Measuring urban economic resilience of two tropical cities, using impulse response analysis

Abstract

The global urbanisation rate had increased rapidly from just 30% in 1950 to 55% in 2018, and it is projected to reach 68% by 2050. This ongoing urbanisation shows the importance of building resilient economies in dealing with complex external financial and public health shocks and disturbances. Although most growing cities are beginning to demonstrate dedication to integrating sustainable development goals, building economic resilience in cities remains a significant challenge. During the past crises, stronger economies have shown an apparent ability to recover from shocks relatively quickly. Nonetheless, the severe COVID-19 recession has unmasked superficial evidence of economic resilience while also identifying underlying vulnerabilities and economic weak-spots. Accordingly, this paper focuses on resilience as a non-equilibrium property of urban economic structures. Focusing on two tropical cities, the paper explores sources of volatility transmission as indicators of urbanisation change, by utilising orthogonal impulse-response (OIR) functions based upon the Cholesky decomposition. The findings suggest a metropolitan disadvantage concerning urban economic resilience predominantly from shocks on sources of urbanisation.

Relationships between Thermal Environment and Air Pollution of Seoul’s 25 Districts Using Vector Autoregressive Granger Causality

“…In VAR analysis, employing an impulse response function (IRF) is a typical procedure used to identify the influence of modifications in one endogenous variable on another endogenous variable usually in a graphical manner and to observe how the system dynamically reacts to shocks. To account for the immediate impacts of shocks, we employ the orthogonalized impulse response function (IRF), achieved through the utilization of Cholesky decomposition to transform the residual terms to become independent [60][61][62].…”

Productivity Growth Recovery Mechanisms: An ARDL Approach Lessons from the United States, Japan and South Korea

“…Relaxing the assumption of diminishing returns to capital, a set of long-run economic models were created to explain this process endogenously (Parjiono, 2009). In exploring the concept of economic resilience, Chaiechi and Nguyen (2021) argue that since classical economics is primarily concerned with equilibrium conditions, such a framework is not suitable, instead suggesting that post-Keynesian economics provides a more appropriate approach. The established methods and frameworks for out-of-equilibrium phenomena in contemporary economic theories are commonly utilised in the works of post-Keynesian economists.…”

“…This method shows proportional contribution in one variable due to innovative stemming in other variables (Pesaran & Shin, 1999). Chaiechi and Nguyen (2021) argue that such impulse responses could measure the recovery or adjustment speed (an important aspect of resilience) after orthogonal uncorrelated shocks. As such, time-series data is incorporated with Sim's Cholesky decomposition techniques to the variables' compositional speed adjustments in response to simulated shocks.…”

Editorial- The Resilience Shift

“…In a global-scale emergency such as the COVID-19 pandemic, even stronger economies-that historically have shown an apparent ability to recover from external shocksprove to be unable to recover quickly due to demonstrated lack of resilience and numerous economic weak spots (Chaiechi, 2021). Communities and businesses worldwide continue to struggle even though governments worldwide have continuously responded to the crises through stimulus packages, fiscal and monetary policies, liquidity supports, and welfare systems to compensate for the pandemic's undesired social and economic consequences.…”

“…Not only do we need policies that are best supported by measures of accountability and effective monitoring of the intervention measures but also we need to improve our understanding of the concept of resilience by developing innovative methodologies to assess sources of future risks, improve our social and economic systems' capacities to cope and their ability to recover relatively quickly. Not surprisingly, building economic resilience remains a significant challenge of the century (Chaiechi, 2021).…”