Economic Journal of Emerging Markets

The role of foreign reserves in inflation dynamics

Haryo Kuncoro — 2024-04-01

Purpose – Central banks’ foreign reserve stocks in emerging markets have increased substantially in recent decades. Foreign reserves accumulation has been widely believed as a shock absorber to prevent financial crises. Meanwhile, accelerating foreign reserves might be contradictory to the monetary policy objectives. This research aims to investigate the impact of foreign reserves on the inflation dynamics.
Method – We apply the inflation-expectation augmented Phillips curve on the monthly data over the period of 2005(7) to 2020(12) in the case of Indonesia.
Findings – We show that stockpiling foreign exchange reserves indeed has an inflationary pressure impact. The central bank's intervention in the foreign exchange market is more significant in selling rather than purchasing foreign exchange. However, the non-monetary factors also play an important role in determining inflation.
Implications – Considering channels through which foreign reserves might affect inflation, our findings suggest the monetary authority should be concerned with inflationary expectations in the short term as one of the major policy-driven goals to maintain price stability in the long run.
Originality – This paper contributes to the literature on monetary policy in developing countries. Unlike other empirical studies, this research employs the inflation-expectation augmented Phillips curve and accommodates the issue of asymmetric effects of the change in foreign reserves.

Impacts of unemployment benefit program on job search duration: Evidence from Indonesia

Turro Selrits Wongkaren — 2024-04-08

Purpose ― This study examines the impacts of the Unemployment Benefit Program (Jaminan Kehilangan Pekerjaan, JKP) on the duration of job search in Indonesia using internal data sourced from the Employment Social Security Administering Agency (Badan Penyelenggara Jaminan Sosial Tenaga Kerja, BPJS TK).
Method ― The study employs the Regression Kinked Design (RKD) model and Ordinary Least Square (OLS) estimation method to analyze the data on laid-off workers who have received the JKP benefits.
Findings ― The study finds that, on average, the JKP beneficiaries have a longer duration of job search than laid-off workers who do not receive benefits. An increase in the replacement rate of the JKP benefits is associated with an increased duration of both job search and benefit claims. The RKD plot indicates that a replacement rate lower than 45% may decrease the duration of benefit claims and job searches.
Implication ― The study recommends that the government should consider two potential options: (1) maintaining the current level of monetary benefits that leads to a longer job search duration; in other words, the program management must continue providing benefits for the maximum duration offered (up to 6 months), or, (2) reducing the monetary benefits, if BPJS TK aims to reduce the job duration. The results may change if a more robust labor market information system is available.
Originality ― This study represents the first attempt to investigate the impact of the Unemployment Benefit Program (JKP) on job search duration in Indonesia. It might also be important to enrich the existing literature on the impact of similar programs in developing countries and countries with large populations.

Impact of public sector governance and human capital development on Myanmar's economic growth

Hidekatsu Asada — 2024-04-25

Purpose ─ This research examines the effects of Myanmar's domestic economic reform measures on its economic growth, highlighting the impact of public sector governance and human capital development.
Methods ─ The Toda-Yamamoto test on Granger causality and the vector error correction model are employed to examine the impact of Myanmar's domestic economic reform measures on its economic growth.
Finding ─ The results reveal that unidirectional causality existed, from public sector governance to economic growth and human capital development to economic growth. The vector error correction model revealed that public sector governance and human capital development had a long-term and positive relationship with economic growth from 2001 to 2019.
Implication ─ The study confirms that Myanmar's domestic economic reform measures contributed to its economic growth from 2001- 2019. These findings underpin the importance of continuing domestic economic reform, such as public sector governance and promoting human capital development, to achieve economic growth in the long run.
Originality ─ This paper contributes to existing literature by shedding light on the impact of public sector governance, human capital development, and public sector governance on Myanmar's economic growth.

Investigating the factors affecting the PISA-based test performance of Asian students

Ebru Çağlayan Akay — 2024-04-25

Purpose ― This study investigates the factors affecting the learning outcomes of Asian students.
Methods ─ The effects of both educational inputs and economic and socioeconomic variables on the PISA scores of 10 Asian countries (Hong Kong, Indonesia, Japan, Singapore, Macau, Korea, Turkey, Israel, Qatar, and Thailand) for the years 2006, 2009, 2012 and 2015 were examined using unbalanced panel data.
Findings ─ The results show that country-level economic factors strongly affect academic achievement. Furthermore, country-level economic factors dominate the other explanatory factors in the numerical and statistical sense.
Implication ─ The findings provide valuable information for educators, policymakers, and researchers aiming to develop efficient educational strategies to improve educational quality. Furthermore, the results offer policy suggestions for addressing factors that impact the quality of education both at the national and international levels.
Originality ─ This research enhances the current body of knowledge by investigating how economic and socioeconomic variables affect students' math, science, and reading performance, particularly emphasizing Asian countries.

Deciphering the black-box of monetary policy transmission in South Asia

Khalil Ullah Mohammad — 2024-04-25

Purpose ─ This study aims to identify the role of the bank capital channel by investigating how monetary policy affects bank lending through its influence on bank equity capital, in the transmission of monetary policy.
Method ─ The study employs panel vector autoregression (pVAR) to investigate the complex relationship between monetary policy shocks, bank capital, and lending behavior.
Results ─ The main findings are as follows: 1) The study finds evidence of both the bank lending and bank capital channels in South Asia. The analysis reveals a Granger causality between changes in bank capital position and policy rate adjustments, indicating a dynamic interplay between these variables. 2) The findings suggest, although direct effects of capital position changes on bank lending appear negligible, a nuanced examination uncovers the moderating influence of capital position changes on the impact of policy rate fluctuations on lending behavior. 3) The study suggests that healthier banking systems weaken the bank lending channel in South Asia.
Implications/Significance ─ The study is significant because it sheds light on the mechanism involved in the interplay between monetary policy, bank capital, and lending, providing valuable insights for policymakers and future research directions.