Debt Repayment Capacity Suggested A Large Emporium Finance Essay - Free Essay Example

Sample details Pages: 7 Words: 1969 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? This chapter keeps the following structure: section 4.2 put forward the research questions, 4.3 present the data sources and hypotheses of the study and section 4.4 relates to the methodology employed explaining the econometric model to be used. While the following chapter concentrates on the empirical findings. 4.1 Introduction The literature and empirical findings on debt repayment capacity suggested a large emporium of macroeconomic variables which determines the servicing capacity of a countrys external debt and thereby affecting the economic performance of a country. The study here employs the most relevant variables determining the servicing capacity of debt for a developing state economy Mauritius. Don’t waste time! Our writers will create an original "Debt Repayment Capacity Suggested A Large Emporium Finance Essay" essay for you Create order 4.2 Research Questions The curbing effect of international trade post the US Subprime crisis on debt repayment capacity is a matter of concern for an economy. The total public debt of the country being around 57.3 %[1]of GDP in 2011 and external debt represent one third of this percentage. Alongside, it is vital to analyze how the different macroeconomic variables following the economic/financial crisis responding to repayment capacity of the economy. In this optic, a country level analysis through a time series econometric analysis is undertaken for the period 1990 to 2011. The following sets of hypotheses19 are mentioned with their explanation below: 4.3 Data Sources The study makes use of time series data from 1990 to 2011, thus making use of 21 data points just enough for effective regression analysis. The data used for this study has been taken from the World Bank. . 4.4 Methodology Time Series Models describes the historical patterns of data is popular forecasting methods and have often been found to be competitive relative to economic system of equations (particularly in their multivariate forms). These are the work-horse of the forecasting industry. Although time series data are used heavily in econometric studies, they present special problems for econometricians. One common problem is that of serial correlation and another one is that the underlying time series should be stationary. If that is not the case, we encounter the problem of what is known as spurious or nonsense regression (Granger and Newbold (1974)). The term spurious regression is used to describe regression results, involving time series, that look good (the t-values suggest that there is a significant relationship between the two variables) when in fact the truth is that there can be no significant relationship between the two variables. To avoid the spurious regression problem that arises from regressing a non-stationary on one or more non stationary time series, we have to transform the non stationary times series into a stationary times series. Because if a time series is not stationary, we can study behavior only for the period under consideration. As a consequence, it is not possible to generalize it to other time periods. Therefore for the purpose of forecasting, non stationary time series may be of little practical value. Stationarity has always played a major role in time series analysis. To perform forecasting, most techniques required stationarity conditions. Loosely speaking, a time series is stationary if its mean and variance do not vary systematically over time. One advantage is that Time Series Data are very easily available. The Econometric Approach The Economic Model-adapted from Ramlall (2011) Following the literature review, we cannot conclude which variable mostly affect Debt repayment positively or negatively. The central objective is to determine and analyze the most important factors that affect debt repayment in Mauritius. In this view, the following model is to be used: The following model is set up according to Ramlall (2011). Debt repayment capacity is influenced by the macroeconomics factor specified in the model below. DSCR = f (IT, FDI, EXTDEBT, RES, INV) Where, DSCR is Debt Service Coverage Ratio IT stands for International Trade FDI stands for Foreign Direct Investment EXTDEBT stands for External Debt RES stand for Reserves INV stands for Investment For analytical purposes and to conduct various tests, the function has been transformed into an econometric model which can be described as follows: DSCRt = ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²0 + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²1ITt + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²2FDIt + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²3ExternalDebtt + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²4RESt + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²5INVt + ÃÆ'Ã… ½Ãƒâ€šÃ‚ µt Where the unknown parameter ÃÆ'Ã… ½Ãƒâ€šÃ‚ ² captures the effects of each variable, ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²0 is a constant also known as the intercept term and ÃÆ'Ã… ½Ãƒâ€šÃ‚ µt, the random error term. The t in subscript denotes the use of time series data. Where the dependent variable is rate of interest (ROI) and the explanatory variables are the constant (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ±), the treasury bills rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²1), usa interest rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²2), inflation rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²3) and money supply (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²4). The model above, measures the percentage change of interest rate (Y variable) given a percentage change in the macroeconomic factors(X variables). The slope coefficients on the other hand assess the elasticity of rate of interest in respect with the other macroeconomic determinants. A time series analysis will be performed for the period 1990 to 2010. A set series represent a set of observations on the values which a variable takes at different times. Such data are collected at regular intervals for example daily (such as stock prices, weather reports), weekly (such as money supply), monthly (for e.g. unemployment rates, consumer price index), quarterly (e.g. GDP) and annually (such as government budgets). Although time series data are heavily used in many econometric studies, they pose many problems to econometricians. Such can take the form of serial correlation (occurs in time series when the errors associated with a given time period carry over into future time periods) or a problem known as spurious or nonsense regression (Granger and Newbold 1974). The term spurious regression describes regression results which involve time series that look good (the t values suggest significant relationship between the variables) when in fact there can be no significant association between the two variables. A time series therefore is stationary when the mean and variance do not vary systematically overtime. 4.2 The Econometric Approach 4.2.1 The Economic Model-adapted from Maysami, Howe and Hamzah (2004) Stock Market indices are influenced by all the macroeconomic factors specified in the econometric model below. LnS = f {INF, RINT, GRW, LnMS, EXR} Equation (5) where LnS: Ln SEMDEX, INF: Inflation Rate, RINT: Real Interest Rate, GRW: Growth Rate, LnMS: Ln Money Supply, EXR: Exchange Rate 4.2.2 Variable Description and Justification The following criteria have been used as determinants for the selection of variables: existing literature on the topic, economic theory, availability of data and whether they fit well in the model in statistical terms. Before conducting the regression analysis, the study give a concise description of their being in the model. LnS is the SEMDEX (Ln is applied). It is the one of the main indices that tracks the evolution of prices of securities listed on the official market. This variable captures the overall performance of the market and it is the dependent variable in our regression analysis. INF; inflation rate is generally described as a rise in the general price level. Inflation rate is one of the most important national economic statistics. Increase in inflation rates increases the cost of living and causes a transfer of resources from stock market instruments to consumables. This therefore leads to a decline in the demand for market instruments which tends to reduce the volume of trading and thus value of traded stocks with no price increase. Inflation is widely used in many such studies. For example, Maysami, and Koh (2000) make use of this variable in order find a relationship between the Singapore all index and the macroeconomic variables. In the study a negative relationship was hypothesized, however they concluded a significant positive relationship between the stock prices and inflation. RINT; Real Interest Rate, is the lending interest rate adjusted for inflation as measured by the GDP deflator. GRW; represents growth rate of the economy. It is a measure of the value of economic activity within a system. LnMS is the money supply-M2, as defined by the International Financial Statistics comprise the sum of currency outside banks, demand deposits other than those of the central government, and the time, savings, and foreign currency deposits of resident sectors other than the central government. Changes in money supply may affect share prices in 2 ways. First, changes in money supply may be related to unanticipated increases in inflation and future inflation uncertainty and hence negatively influence the share price. Secondly, changes in money supply may positively influence the share price through its impact on economic activity. EXR is the exchange rate of the Mauritian rupee vis a vis the US dollar. Exchange rate is an important variable for as a currency depreciates rapidly, capital flight affects the exchanges trading volume and market index as funds are redirected outside. 4.2.3 Model Specification To be able to carry out the empirical analysis of the link between the selected macroeconomic indicators and the performance of the stock market index, we develop the following model: Equation (6) where St- the stock market index (SEMDEX), INF is the inflation rate, RINT-Real Interest Rate, LnMS-Money Supply, EXR-Exchange Rate, ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²s are the coefficients of the variables and  µt is the error term. Under this chapter, the different hypotheses and variables used are put forward in section 4.2 and 4.3. Section 4.4 presents the data sources, limitations and methodology utilized. The theory of gravity model is explained and the models for our hypotheses are specified in section 4.5. Moreover, a priori report of expected results is set forward in section 4.6. Ultimately, section 4.7 bestows explanation on choice of estimation method. 4.2 METHODOLOGY In order to estimate the impact of financial infrastructure undertaken in Sub-Saharan Africa on financial sector development and growth, the panel fixed effect model and the random effect model are used respectively. An augmented model has been invoked based on the different components regarding the definition of Financial Infrastructure and other financial variables. Firstly, a general equation is estimated. In such an equation, the various variables are likely to interact with each other. In order to choose the most significant variables in explaining financial sector development and growth, a reduced form regression is obtained with the elimination of Domestic credit to Private Sector as % of GDP. Thus, this implies that the ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¾from general-to-specificÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸ method is used. On the other hand, in order to test the different hypotheses, the ÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¾general-to-specificÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸ approach had to be used so as to remove the insignificant variables and it is noteworthy that the variables which need to be eliminated differ from regression to regression. The result will enable in validating one of these hypothesis: H0: Null hypothesis the values of each macroeconomic factor is not related to the debt repayment capacity of Mauritius. H1: Alternate hypothesis the values of each macroeconomic factor is related at any point to the debt repayment capacity of Mauritius In the previous chapters, the different views regarding how exchange rates and stock market are related have been mentioned. In this chapter, the data and the methodology used for this study will be explained. The chapter is structured as follows: section 4.1 presents the data which will be used for the time series analysis and their sources; section 4.2 gives a data analysis and finally in section 4.3 the methodology to be used will be explained. 5.1 Model specification The following model is set up according to Lucio Sarno et al., Shmuel Kandel et al. 2001 Interest rate is modeled in the following specified factors below: Rate of interest = f (treasury bills rate, Money Supply, Inflation, USA interest rate) For analytical purposes and to conduct various tests, we have transformed the function into an econometric model which can be described as follows: ROIt = ÃÆ'Ã… ½Ãƒâ€šÃ‚ ± + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²1Treasury billst + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²2Usa interest ratest + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²3inflation ratest + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²4lnMSSt + ut Where the dependent variable is rate of interest (ROI) and the explanatory variables are the constant (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ±), the treasury bills rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²1), usa interest rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²2), inflation rate (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²3) and money supply (ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²4). The model above, measures the percentage change of interest rate (Y variable) given a percentage change in the macroeconomic factors(X variables). The slope coefficients on the other hand assess the elasticity of rate of interest in respect with the other macroeconomic determinants.

For Many Years, Romanticism Dominated English Literature,

For many years, Romanticism dominated English literature, and consequently American literature, as American writers were heavily influenced by the English. Writers like Poe and Hawthorne were leaders in this form of literature. As thinking changed scientifically, philosophically and spiritually, so did literature. Mark Twain’s Huckleberry Finn showed American culture in a way it had never been shown, and in doing so became arguably the most famous piece of realist literature. His novel exemplifies the rejection of romantic ideals. Realism started in France, as the rejection of the popular romantic novels. While romantic novels were usually overly dramatic and emotional, realist novels were objective and without a touch of personal†¦show more content†¦He shows the other characters personalities for what they really are, He just gives details of what he sees, giving the reader a realistic view. Huck’s literalness and practicality sometimes make it difficult for him to even play and fantasize the way children do. For example, Tom; a very romantic character, starts a gang with the local boys.Tom says the gang must sign a blood oath, and if they leave the gang their whole family must be murdered. He talks about how the gang will be highwaymen, robbing and killing caravans as they pass by. Huck, being the realistic character he is, takes this completely literal. The gang conducts a â€Å"raid† on what Tom said was a huge meeting between Spanish merchants and Rich A-rabs; when it turns out to be a sunday school picnic, Huck is disappointed. Tom then convinces Huck that Genies had made the whole thing disappear, he then tells Huck how to get conjure the Genie. Huck tries, and reaction shows his realist personality and his reluctance to trust superstition â€Å"So then I judged that all that stuff was only just one of Tom Sawyer s lies. I reckoned he believed in th e A-rabs and the elephants, but as for me I think different. It had all the marks of a Sunday-school.†(Twain, 1884, p. 115, lines 3-5). Huck deals with many hardships in his life, which is a very real concept, as everything is not always perfect and easy. His hardships include a dead mother and a drunken father.Show MoreRelatedEssay about Romanticism1678 Words   |  7 PagesRomanticism, Romanticism, in a way, was a reaction against rigid Classicism, Rationalism, and Deism of the eighteenth century. Strongest in application between 1800 and 1850, the Romantic Movement differed from country to country and from romanticist to romanticist. Because it emphasized change it was an atmosphere in which events occurred and came to affect not only the way humans thought and expressed them, but also the way they lived socially and politically (Abrams, M.H. 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Darkness Illuminated Free Essays

Since the conception of humanity, man has been fascinated with that presence which illuminates, yet cannot be touched. Mankind has brought it into his religions, giving it a great deal of importance in his creed. Following in the footsteps of his ancestors, Nathaniel Hawthorne uses light as a tool of God that illuminates the darkness of human iniquity and exposes its permanence. We will write a custom essay sample on Darkness Illuminated or any similar topic only for you Order Now He studies the psychological theme of the impossibility of eradicating sin from the human heart in his novel The Scarlet Letter. The use of light in order to fortify this psychological theme confirms its significance in the novel. As though he were weaving an elaborate tapestry, Hawthorne meshes lights intense symbolism into his characters natures until a chef d’oeuvre manifests itself upon the loom of the readers intellect. This tapestry serves as a subtle background upon which the characters sinful hearts are bared. As Hawthorne navigates the reader through the passages of his dark tale, one follows Hester as she goes to Governor Bellinghams mansion. Light is reflected by almost every aspect of the extravagant dwelling. Through the narrators words, we see the Governors house as Hester sees it: â€Å"†¦though partly muffled by a curtain, it [the hallway] was more powerfully illuminated by one of those embowed hall windows†¦Ã¢â‚¬  (Hawthorne 101). One can envision the brilliant sunlight streaming though the immense window, slicing through the facade of the Governors feigned sanctity. Is not simplicity one of the fundamental tenets of the Puritan faith Yet Bellingham, the very person that passed judgment on Hester and her sin is laid bare to the readers opened eye. Here, light shows Governor Bellingham to be corrupt due to his improvident lifestyle. In his genius, Hawthorne defines light not only as a presence, but as an animate consciousness. Still acting as a tool of God, light seems to run away from Hester when she tries to touch it. Pearl, in her inexplicable intuitiveness, says to Hester, â€Å"†¦the sunshine does not love you. It runs away and hides itself, because it is afraid of something on your bosom† (Hawthorne 180). Although Pearl makes this comment concerning the scarlet â€Å"A†, one may argue that the sunlight is actually afraid of Hesters sin, and not the scarlet â€Å"A†. In this case, light is used to remind Hester of her sin and to bring it to the front of her mind as punishment for her adultery. Not only does light show Hesters sin to herself, it shows her sin to others as well. Near the end of the story, Mistress Hibbins speaks with Hester, â€Å"I know thee, Hester; for I behold the token. We may all see it in the sunshine; and it glows like a red flame in the dark† (Hawthorne 237). By shining on the palpable reminder of Hesters sin, the sunlight screams to others of the scarlet letters noncorporeal counterpart: her immorality. Though the scarlet â€Å"A† is intrinsically only a superficial indication of Hesters sin, Mistress Hibbins goes beyond this surface detail when she says, â€Å"I know thee†, implying that she perceives the immutable nature of Hesters sin. Light can expose not only exterior indications of human sin, but can also make known the sin itself. Hawthorne leaves the reader with a crystal clear picture of how light is a brutal reminder of mans permanent sin. It cuts, pierces, even shatters the masks which man tries to place over his sin. Man no longer falls on his knees in awe of the dazzling lightning bolt or the godlike rays of sunlight through misty clouds. He no longer regards light as a magical deity to be worshipped. Despite this, Hawthorne again bestows upon light its original glory as a thing of God. Its role remains constant as an exhibitor of iniquity, a spotlight lancing into the sordid darkness of mankinds damned souls. How to cite Darkness Illuminated, Essay examples