Narrow Results

This paper studies a Stackelberg game among the downstream firms in a vertical industry where one-way R&D spillovers occur, from the leader to the follower. When the upstream market is perfectly competitive under certain conditions the standard first-mover advantages disappear. When we move to the upstream monopolistic case we find that despite the existence of spillovers in most of the cases, the leader gets higher profits and thus first-mover advantages are reinstated due to the price setting behavior of the upstream firm. It therefore challenges to some extent the “naive” idea that under one-way spillovers there are no incentives for early movers.

This paper explores the return connectedness among energy and financial markets in China and the US pre and during the COVID-19 pandemic. We find that the spillovers during COVID-19 were obviously higher than normal period, and before COVID-19, the total spillover effects of Chinese markets are larger than that of the US, while during the COVID-19, the situation is just the opposite. Second, before COVID-19, crude oil, fuel oil, gold, and silver are the main net contributors, gasoline, natural gas, platinum, equities, and exchange rate are the main receivers. However, in the context of the COVID-19 pandemic, the roles of crude oil, gold, gasoline, and platinum as net contributors or net recipients experienced a reversal. Third, during the COVID-19, in the US, the strongest net contributor shifts from gold to fuel oil. In China, silver always be the strongest net contributor. The above findings suggest that policymakers are advised to promptly adjust regulatory policies, and investors should adopt a discerning approach to asset allocation.

The present study investigates the causality-in-variance between macroeconomic variables and the stock market in Singapore from November 1990 to March 2013. This study utilizes the [Sanso, A, V Arago and JL Carrion (2004). Testing for change in the unconditional variance of financial time series. Revista de Economia Financiera, 4, 32–53.] test to detect the structural break in variance; a generalized autoregressive conditional heteroskedasticity (GARCH) process to model volatility; and the cross correlation function (CCF) causality method. The results demonstrate that the most important macroeconomic causes of stock market volatility in Singapore is exchange rate volatility. The findings provide preliminary insights on risk elements for policy makers monitoring the stability of financial markets by providing insights about volatility spillovers and risk transmission between the stock market and macroeconomic variables in Singapore.

This study investigates dynamic interconnectedness, spillover transmissions and risk contagion through the lens of intraday and overnight returns to ascertain whether intraday and overnight trading information (returns) have idiosyncratic effects on risk behavior of financial markets. The study employs the generalized VAR-based spillover measure, graph theory and Bayesian causality network (BN) models. Our results reveal that spillover propagation from the US market is mainly through the intraday return series to Asian markets, whereas the overnight series is mainly a recipient of spillovers. Furthermore, in terms of risk contagion, the result identifies the most systemically central financial markets (SCFMs) as Singapore, Hong Kong, Korea and Taiwan. In particular, the findings demonstrate that while Singapore maintains the role as the most systemically central markets in large part, other markets occasionally took the leading role as most central markets. Overall, the findings provide important practical implications for market regulators and investors to monitor the channels of trading information and the performance of SCFMs for better risk management and strategic investment decisions.

In this paper, we empirically examine the interdependency of uncertainties among ASEAN +3 countries as well as between these countries and the G6 countries. We collect the uncertainty data from the new World Uncertainty Index (WUI) database. The WUI captures uncertainty related to economic and political events in a country. We show that ASEAN + 3 countries as a group are weakly interdependent, in terms of the long-run relationships of uncertainties within the group. We demonstrate that, in the absence of outside influence, i.e., uncertainty shocks emanating from the G6, the $+3$ and ASEAN countries are two independent group of countries with the former having its own dynamics and the latter neither affecting nor being affected by the former. We further demonstrate that outside influence strongly affects China but not the other $+3$ and ASEAN countries. These findings survive robustness checks and suggest that the ASEAN + 3, as a region, may provide long-term diversification benefits to global investors and that the strengthening of the ASEAN + 3 regional cooperation framework may further buttress confidence in this region.

This study analyzes the dynamic connectedness (i.e., spillovers and spillbacks) of financial stress across advanced and emerging economies. As proxy for financial stress, we reconstruct the financial stress index (FSI) for 16 advanced economies and 15 emerging economies from January 1997 to August 2020. The constructed FSIs reflect combined stress level in banking sectors, equity markets, capital markets and exchange rate markets. Using frameworks proposed by Diebold and Yilmaz (Better to give than to receive: Predictive directional measurement of volatility spillovers. International Journal of Forecasting, 28(1), 57–66) and Baruník and Křehlík (Measuring the frequency dynamics of financial connectedness and systemic risk. Journal of Financial Econometrics, 16(2), 271–296), we find that there is strong connectedness of financial stress across economies. Moreover, the connectedness of the financial stress is stronger after the global financial crisis and during the COVID-19 pandemic. Although the spillover of shocks is strongest in the short-term horizon, the spillovers in the longer-term horizons are not trivial. Our results also show that the US is the largest shock transmitter as well as one of the largest shock receivers. Our results also suggest that shocks originating in advanced economies have strong effects on other economies, but shocks originating in emerging economies also play an increasing role. Global factors such as global economic policy uncertainty and geopolitical risks influence the magnitude of the spillover of financial stress.

Simultaneous volatility models are developed and shown to be separate from multivariate GARCH estimators. An example is provided that allows for simultaneous and unidirectional volatility and volume of trade effects. These effects are tested using intraday data from the Australian cash index and index futures markets. Overnight volatility spillover effects from the United States S&P500 index futures markets are tested using alternative estimates of this US market volatility. The simultaneous volatility model proves to be robust to alternative specifications of returns equations and to misspecification of the direction of volatility causality.

In this paper a repeated game is proposed to model competition among firms, with profit maximizing resource allocation. The proposed model differs from the usual competition models because efforts that players exert are not seen as sunk costs, but they accumulate to form a stock of knowledge that has a cost-reducing effect. In modelling knowledge accumulation, we also consider the (knowledge) spillovers, that is, involuntary leakage of useful technological information. The game with n boundedly rational agents is modelled by a 2n-dimensional discrete dynamical system, whose state variables are the R&D efforts and the stock of accumulated knowledge of each firm involved in the competition. The model is characterized by some counteracting forces: Efforts are costly but can increase future profits; immediate expenditures of each firm can have cost-reducing effects in the long run, since accumulated knowledge can decrease both own costs and competitors' ones, because of spillover effects. In the case of two homogeneous firms we prove the existence of a unique equilibrium and its stability. Starting from these analytic results, numerical simulations are performed in order to study the effects induced by heterogeneities between the players on stability and transient dynamics, as well as the influence of the main parameters on the basins of attraction.

We consider a dynamic oligopoly where firms invest to increase product differentiation and an externality effect operates in the R&D activity. We compare the steady state solutions under alternative decision rules, namely, the open-loop and the closed-loop Nash equilibrium. Significant differences emerge, concerning the effect of the number of firms upon the optimal degree of product differentiation. We also compare the private optima with the social optimum, and derive implications concerning the social desirability of different decision rules.

Oil economies in the Former Soviet Union (FSU) region, with geographical proximity to each other, are usually impacted by some common risk factors, which make their country risks closely correlated. This paper focuses on correlation between country risks and investigates the spillovers of country risk returns (CRR). Taking Russia and Kazakhstan for example, firstly, this paper identifies the structural breaks in CRR series, using iterated cumulative sums of squares (ICSS) algorithm. Secondly, on the assumption that there may be similarity in structural breaks of CRR series of the two countries, Vector Autoregression (VAR) process and Granger causality test are used to identify whether there are mean spillovers of CRR series. Finally, the volatility spillovers are captured by using multivariate conditional volatility models in the framework of the BEKK models. Empirical results show that (1) there are significant unidirectional mean spillovers from Russia to Kazakhstan; (2) there are asymmetric bidirectional volatility spillovers between Russia and Kazakhstan; and volatility spillover effects from Russia to Kazakhstan are stronger.

In this paper, we analyse the relationship between Research and Development (R&D) spillovers and productivity. To this aim, we develop a non-overlapping generation model to evidence the theoretical idea of the spillovers between firms and then we implement an empirical investigation based on data from 9th and 10th Survey on Italian Manufacturing Firms (IMM) conducted by Capitalia to test for this idea. The results provide evidence of higher productivity in R&D and skill intensive industries and this can be interpreted as the signal of the relevance of spillover effects. Indeed, in-house R&D does not capture all aspects of innovation, which often occurs via other channels, especially in SMEs. Small and medium firms, such as Italian firms, are much more able to innovate by exploiting knowledge created outside of them. Thus, the results of our paper suggest that R&D spillovers reinforce in-house R&D in affecting SMEs productivity. Moreover, the contribution of this paper is also to stress the importance of skill composition of the labour force in the innovation process of firms.

The world has experienced episodes of global financial stress every 2.5 years on average over the past two decades, with repercussions on a global scale. Over the same period, emerging economies have improved their macroeconomic fundamentals while becoming increasingly integrated with the world. Against this backdrop, are these economies more or less vulnerable to large global financial shocks? What roles have macroeconomic fundamentals and financial integration played in amplifying or buffering the impact of these shocks? This paper addresses these questions by examining the output cost associated with these events in 40 emerging and nine "small" advanced economies during the period 1990–2010.

Asia and China made disproportionate contributions to the slowdown of global trade growth in 2015. China’s import growth slowed starkly, driven by both external and domestic factors, including a rebalancing of demand. Econometric results point to weak investment and rebalancing as the main causes of the import slowdown. Spillover effects from China’s rebalancing are estimated for some 60 countries using value-added trade data, and are found to be more negative on Asia and commodity exporters than others.

The People's Republic of China (PRC) is currently promoting indigenous technology development through support of Chinese firms and, arguably, by restricting operations of foreign multinational firms. This policy seems to overlook the impact of foreign firms on technology development in local firms. For instance, technology might leak out to local firms though spillovers. Moreover, competition from foreign firms might force local firms to engage in technology development. We examine the impact of foreign direct investment (FDI) on technology development in the PRC. We start by surveying a large and growing literature on FDI and spillovers in the country. Most previous studies find evidence of positive spillovers. We then continue to examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ research and development (R&D). Our analysis is conducted on a large dataset including all large- and medium-sized Chinese firms over the period 1998–2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D.

Using panel data from the Chinese Industrial Surveys of Medium-sized and Large Firms for 2000–2006, we show that the presence and the magnitude of technological spillovers from FDI in the People's Republic of China are affected by the source of FDI, by the ownership type of a firm in consideration, as well as by industrial and provincial characteristics. Private firms are more likely to benefit from horizontal spillovers than other domestic firms, but are less likely to benefit from vertical ones. Presence of state-owned firms in the industry impedes technological spillovers in a way that is consistent with diversion of linkages from private to state-owned firms. Finally, horizontal spillovers are larger in industries that are more technologically sophisticated.

This paper examines the differential effects, based on the size of the plant, of industry-level foreign direct investment (FDI) on plant-level employment and the wages of skilled and unskilled workers in India's manufacturing sector. On average, there are strong positive differential effects of increased inward-level FDI for large plants relative to small and average-sized plants in terms of employment and the average wages of both skilled and unskilled workers. Small plants experience negative effects from inward FDI, which can be explained by intra-industry reallocation of output from smaller to larger plants. After conducting a regional analysis, I find positive spillovers to small plants in Indian states that receive large and persistent flows of FDI. This suggests that a critical mass of FDI is necessary for small plants to experience positive spillover effects.

This paper explores the role of imports as a mechanism of transmission of international technology spillovers and its significance for the growth of the OECD countries. For this purpose we estimate a version of the growth model proposed by Benhabib and Spiegel (1994), which includes two main modifications in order to better specify the nature of international knowledge diffusion. The first is the inclusion of the R&D capital stock into this framework. The second consist of using a direct measurement of international technology spillovers instead of using per capita GDP gap in respect to the leader country as approach to it. Our results reveal that international technology spillovers transmitted through imports have had a favourable influence on the economic growth of the OECD countries. However, they show the predominant role of the domestic human and R&D capital endowments in economic growth.

This paper constructs a model of endogenous growth and endogenous industry location where the two interact. We show that with global spillovers in R&D, a high growth rate and a high level of transaction costs are associated with foreign direct investment to the South (the location with a low initial wealth). With local spillovers in R&D, this activity is agglomerated in the North and the rate of innovation increases with the concentration of firms in the North. This in turn implies that a decrease of transaction costs, through its impact on economic geography, will increase the growth rate. We show that industrial concentration can be beneficial for both regions if its impact on the rate of innovation is large enough to compensate the South for the loss of industry. This will be the case only for low enough transaction costs and high enough spillovers.

This paper examines how industrial policy – specifically tariff liberalization and tax subsidies – affects the magnitude and direction of FDI spillovers. We examine these spillover effects across the diverse ownership structure of China’s manufacturing sector for 1998 through 2007. We find that tariff reforms, particularly tariff reductions associated with China’s WTO ascension, increased the productivity impacts of FDI’s backward spillovers. Tax policy – both corporate income and VAT subsidies – has seemingly drawn FDI into strategic industries that spawn significant vertical spillovers. We conclude that liberalization measures during the critical 1998–2007 period on balance served to enhance productivity growth in Chinese industry.

While there is a large empirical literature on productivity spillovers from multinationals, this literature treats the channels through which these spillover effects work as a black box. The new approach in this paper is to investigate whether spillovers occur via worker mobility. We use data on whether or not the owner of a domestic firm has previous experience in a multinational, and relate this information to firm-level productivity. Our results suggest that firms which are run by owners who worked for multinationals in the same industry immediately prior to opening up their own firm are more productive than other domestic firms.