The operational amplifier integrator is an electronic integration circuit. Based on the operational amplifier op-ampit performs the mathematical operation of integration with respect to time; that is, its output voltage is proportional to the input voltage integrated over time. The integrator circuit is mostly used in analog computersanalog-to-digital converters and wave-shaping circuits.

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The equation above shows that L i is a linear function of the independent variables and the slope coefficients measure the change in L i resulting from a unit change in the independent variables. The empirical analysis of the study is twofold. Firstly, the effect of financial liberalisation on financial crises is examined using interest rates as the main proxy for financial liberalisation.

Furthermore, the crises mitigating effect of institutional quality is also incorporated by including an interaction term between interest rates and institutional quality. As shown earlier, studies by Bonfiglioli and Mendicino , Angkinand et al. Secondly, the study determines whether financial liberalisation increases the likelihood of financial crises through financial development. An interaction term between interest rates and credit to the private sector is included in the second part of the analysis.

The financial crisis dummy variable takes the value of 1 in a crisis year and 0 if there is no crisis. The real interest rate captures the effect of interest rate liberalisation on the incidence of financial crises. The real deposit and real lending rates are used in separate regressions. The coefficient of the interaction term on equation 7 is expected to be negative. Institutional quality mitigates the effect of financial liberalisation on financial crises. The interaction term of equation 8 is expected to be positive as excessive credit growth may exacerbate the effect of financial liberalisation on financial crises.

GDP growth captures the effect of higher economic growth on the likelihood of financial crises. Financial development is captured by bank sector credit as a percentage of GDP. A rise in credit growth is expected to have a positive impact on the number of non-performing loans and therefore is expected to increase the likelihood of banking crises Angkinand et al. Capital account liberalisation is represented by the Chinn-Ito index of capital account openness.

According to Barrell et al. Inflation is an indicator of macroeconomic instability, which enhances the likelihood of banking crises Bonfiglioli, The empirical strategy involves answering two questions. Firstly, does financial liberalisation increase or decrease the likelihood of financial crises? Secondly, what is the role of financial development in causing financial crises? To ensure that the results are robust, the explanatory variables are lagged by one period, which provides a true early warning model Barrell et al.

The baseline regression model includes only four explanatory variables: GDP growth, financial openness, current account balance and the inflation rate. The results are presented in Tables IV and V. The probit model, and also the LPM, is estimated for robustness checks; however, the interpretations will centre on the logit model. The coefficient of inflation is positive and significant at 5 per cent level, indicating that financial crises are associated with higher levels of inflation.

High inflation rates signify macroeconomic instability, which increases uncertainty in the economy, so the result is in line with a priori expectations. Capital account liberalisation reduces the likelihood of financial crises, although the coefficient is weakly significant. So capital inflows may mitigate liquidity problems faced by domestic financial institutions, thus reducing the possibility of banking crises. As expected, GDP growth is negatively signed and significant at 5 per cent level, indicating that higher economic growth levels are associated with lower crisis probabilities.

The current account balance has the expected negative sign; however, the coefficient is insignificant. According to the literature, current account imbalances are one of the precursors of financial crises, so positive current account balances are necessary to reduce the likelihood of financial crises Barrell et al.

The results of the probit model and the LPM mirror those of the logit model to a large extent. However, the financial openness variable is negative and significant at 5 per cent in the probit model, but insignificant in the LPM. Table V shows the marginal effects which measure the probability that each explanatory variable contributes to the likelihood of financial crises.

Inflation increases the probability of financial crises by 0. The probability is slightly higher in the LPM. Financial openness reduces the probability of financial crises by 3 per cent in both the logit and probit models, which makes it the most important explanatory variable. GDP growth reduces the probability of financial crises by 1 per cent.

The effect of interest rate liberalisation is introduced in different specifications and the results are presented in Table VI. Due to the strong links between the inflation rate and interest rate liberalisation measures real deposit rate and real interest rate , the inflation rate is omitted from the specification. The two measures of interest rate liberalisation are used separately in regression models. The coefficient of the real deposit rate is negative but insignificant, while that of the real interest rate is negative and significant at 10 per cent level.

The results imply that interest rate liberalisation do not directly increase the likelihood of financial crises in SADC countries. The result supports the findings of Barrell et al. The results provide support to the view that higher interest rates do not necessarily result in bank risk-taking behaviour. Furthermore, financial repression policies that maintain low real interest rates may increase the likelihood of financial crises rather than prevent them.

In most SADC countries real interest rates were low during the s, the period in which most financial crises occurred. In the third and fourth specifications, the interaction between financial liberalisation indicators and a measure of regulatory quality is included. The coefficients of financial liberalisation are negative and significant at the 10 per cent level without regulatory quality. The interaction of the real interest rate and regulatory quality is negative suggesting that the effect of financial liberalisation on the probability of financial crises declines further in the presence of stronger regulatory quality.

The finding supports that of Bonfiglioli and Mendicino , Angkinand et al. Despite the insignificance of the interaction term, it should be noted that in such models the aim is to estimate the marginal effects Brambor et al. The coefficients of the other explanatory variables are similar to those of the baseline model. However, the coefficient of the capital account balance becomes significant in specifications with the real interest rate, which implies that after the adoption of financial liberalisation, the current account balance significantly reduces the likelihood of financial crises.

Table VII shows the marginal effects of the explanatory variables, including the financial liberalisation measures. Financial liberalisation reduces the likelihood of financial crises, as both the real interest rates and the real deposit rate are negative.

The current account balance reduces the likelihood of financial crises by between 1 and 4 per cent. The coefficient of GDP growth suggests that higher economic growth reduces the probability of financial crises by 1 per cent when the real interest rate is introduced into the specification.

Financial openness reduces the probability of financial crises by between 3 and 4 per cent. The marginal effect of regulatory quality is shown in Figure 1. The probability of financial crises declines with financial liberalisation in the presence of stronger regulatory quality which is in line with a priori expectations. Figure 1 also shows that the likelihood of financial crises taking place is higher when real interest rates are in negative territory.

Therefore, financial repression policies that maintain very low interest rates should be avoided. The effect of financial development on the likelihood of financial crises is presented on Table VIII. In the first specification, the bank credit to the financial sector is introduced in the baseline model, while in the second and third specifications, the measures of financial liberalisation are introduced. Bank credit to the private sector is positive and significant at 1 and 10 per cent levels in the baseline model and the third specification, respectively, meaning that it increases the likelihood of financial crises.

The coefficient is in line with a priori expectations and confirms the findings of Angkinand et al. The interaction effects between financial liberalisation and bank credit are positive suggesting that the reductive effect of financial liberalisation on financial crises is lower in the presence of bank credit. Financial liberalisation may increase the likelihood of financial crises through financial development in SADC countries.

This may explain the negative effect of credit to the private sector on economic growth that has been reported by Phakedi , Le Roux and Moyo and Bara et al. The marginal effects shown in Table IX suggest that bank credit increases the likelihood of financial crises by between 0. The marginal effect of the real interest rate on financial crises shown on Figure 2 , declines initially at lower levels of credit to the private sector. However, as bank credit growth grows the effect of the real interest rate on the probability of financial crises increases.

This supports the notion that financial liberalisation may increase the likelihood of financial crises through financial development. Sensitivity analysis involving the use of lagged explanatory variables was conducted and due to the small sample size, only the first lags are considered.

The results showing the baseline regression, the effect of interest rate liberalisation on financial crises and the role of financial development on financial crises are presented in Table X. In the baseline regression, inflation and financial openness retain their respective positive and negative signs, as well as their significance.

GDP growth and the current account balance are insignificant. The introduction of interest rate liberalisation in the specification does not alter the result of financial openness which remains negative and significant. The other coefficients are similar to those in the baseline regression. The interest rate liberalisation variables are negative but insignificant. The coefficient of bank credit retains its positive and significant coefficient. This study examined the effect of financial liberalisation and financial development on the likelihood of financial crises in SADC countries.

Financial liberalisation considered for the analysis was interest rate reforms captured by the real deposit and lending rates, as well as the capital account liberalisation proxied by the Chinn-Ito index. The financial development measure chosen was banking sector credit. The analysis was conducted using the logit model due to the binary nature of the financial crises, the dependent variable. The empirical results suggest that interest rate liberalisation reduces the likelihood of financial crises.

This implies that higher real interest rates may reduce the risk-taking behaviour of banks and financial repression policies that maintain negative real interest rates might increase the likelihood of financial crises. Also, interest rate liberalisation may increase the strength of capital in mitigating financial crises as put forward by Barrell et al.

There is evidence that capital account liberalisation reduces the likelihood of financial crises which may occur through the alleviation of liquidity problems in the banking sector as capital inflows increase Beju and Ciupac-Ulici, ; Hamdi and Jlassi, The results provide support for the hypothesis that financial development increases the likelihood of financial crises. This could be the result of low levels of institutional quality and a weak supervisory framework in the SADC region, which have played a minimal role in mitigating the effects of financial development on financial crises.

As expected, inflation and current account imbalances increase the probability of financial crises, while GDP growth is associated with lower crises probabilities. The results of the study have profound implications. It is recommended that policymakers establish sound supervisory and regulatory framework to accompany financial liberalisation policies to reduce the likelihood of financial crises in the SADC region. Financial liberalisation policies may reduce the incidence of financial crises directly; however, their indirect effects such as the growth of banking sector credit may increase the possibilities of banking crises occurring.

The financial sectors in a number of SADC countries are still at low levels of development. Enhanced levels of financial development should thus be accompanied by stronger institutional quality. Financial repression policies that maintain low or negative interest rates should be avoided by policymakers as these increase the likelihood of financial crises possibly through excessive risk-taking on the part of banks and other financial institutions.

Market forces should thus be allowed to determine interest rates. Economic growth rates should be enhanced as this reduces uncertainty in an economy, while inflation rates should be low so as to promote macroeconomic stability. Capital account liberalisation should be encouraged while maintaining a positive current account balance is important for SADC countries as these reduces the likelihood of financial crises.

Sources: World Bank ; Kaufmann et al. Agoraki , M. Altunbas , Y. Angkinand , A. Arestis , P. Ariss , R. Bara , A. Barrell , R. Beck , T. May Beju , D. Bogutoglu , E. Bonfiglioli , A. Boyd , J. Brambor , T. Cakmakyapan , S. Caldera-Sanchez , A. Caprio , G. Chinn , M. Chowdhury , A. Cubillas , E. Daniel , B. Davis , J. Mack , A. Phoa , W. Demetriades , P. Fattouh , B. Enwobi , M. Glick , R.

Gorlach , V. Gujarati , D. Hamdi , H. Hill , R. Hope , C. Johnson , R. Kaminsky , G. Kates , S. Kaufmann , G. Kaufmann , D. Kiley , M. Kotios , A. Laeven , L. Le Roux , P. Lee , I. Levine , R. McKinnon , R. McLean , B. Mezui , C. Misati , R. Mishkin , F. Mottelle , S. Mowatt , R. Nagler , J. Perugini , C. Phakedi , M. Ranciere , R. Reinhart , C. India's IT services have become globally competitive as many companies have outsourced certain administrative functions to countries where costs esp.

Furthermore, if service providers in some developing economies are not competitive enough to succeed on world markets, overseas companies will be attracted to invest, bringing with them international "best practices" and better skills and technologies. Trade liberalisation carries substantial risks that necessitate careful economic management through appropriate regulation by governments. Some argue foreign providers crowd out domestic providers and instead of leading to investment and the transfer of skills, it allows foreign providers and shareholders "to capture the profits for themselves, taking the money out of the country".

This is also supported by the anthropologist Trouillot who argues that the current market system is not a free market at all, but instead a privatized market IE, markets can be 'bought'. Other potential risks resulting from liberalisation, include:. However, researchers at thinks tanks such as the Overseas Development Institute argue the risks are outweighed by the benefits and that what is needed is careful regulation.

Yet such concerns could be addressed through regulation and by a universal service obligations in contracts, or in the licensing, to prevent such a situation from occurring. Of course, this bears the risk that this barrier to entry will dissuade international competitors from entering the market see Deregulation.

Examples of such an approach include South Africa's Financial Sector Charter or Indian nurses who promoted the nursing profession within India itself, which has resulted in a rapid growth in demand for nursing education and a related supply response. From Wikipedia, the free encyclopedia. Economic policy that advocates the reduction of government regulations. Economic systems.

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India's economic policies. ISBN Retrieved 4 December International Monetary Fund. Ph : About the Philippines". Archived from the original ASP on 3 October National Geographic. Retrieved 26 March India Review. CiteSeerX S2CID Revolutions of Human rights in the Soviet Union.

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