https://doi.org/10.1002/ise3.70019
Xuanyi Shi, Wenjun Wu, Yifan Chen, Chunyang Wang
Abstract: To explore the real effect of banking globalisation on bank liquidity creation, we investigate plausibly exogenous variations in the expectation of further banking globalisation under the Belt and Road Initiative (BRI), which further opens the gate to foreign investors. Using data from both listed and unlisted commercial banks in China from 2007 to 2022, we obtain the results showing that implementation of the BRI enhances the on-balance sheet liquidity creation of banks with foreign investors. Further analysis shows that the BRI has more significant positive economic effects on state-owned commercial banks and foreign banks. Additionally, banks with foreign ownership that are small, unlisted, or located in eastern coastal regions create more liquidity since the implementation of the BRI. Our findings indicate that deepening banking globalisation plays an outstanding role in China's banking industry.
https://doi.org/10.1002/ise3.70024
Susu Wang, Qidi Zhang, Jing Fang
Abstract: The paper delves into the role of institutional quality in bolstering China's economic resilience post-COVID-19, CITIC-Entropy. It divides institutions into basic and changeable categories, establishing an index system via the CITIC-Entropy TOPSIS model. Through Markov chain analysis, a consistent uptrend in institutional quality is observed. Notably, a club convergence pattern emerges, indicating gradual progress with limited leaps. The study underscores the pivotal influence of basic economic institutions on disparities in institutional quality, with a diminishing impact from north to south. By refining the evaluation of institutional quality, the research sheds light on its significance in economic resilience while offering guidance for harmonizing market efficiency with governmental efficacy in policy formulation.
https://doi.org/10.1002/ise3.70031
Abstract: This paper examines the link between climate risk, energy consumption, and financial market performance in a sample of emerging countries over the period 2000–2024. The objective is to model the dynamic interactions between these three dimensions, in order to understand the extent to which energy dependence and exposure to climate risks influence the stability and resilience of emerging financial markets. We use a panel data covering a representative group of emerging countries to examine the nexus among climate risk, energy consumption, and stock market performance. The estimated models are based on a panel VAR to capture endogenous dynamic effects, on DCC-GARCH model to analyze volatility and conditional correlations, on panel cointegration tests for long-term relationships, and on structural break models to integrate exogenous shocks (2008 financial crisis, COVID-19, war in Ukraine). The results show that climate risk negatively affects stock market performance in emerging countries. The dependence on fossil fuels increases financial vulnerability to climate shocks. Moreover, the increased use of renewable energy mitigates this impact and strengthens the resilience of financial markets. Finally, the intensity of the relationship varies depending on the degree of financial and energy development of emerging countries.
https://doi.org/10.1002/ise3.70041
Thakhani Tshibalanganda, Dintuku Maggie Kgomo
Abstract: South Africa's macroeconomic environment continues to be shaped by persistent structural imbalances, including high unemployment, inflationary pressures, and exchange rate fluctuations, all of which have important implications for the country's long-term economic performance. This study investigates the dynamic relationship between economic growth, unemployment, inflation, and the exchange rate over the period 1994–2022, employing the Autoregressive Distributed Lag (ARDL) approach with unit root tests and bounds testing for cointegration, Granger causality analysis, and a set of robustness checks, including FMOLS and DOLS estimations. Annual data sourced from the World Bank, Statistics South Africa and the South African Reserve Bank were used to estimate both the short-run and long-run effects. The ARDL bounds test confirmed a long-run cointegrating relationship among the variables. Long-run estimates revealed that unemployment and inflation significantly reduce economic growth, while the exchange rate exerts a positive but modest long-run effect. In the short run, inflation and the exchange rate significantly influence growth, whereas unemployment does not, reflecting the structural rigidity of the labor market. Granger causality tests revealed unidirectional causality from GDP to unemployment. The study highlights the multidimensional drivers of South Africa's growth dynamics and underscores the need for coordinated macroeconomic strategies that address labor market inefficiencies, stabilize price levels, and strengthen external competitiveness to support sustainable long-term growth.
https://doi.org/10.1002/ise3.70023
Abstract: How geography affects the choice of institutions is studied in a theoretical model. In this model, nations are located around a circle. Rulers compete through choosing tax rates, the level of military spending, and the degree of formality of institutions. Geographic condition is captured by population density. It is shown that societies with higher population densities choose lower tax rates, establish more formal institutions, and give government officials lower levels of autonomies than those with lower population densities do. A higher level of external threats induces a ruler to choose a higher level of autonomy for officials. The model is illustrated by comparing institutions of agricultural and nomadic regimes in ancient China.
https://doi.org/10.1002/ise3.70035
Abstract: This paper examines how the financial development of the target economy evolves under the long-lasting economic sanctions, emphasizing the temporal patterns of the impact. Using panel data for 136 economies from 1980 to 2021 and an event-study approach, we identified a temporal pattern that illustrates how economic sanctions exert a significant negative impact on financial development, progressing step by step from the market to the institutional level. These patterns are especially evident in the asymmetric effects between financial markets and institutions. Financial markets exhibit earlier and short-lived reactions, characterized by rapid responses to external shocks driven by investor expectations. In contrast, financial institutions display delayed responses, with long-term effects shaped by risk-buffering and restructuring mechanisms. We have illustrated a multi-stage transmission process. Initially, economic sanctions trigger market disruptions. This is followed by institutions reallocating resources to maximize profit/efficiency, which reshapes the financial system over time.
