Asian Economic and Financial Review

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Government Deficits and Corporate Liquidity

Pages: 59-75
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Government Deficits and Corporate Liquidity

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Naiwei Chen , Siting Yo

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(2012). Government Deficits and Corporate Liquidity. Asian Economic and Financial Review, 2(1): 59-75. DOI:

This study examines the relationship between government deficit and corporate liquidity (cash holdings). Using data of nonfinancial firms in Taiwan from 1981 to 2009, this study finds that corporate liquidity is lower when government deficit is higher. In addition, corporate liquidity is related with other macroeconomic conditions, such as inflation, short-term interest rate, and economic growth. More precisely, results indicate that inflation and interest rates have a negative impact on corporate liquidity that is aggravated when government deficit is higher. Economic growth has a positive impact on corporate liquidity, and such positive impact is weakened when government deficit is higher.


Contribution/ Originality

Variations in Prices due to Anticipated and Unanticipated Money

Pages: 76-87
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Variations in Prices due to Anticipated and Unanticipated Money

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Biswajit Maitra , C. K. Mukhopadhyay

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  1. Ashra, S, Chattopadhyay, S., & Chaudhuri, K., (2004) “Deficit, Money and Price: The Indian Experience” Journal of Policy Modeling, Vol.26, No.3, pp. 289 - 299
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(2012). Variations in Prices due to Anticipated and Unanticipated Money. Asian Economic and Financial Review, 2(1): 76-87. DOI:

The relation between money and price has unique relevance in price stability. Rational expectations theorists hold that both anticipated and unanticipated money supply affect price level. This paper addresses this issue and enquires if anticipated and unanticipated money supplies have any role in the variations in whole sale and consumer prices (WPI & CPI) in India over the period 1992:Q1 to 2010:Q3. It is found that both anticipated and unanticipated money supply shocks cause rise in WPI and CPI inflation and justifying the rational expectations proposition. Price level, therefore, can be stabilized through appropriate monetary management.


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Modelling Non-Interest Income at Tunisian Banks

Pages: 88-99
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Modelling Non-Interest Income at Tunisian Banks

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Abdelaziz HAKIMI , Helmi HAMDI , Mouldi DJELASSI

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(2012). Modelling Non-Interest Income at Tunisian Banks. Asian Economic and Financial Review, 2(1): 88-99. DOI:

The aim of this paper is to analyze the determinants of the non-interest income for the Tunisian context by the use of data of 10 Tunisian deposit banks. Our sample is observed during the period 1998-2009. Using panel data estimation; our findings reveal that the information and communication technologies adoption and the banking characteristics are the main influential factors shaping the tendency of non-interest income in Tunisia.


Contribution/ Originality

An Empirical Analysis of the Excessive Volatility-Overconfidence Relationship: Evidence from the Tunisian Stock Market

Pages: 100-118
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An Empirical Analysis of the Excessive Volatility-Overconfidence Relationship: Evidence from the Tunisian Stock Market

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Bayoudh Feker , Houfi Mohamed Ali , Tissaoui Kais , Zamouri Sana

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(2012). An Empirical Analysis of the Excessive Volatility-Overconfidence Relationship: Evidence from the Tunisian Stock Market. Asian Economic and Financial Review, 2(1): 100-118. DOI:

The purpose of this paper is to provide that the explanation of excessive volatility can be only done through an attentive description of the psychological aspects of the investors. Our interest is carried in particular to the overconfidence bias. Our objective in this study is to identify whether the excessive volatility of observed stocks on the Tunisian Stock Market (TSE) results from the excessive trading of overconfident investors. The analysis of the obtained results, over the period January 1999 – October 2007, indicates quite clearly the importance of considering this bias in analysis of the specificities of Tunisian Stock Market (TSE). It appears that overconfidence admits a more pronounced effect on the volatility for daily time intervals compared to weekly and monthly intervals.The asymmetric nature of the dynamics of return volatility in response to positive and negative shocks is also checked.


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Are Real Devaluations Contractionary? an Empirical Analysis for Pakistan

Pages: 119-134
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Are Real Devaluations Contractionary? an Empirical Analysis for Pakistan

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Naeem Ur Rehman Khattak , Muhammad Tariq

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(2012). Are Real Devaluations Contractionary? an Empirical Analysis for Pakistan. Asian Economic and Financial Review, 2(1): 119-134. DOI:

The failure of Bretton Woods system in 1970s diverted the attention of the researchers and policy makers from the orthodox wisdoms of elasticities, absorptions and Keynesian towards the new structuralist theories of contractionary depreciations. The present study has been carried out to test this contractionary hypothesis of real depreciations for Pakistan in the framework of a three version IS curve approach by using annual data over the period, 1973-2008. The main finding of the study is that real depreciation increases the output gap in Pakistan. The results also show that movement towards a more flexible exchange rate regimes also raises the output gap.


Contribution/ Originality

Microfinance and Poverty Reduction in Ghana. The Case of Central Region of Ghana

Pages: 135-141
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Microfinance and Poverty Reduction in Ghana. The Case of Central Region of Ghana

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Alex Addae- Korankye

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(2012). Microfinance and Poverty Reduction in Ghana. The Case of Central Region of Ghana. Asian Economic and Financial Review, 2(1): 135-141. DOI:

The study evaluated Microfinance as a tool for poverty reduction in Ghana using central region as a case study. A survey design involving quantitative, qualitative and participatory methods within the framework of impact assessment techniques was used. Simple random and stratified sampling methods were employed to select five Microfinance Institutions (MFIs) and one hundred microcredit beneficiaries. The study made use of both primary and secondary data. It was found out that though there are challenges microfinance has a positive impact on poverty reduction. Among the recommendations were that microfinance clients should be trained before and after disbursement of the loan; and also they should be effectively monitored. In addition to the above recommendations it was concluded that if the challenges facing the Microfinance sector (eg; inappropriate institutional arrangement, poor regulatory environment etc) are addressed microfinance will be a potent tool for poverty reduction not only in Ghana but all developing countries at large.


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Economic Growth and Income Inequality: Empirical Evidence from North African Countries

Pages: 142-154
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Economic Growth and Income Inequality: Empirical Evidence from North African Countries

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Zouheir ABIDA , Imen Mohamed SGHAIER

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(2012). Economic Growth and Income Inequality: Empirical Evidence from North African Countries. Asian Economic and Financial Review, 2(1): 142-154. DOI:

This paper examines the empirical relationship between economic growth and income inequality for 3 countries of North Africa (Tunisia, Morocco and Egypt) over the period 1970-2004. The results of this paper indicate that the long-run growth elasticity of income inequality is negative and significant implying that keeping other factors constant; more income inequality reduces economic growth. Moreover, this paper finds evidence that more physical and human capital investment and higher openness to trade have statistically significant impact on enhancing economic growth and reducing poverty.


Contribution/ Originality

Mechanisms of the Influence of Human Capital on Economic Growth: A Panel Data Analysis of the Cemac Region

Pages: 625-640
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Mechanisms of the Influence of Human Capital on Economic Growth: A Panel Data Analysis of the Cemac Region

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Ongo Nkoa B. Emmanuel , Vukenkeng Andrew Wujung , Seppo Martin P. Emmanuel

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(2014). Mechanisms of the Influence of Human Capital on Economic Growth: A Panel Data Analysis of the Cemac Region. Asian Economic and Financial Review, 4(5): 625-640. DOI:
This paper examines the mechanisms through which human capital influences economic growth in the CEMAC region. The effect of human capital on economic growth was estimated using Two Stage Least Square (2SLS) multiple regression model for the individual countries and the method of Generalized Least Square for the whole sub region. The results show that secondary education improves human capital development. A good health system strengthens/increases the quality of capital. Knowledge acquired on the job increases the productivity of the workers and the accumulated human capital significantly impacts positively on the economic growth of the CEMAC region.

Contribution/ Originality

Could Zhou Xiaochuan Put Option Save Chinas Capital Market?

Pages: 310-318
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Could Zhou Xiaochuan Put Option Save Chinas Capital Market?

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DOI: 10.18488/journal.aefr/2016.6.6/102.6.310.318

Kai Shi , Li Nie , Yifei Cai , Yuan Wang

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(2016). Could Zhou Xiaochuan Put Option Save Chinas Capital Market?. Asian Economic and Financial Review, 6(6): 310-318. DOI: 10.18488/journal.aefr/2016.6.6/102.6.310.318
This article proposes a new framework to analyze the impact of monetary policy on asset price. Based on the Sign-Restriction Approach proposed by Uhlig (2005) some orthogonal restrictions are imposed to filter out the interferences of money supply shock, easing monetary policy shock and national rescue shock on Zhou Xiaochuan Put Option shock in order to fully explore the effects of reserve requirement ratio (RRR) reduction and interest rate cut (so called ?Double Down?) in China?s financial market system. It shows that Zhou Xiaochuan Put Option has faint but relatively enduring positive effects on share price, causing a slight RMB devaluation and a plunge of SHIBOR rate and treasury yields. Moreover, the impact on short-term financing cost and benefits is significantly larger than that on the long-term. In this rescue operation, Zhou Xiaochuan Put Option plays a certain role, but its effects are less vigorous than expected.

Contribution/ Originality
This study contributes in the existing literature on the nexus between monetary policy and asset price. Based on newly proposed Sign-Restriction Approach, we find faint but relatively enduring positive effects of monetary policy. However, they are less vigorous than expected during the rescue mission.

Analyzing the Effect of Economic Variables on Total Tax Revenues in Iran

Pages: 755-767
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Analyzing the Effect of Economic Variables on Total Tax Revenues in Iran

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Mehdi Basirat , Fatemeh Aboodi , Abdulmajid Ahangari

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(2014). Analyzing the Effect of Economic Variables on Total Tax Revenues in Iran. Asian Economic and Financial Review, 4(6): 755-767. DOI:
As the government’s source of revenue, taxes play a major role in the construction and economic development of a country. Accurate knowledge of factors affecting tax revenues provides the policymakers with a clear horizon for economic planning. This study mainly aimed to examine the effect of economic variables on total tax revenues between 1974 and 2011. Accordingly, the Auto regression Distributed Lag (ARDL) Model was used. Results indicated that exchange rate with 0.71398, import with 0.53781, and the value-added of industry sector with 1.0841 had a positive significant relationship with total tax revenues. Moreover, the value-added of agriculture sector with 1.1801 had a negative significant relationship with total tax revenues.
Contribution/ Originality

The Impact of Macroeconomic Factors on the Herding Behaviour of Investors

Pages: 295-304
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The Impact of Macroeconomic Factors on the Herding Behaviour of Investors

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DOI: 10.18488/journal.aefr/2015.5.2/102.2.295.304

Yen-Hsien Lee , Ting-Huei Liao , Chih-Ming Hsu

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  1. Aydemir, O. and E. Demirhan, 2009. The relationship between stock prices and exchange rates: Evidence from Turkey. International Research Journal of Finance and Economics, 23: 207–215.
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(2015). The Impact of Macroeconomic Factors on the Herding Behaviour of Investors. Asian Economic and Financial Review, 5(2): 295-304. DOI: 10.18488/journal.aefr/2015.5.2/102.2.295.304
This study uses the linear model based on the notion of cross-sectional standard deviation (CSSD) by Christie and Huang (1995) and nonlinear model based on cross-sectional absolute deviation (CSAD) proposed by Chang et al. (2000) to provide evidence for the existence of herding behaviour by investors in Taiwan during the period January 4, 2000 to December 28, 2012. We examine whether returns, volume, volatility, S&P500, volatility index (VX) and financial crisis influence the cross-sectional dispersion of the stock market. Macroeconomics is an important factor for the stock market; thus, this paper further examines how exchange rate and interest rate affect herding effect. We investigate asymmetric herding behaviour under different market conditions. Finally, this paper uses quantile regression to estimate the herding effect. First, we find evidence of herding behaviour based on the CSAD model. Second, the cross-sectional return dispersion in Taiwan exhibits a positive (negative) relationship with the US market and financial crisis (interest rate). Third, we find asymmetric herding behaviour under different conditions for market returns, trading volume, VX and interest rate. Fourth, Taiwan?s investors consistently exhibit herding behaviour in different quantiles during different market conditions.
Contribution/ Originality
This study provides in-depth insights into herding behaviour. The cross-sectional return dispersion exhibits different relationships with macroeconomic factors. The asymmetric herding behaviour under different conditions for market returns, trading volume, VX and interest rate. The investor exhibits asymmetric herding behaviour at various market conditions in different quantile levels.

Threshold Effects in the Relationships of REITs and Other Financial Securities in Developed Countries

Pages: 426-438
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Threshold Effects in the Relationships of REITs and Other Financial Securities in Developed Countries

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DOI: 10.18488/journal.aefr/2015.5.3/102.3.426.438

Hui-Na Lin , Wo-Chiang Lee

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(2015). Threshold Effects in the Relationships of REITs and Other Financial Securities in Developed Countries. Asian Economic and Financial Review, 5(3): 426-438. DOI: 10.18488/journal.aefr/2015.5.3/102.3.426.438
We use a Panel Smooth Transition Regression model (PSTR) to investigate the nonlinear dynamic relationship between financial variables and REITs  of Japan and U.S with 3-month interest rate change as threshold variable. We discuss the relationship between explained variable of REITs return and explanatory variables (10 year bond interest rate, real estate return and stock return) within two regimes. Empirical results show that the transition function is an exponential type with region one, and two regimes. In regime 1, the relationships between REITs return and two explanatory variables (10-year bond interest rate change and real estate return) are significantly positive. The relationship between REITs return and stock return is significantly negative. In regime 2, the relationships between REITs return and two explanatory variables (real estate return and stock return) are significantly positive. REITs act as hedgy against stock market downturn when the magnitude of 3-month interest rate reduces greater than 0.9886%. In the low interest rate change regime, the REITs behave more like fix income and real estate than risky stock. In the high interest rate change regime, REITs behave more like stock and real estate than fix income.
Contribution/ Originality
The study contributes in two ways. The first is to use a Panel Smooth Transition Regression model (PSTR) to investigate the nonlinear dynamic relationship between financial variables (real estate index returns, stock index returns, and ten year bonds) and REITs of Japan and U.S with 3-month interest rate change as threshold variable. The second is to investigate at what level of 3-month interest change will induce REITs markets serve as stock market hedgy under economic shock.

Effects of Exchange Rate Arrangements on Trade Cooperation in BRICS Countries

Pages: 563-578
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Effects of Exchange Rate Arrangements on Trade Cooperation in BRICS Countries

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DOI: 10.18488/journal.aefr/2015.5.3/102.3.563.578

Bita Shaygani , Asghar Abolhasani Hastiani , Farhad Ghaffari , Mahdi Sadeghi shahdani , Mahdi Fadaee

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(2015). Effects of Exchange Rate Arrangements on Trade Cooperation in BRICS Countries. Asian Economic and Financial Review, 5(3): 563-578. DOI: 10.18488/journal.aefr/2015.5.3/102.3.563.578
This paper investigated the effects of imposed exchange rate arrangements on trade volume of BRICS countries. This study examined emerging economies, were consists of Brazil, Russia, India, China, and South Africa during the years 2001-2013 using the generalized gravity model and a two-step generalized method of moments, (GMM). The results indicated that applying different exchange rate arrangements has had significant influence on imports. Pegged (PG) and crawling pegged (CP) exchange rate arrangements had significant and positive effect on trade flow (export). Bilateral imports, improved with imposing managed floating (MF) arrangements. Free-floating (FL) arrangements have been meaningless, and a negative impact on the volume of bilateral trade (exports) between members. In BRICS countries, imposing pegged exchange rate arrangements improved bilateral trade toward export and inversely free-floating arrangements improved bilateral trade toward import.
Contribution/ Originality
This study is one of very few studies which have investigated in the effects of imposed exchange rate arrangements on trade volume of BRICS countries using a generalized method of moments, (GMM). Our empirical evidence support different influence on trade by imposing different exchange rate arrangements.