• KDI Journal of Economic Policy
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• 제45권3호
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• pp.25-48
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• 2023

The current article has explored the effect of productive capacities (as defined by the United Nations Conference on Trade and Development) and of structural economic vulnerability (as defined by the United Nations) on fiscal space volatility in developing countries. It relies on the definition and measure of fiscal space proposed by Aizenman and Jinjarak (2010; 2011) and Aizenman et al. (2019). To compute the indicator of fiscal space and hence that of fiscal space volatility, fiscal space is considered as the ratio of outstanding public debt to the 'de facto tax base', the latter being the number of years of tax revenues needed for a country to repay its debt. Results based on a sample of 116 countries from 2000 to 2018 have revealed that the enhancement of productive capacities is associated with lower fiscal space volatility, while higher structural economic vulnerability heightens fiscal space volatility. On another note, highly vulnerable countries tend to experience a higher negative effect of productive capacities on fiscal space volatility than relatively less vulnerable countries.

• The Journal of Asian Finance, Economics and Business
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• 제9권5호
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• pp.19-27
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• 2022

The size of the government is one of the most fundamental debates of open economies. In any economy, government plays an important role, but a pertinent level of economic prosperity has never been obtained in history without government. Therefore, the objective of this paper investigates the association of government size, economic volatility, and institutional quality for 182 economies from the time period 1996-2016 is collected from the World Bank database. GE is defined as the General government's final consumption expenditure. Health expenditure is represented by HE. Government expenditure on education is denoted by EDUEXP. The economic volatility is measured by the rolling standard deviation of GDP per capita growth rate, Population growth, Trade openness, GINI represented Gini index which measures the degree to which the income distributed or consumption expenses among citizens deviates from a perfectly equal distribution. The results proposed that economic volatility has a significant effect on government size and institutional qualities. Moreover, the paper extends the investigation by finding the link between economic volatility with government health and education expenditure separately. The policy implication drawn from this analysis is that controlling economic volatility may reduce the size of government and also significantly affect health and education expenditures.

• The Journal of Asian Finance, Economics and Business
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• 제7권12호
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• pp.683-692
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• 2020

The primary purpose of the study is to investigate the volatility spillovers from global economic policy uncertainty and macroeconomic factors to the Islamic stock market returns. The study focuses on the Islamic stock indices of emerging economies including Indonesia, Malaysia, and Turkey. The Macroeconomic factors are industrial production, consumer price index, exchange rate. EGARCH model is employed for investigation of volatility spillovers. The results show that the global economic policy uncertainty has a significant spillover effect only on the returns of Turkish Islamic stock index. Similarly, the shocks in macroeconomic factors have little influence on the volatility of Islamic indices returns. The volatility of Indonesian and the Turkish Islamic stock indices returns is not influenced from the fluctuations in macroeconomic factors. However, there is significant volatility spillover only from industrial production to the returns of Malaysian Islamic index. The results suggest that the Islamic stock markets are less likely to influence from the global economic policies and macroeconomic factors. The stability of Islamic stocks provide opportunity for diversification of portfolios, particularly in stressed market conditions. The major price factors of Islamic markets could be firms' specific factors or investors' behaviors. The findings are helpful for policy makers and investors in formulating policies and portfolios.

• East Asian Economic Review
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• 제18권1호
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• pp.3-27
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• 2014

This paper examines the effects of financial crises on the long memory volatility dependency of daily exchange returns focusing on the Asian crisis in 97-98 and the Global crisis in 08-09. By using the daily KRW-USD and JPY-USD exchange rates which have different trading regions and volumes, this paper first applies both the parametric FIGARCH model and the semi-parametric Local Whittle method to estimate the long memory volatility dependency of the daily returns and the temporally aggregated returns of the two exchange rates. Then it compares the effects of the two financial crises on the long memory volatility dependency of the daily returns. The estimation results reflect that the long memory volatility dependency of the KRW-USD is generally greater than that of the JPY-USD returns and the long memory dependency of the two returns appears to be invariant to temporal aggregation. And, the two financial crises appear to affect the volatility dynamics of all the returns by inducing greater long memory dependency in the volatility process of the exchange returns, but the degree of the effects of the two crises seems to be different on the exchange rates.

• East Asian Economic Review
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• 제17권3호
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• pp.311-332
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• 2013

This paper examines the effect of initial margin requirements on long-run and short-run volatilities in the Japanese stock market using the Component GARCH model. Our empirical results show that when we do not divide the margin requirement into positive and negative changes, increasing margin requirement is effective for reducing long-run volatility, while not effective in short-run volatility. However, separating the positive and negative changes in margin requirements reveals the fact that the negative changes in margin requirements decrease long-run volatilities, while the higher margin requirements increase short-run volatilities in the Japanese stock market. This suggests that if the Japanese financial authorities intend to increase margin level to reduce volatility, unexpectedly, short-run volatility would be even higher.

• East Asian Economic Review
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• 제20권3호
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• pp.365-390
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• 2016

This paper quantitatively compares the intrinsic features of the daily USD-GBP exchange rates in two different periods, the 1920s and the 2010s, under the same freely floating exchange rate system. Even though the foreign exchange markets in the 1920s seem to be much less organized and developed than in the 2010s, this paper finds that both the long memory volatility property and the structural break appear to be the common intrigue features of the exchange rates in the two periods by using the FIGARCH model. In particular, the long memory volatility properties in the two periods are found to be upward biased and overstated because of the structural breaks in the exchange markets. Thus this paper applies the Adaptive-FIGARCH model to consider the long memory volatility property and the structural breaks jointly. The main finding is that the structural breaks in the exchange markets affect the long memory volatility property significantly in the two periods but the degree of the long memory volatility property in the 1920s is reduced more remarkably than in the 2010s after the structural breaks are accounted for; thus implying that the structural breaks in the foreign exchange markets in the 1920s seem to be more significant.

• 한국산학기술학회논문지
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• 제12권8호
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• pp.3472-3477
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• 2011

많은 연구자들은 변동성에 대한 연구로 변동성의 원인을 규명하고자 하는 연구들이 주를 이루었다. 그리고 선행연구들은 거시경제변수를 이용하였다. 본 연구에서는 변동성을 주식의 변동성으로 정의한다. 주식의 변동성과 기업의 경영성과에 대한 연구는 아직 미비하다. 이에 본 연구에서는 변동성과 기업의 경영성과를 분석한다. 이때 기업 성과를 ROA와 토빈Q를 이용한다. 분석결과를 다음과 같다. 첫째, 기업의 경영성과의 대용지표로 사용한 ROA의 경우에는 주식가격의 변동성과 음(-)의 관계가 있는 것으로 나타났다. 둘째, 경영성과의 대용지표인 Tobin's Q의 경우에는 주식가격의 변동성과 양(+)의 영향을 미치는 것으로 분석�榮�.

• East Asian Economic Review
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• 제25권2호
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• pp.205-230
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• 2021

This study examines the impact of the number of coronavirus cases on regime-switching in stock return volatility. This study documents the empirical evidence that the COVID-19 cases had an asymmetric effect on the regime of stock return volatility. When the stock return is in the low volatility regime, the probability of switching to the high volatility regime in the next trading day increases as the number of cumulative cases increases. In contrast, in the high volatility regime, the effect of cumulative cases on the transition probability is not statistically significant. This study also documents the evidence that the government measures against the pandemic contribute to promoting the high volatility regime of the KOSPI during the pandemic. Besides, this study projects future stock prices through the Monte Carlo simulation based on the estimated parameters and the predicted number of the COVID-19 new cases. Under a scenario where the number of new cases rapidly increases, stock price indices in Korea are expected to be in a downward trend over the next three months. On the other hand, under the moderate scenario and the best scenario, the stock indices are likely to continue to rise.

• 재무관리연구
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• 제13권1호
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• pp.341-357
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• 1996

Some empirical studies have shown that asset prices respond to announcements of economic news, however, others also have found little evidence. This study assesses how market participants of the S&P 500 Index Futures reacted to the U.S. economic news announcements. For this purpose, using a GARCH (Generalized Autoregressive Conditional Heteroscedasticity) model, we use several U.S. news variables, its each surprise component and interest rates. We find that some economic news variables affected significantly on the S&P 500 Index Futures. In other words, we find that weekend variable, lagged volatility, and surprise component of trade deficit increased level of volatility. However, interest rate, M1, unemployment announcements caused the variance of the S&P 500 Index Futures to reduce, and each of the surprise component of M1 and trade deficit increased it. The result suggests that resolution of uncertainty, through economic news announcement, while, in some cases, causes market participants to reduce their forecast of volatility, a large difference between the market's forecast and the realization of the series causes the volatility to increase.

• Journal of Korea Trade
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• 제27권2호
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• pp.96-114
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• 2023

Purpose - This paper elucidates a nexus between the occurrence of rare disaster events and the volatility of economic growth by distinguishing the likelihood of rare events from stochastic volatility. We provide new empirical facts based on a quarterly time series. In particular, we focus on the role of financial liberalization in spreading the economic crisis in developing countries. Design/methodology - We use quarterly data on consumption expenditure (real per capita consumption) from 44 countries, including advanced and developing countries, ending in the fourth quarter of 2020. We estimate the likelihood of rare event occurrences and stochastic volatility for countries using the Bayesian Markov chain Monte Carlo (MCMC) method developed by Barro and Jin (2021). We present our estimation results for the relationship between rare disaster events, stochastic volatility, and growth volatility. Findings - We find the global common disaster event, the COVID-19 pandemic, and thirteen country-specific disaster events. Consumption falls by about 7% on average in the first quarter of a disaster and by 4% in the long run. The occurrence of rare disaster events and the volatility of gross domestic product (GDP) growth are positively correlated (4.8%), whereas the rare events and GDP growth rate are negatively correlated (-12.1%). In particular, financial liberalization has played an important role in exacerbating the adverse impact of both rare disasters and financial market instability on growth volatility. Several case studies, including the case of South Korea, provide insights into the cause of major financial crises in small open developing countries, including the Asian currency crisis of 1998. Originality/value - This paper presents new empirical facts on the relationship between the occurrence of rare disaster events (or stochastic volatility) and growth volatility. Increasing data frequency allows for greater accuracy in assessing a country's specific risk. Our findings suggest that financial market and institutional stability can be vital for buffering against rare disaster shocks. It is necessary to preemptively strengthen the foundation for financial stability in developing countries and increase the quality of the information provided to markets.