Emerging Asian Countries Research Articles

A New Cointegration Econometric Analysis for Contagious and Volatility Spillovers of Subprime Crisis Effects

We examine spillover effects of the recent U.S. financial crisis on five emerging Asian countries by estimating conditional correlations of financial asset returns across countries using multivariate GARCH models. We propose a novel approach that simultaneously estimates the conditional correlation coefficient and the effects of its determining factors over time, which can be used to identify the channels of spillovers. We find a dominant role of foreign investment for the conditional correlations in international equity markets. The dollar Libor OIS spread, the sovereign CDS premium, and foreign investment are found to be significant factors affecting foreign exchange markets.

Interdependencies and Causalities in Coupled Financial Networks.

We explore the foreign exchange and stock market networks for 48 countries from 1999 to 2012 and propose a model, based on complex Hilbert principal component analysis, for extracting significant lead-lag relationships between these markets. The global set of countries, including large and small countries in Europe, the Americas, Asia, and the Middle East, is contrasted with the limited scopes of targets, e.g., G5, G7 or the emerging Asian countries, adopted by previous works. We construct a coupled synchronization network, perform community analysis, and identify formation of four distinct network communities that are relatively stable over time. In addition to investigating the entire period, we divide the time period into into “mild crisis,” (1999–2002), “calm,” (2003–2006) and “severe crisis” (2007–2012) sub-periods and find that the severe crisis period behavior dominates the dynamics in the foreign exchange-equity synchronization network. We observe that in general the foreign exchange market has predictive power for the global stock market performances. In addition, the United States, German and Mexican markets have forecasting power for the performances of other global equity markets.

Nonlinear Effects of the Financial Crisis on Economic Growth in Asian Countries: Empirical Evaluation with a PSTR Model

The objective of this paper is to evaluate the effectiveness of fiscal policy in emerging countries in periods of crisis. We study the effect of fiscal policy on economic activity distinguishing between periods of recession and expansion periods. Our goal will be to explore the nonlinear effect of fiscal policy in Asian emerging countries on the activity during periods of crisis. We use the PSTR model. This model is used on annual data for the period 1990-2013 for a sample of 8 emerging Asian countries. Our main findings are the following: First, this study confirmed that the PSTR model is more robust comparing it to a simple linear model. Indeed, it can highlight the asymmetric effect of fiscal policy on economic activity. Second, the nonlinearity of fiscal policy is explained by the phases of cycles and the level of public debt.

Inequality, Gender Gaps and Economic Growth: Comparative Evidence for Sub-Saharan Africa

A growing body of empirical evidence suggests that inequality—income or gender related—can impede economic growth. Using dynamic panel regressions and new time series data, this paper finds that both income and gender inequalities, including from legal gender-based restrictions, are jointly negatively associated with per capita GDP growth. Examining the relationship for countries at different stages of development, we find that this effect prevails mainly in lower income countries. In particular, per capita income growth in sub-Saharan Africa could be higher by as much as 0.9 percentage points on average if inequality was reduced to the levels observed in the fastgrowing emerging Asian countries. High levels of income inequality in sub-Saharan Africa appear partly driven by structural features. However, the paper’s findings show that policies that influence the opportunities of low-income households and women to participate in economic activities also matter and, therefore, if well-designed and targeted, could play a role in alleviating inequalities.

Marketing tourists gazing into the tourism domain

Purpose – Urry’s model of Tourism Gaze as described by Woodside is problematic, in that tourist participant observers change the phenomenon they observe. The purpose of this study is to present an alternative model that better represents the dialectic between tourists and the destination culture. Design/methodology/approach – A story-telling technique, based upon personal experience and introspection that matches the story told by Woodside, is used to illustrate the theory development and formulate an alternative model. Findings – A new model is proposed that acknowledges that the more a tourist lives their tourism experience and becomes immersed in the destination culture, the greater the affect he/she has upon the destination. The issue of authenticity is discussed in relationship to this new model, as – in a sense – the experience of a one-time traveler is as authentic as those of a long-term stay tourist. Practical implications – The practical implications are both for tourist operators and policymakers. Cultures change, regardless of any tourism activity; but, such activity is a major change-agent, especially so as the emerging Asian countries discover the pleasures of “globe-trotting”. Although the cultural experience of tourists will remain authentic, large-scale tourism projects will inevitably change the culture the tourists sought to experience in the first place. The value of alternate tourism strategies based on the tourist’s impact upon the host culture is becoming increasingly critical. Originality/value – The new model is simple but effective, and is more pragmatic and accurate than the original tourist gaze model of Urry. The introspective, story-telling, methods used are more typical of academic marketing than tourism research, but serve the purpose here well by making the conceptual idea readily available to the reader.

Globalization of R&D and open innovation: linkages of foreign R&D centers in India

In the new form of Globalization of R&D, Multinational (MNEs) firms have established their R&D units in emerging Asian countries, particularly in India and China. In the 1980s MNEs located their R&D units in their country of origin and were very reluctant to go offshore beyond triad (USA, Western Europe and Japan). However, in the last decade there is a growing trend of MNEs going emerging markets such as India and China. Beside this, sourcing knowledge from globally dispersed knowledge hubs is also one of the major motives of this emerging trend. These foreign R&D centers have developed linkages with the other actors of the host economy to build their assets. This study has investigated the linkage patterns of foreign firms in India from an in-house developed database. The ICT sector is considered as a test case to investigate the linkages of foreign firms with the Indian entities. The study observed that most of the foreign firms are collaborating with the other foreign firms located in India. Next to the foreign firms, Indian firms are preferable compared to university or government research institutes. It shows that industry-academia linkages are quite weak in India. Foreign firms’ embededness with the local innovation system is only by linking with the local firms. Although, India has very strong government research laboratories, these are not playing important role in collaborating with the foreign firms. From the policy perspective, industry - academia linkages needs to be strengthened. MNEs enter markets such as India not only for potential markets and ‘cheap’ skilled human resources but also for knowledge and technology base emerging in the knowledge hubs of these countries. Also, most of the collaboration happens in peripheral (joint development) rather than core domain (joint R&D). Many of the firms are going for ‘Open Innovation’ mode to build up their assets in India.

An autoregressive distributed lag (ARDL) analysis of the nexus between savings and investment in the three Asian economies

Savings and investment play a major role in any countries to fostering long term growth. It shows the amount of saving being converted into investment in the domestic economies which is related with capital mobility in the countries. Ever since seminal paper by , the issue regarding the relationship between saving and investment become one of the popular issues among economist researchers. They found that it has a strong relationship between saving and investment where about 85 percent to 95 percent approximately of the domestic saving are converted into domestic investment and at the same time capital mobility is relatively low. It means that saving and investment were circling around in the domestic countries rather than mobile to other countries. Many researchers relate this issue with capital immobility as domestic saving is easily transferred to the other countries and vice versa. As such, the aim of the present paper is to reinvestigate the nexus between saving and investment for the three-Asian economies namely China, India and Malaysia by employing the recent Autoregressive Distributed Lag (ARDL) co-integration modelling approach. Three emerging Asian countries have been chosen in this research which have its own economic strength and weaknesses. In which, the GDP growth prospect for China, India and Malaysia is 7%, 6% and 5% approximately in 2015. This study covers the annual sample from 1970 to 2013. The present paper employs ARDL bound procedure to test the presence of a co-integrated relationship which involves the standard F-test. One of the advantages of ARDL test is that it is more robust and performs better for small sample size of data which suitable for this research. The sample size is 43 years for each country. The annual time series data of saving and investment ratio as percentage of GDP in each country were utilized in this study. The result shows that the null hypothesis of the unit roots for the saving and investment series is rejected in first difference. It reveals that all the variables are co-integrated at first different. The ARDL F-test yields evidence a positive long run relationship between savings and investment for the three emerging Asian countries namely, Malaysia, China and India which is consistent with many past researches. It shows that the estimated ECT t-1 coefficient is found to be negative and statistically significant at 1% confidence level for China and India. Meanwhile, the estimated ECT t-1 is negative and statistically significant at 5% confidence level for Malaysia. As such, this results confirm the existence of long run relationship between savings and investment in the three countries concurrently. In the short run, it has a positive significant relationship between saving and investment in China and India. Furthermore, the estimated model has passes the diagnostic test and the stability test. Based on the finding, the speed of adjustment for Malaysia, India and China are 31%, 23% and 15% respectively. It indicates moderate speed of adjustment back to equilibrium. From this research paper, It shows that there is relationship between saving and invest in the three Asian countries. Thus, it is recommended that the three-Asian countries should not neglect its savings if the countries wish to spur its investments of which, will consequently generate economic growth.

World Economic Prospects

Overview: Drag from emergers pulls down world growth This month sees another downgrade to our world growth forecasts, to 2.5% for 2015 and 3.0% for 2016, from 2.6% and 3.1% last month. A key factor behind this downgrade is the weak performance of emerging markets. In Q1, we estimate that 17 large emergers cut 0.9 percentage points from annual world trade growth – a phenomenon not seen since the global financial crisis. China accounted for much of this, but imports were also weak in other emergers where lower commodity prices, high debt and structural weaknesses are all contributing to slower growth. Forecasts have been cut in several emerging Asian countries this month. As a result, we now forecast world trade growth at just 1.8% for 2015, a pace usually associated with global recessions. Trade growth is expected to remain below its long‐term average next year too, at 4.4%. Sluggish global demand has contributed to weaker US growth in the early part of 2015, with exports also probably suffering from the strong dollar – Eurozone and Japanese exports have held up better. US growth is still set to improve in H2 helped by a strong labour market, but our forecast for all of 2015 is for growth of just 2.1% (from 2.3% last month). The moderate pace of growth in major economies makes the global upswing more vulnerable to adverse shocks than in previous cycles, as does the increased weight of emergers in world GDP. Despite these risks upward pressure on global bond yields has continued. This reflects several factors including a correction from over‐bought levels – especially in the Eurozone where markets had been pricing in an excessively deflationary scenario. Indeed, Eurozone yields are now not only above pre‐QE levels but are also closing in on the levels seen last August when ECB president Draghi first flagged that QE was coming. This suggests that an ECB policy response is also a downside risks to global yields now, as well as slow world growth.

Spillover effects of the U.S. financial crisis on financial markets in emerging Asian countries

We examine spillover effects of the recent U.S. financial crisis on five emerging Asian countries by estimating conditional correlations of financial asset returns across countries using multivariate GARCH models. We propose a novel approach that simultaneously estimates the conditional correlation coefficient and the effects of its determining factors over time, which can be used to identify the channels of spillovers. We find some evidence of financial contagion around the collapse of Lehman Brothers in September 2008. We further find a dominant role of foreign investment for the conditional correlations in international equity markets. The dollar Libor-OIS spread, the sovereign CDS premium, and foreign investment are found to be significant factors affecting foreign exchange markets.

Foreign investment and real exchange rate volatility in emerging Asian countries

This study asks whether greater foreign investment reduces real exchange rate volatility in eight emerging Asian countries. As a noteworthy aspect, we utilize detailed measures of foreign investment, including foreign direct investment, foreign portfolio equity, and foreign debt. Our findings from both time-series and panel data for the period 1980–2011 indicate that greater stocks of foreign liabilities reduced real exchange rate volatility for China, India, Malaysia, Singapore, and South Korea but increased real exchange rate volatility for Indonesia, the Philippines, and Thailand. We further examine the effects of several important factors on real exchange rate volatility for the two groups of countries separately.

The Big Question

The Big Question

Polynesia in Review: Issues and Events, 1 July 2013 to 30 June 2014

Polynesia in Review:Issues and Events, 1 July 2013 to 30 June 2014 Christina Newport (bio) Reviews of American Sāmoa, Hawai‘i, Niue, Sāmoa, Tokelau, Tonga, Tuvalu, and Wallis and Futuna are not included in this issue. Cook Islands As the 49th year of Cook Islands “self-governing” in free association with New Zealand, the period under review has been characterized by a number of political ups and downs, culminating in a snap election with contested results and court action set to determine the outcome. The results highlight the need for reform to address the disparity of the value of a vote across the country. As 2014 is also the International Year of Small Islands Developing States, international and local attention is focused on the country’s development partnerships as it prepares to celebrate its unique form of sovereignty in 2015. Other issues this year revolved around a rollout of tax reforms, marine resources, and the management of the climate change–related drought in the southern group islands. The Cook Islands continues to place priority on climate change and climate-related disaster risks, with a number of southern group islands “dealing with drought-like conditions after months without decent rainfall” (cin, 16 Dec 2013). On Atiu, groundwater supplies were at critically low levels. These problems were further compounded with increased demands expected over the Christmas period and the drought conditions forecast to extend the dry season (cin, 16 Dec 2013). With two water treatment plants and a desalination machine dispatched from Rarotonga, the New Zealand High Commission added its support by supplying one of the solar-powered water-treatment plants as part of a nz$225,000 grant to support the Cook Islands drought response strategy. The strategy includes equipment, training, awareness raising, and water level monitoring and reporting (cin, 31 Jan 2014). On a much larger scale, the nz$60 million Cook Islands Water Partnership, or Te Mato Vai, linked to climate change, is intended to improve water supply and quality on Rarotonga. The initiative will refurbish water intakes, increase water storage and treatment, and replace ring mains and piping (cin, 19 Oct 2013). Funding for the project has been raised, with nz$22 million from the Cook Islands government, a nz$15 million grant from New Zealand, and a nz$23 million concessional loan from the People’s Republic of China. This jointly funded partnership has drawn international attention and is “believed to be a first for the emerging Asian country which has traditionally been known to deliver aid unilaterally” (cin, 12 Sept 2013). Visiting researcher Philippa Brant of the Lowy Institute for International Policy in Australia suggested that because the Pacific faced no current military conflict, the Cook Islands was ideal for Beijing [End Page 251] to test out its new aid strategy while avoiding accusations of self-interest by allowing the Cook Islands and New Zealand to drive the project (cin, 12 Sept 2013). Locally the project also drew attention through public meetings and consultations on the Water Master Plan. With construction due to start on 14 April 2014, a petition with over two thousand signatures was delivered to Parliament seeking to put a stop to the project “until misgivings and shortcomings on the project can be identified and investigated and other options explored,” said James Thomson, spokesman for the Te Mato Vai Petition Committee (cin, 5 April 2014). It was agreed that a Parliamentary Select Committee would be established; however, the project still proceeded. Since the 2011 establishment of the Climate Change Division in the Office of the Prime Minister, a number of initiatives have commenced. A us$5 million Adaptation Fund project facilitated the development of a national climate-change policy. In November 2013, the Kaveinga Tapapa: Climate and Disaster Compatible Development Policy 2013–2016 was launched. In taking an integrated approach, the policy is focused on low-carbon, climate-change–and disaster-resilient development. Prime Minister Henry Puna’s introductory statement notes that the policy, by integrating with existing policy instruments and planning tools, “builds on our existing structures and draws on our capability to lift our game” and its “fundamental message is to prepare today for tomorrow...

The Role of Time Preferences in Explaining the Long-Term Pattern of International Trade

Globalization is accompanied by increasing current account imbalances. They can undermine the positive impacts of increasing international cooperation and trade on economic growth. By applying an economic growth model that requests for long-term compensation of short-term current account deficits, we derive patterns of international trade. Model output, however, is challenged by empirical data – which is related to the Lucas Paradox. This paper demonstrates how, based on the assumption of differentiated time preferences, model results and empirical data are reconciled with each other. The method presented here yields an indirect estimate of the rates of time preference across regions. Our results suggest that the time preference rate is low in emerging Asian countries, while the USA and Europe are characterized by above world-average rates. Based on the applied model that differentiates between trade in energy resources and a composite good, simulated trade patterns of these three world regions significantly differ from each other and also from trade patterns that occur in resource exporting countries.

Arfima-Figarch vs. Arfima-Hygarch: Case Study ETF Returns of Emerging Asian Countries

This research investigate the long memory returns for ETF returns index of seven Asian countries in Emerging Markets Equities during 2008-2013 periods. Those ETFs are Wisdom Tree Indian Rupee Fund (ICN), Market Vectors Indonesia Index (IDX), iShares MSCI Malaysia Index Fund (EWM), Market Vectors Russia ETF (RSX), and iShares MSCI Thailand Investable Market Index Fund (THD), SPDR S&P China ETF (GXC), and Market Vectors Vietnam ETF (VNM). The ARFIMA, ARFIMA-FIGARCH, and ARFIMA-HYGARCH models were estimated. The empirical results of log-likelihood information criterion analyses, the statistics supports ARFIMA-HYGARCH model instead of ARFIMA and ARFIMA-FIGARCH models.

Financial Development and Economic Growth in Emerging Asian Countries

Many countries removed constraints on goods, services and capital gradually after fall of Bretton Woods system and globalization of financial markets accelerated especially as of 1980s. This process contributed to the development of financial sectors in many countries. Therefore many studies have been conducted about the possible effects of financial sector on major macroeconomic variables in recent years. This study investigates the possible effects of financial sector development on economic growth in emerging Asian countries during the period 1992-2011 by panel regression. We found that various indicators representing the development of banking sector and stock market had positive effect on economic growth in emerging Asian countries.

Decoupling and Sources of Structural Transformation of East Asian Economies: An International Input-Output Decomposition Analysis

Decoupling and Sources of Structural Transformation of East Asian Economies: An International Input-Output Decomposition Analysis-Decoupling of Emerging Asian Economies, Asian International InputOutput Tables, Input-Output Decomposition Analysis, Sources of Structural Changes in Gross Outputs and Value-added

Effectiveness of countercyclical fiscal policy: Evidence from developing Asia

Can discretionary fiscal policy effectively stimulate output? This paper examines this question in the context of developing Asia, where many countries implemented fiscal stimulus measures to support domestic demand during the global crisis. Economic conditions normalized after the crisis but growth in Asia has slowed down since. We examine historical data from 10 emerging Asian countries to assess whether countercyclical fiscal policy can support future growth in the region. Our examination is based on identifying shocks by restricting the contemporaneous relation between fiscal and non-fiscal variables. Our most significant and consistent finding is that in developing Asia, tax cuts have a greater countercyclical impact on output than government spending. This implies there is some scope for countercyclical tax adjustments so long as fiscal sustainability is not compromised.

Interdependencies and Causalities in Coupled Financial Networks

We explore the foreign exchange and stock market networks for 48 countries from 1999 to 2012 and propose a model, based on complex Hilbert principal component analysis, for extracting significant lead-lag relationships between these markets. The global set of countries, including large and small countries in Europe, the Americas, Asia, and the Middle East, is contrasted with the limited scopes of targets, e.g., G5, G7 or the emerging Asian countries, adopted by previous works. We construct a coupled synchronization network, perform community analysis, and identify formation of four distinct network communities that are relatively stable over time. In addition to investigating the entire period, we divide the time period into into mild crisis, (1999-2002), calm, (2003-2006) and (2007-2012) sub-periods and find that the severe crisis period behavior dominates the dynamics in the foreign exchange-equity synchronization network. We observe that in general the foreign exchange market has predictive power for the global stock market performances. In addition, the United States, German and Mexican markets have forecasting power for the performances of other global equity markets.

Understanding challenges of supply chain sustainability in Asia

Developed nations such as the USA and Europe have already learnt to an extent how to manage their resource movement judiciously but developing countries especially in Asia have a long way to go to reach the level of the developed world. This research will look into the problems faced by the countries in Asia, namely Malaysia, India, Indonesia and Thailand, to develop good supply chain management systems. The objective is to analyse why the emerging Asian countries are not able to manage the supply chain with the same efficiency and conviction as the developed countries.

Overview of the International Financial Instruments Issued from Malaysia

Malaysia should be lauded for its efforts in positioning itself as a premier international Islamic financial center via MIFC. But, despite having the best infrastructure for Islamic finance, there lies the question – should we be wary of competition? Nonetheless, Malaysia should maintain its momentum whilst keeping an eye on possible competition, not just from Singapore but also from the other emerging Asian countries such as Indonesia, Thailand and Brunei. However, with the continued commitment of the government and regulators, as well as contributions from market participants, Malaysia will be the chosen international Islamic financial centre for many years to come.