IDEAS home Printed from https://ideas.repec.org/a/ntu/ntugeo/vol1-iss1-13-066.html
   My bibliography  Save this article

Financial Contagion Reloaded: The Case Of Cyprus

Author

Listed:
  • Iulia Monica Oehler-Sincai

    (Institute for World Economy of the Romanian Academy, Bucharest, Romania)

Abstract

In the present case study, our main objective is to bring to the forefront the main factors that led to the double-dip recession of the Cypriot economy. We analyze determinants such as "tax haven" status, interlinks with the Greek economy, spillovers originating in the Euro Area as a whole (through the debt crisis) and Greece in particular. In spite of the fiscal reform of 2002 and the new fiscal system in force since the 1st of January 2003, Cyprus continued to be a "tax haven". Its high investment attractiveness spurred the "Cyp-Rus" relations, boosted an outsized banking sector (representing 800% of Cyprus GDP in 2010-2011) and generated an unsustainable proportion between the real and the "virtual" economy. Besides, the public sector became larger than required by such a small economy, its share in the total yearly value added being close to one quarter. Taking into consideration all these factors, we conclude that the „W"-shaped recession of the Cypriot economy is a sui generis one and the questioning of its "fiscal paradise" status is even more acute than in the case of countries such as Luxembourg or Liechtenstein.

Suggested Citation

  • Iulia Monica Oehler-Sincai, 2013. "Financial Contagion Reloaded: The Case Of Cyprus," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 1(1), pages 66-74, May.
    • Handle: RePEc:ntu:ntugeo:vol1-iss1-13-066
    as

    Download full text from publisher

    File URL: http://www.globeco.ro/wp-content/uploads/vol/split/vol_1_no_1/geo_2013_vol1_art_008.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mr. Paul R Masson, 1998. "Contagion: Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 1998/142, International Monetary Fund.
    2. Constantinos Stephanou, 2011. "The Banking System in Cyprus:Time to Rethink the Business Model?," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 5(2), pages 123-130, December.
    3. repec:jes:wpaper:y:2013:v:5:p:33-42 is not listed on IDEAS
    4. repec:jes:wpaper:y:2013:v:5:p:41-50 is not listed on IDEAS
    5. Loredana Maftei, 2013. "An Overview Of The European Tax Havens," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5(1), pages 41-50.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marcell Zoltán Végh, 2014. "Has Austerity Succeeded in Ameliorating the Economic Climate? The Cases of Ireland, Cyprus and Greece," Social Sciences, MDPI, vol. 3(2), pages 1-20, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gimet, Celine, 2007. "Conditions necessary for the sustainability of an emerging area: The importance of banking and financial regional criteria," Journal of Multinational Financial Management, Elsevier, vol. 17(4), pages 317-335, October.
    2. Linda S Goldberg, 2009. "Understanding Banking Sector Globalization," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 171-197, April.
    3. Raghavan, Mala & Devadason, Evelyn S, 2019. "How resilient is ASEAN-5 to trade shocks? Regional and global shocks compared," Working Papers 2019-04, University of Tasmania, Tasmanian School of Business and Economics.
    4. Gan-Ochir Doojav & Borkhuu Gotovsuren & Tsenddorj Dorjpurev, 2012. "Financial Contagion and Volatile Capital Flows," Occasional Papers, South East Asian Central Banks (SEACEN) Research and Training Centre, number occ56, April.
    5. Yury D. Kvashnin, 2018. "The Republic of Cyprus as a Transit Point for Foreign Capital," Outlines of global transformations: politics, economics, law, Center for Crisis Society Studies, vol. 11(1).
    6. Begüm Yurteri Kösedağlı & A. Özlem Önder, 2021. "Determinants of financial stress in emerging market economies: Are spatial effects important?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4653-4669, July.
    7. Chul Park, Yung & Song, Chi-Young, 2001. "Institutional Investors, Trade Linkage, Macroeconomic Similarities, and Contagion of the Thai Crisis," Journal of the Japanese and International Economies, Elsevier, vol. 15(2), pages 199-224, June.
    8. Konstantinos Drakos, 2009. "Cross-Country Stock Market Reactions to Major Terror Events: The Role of Risk Perception," Economics of Security Working Paper Series 16, DIW Berlin, German Institute for Economic Research.
    9. Saqib, Omar F., 2003. "An Investigation into the 1999 Collapse of the Brazilian Real," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 56(2), pages 193-206.
    10. Leonardo Bartolini & Lorenzo Giorgianni, 2001. "Excess Volatility of Exchange Rates with Unobservable Fundamentals," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 518-530, August.
    11. Mustapha Djennas & Mohamed Benbouziane & Meriem Djennas, 2011. "An Approach of Combining Empirical Mode Decomposition and Neural Network Learning for Currency Crisis Forecasting," Working Papers 627, Economic Research Forum, revised 09 Jan 2011.
    12. Bruno P. Arruda & Pedro L. Valls Pereira, 2013. "Analysis of the volatility's dependency structure during the subprime crisis," Applied Economics, Taylor & Francis Journals, vol. 45(36), pages 5031-5045, December.
    13. Bayoumi, Tamim & Fazio, Giorgio & Kumar, Manmohan & MacDonald, Ronald, 2007. "Fatal attraction: Using distance to measure contagion in good times as well as bad," Review of Financial Economics, Elsevier, vol. 16(3), pages 259-273.
    14. John Beirne & Guglielmo Maria Caporale & Marianne Schulze-Ghattas & Nicola Spagnolo, 2013. "Volatility Spillovers and Contagion from Mature to Emerging Stock Markets," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 1060-1075, November.
    15. Taylor, Mark & Mody, Ashoka, 2003. "Common Vulnerabilities," CEPR Discussion Papers 3759, C.E.P.R. Discussion Papers.
    16. Meixing Dai, 2012. "External Constraint and Financial Crises with Balance Sheet Effects," International Economic Journal, Taylor & Francis Journals, vol. 26(4), pages 567-585, March.
    17. Mandilaras, Alex & Bird, Graham, 2010. "A Markov switching analysis of contagion in the EMS," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 1062-1075, October.
    18. Ari, Ali, 2008. "An Early Warning Signals Approach for Currency Crises: The Turkish Case," MPRA Paper 25858, University Library of Munich, Germany, revised 2009.
    19. Neha Seth & Monica Sighania, 2017. "Financial market contagion: selective review of reviews," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 9(4), pages 391-408, November.
    20. Yang, Xin & Wang, Xuya & Cao, Jie & Zhao, Lili & Huang, Chuangxia, 2024. "Cross-regional connectedness of financial market: Measurement and determinants," The North American Journal of Economics and Finance, Elsevier, vol. 72(C).

    More about this item

    Keywords

    Cyprus; financial contagion; tax haven; Cyp-Rus; Cyprus-Greece; recession; euro zone; debt crisis;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G01 - Financial Economics - - General - - - Financial Crises
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ntu:ntugeo:vol1-iss1-13-066. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Stefan Ciucu (email available below). General contact details of provider: https://edirc.repec.org/data/feuntro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.