Marketing in Emerging Market Economies

This paper presents a literature review on the marketing concepts and strategies applied in the emerging economies. The focus of the research was the stage of development and the application of marketing principles in emerging economies, with an emphasis in specific countries, cultures and industries concerned. Issues such as marketing research and its implementation, marketing opportunities, role of distribution channels and communications, marketing strategies and policies in different cultural contexts, marketing specifics compared to developed countries and marketing in specific industries, were reviewed. It was concluded that emerging markets represent a huge opportunity for local and multinational companies. It was also proved that the marketing in general in these countries remains underdeveloped compared to Western countries of established market economies. Despite the fact that emerging market economies represent group countries with same features in some sense, a specific country and industry approach as far as marketing concerns was suggested.     

Institutions and Market Reform in Emerging Economies: A Rent Seeking Perspective

The role of institutions as determinants ofrent seeking success is well established. In this paper, we focus on institutionsthat have received little attention in theliterature, namely electoral institutions. We examine three measures of electoralinstitutional structure that arehypothesized to be instrumental indetermining the level of rent seekingsuccess. These are the type of electoralsystem, pluralistic or proportional; methodof selection of the chief executive,presidential or parliamentary; and thenumber of electoral districts. An index ofeconomic freedom is used as the metric forrent seeking opportunities created bygovernments. Theoretical implications ofvariation in these electoral institutionsare developed. These implications areempirically tested employing data from 29countries classified as having emergingmarket economies. Countries with emergingeconomies are expected to exhibit moreinstitutional flexibility that moredeveloped countries whose property rightsare well established and defended. Theempirical results are controlled fordifferences in a number of demographic andhistorical factors. Plurality electoralsystems are more resistant to the politicaldemands of rent seeking than proportionalsystems. Fewer election districts seem toreduce rent seeking opportunities. However, conditional on the type ofelectoral system, presidential systems arefound to be no more resistant to rentseeking than parliamentary systems. Finally, we find strong control effects. Literacy increases a country's resistanceto rent seeking while military spending andyears of institutional entrenchment reduceit.     

The Municipal Bond Market in a Changing Economy

Due primarily to the Tax Reform Act of 1986, the municipal bond market has undergone great changes in the last two years. Because of severe limitations on the purposes for which and processes by which tax-exempt bonds can be issued, the volume of new issues has fallen dramatically. Interest rates, while volatile, have been declining. The municipal market, although dealing with various cross-currents of unrest emanating from credit quality problems, changing buyers, disclosure concerns, and adverse court decisions, nevertheless appears well positioned to concentrate its resources on its traditional role in the financing infrastructure.     

Municipal Bond Insurance: Trends and Prospects

Privately sold bond insurance is the most common form of credit enhancement for municipal bonds. Research generally finds that bond insurance reduces interest costs for lower rated, long–term debt issues. Researchers have concluded that these results are consistent with presumed investor risk aversion, as well as more "rational" risk management behaviors, and with theories concerning the efficiency–enhancing properties of financial intermediation in imperfect markets. We propose a research agenda based both on traditional theories and on additional hypotheses that seek to account for the observed use of bond insurance where net savings would not normally be predicted.     

Federal Intervention in the Municipal Bond Market: The Effectiveness of the Build America Bond Program and Its Implications on Federal and Subnational Budgeting

The American Recovery and Reinvestment Act of 2009 (ARRA) included several new federal programs intended ostensibly to “unfreeze” the credit markets as a result of the global financial crisis. One such program, the Build America Bond (BAB) program, aimed to lower the borrowing costs for state and local governments by increasing their access to capital and providing a more generous federal subsidy than the traditional indirect tax exemption subsidy. BABs are taxable bonds sold by subnational governments, which carry a 35 percent direct federal payment subsidy to the borrower. In creating this program, the federal government hoped that the large direct federal subsidy along with greater potential investor interest in taxable securities would result in lower borrowing costs for state and local governments vis‐à‐vis traditional tax‐exempt bonds. This research study examines the relative effectiveness of the BAB program and details the various quantitative and qualitative implications on federal and subnational budgeting by moving from an indirect to a direct federal subsidy approach in facilitating state and local government capital raising.     

Municipal Bond Sales in Foreign Markets: Experience and Results

This article reviews the issue of state economic development financial incentives and the more development specific issue of engaging foreign capital markets as a source of funds for state industrial incentive in the post-TRA86 environment. An ex post empirical analysis of such a transaction is provided by revisiting the KDFA yen bond transaction. Observations and policy conclusions are also discussed.     

An Empirical Examination of the Determinants of Insured Municipal Bond Issues

Research demonstrates that there are interest cost savings associated with municipal bond insurance, and yet only half of the bonds are issued with insurance. The theoretical determinants of bond insurance are discussed and evaluated empirically through logistic regression. Statistically significant bond attributes are the underlying credit risk, maturity, par value, and a call option. In addition, regional market characteristics at the time of issue and market segmentations are determinants of bond insurance. These findings strengthen the hypotheses that insurance mitigates market segmentation and that insurers function as delegated monitors of bond quality.     

Competition and Selection in Municipal Bond Sales: Evidence from Missouri

This article describes the results of an interest cost analysis of local government debt issuance in the State of Missouri. In Missouri the vast majority of municipal bonds are sold on a “no bid” basis. We discuss the theoretical arguments for and against competition and selection. Then we determine the degree to which cost differences exist while correcting for any potential selection bias. We use data on local government general obligation bonds sold from May 2004 to May 2005 provided by the Missouri State Auditor's office. We find that this substantial lack of competition imposes significant costs on Missouri governments.     

Determinants of Municipal Bond Ratings for General‐Purpose Governments: An Empirical Analysis

In the wake of the destabilization of the tax‐exempt bond insurance industry, this paper presents an ordered probit model of the determinants of the credit ratings of 965 county and city governments from throughout the nation. The underlying Moody's rating of these governments is posited as a function of a vector of publicly available economic, demographic, governmental, fiscal, and financial variables. The empirical results demonstrate the relative importance of economic base diversity, the growth rates of earnings, and population as well as existing full faith and credit debt on credit ratings. Additionally, our findings support the proposition that the existence of tax limits reduce the perception of credit quality, while expenditure limits raise credit ratings.     

Managing the Bank‐System Crisis in Coordinated Market Economies: Institutions and Blame Avoidance Strategies in Sweden and Japan

Sweden and Japan represent two different positions regarding policymaking when faced with similar crises of the bank systems. Different institutional settings led the main actors to different paths of reactions in order to avoid blame. In the Japanese case, the very close relationship between private banks and the Ministry of Finance, in combination with the lesser degree of widespread perceptions of a system crisis, made it more urgent as well as possible to conceal the actual state of affairs for the politicians. Confronted with the threat of losing power over the financial administration to a new agency, the ministry postponed the reforms in order to conceal the deep financial problems. The institutional setting was different in Sweden. Deregulation had separated the government from the administration of banks. Among the public deteriorating economic conditions were easily connected to the banks. This brought about political unity. It was possible to put the blame on the banks and take the credit for the efforts to tidy up the mess without losing credibility.     

An Empirical Assessment of the Municipal Financial Situation in Spain

ABSTRACT

Public finance theories state that both political and socioeconomic factors must be considered in order to explain governments' finances. On the one hand, “partisan politics matters” thesis argues that progressive parties contribute to increase public deficit. On the other hand, Roubini and Sachs' weak government hypothesis (1989a Roubini , N. and J. D. Sachs . 1989a . “Political and Economic Determinants of Budget Deficits in the Industrial Democracies.” European Economic Review 33 : 903 – 938 .[Crossref], [Web of Science ®] , [Google Scholar], 1989b Roubini , N. and J. D. Sachs . 1989b . “Government Spending and Budget Deficits in the Industrial Countries.” Economic Policy: A European Forum 8 : 99 – 132 .[Crossref] , [Google Scholar]) states that the higher the government fragmentation, the higher spending, deficit and debt. Accordingly, our work evaluates whether municipal ideology and political strength have an impact on public expenditures and taxes. With this aim, we analyze a representative sample of Spanish municipalities (2,729) for the year 2005. We find an influence of the size of the political majority on the municipal financial situation. However, we do not find evidence of the impact of the government's political ideology. Economic and population variables are found highly significant. Our data also show a “flypaper” effect in the Spanish municipal sector.     

No Guaranties: The Decline of Municipal Bond Insurance

The credit crisis that roiled the financial and housing markets in late 2007 and early 2008 resulted in well‐publicized budget challenges for state and local governments. Less visible has been a dramatic change in the bond insurance market, which alters how governments issue long‐term debt. Debt issuance data from Texas are used to model bond insurance premiums and examine utilization following the crisis. The results provide evidence that insurance premiums rose dramatically following the fiscal crisis, even when controlling for widening credit spreads and changes in the underlying credit quality of issuers.     

The Influence of Jurisdiction Size and Sale Type on Municipal Bond Interest Rates: An Empirical Analysis

The authors use data on municipal bond sales in Oregon from 1994 to 1997 to explore whether population (as a proxy for financial-management capacity) and sale type (competitive or negotiated sale) influence interest rates. They find that smaller jurisdictions pay an interest cost penalty in the municipal bond market, and that competitive sales result in significantly lower interest rates compared to negotiated sales. The authors suggest that measures to enhance the financial-management capacity of small governments are warranted and that state laws requiring justification for negotiated sales are appropriate.     

When States Discriminate: The Non-uniform Tax Treatment of Municipal Bond Interest

There is a long history of states using tax systems to encourage residents to invest in bonds issued by jurisdictions within their state. This preferential or discriminatory tax treatment was ruled unconstitutional in 2006 by the Kentucky Court of Appeals. The Kentucky court decision, which sets the stage for this essay, was overturned by the U.S. Supreme Court in 2008. This essay addresses the possible implications of this and similar discriminatory tax policies. Such discriminatory policies are the foundation of the municipal bond market, and altering the practice would have significant implications for revenue collections and borrowing costs in most states and localities. While the Supreme Court's position has been rendered, the case has caused policy makers and administrators to scrutinize discriminatory tax policies and their impact on budgets and borrowing costs.