By Myla Swallow and Richard Vargo
This study regresses key variables that influence the profitability of Conventional and Islamic banks as measured by Return on Average Assets, to determine the impact of Islamicity on the profitability of the banks in a given country. The study compares 36564 banks in 77 countries belonging to both Islamic and non-Islamic countries. We find that Islamic banks have higher operating costs and overall experience lower return on average assets.
Advisors: Professor Kent Kimbrough, Professor Michelle Connolly | JEL Codes: F30; G21; Z12
Asylum Determination within the European Union (EU): Whether Capacity and Social Constraints Impact the Likelihood of Refugee Status Determination
By Louden Paul Richason
This paper analyzes whether capacity and social constraints impact acceptance rates for asylum seekers in the European Union from 2000-2016. Theoretically people should receive asylum based on the criteria outlined in international law – a well founded fear of persecution – but the influx and distribution of applicants in the European Union suggests that this may not hold in practice. For a group of pre identified “legitimate” asylum cases, this paper finds that surges in applications in a country (i.e. capacity constraints) have a positive and statistically significant correlation with acceptance rates, while the percentage of migrants in a country (i.e. social constraints) has a negative and statistically significant correlation with acceptance rates. This suggests that the burden of proof becomes easier during a surge in total applications in a country. However, as the international migrant stock in that country increases, it is more difficult for that same group of applicants to receive asylum.
Advisors: Professor Suzanne Shanahan, Professor Michelle Connolly | JEL Codes: D73, D78, F22, H12, J11, J15, K37, O52
By Joshua Curtis
Using a regression discontinuity design on a gravity model of trade among 36 Middle Eastern and East Asian countries between 1980 and 2014, this study demonstrates network effects in trade. A small improvement in trade between subsets of two cultural blocs diminishes the effect of cultural similarity on trade between all members of the two cultural blocs. The result holds regardless of whether cultural similarity was originally a boon or drag on trade. Furthermore, international businesses adjust to new intercultural acumen very rapidly. The effect demonstrated herein points toward an answer to economic dilemmas posed by Huntington’s “clash of civilizations.”
Advisor: Dr. Lori Leachman, | JEL Codes: F1, F5, B27
By Gwen Geng
The paper considers what attracts Chinese aid and Chinese investment to African countries and what kinds of Chinese financing projects are more likely to have unrevealed financing amount. The main database used is AidData: China’s Official Finance to Africa 2000-2012. It contains 2356 Chinese financing projects to 50 African countries. The results suggest that Chinese aid supports less developed economies, while Chinese investment favors countries with resource abundance and political conditions conducive to profit-making. The findings show that projects with unrevealed funding amounts tend to fall under investment and the government sector among other categories, raising questions on financing secrecy.
Advisors: Robert Garlick and Michelle Connolly | JEL Codes: F13, F54, N47, N57, O24, R11, R15
By Shihab Osman Malik and Faisal Bandar Alsaadi
This study examines the relationship between the fixed exchange rate regime, economic growth, and output volatility in oil-‐‑producing Saudi Arabia over the post-‐‑Bretton Woods period (1973–2016). We assess the implications of the current exchange rate regime on macroeconomic and growth performance, and evaluate its sustainability in the context of oil-‐‑dependency and market dynamics. We develop and employ a theoretical framework and empirical specification based on previous literature to find that for Saudi Arabia, the fix is associated with faster growth and lower output volatility. We believe the result is primarily driven by the credibility of the fix in terms of establishing a strong nominal anchor and monetary policy framework.
Advisor: Lori Leachman | JEL Codes: E42, F31, F36, F41, O53
By Alican Arcasoy
Membership in the European Union has long been a goal of the Turkish Government. The economic benefits of access to the single European market are highly attractive for a developing country like Turkey. However, joining the European Union requires a number of costly reforms. The institutional, political, and economic changes demanded by the Copenhagen Criteria can rack up a large bill for some governments. This paper will focus on the costs of reforming Turkey’s Judiciary to meet European Union standards, and whether or not those costs outweigh the economic benefits of membership.
Advisor: Michael Munger | JEL Codes: F5, F53, F59
By Victoria Lim
The American film industry, which has historically been driven by the domestic market, now receives an increasing proportion of its revenue from abroad (foreign share). To determine the factors influencing this trend, this paper analyzed data from 11 countries of 2,337 American films released during 2000 – 2014. Both film and country attributes were analyzed to determine each attribute’s effect on foreign share, whether its effect size has changed over time and whether each attribute has changed in frequency amongst films released. The results identified six attributes, star actors, sequels, releases in top markets, release time lag, GDP growth and a match in language, that contributed to the increase in foreign share over this period.
Advisor: James Roberts, Kent Kimbrough | JEL Codes: F40, L82, Z11 | Tagged:
By Junaid Arefeen
The recent onset of the sovereign debt crisis in the Eurozone has brought the viabil-ity of the Eurozone as a currency area into question. The unsustainable debt and deﬁcit balances accumulated by several Eurozone nations since the adoption of the common currency in 1999, and the consequent incidence of high levels of sovereign default risk in the euro-area, indicate that the ﬁscal convergence criteria employed by the European Central Bank to monitor the ﬁscal discipline and sustainability of its members have been largely ine↵ectual. This paper draws upon the theory of optimum currency areas, and proposes a set of business cycle convergence criteria that can be employed as an alternate means to minimize the risk of ﬁscal imbalances and sovereign default. Economic theory suggests that a currency union with convergent business cycles will be insulated from asymmetric shocks, removing the need for countries to rely wholly on their ﬁscal policies when dealing with negative shocks (as would be the case in a currency union with non-synchronous countries su↵ering from negative asymmetric shocks). Therefore, as the risk of ﬁscal imbalances is minimized, a currency union with synchronous business cycles is expected to have low incidences of sovereign default risk. This paper tests this economic intuition empirically, and employs a multivariable panel regression model to determine the relationship between business cycle convergence and sovereign default risk (proxied using sovereign yield spreads). The regressions reveal that the degree of business cycle convergence is one of the main determinants of yield di↵erentials, and the relationship between the two is negative (as expected). The consistency of the results to numerous robustness checks provide a strong case for substituting the current ﬁscal convergence criteria with measures that assess the degree of business cycle convergence.
Advisor: Andrea Lanteri, Cosmin Ilut | JEL Codes: E32, E43, F34, F44, F45 | Tagged: Cycle Convergence, Optimum Currency Area, Sovereign Default Risk
Understanding the Argentine Peso’s Devaluation in 2014 —Analysis on Argentina’s Fiscal Sustainability from 1993 to 2013
By Feng Pan
This research analyzes the fiscal sustainability of Argentina from 1993 to 2013. Specifically, it explains the peso devaluation in early 2014 and suggests that it is primarily due to the fundamental problems in Argentina’s economy. This paper highlights Argentina’s inability to enhance its fiscal conditions and suggests possible future economic developments in Argentina. This paper concludes that there is high
chance of hyperinflation, debt default, and the eventual dissolution of the managed exchange rate regime in Argentina in the future.
Advisor: Alison Hagy, Craig Burnside | JEL Codes: E43, E44, E52, E58, E62, F31 | Tagged: Argentine Peso, Exchange Rate, Fiscal Sustainability
What is the Effect of Regulatory Supervision on the Profitability and Outreach of Microfinance Institutions?
By Nikolaus Axmann
Regulatory supervision is an important part of the formal banking process. As microfinance institutions have developed and multiplied, they have become more closely regulated, which has allowed many of them to evolve into more traditional banks. But there are concerns over microfinance regulation, as complying with regulatory can be costly, particularly for smaller institutions. Using high-quality cross-sectional data from the Microfinance Information eXchange, I conduct ordinary least squares and instrumental variables regression of regulatory supervision on profitability and outreach of microfinance institutions. Controlling for the non-random assignment of regulation using instrumental variables, I find that regulation is correlated with higher average loan sizes and less lending to women, but increased profitability among for-profit microfinance institutions. The results are consistent with the hypothesis that for-profit microfinance institutions change their business model in response to regulation by cutting outreach to lending sectors that are generally more costly per dollar lent. In contrast, nonprofit microfinance institutions do not adjust loan sizes or reduce lending to women in
response to regulation, although their profitability does not increase either.
Advisor: Edward Tower | JEL Codes: F6, F61, F63 | Tagged: