Erol M. Balkan

Political instability, country risk and probability of default

Two political risk variables (level of demaocracy and political instability) are created and included in a probit model of rescheduling. Both the coefficient estimates and the forecasting performance strongly support the importance of including quantified proxies of political events in the assessment of overall country exposure faced by international lenders. An inverse relationship between rescheduling probabilities for a given country and its level of democracy is found, while a direct relationship is established between the rescheduling probabilities and the level of political instability.

Earnings and assimilation of female immigrants

This paper investigates the earnings and assimilation of female immigrants to the US, using 1970 and 1980 census data. A correction for selectivity bias is employed. In addition, to correct for the lack of work history data in the census, an experience proxy derived from data in the Panel Survey on Income Dynamics is employed. Female immigrants, taken as a group, with similar characteristics to natives, are shown to have initiality lower earnings but to catch up within about ten years.

A Comparative Analysis of Tax Progressivity in the United States

The proliferating array of measures of tax progressivity is applied to the state-local tax structures in the United States in 1977. An attempt is made to classify state structures into most or least progressive and it is shown that there is a great deal of inconsistency among recently proposed alternative measures.

The reaction of stock returns to anticipated and unanticipated changes in money: a re-examination of the evidence in the frequency domain

The relationship between money and stock returns is analysed for the 1977–1985 period. Spectral analysis and a VAR (vector autoregressive) model are used in the analysis. The preliminary results suggest a positive relationship between stock returns and money supply along a business cycles and high frequency cycles. A detailed analysis, however, suggests the spurious character of this observed relationship. The money/stock returns relationship over business cycles can be explained by a contemporaneous adjustment of stock returns and anticipated money in response to business cycle anticipations. The high frequency relationship, on the other hand, can be related to contemporaneous adjustment of stock returns and money anticipations in response to expected inflation in a framework characterized by the anticipation of the Federal Reserve Reaction Function. The empirical results strongly suggest that both stock returns and money anticipations are determined in a forward-looking manner incorporating the informat...

On democracy and debt

ConclusionsAs we explained there is really little a priori reasoning for a clear prediction that authoritarian regimes will incur more foreign debt. In fact, some other empirical literature reveals that such regimes will face a higher supply price for such debt. Anderson presents a study of a single year using an admittedly crude measure of authoritarianism that finds that such regimes do issue more debt.This study provides a fuller examination of the empirical relationship between foreign debt and the nature of the politys regime. Utilizing a continuous democracy variable and a continuous political liberty variable, it tests the relationship between debt and political variables. It finds little empirical support for the thesis that democracy or autocracy influence foreign debt levels. Generally the continuous variables are not significant if we use a linear in the logs specification. While a linear specification obtains results more consistent with the idea that level of democracy decreases debt, it also obtains results even less favorable to the idea that extreme forms of autocracy increase debt.The formal theorizing about public choices in different types of political regimes has only just begun. It is really unclear how the level of democracy affects choices of various fiscal variables. It is certainly unclear how it affects debt levels. This paper helps make that lack of clarity a little more evident.

How financial markets process money information: A re-examination of evidence using band spectrum regression

Abstract This article re-examines the response of financial markets to money supply announcements. It is argued that the previous research in the area may be suffering from an estimation bias. The potential for estimation bias stems from the questionable practice of assuming the same regression model for all frequency bands. A decomposition of the data into low-frequency and high-frequency components raises the possibility that both expected liquidity and expected inflation effects are in operation simultaneously though they affect different expectation horizons. The results also show that the distinct weight of these separate effects depends essentially on the credibility of the Fed in adhering to announced monetary targets and the state of inflationary fears.

Nouveaux Riches of the City of Minarets and Skyscrapers: Neoliberalism and the Reproduction of the Islamic Middle Class in İstanbul

We focus on the middle class to help better understand the peculiarities of contemporary Turkish society in relation to the dominant neoliberal mode of capital accumulation. We depict processes of cultural reproduction of the middle class in order to provide an account of an on-going social formation driven by the emergence of an Islamic bourgeoisie. We revisit the debate on conceptualizing the middle class and present some of the major findings of our survey of middle class households in İstanbul in a comparative manner to specify differences and similarities among the ‘new’ laic and Islamic middle class factions that have benefited economically, socially, and culturally from the neoliberal regime. Based on our survey, we suggest that in each faction a new middle class reflecting neoliberal values and lifestyles emerged and separated itself from the rest. Thus, although they have had different ideological and cultural pasts and orientations, both the laic and Islamic factions of the new middle class converged into a new status group as the nouveaux riches of the neoliberal landscape.

A choice-theoretic and information-oriented approach to the short-run characteristics of real and nominal interest rates

The paper adopts a choice-theoretic, information-oriented approach to the issue of stationarity of real interest rates. It is shown that a constant real rate of interest, even for short run and within the context of a simple two-market framework, requires overly demanding assumptions which are unlikely to be satisfied if efficient market hypothesis is explicitly considered. Such a model which indirectly supports the short-run variability of real interest rates in response to random information signals is tested empirically by utilizing multiple time series models for the 1959-87 observation period. The empirical results suggest a favourable interpretation of the model.