Risk and Decision Analysis

This paper introduces a new inhomogeneous stochastic 1/2-power Lundqvist-Korf diffusion model to forecast the gross national income (GNI) per capita of Morocco. Through a transformation and the application of It’s calculus, we identify the probabilistic properties of the process, including its analytical form. We then derive the probability transition density function (ptdf) and the mean functions associated with the model. Discrete sampling and the maximum likelihood approach are used to estimate the model parameters. However, because of the complexity of the associated system of likelihood equations, we employ the simulated annealing procedure to deal with the estimation problem. To test the methodology, we first apply the model to simulated data and evaluate the statistical results. To finalize, the model is used to fit real data corresponding to Morocco’s GNI per capita.

This paper revisits the exchange rate–stock return nexus by examining how macro-financial fundamentals—specifically interest rate and inflation differentials relative to the United States—shape the impact of currency fluctuations on equity markets in 14 developed and 16 emerging economies. Motivated by gaps in the literature that overlook threshold behaviour, cross-sectional dependence, and distributional heterogeneity, the paper develops a novel two-stage CCE-augmented Panel Smooth Transition Regression (PSTR) model combined with Quantile Treatment Effects (QTE). This methodological innovation enables the identification of nonlinear regime shifts driven by macroeconomic differentials while addressing endogeneity and global spillovers. The results reveal sharp regime transitions associated with interest rate and inflation thresholds, particularly in developed markets. In emerging markets, exchange rate depreciation significantly lowers stock returns only when inflation differentials exceed a critical threshold, underscoring the role of macroeconomic instability. For developed markets, high-interest rate differentials magnify the negative effect of exchange rate fluctuations on equity performance, consistent with carry-trade dynamics. QTE analysis shows that emerging markets underperform during bearish conditions due to higher exchange rate volatility but outperform during bullish phases, reflecting a conditional “high-risk, high-return” pattern. These findings offer new insights for monetary authorities, investors, and portfolio risk managers.

The COVID-19 pandemic has caused significant global economic disruptions, particularly increasing non-performing loans (NPLs) in the banking sector. This study examines the impact of bank specific factors and macroeconomics on NPLs in banks across ASEAN countries. Panel data from 39 publicly listed banks over the period 2010–2024 were examined using the Generalized Method of Moments (GMM) and system GMM approach. The results indicate that lagged NPLs, return on equity, total assets, credit growth, GDP growth, and lending interest rates significantly influence NPLs, while the Tier 1 capital ratio, non-interest income, and unemployment rate show no significant effect. This study provides important implications for bank management and policymakers in enhancing credit risk management and strengthening banking supervision within the ASEAN region.