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ID: 167889

Impact of the US Interest Rate Hike on Emerging Market Economies and the Belt and Road Initiative / Wu, Shuyu

Wu, Shuyu	Journal Article
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Summary/Abstract

Since the end of 2015, the US Federal Reserve has raised its benchmark interest rate nine times. This has led to capital outflows and asset depreciation in many emerging market economies. The present paper examines the factors that determine the financial volatility of emerging markets in the face of external shocks. By calculating the capital flows of 30 emerging markets from 1990 to 2018 and conducting panel regression, this paper finds that countries with good infrastructure facilities, a sound banking system and high economic growth have significantly lower cross‐border financial risks. An implication from the empirical analysis is that emerging countries would benefit greatly by actively taking part in the Belt and Road Initiative. The framework of the Belt and Road Initiative allows emerging countries better access to China's massive consumer market to promote trade and long‐term growth. Their quality of infrastructure can be improved through cooperation with China in infrastructure investment. They can also jointly establish a cooperative financial framework to enhance regional financial stability. These strategies will reduce systematic financial risks and counteract the negative impacts of US interest rate hikes.

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US Interest ; Emerging Market Economies ; Belt and Road Initiative

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ID: 142018

Stock market efficiency in developing economies / Mukherji, Ronit

Mukherji, Ronit	Article
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This article analyses the degree of stock market efficiency in three emerging economies— India, China and Brazil. It tests to see if US stock returns have an influence on endogenous stock returns, even after controlling for domestic macroeconomic variables. A country-specific vector auto-regression model is used to test the short-run effects and the fully modified ordinary least square procedure has been used to find the long-run relationship, thus checking for degree of efficiency in these stock markets. The results indicate that, despite controlling for key domestic stock return determinants, US stock returns have a significant positive relationship with the stock returns of all three countries.

Key Words

Panel Cointegration ; Emerging Market Economies ; Vector Auto-regression ; Fully Modified Ordinary ; Least Square (FMOLS) ; Dynamic Ordinary Least Square (DOLS)

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