Financial and Economic Factors Affecting Foreign Direct Investment - A Panel Estimation Study of the ASEAN-5 Countries

ASEAN's strength stems from its diversity, which generates a plethora of diverse market opportunities. Over the last few decades, Foreign Direct Investment (FDI) has risen significantly as a major source of international capital transfer, but the COVID-19 pandemic had a detrimental effect on FDI flows, with the outlook for ASEAN remaining highly unpredictable and contingent on the length of the crisis, the efficacy of policy efforts to encourage investment and to mitigate the economic consequences of the pandemic. This study examines the long-run relationships and short-run dynamic interactions between FDI and its determinants comprising of market size, trade openness, stock market capitalisation and financial development over the period 1970 to 2019. The study applies the dynamic heterogeneous panel estimation techniques of Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) to analyse a set of macro panel data of the ASEAN-5 countries, to establish the possible relationships between these variables. An analysis of the results reveals the existence of a long-run causality between FDI and its predictors, indicated by the significant error correction terms for the models tested in this study. There is evidence that market size and stock market capitalization significantly contribute to FDI, with market size being the most dominant contributor. Interestingly, the study also reveals that trade openness and financial development are not significant in determining FDI in the selected countries. The study concludes with an examination of policy implications and also sheds some light on the outlook of FDI in ASEAN-5 post Covid 19. Keywords: foreign direct investment, financial development, pooled mean group, ASEAN-5

Inequality over the business cycle: the role of distributive shocks

This paper examines how wealth and income inequality dynamics are related to fluctuations in the functional income distribution over the business cycle. In a panel estimation for OECD countries between 1970 and 2016, although inequality is, on average countercyclical and significantly associated with the capital share, one-third of the countries display a pro- or noncyclical relationship. To analyze the observed pattern, we incorporate distributive shocks into an RBC model, where agents are ex ante heterogeneous with respect to wealth and ability. We find that whether wealth and income inequality behave countercyclically or not depends on the elasticity of intertemporal substitution and the persistence of shocks. We match the model to quarterly US data using Bayesian techniques. The parameter estimates point toward a non-monotonic relationship between productivity and inequality fluctuations. On impact, inequality increases in response to TFP shocks but subsequently declines. Furthermore, TFP shocks explain 17% of inequality fluctuations.

Telecommunication Infrastructure Development and FDI into Asian Developing Nations

This study strives to evaluate the effects of infrastructure availability and development on foreign direct investment (FDI) in host developing nations.Employing fixed effects panel estimation technique, panel data for 23 Asian developing countries, from 1990-2009 is used with heteroscedasticity corrected standard errors. The results reveal a strong favourable impact of telecom infrastructure (measured by mobile subscriptions) in drawing inward FDI. Therefore, it is concluded that a country with improved infrastructure in general and telecom infrastructure in particular is likely to pull in more FDI. Other variables such as market size, economic development, and currency valuation (measured by exchange rate) appear important in captivating multinational investors, as they exhibit significant coefficients. On the contrary, high-inflation significantly deters inward FDI.

Dynamic Tourism in ASEAN Countries: Do Institutional Indicators Matter?

Tourism is one of the fastest-growing industries. Tourism is able to move the economy forward at the micro-level such as encouraging the informal sector and local potential while at the macro level it can increase currency transactions. In various countries, the tourism sector is able to increase domestic and foreign demands as well as to encourage transportation, hospitality, and manufacturing industries. This study examines the effect of institutional indicators on tourism in ASEAN countries during 2000-2018 under dynamic panel estimation. The number of observations was about 180, namely: time series from 2000-2018 and cross-section of 10 countries. ASEAN as one of the destinations in the world requires an increase in institutional quality to be able to compete and provide world-class tourism services. The six institutional indicators were employed such as voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. Moreover, the dynamic panel estimation was expressed by Pooled OLS and REM estimations. Interestingly, the findings show that political stability compromises the number of tourist arrivals while government effectiveness can stimulate tourist arrivals. Similarly, GDP per capita can hinder the number of tourist arrivals, while the exchange rate leads increasing of tourism arrivals. Thus, the governments in ASEAN countries can promote and cooperate together to develop tourism in the regional level. The GDP per capita of ASEAN countries should be increased, and the level of exchange rate can be maintained at a stable range. Besides, the governments should also improve the quality of institutions.

Determinants of Inter-Regional Financial Inclusion Heterogeneities in the Philippines

This study tries to contribute to the vast literature on promoting financial inclusion in Asia by exploring the key factors that affect the deepening of financial inclusion across the 17 regions of the Philippines for the period between 2013 and 2017. Using the regional multidimensional financial inclusion index (FII) that is developed by the Philippine central bank, the Bangko Sentral ng Pilipinas (BSP), the study finds out that significant heterogeneities exist among regions, and that they persist over the period analyzed, suggesting most importantly that the least financially inclusive regions do not show rapid significant progress. Moreover, using different panel estimation techniques, we try to determine the possible factors that affect this inter-regional financial inclusion heterogeneities. Overall, we show that regional GDP per capita, population, a proxy for the availability of physical infrastructure, and the degree of mobile penetration are among the robust factors explaining the financial inclusion variations across these regions in the Philippines for the observed period.

The Impact of Adoption of The XBRL on the Development of Stock Markets

The paper examines the impact of adoption of the eXtensible Business Reporting Language (XBRL) on the development of stock markets using a large international sample. Our analysis was based on panel estimation techniques for 18 countries for a period of 20 years from 2000 to 2019. Our analysis provided empirical evidence that the adoption of the XBRL has a negative impact on the development of stock markets. This implies that strict policies are needed for the successful adoption of the XBRL and also a mechanism is needed to ensure that stakeholders understand the value of the information provided by the XBRL formatted financial reports. Keywords: XBRL, development of capital markets, panel estimation techniques, cross-countries study

Bank Presence and Rural Development

Rural development is critical to raise rural living standards and reduce income differences between urban and rural areas. Much literature has explored factors that could affect rural development, and we investigate the effects of bank presence in rural areas on rural income. Using Chinese provincial-level data from 2005 to 2017, we quantify the effects of bank presence on rural income. Specifically, we use the number of banks per town to measure bank presence and use rural income per capita of each province to measure rural income. With the ordinal least square model and dynamic panel estimation, we find that bank presence increases rural income. Rural income increases the same year with banks appear in town, and the effects of bank presence last for years on rural income. However, we do not find significant evidence that bank presence in rural areas also contributes to the reduction of the income difference between urban and rural areas.

Determinants of Electric Vehicle Diffusion in China

We analyze the effect of four determinants of electric vehicle diffusion in China for a panel of 31 regions for the period 2010–2016. We analyze diffusion of four different electric vehicle types, namely battery electric cars and buses as well as plug-in hybrid electric cars and buses. System GMM panel estimation results show that total monetary subsidies have a positive effect only on the diffusion of battery electric cars. A closer look reveals that subsidies provided by regional governments are decisive for all types of vehicles but the subsidy provided by the central government and its degression over time dilute the overall effect of subsidies and is partly detrimental. Non-monetary ownership policies, such as license-plate lotteries, show a positive effect only for battery electric cars. Availability of public charging infrastructure increases diffusion of all vehicle types. Charging points are relevant for cars, while charging stations are especially decisive for the diffusion of electric buses. Using local environmental conditions as a novel determinant for the diffusion of electric vehicles reveals that the local air pollution influences the diffusion of buses, but not of cars.