Piyadasa Edirisuriya

Regional Trade and Economic Integration: Analytical Insights and Policy Options

The Asia-Pacific region has emerged as a dominant player in trade and will continue to be an influential pole of world trade and economics, with the center of gravity shifting to this region. This book presents analytical insights into the various regional and bilateral trade agreements (RTAs) and their beneficial effects on bilateral trade and development. It provides an incisive analysis and a roundup of all major RTAs and also presents an overview of all major agreements between the countries involved, which might propel their trade flows and influence future economic engagements. The book in a novel way also discusses possible obstacles that are encountered during the implementation of RTAs and circumvention routes, once those taken into account could ensure the successful execution of the agreements. The book dwells on the issue of regionalism and multilateralism with reference to General Agreements on Trade and Tariffs and World Trade Organisation, which have revolutionized the trade dynamics by opening up new areas of trade-rules and formulating specific policy guidelines for the member countries to adhere to during trade negotiations. The book also provides new insights into some of the issues of negotiations such as sensitive lists, trade and investment cooperation, including trade in services, rules of origin, non-tariff barriers, anti-dumping etc. The book also focuses on policy instruments that could convert trade gains to development gains. The existing economic cooperation arrangements in the region as well as those that are at various stages of study and negotiations, empirical insights and policy suggestions are elucidated in detail.

A decision model to predict profitability using revised Thompson–Thrall profit ratios in DEA with an application to South Asian banks

Many researchers in the past have addressed the issue of profitability of banks from different perspectives using financial ratios and decision models. Thompson et al. (1995) introduced linked-cone (LC) profit ratios with assurance regions (AR) in data envelopment analysis. In this paper, we revise LC–AR and show a contrast between Thompson–Thrall’s and revised profit ratios. We propose a decision model to classify banks as profit-makers, loss-makers or neither, when ‘market prices’ that form AR are not available and hence LC–AR profit ratios do not exist. We demonstrate how this method works for a set of South Asian banks.

Product diversification and bank risk: evidence from South Asian banking institutions

ABSTRACT We investigate whether the product diversification activities of South Asian banking institutions have led to an increase or decrease in their solvency and profit risks. Using the data of five countries – India, Bangladesh, Nepal, Pakistan and Sri Lanka – for the period 2000–2016, we analyse the effect of both income and assets diversification activities on the Z-score and SDs of ROA (Return on Assets) and ROE Return on Equity). Among income diversification activities, securities trading income has a significant positive influence on bank risk while other categories have no influence. With respect to assets diversification, non-interest-bearing assets and loans given to government were found to have a significant positive influence on bank risk, while mortgage loans and non-classified loans have opposite influences. However, the impacts of securities trading income and loans given to the government are mainly confined to private sector banks and state-owned banks, respectively. We also uncover some country-specific diversification influences on the above relationships.

Financial deepening and corruption in selected Southeast Asian countries: A comparison with South Asia

Since the 1980s, Southeast Asian countries have deregulated their financial market sector. Numerous studies on financial market deregulation and corruption levels have argued about positive and negative links between corruption and financial deregulation in many countries. These conflicting results have motivated us to examine the impact of financial market deregulation, which leads to financial deepening, on corruption in Southeast Asian countries. We employ panel data analysis to explore whether financial deepening has a positive impact on corruption levels. Using data for 17 years, we empirically tested the relationship between financial deepening and corruption levels and found a significantly negative relationship between these two factors. When comparing our results with the South Asian region where the level of corruption is higher, we do not find any significant differences.

Stock Market's Assessment of Bank Diversification: Evidence from Listed Public Banks in South Asian Countries

Using data for four South Asian countries over a twelve-year period, we examine how the stock markets in these recently liberalised economies assess diversification attempts of listed public banks. We find that the income diversification has a significant positive association with market to book value and a significant negative association with return volatility. However, the relationship observed between diversification and markets’ assessment of value and risk is non-linear. Relative to listed banks operating in India, the relationship observed remains less pronounced for the banks operating in Bangladesh, Pakistan and Sri Lanka.

Financial deregulation, trade and co-movements among the GDP growth rates: Evidence from south asian countries

Since the 1980s, South Asian countries have been implementing financial market deregulation policies continuously. Although the process of deregulations has been slow, many countries in the region are heading toward a more integrated market despite current global turmoil. Financial market integration in South Asia could have synchronised economic activities of the countries in the region due to the impact of consolidation. This suggests that when the regions economies grow/contract, all countries could follow the same path or co-movement of growth rates is possible. When economic growth rates are similar for a region, it may be easier to formulate economic policies to achieve a common goal. As the political leadership of South Asia has agreed to work towards forming an economic block similar to that of the European Union and ASIAN, examining co-movement of growth rates could shed more lights on the issue of the success of market integration in the region. The objective of this study is to study market integration by analysing financial markets, trade and economic growth data to spot whether there is any co-movement of growth rates among South Asian countries due to financial market deregulation policies implemented so far. Findings show mix results.