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This chapter examines dynamic connectedness among emerging Asian equity markets as well as explores their linkages vis-à-vis other major global markets. We find that international equity markets are tightly integrated. Measuring connectedness based on a generalized Vector Autoregressive (VAR) model, more than half of all total forecast error variance in equity return and volatility shocks come from other markets as opposed to country own shocks. When examining the degree of connectedness over time, we find that international stock markets have become increasingly connected, with a gentle upward trend since the Asian financial crisis (AFC) but with a rapid burst during the global financial crisis (GFC). Despite the growing importance of Asian emerging markets in the world economy, we find that their influence on advanced economies are still relatively small, with no significant increase over time. During the past decade, advanced markets have been consistently net transmitters of shocks while emerging Asian markets act as net receivers. Based on the nature of equity shock spillovers, we also find that advanced countries are still tightly connected among themselves while intraregional connectedness within Asia remains strong. By investigating whether uncertainty plays an important role in explaining the degree of stock market connectedness, we find that economic policy uncertainty (EPU) from the US is an important source of financial shock spillover for the majority of international equity markets. In contrast, US financial market uncertainty as proxied by the VIX index drives equity market spillovers only among advanced economies.

This chapter estimates heterogeneous productivity growth and spatial spillovers through industrial linkages in the United States and China from 1981 to 2010. The authors employ a spatial Durbin stochastic frontier model and estimates with a spatial weight matrix based on inter-country input–output linkages to describe the spatial interdependencies in technology. The authors estimate productivity growth and spillovers at the industry level using the World KLEMS database. The spillovers of factor inputs and productivity growth are decomposed into domestic and international effects. Most of the spillover effects are found to be significant and the spillovers of productivity growth offered and received provide detailed information reflecting interdependence of the industries in the global value chain (GVC). The authors use this model to evaluate the impact of a US–Sino decoupling of trade links based on simulations of four scenarios of the reductions in bilateral intermediate trade. Their estimation results and their simulations are as mentioned based on date that ends in 2010, as this is the only KLEMS data available for these countries at this level of industrial disaggregation. As the GVC linkages between the United States and China have expanded since the end of their sample period their results can be viewed as informative in their own right for this period as well as possible lower bounds on the extent of the spillovers generated by an expanding GVC.

Purpose – This chapter aims at investigating the impact of cross-border knowledge spillovers on technological innovation in the renewable energy sector.

Methodology/approach – The analysis presented in the chapter assumes that technological knowledge exhibits several tacit elements and requires established connections to flow between countries. A new measure for knowledge spillovers is obtained by weighting international R&D stocks through bilateral trade flows. The country-level patenting activity is modelled through a knowledge production function. The sample includes 18 OECD countries over the 1990–2006 period. Estimates are obtained through panel data techniques.

Findings – Our econometric results show that international knowledge developed by other countries has positive effects on the focal country's innovation in renewable energy technologies. Cross-country linkages, rather than mere geographic proximity, are found to favour cross-country knowledge spillovers.

Impact – The research contributes to the design of energy innovation policies. Public R&D is confirmed to be a relevant input to energy innovation. Coordination between countries in energy R&D activities can be required, particularly when countries maintain mutual linkages.

Originality – This study adds empirical evidence on the effect of cross-country knowledge spillovers and on the channels through which technological knowledge diffuses globally. It contributes to the emerging empirical research on energy innovation.

What roles do trade and foreign direct investment (FDI) play in international technology transfer? Do technologies introduced by multinational firms diffuse to local firms? How does the level of intellectual property rights (IPRs) protection in a country affect its ability to absorb foreign technologies? Using these questions as motivation, this paper surveys the recent trade literature on international technology transfer, paying particular attention to the role of FDI. Several useful conclusions emerge. First, the theoretical literature has shown that trade necessarily encourages growth only if knowledge spillovers are international in scope. Second, existing empirical evidence on the scope of knowledge spillovers (national versus international) is ambiguous. Third, recent empirical plant level studies have called into question earlier studies that argued that FDI has a positive impact on productivity of local firms that compete directly with multinationals. Fourth, there is strong evidence in support of vertical spillovers from FDI: i.e. those firms that either supply multinationals or use goods and services produced by them as intermediate inputs experience productivity gains from such interaction. Fifth, it is well established that the degree of global IPR protection affects the pattern of international trade and convincing evidence that it also influences flows of international technology transfer and FDI has also started to emerge.

The purpose of the chapter is to analyze how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, taking into account different sources of asymmetry, such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We follow a game theoretic approach and consider a two-country imperfect competition model with two firms – one from each country – producing a homogeneous good. Both the firms’ mode of foreign expansion and R&D level are endogenously determined. We find that a better ability to manage knowledge flows incentivates the firm to invest more in R&D. By introducing geographically bounded spillovers, we also show that one-way foreign direct investment (FDI) stimulates the multinational enterprise (MNE) to raise its own R&D, due to both the elimination of transport cost and a greater ability to source. Furthermore, it emerges that when geographical proximity increases the MNE's capability to source local know-how, FDI is more likely to occur. The originality of this chapter relies on the analysis of the impact of asymmetries within an oligopoly model with endogenous R&D. Differently from other studies, this framework allows us to provide neat analytical results.

This study examines return and volatility spillovers from the US and Japanese stock markets to three South Asian capital markets – (i) the Bombay Stock Exchange, (ii) the Karachi Stock Exchange and (iii) the Colombo Stock Exchange. We construct a univariate EGARCH spillover model that allows the unexpected return of any particular South Asian market to be driven by a local shock, a regional shock from Japan and a global shock from the USA. The study discovers return spillovers in all three markets, and volatility spillovers from the US to the Indian and Sri Lankan markets, and from the Japanese to the Pakistani market. Regional factors seem to exert an influence on these three markets before the Asian financial crisis but the global factor becomes more important in the post-crisis period.

In seminal work, Den Haan et al. (2007, 2010, 2011) show business loans respond in the opposite direction of what may be intended by monetary policy action in the United States and Canada. Based on various approaches, identification schemes, and samples, we document evidence this loan puzzle is not exclusive to developed economies but is also pervasive in emerging markets. We find business loans generally decline following expansionary monetary policy shocks. A preponderance of statistical and structural evidence indicates important transmissions of this puzzle from the United States to emerging markets.

Patent data have been exploited to track invention and international technology diffusion. We review evidence on research activity, international patenting, and income differences across countries. Guided by that evidence, we construct a model of ideas in the world economy that includes the decision of whether and where to patent them. The model makes precise connections between international patent statistics and cross-country differences in innovation, technology diffusion, market size, and strength of patent protection. We use it to organize our discussion of existing empirical studies, which typically focus on one of five core relationships: (i) national pools of knowledge and international spillovers from basic research; (ii) aggregate productivity and international technology diffusion from applied research; (iii) international patenting and the production of ideas, international diffusion, market sizes, and intellectual property regimes; (iv) the value of ideas and diffusion, market sizes, and the intellectual property regimes; or (v) investment in research and research productivity, the cost of research, and the value of ideas. While distinguishing between these five relationships proves useful, they are, of course, logically intertwined. Taking these interconnections into account will contribute to the goal of building a quantitative model of the creation, diffusion, and adoption of ideas in the global economy.

This chapter assesses the volatility spillover from US monetary policy consequent upon the onset of three episodes primarily engineered by the US Fed, namely quantitative easing 1, taper tantrum and balance sheet normalization (BSN) to select emerging market economies (Brazil, India, Russia, South Africa and Turkey) considering around six months pre- and post-occurrence of these events. AR(k)-GARCH (p,q) framework has been used to assess the spillover effect influencing the return of the financial assets and trekking to their volatility segregated as news and persistence effect across markets and economies under study. The authors find that at the overall level, news impact significantly enhanced volatility of bond and currency markets, however, less impact was observed owing to the onset of BSN announcement as markets had factored the news through the well-articulated forward guidance of the Fed.

This chapter examines spillover effects of global monetary shocks on lending by foreign banks in an emerging country, South Korea. Foreign banks play a significant role by providing additional domestic credit and foreign currency liquidity and directing international capital flows via the banking sector. Using macroeconomic and banking data for the period of 2000Q1–2016Q2, the authors present evidence that foreign bank branches in Korea have responded in providing their foreign currency loans with one-quarter (three months) time lag to changes in monetary policies in their home countries (mainly, the United States and the Euro area). This short-run spillover effect of monetary policy shocks from the home countries to foreign banks in Korea seems consistent with the main findings from our bank-level data analysis. This chapter also discusses useful policy implications.