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Pollution haven hypothesis (PHH) assumes that polluting industries will move to regions with lesser rigorous environmental regulations. On the other hand, pollution halo hypothesis presumes that industries transfer their clean technologies through FDI inflows to the host countries. Following these theoretical perceptions, this paper empirically examines how foreign direct investment (FDI) affects pollution (CO2 emissions) for four selected Asian countries (Malaysia, Philippines, Singapore, Thailand) over the period 1971-2014. This is done by applying the autoregressive distributed lags (ARDL) model of Pesaran et al.. The ARDL model is employed under two scenarios: without and with structural breaks. The long-run findings, for both scenarios, suggest support for the pollution haven hypothesis (PHH) for the Philippines only. Whereas, the findings lend support for the pollution halo hypothesis for Malaysia and Singapore. In addition, the paper explores the causality direction between FDI and pollution (CO2 emissions) using the Vector Error Correction model (VECM). The results show mixed long- and short-run Granger causality findings. [ABSTRACT FROM AUTHOR]

Recent evidence suggests that there might be an asymmetric process of adjustment towards the long-run equilibrium in the government revenue-spending nexus. In this paper, the long-run relationship between government revenue and spending is examined in the case of Thailand using annual data over the period 1991–2019. Specifically, this is an attempt to determine whether this long-run relationship is linear or nonlinear. In doing so, both linear and nonlinear cointegration tests are employed. The empirical results suggest that the positive long-run relationship between revenue and spending is linear and stable when revenue is the dependent variable. By estimating the TAR and MTAR models, evidence of a nonlinear revenue-spending relationship is not found. Therefore, there does not seem to be asymmetric adjustment toward the long-run equilibrium. The results of causality tests based on the estimated ECMs of linear cointegrating equations show no causality between revenue and spending in the short run, supporting the fiscal institutional separation hypothesis. In the long run, there is unidirectional causality running from government spending to revenue, which supports the fiscal spend-and-tax hypothesis. [ABSTRACT FROM AUTHOR]

The analysis of price transmission in vertical markets is challenged by fuzzy policy environments in the case of developing countries. This paper employs threshold cointegration that takes into account the asymmetric adjustment towards a long-run equilibrium and short-run price transmission in vertical markets of wheat and flour in Bangladesh. We find evidence of threshold effects. The speed of adjustment towards the long-run equilibrium is different when the price deviations exceed the threshold value from when price deviations are below the threshold. We find evidence of short-run price asymmetries implying that downstream price responds faster when upstream price increases than when the latter falls. [ABSTRACT FROM AUTHOR]

Twin deficits hypothesis postulates that there is a strong positive linear relationship between a country's budget deficit and its current account deficit. This paper empirically investigates the existence of this relationship in five South Asian Association for Regional Cooperation (SAARC) countries using time-series data for the period 1980–2012. The paper uses cointegration analysis, error correction modeling and Granger causality test under a vector autoregression framework. The results show that the direction of causality for the SAARC countries is mixed. The findings confirm that budget deficit causes current account deficit for Pakistan and Sri Lanka, whereas the reverse is true for India and Nepal. The direction of causality is found to be unidirectional from current account deficit to budget deficit in the short run for Bangladesh. [ABSTRACT FROM AUTHOR]

This paper considers a set of five Asian economies that differ in their degree of outward orientedness, and examines the role of oil price shocks, non‐oil world supply shocks, exports and domestic supply shocks in causing fluctuations in domestic output. Results from a vector autoregressive model indicate that exports and non‐oil world supply shocks are more important for the ‘outward‐oriented’ economies of Singapore, South Korea and Malaysia, when compared with the moderately ‘inward‐oriented’ economy of the Philippines and the strongly ‘inward‐oriented’ economy of India. However, exports and non‐oil world supply shocks each account for no more than a fifth of the variation in output in Singapore, South Korea and Malaysia. There is no long‐term equilibrium relationship (cointegration) between exports and output. This supports the view that exports were not the single driving force behind the economic growth of these high‐performing countries. A substantial portion of variation in domestic output is explained by domestic supply shocks. Adverse effects of oil price shocks are found in the case of the oil‐importing countries of South Korea and India. [ABSTRACT FROM PUBLISHER]

This paper examines the twin deficits hypothesis in the ASEAN countries. The major findings of this paper are the following. (1) Long run relationships are detected between budget and current account deficits. (2) The Keynesian view fits well for Thailand since the causality runs from budget deficit to current account deficit. For Indonesia, the causality runs in an opposite direction while the empirical results indicate that a bidirectional pattern of causality exists for Malaysia and the Philippines. (3) We also found support for an indirect causal relationship that runs from budget deficit to higher interest rates, and higher interest rates leading to the appreciation of the exchange rate, which in turn leads with the widening of the current account deficit. The results of the variance decompositions and impulse response functions suggest that the consequences of large budget and current account deficits become noticeable only over the long run. [ABSTRACT FROM AUTHOR]

The present paper analyzes the inflationary effects of oil prices at the aggregate and disaggregated levels for Thailand using symmetric and asymmetric cointegration and error-correction modeling approaches. The cointegration test results suggest the presence of long-run relations between oil prices and the following price indices: aggregate consumer price index, non-food and beverage price index, housing and furnishing price index, energy price index, non-raw food and energy price index and transportation and communication price index. Meanwhile, food and beverage price index and raw food price index are not cointegrated with the oil prices. From the dynamic analyses, we uncover evidence for asymmetric adjustments of the aggregate consumer prices, the non-food and beverage prices and the housing and furnishing prices towards their long-run values. Further, the effects of oil prices on inflation are observed to be significant in all goods sectors in the short run. The largest impacts of oil price changes are on the energy price inflation followed by the transportation and communication price inflation and the non-raw food and energy price inflation. [ABSTRACT FROM AUTHOR]

This paper explores the international capital mobility in North Asia (South Korea and Taiwan), South Asia (Indonesia, Malaysia, the Philippines, Singapore and Thailand) and India. In particular, the Feldstein-Horioka puzzle, which states domestic investment and savings are highly and positively correlated, was examined for cointegration using an autoregressive distributed lag bounds testing procedure. The results did not show a positive correlation between savings and investment. There was essentially no relationship at level between savings and investment in all eight cases. Thirteen out of 16 structural break tests or 81.25% indicate no structural breaks. The analysis concluded with certain limitations that there is high capital mobility in the economies under study. [ABSTRACT FROM AUTHOR]

This paper utilizes cointegration and vector autoregression (VAR) to assess integration or segmentation of the Malaysian equity market both prior to the Asian crisis and after the imposition of capital controls. We consider both regional and international financial forces represented respectively by the ASEAN markets and the advanced markets of US and Japan. We form three systems of share prices: (i) ASEAN markets; (ii) US, Japan and Malaysia; and (iii) US, Japan and ASEAN. Our findings suggest no long run relation among share prices in all systems either before the Asian crisis or after the imposition of capital controls. However, there are substantial short run dynamic interactions among regional markets of ASEAN. We note significant responses of the Malaysian market to ASEAN shocks regardless of the sample periods. By contrast, its responses to innovations in US and Japan, while significant before the Asian crisis, turn insignificant after the imposition of capital controls. The US market is comparatively more influential in accounting for fluctuations in the ASEAN markets. From these results, we contend that capital controls played some role in insulating the Malaysian market from international disturbances. [ABSTRACT FROM AUTHOR]

Over the years Bangladesh has received a massive inflow of foreign capital, mostly in the form of foreign aid, which has coincided with a substantial outflow of domestic capital. This flight of domestic capital from a capital-scarce country like Bangladesh undoubtedly poses a formidable hurdle to achieving its long-term development objectives. A hypothesis can be put forth that the inflow of foreign capital directly contributes to the outflow of domestic capital. This paper applies the Engle–Granger cointegration procedure to estimate the short-run dynamic and the long-run equilibrium behavior of capital flight from Bangladesh. The estimated results support the hypothesis that the inflow of foreign aid has in fact significantly contributed to the flight of domestic capital. Furthermore, the estimated results suggest that lower real GDP growth, increases in corporate taxes, financial repression and political instability also significantly contribute to capital flight from Bangladesh. These results yield crucial insights into the mechanics of capital flight from China, the source country of most flight capital in the Asia-Pacific region, that suggest that, regardless of the domestic investment environment, availability of foreign exchange, provided by either foreign aid or FDI, can support the flight of domestic capital abroad. [ABSTRACT FROM AUTHOR]

This paper seeks to contribute to the literature on capital flight determinants by employing a new approach to the estimation of capital flight equations over four different measures of capital flight for Malaysian time-series data during the period 1970-96. It improves upon earlier work in the area by employing, for the first time in the relevant empirical literature, relatively recent developments associated with modern time-series analysis, such as cointegration, within the context of a general-to-specific econometric methodology. Empirical findings obtained seem to suggest the importance of macro-economic fundamentals in the capital flight process. The results of econometric analysis reveal the existence of a long-run relationship between capital flight, as variously defined (Dooley's, World Bank's, Private Claim and Balance of Payments measures) on the one hand and exchange rate movements, changes in external debt, real GDP growth and foreign direct investment activities, on the other. [ABSTRACT FROM AUTHOR]

This paper explores the nature and characteristics of business cycles for a group of five small open economies that comprise the Association of Southeast Asian Nations (ASEAN). Business cycles are generated as transitory fluctuations around a stochastic trend. The results show that there is qualified evidence of common business cycles among the ASEAN countries. Sources of common variation in cycles are explored by correlating ASEAN country cycles to cycles in the USA and Japan. The results show that US and Japanese cycles are a major cause of cycles in the ASEAN countries. Cointegration tests reveal a long‐run equilibrium relationship between US business and investment cycles and similar cycles in the ASEAN group of countries. [ABSTRACT FROM PUBLISHER]

The relationship between daily yields on Japanese government bonds (JGBs), and high grade (AA and AAA) yen eurobonds is investigated. We find the cointegration vector differs slightly from the expected order predicted by the expectations hypothesis and attribute this to differing degrees of liquidity in the eurobond and JGB markets. We conclude that the concentration of new Japanese government issues in maturities of five to ten years, combined with the practice by the authorities of holding a significant amount of outstanding bonds, has distorted the transmission process between different risk classes of bonds. An example of the dynamics of the credit spread on the ten-year AA eurobond is provided. [ABSTRACT FROM AUTHOR]

This study identifies the real and financial sector transmission channels of financial crisis in Pakistan and sees how global financial turmoil affects the growth rate of Pakistan. Cooray augmented Mankiw–Romer–Weil growth model is extended by incorporating the financial distortions in financial sector. The empirical validity is tested by applying ARDL approach to cointegration in case of Pakistan over the period 1972–2012. The long-run cointegrating relationship between the financial crisis and economic growth indicates that financial crisis put downward pressure on per capita output and reduces the speed of convergence toward the steady state level of output. Financial development promotes the economic growth. However, to realize the benefits from the financial development, the financial inefficiency resulting from currency crisis, banking crisis, and stock market crisis needs to be reduced and would limits the adverse effect of financial turmoil on the economic growth of the country. [ABSTRACT FROM AUTHOR]

This study examines the linkages between agriculture, industry, and services sectors, and analyses the pattern of economic growth in India. The vector autoregression model is estimated on annual data for the period 1950–1951 to 2009–2010. The results provide strong support for the long-run and a weak support for the short-run linkages among sectors. The development of rural sector is generally synonymous with the growth of agriculture and that of urban sector with the growth of manufacturing and services sectors. The services sector bypassed the successful completion of the process of industrialization, and prematurely emerged as the dominant driver and key lever of economic growth. The development strategy needs to be rebalanced to revitalize agriculture to generate rural employment, support industry, and provide the wage goods and food security. The revitalization of agriculture needs to be complemented by the development of highly productive and internationally competitive manufacturing sector to boost the manufacturing goods exports, stimulate the positive productivity spillovers, provide productive job opportunities to surplus labour in agriculture, generate urban employment, reduce underemployment and disguised unemployment in the informal sector of the urban economy, and accomplish the process of industrialization. [ABSTRACT FROM PUBLISHER]

The present article aims at investigating the effects of financial sector development on economic growth in the case of Pakistan from 1975 to 2008. A composite financial depth indicator is built using principal component analysis (PCA) and is used in the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration. The results suggest the presence of a positive and significant relationship between financial development and economic growth. [ABSTRACT FROM AUTHOR]

In the post-reform period, the monetary policy of India has been undergoing various transformations. The emphasis is shifting from conventional instruments of price and quantity control to a more sophisticated route of monetary transmission. Using the recent econometric methodology of cointegrated vector autoregression with generalized restrictions, this study has attempted to examine whether monetary policy in India does work through interest rates in the post-reform period. The long-run relationship and the short-run dynamics suggest an important role for the interest rate. [ABSTRACT FROM AUTHOR]