Institutional and Non-Institutional Determinants of Volatile Non-Systematic Discretionary Spending: A Panel Data Analysis

Volatility in discretionary public spending has diverse implications for overall economic performance. This study investigates institutional and non-institutional factors of non-systematic discretionary public spending. The study considers a panel of 55 economies for a period of 1990-2019 and applies GMM estimation technique. The findings suggest that in aggregated sample, institutional determinants significantly reduce volatility in non-systematic discretionary public spending; nevertheless, non-institutional determinants promote such spending volatility. Additionally, disaggregated analysis suggests an inverse situation in developing economies.

Empirical determinants of exchange-rate volatility: evidence from selected Asian economies

Purpose This paper aims to explore the empirical determinants of exchange-rate volatility (ERV) in selected Asian economies, namely, Bangladesh, China, India, Indonesia, Malaysia and Pakistan. Specifically, it examines how the volatility of foreign reserves, government spending, industrial production, gold prices and terms of trade affect monthly ERV during the examined period. Design/methodology/approach The authors carry out the empirical analysis by using monthly data for the period January 1997–March 2019. First, the volatility of the underlying variables is measured based on the conditional variances obtained by estimating the univariate (generalized) autoregressive conditional heteroskedasticity [(G)ARCH] model for each variable during the study period. Next, the autoregressive conditional heteroscedasticity (ARCH)-Lagrange multiplier test is applied to ensure that there are no remaining ARCH effects in the residuals. Finally, the multivariate autoregressive-moving average-GARCH (1, 1) models are estimated to examine whether and how the volatility of the underlying variables affects ERV. Findings The results reveal that the current period volatility of exchange rates is significantly affected by ERV in the previous period in all selected countries. The results also indicate that the volatilities of the underlying macroeconomic variables are quite differently related to ERV in examined Asian countries. Foreign-reserve volatility (VFXRES) has negative and significant impacts on ERV in Bangladesh, China and Malaysia. Government-spending volatility is negatively related to ERV in India, whereas it is positively related to ERV in all other examined countries. The results also suggest that although terms-of-trade volatility reduces ERV in both Bangladesh and Pakistan, it amplifies ERV in the remaining examined countries. However, gold-price volatility (VGOLDP) significantly, positively contributes to ERV in Bangladesh, Indonesia and Malaysia. On the contrary, the higher volatility in industrial production (VIPI) results in lower ERV in Indonesia and Pakistan, whereas it increases ERV in China, India and Malaysia. Practical implications The findings have several important policy implications. First, the findings suggest that both Bangladesh and Malaysia should keep an adequate level of foreign reserves to stabilize their foreign exchange rates. Second, as government-spending volatility has a vital role in determining ERV, it is necessary to bring sustainability and continuity in government expenditures. Bangladesh and Pakistan can stabilize their foreign exchange rates by making exports more competitive, viable and accessible. Originality/value This paper significantly contributes to the existing literature by exploring how the behavior of unexpected variations in the factors determining exchange rates affects ERV in selected Asia countries. Most of the published studies have examined the determinants of exchange rates by considering the macroeconomic variables at their levels. Departing from the existing studies, this paper significantly relates the volatility (second moment) of exchange rate determinants to the behavior of ERV. Further, this paper provides firsthand empirical evidence on this issue for the selected Asian economies.

Online Marketing Induced Performance Volatility

This paper analyzes how revenue and cash-flow volatility are influenced by own and competitive online marketing spending volatility, by the level of online marketing spending, by the responsiveness of own online marketing spending, and by competitive reactivity. The author develops hypotheses about the influence of these variables on revenue and cash-flow volatility that are rooted in online market response theory. Based on a broad sample of 99 pharmaceutical brands in four clinical categories in India, the author tests these hypotheses and assess the magnitude of the different sources of online marketing-induced performance volatility. The results support our hypotheses and demonstrate that effective online marketing may incur negative financial side effects such as greater financing costs or higher opportunity costs of cash holdings. Thus, common volatility-increasing online marketing practices such as advertising pulsing are effective at the top-line, but may turn out to be ineffective at the bottom-line.