The impacts of energy poverty on a range of development goals have been widely examined in the literature;
however, how energy poverty affects public health has yet to be studied. Using annual data for a broad panel of 175 countries over the period 2000 to 2018, this paper investigates the effect of energy poverty on public health.
To identify the causal effect of energy poverty on public health and tackle the issue of endogeneity,
we rely on Oster's (2019) bound analysis and the system generalized method of moments (GMM) estimation.
Our results show that energy poverty has a detrimental effect on public health. We also find that living standards can serve as a channel through which energy poverty influences health, and that countries with higher standards of living weaken the negative effect of energy poverty on public health.
Our results are robust across various specifications and measures of health indicators.
Our findings have important implications for policies in public health and transitions to renewable energy.
Many studies address the convergence in per capita CO2 emissions. However, whether countries with lower initial per capita emission levels can “catch up” with more emission-intensive countries is unknown.
Utilising historical CO2 emission data from 1907, this study investigates whether the per capita CO2 emissions of seven developing Asian economies; namely, China, Indonesia, India, Myanmar, the Philippines, Taiwan, and Thailand, catch up with or converge toward that of the US in the long run.
We simultaneously examine the existence of per capita CO2 emissions convergence and the statistical contribution of the emissions drivers using the most recently developed covariate augmented Dickey-Fuller test, which allows for endogenous structural breaks.
The main results show firm evidence of catching-up or relative/absolute convergence between the Asian economies and the US in terms of per capita CO2 emissions.
Emissions drivers such as population and real GDP per capita growth may encourage the Asian economies to achieve and to maintain the long-run convergence toward the reference country.
Theoretically, it is well argued that environmental factors affect the growth of the tourism industry; however, from an empirical perspective, some gaps still exist in the literature.
We empirically examine the effect of carbon dioxide (CO2) and particulate matter (PM2.5) emissions on tourist arrivals in a panel of G20 countries.
Using annual data from 1995 to 2014 and a series of panel data models, our results suggest that the growth of both CO2 and PM2.5 emissions adversely affects international tourist arrivals.
The results also show that the observed effect of CO2 emissions is more pronounced in developed economies, while the effect of PM2.5 emissions is stronger for developing economies.
Given these findings, our study provides and discusses a number of policy and practical implications.
Cross-country capital flows have been widely studied in the literature; however, why some countries may form more similar foreign investment portfolios than others has not been investigated.
Using data for a broad panel of countries during the period 2002–2015, we adopt gravity equations to estimate cross-country foreign portfolio investment patterns.
The main empirical results reveal that countries are more likely to form similar foreign portfolio investment patterns if:(i) countries are geographically closer; (ii) countries share the same official language; and (iii) countries adopt fixed exchange rate regimes.
We examine the impact of foreign direct investment (FDI) on financial inclusion.
To identify the causal effect of FDI on financial inclusion, we use plausibly exogenous source of variations in bilateral investment treaties (BITs) as a novel instrumental variable (IV) for net FDI inflows.
Using annual data for a broad panel of 90 countries over the period 2004 to 2017, our results show that FDI improves financial inclusion both for "access to finance" and "use of financial services".
This impact is more pronounced for relatively poor countries and developing countries compared to rich and developed countries.
We also find that higher financial market development and quality institutions improve financial inclusion directly.
Moreover, financial market development and institutional quality can serve as potential channels and moderating variables through which FDI affects financial inclusion.
Our results are robust to various estimations and sample splitting, and have important implications for policy on financial inclusion.
The interplay between the stock market and the real economy is crucial in the various channels through which financial markets drive economic growth.
In the current study, we investigate the effects of this relationship on the Chinese economy, which is the fastest growing and largest emerging economy in the world.
The methodology incudes unit root testing in the presence of structural breaks and the Autoregressive distributed lag (ARDL) model.
The results of the analysis showed that the global financial crisis from 2007 to 2012 had a significant impact on both the real sector and the financial sector in China.
Our findings also suggest that the Shanghai A share market has had a long-run negative association with the real sector of the economy; however, the magnitude of impact has been miniscule.
These findings indicate that this negative relationship is proof of the so-called existence of irrational prosperity in the stock market and the economic bubble in China's financial sector.
The findings did not show any evidence of a relationship between the stock market and the real economy in the short run.
Toda Yamamoto causality test showed that economic growth has spurred the development of the Shenzhen B share market.
Furthermore, the equally weighted index showed that stock market liquidity and stock market sectoral indices were alternative measures of stock market activities.
The results were robust to the alternative measures of stock market activities.
The results also indicate that state-owned monopolies play an important role in China's economic performance because they stimulate the economy in the short run.
one of the 72 most cited articles at Economic Modelling
selected for celebrating Economic Modelling as a top 20 economics journal in 2023
This paper examines the factors that predict an IMF bailout.
In doing so, we use a large dataset from 1993 to 2021 with 6550 observation and 138 features and adopt recent advances in machine learning and artificial intelligence models such as tree-based, boosting and artificial neural network techniques.
We find that apart from traditional indicators such as debt and macroeconomic factors, agricultural, energy, health and social factors are strong predictors of an IMF bailout.
These factors have hitherto not received much attention in the literature.
We examine hot-debated but underexplored questions of whether and how green strategies affect corporate green revenues.
Using a generalized Difference-in-Differences (DiD) framework, we find that green strategies significantly enhance corporate green revenues in the presence of China’s Emission Trading Scheme (ETS) pilot.
This is consistent with the Porter Hypothesis.
Our mechanism analyses document that green strategies increase green revenues by improving green quality and catalyzing environmentally friendly transformation.
This study has important implications for policymakers and practitioners, offering new insights into the intended consequences and real outcomes of environmental regulations.
Employing fixed and random effects estimation techniques on five-year-non-overlapping-averaged data, covering 1980 through 2019, this study, firstly, investigates, empirically, the potential bi-causal relationship between international tourist arrivals and the importation of consumables/merchandises, in the case of 45 sovereign islands.
The economic growth implication of a concurrent pursuit of tourism expansion and merchandise imports is also examined.
The study further investigates how over-reliance on imported merchandise to feed international tourists, and over-specialisation in the tourism sector, affect the tourism-led-growth hypothesis in the case of these islands.
Results from the study show that an increase in arrivals of international tourists significantly leads to an increase in the importation of consumable merchandises, and vice versa.
In addition, an importation of merchandises to sustain international tourist arrivals is significantly observed not to be detrimental to the economic growth of these islands.
However, the results further reveal that over-reliance on imported merchandises for the sake of international tourists, as well as over-specialisation in tourism with the help of imported merchandises, both exert significant detrimental net effects on the economic growth of islands across the globe.
The findings hold policy guidelines for the pursuit of tourism-led and merchandise-import-led growth strategies among global islands.
This paper examines the tourism markets’ convergence hypothesis across South Korea’s major source markets.
In doing so, we use monthly data of visitor arrivals over the period July 1995 to June 2019 and adopt a novel quantile unit root tests that allows for multiple structural breaks via a Fourier expansion series.
Our results indicate that seven countries out of ten show firm convergence tendencies at most of the quantiles, and two countries have weak but significant converging trends at some quantiles.
This paper examines the impact of access to electricity on financial development.
In doing so, we use average slope of terrain as an instrument for electrification rate.
Using panel data for 44 countries in Sub-Saharan Africa over the period 2000 to 2018, the results suggest that more people having access to electricity can promote financial development.
In addition, mobile phone and commercial bank branches diffusion serve as potential channels through which access to electricity affects financial development.
Our results are robust to sample-splitting and different estimation techniques.
The results have important implications for policies in overcoming barriers to electricity access.
We examine the house prices convergence across twelve OECD countries over the period 1905-2016.
Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles.
Focusing on several specific quantiles, eleven countries have significant convergence tendencies.
Moreover, there are four definite patterns related to shocks on the relative house prices across quantiles.
This paper examines the causes of falling labour share in OECD and non-OECD countries since the 1980s by using Karabarbounis and Neiman’s (2014) labour share model.
While both groups of countries experience an elasticity of substitution between capital and labour, the factors driving down labour share are different.
In OECD countries, export and volatility are key drivers, but in non-OECD countries, the significant factors are financial openness and the capital’s relative price.
Overall, technological advancement – as reflected by declining capital’s relative price - coupled with globalisation and low economic risk are key factors in explaining a long-term decline of labour share world- wide.
This paper investigates the portfolio diversification possibilities between BRICS and the US stock market.
Using bootstrap full-sample Granger causality and bootstrap rolling-window sub-sample Granger causality tests, we did not find evidence supporting the causal linkage between BRICS and the US stock markets; time-varying causality was observed for particular sub-samples.
Our findings imply that BRICS stock markets can provide diversification possibilities for US investors most of the time; however, such opportunities become extremely limited during crisis periods.
We also find that stock markets are more likely to be causally linked if they have similar business conditions, excess returns and size premiums.
The COVID-19 pandemic has inflicted significant damage to the world economy, and the tourism and leisure industry is no exception.
This paper investigates the effect of COVID-19 pandemic, vaccine rollouts and government policy responses on Australia's tourism and leisure industry.
To do so, we use data on stock market performances of the travel and leisure industry as key indicators.
Our findings show that while vaccine rollouts help for a partial recovery of the travel and leisure industry, full and speedy recovery remains a challenge under stringent policies related to COVID-19 safety suggesting the enormous magnitude of the task ahead in terms of policy responses.
Using annual data from 1971 to 2014, we examine stochastic conditional convergence in per capita energy consumption for 26 low income, lower middle-income and upper-middle-income African countries.
To do so, we use panel unit root tests that allow for cross-sectional dependence and structural breaks as well as the recently developed univariate Residual Augmented Least Squares-Lagrange multiplier (RALS-LM) unit root test with structural breaks.
Although for most countries our evidence suggests stochastic conditional convergence, we find divergence for four countries including DR Congo, Senegal, Egypt and Botswana.
Consistent with the neoclassical growth models we also examine the catch-up rate between energy consumption levels of African economies and that one of China and investigate its convergence properties.
As African economies continue to grow, regional energy consumption disparity narrows, African energy consumption levels will catch up to the ones in China.
This article presents findings from the first study to examine the direct effects of financial development on tourism.
Using a unique historical dataset for Germany covering 1870 to 2016, we apply an autoregressive distributional lag (ARDL) model with structural breaks.
To identify the lead–lag relationship between financial development and tourism, we adopt the wavelet coherence method and the most recently developed Shi et al. (2020) time-varying causality test.
The ARDL results suggest that, on average, financial development is associated with an increase in tourist arrivals.
The wavelet coherence results unveil a significant positive correlation between financial development and tourism in both short- and medium-terms, and financial development leads to tourism growth in Germany.
Moreover, the causality results indicate that the positive effect of financial development on tourism is most evident from 2009 onward.
Our study provides important implications for policymakers.
Working Papers
Exchange rate flexibility and firms' employment
with Silvio Contessi, Qingyuan Du, Deting Gao and Shenxiang Xie, under review.
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This paper examines how exchange rate flexibility impacts the allocation of labor across firms.
Specifically, we investigate how labor-intensity or capital-intensity in production affects employment decisions under various exchange rate flexibilities.
In a simple theoretical model, we show that firms utilizing more labor-intensive production technologies are more likely to expand their employment when the exchange rate becomes less flexible.
In contrast, firms employing more capital-intensive technology tend to hire more workers when the exchange rate is more flexible.
We test our theory using extensive firm-level data from China and provide robust evidence supporting the theoretical predictions.
The dollarisation paradox in Cambodia: network externalities matter
with Veasna Kheng and Justin Mckinley, under review.
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The increase in dollarisation in Cambodia has been contrary to the general belief that macroeconomic and political stability help reduce dollarisation.
We provide so far the first explanation for this counterfactual phenomenon.
In doing so, this paper develops a cash-in-advance model by including a dollar pricing index to amplify the network effects of using a foreign currency (denoted dollar).
The dollar pricing index, a proportion of an economy denominated by the dollar, reduces the dollar’s transaction cost, thus increasing its usage in the economy.
This increased use of the dollar further improves the experience of using it, hence results in higher usage of dollar in the price quotation.
The positive interaction of using the dollar as a unit of account and a means of payment causes dollarisation continues to rise, even though the economy has achieved low inflation and political stability.
The role of remittances and FDI for the current account: the case of Cambodia
with Veasna Kheng and Xiaodong Fan, Journal of Money, Credit and Banking, revise and resubmit.
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This paper develops a small open economy real-business cycle model to examine the dynamics of Cambodian current account.
Differing from previous studies, our model incorporates both net foreign direct investment (FDI) and remittances as additional sources of macroeconomic fluctuations.
Our results reveal that these two factors, especially FDI, account for more than 50% of the variations in the current account.
Additionally, the model mimics well the actual trajectory of the Cambodia's current account, suggesting that the nature of the discount factor - whether endogenous or exogenous - does not play a crucial role in explaining the external balances.
Institutions, exchange rate flexibility and firm employment
with Qingyuan Du, Rong Hu, Yanhui Huang and Meihua Wang, under review.
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In this paper, we investigate the effect of exchange rate regime choices on firm employment under varying degrees of institutional quality.
Our theoretical analysis shows that firms tend to hire more workers under a flexible exchange rate regime when institutional quality is relatively low.
Conversely, as institutional quality improves, firms may increase employment when the exchange rate is more stable.
To test our theoretical predictions, we construct an industry-level exchange rate flexibility index and examine how its flexibility influences Chinese firms' employment across different levels of institutional quality.
Our empirical results strongly support the theoretical predictions.
US sneezing and Australian colds: economic spillovers in both conventional and unconventional monetary policy times
with Richard Adjei Dwumfour and Mark N. Harris, under review.
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We provide evidence of international spillover of US monetary policy considering three transmission channels.
In a new framework, we first use a comprehensive dynamic time and frequency domain analysis and identify the main transmission channel (spillover) of US monetary policy to be through interest rates followed by asset prices, and the exchange rate channels respectively.
We find that the most significant spillover was at the onset of the COVID-19 pandemic, with other peak transmissions being during the European sovereign debt crisis (ESDC) and the global financial crisis (GFC).
As a novel contribution, we show that these spillovers can be used as external instruments to remove the prize puzzle for Australia.
We further show that US monetary policy could undermine the domestic monetary policy of Australia.
Our findings suggest international interest rate-channel as a dominant transmission channel for cross-country monetary policy spillovers.
SSRN's Top Ten download list (Oct-2023)
Best Paper Award - Highly commended, Curtin University, 2022
Presented at: The Bank of France (Paris); International Conference on Empirical Economics (Pennsylvania State University at Altoona, USA); Doctoral Students and Early Career Researchers (DSECR) Colloquium (Curtin University, Perth); Curtin University research seminar series; Xi'an Jiaotong-Liverpool University research seminar series; University of Ghana (Finance Research Lab) research seminar series
What doesn't kill you will always make you risk loving? CEO multiple crisis imprints and firm cash holdings
with Wenjun Liu, June Cao, Cong Deng and Zijie Huang, under review.
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Rather than focus on early-life natural disasters (Bernile et al., 2017), this study investigates how multiple pandemic imprints throughout a CEO's career affect their behaviours.
Drawing on imprinting theory, we provide robust evidence that companies led by CEOs who experience SARS tend to have lower cash holdings.
However, the imprinting effects become insignificant when CEOs experience more severe and multiple pandemics (i.e., SARS and COVID-19).
We document a nonmonotonic relationship between the severity and intensity of CEOs' pandemic imprints throughout their careers and their propensity for adopting agressive financial strategies.
Our study extends Bernile et al. (2017) and enriches the literature on CEO imprints by investigating the impact of multiple pandemic experiences at the CEO's career stage rather than early-life on their behaviours.
The green rivalry threat: emission trading scheme and spillover
with Zijie Huang and June Cao, under review.
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We examine whether and how firms subject to stringent environmental regulation have a peer effect on unconstrained firms’ green innovations.
Using a generalized difference-in-differences model, we find that unconstrained firms significantly increase their green innovations in response to the heightened green innovations of constrained firms after China’s Emission Trading Scheme (ETS) pilot.
We document the competitive threat as the underlying mechanism, consistent with the rivalry-based theory.
Our heterogeneity analyses show that peer effects are more pronounced among non-ETS firms characterized by leader status, high public scrutiny, higher financial constraints, more institutional investors, and under-investment.
We further find that these peer effects significantly increase non-ETS firms’ economic performance and green revenues.
Our research offers valuable insights and ex-ante evidence for policymakers and practitioners to further develop decarbonization regulation.
Presented at: The Annual Conference of the British Accounting Review (Harvard Faculty Club); The Global Conference of the British Accounting Review (Cape Town, South Africa); The AFAANZ Annual Conference (Auckland, New Zealand; Outstanding Reviewer Award); Curtin University research seminar series
A $75 billion dollar question: do African countries suffer a systematic sovereign credit ratings bias?
with Elikplimi Kolma Agbloyor, Richard Adjei Dwumfour and Dennis Nsafoah, under review.
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Using data for 132 countries from 2000 to 2023, we investigate whether there is a systematic ratings bias against African countries based on the ratings provided by the major credit ratings agencies using machine learning techniques.
This is not a trivial question as estimates of the costs of this potential subjectivity are in excess of $75 billion.
Following the COVID-19 pandemic and Russia-Ukraine war, African countries argued that the major credit ratings were very quick to downgrade them.
Our empirical analysis offers some credence to the arguments of African countries.
We find that during this period, African countries received more adverse ratings compared to other countries.
Further, the ratings of African countries were less stable as more non-African countries did not experience changes in their ratings.
Indeed, our findings show that the difference or gap in the credit ratings of African countries compared to non-African countries widended after 2015.
The results from our machine learning predictions in the full sample, we do not find evidence of a credit ratings bias against African countries as the African dummy does not rank as a top predictor of credit ratings.
However, after controlling for sample selection bias, we find strong evidence of a credit ratings bias against African countries.
The African dummy increased in importance and was now the number 3 predictor of credit ratings.
The African dummy ranked ahead of many important economic, social, political and institutional variables as a predictor of credit ratings.
Presented at: University of Ghana inter-college lecture series
How did financial markets react to the COVID-19 vaccine rollout? Fresh evidence from Australia
with Takashi Matsuki, under review.
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We provide the first study on how COVID-19 vaccine rollout affects Australian financial markets.
To examine the heterogeneous and asymmetric effects of vaccination rate on financial markets, we adopt the quantile-on-quantile regression (QQR).
We also use the novel quantile copula coherency developed by Baruník and Kley (2019) to detect longer (e.g. monthly or yearly) reactions of financial markets or distinguish the mixed market reactions to short- and long-persistent impacts from vaccine rollout.
We find that relative short-term impacts of lagged vaccination rates on quantiles of the returns of the ASX200 stock price and foreign exchange (FX) are stable against fluctuations of the Dow Jones stock price index or FX return at various quantiles.
Therefore, the vaccination policy implemented in Australia homogeneously affects financial markets at quantiles.
Moreover, our study properly detects short- and long-lived significant reactions of the stock price index and FX returns to the vaccine rate variation.
Foreign direct investment and development and the role of research and development
with Richard Adjei Dwumfour and Mark N. Harris, under review.
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Using a sample of 130 countries over the period 2004-2019, we revisit the development impact of foreign direct investment (FDI), but novelly examine the role of research and development (R&D) within this framework.
To allow us to make causality statement, we use bilateral investment treaties (BITs) as an innovative instrument for FDI in the development equations.
We find that, compared to FDI, expenditure on R&D has a more pronounced impact on development outcomes - through increasing growth and human development while reducing poverty and inequality.
We also find that countries that spend more on R&D are less dependent on FDI for development.
This suggests that R&D and FDI are substitutes in the development process with the results showing varying FDI and R&D thresholds at which the substitution takes place.
We however, find a diminishing effect of FDI on development.
Further to this, we find that R&D complements FDI only when FDI reaches a threshold level, and then begins to hurt development - at this stage there is sufficient R&D expenditure which possibly suggest sufficient adaptive capacity.
Carbon emissions and banking stability
with Elikplimi Kolma Agbloyor, under review.
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This paper examines the impact of per capita CO2 emissions on banking stability in emerging markets and developing economies (EMDE).
To identify the causal effect of carbon emissions on the stability of banking system, we use plausibly exogenous source of variations in energy use as an instrumental variable (IV) for CO2 emissions.
Our results show an inverted U-shaped relationship between per capita CO2 emissions and banking stability.
We also find that industrialization can be a potential channel through which per capita CO2 emissions affect banking stability.
Our results are robust to alternative specifications, sample-splitting and have important implications for policy on banking stability.