International Journal of Economic Policy in Emerging Economies (17 papers in press)

Regular Issues

• Country specific and world productivity shocks and current account: does the relationship hold in case of India and the G20 group?  
  by Nikita Patial 
  Abstract: Intertemporal approach to current account became a fashionable tool in last few decades to study the lending and borrowing decisions of an economy in the international markets. Following, Glick and Rogoff (1995) theoretical model, this study empirically examines the link between Indias current account and its country specific productivity shocks using dynamic factor analysis approach to segregate world and country specific shocks. Our results suggest that Indias current account movements are independent of its country specific productivity shocks as opposed to the theory. The mean reverting nature of country specific shocks leads to consumption smoothing by agents, increasing savings in the economy, which offsets any impact of rise in investment. We also extend our analysis to a panel of G20 countries. This study reiterates the potential of intertemporal models to replace the enhanced versions of Mundell Fleming IS-LM framework in analysing key macroeconomic issues by banks, and other international institutions.
  Keywords: current account; productivity shocks; country specific productivity; global shock; G20 countries; investment; dynamic factor analysis; DFA.
  DOI: 10.1504/IJEPEE.2022.10044142
   
  
• One country, two system: analysing contractual work arrangement and labour practices  
  by Sazzad Parwez, Kapil Meena 
  Abstract: This paper uses both theoretical and empirical methods to examine working conditions of contractual workers with illustrations on discriminative labour practices in mining units. The analysis mainly follows a descriptive approach and based on field data, but we have also used secondary data to support arguments. The primary data reflects on wage and other form of discrimination captured in interview with contractual workers of copper mining units in Madhya Pradesh and Rajasthan state. The most telling finding is significant use of contractual workers in these public units, indicates that the socio-economic background is detrimental to discriminatory behaviour in these mining units. Analysis suggests discrimination is higher for lower caste-based groups in context of education, experience, and skills levels. This informalisation of labour is causing considerable deterioration in working conditions, reflected by wage differential for and among contractual workers. This aggravates the situation for labour community.
  Keywords: workers; labour; contractualisation; discrimination; wage; India.
  DOI: 10.1504/IJEPEE.2021.10044354
   
  
• Are Chinese exports crowding out competitors? Evidence from Malaysian electrical and electronic exports  
  by Kok Onn Ting, Alessandro De Matteis 
  Abstract: The rapid expansion of Chinas production of electricals and electronics is benefiting Malaysia, which is exporting more intermediate parts and components to China to feed into its production networks, especially for finished goods assembly. However, Malaysia concurrently faces competition from China in exports to third markets and import penetration of own domestic markets. The positive side of Chinas rise is characterised in terms of complementary effects, and the negative side as competitive impacts. As Chinas effect on Malaysias electricals and electronics is not clear-cut, there is a need for combined analysis conducted at different levels. This paper combines the analysis of Chinese and Malaysian export performance in their major destination markets with the analysis of ongoing transformative processes in the production and trade of electricals and electronics in the two economies. Our findings highlight that Chinas effect on Malaysian electrical and electronic exports differs according to the market destination of the exports, with some trade war effects between the USA and China captured in the analysis. Overall, Malaysias response to Chinas rising exports has been to upgrade its value chain.
  Keywords: China’s effect; Malaysia trade; electricals and electronics; export sophistication.
  DOI: 10.1504/IJEPEE.2022.10044752
   
  
• Beyond unemployment rate: exploring the unemployment duration in Cote dIvoire  
  by Niango Sika Antoine Brice Adou 
  Abstract: This study explores unemployment duration in Cote dIvoire and focuses on the role of personal characteristics. Along with these characteristics, labour market variables are also explored. We use a discrete time proportional hazard model with census data from the National Statistics Institute. The data show that unemployment duration is higher in general but is quite sensitive to the sector of activity. The gender gap in the labour market is not huge. The results show that education influences positively the probability to find a job faster, while social capital has a mixed impact. Being married and unemployed is a positive signal for employer. Therefore, this study poses that hiring through agencies, which are more likely to match better job needs, can help reducing time spend in unemployment.
  Keywords: unemployment; survival; education; Cote d’Ivoire; social capital.
  DOI: 10.1504/IJEPEE.2022.10044755
   
  
• Nonlinear ARDL approach for asymmetric effects of investor sentiment on asset pricing in an emerging Asian economy: the Malaysian experience  
  by Han Hwa Goh, Lee Lee Chong, Ming Ming Lai 
  Abstract: This paper addresses the issues pertaining to asset pricing model in Malaysian stock market, an emerging Asian economy, using monthly data between January 2001 and December 2015 for all the stocks on the main market of Bursa Malaysia and five different investor sentiment proxies (i.e., market-wide indicators). Employing NARDL nonlinear cointegration approach, we examine the causal relationship between stock excess returns and investor sentiment in the integrated Fama-French three-factor model. The empirical results suggest that the investor sentiment is an added risk factor to help explain directly the mispricing component of returns in the Fama-French three-factor model and thus bridging the current research gap between traditional and behavioural asset-pricing theories in Malaysia. Besides, this paper reveals that the stock returns are affected by sentiment in an asymmetric and nonlinear manner in either short- or long-run. In particular, we found that the immensity of positive changes of sentiment is significantly greater than that of negative changes of sentiment towards stock returns. These findings may help finance professionals to perform smart investing strategies using investor sentiment as a contrarian indicator
  Keywords: investor sentiment; asset pricing; asymmetric cointegration; emerging economy; Bursa Malaysia.
  DOI: 10.1504/IJEPEE.2022.10046790
   
  
• Exchange rate volatility and trade in Sub-Saharan African countries: evidence from augmented mean group estimator  
  by Shuaibu Sidi Safiyanu, Soo Yean Chua 
  Abstract: : Exchange rate plays a major role in trade transaction of Sub-Saharan African countries with their trading partners. This study examines the effects of exchange rate volatility on trade in 40 Sub-Saharan African countries from 19922018. The paper used augmented mean group as a preferred estimator to take account of cross-sectional dependency between the countries under investigation. The dynamic common correlated effect is also used for robustness of the findings. Empirical finding shows that lags of exports and imports have significant positive effects on the contemporaneous levels of exports and imports in Sub-Saharan African countries. Moreover, the coefficients of elasticity of imports and exports with respect to exchange rate volatility are positive. Thus, higher volatility stimulates both imports and exports trade in the region. The results also uncover unidirectional causality running from trading partners income to exports and imports trade, and also from exchange rate volatility to imports and exports trade
  Keywords: exchange rate volatility; trade; panel data; augmented mean group; AMG; Sub-Saharan African countries.
  DOI: 10.1504/IJEPEE.2022.10046800
   
  
• Long and short run drivers of the real exchange rate in Egypt (20022020)  
  by Hoda Mansour, Soliman Hassan 
  Abstract: Egypt is an emerging developing country which has a long history of utilising different exchange rate regimes. Since the liberalisation of its Egyptian pound in 2016, the country has been facing a set of challenges to stabilise its exchange rate. To suggest better policies, this paper examines the long and short run determinants of Egypts real exchange rate. Using Johansen and Juselius co-integration test, VAR, and an error correction model, the study analyses data from 2002 to 2020 for Egypt. The study concludes that, in the long run, growth rate, international reserves, government consumption, terms of trade and workers remittances all have a long-run impact on the real exchange rate, while the degree of openness has no significant impact. In addition, the study provides evidence that, on the short-run, the degree of openness and government consumption have significant impact on the real exchange rate. Results of this study infer a preference for a fixed or strictly managed exchange rate regime over a flexible regime.
  Keywords: real exchange rate; Johansen and Juselius co-integration test; vector autoregressive model; VAR model; Egyptian pound.
  DOI: 10.1504/IJEPEE.2022.10046804
   
  
• Investigating the growth factors of life insurance sector an ARDL approach  
  by Abhijit Chakraborty, Avijit Debnath, Ashim Kr Das 
  Abstract: Insurance sector is considered a significant contributor to the economic growth of economies across the world. The purpose of this study is to investigate the factors affecting growth potentials of life insurance sector in India. ARDL technique is used to investigate short-run and long-run relationships between life insurance sector growth represented by life insurance penetration and 13 independent variables under macro-economic, demographic and socio-cultural category using time series data from 19802018. The ARDL bounds testing procedure was used to check for co-integration. The study found that gross domestic product per capita, interest rate (deposit), young dependency ratio, gross capital formation, and education are significantly influencing life insurance sector growth in the long run. The short-run error correction model revealed speed of adjustment at 0.80 at 1% level of significance. The findings may help favourable policy formulation to support the life insurance sector growth in India.
  Keywords: life insurance sector; determinants; co-integration; ARDL; bounds test; economic growth; India; GDP per capita; macro-economic; demographic; socio-cultural.
  DOI: 10.1504/IJEPEE.2022.10046826
   
  
• The effect of audit committee characteristics on the firms performance: an empirical study of Pakistan Stock Exchange  
  by Sahibzada Kashif Ahmad, Atta Ur Rahman, Fahad Abdullah, Shabir Ahmad, Laila Taskeen Qaz 
  Abstract: The purpose of this study is to investigate the impact of audit committee characteristics on firms performance. We used gender diversity, size of the committee, frequency of audit meetings, financial expertise, and independence as audit committee characteristics and return on assets and return on equity as performance measures. A panel of 94 firms was investigated from 2015 to 2019 using a weighted least square regression. The overall results show that the size of the audit committee negatively affects the firms performance. While the frequency of meetings, expertise, and gender diversity positively impact the firms performance. Indicating the significance of frequent communication, experience, and presence of women in audit committees, respectively. Our study highlights insight for policymakers and regulators considering ongoing corporate governance and regulatory reforms in Pakistan.
  Keywords: corporate governance; audit committee characteristics; performance; Pakistan.
  DOI: 10.1504/IJEPEE.2022.10048785
   
  
• Diversion of loan use: evidence from rural West Bengal, India  
  by Moumita Poddar Rana, Tanmoyee Banerjee, Ajitava Raychaudhuri 
  Abstract: Present paper explores spending behaviour of loan proceeds and identifies the effect of different socio-economic and political factors on the probability of loan diversion using a primary household survey data drawn from four villages of state of West Bengal, India. Loan diversion refers to the incidence where institutional borrowers use total or part of their loan for purposes that was not specified during the borrowing. Survey reveals that institutional loans taken for working capital needs are mostly diverted either partly or fully and mainly for household expenditure. This study considers Heckman sample selection model, considering the sample selection bias. Results show that religion, age, support of political party and financial literacy of principal earner significantly increases probability of loan diversion. The study also investigates the joint probability of indebtedness and loan diversion; multiple borrowing and loan diversion; indebtedness and institutional borrowing and socio-economic determinants by using bivariate probit model.
  Keywords: loan diversion; financial literacy; multiple borrowing; indebtedness; institutional borrowing; sample selection bias; Heckman probit model; bivariate probit model; West Bengal; India.
  DOI: 10.1504/IJEPEE.2022.10048959
   
  
• Financial stability and macroeconomic risk: an outlook from emerging economies  
  by Rexford Abaidoo, Elvis Kwame Agyapong 
  Abstract: Financial stability or stability in the banking industry constitutes one of the core enabling conditions critical for economic growth and development among economies globally. This paper examines the impact of macroeconomic risk (instability in key macroeconomic variables) on stability in the banking industry using data from 32 countries in Sub-Saharan Africa (SSA) from 2001 to 2018. The study uses principal component analysis (PCA) constructed macroeconomic risk index and proxies financial stability by two indicators bank liquid reserves to bank assets ratio and bank Z score respectively. Empirical estimates examining the relationships in the study uses the two-step system generalised method of moments (GMM) model. The results suggest that macroeconomic risk (instability in the macroeconomic environment) contributes significantly to instability in the banking industry among economies in Sub-Sahara Africa; this conclusion is similar for the two measures of financial stability employed in the study. The results further suggest that trade liberalisation has significant moderating impact on the financial stability (bank liquid reserves to asset ratio) macroeconomic risk nexus. The empirical estimates additionally show that macroeconomic risk may negate any positive impact financial sector improvement may have on financial stability among economies in the sub-region.
  Keywords: financial stability; macroeconomic risk; principal component analysis; PCA; generalised method of moment; GMM.
  DOI: 10.1504/IJEPEE.2022.10049377
   
  
• COVID-19 pandemic and work behaviour of non-farm household enterprises: evidence from Nigerian data  
  by Obed I. Ojonta, Jonathan E. Ogbuabor 
  Abstract: This study investigated the influence of COVID-19 pandemic on the work behaviour of non-farm household enterprises (NHEs) in Nigeria using multinomial logistic regression technique and Nigerias 2020 Living Standard Measurement Survey data. Specifically, the study addressed two main questions: how has COVID-19 pandemic impacted on the work behaviour of NHEs in Nigeria? What other factors significantly influence the work behaviour of these enterprises? The results show that the influence of COVID-19 pandemic on the work behaviour of NHEs in Nigeria is negative and significant. The results further indicate that other key drivers of the work behaviour of NHEs in Nigeria include: sufficient soap to wash hands, skipping a meal, thought of eating less, and running out of food. Consequently, the study recommended that government should ensure that NHEs are adequately funded during and after the pandemic in order to strengthen their operations on a sustainable basis.
  Keywords: COVID-19 pandemic; work behaviour; non-farm household enterprises; multinomial logit model; Nigeria.
  DOI: 10.1504/IJEPEE.2022.10052680
   
  
• Effects of resource mix and internationalisation on alliance portfolio configuration  
  by Wei He, Tantatape Brahmasrene 
  Abstract: Studies focusing on the strategic outcomes of alliance portfolios are receiving attention recently. However, only a handful research addresses the areas of determinants of the portfolio mix or its characteristics. This study attempts to fill this gap by investigating the key drivers of alliance portfolio configuration. Drawing on multiple theoretical lenses and a two-dimensional typology of portfolio composition, a longitudinal study is developed and applied to a sample of multinational firms in the global hospitality sector. The results suggest that alliance management experience, brand image, and organisational slack play significant roles in predicting the type of alliance portfolio configuration. Moreover, focal firms' degree of internationalisation moderates the predicting effects. Using firm-specific factors, this study bridges the gap between firms' internal resource mix and alliance portfolio complexity, and sheds new light on how alliance portfolio configuration is defined, measured, and predicted. Implications for policymakers are also discussed.
  Keywords: strategic alliance; alliance portfolio complexity; alliance portfolio configuration; resource-based view; resource dependence.
  DOI: 10.1504/IJEPEE.2021.10043255
   
  
• Does corporate governance play a dynamic role in mitigating opportunistic transactions? Evidence from India  
  by Nitya Nand Tripathi, Asha Binu Raj, Sudhakara Reddy Syamala, Aviral Kumar Tiwari 
  Abstract: This paper investigates the effect of corporate governance mechanism on various types of related party transactions (RPTs) in India. We examine whether the corporate governance mechanism helps to restrict the management's opportunistic behaviour of transferring resources from the company through RPTs or not. We find that the percentage of related party sales to total assets is between 6.4%-37.98% and the percentage of related party expenses to total assets is in the range of 4.4%-25.30% during the study period. Whereas, the percentage of loans given to related parties to total assets is between 5.0% to 26.0% and loans taken from related parties to total assets is 3.9% to 22.70%. The empirical findings show a negative relation between independent directors and RPTs. The findings can strategically facilitate the regulators to make necessary decisions which could strengthen the corporate governance mechanism to mitigate opportunistic transactions in terms of RPTs.
  Keywords: corporate governance; related party transactions; audit committee; opportunistic transactions; corporate governance index; CGI; India.
  DOI: 10.1504/IJEPEE.2022.10044140
   
  
• The relationship between Islamic banking deposits and profitability: an evidence from Malaysia Islamic banks  
  by Roukia Bouhider 
  Abstract: The main objective of this paper is to analyse the relationship between the deposits and the profitability of 14 Malaysian Islamic banks over the 2006-2018 period by employing fixed effects panel data. The main independent variable is the deposits to assets ratio, and the return on assets (ROAs) is the main profitability measure. The findings of this study have reported a strong positive relationship between the bank deposits to assets ratio and profitability. The study recommended that Islamic banks in Malaysia embark on a serious effort to develop their own instruments to mobilise deposits and to use them in order to foster economic and social development, which would increase their future profitability and reduce their costs.
  Keywords: Islamic banks; current deposits; saving deposits; Al-Wadiah; deposits; Al-Mudarabah; profit-sharing investment accounts; PSIA; panel data; profitability; Malaysia.
  DOI: 10.1504/IJEPEE.2021.10043873
   
  
• Mediating role of green innovation on green entrepreneurship and sustainable development: an empirical evidence from Indian companies  
  by Manoj Kumar Mishra, Sunil Kumar 
  Abstract: The current research has investigated the relationship between green entrepreneurship (GE) and sustainable development (SD) among Indian companies. The study also has captured the mediating effect of green innovation between GE and SD. A survey is conducted among 451 managerial level employees in Indian companies. The research then uses SPSS (version 22) and AMOS for the analysis of data. For testing the hypotheses of mediation were checked using PROCESS Macro tests in SPSS. The results indicated that green entrepreneurship has significant impact on green innovation and sustainable development. However, the partial mediating effect of green innovation has been found between green entrepreneurship and sustainable development. Practices of GE are the need of hour. If it is promoted and practiced by the companies, they will be the biggest beneficiaries of it. If their process includes green entrepreneurial practices, they will be able to achieve their long-term goals effectively.
  Keywords: green entrepreneurship; green innovation; sustainable development; mediation; India.
  DOI: 10.1504/IJEPEE.2022.10046813
   
  
• Impact of systematic transaction cost on enterprise competitive strategy and performance - research on Sany Heavy Industry's change of registered place  
  by Weiguo Kang, Haoran Ji, Yuan Li, Hanwen Xu 
  Abstract: The market mechanism and formal system in China's economic system are not perfect, and the government has absolute authority in the allocation of resources and has the right to intervene in the operation of enterprises. Systematic transaction costs are different among regions, even among different enterprises in the same region. Taking the change of Sany Heavy Industry's registered place as an example, from the perspective of systematic transaction cost, we use difference in difference and financial index analysis to study the reasons why Sany Heavy Industry 'leaves home'. We find the explicit institutional transaction cost of Sany Heavy Industry rises significantly before the change of registered place, and the growth rate of explicit systematic transaction cost of Sany Heavy Industry slows down after the change. However, the implicit systematic transaction cost changes inversely, which affects the performance of enterprises. The research provides implications for the healthy development of the relationship between the government and private enterprises.
  Keywords: systematic transaction cost; competitive strategy; relocation of headquarters; property right theory; enterprise performance.
  DOI: 10.1504/IJEPEE.2022.10046825