The growth effect of trade openness on African countries: Evidence from using an instrumental variable panel smooth transition model

This paper assesses the relationship between trade openness and economic growth in Africa by accounting for the heterogeneity of African countries. In addition, the paper contributes to the literature on trade openness and economic growth nexus by applying the instrumental variable panel smooth transition regression, a methodology that accounts for nonlinearity and endogeneity in the relationship between the two variables. The results of the empirical analysis reveal that the investment ratio is a channel through which trade openness affects economic growth in the African continent. In addition, the relationship between trade openness and economic growth varies according to the degree of a country's development in Africa. The study finds a negative relationship between openness and growth in low-income countries. Conversely, for upper-income countries, the coefficients of trade indicators are positive and statistically significant. The results indicate that African countries are not homogeneous, especially concerning trade openness and economic growth nexus.     

Intricacies of competition,stability, and diversification: Evidence from dual banking economies

This paper investigates the nexus of competition and stability by introducing the interaction of diversification and competition. We use a sample of both conventional and Islamic banks from 14 dual banking economies over 2005–2016. The core finding illustrates that competition does not impact bank stability and that diversification is insignificant in the competition-stability nexus. Further, we find that concentration is beneficial for the banking stability of both types of banks. In most of our results, we found no difference in the impact of competition and diversification on the stability of conventional and Islamic banks. To put our findings in a broader context, we argue that no difference between the business models can be considered an early signal of possible convergence between the two systems.     

The effect of risk-taking behavior on profitability: Evidence from futures market

We explore how futures traders make a tradeoff between risk and return by examining their risk-taking in the action. By applying a novel measure to their trade-by-trade transactions to capture their tendency in risk-taking, we find a general tendency to reduce risk-taking by cutting positions when facing losses or gains, and the tendency is stronger in the case of losses. However, great variations exist among traders in the risk-taking tendency and the results for trading are opposite for profitable and unprofitable traders. For the unprofitable, more risk-taking by trading more actively leads to greater losses. This is concrete evidence for the prevailing belief in the literature that trading too much, arguably due to overconfidence, is hazardous to investor's wealth. Contrary to that belief, however, we find fresh evidence that more active trading by the profitable traders leads to greater profits, suggesting their trades are likely based on ability and skills.     

International Transmission of the 2007–2009 Financial Crisis: Evidence from Japan

We investigate the international transmission of the 2007–2009 financial crisis to Japanese firms by examining both stock returns and changes in operating performance during the crisis. Our results indicate that Japanese firms were affected by the crisis mainly through the trade channel in both stock returns and changes in operating performance. We also find that the liquidity channel played a role in the fall of stock returns in response to the crisis and in the changes in return on assets during the first year of the crisis. We obtain weak evidence for the credit crunch channel and no evidence to support the trade finance channel.     

Asymmetric effects of financial development on South-South and South-North trade: Panel data evidence from emerging markets

Using bilateral trade data in total and technology-and-skill-intensive manufactured goods for 28 developing countries that account for 82% of all developing country manufactures exports between 1978 and 2005, this paper explores the effects of financial development on the pattern of specialization in South-South and South-North trade. The empirical results using dynamic panel regressions and comprehensive sensitivity tests suggest that financial development in the South has an economically and statistically significant positive effect on the share of total and technology-and-skill-intensive manufactures exports in GDP, and total exports in South-South trade. In contrast, no such significant or robust effect of financial development is found in South-North trade. Overall, the positive effect of financial development is found to be asymmetric favoring South-South significantly more than South-North trade. In addition, financial development is found to be increasing technology-and-skill-intensive manufactured goods exports significantly more than total manufactured or merchandise goods exports.     

The effect of the Internet on economic growth: Evidence from cross-country panel data

Using cross-country panel data, we found evidence that the Internet plays a positive and significant role in economic growth after investment ratio, government consumption ratio, and inflation were used as control variables in the growth equation.     

The impact of income,economic openness and interest rates on housing prices in China: evidence from dynamic panel quantile regression

The rapid growth of housing prices has attracted the attention of the whole of society in China. This article adopts the dynamic panel quantile regression to investigate the impact of income, economic openness and interest rates on housing prices in China, based on the panel data of 35 major cities from 2002 to 2012. Compared with previous studies, we can more precisely and reasonably discuss the impact of these variables on different levels of housing prices. The empirical results indicate that the impact of independent variables on housing prices is heterogeneous across quantiles. Specifically, the impact of income is positive and significant across quantiles, and the impact becomes greater at the 90th and 95th quantiles. Economic openness has a positive and significant effect at the 5th–80th quantiles, which support the Balassa–Samuelson effect, but it is insignificant at the 90th and 95th quantiles. The impact of interest rates is positive and significant at low quantiles, but the impact is negative and insignificant at high quantiles. Furthermore, we also find that the coefficients of interest rates at various quantiles are smaller. In addition, the population has a significant positive effect across quantiles. Finally, we provide important policy implications.     

The more contagion effect on emerging markets: The evidence of DCC-GARCH model

The paper aims to test the existence of financial contagion between foreign exchange markets of several emerging and developed countries during the U.S. subprime crisis. As a result of DCC-GARCH analysis, we find the evidence of contagion during U.S. subprime crisis for most of the developed and emerging countries. Another finding is that emerging markets seem to be the most influenced by the contagion effects during U.S. subprime crisis. Since financial contagion is important for monetary policy, risk measurement, asset pricing and portfolio allocation, the findings of paper may be interest of policy makers, investors and portfolio managers.     

Financial markets, the pattern of industrial specialization and comparative advantage: Evidence from OECD countries

Due to underlying technological and organizational differences, industries differ in their need for external finance. Since services provided by the financial sector are largely immobile across countries, the pattern of industrial specialization should be influenced by the level of financial development. Among OECD countries we find a strong causal effect of the financial sector on industrial specialization. Further, the financial sector is a source of comparative advantage in a way consistent with the Hecksher-Ohlin-Vanek model. Results are also presented on which aspects of financial systems are important for specialization and comparative advantage.     

FDI对国际贸易的影响：来自中国的证据

本文利用2003~2006年的面板数据检验了我国外向与内向FDI存量与进出口贸易之间的关系。通过实证分析发现:我国的外向FDI与进出口均存在互补关系,因此外向FDI具有贸易创造效应,其中又以出口创造效应为甚,从而使我国的外向FDI具有"净出口"效应;而内向FDI与进出口的关系都不显著。     

The effects of prudential policies on bank leverage and insolvency risk in Central and Eastern Europe

This paper analyses the effects of prudential policies on leverage and insolvency risk in eleven Central and Eastern Europe banking systems in the 2005–2014 period. It explores the relationship between leverage, insolvency risk and regulation variables, and the temporal patterns of this relationship. It also examines whether the effects of prudential policies on leverage and insolvency risk are influenced by bank ownership structure and financial cycle. The paper finds a consistent link between prudential regulation and leverage, which varies over the sample period. Conversely, the insolvency risk shows a stronger relationship with macroprudential policies. The estimates reveal that prudential policies work better on leverage and z-score for foreign banks. Both leverage and insolvency risk are better mitigated over booms. Finally, prudential policies have similar effects on both domestic and foreign banks' stability in normal times, while the effects are opposite during turbulences. These dissimilarities are raising challenges to the conduct of prudential policies.     

The effect of religious piety on managerial entrenchment: evidence from entrenched boards of directors

Prior research shows that religious piety is linked to honesty and risk-aversion. Religious piety alleviates the agency conflict by lessening the motivation for managers to exploit shareholders. Because of its role in mitigating the agency conflict, we argue that religious piety influences corporate governance arrangements. We exploit the variation in religious piety across U.S. counties and show that religious piety significantly influences the probability that a firm has an entrenched (staggered) board of directors. In particular, firms located in an area with stronger religious piety are significantly less likely to have a staggered board. This negative effect, however, is significant only when the degree of religiosity is higher than a certain threshold. Further analysis reveals that our results are unlikely confounded by endogeneity. Our results are especially interesting as they demonstrate that non-financial attributes, such as religious piety, has a significant influence on one of the most crucial governance mechanisms, i.e. the board of directors.     

The effect of ethnic diversity on the participation in social groups: Evidence from trade unions

This paper advances the hypothesis that individuals in more ethnically fragmented societies, participate less in social groups. More precisely, the empirical analysis places the spotlight on trade unions and investigates whether ethnic diversity affects the decision of workers to participate in them. The analysis takes place along two layers: (a) country-level and (b) individual-level. First, building on a set of innovative instruments derived from the parasite-stress theory of values and sociality, our country-level analysis seeks to exploit exogenous sources of variation in ethnic diversity and establish a convincing causal relationship between ethnic diversity and trade union density across countries. In turn, we employ individual-level data from the European Social Survey (ESS) and investigate whether immigrants who cοme from more ethnically fragmented societies participate less in trade unions in their European countries of residence. Consistent with the prediction of the theory, both layers of the empirical analysis provide robust evidence of a negative, sizeable and highly significant effect of ethnic diversity on the participation in trade unions.     

The impact of interest rate and exchange rate volatility on banks' stock returns and volatility: Evidence from Turkey

This paper investigates the effects of interest rate and foreign exchange rate changes on Turkish banks' stock returns using the OLS and GARCH estimation models. The results suggest that interest rate and exchange rate changes have a negative and significant impact on the conditional bank stock return. Also, bank stock return sensitivities are found to be stronger for market return than interest rates and exchange rates, implying that market return plays an important role in determining the dynamics of conditional return of bank stocks. The results further indicate that interest rate and exchange rate volatility are the major determinants of the conditional bank stock return volatility.     

Optimum government size and economic growth in case of Indian states: Evidence from panel threshold model

This paper investigates the relationship between optimum government size and economic growth using data of Indian states during 1990-91 to 2017–18. Our results derived from panel threshold regression model show a positive and significant impact of government size on economic growth within the estimated thresholds for both aggregate and sub-panels based on income and regions. Once the government size moves above the upper threshold level, then its impact declines and turns to be insignificant. Thus, our findings suggest the policymakers for maintaining the government size within the thresholds limit.     

Political instability: Effects on financial development, roots in the severity of economic inequality

We here bring forward strong evidence that political instability impedes financial development, with its variation a primary determinant of differences in financial development around the world. As such, it needs to be added to the short list of major determinants of financial development. First, structural conditions first postulated by Engerman and Sokoloff (2002) as generating long-term inequality are shown here to have strong empirical support as exogenous determinants of political instability. Second, that exogenously-determined political instability in turn holds back financial development, even when we control for factors prominent in the last decade’s cross-country studies of financial development. The findings indicate that inequality-perpetuating conditions that result in political instability and weak democracy are fundamental roadblocks for international organizations like the World Bank that seek to promote financial development. The evidence here includes country fixed effect regressions and an instrumental model inspired by Engerman and Sokoloff’s (2002) work, which to our knowledge has not yet been used in finance and which is consistent with current tests as valid instruments. Four conventional measures of national political instability – Alesina and Perotti’s (1996) well-known index of instability, a subsequent index derived from Banks’ (2005) work, and two indices of managerial perceptions of nation-by-nation political instability – persistently predict a wide range of national financial development outcomes. Political instability’s significance is time consistent in cross-sectional regressions back to the 1960s, the period when the key data becomes available, robust in both country fixed effects and instrumental variable regressions, and consistent across multiple measures of instability and of financial development. Overall, the results indicate the existence of an important channel running from structural inequality to political instability, principally in nondemocratic settings, and then to financial backwardness. The robust significance of that channel extends existing work demonstrating the importance of political economy explanations for financial development and financial backwardness. It should help to better understand which policies will work for financial development, because political instability has causes, cures, and effects quite distinct from those of many of the key institutions most studied in the past decade as explaining financial backwardness.     

The impact of institutions on financial development: Evidence from East Asian countries

This paper examines the impact of institutions on regional financial development using a panel data model of 11 East Asian countries during 1996–2017. It divides the institutional factors into six economic factors and six legal‐political factors. The analysis demonstrates that the legal‐political institutional factors have a stronger impact on financial development than the economic institutional factors in East Asia. Improvement in institutional quality such as fiscal freedom, business freedom, control of corruption, government effectiveness, regulatory quality and rule of law can promote financial development. Improvements of these institutional factors facilitate the ability of enterprises to allocate resources and improve the strength of business operations, thereby reducing transaction costs and making the financial operating environment fairer and more efficient. With the improvement of institutional factors, financial development will have more opportunities to develop better. Institutional impacts are more pronounced in the financial development in Malaysia, Indonesia, the Philippines and Myanmar than in the other countries such as China, Japan, Korea and Singapore.     

Impact of foreign direct investments on economic growth in Africa: Evidence from three decades of panel data analyses

This paper examines the impact of foreign direct investment (FDI) on economic growth in Africa and presents estimations based on panel data of 50 African countries during the period from 1980 to 2009, and the system generalized method of moment (SYS-GMM) estimators as proposed by Blundell and Bond (1998). It finds that FDI inflows had a significant impact on economic growth in the African region during the period of interest. It also finds that while the low level of human resources did not limit the impact of FDI, and that the impact of FDI on economic growth was negative during the period from 1980 to 1994 and positive during the period from 1995 to 2009.     

Impact of Internet use on economic well‐being of rural households: Evidence from China

The expansion of the Internet in developing countries has important implications for the economic development of rural areas. Although many studies have investigated various benefits of Internet use, little attention has been paid to find the relationship between Internet use and the economic well‐being of rural households. This paper, therefore, investigates the effects of Internet use on household income and expenditure, using a sample of rural households from China. Both endogenous treatment regression (ETR) and unconditional quantile regression (UQR) techniques are used to identify the homogenous and heterogeneous effects of Internet use, respectively. The ETR results show that Internet use increases household income and expenditure significantly. However, the UQR results reveal that Internet use has a larger impact at the upper distributions of household income and expenditure.     

The impact of digital finance on household consumption: Evidence from China

Using panel data from the China Household Finance Survey (CHFS) in 2013, 2015, and 2017 and the digital inclusive finance index developed by Peking University, this study examined impacts of the digital inclusive finance on household consumption and explored its mechanisms. Results suggest that the digital inclusive finance could promote households consumption. A heterogeneity analysis showed that households with fewer assets, lower income, less financial literacy and in third- and fourth-tier cities experienced larger facilitating effects of digital finance on consumption compared to their counterparts. For consumption categories, digital finance was positively correlated with food, clothing, house maintenance, medical care, and education and entertainment expenditures. In terms of consumption structure, digital finance mainly promoted the recurring household expenditures rather than the non-recurring expenditures. Further analyses based on the mediating model found that online shopping, digital payment, obtainment of online credit, purchase of financing products on the internet and business insurance, were the main mediating variables through which digital finance affected household consumption.