Causalities of the Taiwan Stock Market

Volatility, fitting with first order Landau expansion, stationarity, and causality of the Taiwan stock market (TAIEX) are investigated based on daily records. Instead of consensuses that consider stock market index change as a random time series we propose the market change as a dual time series consists of the index and the corresponding volume. Therefore, causalities between these two time series are investigated.Comment: 8 pages, 15 figure

An Empirical Analysis of the Thai and Major International Stock Markets

This paper investigates the existence of cointegration and causality between the stock market price indices of Thailand and its major trading partners (Australia, Hong Kong, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, the UK and the US), using monthly data spanning December 1987 to December 2005. Both the Engle- Granger two-step procedure (assuming no structural breaks) and the Gregory and Hansen (1996) test (allowing for one structural break) provide no evidence of a long-run relationship between the stock prices of Thailand and these countries. Based on the empirical results obtained from these two residual-based cointegration tests, potential long-run benefits exist from diversifying the investment portfolios internationally to reduce the associated systematic risks across countries. However, in the short run, three unidirectional Granger causalities run from the stock returns of Hong Kong, the Philippines and the UK to those of Thailand, pair-wise. Furthermore, there are two unidirectional causalities running from the stock returns of Thailand to those of Indonesia and the US. We also found empirical evidence of bidirectional Granger causality, suggesting that the stock returns of Thailand and three of its neighbouring countries (Malaysia, Singapore and Taiwan) are interrelated. No previous study examines the possibility that the pair-wise long-run relationship between the stock prices of Thailand and those of both emerging and developed markets may have been subject to a structural break.Stock markets, Cointegration, Structural breaks, Thailand

Is Vietnam economic paradigm sustainable for catch up

In the course of catching-up, Vietnam faces risks in two sectors: in real sector and in financial sector. In this paper we focus mostly on risk in real sector: the risk of getting stuck in middle-income trap. Vietnam is still far lagged behind her neighbors and much more further to developed economies. Does the economic paradigm that Vietnam follows in the last two decades allow her to catch up with those economies? We show that Vietnam’s economic growth in the last two decades based essentially on cheap but low skill labor and physical capital. Participation in international and regional production network probably lock Vietnam in low-tech position, hence low value added. If Vietnam keeps on growing in present paradigm, hardly can it catch up the neighboring economies.Flying geese paradigm, VAR models, TFP, Technological improvement, catch-up, Vietnam.

Stock market integration: Malaysia and its major trading partners

This study examines the stock market integration among Malaysia and its major trading partners by employing Johansen (1988) and Johansen and Juselius (1990) cointegration tests and VECM approach in investigating the dynamic linkages between markets. By using a weekly data, the results indicate that Malaysia stock market is significantly influenced by the stock market development from the major trading partners. The empirical findings are consistent with the view that stronger the bilateral trade ties between two countries, the higher the degree of comovements (Masih and Masih, 1999; Bracker et al., 1999). Since the markets move towards a greater integration, there are no opportunities for international portfolio diversification. In addition, any development in the stock market from major trading partners can not be ignored and should be taken into consideration by the Malaysian government in designing an appropriate policy in the domestic stock market.Cointegration; VECM; major trading partners; stock market integration

Causal effects of the United States and Japan on Pacific-Rim stock markets: nonparametric quantile causality approach

This article adopts a nonparametric quantile causality approach to examine the causal effects of the U.S. and Japan stock markets on the stock markets of the Pacific-Rim region. This approach allows us to detect not only nonlinear causalities in conditional return (mean) and conditional volatility (variance) but also the asymmetries of causalities under extreme market conditions (bullish vs. bearish states). Our results provide significant evidence of causality in return and volatility at different points of the conditional distributions of returns, with the greater effects from the U.S. than from Japan. Asymmetric quantile causality patterns are particularly pronounced in the case of Japan

The empirics of trade and growth: where are the policy recommendations?

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature.theoretical trade and growth studies, empirical trade and growth studies, policy recommendations, W�lde, Wood

Herd Behavior by Japanese Banks After Financial Deregulation in the 1980s

This paper empirically investigates whether Japanese banks followed herd behavior as a result of financial deregulation in the 1980s, and whether any observed herd behavior brought about inefficiencies that could have caused macroeconomic fluctuations. Using loan-portfolio data, the paper examines Granger-causalities in lending behavior by different types of banks. We find that Japanese banks inefficiently herd from the early through mid-1980s, the period immediately after financial deregulation began. However, contrary to anecdotal evidence, inefficient herd behavior is rarely observed in the 1990s. The herd behavior in the 1980s was more frequently observed in lending to new borrowers than to traditional borrowers. In addition, other banks were inclined to follow those banks that were considered more informed in lending to a specific industry, or that were large enough to adjust more effectively to the environment created by deregulation. These results are consistent with theoretical predictions in the literature and suggest the possibility that the herd behavior contributed to the asset price bubble in the late 1980s

On the Relationship Between Exchange Rates and Stock Prices: Evidence from Emerging Markets

This study examines dynamic linkages between the exchange rates and stock prices for twelve emerging market countries for the period from May 1994 to April 2010 by using linear and non-linear Granger causality tests. Our empirical results show that stock prices and exchange rates have linear and non-linear bi-directional causality in most cases. The exceptional countries are Brazil, Poland and Taiwan, in that there is no evidence for a non-linear Granger causality from stock prices to exchange rates. The results support both the portfolio balance and the goods market theories for eight out of twelve countries. JEL Classifications Codes: F30, G15

The empirics of trade and growth: Where are the policy recommendations?

Existing literature repeatedly documented a strong correlation between trade and growth. It has also shown a causal effect of imports (though not necessarily exports) on growth in simultaneous equation models but to a lesser extent in Granger-causality tests. Export and import taxes have sometimes been found to negatively affect growth. Drawing policy conclusions from these general findings for a particular country is difficult not only because of the contradictory results but also because of potential second best world effects and the implied endogeneity of trade policy. Policy recommendations for a specific country require a careful analysis of market and institutional arrangements and can not be based on the existing cross-country literature. --