China and India: the Challenge and Opportunity

Sources: Capell, Kerry. â€Å"IKEA: How The Swedish Retailer Became A Global Cult Brand†. BusinessWeek. 14 Nov. 2005: 96-106. Ikea. com CASE 2 CHINA AND INDIA: THE CHALLENGE AND OPPORTUNITY OVERVIEW China and India are the two nations that will transform the global economy as we now know it. China has state-of-the-art manufacturing and India is boosting its competitive edge through innovation hubs. While the United States is deciding if â€Å"Chindia† is a threat or an opportunity the massive low wage, highly educated, and forward thinking work force is transforming these two poor nations into global powerhouses.Yet, all is not perfect. While governments and business pour mass amounts of investments into the countries there are huge obstacles to continued growth. There are social, political, and environmental challenges. Important is keeping growth at a steady pace that will eliminate the unemployment lines. Pollution and environmental challenges, political backlash, de bt and currency crises, inadequate medical care, threats of epidemics, and war are continuing challenges. DISCUSSION QUESTIONS 1.Discuss the innovation implications for the leading developed nations concerning China’s and India’s rapidly escalating capabilities. 2. Examine the collaboration potential and hurdles of greater collaboration between China and India regarding innovation and other commercial ventures. 3. What are the potential market opportunities for developed nations in China and India? 4. Evaluate the evolving balance of economic power shift from the west to the east. 5. Discuss the future competitive threats of China and India for industries in developed countries.

Mr.michael

What are the advantages and disadvantages of living alone? How can living alone or living with other people affect your mood or behavior? Is living alone something that Is appropriate for you? Why or why not? The advantages of living alone are that you feel more comfortable being dependent on yourself, no sense of control, and free. You can do whatever and however you want, keep things in the order you want, and no one will judge you.For example, ear anything you want, watch your favorite channel and listen to music as loud as you wish, and no one will complain about it. The disadvantage of living alone is that it gets depressing from time to time. Having a partner or a roommate is really helpful in many situations. One of the examples, if you fall ill there will be someone who will take care of you. Another example is that you will have company when watching TV, cooking food, or dinning together.But, there are different types of people, some refer living alone and it doesn't get bor ing or depressing for them, others like to live with someone and feel comfortable with it. People who live alone tend to be more angry, lonely and depressed. Therefore, their mood is not always good. People who live with other people most of the times would be happy. This is because there is always someone they can chat with, discuss, and be around with. Living alone for me is appropriate, for now. I think that Is because now Is the stage in my life, where I need to live alone for a bit.Learn how to be dependent on myself, be responsible for the actions I do, and feel free. Mr.. Michael By mushy DO. Write What are the advantages and disadvantages of living alone? How can living alone or living with other people affect your mood or behavior? Is living alone something that is appropriate for you? Why or why not? Want, keep things in the order you want, and no one will Judge you. For example, Living alone for me is appropriate, for now. I think that is because now is the stage.

12 Angry Men by Talita E. Sigillo

Based on the movie  «12 angry men » In the movie  «12 angry men », one can explore a variety of fallacies and generalizations. Each juror except for one comes in with a verdict of  «Guilty », but by using critical thinking the reasons to support their claim are dismissed one by one. Except for Juror number three who is the last one to change his verdict. He disregards all critical reasoning and sticks to his initial claim using multiple fallacies to support it.He is clearly prejudiced towards the defendant no mater the evidence brought forward to him. Only at the end does he realize that all this time he was seeing his own son in the eyes of this boy, a son that had  «disrespected » the father. Him. Following are only some of the multiple fallacies juror number three used to support his claim. One of the very first fallacies juror number three uses is  «begging the question.  » This is when one states an opinion as though it is a well known fact. When he first ent ers the room he claims  «everyone knows he is guilty!! and when asked by the critical thinker to explain the reasons for his claim the juror answers:  «everything Says he is guilty » by using this reason he again is  «begging the question » and simultaneously uses  «Circular reasoning » since he restates his claim as though it is reason. Moreover when analyzing the two testimonies, the critical thinker finds ways to prove that there is a reasonable doubt in the two witnesses testimonies. Again juror number three uses more than one fallacy to claim that he has no reasonable doubt.It was brought to their attention that the woman who testified that she had seen the boy kill the father couldn’t actually see someone clearly. This claim was supported with the following reason and train of thought: The glimpse of the murder was seen through her bedroom window, the window of the moving train, across the street and through the victim’s apartment window.  «Could, who the woman saw commit the murder, be someone else »? Juror number three claimed that the  «woman testified in court » and also said  «The woman said she saw him » and finally ended with  «the woman saw it! After reasonable doubt to the testimony is applied, juror number three used the above quotes as his reasons to support his claim that it was the boy that the woman saw, concluding with evidence that do not follow through with his claim and thus being  «non sequitor ». Juror number three still had a valid reason to believe the boy had committed the murder since the man’s testimony was that he heard the boy shout out the phrase  «I’m going to kill you!  » to his father and that the old man who testified in court, saw the boy running down the stairs and that he heard the body fall.Through critical thought and analysing the evidence piece by piece, it was pointed out that, since the murder took place during the passing of a train, the old man coul d not have possibly heard the body fall and that it took him too long to cross his room and open the door for him to have seen the boy after committing the murder. Still juror number three voted guilty saying he had no reasonable doubt that  «the boy said ‘I’m going to kill you’ and he killed him » at this point he was using circular reasoning, restating his claim as a reason.It was at this point that the critical thinker decided to prove his point to juror number three, he provoked him so much to the point that he said  «I’m going to kill you!!  » to the other juror who provoked him, it was brought to his attention that a lot of them could have  «criminal tendencies » like the boy, but having them did not mean acting upon them. It was then that juror number three started loosing control. All the reasons he was using to mask the truth about why he was convicting the boy had been questioned leaving him with no logical warrants to support his cla im of guilty.When questioned again  «what proof do you have that the boy is guilty?  » he answers with a  «Red Herring » that he is  «entitled to his opinion » By the end of the movie his true premise behind the verdict of guilty was came to the surface. Juror number three had a son that had gotten in an argument with him and had stopped talking to him. This, according to the values in which the juror was raised, was disrespect and disrespect was inexcusable towards the father.It was obvious, that he prioritized respect to the father above everything else, when he said  «It doesn’t matter what his father did it’s his father and you can’t say ‘I’ll kill you’ to you father!  » This value that he prioritized along with the incident with his son was what had clouded his judgement and affected his point of view. Juror number three was therefore unable to critically look at the evidence presented since he was prejudiced towards the boy. For Juror number three the boy was guilty to begin with for disrespecting his father witch is this Jurors highest value.

PROBATION PRACTICE IN ENGLAND Essay Example | Topics and Well Written Essays - 2000 words - 1

PROBATION PRACTICE IN ENGLAND - Essay Example Racism produces its effects through segregation, socioeconomic stratification, and marginalization as well as through the individual experience. Institutionalized racism produces discriminatory effects on health through public policy, the physical environment, social and medical services and preventive health policy. The studies conducted by various organizations and individuals shows that the practice of racism is prevails in the criminal justice system also. There is recent evidence (from the 2000 British Crime Survey) that black and particularly Asian people are more likely than whites to say that the criminal justice system is effective in bringing offenders to justice, dealing with cases promptly and efficiently, and meeting the needs of crime victims. But at the same time Minority ethnic people were less confident that the system respected the rights of suspects and treated them fairly, and black respondents especially were less likely than whites to believe that the police treated witnesses well (Mirrlees-Black, 2001)(1). Whatever it is, it is important to explore the field of probation practice and the treatment of minority ethnic groups in the criminal justice system, to identify the criminogenic needs of black and Asian offenders, and to explore their views about probation supervision, and to inform decisions about appropriate service provision. Thereby we can have a deep look into the probation practice to diversity in working with these Black and Asians .Moreover we can corroborate the possibility that people from minority ethnic groups may be subject to disadvantageous treatment at all stages of the criminal justice process, even if this does not result from overt racist discrimination (Phillips and B rown, 1998).(2) Before going to explore the areas of diversities in the probation practice regarding the black and Asian offenders, it will be helpful to have look on the scope of probation practices and criminal justice

A contract to enter into a contract is not enforceable. when contract Essay

A contract to enter into a contract is not enforceable. when contract is subject to Negotiation, it is too uncertain to have a binding force - Essay Example ses the Courts have generally demonstrated a tendency to render a decision on the basis of interpretation of such agreements, taking into account all the circumstances of the case. In the case of contracts where the price for a service or transaction is to be determined, this element of uncertainty has become even more relevant. The extent to which Courts have allowed recoveries in some cases has been determined by the extent to which damages may be suffered by one party, but when there is uncertainty introduced into the contract or pre-contractual agreement, such recoveries may be difficult. In the case of Courtney and Fairbairn Ltd v Tolaini Bros(Hotels) Ltd2 the appellants were property developers and had secured finances for the defendants to develop a hotel. Prior to the appellants securing the monies, they had entered into negotiations with the defendants; there was a written agreement between them that the defendants would negotiate to use the services of the appellant to develop the hotel property. However, when the appellant actually secured the finances, the defendants went ahead and hired different property developers rather than using the services of the appellants. This led to the legal action. Lord Denning, in providing the judgment on the case, pointed out that there had been some preliminary steps taken by both parties as an act of good faith in pursuance of their negotiations. Mr. Courtney of the appellants found a person willing to finance the property development, while the defendant Mr. Toliani appointed a quantity surveyor with a view to negotiating the price with Mr. Courtney. There was a written agreement between them; however Lord Denning did not equate this to a contract. He held that there was no actionable contract between the two parties because the agreement between them was only an agreement â€Å"to negotiate fair and reasonable contract sums†, and no agreement could be found â€Å"on the price or on any method by which the price was to

Security as a management or technological issue Essay

Security as a management or technological issue - Essay Example This study looks into information system security that is becoming a dominant and challenging factor for organizations, as it leverages many risks that are constantly changing. Every now and then, there are new security breaches resulting in massive losses in terms of customer confidence, as well as revenue. As information technology is now considered as the fundamental function, every organization acquires information systems for business automation. Moreover, electronic commerce has also introduced many businesses that are only virtually present. For instance, Amazon that is an online store for selling books generates revenue from the Internet. Customers pay via credit cards for the purchased books that are delivered to them. In this scenario, any sort of security breach may inject an SQL injection or cross site scripting attack on the website can affect the business as well as customer confidence. Therefore, securing the systems as well as data communication on the web is essentia l to protect. This also implies to personal or customer data that is maintained and managed by the organization. For instance, E- commerce based organizations stores information of their customer related to credit card numbers, telephone numbers, address, bank details etc. It is the responsibility of the organization to protect and secure data privacy. However, there is not a single law that states how to handle customer information. For this reason, organizations sell or trade customer information with business partners and even to third parties. Likewise, sometimes the sole purpose of this personal data exchange is funds. Although, every online organization has a privacy policy which states how they will handle and secure customer data but at the same time there is no verification criteria. In the following sections, we will discuss the technical as well as the managerial aspect of these three domains i.e. Information system security, privacy and data protection. Likewise, we will also discuss our main thesis i.e. is it a technical issue or a managerial issue for effectively handling and managing these issues in an organization. The first section will emphasize on all the technical aspects followed by all the managerial aspects and lastly comparing these two aspects for conclusion. 2 Information System Types and Coordination Organizing information systems is defined as the series of activities that are associated with information handling. Organizations expand their business gradually. For instance, strategic plan for any financial institution is to open a branch on every quarter of the year depending on stable revenue and defined achieved objectives. Similarly, the expansion of the organization create more risks and increase the workload for handling information because the maintenance, storage and exchange of information has now become more than ever before. Information handling takes place on three levels i.e. formal level, informal level and technical le vel (Dhillon 2007). The formal information system is associated with communication from third parties, suppliers, contractors, clients, regulatory authorities and financial sectors. As the word formal says for itself, it is a process in which rules are followed for making standardization of business practices and following standards is important for any organization. However, it terms of non-compliance, it may become a

Legal Issues Surrounding Personal, Real, and Intellectual Property Research Paper

Legal Issues Surrounding Personal, Real, and Intellectual Property - Research Paper Example This has primarily been because of the changes which have taken place in the all-round development of human being. This paper focuses mainly on the implication of the technology on all legal systems which affect property at all levels i.e. definition, acquisition and conveyance. A clear definition of what personal property, real property and now the modern intellectual property is given some weight of focus. It is the stand of this paper that understanding the definitions which surround these keywords is the fundamental necessity which opens a door of understanding into the legal frameworks which govern them. Accessing the property of whatever kind in this century is defined by legal frameworks and this research aims at singling out those general principles which govern the same. There are also the common legal issues that definitely surround the personal, real and intellectual property and this research has centered on them so that the impact which the technology has brought on the same is known. When you know the law, you will know how to navigate its course. This research aims at making you know the law and be in a position to apply it without fear or doubt of any kind. Amendments are also very inevitable and this research makes a proposal of what needs to be changed so that both ethics and legalizations can be at par in serving the 21st century generations. It is noted that this generation is the most advanced in terms of technology than any other time in human history thus the new changes need incorporation in the legal frameworks. It is needless to say that the inter-relationships is also observed and all the strengths and weaknesses analyzed. Introduction Popular law makers have often quoted the words of Bentham that no property no law. This is quite very true because every conduct of human being is property oriented. It may take centuries before everybody comes into agreement that everybody engages in everyday activities with an aim of acquiring some fo rm of property. Property, since time immemorial, has been used to define most of the social human structures the major one being legal frameworks. It is even a known fact that according to the prevailing condition of a social-political and economic condition, the legal frameworks have been used into bequeathing rights of ownership of property. This has though been based on previous experiences of any community setting. A turn of things in legal circles was born when science and technology began yielding its best. The law of property had to inevitably be changed to incorporate the new definitions of property. Due to this aspect, the ideal of intellectual property was born. Since the conception of this kind of property, its protection has been of major concern mainly because of its intangible nature. New rules and regulations have been formed to protect and enforce intelligent property. This paper will explore deeply into the forms of properties known today and there legal implication s. Distinction of Real, Personal and Intellectual properties Real The distinction between these forms of properties is very interesting. Before introduction of technology, which came and complicated the legal system, a real property would simply imply anything which was attached to the ground. This basically included things which were â€Å"planted† on the ground like houses and other structures or anything

E-participation model Dissertation Example | Topics and Well Written Essays - 750 words

E-participation model - Dissertation Example Since attitude can significantly affect their behavioral intention to use e-partipation, several studies purposely has decided to adopt the use of TAM as a way to explore and examine the end-users’ attitude on e-participation (Sahari et al., 2012; Wang and Lo, 2012; Hung, Chang and Yu, 2006). To identify factors that could affect people’s intention to use the e-government system in Malaysia, Sahari et al. (2012) conducted a cross sectional study. According to Sahari et al. (2012), factors that can affect the citizen’s use of e-government system include not only the perceived ease of use but also other factors like â€Å"perceived usefulness†, â€Å"social influence†, â€Å"attitude†, â€Å"trust†, â€Å"intention to use behaviour†, â€Å"ICT infrastructure†, and the â€Å"personal background† of each person (i.e. age, race, educational attainment, skills in using ICTs, and service group). Based on the research find ings, factors like â€Å"perceived ease of use†, â€Å"perceived usefulness†, and â€Å"social influence† has a strong impact on â€Å"users’ attitude† and that factors like â€Å"attitude† and â€Å"trust† strongly influence the â€Å"users’ behavioural intention† to use the e-government system (Sahari et al., 2012, p. 329). ... 100 – 101). With regards to attitude behaviour, Hung, Chang and Yu (2006) conducted a primary research study which aims to examine the impact of dependent variables such as â€Å"perceived usefullness†, â€Å"perceived ease of use†, â€Å"perceived risk†, â€Å"trust†, â€Å"personal innovativeness†, and â€Å"compatibility† on attitude and the impact of attitude on the general public’s intention to use e-government services. Based on the research findings, perceived usefullness, perceived ease of use, trust, personal innovativeness, and compatibility has a strong positive impact on attitude and that attitude has a positive impact on intention to use e-government services (Hung, Chang and Yu, 2006). Using on environmental factors such as â€Å"subjective norms† and â€Å"perceived behavioral control† as well as the citizens’ attitude towards the use of internet and mobile technology in e-democracy, Nchise (2 012) purposely investigated the citizens’ decision on technology adoption. After examining e-democracy in the concept of â€Å"planned behavioral theory†, Nchise (2012) found out that â€Å"environmental subjective norm positively influences the citizens’ attitude to adopt e-democracy†; â€Å"citizens’ perceived behavioral control over e-democracy positively influences their attitude to adopt e-democracy†; and that the â€Å"citizens’ attitude toward e-democracy positively influences their intention to adopt e-democracy†. Wang and Lo (2012) also conducted a research survey study which aims to examine factors that will somehow influence the citizens’ intention to use e-government websites. Based on the research findings, Wang and Lo (2012) found out that factor such as â€Å"perceived usefulness† and â€Å"perceived ease of use† has a strong impact

Homo heidelbergensis Research Paper Example | Topics and Well Written Essays - 2750 words

Homo heidelbergensis - Research Paper Example Another group headed to eastwards side throughout Asia and evolved to Denisovans. Homo heidelbergensis were discovered in 1907 near Herdelberg, Germany. Between 300000 and 400000 years ago, a group of Homo heidelbergensis left Africa, one group went into Europe and west Asia and another group went eastwards through Asia which later evolved into Homo Sapiens about 130,000 years ago. The Schoningen spears were discovered between 1994 and 1998 in Schoningen, Germany under the management of Dr. Hartmut Thieme. About 16000 animal bones were also found at that time approximated to be about 300000 years old. These were the oldest complete hunting weapons preserved in the world and provided proof that Homo heidelbergensis was hunting. In 1992, a team from Spain located about 5500 human bones in Sima de los Huesos site, northern Spain that were dated to be at least 350000 years of age. The pit that was excavated had 32 individuals. In 1994, a british scientist discovered a lower hominin Tibia bone a few distance from the English channel together with many primordial hand axes at Boxgrove Quarry site. The discovered leg dated between 478000 to 524000 years old. A number of Homo heidelbergensis teeth were also discovered in subsequent researches. In 2005, there was a discovery of flint tools from water vole in Suffolk, England. Mimomys Savini which was a key dating species were discovered at Pakefields, Suffolk in the cliff. This is an indication that Hominins can be dated to 700000 years ago in England. Homo heidelbergensis is approximately 300000 to 400000 years old as evidenced in the above descriptions. About 30 human skeletons found in Atapuerca, Spain suggested that Homo heidelbergensis were the first species to bury their dead. The Homo heidelbergensis was discovered by first discovered by Daniel Hartman in 1907 in Mauer,

The Devils Highway Essay Example | Topics and Well Written Essays - 750 words

The Devils Highway - Essay Example Most of these emigrants get to the US through illegally crossing the border. Crossing over the Mexican border has not always been illegal though. During the 19th Century and the beginning of the 20th century, Mexicans were allowed to cross by the American government as they provided labor which grew the economy. In fact, they were so essential that the government would entice them with some allowances, to top up their salaries. The 1920s depression however saw an end to this and a barrier was constructed across the border to stop the crossing over. Nowadays, Mexicans wanting to access a better life in the US, have to illegally cross the border and survive the ruthless border patrol, unimaginable transportation conditions and not forgetting the one of harshest deserts in the world (Borjas 58). The Devil’s Highway Journalist Luis Alberto Urrea shares with us such an occasion in his book, The Devil’s Highway. The book describes the horrifying ordeals of some 26 Mexicans in their journey across the border. The group manages to cross over, only to find themselves in the Sonora Desert, or as others call it, the devils highway. In the aftermath, 14 of the emigrants die, making the highest group of deaths while crossing the border in history. Many of the deaths result from exposure to the extreme desert heat while those who survive are near death themselves. Urrea also details of all the mechanisms that facilitate the border crossing in the region, from the coyotes to the vigilante border patrols (Urrea 78). The story can be described as nothing less of an international tragedy. It is a very vivid description of the horrors that Mexican immigrants undergo as they are smuggled into Arizona. In comparison to other writers of his age, Urrea is very daring from the way he vividly and fearlessly tells it from all sides of the story with brutal honesty, even through the eyes of the border patrol officers. For example, in spite of their Wild West and ruthless na ture, one cannot help but empathize with the situations of the border patrol officers. Urrea also tells this tale with horrifying descriptions, but at the same time, shows compassion to these victims. The story is thrilling and fascinating while being tragic and horrifying at the same time. It is heartbreaking to learn of how some poor Mexicans fall prey to the promises of smugglers in the pursuit of some greener pastures, only to end up dead or in near-death. Some do not even make it to the other side as the coyotes betray them to die in the desert while they part with the money. Even those who complete the journey cannot be termed as lucky as they meet with a society that does not approve of their arrival, and a government that constantly seeks to flush them out and expel them. How the migration matters to us The issue of Mexican migration affects us all as the youth and citizens of America. As much as it pains to admit it, illegal emigrants bring more harm than benefit to the cou ntry, the biggest being the crossing over of drugs. In 2004, for example, 90% of the cocaine sold in America was smuggled by illegal emigrants through the US-Mexico border. Also, many of those caught attempting to cross over have been found in possession of such drugs, which they were meant to sell in the US. Another disadvantage of the emigrants is the increase of crime associated with them. Many of those who manage to cross over have criminal pasts from their country origin. These individuals enter the US then join or start up some criminal gangs like the

Look at the attachments Essay Example | Topics and Well Written Essays - 750 words

Look at the attachments - Essay Example provement of others’ health from the very beginning of my life, and I used to read various topics which are related to health care, public health issues, and the latest medical developments. Though I was not sure as to which stream in health care I would select, I was convinced that I would be in to health care as I grew. In fact, I can claim that this concern for the health of others runs in my family. To illustrate, my cousin has a B-Pharm and is working at Beximco Pharmaceutical in Bangladesh. When I felt for sure that my future lies in pharmacy, I decided to go and observe myself as to how the pharmacy system works. Thus, I reached Bangladesh and worked under my cousin. Evidently, this period helped me learn a lot about pharmacy. As I sifted through the drugs in the pharmacy and disposed the expired ones, I learned a lot about the importance and nobility of the profession. I think it is necessary to mention yet another incident that further strengthened my desire and conviction. When I reached the age of 18, my grandmother fell sick and it was soon found that she was suffering from cancer. As there was no effective medication at that time, she died of the disease. This incident acted as a wake up call in my life. Seeing her pain and suffering, I understood the need to find a cure for the disease. Again, the solution to the question lies in studying pharmacy. Thus, it becomes evident that pharmacy has been my passion. My immediate goal is to join a medical firm as a clinical pharmacist. From my experience and knowledge, I know very well that a clinical pharmacist has various challenging responsibilities including advising physicians on the effects and side effects of drugs and correct use of drugs. In addition, a clinical pharmacist is responsible to coordinate the pharmacy technicians’ duties like preparing, labeling, and delivering different medications and to ensure that the same is done in accordance with local, state and federal laws. Admittedly, in

Sugar Trade Essay Example for Free

Sugar Trade Essay Many things helped drive the sugar trade. Demand, slavery, and climate played a major role in the driving of the sugar trade. Demand was greatly increasing throughout the years. The climate of the caribbean islands where cane sugar was grown. Slavery provided â€Å"free† work to produce sugar which in turn increased profits for the farmers. In England, sugar was not shipped there until the year 1317. But once the sugar was becoming a popular import, it boomed. Sugar consumption and import grew tremendously from 1700 to 1775. In 1700, Britain imported 280.7 sugar imports per 1000 cwts and each person consumed 4.6 pounds of sugar annually. These numbers increased by almost as much as 500% of imports and almost 400% of consumption. In 1770, 1,379.2 per 1000 cwts were imported to Britain and each person annually consumed 16.2 pounds of sugar. Sugar consumption equalled nearly 105 of overall food consumed for some families in England in the 1700s. After 1660, sugar imports exceeded the total imports of ALL the other imports coming into Britain. Slavery was probably the most important factor in the driving of the sugar trade. Slaves could be traded for common items that people on plantations had. This in turn could pretty much provide â€Å"free† labor in the production of sugar. If a plantation owner could have enough slaves to run the sugar farm, they could produce more profit and eliminate paid labor. in 1768, at a male slave’s peak price, they cost 41 British pounds. If a plantation owner needed say 100 people to farm and produce sugar, they would be spending roughly 4100 British pounds to have slaves do essentially â€Å"free† work then. If a plantation owner owner had to hire 100 workers and had to pay them 1 British pound a day, then in 41 days, they would be spending more money than they would have if they would have bought 100 slaves. So, slaves essentially paid for themselves in 41 days. After 41 days, production of sugar would be â€Å"free† for the plantation owners. Climate was also a key role in the sugar trade. Without the right climate, sugar cane would have to be produced further away therefore increasing the price of the import. Ideal climate for the production of sugar cane was a latitude range of 37 degrees north to 30 degrees south, a temperature range of 68 to 90 degrees, soil type of volcanic or alluvial with sand/silt/clay mix, and an average rainfall of 80 to 90 inches a year. The climate for the two caribbean islands that Britain received its sugar from was 18 degrees north latitude for Jamaica and 13 degrees north for Barbados, the temperature range for Jamaica was 68 to 86 degrees and 72 to 86 degrees in Barbados, the soil type was clay/silt/sand mix in Jamaica and clay and sand mix in Barbados, and the average rainfall was 77 inches in Jamaica and 60 inches (with considerable variety) in Barbados. The sugar trade was a very booming trade. Many things influenced this trade. We are still experiencing a major usage of sugar in todays world, with many of the same things influencing it, except for slavery. Machines took the place of the slaves.

Impact of Discount rate Changes on Stock Market Return

Impact of Discount rate Changes on Stock Market Return CHAPTER 1 Stock market plays an important role in the economic development of a country. Stock exchange performance has attained significant role in global economics and financial markets, due to their impact on corporate finance and economic activity. For instance stock exchanges enable firms to acquire capital quickly, due to the ease with which securities are traded. Stock exchange activity, thus, plays an important role in helping to determine the effects of macroeconomic activities. Stock market returns are the returns that the investors generate out of the stock market; it can be in the form of dividends or profits, as a company gets its dividends and profits in the form of their share holders in the secondary market. Well there is a definite change in the market as with the behavior changes with the discount rate, changes can be technical or non-technical. Technical changes refers to the internal changes and non-technical as external changes which are mostly related to the behavior and response of the customers and consumers. Equity returns also measured by the industrial index respond rather rapidly to the unexpected announcements of discount rate changes. Not only affecting equity returns, the unexpected discount rate changes also contribute to higher market volatility. An unexpected discount rate change also induces trading which is more supportive of the contention that public information causes price changes with trading. Increased trading volume due to unexpected public information, however, occurs only in the current period. Whenever, the market is not efficient, stock prices adjust to new information slowly and it is possible to generate abnormal profits. Financial market volatility is important for investors confidence, for port-folio selection, and for the pricing of both primary and derivative securities. Market volatility is not related to existing public information such as expected discount rate change announcements. Karachi Stock Exchange 100 Index  (KSE-100 Index) is a  stock index  acting as a standard to compare prices on the  Karachi Stock Exchange  (KSE) over a period of time. In formative representative companies to calculate the index on, companies with the maximum  market capitalization  are selected. On the other hand, to ensure maximum market representation, the company with the maximum market capitalization from each sector is also incorporated.. 1.2 Problem Statement To study the impact of discount rate changes on stock market return 1.3 Research Hypothesis: The expected discount rate change announcements have impact on stock market return. 1.4 Outline of the Study The aim of the study is to observe Impact of Discount rate Changes on Stock Market Return. This Study is observing on Karachi Stock Exchange (KSE). The  Karachi Stock Exchange  is a  stock exchange  situated in  Karachi,  Pakistan, established on 18 September, 1947 it started with 5 companies with a capital of Rs. 37 million. It is Pakistans biggest and oldest stock exchange, with a lot of Pakistani as well as overseas listings. Its present premises are placed on Stock Exchange Road, in the heart of Karachis Business District. KSE starts with a 50 shares index. As the market develops a representative index was needed. In poor political condition, social issues, financial and other problems, KSE played a very important role in the financial system of Pakistan. KSE 100-index showed a return of 40.19% and became the sixth best markets in the year 2007. It gets a biggest milestone by touching of KSE-100 Index level of 15,000 for the foremost time in the history of Karachi sto ck exchange on 20 April, 2008. On the other hand, the raise of 7.4 percent in 2008 build-up the best performer in all the emerging market. The KSE 100TM Index closed at 9645 points on 19 June, 2010. Although by 30th July total market capitalisation of the KSE reached Rs2.95 trillion, approximately around 35 billion dollars CHAPTER 2 LITERATURE REVIEW As it can be figured out by the models of stock market and about the interest rates, value of share in the stock market, maturity of the bonds with short run and long run and the value of the capital as well as the factor of production, All these things influence a great deal towards the changes as well as the demand and supply model. Equilibrium is also there, which is basically an intersection, the point where the quantity of supply equal to the quantity demands. Output and interest rates plays a bigger role in the discount changes, as from the different policies, laws and models have been mentioned in the previous studies. If prices are fixed country can never faced inflation because of the nominal and real rates. Output depends on the stock market and fiscal policy (Blume, 1994). The stock market is the ratio of steady-state profit to the steady-state interest rate. If the money increases in the market the steady-state effects are quite clear, Output and stock market are higher in the equilibrium. The higher money stock lowers the real interest rate and thus the cost of capital. This was all about a monetary expansion under fixed price. We find that in the pre-79 period, there was no securities market response to either technical or nontechnical changes, while in the post-79 period there was no response to technical changes (Hardouvelis and Gikas, 1987). Discount rate changes will affect market rate and equity returns if such changes brings information about either short- or long- run monetary policy objectives. So an in increase in the discount will definitely help to attract more and more people towards the policy, and there will be a huge amount of change in the customers and clients response towards it. As a result, current (spot) and expected short-term rates rise in reaction to reduced short-run money growth. Long-term rates and forward rates may also increase to reflect the higher expected short-term rates. It doesnt have much impact over the long-term rates as it has on short-term rates just because the monetary policy and consumers response (Maberly, 1992). Short term rates makes more people attractive and kind of working well for the secondary markets, so mostly they all rely on the short-term rates, as they prefer short-term rates than long-term rates. And short-term is the one which affect a great deal. The impact of discount rate changes on equity prices can operate through two possible channels. This is most readily seen by viewing the value of the firm as the present value of its future net cash flows. To some extent discount rate increases (decreases) result in increases (decreases) in interest rates. It has also based on the capital or investment as well, capital can fall or rise just because of the stock prices, stock prices has an ultimate effect on capital and economic activity can be disturbed too, that also can be altered due to this price change. If the capitalization rates and cash flow expectation are affected by discount rate changes, these effects will also work in the same direction. From previous studies we have an i dea that stock prices declines to be associated with discount rate increases (Ederington and Lee, 1993). Considering the New York stock exchange, the stock return data are the daily percentage return on the New York Stock Exchange value-weighted index and is denoted SP. The interest rate data are for constant maturity Treasury securities and include eight different maturities: 90-, 180-, and 360-day bills and three-, five-, seven-, ten-, and twenty-year bonds. These rates are obtained from DRI, who compile them from the Federal Reserve Board Statistical Release from DRI. These eight interests are used to calculate seven forward rates in addition to the 90-day bill rate. The stock price coefficient for the post-79 period suggests a 1 percent increase (decrease) in the discount rate will result in a decline (increase) of 1.06 percent in stock prices. A similar finding in reported for the interest rate data. Only one interest rate series evidences a significant market reaction in the pre-79 period, while six of the eight interest rates indicate a significant market response over the post-7 9 period (Gerety, and Mulherin, 1992). Although the early researches result indicates that the real issue is whether the observed announcement effect, regardless of the monetary policy regime, indicates market inefficiency. In classification of the discount rate changes from the previous discussion we have evaluated that to assess properly the announcement effects of discount rate changes, it is necessary to distinguish technical from nontechnical changes. There are several short comings with this approach that limit its usefulness in predicting discount rate changes and cast substantial doubt on the assumption of discount rate erogeneity (Lee and Bong, 1992). Researches rely on two different methods to classify discount rate changes. The best model, both in terms of in-sample fit and prediction of actual discount rate changes, related changes in the discount rate (measured in basis points) to the spread between the Fed Funds rate and the discount rate. Nonetheless, if the model incorporates the relevant information set, then by construction the forecast and optimal predictions based on available information and, therefore, rational. Through the study of different modules we came on to know in conclusion that the purpose of this has been to reconcile previous findings of both an endogenous discount rate and discount rate announcement effects with market efficiency (Harris, 1986). By classifying discount rate changes as either technical or non-technical, and recognizing that the latter are (at least) partially endogenous, it is argued that, within the framework of market efficiency, the discount rate can fail tests of statistical erogeneity and still exhibit announcement effects. The empirical evidence of this paper supports this view and suggests that previous studies were missing specified by not controlling for the purpose of discount rate change. The evidence also implies that the common assumption contained in virtually all theoretical and empirical macroeconomic models, that the discount rate is either purely endogenous or purely exogenous, is inappropriate. This also specifies market only react when there appears to be a shift in policy- in the discount rate. At least from this standpoint, one cannot rule out the discount rate as a useful tool of monetary policy. Eventually, our results support the existence of efficient markets based on the dual findin gs that only nontechnical changes are characterized by announcement effects and that virtually the entire market adjustments occurs by the end of the announcement day (Jones, 1994). From previous studies the issue of monetary neutrality has long been debated by financial economists. There was evidence been brought in to the market which says that increases in the growth rate of money raises stock returns? Monetary policy affects the real economy, and whether its effects are quantitatively important, remain open questions. These questions by examining the effects of monetary policy innovations on stock return data. Theory posits that stock prices equal the expected present value of future net cash flows. To examine the relationship between monetary policy and stock returns, a variety of empirical techniques are employed. The size portfolios are useful for investigating why monetary policy matters, if in fact it does. If monetary policy has real effects, one reason for this could be that it affects firms balance sheets. To investigate whether monetary policy affects size and industry portfolios, both impulse responses and innovation accounting methods are used. Al l the results in table one to four measures the effects of monetary policy shocks on nominal stock returns. In considering the question of monetary neutrality, we are interested in whether monetary policy affects real stock returns. Thus rather than complicate the analysis by considering the best way to measure expected inflation we focus on results using nominal returns. Through the different systems results reported are robust to minor changes in the specification. When total reserves are dropped, employment growth or unemployment is used instead of industrial production growth, the non stationary variables are first-differenced, and the number of lags is changed (Marshall and David, 1992). There was another approach to identifying monetary shocks is Data and Methodology which is been made to the use of Federal Reserve statements and other historical documents over the period to identify exogenous changes in monetary policy and the responses of real variables. This narrative approach has recently employed to assemble a much larger sample of monetary policy shocks. An alternative way is used to test whether monetary policy affects stock returns (Morse, 1981). A growing number of papers in both the economics and finance literature focus on the effect of economic news on asset returns. Nonetheless, there seems a wide gap between these two literatures. These elements of surprise in one particular type of news announcements of short-term interest rate decisions made by the Open Market Committee affect the volatility of the stock market in the short term. Relationship between monetary policy and daily stock market volatility from two vantage points: days around regularly scheduled meetings of the stock market committee, the main monetary policy making body and days of actual policy decisions involving the target level of the federal funds rate (Fama and Kenneth, 1995). Turning to the days of actual policy decisions regardless of whether they were announced on regularly scheduled meetings days. Some evidence was found that such decisions tend to boost volatility in the stock market. The effect of policy decisions is greatest that exclude those decisions that were fully anticipated by market. Besides identifying monetary policy announcements as an important source of short-run volatility in the stock market, this will also addresses broader issues in the finance literature. In particular, higher interest rates induce higher leverage ratios, which in turn increase the risk associated with holding stocks and the volatility of stock returns (Patell and Wolfson, 1984). In examining the relationship between the stock market and fiscal policy, all models combined two different approaches widely used in the monetary economics and finance literature. In particular, in analyzing the markets response to scheduled and unscheduled announcements, a potentially interesting issue is whether the corresponding impulse response functions for volatility are significantly different. Other issues that also merit further consideration include a closer look at the relationship between first- and second- moment responses to policy news and the explicit analysis of risk premiums around announcements days (Penman, 1987). From all these models and theories, have come to know that anything that happens in the secondary market, it does have an impact over the entire economy as we have gone through from the different examples across the world. Even if it is pre-announcement, monetary policy or whatever, stock market does change its state according to the circumstances and events. Pre-announcements are also made as precautions that are for safety announcements for the share holders of the companies. Due to this they can easily draw their amount and will not have to see further more difficulties. Unpredictability or volatility is always there in the market, when the investors just to keep on guessing for the right time to invest and stock holders wait for the right time to buy shares of the companies and all this process makes things more complicated especially for the investors and then it effects the stock market. Monetary policy on the other hand takes things more attractive for the investors and share holders that they believe their money is in safe place so they would love to invest as long as they are sure about the monetary policy (Stoll and Whaley, 1990). Policies are always made for the betterment of the people who are your clients or customers as per organization requirements, it also refers to the trust that how much they trust on their policies that people could come and invest. Banks do the same thing; the only thing they sell is trust, because as many people trust on you as they will go on to be their customers. Many of the sources indicate that there is a connection between news and stock prices, finance literature highlights that too. The finance literature focus on economic announcements per se, without controlling for the element of surprise in such announcements, might help to explain why so many studies have failed to find a significant link between market volatility and economic news. Either by implicitly assuming that the conditional volatility of stock returns is time invariant or by simply leaving its time-varying nature unspecified, monetary economists have failed to consider a potentially significant effect of policy surprises on the short-run behavior of the market (Wood and McInish, 1985). Equity returns also measured by the industrial index respond rather rapidly to the unexpected announcements of discount rate changes. Not only affecting equity returns, the unexpected discount rate changes also contribute to higher market volatility. An unexpected discount rate change also induces trading which is more supportive of the contention that public information causes price changes with trading. Increased trading volume due to unexpected public information, however, occurs only in the current period. Whenever, the market is not efficient, stock prices adjust to new information slowly and it is possible to generate abnormal profits. Financial market volatility is important for investors confidence, for port-folio selection, and for the pricing of both primary and derivative securities. Market volatility is not related to existing public information such as expected discount rate change announcements (Richard Roll and Stephen Ross, 1986). CHAPTER 3 RESEARCH METHOD This chapter explains the methodology used for the research study. The main research data set is used in this paper consist of KSE 100 index listed on Karachi Stock Exchange. It is the data for last ten years 2000 to 2010 for every monetary policy has been announced Data would be collected through the website and business recorder website. This chapter also discusses the methods to evaluate validity and reliability of research for the factors associated with the Impact of Discount rate Changes on Stock Market Return. 3.1 Method of data collection: The secondary data which was used in this research was available on the website of Karachi Stock Exchange from 2000 to 2010. 3.2 Sample size and Sampling Technique: In this research, data from the year 2000 to 2010 has been taken as a sample size. The data collected through Karachi Stock Market and State Bank of Pakistan 3.3 Instrument of Data Collection: This research was carried out through Secondary Data. 3.4 Statistical tool used: In order to measure the relationship between the variables stock market return and discount rate and impact of discount rate change on stock market return, Regression is used as a statistical tool in this research. SPSS software is used to evaluate the relationship between the two variables CHAPTER 4 RESULTS Hypothesis Testing Ho: The expected discount rate changes announcements have impact on stock market return. Table 4.1 From the above Durbin Watson value, it has been clarified that there was an existence of auto correlation in the data set. In order to resolve the issue we have generated the lag variables of the dependent variable up to the level 2. Table 4.2 Form the above table we can observe the value of the Adjusted R Square is .934 or 93.4%. It means that 1 unit change in the set of independent variables brings out the 93.4% change in the variation of dependent variable. With the inclusion of the lag variables in the data set, the problem auto correlation has been resolved. The Durbin Watson value mentioned in the above table is 1.964 closer to 2. Value closer to 2 means that there is no auto correlation exists in the data set. Table 4.3 From the above table we can observe that the significant value of the above ANOVAs test model 2 is less that 0.05. It means that the data is suitable for the application of regression model. Table 4.4 The above table shows the coefficient value of the analysis. As it can be observed that, the significant value of the discount rate is less than 0.05 it means that the change in discount rate has a significant impact on the stock therefore; the Null hypothesis is not rejected. At 95% confidence interval level the significant value of alpha/constant is 0.000 it means that the in the absence of all the variables the minimum return of the KSE is equal to the alpha value. The Beta value of lag 1 is 5376.550 it means that the today returns from the stock market is dependent on the stock market returns after the announcement of last monetary policy. For e.g. if the current stock return are equal to 1 the stock returns after the announcement of the next monetary policy is 5376.550 times of the current stock returns. The relationship of the lag 2 stock returns is vice versa of the lag 1 stock returns. It has a negative relationship with the current stock returns. Graph 4.1 The above diagram shows the trend of the KSE index and the change in discount rates for the last 10 years in the country. On a whole an upward trend has been observed in the KSE 100 index it is due to the increase in the FDI investments as well as the development in the financial sectors. The change in the discount rate shows overall a mix trend, we can observe a huge peaks and valleys in the graph. In our research, we have not found any significant relationship among the announcement of change in discount rate and stock returns. Some of these factors are political situation of the country, foreign direct investments, Law and order situation and most importantly exchange rate. Collectively, all these factors are contributing in the stock returns. However, change in the discount rate do impact the stock returns but, not in the short run, in the long run the chances are quite high that it does impact on the stock returns in Karachi Stock market. The reason behind the Long term affect i s that, the change in the discount rate affects the profitability of the companies in the next coming quarters so, immediately the affect in the stock returns are not massive that are in the long run. 4.2 Hypotheses Assessment Summary The hypotheses of this research study are based on variables like stock market return and discount rate intraday. The significant value is less than 0.05 It means that the data is suitable for the application of regression model. S.NO. Hypotheses T SIG. RESULT H1 the expected discount rate changes announcement have impact on stock market return. 11.991 .000 Accepted CHAPTER 5 CONCLUSIONS, DISCUSSIONS, IMPLICATIONS AND FUTURE RESEARCH 5.1 Conclusion As anticipated, expected discount rate changes, representing existing public information, have no impact on the trading volume for the current period nor does for any other periods. Public information also induces trading only in the current period but not in the future periods. More trading has occurred during the decreasing discount rate periods than the increasing discount rate periods as evidenced by the significant parameter. 5.2 Discussion This research shows that the change in the discount rate shows overall a mix trend, it can be observed a huge peaks and valleys in the graph. In this research there was no significant relationship found among the announcement of change in discount rate and stock returns. The reason behind this is, other than monetary policy there are lots of other factors that are contributing towards the stock returns in Karachi stock market. Some of these factors are political situation of the country, foreign direct investments, Law and order situation and most importantly exchange rate. Collectively, all these factors are contributing in the stock returns. However, change in the discount rate do impact the stock returns but, not in the short run, in the long run the chances are quite high that it does impact on the stock returns in Karachi Stock market. The reason behind the Long term affect is that, the change in the discount rate affects the profitability of the companies in the next coming qua rters so, immediately the affect in the stock returns are not massive that are in the long run. In this research it has been identified more accurately that if and when the stock market responds to the release of the discount rate change information. More importantly, studying the market volatility and trading volume sheds additional light on the information literature. Equity returns respond negatively and significantly to the unexpected announcements of discount rate changes, while the expected changes generally have no bearing on the equity returns. 5.3 Implementations For practical implementation, this research can be used to analyze the impact of Discount rate Changes on Stock Market Return as The effect of discount rate changes on stock market returns. Equity returns generally respond negatively and significantly to the unexpected announcements; however, the effect of expected changes on equity returns is insignificant. Abnormal trading volume occurs only in period. 5.4 Recommendations Pre-announcement, monetary policy or whatever, stock market does change its state according to the circumstances and events. Pre-announcements are also made as precautions that are for safety announcements for the share holders of the companies. Due to this they can easily draw their amount and will not have to see further more difficulties. Unpredictability or volatility is always there in the market, when the investors just to keep on guessing for the right time to invest and stock holders wait for the right time to buy shares of the companies nd all this process makes things more complicated especially for the investors and then it effects the stock market. CHAPTER 6 REFERNCES Blume, L, 1994, Market statistics and technical analysis, the role of volume. Journal of Finance, 49, 153-181. Ederington, L.H and Lee, J.H, 1993, How markets process information, News releases and volatility, Journal of Finance, 48, 1161-1191. Fama and Kenneth, 1995, Size and book-to-market factors in earnings and returns, Journal of Finance, 50, 131-156. Gerety, M.S and Mulherin, H.J, 1992, Trading halts and market activity, An analysis of volume at the open and the close, Journal of Finance, 47, 1765-1784. Harris, L, 1986, A transaction data study of weekly and intradaily patterns in stock returns, Journal of Financial Economics, 16, 99-117. Hardouvelis, Gikas, 1987, Reserves announcements and interest rates, Does monetary policy matter? Journal of Finance, 42, 407-422. Lee, Bong-Soo, 1992, Causal relations among stock returns, interest rates, real activity, and inflation, Journal of Finance, 47, 1591-1603. Maberly, E.D, 1992, Odd-lot transactions around the turn of the year, Journal of Financial and Quantitative Analysis, 27, 591-604. Jones, 1994. Information, trading and volatility, Journal of Financial Economics, 36, 127-154. Morse, D, 1981, Price and trading volume reaction surrounding earnings announcements, A closer examination. Journal of Accounting Research 19, 374-383. Marshall and David, 1992, Inflation and asset returns in a monetary economy, Journal of Finance, 47, 1315-1342. Penman, S.H, 1987, The distribution of earnings news over time and seasonalities in aggregate stock returns, Journal of Financial Economics, 18, 199-228. Patell, J.M and Wolfson, M.A, 1984, The intraday speed of adjustment of stock prices to earnings and dividend announcements, Journal of Financial Economics 13, 223-252. Richard Roll, and Stephen Ross, 1986, Economic forces and the stock market, Journal of Business, 59, 383-403. Stoll and Whaley, 1990, The dynamics of stock index and stock index futures returns, Journal of Financial and Quantitative Analysis, 25, 441-468. Wood, and McInish, 1985, An investigation of transaction data for NYSE stocks, Journal of Finance 60, 723-739. Impact of Discount rate Changes on Stock Market Return Impact of Discount rate Changes on Stock Market Return CHAPTER 1 Stock market plays an important role in the economic development of a country. Stock exchange performance has attained significant role in global economics and financial markets, due to their impact on corporate finance and economic activity. For instance stock exchanges enable firms to acquire capital quickly, due to the ease with which securities are traded. Stock exchange activity, thus, plays an important role in helping to determine the effects of macroeconomic activities. Stock market returns are the returns that the investors generate out of the stock market; it can be in the form of dividends or profits, as a company gets its dividends and profits in the form of their share holders in the secondary market. Well there is a definite change in the market as with the behavior changes with the discount rate, changes can be technical or non-technical. Technical changes refers to the internal changes and non-technical as external changes which are mostly related to the behavior and response of the customers and consumers. Equity returns also measured by the industrial index respond rather rapidly to the unexpected announcements of discount rate changes. Not only affecting equity returns, the unexpected discount rate changes also contribute to higher market volatility. An unexpected discount rate change also induces trading which is more supportive of the contention that public information causes price changes with trading. Increased trading volume due to unexpected public information, however, occurs only in the current period. Whenever, the market is not efficient, stock prices adjust to new information slowly and it is possible to generate abnormal profits. Financial market volatility is important for investors confidence, for port-folio selection, and for the pricing of both primary and derivative securities. Market volatility is not related to existing public information such as expected discount rate change announcements. Karachi Stock Exchange 100 Index  (KSE-100 Index) is a  stock index  acting as a standard to compare prices on the  Karachi Stock Exchange  (KSE) over a period of time. In formative representative companies to calculate the index on, companies with the maximum  market capitalization  are selected. On the other hand, to ensure maximum market representation, the company with the maximum market capitalization from each sector is also incorporated.. 1.2 Problem Statement To study the impact of discount rate changes on stock market return 1.3 Research Hypothesis: The expected discount rate change announcements have impact on stock market return. 1.4 Outline of the Study The aim of the study is to observe Impact of Discount rate Changes on Stock Market Return. This Study is observing on Karachi Stock Exchange (KSE). The  Karachi Stock Exchange  is a  stock exchange  situated in  Karachi,  Pakistan, established on 18 September, 1947 it started with 5 companies with a capital of Rs. 37 million. It is Pakistans biggest and oldest stock exchange, with a lot of Pakistani as well as overseas listings. Its present premises are placed on Stock Exchange Road, in the heart of Karachis Business District. KSE starts with a 50 shares index. As the market develops a representative index was needed. In poor political condition, social issues, financial and other problems, KSE played a very important role in the financial system of Pakistan. KSE 100-index showed a return of 40.19% and became the sixth best markets in the year 2007. It gets a biggest milestone by touching of KSE-100 Index level of 15,000 for the foremost time in the history of Karachi sto ck exchange on 20 April, 2008. On the other hand, the raise of 7.4 percent in 2008 build-up the best performer in all the emerging market. The KSE 100TM Index closed at 9645 points on 19 June, 2010. Although by 30th July total market capitalisation of the KSE reached Rs2.95 trillion, approximately around 35 billion dollars CHAPTER 2 LITERATURE REVIEW As it can be figured out by the models of stock market and about the interest rates, value of share in the stock market, maturity of the bonds with short run and long run and the value of the capital as well as the factor of production, All these things influence a great deal towards the changes as well as the demand and supply model. Equilibrium is also there, which is basically an intersection, the point where the quantity of supply equal to the quantity demands. Output and interest rates plays a bigger role in the discount changes, as from the different policies, laws and models have been mentioned in the previous studies. If prices are fixed country can never faced inflation because of the nominal and real rates. Output depends on the stock market and fiscal policy (Blume, 1994). The stock market is the ratio of steady-state profit to the steady-state interest rate. If the money increases in the market the steady-state effects are quite clear, Output and stock market are higher in the equilibrium. The higher money stock lowers the real interest rate and thus the cost of capital. This was all about a monetary expansion under fixed price. We find that in the pre-79 period, there was no securities market response to either technical or nontechnical changes, while in the post-79 period there was no response to technical changes (Hardouvelis and Gikas, 1987). Discount rate changes will affect market rate and equity returns if such changes brings information about either short- or long- run monetary policy objectives. So an in increase in the discount will definitely help to attract more and more people towards the policy, and there will be a huge amount of change in the customers and clients response towards it. As a result, current (spot) and expected short-term rates rise in reaction to reduced short-run money growth. Long-term rates and forward rates may also increase to reflect the higher expected short-term rates. It doesnt have much impact over the long-term rates as it has on short-term rates just because the monetary policy and consumers response (Maberly, 1992). Short term rates makes more people attractive and kind of working well for the secondary markets, so mostly they all rely on the short-term rates, as they prefer short-term rates than long-term rates. And short-term is the one which affect a great deal. The impact of discount rate changes on equity prices can operate through two possible channels. This is most readily seen by viewing the value of the firm as the present value of its future net cash flows. To some extent discount rate increases (decreases) result in increases (decreases) in interest rates. It has also based on the capital or investment as well, capital can fall or rise just because of the stock prices, stock prices has an ultimate effect on capital and economic activity can be disturbed too, that also can be altered due to this price change. If the capitalization rates and cash flow expectation are affected by discount rate changes, these effects will also work in the same direction. From previous studies we have an i dea that stock prices declines to be associated with discount rate increases (Ederington and Lee, 1993). Considering the New York stock exchange, the stock return data are the daily percentage return on the New York Stock Exchange value-weighted index and is denoted SP. The interest rate data are for constant maturity Treasury securities and include eight different maturities: 90-, 180-, and 360-day bills and three-, five-, seven-, ten-, and twenty-year bonds. These rates are obtained from DRI, who compile them from the Federal Reserve Board Statistical Release from DRI. These eight interests are used to calculate seven forward rates in addition to the 90-day bill rate. The stock price coefficient for the post-79 period suggests a 1 percent increase (decrease) in the discount rate will result in a decline (increase) of 1.06 percent in stock prices. A similar finding in reported for the interest rate data. Only one interest rate series evidences a significant market reaction in the pre-79 period, while six of the eight interest rates indicate a significant market response over the post-7 9 period (Gerety, and Mulherin, 1992). Although the early researches result indicates that the real issue is whether the observed announcement effect, regardless of the monetary policy regime, indicates market inefficiency. In classification of the discount rate changes from the previous discussion we have evaluated that to assess properly the announcement effects of discount rate changes, it is necessary to distinguish technical from nontechnical changes. There are several short comings with this approach that limit its usefulness in predicting discount rate changes and cast substantial doubt on the assumption of discount rate erogeneity (Lee and Bong, 1992). Researches rely on two different methods to classify discount rate changes. The best model, both in terms of in-sample fit and prediction of actual discount rate changes, related changes in the discount rate (measured in basis points) to the spread between the Fed Funds rate and the discount rate. Nonetheless, if the model incorporates the relevant information set, then by construction the forecast and optimal predictions based on available information and, therefore, rational. Through the study of different modules we came on to know in conclusion that the purpose of this has been to reconcile previous findings of both an endogenous discount rate and discount rate announcement effects with market efficiency (Harris, 1986). By classifying discount rate changes as either technical or non-technical, and recognizing that the latter are (at least) partially endogenous, it is argued that, within the framework of market efficiency, the discount rate can fail tests of statistical erogeneity and still exhibit announcement effects. The empirical evidence of this paper supports this view and suggests that previous studies were missing specified by not controlling for the purpose of discount rate change. The evidence also implies that the common assumption contained in virtually all theoretical and empirical macroeconomic models, that the discount rate is either purely endogenous or purely exogenous, is inappropriate. This also specifies market only react when there appears to be a shift in policy- in the discount rate. At least from this standpoint, one cannot rule out the discount rate as a useful tool of monetary policy. Eventually, our results support the existence of efficient markets based on the dual findin gs that only nontechnical changes are characterized by announcement effects and that virtually the entire market adjustments occurs by the end of the announcement day (Jones, 1994). From previous studies the issue of monetary neutrality has long been debated by financial economists. There was evidence been brought in to the market which says that increases in the growth rate of money raises stock returns? Monetary policy affects the real economy, and whether its effects are quantitatively important, remain open questions. These questions by examining the effects of monetary policy innovations on stock return data. Theory posits that stock prices equal the expected present value of future net cash flows. To examine the relationship between monetary policy and stock returns, a variety of empirical techniques are employed. The size portfolios are useful for investigating why monetary policy matters, if in fact it does. If monetary policy has real effects, one reason for this could be that it affects firms balance sheets. To investigate whether monetary policy affects size and industry portfolios, both impulse responses and innovation accounting methods are used. Al l the results in table one to four measures the effects of monetary policy shocks on nominal stock returns. In considering the question of monetary neutrality, we are interested in whether monetary policy affects real stock returns. Thus rather than complicate the analysis by considering the best way to measure expected inflation we focus on results using nominal returns. Through the different systems results reported are robust to minor changes in the specification. When total reserves are dropped, employment growth or unemployment is used instead of industrial production growth, the non stationary variables are first-differenced, and the number of lags is changed (Marshall and David, 1992). There was another approach to identifying monetary shocks is Data and Methodology which is been made to the use of Federal Reserve statements and other historical documents over the period to identify exogenous changes in monetary policy and the responses of real variables. This narrative approach has recently employed to assemble a much larger sample of monetary policy shocks. An alternative way is used to test whether monetary policy affects stock returns (Morse, 1981). A growing number of papers in both the economics and finance literature focus on the effect of economic news on asset returns. Nonetheless, there seems a wide gap between these two literatures. These elements of surprise in one particular type of news announcements of short-term interest rate decisions made by the Open Market Committee affect the volatility of the stock market in the short term. Relationship between monetary policy and daily stock market volatility from two vantage points: days around regularly scheduled meetings of the stock market committee, the main monetary policy making body and days of actual policy decisions involving the target level of the federal funds rate (Fama and Kenneth, 1995). Turning to the days of actual policy decisions regardless of whether they were announced on regularly scheduled meetings days. Some evidence was found that such decisions tend to boost volatility in the stock market. The effect of policy decisions is greatest that exclude those decisions that were fully anticipated by market. Besides identifying monetary policy announcements as an important source of short-run volatility in the stock market, this will also addresses broader issues in the finance literature. In particular, higher interest rates induce higher leverage ratios, which in turn increase the risk associated with holding stocks and the volatility of stock returns (Patell and Wolfson, 1984). In examining the relationship between the stock market and fiscal policy, all models combined two different approaches widely used in the monetary economics and finance literature. In particular, in analyzing the markets response to scheduled and unscheduled announcements, a potentially interesting issue is whether the corresponding impulse response functions for volatility are significantly different. Other issues that also merit further consideration include a closer look at the relationship between first- and second- moment responses to policy news and the explicit analysis of risk premiums around announcements days (Penman, 1987). From all these models and theories, have come to know that anything that happens in the secondary market, it does have an impact over the entire economy as we have gone through from the different examples across the world. Even if it is pre-announcement, monetary policy or whatever, stock market does change its state according to the circumstances and events. Pre-announcements are also made as precautions that are for safety announcements for the share holders of the companies. Due to this they can easily draw their amount and will not have to see further more difficulties. Unpredictability or volatility is always there in the market, when the investors just to keep on guessing for the right time to invest and stock holders wait for the right time to buy shares of the companies and all this process makes things more complicated especially for the investors and then it effects the stock market. Monetary policy on the other hand takes things more attractive for the investors and share holders that they believe their money is in safe place so they would love to invest as long as they are sure about the monetary policy (Stoll and Whaley, 1990). Policies are always made for the betterment of the people who are your clients or customers as per organization requirements, it also refers to the trust that how much they trust on their policies that people could come and invest. Banks do the same thing; the only thing they sell is trust, because as many people trust on you as they will go on to be their customers. Many of the sources indicate that there is a connection between news and stock prices, finance literature highlights that too. The finance literature focus on economic announcements per se, without controlling for the element of surprise in such announcements, might help to explain why so many studies have failed to find a significant link between market volatility and economic news. Either by implicitly assuming that the conditional volatility of stock returns is time invariant or by simply leaving its time-varying nature unspecified, monetary economists have failed to consider a potentially significant effect of policy surprises on the short-run behavior of the market (Wood and McInish, 1985). Equity returns also measured by the industrial index respond rather rapidly to the unexpected announcements of discount rate changes. Not only affecting equity returns, the unexpected discount rate changes also contribute to higher market volatility. An unexpected discount rate change also induces trading which is more supportive of the contention that public information causes price changes with trading. Increased trading volume due to unexpected public information, however, occurs only in the current period. Whenever, the market is not efficient, stock prices adjust to new information slowly and it is possible to generate abnormal profits. Financial market volatility is important for investors confidence, for port-folio selection, and for the pricing of both primary and derivative securities. Market volatility is not related to existing public information such as expected discount rate change announcements (Richard Roll and Stephen Ross, 1986). CHAPTER 3 RESEARCH METHOD This chapter explains the methodology used for the research study. The main research data set is used in this paper consist of KSE 100 index listed on Karachi Stock Exchange. It is the data for last ten years 2000 to 2010 for every monetary policy has been announced Data would be collected through the website and business recorder website. This chapter also discusses the methods to evaluate validity and reliability of research for the factors associated with the Impact of Discount rate Changes on Stock Market Return. 3.1 Method of data collection: The secondary data which was used in this research was available on the website of Karachi Stock Exchange from 2000 to 2010. 3.2 Sample size and Sampling Technique: In this research, data from the year 2000 to 2010 has been taken as a sample size. The data collected through Karachi Stock Market and State Bank of Pakistan 3.3 Instrument of Data Collection: This research was carried out through Secondary Data. 3.4 Statistical tool used: In order to measure the relationship between the variables stock market return and discount rate and impact of discount rate change on stock market return, Regression is used as a statistical tool in this research. SPSS software is used to evaluate the relationship between the two variables CHAPTER 4 RESULTS Hypothesis Testing Ho: The expected discount rate changes announcements have impact on stock market return. Table 4.1 From the above Durbin Watson value, it has been clarified that there was an existence of auto correlation in the data set. In order to resolve the issue we have generated the lag variables of the dependent variable up to the level 2. Table 4.2 Form the above table we can observe the value of the Adjusted R Square is .934 or 93.4%. It means that 1 unit change in the set of independent variables brings out the 93.4% change in the variation of dependent variable. With the inclusion of the lag variables in the data set, the problem auto correlation has been resolved. The Durbin Watson value mentioned in the above table is 1.964 closer to 2. Value closer to 2 means that there is no auto correlation exists in the data set. Table 4.3 From the above table we can observe that the significant value of the above ANOVAs test model 2 is less that 0.05. It means that the data is suitable for the application of regression model. Table 4.4 The above table shows the coefficient value of the analysis. As it can be observed that, the significant value of the discount rate is less than 0.05 it means that the change in discount rate has a significant impact on the stock therefore; the Null hypothesis is not rejected. At 95% confidence interval level the significant value of alpha/constant is 0.000 it means that the in the absence of all the variables the minimum return of the KSE is equal to the alpha value. The Beta value of lag 1 is 5376.550 it means that the today returns from the stock market is dependent on the stock market returns after the announcement of last monetary policy. For e.g. if the current stock return are equal to 1 the stock returns after the announcement of the next monetary policy is 5376.550 times of the current stock returns. The relationship of the lag 2 stock returns is vice versa of the lag 1 stock returns. It has a negative relationship with the current stock returns. Graph 4.1 The above diagram shows the trend of the KSE index and the change in discount rates for the last 10 years in the country. On a whole an upward trend has been observed in the KSE 100 index it is due to the increase in the FDI investments as well as the development in the financial sectors. The change in the discount rate shows overall a mix trend, we can observe a huge peaks and valleys in the graph. In our research, we have not found any significant relationship among the announcement of change in discount rate and stock returns. Some of these factors are political situation of the country, foreign direct investments, Law and order situation and most importantly exchange rate. Collectively, all these factors are contributing in the stock returns. However, change in the discount rate do impact the stock returns but, not in the short run, in the long run the chances are quite high that it does impact on the stock returns in Karachi Stock market. The reason behind the Long term affect i s that, the change in the discount rate affects the profitability of the companies in the next coming quarters so, immediately the affect in the stock returns are not massive that are in the long run. 4.2 Hypotheses Assessment Summary The hypotheses of this research study are based on variables like stock market return and discount rate intraday. The significant value is less than 0.05 It means that the data is suitable for the application of regression model. S.NO. Hypotheses T SIG. RESULT H1 the expected discount rate changes announcement have impact on stock market return. 11.991 .000 Accepted CHAPTER 5 CONCLUSIONS, DISCUSSIONS, IMPLICATIONS AND FUTURE RESEARCH 5.1 Conclusion As anticipated, expected discount rate changes, representing existing public information, have no impact on the trading volume for the current period nor does for any other periods. Public information also induces trading only in the current period but not in the future periods. More trading has occurred during the decreasing discount rate periods than the increasing discount rate periods as evidenced by the significant parameter. 5.2 Discussion This research shows that the change in the discount rate shows overall a mix trend, it can be observed a huge peaks and valleys in the graph. In this research there was no significant relationship found among the announcement of change in discount rate and stock returns. The reason behind this is, other than monetary policy there are lots of other factors that are contributing towards the stock returns in Karachi stock market. Some of these factors are political situation of the country, foreign direct investments, Law and order situation and most importantly exchange rate. Collectively, all these factors are contributing in the stock returns. However, change in the discount rate do impact the stock returns but, not in the short run, in the long run the chances are quite high that it does impact on the stock returns in Karachi Stock market. The reason behind the Long term affect is that, the change in the discount rate affects the profitability of the companies in the next coming qua rters so, immediately the affect in the stock returns are not massive that are in the long run. In this research it has been identified more accurately that if and when the stock market responds to the release of the discount rate change information. More importantly, studying the market volatility and trading volume sheds additional light on the information literature. Equity returns respond negatively and significantly to the unexpected announcements of discount rate changes, while the expected changes generally have no bearing on the equity returns. 5.3 Implementations For practical implementation, this research can be used to analyze the impact of Discount rate Changes on Stock Market Return as The effect of discount rate changes on stock market returns. Equity returns generally respond negatively and significantly to the unexpected announcements; however, the effect of expected changes on equity returns is insignificant. Abnormal trading volume occurs only in period. 5.4 Recommendations Pre-announcement, monetary policy or whatever, stock market does change its state according to the circumstances and events. Pre-announcements are also made as precautions that are for safety announcements for the share holders of the companies. Due to this they can easily draw their amount and will not have to see further more difficulties. Unpredictability or volatility is always there in the market, when the investors just to keep on guessing for the right time to invest and stock holders wait for the right time to buy shares of the companies nd all this process makes things more complicated especially for the investors and then it effects the stock market. CHAPTER 6 REFERNCES Blume, L, 1994, Market statistics and technical analysis, the role of volume. Journal of Finance, 49, 153-181. Ederington, L.H and Lee, J.H, 1993, How markets process information, News releases and volatility, Journal of Finance, 48, 1161-1191. Fama and Kenneth, 1995, Size and book-to-market factors in earnings and returns, Journal of Finance, 50, 131-156. Gerety, M.S and Mulherin, H.J, 1992, Trading halts and market activity, An analysis of volume at the open and the close, Journal of Finance, 47, 1765-1784. Harris, L, 1986, A transaction data study of weekly and intradaily patterns in stock returns, Journal of Financial Economics, 16, 99-117. Hardouvelis, Gikas, 1987, Reserves announcements and interest rates, Does monetary policy matter? Journal of Finance, 42, 407-422. Lee, Bong-Soo, 1992, Causal relations among stock returns, interest rates, real activity, and inflation, Journal of Finance, 47, 1591-1603. Maberly, E.D, 1992, Odd-lot transactions around the turn of the year, Journal of Financial and Quantitative Analysis, 27, 591-604. Jones, 1994. Information, trading and volatility, Journal of Financial Economics, 36, 127-154. Morse, D, 1981, Price and trading volume reaction surrounding earnings announcements, A closer examination. Journal of Accounting Research 19, 374-383. Marshall and David, 1992, Inflation and asset returns in a monetary economy, Journal of Finance, 47, 1315-1342. Penman, S.H, 1987, The distribution of earnings news over time and seasonalities in aggregate stock returns, Journal of Financial Economics, 18, 199-228. Patell, J.M and Wolfson, M.A, 1984, The intraday speed of adjustment of stock prices to earnings and dividend announcements, Journal of Financial Economics 13, 223-252. Richard Roll, and Stephen Ross, 1986, Economic forces and the stock market, Journal of Business, 59, 383-403. Stoll and Whaley, 1990, The dynamics of stock index and stock index futures returns, Journal of Financial and Quantitative Analysis, 25, 441-468. Wood, and McInish, 1985, An investigation of transaction data for NYSE stocks, Journal of Finance 60, 723-739.

Corruption In Latin America The Case Of Ecuador Politics Essay

Corruption In Latin America The Case Of Ecuador Politics Essay As part of an activity in the area of studies in Latin America, the purpose of this essay is to analyze Corruption as one of todays most marked problematic in politics, but more specific the paper will focus in discuss the reasons and consequences of corruption and its manifestation in Ecuador. The background of the regions domestic politics, neighboring countries like Bolivia and Venezuela and its influence over national politics, and the actual events which have determined the situation Ecuador is facing nowadays; during the development of the essay some of these variants will be explained. In this essay, effects of legality and legitimacy will be addressed towards corruption, and how the failure of one of them, lead to larger possibilities of corruption. It will be also explained the reason corruption causes poverty and creates barriers to overcome this problem and the explanation of how corruption affects more to the poor people due to their fewer options to deal with its consequences. It has also shown the negative impact on programs for the eradication of poverty, making them ineffective. Another trend of corruption addressed in this paper is the tendency to the misallocation of resources and the resulting stagnation of economic development. Some of the key factors related to corruption participation, questioning the authority and the observation of law citizens have towards their governments, have being reflected it variables like the income per capita, percentage of poverty, lack of opportunities for education and health care, all of them negative correlated with Corruption. Corruption not only violates the economic and social rights but also violates civil and political rights, distorting or invalidating the political processes and institutions, weakening the role of the judiciary and law enforcement officials. Latin America, a continent full of contrast, determined by a wide variety of climates and natural resources, it also occupies the status as having some of the most corrupted countries in the world. The main issues drawn into this problematic derived from the dilemma of Legality and Legitimacy; the first one is defined as situations accepted by the establish law, while legitimacy consists in the credibility of this law. For many decades Latin American presidents have faced coups and judicial proceedings for corruption cases, Pinochet and Fujimori are clear examples. These violations to democracy and citizen rights have resulted in the lack of credibility in the governors and government institutions by the population. Corruption has had greater impact in the macroeconomic variables, reducing the opportunities to be part of an important international trade and scaring away any forms of foreign investment. Latin Americas institutions are viewed as obsoletes, and due to the high corruption public officials are involved into, the inexistence of governmental institutions provide more chances for all types of corruption, among others, cronyism and embezzlement. Another important factor inducing to corruption in the Latin states is the lack of vertical accountability, which is the standards citizen must have for their political leaders and the punishment they should received, if doing something wrong. Despite many Latin nations counts with a system of elected representatives, the empowerment giving for decision makings to individuals and institutions exert a disproportionate influence in national politics, state and local levels through corruption; This creates loss of public confidence in the institutions of democracy, losing their legitimacy among their citizens. Some of the most common examples of corruption are related to taxation, distribution of public resources and trade regulations. It is important to mention not all the countries posses the same grade of corruption, for instance Panama and Peru have shown a rapid growth (except in 2008-2009), Brazil, Mexico Colombia and Chile have grown into political maturity and a certain economic prosperity; But countries like Honduras, Venezuela, Paraguay and Ecuador have gone backwards, sustaining political instability, the rising of poverty and new opposition parties. In general terms corruption is a phenomenon which many democratic nations face around the globe, its best defined as political corruption involves the abuse of public power for some private benefit (Canache et al, 2005). In the case chosen for this paper, Ecuador, a country in Latin America with a population of 14 million of people is consider according to the Corruption Perception Index (CPI) 2009 as the fourth most corrupt country in Latin America after Haiti, Venezuela and Paraguay respectively. To understand Ecuador todays situation, it is crucial to stress some key facts in the countrys political system. Since the 90s was marked by The Confederation of Ecuadorian Indigenous Nationalities (CONAIE) consider as of Latin America ´s most active indigenous movement, who despite the efforts was unable to reach a vigorous participation in the political system. During the years to come (1997-2005) Ecuador counted with five different presidents, Abdala Bucaram, Fabian Alarcon, Jamil Mah uad, Gustavo Nova and Lucio Gutierrez, three of them elected by popular vote and then forced to leave office by coup dà ©tat; Some of the causes were the severe Ecuadorian Financial crisis in 1999 by the falling of international oil and the latest one caused by popular revolts known as rebelià ³n de los forajidos leader by Rafael Correa. Ecuador actual formal president Correa ran for presidency in 2006 with MPAIS as his electoral movement, competing against the PRIAN and PSP two of the most powerful parties in the country. His strategic formula to win the spot was defined by anti neoliberals formulas, promising a political reform, redesigned the governmental institutions and placed the state as the main actor in regulating the national economy. Correa, characterized by left turn ideology, played his first card by calling to a plebiscite to support his idea of a new constituent agenda annexed to the creation of a new constitution, winning by 82% yes vote; the triumph was indubitable in double sense, not only he placed 80 of the 130 seats with his viewers (MPAIS) in the constituent assembly, but he appeal for the public opinion as a democrat, taking peoples voice into account and increasing public content on his government. Due to the new constitution elections were call again in 2009, this time Correa won in the first round with an overwhelming 51,69% of approval. Despite his triumph during the last year his popularity has dropped from an initial 73% to 52%; Correa Falling in the polls was due, among other things, the scandal sparked by millionaires public contracts awarded to Fabricio Correa, brother of the president. This Abuse of public power for private gain is consider as one of the most popular form of corruption, which results into a mistrust of the population in the government and its institut ions. According to Huguette Labelle, Chair of Transparency International when basic institutions are weak and nonexistent, corruption spirals out of control and the increased looting of public resources, enhance the insecurity and impunity. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Country Rank 82 74 79 89 113 112 117 138 150 151 146 CPI Score 2,4 2,6 2,3 2,2 2,2 2,4 2,5 2,3 2,1 2,0 2,2 The above graphic shows the Corruption Perception Index during the past 10 years in Ecuador, the score maintains a similar range, but more surprising regardless of the many different presidents Ecuador has counted with, and the different policies applied, they seem to be trapped in the same problem: Corruption When Correa took office he argued to be part of todays new wage of leftist president, with domestic and foreign policies to be implemented according to the 21st century socialism. Although he increased social expenditure by rising salary wages and conceding credits to small businesses, they were likely to be short term concessions, per suiting a permanent campaign and keeping opposite parties under control. Part of Correas government initial trend was retuning the exploitation of natural resources done by foreign multinationals to the Ecuadorians, instead in practice, he signed contracts with outsider companies for the exploitation of strategic mining and energy resources, the real question here is what was under this rare contradiction, or perhaps is a form of clientelism? In this process, Indian communities living and working the lands signed to the mineral multinational complained, but Correa dismissed the movements, replacing and rejecting claims; in other words, his new socialism proved to have a lack any social structural changes, but more into what he opposed or not. Some other initiatives took by Correa and his government, relying in the countrys development strategy, was granting telecommunication monopolies to private firms, an opposition to land reforms by attacking the agro-commercial class (located mainly in Guayaquil) and a subsidy with clear support to the capitalist class. Some responses by the people have resulted in protests, and a consider drop in the polls. One cannot assume the surplus of money for private benefits in Correas government, but the lack of transparency in the actions made with the public budgets; prove the non existence control by Ecuador legislature, an ineffective judiciary, as well as non independent oversight bodys institutions and a weak implementation of the law. In the International Arena, the situation of Ecuador has followed two paths; the most visible influence by other states in Ecuadors government orientation is the clear support from other leftist presidents, as it is the Case of Venezuela with Hugo Chavez, and Bolivia with Evo Morales. The alignment for new plans of cooperation within the nations and the ideas of imperialism by remain in power, adds more reasons to believe the impunity of corruption Ecuador posses. The idea of refusing to pay the external debt by Correa, stressing an illegitimate foreign debt, contracted by past corrupt governments was conceive by the World Bank as a way to mislead public budgets into actions leaded for private gains, and although Correa did not take the risk, the hinders for development and the investment in the country has maintain a low range due to the apparent instability of Ecuador The opposition by renewing the U.S. military base in Manta expired in 2009, the resistance of signing a FTA with U.S., and the diplomatic crisis handle with Colombia in 2008, have been some of the events which placed the country resistant against globalization, and rumors of ties with the terrorist group FARC with president Correa have damage the states image considerably. Some other scandals have included the spenditure of more than US$ 4 billion in subsidizing sectors which do not require, like petroleum products and the electrical sector, consuming over 80% of total subsidies; the benefits seem to be directed to the elite classes, leaving behind the thousands of people living in poverty conditions. When corruption is spread in a country variedly segments are involved, but the most affected Part of the population is the poor due to their incapability to absorb the costs, and this is exactly the consequences of corruption in Ecuador, where the percentages of poverty have raised dramatically over the past years. Corruption has undermined the people in many ways, traducing in inequality, remote access to health and education, and therefore the illiteracy of the population. One of the main consequences is a conversion to a society very tolerant with corruption, perpetuating a vicious cycle ending again in more corruption. Nowadays Ecuadors domestic politics is highly oppressed by Correas government, leaving narrow participation for the opposition parties PRIAN and PSP, and almost no room for the rising of new parties. Also in encounters coercion to Indigenous movements, dismissing any kind of ideas nonaligned with Correas conceptions. President Rafael Correa admitted this year that there is widespread corruption in the society of his country and announced his government is preparing a national campaign to fight against corruption. Correa stated corruption has not yet reached the levels of the upper government, it has taken not only the public sector but the private sector as well. Actually there is a campaign which evolves the entire population, acknowledging the population they must denunciate anyone who enriches with public money, and avoid paying taxes is a form of stealing to the state, and therefore is a form of corruption. Among other strategies the campaign promulgates to claim any information regarding to politicians visiting them with special offers. Corruption is negative related to the countrys performance in terms of GDP, international trade, foreign investment, economic diversity and wealth (Volkema, 2001) meaning corruption will have to be taken seriously by the government, the strategies implement m ust focus on addressing the real causes of corruption in order to balance Ecuador to a more prosperous and equal country. PERSONAL OPINION AND FINAL RECOMMENDATIONS As stated in the preamble to the United Nations Convention against corruption, the scourge poses a serious threat to stability and security of societies, undermining the institutions and values of democracy, ethics and justice and jeopardizing sustainable development and the rule of law in my opinion this phase can be linked to Ecuador actual situation, where no real institutions exist for defending populations rights, and the coercion of opinion from other movements and a constituent assembly who obeys to Correas mandates encloses the country with clear and pure examples of corruption. Ecuador is a country with its majority are indigenous living to merely filling some of their needs, leaving aside the idea of attending to schools and very weak health system, consequently they do not bother to really claim for a more transparency government. Although is it true many protests are done in Ecuadorian lands, they seem not be effecting with lowering corruption, in my opinion the country must concentrate in creating proper institutions in order to audit this process, but society itself must engage into one voice, proclaiming their rights and cease the toleration of corruption. It is wicked to say elections should be call again and chose another candidate from a more capitalist party, and one of the main reasons is that history have shown despite the wing a president comes, corruption still persists, so even mayor changes should be done. One of my recommendations is the creation of programs that develop the economy of the poorest ones, and based in hypothesis made Davis and Ruhe (pag 6) countries with a high per capita income and upper foreign investment are perceived as less corrupted. At the same time this part of the population will have more opportunities for education, and the generations to come will be more aware of how deep corruption hurts a country. I do not criticize the new leftist in their in basis or proclamations, but I contentedly oppose the way the ideas from the 21st century socialism its being applied, contemplating a more equal distribution, but in reality the only beneficiaries are the ones who receive mayor contracts for being brother of the high commanders, or the elite people who keeps the subsidies supposed to be for helping the real needs of one economy, and neither the suppression of voice, which is why after studying the different variables in Ecuadors corruption I finish this paper by pointing Mahadma Ghandis quote Corruption and hypocrisy ought not to be inevitable products of democracy, as they undoubtedly are today.