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Vol.2 No.2
August 2014

 Page Number

 Article Information


Negative Return-Volume Relationship in Asian Stock Markets: Figarch-Copula Approach          

Muhammad Naeem, Hao Ji, and Brunero Liseo

DOI: 10.15604/ejef.2014.02.02.001


We explore the potential dependence among different Asian stock markets, using several different statistical models. Extreme return-volume dependence in Hong Kong Seng Index, Bombay Stock Exchange, Indonesia Composite Index and Bursa Malaysia has been examined by using FIGARCH-Copula and GARCH-Copula approach. We have used Gaussian, Student-t, Frank, Clayton, Survival Clayton and Gumbel copulas. Based on Akaike information criterion (AIC), we found that using FIGARCH model for return series improves the results of copula parameter estimation. According to our finding, Hong Kong and Indian stock indices showed weak upper tail dependence between return and volume. Further, we have found that the extremely low returns for Malaysia and Indonesia stock indices are followed by high volumes, providing evidence of leverage effect. Our investigation shows that Malaysia and Indonesia stock indices are sensitive to bad news rather than good news.

Keywords: Long Memory, FIGARCH-Copula Model, Asian Stock Markets, Upper Tail Dependence, Negative Returns


Fundamental Flaws in the Architecture of the European Central Bank:  The Possible End of the Euro Zone and its Effects to East African Community (EAC) Countries

Nothando Moyo

DOI: 10.15604/ejef.2014.02.02.002


European countries embarked on a European integration programme that saw the formation of the Euro, which has emerged as a major currency (Blair, 1999) that was introduced in 1998. With the Euro, came the establishment of the European Central Bank. Thus this study seeks to investigate the flaws in the formation of the European Central Bank that surfaced during the major economic crisis in Europe. The crisis revealing the gaps in the formation and structure of the European central bank have created major challenges for the Economic and Monetary Union (EMU). Through an extant review of literature the study will examine the East African Community Countries, investigating the ties they have to the euro zone to analyse how the crisis has affected them. Furthermore, the study will analyse what would happen to the growth patterns of the East African Countries and the various prospects they may have should the Eurozone come to an end.

Keywords: European Central Bank, Euro-zone, East African Community Countries


The Role of FDI in the Economic Development of Transition Countries  

Jelena Tast

DOI: 10.15604/ejef.2014.02.02.003


FDI are considered a key instrument in the process of transforming the former centrally planned economies and stimulate economic growth in the transition period. Economic theory suggests that FDI are an important factor for the economic growth of the host-country, while according to empirical research in general, there is a positive correlation between FDI and the economic growth, but the causality direction is not clear: FDI inflow stimulates economic growth, but in the same time FDI inflows grow with the country’s economic development. Therefore, the objective of research in the paper is the relationship between FDI and economic growth in SEE and CIS countries. The relationship between the FDI and the economic growth in transition countries is examined by linear regression correlation of the relevant variables, covering the period from 2004 to 2011. Through the Pierce coefficient and the coefficient of determination, the interaction between the relevant variables and the dependence intensity is examine, and in this context general conclusions are drawn about the effects of FDI in the SEE and CIS countries. At the same time, the beta-coefficient is used to examine the value of the change in each variable separately, in order to make a more detailed analysis of the results obtained. In order to determine the direction of causality between the FDI and the economic growth of the country, research is carried out the influence of the transition indicators on the FDI inflow in the SEE and CIS countries from 2004 to 2011.

Keywords: Foreign Direct Investment, Transition Countries, Economic Development


Risks Impact on the Accommodation and Food Services: The Case of Latvia      

Inga Jansone and Irina Voronova

DOI: 10.15604/ejef.2014.02.02.004


The target of this work is to research risks impact on the commercial activity of the accommodation and food services sector’s enterprises. Classification of technological process risks of the accommodation (hotel) and food services are created in the article. The authors have carried out a survey of the most important risks’ factors in the stages of the technological process. Classification of Latvian accommodation and food services sector’s economic and financial risks are created in the period from year 2012 till year 2013. Risks ranking method, experts’ method and special coefficient method are used to analyse risks impact on Latvian accommodation and food services sector enterprises’ development. The risks matrixes are used as risks assessment tools. Risks are arranged by the size of potential losses. The risks assessments by using the special coefficient method are made in the period from year 2007 till year 2012. The authors have offered rating of external and internal risks by their impact on the commercial activity of enterprises. The authors have used their own created model of enterprises’ risks identification, classification and assessment that to research risks impact on Latvian accommodation and food services sector enterprises’ development. 

Keywords: Assessment, Risks Identification, Classification and Assessment Model, Risks Impact on the Accommodation and Food Services


Tourism Expenditures and Environment in Thailand

Malliga Sompholkrang

DOI: 10.15604/ejef.2014.02.02.005


Tourism activities affect the environment of different destinations, which is influenced by different tourists’ consumption. The objective of this study is to examine the relationship between inbound tourist expenditures and three main environmental dimensions, which are carbon dioxide emission from transport, energy demand, and water usage, in Thailand. This paper employs Vector Autoregressive (VAR) models to determine the relationship of variables. Data from Ministry of Energy, Bank of Thailand, Metropolitan Electricity Authority, Provincial Waterworks Authority, National Statistical Office, Department of Tourism, and Tourism Authority of Thailand between 1988 and 2012 have been applied in the model. Note that, energy demand is represented by total electricity consumption of hotel and accommodation sector in Thailand, while water usage is represented by the total water consumption of tourists. This study found the relationships among tourists’ expenditures, carbon dioxide emission from transport, energy demand, and water usage. Therefore, the policies recommendations may be essential to prepare the optimal schemes and budgets for encountering the environmental impacts from tourism business expansion.

Keywords: Tourist Expenditure, Environment, Thailand


The Impact of Different Forms of Foreign Capital Inflow on GDPpc in CEE Countries during the Crisis up to 2012

Goran Pitic, Nebojsa Savic, Lidija Barjaktarovic, and Snezana Konjikusic

DOI: 10.15604/ejef.2014.02.02.006


This paper represents further analysis of the authors of previous research on the impact of foreign capital inflow on GDPpc. The analysis includes nine countries of Central and Southeastern Europe – CEE-9 in the period 2005-2012. The previous research has shown that foreign capital inflow (foreign direct investment /FDI/, portfolio investment /PI/, remittances /REM/ and cross-border credits/CBC/) had an impact on an increase in GDPpc and that CBC inflow had the greatest impact on an increase in GDPpc in the period 2005-2012. In this paper, we use correlation and panel regression in order to determine the cause and impact of the available source of financing on the level of GDPpc. Research showed that the influence of the crisis was evident from 2008 onwards and that CBC had the greatest impact on an increase in GDPpc in the period 2005-2012. Under conditions of a lack of financial resources from domestic sources, coupled with an insufficiently attractive business environment, CBCpc inflow had the greatest impact on an increase in GDPpc. Such a high significance of CBCpc is the result of the fact that CEE-9 failed to create a sufficiently attractive business environment. In an attempt to catch up with advanced EU economies, CEE-9 had to finance the increasing amount of investment from the relatively most expensive sources, such as CBCs, during the crisis. The problems related to the quality of the business environment and underdeveloped institutions contributed to a weak relationship between FDIpc and GDPpc. A weak indirect relationship also exists between PIpc and the level of GDPpc. A strong indirect relationship between REMpc and GDPpc was also observed. The correlation analysis showed that GDPpc was directly and strongly related to CBCpc.

Keywords: Foreign Capital Inflow, Cross-Border Credits, FDI, CEE

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