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    Does the U.S. export inflation? Evidence from the dynamic inflation spillover between the U.S. and EAGLEs
    (Elsevier Inc, 2024-07-02) Nguyen TTT; Pham SD; Li X-M; Do HX
    Given the crucial role of inflation as a key economic barometer, our paper investigates the dynamic inflation spillover between the U.S. and the nine emerging and growth-leading economies (EAGLEs) between 1991M1 and 2020M2. Employing the recently developed time-varying parameter vector autoregressions (TVP-VAR)-based connectedness approach, we find evidence of a moderate inflation spillover across the sample countries at normal condition. We further point out that inflation spillover effects with the U.S. are more pronounced for the emerging markets with higher openness, the net oil-importing emerging markets, and the emerging markets following free-float exchange rate regimes. More importantly, the inflation spillover index among the system rises dramatically to over 70% under extremely inflationary conditions, implying that the transmission of spiral inflation is very high. Additionally, the time-varying analysis shows that the role of the U.S. in the inflation shock transmission with emerging countries varies between being a net inflation-exporter and inflation-importer over times. Finally, an investigation of the drivers of the inflation spillovers reveals that the U.S. dollar, emerging markets' economic policy uncertainty, and bilateral trade are key determinants of the inflation shock transmission among the system. Our findings justify central banks’ actions in decreasing U.S. dollar reserves to safeguard their domestic currencies.
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    Sectoral uncertainty spillovers in emerging markets: A quantile time–frequency connectedness approach
    (Elsevier Inc, 2024-06) Dang THN; Balli F; Balli HO; Gabauer D; Nguyen TTH
    This study investigates the sectoral expected uncertainty connectedness in emerging markets across different frequencies and quantiles using the novel quantile time–frequency connectedness approach of Chatziantoniou et al. (2022a). The employed dataset spans from January 1st, 2003 to October 4th, 2022, encompassing 10 key sectors. The findings reveal a robust and notable interconnection among these sectors, with a substantial total connectedness index of 91.01%. We also note that the largest proportion of the sectoral total connectedness is associated with long-term spillovers. Consumer Cyclicals emerges as the primary source of net risk transmission. Conversely, the Communications & Networking and Healthcare appear to be the greatest net receivers of shocks at the median level. Furthermore, we find that the degree of interconnectedness substantially varies over time, frequency, and quantile, and by economic events. In addition, we find suggestive evidence of asymmetric sectoral uncertainty connectedness effects as the uncertainty spillovers are higher during turbulent market conditions than normal market conditions. A positive relationship between uncertainty measures and sectoral connectedness is also observed during periods of smooth and normal market conditions. Besides, we also conduct different portfolio analyses illustrating the importance of risk diversification to reduce investment uncertainty. This has important implications for international investors and policymakers in forming optimal investment portfolios reducing adverse risk spillovers.
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    The impact of politics on stock return dynamics in emerging markets : a thesis presented in fulfilment of the requirements for the degree of Doctor of Philosophy in Finance at Massey University
    (Massey University, 2012) Civilize, Sireethorn
    It is argued that politics plays a vital role in emerging capital markets. This thesis focuses on three specific political aspects and examines how each of these aspects could impact the stock return dynamics in emerging markets. Firstly, to examine the relationship between political risk and stock returns, political risk ratings from ICRG observed during the period of 1984 – 2007 is employed for the analysis. This thesis finds the magnitude of political risk change to be larger in emerging markets than in developed ones and the presence of global convergence in political risk between these two markets portfolios after the year 1995. Moreover, the influence of political risk is found to be greatest on the aggregated returns of Pacific Basin markets as opposed to other emerging and developed markets. This essay thus provides important implications for international investors that there are differences in political risk exposures among the different types of market and investing in Pacific Basin emerging markets can increase the level of risk and affect the risk-return characteristic of their investment portfolios. Secondly, an investigation is made on the differences between the stock returns of ten emerging markets under military and civilian regimes. This thesis provides evidence that there is no significant difference in stock returns between military and civilian governments for eight of the ten markets being examined. However, military rule is found to be a stock price factor for two markets being those of Pakistan and Thailand. Such military returns premiums found in these two countries do not appear to be explained by economic cycle fluctuation, extreme stock market slumps, the error term, or returns volatility. The findings are robust to the control of worldwide stock market movements as well as to the test of spurious regression bias and randomisation-bootstrap. The findings provide important information for investors that the shifts from civilian to military government in Pakistan and Thailand do not increase the risk level of their investment portfolios. However, such findings observed in these two countries are country-specific and cannot be applied to all countries under military governments. Lastly, the relationship among political connectedness, stock returns, and firm values in Thailand is examined. From a newly hand-collected sample of Thai firms observed over the period 1987 to 2008, this thesis finds that there are differences in the stock returns and financial performance of firms with different levels of political connection. The findings suggest that firms which are connected to higher level politicians are associated with higher stock returns. This is particularly prevalent for firms in tightly regulated industries. Highly connected firms are also associated with better financial performance and earnings prospect than those with lower level of connection. Moreover, this thesis finds the incidence of political connections to be higher for firms with long establishment and listed firms seek political affiliations regardless of where their headquarters are located in Thailand. The evidence strongly suggests that the stock market participants do incorporate factors such as political connection into their investment decisions and the level of corporate political connectedness is a stock price factor in Thailand.