Random walk and efficiency tests in the Asia-Pacific foreign exchange markets: Evidence from the post-Asian currency crisis data

This paper empirically tests the random walk and efficiency hypothesis for 12 Asia-Pacific foreign exchange markets. The hypothesis is tested using individual as well as panel unit root tests and two variance-ratio tests. The study covers the high (daily) and medium (weekly) frequency post-Asian crisis spot exchange rate data from January 1998 to July 2007. The inferential outcomes do not differ substantially between the unit root tests and the variance-ratio tests when using daily data but differ significantly when using weekly data. With the daily data, both types of unit root tests identify unit root components for all the series and two variance-ratio tests provide the evidence of martingale behavior for majority of the exchange rates tested. With the weekly data, panel unit root tests identify unit root component for the exchange rates and, the unit root tests on a single series basis identify unit root component for 10 foreign exchange markets. However, the variance-ratio tests reject the martingale null for the majority of the exchange rates when using weekly data.     

Prices,output and the trade balance in Iran

This paper analyses the impact of the rise in oil prices on domestic inflation, the trade balance, and output growth in Iran for the period 1960–1977. A macro framework is developed in which the domestic spending of oil revenues results in higher output, inflation and imports. Our results indicate that, although the overall growth remained high, the rapid increase in oil revenues in 1973–1974 was mainly reflected in higher inflation and higher imports. In the absence of any exchange rate adjustment, there was a sharp deterioration in the competitive position of the non-oil traded sector.     

Efficiency,Cointegration and Contagion in Equity Markets: Evidence from China,Japan and South Korea*

This paper empirically examines whether three East Asian stock markets, namely, those of China, Japan and South Korea, are individually and/or jointly efficient, and whether contagion exists between the cointegrated markets. While individual market efficiency is examined through testing for the random walk hypothesis, joint market efficiency is examined through testing for cointegration and contagion. The present study finds that the hypothesis of individual market efficiency is strongly rejected for the Chinese stock market, but not for the Japanese and the South Korean stock markets. However, when testing for cointegration, market efficiency is strongly rejected for all these markets. We take a simple case of contagion and find that although there is a long‐term relationship among the three markets, the contagion hypothesis cannot be rejected only between Japanese and South Korean stock markets, indicating short‐run portfolio diversification benefits from these two markets.     

ISLAMIC BANKING,COSTLY RELIGIOSITY,AND COMPETITION

In this article we explain how Islamic banks (IBs) maximize profitability in the presence of costly religiosity. Because of strong competition between IBs and conventional banks (CBs), a unique equilibrium emerges that affects the IB pricing structure. We propose a new model that identifies the optimal rate on the asset and liability sides of IBs. It shows that the financial products offered by IBs are not an exogenous function of religiosity; instead, they are endogenously determined by the nature of market forces in which IBs are operating. We show that in the presence of costly religiosity and competition, the rates of both converge. Moreover, the competitive pricing mechanism induces IBs to structure their asset- and liability-side financial products (particularly Murabaha) with a risk profile similar to that of the CB loan system. This article empirically supports the theoretical propositions by using data from 17 Muslim majority countries where both IBs and CBs coexist from 2000 to 2015. We find that, holding other factors of bank returns constant, competition significantly affects IB asset- and liability-side returns. The analysis also reveals that because of increasing competition between IBs and CBs, the market power of IBs has significantly declined over time.     

Incorporating location,routing and inventory decisions in supply chain network design

This paper for the first time presents a novel model to simultaneously optimize location, allocation, capacity, inventory, and routing decisions in a stochastic supply chain system. Each customer’s demand is uncertain and follows a normal distribution, and each distribution center maintains a certain amount of safety stock. To solve the model, first we present an exact solution method by casting the problem as a mixed integer convex program, and then we establish a heuristic method based on a hybridization of Tabu Search and Simulated Annealing. The results show that the proposed heuristic is considerably efficient and effective for a broad range of problem sizes.     

A framework to measure relative performance of Indian technical institutions using integrated fuzzy AHP and COPRAS methodology

There are many opportunities and challenges in area of Indian technical education due to liberalization and globalization of economy. One of these challenges is how to assess performance of technical institutions based on multiple criteria. This paper is focused on performance evaluation and ranking of seven Indian Institute of Technology (IITs) in respect to stakeholders’ preference using an integrated model consisting of fuzzy AHP and COPRAS. Findings based on 2007–2008 data show that performance of two IITs need considerable improvement. To the best of our knowledge it is one of few studies that evaluates performance of technical institutions in India.     

Testing sensitivity of student enrollment with respect to tuition at an institution of higher education

This study was conducted to measure the impact of H-University's (HU's) tuition increases on enrollment. Based on an internal survey, this study attempts to explain the sensitivity of student enrollment to tuition variations. In addition, this paper develops an aggregate enrollment model and uses the common economic variables such as tuition, income, wage rates, financial aids, and unemployment rates to explain the sensitivity of demand. The most significant finding of this study is that tuition consideration seems to have a relatively small effect on students' decisions. Actually, enrollment at HU (a private institution) have increased despite higher tuition rate. Possible justifications could be proposed, such as the necessity of higher education and the fact that higher education is a continued investment in human capital, in which the more relevant decision factor is the corresponding expected rate of return and not just the cost of investment. Presented at the International Atlantic Economic Society's Conference, Vienna, Austria, March 2003.     

International Insurance Society Roundtable on Risk Management After the Crisis

In this roundtable, an adviser to several central banks and founding member of the Group of 30 discusses regulatory reform and corporate risk management strategies with senior executives from three of the world's largest insurance companies. Much of the discussion attempts to explain why insurance and reinsurance companies have proven less vulnerable to the crisis than commercial and investment banks. Part of the explanation has to do with their financial conservatism, which is attributed to a habitual tendency to decision‐making that gives heavy weight to long‐term probabilities and risks. But along with this “actuarial” cast of mind is a growing willingness to accept and make use of risk‐based capital requirements—a decision‐making framework that is, in some respects, in conflict with the accounting and regulatory capital conventions that still prevail in the industry. In particular, “Solvency II”—the risk‐based capital guidelines that are set for adoption in 2012 by insurers in the European Union—is held up as a possible model for global use.     

Public Pension Programs in Southeast Asia: An Assessment

This paper assesses public pension programs in select Southeast Asian economies (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam – henceforth referred to as the SEA6) and the key issues facing them. The criteria used in assessing pension systems are the philosophy of pension design, the extent of coverage, investment policies and performance, and administrative and compliance costs. The paper argues that three broad reform directions to strengthen public pensions merit consideration. The first direction is to enhance the professionalism of the existing provident and pension fund organizations, including their governance practices. The second direction is to strengthen the role of noncontributory budget‐financed pensions (e.g. social pensions). The third is to adopt a systemic perspective to pension reform that includes reforms in complementary areas (labor markets, public financial management practices, and the civil service); developing a financing‐mix of pensions; and lastly, improving effective coverage by exploring complementarities between health care and pension programs.