An Economic Analysis of Monetary Policy in Four ASEAN Economies

Asymmetric effect, in the context of monetary policy, refers to a situation in which the effects of a given policy are not constant but vary depending on the circumstances. By employing a relatively popular technique of non-linear modelling - for instance, Hamilton's Markov-switching model - this study empirically analyses if real output asymmetrically responds to monetary policy shocks in four ASEAN economies: Indonesia, Malaysia, the Philippines and Thailand. Typically, the asymmetries in discussion are pertaining to, (i) the policy action and, (ii) the phase of the business cycle. Quarterly data spanning the period from 1978: 1 for Indonesia; 1974:l for Malaysia; 1977:l for the Philippines and Thailand; to 2003:4 are being utilised in this study. Several important observations can be made based on this study. First, this study provides evidence that a tight monetary policy has a larger absolute impact than an easy policy. For instance, by incorporating a time-varying inflation parameter in the model, both the money supply shocks and interest rate shocks in all economies under study are found to have asymmetric effects on real output, in which the effects of an easy policy mitigate while the effects of a tight policy increase, with higher inflation rates. Furthermore, the inverted L-shaped aggregate supply curve and negative-sloped equilibrium locus is supported in the case of Indonesia, the Philippines and Thailand. This evidence implies that an easy policy has a favourable impact, no impact and a harmful impact on output during the low, medium and high inflation regimes respectively in these economies. The fact of asymmetry is particularly important in the Asian context in their discussion and formulation for a monetary union. It implies that monetary authorities must take into account not only the fact that these economies do not react symmetrically in response to the policy action but also the behaviour of the inflation process. In other words, the evidence of high inflation rates for some of the developing economies may contribute to increased asymmetries in this context. Second, the results do support the argument that effects of monetary policy vary depending on the phase of the business cycle. More precisely, monetary policy effects are found to be larger during recessionary periods for all economies under study. This finding therefore suggests the important role that credit market imperfections have on a firm's investment behaviour, which in turn points to the financial accelerator as a relevant mechanism underlying the observed asymmetry. An important lesson based on this study is that the macroeconomic stability will be in dire peril if financial systems of these economies are not managed prudently. Policies thus may be designed to reduce the financial sector's vulnerability to a crisis by encouraging appropriate and disciplined financial intermediary practices

Long Memory Features in Return and Volatility of the Malaysian Stock Market

This study aims to investigate the existence of long memory in the Malaysian stock market utilizing daily stock price index from the period 1998:09 to 2009:12. Various ARFIMA-G(ARCH)-type models have been taken into consideration to address this issue, which has led to several interesting conclusions. Firstly, the long memory property exists in both the return and volatility, with and without incorporating the crisis impact. Secondly, the stock volatility is found to be experiencing significant leverage effect especially with the inclusion of the impact of crisis. This implies that the volatility has the tendency to respond to bad news more than good news as compared to the other periods under study. Thirdly, among the various G(ARCH)-type models with different innovation distributions, the Student-t distribution provides better specifications in terms of the long memory volatility processes. In summary, ARFIMA-FIAPARCH model is found to be the most appropriate method of presenting the stylized facts of stock return and volatility in Malaysia.long memory property, leverage effect, ARFIMA-G(ARCH) models

Non-linear unit root properties of stock prices: Evidence from India, Pakistan and Sri Lanka

This study applies a threshold autoregressive (TAR) model to monthly stock prices for three South Asian countries over the period from 1991:01 to 2009:09. Two main conclusions are drawn. Firstly, the results indicate that all the stock prices in this study exhibit non-linear behavior. Secondly, a partial unit root was found to be present in one of the regimes indicating that the stock prices are weak form efficiency, but not all the time.non-linear, unit root, efficient market hypothesis

Asymmetric effects of monetary policy in ASEAN-4 economies

By employing the Markov-switching model, this study examines if real output asymmetrically responds to monetary policy shocks in Indonesia, Malaysia, the Philippines and Thailand. This study provides evidence that a contractionary monetary policy has a larger absolute impact than an expansionary policy. Moreover, the effects of an expansionary policy are gradually mitigated when the inflation rate is increasing (except in Malaysia). These findings imply that monetary authorities must consider not only the behaviour of the inflation process but also the fact that not all economies can react in a similar way to expansionary and contractionary monetary policy shocks

The asymmetric effects of monetary policy in four Asian economies.

The idea that the effectiveness of monetary policy measures may depend on the state of the economy is examined for four Asian economies using a generalized Hamilton Markov switching model of output due to Garcia and Schaller (2002). The null hypothesis of symmetry is rejected for these economies and monetary policy is seen to have larger effects during downturns than during upswings

Impact of Climate Change on the Number of Threatened Species: International Evidence

Global warming is the price for economic development. Rapid industrialization produces greenhouse gases that trap the heat and make the earth warmer. The rise in temperature and changes in precipitation resulted in extreme weather conditions. Global climate change affects both physical and biological environments and the impacts on biodiversity is directly and indirectly. The direct effects of climate change includes the increased in temperature and precipitation that affect individual organisms, populations, species distribution and ecosystem compositions and functions. The indirect effects of climate change are through increased salinity and extreme weather events such as floods, cyclones and droughts that will have a profound negative impacts on the forest and biodiversity. The present study investigates the impact of climate change on the number of threatened species as proxy for biodiversity loss using a cross-national data consisting of 98 countries. We have estimated the impact of temperature, precipitation and the number of natural disasters occurrences on the number of threatened species, in particular birds, fishes, mammals, plants and reptiles. As control variables, we have considered government effectiveness (proxy for good governance) and the level of economic development (proxy for wealth). By employing Ordinary Least Square (OLS) with robust standard error and quantile regressions analyses, our results suggest that all three climate change indicators – temperature, precipitation and the number of natural disasters occurrences increase the number of threatened species (biodiversity loss). Higher economic development also affect the number of threatened species positively. On the other hand, good governance such as government effectiveness reduces the number of threatened species. Thus, practicing good governance, promoting conservation of the environment and the control of greenhouse gasses would able to mitigate biodiversity loss

Non-linear unit root properties of stock prices : evidence from India, Pakistan and Sri Lanka.

This study applies a threshold autoregressive (TAR) model to monthly stock prices for three South Asian countries over the period from 1991:01 to 2009:09. Two main conclusions are drawn. Firstly, the results indicate that all the stock prices in this study exhibit non-linear behavior. Secondly, a partial unit root was found to be present in one of the regimes indicating that the stock prices are weak form efficiency, but not all the time

The impact of the dimensions of environmental performance on firm performance in travel and tourism industry

This study investigates the impact of the aggregate and individual dimensions of environmental performance (EP) on financial performance (FP), based on a dataset covering the travel and tourism industry (airlines, casinos, hotels, and restaurants) across different economic regions over the period 2003–2014. The results reveal that EP positively affects the FP in the hotel industry when aggregate EP is used. When individual dimensions of EP are considered, resource reduction is found to positively (negatively) affect the performance in the hotel (airline) industry, while product innovation positively affects the performance in the restaurant industry. Hence, the trade-off effect seems to be dominant in the airline industry, and the ‘heterogeneous resources and reputation-building’ hypothesis is evident in both the hotel and restaurant industries. In addition, in general, the findings support the positive moderating effect of slack resources on the relationship between the individual dimensions of EP and FP in the travel and tourism industry, and, hence, are supportive of the slack resources hypothesis. These effects, however, vary depending on the travel and tourism industry under investigation

Testing for financial-led, export-led and import-led growth hypotheses on four Asian emerging economies

The main objective of this study is to investigate the dynamic relationships between economic growth and macroeconomic variables, namely financial deepening, exports and investment for the cases of Singapore, South Korea, Taiwan and Thailand. The vector errorcorrection model (VECM) is employed to distinguish between shortrun and long-run causal effects in examining the three led-growth determinants. The out-of-sample dynamics of the system are also picked up through variance decomposition analysis. The empirical results suggest that financial deepening leads to economic growth in South Korea, Singapore and Thailand. In terms of exports, the findings demonstrate that export-led growth hypothesis is supported for all four Asian economies, namely Singapore, South Korea, Taiwan and Thailand. Apart from export promotion strategies and financial liberalisation, the evidence also shows that economic growth in these four Asian economies is found to be generated by capital formation or investment

Sustainable tourism, deforestation and growth: a case for Malaysia

Sustainable tourism perceived as a significant driver of income and creates job opportunities for local communities, which, as a result, deliver significant incentives to preserve biodiversity. Preserving the quality of environment becomes the prime concern to attract more tourists, which as a result, increase funds for biodiversity conservation. Massive increase in tourism together with limited environmental resources capacity, there is an urgent need to raise the awareness on the issue of biodiversity for tourism development. For the purpose of this research, we examine the impact and economic growth on sustainable tourism for the period 1996 – 2012 in Malaysia. For the purpose of this study, we construct a Sustainable Tourism Index (STI) and employed few methods which are the Ordinary Least Squares (OLS), Canonical cointegrating regression (CCR), Dynamic OLS (DOLS) and Fully-Modified OLS (FMOLS) methods to test the long-run model of sustainable tourism. Generally, our results found that economic growth and mitigating do contribute to sustainable tourism in Malaysia