Emerging Market Countries Research Articles

The Effect Of Money Supply And Interest Rate On Stock Price

Research on stock prices is an important aspect in the development of financial management studies, because it has an impact on scientific perspectives and is able to become a practical study for investors in making investment decisions. Interestingly, various studies show different results regarding the effect of macroeconomics on stock prices, both by sector, country classification, and study period. This study aims to examine more generally using the composite stock price index in analyzing macroeconomic effects on stock prices. The research period is used during 2000-2020, using the money supply and interest rates as macroeconomic variables in Indonesia and Malaysia. The results of the study show that both the money supply and interest rates have an influence on stock prices in Indonesia, while research in Malaysia shows that only interest rates have an influence on stock prices. Research in two emerging market countries shows different patterns of influence, this shows that Arbitrage Pricing Theory has different patterns of influence.

Do business-friendly regulations foster corporate social performance Evidence from 20 emerging market countries

Do business-friendly regulations foster corporate social performance Evidence from 20 emerging market countries

Gold and the global financial cycle

<abstract> <p>We examine the potential of gold and other precious metals as safe havens during negative market shocks caused by the Global Financial Cycle (GFCy). We analyze a vast global vector autoregressive (GVAR) model that includes developing and emerging market countries for a total of 33 countries, from 1979:Q2 to 2019:Q4. This approach allows us to account for individual country peculiarities while also considering the transmission of global shocks. We found that during financial market distress caused by a negative GFCy shock, gold, silver and platinum all serve as hedges. Interestingly, our results suggest that silver and platinum are better hedges than gold, offering greater positive returns in response to negative GFCy shocks, especially in recent years. Overall, our findings support the benefits of investing in precious metals, as they can help investors mitigate losses resulting from global financial shocks. While the metals vary in their hedging ability, platinum and silver offer even greater protection than gold.</p> </abstract>

Enclave Economies and Political Connections of Big Business in Emerging Market Countries

Relationship between enclave economies functioning and political connections using by large businesses in emerging markets countries is considered in the article. Enclave economies have their origins in the colonial past of these countries, and these political and economic systems make it difficult to transfer to a model of linkages economy. Linkages economy is characterized with the presence of multiplier effect that ensures the production of high-tech in manufacturing industries, the emergence of small innovative enterprises, the formation of demand for human capital in the field of research and development. On the contrary, enclaves of wealth represent that part of the economy that is embedded in global value chains, but does not work to form domestic markets, does not provide basis for the development of high added value manufacturing industries, blocks the emergence of fast-growing companies from the innovation sector, and the directions of human capital investments are determined precisely with the extraction of natural and mineral resources. The everlasting existence of enclave economies is grounded by special interest groups including representatives of the ruling elites and politically connected firms. Access to wealth enclaves is linked with certain privileges for politically connected firms. Mineral rents can be used by the ruling elites as a source to set patronage sinecures that to strengthen existing regimes.

Integration of ASEAN Capital Markets with Developed Countries: Spillover Analysis for the 2003-2019 Period

This study aims to determine the spillover effect on the ASEAN stock market, which is influenced by the turmoil of the world's financial stock market centres, namely the United States, Japan and the United Kingdom, and to determine the pattern of influence of financial centres on countries in ASEAN. The data used in this research is time series data. Then an analysis of each country index was carried out, which the author obtained from the 2003-2019 period, and then the author used it to find emerging markets that were influenced by developed countries. This study uses the Dynamic Conditional Correlation-Generalized Autoregressive Heteroscedatic Model (DCC-GARCH) so that it is possible to examine the transmission of volatility between two different stock markets together. Based on the research results, it was found that there was a spillover effect from financial centre countries to emerging market countries in ASEAN. Besides that, there is also a finding that the spillover effect between the stock market of financial centers and developing country markets has varying results in the observation period. The 2008 financial crisis, which stemmed from the US financial crisis, caused significant changes to the ASEAN-5 stock market. This can be seen from the increasing influence or spillover effect of the American stock market, namely the SP500 and FTSE100, the most significant impact during and after the 2008 crisis.

Analysis of sustainability reporting quality and corporate social responsibility on companies listed on the Indonesia stock exchange

This study aims to analyse the diffusion level of non-financial reporting (sustainability reporting, corporate social responsibility, and integrated reporting) in companies listed on the Indonesia Stock Exchange and analyse the quality of sustainable reporting standalone. Indonesia, which is one of the emerging market countries, has not yet established independent sustainable reporting regulations, but a small number of companies in Indonesia are committed to following global regulations to support sustainable development. The study was conducted on public companies listed on the Indonesian stock exchange and examined 240 sustainability reports from 2016 to 2019. For the quality of sustainable reporting standalone, we used the disclosure of triple bottom-line items (economic, environment, social) in accordance with GRI and content analysis to analyze the quality of sustainability reporting based on the GRI (Global Reporting Initiative) principles to measure quality: clarity and accuracy, timeliness, and engagement, stakeholders, comparability, and reliability. This analysis follows, whos argue that in Indonesia public companies, there do not yet require the preparation of a standalone sustainability report. This study shows that the diffusion of sustainability reports is still shallow compared to mandatory social responsibility reports. The quality of sustainability reports based on disclosure is also still low, but industry groups vary in quality. The quality of Sustainability Reporting is based on timeliness and stakeholder engagement, and comparability, satisfactory. However, for clarity and accuracy, the results are acceptable, while reliability is less acceptable.

Optimizing Monetary Policy Transmission Through The Emerging Market Interest Rate Channel

Research using the ARDL Panel Model includes Inflation, Gross Domestic Product, Total Money Supply, Exchange Rates, Consumption, Investment, and Interest Rate in Asia's Three Emerging Markets namely India, China, and Indonesia which aims to boost the economy. This study uses secondary data with a quantitative research type using ARDL Panel Regression, the software used is Eviews 10 with cross-section data for 3 Emerging Market Countries, namely India, China, and Indonesia time series data for 2001-2020. The research results show that Exchange Rates, Investments, and Interest Rates can also be leading indicators to support price stability in Indonesia, China, and India, but their positions are unstable in the long run and short run. The main leading indicator in optimizing the variables in controlling price stability in the Three Emerging Markets Asia is Consumption seen from the stability of the short run and long run, where the long-term and short-term interest rate variables are significant in controlling price stability.
 

Analysis of the Effect of Information and Communications Infrastructure on Foreign Direct Investment in Emerging Market Countries

This study examines the effect of information and communication technology infrastructure on foreign direct investment in 20 emerging market economies. In the 90s, developing countries had policies to make it easier for investors. Emerging markets countries are significant and potential markets. There is data that emerging market countries have increased from 35.90% to contributing 46.62% of FDI of the world’s total in 2019. Using 25 years of data (1995-2019), use the panel data regression method to see the influence of ICT infrastructure on FDI. Find strong empirical evidence showing that the influence of ICT infrastructure on FDI is significantly positive in emerging market economies. In addition, we also examine the relationship between the variables GDP, inflation, and Trade openness to FDI. GDP, and Trade openness have significant positive results for FDI, while inflation has significant negative results for FDI in emerging market economies.

The FDI-spawned technological spillover effects on innovation quality of local enterprises: evidence from industrial firms and the patents in China

ABSTRACT Foreign direct investment is a topic of crucial importance for emerging market countries for capital accumulation, innovation and sustainable development. From the perspective of technological innovation, the article explores how ‘desirable’ the FDI is in stimulating domestic innovation. Using industrial firm-level data from 1998 to 2013 combined with patent database from China National Intellectual Property Administration and patent citations from Google Patents, the article captures the significant impact of innovation quality of regional FDI on the innovation quality of local firms with both multi-fixed effects and instrumental variable estimations, which are proved to be reliable with robustness checks. Further, under different entry modes, the article finds that M&A FDI plays a more positive role in spillovers compared with greenfield investment. Finally, the article explores the upstream and downstream linkage benefits and intra-industrial benefit from FDI innovation, which shows that the intra-industrial benefit, or the demonstration effect is prominent. Our article renders a more direct micro evidence of FDI spillovers and sheds light on FDI attracting policies.

Tracing carbon emissions convergence along the way to participate in global value chains: A spatial econometric approach for emerging market countries

The proliferation of trade agreements has offered a viable framework for the economic and trade integration of many nations. Additionally, the growth and expansion of global value chains has increased prospects for knowledge and technological spillovers as well as the potential for production method convergence. This might have possible effects on the environment in both developed and developing nations. The objective of this study is to determine whether participation in global value chains (GVCs) can serve as a foundation for the convergence of carbon emission across nations. Spatial panel data econometrics is used to examine data from 22 emerging economies between 1995 and 2019 in order to provide an answer. The findings support the global value chains-based conditional carbon convergence of the countries and show a spatial link between global value chains participation and CO2 growth. Furthermore, results show that increasing global value chains participation with other variables; both directly and indirectly, via spillover effects, encourages closing the CO2 emission gap across nations. The findings show that global value chains may be able to increase how successful carbon efficiency initiatives are. Therefore, when developing environmental legislation, many aspects of global value chains participation and their advantages should be considered.

The Effect of Return on Equity, Current Ratio, and Earnings Volatility on Capital Structure

The company's capital structure is an important aspect for the company's growth in the future. Companies that have an optimal capital structure can be the basis for developing the company in a better direction. The phenomenon of the COVID-19 pandemic has had a major impact on various companies in Indonesia, but it is interesting that health companies are gaining momentum to increase company profits. This study aims to analyze the effect of Return on Equity, Current Ratio, and Earnings Volatility on Capital Structure. This study uses a quantitative approach with descriptive and causal methods, research data using the Indo Farma company (INAF). The researcher uses the main data sources to be processed in this analysis. The results of the data test using eviews-10 are categorized into three parts, namely the descriptive test, the classical assumption test, and hypothesis testing. Based on the results of the study, it shows that ROE has a negative effect on the capital structure, meaning that the lower the ROE, the higher the capital structure. CR has a positive effect on the capital structure, meaning that the higher the CR, the higher the capital structure. Earnings volatility has a positive effect on the capital structure, meaning that the higher the earnings volatility, the higher the capital structure. The results of this study show similarities with previous studies, both in developed countries and emerging market countries.

Dampak Remitansi terhadap Investasi Domestik: Analisis Peranan Perkembangan Sektor Keuangan dan Kualitas Institusi pada Emerging Market di Negara-Negara Asia

Remittances is one of the largest capital inflows in emerging markets Asia after FDI. This study investigates the impact of remittances on domestic investment in Asian emerging market countries. A panel domestic investment model uses remittances, financial development and institutional quality. The interaction variables between remittances, financial development and institutional quality are also added to see the joint effects of these variables. The panel data approach used includes slope heterogeneity, cross-section dependence, unit root panel, cointegration panel and FMOLS which takes into account the potential for heterogeneity and endogeneity. The period considered were 1998 – 2019. This study’s outcomes show that increasing of remittance inflows led to decline in domestic investment and confirmed the dutch disease phenomenon. However, joint effect of remittances and financial development and also institutional quality is positive and nullflies the dutch disease phenomenon. In addition, increased of financial development and institutional quality may foster domestic investment.

FDI inflows and income inequality: A Schumpeterian economic growth

It is well documented that inward FDI promotes economic growth and technological progress which are demonstrated to affect income inequality. This paper investigates the distributional effect of FDI inflows. We propose a Schumpeterian economic growth model adopted with the Pareto income distribution. The theoretical model implies that FDI inflows would increase income inequality by promoting economic growth but reduce it by causing creative destruction. The overall distributional effect of FDI inflows is hard to be predetermined. We employ the GLS approach to conduct the empirical test, relying on the dataset taken from 126 countries. The Pareto index constructed based on top income shares indicates that FDI inflows reduce income inequality in emerging market countries but increase income inequality in developed countries. This finding is further confirmed by directly regressing top income shares on FDI inflows. Empirical evidence supports the channels suggested by the theoretical model. The results are found consistent on employing alternative top income shares, proxies of FDI inflows, model specification and estimation approaches.

Can ESG certification help company get out of over-indebtedness? Evidence from China

Using Chinese listed companies from 2007 to 2019 as a sample, we employ a fixed-effect panel model to provide empirical evidence between ESG and company over-indebtedness. The results show that, benefiting from ESG certification, both firms' leverage scale and incidence of over-indebtedness are inhibited. After controlling for potential endogeneity and measurement bias, this finding remains robust. Heterogeneity analysis shows that the positive effect of ESG on company over-indebtedness is affected by both micro and macro factors, showing more significant impact for companies with higher debt levels, non-innovative companies, non-highly polluting companies, and companies in eastern regions. Moreover, mechanism analysis suggests that the driving force behind this phenomenon is that ESG certification effectively relaxes financing constraints and enhances stock liquidity. Moreover, we discuss the economic implications of the positive effect of ESG on company over-indebtedness and find that the resulting moderating effect promotes companies' cross-regional investment and improves investment efficiency. This paper has important practical implications for revealing the value of ESG certification and provides useful insights into ways of getting out of over-indebtedness for companies in emerging market countries.

Impact of de-globalization on development: Comparative analysis of an emerging market (India) and a developed country (USA)

Strategists observe that the world is moving toward deglobalization thinking, and developed states have already marked their beginning. In this study, we have tried to analyze how the impact of globalization is different in the case of an emerging market country and a developed country. We have chosen India for our study because of its robust growth in manufacturing and business-friendly policy reforms. On the other hand, we have taken the case of the United States pertaining to the recent policy reforms it has undergone. We have employed the SAP-LAP approach to analyze the country's case situation. This research finds that India’s way of managing globalization has positively affected its dominant performance domains like employment rate, GDP growth, and poverty. Conversely, in the case of a developed country like the United States, globalization has adversely impacted the dominant performance areas, particularly GDP, employment generation rate, and poverty.

Directional predictability from energy markets to exchange rates and stock markets in the emerging market countries (E7 + 1): New evidence from cross‐quantilogram approach

AbstractWe examine the directional predictability of energy stock returns on exchange rates and stock market in the E7 + 1 emerging market economies, which include India, China, Indonesia, South Korea, Turkey, Brazil, Mexico, and Russia, over the period 4 January 2000 to 31 May 2018. To achieve this, we carried out a cross‐quantile analysis in the static and dynamic frameworks, using the bi‐variate cross‐quantilogram (CQ) and the partial cross‐quantilogram (PCQ) approaches and a dynamic variant of such approaches. The predictability of the stock returns on the energy prices for WTI, Brent, OPEC, heating oil and natural gas is examined. Further relationships are also conditioned by using two measures of geopolitical risk, including the general geopolitical risk (GPRD), and the geopolitical risk threats (GPRD_Threat). The overall results highlight the importance of employing the PCQ approach in examining the predictability of different pairs of the energy prices, exchange rates and stock markets. They also indicate that controlling for GPRD and GPRD_Threat significantly improves the predictability of these variables. Policy implications of the empirical findings have been elaborated and discussed.

Dynamic risk spillovers from oil to stock markets: Fresh evidence from GARCH copula quantile regression-based CoVaR model

This study proposes a GARCH copula quantile regression model to capture the downside and upside tail dependence between oil price change and stock market returns at different risk levels. In the model, ten copulas are provided to measure the nonlinearity of the tail dependence with the marginal distribution built on the GARCH family models. Using daily price data of stock markets in ten important countries and Brent oil market, we estimate the downward and upward risk spillovers from oil to stock markets. The empirical results suggest strong evidence of risk spillover effects from oil to stock markets. Furthermore, downside and upside risk spillovers from oil to the Italian and German stock markets, and the Brazilian and Russian stock markets are the largest for developed countries and emerging market countries, respectively. The US and Mexican stock markets display the smallest downside and upside risk spillovers for two types of countries. We also find evidence that the downside risk spillovers are larger than upside risk spillovers, a finding which is consistent with the flight-to-quality phenomenon. Finally, the dynamic risk spillover effects show heterogeneity over time and are comparatively different for each country. Our results provide significant implications for portfolio managers and international regulators who want to optimize their investment portfolios and maintain stock market stability.

The squeaky wheel gets the grease: Violent civil unrest and global social assistance provision.

What are the contemporary determinates of social assistance provision? What is the role of contentious politics? Social assistance literature is dominated by economic and demographic accounts, which under-examine the possibility that governments extend social assistance to contain social unrest. We test factors associated with these “structuralist” and “political” theories on a new panel dataset which includes 54 OECD and emerging market countries between 2002 and 2015. The results indicate social assistance coverage has a significant positive relationship with riots. We explain this outcome as policymakers expanding social assistance as a means of containing violent civil unrest. This effect is more significant in emerging markets, suggesting that the domination of structural explanations is a result of sample bias toward the OECD. Finally, we find that governments consider World Bank social policy recommendations only insofar as there is violent unrest.

The Effect of Financial Development on Unemployment in Emerging Market Countries

This study examined the effect of financial development on unemployment in 19 emerging market countries, considering their age groups and gender dichotomy. The data covers the period from 1991–2019. Pooled Ordinary Least Square (OLS), Dynamic OLS, and quantile regression via moments were employed as the estimation methods. Robustness was tested with Fully Modified OLS and Canonical Cointegration Regression (CCR) estimation methods. Our results show that financial development has a conditional mean reducing effect on unemployment and a reducing effect on the distribution of unemployment. However, the reducing effect of financial development on the distribution of unemployment varies across the working-age population and youths. Thus, there is a need to formulate and implement a long-term financial policy to ensure economic growth and guarantee employment for the working-age population and the youths irrespective of gender.

How political risk in host country affects FDI: an explanation for the paradox of China’s investment risk preference

In recent years, the scale of China’s outward foreign direct investment has been expanding, and the political risks are also intensifying. How does political risk affect the decision-making of outward foreign direct investment? This paper collected the relevant data of 134 countries from 2003 to 2016, using the regression method of System Generalised Method of Moments. It studies the political risk preference of outward foreign direct investment in the world and China. The study found that there is no political risk preference in the world as a whole. In contrast, China’s outward foreign direct investment has obvious political risk preference. China does not have a political risk preference for developed countries. At the same time, China has shown strong default risk preference for emerging market countries and countries along the "the Belt and Road". This study adds default risk when measuring political risk, and further subdivides political risk into five categories, taking into account their internal interaction mechanism. In addition, this paper not only studies the similarities and differences of outward foreign direct investment 's political risk preferences between China and the world, but also introduces investment motivation to better explain the location choice of China’s outward foreign direct investment.