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Application of Quantitative Methods in Modelling Sustainability in Economics and Finance

A special issue of Sustainability (ISSN 2071-1050). This special issue belongs to the section "Economic and Business Aspects of Sustainability".

Deadline for manuscript submissions: closed (31 December 2021) | Viewed by 51372

Special Issue Editors

Department of Quantitative Methods and Economic Informatics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, 010 26 Zilina, Slovakia
Interests: quantitative methods in economics; data mining; predictive modeling; applied multivariate statistics; econometrics
Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, 010 26 Zilina, Slovak Republic
Interests: data analysis; statistical analysis; econometrics; counterfactual evaluations; financial derivatives
Special Issues, Collections and Topics in MDPI journals
Department of Quantitative Methods and Economic Informatics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, 010 26 Zilina, Slovakia
Interests: modeling; machine learning; data analysis; service quality prediction
Special Issues, Collections and Topics in MDPI journals

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Guest Editor
Department of Economics, Faculty of Operation and Economics of Transport and Communications, University of Zilina, 010 26 Zilina, Slovakia
Interests: financial analysis and accounting; risk management and insurance; business administration

Special Issue Information

Dear Colleagues,

We would like to invite you to participate in the Special Issue on “Application of Quantitative Methods in Modeling Sustainability in Economics and Finance” in the Sustainability journal .

Since the middle of the 20th century, there has been a visible effort to develop new mathematical models, quantitative methods, and data-mining tools for application in economics and finance. In recent years, the application of these approaches in economics and finance has attracted much attention. A wide range of quantitative methods, based on mathematical, probabilistic, statistical, and econometric principles are being applied and developed in various economic phenomena and processes. In addition, the huge development of computer technology has brought forth more recent methods of artificial intelligence, big data, and machine learning techniques such as decision trees, and back-propagation neural networks or self-organizing maps have been and are still being created and applied. However, it is still necessary to continue developing new quantitative tools and applying already developed methods to better understand and analyze economic and financial processes and problems. Achieving stability of the economic environment in terms of financial and social sustainability of economic entities is the goal of almost all research.

The purpose of this Special Issue is to bring together a collection of articles reflecting recent developments in various areas of economy and finance, in which quantitative methods and data mining techniques going hand in hand with the practical side of solved issues play an important role. This Special Issue aims to be a collection of studies that develop new knowledge and/or apply approaches based on quantitative methods, mathematical–statistical and econometrics models, probabilistic models, and various artificial intelligence-based approaches. Contributions focused on the application of valuation financial instruments are of interest. Studies dealing with the application of current methods of artificial networks in evaluation and forecasting in economics, insurance, and finance, which support decision-making processes in companies or management of processes in them, are also welcome.

We invite both theoretical and empirical contributions of authors who would be interested in contributing to the development of the subject issue and who would appreciate this Special Issue as an opportunity to discuss their research results whether with theorists or practitioners interested in the topic.

Dr. Marek Durica
Dr. Lucia Svabova
Dr. Jaroslav Frnda
Dr. Katarina Kramarova
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Sustainability is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • modeling of economic and finance processes
  • quantitative methods in economics and finance
  • financial derivatives
  • insurance models
  • company evaluation
  • predictive models
  • neural networks
  • data mining
  • machine learning
  • applied statistical models
  • econometrics models

Published Papers (14 papers)

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Research

15 pages, 293 KiB  
Article
Multinational Firm Growth and Sustainability Responses to Dynamics of Business Regulations in Host Market
by Damto Basha Chewaka and Changzheng Zhang
Sustainability 2021, 13(24), 13945; https://doi.org/10.3390/su132413945 - 17 Dec 2021
Cited by 4 | Viewed by 2325
Abstract
Dynamics in business regulations measured by ease of doing business is a new approach that indicates countries’ business climate reforms toward suitability for investment growth. The present study took three variables from the ease of doing business data and evaluated them toward predictive [...] Read more.
Dynamics in business regulations measured by ease of doing business is a new approach that indicates countries’ business climate reforms toward suitability for investment growth. The present study took three variables from the ease of doing business data and evaluated them toward predictive power of FDI flow to 19 Sub-Saharan African countries by using fixed-effect model. Based on the analysis, the official time, procedures, costs, and minimum capitals in starting a business stage, enterprise registrations and official permissions of the firm establishment had a material effect on investment growth. Even though, on one side trade openness and the growing market size was seen as an opportunity, the deep-rooted corruption and landlocked was the trap for the smooth growth of firms in the region. Full article
18 pages, 1549 KiB  
Article
Asymmetric and Symmetric Link between Quality of Institutions and Sectorial Foreign Direct Investment Inflow in India: A Fresh Insight Using Simulated Dynamic ARDL Approach
by Faheem Ur Rehman, József Popp, Ejaz Ahmad, Muhammad Asif Khan and Zoltán Lakner
Sustainability 2021, 13(24), 13760; https://doi.org/10.3390/su132413760 - 13 Dec 2021
Cited by 4 | Viewed by 2046
Abstract
This study explores the bicausality between institutional quality and FDI inflow both aggregated and sector-wise, i.e., the agricultural, manufacturing, and tertiary sectors in the Indian economy, by applying simulated autoregressive distributed lag (SARDL) dynamic new techniques, an extended variant of orthodox ARDL and [...] Read more.
This study explores the bicausality between institutional quality and FDI inflow both aggregated and sector-wise, i.e., the agricultural, manufacturing, and tertiary sectors in the Indian economy, by applying simulated autoregressive distributed lag (SARDL) dynamic new techniques, an extended variant of orthodox ARDL and NARDL. The study confirms that aggregated and sectorial FDI are enhanced by adequate institutional quality, and similarly, FDI promotes quality institutions. The nexus between institutional quality and FDI inflow is an inspiration for India to compete with developed economies by enhancing its institutional quality. The study observes cointegration and bidirectional causality between institutional quality and aggregated FDI. Full article
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25 pages, 1436 KiB  
Article
Public Debt Frontier: A Python Toolkit for Analyzing Public Debt Sustainability
by Gonzalo F. de-Córdoba, Benedetto Molinari and José L. Torres
Sustainability 2021, 13(23), 13260; https://doi.org/10.3390/su132313260 - 30 Nov 2021
Cited by 2 | Viewed by 2564
Abstract
This study proposes a synthetic visual indicator with which to perform debt sustainability analysis using dynamic general equilibrium models. In a single diagram, we summarized the general equilibrium relationships among economic activity, government budget, and the maximum amount of sustainable public debt. Then, [...] Read more.
This study proposes a synthetic visual indicator with which to perform debt sustainability analysis using dynamic general equilibrium models. In a single diagram, we summarized the general equilibrium relationships among economic activity, government budget, and the maximum amount of sustainable public debt. Then, we measured sustainability using the distance of actual debt from the model-consistent maximum debt. This indicator can be implemented with any DSGE model; as a backing theory, we used a neoclassical model augmented with endogenous tax revenues, disaggregated public spending, different production technologies for public and private goods, non-atomistic wage setters in public labor (unions), and a fully specified maturity curve for public bonds. We provided an example of its usage using the case of Greece during the last public debt crisis. To perform the numerical analysis, we developed original software, whose advantage is allowing an audience without expertise in DSGE models to perform general equilibrium debt sustainability analyses without requiring an understanding of the technicalities of DSGE models. Full article
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24 pages, 2218 KiB  
Article
Analysis of Difference in Household Debt across Regions of Thailand
by Paravee Maneejuk, Sopanid Teerachai, Atinuch Ratchakit and Woraphon Yamaka
Sustainability 2021, 13(21), 12253; https://doi.org/10.3390/su132112253 - 06 Nov 2021
Viewed by 2333
Abstract
This study analyzed the determinants of household debt in Thailand at both the regional and the national levels using the panel data of 76 provinces over the years 2009–2017. The Panel Quantile Regression Model was employed to enable the analysis of the formation [...] Read more.
This study analyzed the determinants of household debt in Thailand at both the regional and the national levels using the panel data of 76 provinces over the years 2009–2017. The Panel Quantile Regression Model was employed to enable the analysis of the formation of household debt ranging from low to high levels. The findings indicate that household indebtedness in different regions has been shaped by a variety of factors, and that households in the same region with different levels of debt burden would experience different impacts or outcomes. We also tested the convergence of household debt, which produced the thought-provoking finding that household debt convergence failed to occur at both the national and the regional levels, while household debt divergence was found instead at the statistical significance level in some regions. The growing debt divergence phenomenon might be an outcome indicator of the unequal access to credit sources among different households in Thai society. Full article
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15 pages, 386 KiB  
Article
Economic Policy Uncertainty, National Culture, and Corporate Debt Financing
by Bilal Haider Subhani, Umar Farooq, M. Ishaq Bhatti and Muhammad Asif Khan
Sustainability 2021, 13(20), 11179; https://doi.org/10.3390/su132011179 - 11 Oct 2021
Cited by 5 | Viewed by 2711
Abstract
Financial innovation vis-à-vis economic policy uncertainty (EPU) without due regards being given to debt financing. This paper fills this gap and unveils the dynamic role of national culture in defining debt financing via EPU. We use a sample of 3831 non-financial firms of [...] Read more.
Financial innovation vis-à-vis economic policy uncertainty (EPU) without due regards being given to debt financing. This paper fills this gap and unveils the dynamic role of national culture in defining debt financing via EPU. We use a sample of 3831 non-financial firms of Asian economies and employ the System Generalized Method of Moments to estimate the regression coefficients. Our findings reveal an inverse relationship between the EPU and debt financing, which suggests that debt finance mitigation strategies are successfully executed in the region. The potential reasons for this include the policies by businesses to reduce business activities and avoid the unfavorable rising financing cost through EPU. On the supply side, the rising EPU induces the banks to accelerate their interest rate due to increased default risk. Similarly, we observe that high uncertainty avoidance (UND) has a negative and significant link with debt financing due to an unpleasant behavior of corporate managers towards debt when they have an alternate source of financing instruments instead of accepting long-term obligations. However, we find that the UND and EPU interaction has a significantly positive impact on debt financing due to the rigid behavior of managers, which forces them to consider cultural traits and converts their risk-averse attitude into risk-friendly behavior. This implies that corporate managers should reflect the sensitivity of the national culture while considering debt financing. Full article
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20 pages, 4256 KiB  
Article
Trading Macro-Cycles of Foreign Exchange Markets Using Hybrid Models
by Joseph Zhi Bin Ling, Albert K. Tsui and Zhaoyong Zhang
Sustainability 2021, 13(17), 9820; https://doi.org/10.3390/su13179820 - 01 Sep 2021
Viewed by 1820
Abstract
Most existing studies on forecasting exchange rates focus on predicting next-period returns. In contrast, this study takes the novel approach of forecasting and trading the longer-term trends (macro-cycles) of exchange rates. It proposes a unique hybrid forecast model consisting of linear regression, multilayer [...] Read more.
Most existing studies on forecasting exchange rates focus on predicting next-period returns. In contrast, this study takes the novel approach of forecasting and trading the longer-term trends (macro-cycles) of exchange rates. It proposes a unique hybrid forecast model consisting of linear regression, multilayer neural network, and combination models embedded with technical trading rules and economic fundamentals to predict the macro-cycles of the selected currencies and investigate the predicative power and market timing ability of the model. The results confirm that the combination model has a significant predictive power and market timing ability, and outperforms the benchmark models in terms of returns. The finding that the government bond yield differentials and CPI differentials are the important factors in exchange rate forecasts further implies that interest rate parity and PPP have strong influence on foreign exchange market participants. Full article
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23 pages, 1972 KiB  
Article
An Analysis of the Impact of Market Segmentation on Energy Efficiency: A Spatial Econometric Model Applied in China
by Liangjun Yi, Wei Zhang, Yuanxin Liu and Weilin Zhang
Sustainability 2021, 13(14), 7659; https://doi.org/10.3390/su13147659 - 08 Jul 2021
Cited by 4 | Viewed by 2176
Abstract
China’s recent development has been nothing short of remarkable, but energy-saving, and environmental protection is still a serious problem. The improvement of energy efficiency (EE) is an important factor for China to better follow the path of energy conservation, sustainable development, and environmental [...] Read more.
China’s recent development has been nothing short of remarkable, but energy-saving, and environmental protection is still a serious problem. The improvement of energy efficiency (EE) is an important factor for China to better follow the path of energy conservation, sustainable development, and environmental protection. Meanwhile, market segmentation is a unique phenomenon in the process of China’s economic development. Hence, studying market segmentation on energy efficiency has positive significance for improving energy efficiency. The major objective of this study is to investigate the relationship between EE and market segmentation. This paper measures market segmentation by the Price-Based Approach, calculating EE by super slack-based measure (super-SBM), and integrated spatial Durbin model and geographically weighted regression model. Based on the panel data of 30 provinces in China from 1995 to 2018, this paper finds that: (1) Regional market segmentation has a significant negative effect on EE. Moreover, in terms of spatial effect, market segmentation has a positive spatial spillover on EE estimated by 0-1 matrix suggesting that market segmentation in the surrounding area has a positive impact on local EE. (2) The negative effect of Market segmentation on EE demonstrates the obvious regional difference: Eastern region > central region > western region. In addition, geographically weighted regression results show that the impact of market segmentation on EE shows that in regional spatial distribution, Shanghai, Jiangsu, Zhejiang, and Anhui have the strongest negative effect, second in Fujian, Jiangxi, Shandong, Henan, Hubei, Beijing, Tianjin, and Hebei. (3) This paper confirms that market segmentation can affect EE through local protectionism, technological difference, and scale effect. Finally, through the above research basis, put forward the corresponding policy suggestions. Full article
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17 pages, 515 KiB  
Article
Green Strategy Effect on Financial and Environmental Performance: A Mediation Analysis of Product Quality
by Akintunde Olayeni, Anastasia Ogbo, Henry Okwo, Benjamin Chukwu, Chuka Ifediora and Charity Ezenwakwelu
Sustainability 2021, 13(4), 2115; https://doi.org/10.3390/su13042115 - 16 Feb 2021
Cited by 13 | Viewed by 3718
Abstract
The dilemma of firms in developing economies was the crux of this study. In probing whether the adoption of organization-wide green strategy would enhance the product quality and the firm’s financial lifeline, while also improving the environment, we developed a mediation model. The [...] Read more.
The dilemma of firms in developing economies was the crux of this study. In probing whether the adoption of organization-wide green strategy would enhance the product quality and the firm’s financial lifeline, while also improving the environment, we developed a mediation model. The specific objectives were to ascertain the direct effect of green strategy on both environmental and financial performance and its total effect on both environmental and financial performance through product quality. With data collated and analyzed from 648 respondents, using the Hayes mediation approach, results show that while environmental performance is strongly predicted by green strategy and product quality (as a mediator), financial performance is also positively predicted, but by a smaller effect. The import of the findings of this study is that the adoption of green strategy mediated by product quality improves both environmental and financial performance, implying that firms can remain financially viable while adopting product-focused green strategy. Full article
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18 pages, 320 KiB  
Article
Directional Distance Function Technical Efficiency of Chili Production in Thailand
by Wirat Krasachat and Suthathip Yaisawarng
Sustainability 2021, 13(2), 741; https://doi.org/10.3390/su13020741 - 14 Jan 2021
Cited by 6 | Viewed by 1866
Abstract
To overcome the challenging food safety and security problem, in 2003, the Thai government initiated ‘Good Agricultural Practices’ (GAP) technology. This paper used a sample of 107 small chili farms from the Chiyaphoom province for the 2012 crop year, and data envelopment analysis [...] Read more.
To overcome the challenging food safety and security problem, in 2003, the Thai government initiated ‘Good Agricultural Practices’ (GAP) technology. This paper used a sample of 107 small chili farms from the Chiyaphoom province for the 2012 crop year, and data envelopment analysis (DEA) meta-frontier directional distance function technique to answer two questions: (1) Are GAP-adopting farms, on average, more efficient than conventional farms? (2) Does access to GAP technology affect farmers’ decisions to adopt GAP technology? We also developed an ‘indirect’ approach to reduce the potential sample selection bias for small samples. For the dry-season subsample, GAP farms were more technically efficient when compared with non-GAP farms. These dry-season non-GAP farms may not adopt the GAP method because they have limited access to GAP technology. For the rainy-season subsample, on average, GAP farms were more efficient than non-GAP farms at the 5% level. Access to the GAP technology is not a possible reason for non-GAP rainy season farms to not adopt the GAP technology. To enable sustainable development, government agencies and nongovernmental organizations (NGOs) must develop and implement appropriate educational and training workshops to promote and assist GAP technology adoption for chili farms in Thailand. Full article
23 pages, 386 KiB  
Article
Impact of Sustainability on Firm Value and Financial Performance in the Air Transport Industry
by Yaghoub Abdi, Xiaoni Li and Xavier Càmara-Turull
Sustainability 2020, 12(23), 9957; https://doi.org/10.3390/su12239957 - 28 Nov 2020
Cited by 31 | Viewed by 9719
Abstract
In this study, we examine the extent to which the implementation of environmental, social, and governance (ESG) disclosures influence the firm value and financial performance of airlines. The panel data analysis is applied to the set of collected data from the Thomson Reuters [...] Read more.
In this study, we examine the extent to which the implementation of environmental, social, and governance (ESG) disclosures influence the firm value and financial performance of airlines. The panel data analysis is applied to the set of collected data from the Thomson Reuters Eikon database for the sample of 27 airlines worldwide from 2013 to 2019. Findings of this study support the positive relationship between the environmental pillar score (Env) and governance pillar score (Gov), with market-to-book ratio and Tobin’s Q as proxies for firm value and financial performance, respectively. This finding implies that an increase in both pillars leads to higher market value and financial efficiency for investigated airlines. Therefore, an airline’s effort to improve Env and Gov dimensions will lead to higher market value and return on invested funds. In contrast, the social pillar disclosure in both models is found to have a significant negative association with the dependent variables, showing that airlines’ social activities result in lower value as well as level of performance. Full article
24 pages, 859 KiB  
Article
Nuclear Hazard and Asset Prices: Implications of Nuclear Disasters in the Cross-Sectional Behavior of Stock Returns
by Ana Belén Alonso-Conde and Javier Rojo-Suárez
Sustainability 2020, 12(22), 9721; https://doi.org/10.3390/su12229721 - 21 Nov 2020
Cited by 3 | Viewed by 1742
Abstract
Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing [...] Read more.
Using stock return data for the Japanese equity market, for the period from July 1983 to June 2018, we analyze the effect of major nuclear disasters worldwide on Japanese discount rates. For that purpose, we compare the performance of the capital asset pricing model (CAPM) conditional on the event of nuclear disasters with that of the classic CAPM and the Fama–French three- and five-factor models. In order to control for nuclear disasters, we use an instrument that allows us to parameterize the linear stochastic discount factor of the conditional CAPM and transform the classic CAPM into a three-factor model. In this regard, the use of nuclear disasters as an explanatory variable for the cross-sectional behavior of stock returns is a novel contribution of this research. Our results suggest that nuclear disasters account for a large fraction of the variation of stock returns, allowing the CAPM to perform similarly to the Fama–French three- and five-factor models. Furthermore, our results show that, in general, nuclear disasters are positively related to the expected returns of a large number of assets under study. Our results have important implications for the task of estimating the cost of equity and constitute a step forward in understanding the relationship between equity risk premiums and nuclear disasters. Full article
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17 pages, 560 KiB  
Article
Jump Aggregation, Volatility Prediction, and Nonlinear Estimation of Banks’ Sustainability Risk
by Zhouwei Wang, Qicheng Zhao, Min Zhu and Tao Pang
Sustainability 2020, 12(21), 8849; https://doi.org/10.3390/su12218849 - 25 Oct 2020
Cited by 4 | Viewed by 2412
Abstract
Extreme financial events usually lead to sharp jumps in stock prices and volatilities. In addition, jump clustering and stock price correlations contribute to the risk amplification acceleration mechanism during the crisis. In this paper, four Jump-GARCH models are used to forecast the jump [...] Read more.
Extreme financial events usually lead to sharp jumps in stock prices and volatilities. In addition, jump clustering and stock price correlations contribute to the risk amplification acceleration mechanism during the crisis. In this paper, four Jump-GARCH models are used to forecast the jump diffusion volatility, which is used as the risk factor. The linear and asymmetric nonlinear effects are considered, and the value at risk of banks is estimated by support vector quantile regression. There are three main findings. First, in terms of the volatility process of bank stock price, the Jump Diffusion GARCH model is better than the Continuous Diffusion GARCH model, and the discrete jump volatility is significant. Secondly, due to the difference of the sensitivity of abnormal information shock, the jump behavior of bank stock price is heterogeneous. Moreover, CJ-GARCH models are suitable for most banks, while ARJI-R2-GARCH models are more suitable for small and medium sized banks. Thirdly, based on the jump diffusion volatility information, the performance of the support vector quantile regression is better than that of the parametric quantile regression and nonparametric quantile regression. Full article
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16 pages, 967 KiB  
Article
Between Sustainable and Temporary Competitive Advantages in the Unstable Business Environment
by Letycja Sołoducho-Pelc and Adam Sulich
Sustainability 2020, 12(21), 8832; https://doi.org/10.3390/su12218832 - 24 Oct 2020
Cited by 45 | Viewed by 10910
Abstract
Gaining a competitive advantage assumes that a company should build a unique position, but this concept is related to a relatively stable environment. However, it is difficult to predict the consequences of the enterprises’ changes, leading to changes both in the business and [...] Read more.
Gaining a competitive advantage assumes that a company should build a unique position, but this concept is related to a relatively stable environment. However, it is difficult to predict the consequences of the enterprises’ changes, leading to changes both in the business and natural environment. Therefore, this study’s authors asked a research question: Is it possible to restore a balance between durability and variability of the organization in terms of strategy? The answer to such a question was drawn upon the literature review and survey research. This paper presents a qualitative and quantitative model of competitive advantage in a changing business environment. This article uses an inductive inference method supported by a literature study and a deduction method supported by statistical calculations, based on a survey conducted among 150 Polish companies in different economic sectors. As a result of the research methods, a dualistic competitive advantage model in a changing environment was proposed and discussed. The article’s aim was achieved in the model combining a sustainable (SCA) and temporary competitive advantage (TCA). Understanding the conditions for gaining competitive advantage allowed to formulate general conditions under which sustainable strategic management can be built to consider sustainability objectives and contribute to the green economy. This research has confirmed that building a competitive advantage in unstable conditions requires finding a balance between implementing the planned development strategy and using new opportunities. Full article
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24 pages, 1180 KiB  
Article
Relationship between International Reserves and FX Rate Movements
by Yeonjeong Lee and Seong-Min Yoon
Sustainability 2020, 12(17), 6961; https://doi.org/10.3390/su12176961 - 26 Aug 2020
Cited by 3 | Viewed by 2592
Abstract
This paper investigates the relationship between international reserves changes and foreign exchange rate movements for five Far Eastern countries (China, Japan, Taiwan, Hong Kong, and Korea) from January 1997 to May 2020. We use the quantile Granger causality test and the quantile autoregressive [...] Read more.
This paper investigates the relationship between international reserves changes and foreign exchange rate movements for five Far Eastern countries (China, Japan, Taiwan, Hong Kong, and Korea) from January 1997 to May 2020. We use the quantile Granger causality test and the quantile autoregressive model to capture the monetary authorities’ motivations for intervention. The primary results of this study are as follows. First, in China and Hong Kong, we capture the mercantilists’ motive of accumulating their international reserves for the purpose of responding to the appreciation of currencies. Relatively speaking, the monetary authorities’ motivation for precautionary stabilizing their currencies is high in Korea and Japan. Second, we identify the asymmetric causal relationship between the variables. Considering the causal relationship with significant regression coefficients, these characteristics are found to be more evident in all countries. Last, we confirm the properties of the quantile- and tail-dependent relationship between the variables. In particular, Korea has a relatively stronger tail-dependence than other countries. That is, the causal relationship between the Korean foreign exchange reserves and the exchange rate is stronger at the rapid fluctuations of the variables, and this relationship is weakened at the moderate fluctuations of them. Full article
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