Economic Issues Volume 15

ECONOMIC ISSUES

Volume 15 (2010)

Part 1, March

Please select from the titles below:

B Harrison and W Moore, Stock Market Co-Movement in the Carribean
K Aristotelous, What is the EMU Effect on the UK's Exports to Eurozone Countries?
E Lau, S A Mansor and C-H Puah, Revival of the Twin Deficits in Asian Crisis-affected Countries
E Kasabov, Success of Path Dependence through Perpetuation during Reform
M Perugini, J H W Tan and D J Zizzo, Which is the More Predictable Gender? Public Good Contribution and Personality

Part 2, September

Please select from the titles below:

Part 1, March

Stock Market Co-Movement in the Caribbean (p.1)

by B Harrison and W Moore

Abstract: This paper investigates co-movement in five Caribbean stock markets (Barbados, Jamaica and Trinidad and Tobago, The Bahamas and Guyana) using common factor analysis. The common factors are obtained using principal component analysis and therefore account for the maximum portion of the variance present in the stock exchanges investigated. We break our analysis down and test for co-movement in different periods so as to ascertain any changes that have taken place from one period to the next. In particular we examine 10-year, 5-year and 3-year periods. We also specify a vector autoregression model and test for co-movement between the five markets during the sample period through impulse response functions. Both of our tests fail to find any evidence of co-movement between the exchanges over the entire sample period. However, we find evidence of periodic co-movement, particularly between exchanges in Barbados, Jamaica and Trinidad and Tobago.

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What is the EMU Effect on the UK’s Exports to Eurozone Countries? (p.17)

by K Aristotelous

Abstract: This paper investigates the EMU effect on the UK's exports to eurozone countries, using pooled data from 1981-2006 between the UK and all EU members at the time when the euro was launched. The results show that EMU led to a decrease in the UK's exports to the countries that adopted the euro as their national currency. That decrease is statistically different from zero.

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Revival of the Twin Deficits in Asian Crisis-affected Countries(p.29)

by E Lau, S Abu Mansor and C-H Puah

Abstract: This paper revisits the twin deficits argument in the Asian crisis-affected countries. We also include data from the 1997 crisis to examine the disparities in the empirical regularities governing the two deficits in these countries. Empirical results suggest that causality runs from budget deficit to current account deficit for Malaysia, the Philippines (pre-crisis) and Thailand, which fits well with the Keynesian view. For Indonesia and Korea the causality runs in the opposite direction while a bi-directional causality exists for the Philippines in the post-crisis era. As these countries are at a crossroad in the aftermath of the 1997 crisis, managing these deficits are indeed important policy options in promoting macroeconomic stability and sustainability in the region.

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Success of Path Dependence Through Perpetuation of Failure During Reform (p.55)

by E Kasabov

Abstract: The primary purpose of this paper is to extend current debates about path dependence and to contribute to scholarship by addressing inadequately researched aspects of path dependence: the role of individuals in sustaining long-standing 'inefficient' institutions; the balance of 'path following' and 'path violation'; and path dependent resource utilisation, not resource allocation. These matters are illustrated through and discussed in the context of 'asset-stripping' and 'rent-seeking' in the 2000s and during the earlier, illegal privatisation of state-owned assets in 1990s Bulgaria.

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Which is the More Predictable Gender? Public Good Contribution and Personality (p.83)

by M Perugini, J H W Tan and D J Zizzo

Abstract: Questionnaires can and have been used to predict behaviour in economic settings. Using two sets of measures from personality psychology (the Big Six) and social psychology (Social Value Orientation), we find that the behaviour of men is predictable in the first half of a public good contribution experiment, whereas that of women is not. This result agrees with the reinterpretation of Carol Gilligan’s (1982) view that women are more sensitive to the context in which decisions are made. In practice, questionnaires such as those used in human resource management settings may fail to capture women’s preferences.

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Part 2, September

Testing the Fisher effect in the presence of structural change: A case study of the UK, 1966-2007 (p.1)

by O Bajo-Rubio, C Díaz-Roldán and V Esteve

Abstract: In this paper, we provide an empirical test of the Fisher effect using cointegration techniques, where the existence of instabilities in the cointegrating or long-run relationship is explicitly tested. The analysis is applied to the UK, a country that has been subject to potentially strong regime shifts, for the period 1966-2007. To this end, we apply some recent econometric techniques aimed to detect eventual structural changes, allowing the instability to occur at an unknown date.

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Monetary Variability and Monetary Variables in the Franc Zone (p.17)

by S Coleman and M Karoglou

Abstract: Failure to detect or account for structural changes in economic modelling can lead to misleading policy inferences, which can be perilous, especially for the more fragile economies of developing countries. Using three potential monetary policy instruments (Money Base, M0, and Reserve Money) for 13 member-states of the CFA Franc zone over the period 1989:11-2002:09, we investigate the magnitude of information extracted by employing data-driven techniques when analyzing breaks in time-series, rather than the simplifying practice of imposing policy implementation dates as break dates. The paper also tests Granger's (1980) aggregation theory and highlights some policy implications of the results.

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Convergence of Corporate Finance Patterns in Europe (p.49)

by A Mullineux, V Murinde and R Sensarma

Abstract: We investigate the patterns of corporate financing through bank loans, bond markets and stock markets in the European Union (EU). Specifically, we examine whether the EU economies are converging towards a market-oriented or a bank-oriented financial system. Panel unit root tests and GMM regressions are applied to flow of funds data for eight EU countries over the period 1972-2004. We find that the patterns of corporate financing in the EU mimic elements of the pecking order theory of financing choices. Furthermore, the EU financial system seems to be converging on a variant of the Anglo-Saxon model, with heavy reliance on internal financing and financing from the capital market.

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The determinants of economic growth in Pakistan: Does stock market development play a major role? (p.69)

by M Mafizur Rahman and M Salahuddin

Abstract: This paper provides an empirical analysis of the relationship between economic growth and its determinants, with special focus on stock market development in Pakistan. Using data for the period from 1971 to 2006, we employ FMOLS and ARDL bounds-testing for the long run relationship and ECM for the short run dynamics. The findings suggest a positive relationship between efficient stock markets and economic growth, both in short run and long run. Financial instability and inflation have negative effects while human capital, foreign direct investment and stock market liquidity have positive effects on growth. The results are consistent with the theoretical and empirical predictions.

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Additive Labour Values and Prices: Evidence from the Supply and Use Tables of the French, German and Greek Economies (p.87)

by T Mariolis and G Soklis

Abstract: This paper finds, on the basis of a usual 'square' linear model of joint production, that the vectors of additive labour values and/or actual prices of production associated with the Supply and Use Tables of the Greek economy (for the years 1995 and 1999) are economically insignificant, whilst the relevant vectors of the French (for the years 1995 and 2005) and German (for the years 2000 and 2005) economies are economically significant. The evaluation of the results reveals certain technical-social features of the economies under consideration and casts doubt on the logic of the so-called empirical labour theory of value.

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