Asian Journal of Applied Economics

Impacts of Rules of Origin Complexity on Thai Exports

Kunchalika Pongjit — 2025-08-28

This study examines the impact of the complexity of Rules of Origin (RoOs) on Thai Exports under three regional FTAs, namely the ASEAN – China Free Trade Agreement (ACFTA), the ASEAN – Japan Comprehensive Economic Partnership Agreement (AJCEP), and the ASEAN – Republic of Korea Free Trade Agreement (AKFTA), using Thailand as a case study during 2006 – 2020. We use the Product – Specific Rules in RoOs Annex to construct an index gauging the complexity of RoOs across the three FTAs. Using gravity model, the effects of RoOs complexity on exports are estimated by applying the System Generalized Method of Moments (GMM) fixed – effect regression technique, which is one of the estimation methods for Dynamic Panel Data (DPD) models. The results indicate that RoOs act as a trade barrier, negatively impacting export flows, particularly under the AJCEP agreement. The effects of RoOs complexity vary across export categories, with the most significant negative impacts observed in the fish and fish preparations industries, followed by the machinery and electrical industries, and the automotive industry.

Human Development, Freedom, and Income Inequality: Evidence from ASEAN Countries

Emre Gökçeli — 2025-08-28

Income inequality reflects the uneven distribution of income within a country's population, with high inequality levels often leading to social and economic instability. Among the potential determinants of income inequality, the Human Development Index (HDI) has received increasing attention for its multidimensional approach to development. Rooted in Amartya Sen’s Capabilities Approach, HDI expands beyond GDP by incorporating indicators of health and education. However, it omits Sen’s core emphasis on freedom—defined as individuals' ability to realize and express their capabilities. This study introduces an Extended Freedom-based HDI (EFHDI), which includes a freedom component, and examines its effect on income inequality compared to the standard HDI. Using the ARDL-PMG model, the analysis covers ASEAN countries from 1995 to 2020. The findings indicate that while neither HDI nor EFHDI significantly affects income inequality in the short run, both exert a significant negative effect in the long run. Notably, the long-run impact of EFHDI is nearly twice that of the standard HDI, underscoring the enhanced role of freedom in promoting equitable income distribution. These results are confirmed through robustness checks using the CS-ARDL model, and Granger causality tests further reveal a bidirectional relationship between both HDI variants and the Gini index. Based on these findings, the study recommends that ASEAN policymakers integrate freedom-related reforms—such as safeguarding civil liberties, strengthening rule of law, and improving access to fair markets—into broader human development strategies to reduce long-term income inequality.

Impact of Financial Development on Economic Growth Volatility: Moderating Role of Innovation in Developed and Developing Economies

Mansoor Mushtaq — 2025-08-28

While financial development has contributed to higher economic growth, it has also influenced the volatility of that growth. Numerous studies have investigated the impact of financial development on economic growth volatility, yielding ambiguous results. Additionally, innovation has emerged as a significant determinant of growth volatility. This study explores the relationship between financial development and economic growth volatility within the context of innovation, using panel data from 1996 to 2022 for both developed and developing countries. The Generalized Method of Moments (GMM) is employed as the estimation technique. The findings reveal that, when accounting for innovation, financial development negatively affects growth volatility in both developed and developing nations. Furthermore, inflation is found to increase economic growth volatility across both panels. Government spending reduces growth volatility in developed countries but exacerbates it in developing ones. Institutional quality either positively influences or has an insignificant effect on growth volatility in developing countries, whereas it contributes to reducing volatility in developed economies. The study underscores the importance of leveraging a combination of innovation and financial development to mitigate economic growth volatility.

Financial Development and Employment Structure in China: A VAR-Based Analysis

Juan Wang — 2025-08-28

This study investigates the relationship between China’s employment structure and financial industry structure, with a focus on their evolution and current dynamics. The objective is to assess how the development of China’s financial sector influences labor distribution across primary, secondary, and tertiary industries, and vice versa. To achieve this, the study employs correlation analysis and a Vector Autoregressive (VAR) model using time-series data from 2000 to 2022. The financial development scale (FIR), financial development structure (FDS), and employment structure (ES) are the key variables. Data were sourced from the China Statistical Yearbook and the China Financial Statistical Yearbook. The empirical findings reveal that while China’s financial development has progressed rapidly—marked by an expanding asset base and diversification—the scale and structure of financial development exert a negative impact on the employment structure in the long term, constraining its advancement. In contrast, improvements in the employment structure positively influence financial development in the short term. Among financial variables, the FDS has a stronger and more sustained effect on employment structure than FIR. The employment structure also exhibits strong self-stability. Based on these results, the study offers policy recommendations in three areas. Financial policy should target the efficient allocation of resources, support employment-intensive sectors, and align financial innovation with labor market needs. Industrial policy should promote closer industry–finance coordination and support the upgrading of traditional sectors to enhance job absorption. Employment policy should prioritize vocational training and strengthen employment services to increase labor adaptability and ensure market stability amid structural shifts.

Do Remittances Lead to Financial Instability? Evidence from Selected Asia–Pacific Countries

Selçuk Akçay — 2025-08-28

The Asia–Pacific region is among the top recipients of international remittances globally. This study examines the impact of remittances on financial instability and investigates whether the causal relationship between remittances and financial instability is symmetric or asymmetric in selected remittance-dependent Asia–Pacific countries: Pakistan, the Philippines, and Sri Lanka. Using the frequency domain causality approach and monthly data (Pakistan: 2005m01–2023m08; the Philippines: 1998m10–2023m08; Sri Lanka: 2015m01–2022m12), the results reveal both symmetric and asymmetric unidirectional causality from remittances to financial instability in Sri Lanka. In Pakistan, symmetric and asymmetric causality is observed from financial instability to remittances. No significant symmetric or asymmetric causal relationship is found in the Philippines. These findings suggest that recognizing asymmetric effects is essential for designing targeted policy responses in remittance-dependent economies. In particular, strengthening formal remittance channels, enhancing financial sector resilience, and using foreign exchange interventions in crisis-prone contexts like Sri Lanka can help mitigate remittance-induced instability.

Resolving the Dilemma of Unemployment Rate Hysteresis Versus the Natural Rate Hypothesis in India

Deepti Singh — 2025-08-28

This study investigates the presence and degree of hysteresis in India’s unemployment rates, with particular attention to gender disparities across pre- and post-COVID-19 periods. Using quarterly data from Q2 2018 to Q2 2025, the analysis employs standard unit root tests, unit root tests with structural breaks, and Variance Ratio (VR) analysis to evaluate whether unemployment follows a persistent random walk—indicative of strong hysteresis—or exhibits mean-reverting behavior consistent with the natural rate hypothesis. Results from conventional unit root tests support the natural rate hypothesis, while structural break tests suggest the presence of non-stationarity, indicating a mild form of hysteresis. The VR analysis reinforces this mixed conclusion, revealing moderate mean reversion alongside limited shock persistence. Overall, the findings suggest that the natural rate hypothesis holds predominantly in India, although asymmetric labor market adjustments—especially during major disruptions such as the COVID-19 pandemic—indicate that mild hysteresis effects persist. These results imply that structural labor market reforms and targeted upskilling policies are more effective than prolonged cyclical interventions in ensuring long-run employment stability.

Can Non-Monetary Sanctions Improve Road Safety? A Policy Impact Assessment of Thailand’s Demerit Point System

Supapong Tunsuparp — 2025-08-28

Thailand's road accident rate ranks among the highest globally, causing significant harm to individuals and economic losses. In 2023, the government introduced a demerit point system—a policy with mixed international outcomes. This study evaluates its impact on daily accident rates in Bangkok, analyzing data for all vehicle types, private/public passenger vehicles, and motorcycles. Using interrupted time series analysis, the results show that while the demerit point system did not reverse the upward accident trend, it effectively moderated the rate of increase. Behavioral economic concepts such as present bias, status quo bias, and loss aversion offer additional explanations for the observed behavioral patterns. Statistically significant variables affecting accident frequency include weather conditions and temporal factors such as weekends and festival holidays. These findings suggest that enhancing the system’s effectiveness could involve strategic measures such as increased point deductions during high-risk periods like festivals, along with communication campaigns that emphasize loss-framed messages to discourage risky driving behavior.

A Development Dilemma: How Does Energy Poverty Improvement Affect Fossil Fuel Energy Consumption in Southeast Asian Countries in the 21st Century?

Chanon Thongtai — 2025-08-28

Governments worldwide have actively addressed energy poverty through extensive subsidy policies; however, these efforts face the complex challenge of balancing improved energy access with long-term sustainable development goals. This study examines the effects of energy poverty improvement (EPI) on fossil fuel consumption using a cubic form of the Environmental Kuznets Curve in five Southeast Asian countries—Philippines, Indonesia, Malaysia, Thailand, and Vietnam—over 2000–2020, employing GLS panel regression. A new EPI indicator is constructed by combining binary data on access to clean cooking energy and rural electricity. Results reveal a non-linear relationship: fossil fuel consumption per capita increases with EPI until a peak value of 91.88, after which it declines, supporting the EKC hypothesis. The findings underscore the need for policies promoting renewable energy adoption to ensure that gains in energy access are consistent with environmental sustainability.

The Influence of Global Crude Oil Prices on Banking Sector Profitability: Panel Evidence from Selected Economies

Emmanuel Ezekiel Mwanjilinji — 2025-08-28

This study investigates the impact of global crude oil prices on banking sector profitability in 16 selected economies from 2000 to 2021. Using panel Autoregressive Distributed Lag (ARDL) analysis, the study explores both long-run and short-run relationships, incorporating GDP growth, inflation, and real interest rates as control variables. The results reveal a weak but positive long-term association between oil prices and bank profitability, while GDP growth significantly enhances profitability, and inflation exerts a negative effect. Real interest rates also show a positive influence. In the short run, none of the macroeconomic variables exhibit statistically significant effects. The findings suggest that macroeconomic stability—particularly sustained growth and inflation control—is essential for long-term banking sector performance. Policymakers and financial institutions should consider structural drivers and adopt strategies that enhance resilience to commodity price volatility.

Editorial Note

Waleerat Suphannachart — 2025-08-28

It is my pleasure to present the second issue of Volume 32 of the Asian Journal of Applied Economics (AJAE). We're delighted to share that AJAE has been ranked among the top 10 Thai journals with the highest impact factor (IF 2024 = 1.0) in the Journal Citation Reports 2025 by Clarivate. This recognition reflects the collective efforts of our authors, reviewers, editorial board, and readers in advancing applied economic research with regional and global relevance. We extend our sincere appreciation to all who have contributed to our success.

This issue features nine research articles that address diverse and timely topics in economics, finance, trade, development, and public policy. The articles cover a wide range of subjects, from the impact of trade rules on Thai exports and the role of financial development in economic growth to the influence of remittances in the Asia–Pacific and the effectiveness of road safety policies in Thailand. We invite you to explore the full text of these articles and engage with the cutting-edge research presented. For prospective authors, we kindly remind you to review and follow the AJAE Author Guidelines on our website before submitting a manuscript.