Financial Openness Research Articles

Do Institutional Quality and Trade Openness Strengthen the Role of Financial Openness in Financial Development?

Do Institutional Quality and Trade Openness Strengthen the Role of Financial Openness in Financial Development?

The Green Sin: How Exchange Rate Volatility and Financial Openness Affect Green Premia

The Green Sin: How Exchange Rate Volatility and Financial Openness Affect Green Premia

Dynamic Connectedness between Crypto and Conventional Financial Assets: Novel Findings from Russian Financial Market

In the dynamic landscape of the Russian digital economy and increasing financial openness, crypto assets have emerged as influential players in the financial market. The geopolitical and economic developments after a conflict with Ukraine have presented formidable challenges in the shape of financial and trade sanctions, coupled with the suspension from the SWIFT banking system, has plunged the Russian economy into a precarious situation. The current study delves into the network spillover effects between a prominent crypto asset and various financial assets including equity, exchange rates, crude oil, gold, and commodity futures using daily data from January 01, 2018, to August 31, 2023. The purpose of the study is to provide empirical and theoretical insights into countering the impact of sanctions on Russia, proposing a pragmatic solution for the Russian financial market. The research methodology involves the application of network spillover estimation and value-at-risk analysis. Notably, the findings expose a robust association between crypto and financial assets, where crypto assets play a pivotal role in transmitting risk within the financial landscape. While their impact on other financial assets remains relatively subdued, short-term correlations exhibit volatile fluctuations, often marked by sharp increases in downside risk. Theoretical implications follow the portfolio theory of asset pricing, with extreme risk spillover originating from long-run fluctuations in the crypto market, impacting market sentiment and elevating risk propagation in the Russian financial market. These results carry practical significance for payment and receipt processes, as well as trading activities with foreign countries, presenting essential insights for policymakers and investment decision-makers.

The Impact of Financial Sector Development on the Sustainable Economic Growth of Pakistan

Purpose: The study examine the impact of financial Institutions and markets development on the sustainable economic growth of Pakistan.
 Design/Methodology/Approach: Time series data of Pakistan is analyzed from 1985 to 2022 by using OLS.
 Findings: Financial institutions development particularly banks are playing positive role in the real GDP growth rate of Pakistan. Financial openness has neutral effect, intermediation and liquidity has positive effect and financial institutions expansion has negative effect on the real GDP. The financial markets development is playing negative role in the real GDP growth rate in Pakistan due to weak, fragile and inefficient market institutions.
 Implications/Originality/Value: Our study findings suggest that for a sustainable economic growth Government should encourage and support financial institutions particularly banks to increase economic activities in the country.

Cross-sectional dependence in financial openness and its influence on renewable energy consumption in Asia

Renewable energy is known for its lower environmental impact compared to conventional fossil fuels. The integration of financial openness plays a pivotal role in driving renewable energy consumption. The existing literature has predominantly overlooked the nonlinear impact of financial openness on renewable energy consumption. This study examines the nonlinear impact of financial openness on renewable energy consumption across different regions in Asia, such as Central Asia, East Asia, South Asia, Southeast Asia, and West Asia, by employing linear and nonlinear cross-sectionally augmented autoregressive distributed lag techniques. The findings of the linear analysis confirm that financial openness favorably impacted renewable energy consumption in the long run in all regions. On the other side, the nonlinear analysis highlights that an increase in financial openness promotes renewable energy consumption in all regions except West Asia. In contrast, the fall in financial openness hurt renewable energy consumption in Asia, Central Asia, and West Asia. Greenhouse gas emissions and GDP promote renewable energy consumption in almost all regions in both linear and nonlinear analysis, and ICT and trade help the consumption of renewable energy to rise in some regions. Policymakers in Asia and its subregions should focus on increasing the collaboration between the financial sectors of the Asian economies and increasing the flow of funds to renewable energy sources in Asia.

Does cycle superposition amplify bank liquidity risk under different levels of financial openness? Empirical evidence from China

PurposeThis paper aims to explore the impact of cycle superposition on bank liquidity risk under different levels of financial openness so that banks can better manage their liquidity risk. Meanwhile, it can also provide some ideas for banks in other emerging economies to better cope with the shocks of the global financial cycle.Design/methodology/approachEmploying the monthly data of 16 commercial banks in China from 2005 to 2021 and based on the time-varying parameter vector autoregressive model with stochastic volatility (TVP-SV-VAR) model, the authors first examine whether the cycle superposition can magnify the impact of China's financial cycle on bank liquidity risk. Subsequently, the authors investigate the impact of different levels of financial openness on cycle superposition amplification. Finally, the shock of the financial cycle of the world's major economies on the liquidity risk of Chinese banks is also empirically analyzed.FindingsCycle superposition can magnify the impact of China's financial cycle on bank liquidity risk. However, there are significant differences under different levels of financial openness. Compared with low financial openness, in the period of high financial openness, the magnifying effect of cycle superposition is strengthened in the short term but obviously weakened in the long run. In addition, the authors' findings also demonstrate that although the United States is the main shock country, the influence of other developed economies, such as Japan and Eurozone countries, cannot be ignored.Originality/valueFirstly, the cycle superposition index is constructed. Secondly, the authors supplement the literature by providing evidence that the association between cycle superposition and bank liquidity risk also depends on financial openness. Finally, the dominant countries of the global financial cycle have been rejudged.

Effects of trade and financial openness on inflationary pressure in Nigeria

The continuous rapid upsurge in inflationary pressure in Nigeria amidst the gradual liberalisation of the country’s trade and financial market calls for questioning of the role of trade and financial openness in the inflationary trend in Nigeria, which makes the research on this issue relevant. The purpose of this study was to determine the effects of trade and financial openness on inflation in Nigeria. In the estimation of the model built to capture the objective of the study, the fully modified ordinary least squares was employed based on the data collected from the World Development Indicators covering the period of 1981 to 2023. The results showed that trade openness and exchange rate exerted a significant negative effect on inflation in Nigeria while exchange rate showed a significant positive effect. The study concluded that financial openness had a positive significant effect on inflation while trade openness and exchange rate exerted a significant negative effect. The need for government to review their foreign trade policies in such a way that the importation of both finished and intermediate goods and services from the rest of the world can be significantly reduced by boosting local production was recommended. The study offers two-folds contributions. It provides new information on the factors that determine inflation and it specifically shows the nexus among trade and financial openness. The findings therefore revealed that higher trade and financial openness raises inflation implying openness-induced inflation. The findings from the study will be of practical value to policy makers such as those in the fiscal authorities and the Central Bank of Nigeria in devising policies to tame the current inflationary pressure in Nigeria

Stock market liberalization and stock tail systemic risk: Evidence from China’s “Mainland-Hong Kong Connect” program

ABSTRACTAs a crucial component of financial opening, stock market liberalization is a vital measure for China to advance market-oriented and open-oriented reforms. However, effective risk prevention and control must be in place as a prerequisite. Examining the ‘Mainland-Hong Kong Stock Connect’ program as a quasi-natural experiment, this study explores the mechanism through which this stock market liberalization policy affects stock tail systemic risk using a time-varying Difference-in-Differences (DID) model. The findings indicate that: (1) The ‘Mainland-Hong Kong Stock Connect’ program significantly reduces stock tail systemic risk in both Shanghai and Shenzhen stock markets. (2) The key to risk reduction lies in enhancing information transparency, corporate governance, and stock liquidity. (3) The risk mitigation effect of this policy is particularly pronounced in regions with weaker investor protection.

An investigation of financial openness, trade openness, gross capital formation, urbanization, financial development, education and energy nexus in BRI: Evidence from the symmetric and asymmetric framework

Clean energy development can bring numerous benefits, such as decreased greenhouse gas emissions, improved air quality, and increased job opportunities in the green industry. These advantages can be achieved through the collaborative efforts of all stakeholders involved. Ultimately, adopting clean energy can lead to a healthier planet and economy. Energy availability and scarcity influence the aggregated economy. The present study explores the interrelationships between financial openness, trade openness, gross capital formation, urbanization, financial development, education, and energy within the Belt and Road Initiative (BRI) nations. A panel of 56 nations has considered empirical investigation for 2002–2020. The coefficients extracted from CS-ARDL revealed a catalyst role of openness in the energy mix, especially the inclusion of clean energy both in the long run and short. The asymmetric evaluation revealed that positive negative shocks in openness lead to a positive association with energy consumption. Moreover, the asymmetric association was also exposed through the execution of a standard Wald test. The study findings show that FO, TO, and GCF are critical in energy sustainability in BRI nations. It implies that clean energy inclusion in the energy mix might be amplified, and energy sustainability may be ensured. The energy transition of Belt and Road Initiative (BRI) nations is significantly affected by financial, trade, and domestic capital adequacy. The success of sustainable energy policies is determined by several factors, which play a crucial role in countries participating in BRI projects; the findings provide insight into the complex interdependencies among the variables above and their effects on the energy dynamics within the BRI region. Furthermore, the research findings hold considerable significance for policymakers as they offer valuable insights into the possible synergies and trade-offs among these factors that can facilitate sustainable energy transitions in the BRI economies.

Unraveling Exchange Rate Volatility Impact on Economic Growth: A Study of Developing Countries through the Lens of Exchange Rate Regimes and Financial Openness

Unraveling Exchange Rate Volatility Impact on Economic Growth: A Study of Developing Countries through the Lens of Exchange Rate Regimes and Financial Openness

Unraveling Exchange Rate Volatility Impact on Economic Growth: A Study of developing Countries through the Lens of Exchange Rate Regimes .and Financial openness

Unraveling Exchange Rate Volatility Impact on Economic Growth: A Study of developing Countries through the Lens of Exchange Rate Regimes .and Financial openness

Accounting of State Grants According to International Financial Reporting Standards

Accounting for grant agreements is an important aspect of financial management for a variety of organisations, including not-for-profit, commercial enterprises, and public institutions. Accounting for grants helps to ensure financial openness and transparency in the organisation's activities. This is important to meet the requirements of stakeholders, including donors, government agencies, investors, and the public. The purpose of the study is to identify the areas of grant funds reporting in accordance with international financial reporting standards. The study found that many organisations receive grants from various sources, and this may include funds from governmental organisations and international donors. Accounting for grants helps ensure compliance with the terms and conditions that accompany the grant. Grants accounting helps organisations to effectively manage financial resources provided for specific projects or programmes. This ensures the efficient use of funds and the achievement of planned results. In addition, Grant Accounting allows you to evaluate the results and impact of projects that have been funded by grants. This helps organisations and donors understand how successful their investments have been. In general, grant accounting is important for the financial stability, transparency, and efficiency of grant-receiving organisations. It helps ensure effective management of financial resources and fulfilment of obligations to donors and other stakeholders.

Globalization and Economic Growth in Nigeria

The study examined globalization and economic growth in Nigeria from 1985 to 2021. The objectives of the study are to; determine the impact of financial openness on economic growth in Nigeria; examine the effect of the net exports on economic growth in Nigeria; and examine the impact of exchange rate on economic growth in Nigeria. Annual data was collected from Central Bank of Nigeria statistical bulletins and World Development Index. The technique of Autoregressive Distributed Lag (ARDL) model was used to analyze the data. The empirical results showed that in the long run, all the variables of globalization have positive and significant relationship with economic growth in Nigeria during the period of study. In the short run, both financial openness and exchange rate have positive relationship with economic growth in Nigeria. But net exports have negative impact on economic growth in Nigeria. Based on these findings, it was concluded that, to a great extent economic globalization significantly accelerate economic growth in the longrun in the Nigerian economy. Based on these findings, it was recommended that, there should be creation of conducive environment to encourage openness of trade through inflow of investment that will trigger economic growth. Similarly, depreciation of the exchange rate which is an indicator of global price could be an obvious instrument that helps to drive the growth process in the Nigerian economy.

Analysis of the Path and Countermeasures for the Central Bank's Digital Currency to Boost the Internationalization of the RMB

In order to meet the needs of China's economic development and international trade, and to prevent potential risks arising from the international monetary system dominated by the US dollar, China officially began the process of RMB internationalization in 2009. However, in the process of development, it faces obstacles caused by factors such as US dollar hegemony and limited financial openness in China. In recent years, China has further developed the internationalization of the RMB and achieved significant results. Among them, the issuance of the Central Bank's Statutory Digital Currency (DC/EP) in 2020 has brought a new upgrade to the RMB. As an emerging circulation method, the digital RMB has the advantages of efficiency, convenience, centralized management, and information recording, bringing a new development to the internationalization of the RMB. It can be foreseen that with the development of China's economy and technology, the digital RMB will play an important role in future development. This article aims to analyze the current development status of RMB internationalization, explore the opportunities and challenges brought by the issuance of legal digital currency by the central bank to the development of RMB internationalization, and propose corresponding countermeasures and suggestions.

Capital flight and the real exchange rate: evidence from resource scarce MENA countries

ABSTRACT We analyze the determinants of capital flight in three resource scarce MENA countries namely Egypt, Morocco, and Tunisia. Our methodology involves both the linear and nonlinear autoregressive distributed lag (ARDL) cointegration approaches, with a focus on asymmetric relationships between capital flight and the real exchange rate, to distinguish the impact of real appreciation and depreciation of domestic currency on capital flight. The results based on nonlinear ARDL approach using annual data between 1977 and 2019 indicate that in Egypt, financial openness is negatively related with capital flight, while real depreciation seems to increase it in the long run. Our findings also reveal that the real GDP growth rate, institutional quality as well as inflation are important factors affecting capital flight in Morocco, whereas financial openness and the real exchange rate influence capital flight significantly in Tunisia.

Do global and local economic policy uncertainties matter for systemic risk in the international banking system

Using panel data from 60 countries spanning from January 2006 to December 2021, we investigate how economic policy uncertainties (EPUs) affect two subcomponents of systemic risk (systemic linkage and individual risk), and differentiate the influences resulting from global and local EPU shocks. Our findings demonstrate that increased global shocks result in higher systemic linkages, while domestic uncertainties significantly contribute to individual risks. Cross-border bank loans and non-performing loans serve as the channels through which EPUs induce cascading effects. Moreover, heterogeneity analysis reveals the roles of financial openness and financial development in shaping the EPUs–systemic risk nexus.

South Africa’s interest rate behaviour: Investigating the influence of the indicators of financial openness

This study seeks to investigate the influence of financial openness variables on South Africa’s interest rate during the period between1980-2020. The study used both Augmented Dickey-Fuller (ADF) and Philip-Perron (PP) tests to determine the order of integration of the variables, while the autoregressive distributed lag (ARDL) bounds test was used to investigate both the short and long-run impact of the independent variables on the dependent variable. The findings of the study revealed that in the short-run both foreign direct investment (FDI) inflows and FDI outflows impacted the interest rate positively. However, portfolio investment, exchange rate and capital account openness did not have any significant impact on interest rate within the duration of this research. The long-run results revealed that FDI inflows had a positive and significant impact on interest rate. Also, while capital account openness had a significant and positive impact on the interest rate, FDI outflows, portfolio investment, and the exchange rate had no significant impact on interest rate. The study concludes that apart from portfolio investment which did not exert significant impact on interest rate, other financial openness indicators used in the study had a significant impact on South Africa’s domestic interest rate. The paper argues that, appropriate monetary policy measures targeted to lessen the monetary impact of excess capital inflows should be considered. Additionally, capital account liberalization policy should be encouraged, but it needs to be regulated if it places an excessive amount of liquidity pressure on the economy.

How does financial openness affect pollution emission of industrial enterprises?—Empirical evidence from the entry of foreign banks in China

AbstractCurrently, the effects of financial openness (FO) on the environment have not been assessed at the micro level of enterprises. This article uses the difference‐in‐differences method to explore the pollution abatement effect of FO. The results show that FO can effectively promote pollution abatement with a significant environmental performance enhancement effect. In addition, the pollution abatement effect of FO is stronger in large, heavy industrial, and state‐owned enterprises. Besides, FO significantly alleviates financing constraints and promotes the pollution abatement by driving R&D investment and strengthening the intensity of end‐of‐pipe treatment. Policy recommendations are given to steadily expand the FO pattern, improve the financial disclosure system of small and medium‐sized enterprises, and optimize subsidies for increased R&D investment to stimulate pollution abatement. A reference for other emerging economies, especially transitioning economies, is provided to fully utilize the financial system under construction or improvement to realize the value of pollution control.

GLOBALIZATION AND ECONOMIC GROWTH IN NIGERIA

The study examined globalization and economic growth in Nigeria from 1985 to 2021. The objectives of the study are to; determine the impact of financial openness on economic growth in Nigeria; examine the effect of the net exports on economic growth in Nigeria; and examine the impact of exchange rate on economic growth in Nigeria. Annual data was collected from Central Bank of Nigeria statistical bulletins and World Development Index. The technique of Autoregressive Distributed Lag (ARDL) model was used to analyze the data. The empirical results showed that in the long run, all the variables of globalization have positive and significant relationship with economic growth in Nigeria during the period of study. In the short run, both financial openness and exchange rate have positive relationship with economic growth in Nigeria. But net exports have negative impact on economic growth in Nigeria. Based on these findings, it was concluded that, to a great extent economic globalization significantly accelerate economic growth in the long-run in the Nigerian economy. Based on these findings, it was recommended that, there should be creation of conducive environment to encourage openness of trade through inflow of investment that will trigger economic growth. Similarly, depreciation of the exchange rate which is an indicator of global price could be an obvious instrument that helps to drive the growth process in the Nigerian economy.

Analysis of inclusive growth in ASEAN countries

There are 17 goals to achieve sustainable development in Sustainable Development Goals (SDGs) adopted by the United Nations. One of SDG that promote inclusive and sustainable economic growth is SDG number 8. Sustainable economic growth seeks to achieve goals that support the process of economic development. Inclusive growth is sought to support the process of economic growth and economic development to prevent future generations from suffering depletion of resources. The effort to achieve inclusive growth in line with the Sustainable Development Goals (SDGs). ASEAN was formed as an integration of any counties as a result of globalization,. The integrated economies of ASEAN countries form economic liberalization, giving rise to economic openness. The manifestation of economic openness is trade openness and financial openness. The panel regression method is used to see the effect of economic openness and macroeconomic variables on economic growth as a proxy for inclusive growth. The results found that inflation and unemployment as macroeconomic variables had a significant negative effect on economic growth. It means to achieve the inclusive growth; the ASEAN countries should keep the inflation stable and low unemployment rate.