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Offering an example of a small open developing economy, the purpose of this paper is to explore the reasons for relative stability in Armenia’s foreign exchange market. Relying on a single currency and derived cross-currency exchange rates, the paper models short-term effects between exchange market pressure and financial and macroeconomic factors.

Following a literature review, the paper sets the macroeconomic context with an initial variance comparison of standard currency pairs and derived cross-currency exchange rates. Then, the core analysis is carried out with a vector error correction model, focusing on short-term cross-dynamics in monthly data. The orthogonal impulse response function analyses help solidify and further inform relevant conclusions.

Three broad factors influence Armenia’s foreign exchange market: external push factors; domestic banking sector competition, and foreign currency risk perceptions; and domestic macroeconomic and dual, cross-pair, exchange rate target priorities. The central bank’s implicit management of the foreign exchange market’s expectations, pull factor, is consistent with trader market power’s contribution to lower volatility. Yet, the risk of financial and real-sector decoupling remains.

The results are relevant for emerging markets attempting to leverage the global liquidity and low interest rates, while being exposed to external pressures in the post-crisis environment, in which international reserves may be scarce while currency stability is an implied priority. This study can be further adapted to a more comprehensive structural short-term analysis of currency determination or similar dynamics in other small open economies.

This chapter contributes to the study of social capital in international business from a perspective of diaspora networks. Previously secure within the domains of academic fields of history and sociology, diaspora is now an essential concept across business disciplines influencing economic development policy. Diaspora networks are argued to be the first movers carrying a promise of robust entrepreneurial activity, potentially transferring unique skills and knowledge by way of formal and informal engagements with their ancestral lands. Stitching global value chains into the development structures of weaker economies, diaspora networks are hypothesized to be strengthening homeland's competitive advantage and macroeconomic resilience. With much enthusiasm for the strong potential of diaspora networks, this study calls for a realistic caution and against mechanistic interpretation of the phenomenon. Three key elements formulate a diaspora network operational sustainability requiring deeper reflection in the business literature: identity, trust, and engagement infrastructure. Such triangularity of diaspora networks is in parallel with the three dimensions of social capital: bonds, bridges, and linkages. Connecting with the literature and informed by a unique survey, this contribution also sketches an analytical framework for future research and meaningful policy approach.

Derivatives market has been epitomized with gross evil in the wake of the global economic crisis that ensued in 2008. This study argues for more extensive understanding of the phenomena as dynamics previously viewed unrelated now exhibit correlation. As empirical reference, this research relies on recent trends in the commodity futures contracts with analytical relation to the currency exchange rate and by extension the financial and real sectors. With varying intensity often speculative sporadic trading in crude oil, coffee, wheat, rice, sugar, and gold benchmark futures may inflict detrimental effects on the global development efforts. The issue is most acute in the emerging markets facing inflation fears, speculative movements of foreign currency-denominated funds, and underlying domestic currency value. This dynamic reasserts the concept of fundamental uncertainty allowing us to connect the typical risk-return stand with a dialectical unity of the financial, real sector, and social costs. Ultimately, issues raised in this study relate to the problems of social stability and sustained economic development in the postcrisis environment given high frequency and volatility of capital flows. As such, this chapter contributes to the literature that bridges financial empirical analysis with modern socially responsible economic development.

Emerging markets are said to have sustained relatively well in the recent global crisis. There are several factors that help explain this popular view, such as, for example, perceived separation from key international financial centres. Still a lot is to be digested in the crisis aftermath with immediate implications for financial markets and real economy. This chapter offers a unique insight into dynamics within transition economies via an extended blended fiscal–monetary policy rules model with possibility of foreign reserves targeting and foreign currency-denominated debt dynamics. Calibration is based on actual data and is done under various targets and financial risk conditions. Prudent monetary policy and fiscal policy initiatives within current context drive the choice of targets. That may help dampen negative impacts of the crisis and thwart potential currency run. This chapter advances three possible post-crisis scenarios, each with unique solution for reserves, exchange rate, sustainable debt and output levels. Categorizing between net exporters and net importers based on countries' external positions, group-specific results are derived. While both groups are susceptible to exchange-rate risk affected by a multitude of shocks due to their fragile financial system, net importers risk high inflation, but net exporters over-borrowing. This chapter contributes to the literature on global financial crisis, macroeconomic policy, and role of nominal targets and foreign reserves in emerging markets.

Emerging financial markets have largely proven resilient to the consequences of the Global Financial Crisis. While this owes much to the bitter experience and economic strategies developed and implemented following the Asian Financial Crisis of 1997–1998, providence also played a hand in that relatively few of its financial institutions were exposed to the complex structured products that underpinned the demise of many financial intermediaries in the United States and Europe. The objective of this volume is to investigate and assess the impact and response to the crisis in emerging markets from a number of perspectives. These include asset pricing, contagion, financial intermediation, market structure and regulation. Our hope is that the assembled chapters offer clear insights into the complex financial arrangements that now link emerging and developed financial markets in the current economic environment. The volume spans four dimensions: first, a series of background studies offer explanations of the causes and impacts of the crisis on emerging markets more generally; then, implications are considered. The third and final sections provide insights from regional and country-specific perspectives.