Leading Change

â€Å"The harder you push, the harder the system pushes back† is the 2nd law in The Laws of the Fifth Discipline.   These laws are the core of a process called systems thinking and the concept is that it’s â€Å"best to manage the system, not just the individual processes.†Ã‚   (West & Cianfrani, 2004, p. 69)   Corporations have a tendency to look at the â€Å"direct linear cause and effect relationships,† rather than looking at â€Å"interactions.†Ã‚   (West & Cianfrani, 2004, p. 69)   Peter Senge’s book The Fifth Discipline identified 10 laws that defined systems thinking. The 2nd law in The Laws of the Fifth Discipline can be interpreted as â€Å"Compensating feedback.†Ã‚   Senge defines this as â€Å"when well-intentioned interventions call forth responses from the system that offset the benefits of the intervention.†Ã‚   (Senge, 1990, p. 58) In other words, the more effort exerted to change or improve the current organizational processes, the more effort it requires. Organizations have experienced this process when, for example, a product or brand suddenly begins to lose its popularity within the market.   When organizations begin to push new marketing strategies aggressively it often turns out that more revenue is spent on the marketing efforts with only a temporary pay back.   This process is not only limited to the business market, it can also be illustrated in personal experiences.   Senge uses the smoker as an example – if a person who is a regular smoker suddenly quits he or she might begin to gain weight, become frustrated with personal appearance and then suddenly begin smoking again.   (Senge, 1990, p. 59) As humans it is natural for us to get drawn into the process of compensating feedback.   We push harder and it’s exhausting and we often â€Å"glorify the suffering that ensues.†Ã‚   (Senge, 1990, p. 59)   When our efforts to produce change fail initially, we push harder and often have the belief that our hard work and effort will overcome all of the obstacles in front of us. However, compensating feedback is a process where we become blind to the fact that our efforts are actually contributing to the current obstacles we are facing as well as creating others we must overcome. (Senge, 1990, p. 59-60) Over the past two decades information and communication technology has continuously evolved and has empowered small businesses and large corporations with new emerging markets and tools.   The Internet has become the information highway and has impacted both social and economic relationships in various sectors such as education, health, government, trade and tourism.   (Waddell & Singh, 2003, p. vii) In order to maintain its impact on society the information technology must continuously evolve to compensate for future needs for both local and global societies.   (Waddell & Singh, 2003, p. VI)   Focusing on one idea or concept that does not elicit long-term success consumes time and effort that is imperative to online success. The consistent evolution of technology and the platforms provided are numerous and are impacting our society regularly.   These newly emerging technologies affect the way we do business, communicate with others, daily entertainment, study and do research.   (Waddell & Singh, 2003, p. VI)   Ecommerce is the largest growing platform of the World Wide Web and it has provided a â€Å"new momentum of doing business in the digital economy.†Ã‚   (Waddell & Singh, 2003, p. VI) In order to compensate and adjust to the constant change through the internet environment we must be able to identify the implications. At the end of 2004 it was estimated that 750 million users represented the Internet community worldwide.   (Waddell & Singh, 2003, p. VI) The e-marketplaces consist of various products and services that market their products both from Business to Business and Business to consumer.   These products and services provide value for both buyers and sellers. In order to create a successful ecommerce venture processes must be transformed from the traditional ways of doing business to modern Internet transactions that are efficient to both the buyer and the seller.   The biggest challenge for internet businesses is adapting to the virtual environment and integrating their current business processes into the e-marketplace. (Waddell & Singh, 2003, p. 97) The Internet environment has its benefits as well as disadvantages, or threats.   On a local business level it immediately provides â€Å"easy and fast entrance to new markets,† 24/7 business hours, less physical structure maintenance, and the possibility of sales increasing.   (Waddell & Singh, 2003, p. 99) For buyers this offers more selection of products and services, 24/7 business access and easy comparison between the various seller’s offers.     (Waddell & Singh, 2003, p. 99) Threats for businesses as a whole are the loss of direct customer face to face relationships, increased competition and the extra funds required for consistent upgrading of products and platforms.   (Waddell & Singh, 2003, p. 99)   For buyers there is the same lack of direct face to face relationships, the unknown reliability of the seller and lack of trust in products and services.   (Waddell & Singh, 2003, p. 99) E-commerce is about â€Å"rediscovering the individuality of the customers and their needs, and the creation of frictionless modes of commercial interaction with them.†Ã‚  Ã‚   (May, 2000, p. 4)   Businesses must approach change in an internet environment carefully, as in the traditional business model the direct interaction allows the consumer to feel important.   Ecommerce does not provide the close interaction; therefore it is imperative that the online business practices allow the consumer to feel like a person, not a type.   (May, 2000, p. 5) A great example of ecommerce success is Amazon.com.   This company has proven its ability to implement change and business growth without affecting its customer base or falling behind the competition.   The vision of the â€Å"Earth’s biggest bookstore† (May, 2000, p. 52) was to offer a range and large quantity of products that would dominate traditional booksellers and to â€Å"achieve market ubiquity without acquiring retail real estate.†Ã‚   (May, 2000, p. 52) Jeff Bezos identified books as an ideal product for selling online because the number of books the traditional bookseller could offer was limited; therefore, if these products were offered online the number available would be unlimited.   In a sense the book trade has always been â€Å"virtual† – any customer can enter a traditional bookstore and order any book in print. Amazon.com brought a new online concept to the book trade and improved the efficiency of a traditional process.   However, though this insight was extraordinary introducing the concept into the ecommerce marketplace meant that consistent change was necessary and that customers must receive the same attention and personal relationships currently experienced in the traditional environment.   (May, 2000, p. 53-54) In order to change the ecommerce impersonal environment Amazon.com had to introduce a new strategy into maintaining and increasing its customer base.   Changing the internet environment is not a simple display creation or the addition of a personable salesperson to physically approach customers.   Amazon.com had to approach this change with a technology based solution that offered a personal approach to its customers.   The applications Amazon implemented offered their customers a positive experience. Customers are now able to access their portfolios at any time and without interaction with a sales representative.   These portfolios are personalized and address customers on a first name basis, provide purchase history and even suggest similar titles that might be of interest to the customers.   This change provided a personal touch, saved Amazon on staff time and clearly benefits the customer.   (May, 2000, p. 54) Rick Berry, CEO of ICGCommerce.com, an Internet-Based procurement business, describes leading an e-commerce business as â€Å"driving a Ferrari with a cinderblock on the accelerator.†Ã‚   (Pandya, 2004)   This fast-paced environment requires consistent change, as â€Å"E-Procurement is a $10 trillion market worldwide.†Ã‚   (Pandya, 2004) Berry states that building a procurement business in the traditional sense would take at least 10 years to become successful; however within the internet environment they are making an attempt to establish credibility within six months.   Their goal is â€Å"to grab a chunk of that market before the competition moves in.†Ã‚   (Pandya, 2004) Berry believes that talent is what businesses require to provide effective leadership and the ability to change quickly within Internet based businesses.   Leadership must have the ability to â€Å"attract teams of talented risk-takers.†Ã‚   (Pandya, 2004)  Ã‚   The speed of the working environment in an e-commerce structure means that very little time is available to train staff; therefore leaders of e-commerce ventures â€Å"must strive to create a specific type of work culture† that is high-energy and results-oriented.   (Pandya, 2004) Because little time is allowed for training and communication in an internet environment is more direct than others, changing the actions of others as well as effectively communicating the vision of change is difficult.   â€Å"You communicate directly, and you must build a team that can cope with that.†Ã‚   (Pandya, 2004) If an internet company is to be successful it must begin with establishing a visionary culture with the ability to attract and retain talented staff.   Talented staff members have the ability to effectively introduce change within the internet environment effectively and without disrupting business flow. David Perry, founder of Chemdex says that creating a successful business with the ability to adapt to the constant change of the internet environment is â€Å"raising money, so you can hire good people, so you can make and sell good products, so you can raise more money.†Ã‚   (Pandya, 2004)   These staff members must be â€Å"enthusiastic, passionate and share the organization’s values.†Ã‚   (Pandya, 2004) In his article titled The True Value of Change Management, George Spafford quotes â€Å"The only constant is change.†Ã‚   (Spafford, 2005)   He believes that many IT organizations â€Å"lack a fundamental understanding of the need to manage change† and that these organizations feel that change management stops at budgetary planning. When introducing change into the internet environment organizations must understand that this process has huge impacts on business operations – the more complex the change is within the system the â€Å"effective change management processes† increase.   (Spafford, 2005)   As most change within the internet environment is technology based, it’s imperative to know that 80% of security breaches have been caused by human error. (Spafford, 2005) Potential solutions in technology have three parts â€Å"people, technology and process.†Ã‚   (Spafford, 2005)   Most organizations have processes in place where change requests are â€Å"submitted, reviewed, planned tested, scheduled and then implemented.† (Spafford, 2005)   The procedures are put into place to ensure that proper thought and planning have been applied and the implications assessed before introducing it within the business structure. Spafford believes that many organizations lack the resources to implement change and that many simply give up once the implications have surfaced with unsuccessful results.   He believes that companies must learn from their mistakes and work continuously to improve and implement future successes.   Developing one simple model of change in an internet environment can also be devastating.   â€Å"The point is to be flexible, keep costs down and remain responsive, adopting multiple change models.†Ã‚   (Spafford, 2005) The ability to manage change within the internet environment will always be a challenge for organizations.   Effective leadership is the key to any organization’s success as well as leadership’s ability to attract talented staff members who are constantly looking to the future, rather than traditional one-sided ideas. Technology is constantly evolving and introducing new competitive strategies into the ecommerce marketplace and little time is available to adapt to the competition.   Looking back at The Laws of the Fifth Discipline, â€Å"The harder you push, the harder the system pushes back† we see that it’s imperative to remain open-minded and constantly looking to the future where new concepts and ideas will introduce positive changes to the Internet environment. References May, P. (2000). The Business of Ecommerce: From Corporate Strategy to Technology. New York, New York: Cambridge University. Pandya, M. (2004). Center for Leadership and Change Management:   Leadership in E-Commerce:   What does it Take to Lead an E-Commerce Venture? Retrieved from http://leadership.wharton.upenn.edu/ecommerce/articles/Wharton_ECommerce_Forum.shtml Senge, P. M. (1990). The Fifth Discipline. New York, New York: Doubleday Dell Publishing Group. Spafford, G. (2005, August 15). Datamation:   The True Value of Change Management. Retrieved from http://itmanagement.earthweb.com/service/article.php/3527471 Waddell, D., & Singh, M. (2003). E-Business Innovation and Change Management. London: Idea Group Inc (IGI). West, J., & Cianfrani, C. A. (2004). Unlocking the Power of Your Qms: Keys to Business Performance Improvement. Milwaukee, Wisconsin: American Society for.          Leading Change Introduction Intense global competition, rapid technological change, and international capital markets are creating more demand for change leadership than at perhaps any other time in history. These forces, combined with the complexity of new and more global organizational forms that span nations and unite organizations through alliances, joint ventures, and mergers and acquisitions, make the job of leadership increasingly difficult. No wonder it is popular to suggest that leadership is in short supply in most organizations. Moreover, we have a limited understanding of the role that leaders should play in making effective change a reality. This is the motivation for this essay. In the pages that follow, I discuss how leaders can help organizations change to meet the challenges of the twenty-first century.Body of the Essay It is one thing to argue that organizations need to reinvent themselves and develop new, more effective approaches to organizing, and quite another to accomplish it . Large-scale organizational transformation is, at best, a developing art that has yet to produce any clear formulas for success, but more and more attention is being turned to executives as the principle agents of change and adaptation. It is increasingly common to assume that leadership plays the crucial role in an organization's successful adaptation to a changing world. Companies are paying record compensation to attract the best and brightest executive talent to lead them safely through today's turbulent business environment. Many boards and executive recruiters assume that there exists an elite corps of individuals who possess leadership skills that have almost universal application.The subject of leadership and organization change is embedded deeply in the lexicon and discourse of business executives, management consultants, and organizational scholars. Business periodicals, the trade press, and academic publications are brimming with information and knowledge about leading o rganization change. Widespread attention to leading change is largely a reflection of the times. Fueled by unprecedented changes in technologies, markets, and economies, organizations are experiencing rapidly changing environments and enormous competitive pressures. Responses to these challenges are resulting in a virtual revolution in new organizational forms and systems. Organizations are increasingly seeking to transform themselves to become more adaptable and competitive, with leaner, more flexible structures, more empowered and committed employees, and more performance-driven human resource practices. (Lawler et al., 1995)As organizations strive to implement these innovations, they discover that change is incredibly arduous, requiring a great deal of expertise, resources, and luck. The sheer difficulty of transforming organizations is evident in their enormous inertial qualities as well as the scope and magnitude of the required changes. Organization transformation typically in volves radical changes in strategy and structure, in work practices and methods, and in members' perceptions, norms, and work behaviors. As many observers have pointed out, because transformational change involves the total organization including strategic relationships with the competitive environment, top leaders or CEOs need to lead the change process and are essential to its success. (Tichy & Devanna, 1986; Greiner & Bhambri, 1989; Nadler, 1997)â€Å"The Harder You Push, The Harder The System Pushes Back† Any organization has its own corporate culture and the employees in all hierarchies are accustomed to that particular culture. Bringing about any change at any level is bound to shake the status quo and bring in an element of disturbance within the smooth functioning of the organization. Keeping that in mind, the change leader has to be extremely careful in doing the job and allowing ample space and time for the employees and other variables to adjust to the change being brought about. If the change process is accelerated too much and transformation is imposed hard on the people and the system as a whole, it will result in increased resistance from the system and mounting difficulties in the process of change.â€Å"Change involves moving from the known to the unknown (Cummins/Worley, 1993). Because the future is uncertain and may adversely affect people’s competencies, worth, and coping abilities, organizational members generally do not support change, unless compelling reasons convince them to do so. Similarly, organizations tend to be heavily invested in the status quo, and they resist changing it in the face of uncertain future benefits. Consequently, a key issue in planning for action is how to motivate commitment to organizational change, such as Business Reengineering. This requires management attention to two related tasks: creating readiness for change and overcoming resistance to change.† http://www.prosci.com/w_4.htmPeople c an be made ready to accept and contribute towards change once they themselves get to feel the need for change. This means making people so discontented with the status quo that they are provoked to try new ways of performing. Generating such discontent can be to a certain extent difficult. People who have been functioning and behaving in ways that have become norms for them now, may find it difficult to the level of hurt, prior to their undertaking the change seriously. In a situation as sensitive as such, the change has to be led very cautiously providing room for delay. The many issues related to change leadership could be structured around multiple themes. They include leader behaviors for effective change, sources of change, different change strategies, whether leadership really matters, and the development of change leaders.Most leadership scholars emphasize the importance of developing a vision or direction as the first step in leading change. This direction is critical in mak ing sure that everyone is moving in the same direction. It is, however, an open question whether a vision is really necessary for leading change. A key issue, particularly in the literature on charismatic leadership, is how to create a sense of empowerment and ownership for employees.One argument is that this requires giving employees the autonomy to determine appropriate means for implementing the vision. (Conger, 1989) Prior research has shown that employees are most motivated when they have the freedom to determine what works best given their talents and skills. (Spreitzer et al., 1997) However, in order for such autonomy to work employees must have access to the resources necessary for implementation and to information about the competition and the financial situation of their organization; without these they are likely to feel helpless in bringing about change. Also, rewards may be particularly helpful in building a sense of ownership. (Lawler, 1986)Leaders in crisis organizati ons facing a revitalization challenge must devote considerable effort at the front end of their transformation to the creation of resources. Individuals' resistance to change builds in direct proportion to the magnitude of the gap they perceive between the level of effort expected of them as part of the transformation process and the resources available to get the job done. Often this initial resource-generating step involves closing and consolidating peripheral or under-performing operations, trimming employee payrolls, reducing corporate staff overhead expenses, and suspending or deferring programs so that current operations can generate more cash to be redeployed to the launch of the corporate transformation process. Leaders attempting to revitalize their organizations also need to seek new external resources as they launch their transformation process.For example, at General Electric during the early 1980s under Jack Welch, the creation of slack resources was not so much a probl em as was the reallocation of existing resources to the corporate transformation effort. So the initial transformation issue was less one of resource creation than one of resource reallocation. Businesses that did not fit the vision had to fix, sell, or close themselves, and resources that would otherwise be consumed by these ill-fitting businesses were reallocated to enhance productivity and automation initiatives and to fuel capital investments in businesses that offered greater promise for achieving Welch's lofty vision of being first or second in their chosen global markets. (Aguilar et al., 1985)It might be argued that the key role for the leader is setting context; he or she must create a culture that embraces the importance of change. The leader then needs to create an organization structure that will support the new vision. This might, for example, involve a team-based design to reduce centralization, hierarchy, and bureaucratization. The leader must select and hire top-notc h people who have the skills necessary to bring the new vision to actuality. If the vision involves globalization, for example, this might involve hiring or promoting people who have international experience. The leader must also create a reward system that encourages behaviors appropriate for the new vision. For example, if the vision requires more focus on the customer, then employees must be rewarded for actions that improve customer satisfaction. In other words, the leader's most important role may be to devise an organization that sustains the vision.Implications For Change In An Internet Environment Sebastian  and Samuel  (2004) â€Å"explore the challenge that technology will deliver to management at both the tactical and strategic level. Changes in communication, content of communication, globalization of communication, are critical to these changes. The environment will support a greater degree of discontinuities in planning which is brought about by the globalization of management activities. Successful management must encompass the management of these discontinuities but use information in an artificial intelligence environment. The integration of these data and the actions that come from that integration must be understood within a moral framework.† (Sebastian  & Samuel, 2004)In the present era of technological innovation and globalization, when the world’s business is coming closer to work as a network, when the logistics are being designed in a way that encompass the ever so easy access of technology, communication and information, when a single business is catering to the markets around the globe, the changes within the organization become more important than those ever were. It is the international culture that the employees have to work in, the greater than ever expansion plans and newer and faster service demands that they have to attend to. All these developments and enhancements come as part and result of the Internet en vironment in which virtually all businesses are operating these days.ConclusionLeading change in such circumstances become an even more demanding and challenging of a task for the managers or leaders. As the trade of goods and services around the world is getting faster and easier, the need for as fast a change continues. However as mentioned in the preceding pages that such changes cannot be brought overnight, nor can those be imposed or pushed hard on the individuals. The system pushes back even harder and poses even more resistance to the change. Instead, the vision once established has to be communicated to the people properly, make them ready for the change by suitably establishing the loopholes of the current state and furnish the future expectations of being technologically sound and equipped.ReferencesAguilar, F. J., Hamermesh, R. G., and Brainard, C. General Electric, 1984. (1985) Boston: Harvard Business School Press (9–385–315, Rev. Mar. 24, 1993).Conger, J. A. (1989) â€Å"The Charismatic Leader† San Francisco: Jossey-Bass.Greiner, L., and Bhambri, A. (1989) â€Å"New CEO Intervention and Dynamics of Deliberate Strategic Change.† Strategic Management Journal, 10, 67–86.Lawler, E. E. (1986) â€Å"High-Involvement Management† San Francisco: Jossey-Bass, 1986.Lawler, E., Mohrman, S., and Ledford, G. (1995) â€Å"Creating High Performance Organizations: Practices and Results of Employee Involvement and Total Quality Management in Fortune 1000 Companies† San Francisco: Jossey-Bass.Nadler, D., (1997) â€Å"Champions of Change† San Francisco: Jossey-Bass.Spreitzer, G. M., Kizilos, M., and Nason, S. (1997) â€Å"A Dimensional Analysis of the Relationship Between Psychological Empowerment and Effectiveness, Satisfaction, and Strain.† Journal of Management, 23 (5), 679–704.Tichy, N., and Devanna, M. (1986) â€Å"The Transformation Leader† New York: Wiley.Wolf D. Schumacher â€Å"Ma naging Barriers To Re-engineering Success.† http://www.prosci.com/w_4.htm Accessed January 31, 2007.

Relative ethics Essay

Relative ethics is where decisions are made with the circumstances in mind. For instance the culture and traditions of the place, the individuals, and society. Examples of relative ethics is utilitarianism and situation ethics. Relative ethics can be seen to be a fair approach to decision making because it is tolerant of different values, it is more realistic that nothing is right or wrong, it is more open to atheists, and is considers emotions as important. However it is more complex and makes decisions harder, it can be used as an excuse to act in an immoral way, it implies that we should not have laws and it does not protect worldwide human rights. Relative ethics is tolerant of different cultures. For example just because in one place it is considered wrong for women to have an education in one country e.g. Islamic countries, it doesn’t mean that in the UK women should not have an education. The UK is not morally superior and should not try to implement its own morals on any other country. This may seem fair in one way but it actually means that any act can be acceptable and doesn’t protect our human rights, sexism is wrong and women should never be discriminated against no matter their religion. Some laws need to be absolute. Someone in a different country may claim that for example kidnap and torture are part of their culture, but we know this is wrong. Relative ethics can be seen as fair because in it there are no absolute objective rights or wrongs. The right thing to do depends on the situation. For example, if a woman stole food out of greed then it would be wrong. However if she stole food to feed her starving children then this is right. It is fairer than absolute ethics because an absolutist would say that the woman shouldn’t steal even if he children are dying of starvation. Obviously, this is wrong and so the relativist view if a fairer approach to decision making The idea that there are no objective rights or wrongs can make relative decision making a slow process. In Utilitarianism, the consequences of each option have to be predicted and consequences. When each individual situation has to be considered, it can cause complications and ensuring every person gets a good result is difficult. Some may argue that the time it takes to make a decision about the morality of an act is causes those involved more suffering and is unjust. In conclusion I think that relative ethics is the best approach to making fair ethical decisions. However, I believe that some actions are wrong no matter the culture or time or individual. For example, discrimination is always wrong and torture of innocents and kidnapping is wrong. Despite this, relative ethics is tolerant of all cultures and does not believe that in any situations that one persons or country’s morals are superior to anothers.

The Manhattan Project Essay Example | Topics and Well Written Essays - 1000 words - 1

The Manhattan Project - Essay Example ts of Manhattan Project lie in the soil of Germany but Hitler through his brutality and arrogance uprooted the tree of nuclear physics unconsciously and handed it to America. The scientist and the physicists who left Germany and Europe came to America to look for new arenas of opportunities and gave impetus to the Manhattan project. It was already known that a single atom possesses energy and this energy if projected in the required direction can become a bomb. The Germans were already working on development of such a device that could use atomic energy to produce massive destruction but at what pace was unknown. Alexander Sachs (1893-1973), who was a close friend of the then American president Roosevelt D. Franklin brought him the letter from Albert Einstein telling about the massive energy that an atom possess and the German plan to build a bomb from it, the project started with the name of â€Å"The Manhattan Military Engineering District†. October 11th 1939 was the day whe n president Roosevelt D. Franklin has formed the advisory committee in uranium, which worked as the launching pad of this project. He also wrote back to Einstein on October 10th 1939 that he had sent up a committee comprising army personnel to study uranium. (Cynthia C Kelly. The Manhattan project: the birth of the atomic bomb in the words of its creators, eyewitnesses, and historians.) USA was at that time had the policy of no intervention in the Second World War and not much attention was paid to this at first. The project was to create something that was only theoretical and from the material that could not be seen. With some time, the president felt the gravity of the situation that if in case the Germans were able to develop a bomb that can cause massive destruction, he immediately made the project a top priority military project and allocated massive funds for the development of the bomb. Strange it may seem, but it was the most highly budgeted and top secret military project at that

The African National Congress and the South African Communist Party Essay

The African National Congress and the South African Communist Party - Essay Example The relationship between the African National Congress and the South African Communist Party was not always close, especially in the periods starting 1940 to 1950, when the ANC started considering the SACP as a party advancing foreign ideology (SAHO, n.d. web.) . This feeling strongly emanated after Nelson Mandela made a tour throughout Africa, meeting various leaders from different countries in the African continent, whose countries had achieved independence by then (Mandela, 2008 p49). The African leaders perceived the communist ideology, as advocated for by the SACP as anti-African, and more of a foreign ideology, which was perceived to be incongruent with the African ideology of democracy and total independence from the colonialists. Therefore, most of the African leaders were confused by the association of the ANC with the SACP, which they considered unusual, since the SACP was constituted by most foreigners, and its ideologies were not perceived as purely African (Mandela, 2008 p102). Another issue that strained relationship between the African National Congress and the South African Communist Party is its perceived relations with the USSR. Most of the members of the ANC were highly skeptical about working with the SACP, due to the fact that it was not regarded as based on the African ideology, thus raising concerns among the members of the ANC regarding how the other African countries would perceive the working relationship between the ANC and the SACP.... Another issue that strained relationship between the African National Congress and the South African Communist Party is its perceived relations with the USSR. Most of the members of the ANC were highly skeptical about working with the SACP, due to the fact that it was not regarded as based on the African ideology, thus raising concerns among the members of the ANC regarding how the other African countries would perceive the working relationship between the ANC and the SACP. Secondly, there was the issue of concern regarding how the western countries would relate with South Africa, through the consideration of the working relationship between the ANC and the SACP, which was perceived to be USSR oriented, thus creating suspicion that the western countries would not want to work with such a party. Such members of the ANC suspected that the western countries would withdraw their support for South Africa, due to its association with communism (Mandela, 2008 p87)2. Thus, some members of th e ANC would cause conflict, to ensure that the two parties did not work together. Therefore, there has been a long deal of strained relationship between the ANC and the SACP, which ranges from the liberation struggle period, to the post-independence and modern day relationship. Nevertheless, the relationship between the African National Congress and the South African Communist Party has not always been strained and suspicious. There are times when the two parties have had long periods of cordial working relationships, both in the liberation struggle period, and the post-independence period. The cordial and strong positive relationship between the African National Congress and the South African Communist

Evaluate the Role of Market Research in the Decision Making Process of Essay

Evaluate the Role of Market Research in the Decision Making Process of an Organisation - Essay Example Mostly, the firm undertakes a study of a small sector of the population and the data collected represents the entire population. For example, married women who work in Bristol and are between the ages of 30-45 can be used to represent all urban women who work in the United Kingdom. The Role of Market Research in the decision making process of an organization In order to reach and appeal to the target market, organizations utilize strategies that enhance the success of their activities in the market. For example, Arbitron conducted market research that indicates people who frequently attend movies say that commercials on television cannot be termed more acceptable than commercials aired before the start of the movie. 53% of people who frequent cinema halls find movie advertising more acceptable; only 46% contend that television advertising can be termed as acceptable. The research also indicated that 59% of people who attend movies remember the commercials they watched on the screens before the start of the movies (Wiley 2012, p. 4). The study also indicated that advertising using cinema can be regarded as the best way of connecting with the younger generation. Movie theaters’ adverts reach 124 million people or 45 percent of Americans from the age of 12 years. 67% percent of adults between the ages of 18 and 24 years frequent movie theaters in every 30 days. The collection of such data during market research plays an essential role in informing the decision making process of an organization (Wiley 2012, p. 4). In the decision making process of an organization, market research plays a number of roles. First, market research contributes significantly to the marketing system, especially in the marketing intelligence feedback process. It provides management with data regarding the effectiveness of the marketing mix that the organization relies on in the market. Based on this, an organization will be in a position to identify the necessary changes that ought to be made in the marketing mix. In addition, market research plays a crucial role when the organization wants to explore new opportunities available in the market. This is accomplished through new product research, which enables an organization to make decisions on how to structure the product to meet the demands of the customers. For example, an organization makes decisions on branding and packaging of the products (McDaniel & Gates 1998, p. 5). Another role of market research in decision making emanates from the crucial role that it plays in helping the management understand the needs of the customers. In the modern world, market research provides many organizations with the necessary knowledge on the customers' needs. As a result, the organization will be in a position to make decisions that will enhance the retention of customers and customer loyalty. Consequently, this will lead to job satisfaction and employee retention as employees becomes effective while serving loyal custo mers (McDaniel & Gates 1998, p. 7). Statistics in a study conducted by Bain and Company indicates that a reduction in the rate of customer defection can boost the profits by 25 percent up to 95 percent. Apart from assisting the organization to understand the ne

Individual report Essay Example | Topics and Well Written Essays - 1750 words

Individual report - Essay Example ram should find ways to make it possible for individuals using all kinds of phones to be able to access Instagram since it is restricted to individuals with Smart phones only. Pattarada (2013) defined Instagram as an online video and photo sharing service that makes it possible for users to enjoy the pleasure of taking videos and pictures and then sharing them on the various social network services such as Twitter, Flickr, Whatssap, Tumblr, and Facebook. The cloud based video and photo-sharing services for Instagram are delivered via mobile and desktop devices, and the whole process relies on technology. Mike Krieger and Kevin Systrom founded Instagram and on October 2010, their services were launched. This paper is going to analyze how Instagram is using information systems to support its business strategy and how the company is using technology to build a sustainable competitive advantage. This model was named after Michael Porter and it provides five forces competitive forces that determine how the organizations can use them to shape their industries and provides guidelines on how to find out the strengths and weaknesses of the business (Cohan, 2012). These forces affect the ability of an organization to provide service to their customers and to make profits. The five competitive forces include: Instagram has competition from existing companies such as Facebook, Twitter, and Whatssap among others. These competitors make it difficult for Instagram to develop successfully since they all offer almost the same services. Instagram therefore have to devise powerful competitive strategies to be the best in the market and sustain competitive advantages through innovation (Pattarada, 2013). The growth rate for industries related to Instagram is high and different new products are introduced in the market at a high level. The existence of other applications such as Facebook, Twitter, and Whatssap that can share photos and videos increase the probability of customers

Alexander the Great and his conquest of Egypt and Persia Essay

Alexander the Great and his conquest of Egypt and Persia - Essay Example He was a principled hero with courageous acts, a virtuous politician, and flawless tactician who always termed himself as being Zeus son. He deserved the title because by the age of thirty, he had captured what was by the time termed as world, which was an accomplishment worth labelling as great where he still merits the title since he is still admired and remembered today for his seize of Persia and the diffusion of Greek culture all over his conquered nations. He was a great victor who in only thirteen years he was able to amass the largest empire in the entire ancient world that covered 3000 miles. Alexander did all this besides the benefits of modern technology and weapons because troop movement were primarily on foot and communication was face to face and this was an achievement made by a kid who became a king of Macedon at the age of twenty. As an honored prince, he received the top quality education in Macedonian court under his famous tutor Aristotle (Marsico 18), and at the age of 20 he was already a charismatic decisive king. Many of Alexander’s accomplishment were made possible by his father who succeeded in doing what years of fighting in Greek city-states had not done by invading and conquering the Greek and thus united the Greece. His next goal was to defeat the Greece’s enemy to the Persia but was assassinated before he pursued the goal and upon taking the thrown Alexander vowed to complete the plans of his father (Abbott 36). The self-confident young king had just defeated the Greek city of Thebes that had rebelled against him after the demise of his father, though he was convinced that if he could defeat the Thebes then he would as well defeat the Persia. He had a belief that if he achieves the conquest he and his father Philip had fancied about, the entire of Asia Minor would be open to him owing to his conquest; thus, the battle of Gracias began one of the greatest overthrows in history (Burgan 10). Alexander quickly controlled the Macedonian armies that his father’s initiated changes had made it to become the leading military authority in the area and led a majestic army across the Hellespont in Asia with some 4300 infantry and 5500 cavalry that was the most powerful military expedition ever to leave Greece. Alexander decided not to first attack Persia but capture Egypt who is ruled by Persia at that time where he stayed with his army for six months and he had to betray his culture and custom as a way of earning respect. Fortunately, the Egyptians hated the Persians for owning little attention and honor for their customs and culture but Alexander had some respect and was honored greatly and saluted him as their savior and liberator thus they appointed him as their pharaoh (Goldschmidt 31). The conquest of Egypt occurred in 332 BCE when Alexander treated Egyptician culture with respect and offered sacrifices making him a true pharaoh. He created the port city of Alexandria which grew into a cosmopol itan center of power and culture that joined the Egypticians economically with the Mediterranean world. Alexander was able to conquer Egypt and founded the city named Alexandria, which became a cosmopolitan, diverse, bustling center of trade, the arts and ideas city (David 42). Possessed with a resolve to rule the world, Alexander pursued the goal to capture north, through the Syria and Mesopotamia winning over the land of Phoenicia effortlessly with

Software Systems Fundamental Essay Example | Topics and Well Written Essays - 1000 words

Software Systems Fundamental - Essay Example This report will discuss some software development problems which can cause overall software development failure. CAUSE OF SOFTWARE FAILURE According to May (2000), the majority software projects fail partially or totally due to software unable to meet all established requirements, cost and time overrun or less effective project management. These requirements could include schedule, cost, objectives or quality related (May, 2000). This section outlines the causes and factors of software development failure: Poor User Requirements The process of software development failure starts when a user states the system development requirements in a less effective way. In this way the system developed on the basis of such faulty system requirements become a disaster. In this scenario, the inability to state the user requirements can be due to lack of software working knowledge, poor understanding of software working or less effective business process information. However, mismarks in requiremen ts recording can be done on both sides at client side or at developer side (May, 2000) and (Kaur & Sengupta, 2011). ... Moreover, the lack of effective project quality management plan can cause less effective project quality that lead to project failure (May, 2000) and (Kaur & Sengupta, 2011). Failure of Cost and Schedule Estimation Another important reason of software development failure is the less effective cost and time estimation. In addition, effective cost and time estimations are very important for the successful software development. However, it depends on the project manager and team leader to estimate and figure out important project factors to better assess the project time and cost aspects. Moreover, if the time and cost of software development project overruns, it will surly lead to overall failure of project (May, 2000) and (Kaur & Sengupta, 2011). Team Size Estimation of team size is crucial in software development project. Fundamentally there are 3 main types of team small, medium and large. However, team selection is completely based on the project size if the project size is small t hen managers obviously take the small team and in case of big project they can select the large or medium team. Moreover, the selection of team size depends on project leaders or managers how successfully they can perceive the project and develop a well balanced project team. Furthermore, a lot of software development projects fail due to less effective team size that can lead to some of extensive problems regarding effective project management. This can also lead to amplifying the project cost and damaging project performance (Kaur & Sengupta, 2011). Human Resource Skills Effective and well organized team for a software development is really essential. Seeing that in software development an effective team for

Description of a place Essay Example | Topics and Well Written Essays - 250 words

Description of a place - Essay Example It looked like a rat’s nest. The tub was full of mud. For a house that had to be sold on the market, this house needed some major rehabbing—and it was not going to be an easy job. Description #2 The old Victorian house had character oozing from every inch of its walls. Walking through the front door, one could plainly see that this house was fit for kings. Elegant paintings hung on the walls. The gilded edges of the paintings shone like pure gold. Apart from some minor issues in the kitchen and the bathroom, the wine-colored velveteen armchair in the living room and ornamental Turkish area rugs provided an inviting scenario in front of the fireplace. A pair of pink satin slippers awaited someone’s return at the base of the armchair. On the mantle, a large collection of porcelain Lladro figurines graced the entire room in various poses. No wonder this house was being put on the market for $500K. BIBLIOGRAPHY Palika, Liz, and Sheri Wachtstetter. Puppy Love. US: Joh n Wiley & Sons, 2009.

Vancouver Communication Essay Example | Topics and Well Written Essays - 3750 words

Vancouver Communication - Essay Example As the report declares VC operates a participative style of management with formality; rules and regulation are kept to a minimum. Company operates on meritocracy with proper polices for career advancement, rewards, and performance appraisal system. Company pursue multi-skilling policy and emphasized on flexibility and skills rather than job descriptions. Now VC commenced the building of new production and distribution facility in Turkey due to low labour cost and to cover markets like Eastern Europe and Middle East. The CEO of the company Mr. Mike Ansell suggesting Helen Reeves, who has been appointed as Head of Turkish operations, that she should pursue the same organizational and people management system and practices which has been successful till now. Another fellow Tony Rossini, head of HR in VC HQ is performing a review to assess the present expatriate management system by conducting e-mail surveys to previous and current expatriates to determine the issues and problems and id entified certain issues. This paper stresses that managers at the beginning of the twenty first century are faced with the reality of globalization. Managers must be conscious that markets, supplies, investors, locations, partners, competitors and so on can exists anywhere in the world. Successful managers in this environment need to understand the similarities and difference across national boundaries in order to exploit the opportunities and deal with the threats. The organizations effectiveness will increase to the extent that managers understand the factors influencing behaivour. An international firms performance is likely to enhanced when systems are in place that are congruent with the various influences that determine behaviours. While it is clearly impossible to understand all of the factors influencing behaviours, national cultures and values appear to be an important starting point. Culture is one of the important factors, which influences immensely. Discussion: "Culture can be referred to a shared, commonly held body of general beliefs and values that define what is right for our group (Kluckhohn and Strodtbeck, 1961: Lane & Distefano, 1988) or to socially elitist concepts including refinement of mind, tastes and manners (Heller, 1988). Different definitions of culture shows that culture is learned, shared, compelling, interrelated set and provides orientation to people. Culture is so fundamental to society that it influences people's behaviours in critical ways. Effective management depends, at least in part, on ensuring that people behave in ways that are appropriate for the organization. So understanding culture is important for managers to achieve desired behaviour and results. Values are useful in explaining and understanding cultural similarities and differences in behaviour; thus understanding values and their cultural basis in helpful to international managers (Punnett, 2004). Values establish the standards by which the importance of everything in society is judged. Similarly needs, attitude and norms decides specific behaviour patterns of individual's or groups.

Chronicle of a Death Foretold and Fly Away Peter Comparative Essay Essay Example for Free

Chronicle of a Death Foretold and Fly Away Peter Comparative Essay Essay Menace and threat are two elements in fiction that often help to create tension and build towards a climax. These components are evident in David Maloufs Fly Away Peter and Gabriel Garcia Marquezs Chronicle of a Death Foretold under two overarching themes: sense of duty and violence. Through the perspectives and experiences of different characters in the stories, both Malouf and Marquez develop the concept of peril that is sustained throughout their stories of war and murder. In Fly Away Peter, Malouf introduces the notion of threat in the context of war a place where people, including peace lovers like Jim, are forcibly drawn into. Jim is invited by Bert to ride on the bi-plane and Malouf reveals his blood fear, a bone fear, of leaving the earth and is thus portrayed as being resistant to change. When the war arrives, he feels panicky on this new and dangerous slope that had once been ground [that] stretched away to a clear future Brisbane is sliding towards Europe and the war as it is a duty befallen on patriotic men to prove their worth in defending the honour of their country. Many people seem to be supporting this view; Jim meets a girl who says passionately she would want to be in it because it is an opportunity, and similarly his father feels it is a chance to reach out and touch a unique thing. Malouf thus draws our attention to Jims change as he slide[s] with the rest down into the pit of war with superstitious dread and juxtaposes this to his initial uneas[e] about the new presence of bi-planes and man-made technology. This creates a sense of foreboding and threat, further emphasized by warnings such as catastrophe and madness, as Jim plunges into a brutal world of war from his sacred haven in the sanctuary (the light, and then the dark) to fight for his country. On the other hand, Marquez expresses the idea of threat in Chronicle of a Death Foretold through the rigidness of the townspeople in their ideas regarding tradition and family honour. To uphold the honour of their sister, the Vicario twins perceive as their duty to kill Santiago who supposedly took her virginity. However, this crime is largely condoned by their Catholic society and even Father Amador the priest pronounces their innocence before God. Marquez presents a town where first-degree murder is justified in the name of the cult of virginity and it is the responsibility of the men in the town to defend this tradition. Prudencia Cotes would never have married [Pablo] if he hadnt done what a man should do. Her mother tells Pedro and Pablo them honour doesnt wait and Clotilde Armenta voices her sympathy in saying it is a horrible duty thats fallen on them as they are duty-bound to avenge Angela. The twins are forced to conform to societys expectations of masculine assertiveness even if they couldnt sleep for the rest of [their lives] on their conscience. In killing Santiago, the twins have proved their status as men [and] the seduced sister was in possession of her honour once more in defending the validity of their culture. The town can be viewed, to an extent, as dysfunctional and a tense atmosphere is present throughout the book as readers know the threat of this cult will result in an innocent mans death. The theme of violence is exemplified in many characters and through the eyes of Jim, we see the menace posed in Mans capacity to cause suffering and death in Fly Away Peter. Even before the war, violence is hinted as being part of daily life when Jim witnesses the killing of a lone man with his hands over his face with blood between them as another figure, hurling itself from the shadows, brought him down. Although Jim has always been consciously rejecting any notions of violence, he discovers black anger in himself and a potential for violence when he faces Wizzers bullying later. He is shaken to realize that he has come closer to his fathers [similar] nature of violence unwittingly to the extent that he does not wish to be confronted with some depth in himself that frightened him and he doesnt understand. Killing in war is also epitomized by the brutality of Clancys death where Jim experiences for the first time Mans ruthlessness on a personal level. Clancys senseless death comes as a shock to him and Jim is greatly affected by this; the hosing off never left him clean and often woke from nightmares drenched in a wetness that dried and stuck. Malouf forcefully juxtaposes the previous setting of Jim buttering slabs of bread with the diversely opposite scene of Clancys accident, effectively demonstrating the harsh reality of war. Clancys passing further shows another step in Jims loss of innocence as he feels touched by the horrors of war and menace is manifested in Fly Away Peter through the ordinariness with which violence presents itself. Violence is a dominant theme in Chronicle of a Death Foretold as it is in Fly Away Peter as it leads to the ultimate menace of Santiagos death. It is a minor yet significant part of everyday life for most of the town; Victoria Guzman [disembowels] rabbits pull[s] out the insides by the roots and throw[s] the steaming guts to the dogs and Leandro Pornoy dies gored in the jugular vein by a bull all of which are accepted by the town matter-of-factly. The murder of Santiago is brutal as his liver was almost sliced in pieces, his pancreas [was] destroyed and there were perforations in the transverse colon and small intestine among other injuries. His death has been brought on by any one of the seven major wounds and this reflects an unnecessary level of violence on the part of the Vicario twins. Even after his death, Santiagos autopsy is mishandled as a syrup-coloured liquid began to flow from the wounds, drawing flies, and a purple blotch appeared on his upper lip and spread out very slowly up to his hairline and Father Amador remarks it was as if we killed him all over again after he was dead. Through the use of violence in the lives of common people and graphic imagery illustrating the aftermath of a murder, Santiagos killing mirrors the menace in which the town is under in their acceptance of the idea of violence. The themes of male duty and violence in both Fly Away Peter and Chronicle of a Death Foretold develop the concepts of threat and menace. Malouf uses Jims dilemma in enlisting for the war to highlight the threat of the blind trend in which men fight to prove their masculinity even though it results in countless lives lost and Jims experiences in the war that draw on the idea of menace in the form of violence. Conversely, Marquez develops the notion of threat through the tradition of the town surrounding Angela Vicarios enigmatic predicament which precipitates the menace of Santiagos murder wherein violence plays an important role. A tense and portentous atmosphere is thus crafted in both books as the authors expand on these themes, building up to a final climax.

Protective Factors Among Youth Offenders Psychology Essay

Protective Factors Among Youth Offenders Psychology Essay Causal explanations of delinquent behavior and the identification of risk factors that characterize the young criminal offender have been the devotion of volumes of theoretical and empirical research. In an attempt to understand the causes of delinquency, and to work towards effective interventions, the juvenile justice field has adopted an approach from the public health arena (Shader, 2003), this approach toward the public health model, according to Farrington (2000), is the risk factor paradigm. Following this model, a risk assessment is thought to aid in identifying youth who possess the key risk factors for delinquency, and determining the type of intervention that will be best suited for the youths needs (Shader, 2003; Farrington, 2000). Risk factors are those conditions that are associated with a higher likelihood of negative outcomes, such as having trouble with the law and engaging in problem behavior. Such factors can compromise an individuals health, well-being, and social performance (Jessor, Van Den Bos, Vanderryn, Costa, Turbin, 1995). Findings from research on risk factors for delinquency have consistently shown these factors as predictive of increased probability of delinquency; however, this does not mean that the presence of risk factors, will definitely lead to offending or delinquency (Shader, 2003). From the risk perspective, the youth offender is depicted on a trajectory of criminality; with repeated delinquency leading to career paths in criminal activity later in life. However, not all of those exposed to risk factors and adverse circumstances, continue to commit criminal acts. Focusing on those adolescents who have desisted from delinquent involvement, and have transcended the limitations of their environment, emphasis is placed on the strengths and assets (protective factors) of youth offenders (Carr, Vandiver, 2001). Research within recent decades have brought major advances in the prediction of who becomes a serious delinquent; findings indicate that factors in several domains-in the individual, fami ly, peer group, school, and neighborhood-contribute to the prediction of delinquency (Loeber, Pardini, Stouthamer-Loeber, Raine, 2007). This work has prompted researchers to investigate the factors that may act as a safeguard, or provide a buffer between risk factors and delinquency. To better understand the protective factors that differentiate between nonrepeat and repeat youth offenders, this study further investigates the constructs of self-efficacy, empathy, problem-solving, and self-awareness in two ways: (a) in comparison to the normative data on these four internal assets and (b) in relation to risk for recidivism in youth offenders. Unlike prior studies, the current study will exclude external assets and look solely at these four internal assets of youth offenders and their relationship with recidivism within six months. For the purposes of this study and consistent with other studies of juvenile delinquency, recidivism is defined as being referred to the juvenile court or being adjudicated on another criminal other than the youths initial contact with juvenile probation. Status offenses (e.g., curfew violations, tobacco use) were not considered re-offenses. These four internal assets were chosen based on the available data and their importance, as relat ed to the development of resiliency. As a prelude to this investigation, a review of the literature is provided across the following topics as related to youth offenders: (a) juvenile delinquency in the United States, (b) theoretical background, (c) resilience, and (d) internal assets as protective factors. Juvenile Delinquency in the United States Over the last few decades, juvenile courts in the United States have seen an overall pattern of increase in the number of delinquency cases that involved juveniles charged with criminal law violations. From 1985 to 1997, the number of delinquency cases climbed steadily (63%), and in 2009, there were approximately 30% more juvenile delinquency cases than in 1985. Puzzanchera and Adams (2011) report 1.9 million arrests of persons under the age of 18 in 2009; juveniles under the age of 16 accounted for the majority (52%) of delinquency cases handled. Considering the staggering number of juvenile delinquency cases, it is important to also consider the number of those who return to juvenile court. According to the Office of Juvenile Justice and Delinquency Prevention (OJJDP) report there is no national recidivism rate for juveniles. Such a rate would not have much meaning since juvenile justice systems vary so much across states. This  OJJDP report  does, however, contain a summary of findings from recidivism studies conducted at the state-level. State studies have shown rates of rearrests for youth, within 1 year of release from an institution, average 55%, and nearly 6 in 10 juveniles returned to juvenile court by the time they turned 18-years-old (OJJDP, 2012). In efforts to explain the prevalence of juvenile delinquency, theorists have proposed the existence of distinct developmental pathways with different etiologies (Farrington, 2003; Moffitt, 1993; Thornberry, Krohn, 2005; van der Geest, Blokland, Bijleveld, 2009). Theoretical Background The development of offending, has demonstrated a bell-shaped pattern, increasing in early adolescence and decreasing throughout adulthood (van der Geest et al., 2009). In an attempt to explain the process of delinquency that lead to this distinctive shape, Moffitt (1993) developed a dual taxonomy of offending behavior, which was later expanded to include a third group. Delinquency, according to Moffitt (1993), could be best understood if viewed as progressing along at least two developmental paths: those who continue to offend pre- and post- adolescence are life-course persisters, and those who only offend during adolescence are adolescent-limited offenders. In her developmental taxonomy, Moffitt argued that although delinquency is most often temporary, a small proportion of youth continue to offend beyond adolescence (1993, 2006). The large group of adolescence-limited offenders is composed of average youth from nonproblematic backgrounds. Adolescent-limited offenders have usually m aintained empathy and learn socially approved behaviors. Delinquency for these adolescents is considered normative, rather than abnormal. Thought to be rebelliously acting out personal autonomy, their minor delinquency often does not result in criminal justice involvement (Moffitt, 2006). Criminal activity for adolescent-limited offenders, is confined to the adolescent years; suggesting that causal factors may be specific to the period of adolescent development (Moffitt, 1993). According to Moffitt (1993) the rise in delinquent behaviors, for this type of offender, is markedly coincidental with the onset of puberty. This developmental period is characterized by features such as variability in biological age, increasing importance of peer relationships, and maturing of self-conscious values, attitudes, and aspirations (Moffitt, 1993). For youth considered to be classified as life-course-persistent (LCP) offenders, signs of persistent antisocial behavior can be detected early in life. Moffitt (1993) posits that there is evidence that these offenders suffer from deficits in neuropsychological abilities, such as deficits in verbal and executive functions. Verbal deficits can be seen affecting receptive listening and reading, problem solving, memory, and expressive speech. Inattention and hyperactivity are symptoms of executive deficits, which have been associated with this category of offenders (Moffitt, 2003). Personal characteristics of life-course-persistent offenders are thought to interact with their environment, produce negative outcomes, and promote delinquency across time and life domains. Moffitt (1993) suggested that the continuity of delinquent behavior may occur because these individuals fail to learn conventional prosocial alternatives, miss out on opportunities to acquire and practice such alternatives at each stage of development, and become ensnared in a deviant life-style by crimes consequences (p. 683). Life-course-persistent offenders are most at-risk for continued criminality when individual and family-level risk factors coincide (Moffitt, 1993; Thornberry, Krohn, 2005, van der Geest et al., 2009). In 2006, Moffitt added a third group to her taxonomy: low-level chronic offenders. These youth are thought to persist in delinquent activities, much like the life-course-persistent offenders, but do not increase in severity, or participate in serious or violent acts. In order to understand differences across these three developmental trends for delinquency, researchers have examined differences across factors that influence the different behavioral outcomes of desistence versus persistence in crime for youth offenders. The social-psychological framework known as Problem-Behavior-Theory was initially developed for a study of alcohol abuse and other problem behaviors in a small tri-ethnic community. Since then, problem-behavior theory has been employed in a variety of studies to account for a variety of adolescent behaviors including delinquency. Problem behavior is defined as behavior that departs from the norms-both social and legal- of the larger society (Jessor, 1987). Problem-behavior theory, according to Jessor (1987), has a psychosocial perspective, rather than biological, medical, or genetic. The psychological, social, and behavioral characteristics of a juvenile, as well as the relevant dimensions of the larger social environment and the attributes of the situation, provide an explanation of problem behavior (Jessor, 1987, p. 331). Problem-behavior theory emphasizes three systems of explanatory variables: perceived-environment system, personality system, and behavior system (Jessor, 1987). E ach of these systems, are thought to generate a dynamic state- proneness- which specifies the likelihood of involvement in problem behavior. Variables, within each of these systems, act as either controls against or instigations to involvement in problem behavior. Variables that control against problem behavior are synonymous with protective factors, while variables considered to be instigations to involvement in problem behavior are synonymous with risk factors. Within each system, it is the balance of instigations and controls that determines psychosocial proneness for involvement in problem behavior; and it is the balance of instigations and controls across the three systems that determines the adolescents overall level of problem behavior proneness-or psychosocial unconventionality (Jessor, 1987). Values, expectations, beliefs, attitudes, and orientations toward self and others, are the different variables within the personality system. When juveniles are lacking the controls ag ainst involvement in problem behavior within the personality system, they are said to have personality proneness. Variables such as lower self-esteem, lower value on academic achievement, and more external control, are found in those who have personality proneness to problem behaviors (Jessor, 1987). Problem-behavior theory has been expanded to include research that tests other factors that may strengthen the predictive process. In a recent study, several protective factors were analyzed independently in order to determine their effect on risk behaviors taking place in relation to this theory. Similar to conventional behaviors, protective factors are absent of risk and act opposite of risk factors or unconventional behaviors (Jessor, Van Den Bos, Vanderryn, Costa, Turbin, 1995). Through analyzing middle school children in this longitudinal study researchers concluded that protective factors had a strong effect on adolescent behavior over time and certain factors even influence gender and ethnicity more directly (Jessor, et al., 1995).   Resilience As investigators studied risk, they began realizing that there were children flourishing in the midst of adversity; this led to the study of resilience (Garmezy, 1974; Rutter, 1979; Werner, Smith, 1982; Masten, Coatsworth, 1998). In an effort to account for individual differences in outcome in which exposure to risk was essentially held constant, Garmezy (1985) began to articulate factors that may serve to be protective against risk. Garmezy (1985) used three categories to organize the protective variables: (a) dispositional attributes (individual differences), (b) family attributes, and (c) extrafamilial circumstances, while exploring protective factors as moderators of the relationship of risk to behavioral outcomes (Jessor et al., 1995). The Kauai Longitudinal Study is one of the most influential studies of individual resilience and protective factors in children. Following 698 children born in 1955, over a 40 year span, Werner and Smith explored the impact of a variety of biological and psychosocial risk factors, stressful life events, and protective factors on the development of a multiethnic cohort (Werner, Smith, 1992). Findings from this study demonstrated that both internal and external factors work together to strengthen resilience in children, as they moved toward adulthood. Characteristics of resilient children, during early childhood, were found to be predictive of resilience in later years. When these children progressed through middle childhood and adolescence, they were characterized by their impressive communication and problem-solving skills. Findings also suggested other salient protective factors that were operated in the lives of the resilient youth. These factors included an internal locus of cont rol, self-efficacy, and a positive self-concept (Werner, 1995). According to Werner, the development of human resiliency is none other than the process of healthy human development-a dynamic process in which personality and environmental influences interact in a reciprocal, transactional relationship. The range of outcomes is determined by the balance between risk factors, stressful life events, and protective factors (Werner, Smith, 1982). Developmental asset framework. Resilience research supports a developmental theory of change (Bowlby, 1969; Bronfenbrenner, 1979; Erikson, 1963; Rogoff, 2003). According to the Search Institute (2003) as children move through their developmental stages, they acquire a set of personal assets, which help them become resilient and face the challenges and opportunities ahead. Focus on prevention, protective factors, and resiliency, the framework of developmental assets foundations are rooted in empirical studies of child and adolescent development. The original configuration of 30 developmental assets was described in several publications (Benson, 1990; Benson, 1996; Benson, Espeland, Galbraith, 1994) as well as in data-based reports developed for each of 460 school districts. These reports were based on Search Institutes survey, Profiles of Student Life: Attitudes and Behaviors, designed to measure the developmental assets. In 1996, the model was expanded to 40 developmental assets; gr ouped into 20 external assets and 20 internal assets (Search Institute, 2003). These assets, both internal and external, have been associated with protection against deviant behaviors; the more assets youth report, the less likely they are to engage in risk behaviors (Benson, Scales, Leffert, Roehlkkepartain, 1999). The external assets refer to the positive developmental experiences of relationships and opportunities that adults provide and are grouped into four categories: (a) support, (b) empowerment, (c) boundaries and expectations, and (d) constructive use of time. The internal assets are competencies, skills, and self-perceptions that young people develop gradually over time. Benard (1991) suggested four categories of overlapping personal strengths, or internal assets, of resilient children, which include social competence, problem-solving, autonomy and identity, and a sense of purpose. Benson, Leffert, Scales and Blyth (1998) have placed the internal assets in four similar categories: (a) commitment to learning, (b) positive values, (c) social competenci es, and (d) positive identity. Regardless of terminology, each of these four categories of personal strengths encompasses many inter-related individual characteristics associated with healthy development and life success. Research has demonstrated a clear association between the internal factors and the external factors, and their relationship to the development of juvenile delinquency; however, little is known about the direct effect that these factors have on an individual, once criminal behavior has been initiated. Understanding how these factors contribute to desistance from crime, is of critical importance for sustained post-onset interventions (Kazemian, 2007). Providing individuals with the resources and the skills to maintain desistance efforts is needed for rehabilitation and reintegration. Kazemian (2007) highlights the importance of viewing desistance as a process that occurs within individuals. Focusing on within-individual change, allows monitoring progress, and is more valuable for guiding post-onset intervention strategies; differences in internal factors that promote desistance from crime, are easier to manipulate through individual intervention, than the external factors between those who persist and those who desist (Kazemian, 2007). Internal Assets as Protective Factors The ongoing, dynamic process of resilience, reiterates the need for a better understanding of the factors contributing to this process. What factors are likely to build resiliency? What factors seem to alter the predictions of negative outcome and enable individuals to circumvent conditions of great adversity and stress? Once the onset of delinquency or antisocial activity has occurred, the same dynamic processes must be considered in order to understand the internal and external factors that promote or inhibit desistance within individuals (Kazemian, 2007; Benard, 1998; Mulvey et al., 2004). Mulvey et al. (2004) conceptualize the desistance process as involving the interactions among dynamic changes in psychological states, developmental capacities, and social contexts; therefore, developmental changes occurring in late adolescence, or the time of desistance, must also be considered. Review of the literature surrounding desistance, suggests that the desistance is an ongoing process of change over time. Findings also suggest that the desistance process is developmentally based, and that dynamic psychological traits differentiate adolescents who continue to commit criminal offenses from those who desist (Mulvey et al., 2004; Decoene, Bijtteber, 2008; Loeber et al., 2007). Preliminary investigations of factors related to desistance from youth offending provide increasing evidence for the importance of internal assets as protective factors. Traditionally, researchers have placed youth offenders within a high-risk, nonresilient category (Ferguson, Lynskey, 1996; White, Moffitt, Silva, 1989). Moving away from the risk perspective, by emphasizing the strengths and assets of youth offenders, and looking at those adolescents who have desisted from delinquent involvement, researchers have begun to identify protective factors in resilient children. Carr and Vandiver (2001) applied the knowledge gleaned from resiliency research to the domain of juvenile delinquency. This study sought to identify the stressors, risk factors, and protective factors among a population of youth offenders, and to determine if these factors are associated with recidivism status. Findings suggested that protective factors play an important role in decreasing recidivism among youth o ffenders. Additionally, personal characteristics were found to independently differentiate the non-repeat offenders and repeat offenders (Carr, Vandiver, 2001). Similarly, in an examination of factors discriminating between recidivists and non-recidivists, self-esteem, self-efficacy, expectations of future success, and resilience were the personal attributes expected to be discriminators (Benda, 2001). Social Competence. The social competencies assets include a personal skill set needed to deal with the myriad choices, challenges, and opportunities presented in complex societies. Social competence is thought to develop with the social contexts and includes planning and decision making, interpersonal and cultural competence, resistance skills, and the ability to resolve conflicts (Benson, Leffert, Scales, Blyth, 1998). Social competence, according to Luthar, is considered to be a particularly useful indicator of childrens overall positive adaptation or wellness (Luthar, Burak, 2000, p. 30). Similarly, Kholberg, LaCrosse, and Ricks (1972), found social competence to be among the broad developmental-adaptational attributes, that were the best predictors of later adult outcomes. This category includes the characteristics, skills, and attitudes essential to forming relationships and positive attachments to others; such as empathy and caring, compassion, forgiveness, and communication. Studies on resiliency, not only document these attributes, studies done on individuals already experiencing problems with delinquency, crime, mental illness, and substance abuse have consistently identified the lack of these qualities. Deficits within social competence have been associated with a history of higher stress reactivity and lower self-control of attention and behavior (Masten, Coatsworth, 1998). Additionally, there is evidence that individuals with the poorest social competence have the worst prognoses and highest relapse rate, and childhood competence level is predictive of severity of adult psychiatric problems (Benard, 1998). Empathy has been defined as, an emotional reaction elicited by and congruent with anothers emotional state or situation (Hoffman, 1982). According to Eisenberg, Miller, Shell, McNalley, and Shea (1991), empathy begins being expressed in children during late elementary school and beyond; expressed through reasoning, which is reflective of abstract principles, internalized affective reactions, and self-reflective sympathy and perspective taking. Empathy, according to Hoffman (1984), is important for prosocial behavior, as it functions as a motive for moral behavior. Empathic children are more inclined to consider the implications of their actions for the welfare of others and to refrain from delinquent behaviors. As such, empathic capacities function as a deterrent against certain types of delinquent behaviors. Individuals with higher empathy scores, tend to be morally mature (Hogan, 1973). In fact, empathy has consistently been found to be positively associated with adolescents prosoc ial moral judgment and is a strong predictor of males prosocial behavior (Benard, 2004; Eisenberg et al., 1991). With age, moral judgment becomes a component of individuals prosocial disposition, or lack thereof. Understanding, and sensitivity to, others feelings, thoughts, and experiences, directly affects behavior as well as indirectly affecting moral cognitions. As the root of morality and mutual respect, empathy is considered a hallmark of resilience and is essential to healthy development. Problem-solving. Abilities such as planning, flexibility, critical thinking, and insight fall into the category of problem-solving. Several studies have found planful behavior to be the primary internal asset of individuals that helped them avoid choosing troubled mates. Studies have also demonstrated flexibility as a critical life skill; flexibility is one of the most often named personal resources, of adults asked what personal strength has helped them deal with stress and challenge (Benard, 2004). More effective problem-solving skills have been found in stress-resilient children and are strong indicators of adult adaptation and functioning (Luthar, Zigler, 1990; Werner, Smith, 1982, 1992, 2001). Problem-solving, according to Masten and Coatsworth (1998), requires skills useful for coping. In a study of offenders and non-offenders, Fougere, Daffern, and Thomas (2012) found those considered to be resilient, had stronger coping skills and better problem-solving skills. Findings also suggested that those considered to be resilient, were also more likely to be the non-reoffenders or succeeders. By the same token, offending behavior has been linked to cognitive predispositions, such as interpersonal cognitive problem-solving skills. Deficits in these skills have been associated with deficits in interactions with others (Kazemian, 2007). Furthermore, Tate, Reppucci, and Mulvey (1995), found chronically violent individuals to have constricted problem-solving skills. Autonomy and identity. The category of autonomy includes attributes revolving around the development of ones sense of self, identity, and of power; such as self-efficacy and self-awareness. Positive identity, according to Erik Eriksons (1968) theory of psychosocial development, is the critical developmental task of adolescence. Research has confirmed that a clear sense of identity is associated with optimal psychological functioning in terms of personal well-being and the absence of anxiety and depression. Positive self-identity is closely aligned with positive self-evaluation or self-esteem. These characteristics are not only critical to normative development but have consistently been documented as characteristics describing resilient children and adolescents (Masten, Coatsworth, 1998; Werner, Smith, 1992). Self-awareness. Self-awareness is a nonreactive, nonjudgmental attention to inner states (Goleman, 1995, p.47, 315). It includes observing ones thinking, feelings, attributions or explanatory style as well as paying attention to ones moods, strengths, and needs as they arise, without getting caught up in emotion. Self-aware individuals, according to Mead (1934), have the ability to look at themselves as others do. They can adopt an outside social perception of themselves. Self-awareness, as posited by Diener and Srull (1979), increases adherence to normative standards. Individuals, who are high in this asset, are more concerned with their social selves and are more likely to avoid anti-normative behavior. Studies of desistance indicate the importance of individual-level motivational traits in change toward positive behavior (Mulvey et al., 2004; Twyford, 2012). Mulvey et al. (2004) have suggested agency as a potentially relevant factor for promoting or inhibiting desistance. A sense of personal agency, is a pivotal role in cognitive development, and includes the first stage of self-awareness. A change in the way the individual sees him or her self, and who they believe they are, are important to the process of personal reformation and desistance (Mulvey et al., 2004). Self-awareness is considered a hallmark of successful and healthy human development; it is the fundamental internal asset upon which other assets are built (Werner, 1989; 1992). Self-efficacy. Self-efficacy has been defined as, ones belief in ones ability to succeed in specific situations. Ones sense of self-efficacy can play a major role in how one approaches goals, tasks, and challenges; affecting behavior through its impact on motivational, decisional, and affective determinants (Bandura, 1977; Caprara, Gerbino, Paciello, Di Giunta, Pastorelli, 2010). Research has demonstrated self-efficacy to be a critical component of developing ones identity and sense of self-the major developmental task of adolescent years (Benard, 2004). Self-efficacious children and adolescents have developed a sense of personal control. A sense of personal control is essential for individuals to surmount serious social and contextual adversities (Scales, Benson, Leffert, Blyth, 2000). When individuals have a sense of personal control, they are better able at recognizing what is out of their control and to understand that they are able to control the course of their lives, regardless of what cannot be controlled. Confidence in the personal control over their lives and their life choices, or a sense of personal agency, is crucial for adolescents to make any significant and lasting changes (Mulvey et al., 2004; Twyford, 2012). This may be, in part, because individuals with high self-efficacy beliefs are better at monitoring their behavior. According to Caprara et al., (2010) self-efficacious children may learn to cope and regulate temperamental and behavioral problems, by relying on cognitive and emotional resources. Studies have sho wn the positive influence that self-efficacy beliefs have on academic achievement and prosocial behavior and their positive role in counteracting antisocial careers. Self-efficacy is said to supply adolescents with the cognitive, emotional, and motivational resources to cope successfully with transition to adulthood (Caprara et al., 2010). Over the past few decades, researchers have begun to focus on both risk factors and protective factors; recognizing their interactive roles throughout youth development. Findings have demonstrated a clear association between the internal factors and the external factors, and their relationship to the development of juvenile delinquency; however, little is known about the direct effect that these factors have on an individual, once criminal behavior has been initiated. Therefore, as empathy, problem-solving, self-awareness, and self-efficacy have demonstrated to be a predictor of and a positive influence on prosocial behavior, these assets require further investigation to determine the extent to which they promote desistance and if they are indeed internal protective factors. Currently, research regarding the individual personal strengths, or internal assets, and their relation to youth offending patterns has been limited. The present study investigated the protective effects of the internal assets of empathy, problem-solving, self-awareness, and self-efficacy in a youth offender population. Specifically, the proposed study sought to explore these assets and their ability to differentiate between non-repeat and repeat youth offenders. It was predicted that youth offenders would have lower scores on the internal assets, than a normative sample. Furthermore, it was predicted that youth offenders with higher scores on the internal assets would be less likely to recidivate within a six-month period, than youth offenders with lower internal assets scores.

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.