Financial Liberalization, Weighted Monetary Aggregates and Money Demand in Indonesia

This study investigates the significance of Divisia monetary aggregates in formulating the monetary policy in Indonesia. A money demand function has been constructed to compare the relative performance for Simple-sum M1 and M2 (SSM1 and SSM2) and Divisia M1 and M2 (DM1 and DM2) monetary aggregates. The econometrics testing procedures that have been utilized in the estimation include unit root test, cointegration test, Vector Error Correction Model (VECM), Granger causality test and residual test. Empirical findings indicate that only DM1 model yields credible result amongst all of the money demand models. The obtained coefficients for DM1 model are consistent with a prior theoretical expectation and carry plausible magnitudes. The DM1 model is satisfactory as proven by the diagnostic tests. Divisia monetary aggregates are proven not only theoretical superior but also empirical valid as useful measurement of money for the case of Indonesia. The central bank of Indonesia may consider using Divisia monetary aggregates as the policy variables in formulating monetary policy.Money Demand; Divisia Money; VECM

White-collar crime and stock return: Empirical study from announcement effect

White-collar crime continues to hit the headlines across Malaysia and it remains a serious issue influencing organizations globally. A share price event study is thus conducted on a group of public listed companies in Malaysia to examine the announcement effect of white-collar crime. The period of the study is from 1996 to 2010, covering both the Asian Financial Crisis in 1997/98 and the sub-prime mortgage crisis in 2008/09. Results indicate the existence of significant negative abnormal share price reaction on 10 trading days subsequent to the day of announcement. It means that the stock market in Malaysia is not efficient. However, it implies that the market possesses the power to discipline unethical companies as the shareholders drive down their value by disposing their stocks following the announcement.Share Price, Event Study; White-Collar Crime

Outward FDI of Malaysia: An Empirical Examination from Macroeconomic Perspective

Outward FDI of Malaysia was nearly non-existent prior to 1970s. Nonetheless, recently Malaysia has not only been able to sustain FDI inflows position, but also emerged as the fifth largest investor among the developing economies in Asia region (UNTACD, 2005). This study aims to investigate the selected macroeconomic determinants of outward FDI of Malaysia, namely income, exchange rate and openness. The Johansen and Juselius cointegration test and the vector error correction model are applied in this study to analyze the quarterly data from 1991:Q1 to 2004:Q4. The findings verified that the outward FDI of Malaysia is determined by income, exchange rate and openness of the economy in both the short- and long-run.

Some Empirical Evidence on the Quantity Theoretic Proposition of Money in ASEAN-5

This study examines the international evidence on long-run neutrality (LRN) of money based on low frequency data from five emerging ASEAN economies, namely, Indonesia, Malaysia, the Philippines, Singapore, and Thailand, using a nonstructural reduced-form bivariate ARIMA model proposed by Fisher and Seater (1993). Empirical evidence shows that the classical proposition cannot be rejected with respect to real export except for Thailand. However, the LRN test results are not robust to changes in money supply in countries under study with respect to real output. The narrow monetary aggregate seems to have greater impact on Indonesia, Malaysia, and Thailand economic activities as compared to the other two countries.Long-run neutrality of money; ARIMA model; ASEAN

Testing the Rational Expectations Hypothesis on the Retail Trade Sector Using Survey Data from Malaysia

The rational expectations hypothesis states that when people are expecting things to happen, using the available information, the predicted outcomes usually occur. This study utilized survey data provided by the Business Expectations Survey of Limited Companies to test whether forecasts of the Malaysian retail sector, based on gross revenue and capital expenditures, are rational. The empirical evidence illustrates that the decision-makers expectations in the retail sector are biased and too optimistic in forecasting gross revenue and capital expenditures.REH, Unbiasedness, Non-serial Correlation, Weak-form Efficiency

Bounds Estimation for Trade Openness and Government Expenditure Nexus of ASEAN-4 Countries

Southeast Asia countries are encountering several challenges as they are moving towards the globalization and trade liberalization era. Due to that, government intervention is essential in ensuring that the economy is resilience against the severe implications of trade openness. Therefore, this study aims to examine the relationship between trade openness and government expenditure of ASEAN-4 countries using the Autoregressive Distributed Lag [ARDL] bounds testing approach that covers a sample period of annually data from 1974-2006. Empirical results indicate that there is an existence of a significant positive long-run linkage between trade openness and government expenditure of all the ASEAN-4 countries under study. This means that government intervention in an open economy is crucial as to cushion the risks associated with trade liberalization.ARDL, ASEAN-4, openness, government expenditure

Economic Integration between ASEAN+5 Countries: Comparison of GDP

This study aims to investigate the causality direction of economic integration among ASEAN countries together with five other neighboring countries, namely Australia, China, Japan, New Zealand and South Korea. The analysis is based on the economic integration of GDP covering the sample period from 1967 to 2007. Empirical results from the Toda and Yamomoto (1995) Granger non-causality tests depicted the existence of bi-directional causality relationships between the GDP of ASEAN and China; GDP of ASEAN and Japan; GDP ASEAN and South Korea, and also GDP of ASEAN and New Zealand. This indicates that there is a great potential for ASEAN countries moving towards higher degree of economic integration via strengthening the relationship with those countries within the region.Toda and Yamomoto; Economic Integration; ASEAN+5

Selected Macroeconomic Determinants of Foreign Direct Investment Outflow of Singapore

The role of Foreign Direct Investment (FDI) outflow has become significant and essential for sustainable economic growth in Southeast Asia region particularly Singapore. The saturation of the domestic resources accumulation and as export-led regime, the government of Singapore introduced the regionalization policy in the 1990s to encourage abroad investment. Due to that, this study aims to investigate the determinants of Singapore FDI outflows from the perspective of selected macroeconomics variables namely income, trade openness, interest rate and exchange rate. This study adopted the Johansen and Juselius cointegration test and Granger causality based on vector error correction model to investigate the annually data from 1975 to 2007. Empirical results indicated that FDI outflow of Singapore is positively associated with income while inverse linkage with trade openness, interest rate and exchange rate in the long run. Moreover, exchange rate has the tendency to have greater influence towards the FDI outflow of Singapore in relative to the other determinants. Meanwhile, income, trade openness and interest rate portrayed causality linkage towards FDI outflow of Singapore, except for exchange rate in the short run. The continuous commitment towards economic integration in the East Asia region via the Free Trade Area has further contributed to the expansion of FDI outflow of Singapore in the future.FDI outflow, trade openness, vector error correction model

Evaluation of agricultural ecosystem services in fallowing land based on farmers' participation and model simulation

Fallowing with green fertilizer can benefit agricultural ecosystem services (AES). Farmers in Taiwan do not implement fallow practices and plant green fertilizer because the current subsidy level (46,000 NT$per ha) is too low to manage fallowing. This paper defines the objective of government agriculture policy or the farmer’s objective as maximization of farm productivity, approximated to the value of social welfare and AES. Farms, which do not follow proper fallowing practices, often have poorly maintained fallow land or left farmland abandoned. This results in negative environmental consequences such as cutworm infestations in abandoned land, which in turn can affect crops in adjacent farmlands. The objectives of this study are twofold. First, it determines the proper fallowing subsidy based on the concept of payment for ecosystem services to entice more farmers to participate in fallowing. Second, it simulates the benefit of planting green manure in fallow land to the supply of AES based on the rate of farmers who are willing to participate in fallow land practices and essential parameters that can affect soil fertility change. The approach involves a series of interviews and a developed empirical model. The value of AES when the rate of farmer participation is 100$perha)istoolowtomanagefallowingThispaperdefinestheobjectiveofgovernmentagriculturepolicyorthefarmer’sobjectiveasmaximizationoffarmproductivityapproximatedtothevalueofsocialwelfareandAESFarmswhichdonotfollowproperfallowingpracticesoftenhavepoorlymaintainedfallowlandorleftfarmlandabandonedThisresultsinnegativeenvironmentalconsequencessuchascutworminfestationsinabandonedlandwhichinturncanaffectcropsinadjacentfarmlandsTheobjectivesofthisstudyaretwofoldFirstitdeterminestheproperfallowingsubsidybasedontheconceptofpaymentforecosystemservicestoenticemorefarmerstoparticipateinfallowingSeconditsimulatesthebenefitofplantinggreenmanureinfallowlandtothesupplyofAESbasedontherateoffarmerswhoarewillingtoparticipateinfallowlandpracticesandessentialparametersthatcanaffectsoilfertilitychangeTheapproachinvolvesaseriesofinterviewsandadevelopedempiricalmodelThevalueofAESwhentherateoffarmerparticipationis100 ) over the value at the current participation rate of 14%. This study further concludes that the appropriate fallowing subsidy has a large positive impact on AES and social welfare (e.g., benefit from food and biofuel supplies) and is seen as a basis of ecological governance for sustainable agro-ecosystems

Can Financial Ratios Predict The Malaysian Stock Return?

Abstract is not available