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Vol.5 No.3
September 2017

 Page Number

 Article Information

1-16

Time Zone Difference, Comparative Advantage and Trade: A Review of Literature

Alaka Shree Prasad, Biswajit Mandal, and Prasun Bhattacharjee

DOI: 10.15604/ejef.2017.05.03.001

Abstract

With the growing development in communication technology and increased fragmentation of production process, services that were once considered non-tradable can now be traded across different nations. In this respect, trading countries located in different time zones of the world with non-overlapping working hours are able to develop a comparative advantage together for the supply of these services. Disintegrating the production of a service across different time zones can allow the production to be completed efficiently and make the product available in the market meeting consumer demand in a timely fashion. In this paper, we have reviewed some of important research that has been conducted in the area of time zone differences and trade. This type of trade further affects the factor market and production patterns of the involved countries and has also been significant for their growth and welfare.

Keywords: Comparative Advantage, Time Zone, Service, Trade

17-26

Empirical Evidence on Dynamics of Credit Growth and Foreign Reserve

Satrugan Sinah

DOI: 10.15604/ejef.2017.05.03.002

Abstract

The paper presents a model for looking into the nature of change in foreign reserve from movements in domestic credit. This model is relevant to foreign reserve targeting, small and open economies. The model denotes that measures undertaken by central banks to constraint domestic credit growth with the view of controlling capital outflows will also be detrimental to foreign reserves level. The empirical studies with application of Fourier Transformation technique have been used to build a model, which shows that growth in domestic credit is more biased towards positive swings in foreign reserves, rather than being unfavorable.  The small and open economies, particularly, the Pacific Island nations, have the right set up for application of this model to safeguard foreign reserves level.

Keywords: Fourier, Domestic Credit, Foreign Reserve, Monetary Policy

27-35

Demographic and Financial Dynamics in Prabumulih Region as the Development Expansion Impact  

Sari Lestari Zainal Ridho, Anna Yulianita and Yunisvita  

DOI: 10.15604/ejef.2017.05.03.003

Abstract

The process of urbanization leads to the development of rural urban areas, either in the form of transitional area or interactive area, and becomes a site for urban and rural activities aligned, and the natural conditions in the region experiences rapid changes. The construction expansion is expected to create wealth that can be measured through poverty reduction and regional finance improvement. Therefore, the purpose of this study was to examine changes in demographic elements and regional finances in Prabumulih as a result of development in that region. The data used during the data were Prabumulih region data in period of 2000- 2014 for financial data and data of 2010 to 2014 for demographic variables. The quantitative analysis, Pearson Product Moment Correlation (Correlation PPM) was used in order to find out and test the associative hypothesis or relationships among demographic variables used in this study and descriptive analysis to assess the financial condition in Prabumulih region. The findings in this study indicated that the total population which increased due to the development expansion in the process of the urbanization, contributed to the economic development through the poverty reduction and regional finance source improvement in the form of regional income, that showed an increase in the amount of the region’s ability to financial expenditure and contributed more to regional income or economic development.

Keywords: Demographics, Finance, Urbanization

36-48

Movement of Intra-Industry Trade Index in Terms of Exchange Rate Change: Theoretical Analysis Based on a Two-Stage Production Model

Nobuhiro Takahashi and Mita Takahashi

DOI: 10.15604/ejef.2017.05.03.04

Abstract

This paper analyzes the movement of intra-industry trade index when the exchange rate or the world price changes. In our two-stage production model, firms construct factories in a foreign country by foreign direct investment (FDI). The firms export components from the home country to the foreign factories, and import final products from the foreign factories. The foreign factories also sell the final products in the world market. Under this knockdown system, we research the movement of the intra-industry trade index of the home country. This paper shows that appreciation of the exchange rate does not always raise the intra-industry trade index. We also show that changes in the world price have the similar effect on the movement of the intra-industry trade index.

Keywords: Intra-Industry Trade Index, Foreign Direct Investment (FDI), Exchange Rate

49-66

Convergence or Divergence? An Empirical Analysis for the Regions of Turkey

Hakki Kutay Bolkol

DOI: 10.15604/ejef.2017.05.03.005

Abstract

This study aims to investigate the convergence issue for the NUTS2 level regions of Turkey based on the neoclassical perspective in order to test the empirical power of neoclassical models. The difference and one of the contributions of this study is that it uses per-capita gross value added instead of per-capita income because of not only data limitations but also some advantages it has. For example, it is purer and it shows real production activities that is why using it is not a handicap rather it is better indicator for growth studies. The investigation period of this study is the years between 2005 and 2011 due to the lack of data. In empirical part, β convergence (both conditional and unconditional), σ convergence, and coefficient of variation method are tested in order to capture whether there exists convergence or not. Empirical results show that there is convergence between regions of Turkey. However, by investigating the descriptive statistics in the light of empirical results, it can be easily seen that the reason of convergence is the crisis (2008 crisis). Since our investigation period is too short, the empirical result is highly affected by the crisis so that it is impossible to infer that there is convergence. The reason of finding convergence in crisis is that 2008 crisis is related with financial sector and it affects rich regions more. Therefore, this type of convergence is deceptive. In other words, it does not show the real trend. Consequently, according to this work, we cannot infer that there is convergence, to say that we need reinvestigation with larger time period.

Keywords: Economic Growth, Regional Convergence, β Convergence, σ Convergence, Coefficient of Variation

67-86

A Look at Some of the European Union’s Major Social Problems and Their Economic Impact

Monika Moraliyska

DOI: 10.15604/ejef.2017.05.03.006

Abstract

The EU’s economy accounts for a significant share of the world economy. Measured in terms of GDP, it is still the biggest in the world. In addition to that, being a single market of 28 countries, the EU has been a major trading player accounting for around 20% of global exports and imports. However, EU’s trade was hit by the global recession. It is additionally hindered by the attempts of its economic policy to provide for a sustainable growth by investing in transport, energy and research in order to minimize the impact of further economic development on the environment. The most serious problems of the EU are connected with the unstable and comparatively low employment, continuing energy dependence, demographic change and population’s aging, as well as the persisting economic and social disparities within member states and between European regions in the North and South, West and East. The migration crisis adds to the problem with the lack of coherent solution, unsuccessful integration, growing inequalities and fragile multilateralism, having both – their social and economic effects. This paper aims to explore the most pressing challenges before the European Union’s economy today and in the years to come – aging population and social disparities.

Keywords: European Union, Ageing Population, Social Disparities, Economic Effects

87-98

Relationship between Human Capital and Economic Growth: An Application to Developing Countries

Ali Altiner and Yilmaz Toktas

DOI: 10.15604/ejef.2017.05.03.007

Abstract

High and sustainable economic growth, that is an important indicator of life quality, is an essential condition in the realization of economic growth. In this regard, achieving strong economic growth in developing countries which mostly need development today, is one of the most debated topics. For many years, physical capital has been recognized as the most important determinant of economic growth. New approaches to economic growth have been developed since 1980s. In this context, according to endogenous growth theory, it is stated that the most important determinant of economic growth is the human capital stock. Today, while the subject of economic growth is examined, the effect of human capital on economic growth is intensively investigated. In this study, the impact of human capital on economic growth for selected 32 developing countries is investigated by panel data analysis method using data from the period 2000-2014. The focus of the study is also the direction and degree of effect of the increase in the level of education on economic growth. According to empirical analysis results, it is founded that human capital positively affects economic growth. It has also been found that its positive effect on economic growth has reduced while the education level has increased. On the other hand, the results of the analysis indicate that physical capital has a positive impact and that the labor negatively affects economic growth in the studied countries. However, it has been determined that the effect of human capital on economic growth is lower than that of physical capital.

Keywords: Human Capital, Economic Growth, Developing Countries, Fixed Effects Model

99-108

An Analysis of Bankruptcy Likelihood on Coal Mining Listed Firms in the Indonesian Stock Exchange: An Altman, Springate and Zmijewski Approaches

M. Noor Salim and Sudiono

DOI: 10.15604/ejef.2017.05.03.008

Abstract

This research was conducted to determine the bankruptcy possibility of Coal Mining Companies listed in Indonesia Stock Exchange (IDX), using Altman Model (Z-score, Springate Model (S-Score) and Zmijewski Model (X-Score) approaches. The respondent is 19 Coal Mining Companies listed in IDX taken from 22 companies’ population. Purposive sampling was used as the sampling technique which required the following criteria: go public Coal Mining Companies listed in IDX respectively from 2011 until 2011, and have audited financial statements for the fiscal year 2011 – 2014. Data collection methods were desk research. The result of this research showed that Zmijewski Model is the most accurate predictive models that can be applied to coal mining company listed on the Indonesia Stock Exchange (IDX) because this model has the highest level of accuracy compared to other predictive models that are equal to 78.95%, followed by Springate Model which has an accuracy rate of 47.37%, and the last one, Altman Model only has 5.26%.

Keywords: Potential Bankruptcy, Coal Mining Companies, Altman (Z-Score), Springate (S-Score), Zmijewski (X-Score)

109-132

Re-Examining Stock Market Integration among BRICS Countries

Berzanna Seydou Ouattara

DOI: 10.15604/ejef.2017.05.03.009

Abstract

The main goal of this paper is to contribute to the international investment decision making process among the BRICS countries and to the development or changes of policies in response to the dynamics in these countries. The background is important for international investors seeking diversification benefits abroad and for policy makers reacting to the developments in the aforementioned economies. Thus, the context of this paper is directed to the examination of the stock market interaction among the BRICS countries. The objective of this research paper is to analyze the existence of the short-term linkages and long-term cointegration among the BRICS markets. Augmented Dicker-Fuller (ADF) and Philips-Perron tests (PP) are used to analyze stationarity among the selected variables. The research applies the correlation test on the stock markets returns to investigate the degree of freedom existing among the markets. The long run and the short run are also investigated using Johansen cointegration test while the Pairwise Granger Causality and the Wald tests are applied to assess the direction of the causality between the stock market indices. The study also extends the investigation by employing the impulse response function and variance decomposition to evaluate the reaction of each stock to a shock from other stock indices. The quarterly data consisted of fifteen years from 2000 to 2015 and are exclusively composed of stock market index of selected countries. One of the key findings of the research is that the Chinese stock markets are mostly independent from other BRICS markets, implying diversification benefits for the international investors both in the short and the long run. Another important finding is that the BRICS stock markets are not cointegrated in the long run, thus, being a favorable destination for the long-term investments.

Keywords: BRICS Stock Markets, Integration, ADF and PP Tests, JJ Cointegration Test, Granger Causality Test, VAR, Impulse Response Function, Variance Decomposition Analysis

133-141

The Influence of Arab Spring Effect on Economic Growth in the Middle East Countries: Structural Break Panel Data Analysis

Murat Beser and Nazife Ozge Kilic

DOI: 10.15604/ejef.2017.05.03.010

Abstract

Civil commotions that are started in December, 2010 and named as “Arab Spring” had been spread to Middle East countries and had also brought with it economic and political crises. Many economic, social and political factors that are mostly structural had been effective on starting this process. In this research, influence of Arab Spring on economic growth had been investigated with the help of cross-sectional dependency and structural break unit root test in five Middle East countries by using annual data in between 1990-2014. While cross-sectional dependency has been determined for the overall of panel, it had been reached to the conclusion that there is not structural break unit root.

Keywords: Economic Growth, Arab Spring, Structural Break Panel Unit Root Test

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