Developing ASEAN‐5 bond markets: what needs to be done?

This paper examines development challenges facing bond markets in the ASEAN‐5 (Indonesia, Malaysia, Philippines, Singapore, and Thailand). It first assesses their level of development, finding that bond market frameworks—that is, the quality of the physical infrastructure, monitoring, and regulation—compare favourably with those in other emerging markets. The paper then considers possible further enhancements, including changes in disclosure practices as well as reforms of ratings agencies, central bank liquidity management, and taxation. It also considers steps to develop derivatives markets, which in some countries remain quite small. Finally, the article draws lessons from the global financial crisis in developed markets for the future development of ASEAN‐5 markets.     

Reflections on the Business History Tradition: Where has it Come from and Where is it Going to?

The question of what constitutes the discipline of business history has been the focus of ongoing debate for several decades. The output of business history researchers is diverse ranging from company histories to the application of theoretical frameworks used to interpret the many facets of business development. This article, in introducing this special edition of the Australian Economic History Review, provides an overview of the development of the business history discipline and the contribution it has made to understanding the operation of business enterprises and the markets in which they operate.     

China's economic development: does exchange rate and FDI nexus matter?

This study aims to investigate the relationship between China's exchange rate, foreign direct investment (FDI) inflows, and economic development. We applied the bound testing approach on aggregate level data from 1981 to 2013. The results showed that the Chinese economy benefitted from a lower exchange rate over this period, and that there was a direct link between FDI inflows and economic development on an aggregate level both in the long and short run. The results of the Granger causality test identified a long‐ and short‐run association among these variables. The GMM estimations with dummies for financial crises and RMB exchange rate policy fluctuations also confirmed the growth enhancing impact of the exchange rate and FDI inflows. To promote sustainable economic development in the future, China should focus on improving the levels of domestic investment and human capital, as well as supervising the level of openness and capital controls.     

South–South FDI: is it really different?

We compare the performance of Northern and Southern multinationals in Sub-Saharan Africa, and contrast it with local firms in the host country. Employing unique firm level data for 19 Sub-Saharan African countries, we show that firms receiving FDI outperform domestic ones, while the origin of the foreign investor is of minor importance. We use three different definitions of “South” to compare Northern and Southern FDI. Overall, we do not find strong differences in terms of firm productivity growth between Northern and Southern FDI, irrespective of how the latter is defined. However, we find that employment growth is generally higher for firms receiving FDI from other African investors as compared to Northern FDI, and they also receive more technology transfer from their parent company abroad.     

What moved share prices in the nineteenth‐century London stock market?†

Using a new weekly blue‐chip index, this article investigates the causes of stock price movements on the London market between 1823 and 1870. We find that economic fundamentals explain about 15 per cent of weekly and 34 per cent of monthly variation in share prices. Contemporary press reporting from the London Stock Exchange is used to ascertain what market participants thought was causing the largest movements on the market. The vast majority of large movements were attributed by the press to geopolitical, monetary, railway‐sector, and financial‐crisis news. Investigating the stock price changes on an independent list of events reaffirms these findings, suggesting that the most important specific events that moved markets were wars involving European powers.     

Do E‐verify mandates improve labor market outcomes of low‐skilled native and legal immigrant workers?

We examine the impact of the 2007 Legal Arizona Workers Act (LAWA) on employment outcomes of low‐skilled legal workers. We use the synthetic control method to select a group of states against which the labor market trends of Arizona can be compared. Our results suggest that contrary to its intent, LAWA does not appear to have improved labor market outcomes of legal low‐skilled workers who compete with unauthorized immigrants, the target of the legislation. In fact, we find some evidence of diminished employment and increased unemployment among legal low‐skilled workers in Arizona. These findings are concentrated on the largest demographic group of workers—non‐Hispanic white men. While they are less likely to find employment, those who do have on average higher earnings as a result of LAWA. The pattern of results points to both labor supply and labor demand contractions due to LAWA, with labor supply dominating in terms of magnitude.     

The high demand for international reserves in the Far East: What is going on?

This paper explores econometric and theoretical interpretations for the relatively high demand for international reserves by countries in the Far East and the relatively low demand by some other developing countries. Using a sample of about 125 developing countries, we show that reserve holdings over 1980–1996 seem to be the predictable outcome of a few key factors, such as the size of international transactions, their volatility, the exchange-rate arrangement, and political considerations. The estimating equation does a good job of predicting reserve holdings in Asia before the 1997 financial crisis. After the crisis, the estimating equation significantly underpredicts the reserve holdings of several key Far East countries, as one might expect from the Lucas Critique. This underprediction is consistent with models explaining reserve demand in developing countries. Specifically, we show that sovereign risk and costly tax collection to cover fiscal liabilities lead to a relatively large precautionary demand for international reserves. In the aftermath of a crisis, countries that have to deal with higher perceived sovereign risk and higher fiscal liabilities (both funded and unfunded) will opt to increase their demand for reserves. The models also help us understand why some developing countries do not hold large precautionary reserve balances in the aftermath of crises. Countries with high discount rates, political instability or political corruption find it optimal to hold smaller precautionary balances. We also show that models that incorporate loss aversion predict a relatively large demand for international reserves. Hence, if a crisis increases the volatility of shocks and/or loss aversion, it will greatly increase the demand for international reserves. Consequently, we conclude that the ‘puzzling’ pattern in international reserve holdings is reasonably explained by the extended models described in this paper.     

China's oil product pricing mechanism: What role does it play in China's macroeconomy?

The oil product pricing mechanism is a regulation system that was introduced in the late 1990s to control the oil product prices in China. For the first time to our knowledge, we provide an empirical evaluation of this regulation system, with a particular focus on its role in China's macroeconomy. Based on monthly data between 2000 and 2013, we find that: (i) contrary to the general public's impression, the mechanism is ‘fair’ overall in the sense that it responds to the rise and fall of international oil price symmetrically; (ii) the effect of the mechanism on the Chinese economy, however, is very limited; and (iii) the limited effect of the mechanism holds for different levels of regulation during the studied period, suggesting that potential deregulation may have little impact on the economy.     

Middle‐income countries: trapped or merely slowing?

Since the turn of the century, growth has slowed in a number of middle income economies, giving rise to fears ‐ exacerbated by the financial crisis of 2008‐09 ‐ that they were entering a low growth equilibrium. A survey of the literature on the middle income trap suggests that it is difficult to rigorously identify countries that might be trapped; that in most cases growth appears to be regressing to a longer term normal and in East Asian economies remains at a respectable 5 percent to 7 per cent rate; that the research on the trap has yet to come up with a new growth model for middle income economies; and that policy recommendations on offer are of the generic variety applicable to virtually all economies, developed and developing.     

Community Banks vs. Non-Community Banks: Where is the Advantage in Local Small Business Funding?

Recent literature questions the relative advantage of community banks vs. non-community banks in small business funding. Using the Federal Deposit Insurance Corporation’s definition of a community bank, the study re-examines the role of community banks in providing funding to small businesses using the Community Reinvestment Act (CRA) small business lending data over the period 2003 to 2016. The empirical results indicate that community banks are still providing 30 percent more small business funding than non-community banks, especially after the Great Recession. This role is even more important in those counties in non-metropolitan areas. In addition, the results indicate that in counties where community banks do not have offices, they provide 48 percent fewer loans compared to non-community banks in counties where they do not have offices, which suggests community banks still use physical offices to maintain their relationship lending advantage. Clearly, from a public policy standpoint, the results support the view that community banks are important because they continue to provide valuable services to small business firms throughout the country.

     

Targeting Teaching Lecture Capture Learning: Do Students Perform Better Compared to Face‐to‐Face Classes?

Online learning has become more prevalent in colleges and universities as new technology is introduced. One such technology is lecture capture, which allows a live lecture to be recorded and packaged with classroom media and delivered online to many more students than a traditional face‐to‐face class. This article studies the selection process and educational outcome differences between students enrolled in a lecture capture and a face‐to‐face course in economic principles. Students could select either course format, both with the same instructor and course requirements, without capacity restrictions. We find that students’ attitudes toward online learning are the chief determinant of their choice of class over demographics, opportunity cost measures, or past online experiences. Additionally, our findings suggest that lecture capture students perform as well as those who take a face‐to‐face course when not accounting for self‐selection. When selection is taken into account, lecture capture is not significantly worse than face‐to‐face.     

The resurgence of currency mismatches: Emerging market economies are not out of the woods yet?

International Economics and Economic Policy - The emerging market economies (EMEs) are experiencing significant financial distress due to the rapid accumulation of foreign currency-denominated debt...     

Dutch Disease in the post-soviet countries of Central and South-West Asia: How contagious is it?

This study seeks to determine the extent to which the former communist states of Central and South-West Asia are “infected” by the Dutch Disease. We take a detailed look at the functioning of the transmission mechanism of the Dutch Disease, i.e. the chains that run from commodity prices to real output in manufacturing. We complement this with two econometric exercises. First, we estimate nominal and real exchange rate models to see whether commodity prices are correlated with the exchange rate. Second, we run growth equations to analyse the possible effects of commodity prices and the dependency of economic growth on natural resources.     

Public Revenue‐Expenditure Nexus in South Africa: Are there Asymmetries?

This paper re‐examines the government revenue and expenditure relationship in South Africa using Enders and Siklos' Threshold adjustment and Granger causality tests. The paper allows for structural breaks in the unit root and cointegration tests. The results indicate the absence of any asymmetries in both the threshold autoregression and momentum threshold autoregression specifications of adjustments in the South African's budgeting process. The estimated symmetric error‐correction models provide support for the fiscal synchronization hypothesis of government revenues and expenditures for long‐run and short‐run dynamic equilibrium. These findings indicate that the South African fiscal authorities should try to maintain or even improve the control of their fiscal policy instruments to sustain the prudent budgetary process.     

Managing the renminbi: should China peg to a trade‐weighted basket?

Pegging the renminbi (RMB) to the US dollar since 1994 has characterised China's exchange rate policy under a fixed peg or appreciating crawling peg. The current policy, announced in June 2010, of ‘floating with reference to a basket’ made the RMB 25 per cent stronger against a trade‐weighted basket by early August 2015, while it was 10 per cent stronger against the US dollar. Thus, 14 percentage points arose from changes in the cross rates of the other currencies, notably from the fall of the euro since December 2014. Devaluation of the RMB by 3 per cent in August 2015 just covered the effective appreciation since December 2014. Effects of the cross rates of other currencies could be eliminated by managing the external value of the RMB with reference to a genuine trade‐weighted basket. This could be a suitable intermediary exchange rate regime for China, as the risks associated with free floating are still great. Diversifying further the currency composition of the foreign exchange reserves and other foreign assets of the Chinese government, from US dollars towards euro and yen assets, would be a natural parallel shift. The euro–US dollar–yen exchange rates in late summer 2015 may offer a good opportunity to carry out this move.     

Single Currency in ECOWAS: Is the Proposed Fiscal Convergence Criterion Pro‐Growth?

To facilitate the introduction of a single currency in Economic Community of West African States (ECOWAS), the fiscal convergence criterion currently proposed by countries limits the public deficit to 3 per cent of GDP. According to the literature, the limitation of the public deficit to a given threshold is the most fundamental norm of the various convergence pacts existing and needed for monetary integration. Through a nonlinear panel data model, this paper tests the validity of the threshold by determining the public deficit threshold not to be exceeded so that fiscal policy has a positive effect on economic growth. Over the decade 2007–2016, this threshold is estimated at 4.74 per cent of GDP. Thus, the paper concludes that the proposed convergence criterion of 3 per cent of GDP is pro‐growth. However, in relation to the estimated threshold, there is a room for manoeuvre that can be used for supporting economic growth. Thus, the proposed threshold could be readjusted upward. The analysis also reveals that only four countries in ECOWAS are on the track to respect in the future, the proposed fiscal criterion and therefore are taking an important step toward the adoption of the future currency. The other countries need to make significant fiscal consolidation operations before hoping to adopt the single currency on the basis of fiscal discipline.