This thesis studies the provision of public pension system through three different approaches. Part one focuses on demographic change and pension system reforms in China. It reviews the historical reforms and the problems and suggestions associated with the current system. More importantly, by applying a calibrated overlapping generations general equilibrium simulation model, it investigates the impact of the demographic changes and the choice of pension system to the individual choices and macroeconomic variables in the future. As with all social insurance programs, the provision a public pension system involves a trade-off between protection and distortion. The second part is a theoretical study about the optimal level of public pension system. It derives the optimal pension benefit level by considering the welfare loss imposed by the saving and labour supply distortion. The third part of the thesis, is an empirical study investigating the reasons for different choices in pension systems. There are three types of public pension systems popular throughout the world: Pay-As-You-Go (PAYG), Funded and Mixed. The latter two have grown up largely since 1980s, after Chile successfully built its Funded system. By applying logistic regression tests, we examine the likely social and economic variables which have been affecting the choices.

Since Jensen (1968), performance evaluation of managed funds has been a popular topic in Finance. Whilst most of the studies have been focused on the US mutual funds, the evaluation of fund performance in the UK has been relatively few. This thesis investigates if active equity portfolio management can add value using a sample of UK unit trusts. Chapter 1 introduces the UK unit trust industry and the descriptive results of the data. Chapter 2 provides a literature review on performance evaluation. Chapter 3 explains the stochastic discount factor models and the generalized method of moments. It further explores the most fitted estimator with examinations of their small sample properties. Chapter 4 evaluates the conditioning performance of UK unit trusts within the framework of the stochastic discount factor models. Chapter 5 investigates style performance and presents the evidence of superior performance of style rotation strategies. Chapter 6 examines performance persistence. Chapter 7 concludes.

This thesis investigates the monetary transmission mechanism in the Euro area, for countries taken individually and as an aggregate. The focus of the thesis is on the effects of monetary policy shocks on the area as a whole, across countries and over time during the period of single monetary policy by the Eurosystem. Using the mostrecent empirical techniques such as factor-augmented vector autoregression (VAR), Bayesian Gibbs sampling, rolling windows, data pre-screening and panel VAR, the thesis investigates a novel (large) data set for the economies of the Euro area. According to our empirical analyses utilising these techniques, the thesis reaches the following main conclusions: First, time variation in the impulse responses of area-wide consumer prices and monetary aggregates to monetary policy shocks is stronger than that of other key macroeconomic indicators. The contractionary impact of the monetary tightening on real activity is the strongest when it hits the economy during the global financial crisis period (Chapter 1). Second, although the effects of the policy shocks on national real activities and price levels are homogeneous across countries, the transmission mechanism displays important cross-country heterogeneity with the national monetary aggregates responding most heterogeneously to common monetary policy shocks (Chapter 2). Finally, despite the responses of the Eurosystem to the global financial crisis with unconventional monetary measures, country-specific factors such as defaults risks and bailouts played a significant role in disrupting the transmission of the policy actions to individual economic activities (Chapter 3).

This thesis studies the implications of risk spillover effects in the systemic risk regarding the financial institutions and the financial system. We study the risk spillovers from sovereign CDS market to financial CDS market and the systemic risk contributions of sovereign countries. We then extend the previous study to investigate the dynamics of sovereign risk spillovers to the sovereign bond market, sovereign CDS market, and the national banking sectors, and we examine the interdependence of these markets. Lastly, we study the implications of network interconnectedness of the financial institutions and its contributions to systemic risk. Our research provides deeper understanding regarding the systemic risk and risk spillovers, and offer practical empirical evidence regarding the regulation of financial institutions.

This thesis presents a multi-national empirical study of the relationship between financial development and economic growth from the legal protection perspective based on both micro firm-level data and macro country-level data. Our study comprehensively examines the investor legal protection in terms of legal statues, legal enforcement and legal origins. We first examine the mechanism through which the legal system affects firm investment behaviour. The study suggests that a well-functioning legal system will benefit financial development; consequently access to external finance in the financial sector will be easier, thus firms are less sensitive to internal financing. Secondly, we investigate this relationship by taking into account of the cost of capital. The empirical study provides evidence that stronger legal protection will lead to a decrease in the cost of debt and equity, since it promotes financial development and thus funds are more available. Finally, we construct four new indices to measure financial development from the qualitative aspect rather than the quantitative aspect. The indices measure the liquidity and volatility of financial market while assessing the efficiency of banking and non-banking sector. We find that economic growth is accelerated by financial development which is exogenously determined by the functioning of legal systems.

This thesis is composed of four original working chapters in terms of four researching purposes to show the macroeconomic development with finance, as well as to consider the comparative proxies of investment and trading sectors in emerging economies. These four original working chapters can be briefly presented as: Theoretical Models, Structural Breaks for NICs of Asia, Causations in Steady State and Dynamic Process in NICs of Asia, and Studies with Countries’ Sizes in BICS1. For different groups of countries in the developing world, it is necessary to mention a fact for empirical studies: that the methodology for estimations should be different, due to many realistic situations and some important ideas from development economists. In the theoretical section, some mathematical models are developed to look at the relationship and effects of finance and development, each of which highlights one special aspect of the interconnections in terms of taxonomy idea. The first empirical part of this thesis investigates the different types of emerging economies of New Industrialized Countries (NICs) in Asia, typically Singapore, Korea, Malaysia and Thailand, and various stages they pass tough in terms of their economic development and financial growth 1960s to 2007. Another different empirical study concentrates on the size effects on the impacts of financial systems to economic development, which involves specific estimations of four specific large emerging economies of Brazil, China, India and South Africa (BICS) with quarterly data from 1995 to 2007. Specially, the study of BICS means the comparison of interrelationship of real sectors and financial sectors on development in terms of specifications of size effects on financial systems. The roles of financial system to economic development are suggested to be investigated in terms of specifications of different emerging economies based on either theoretical or empirical studies of this thesis.

This thesis presents an empirical investigation of the relationship between exporting, foreign direct investment (FDI) and firm heterogeneity in Thailand using a firm-level data from the Annual Survey of Thailand’s manufacturing industry between 2001 and 2004. We first examine the factors affecting the export participation decision of a firm by emphasising the importance of sunk entry costs, structure of ownership and other firm-specific characteristics. If a firm has export experience, the probability of exporting is likely to increase in the current period. Other firm-specific characteristics such as ownership, productivity, firm size, training and establishment location also significantly determine the probability of exporting. Second, we consider the role of the financial factors and the export participation decision. The internal finance of a firm as a measure of financial health is used to explain the capability to invest in order to enter export markets. The liquidity ratio has a positive and significant effect on the probability of exporting whilst the leverage ratio has the opposite effect. Third, we make a distinction between single- and multi-product firms and examine the characteristics associated with a multi-product firm. Being a multi-product firm and the number of products produced are associated with various firm-specific characteristics such as productivity, firm size and research and development (R&D). Finally, we emphasise on an indirect impact of FDI inflows in the host economy by investigating spillover effects from foreign to domestic firms. The positive and significant results for horizontal productivity spillovers and vertical export spillovers confirm that foreign firms do generate some positive externalities to domestically-owned firms.

This thesis consists of three essays on sovereign risk and banking. In the first essay, we examine the determinants of sovereign risk in the Eurozone focusing on the recent crisis episode and search for a self-fulfilling contagion link by using an exogenous ECB policy announcement for identification. our principal components analysis reveals that the perceived commonality in default risk among peripheral and core Eurozone countries increased after the announcement. An event study detects significant pre-announcement news transmission from Spain to Italy, Belgium, France and Austria that clearly dissipates post-announcement. Country-specific regressions of CDS spreads on systematic risk factors illustrate frequent days of large adverse shocks affecting simultaneously those same Eurozone countries during the pre-announcement period; but not afterwards. Altogether these findings support the view that market expectations during Eurozone crisis were at least partially self-fulfilling and ECB policy helped to contain such adverse dynamics. In the second essay we focus on European banks' sovereign bond exposures. By using a novel bank-level dataset covering the entire timeline of the Eurozone crisis, we first reconfirm that the crisi led to the reallocation of sovereign debt from foreign to domestic banks. This reallocation was only visible for banks as opposed to other domestic private agents and it cannot be explained by the banks' risk-shifting tendency. In contrast to the recent literature focusing only on sovereign debt. We show that the bank's private sector exposures were (at least) equally affected by a rise in home bias. Finally, we propose a new debt reallocation channel based on informational frictions and show that crisi-country debt was not only reallocated to domestic banks, but also to the informationally closer foreign banks. Our results imply that informational asymmetries among banks played a key role in the recent fragmentation across Eurozone debt markets. In the third essay, our investigation shifts towards political economy aspects of the relationship between sovereigns and domestic banks. We use date on the universe of credit extended over a 14 year period in Turkey to document a strong political lending cycle. We find that state-owned banks systemically adjust their provincial lending around local elections relative to the private banks in the same province. there is considerable tactical redistribution: state-pwned banks increase loans in politically competitive provinces with a current mayor aligned with the ruling party but reduce it in similar provinces with a current mayor from opposition.this effect only exists in corporate lending as opposed to consumer loans, suggesting that tactical redistribution targets job creation to increase electoral success. Such political lending also seems to influence real outcomes as the credit constrained opposition areas suffer a drop in economic output as measured by local construction activity.

This thesis aims at providing rigorous micro-foundations for explaining detailed firm and product level trade flows. In this research I investigate the mechanisms by which firms break into foreign markets and the impact of “\(entry\)” on \(growth\), \(further\) \(entry\) and \(exit\), as well as the potential biases when measuring the export growth of firms using annual data. Specifically, I introduce Quarter-Year, Month-Year and Week-Year estimations and examine whether there are certain countries that act as launch pads for Argentinean firms to target exports. My results provide an accurate measure of export growth and have implications for trade policy. I introduce the concept of “trade liberalisation externalities” whereby bilateral trade liberalisation can lead to an expansion of trade to third countries via the process of sequential exporting. This research also deals with the relationship between exporting, importing and product quality.

Floating exchange rate has recently become more volatile after the collapse of the Bretton Woods system in 1973. Impediments to trade introduce price differentials and deviations from the law of one price and even diminish trade transactions. Uncertainty can be an example of an impediment to trade. The central objective of the thesis has been to analyse trade costs and exchange rate volatility and their role in bilateral trade, with particular reference to developed countries and Asia developing countries. This thesis contains three main parts as follows: Chapter Two investigates the purchasing power parity hypothesis by testing the real exchange rates using the Robinson (1994)’s fractional integration approach as well as conventional unit root tests. Chapter Three is a panel data study on the impact of relative trade barriers on bilateral exports using gravity model. In the first step the impact of the technology factor along with geographical factors, institutional factors on bilateral transportation costs is investigated. In the second step, GMM and an instrumental variable approach are used to tackle the econometric problem of endogeneity. Chapter Four and Five investigates the impact of both real and nominal exchange-rate volatility on the UK aggregate and disaggregate bilateral trade flows.