Showing papers by "Mardi Dungey published in 2014"

The impact of natural disasters on household income, expenditure, poverty and inequality: evidence from Vietnam

Abstract: Natural disasters are expected exacerbate poverty and inequality, but little evidence exists to support the impact at household level. This article examines the effect of natural disasters on household income, expenditure, poverty and inequality using the Vietnam Household Living Standard Survey in 2008. The effects of a natural disaster on household income and expenditure, corrected for fixed effects and potential endogeneity bias, are estimated at 6.9% and 7.1% declines in Vietnamese household per capita income and expenditure, respectively. Natural disasters demonstrably worsen expenditure poverty and inequality in Vietnam, and thus should be considered as a factor in designing poverty alleviation policies.

Modelling large open economies with international linkages: the usa and euro area

Abstract: Empirical modelling of the linkages between the euro area and the USA requires an open economy framework. The methodology proposed in this paper achieves identification of a structural vector error correction model by supplementing restrictions from economic theory with assumptions for the direction of causality in cross-country contemporaneous relationships. Our baseline model assumes contemporaneous causality runs from the USA to the euro area for both output and inflation, with monetary policy domestically focused. The role of the USA as leading the euro area business cycle is reinforced by our results, but strong bidirectional cross-country interactions are uncovered for inflation and interest rates

Chinese resource demand and the natural resource supplier

Abstract: This article provides empirical evidence on the effects of Chinese resource demand on the resource-rich natural resource supplier using the example of Australia. A structural VAR model is used to examine the effects of Chinese resource demand, commodity prices and foreign output on the macroeconomy with a formally specified mining and resource export sector. The key findings of the article are that shocks to Chinese demand and commodity prices result in a sustained increase in commodity prices and mining investment and a positive impact on the resource sector. However, these shocks eventually lead to lower real domestic output with factors of production moving out of the nonresource sectors and into the resource sector, resulting in a fall in nonresource sector output which is not fully offset by the rise in resource sector output. The results also indicate some market power by the natural resource supplier.

International Transmissions to Australia: The Roles of the USA and Euro Area.

Abstract: This paper examines the influences of the world's two largest developed economies, namely the USA and the Euro area, on Australia as an exemplar of a small open economy. To do so, we specify and estimate a structural VAR with bilateral linkages between the two large economies, and allow shocks originating in either to affect the Australian economy. More specifically, we show the role of foreign output shocks, the differential effects of USA- or Euro-area-sourced inflation and interest rate shocks on the Australian economy, and the relative unimportance of these foreign shocks to variations in the value of the Australian currency.

Emergence of systemically important insurers

Abstract: The combination of short-term liquidity requirements in the banking industry (due to the new regulations), and significant equity hold by insurers that seek yield may be rendering the latter institutions systemic. Though traditional insurance business is not deemed systemic, alternative noninsurance underwritings of their equity -facilitated by the vacuum left by banks in numerous business lines- results in systemically important insurers. The use of a methodology similar to PageRank connectedness, coupled with firm characteristics, confirms that this is the case. Results call for policy actions to ensure financial stability in the insurance sector, and in the economy overall.

Identifying Periods of Financial Stress in Asian Currencies: The Role of High Frequency Financial Market Data

Abstract: We formally test that a process containing Brownian motion and jumps characterises the high frequency observations for eight Asian currencies against the US dollar. By harnessing the changes in behaviour of the data during periods of stress we develop a new indicator to detect stress dates in currency markets. We find that the global share of currency trade for each currency relates to the frequency of stress days detected. We align the stress dates to economic and political conditions using central bank and IMF reports on developments in currency markets.

Mortgage product choice in Australia: The impact of market stress

Abstract: This paper presents evidence on the impact of the global financial crisis on the selection of mortgage products by borrowers. Using a sample of bank-originated mortgage applications between January 2003 and May 2009, we show that the advent of the crisis results in significant changes in the effects of a number of borrower characteristics on mortgage product choice. These changes are consistent with the hypothesis that risks are transferred to the borrower at a discounted price during the crisis period. ‘Honeymoon’ products became increasingly popular and more accessible during the crisis, offering the applicant higher discounts on the variable interest rate. Also, variable and fixed-rate mortgages are both taken up by relatively low-risk applicants. An earlier version of this paper was presented to the 2014 Australian Centre for Financial Studies’ Melbourne Money and Finance Conference.

Should ASEAN-5 monetary policymakers act pre-emptively against stock market bubbles?

Abstract: Stock market rises and asset price inflation in ASEAN economies have raised the question of whether monetary authorities of these economies should act pre-emptively against these rising trends to prevent impending financial crises. Using a structural VECM which incorporate mixed data characteristics we examine the effects and interactions between monetary policy and stock market shocks for Singapore, Malaysia, Thailand, Indonesia and the Philippines. The results suggest that monetary policy focused on the stock market detracts from price stability objectives, in particular because containing a stock market bubble may inadvertently depress output and inflation.

VAR modelling in the presence of China’s rise : an application to the Taiwanese economy

Abstract: This paper uses the impulse responses of a structural VECM to compare the effect of output shocks originating from the US and China on the Taiwanese economy. From 1980 to 2011 the impact of a US output shock on Taiwan is seven times greater than one originating in China, yet from 2000 to 2011 the impact from either country is the same. Exposure to China has grown more rapidly than exposure to the US, reflecting the rapid growth in cross-strait trade intensity between China and Taiwan this century. Other East Asian economies that have booming trade with China are likely to exhibit similar results, questioning the common practice of using the US as a proxy for foreign effects in the region. We provide two examples motivating the need to include both US and Chinese foreign effects in modelling Taiwan; one based on the evolving economic openness of Taiwan and the second from the East Asia monetary union literature.

The impact of post-IPO changes in corporate governance mechanisms on firm performance: evidence from young Australian firms

Abstract: This paper examines the potential impact of governance mechanisms (top management team structure and board composition) on post-IPO performance of young Australian firms from 2002-2007. We find that change in board of directors and TMT membership significantly affects firm performance. The higher proportion of the IPO original board remains, the better performance. An analogous relationship between the proportion of original TMT members and firm performance is also documented. Our study reveals that both original TMT and board members have a significant effect on both short-term and long-term IPO performance. We conclude that the retention of both the original directors and TMT members is favourable to young IPO firms and their post-IPO performance.

Contagion and banking crisis — internatonal evidence for 2007-2009

Abstract: Policy makers aim to avoid banking crises, and although they can to some extent control domestic conditions, internationally transmitted crises are difficult to tackle. This paper identifies international contagion in banking during the 2007- 2009 crisis for 50 economies. We identify three channels of contagion - systematic, idiosyncratic and volatility - and find evidence for these in 41 countries. Banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion. The results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 27 percent, whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system. Thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises, reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy.

Contagion and Banking Crisis - International Evidence for 2007-2009

Abstract: Policy makers aim to avoid banking crises, and although they can to some extent control domestic conditions, internationally transmitted crises are difficult to tackle. This paper identifies international contagion in banking during the 2007-2009 crisis for 50 economies. We identify three channels of contagion -- systematic, idiosyncratic and volatility -- and find evidence for these in 41 countries. Banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion. The results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 27 percent, whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system. Thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises, reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy.