Mena Stock Markets Integration: Pre and Post Global Financial Crisis

This paper examines the short‐ and long‐run linkages in pre and post global financial crisis among Middle East and North Africa (MENA) stock markets, between MENA and Chinese stock markets and also between MENA and developed (United States and United Kingdom) stock markets. Results indicate that both long‐run co‐integration relationships and short‐run causal linkages among MENA stock markets increased in post‐crisis than that in pre‐crisis sub‐period. The degree of integration between MENA and Chinese stock markets increased in post‐crisis than pre‐crisis. We also find that the degree of integration between MENA and developed (United States and United Kingdom) stock markets increased in post‐crisis than that in pre‐crisis. The presence of increased linkages among MENA markets, and between MENA and Chinese stock markets and also between MENA and developed (United States and United Kingdom) markets has important implications for portfolio investors and policy makers.     

Trade and Investment Linkages and Stock Market Long‐Run Relationship

This paper aims to examine whether the intensity of trade and investment linkages among the countries matter for their stock market long‐run relationship. To achieve this, we classify Australia's bilateral trade and investment partners into major, medium and minor. Empirical findings of an asymmetric generalised dynamic conditional correlation generalised autoregressive conditional heteroskedasticity model show that correlations are time varying and increased significantly during the global financial crisis (GFC). Results of multivariate cointegration test confirm the long‐run equilibrium relationship between the stock markets of Australia and its major partners in the pre‐GFC and during GFC. Based on the full‐sample results, it indicates that the GFC has segmented the stock markets from the long‐run equilibrium relationship. Granger non‐causality test results on full sample show that Australian stock market causes only the New Zealand market while the USA, the UK, Germany, Canada, Switzerland and Italy drives the Australian market. Our results therefore suggest that the intensity of bilateral trade and investment linkages among the countries matter for their stock markets' long‐term relationship.     

Endogenous Growth Models and Stock Market Development: Evidence from Four Countries

This paper re‐examines the relationship between stock market development and economic growth. It provides a theoretical basis for establishing the channel through which stock markets affect economic growth in the long run. It examines the hypothesis of endogenous growth models that financial development causes higher growth through its influence on the level of investment and its productivity. The empirical part of this study exploits techniques recently developed to test for causality in VARs. The evidence obtained from a sample of four countries suggests that investment productivity is the channel through which stock market development enhances the growth rate in the long run.     

How important is the stock market wealth effect on consumption in India?

We examine how shocks emanating from changes in the stock wealth affect the consumption demand in India using a Bayesian VAR framework. The effect of the stock market wealth shock on consumption demand in India is relatively small in magnitude. The estimates suggest that a 10% increase in the real stock wealth raises the consumption demand by 0.3%, which seems to be consistent with some empirical estimates for the emerging market economies given a relatively low share of stock wealth in the household asset portfolio and its asymmetric distribution. The stock market wealth effect being short run in nature does not have a large and persistent effect on consumption demand since consumers may not perceive the changes in the stock wealth to cause a permanent shift in their wealth.     

The Relationship Between Growth,Total Investment and Inward FDI: Evidence from Time Series Data

This paper explores the causal relationship between growth, total investment and inward FDI in 47 countries. Using error‐correction model, the significance, direction and sign of long‐run and short‐run causal effects between GDP, capital stock and FDI stock are investigated. The miscellaneous results echo the divergent theoretical viewpoints and the mixed empirical results of previous works. However, the evidence found in this study suggests that there are differences in growth mechanism between developed and developing countries, between various developing regions, and between oil‐exporting and non‐oil‐exporting countries. The main policy implication is that capital investment is essential for growth while FDI’s effect is uncertain in developing countries. FDI as well as total investment enhances growth only under some conditions.     

Shocks and rigidities as determinants of CEE labour markets’ performance

In this article, the impact of real wage, productivity, labour demand and supply shocks on eight Central and Eastern European (CEE) economies from 1996–2007 is analysed with a panel structural vector error correction model. A set of long‐run restrictions derived from the dynamic stochastic general equilibrium (DSGE) model is used to identify structural shocks, and fluctuations in foreign demand are controlled for. We find that the propagation of shocks on CEE labour markets resembles that found for OECD countries. Labour demand shocks emerge as the main determinant of employment and unemployment variability in the short‐to‐medium run, but wage rigidities were equally important for observed labour market performance, especially in Poland, Czech Republic and Lithuania. We associate these rigidities with collective bargaining, minimum wage, active labour market policies and employment protection legislation.     

DYNAMIC STOCK RETURN–VOLUME RELATION: EVIDENCE FROM EMERGING ASIAN MARKETS

This paper empirically examines the dynamic stock return–volume relations for six emerging Asian markets: Indonesia, Malaysia, Singapore, South Korea, Taiwan, and Thailand. Evidence is found that trading volume Granger causes stock return in quantiles and the causal effects of volume are heterogeneous across quantiles. This shows that volume carries some information to the return and could be interpreted in light of theoretical models. In addition, we find that there is bi‐directional causality between stock return and trading volume in most of the markets. The finding indicates that those Asian emerging markets with different institutions and information flows than more mature markets have present similar causal effects on the stock return–volume relation. Furthermore, the cross‐country evidence shows that the US market helps to predict the returns of the emerging Asian markets.     

Unemployment Invariance

Abstract. This paper provides a critique of the ‘unemployment invariance hypothesis’, according to which the behavior of the labor market, by itself, ensures that the long‐run unemployment rate is independent of the size of the capital stock, productivity and the labor force. In the context of an endogenous growth model, we show that the labor market alone need not contain all the equilibrating mechanisms to ensure unemployment invariance; in particular, other markets may perform part of the equilibrating process as well. By implication, policies that raise the growth path of capital or increase the effective working‐age population may influence the long‐run unemployment rate.     

A core–periphery framework in stock markets of the euro zone

The introduction of the euro was expected to have an effect not only on real convergence of economies but also on stock markets. This research compares the dynamics and synchronization of stock market regimes in European markets before and after the euro launch. Countries of the euro zone are found to have different dynamics with regard to switching between bull and bear markets, but the differences become less pronounced after the introduction of the single currency, increasing the overall level of stock market synchronization. Nevertheless, Austria and Portugal reduced the level of regime synchronization with other stock markets. The results delineate a framework of core–periphery stock markets, i.e., a large group of stock markets that share the same market regime, with some others on the periphery characterized by distinctive behavior.     

Currency crises and the stock market: empirical evidence for another type of twin crisis

We explore the dependency between currency crises and the stock market in emerging economies. Our focus is two-fold. First, the risk of a currency crisis rises as the foreign stake in the domestic stock market increases. Successful economies with high capital flows into their booming stock markets especially are prone to stock market-induced currency crises. Second, we apply the dividend growth model to show that stock markets crash in the run-up to a currency crisis. This new type of twin crisis is empirically tested by employing a logit framework using quarterly data for 33 emerging economies for 1994Q1–2007Q4.     

The relationship between stock prices and exchange rates in South Africa and Nigeria: structural breaks analysis

The relationship between stock prices and exchange rates has continued to generate interest from both the academia and financial industry players for many years. This study conducts an empirical investigation into the relationship between stock prices and exchange rates for the two largest economies in Sub-Saharan Africa – South Africa and Nigeria. Our methodology accounts for structural breaks in the data and the long-run relationship between stock and foreign exchange markets. The results of multivariate causality tests with structural breaks showed that causality runs from exchange rates to domestic stock prices in Nigeria (flow channel) while in South Africa, no causality exists between domestic stock prices and exchange rates. The results also reveal that there is causality from the London stock market to both countries’ stock markets, thus showing that international stock markets are driving both the Nigerian and South African stock markets.     

中国沪深股市收益率和波动性的实证分析

沪市和深市股票收益率和波动性之闻具有相互作用和相互影响,存在股价变化和走势之间的互动作用和示范效应,我们发现两市收益率序列之间具有长期协整关系,这说明它们存在类似的长期趋势成分;它们的短期误差修正系数存在一定的差异,这说明它们具有相异的短期波动模式;我们利用 GARCH 模型等非对称性方法发现两市之间存在显著的波动"溢出效应"和"杠杆效应",这说明两市资金的流动性约束较低,投资主体的相关性较强,两市收益率和波动性之间具有一定程度的整合性。     

Creative destruction and unemployment in an open economy model

I develop a model of endogenous economic growth and search and matching frictions in the labour market. I study the effect of trade liberalization between two identical economies on long‐run unemployment and show that bilateral trade liberalization has a steady state effect on unemployment that is negative for countries with a relatively larger R&D sector and positive for countries with a smaller R&D sector.     

Crude oil and BRICS stock markets under extreme shocks: New evidence

In this paper, we propose an extreme Granger causality analysis model to uncover the causal links between crude oil and BRICS stock markets. Instead of analyzing the average causal relationship, as is usually done, we first decompose the data into three cumulative components and investigate the causality between different combinations of extreme positive, extreme negative and normal shocks. These types of combinations can describe all facets of the interactions between crude oil and BRICS stock markets, especially under extreme shocks. In contrast to the results obtained by the traditional Granger causality test, our empirical findings demonstrate that the effect of oil price changes on the stock markets is stronger under extreme circumstances than under normal circumstances. Furthermore, large upward or downward oil price changes have an asymmetric impact on extreme upward or downward stock price changes. Finally, robustness checks verify the rationality and validity of the extreme Granger causality analysis.     

COINTEGRATION OF STOCK MARKETS BETWEEN NEW ZEALAND, AUSTRALIA AND THE G7 ECONOMIES: SEARCHING FOR CO-MOVEMENT UNDER STRUCTURAL CHANGE

This paper examines whether the New Zealand equity market is integrated with the equity markets of Australia and the G7 economies by applying both the Johansen (1988 ) and Gregory and Hansen (1996 ) approaches to cointegration. The Johansen (1988 ) test suggests that there is no long-run relationship between the New Zealand stock market and any of the other stock markets considered in the study. The Gregory and Hansen (1996 ) test finds that the New Zealand and United States stock market is cointegrated, but the New Zealand stock market is not cointegrated with the other stock markets in the study. This suggests that in order to avoid some of the risk through international portfolio diversification there is potential for investors to purchase shares in the New Zealand market and either the Australian market or most of the world's leading equity markets.     

Foreign News and Spillovers in Emerging European Stock Markets

We analyze foreign news and spillovers in the emerging EU stock markets (the Czech Republic, Hungary, and Poland). We employ high‐frequency five‐minute intraday data on stock market index returns and four classes of EU and US macroeconomic announcements during 2004–07. We account for the difference of each announcement from its market expectation and we jointly model the volatility of the returns accounting for intraday movements and day‐of‐the‐week effects. Our findings show that intraday interactions on the new EU markets are strongly determined by mature stock markets as well as the macroeconomic news originating thereby. We show that strong contemporaneous links across markets are present even after controlling for macroeconomic announcements. Finally, in terms of specific announcements, we are able to show the exact sources of macro news spillovers from the developed foreign markets to the three new EU markets under research.     

Stock and credit market expansion and economic development in emerging markets: further evidence utilizing cointegration analysis

This paper empirically investigates the relationship between equity and credit market development and economic growth, in a sample of five very important ‘emerging’ markets. In particular, employing a multivariate time-series methodology to test for long-run trends and causality between variables that proxy for stock market development, credit market development and economic development. The results seem to suggest that equity markets have a role to play only in relatively liberalized economies, like Chile and Mexico. In financially repressed economies, like India, the equity market does not affect real sector growth. Furthermore, the banking crises in the 1980s and 1990s in Chile and Mexico resulted in a negative relation between economic growth and the credit market. In South Korea, equity and credit markets both affect economic growth, but not vice versa. In countries where the nature of the stock market has been speculative, like Taiwan, a negative relationship is detected between equity market development and economic development.     

居民资产、财富效应与我国城镇居民消费

现代消费理论认为财富是影响居民消费的重要因素,并且各种财富形式对消费水平影响不同.对我国居民资产财富效应的实证研究表明,股票资产在长期对居民消费有负向影响.财富效应微弱,而房产财富对居民消费的正向效应比较明显,刺激消费作用较强.当前财富效应的产生与我国股市发展不稳定及房地产市场的发展特性相关,而个人可支配收入和储蓄仍是影响我国居民消费支出的主要因素.     

FINANCIAL CRISES AND INTERNATIONAL STOCK MARKET VOLATILITY TRANSMISSION

This paper examines the interplay between stock market returns and their volatility, focusing on the Asian and global financial crises of 1997–98 and 2008–09 for Australia, Singapore, the UK, and the US. We use a multivariate generalised autoregressive conditional heteroskedasticity (MGARCH) model and weekly data (January 1992–June 2009). Based on the results obtained from the mean return equations, we could not find any significant impact on returns arising from the Asian crisis and more recent global financial crises across these four markets. However, both crises significantly increased the stock return volatilities across all of the four markets. Not surprisingly, it is also found that the US stock market is the most crucial market impacting on the volatilities of smaller economies such as Australia. Our results provide evidence of own and cross ARCH and GARCH effects among all four markets, suggesting the existence of significant volatility and cross volatility spillovers across all four markets. A high degree of time‐varying co‐volatility among these markets indicates that investors will be highly unlikely to benefit from diversifying their financial portfolio by acquiring stocks within these four countries only.     

Currency appreciation and stock market performance: Evidence from China

This paper analyzes the relationship between the change of the exchange rate and the performance of the Chinese stock market after exchange rate regime and split share structure of stock market reformed in 2005, which is important for us to understand the linkages and mechanisms between the two markets deeply. We find that the exchange rate is highly related with the stock market, and there exists long-term cointegration. The results demonstrate that in the long term, the relationship between the two variables mainly belongs to flow-oriented model; Shanghai A Share index is influenced by the exchange rate, yet Shanghai B Share index has shown less indication of long term interrelation with the exchange rate. In the short term, the relationship between the two variables mainly belongs to stock-oriented models, there are inter influence between the stock market and the exchange market. The paper further analyzes the possible influence of different sector indices to exchange rates. Finally, the paper puts forward some advices and policy suggestions.