review & Critique The article is an ideally made warning on the growing imbalances across the globe with reference to economy and social traits. When the world and the countries individually as well are striving hard for economic development, the social, cultural and political values are being forgotten. Though the paper has specifically dealt with Algeria, the message is generic for all the countries, especially for the ones which are rich in their culture. The pressure of the economic competition from different nations is also a clear message of warning. The inclusion of economic and cultural flow as a factor contributing to the internal conflicts in Algeria is message which is quite applicable in the present global scenario. The global flow and exchange of economic, cultural and human resources is a unique feature of the present economic scenario. Thus this article leaves a generic message to the whole world on dealing with the issues of cultural, economic and human resource leakage. The conflicts that these leakages along with intrusion of foreign factors bring into the national economy must be duly considered. As far the credibility of the historic content explained in the article is concerned, it can be reviewed as authentic because a number of references has been included in the article which are abstracted from other authentic works. ‘Does it matter that we dont agree on the definition of poverty?: A comparison of four approaches’ by Caterina Ruggeri Laderchi, Ruhi Saith and Frances Stewart Summary The paper titled ‘Does it matter that we dont agree on the definition of poverty?: A comparison of four approaches’ written by Caterina Ruggeri Laderchi, Ruhi Saith and Frances Stewart compares the four different approaches followed for the definition and measurement of poverty. Globally the accepted approaches are the monetary, capability, social exclusion and participatory methods. The authors opine that there can be differences in the poverty statistics depending on the adopted approach which in turn influences the economic policy. The variation can be to the extent that the characterizations go wrong. The author has included the recent studies conducted in India and Peru provides as proof for this. Thus the definition of poverty plays pivotal role in planning poverty eradication strategies. Further, the authors explain the four different methodologies in detail. The monetary approach is the most widely used but it creates a false impression of being accurate methodology. The capability poverty does not include what we usually mean by poverty but it covers wide range of deprivations which do not come under other approaches .Participatory poverty methods are highly useful in poverty analysis and in providing a meaningful but not exclusive definition of poverty. Social exclusion approach is relevant in the context where a complete focus on individual measurement based either on monetary or capability approach divert the attention from the basic causes of depreciation. Defining SE approach in a developing country context might seem difficult but its effort is highly appreciable since it points out the process of impoverishment, societies responsibilities in causing deprivation and group issues that may be neglected in other approaches. The author concludes that so as to adopt a policy suitable for the requirement, conceptual awareness of different methods is a necessity .Adoption of combined methods while identifying and targeting the poor must also be executed in a better manner for removal of poverty .Therefore formulating a clearer definition of poverty is inevitable for the economic policy of any country that focuses poverty reduction as its major theme. Review & Critique The strength of the paper is that the key suggestions of the paper can help governments to have precision in their policies. Thus the article is very much locally applicable and relevant. This must be read together with the fact that in the present scenario poverty alleviation is a major concern all around the globe and this makes it mandatory to properly understand who is poor and why is he or she poor. The findings of the paper are very well substantiated by evidences and case studies. Each of the definition methodologies has been reviewed in detail using scientifically relevant indicators. The authors have done ample research in the process of identifying the common problems encountered in defining and measuring poverty. So as to add more clarity and understandability for the ideas relevant diagrams also has been included. Along with a theoretical approach, the practical and the operational issues while dealing with each of the methodology has been explained in detail. The paper also includes charts comparing the four methodologies aiding as an easy reference. The lacunas and the non-overlapping nature of the four methodologies have been expressed through the comparison of poverty charts done using different methodologies. In totality, the article has been successful in extending to the reader, the lacunas that prevail in the present statistics on poverty. ‘Agent and Broker Intermediaries in Insurance Markets – An Empirical Analysis of Market Outcomes’ by Martina Eckardt Summary The article titled ‘Agent and Broker Intermediaries in Insurance Markets – An Empirical Analysis of Market Outcomes’ written by Martina Eckardt is a comparative study on the efficacy of insurance brokers and the insurance agents in ensuring optimal service for the customers. The author is in favor of the fact that insurance brokers are one step ahead of insurance agents in providing high quality information and advisory services to consumers .This hypothesis is easily derived from theories like transaction costs economics, agency theories, law and economics literature etc . The author uses empirical tests conducted by German insurance intermediaries to support these facts. In reducing transaction costs and information asymmetries, insurance intermediaries play a pivotal role. Insurance markets are subjected to various risks and fluctuations. The incentives provided by the legal authorities force the brokers to supply better quality services. Though the incentives provided by them sounds pretty good, structural factors like size of the firm, structure of the employment, degrees of specialization influence the consumers in the market as well. The author is also of the opinion that the insurance agents and the brokers who have huge share of new customers in their respective sales volume shows similar behavioral pattern. The quality problems during intermediation processes cannot be solved even if the customers seek advice from either insurance agents or brokers alone. Thus one has to consider both mean values and absolute values of quality indicators provided by the producer in the market before reaching at a conclusion. Though this is the case, in the present scenario insurance brokers show high mean values on their provided services indicating a small weightage required for their counseling services. Therefore according to author’s point of view enhancing both agents and brokers with more incentives will definitely improve the provided services. Review & Critique The observations made by the author can act as a benchmark for the insurance companies in the present competitive corporate scenario. This must be read together with the fact that quality services would be the key to success with a number of companies sharing the same competitive ground with a wide range of products. The cost reduction is also important especially in the current global economic scenario which is passing through hard times of recession. Thus the information provided by the paper is locally relevant and applicable. One of the keys strengths if the article us the wide range of literatures included in the literature review process. So as to provide proof for the different aspects dealt by the article, the author has effectively used references from different authors. This adds to the credibility of the paper. The theoretical approach followed by the author also aids the scientific relevance of the paper. The author has taken care to apply contextually relevant theories as well. The hypothesis of the study has a clearly focused issue. The sample size used for the survey involving 4687 German self-employed insurance intermediaries also has been big enough to represent the population. The sample selected is thus a representative sample of the whole population. The inclusion criterion of the insurance agencies is however on doubt. But as this was not measurable, the input and output indicators used solved this concern to a major extent. Thus the research has been done with proper scientific quality making the conclusions of the paper precise and practically applicable. Issues of US-EU Trade Policy by Wilhelm Kohler Summary The working paper titled ‘Issues in US-EU trade policy’ written by Wilhelm Kohler published in 2002, is a critique on the article “Trade and Investment: An American Perspective” by G. Hufbauer and F. Neumann and also on “Old and New Issues in EC-US Trade Disputes” by André Sapir. The main criticism that has been pointed out by Wilhelm Kohler on the two articles is that both of it does not contain any policy proposal on US-EU trade and investment issues. However the author finds the articles reviewed as interesting and thought provoking and these have provided investigations on the history of US-EU trade policy. The author says that there were no dramatic changes in the US-EU trade and investment during 90s.Despite equality in market size, EU has competitive advantage in the trade and investments than US. The trade effect from NAFTA seriously affects the importance of EU as a source of US imports and a destination of US exports. According to the Author, Sapir is of the opinion that at the late 90s the bilateral EU-US trade became less significant. Recently EU caught up with US in external FDI investments. The author emphasis the possibility of further increment in bilateral trade in future trade liberalization. Policy makers stress the importance on regional agreement than multilateral trade liberalization which resulted in the erection of a Free Trade Area of America by 2005. The author analyses the report of Hufbauer / Neumann in distinguishing market access from industrial policy conflicts and ideological disputes. Though Hufbauer/Neumann is of the view that a continuation of ‘modus vivendi’ approach is the most likely future course of transatlantic trade policy, the author feels that it must be critically analyzed. The role of macroeconomic imbalances in US-EU trade disputes must be considered with due respect. Review & Critique The article has addressed the objective of commenting on the articles of G. Hufbauer and F. Neumann, and André Sapir on the varied impacts of US-EU trade policy. The qualification of the author well suits with the subject and the professional credentials make the author ideally qualified for dealing with such a critique. The introduction of the paper has well dealt with the history of US-EU trade. It has critically discussed the history of trade agreements a dealt by the two articles critiqued. Thus the introduction serves as an ideal background for the whole paper as the reader very well gets to understand the relevance of the critique. Though there is no separate section in the paper for the literature review, all through the paper the authors have referred to appropriate and adequate works. The authors have referred to an explicit range of database and periodicals. A wide range was covered as literatures have been referred by the authors in the process of reviewing the methodology. However, there is no reference in the study regarding the quality assurance process of the review of literature. In totality, the author has effectively used other available contextual literatures to effectively comment on the articles “Trade and Investment: An American Perspective” and “Old and New Issues in EC-US Trade Disputes.” Read More