Time Varying Linkages Of Economic Activities In China And The Stock Markets In Asean 5

This study attempts to investigate the evolution of dynamic linkages and volatility spillover between the five countries of the Association of Southeast Asian Nations (ASEAN-5) stock markets and China's economic activities. By using the movements and structural breaks of the time-varying correlation and Granger causality test, a suitable destination for equity portfolio diversification can be determined among the studied markets. This study covers monthly data from January 1991 to March 2015. The DCC-MGARCH model shows that the studied countries are time-varying correlated, while the structural break observed by Bai and Perron test coincided with major economic shocks, policy changes and the establishment of regional trade policies. The VAR model Granger causality test observed no volatility spillover from Chinese economic activities to the ASEAN-5 stock markets, except for Malaysia and the Philippines. However, the ASEAN-5 stock markets' volatility exerts a significant influence on China's economy, except for Singapore's stock market volatility. This study reveals that ASEAN-5 has gradually became the preferred destination for diversifying equity portfolios for investors in China.

This volume of "International Finance Review" focuses on the Asia-Pacific financial markets. A total of 22 original papers, not published elsewhere, have been selected from a competitive field. These papers utilize a variety of methods, including theoretical, empirical and qualitative to highlight a range of issues across the region. Several papers offer combinations of these different categories and among the empirical papers, there are a wide variety of datasets analyzed. While China does play a significant part in the analysis of five of the papers in this volume (this is to be expected given its importance in the region), a host of other countries are also considered. This ensures the volume is truly international in its scope. These papers each serve to contribute to the knowledge on a particular issue related to the financial markets within this region and for this volume, three main issues have been identified: integration, innovation and challenges. Articles are contributed by experts in their fields. It is truly international in scope.

The first part of the book examines the evolution of monetary policy and prudential frameworks of the ASEAN5, with particular focus on changes since the Asian financial crisis and the more recent period of unconventional monetary policy in advanced economies. The second part of the book looks at policy responses to global financial spillovers. The third and last part of the book elaborates on the challenges ahead for monetary policy, financial stability frameworks, and the deepening of financial markets.

The Pacific Trade and Development (PAFTAD) conference series has been at the forefront of analysing challenges facing the economies of East Asia and the Pacific since its first meeting in Tokyo in January 1968. The 38th PAFTAD conference met at a key time to consider international economic integration. Earlier in the year, the people of the United Kingdom voted to leave the European Union and the United States elected Donald Trump as their next president on the back of an inward-looking ‘America First’ promise. Brexit and President Trump represent a growing, and worrying, trend towards protectionism in the North Atlantic countries that have led the process of globalisation since the end of the Second World War. The chapters in the volume describe the state of play in Asian economic integration but, more importantly, look forward to the region’s future, and the role it might play in defending the global system that has underwritten its historic rise. Asia has the potential to stand as a bulwark against the dual threats of North Atlantic protectionism and slowing trade growth, but collective leadership will be needed regionally and difficult domestic reforms will be required in each country.

This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.

This paper finds that financial spillovers from China to regional markets are on the rise. The main transmission channel appears to be trade linkages, although direct financial linkages are playing an increasing role. Without an impact on global risk premiums, China’s influence on regional markets is not yet to the level of the United States, but comparable to that of Japan. If China-related shocks are coupled with a rise in global risk premiums, as in August 2015 and January 2016, spillovers to the region could be significantly larger. Over the medium term, China’s financial spillovers could rise further with tighter financial linkages with the region, including through the ongoing internationalization of the renminbi and China’s capital account liberalization.

No sooner had the Asian crisis broken out in 1997 than the witch-hunt started. With great indignation every Asian economy pointed fingers. They were innocent bystanders. The fundamental reason for the crisis was this or that - most prominently contagion - but also the decline in exports of the new commodities (high-tech goods), the steep rise of the dollar, speculators, etc. The prominent question, of course, is whether contagion could really have been the key factor and, if so, what are the channels and mechanisms through which it operated in such a powerful manner. The question is obvious because until 1997, Asia's economies were generally believed to be immensely successful, stable and well managed. This question is of great importance not only in understanding just what happened, but also in shaping policies. In a world of pure contagion, i.e. when innocent bystanders are caught up and trampled by events not of their making and when consequences go far beyond ordinary international shocks, countries will need to look for better protective policies in the future. In such a world, the international financial system will need to change in order to offer better preventive and reactive policy measures to help avoid, or at least contain, financial crises.

Financial crises often transmit across geographical borders and different asset classes. Modeling these interactions is empirically challenging, and many of the proposed methods give different results when applied to the same data sets. In this book the authors set out their work on a general framework for modeling the transmission of financial crises using latent factor models. They show how their framework encompasses a number of other empirical contagion models and why the results between the models differ. The book builds a framework which begins from considering contagion in the bond markets during 1997-1998 across a number of countries, and culminates in a model which encompasses multiple assets across multiple countries through over a decade of crisis events from East Asia in 1997-1998 to the sub prime crisis during 2008. Program code to support implementation of similar models is available.

The Association of Southeast Asian Nations (ASEAN) is strategically significant because of its size, dynamism, and role in the Asian economic and security architectures. This paper examines how ASEAN seeks to strengthen these assets through "centrality" in intraregional and external policy decisions. It recommends a two-speed approach toward centrality in order to maximize regional incomes and benefit all member economies: first, selective engagement by ASEAN members in productive external partnerships and, second, vigorous policies to share gains across the region. This strategy has solid underpinnings in the Kemp-Wan theorem on trade agreements. It would warrant, for example, a Trans-Pacific Partnership (TPP) agreement with incomplete ASEAN membership, complemented with policies to extend gains across the region. The United States could support this framework by pursuing deep relations with some ASEAN members, while broadly assisting the region's development.