Global Business and Economics Review (5 papers in press)

Special Issue: “The Political Economy of Transition”
Guest Editor: Dr. John Marangos, Colorado State University, USA

• Determinants of Non-Bank Financial Institutions’ Profitability: Empirical Evidence from Malaysia
  by Fadzlan Sufian 
  Abstract: The present paper examines the determinants of non-bank financial institutions’ (NBFIs) profitability in a developing economy. Specifically working within the Malaysian financial sector, the analysis is confined to the universe of the merchant banks and finance companies operating in the Malaysian financial sector during the period 2000-2004. The results suggest that Malaysian NBFIs with a higher risk exhibits lower profitability level. On the other hand, the large Malaysian NBFIs with high operational expenses exhibits higher profitability level, thus supporting the expense preference behavior hypothesis. The results suggest that specialization has no significant relationship with Malaysian NBFIs profitability.
  Keywords: Non-Bank Financial Institutions, Profitability, Multivariate Regression Analysis, Malaysia
   
• The Globalization of the Australian Passenger Motor Vehicle Industry: Lessons for Other Countries
  by Andrew Marks 
  Abstract: Protectionism played a pivotal role in encouraging the growth of the Australian passenger motor vehicle (PMV) industry from the early to late 20th century. However, the prolonged nature of this policy led to the appearance of various negative influences on this industry’s economic performance that were encapsulated by a weak international competitive position. This was reflected by a persistent low export profile, within the context of rising import penetration, thereby threatening the long run viability of not only motor vehicle production, but also the related segments of the economy that depended upon this industry. Policy initiatives to arrest this serious situation were underpinned by pursuing trade liberalization and reinforcing industry specific assistance measures. These measures “spearheaded” efforts to improve the (PMV) industry’s economic fundamentals and hence international competitiveness in order to encourage the multinational parents to integrate their Australian subsidiaries into their global operations so as to achieve export oriented production and hence safeguard long run output and employment growth.. This central objective was largely achieved thereby not only promoting this industry’s long run viability, but also stimulating output and employment growth throughout the economy because of the extensive linkage effects between motor vehicle production and manufacturing and service inputs. However, numerous costs simultaneously appeared in the form of employment losses in the PMV industry, greater susceptibility to fluctuations in the international business cycle for both this industry and related sectors and a deterioration in the balance of trade in motor vehicles which has compounded the current account deficit. The Australian experience of globalizing the operations of the PMV industry carries the broad but nevertheless important implication for other countries that sustained strong economic growth can be achieved by improving international competitiveness in order to encourage multinational corporations to them as an export base.
  Keywords: Trade liberalization, Australian motor vehicle industry, protectionism, export orientation, international, competitiveness, investment in export creating capacity, multifactor productivity, research and development, motor vehicle exports.
   
• Application of classical and robust chain-ladder methods: Results for the Belgian non-life business
  by Martine Van Wouwe, Tim Verdonck, Kristel Van Rompay 
  Abstract: The solvency II regulation for the non-life insurance business focuses on the application of the chain-ladder method in the EU. A recent memorandum of the EU also expresses its concern about the treatment of outlying data. Not only the appearance but certainly the consequences for the solvency risk capital are brought up. We will discuss the results of applying classical and robust chain-ladder methods to real data from several lines of business in the non-life insurance branch in Belgium.
  Keywords: Claims reserve, Chain-ladder method ,Outliers, Robustified Chain-ladder method
   
• Determinants of Inward Foreign Direct Investment in the Ghanaian Manufacturing Sector
  by Joshua Abor Abor, Simon Harvey 
  Abstract: This study investigates the determinants of foreign direct investment (FDI) in the Ghanaian manufacturing sector, using the Regional Project on Enterprise Development (RPED) dataset. The study adopts a binary logistic regression model in which the dependent variable, FDI, is expressed as a function of firm-level characteristics and location variables. The results of this study showed that firm size, capital requirement, skill intensity, labour cost, technological capability and unionization of a firm’s workers positively affect FDI inflows. The results, however, revealed that firm age negatively affect FDI. We also found that the location and sub-sector of the firm influence FDI inflows. The main findings of this study are that, larger firms are more likely to attract FDI in the manufacturing sector. Also, firms with high capital base, skilled labour force, improved technological capability and unionized labour are often in the position to attract more FDI into the manufacturing sector.
  Keywords: Foreign Direct Investment, Manufacturing Sector, Ghana
   

• Trade Balance and Real Exchange Rate: New Evidence from Mauritius-UK Trade
  by Rakesh Bissoondeeal 
  Abstract: Two main questions are addressed here: is there a long-run relationship between trade balance and real exchange rate for the bilateral trade between Mauritius and UK? Does a J-curve exist for this bilateral trade? Our findings suggest that the real exchange rate is cointegrated with the trade balance and we find evidence of a J-curve effect. We also find bidirectional causality between the trade balance and the real exchange rate in the long-run. The real exchange rate also causes the trade balance in the short-run. In an out-of-sample forecasting experiment, we also find that real exchange rate contains useful information that can explain future movements in the trade balance.
  Keywords: Trade balance; real exchange rate; cointegration; J-curve; Granger causality; forecasting.