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Purpose This study aims to examine the systemic risk contagion in banks from 15 US states using extreme shocks in their distance to risk. Design/methodology/approach The authors contemplate a model that inputs co-exceedances in the base US states’ banking sector as the dependent variable and the co-exceedances in other states’ banking sector (along with other underlying variables of a banking system) as the explanatory variables. Findings The authors find smaller states transmit and receive more systemic shocks than their larger counterparts and larger states exhibit a better shock-resisting capacity than their smaller counterparts. The authors also find that bigger shocks are more contagious than the smaller shocks. Originality/value This will be the first paper that will investigate the inner linkage of US states’ banking network using three different distance to risk methods, thus providing timely guidance for regulators.

I compare, for the first time, how the two most popular multi-item auction formats used to allocate online ad space (Vickrey-Clarke-Groves and Generalized Second Price) perform in real time markets. Comprehensive laboratory sessions using proprietary software suggest that the Vickrey-Clarke-Groves mechanism outperforms the Generalized Second Price auction with respect to efficiency across all treatments. This difference is economically significant for more competitive parameter configurations and is statistically significant for most treatments. Revenue capture across treatments tends to be roughly similar between auction formats. Overall, theoretical predictions made in papers by Varian (2007) and Edelman, et al. (2007) seem to organize the data well.

The paper examines the financial connectedness via return and volatility spillovers between Brazil, Russia, India, China and South Africa (BRICS) and three global bond market indices represented by the United States of America (USA), European Monetary Union (EMU) and Japan for the period 01 January 1997 to 27 July 2016 (weekly data). We find that Russia followed by South Africa is the net transmitter of shocks within BRICS, implying that the risk arising from these markets may have an adverse impact on others in BRICS. However, China and India exhibit weak connectedness, suggesting that these markets may be useful for hedging and diversification opportunities in BRICS. The networks of pairwise spillover results further confirm this. Among global indices, China appears as highly interconnected with the USA. USA is the strongest transmitter of shocks to BRICS bond indices. The panel data results further confirm the significant determinants of net directional spillover. Thus, we can conclude that BRICS is a heterogeneous asset class even in the case of the bond market. India and China are the markets to look for better risk management strategies.

This chapter provides a literature review of several of the works in the field of the ultra-rich and wealth accumulation. This includes a discussion of how both wealth and its close relative, capital, have been defined historically. In addition, the relationship between wealth accumulation and capital accumulation models is discussed. A review of historical approaches to the issue of wealth accumulation is provided as it pertains to the ultra-rich specifically. This review is not solely limited to the discipline of economics but includes aspects of elite theory from the social sciences. In addition, recent empirical analyses of the rich are reviewed, which have mostly focused on establishing the sources of great fortunes.

This chapter examines the determinants of wealth accumulation and inequality in the modern world. The conceptual framework adopted borrows heavily from Meade (Efficiency, equality, and the ownership of property. London: George Allen & Unwin, 1964; The just economy. London: George Allen & Unwin, 1975) and Saez and Zucman (Wealth inequality in the United States Since 1913: Evidence from capitalized income tax data (NBER Working Paper No. 20625). Retrieved from National Bureau of Economic Research website http://www.nber.org/papers/w20625, 2014), but contextualises their framework in a grander socioeconomic context. The aggregate trends examined in Chap 3. are explained against the backdrop of significant historical changes in the economic systems of several advanced economies.

This study examines the dynamic dependence structure via return and volatility spillovers between BRIC (Brazil, Russia, India, and China) and global markets (USA, Europe, and World) at sectoral level. Using directional spillover and dynamic conditional correlation models, we find that there is substantial evidence of heterogeneity across sample sectors within BRIC and between BRIC and global indices. The sectors that exhibit high inter-country spillovers are industrial metal & mining, banking, industrial transportation and oil & gas. The regional and global indices represented by Europe and World show better spillover mechanism than any other indices, implying that these global sectoral indices impact the sectoral indices returns of BRIC markets. The dynamic hedge ratios and portfolio weights suggest that among BRIC, the sectoral indices of China and India provide better opportunities for risk management than Brazil and Russia. We thus conclude that the heterogeneous dependence structure makes BRIC as a diverse asset class from strategic asset allocation perspective.

This paper presents evidence that extreme negative shocks for the global systemically important banks (GSIBs) are contagious to Australian banks. Our logit regression models predict transmission of adverse extreme shocks in the distance to default (DD) of GSIBs to the Australian banks. While most previous studies consider contagion across national stock markets, we investigate the degree of contagion risk for Australian banks spreading from GSIBs. Our results point to the critical importance for the Australian Prudential Regulation Authority (APRA) (2015 ) to closely observe and monitor developments across the major GSIBs and direct appropriate local policy measures accordingly.

The paper examines the relationships between market concentration, bank competition and X-efficiency in banking across six emerging Asian countries—Bangladesh, India, Indonesia, Malaysia, the Philippines and Vietnam—over the period 2005–12. Market concentration has a positive effect on X-efficiency, whereas competition has a negative effect on X-efficiency. Moreover, bank size and gross domestic product growth have positive influences on X-efficiency whereas liquidity risk is negatively related to X-efficiency. In addition, the study has important policy implications for governments and banks with respect to increasing X-efficiency of banking.

There is an increasing consensus that global ‘excess saving’ has contributed to a reduction in equilibrium real interest rates. While economists dispute the extent of the decline, few now question that a decline has taken place or that excess saving has played a causal role. A key implication of this narrative is a decline in yields of all assets, including but not restricted to government bond yields. Yet, since the turn of the century, yields on global equity have risen. A complementary explanation is that there has been an increase in the global equity risk premium (ERP), which has simultaneously pushed risk-free yield curves lower and equity yields higher. Applying a sign restrictions approach, I find that excess savings shocks were the predominant force affecting global real bond yields between the mid-1980s and 2000 but that ‘risk premium’ shocks have accounted for more of the decline in real bond yields since 2000.

A mean-variance framework is applied to Australian household financial portfolios in order to provide estimates of relative risk aversion in the economy. Controlling for various socio-economic characteristics, we explore whether risk aversion heterogeneity is a function of wealth heterogeneity. In contrast to most studies, we find evidence of very high risk aversion amongst the majority of households of poor households but vastly lower risk aversion amongst the high percentiles in the wealth distribution. Applying a first differences model across three survey waves spanning 2002 to 2010, we find that risk tolerance increases significantly with wealth. Risk tolerance is positively associated with mortgage payments, but rental payments have no relationship. In addition, we found no evidence that holding a university education has any discernible impact on risk aversion. Lastly, we present some preliminary findings as to the impact of financial advice on observed risk aversion. Financial advice is found to accentuating risk aversion, particularly amongst the wealthiest households. The findings have potential implications for the distribution of wealth in Australia that has received renewed interest recently.

This research examines the way retail price image develops and produces marketing outcomes in two nations that contrast in both cultural profile and market characteristics. Key Individual difference constructs include sugrophobia and risk aversion. Multi-group SEM analysis compares French and US respondents to allow an assessment of two competing theoretical explanations. The results prove somewhat surprising in that individual difference characteristics related to uncertainty avoidance are diagnostic for US respondents while price image plays a more important explanatory role in France. This pattern of results supports a theoretical conceptualization based on the retail competitive structure rather than one based solely on cultural differences.

This paper examines the microlevel impacts of domestic and overseas remittances on household behavior such as consumption–investment expenditure patterns and propensity of households being engaged in business activities in the case of Viet Nam. The first part summarizes previous related empirical literature conducted in the Philippines, Bangladesh, Mexico, Pakistan, Albania and Guatemala, as these developing nations share more and less similarities with Viet Nam and are among the top countries receiving remittances. Secondly, employing the ordinary least square (OLS) regression and logistic regression models and utilizing the large-scale and nationally-representative household income and expenditure survey with the technical assistance of the World Bank and United Nations Development Program, this study contributes to the ongoing discussion about the link between remittances and Vietnamese household behavior by applying a microeconometric approach. First, as expected, households in receipt of remittances spend less at the margin on the key consumption normal good: food; or food is income elastic. Second, overseas remittances are associated with increased investment in education, which generates augmented human capital and has a future social return. Third, households in receipt of overseas remittances, especially those residing in urban areas, are more likely to channel funding towards productive business investment and capital gains in comparison with those without remittances. The findings strengthen the optimistic perspective of significant positive effects of remittances on household expenditure patterns in developing economies. The OLS method employed in this research, likewise in most previous studies, may affect the results of the estimated impacts of remittances on household behavior. The paper successfully proved international evidence of the remittances and household behavior nexus in Vietnam as a case study.

Using household panel data for Australia sourced from HILDA, we explore how household risk preferences in relation to portfolio holdings differ across wealth ranges and in relation to various household sociodemographic characteristics across the nation. Our measure of risk is based on the proportion of variance of the optimal household portfolio rather than the proportion of risky assets in the portfolio. Based on this measure, we estimate the coefficients of relative risk aversion for investors in various wealth ranges. In contrast to most studies, we find evidence of very high risk aversion amongst the majority of households. However, this is heavily concentrated amongst less wealthy households. We apply a first differences model across three survey waves spanning 2002 to 2010, and focus on the aggregate national level. We find that risk tolerance increases significantly with household wealth, the relationship is both statistically and economically significant. Liquidity contraints in the form of rental payments were found to diminish household appetite for risk. However, risk tolerance is positively associated with mortgage payments.

This paper investigates contagion risk for the global banking environment using three different distance to risk measures (distance to default, distance to capital, and distance to insolvency). The timeframe for this research covers a period that is characterized by substantial financial innovation in regards to regulatory, monetary and technological change experienced in the banking environment. Our hypothesis is that volatility in the banking structure of a particular country upsurges the prospect of financial volatility in another. We model extreme shocks for banks by replicating four separate conditions of financial stress. We compute the probability of these states moving from one country′s banking system to another by employing multinomial logistic model. In total, we investigate the possibility of extreme event in one country′s banking system as a function of extreme events in other countries banking systems throughout our sample period. Our sample consists of ninety-one banks from twenty countries including all G8 and BRICS countries in operation from 6th January 2006 up to 31st December 2015. Overall, we find evidence of strong correlations between countries’ banking systems especially between those of UK and US. Our findings suggest the need for greater regulatory control over banks operating as global systemically important banks (GSIBs).

Despite the well documented gains from international diversification, investors continue to show a strong preference for investing in domestic assets, a phenomenon referred to in the literature as ‘home bias’. This bias comes at a price — a higher cost of capital for businesses. We estimate the share of foreign equity in a typical Australian equity portfolio to be approximately 17% while the standard portfolio theory suggests that the proportion ought to be in the order of 98%. Applying these proportions to the typical Australian portfolio would cause Australian borrowing costs to fall by approximately two percentage points. This paper provides a detailed analysis of the drivers of home bias from the perspective of an Australian investor. The results indicate that the typical Australian investor undervalues the benefits of international diversification by investing a proportionally larger share of their equity in domestic stocks relative to overseas markets. Evidence from our research indicates that trade, governance, market size, cross-border capital controls and transaction costs play a positive and statistically significant role in influencing Australian investor's home bias.

A growth model that endogenizes skill formation and the skill requirements of invention and innovation is used to analyze developed countries that must invent and innovate vs those that may specialize in innovation. Invention (innovation, respectively) is defined as the creation of (use of) new technologies with the potential to increase (that actually increases) total factor productivity. It is shown that a small innovation specialist will have a larger share of knowledge that is skill saving resulting in lower wage inequality, but with an equal economic growth rate as the invention leader. Specialization in innovation is preferred for all agents in the small country because growth rates of wages for high- and low-skilled workers are higher at the steady state. The large country cannot specialize in innovation, as it cannot rely on significant amounts of invention from abroad. The novel effect helps explain higher returns to skills and the larger increase in wage inequality in the arguably more inventive United States than in other advanced countries in recent decades. The results do not depend on international spillovers from the large to small country (yet still hold in their presence), thereby explaining the skill differential during the information technology revolution, which has been not been characterized by significant, costless spillovers.

Globalisation has led to a rapid increase in the growth of foreign direct investment (FDI) globally. Over the last decade China has become the largest recipient of FDI whilst simultaneously increasing its outward FDI dramatically. The growth in China's outward FDI has attracted little attention from scholars in mainstream research publications. The motivation behind this paper is to investigate the factors driving this growth from both economic and strategic backgrounds. The paper employs panel data analysis covering the period 2003–2009 where we quantify the main drivers of China's outward FDI across a range of variables including bi lateral and multi lateral trade, market size, GDP growth, openness and resource endowment.

This paper performs an empirical investigation into the relationship between oil price and stock market returns for seven countries (Kuwait, Oman, UAE, Bahrain, Qatar, UK and USA) by applying the Vector Auto Regression (VAR) analysis. During this period oil prices have tripled creating a substantial cash surplus for the Gulf Cooperation Council (GCC) Countries while simultaneously creating increased deficit problems for the current accounts of the advanced economies of the UK and USA. The empirical investigation employs daily data from September 2005 to February 2010. Our empirical findings suggest the following: (1) the predictive power of oil for stock returns increased after a rise in oil prices and during the Global Financial Crises (GFC) periods. (2) the impulsive response of a shock to oil increased during the GFC period. (3) Qatar and the UAE in GCC countries and the UK in advanced countries showed more responsiveness to oil shocks than the other markets in the study.

The study of financial stability has become the cornerstone of modern macroeconomic policy particularly for developed countries. The recent global financial crisis has underscored the importance of understanding financial instability especially in the context of managing credit risk with particular emphasis on the banking sector. The key motivation for this paper is to improve our understanding of credit risk modelling at the country level especially under the framework of Basel II capital adequacy standards. The aim of the study is to investigate the interaction between the cyclical implications of aggregate defaults in an economy and the capital stock of a bank. The approach used requires the construction of a macroeconomic credit model that provides the framework to perform scenario analysis. Within this framework, our study forms the basis of a comparative analysis of two countries, a relatively immune economy from the recent crisis—Australia and the worst effected economy—the USA. The key questions posed in the study are which macroeconomic variables are important for both countries in addition we examine the impact of adverse macroeconomic shocks on default rates in both countries. The results indicate that the same set of macroeconomic variables display different default rates for the two counties. Additionally the study finds that compared to Australia, the US economy is much more susceptible to adverse macroeconomic shocks.

This article is the second of a two-part series that develops a framework for comparative valuation of major equity markets around the world. In this article, the authors invert the dividend discount model (DDM) discussed in “Fair Value in Global Equities:Part I,” published in the preceding issue of this journal, in order to extract a time series of the implied equity risk premium (ERP) and the real required return (RRR).They estimate regression equations to find the macroeconomic drivers of these series. The ERP increases with the output gap at home and abroad, as well as with high past values of the ERP. This relationship allows for benchmarking the ERP and the RRR to the current economic environment and to forecasts of the future economic environment. The authors compare the use of these tools with other ways to forecast returns. At a five-year horizon, valuation alone is a good predictor of future returns, and the current value of the RRR works particularly well in this regard. At a one-year horizon, forecasts based on the benchmarking of the RRR to the future economic environment work significantly better than traditional valuation metrics, if the economic outlook is correct.

Using panel data on selected Financial Soundness Indicators (FSIs) this paper investigates the potential strengths and vulnerabilities of financial intermediaries across more than 50 countries. Our econometric analysis reveals strong influence of business cycle, inflation, and real effective exchange rates, and size of the industry on capital adequacy —a core indicator of banks' financial soundness. Furthermore, our analyses provide evidence that banks' profitability is determined by a combination of macroeconomic, bank specific and industry characteristics such as business cycle, inflation, credit risk, capital adequacy, and the level of competition.

In this paper we attempt to distinguish the direct effect of financial development on poverty reduction from its indirect effect through economic growth. Using an efficient estimator called fixed effect vector decomposition (FEVD) we employ a set of panel data from 54 developing countries for the period 1993–2004. Our results indicate that on average financial development is conducive for poverty reduction but the instability accompanying financial development is detrimental to the poor. The major policy recommendations suggested by the paper indicate that financial sector reforms should be directed at easing credit restrictions while taking into consideration the effects of financial instability on the poor.

The authors construct panels of individual and corporate income tax data from 1997 to 2004 to investigate whether the new markets tax credit (NMTC) program leads to increased investment. The authors' approach is unique in the examination of development incentives as their focus is on investor behavior instead of community-level outcomes. They use both instrumental variables and propensity score approaches to address nonrandom selection into the program. The authors' results suggest at least a portion of NMTC investment by individual investors is ``new'' investment financed through a decrease in consumption. This ``new'' investment represents an increase in investment funds available to low-income communities. On the corporate side, the authors find no change in corporate investment levels in response to the NMTC. Using survey data from the Government Accountability Office, the authors infer that corporations have most likely shifted investment funds from higher income communities to NMTC-eligible communities.

A three-sector, overlapping-generations growth model endogenizes the opportunity cost of human capital formation and the relative skill requirements of invention, innovation, and adoption of general-purpose technologies. As a result, the relative wage of skilled workers is a function of the endogenous ratio of total-to-adoptive knowledge (where the difference in knowledge stocks is frontier knowledge). Comparative statics are examined for the model's seven parameters. Simulations (representing a transition with phases to a more complex level of economic development) are presented for simultaneous exogenous shocks capable of matching (i) observed inverse movements of the relative wage and the detrended relative supply in the USA, (ii) the sharp slowing and recovering US multifactor productivity growth data since the 1970s, and (iii) a reconciliation of data used to support or deny skill-biased technological change as a major force driving up the relative wage since 1980.

This article presents a study of asset price volatility, correlation trends and market risk premia. Recent evidence shows an increase in firm-level volatility and a decline of the correlation among stock returns in the US (Campbell et al ., 2001). We find that, in relation to the Euro-area stock markets, both aggregate firm-level volatility and average stock market correlation are trended upwards. This article estimates the time series of market and idiosyncratic volatilities for the firms composing the index Dow Jones Eurostoxx50 for the 1992–2001 period following the volatility decomposition method of Campbell et al . (2001) Monthly time series of market and firm-level volatility are obtained using within monthly daily returns relative to the market return. This article also investigates the time series properties of the volatility series, in particular whether there are trends and whether there is a risk-return trade-off. The main findings are the following. There is a positive trend in both market and...

A growth model that endogenizes human capital formation helps to explain why high initial inequality is harmful for subsequent growth in developing countries. Sectors ranging from most to least skill-intensive interact for the creation and diffusion of technologies. The model explores exogenous high initial education inequality in developing countries with sectors that are or are not linked by positive knowledge spillovers. Endogenous diffusion is inadequate for self-financing of human capital and economic growth when there are not adequate inter-sector linkages. Empirical evidence shows that initial education inequality slows subsequent economic growth.

In this paper we study the effect of quality of institutions in the OECD and Asian host countries on outward foreign direct investment (FDI) stocks of source OECD countries using International Country Risk Guide governance indicators, for the period 1991 to 2001. We find that better institutions in the host countries have an overall positive and significant effect on source countries' outward FDI stocks. The strength and impartiality of the legal system, popular observance of law, strength and quality of bureaucracy and government stability in host countries have a direct effect on source countries' outward FDI stocks. Interestingly, trade changes sign and loses significance in two-stage least squares regressions compared with theoretical expectation. Furthermore, skill proxied by labour abundance in source countries relative to host countries appears to be insignificant in determining source countries' outward FDI stock.

It is generally accepted that there has been an increase in the degree of international financial integration over the last two decades. As a result, international financial integration has become a topical area of research for many financial economists. To enrich the literature in this area, our paper provides an empirical investigation into identifying the potential “drivers” of international financial integration including policy on capital controls, the level of economic and educational development, economic growth, institutional and legal environment, trade openness, financial development and tax policy. Overall, the results provide strong evidence in support of our choice of drivers of international financial integration.

The rapid increase in international capital flows is one of the most significant developments in the global economy in recent decades. International portfolio diversification brings potential benefits to investors by offering investors the opportunity to insulate their portfolios from domestic risks associated with a down turn in local asset prices. The Australian investment environment has been progressively liberalised beginning with the removal of foreign exchange controls in 1987, and the movement to a floating exchange rate regime, other milestones included opening up the banking sector to foreign competition. Until recently, data on the level and geographical pattern of international portfolio investment has been inadequate. In recognition of this fact the International Monetary Fund (IMF) commenced in the mid nineties a pioneering comprehensive survey of the geographic structure of the foreign portfolios (equity and long-term bonds). The first publication covered the 1997 position of foreign portfolios held by the residents of twenty-nine countries, including Australia (IMF 2000), data from a follow up survey relating to 2001 international portfolio holdings was made available in 2003. In this paper we analyse the Australian data reported in the surveys by providing an analysis of the geography of international portfolio investment (equity and long-term securities). We find that countries most open to trade and hence most vulnerable to external shocks tend to diversify more by holding a higher percentage of their portfolios in foreign assets, compared to other countries. Australia appears to be quite outward looking in its investment behaviour, suggesting that Australian investors recognise the advantages of international diversification. However, a cross country analysis of the pattern of international portfolio investment indicates that the Australian portfolio investment position is not proportional to the overall economic or financial market size of the destination countries global standing, but instead matches Australian trade patterns surprisingly closely, here the US is over represented in the case of Australia's international portfolio investment position. Does this reflect a preference for investing in countries made familiar by trade and other relations? If so, this portfolio may imply sub-optimal strategies by Australian investors?

The paper examines the question whether the economic convergence brought about by the European Monetary Union resulted in increased correlations across EMU equity market returns, which subsequently lead to a reduction in the benefits for investors in these markets. The study employs data from 1988 to 2003 in which correlation, cointegration and causality estimation techniques are used to describe the behaviour of the seven European equity market returns. The paper focuses on the question of whether a foreign (US) investor can benefit from investing in European equity markets in light of the developments brought about by the European Monetary Union (EMU).

This article investigates both the static and dynamic interdependence of the stock markets of Indonesia, Malaysia, the Philippines, Singapore, Thailand, and the advanced stock markets of Australia, Germany, and the United States. Using data from 1990 to 2001, the paper employs both correlation and co-integration analysis to describe the behaviour of the above markets, both before and after the 1997 Asian financial crisis. Examination of stock market returns, using correlation analysis, reveals an increase in the interdependendes (increased correlation) across the Southeast Asian stock markets in the aftermath of the crisis. Both multivariate andpairwise co-integration tests are carried outfor all the above stock markets. Although there is evidence of integration between the Southeast Asian stock markets, overall the results suggest that there has been no significant increase in the integration between the Southeast Asian stock markets during the post-crisis period. With a few exceptions, there is little evidence to indicate the existence ofany co-integrating vectors in either the multivariate or pairwise co-integration tests.

The paper examines the extent to which the conditional volatility of stock market returns in a small, internationally integrated stock market are related to the conditional volatility of financial and business cycle variables. It employs a low frequency monthly dataset for Australia including stock market returns, interest rates, inflation, the money supply, industrial production and the current account deficit over the period from July 1972 to January 1994. A novel feature of the analysis is the estimation strategy employed to overcome the generated regressors problem which pervades some recent related research. Specifically, the procedure of employing a two-stage estimation process to first estimate conditional volatilities and then model their interrelationships yields inefficient estimates, introduces bias into a number of diagnostic test statistics and generates potentially invalid inferences. This problem is overcome in the current paper by jointly estimating the equation for the conditional volatil...

One of the perceived benefits of a flexible exchange rate system is the insulation of the domestic economy from foreign shocks, and the potential for independent policy actions. In view of the considerable uncertainty, which pervades appropriate specification of the relevant theoretical models, the empirical analysis of this paper adopts the vector autoregressive approach. Using quarterly data over the period 1975(2)‐1995(2), models are estimated which test the effect on exchange rates of fiscal variables for seven countries (Australia, Canada, Britain, France, Germany, Italy and the USA). In testing the exchange rate response to a bond financed fiscal expansion, a tax financed fiscal expansion and to a swap of taxes for debt with no change in the level of government expenditure, the results for the seven countries over the recent float are mixed because the impulse response functions to the shocks do not have the same pattern in every country.

The purpose of this paper has been to examine the extent to which exchange rate volatility impedes Japan's bilateral trade flows. In addition to exchange rate volatility, other factors that were posited to affect trade flows include data on real economic activity, costs, and prices which feature in the theoretical framework. The empirical analysis differs from the majority of previous research by appropriately specifying the models in terms of the order of integration of the data and in terms of the equation dynamics. The major finding of the paper is that exchange rate volatility is at least as likely to raise trade flows as it is to impede them.

This paper examines how monetary volatility is transmitted to the volatility of financial asset prices, inflation and real output in an open economy. A Markowitz efficient portfolio is constructed to eliminate diversifiable financial risk, and estimation by GLS on monthly Australian data from 1972(1)–1994(1) using the general-to-specific estimation strategy overcomes the generated regressors problem in related ARCH-type models. The findings include: first, higher monetary volatility is associated with lower volatility of financial asset prices and higher real output volatility, and second, monetary volatility is transmitted to real output volatility predominantly through the share market with no foreign exchange market effect.

This paper investigates the transmission mechanism of the Global Financial Crisis originated in the United States to the East Asian equity markets, including the developed markets (Hong Kong, Japan and Singapore), emerging markets (Malaysia, Thailand and Taiwan) and frontier market (Vietnam). To test for the transmission, we employ the constant conditional correlation (CCC) and the dynamic conditional correlation (DCC) based on the MGARCH model to estimate the time-varying correlations between the United States and East Asian equity markets. Our empirical findings suggest that the Global Financial Crisis transmitted to these markets vary over time, particularly to Hong Kong and Singapore during the pre-crisis period, and to Japan and Vietnam during the crisis period. In addition, the results show that almost all the East Asian markets reveal higher correlations to other markets in the region than the United States even during the crisis period. Finally, the crisis is attributed to enhancing the correlations between the frontier market towards regional and global markets.

This paper performs an empirical assessment of China’s inward FDI by analysing the relative importance of the potential determinants of FDI inflows across the four regions of China for the period 2001-2009. The determinants examined are: Market size, labour cost, labour quality, physical infrastructure development, telecommunication, degree of economic openness and government incentives to attract FDI. Our paper employs a multiple regression model for each region and then compares the results across four regions. The results indicate a mixed picture, for example we find that market size holds priority for FDI inflows into coastal region and northeast regions while the degree of openness is the most important determinant for FDI inflows in central region. The labour quality has no effect in central region but has a positive impact on FDI inflows into coastal and northeast regions. These results have important implications for China’s regional policy makers as they can help them identify the kinds of industries which respond to specific drivers and identify regional social economic characteristics which are more attractive to particular FDI inflows.

Since China opened its economy to foreign investment in 1979, it has become the second largest Foreign Direct Investment (FDI) destination in the world after the USA. Over the past three decades, the manufacturing sector has dominated China’s FDI inflow, however, when manufacturing activity is bifurcated into low and high technology classes, it becomes evident that China is in a transition stage, moving from FDI in traditional low-tech manufacturing activity to a high-tech manufacturing environment. This paper attempts to analyse the key determinants of FDI inflow across low and high technology manufacturing industry across the four geographical regions of China. In the paper we empirically investigate the determinants of FDI inflows to both high and low-tech manufacturing industries by market size, labor cost, labor quality, and government spending on human capita.

The framework used to test the hypothesis of forward income tax shifting is based on a simple mark-up pricing model and follows the methodology of Beath (1979). In this framework indications of forward tax shifting are inferred if the gross mark-up varies in order to achieve a targeted net of tax mark-up. Empirical results derived support the hypothesis and suggest significant forward corporate income tax shifting in Australian manufacturing companies over the data period 1968 to 1990.