Asian Economic and Financial Review

The impact of digital financial inclusion on household financial vulnerability in China: An empirical study based on CFPS

2025-11-10T23:50:10-06:00

Digital Financial Inclusion (DFI) has developed rapidly worldwide and is considered an important tool to alleviate Household Financial Vulnerability (FV). However, most of the existing studies are limited to short-term effects and are based on single-time cross-sectional data, lacking a dynamic analysis of the impact of digital inclusive finance before and after. Therefore, based on the CFPS data from 2018 and 2022, employing an Ordered Probit regression model and its marginal effect analysis, combined with mediating effect tests, heterogeneity analysis, and robustness tests, the following hypotheses are verified: (1) DFI significantly reduces household financial vulnerability; (2) this effect is partly realized by increasing household income and easing credit constraints; (3) low-income households and economically underdeveloped areas rely more on DFI to alleviate financial vulnerability; (4) after the epidemic, the mitigation effect of DFI on household financial vulnerability is enhanced. The results show that digital financial inclusion plays a significant role in reducing household financial vulnerability, and digital inclusive finance can also reduce household financial vulnerability by increasing household income. At the same time, the role of digital inclusive finance is more significant in economically developed regions and low-income families. Additionally, the marginal effect of digital financial inclusion is stronger in 2022 after the pandemic compared to 2018.

The influence of human, relational, and structural capital on innovative performance in Indonesia's sharia banking industry: The mediating role of dynamic potential and realized absorptive capacity

2025-11-24T04:31:07-06:00

The challenge for the Sharia Banking industry is product innovation, which is considered unable to meet market needs and lacks high competitiveness compared to conventional bank products. This study aimed to demonstrate the influence of human, relational, and structural capital on innovation performance in the Indonesian Sharia Banking industry. The authors are concerned that dynamic potential absorptive capacity (DPAC) and dynamic realized absorptive capacity (DRAC) can mediate this relationship based on the dynamic capabilities theory. This study obtained 288 valid questionnaires that collected data from several Sharia Bank locations in Indonesia. PLS-SEM is a modeling technique that aims to determine structural equations. The findings of the study indicate that the development of human capital and relational capital, mediated by DPAC and DRAC, enhances innovative performance in Indonesia's Sharia banking sector. Moreover, the mediating role of DRAC, rather than DPAC, showed a significantly greater influence in improving the innovation performance of the antecedent variable, human capital, compared to other antecedent variables, namely relational capital. Theoretically, DRAC acts as a mediator to help banks transform and integrate new knowledge and insights gained from human capital, then transform them into innovative solutions. Banks can enhance their employees' ability to absorb and synthesize various types of knowledge, fostering creativity and innovation that result in stronger and more effective solutions.

Country risks and foreign direct investments in 7 ASEAN countries

2025-11-24T08:34:02-06:00

This study investigates the influence of country risk on foreign direct investment (FDI) inflows in ASEAN nations over the period 1998–2022, focusing on political, economic, and financial risk components. Employing the Fixed Effects Model (FEM), this study analyzes panel data across ASEAN countries to assess how different aspects of country risk affect FDI attraction. The findings reveal that while no significant overall connection exists between country risk and FDI inflows across the entire sample, country-specific characteristics play a crucial role. Specifically, negative impacts are observed in developing nations, nations with lower FDI inflows, and those with relatively low-risk profiles. Political risks significantly discourage foreign investments, especially in developing economies, economies with difficulty attracting foreign capital, and those considered high-risk. By contrast, financial and economic risks generally exhibit no significant influence on FDI. Nonetheless, reducing economic risk emerges as an important factor for enhancing FDI in countries with low levels of FDI attraction, whereas mitigating financial risk is critical for countries that attract higher volumes of FDI. Country risk impacts FDI inflows in a nuanced, country-specific manner, with political risk being the most significant deterrent for developing and high-risk ASEAN nations. Based on this finding, we are able to provide recommendations to address distinct dimensions of country risk and foster a more favorable investment environment across ASEAN member states.

Asymmetric effects of internet penetration on high-quality financial development in a resource-depleted Chinese city: Evidence from Jiaozuo

2025-11-25T09:21:55-06:00

This study investigates the asymmetric effects of internet development on high-quality financial development in resource-exhausted cities, with Jiaozuo serving as a representative case. Jiaozuo is selected as a representative case due to its status as a typical resource-exhausted city undergoing institutional and economic transformation. It challenges the conventional assumption that digital expansion uniformly enhances financial performance in structurally constrained environments. Employing a Nonlinear Autoregressive Distributed Lag (NARDL) model on annual data from 2000 to 2023, the analysis decomposes internet penetration into positive and negative changes to examine their differential impacts on a composite index of financial development quality. R&D intensity, economic openness, income level, are incorporated as control variables. The results show that positive internet shocks do not have a statistically significant impact on high-quality financial development, while negative shocks, although causing short-term disturbances, are conducive to long-term institutional adaptation and systemic improvements. According to the results, policies should prioritize institutional capacity building and digital financial literacy over indiscriminate infrastructure expansion, consistent with the Sustainable Development Plan for Resource-Exhausted Cities from 2025-2027. Reforms in financial governance and sustained innovation support are essential to advance digital-financial integration, in alignment with the 14th Five-Year Plan for Digital Economy Development for 2028-2035 targets.

Do global investors weather the storm? Evidence from mainland China and Hong Kong stock markets

2025-11-25T09:28:54-06:00

This study examines the influence of extreme weather events on stock market behavior in China, focusing on the Shanghai and Hong Kong Stock Exchanges. This article’s hypothesis is that local weather affects individual investors in Shanghai more significantly due to their short-term, speculative trading habits. In contrast, institutional investors in Hong Kong are less influenced by short-term considerations due to their long-term strategies and access to resources. The Glosten-Jagannathan-Runkle Generalized AutoRegressive Conditional Heteroskedasticity (GJR-GARCH) estimator can test the hypothesis under different market conditions and volatility clustering. The analysis utilizes daily financial and meteorological data from January 1, 2009, to December 31, 2023. The GJR-GARCH estimator incorporates variables such as air pressure, humidity, sunshine hours, and temperature. The results show that extreme weather has a more pronounced effect on the Shanghai market than the Hong Kong market. Furthermore, extreme weather events influence stock turnover and volatility more than stock returns, reflecting shifts in investment behavior. The hypothesis is further tested to determine whether it remains valid during bull and bear markets, which are emotionally charged periods. The hypothesis still holds, albeit with less pronounced effects. Thus, extreme weather can impact stock market performance, with the composition of investors playing a significant role.

The artificial intelligence dividend: Firm-level profitability and the asymmetric impact of gulf cooperation council technology policies

2025-11-26T09:11:59-06:00

We examine the asymmetric effects of national Artificial Intelligence (AI) and diversification policies on firm-level profitability in the Gulf Cooperation Council (GCC), addressing a critical gap in the microeconomic literature on the region's technology-driven transition. Using a dynamic panel dataset of 53 strategically essential firms across all six GCC countries from 2015 to 2024, we employ a Difference-in-Differences (DiD) approach, complemented by System Generalized Method of Moments (SGMM) estimation, to establish causal relationships while rigorously addressing concerns about endogeneity. The results reveal that AI-focused policies boosted profitability in firms actively investing in AI, with policy milestones increasing asset-based returns by 2.1% and equity-based returns by 2.8%. In comparison, government subsidies dedicated to the AI sector amplified these effects by an additional 4.5% and 6.5%, respectively. The positive impact of these policies grew even stronger after 2020. For firms deeply invested in AI, targeted subsidies led to profitability increases of 8.8% on assets and 13.1% on equity. In stark contrast, companies in traditional, non-AI sectors showed no statistically meaningful improvement from the same policy measures. These findings highlight the power of well-targeted fiscal incentives and selective policy support for the AI sector in promoting successful economic diversification. They offer a valuable blueprint for policymakers in resource-rich nations aiming to build sustainable, knowledge-based economies by making strategic technological investments. Notable limitations include the study's focus on large, strategic firms and its timeframe, which captures only the initial phase of AI policy implementation.

Financial feasibility of converting plastic waste as an alternative energy source

2025-11-26T21:22:32-06:00

The increasing accumulation of non-degradable plastic waste is threatening our environment. Transforming plastic waste into fuel via pyrolysis is a promising approach. This research aims to evaluate the economic viability of a project that converts plastic waste into gasoline, diesel, and kerosene through the pyrolysis process. The profit and loss projection, Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI), Break-Even Point (BEP), and Contribution Margin (CM) were calculated over 10 years to conduct the analysis. The analysis indicates that the project demonstrates significant financial viability, featuring an NPV of IDR 550.75 billion, an estimated IRR exceeding 1000%, an ROI of 1,610.7%, a BEP of around 23 working days, and a CM of IDR 7,040 per liter or 86.9%. However, this research has some limitations, including the quality of the generated products, the environmental implications of the pyrolysis process, and the reliable supply of raw materials. This research provides a more comprehensive understanding of the feasibility of the plastic waste-to-fuel conversion project from a technical and financial perspective by incorporating a comprehensive technical and financial analysis. It also supports the concepts of a circular economy and sustainable waste management by turning waste into a valuable resource.

Role of income and skill development in plastic waste-to-wealth entrepreneurship: Empowering women in Sub-Saharan Africa

2025-12-04T21:11:28-06:00

Addressing plastic waste pollution has become a global environmental concern. Although plastic pollution harms terrestrial and aquatic ecosystems, it also presents opportunities for wealth creation. This study investigates the role of plastic waste-to-wealth entrepreneurship in enhancing women’s empowerment through income generation and skill development in Lagos State, Nigeria. Using a quantitative research design with a Structural Equation Modelling (SEM) approach, data were collected from 302 women plastic waste pickers across three major dump sites in Lagos State, the largest consumer market in Africa. The study achieved a response rate of 98%. Findings reveal a significant positive relationship between plastic waste-to-wealth initiatives and women’s income, as well as a strong link between skill development and empowerment among women entrepreneurs. The study recommends increased financial support, access to resources, and strategic partnerships with plastic waste cooperatives to help women expand their businesses and income. It further emphasises the importance of training and skill acquisition programs in strengthening empowerment and promoting sustainable entrepreneurship.

Examining macroeconomic drivers of inflation: Evidence from panel ARDL and wavelet coherence approaches

2025-12-05T21:12:49-06:00

This study explored the effects of key macroeconomic variables—money supply, exchange rate, unemployment rate, and oil price—on inflation in five ASEAN countries from 1980 to 2020, using a panel ARDL model. The co-movement of this dynamic relationship was analyzed through a Wavelet Coherence approach to strengthen the findings to a certain extent. The analysis showed a positive, significant long-run link between money supply and inflation, emphasizing the need for prudent monetary policies. The absence of short-run effects of money supply on inflation underscores the importance of multidimensional policy formulation. Additionally, the positive exchange rate-inflation relationship in the long run calls for careful consideration in policy decisions. Furthermore, the negative unemployment-inflation relationship emphasizes the need for structural labor market reforms. Lastly, the significant short-term influence of oil prices on inflation warrants vigilance and sustainable energy strategies. This study is a valuable methodological and empirical addition to the existing body of knowledge on inflation dynamics, with its extensive analysis of macroeconomic determinants of inflation in ASEAN countries, using advanced econometric techniques. It bridges theoretical gaps, enriches methodological applications with wavelet coherence analysis, and delivers actionable insights for policymakers in emerging economies.

Behavioural heterogeneity and stock market dynamics during the COVID-19 pandemic and Ukraine war: An empirical Markov Switching analysis of the GCC countries

2025-12-09T12:14:45-06:00

This study investigates the effects of two global crises: the COVID-19 pandemic and the Russia-Ukraine conflict, on stock market dynamics in GCC countries. The study employs the Markov Switching Model (MSM) to analyze investor behavior during three distinct subperiods: the quiet pre-crisis period, the COVID-19 pandemic, and the Russia-Ukraine conflict. The findings reveal that fundamentalists, contrary to traditional economic assumptions of price correction, often exhibited destabilizing effects, particularly in Kuwait, Oman, and Qatar during low-volatility periods. Chartists, by contrast, demonstrated a consistently positive and significant influence, reinforcing momentum-based trading patterns. Empirical results also indicate that during the calm period, Bahrain and Kuwait were believed to remain under stable market conditions for a longer duration, whereas Saudi Arabia showed lower stability and experienced extended periods of volatility. During the COVID-19 period, most GCC countries shifted toward high-volatility regimes, with longer durations of market instability. During the Russia-Ukraine war, Bahrain, Saudi Arabia, and the UAE continued to experience sustained high volatility and prolonged unstable periods. The practical implications of this paper show that heterogeneous investor behavior, especially the destabilizing actions of fundamentalists and momentum-driven chartists, significantly affect GCC market dynamics during crises. Regulatory strategies should focus on monitoring trading patterns, managing risk, and promoting long-term investment to enhance market stability in turbulent conditions.