Intraregional Linkages Research Articles

Does volatility transmission between stock market returns of Central and Eastern European countries vary from normal to turbulent periods?

AbstractThis study investigates the transmission mechanism of price and volatility spillovers across the Budapest, Warsaw, Prague, Bucharest, and Zagreb stock markets in the pre- and post-financial crisis periods under the framework of the multivariate Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) model. By using daily closing prices, the results highlight certain interesting findings. I found evidence of price spillovers of the intraregional linkages among the stock price movements in five countries. This analysis shows the existence of bi-directional volatility spillovers between stock markets of the Czech Republic and Croatia in the pre-crisis period, and between Hungary and Romania in the post-crisis period. Also, there are significant volatility spillovers from Croatia to Poland and from Poland to the Czech Republic during two periods. The volatility is found to respond asymmetrically to innovations in other markets. The findings also indicate that the stock markets are more substantially integrated into crisis, as well as the persistence of volatility spillovers between the stock markets increases, and the financial stock markets become more integrated after the crisis period.

Comments on Economic Integration and Network Trade: A Comparison of East Asia and the European Union

Prema-chandra Athukorala, Australian National University: This paper undertakes a comparative analysis of production networks in Europe and East Asia in the global context, with emphasis on determinants of export patterns and intra-regional linkages. The findings suggest that: exports of intermediate goods (used as a proxy for parts and components or “middle products” exchanged within production networks) are more sensitive to trade barriers than total goods exports; regionalization of production networks is primarily determined by greater sensitivity of intermediate goods trade cost associated with distance that overwhelms cost advantages arising from advances in transportation and communication technology; and the production network in these two regions are being guided by distinct factors with geographic distance and remoteness playing a more significant role in East Asia than in the EU. Overall, this is an interesting paper on an important subject. However, I would like to suggest that the authors pay attention to the following methodological imitations in their further research.Trade within global production networks (“network trade”) is based on “global production sharing”—breakup of the production process of a given product into vertically separated stages/tasks carried out in several countries. Therefore, network trade essentially has two components: trade in parts and components (involving the “middle layer” of the production process) and trade in final assembly (Jones and Kierzkowski 2001; Obashi and Kimura 2018). The empirical analysis of this paper uses “intermediate goods” (delineated using the UN Broad Economic Classification Broad Economic Categories [BEC] at the 3-digit level of commodity classification) rather than parts and components and completely ignore final assembly.BEC-based intermediate goods include both parts and components and the standard intermediate goods such as iron and steel, industrial chemicals, and metal products. These two categories of intermediate goods have different characteristics as traded goods. Unlike standard intermediate goods, which are normally traded based on market-determined prices, trade in parts and components are mostly characterized by “relationship specificity” among the user firms (Athukorala and Khan 2016). Therefore, the former is not a good proxy for latter. In addition, data relating to intermediate goods (based on the BEC classification) significantly overstate the magnitude of bilateral trade links within global production networks of resource-rich countries, such as Malaysia and Indonesia.According to my calculations, final assembly accounts for 53.2 percent of total world network exports in 2006–07 (two-year average) (Athukorala 2014). More importantly, this share varies notably among countries: For instance, final assembly bulks large in network exports from China because it is the world's finally assembly center, where as parts and components (mostly exported to China) account for much of networks exports from the other countries in the region. Given this fundamental structural feature of production sharing, ignoring final assembly significantly underestimate the relative importance of network trade in global manufacturing but also the underestimation bias varies significantly among countries, giving rise to a bid problem in econometric analyzing of trade patterns using multi-country data, as has been done in this paper.I believe that the finding of this paper relating to regional rather than global integration of East Asian production networks is a statistical artefact resulting from the omission of final assembly from the commodity coverage of network trade. China accounts for more than half of final assembly exports from the region and more than 70 percent of these exports are to markets in North America, Europe, and the rest of the world. If network trade is measured appropriately, capturing both parts and components and final assembly, you will find a China-centered global (rather than regional) production network in Asia. The other Asian countries export parts and components to China, and China exports final assembly largely to the rest of the world.The empirical analysis of the paper is a direct application of the gravity equation specified by Anderson and van Wincoop (2003) to analyze determinants of “total” trade flows. No attempt has been made here to modify it to suit analyzing trade flows within global production networks informed by the theory of global production sharing (Jones 2000; Jones and Kirzkowski 2001; and many other papers). The “missing prince from Hamlet” is the “lead firm” (multinational enterprise [MNE]). There is no variable in the model to capture the pivotal role of MNEs within production networks. The standard variable used for this purpose is foreign direct investment. The production location decision of the lead firm is determined by the “relative cost” (mostly relative wages) among countries and the “service link cost” associated with undertaking different tasks of the production process and smoothly linking/coordinating these tasks. There is no relative cost variable in the model. I think per capital gross national income is a reasonably good proxy, if data on manufacturing wages are not available. Inclusion of most of the other variables (distance, remoteness, colonial links, RTAs, common language) can be theoretically justified as capturing “service link cost.”

Oil in the West African Transform Margin: Dangers and Possibilities

ABSTRACTThe West African Transform Margin (WATM) is the new centre of oil exploration in Africa. Less is known about its experiences and more work is needed to unearth them. Viewed through the eyes of Frantz Fanon, Aimé Césaire, and Walter Rodney, the available evidence shows not only the persistence of grave limiting dangers about the colonial economic structure in this subregion but also major possibilities about inter- and intra-regional linkages. A strategy of alternative indigenous regional vision that de-emphasises economic growth and stresses autonomy, distribution, and energy sovereignty is shown to be workable, and superior to the status quo. How to make the transition will be challenging but the effort is worth making for by doing so the region will take control and direction of its resources, to plan, to develop, and to manage them, and hence to free itself from the debilitating shackles of the unjust economic order of the world system.

On City-Region Relations. Towards the Urban-Rural Region of Warsaw

Since 1989 Warsaw [Warszawa] has been marked by considerable functional change, accompanied by modernisation of its physical tissue. Yet, there are some factors that can retard Warsaw’s future development. Among them, the most important appears to be the persisting social and economic disparities between the city and its surrounding region. This problem is discerned in strategic spatial policy documents and tends to be addressed in two ways: One of these aims at the generation of spill-over of economic activity towards the peri-urban zone and an enlargement of the city labour market via investment in transportation infrastructure. Another approach is to promote functional polycentricity at the regional level by focusing on the development of the so-called sub-regional centres – several medium-sized cities situated within the radius of ca. 100–120 kilometres from Warsaw, with the goal of strengthening interurban, intra-regional linkages. In this paper some limitations of the above-mentioned approaches are exposed, and an alternative path for the evolution of the city-region relations is outlined, based on the concept of the urban-rural region. This concept emphasises the importance of environmental assets as factors in attracting migrants and economic activities including knowledge- intensive functions to peripherally situated, smaller urban and rural places. In the case of the Region of Warsaw with its extensive, amenity-rich rural countryside, such a development perspective may seem especially relevant. Against this background, in the paper some results are presented and interpreted that are derived from a research project conducted by the author focusing on the development of cultural-cognitive functions in selected small and medium-size towns in the Region.

Asset price volatility and financial contagion: analysis using the MS-VAR framework

This paper investigates volatility linkages and financial contagion via the asset price channel from the US and Europe to East Asia during the 2007–2011 global financial crisis. Following crisis contingent theories, financial contagion is modeled as the structural change in transmission mechanism after a shock in one country (shift-contagion). Using Markov-switching vector autoregression and multivariate unconditional correlation tests, this study not only addresses the theoretical assumptions about multiple equilibria and nonlinear linkages, but also handles the problems of heteroskedasticity, endogeneity, simultaneous equations and sample selection bias. The empirical results show a significant nonlinear dynamic behaviour of asset returns and volatility interactions across-countries. The volatility spillovers from the US and Europe to East Asian financial markets were mainly caused by fundamental links, apart from in Thailand, which experienced shift-contagion caused by investor behaviours. There is also evidence of the intensified intra-regional linkages in the event of an external shock.

Regional Aspects of Collaborative Invention Across National Innovation Systems

This article analyzes the association between intraregional collaboration and levels of invention in nine developed countries. Patent data of the Organization for Economic Co-operation and Development (OECD) regions of nine inventive countries are used to determine if a significant positive correlation exists between reliance on own region partners and overall invention. Strong intraregional collaboration is also related to the knowledge bases of technologies and to the tendency for inventors to team up in the first place. Results show strong evidence that inventors in highly inventive regions co-patent more with own region partners and that they have a greater tendency to collaborate in the first place. Support for the hypothesis that information and computer technologies favour own region collaboration and that more biotechnology invention encourages external alliances is mixed. However, there is far less evidence that more biotechnology invention encourages more external alliances. Variation in the results between countries is interpreted as evidence that national innovation systems have distinctive internal locational attributes. The findings refute the assertion that strengthening aspatial network proximities has eclipsed the pivotal role of intraregional linkages in technological advance.

Globalization and response of large statedowned enterprises in agricultural related industries: Company case studies from central China

By using interview data from three large state-owned enterprises (SOEs) in agriculture related industries, this paper reveals that SOEs in inland area are much slow in response to globalization. Although they pursued some strategies to adjust themselves, they are far behind the position to utilize the opportunities generated by economic globalization. Most of them are still out of the networks of transnational corporations. The strategies they adopted are quite different from SOEs in the coastal area. They overlook the importance of information infrastructure, well-educated personnel, and collaboration with the competitive leaders in their industries. The lagging situation is related to isolated location, traditional culture, and slow progress in enterprise reform. International comparison shows that the case companies did follow the general patterns that globalization promotes extension of company’s networks of linkages but in a rather slow phase. The decision makers should encourage intra-regional linkages between SOEs, between SOEs and private, foreign owned companies, as well as inter-regional linkages among them. The latter appears particularly important given the enlarging gaps between coastal and inland areas.

Innovative Linkages and Proximity: Empirical Results from Recent Surveys of Small and Medium Sized Firms in German Regions

STERNBERG R. (1999) Innovative linkages and proximity: empirical results from recent surveys of small and medium sized firms in German regions, Reg. Studies 33 , 529-540. Recent theoretical discussion about modern approaches to explaining knowledge-based regional development in terms of industrial district, innovative milieu and network hypotheses emphasizes the importance of intraregional linkages between innovative actors. Among these, innovative firms and research institutions are regarded as most important for influencing regional economic development by intraregional linkages. This paper supplies databased research by analysing several comprehensive surveys in three German regions. It focuses on the role that spatial proximity of partners plays in the establishment of innovative linkages between manufacturing SMEs and other actors, such as research institutions, customers and suppliers. The results in general confirm the hypothesis of strong and increasing intraregional linkages between innovative actors. However, some of the empirical findings regarding industrial districts like Baden do surprise. STERNBERG R. (1999)Innovation maillée et proximité: des résultats empiriques provenant des enquêtes récentes auprès des Petites et moyennes entreprises situées dans les régions d'Allemagne, Reg. Studies 33 , 529-540. Le débat théorique récent sur les façons d'expliquer, de nos jours, le développement régional fondé sur les connaissances à partir des hypothèses sur les zones industrielles, les technopoleset les réseaux, souligne l'importance d'un maillage intrarégional des acteurs de l'innovation. Dont les entreprises innovatrices et les instituts de recherche s'avèrent les plus importants pour le développement économique régional à partir des maillages intrarégionaux. Cet article fournit des résultats empiriques provenant de plusieurs enquêtes détaillées menées dans trois régionsd'Allemagne. Il porte sur le rôle que joue l'aproximité spatiale des partenaires dans le tissage de l'innovation maillée entre Pmi et autres acteurs, tels les instituts de recherche, les clients et les fournisseurs. En général, les résultats viennent à l'appui de l'hypothèse de maillages intrarégionaux forts et croissants entre les acteurs de l'innovation. Toujours estil que certains des résultats empiriques relatifs aux zones industrielles, Baden par exemple, sont étonnants. STERNBERG R. (1999) Innovative Verflechtungen und räumliche Nähe: Empirische Ergebnisse jüngerer Untersuchungen kleiner und mittel großer Unternehmen (KMU) in deutschen Regionen, Reg. Studies 33 , 529‐540. Aktuelle Erklärungsansätze wissensbasierter Regionalentwicklung wie der Industriedistriktansatz, die innovativen Milieus oder die Netzwerkhypothese betonen die Bedeutung intraregionaler Netzwerke von Innovationsakteuren. Dabei werden innovative Unternehmen und Forschungseinrichtungen zu den wichtigsten Innovationsakteuren gezählt, sofern es um den Einfluß intraregionaler Verflechtungen auf Regionalentwicklung geht. Der Beitrag basiert auf umfangreichen Erhebungen in drei deutschen Regionen. Er konzentriert sichauf dieRolle, diedieräumliche Nähevon Kooperationspartnern für die Entwicklung von innovativen Verflechtungen zwischen KMU des Verarbeitenden Gewerbes und anderenPartnertypen wie Forschungseinrichtungen, Kunden oder Zulieferern spielt. Die Ergebnisse bestätigen im wesentlichen die Hypothese einer starken und zunehmenden Bedeutung intraregionaler Verflechtungen zwischen den Innovationsakteuren. Allerdings überraschen manche der empirischen Resultate, beispielsweiseim Zusammenhang mit dem vermeintlichen Industriedistrikt Baden.

Rural-urban interdependencies: Analysis using an inter-regional SAM model

An inter-regional SAM-based model is used to analyse the nature of interdependencies within and between rural and urban areas in Grampian, North East Scotland. Through multiplier decomposition, the relative importance of inter- and intra-regional linkages is investigated. The results suggest that the magnitude of inter-regional feedback effects between the rural and urban areas is small, with both areas 'leaking' benefits from increased industrial activity to the rest of the world. However, attention is drawn to the reliance of urban industries an rural households for the provision of factor services as well as a source of final demand. The results suggest the need to broaden analysis of rural economies beyond production-related linkages. Copyright 1998 by Oxford University Press.

Yung Chul Park: East Asian Liberalization, Bubbles, and the Challenge from China

FOR THE PAST ten years, the economic growth and industrialization of many East Asian countries has been impressive by any measure of performance. I The newly industrializing economies (NIEs) and China have sustained exceptionally high rates of growth, ranging from 6.1 percent in Hong Kong to 10.2 percent in China. Equally impressive has been the extent to which these countries have been able to pursue economic integration among themselves, while also deepening their trade and financial relations with the rest of the world. Intraregional trade as a share of the region's total trade jumped from 31.4 percent in 1984 to 42.2 percent in 1994. Under the auspices of the Asia Pacific Economic Cooperation (APEC), these countries have committed to a rather ambitious schedule of trade liberalization with the goal of free trade in the region by 2020, without forming an economic bloc. A number of recent studies also suggest that financial flows between East Asian countries have risen markedly in recent years, thereby allowing their financial markets to forge stronger intraregional linkages and gradually to become integrated into the markets of North America and Europe.2 The economic growth and integration of East Asia is largely the result of the sweeping economic, social, and political changes that have taken place over the past decade. Two developments stand out as the main driving forces. The first is the widespread acceptance of liberal economic policies that have accelerated the process of trade and financial liberalization. Notwithstanding their continuing trade disputes with Europe and North America, most of the East Asian countries have managed to lower tariff rates and invisible trade barriers substantially and to deregulate and open up domestic capital markets. The opening of local financial markets has been instrumental in East

Die Konzepte der flexiblen Produktion und der Industriedistrikte als Erklärungsansätze der Regionalentwicklung

Summary: The concept of flexible production and indus trial districts and their applicability as theories of regional development According to the theories of flexible production/specia lisation and strongly connected industrial districts, a new wave of economic growth is being led in a number of regions in advanced economies by spatially concentrated networks of mostly small and medium sized enterprises, normally using flexible production technology and charac terized by extensive local inter-firm linkages. On the basis of the relevant literature, this paper tries to assess the value of both concepts regarding their applicability as theories of regional development. Three criteria are used to evaluate the concepts. First, causality is investigated concerning their basic hypotheses. Second, we ask, whether the basic hypotheses are transferable to all industries and types of regions. In order to test for empirical validity, a third group of aspects will be discussed around the ques tion of quality and quantity of empirical studies upon industrial districts. Fourth, the potential for policy conclu sions is in the centre of interest. Both concepts are valuable because they combine mainly well-known hypotheses from economic theory (e. g., loca lisation and urbanisation effects) and social sciences (cul ture, embeddedness, and common historical background as reasons for firm growth and intra-regional linkages) in a new kind of concept of regional development. In addi tion to that, they take into account the steadily growing importance of networks and flexibility in production pro cesses. However, three main deficiencies considerably decrease their value as regional development concepts. First, essential hypotheses like the local dominance of innovative networks and the comparative advantages of SME within these networks have to be characterized as yet unproved. Second, flexible economies in the sense of industrial districts are the exception to the rule of econo mies dominated by large companies integrated into inter national and global networks. Finally, in the respective literature promising regional development policies, based upon industrial district theory, are difficult to find.

Corporate Dominance of Manufacturing in Appalachia

EOGRAPHERS and planners have become increasingly aware that the location of a manufacturing operation in a rural area does not necessarily result in long-term economic growth in the area.1 Community leaders of small towns and rural places, however, expect increases in manufacturing to create economic advancement in places close to the new manufacturing plants.2 They panticipate that new manufacturing operations will bring additional revenue to the town coffers, will increase business in the retail and service sectors, will provide employment for local people, and will encourage other manufacturing plants to locate nearby. Support for the conventional notion that manufacturing means growth comes from traditional theories in regional economics, which purport that a new industrial enterprise will entice other factories to locate nearby for the exchange of inputs and outputs and will employ people who, in turn, will spend their wages in local retail outlets.3 Although this sequence of events is supposed to establish an advanced economic environment, the character of manufacturing activity in certain rural places works against long-lasting economic advancement.4 Manufacturing in rural areas often generates little intraregional exchange of revenue and resources because plants are attached to other places throughout the nation.6 A case study of one rural area in Appalachia shows that the corporate and input-output linkages of forty-nine establishments extend beyond the rural area and regional centers to the detriment of the area. In this rural study area, most manufacturing operations obtain inputs largely from the core of the nation and from the Piedmont of the South. Marketing of retail and industrial outputs is largely linked to the core. The core in this study consists of the Northeast and Midwest, as defined by the Census Bureau.6 As this study further shows, geographical linkages to the core are strongly influenced by small consumer-industrial markets and by few complementary industries in the rural area, coupled with corporate affiliation. Partly because of the dominance of national corporations over their branch plants, manufacturing operations never stay long enqugh to establish intraregional linkages. As a result of the external character of industry in the rural area, long-lasting economic gains through an intraregional exchange of manufactured products are minimized. The rural area of Appalachia therefore maintains its low income levels under this form of corporate dominance.7