Saba Qureshi, Muhammad Aftab and Scott Hegerty
The foreign exchange market plays a crucial role in defining the overall health of an economy. In these times of globalization and (in some ways) deglobalization, these markets…
Abstract
Purpose
The foreign exchange market plays a crucial role in defining the overall health of an economy. In these times of globalization and (in some ways) deglobalization, these markets are highly vulnerable to external shocks. In this line of research, this study investigates exchange-market vulnerability among the BRICS economies by considering the co-movements among variables and contagion among markets.
Design/methodology/approach
This study uses DCC-IGARCH and Wavelet approaches to examine interdependence and contagion among the foreign exchange markets of the BRICS countries. The prior approach gives exposure to correlations over time, while the latter approach is suitable to provide insight regarding correlations over different frequency and time domains.
Findings
These results show evidence of meaningful co-movements in the vulnerability of the BRICS economies' foreign exchange markets during periods of market instability. The authors observe that interdependence significantly increased after 2008 and is prominent in the short run, particularly up to the scale of 1.5 years. In addition, there is evidence of persistent integration across the short and medium run. Furthermore, the findings indicate recurrent patterns of co-movements and the presence of contagion.
Originality/value
Given the high degree of economic integration among the BRICS economies, there is relatively little literature on how each member country's foreign exchange vulnerability can affect others. This research fills this gap, by applying appropriate econometric techniques and using a newly created measure of exchange market vulnerability that is unit consistent—such that it combines observed change in exchange rates with the change that is prevented through central bank intervention in a common unit, rather than by combining percentages with dollar-denominated values. This research provides important implications for investors and policymakers.
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Izabela Pruchnicka-Grabias, Iwona Piekunko-Mantiuk and Scott W. Hegerty
The Polish economy has undergone major challenges and changes over the past few decades. The country's trade flows, in particular, have become more firmly tied to the country’s…
Abstract
Purpose
The Polish economy has undergone major challenges and changes over the past few decades. The country's trade flows, in particular, have become more firmly tied to the country’s Western neighbors as they have grown in volume. This study examines Poland's trade balances in ten Standard International Trade Classification (SITC) sectors versus the United States of America, first testing for and isolating structural breaks in each time series. These breaks are then included in a set of the cointegration models to examine their macroeconomic determinants.
Design/methodology/approach
Linear and nonlinear and nonlinear autoregressive distributed lag models, both with and without dummies corresponding to structural breaks, are estimated.
Findings
One key finding is that incorporating these breaks reduces the significance of the real exchange rate in the model, supporting the hypothesis that this variable already incorporates important information. It also results in weaker evidence for cointegration of all variables in certain sectors.
Research limitations/implications
This study looks only at one pair of countries, without any third-country effects.
Originality/value
An important country pair's trade relations is examined; in addition, the real exchange rate is shown to incorporate economic information that results in structural changes in the economy. The paper extends the existing literature by conducting an analysis of Poland's trade balances with the USA, which have not been studied in such a context so far. A strong point is a broad methodology that lets compare the results the authors obtained with different kinds of models, both linear and nonlinear ones, with and without structural breaks.
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Mohsen Bahmani-Oskooee, Scott Hegerty and Ruixin Zhang
Recent years have seen a rapid expansion of studies that examine the effects of exchange-rate risk on bilateral exports and imports for specific industries. Since the underlying…
Abstract
Purpose
Recent years have seen a rapid expansion of studies that examine the effects of exchange-rate risk on bilateral exports and imports for specific industries. Since the underlying theory is ambiguous, each case must be studied individually. This paper considers British trade with China, for 47 types of product, over the period from 1978 to 2010. Consistent with the underlying theory, cointegration analysis shows that most industries register no effect due to volatility in the long run, while some trade flows are reduced and a handful are even increased. An analysis of industry characteristics suggests that while the type of good might play little role on an industry's specific results, a product's trade share does. This is the case for UK imports of Chinese goods, perhaps because large Chinese exporters are able to successfully hedge against exchange-rate risk. The paper aims to discuss these issues.
Design/methodology/approach
The method is based on bounds testing approach to cointegration and error-correction modeling.
Findings
The paper arrives at two key conclusions. First, as has been shown previously for other country pairs, most industries demonstrate no long-run response to exchange-rate volatility. A fraction of industries are affected, and most of these effects are negative.
Research limitations/implications
This research pertains to the case of industry trade between the UK and China only.
Practical implications
The paper identifies industries that are affected by exchange rate uncertainty.
Originality/value
No study has looked at the impact of exchange rate uncertainty on the trade flows between China and the UK at commodity level.
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Mohsen Bahmani‐Oskooee and Scott W. Hegerty
Since the introduction of the concepts of the J‐ and S‐curves, many researchers have tried to verify their validity empirically. This paper aims to review the related papers and…
Abstract
Purpose
Since the introduction of the concepts of the J‐ and S‐curves, many researchers have tried to verify their validity empirically. This paper aims to review the related papers and to offer direction for future research.
Design/methodology/approach
This is a review paper. As such, no method is employed here. Rather, the methodologies used by others to test the J‐ and S‐curves are explained and reviewed.
Findings
No new findings are offered since this is a review paper.
Practical implications
The J‐ and S‐curves show whether currency depreciation worsens the trade balance first before improving it. Since the majority of studies are country‐specific, policymakers could benefit by learning whether currency depreciation will be effective in improving the trade balance.
Originality/value
This is a literature review paper and its originality is in terms of collecting the literature together and presenting it in one single paper.
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Małgorzata Stefania Lewandowska, Arkadiusz Michał Kowalski, Dawid Majcherek and Scott William Hegerty
Purpose: The objective of this chapter is to provide an international comparative analysis of the economic, social and healthcare inequalities in the European Union (EU) from the…
Abstract
Purpose: The objective of this chapter is to provide an international comparative analysis of the economic, social and healthcare inequalities in the European Union (EU) from the perspective of 13 EU member states (EU-13) that have joined the union in 2004, 2007, and 2013.
Need for study: Significant disparities exist in the development levels among various regions and countries in the EU.
Methodology: The study compares EU-13, PIGS countries (Portugal, Italy, Greece, and Spain), and EU-10 over the last 20 years, focussing on income competitiveness, unemployment rates, employment structures in services, industry, and agriculture, and social and healthcare disparities. Data on gross domestic product (GDP) per capita, internet access, and unmet medical needs are also analysed. The Summary Innovation Index (SII) is dynamically analysed to determine the key factors of international competitiveness, including innovation.
Findings: Employment in agriculture in EU-13 countries is five times higher than in EU-10 countries, and income gaps persist between the two regions. However, EU-13 is closing these gaps with PIGS countries. Digitalisation has improved, and there are no visible disparities in internet access. The Human Development Index and unmet healthcare needs are diminishing. Performance groups, such as Innovation Leaders and Strong Innovators, are dispersed across Europe.
Practical implications: This study offers a new research agenda for critically investigating economic, social, and healthcare inequality topics, which are of crucial importance. The findings may serve as the foundation for future cohesion policy development in order to maximise its effectiveness in achieving the EU’s integrity.
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Mohsen Bahmani, Hanafiah Harvey and Scott W. Hegerty
The Marshall‐Lerner (M‐L) condition, which stipulates that a devaluation or depreciation of its currency will improve a country's trade balance only if the sum of the absolute…
Abstract
Purpose
The Marshall‐Lerner (M‐L) condition, which stipulates that a devaluation or depreciation of its currency will improve a country's trade balance only if the sum of the absolute values of a country's import and export price elasticities are greater than one, is a fundamental tenet of international economics. The purpose of this study is to survey the literature that has tested the M‐L condition, examining in particular whether previous studies' results are statistically significant. The authors then conduct their own estimation of 29 countries' trade elasticities, over the past few decades.
Design/methodology/approach
While mostly a review paper, the paper also applies statistical techniques in two ways. First, the authors use t‐tests on previously‐published statistical results to see if the sums of their elasticities are significantly greater than one. The authors also apply the recently developed ARDL cointegration method, which has a number of attractive statistical properties, to estimate 29 countries' long‐run import and export elasticities and test the M‐L condition using recent data.
Findings
The authors re‐estimation using previous studies' coefficients and standard errors shows that, although the point estimates in many studies suggest that the M‐L condition is met, it really is not met in half of the cases. This lack of evidence is confirmed with the authors' own empirical tests.
Research limitations/implications
Not only does this paper collect the relevant literature in a way that will assist future researchers on the topic, these findings suggest that support for the M‐L condition is much weaker that commonly thought. This therefore makes an important contribution to thinking regarding the potential benefits of devaluation, and to economic theory in general.
Practical implications
Policymakers who hope to improve their countries' competitive position could benefit from learning that this policy is indeed less effective than might be supposed. This could lead to the implementation of more effective economic policies.
Originality/value
As a literature review, the originality of this paper is that it collects relevant studies into one single paper. The statistical analyses allow the reader to re‐interpret these studies' findings in a new light.
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Mohsen Bahmani‐Oskooee and Scott W. Hegerty
Since the last review article by McKenzie, the literature has experienced a surge in the number of empirical articles. These new contributions, coupled with those that were…
Abstract
Purpose
Since the last review article by McKenzie, the literature has experienced a surge in the number of empirical articles. These new contributions, coupled with those that were overlooked by McKenzie, set the stage for this review. Many of the recent studies have been empirical in nature and these deserve specific attention. Thus, this paper aims to survey and review all of the studies by paying attention to the attributes outlined in the text.
Design/methodology/approach
This paper examines the vast empirical literature, up to 2005, to assess the main trends in modeling and estimating these trade flows at the aggregate, bilateral, and sectoral levels.
Findings
The increase in exchange‐rate volatility since 1973 has had indeterminate effects on international export and import flows. Although it can be assumed that an increase in risk may lead to a reduction in economic activity, the theoretical literature provides justifications for positive or insignificant effects as well. Similar results have been found in empirical tests. While modeling techniques have evolved over time to incorporate new developments in econometric analysis, no single measure of exchange‐rate volatility has dominated the literature.
Originality/value
An argument put forward by the opponents of the floating exchange rates is that such rates introduce uncertainty into the foreign exchange market, which could deter trade flows. However, a theoretical argument is put forward by some to show that uncertainty could also boost trade flows if traders increase their trade volume to offset any decrease in future revenue due to exchange rate volatility. The empirical literature reviewed in this paper supports both views.
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This study introduces the concept of financial advice deserts (FADs), including financial advice received from personal financial advisors (PFAs) and Certified Financial Planners�…
Abstract
Purpose
This study introduces the concept of financial advice deserts (FADs), including financial advice received from personal financial advisors (PFAs) and Certified Financial Planners™ (CFP professionals) and investigates the association between living in these FAD states and the retirement planning activities of individuals.
Design/methodology/approach
This study uses merged data gathered from multiple sources including (1) available state-level information on CFP professionals from the CFP board website, (2) state-level information on PFAs from the US Bureau of Labor Statistics and (3) individual levels of retirement planning behavior and other personal characteristics from the 2018 FINRA National Financial Capability Study. Using web data extraction tools and logistic regression analyses, this study examines the association between a series of individual retirement planning activities and living in the FAD states.
Findings
The study found that living in the FAD states was negatively associated with both having retirement accounts and contributing regularly to retirement accounts. Overall, the findings of this study underscore the need for providing greater access to financial advice and improving financial literacy among financially marginalized populations who are residing in FAD states in the United States of America.
Originality/value
This study makes unique contributions to the literature by raising the issue of geographic inequality in terms of access to financial advice and introducing the innovative notion of FADs. The findings provide fresh insights into the understanding of retirement planning and preparedness from the perspective of state-level inequality of financial advice through PFAs and CFP professionals, thereby expanding the previous knowledge that emphasizes only individual- and household-level differences. Significant implications for public policies and practitioners are also discussed.