Hong-Ghi Min

Dynamic correlation analysis of US financial crisis and contagion: evidence from four OECD countries

By analysing the Dynamic Conditional Correlations (DCC) of the daily stock returns of four OECD countries with that of the US for the period 2006–2010, we could find a process of increasing correlations (contagion) in the first phase of the US financial crisis and an additional increase of correlations (herding) during the second phase of the US financial crisis for the UK, Australia and Switzerland. However, the impact of the US financial crisis on Japan was limited to the increase in correlation volatilities in the first phase. We also propose a new approach (DCC Multivariate Generalized Autoregressive Conditional Heteroscedastic model with Exogenous variables (DCCX-MGARCH)) that allows simultaneous estimation of the DCC and their determinants, which can be used to identify channels of contagion. It is shown that an increase in VIX stock market index increases conditional correlations but an increase in the TED spread and relative stock market capitalization decrease conditional correlations of stock returns between four OECD countries and the US.

The influence of financial development on R&D activity: Cross-country evidence

The financial environment affects the level of R&D activity of a country. Using the proxy measures of macroeconomic financial environment variables, we show that cross-country differences in R&D activity, including expenditures, researchers, and patents etc., are correlated with the stock market turnover ratio. In particular, we found that the relationship was in direct relation to R&D expenditures or the number of researchers but indirect in relation to R&D outputs such as patents. These results imply that finance structure of an economy could enhance R&D activity through providing efficient resource allocation function. Other proxy measures of the financial environment such as banking sector size or stock market capitalization are not found to be significant. The size of the finance industry does not seem to change the national portfolio toward more high-risk innovative sectors. Financial quality, not size, determines the level of R&D intensity.

Export Similarity, FDI and Yen-Synchronization of East Asian Currencies: Regime Switching Regression Model and Microstructural Analysis

Using a regime-switching regression model, we provide evidence of the synchronization of East Asian (Korea, Thailand, the Philippines, Indonesia, and Taiwan) currencies-dollar exchange rates with yen dollar exchange rates and report that the export similarity index and FDI between Japan and this group of countries are two main determinants of yen synchronization in the region. Our estimation results are robust with different econometric techniques.We also investigate the microstructural characteristics of yen synchronization and show that the synchronization period persists once it has begun and the volatility of dollar exchange rates is higher during synchronization than during de-synchronization. Finally, we conclude that those findings support the idea of a so-called “yen bloc”. However, as opposed to traditional arguments, we show that yen synchronization is driven not by increased exports and imports in this area but by increased export similarity in the region and FDI between Japan and East/Southeast Asian countries