Economic Journal of Emerging Markets

Economic policy uncertainty and foreign direct investment: The role of social connectedness in Vietnam

Thu Ha Nguyen, Truong Giang Nguyen, Cao Chuong Nguyen — Wed, 23 Apr 2025 00:00:00 +0000

Purpose — This study examines the association between home countries’ economic policy uncertainty (EPU) and foreign direct investment (FDI) inflows into Vietnam. It also investigates how social connections between home countries and Vietnam, measured by the Social Connectedness Index, moderate the EPU—FDI relationship.
Method — Using data from 12 home countries from 2011 to 2022, this study analyzes the impact of EPU on FDI inflows through regression models, incorporating the social connectedness index to explore moderating effects.
Findings — The results show that higher EPU significantly leads to lower FDI inflows into Vietnam. Social connectedness mitigates the negative impact of EPU on FDI by reducing information friction and enhancing trust in uncertain policy environments. These results are robust for home countries that experience periods of high global uncertainty and geopolitical risk and are members of APEC.
Implications — The findings suggest that both the home and host countries should focus on stabilizing their policies and leveraging social connections to mitigate the negative impact of policy uncertainty, which could improve policymaking and investment strategies.
Originality — This research uniquely examines how EPU in home countries affects FDI in a specific emerging country, Vietnam. It introduces social connections as a moderating factor, offering new insights into the interplay between policy uncertainty and international investment behavior.

Impact of financial inclusion and institutional quality on banking stability: Lessons from the Asia region

Rindang Nuri Isnaini Nugrohowati, Jannahar Saddam Ash Shidiqie — Wed, 23 Apr 2025 00:00:00 +0000

Purpose — This study examines the effects of financial inclusion and institutional quality on bank stability. It first examines the effects of banking on the whole Asian region and then the region according to income categories.
Method — We use aggregate data from 2013 to 2021 to investigate banking stability in 39 Asian countries and apply the generalized method of Moments (GMM), specifically the first difference GMM and system GMM. In addition, this research uses Principal Component Analysis (PCA) to measure the composite variables of the financial inclusion index and institutional quality index.
Findings — The findings demonstrate that overall financial inclusion has a favourable effect on Asian nations' banking systems. However, an examination based on income categories reveals some intriguing results: financial inclusion improves bank stability in lower- and upper-middle-income countries but does not affect high-income countries. In lower-middle-income countries, institutional quality has a detrimental effect on bank stability; in upper-middle-income and high-income countries, it has no effect.
Implications — The availability of financial services to households and small and medium-sized enterprises (SMEs) significantly impacts the stability of Asian banks. Several policy recommendations are feasible to implement, including the need for collaboration between banks and the government to broaden banking services to all communities, particularly in lower-middle-income nations.
Originality — Analyzing the differences in the impact of institutional quality and financial inclusion variables on banking stability in Asian countries according to income categories.

Bank efficiency and shareholder value in Vietnam Banking

Buu Kiem Dang, Duc Toan Vo — Wed, 23 Apr 2025 00:00:00 +0000

Purpose — This paper investigates the impact of bank efficiency on shareholder value in the context of Vietnamese commercial banks.
Methods — Bank technical efficiency is measured using the DEA input cost minimization method. We employ fixed effects model (FEM), random effects model (REM), and two-step difference generalized method of moments (GMM) to regress the research models.
Findings — The findings indicate that bank efficiency positively impacts shareholder value. Additionally, the study reveals that specific bank characteristics, such as return on equity, bank size, market risk, liquidity risk, and macroeconomic factors, such as GDP growth rate, inflation rate, and credit to the private sector, also affect shareholder value.
Implications — We recommend that bank managers implement policies to enhance technical efficiency, creating greater shareholder value.
Originality — This study is the first to explore the role of technical efficiency in predicting shareholder value, specifically within the context of Vietnamese banks.

Bank-specific determinants of explicit deposit insurance adoption: A global analysis

Khalil Ullah Mohammad, Noor Ul Haya Adnan, Muhammad Kasheer, Madeeha Ali — Fri, 25 Apr 2025 00:00:00 +0000

Purpose — The adoption of explicit deposit insurance has increased significantly over the past two decades, yet there is limited evidence on how bank-specific factors influence this decision. This study addresses this gap by investigating the determinants of explicit deposit insurance adoption.
Method — This study uses 25 years of unbalanced data from 107 countries and a probit model to identify the key factors influencing the adoption of the financial safety net.
Findings — The analysis reveals that bank-specific factors significantly influence the decision to implement explicit deposit insurance. However, bank capitalization does not significantly impact the decision. Additionally, regulatory quality, economic growth, and financial crises are critical determinants of the adoption decision. The likelihood of adopting explicit deposit insurance also varies considerably across different income groups in countries.
Implications — The study provides valuable insights for policymakers on the factors to consider when implementing this financial safety net.
Originality — This study contributes to the existing literature by highlighting the previously overlooked role of bank-specific factors in adopting explicit deposit insurance.

The dynamic effect of cash and non-cash payment instruments on money velocity in Indonesia

Dian Zulfa, Sofyan Syahnur — Mon, 28 Apr 2025 00:00:00 +0000

Purpose — This study explores the dynamic effect of electronic money as a non-cash payment instrument on the velocity of money in Indonesia from 2012 to 2020.
Method — Using quarterly time series data from 2012 to 2020, the research employs the Error Correction Model (ECM), stationarity, cointegration, and classical assumption tests to ensure the correct estimation procedure.
Findings — The findings reveal several essential points: (1) Faster circulation of cash generally increases the velocity of M1; (2) Excessive money supply slows down M1 circulation; (3) An increase in the use of debit cards (ATMs) tends to reduce M1 velocity, while quicker credit card transactions can accelerate it; (4) Rapid circulation of electronic money can expedite M1, but large amounts can hinder it. Overall, both cash and non-cash money equally influence the behavior of M1 velocity in Indonesia.
Implication — The government should focus more on money velocity to maintain stability, even though various payment instruments are utilized in the economy.
Originality — The current research focuses on the dynamic development of modern finance in Indonesia and electronic money as non-cash payment instruments that impact money velocity.

How does Green Finance affect the environment in the ASEAN emerging countries?

Isnaini Nuzula Agustin, Rizky Adi Mahendra, Hesniati Hesniati — Tue, 29 Apr 2025 00:00:00 +0000

Purpose — This study examines how economic growth, green finance, and renewable energy affect environmental quality (CO2 emissions) under the Environment Kuznets Curve (EKC) hypothesis framework.
Methods — This study uses data from ASEAN-6 developing countries, including Indonesia, Malaysia, Thailand, Vietnam, the Philippines, and Cambodia, from 2000 to 2020. It employs Panel Autoregressive Distributed Lag (ARDL), which is widely used for time series analysis since it can capture the short-run and long-run effects among variables.
Findings — The result shows the presence of the EKC Hypothesis in ASEAN developing countries. Green Finance and Renewable Energy reduce CO2 emissions only in the long run. In contrast, in the short run, Green Finance shows no effect in lowering CO2 Emissions due to initial costs, infrastructure challenges, market dynamics, and delayed policy implementation; the effect seems to increase in the long run as economies evolve, technologies mature, and awareness of environmental issues rises within emerging economies.
Implication — This study suggests that ASEAN developing countries should enhance their green finance efforts and expedite the transition to renewable energy by attracting additional investments in green finance and renewable energy transition. Governments in the Southeast Asian region must improve their policies and laws.
Originality — Revisiting the EKC hypothesis by including Green Finance within the ASEAN-6 emerging countries, which has been scarcely conducted in recent literature, this study contributes to the region's policymakers regarding green finance allocation and its relationship to environmental quality.

The role of productivity, wages, demand, and exchange rates on export performance: Evidence from the Turkish manufacturing industry

Ahmet Koluman, Fatih Kaplan — Tue, 29 Apr 2025 00:00:00 +0000

Purpose — This study explores the determinants of export performance in the Turkish manufacturing industry by examining the effects of productivity, wages, demand, and sector-specific real effective exchange rates from 2006 to 2019.
Methods — Using firm-level export data across 21 manufacturing sectors, the study applies a Fixed-Effects model with Driscoll-Kraay standard errors to address heteroscedasticity, autocorrelation, and cross-sectional dependence. Endogeneity concerns are mitigated using Two-Step System GMM estimation, complemented by Moment Quantile Regression (MQR) for robustness checks across the export distribution.
Findings — The results reveal that higher productivity, increased wages, and stronger external demand significantly enhance exports, while currency appreciation adversely affects export performance. Productivity emerges as the most influential factor.
Implication — Productivity enhancement, stable exchange rate management, and workforce development support export-driven growth. Targeted policies that strengthen sectoral competitiveness and expand foreign market access are essential for sustaining manufacturing exports.
Originality — This study departs from traditional macro-level analyses by constructing sector-specific indices for real exchange rates and external demand. It offers a more granular and precise understanding of export dynamics. The methodological rigor combines static and dynamic panel estimators to ensure robustness and advance empirical insights into firm-level export behavior.

Informal economy, institutional quality, and socioeconomic conditions in African countries

Tolulope Osinubi, Munacinga Simatele — Tue, 29 Apr 2025 00:00:00 +0000

Purpose — This paper examines the impact of the informal economy and institutional quality on socioeconomic conditions in 35 African countries from 2000 to 2022.
Methods — The study employs Driscoll-Kraay, Fully Modified Ordinary Least Squares, Method of Moments Quantile Regression, Dynamic Panel Threshold, and Dumitrescu-Hurlin (D-H) Granger non-causality techniques.
Findings — The findings indicate that the informal economy significantly worsens socioeconomic conditions, whereas stronger institutional quality, evident in factors such as government stability and corruption control, enhances these outcomes. A critical institutional quality threshold of 5.282 is established, suggesting that countries with institutional quality above this level experience substantial improvements in socioeconomic conditions. Unidirectional causality from the informal economy to socioeconomic conditions and a bidirectional relationship between institutional quality and socioeconomic outcomes are also noted.
Implication — Enhancing institutional quality is essential for promoting economic development and improving overall well-being in African and similar countries. Addressing institutional weaknesses could enable these countries to exceed the quality threshold and achieve better socioeconomic outcomes.
Originality — This research differs from previous ones by investigating the effects of both informality and institutional quality within a threshold framework on socioeconomic situations in African countries. Furthermore, it includes a socioeconomic conditions index that combines three subcomponents: poverty, unemployment, and consumer confidence. Additionally, the study employs various measures of institutional quality to explore their differing impacts on socioeconomic conditions.