Faculty Conference Presentations at East Asia Economics Association International Conference – Dr. Clinton Watkins, Dr. Hideyuki Nakagawa, Dr. Wenti Du, Dr. Suppaleuk Sarpphaitoon

Four faculty members from AIU’s Global Business Program presented their research at the 19th East Asia Economics Association International Conference hosted by AIU Partner Thammasat University in Bangkok, Thailand from 1-2 November 2024. Please see below for an overview of their presentations.

Multinationality and cash holdings: Evidence from Japan

Presenter: Dr. Clinton Watkins, Professor and Director, Global Business Program
Description: Investors frequently criticise Japanese corporations for excessive cash holdings. On average and on aggregate, cash holdings have increased over the last decade. However, there is substantial variation in cash holdings within and between firms. At the same time, many large Japanese firms’ businesses have become more international. This research examines how international factors influence firms’ cash holdings via the precautionary motive – through overseas sales, foreign ownership, and cultural differences between the parent corporation and its overseas affiliates. Random effects within-between regression is used to jointly estimate the relationships within firms over time and between firms in the cross-section. Internationalisation through overseas sales has positive within and between firm relationships with cash holdings, but foreign shareholding is associated with lower cash holdings in the time series. Positive within-firm effects dominate the relationship between cash holdings and cultural heterogeneity.
Presentation Video: Dr. Watkins presented on the same topic during the Nippon Finance Association 6th Fall Conference at Kyushu University and during AIU’s 2024 Research Showcase. A video of the latter presentation can be viewed here.

Aggregate Investment with a Liquidity Trap: A Comparison between Japan and the UK Economies

Presenter: Dr. Wenti Du, Associate Professor, Global Business Program
Authors: Dr. Wenti Du, Dr. Eric Pentecost, Professor, Loughborough University, U.K.
Description: The Japanese and UK economies have both been functioning with very low nominal interest rates characteristic of a liquidity trap situation. Under such recessionary conditions, monetary policy is believed to be ineffective at raising demand and, in particular, at stimulating investment. This paper takes an empirical approach to modelling aggregate business fixed investment in both Japan and the UK to try to identify the key drivers of business investment with a view to drawing a comparison between the investment performance of the two countries stuck in a liquidity trap scenario. We find that changes in output are the primary driver of investment via the stock-adjustment model, with a supporting role-played world economic uncertainty in Japan.

Evaluating the Externality from the Small-Scaled NIMBY Facilities: The Case of Nursery
Facilities in the Tokyo Metropolitan Area

Presenter: Dr. Hideyuki Nakagawa, Assistant Professor, Global Business Program
Description: Certain public facilities are associated with positive externalities that extend across a broader geographic area, while simultaneously producing localized negative externalities. When negative externalities outweigh positive externalities near the facility, NIMBY (Not In My Backyard) problems arise: while community members acknowledge the necessity of the facility, they oppose its location in their neighborhood. Nursery facilities, akin to waste management plants and airports, exemplify this issue. The adverse effects of nursery facilities are often attributed to perceived inconveniences, such as increased noise levels and traffic congestion during peak commuting hours. This study employs the Hedonic pricing method to rigorously assess the external effects of nursery facilities. Utilizing rental property data from the Tokyo metropolitan area, the analysis reveals a complex interplay between positive and negative externalities. Properties in close proximity to nursery facilities exhibit significant negative effects, while those situated at greater distances experience net positive externalities, which diminish incrementally with increasing distance.

Does Quantitative Easing Policy in Japan Have a Uniform Impact? An Evidence from
Japanese Industries

Presenter: Dr. Suppaleuk Sarpphaitoon, Assistant Professor, Global Business Program
Description: This study aims to evaluate the effectiveness of the Qualitative and Quantitative Easing (QQE) policy in Japan through the framework of the Bayesian VAR. By incorporating the 14 indices of industrial production of Japanese industries, inflation, yield curve control, and interest rate in the empirical model, the results verify that the BOJ’s QQE has a positive effect on increasing industrial production and inflation. However, the potency of monetary policies depends on the types of monetary measures and the industry in consideration. In particular, the BOJ’s QQE, with an unprecedented enormous money supply and the ultra-low interest rate policy, has a substantial positive impact on boosting inflation in all industries in the sample but has a weaker effect in the real sector. However, the results of the IRFs do not support the BOJ’s YCC for enhancing industrial production and inflation.