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Economics of Banking General Economic Questions Write

Economics of Banking General Economic Questions Write a one sentence description for each of the following financial instruments. Then fill in the following table in terms of type of claim (debt/equity), maturity (money market/capital market), risk (low/high/highest), and liquidity (low/medium/high). Identify a type of financial institution or other participant in the financial market (individuals, government, and business) that are most likely to borrow using these instruments, and a type of institution or other participant that are most likely to lend using these instruments. A a) Commercial Paper: An instrument issued by commercial companies (banks, insurance and corporations) which offers fixed, generally low short-term rates for loans to the issuer for periods of one night ('overnights') to several months. It is generally used to fund working capital. A b) Consumer Loans (Credit Card): Non-secured loans to consumers, generally with an indeterminate end date and minimum payments which are mostly interest. Residential Mortgages: Secured loans to consumers using their primary or secondary residences as the main collateral. Generally backed by FHA if below certain threshold amounts, which change regularly. A d) Municipal Bonds: Debt obligations issued by cities and counties, generally tax-free at the state level. A e) Repurchase Agreements: Financial instruments issued in the money markets in which the seller provides securities to the buyer; the seller agrees to repurchase those securities for a greater sum at a later date. A f) Junk Bonds: Bonds issued by debtors whose credit rating is below "investment grade," generally less than B. rating. These generally carry higher risk, but higher interest rates, than investment-grade bonds. Type of claim Maturity Risk Liquidity Commercial paper Debt Consumer loans Debt Indeterminate Residential mortgages Debt 5-30 years Municipal bonds Debt 1-30 years Repurchase agreements Debt/Equity kicker Usually <1 year Junk bonds Debt 1-30 years Likely to borrow Likely to lend Commercial Paper Corporations Banks, Money Market funds Residential Mortgages Consumers Banks, Mutual funds Municipal Bonds Cities, Counties Banks, consumers Junk Bonds Corporations Consumers, Mutual funds Type Maturity Risk Liquidity Borrower Lender Commercial Paper Credit Cards Banker's Acceptances Residential Mortgages Municipal Bonds Repurchase Agreement Junk Bonds 2) Each of the following will make a poor medium of exchange except one. Why is each a poor medium of……

Pages: 3  |  Term Paper  |  Style: n/a  |  Sources: 0


Economic Stimulus

¶ … Economic Stimulus, Banking Firms, and Their Performances: The Current U.S. Financial Environment and What Comes Next The banking industry in the U.S. has been strongly and negatively impacted by the current financial situation of the country, particularly with regard to the subprime mortgage crisis. This crisis became very obvious in 2007 and, since then, there have been a…

Pages: 9  |  Research Proposal  |  Style: MLA  |  Sources: 5


Japan's Economic Crisis Japan Is

" After each attempt to lower the value of the Japanese yen inflation failed to pick up and the country stumbled closer to crisis. Retirement is a huge demographic challenge facing Japan. By 2010, twenty-one percent its population will be over sixty five, the highest of any country. Pension expenditures will be a walloping ten percent of GDP, almost two…

Pages: 10  |  Term Paper  |  Style: n/a  |  Sources: 0


Principles of Banking

¶ … Banking Modern banking has its antecedents in ancient Greece, where entrepreneurs undertook many of the basic functions still conducted by modern banks -- taking deposits, lending money and handling currency. Throughout the middle ages, various groups performed banking functions, mainly for royalty, traders and wealth landowners (Historyworld.net, no date). During this time, governance of the banking industry became stricter and the industry became more formalized. For much of early banking history, the issue of interest was controversial. Christianity forbade the charging of interest and there were many instances where rulers banned bankers or interest-charging. Some banks, such as the Bank of St. George, were nonetheless able to prove successful, financing trade around the Mediterranean. As world trade grew more far-flung, risk levels increased. As a result, the banking profession grew and increased in complexity in response to the new operating environment of world trade, increasingly complicated by long distances, wars, and uncertain supply chains. The National Bank Act at the end of the Civil War established the modern banking system in the United States, and the system developed in a similar fashion in other developed nations. The banking system was beginning to take shape, with a central bank and with stricter regulations. The most fundamental function of banks is to act as a financial intermediary between savers and borrowers (SparkNotes, 2009). Banks accept deposits -- a form of safekeeping for money -- and then lend that money back out. The deposit function is seldom a viable business on its own, but it does serve a valuable purpose with respect to the safeguard of money. Physical forms of wealth are inherently insecure -- they can be stolen. Thus, banks provide security for such wealth. The lending function is where bankers can make profit. This function allows for economic expansion. It facilities capital investment, be it in housing or in equipment for a business. Banks have expanded their role as facilitators of economic growth and capital preservation over the years. Banks now play a critical role in the creation of money. They lend to each other, in addition to the public. The result of this lending is that banks have a higher system-wide capacity for lending. Since more money can be lend, the needs of more borrowers can be met, spurring growth (Ibid). Banks are just one of many different types of financial intermediaries. Although banks have expanded their roles…

Pages: 4  |  Thesis  |  Style: APA  |  Sources: 5


Finance it Is With Great Pleasure and

¶ … Finance It is with great pleasure and enthusiasm I apply for acceptance into the PhD program at your university. My enthusiasm for finance though not immediately recognized as a youth has steadily grown and developed during my career as a student. In a world that is ever evolving and changing, I feel it is essential that financial students and professionals of the future take into consideration the impacts technology and the global business environment will have on the field of finance. My interests in pursuing my professional degree align with this thought process. My research experience thus far has created a strong desire to learn more about global finance. Thus far my research foundation has included examining the strength and creditability of various enterprises and industries as well as summarizing market trends and general financial information. My goal in pursuing higher education in finance includes exploring what strengths and best practices small to medium financial enterprises must adopt to succeed and remain competitive in an increasingly global or international business environment. More and more organizations are relying on international relationships to conduct business in. Technology has changed the way financial enterprises conduct business and communicate with one another. I am eager to pursue analysis of the financial industry in light of these changes to determine what impact technology has had on the industry and what impact it will continue to have on the industry and nature of services global financial firms have on consumers. My skills base currently includes exceptional knowledge in finance and economics, exceptional presentational and team player ability complemented by a collaborative demeanor and the detail oriented, ambitious personality required of a professional student. Thus far my work experienced includes assisting the finance professor at Fisher College of Business, a position that provided great experience in the areas of analysis, market competition and financial review. I feel this foundation will provide me the knowledge base I need to excel in my professional pursuit of finance. My love of finance was not always as clear to me as it is today. During my youth my family encouraged me to pursue finance and follow in their footsteps. My parents both worked in finance, my father as Vice President of a branch of the Chinese Central Bank for eight years; my mother as President of a branch of the Bank of China. Many of my relatives also work…

Pages: 3  |  Admission Essay  |  Style: n/a  |  Sources: 0


Disrupting America's Economic System Is

The U.S. Treasury, led by Andrew Shaw, subsidized these gold flows by offering to temporarily place public deposits in banks if they imported gold from abroad. The policy lowered the gold import point by offsetting the interest lost while gold was in transit. Goodhart [1969], however, notes that the gold import point was often low enough to have justified specie…

Pages: 50  |  Term Paper  |  Style: n/a  |  Sources: 0


English Right of Set-Off and

And, according to the Court of Appeals, claims that are merely contingent at the relevant date, but are not "due" are not employed in a set-off. The right of combination differs from the right of set-off because, unlike set-off which assumes independent obligations between parties, combination allows full balancing of all liabilities. Unless there is an express or implied agreement…

Pages: 30  |  Term Paper  |  Style: n/a  |  Sources: 0


Brazil and China

¶ … Global Economic Giants Brazil is geographically the largest South American country and the fifth largest in the world (Economy Watch, 2010). With more than 190 million people, it is the fifth most thickly populated in the world. Its GDP in 2009 was U.S.$1.482 billion and growth rate was .05%. Its total labor force in the same year was…

Pages: 8  |  Term Paper  |  Style: n/a  |  Sources: 10


Existence of an Individual Which Determine the

¶ … existence of an individual which determine the destiny and future course of life. The choices one makes come to define the road ahead. They can be a mirror image of the personal background or the result of external pressures. My choice to pursue doctoral studies at UC Santa Cruz is part of the former category. Indeed, in most cases, the passion for a certain area of study remains so often a mere hobby or aspirations. However, there are also few lucky persons, among which I dare to include myself, which have had the possibility to follow up on their passion and dream of transforming the subject of their strongest preoccupation into the field of a lifetime job. From this point-of-view, I see the study of monetary economics as the expression of my lifelong interest in the area of economics and at the same time as an obvious result of my entire academic and personal background. Although I was interested in economy from the early stages of my academic life, there were certain personalities which guided my thoughts, ideas, and most importantly my questions towards the complex world of monetary economy. Professor Giovanni Ferri exercised an important influence upon me during my undergraduate years at the University of Bari, Italy. He was the one who supported me in completing my dissertation entitled "The Sacrifice Ratio and the Effectiveness of Monetary Policy." The paper discussed various factors that influence economic parameters in developing countries, and, although my task was difficult from the point-of-view of the accessibility of the data I had to use, my passion for the subject, the relentless efforts made to put together a high quality presentation, as well as the unlimited support from my professor enabled me to have a strong argument-based paper which won Special Merit from Evaluation Committee. However, none of this would have been possible if I hadn't benefited from the input of Professor Ferri who answered many of my uncertainties and guided my thoughts towards new, inquisitive questions. As a result of this experience, and most importantly, as part of my constant desire to improve and find answers to problems facing economies in this globalised world, I am now completing my Master of Science in Economics degree at the University of Warwick where I focus on monetary economics, as part of my strive to……

Pages: 2  |  Term Paper  |  Style: n/a  |  Sources: 0


Investment Projects

¶ … Investment Projects The success of a business depends on risk-taking. Decisions must be made to move a company forward and ideally lead to greater success. However, risks are not taken in the dark, rather, every metric and angle of a decision is analyzed with great scrutiny by those with knowledge in economics. The findings are drafted into reports and decisions are made based on this information. This practice, known as prudent decision making is an essential fallback should a risk prove to be less advantageous than originally believed. So, in firms, finance plays a significant role in decision making through proper capital budgeting, sensitivity analysis, project ranking, and ability to quantify inflation. Capital budgeting is the first factor that businesses utilize in their decision making process. According to Arthur Sullivan, capital budgeting is a "planning process used to determine whether an organization's long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures." (Sullivan, 375). In other words, capital budgeting is a means of ensuring that each proposed investment meets the company's overall goals and criteria for funding approval. There are multiple methods within capital budgeting that firms use when making a decision. Some examples of commonly adopted methods include calculations of net present value, equivalent annuity method, internal rate of return and profitability index. As a general rule, if an investment meets a certain numerical hurdle through these calculations, it will be presented to a board for approval. If it fails to meet the criteria, then other factors may be considered or the investment proposal may be dropped entirely depending on how risky it would actually be regarding the overall growth of the company. So, for many firms, capital budgeting reports provide an initial hurdle to determine whether a proposed project is prudent. Sensitivity analysis is another method used by businesses to consider whether an investment is worth the risk. Sensitivity analysis is "the study of how the uncertainty in the output of a model (numerical or otherwise) can be apportioned to different sources of uncertainty in the model input." (Pannell, 1997). Sensitivity analysis is almost always preformed as a computer model that outlines the possible robustness of a certain factor, simplify models, explore the cost of input factors, and recognize instability (Saltelli, 2005). For instance, a lumber company when…

Pages: 3  |  Research Paper  |  Style: APA  |  Sources: 5


Role of Private Investment on Economic Development in Iraq

Role of Private Investment on Economic Development in Iraq Private investment in developing countries An overview on early Empirical studies In 1980s, the developing countries encountered some increment in their development behaviours with debt crisis, which affected the formation of capital. Concurrently, the affected countries were transforming from the post-era to a structural reform efforts. In mid 1980s, the developing…

Pages: 40  |  "Literature Review" Chapter  |  Style: n/a  |  Sources: 45


Merger Outcomes in Malaysian Banking

1% in productivity is solely caused by an increase in technological progress of 17.1%, since the efficiency mean has fallen off by 6%. This means that the productivity expansion was driven absolutely by the transformation of technology, more readily than through the utilization of inputs and improved scale. These newly amalgamated banks then had gone through a process of capital validation including reposting and reorganizing staff, changing branch locations and also delivery channel consolidation, to reap the benefits of merging. Out of the five years examined, the technological change has only decreased and experiences retrogress once in 2005, with a depreciation of 9%. However, since then, it can be seen that the evolution of technology in Malaysia is improved as the indices keep getting higher and increasing. References Abd-Kadir, H., Habibullah, M.S., Radam, A. & Azali, A., 2005. An Analysis of Technical Progress and Efficiency in Malaysian Finance Companies. The ICFAI Journal of Industrial Economics, pp. 6-19. Abd-Kadir, H., Selamat, Z. & Idros, M., 2010. Productivity of Malaysian Banks after Mergers and Acquisition. European Journal of Economics, Finance and Administrative Sciences, pp. 112-120. Bank Negara Malaysia, 2001. Bank Negara Malaysia, Kuala Lumpur: Bank Negara Malaysia. Kumar, M., Fong, K.T. & Charles, V., 2010. Comparative evaluation of critical factors in delivering service quality of banks: An application of dominance analysis in modified SERVQUAL model.……

Pages: 6  |  "Literature Review" Chapter  |  Style: Harvard  |  Sources: 5


Economic Recession on Customer Loyalty

¶ … Economic Recession on Customer Loyalty to Banks in the United Kingdom The global economic recession has had a number of various effects on economics in the United Kingdom, including how people in the UK conduct their banking. While it is impossible to argue that the economic recession has been positive for consumers, it is undeniable that the recession…

Pages: 11  |  Research Proposal  |  Style: n/a  |  Sources: 30


Home Depot in Order to

The interest rate that could be generated for a risk-averse investor, thus, interest rate paid by the banks on savings accounts or certificates of deposit, varied from 4% up to 6% which is much lower than the one that could be generated from investing into the shares. But the risks are much higher for the share investors and thus the risk-adjusted returns must be considered in order to arrive at optimal for investor decision. I am not a very risk-averse person and I would not forgoe stable interest on my savings account or certificate of deposit in order to invest money into shares. But as a profit seekrer, I would diversify my savings and invest some part of it into shares. Having set my risk preferences, I would screen the shares in order to arrive at optimal for me portfolio and I should invest into Home Depot. As the interest rates provided by the banks on rather safe investments are not as high as opportunities for players on stock markets, and also considering my risky nature, I would be willing to pay more for equity future today that I believe is promising annual return which I do not consider to be the fact for Home Depot. On the other hand, as more patient people tend to prefer long-term promising investments rather than short-term but lower yielding investment, the latter would not consider Home Depot as an opportunity for them, while the former may do so. I would construct my portfolio from investing into savings account with stable return, and dividing the rest between very risky with high promising short-term results stocks and put in some part into Home Depot which I consider stock with higher returns in longer future. But if after having examined the stock opportunities, I would have found more promising short-term investment opportunities, I would choose them rather than Home Depot. The dividend discount model also states that the present value of the stock reflects not only one year expectations, but several years expeations and the price is equal in the present time for all. If the expected in the near future return is rather low comparing to other stock and safe investment opportunities, but the price of the share is rather stable and is increasing, also, other indicators are positive, this can signal of very positive middle-term opportunities and may be some inside information availalbe for…

Pages: 3  |  Term Paper  |  Style: n/a  |  Sources: 0


Europe Modern History

Europe Svalbard is an archipelago in the Arctic Sea., de jure controlled by Norway but subject to unique international agreement.. It is located from 74 to 81N, above the Arctic Circle, and as such is the most northerly populated locality in Europe, and the northernmost civilian locality in the world -- Canada has permanent military settlements further north. Svalbard's significance for Europe is that there are both Norwegian and Russian settlements on the island of Spitsbergen. The archipelago has unique status as a free economic zone and a demilitarized zone. The Russian presence there amounts to a small mining village that was basically allowed under the Svalbard Treaty that assigned sovereignty of the archipelago to Norway, yet Norway typically exercise no control over the village of Barentsburg, which is instead administered by Russia (University of Oslo, 2011). The Chunnel is the tunnel that runs under the English Channel. This project creates the first land link between the island of Great Britain and the European continent in history. In contains a high speed railway line, freight lines and a line for transporting cars through the tunnel as well. The Chunnel is significant in the context of closer ties between Europe and Britain, in particular closer trade ties. Given the strategic significance of the lack of land barrier between Britain and Europe during the two world wars, the presence of this link has security connotations for Great Britain as well (Doughty, 2014). A sirocco is a hot wind from the Sahara that blows across northern Africa, the Mediterranean and southern Europe. Sirocco can be very fast winds, bringing with them both hot air and sand, the latter as evidenced by satellite photos. Sirocco can have a significant effect on the weather conditions across Mediterranean Europe. Transdniester is a breakaway republic, de jure a part of Moldova but de facto independent, with its own government, border patrol and even its own currency. When the Soviet Union split, Transdniester's predominantly Russian-speaking population opposed independence, at least as part of the ethnically-Romanian Moldova. A war for independence was conducted, ending in the breakaway state. Transdniester has maintained close ties with Russia, one of the only countries in the world to recognize its autonomy. The region is of particular importance today because of the threat that Russia will run across southern Ukraine, capturing Odessa and then annexing Transdniester (The Economist, 2014). Such a move would render…

Pages: 4  |  Essay  |  Style: n/a  |  Sources: 4


Growth Rate Slow Model (1992)

"According to the Bureau of Labor Statistics, labor productivity rose by 69% in the service-providing and mining industries in 2010, up from 42% in 2009. It is widely believed that research and development (R&D), patents, and management innovations have contributed to productivity growth in the U.S., while the diffusion of new technologies and their application in more firms and sectors…

Pages: 9  |  Term Paper  |  Style: n/a  |  Sources: 6


Public Policy in the State

Maryland's forest lands future is greatly depending on private landowners. Forest land in Maryland is owned by the following entities: Individuals 51% Public Sector 20% Farmers 18% Forest Industry 1% (State of Maryland -- Forest Taskforce, 2010) It is reported that the Forest Conservation Act 9 FCA) has been successful in its implementation of the Forest Conservation Act (FCA) has "slowed the loss of forest land and has focused forested areas along stream valley corridors where water quality benefits can be most effectively realized." (State of Maryland -- Forest Taskforce, 2010) VIII. Ecotourism and Sustainable Tourism Ecotourism and sustainable tourism are presently hot items in the tourism market and this includes the destination of natural areas such as forest lands, lakes, mountains and streams in addition to other various tourist attractions. The work entitled "Conserving Land for People" states that communities are realizing benefits from tourism and recreation on federal forest lands. In fact, "recreation is the second largest producer of direct revenue from U.S. Forest Service lands -- bringing in more than grazing, power generation and mining combined -- and may account for as much as 74% of the economic benefit from these lands when indirect contributions are taken into account." ( ) Findings of the Study This study has determined that the state of Maryland has invested wisely in its natural resources however, due to budgetary constraints some of the necessary programs that were previously funded have been reduced and employees of the Department of Natural Resources. It is time that the state of Maryland redesign its policies in regards to the forest lands of Maryland so that ecotourism and sustainable tourism can assist in growing the economy and revenues for the state of Maryland while simultaneously preserving, conserving, and protecting the……

Pages: 6  |  Research Paper  |  Style: n/a  |  Sources: 8


Open System Theory

PDA SIM I The first simulation was run using the default values. During this simulation, after the first year the X5 had market saturation of 31%. This means that the X5 is in the growth phase of the market. This has lasted for one year and may last 1-2 more years. The X6 has a market saturation of 18%, heralding the beginning of the growth phase. The X7 has a market saturation of 3%, so the product is still in the introductory phase. In subsequent years, the X5 remains in the growth phase for 2006 and 2007, but enters the mature phase in 2008 and 2009. The X6 lags the X5 by a year, growing through 2008 and entering maturity in 2009. The X7 never enters the growth phase during the length of the simulation. This hints at two key issues to address during this simulation. The first is going to be determining when to cut the X5 from the lineup. Under the default condition, the X5 makes money through 2008 but loses money in 2009. The second major issue is going to be to spur the X7 into the growth phase. Under the default scenario, the X 7 finishes the simulation with 2 million customers out of a total possible of 15 million. The other products reach saturation, so the best opportunity for growth beyond the default scenario lies with the X7. The final score for the default simulation was a profit of $1.165 billion. The total profit declined every year, such that 2006 saw the highest profit at $505 million (43% of the final total). The following graph shows the profits for the different products for the four years: This graph illustrates the strategic issues that are being faced. The X5 holds a slender profit in 2008 but loses money in 2009. Clearly, it will need to be cut by that year. Part of the problem for the X5 is that it has high fixed costs - $70 million per year -- which means that it will be profitable for less time than the other two products. The X7 begins to show strong profitability by 2009 even though it has not even entered the growth phase. In that year, it accounts for 75.8% of total profits. The implication for this is that the primary profit driver for the last year -- maybe the last two years -- is…

Pages: 4  |  Capstone Project  |  Style: n/a  |  Sources: 4


Grameen Project (Bank) Is an

Contrary to the positions espoused by most world economic and banking institutions, the Grameen project views population growth much differently. Yunus and the Grameen project do not necessarily view population growth as a negative factor in a nation or society's attempt to escape poverty and that, in fact, is some ways population growth can be a positive. Yunus points out that one of the side benefits of the Grameen project is that it serves to limit population growth as more and more women enter the workforce, become better educated, and recognize that they have a purpose other than reproduction, child care, and maintaining a home. The Grameen project has been criticized for placing thousands of individuals in debt that they otherwise would not have had but such criticism ignores the fact that these same individuals were afforded an opportunity that they otherwise would not have had but for the Grameen project. Other bank and economic development institutions such as the World Bank and IMF have failed to connect with the poor at the grass roots level that the Grameen project has. Such organizations are bureaucratic top heavy and lack the capacity to connect with those who need the money. An important consideration is that the small loan amounts that the Grameen project handles not only minimize the risk to the lending institution but also are small enough so as to not discourage the borrower. The individuals involved in the operation of the Grameen project are encouraged by the employees of the project to believe that they are capable of repaying the loan and are carefully monitored to assist them in their efforts to succeed. Such support and encouragement has not historically been provided by other world economic relief and development organizations. The success of the Grameen project has been remarkable provided its sphere of operation. It has provided encouragement in some of the world's poorest regions and has done so in a way that is truly unique. Two Approaches to……

Pages: 2  |  Essay  |  Style: n/a  |  Sources: 0


Foreign Exchange Markets

Foreign exchange markets are one avenue that international businesses take to avoid losses during purchases and shipments. While some may argue that knowing the market and selecting the right technique saves the company money, there are also arguments that the techniques and specialty calculations required for such transactions can actually cost the companies as much as simply letting the market run its course (Giddy, 2003). This theory, known as the Purchasing Power Parity, has unequivocally shown that between the purchase and exchange of goods, the market prices between the two countries even out, resulting in little to no difference in exchange. Thus, the overall notion of manipulating the markets can actually be seen as wasteful on the part of businesses and often does not result in positive shareholder outlook. On such example of the futility of market manipulation is that of Japan. In the 1970's Japan changed its currency exchange rate from the Bretton Woods Exchange Rate System (Taylor, 2001). The result was Japan taking an active role in intervening into the foreign exchange market. In just nine years, between 1991 and 2000, the Bank of Japan purchased and sold $304 billion U.S. dollars. While these figures may sound large, the reality is that this amount is actually very small compared to the total amount. Additionally, even with their interventions, there were periods of substantial loss of value for the Bank of Japan due to market fluctuations. Thus, the intentional purchase of currency in an attempt to impact the market resulted in losses that otherwise would not have happened. Such actions could nearly be argued as the equivalent of gambling or investing in risky stocks. Due to the obvious risk and associated losses with market……

Pages: 2  |  Research Paper  |  Style: n/a  |  Sources: 3


Stock Price Trading Value and

The Eastern European economies are also dependent on following the recommendations of the IMF that imposes restrictions on government support programs for these countries. Turkey is an example of an economy that has emerged successfully into economic success through the programs of the World Bank and IMF. These programs have required countries in the region to refrain from stimulus packages…

Pages: 8  |  Article Critique  |  Style: n/a  |  Sources: 0


South Africa Is the Economic Leader in

South Africa is the economic leader in the continent in terms of industrial output and mineral production (Brand South Africa 2012). It produces a large part of the electricity in Africa. Its natural resources are robust. Its financial, legal, communication, energy and transport sectors are well in place and delivering. Its stock exchange ranks within the top 20 in the…

Pages: 7  |  Term Paper  |  Style: MLA  |  Sources: 5


Behavioral Economics Many Academics Advocate

This is under the backdrop of increased profits and record earnings. Wells Fargo has now had 5 consecutive quarters of record earnings growth. However, due in part to regulation, the company is initiating cost cutting measures to insure the viability of the franchise. This again is a result of the economic forces prevailing in the market. As the psychology of the market changes, so too will the behavior of large and small businesses alike (Rabin, 1998). The same concepts apply to marketing and marketing related expense. Marketing particular for denigrated industries such as financial services will market themselves primarily to alter consumer sentiments. These sentiments through marketing can change the views of consumers as they establish a brand in their thoughts. Conclusion In conclusion, behavioral economics impacts decision making through emotions, prevailing sentiments, and the social aspect of business. These concepts all provide a means for business to obtain superior returns relative to their peers if they think rationally while ignoring emotions. However, many fortunes are lost due to the mass euphoria prevailing in the economy. Over priced mergers and acquisitions is just one method in which over optimism can cripple decision making. By realizing the prevailing sentiments in the markets management can make better informed financial decisions regarding their personal lives and business dealings. References: 1) Shleifer, Andrei (1999). Inefficient Markets: An Introduction to Behavioral Finance. New York: Oxford University Press. ISBN……

Pages: 5  |  Essay  |  Style: n/a  |  Sources: 5


School Finance: Its Economics and

They also need to explore the avenues for implementing the state-controlled full funded system. They need to increase the bases for revenue to increase the sales tax base for state and local governments. This is to include non-taxed goods and more services. There is also a necessity to replace sources of revenue for school financing from local to state sources.…

Pages: 15  |  Term Paper  |  Style: n/a  |  Sources: 0


Asian Economic Crisis in the

"Suharto inaugurated an...[exemption] from sales tax and tariffs...the only firm to qualify was an obscure company owned by Suharto's youngest son." Such political interference insured that projects that wouldn't have been considered economically viable received more favorable consideration when a Suharto family member or friend was involved. Additionally, the Indonesian government (as well as the Philippines) was intent on its…

Pages: 9  |  Term Paper  |  Style: n/a  |  Sources: 0


Economic Crisis 2007-2010

Irrational Exuberance: The Economic Crisis of 2007-2009 According to the National Bureau of Economic Research, what will no doubt become known as first Great Recession of the 21st century began in 2007. "The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began [in 2007]…the NBER…

Pages: 7  |  Research Paper  |  Style: n/a  |  Sources: 5


GDP and Economic Growth in Ireland

Ireland's Economy Ireland's banking system which for over a decade was a financial global powerhouse, suffered an ignominious fate when Irish central bank regulators proposed "to nationalize its banking sector after its government uncovered a €24 billion ($33.9 billion) capital shortfall in the latest round of 'stress tests' of top banks" (Enrich. D. April 1, 2011). The nationalization of the…

Pages: 5  |  Term Paper  |  Style: n/a  |  Sources: 5


International Politics Economics

International Political Economics The international financial system has changed significantly over the past thirty years. Among the most significant changes, the Bretton Woods system collapsed, regulations regarding transborder capital flows have eased and the Euro was created. Each of these major changes has contributed significantly to the global financial system we have today. The Bretton Woods system was devised in the wake of the Second World War and was based on pegging the world's major currencies to the value of gold. The pegs were to be within 1%. By 1968, Bretton Woods had been adapted to a floating rate system. The U.S. dollar, the reserve currency under Bretton Woods, was unable to maintain its peg. The U.S. dollar became overvalued in relation to gold. The Smithsonian Agreement of 1971 ended the gold pegs for good. The U.S. had unilaterally ended the gold standard the year prior. This agreement set the stage for the development of international currency markets. The first stage, however, saw exchange rates negotiated, rather than be backed by the value of silver or gold (Investopedia, 2009). Once the free float of major currencies was established, the next step in the development of global financial markets was the freeing of global financial flows. International trade agreements have been signed at an increasingly rapid pace since the U.S. And Canada signed the first major free trade act. While the flow of goods has improved as a result of these agreements, the flow of capital has freed the most. This impacts the world's financial system in a number of ways. The first is that it increases the efficiency of resource allocation, but in doing so it also increases the volatility of global financial markets (Eichengreen, 2004). Speculation, both directly on currency markets and indirectly with foreign investment, contributes to this volatility. Another major change in the global finance system is the creation of the Euro. When the U.S. dollar began to lose prominence in the 1970s, the other major world currencies were all in smaller economies. They were important, but never a threat to supercede the preeminence of the dollar. The euro absorbed some of these powerful currencies, such as the mark and the franc, and became a world currency in its own right. The euro provides global financial markets a realistic, viable alternative to the dollar, the first real one since the pound prior to World War Two (Pollard,…

Pages: 4  |  Essay  |  Style: APA  |  Sources: 4


Venezuelan Banking Sector - Bbva Banco Provincial

¶ … Venezuelan Banking Sector - BBVA Banco Provincial General country background Venezuela is the 31st largest economy of the globe in terms of measured GDP. For 2007, the country's gross domestic product has been estimated at a total value of $334.3 billion. The country is located on the northern part of South America and its primary natural resources are…

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Finance and Financial System Overview of Financial

Finance and Financial System Overview of Financial System Finance is a commercial study concerning management of money and other assets through crediting, banking and investing. It is an outgrowth of economics and accounting (Houston & Brigham, 2009, pg 4). The inter-relationship between finance and these two subjects has brought about financial economics and financial accounting. Another related field is corporate finance that deals with financial management, capital markets and investments. The degree of importance in financial economics is significant especially in the business venture. Business firms and other institutions have made tremendous contributions in upgrading the economies of their respective countries. Finance is also vital in shaping efficient markets hypothesis (EMH) and behavioral finance among its practitioners (Houston & Brigham, 2009, pg 49). Moreover, the field creates a lot of slots for employment. It is, therefore, important to comprehend the knowledge of financial economics and how it affects vital decisions around individuals. Most importantly, financial role of decision making impacts more in behavioral finance. Finance and Decision-making The phenomenon of finance in decision-making is intuitive. Finance is a great contributor to business decision-making and the development of strategic marketing decisions. The planning and implementation of vital decisions is dependent on the availability of a budget. The budget poses as a financial tool under which the decision can be analyzed. The analysis, therefore, becomes a basis for decision making. Finance in decision making acts as insurance of the assessment being asserted. Any impending set back that might be experienced is refrained from causing termination of the decision. Finance plays a considerable by providing a foundation on which rational policies are made by individuals, practitioners, managers and the business markets (Deaves & Ackert, 2009, pg 3). Finance achieves this by designing goals to be accomplished by the latter. Certainty and uncertainty are confronted at all angles in fully bombarding the decision being made. Models of finance such as demand and supply chains also contribute in decision-making. Individuals and corporate firms optimize their ability by presuming fundamental assumptions. Assumptions are based on the outcomes of the decision, maximization of the decision's utility and profit and deriving relevant information that the decision provides (Deaves & Ackert, 2009, pg 4). Financial System A financial system is crucial is ensuring a healthy economy in a nation by regulating rates of inflation, unemployment and growth. The study of finance is apprehensive in how the system organizes and…

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International Project Finance

Project Financing International Project Finance: Commercial risk Completion risk Completion risk entails the concept of whether the project can be completed on the recommended period and within the set amount of budget Completion risk is also known as Cost Overrun risk or the construction risk. Three common terms employed in order to allocate the completion risk. One of the concepts…

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Crisis Economics by Nouriel Roubini in a

¶ … Crisis Economics" by Nouriel Roubini In a word, Nouriel Roubini's book, Crisis Economics: A Crash Course in the Future of Finance, which was co-authored with Steven Mihm, is radical. The book is largely about the current fiscal crisis that the United States finds itself in. However, the author makes a point to spend a considerable greater amount of time tending to potential solutions -- and measures to ensure that similar fiscal crises cannot proceed -- than giving a history lesson about the critical time that was probably at its worse in 2008. In doing so, he suitably demonstrates that this crisis is not a "freak event" (Sunderland, 2010). The vast majority of the notions posed by Roubini are certainly radical by most conservative standards that still govern America -- and particularly those that are directly responsible for its pecuniary practices and economic regulations. Yet what makes Roubini's viewpoint and radicalism all the more intriguing is the fact that quite clearly, as a cursory review of the events of the past decade demonstrate, these are far from pedestrian times. It is this acknowledgement of the dire situation that America finds itself in, which is both acknowledged by the author and implicit in much of his monetary analysis and economic advice, that calls for (quite deservingly) radical measures to cure an intense financial dilemma. Despite the fact that Roubini's book is far from a general history lesson that recaps the diverse collapse of industries that largely contributed to what is a global crisis, no amount of astute observation on the subject could completely avoid recounting some of the most salient of those details -- if for no other reason than to explain and contextualize many of the curative proposals Roubini advocates. In doing so, the author evinces a palpable congratulatory tone, perhaps because he was one of the few economists who presaged these financial conditions. For the most part, however, this tone and its deserved vantage point help to punctuate Roubini's perspectives with an air of authority that allows readers to trust some of his more unconventional notions. And it is ultimately this viewpoint of the author's that is at the heart of his beliefs for a completely revised financial system of running the U.S. economy, as the following quotation demonstrates. The crisis was less a function of sub-prime mortgages than of a sub-prime financial system. Thanks to everything from…

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Japan's Banking Crisis

Japan's Banking Crisis Rubber Rules Origins Same Story... Different Setting Relating Reasons More Nets More Accepting Responsibility Sewing Up the Wounds Rubber Rules Money changes all the iron rules into rubber bands." Kapuscinsk) Japan's current, positive financial movements are touted to symbolic of the strength of the recovery and the end of a long and painful period. In the article,…

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Economic Advisor to a Less Developed Nation in Africa

Economic Advisor to a Less-Developed Naton in Africa Economic Advisor to a Less-Developed Nation in Africa For many years, experts in fiscal decentralization and local public finances have held the firm opinion that tax is close to an ideal tax for local government finance. The experts have presented compelling reasons why they hold this conviction. This study provides some recommendations to property taxes in Least Developing Country (LDC) on how they can achieve their objectives. Property Tax Role that I would assign to property taxes in this nation to achieve its objectives LDC's should assign revenue sources, particularly taxes to each level of government. This will enable the country to align expenditure assignments with sufficient revenue thus raising capacity at every level of the government to finance the assigned responsibilities. LDC can raise adequate revenues through a wide range of revenue assignments even without any tax autonomy. This can be achieved through intergovernmental transfers. However, this approach raises concerns because if governments are allowed to carry out the transfers, the country will end up overspending on local services because they will fail to internalize the full cost of providing the benefits (Bahl, 2008). Political accountability can be enhanced through the provision of sub-national governments with revenue autonomy. In this context, sub-national governments in LDC will be able to raise their own funds and face hard budget problems on their operating budgets. In the perspective of LDCs, I would recommend that these governments raise their own revenue to finance expenditures at different margins. This will create a nexus link between the cost of providing the services and the benefits of locally provided services. This will encourage the nation to internalize the marginal costs of providing services thus avoiding overspending on them. Alternatively, once LDC accepts that the sub-national governments need at least some form of limited tax autonomy, they will be able to limit some ways of levying certain taxes such as introducing taxes on inter-jurisdictional trade (Bahl, 2008). With the above general restrictions in place, any LDC in Africa can choose between a closed list of allowable taxes and an open list of taxes. Whichever approach the country adopts, they will enjoy significant benefits. In overall terms, if the country embraces a closed list of sub-national taxes, it may be able to avoid the introduction of highly distortionary taxes and nuisance taxes, which can easily impede on their economic development…

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Hurricane Katrina and Economic Implications

The reconstruction of homes took up much of the state's resources and although this was a slow process, it was the state's utmost priority. Since there were no businesses left in the states, there was no prospect for employment either and this added to the despair of people. The people who were mortgage holders had no way to repay back…

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Economic Systems of South Korea

The government also fostered development by allowing South Korea to be a destination of several global manufacturers. The government also provided impulses for foreign and local investors through expansion of its network of free trade agreements. This brought change to the country and allowed the economy to grow. Though South Korea can be seen to rely greatly on exports it…

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Shadow Banking System, Its Role

The shadow banking system, which is believed to be at least equal in size to the traditional banking system, also affects the money supply. If the shadow banking system slows down its lending, the money supply is likewise affected. With the shadow banking system's reliance on ultra-safe collateral, the less collateral that there is, the less new debt the system…

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Economic Crisis in Europe and

By reducing the amount of decisions made by human operators, the risk for errors in inputting or analyzing information is greatly reduced. Automating audit systems also helps organizations determine if its processes are effective by identifying transactions outside of the norm for further evaluation. Enterprise software provides information to the people that can act upon it making it a better…

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1980s Affecting Corporate Finance From

Gongloff (2010) tried to predict the future of investors' desire for corporate debt by mentioning that a double-dip recession would imply more defaults and scare investors away from corporate bonds. By contrast, economic recovery could lead to higher interest rates and an invigorated stock market, luring investors back into the purchase of stocks and weakening demand for bonds. The latter scenario seems more likely. Despite the huge exodus of money from stocks since the summer of 2010, it may be a good idea to own stocks. Corporate earnings are setting record levels, due to increases in productivity and businesses in foreign markets, and corporate profits increase stock prices. Yet for institutional investors, which have superseded individual investors in stock markets, the only choice is not bonds vs. stocks in American corporations. There is the option of investing in stocks of foreign companies. For example, American investors have been heavily involved in Korean stocks. In sum, developments in the 1980s like deregulation and internationalization motivated corporations to bypass commercial banks and seek financing in capital markets. This was true mainly for large corporations with good credit ratings. But even smaller firms entered the financial markets in a significant way via the issuing of junk bonds. The predominance of financial markets has continued up to 2010 with no strong indications of abating. Today's low interest rates and the hampered stock market have strengthened the old trend toward financial markets as a source of external financing for corporations. Yet some analysts feel that the huge supply of bonds will eventually saturate the market. Moreover, high levels of profits by many American corporations and expected economic recovery in the U.S. are signs that the bond market will eventually subside as investment in stocks becomes a more desirable option, at least in the medium term. Financial Markets and Corporate Finance Reference Gongloff, M.(2010, September 8). Blue-Chip Borrowers Issue Debt in Droves Wall Street Journal (Online). Retrieved from http://proquest.umi.com.ezproxy.fiu.edu/pqdweb?index=0&did=2133668831&SrchMode=2&sid=2&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1290691705&clientId=20175…

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Banking and Finance Law Are

Mishkin) The International Bank for Reconstruction and Development (World Bank) was organized in 1945 to make loans both to governments and to private investors. The discharge of debts between nations has been clarified and uncomplicated through the International Monetary Fund (IMF), which also provides members with technical assistance in international banking. The former European Monetary Agreement also made possible the rapid discharge of debts and balance of payments obligations between nations. The European Central Bank (see European Monetary System) was established in 1998 to help formulate the joint monetary policy of those European Union nations adopting a single currency. (Blinder) Banking in its simplest form was practiced by the ancient temples of Egypt, Babylonia, and Greece, which loaned at high rates of interest the gold and silver deposited for safekeeping. Private banking existed by 600 B.C. And was considerably developed by the Greeks, Romans, and Byzantines. (Binhammer) Medieval banking was dominated by the Jewish and Levantines because of the strictures of the Christian Church against interest and because many other occupations were largely closed to Jews. "The forerunners of modern banks were frequently chartered for a specific purpose, e.g., the Bank of Venice (1171) and the Bank of England (1694), in connection with loans to the government; the Bank of Amsterdam (1609), to receive deposits of gold and silver." (Granger) Banking developed rapidly throughout the 18th and 19th centuries, accompanying the expansion of industry and trade, with each nation evolving the distinctive forms peculiar to its economic and social life. Since the establishment of the Federal Reserve system, federal banking legislation has been limited largely to detailed amendments to the National Bank and Federal Reserve acts. The Glass-Steagall Act of 1932 and the Banking Act of 1933 together formed an extensive reform measure designed to correct the abuses that had led to numerous bank crises in the years following the stock market crash of 1929. The Glass-Steagall Act prohibited commercial banks from involvement in the securities and insurance businesses. The Banking Act strengthened the powers of supervisory authorities, increased controls over the volume and use of credit, and provided for the insurance of bank deposits under the Federal Deposit Insurance Corporation (FDIC). The Banking Act of 1935 strengthened the powers of the Federal Reserve Board of Governors in the field of credit management, tightened existing restrictions on banks engaging in certain activities, and enlarged the supervisory powers of the FDIC.…

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