Large Asian Economies Research Articles

The asymmetric impact of oil market shocks on the time-varying connectedness and spillover of financial stress

ABSTRACT Applying a novel time-varying parameter VAR (TVP-VAR) extended joint connectedness approach this study first examines the connectedness and spillover of financial stress among twelve large Asian economies. The finding shows that the usually high connectedness of the financial stress among these economies was further elevated during the Asian financial crisis and global financial crisis but not significantly during COVID-19 pandemic. The direction of spillover depends on the level of economic development. Developed economies such as South Korea, Singapore and Hong Kong are significantly net transmitters of financial stress to other Asian economies whereas countries such as Pakistan and Indonesia are significantly net receivers. Applying linear and non-linear Markov-switching models this study further examines the impact of oil-supply, and consumption- and speculation-led oil-demand shocks on the dynamic connectedness of financial stress indexes. In the linear model only a speculation-led increase in demand for oil increases the connectedness. However, the Markov-switching model reveals that in the high-volatility regime all types of oil shocks influence the connectedness of the financial stress among these economies. This emphasizes the elevated role of oil market in transmitting financial stress across economies during the time of economic turmoil.

Four great Asian trade collapses.

This paper introduces a new dataset of commodity‐specific, bilateral import data for four large Asian economies in the interwar period: China, the Dutch East Indies, India and Japan. It uses these data to describe the interwar trade collapses in the economies concerned. These resembled the post‐2008 Great Trade Collapse in some respects but not in others: they occurred along the intensive margin, imports of cars were particularly badly affected, and imports of durable goods fell by more than those of non‐durables, except in China and India which were rapidly industrialising. On the other hand the import declines were geographically imbalanced, while prices were more important than quantities in driving the overall collapse.

The monetary policy during shocks: an analysis of large Asian economies’ response to COVID-19

The economies all over the world that have been adversely affected by the COVID-19 pandemic have recently started to devise different strategies to mitigate its consequences. Therefore, in order to dwell deeper into the measures taken by the policy makers around the world, this paper specifically analyzes how the monetary policies have been devised, in response to COVID-19. For this purpose, this paper has taken into consideration a panel of 8 Asian economies that have been affected the most acutely by the virus, have faced multiple lockdowns, and have also experienced other economic restraints, due to this very phenomenon. In order to compare the possible monetary policy options, and their outcomes during the COVID-19 pandemic, this paper refers to the global recession shock, as a valid point of reference. In addition to this, in order to gain access to the empirical evidence, the ARDL methodology has been applied on the quarterly data from 2005Q3 to 2020Q3. The results of the study have indicated that various plans have been taken into consideration, so as to lessen the consequences of these shocks that have trickled down into the respective economies of these countries. That is to put forth that, in the incidence of global recession, the monetary authorities have resorted to a less prudent stance. Whereas, more flexibility, through a persistent decrease in the policy rate has been observed since the pandemic first hit the world. In this regard, our results imply that a successful, efficient and effective response to the economic consequences of COVID-19, would ideally entail a set of remedial policies and structural reforms.

A comparative analysis of environmental quality and Kuznets curve between two newly industrialized economies

PurposeDue to large amounts of coal burning, huge carbon dioxide emission and poor environmental quality, it is important to identify whether environmental Kuznets curve exists in China and India since in downward period of environmental Kuznets curve, economic growth in these countries will largely contribute to world environmental quality. Further, it helps to make a comparative analysis between China and India on how economic growth will contribute to the environmental quality in both upward and downward period of environmental Kuznets curve due to energy consumption.Design/methodology/approachThis study uses the data of carbon dioxide emission, per capita GDP and energy consumption from 1972 to 2017 to identify individual and panel-level environmental Kuznets curve of China and India. Before going to regression and causality analysis, unit root and cointegration tests are performed.FindingsThis study finds the existence of environmental Kuznets curve in China and India at both individual and panel level. Further, due to high energy consumption, environmental quality in China will deteriorate at a lower rate in the long run than that of India. Next, the increase in economic growth or per capita GDP in the long run will deteriorate environmental quality at a lower rate in China than that of India. Besides, with the zero level of energy consumption and per capita GDP, the environmental quality of China will be worse than that of India. However, increase in per capita GDP after threshold level will improve environmental quality in India at a higher rate than that of China.Research limitations/implicationsIt helps to formalize the comparative relationship between the two large Asian economies by knowing the influence of economic growth on environmental degradation due to energy consumption. However, this study cannot conclude exactly when China and India can avail the downturn in environmental Kuznets curve.Originality/valueIt firstly establishes a link among energy consumption, economic growth and environmental quality between China and India including comparative pace in both upward and downward period of environmental Kuznets curve.

Analýza relativní přeinvestovanosti či podinvestovanosti ekonomik na panelových datech 122 zemí světa

The aim of this paper is to evaluate relative over-investment or under-investment of economies. To achieve this, we build a panel regression for 122 countries, where rates of investment and capital-output ratios are explained by key fundamental variables stemming from the theory in Chapter 1. We present implied-equilibrium values for both variables and all the countries in the sample. Countries of the former Soviet Union, the USA and Germany, for example, were identified as relatively underinvested. Large Asian economies such as China, India and Indonesia, and some countries of Latin America and Africa appeared to be overinvested. No significant imbalance was identified for Czechia, Slovakia and Hungary, while Poland showed to be rela- tively underinvested.

The size and growth of firms: new evidence on law of proportionate effect from Asia

PurposeThis paper aims to investigate the relationship between firm size and growth under the framework of Law of Proportionate Effect (LPE) for Asian firms.Design/methodology/approachAn unbalanced panel data for about 12,001 unique non-financial listed and active firms from 1995 to 2016 for 12 industrial and emerging Asian economies was examined. Total assets and net sales were used as size variables. Firm-specific variables such as return on equity, leverage and liquidity ratio were used along with macroeconomic variables such as GDP growth and two financial development indicators. The fixed effects and random effects approach were used to estimate the dynamic growth model after taking into account econometric issues such as correlation between the cross-country-specific error component and the regressors and heteroscedasticity.FindingsThe estimated coefficient of firm size was found to be always significant and negative rejecting the Gibrat’s law for Asian firms confirming that the small-sized firms are growing faster than larger-sized firms. Also, the persistence of growth coefficient suggested that a positive persistence of firm growth does not exist for the selected Asian firms. Gibrat’s LPE was also rejected across small, medium- and large-sized companies. For the aggregate sample, the coefficient of leverage was found to be negative and significant, whereas liquidity ratio, GDP growth, banking sector and stock market variables are found to have positive and significant relationship with growth of firms. For individual economies, a mix of positive and negative (significant and insignificant) estimated coefficient was observed.Practical implicationsAt macro-level, the examination of firm growth is likely to have significant policy implications for the regulators and various government agencies as firm growth may increase economic activity in general and employment opportunities in particular. The policymakers can control economic and employment activity by designing specific firm growth policies. At micro-level, the study will have significant implications for managerial decision-making.Originality/valueTo the best of the authors’ knowledge, this is one of the first studies to test the validity of Gibrat’s LPE for large Asian economies and firms using recent data under a dynamic growth framework using firm-specific and macroeconomic variables. Also, persistence of growth of firms under LPE (that growth does not persist from one period to the next) is uniquely examined for Asian firms.

Current trends and policies of energy consumption and CO<SUB align="right">2 emission from the largest Asian economies

This article presents the current trends of energy consumption and CO2 emission as well as their relationship for the five largest Asian economies i.e., People's Republic of China (China), Japan, India, Republic of Korea (South Korea) and Indonesia using the time series data from 1991 to 2014. The total energy consumption has increased by 3.62 times from 1991 to 2014 in China where India, Korea and Indonesia have faced more than double of their energy consumption during that time. However, total CO2 emission in China, India, Korea and Indonesia was increased by 3.5, 2.81, 2.25 and 3.14 times respectively from 1991 to 2014. All the countries except Japan are facing increasing trends of energy consumption and CO2 emission while positive and significant relationship have found between them for all the countries. Thus, the implementation of current policies and emission reduction target of these five countries are presented in this paper.

Current Trends and Policies of Energy Consumption and CO2 Emission from the Largest Asian Economies

Current Trends and Policies of Energy Consumption and CO2 Emission from the Largest Asian Economies

Measuring the effects of dollar appreciation on Asia: A FAVAR approach

Exchange rate shocks have mixed effects on economic activity in both theory and empirical VAR models. In this paper, we extend the empirical literature by considering the implications of a positive shock to the U.S. dollar in a factor-augmented vector autoregression (FAVAR) model for the U.S. and three large Asian economies: Korea, Japan and China. The FAVAR framework allows us to represent a country’s aggregate economic activity by a latent factor, generated from a broad set of underlying observable economic indicators. To control for global conditions, we also include in the FAVAR a “global conditions index,” which is another latent factor generated from the economic indicators of major trading partners. We find that a dollar appreciation shock reduces economic activity and inflation not only for the U.S. economy, but also for all three Asian economies. This result, which is robust to a number of alternative specifications, suggests that in spite of their disparate economic structures and policy regimes, the dollar appreciation shock affects the Asian economies primarily through its impact on U.S. aggregate demand; and this demand channel dominates the expenditure-switching channel that affects a country’s export competitiveness.

Measuring the Effects of Dollar Appreciation on Asia: A Favar Approach

Exchange rate shocks have mixed effects on economic activity in both theory and empirical VAR models. In this paper, we extend the empirical literature by considering the implications of a positive shock to the U.S. dollar in a factor-augmented vector autoregression (FAVAR) model for the U.S. and three large Asian economies: Korea, Japan and China. The FAVAR framework allows us to represent a country's aggregate economic activity by a latent factor, generated from a broad set of underlying observable economic indicators. To control for global conditions, we also include in the FAVAR a “global conditions index,” which is another latent factor generated from the economic indicators of major trading partners. We find that a dollar appreciation shock reduces economic activity and inflation not only for the U.S. economy, but also for all three Asian economies. This result, which is robust to a number of alternative specifications, suggests that in spite of their disparate economic structures and policy regimes, the dollar appreciation shock affects the Asian economies primarily through its impact on U.S. aggregate demand; and this demand channel dominates the expenditure-switching channel that affects a country's export competitiveness.

Bangladeshi Real Exchange Rates and Compettitive Positions in Export Markets Relative to the two Asian Largest Countries

An exchange rate system is important for a country to maintain economic stability. The objective of this study is to calculate the real exchange rate between Bangladeshi taka-Chinese renminbi and taka-Indian rupee to analyze the Bangladeshi competitive positions in the bilateral export markets with her two largest trading partners in Asia. Empirical results suggest that the Bangladeshi inflation rate is relatively higher than that in the People’s Republic of China but relatively lower than inflation rate in India, particularly since 2009. However, takarenminbi and taka-rupee real exchange rates were consistent with the predictions by the Purchasing Power Parity theory, whereby reserving Bangladesh’s relative competitive positions in export markets with the two largest Asian economies over a period during which many extraordinary events—political, economic, and otherwise—occurred both in Asia and throughout the world.

In the Passing Lane

“Of the large Asian economies, India probably will be the fastest growing over the next decade,” says Punita Kumar-Sinha, CFA.

Trade openness and technical efficiency in Brazilian agriculture

This study is conducted (1) to examine the possible link between increased trade openness and technical efficiency in Brazilian agriculture and (2) to contribute to the scholarly debate in the literature by measuring the impact of trade openness on technical efficiency. The analysis is conducted by using the Stochastic Frontier Analysis (SFA) method. Our results indicate large and significant impact of capital, and lesser but significant impact of labour on sectorial output, while expanding farmland would not increase the output. The estimates of trade openness are not statistically significant, indicating that it does not impact technical efficiency. Trade liberalization as an underlying motive for increasing technical efficiency does not exist based on our results. The primary markets for Brazilian agricultural commodities are still the domestic markets, which are still relatively well protected from foreign competition. This implies that domestic producers are not forced to use existing inputs more efficiently given the relative lack of competition domestically and enlarged foreign markets expanding primarily in the booming and large Asian economies.

Trans-Pacific Economic Relations and US-China Business Cycles: Convergence within Asia Versus US Economic Leadership

This paper tests the hypothesis that the links and leadership/dependency relationships between the People’s Republic of China (PRC), the United States (US), and the other large Asian economies have changed over the past 20 years with the industrialization of the PRC economy. We use time-varying spectral methods to decompose the links between seven advanced Asian economies and the US. We find: (a) the links with the US have been weakening, while those within a bloc based on the PRC have strengthened; (b) that this is not new — it has been happening since the 1980s, but has been partly reversed by the recent surge in trade; (c) that there are two blocs within the Asian economic area: one based on Japan and the Republic of Korea and the other on the PRC and her satellites; (d) that product composition is responsible for this division (and for some movement between the blocs); and (e) that the links between the PRC and the US are rather complex, with the US able to shape the cycles elsewhere through her control of monetary conditions, but the PRC able to control the size of the cycles at home and (to some extent) abroad.

Global Political Economy: Power, Labour, Politics

AbstractThis discussion examines the issue of globalisation in terms of the interaction of economy, politics and power. It begins by considering the claims implied by the language of globalisation. How extensive and inclusive is the global economy? The second section goes on to outline the broad geography of globalisation in terms of a balance of power that is both highly uneven but also subject to marked changes. While the global economy as this developed since the 1970s may have reproduced established patterns of colonial and post‐war economic power, in the current century, power is shifting away from these nineteenth‐ and twentieth‐century models to a new balance of regional power in which large Asian economies may dominate. Alongside these patterns of regional and national power, third, the discussion considers the uneven geography of capital and labour captured in models of an international division of labour that is organised by flows of capital investment but also of mobile workers. The final section offers an overview of the architecture of global politics, from the level of international institutions and nation‐states, to non‐governmental bodies that operate across borders to support or resist the workings of a global economy.

From fever to flu: The rhetoric of reporting Asia in a Swedish business magazine

In this paper some aspects of the stereotyping of China and Japan are explored by using a sample of articles from a Swedish business magazine. The main objective is to show how stereotypes are adapted to capture new developments in economy and technology. During the years of high hopes for the largest Asian economies, stereotypes proved to be far from timeless and unchanging. Also a large number of metaphors were used to express perceived similarities between East and West, further undermining tradi-tional Western understanding of Asia as inert and eternally different. The recent decline of Japan put an end to this, creating a return to a vocabulary of cultural characterisations and explanations.