Do we have a defensible account of what is to be a person?

To support the assertion that a person exists as a person in their individual unique position and that, they do not, cannot and can never occupy the space and position of another person must be proven using unchallengeable, unquestionable or unchanging evidence. Before we begin answering this question, we must first of all establish who and what a person is: i.e. what are the basic and universal characteristics of a person?Where does the definition of a person begins and ends along the continuum that is occupied by all species – they could be hominoids – monkeys, baboons, apes, chimps, or non-person species etc†¦.† When does a person cease being a person to become a non-person? Is this a reversible process – if so, why? If not, why?According to Wiktionary a person is a human being, then a human being is defined as man, the characteristics of man are identified from the later â€Å"human being† being signifies existence, human means belonging to the species of Homo sapiens some of the characteristic that would be associated to this is ability to express, feel, all humankind characteristics like being weak or fallible. Where then do we find the person in the human being is it the physical body of an individual being?Aristotle says man is a logical â€Å"word using† animal and a featherless two footed animal. These however, are not the only differences.A lot of other animals share these characteristics for instance insects and apes though remotely but it emerges that people are distinctly quite distinctive, befitting account of what it is to be a person could give the core of this distinction hence illustrating why certain characteristics are important and the others but incidental John Haugeland Noà »s, Vol. 16, No. 1, 1982.We are told, that modern philosophers and Christians interpreted Aristotle’s â€Å"logical† as â€Å"rational† thus proposing this rationality as our principle differentia, th erefore Descartes maintains that people can talk because they reason and he could have stated the same on other characteristics.Contrary to other animals humans have a highly developed brain with an ability to reason abstractly, use words and examining thoughts, it is due to this mental capacity together with their body structure that allows their upper limbs to make more use of tools than other animals. Human beings are social by nature a characteristic of most primates; nevertheless they are more skillful in using systems of communication for self-expression, interaction, exchange of ideas and planning.Man has put in place social structures made of competing and cooperating groups such structures are, families marked by blood relations and other relations, nations originating from geographical boundaries, social groups and so on.These interactions between humans have put in place a wide variety of traditions, rituals, ethics values laws and social norms which are the foundation of a human society. Man has a clearly noticeable recognition for beauty and tastefulness which is compounded by the human desire for self-expression has given rise to cultural inventions and innovations such as art, literature and music.Humans are distinct for their desire to understand and influence the world around them, man seeks to explain and manage natural occurrences by science, mythology, philosophy and religion, this curiosity in man has led to development of tools and skills, this may be one of the most significant characteristic of human beings. It is by these characteristics:Anatomical structures, mental abilities, social responsibility, cultural norms, conscious and unconscious will and freedom of choice, innovativeness that we define a person. This may be the basic and universal characteristics of a person.

A Bend in the River

A Bend in The River is a book published by V.S. Naipaul in 1979. The novel is set in Zaire during the rule of Mobutu Sese Seka in the late 1960s and early 1970. The country nor its president are ever mentioned but many commentators agree that it is in fact Zaire.This period was one of great social and political upheaval in Zaire, later known as the Democratic Republic of Congo. There were armed coups, political machinations, guerilla rebellions, urban riots, rural massacres and widespread social reforms. Against this backdrop, the transformation of Salim is presented. External sources are one in saying that Salim transformed from a propertied and upright man into a poor scoundrel because of the environment he was thrust in. I am in agreement with this.â€Å"The tall lilac-coloured flower had appeared only a few years before, and in the local language there was no word for it. The people still called it ‘the new thing' or ‘the new thing in the river,' and to them it was a nother enemy. Its rubbery vines and leaves formed thick tangles of vegetation that adhered to the river banks and clogged up waterways. It grew fast, faster than men could destroy it with the tools they had. The channels to the villages had to be constantly cleared.Night and day the water hyacinth floated up from the south, seeding itself as it travelled.† This except from the book can be taken as a simple botanical statement, yet in the subtle mind of Naipaul this simple botanical fact suggests a broader truth in relation to the life of Salim. It will be a foreshadowing of the creeping corruption that will rend Salim’s soul.In the beginning of the novel, Salim is an Arab-African of Indian descent who comes from a lapsed Muslim family that has resided in eastern Africa for generations. However, Salim sees no future for himself or for his culture along the east African coast. He also has a bit of an inferiority complex, in chapter two he says he left English language sch ool when he was 16 not because he was not smart enough to graduate but because no one in his family went to school beyond 16.He decides to travel to the interior of the Continent. However, because of the chaos prevalent in those days his trip takes a full week and Salim paid bribes to many people to facilitate his travels. Family friend Nazruddin had sold him sundries and supply store which he discovers is a mess. and travels to the interior of the African Continent to start a new life.At this stage he still has high hopes and aspirations for a better life. He eventually arrives along a town at a town along the bend of the river, this is likely based on the river Kisangani, there he is joined by his servant Metty and he establishes his business. Salim quickly gains a regular customer in Zabeth the merchant.Zabeth is an authentic African who is in touch with the tribal ways, she uses charms and potions to defend from evil yet is easily able to enter the modern world. By comparison he r son Ferdinand is a through and through ‘modern’ African who is in the process of being educated in the modern ways. Since Zabeth is his friend Salim takes an interest in watching over the boy as he grows up.Clearly in the beginning of the novel, Salim is a man of some property and he is also an upright and moral person despite his lack of faith in his religion.However Salim is trapped in a rather miserable environment, the post colonial environment he resides in is a no-man’s land. There are European Intellectual advisers, mercenaries, profiteers and other Third World flotsam and jetsam who populate the land.These people and the environment of rebellions and repression will slowly degrade Salim as he loses his properties and his integrity in the mounting chaos. By the end of the novel Salim’s transformation is complete when he notes in page 36-7 that even Natives have become exiles in their own country, so can become exiles in their own country when life itself is lived at the whims of the ruler.This descent from propertied upright man to improvished scoundrel happens gradually. It begins for our man living along the bend of the river with Bigburgers. This is the name of the place where the prominent members of the local society meet. It is also the name of a large hamburger which Salim, descendant of fastidious Indian immigrants, describes the Bigburger as â€Å"smooth white lips of bread over mangled black tongues of meat† Here is where Salim goes regularly and strikes acquaintances with the locals.In the beginning the town is admirable in its simplicity. The Villagers descend from the bush to sell monkey meat to the steamer passengers. Then they turn around and use it to buy pots, cloths and razor blades from the shops. The shop owners can then go to Bigburgers for their meals. Salim for his part moves his sundry and supplies store and converts it into a dry-goods store, he bought the place cheap because the revolution de pressed real estate values. Lucky for him he catches on to the economic boom that occurs shortly after he arrived.Soon the jingoistic â€Å"Big Man’s† misrule takes its toll on his prosperity. Father Huisman, a Belgian priest who taught at the school where Ferdinand studies is depressed at his relative wealth compared to the young Africans who must eat caterpillars just to sate their hunger.He decides to leave but dies before he can go. In chapter 6 the town becomes a thriving marketplace. However the lack of urban planning, since the â€Å"Big man† has neglected the town, leads to squatters who have no homes and just throw their garbage out the door creating a big hill of garbage making the town stink.In chapter nine Indar talks about his life to Salim, Indar reveals how in the past he too was idealistic and appreciated nature in all its beauty. His visit to London changed him greatly, he became London-centric in a sense believing that all other life was false and London was the true life.Indar was so in love with London that he wanted to stay there for good. However, he had a change of heart and after graduating from college he already had a cynical view of life. He now thinks only of himself and cares little for the greater world around him. Little do we know that Indar is a foreshadowing of Salim’s fate.By chapter 13 things are really going bad for Salim as well. He is now intimately involved with a woman named Yvette who in the past was seduced by Raymond. Before, he derided Mahesh as a half man because of his devotion to his wife.Now he is doing exactly the same thing with Yvette seeing the world based on how it would affect their relationship. After the Youth Guard is disbanded in chapter 14, things get even worse. The police are harassing everyone thinking them to be rebels, supposedly, in fact they are merely trying to extort money from everyone they suspect still has any.â€Å"The world is what it is; men who are nothing, who allow themselves to become nothing, have no place in it.† Reads the first sentence of page one. It summarizes, Naipaul’s rather cynical world view and the thesis of his book. In the end Salim casts doubt upon the validity and legitimacy of the historical documents from which he draws his identity.Despite all the turmoil he sees around him his friend Raymond, a historian, can be seeing painting a rosy picture of the events. He asks himself if it were possible that his own past had been manipulated too?This crisis is the last straw that breaks the camels back. With his present in ruins and his future bleak, Salim finds that his past is also a sham. This is too much to bear, following his trip to Europe and seeing that even Europe is not the paradise it was made up to be Salim returns having lost all hope in the world.   

Regional and Economic International Organizations Essay

Regional and Economic International Organizations - Essay Example Many people lived lives of total despair. However, there were a number of brave men and women who decided to look at this crisis as an opportunity and to fashion something new out of the mess. The most important change to make involved the world economic system. And so the Bretton Woods regime was founded on July 1944, in Bretton Woods, New Hampshire, United States, by the delegations of the 44 Allied nations with the intent of creating a new financial and economic order, due to the shift of power occurred as a result of the Second World War. The Bretton Woods regime was a result of the events which affected the world economy and political system, starting from the great Depression to the rise of Nationalist dictatorships and finally the Second World War; its declared objective was to ensure prosperity to all nations, so conflict would never occur again, and can best be understood by this quotation: "The nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties." The lesson learned by the horrors of the war were that increased economic integration would stand a good chance of reducing the opportunities and incentives to go to war. If war cost the same amount to everyone there would be few advantages for any one country to start one. Economic integration and some standardization would be key to this. The policy of open markets first seriously pushed at this conference would have a major influence on the world economy to this day. This policy however did not come out of the blue. There were a number of significant individuals who came up with the theories and principles that underlay and who worked hard to guide the process forward. Without a doubt one of the most important of these figures was the economist John Maynard Keynes, one

Anhuser-busch buys rolling rock brands Research Paper

Anhuser-busch buys rolling rock brands - Research Paper Example However, although the company’s net profit sales have increased, the volume of beer has lowered and the Rolling Rock brand is among the least performing in the beer market. This weak performance triggered AB InBev to consider the sale of Rolling Rock. Reports only give hints that the most likely acquirer would be North American Breweries Inc. (NAB), owned by KPS Capital Partners, a private equity firm headquartered in New York. In March 2009, Labatt USA, the private U.S. importer of Labatt beer, was bought by KPS from AB InBev (Brooks). Besides KPS, another potential acquirer is C2 Imports, a California beer importer of specialty beers around the world. The company had earlier entertained bids to purchase Rolling Rock with the help of Lazard investment bank, but was displeased with the offers. Rolling Rock among many assets AB InBev needs to â€Å"divest in order to repay debt† incurred from the $52 billion merger (â€Å"Anheuser mulls†). Estimated asking price for Rolling Rock, although not specifically stated by AB InBev, may probably be along the lines of $70-$75 million. This is due to the fact that the value of the product has gone down over the years since its sale to Anheuser-Busch, then later when company merged with InBev. The asking price is also likely to go up, depending on the amount the highest bidder is willing to pay for. Sales for Rolling Rock recently declined to 13% from 2007 to 7.4 million cases in 2008. The Wall Street Journal reported that in 2004 Rolling Rock sold around 11 million cases (Cohen). States in America sell the brand for different prices. The current estimated price range per case of Rolling Rock lager beer is $16-$22 (which is already rounded off, including all innovations under the brand) (â€Å"Price List†). Since the product’s decline, pertinent information about it is limited, incomplete and outdated. However, if on the average, the price sold per case is $19 then multiplied by

Operating system Essay Example | Topics and Well Written Essays - 1000 words

Operating system - Essay Example As a result, there is a need for a communication interface between the computer and the human users. Interfacing the peripheral with the CPU For the central system to function, it requires a number of peripheral units which helps the system to work. Such peripheral units include the memory, the hard drive etc. The processor also needs input and output devices such as the keyboard, the mouse and the monitor in order for it to be able to receive data and give data from the results of processing the raw data. All these resources need to be managed and that is where the operating system comes in. The operating system sits between these peripheral components and the central hardware (the processing unit) and regulates the way these units access and use the operating system. The operating system manages the application systems as well and acts as the intermediary between the applications which are not able to communicate directly with the computer hardware. Advantages of an operating syste m Multitasking and time sharing One of the greatest advantages of an operating system is the ability to multitask. Multitasking refers to the fact that the processor will be handling more than one process concurrently. This is done through time sharing and the operating system in any computing environment is very useful in determining which functions will be given which computing resources. Before the modern operating system architecture was developed in the 1950s and the early 1960s, computer processors only processed one process at a time (Meyler, Fuller and Joyner 584). The main disadvantage of processing one process at a time is that valuable processor time is lost every time there is a delay in data execution or memory access for that particular process. An operating system schedules the access of the processor of the computer and makes sure that the processor is busy throughout the uptime. Using complicated algorithms, the operating systems also determine which application or device to be given access to the processor. Based on how complicated a process is, it can be given preference or denied preference. The operating system also is able to determine which processes are critical and therefore gives them preference in order to avoid fatal errors. For instance, if a printer is asking for a timeslot in the processor, it may be given preference over other processes because delays in processing the printing data may lead to the whole process failing. In this regard, a computer operating system not only schedules processes but also acts as an error handling system which prevents the computer as well as the various processes from failing. Programmers don’t need to know the processor architecture One of advantages of operating systems is that programmers never have to worry about the architecture of a computer as long as they code programs which can be executed by the operating system. This also means that programs can be run in computers with different hardware architectures since the applications don’t have to communicate directly with the hardware (processor). In this regard, the operating system separates the functions of application developers from computer architects. The computer programmer does not have to understand the internal working of the computer because the operating system will do most of the communication between the applications developed by

This for East Asian paper Essay Example | Topics and Well Written Essays - 1750 words

This for East Asian paper - Essay Example The country has a population of more than 1.35 million with 22 provinces, two special administrative states, Macau and Hong Kong and four directly controlled states which are Beijing, Shanghai, Chongqing and Tianjin. The country is the second biggest nation in the world as computed by the land area covered with an area of 9.6 million square kilometers. The selected topic is considered to be relevant and suitable for study because of the tremendous growth that China has experienced over the years, the complexities inherent to the country and the impressive strategies used by the country to deal through the various economic fractures and downturns faced by it over the years of its existence. The word Chinese refers to anything that is related to the country China and its people, culture, ethnicity or language. Chinese from the perspective of an individual refers to any person who is an inhabitant or resident of China or an individual who belongs to the Chinese ancestry. Chineseness refers to the state of having the unique characteristics pertaining to China including its culture, ethnicity, language, political and social aspects etc. (Leutner 404). The culture of China is one of the oldest cultures in the history of the world. The significant components of the Chinese culture are music, architecture, martial arts, religion, ceramics, visual arts and cuisine. The culture of China is dominant over wide geographical regions in the eastern parts of China. The traditions and customs of China vary greatly in towns, cities and provinces. The traditional culture of China is spread over wide geographical territories in which each region is divided into separately identifiable sub cultures. Each of these regions is represented by at least three ancestral components related to the ancient Chinese customs and traditions. For example, ancient cities like Guangdong

Capital Punishment in the USA Essay Example | Topics and Well Written Essays - 1250 words

Capital Punishment in the USA - Essay Example The main argument against capital punishment states that capital punishment disregards the value of human life2. Human value is viewed as being highly valuable and should not be taken away under any circumstances, legal or otherwise. It is believed that not even the worst form of crime should deprive one his life. Those against capital punishment believe that the value of the criminal’s life should not be destroyed by their crime even if they killed someone. They argue that a substitute of this form of punishment can be through life imprisonment which gives the offender a chance to turn over a new leaf and lead a better life. In summary, human life is valuable and no authority should take it a away and no crime warrants for capital punishment. Capital punishment violates the due process of law in several ways. First, the imposition is arbitrary and irrevocable. This denies the offender the opportunity to benefit from reversal of a conviction or discovery of any new evidence wh ich might reverses the verdict. Additionally, the death penalty violates the Constitution's provision of equal protection of its citizens3. It was observed to be imposed randomly and with biases based on one’s skin color, social status and ethnicity. This shows that the death penalty does not conform to the due process of the law. The death penalty violatebiasesst important universal human right which is the right to live. This right should be respected at all times regardless of the form of crime that an individual has committed. This argument is similar to the one concerning the value of human life. This argument supports the point that a victim could kill their attacker in the process of a murderous attack. In such a case, the victim can be argued to have committed murder in self defense. In conclusion, killing does not correct the act committed by the offender, instead their natural worthiness is taken away. Moreover, it does not bring any form of retributive justice in s ociety. Capital punishment results to the wastage of limited resources that could have been directed to other meaningful activities in fighting crime3. In addition to, it is time consuming and wasted the energy of prosecutors, defense counsel, prosecuting attorneys and the legal enforcement personnel. It burdens the criminal justice system and has negative effects of societal values and morals. It goes ahead to prove that killing is right which is not true. There are higher chances of execution of the innocent as offenders may get killed due to the loopholes in the justice system. Jurors and prosecutors make mistakes and in the event an offender is innocent, they are killed for a crime that they did not commit which is highly regrettable. This together with the mistakes in the legal system can lead to death of innocent people where capital punishment is practicable3 . There is ample evidence for such situations leading to the conclusion that capital punishment should be abolished to avoid the loss of innocent lives.  

Research Paper and Power Point on Artist Claude Monet

And Power Point on Artist Claude Monet - Research Paper Example Monet got born in 1840 in Paris but got raised in the Normandy region. He was the second born to his father Claude Adolphe Monet and mother Louise Justine Aubree Monet. His parents were second generation Parisians (Whiting 8). His father worked in the family’s shipping business while his mother was a housewife who took care of the family. His mother was also a trained singer who liked poetry and was also a very popular hostess. His family relocated to the Normandy region when he was aged 5 years. Monet developed his love for drawing at an early age through his interest for being outside than confined in a classroom. His mother greatly supported his artistic pursuit while his father wanted him to join the family business. Upon his mother’s death in 1857, Monet suffered greatly (Katilina & Brodskaya 50). Monet became well known in the community for drawing many of his town’s resident as well as for his caricatures. Monet started to develop a liking for the natural world in his works when he met a local landscape artist in Eugene Boudin. Boudin was influential in introducing Monet to outdoor painting also known as plein air painting, which eventually formed the basis of his works. Monet moved to Paris in 1859 to pursue his artistic dream where he enrolled at the Academic Suisse as a student(Katilina & Brodskaya 22) . His enrollment was also fuelled by the works of the Barbizon painters earlier in the century who showed close observation and great naturalistic representation in their works. His time as a student at the institution led him to meet Camille Pissarro, a fellow artist who became his close friend for years. The years 1861-1862 saw him serve in the military in Algiers, Algeria where he got discharged for poor health. His return to studies in Paris saw him meet other a rtists in Alfred Sisley, Frederic Bazille, and Auguste Renoir. The four developed an artistic friendship. Monet also worked

Fast food restaurant Essay Example for Free

Fast food restaurant Essay Analysis on Fast Food Culture and Its Double-side Effects to the world from the Development of American Fast Food ?. Introduction Fast food is becoming more and more popular around the world these years. It is estimated that there are more than 100 branches of McDonald’s and KFC only in Beijing. The appearances of the fast-food arouse a new thing named â€Å"fast-food culture†, and also the debate about this culture by people. ?. Brief history of American fast food 1. McDonald’s two brothers named Richard and Maurice McDonald left their home in New Hampshire and seeking jobs in southern California. At first they tried opening a theater but it was not a success. Then they caught on to the new craze of eating at drive-in restaurants and they opened one in 1939, in Pasadena, California, calling it â€Å"McDonald’s Famous Hamburgers†. (http://hi. baidu. com/) 2. The Emergences and Expansion of KFC KFC, shorted from Kentucky Fried Chicken, is a chain of fast food restaurants based in Louisville, Kentucky. KFC primarily sells chicken in form of pieces, wraps, salads , sandwiches and so on. The popularity and novelty of KFC made it famous and popular throughout the world. The fast food like KFC is also developed in the whole world. (http://www. kfc. com. cn) ?. The Development of Fast Food Industry Most people think that it is the McDonald brothers who start the fast-food craze in America, but in reality, it is the White Castle hamburger chain that actually started fast food history in America. J. Walter Anderson opened the first White Castle in 1916 in Wichita, Kansas, Richard and Maurice McDonald, the two brothers who created the first McDonald’s restaurant in 1948 in San Bernardino, California. By 1953, the brothers had decided to franchise their idea, and two franchisees opened in Downey, California and Phoenix, Arizona. Today, fast food chains have spread all around the world, and have spread American culture right along with them. There are many more popular chains, like Carls Jr. , Arby’s, Dominos and Dairy Queen, indicating that fast food isn’t always about hamburgers. ?. Globalization In 2006, the global fast food market grew by 4. 8% (Linda Stradley, 2008) Globalization is that the world is moving away from self-contained national economies towards an interdependent, integrated global economic system. It refers to the shift toward a more integrated and interdependent world economy. Fast food is becoming more and more popular around the world these years. It is estimated that there are more than 100 branches of McDonald’s and KFC only in Beijing. But the fast food sell in China which crude material is always manufactures in other countries. So if something changed in China, it is sure affects other countries. Fast food is already spread into the world, it is sure increase the knowledge between countries. Conclusion Throughout the world, American fast-food chains have become symbols of Western economic development, opening everywhere from Bulgaria to Western Samoa.and attracted a large number of consumers and the economic benefits. Fast food industry is decided by the development of social progress and economic development, it improves people’s living standards and way of life. The fast food industry is an important industry of living environment and investment environment, and also an important component of the consumer leisure, tourism, consumption, shopping and spending. The competition in the fast food market is very intensely, but should be focused on one aspect: that is, to eat fast food with nutrition, health. High-calorie fast food as a high-fat food is not suitable for eating. Fast food does have double-sided effects on the development of economy and people’s life. Though fast food still have so many shortages of this or that, This kind of food culture is true developed to be part of people’s life, no matter the criticism of fast food is true or not, fast food is still to be a trend in the future. Works Cited Linda Stradley. 2008. What’s Cooking America New York: New York University Press http://hi. baidu. com/ http://www. kfc. com. cn.

A view from the Bridge Essay Example for Free

A view from the Bridge Essay Eddie Carbone is in love with his niece by marriage, Catherine or Katie as he affectionately calls her. He has bought up the orphaned child as his own, loved her unconditionally. However, on the cusp of womanhood he has fallen in love with her, something he cannot admit to himself, as it is too terrible to acknowledge. The first clue to this unlawful love is his obsessive concern for her appearance Katie, you are walkin wavy! I dont like the looks theyre givin you in the candy store. And with them new high heels on the sidewalk clack, clack, clack. The heads are turnin like windmills. Without realising quite why he has done it, he has delayed her oncoming womanhood by keeping her at school and secretarial college. This way he can protect her from external influences keeping her wings clipped. This is why he is so keen to dissuade her from taking a job offered to her. I know shell be in the office but that aint what I had in mind We are afforded here a confirmation of the tragedy that is likely to unfold by the way Eddies wife; Beatrice reacts to Eddies dismay at Katies first steps to freedom. We feel her sense of urgency in her attempting to put distance between Katie and Eddie, she remonstrates with Eddie I dont understand you; shes seventeen years old you gonna keep her in the house all her life? To re enforce our understanding of Eddies true feelings another character fills us in on ensuring drama. This part belongs to Alfieri the lawyer / narrator of the play who in the traditional tragedy takes the part of the Greek chorus. More educated and yet part of the community, he tries to forestall the inevitably tragic ending even though he knows he is powerless to stop it. As the play progresses a monstrous change creeps up on Eddie. He is violently opposed to this romance between Rudolpho and Catherine. Eddie is not intelligent enough to realise that this opposition is not motivated, as he thinks, by a dislike of the boy and the suspicion that he is a homosexual. Not even the Alfieri can persuade Eddie to let go of the girl. Most ancient tragedies have a recognition scene wherein self-realisation dawns on the protagonist, in this case Eddie as it happened with Oedipus Rex. All of Shakespeares tragedies have recognition scenes. In this play there is no formal recognition scene. Only after Eddie has given Marco and Rudolpho up to the immigration service and he knows that he is facing certain death, due to his jealous desperate behaviour, does he begin to realise his faults and this is when the recognition scene takes place. This is similar in Millers A Death of a Salesman. He is adamant about wanting his name back, and he knows that he is in an impossible situation so he sees no other way out, and this is when everything comes crashing down around Eddie because he realises what he has done and cannot change anything. In my opinion what makes this play such an important and textbook modern tragedy is the way the viewer or reader is made aware of the inevitability of a tragic outcome given the setting and cast of characters. We are aware of the importance of name to the Italians, and the system men are judged by in the ethnic group in America. As Eddie loses more and more control over his feelings for Katie and thereby causing the problem to worsen he is in desperate need of some other focus, hence the significance of his blinding desire to clear his name of traitor which Marco has accused him of being. He feels if this can be sorted out so will his life. Hes gonna take that back, hes gonna take that back of Ill kill him! You hear me? Ill kill him! Ill kill him. This point is further emphasised by Eddies point blank refusal to accept Rodolphos apology which would help to sort things out. Eddie knows that if he and Rodolpho were seen to have made up that things between Marco and Eddie may possibly be patched up. Eddies near hysterical response is I want my name! He didnt take my name; hes only a punk. Marcos got my name By refusing the option that would have diffused the situation, the way is cleared for the inevitable outcome, his sense of self righteousness over Marco taking his name obscures his vision as to the real villainy of the piece his wrongful love for Catherine. The audience now knows that he truly would rather die than admit his true feelings showed in his horrified utterance of Beatrice in response to her accusation of you want somethin else Eddie, and you can never have her! The outcome of this disaster is one man killed, one facing deportation and therefore financial ruin for his family. Two families are ruined. All this has come about from the combination of one mans psychological make up and the circumstances ensuing from his social background. A truly modern tragedy. Show preview only The above preview is unformatted text This student written piece of work is one of many that can be found in our GCSE Arthur Miller section.

Benefits of Financial Liberalisation

Benefits of Financial Liberalisation A EUROPEAN POLICY ABSTRACT: This paper extends to test if the short and in the long run. Weak indica- the same short-run increase in cyclical tions are found that this may happen par- volatility arising from financial integration tially due to the anchoring of expectations is observed in this specific sample of â€Å"emerg-provided by the EU Accession, and to the ing markets. This work finds signs that, more robust institutional framework contrary to other emerging markets, this imposed by this process onto the countries in does not happen: for the future Member question. States, financial integration, similarly to the KEY WORDS: Enlargement, European outcome observed in mature market Union, financial liberalization, booms, 81 economies, reduces cyclical volatility both in busts, cycles, volatility. 1. INTRODUCTION Financial and capital flows liberalization can play a fundamental role in increasing growth and welfare. Typically, emerging or developing economies seek foreign savings to solve the inter-temporal savings-investment problem. On the other hand, current account surplus countries seek opportunities to invest their savings. To the extent that capital flows from surplus to deficit countries are well intermediated and, therefore, put to the most productive use, they increase welfare. Liberalization can, however, also be dangerous, as has been witnessed in many past and recent financial, currency and banking crises. It can make countries more vulnerable to exogenous shocks. In particular, if serious macroeconomic imbalances exist in a recipient country, and if the financial sector is weak, be it in terms of risk management, prudential regulation and supervision, large capital flows can easily lead to serious financial, banking or currency crises. A number of recent crises, like those in Ea st Asia, Mexico, Russia, Brazil and Turkey (described, for example, in IMF (2001)), and, to some extent, the Argentinean episode of late 2001, early 2002, have demonstrated the potential risks associated with financial and capital flows liberalization. Central and Eastern Europe has a somewhat different experience, when compared to other emerging regions, concerning the financial liberalization process, as the process there seems to have been much less crisis-prone than in, for instance, Asia or Latin America. This maybe, at least partially, because the current high degree of external and financial liberalization in the Central Eastern European countries (CEECs), beyond questions of economic allocative efficiency, must be understood in terms of the process of Accession to the European Union. The EU integration process implies legally binding, sweeping liberalization measures-not only capital account liberalization, but investment by EU firms in the domestic financial services, and the maintenance of a competitive domestic environment, giving this financial liberalization process strong external incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated regulatory and supervis ory structure, again based on EU standards. This whole process happened also with the EUs technical and financial support, through specific programs-like the PHARE one, for these so-called Accession, and the TACIS, for the former Soviet Union ones- and direct assistance from EU institutions, like the European Commission, the European Parliament and the European Central Bank (also, on a very early stage of the transition process, the influence of the IMF in setting up policies and institutions in several countries in the region-an intervention widely considered to haven been successful-was important: see Hallerberg et al., 2002). Additionally, EU membership seems to act as an anchor to market expectations (see Vinhas de Souza and Hà ¶lscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the observed devastating effects in both Asia and Latin America (even a major event, like the Russian collapse of 1998, had very reduced regional side effects). Several regional episodes of financial systems instability did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), but none with the prolonged negative consequences observed in other region (which was also due to the effective national policy actions undertaken after those episodes). This studys main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from now on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania , Slovakia and Slovenia). In their original work, KS build an extensive database of external and financial liberalization, which includes both developed countries and countries from emerging regions (but not from Eastern Europe). With that, they create different indexes of liberalization (capital account, banking and stock markets: see Table I below) and using them individually and in an aggregate fashion, test for the effects and causality of this process on financial and real volatility, for the existence of differences between regions, and for the effects of the ordering of the liberalization process. One underlying hypotheses of this work is that the existing regulatory and institutional framework in Eastern Europe, plus a more sustainable set of macro policies, played an important role in enabling liberalization to largely deliver the welfare enhancing outcomes that it is supposed to. Such an â€Å"anchoring role of the European Union in the CEECs, through the process of EU membership, and through the effective imposition of international standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the United States, or by some regional sub-grouping, like Mercosur, may also be welfare enhancing for other â€Å"emerging regions. 2. CAPITAL ACCOUNT The achieving of capital account liberalization happened rather swiftly in most of the countries in our sample: by the mid 1990s, all bar Bulgaria and Romania had been declared Article VIII compliant (for those two countries, this happened in 1998: see Table II below). One of the main driving forces behind this was the process of European Integration, for which external liberalization is a pre-requisite: in the early to mid-1990s, all the countries had signed Association Agreements with the European Union (frequently preceded by trade liberalization agreements with the EU, also called â€Å"Europe trade agreements, usually with years given to the countries to prepare for their full implementation) and formally applied for EU membership. Another additional factor supporting liberalization was IMF and OECD membership: four of the larger countries in our sample became OECD members during the second half of the 1990s. Another factor to be considered, is the endogenous decision process to liberalize in a sustainable fashion. 3. BANKING SECTOR Financial integration, in the form of the opening up the banking sector to foreign banks, is seen as being positive, on a micro level, as foreign banks are usually better capitalized and more efficient than their domestic counterparts (of course, the domestic banking sector eventually catches-up: for an indication of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that foreign banks do not contract either their credit supply nor their deposit base, in helping to smooth the cycle (see de Haas and Lelyveld, 2003: they find some indication that this is linked to the better capitalization base and prudential ratios, as better capitalized domestic banks behave similarly to foreign banks). Given the bank-centered nature of virtually all the financial systems of the future Member States, this is particularly important for them. In most of the member states, the initial stage of the creation of the two-tier banking system, modeled on the Western European â€Å"universal bank system, was characterized by rather liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking sector: see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Sà ¶rg et al., 2003). This caused a mushrooming of new banks in those countries in the early 1990s. Parallel to this, a series of banking crises, of varied proportions, affected most of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command economy period (the political need to support state-owned, inefficient industries, with the consequent accumulation of bad loans and also the financing of budget deficits), macroeconomic instability, risky expansion and investment strategies and also sheer inexperience, both from the investor s and from regulators. Progressively, the re-capitalization, privatization and internationalization of the banking system (mostly into the hands of EU financial conglomerates), coupled with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems. Two of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other smaller banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of â€Å"financial sector distress in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The initial proliferation of banks was, quite naturally, followed by a process of consolidation and strengthening-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 currently, while Hungary had 33 banks in 2002, showing only a very slight decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 8 1 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone). This consolidation process was frequently led by foreign companies, which now hold the majority of the assets of the banking system in virtually all of them-contrary to the situation in the current EU Member States-bar Slovenia. This process now has a component of regional expansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Sà ¶rg et al., 2003, ibid). The share of banking assets to GDP, nevertheless, is still far below the Euro area average (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, especially in the Balti c republics: with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and close to 5% in Latvia (Latvia, with its close trading ties to Russia, has a particular strategy of selling itself as a stable financial services center to CIS depositors: see IMF, 2003(b), ibid). The supervision system has also substantially improved, and, following recent international-and EU- best practice, is now centered in independent universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., estimate that the formal regulatory environment for the Czech Republic, Hungary and Poland is actually above the EU, and that its actual enforcement level is at its average;Liive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002). 3.1 BANKING CRISES IN EASTERN EUROPE The Baltic bank crises were, to different degrees, linked to liquidity difficulties related tolerations with Russia (in the November 1992 Estonian case, by the freezing of assets held by some Estonian banks in their former Moscow headquarters, while the Latvian and Lithuanian episodes of, respectively, March and December 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose export commodities, at that time, were still below world price levels) and regulatory tightening (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the country to hyperinflation (reaching over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to inadequate real sector reform, with state-owned, loss making enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector: those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the largest state bank, the State Savings Bank -SSB). Periodic foreign exchange crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close insolvent banks), and a tightening of policy actually led to more bank runs. A caretaker government in February 1997 (before a newly elected government took power in May) paved the way to longer lasting reform and the implementation of t he CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilateral institutionsamely, (namely the IMF). 4. STOCK MARKETS The existence of stock markets is assumed to be beneficial for economic performance. In principle, it provides a way for companies to raise capital at lower costs than through simple banking intermediation, and because it is not as restricted a source of capital as internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based governance in the US and the EU, and the shift towards a more regulated environment) assumed to provide better governance for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with stock markets playing marginal roles in most of them (and, in some, a very marginal role: in Bulgaria, Slovakia and Romania, their average market capitalization in GDP terms is below 5%: see Figure I below). All of these countries had (re-)established stock markets by the mid-90s (see Table III above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of voucher certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial Public Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher-driven privatization, the initial large number of investors and traded stocks in those stock markets was soon concentrated in a rather limited number of institutional investors-domestic and foreign- and â€Å"blue chip stocks. In the IPO-driven markets, the number of stocks and investors actually tended to increase with time, albeit from a rather concentrated base. Even in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU average (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slovenia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in several years. Also, the average market turnover is equally below the one observed in comparable EU economies. Similarly to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources. This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets: the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the ongoing efforts of the Lamfalussy Committee towards a single European market for securities: according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approval), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each individual country to have its own separate stock market. One must also recall that the current national stock markets in the mature developed economies are themselves the result of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgari a in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some mature markets, like Germany and the US. Nevertheless, the observed tendency of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania). All the specific questions described above concerning the way those stock exchanges were founded and their later developments, plus their relative smallness and shallowness, affect the dynamics of their stock market indexes (SMI), and are clearly reflected by them (as one may see in Figure II, below). This, coupled with the rather limited duration of the series, may affect their adequacy as proxies of financial cycles. Source: Datastream, modified by the authors. The price indexes here were converted to US Dollars and re-based to a common reference period were they equal 100, May of 1998. The country codings are as described in the Annexes. 5. ESTIMATED INDEXES The construction of the index for this new sample of countries was the core of this work. A comprehensive effort was done to crosscheck the information collected from papers and publications with national sources. Below we present the estimated monthly index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written about the individual countries and the region. This is an index that falls with liberalization, where maximum liberalization equals one and minimum three (in this sense, one could actually see it as an index of financial repression). As an additional robustness check, the year-end value of the index here constructed was regressed on the combined EBRDs yearly indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35. As one may see from Figure III above, the process of integration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the â€Å"Full Liberalization Index in the early 1990s do not indicate reversals: the merely reflect the entry into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they â€Å"enter the world as highly closed economies, but those countries introduced liberalization reforms almost immediately from the start. After this, a slight increasing trend, that does reflect a mild liberalization reversal, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed. Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the collapse of the Czech monetary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly dependent of imported energy sources) seems to have driven these mild liberalization reversals. Comparing the Full Index constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, but both the â€Å"entry of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the emerging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, but it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs â€Å"leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy institutions and instruments (see Vinhas de Souza and Hà ¶lscher, 2001): a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of mature, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spikes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was essentially driven by the Financial Sector liberal ization component. As will become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s. Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account restrictions) and ACs set (financial sector): see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower. One could, in principle, aggregate the countries in our sample in three different groups: rapid liberalizers (the ones that followed a â€Å"big bang early approach, without major reversals: Bulgaria, Estonia, Latvia, Lithuania), consistent liberalizers (the ones that followed a more delayed path, but also without major roll backs: the Czech Republic, Hungary, Poland) and cautious liberalizers (the ones whose liberalization path was either openly inconsistent or downright mistrustful: Romania, Slovakia, Slovenia). 5.1 COUNTRY-BY-COUNTRY LIBERALIZATION PATH. In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restrictive measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-)constitution of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard peg and the potential gains with interest rate differentials. After the peg was replaced by the current float regime, this restriction i s duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of any liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the late 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003: resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the f inancial sector liberalization is observed from early 1998, also resulting from the experienced banking crisis: reserve requirements on deposits on foreign accounts by non-resident are introduced; In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time; In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and cautious one: at the end of the sample, it has the highest (i.e., less liberalized) score for the â€Å"Full Index of all countries in the sample: 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other â€Å"Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversals are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the entry in effect of the EU Association Agreement, across-the-board further (re)liberalization measures have been introduced. 6. FINANCIAL CYCLES AND LIBERALIZATION The financial cycle coding which is used by KS defines cycles as a at least twelve month-long strictly downwards (upwards) movement, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. Beyond that, these series have a rather limited time extension (our sample covers the 01:1990-06:2003 period). Adapting KS criteria to the limited time dimension of our sample, we use a less stringent definition of â€Å"cycle, the same algorithm as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of these 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration. 7. CONCLUSION The main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally planned economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study: in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and common shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the extension of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results diverge from KS, as in their work â€Å"emerging markets experience a relative short run increase in the amplitude of downward cycles. Another noteworthy feature is that only minor liberalization rever sals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by â€Å"contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the importance of institutions and of the EU Accession, this papers initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyzed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process. Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the majority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility. Benefits of Financial Liberalisation Benefits of Financial Liberalisation A EUROPEAN POLICY ABSTRACT: This paper extends to test if the short and in the long run. Weak indica- the same short-run increase in cyclical tions are found that this may happen par- volatility arising from financial integration tially due to the anchoring of expectations is observed in this specific sample of â€Å"emerg-provided by the EU Accession, and to the ing markets. This work finds signs that, more robust institutional framework contrary to other emerging markets, this imposed by this process onto the countries in does not happen: for the future Member question. States, financial integration, similarly to the KEY WORDS: Enlargement, European outcome observed in mature market Union, financial liberalization, booms, 81 economies, reduces cyclical volatility both in busts, cycles, volatility. 1. INTRODUCTION Financial and capital flows liberalization can play a fundamental role in increasing growth and welfare. Typically, emerging or developing economies seek foreign savings to solve the inter-temporal savings-investment problem. On the other hand, current account surplus countries seek opportunities to invest their savings. To the extent that capital flows from surplus to deficit countries are well intermediated and, therefore, put to the most productive use, they increase welfare. Liberalization can, however, also be dangerous, as has been witnessed in many past and recent financial, currency and banking crises. It can make countries more vulnerable to exogenous shocks. In particular, if serious macroeconomic imbalances exist in a recipient country, and if the financial sector is weak, be it in terms of risk management, prudential regulation and supervision, large capital flows can easily lead to serious financial, banking or currency crises. A number of recent crises, like those in Ea st Asia, Mexico, Russia, Brazil and Turkey (described, for example, in IMF (2001)), and, to some extent, the Argentinean episode of late 2001, early 2002, have demonstrated the potential risks associated with financial and capital flows liberalization. Central and Eastern Europe has a somewhat different experience, when compared to other emerging regions, concerning the financial liberalization process, as the process there seems to have been much less crisis-prone than in, for instance, Asia or Latin America. This maybe, at least partially, because the current high degree of external and financial liberalization in the Central Eastern European countries (CEECs), beyond questions of economic allocative efficiency, must be understood in terms of the process of Accession to the European Union. The EU integration process implies legally binding, sweeping liberalization measures-not only capital account liberalization, but investment by EU firms in the domestic financial services, and the maintenance of a competitive domestic environment, giving this financial liberalization process strong external incentives (and constraints). Those measures were implemented parallel to the development of a highly sophisticated regulatory and supervis ory structure, again based on EU standards. This whole process happened also with the EUs technical and financial support, through specific programs-like the PHARE one, for these so-called Accession, and the TACIS, for the former Soviet Union ones- and direct assistance from EU institutions, like the European Commission, the European Parliament and the European Central Bank (also, on a very early stage of the transition process, the influence of the IMF in setting up policies and institutions in several countries in the region-an intervention widely considered to haven been successful-was important: see Hallerberg et al., 2002). Additionally, EU membership seems to act as an anchor to market expectations (see Vinhas de Souza and Hà ¶lscher, 2001), limiting the possibilities of self- fulfilling financial crises and regional contagion (see Linne, 1999), which had the observed devastating effects in both Asia and Latin America (even a major event, like the Russian collapse of 1998, had very reduced regional side effects). Several regional episodes of financial systems instability did happen (see Vinhas de Souza, 2002(a) and Vinhas de Souza, 2002(b)), but none with the prolonged negative consequences observed in other region (which was also due to the effective national policy actions undertaken after those episodes). This studys main aim is to expand the Kaminsky and Schmukler database (see Kaminsky and Schmukler, 2003), from now on indicated as KS, to include the Accession and Acceding Countries from Eastern Europe (namely, for Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania , Slovakia and Slovenia). In their original work, KS build an extensive database of external and financial liberalization, which includes both developed countries and countries from emerging regions (but not from Eastern Europe). With that, they create different indexes of liberalization (capital account, banking and stock markets: see Table I below) and using them individually and in an aggregate fashion, test for the effects and causality of this process on financial and real volatility, for the existence of differences between regions, and for the effects of the ordering of the liberalization process. One underlying hypotheses of this work is that the existing regulatory and institutional framework in Eastern Europe, plus a more sustainable set of macro policies, played an important role in enabling liberalization to largely deliver the welfare enhancing outcomes that it is supposed to. Such an â€Å"anchoring role of the European Union in the CEECs, through the process of EU membership, and through the effective imposition of international standards of financial supervision and regulation, may indicate that, beyond multilateral organizations like the IMF or the OECD, a greater, pro-active regional stabilizing role in emerging markets by regional actors, for instance, the United States, or by some regional sub-grouping, like Mercosur, may also be welfare enhancing for other â€Å"emerging regions. 2. CAPITAL ACCOUNT The achieving of capital account liberalization happened rather swiftly in most of the countries in our sample: by the mid 1990s, all bar Bulgaria and Romania had been declared Article VIII compliant (for those two countries, this happened in 1998: see Table II below). One of the main driving forces behind this was the process of European Integration, for which external liberalization is a pre-requisite: in the early to mid-1990s, all the countries had signed Association Agreements with the European Union (frequently preceded by trade liberalization agreements with the EU, also called â€Å"Europe trade agreements, usually with years given to the countries to prepare for their full implementation) and formally applied for EU membership. Another additional factor supporting liberalization was IMF and OECD membership: four of the larger countries in our sample became OECD members during the second half of the 1990s. Another factor to be considered, is the endogenous decision process to liberalize in a sustainable fashion. 3. BANKING SECTOR Financial integration, in the form of the opening up the banking sector to foreign banks, is seen as being positive, on a micro level, as foreign banks are usually better capitalized and more efficient than their domestic counterparts (of course, the domestic banking sector eventually catches-up: for an indication of this process at the ACs, see, among others, Tomova et al., 2003). Also from a macroeconomic perspective, financial integration maybe positive for the Eastern European countries, both for long run growth and, as there are indications that foreign banks do not contract either their credit supply nor their deposit base, in helping to smooth the cycle (see de Haas and Lelyveld, 2003: they find some indication that this is linked to the better capitalization base and prudential ratios, as better capitalized domestic banks behave similarly to foreign banks). Given the bank-centered nature of virtually all the financial systems of the future Member States, this is particularly important for them. In most of the member states, the initial stage of the creation of the two-tier banking system, modeled on the Western European â€Å"universal bank system, was characterized by rather liberal licensing practices and limited supervision policies (aimed at the fast creation of a de novo commercial, private banking sector: see Fleming et al., 1996, Balyozov, 1999, Enoch et al., 2002, Sà ¶rg et al., 2003). This caused a mushrooming of new banks in those countries in the early 1990s. Parallel to this, a series of banking crises, of varied proportions, affected most of those de novo banking systems, due to this lax institutional framework, inherited fragilities from the command economy period (the political need to support state-owned, inefficient industries, with the consequent accumulation of bad loans and also the financing of budget deficits), macroeconomic instability, risky expansion and investment strategies and also sheer inexperience, both from the investor s and from regulators. Progressively, the re-capitalization, privatization and internationalization of the banking system (mostly into the hands of EU financial conglomerates), coupled with the implementation of a more robust, EU-modeled institutional framework, did away with most of those problems. Two of the worst cases where the set of Baltic banking crises and the Bulgarian episode, which are described in more detail below. Other smaller banking crises happened in Estonia in 1994 and 1998, and in Latvia in 1994. Caprio and Klingebiel, 2003, report smaller episodes of â€Å"financial sector distress in the Czech Republic (94-95), Hungary (93), Poland (91-93), Romania (98-00), Slovakia (97) and Slovenia (92-94). The initial proliferation of banks was, quite naturally, followed by a process of consolidation and strengthening-parallel to the privatization of the remnant state-owned components of the financial system- of the banking sector in most of those economies (in Bulgaria, from 81 banks in 1992 to 35 in 2001, in the Czech Republic from 55 in 1995 to 38 in 2001, Estonia, from 42 in 1992 to 7 currently, while Hungary had 33 banks in 2002, showing only a very slight decrease from the early 1990s, Latvia from 56 in 1994 to 23, Lithuania from 27 in 1993 to 13, in Poland from 8 1 in 1995 to 71 in 2001, in Romania from 45 in 1998 to 41 in 2001, in Slovakia from 22 in 2000 to 19 in 2001, and in Slovenia, where the number fell from 25 to 21 during 2001 alone). This consolidation process was frequently led by foreign companies, which now hold the majority of the assets of the banking system in virtually all of them-contrary to the situation in the current EU Member States-bar Slovenia. This process now has a component of regional expansion of the Eastern European banks themselves, or, more precisely in most cases, the regional expansion of Western banks via some of their locally-owned subsidiaries (see Sà ¶rg et al., 2003, ibid). The share of banking assets to GDP, nevertheless, is still far below the Euro area average (which stood at around 265% of GDP by end 2001), compared with 47% in Bulgaria, 136% in the Czech Republic, 72% in Estonia and Latvia, 32% in Lithuania, 63% in Poland, 60% in Hungary, 30% in Romania, 96% in Slovakia and 94% in Slovenia (data also for 2001). Another peculiar feature of the banking system in the region is that foreign currency lending -usually euro-denominated-to residents is very high, especially in the Balti c republics: with 80% of total loans in Estonia, 56% in Latvia and 61% in Lithuania. Also, the Baltic countries have substantial shares of deposits by non-residents, with over 10% in Estonia and Lithuania and close to 5% in Latvia (Latvia, with its close trading ties to Russia, has a particular strategy of selling itself as a stable financial services center to CIS depositors: see IMF, 2003(b), ibid). The supervision system has also substantially improved, and, following recent international-and EU- best practice, is now centered in independent universal supervisory agencies in the most advanced of those countries (Reininger et al., 2002, ibid., estimate that the formal regulatory environment for the Czech Republic, Hungary and Poland is actually above the EU, and that its actual enforcement level is at its average;Liive, 2003, gives a description of the Estonian experience that culminated in the creation of the EFSA -Estonian Financial Supervisory Authority- in January 2002). 3.1 BANKING CRISES IN EASTERN EUROPE The Baltic bank crises were, to different degrees, linked to liquidity difficulties related tolerations with Russia (in the November 1992 Estonian case, by the freezing of assets held by some Estonian banks in their former Moscow headquarters, while the Latvian and Lithuanian episodes of, respectively, March and December 1995, were caused by the drying-up of lucrative trade-financing opportunities with Russia, whose export commodities, at that time, were still below world price levels) and regulatory tightening (Latvia, Lithuania), compounded by the elimination of credit opportunities with the implementation of the Estonian and Lithuanian CBAs (Currency Board Arrangements). In Lithuania, as in Bulgaria, the financing of the budget deficit also played a role. In the Estonian and Latvian cases, around 40% of the assets of the banking system where compromised, in the Lithuanian and Bulgarian cases, around a third. The Bulgarian 1996-1997 crisis eliminated a third of its banking sector, and led the country to hyperinflation (reaching over 2000% in March 1997, see Yotzov, 2002). Its roots lie in the political instability that preceded it (which, on its turn, led to inadequate real sector reform, with state-owned, loss making enterprises being financed via the budget deficit or through arrears with the, at the time, still mostly state-owned part banking sector: those arrears were, in turn, partially monetized by the Bulgarian National Bank -BNB- and the largest state bank, the State Savings Bank -SSB). Periodic foreign exchange crises (March 1994, February 1997) and bank runs (late1995, late 1996, early 1997) were part of this picture. The implementation of tighter supervisory procedures during 1996 (giving the BNB the power to close insolvent banks), and a tightening of policy actually led to more bank runs. A caretaker government in February 1997 (before a newly elected government took power in May) paved the way to longer lasting reform and the implementation of t he CBA, with its tighter budget constraints towards both the government and the banking sector. This reform process happened with the support from multilateral institutionsamely, (namely the IMF). 4. STOCK MARKETS The existence of stock markets is assumed to be beneficial for economic performance. In principle, it provides a way for companies to raise capital at lower costs than through simple banking intermediation, and because it is not as restricted a source of capital as internal financing. Also, it is assumed that the existence of alternative modes of finance may reduce the likelihood of credit crunches caused by problems with the banking sector (see Greenspan, 2000). Additionally, the existence of external ownership is (or was, given the recent problems with market-based governance in the US and the EU, and the shift towards a more regulated environment) assumed to provide better governance for the management of firms. The majority of economic analyses seem to support the position that a diversified financing mix is positive for economic growth and stability. As described in the previous section, all the financial sectors in the Member States are bank-centered, with stock markets playing marginal roles in most of them (and, in some, a very marginal role: in Bulgaria, Slovakia and Romania, their average market capitalization in GDP terms is below 5%: see Figure I below). All of these countries had (re-)established stock markets by the mid-90s (see Table III above). About half of the future Member States used them to drive the initial process of re-privatization, either via mass issues of voucher certificates for residents (the most famous case of this strategy was the Czech Republic), or via IPOs (Initial Public Offerings) re-privatization processes, to lock-in domestic and foreign strategic investors (see Claessens at al., 2000). In the voucher-driven privatization, the initial large number of investors and traded stocks in those stock markets was soon concentrated in a rather limited number of institutional investors-domestic and foreign- and â€Å"blue chip stocks. In the IPO-driven markets, the number of stocks and investors actually tended to increase with time, albeit from a rather concentrated base. Even in the largest ones, nevertheless, market capitalization, as a GDP share, was and remains rather low (see Figure I below), and far below the EU average (around 72% of GDP). Only in the Czech Republic, Estonia, Hungary and Slovenia the average market capitalization is above a 20% GDP share, while in Romania is below 1% in several years. Also, the average market turnover is equally below the one observed in comparable EU economies. Similarly to what is observed in the banking sector, the initial regulatory environment was deliberately lax, and the regulators were plagued by much the same problems of inexperience and limited number of staff and resources. This does not mean that domestic agents in those countries lack access to the financial services supposed to be provided by stock markets: the very process of opening up, the increase in cross-border trade in financial services, the harmonization of rules for capital trading with the EU (including the ongoing efforts of the Lamfalussy Committee towards a single European market for securities: according to the current proposal, small and medium size firms would be able to use a simplified prospectus valid throughout the EU and choose the country of its approval), plus the development of information technology, all imply that is not actually necessary-nor economically optimal, given economies of scale-for each individual country to have its own separate stock market. One must also recall that the current national stock markets in the mature developed economies are themselves the result of process of consolidation-and closing-of smaller regional stock markets (as was observed in Bulgari a in the early 1990s), which still today coexist with larger, dominant national stock exchanges even in some mature markets, like Germany and the US. Nevertheless, the observed tendency of domestic larger companies, with presumed better growth prospects, to list abroad (see Table IV below), due to the obvious cost and liquidity advantages of the larger international stock markets, does seems, on balance, to deprive those stock markets of liquidity (see Claessens at al., 2003). On the other hand, nonresidents seem to play a major role in most of those markets (accounting for 77% of the capitalization in Estonia, 70% in Hungary and half of the free-float capitalization in Lithuania). All the specific questions described above concerning the way those stock exchanges were founded and their later developments, plus their relative smallness and shallowness, affect the dynamics of their stock market indexes (SMI), and are clearly reflected by them (as one may see in Figure II, below). This, coupled with the rather limited duration of the series, may affect their adequacy as proxies of financial cycles. Source: Datastream, modified by the authors. The price indexes here were converted to US Dollars and re-based to a common reference period were they equal 100, May of 1998. The country codings are as described in the Annexes. 5. ESTIMATED INDEXES The construction of the index for this new sample of countries was the core of this work. A comprehensive effort was done to crosscheck the information collected from papers and publications with national sources. Below we present the estimated monthly index, for the period January 1990 to June 2003 (see Figure III). The base data for its construction was collected from IMF and EBRD publications, and then exhaustively verified both with national sources and with works written about the individual countries and the region. This is an index that falls with liberalization, where maximum liberalization equals one and minimum three (in this sense, one could actually see it as an index of financial repression). As an additional robustness check, the year-end value of the index here constructed was regressed on the combined EBRDs yearly indexes of banking sector reform and non-banking financial sector reform. The results from a panel regression with the index constructed here on the LHS and the EBRD index on the RHS yield a coefficient of .60, and correlations among the individual country- specific index series range from -0.91 to -0.35. As one may see from Figure III above, the process of integration and liberalization was almost continuous throughout the 1990s and early 2000s. The spikes in the â€Å"Full Liberalization Index in the early 1990s do not indicate reversals: the merely reflect the entry into the sample of the newly independent Baltic republics. As former members of the Soviet Union, they â€Å"enter the world as highly closed economies, but those countries introduced liberalization reforms almost immediately from the start. After this, a slight increasing trend, that does reflect a mild liberalization reversal, is observed, starting mid-1994 and lasting until early 1997, from when a continuous liberalization trend is observed. Noteworthy here is the fact that virtually none of the obvious candidates for a reversal of liberalization (the 1997 Asian Crisis, the collapse of the Czech monetary arrangement in 1997, the collapse of the Bulgarian monetary arrangement in 1996/97, the 1998 Russian Crisis, the 1999-2001 oil price shocks-as all those economies are highly dependent of imported energy sources) seems to have driven these mild liberalization reversals. Comparing the Full Index constructed here with the one constructed by KS, for similar time samples, one may observe that the ACs start substantially below the average level of other emerging markets- i.e., they are more liberalized, but both the â€Å"entry of the initially less liberalized former Soviet republics, plus continuous liberalization efforts in the emerging market KS set reverse this situation. A similar liberalization reversal trend in both the ACs and the merging market set is observed from early 1994, but it is actually slightly stronger on the ACs sample, until its reversal in 1996. By the end of our sample, the ACs are clearly below the final value for the emerging set in KSs sample. This sort of remarkably fast pattern of the ACs â€Å"leapfroging towards best international practice is also observed in several types of institutional frameworks, like, for instance, monetary policy institutions and instruments (see Vinhas de Souza and Hà ¶lscher, 2001): a process that virtually took decades for Western central banks was compressed in a half a dozen years in the Future Member States. Nevertheless, by the end of the sample, both emerging and ACs are still above the level of mature, developed economies. Analyzing the individual components of the index (see Figure V), one may see that, abstracting again from the initial spikes in the index, which are, as explained above, caused by the addition of new countries to the sample, the 1994/1997 reversal of liberalization was essentially driven by the Financial Sector liberal ization component. As will become clear with the country specific analysis below, this was related, in most cases, to-and here it must be stressed that those were rather limited reversals-to the banking crises that plagued several countries in our sample in the early to mid 1990s. Comparing now the individual components of the Full Index constructed here with the ones from KS, again for emerging and mature economies, it becomes clear that the reversals observed in Figure IV were driven by different sources in the emerging set (increase in capital account restrictions) and ACs set (financial sector): see Figure VI. All the indexes for mature economies are, again as one would expect, substantially lower. One could, in principle, aggregate the countries in our sample in three different groups: rapid liberalizers (the ones that followed a â€Å"big bang early approach, without major reversals: Bulgaria, Estonia, Latvia, Lithuania), consistent liberalizers (the ones that followed a more delayed path, but also without major roll backs: the Czech Republic, Hungary, Poland) and cautious liberalizers (the ones whose liberalization path was either openly inconsistent or downright mistrustful: Romania, Slovakia, Slovenia). 5.1 COUNTRY-BY-COUNTRY LIBERALIZATION PATH. In Bulgaria, virtually no sign of a liberalization reversal is observed, even during the substantial stress experienced by the country during the banks runs of 1996/97 and the ultimate collapse of the floating regime in 1997 (beyond ad hoc restrictive measures adopted by the banks themselves). As in most of the countries in my sample, the stock market is the last one to liberalize, but does so in a faster fashion. Nevertheless, this is in most cases a data quasi-artifact that arises from the later (re-)constitution of the stock exchange itself. In the Czech Republic, a limited reversal of the financial sector liberalization is observed from late1995 to late 1997, namely, via the imposition of limits on banks short-term open positions towards on-residents, as a way to limit the exposure of the financial sector to the inflows brought about by the hard peg and the potential gains with interest rate differentials. After the peg was replaced by the current float regime, this restriction i s duly removed. In Estonia, again, virtually no sign of a liberalization reversal is observed, even during the bank runs of the early 1990s, the unwinding of the 1997 bubble, nor during the 1998 Russian crisis. Again, the stock market is the last one to liberalize, but one more time, this arises from the later constitution of the stock exchange. In Hungary, also no signs of any liberalization reversal are observed. Hungary was an early reformer, introducing some liberalization measures already during the late 1980s, but the profile of its reform path is much more discounted through time, as compared, for instance, with the Baltic countries. In Latvia, a rather limited reversal of the financial sector liberalization is observed from mid 1996all the way to early 2003: resulting from the 1996 banking crisis, specific aggregate lending limits to regions (i.e., limits on exposure to non-OECD countries, bar the other Baltic republics) are imposed. In Lithuania, a limited reversal of the f inancial sector liberalization is observed from early 1998, also resulting from the experienced banking crisis: reserve requirements on deposits on foreign accounts by non-resident are introduced; In Poland, no signs of any liberalization reversal are observed. Similarly to Hungary, the profile of its reform path is much more discounted through time; In Romania, no signs of any liberalization reversal are observed, but the reform path is a decidedly slow and cautious one: at the end of the sample, it has the highest (i.e., less liberalized) score for the â€Å"Full Index of all countries in the sample: 1.60 (see Table V). In Slovakia, no signs of any liberalization reversal are observed. Here, the reform path is characterized by a broad stagnation since the Czechoslovak partition till 1998/1999, when, after a change in the political leadership, reforms are re-started, reaching after that levels similar to the other â€Å"Vise grad countries in a rather quick fashion. In Slovenia, one of the most consistently cautious Member States concerning the advantages of integration and liberalization, reversals are indeed observed in all three indexes, since early 1995in the capital account and financial sector components, and from early 1997 in the stock market one. Since early 1999, with the entry in effect of the EU Association Agreement, across-the-board further (re)liberalization measures have been introduced. 6. FINANCIAL CYCLES AND LIBERALIZATION The financial cycle coding which is used by KS defines cycles as a at least twelve month-long strictly downwards (upwards) movement, followed by a equally upwards (downwards) 12-month movement from the through (peak) of a stock market index, measured in USD, as they should reflect returns from the point of view of an international investor. As described in the stock market section of this work, one must be warned that there are specific factors in the countries in our sample that may affect the effectiveness of a stock market index as an adequate proxy of financial cycles, at least for the sample here considered. Beyond that, these series have a rather limited time extension (our sample covers the 01:1990-06:2003 period). Adapting KS criteria to the limited time dimension of our sample, we use a less stringent definition of â€Å"cycle, the same algorithm as above but with a 3-month window for the cycle (Edwards et al., 2003, use a 6-month window). With this we get 118 observations for all countries in our sample. Of these 118 cycles, 61 are upward, with an average of 7.51 months duration, and 57 are downward, with an average of 8.20 months of duration. 7. CONCLUSION The main aim of this paper was to extend the index developed by Kaminsky and Schmukler, 2003, for a specific sample of countries, namely, the previously centrally planned economies from Central and Eastern Europe, and to perform a similar analysis on them. Our results do lend some support to the basic assumption of this study: in spite of all the limitations of the time series used (their shortness, the fact that they were buffeted by several country-specific and common shocks), a re-estimation of KSs core regressions strongly supports the notion that financial liberalization does generate benefits both in the short and in the long run, measured via the extension of the amplitude of upward cycles and its reduction for downward cycles of stock market indexes. Importantly, these results diverge from KS, as in their work â€Å"emerging markets experience a relative short run increase in the amplitude of downward cycles. Another noteworthy feature is that only minor liberalization rever sals, led by the financial sector component, were observed in the aggregate index. Also, those reversals do not seem to be driven by â€Å"contagion from shocks in other emerging markets (like the Asian or Russian crisis), but reflect country-specific shocks. When considering the individual components of the index separately, again signs of minor reversals in financial sector liberalization are observed, related to temporary reactions to the several banking crisis observed in the region. Concerning the importance of institutions and of the EU Accession, this papers initial assumption was that the mostly positive results above would come about due to the anchoring of expectation provided by the perspective of entry into the EU already by mid-2004 (or 2007, in the case of Bulgaria and Romania) for the countries here analyzed, and by the imposition of a more robust macro and institutional framework by the requirements of the Accession process itself. Signs of this are not found in the KS regressions, perhaps because the liberalization index itself captures the effects of the EU Accession process. Finally, using a different framework than KSs to assess the affects of liberalization on financial, real and nominal volatility, most of the econometric results seem to support the previous ones, but they seem to indicate that the capital account liberalization is the element that most consistently and significantly reduces volatility. On this final section, the majority the econometric results seem to support some specific role for the EU Enlargement process in reducing volatility.