Showing papers in "Applied Economics Letters in 2001"
TL;DR: In this article, the authors apply the Granger no-causality procedure developed by Toda and Yamamoto in a vector autoregresion (VAR) model, and attempt to improve previous tourism forecasting studies, in the context of tourist demand function, by identifying the direction of the endogeniety between tourist travel and international trade.
Abstract: Current literature concerning tourism forecasting points out the role played by international trade in affecting international tourism flows. This study investigates the nature of causal relationship, if any, between international tourism and international trade flows using the case of China. The study applies the Granger no-causality procedure developed by Toda and Yamamoto in a vector autoregresion (VAR) model, and attempts to improve previous tourism forecasting studies, in the context of tourist demand function, by identifying the direction of the endogeniety between tourist travel and international trade. Findings indicate a two-way Granger causality between international travel and international trade and hence imply that trade flows do link with tourism in the case of China. Thus, previous tourism forecasting studies using a single equation approach may lead to biased estimates since they fail to consider possible feedbacks between international trade and international tourism.
276 citations
TL;DR: In this paper, the authors examined the evidence for a day-of-the-week effect in five Southeast Asian stock markets: South Korea, Malaysia, the Philippines, Taiwan and Thailand.
Abstract: This paper examines the evidence for a day-of-the-week effect in five Southeast Asian stock markets: South Korea, Malaysia, the Philippines, Taiwan and Thailand. Findings indicate significant seasonality for three of the five markets. Market risk, proxied by the return on the FTA World Price Index, is not sufficient to explain this calendar anomaly. Although an extension of the risk-return equation to incorporate interactive seasonal dummy variables can explain some significant day-of-the-week effects, market risk alone appears insufficient to characterize this phenomenon.
183 citations
TL;DR: The authors re-examine Wagner's hypothesis of an expanding government sector with progress of the economy using advanced econometric techniques such as cointegration and exogeneity tests not used in previous empirical studies.
Abstract: This paper re-examines Wagner's hypothesis of an expanding government sector with progress of the economy using advanced econometric techniques such as cointegration and exogeneity tests not used in previous empirical studies. This study also uses much longer time series data for the USA than previously utilized. The empirical results based on cointegration and exogeneity tests provide strong support for the hypothesis for the USA.
147 citations
TL;DR: In this paper, the Granger causality is tested for to examine the exogeneity of GDP which is assumed in previous research on the determinants of aggregate health care spending, and it appears that health care expenditure Granger causes GDP, and vice versa for others.
Abstract: Granger causality is tested for to examine the exogeneity of GDP which is assumed in previous research on the determinants of aggregate health care spending. In theory, the causal relationship between these variables could be in either or both directions. For some of the 20 OECD countries tested it appears that health care expenditure Granger causes GDP, and vice versa for others. Therefore care must be taken when specifying health care expenditure and growth equations respectively in defining the appropriate ‘independent’ (and exogenous) and ‘dependent’ variables. In particular, these results suggest that standard models of aggregate health care expenditure may be misspecified.
126 citations
TL;DR: This article examined the effect of the recent radical agricultural liberalization policy, ie the 1996 FAIR Act, on agricultural commodity price volatility using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models.
Abstract: This study examines the effect of the recent radical agricultural liberalization policy, ie the 1996 FAIR Act, on agricultural commodity price volatility using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models Results of the study indicate that the agricultural liberalization policy has caused an increase in the price volatility for three major grain commodities (corn, soybeans and wheat) and little change for oats, but a decrease for cotton These findings stand in sharp contrast to Crain and Lee's observations in 1996 based on wheat markets that market-oriented measures in government farm policies tend to reduce agricultural price volatility
95 citations
TL;DR: In this paper, regression results from a panel data set of high-quality comparable data on Gini coefficients, income quintiles and real GDP per capita in 96 countries over the postwar period, suggest that the relation between income inequality and development corresponds to an inverted-U, as hypothesized by Kuznets.
Abstract: Regression results from a panel data set of high-quality comparable data on Gini coefficients, income quintiles and real GDP per capita in 96 countries over the postwar period, suggest that the relation between income inequality and development corresponds to an inverted-U, as hypothesized by Kuznets.
91 citations
TL;DR: In this paper, the authors consider the evidence from one country, New Zealand, which has in recent times been subject to substantial economic reforms, not least in the financial sector, and find valid long-run relationships are found between indicators of both banking and stock market development and private savings.
Abstract: Most of the empirical evidence on how development of the financial sector impacts on economic growth is in a cross-country context. This paper considers the evidence from one country, New Zealand, which has in recent times been subject to substantial economic reforms, not least in the financial sector. Some valid long-run relationships are found between indicators of both banking and stock market development and private savings, but rather more mixed results when considering either real GDP per capita or its growth rate.
84 citations
TL;DR: In the absence of revealed preference behaviour, economists use experimental techniques to estimate welfare changes as discussed by the authors, which relies on a number of assumptions concerning individual behaviour, such as rationality, continuity and symmetry.
Abstract: In the absence of revealed preference behaviour, economists use experimental techniques to estimate welfare changes. Such an approach relies on a number of assumptions concerning individual behaviour. This paper uses a discrete choice experiment to test three of these assumptions – rationality, continuity and symmetry. The experiment was carried out with users of a rheumatology clinic in the Grampian area of Scotland and was concerned with preferences for a specialist-nurse-led clinic. Two tests of ‘rationality’ were included in the experiment. Tests were carried out to see if respondents always chose on the basis of their preferred staffing, suggesting discontinuities in the utility function. The axiom of symmetry was tested using a split sample design, with respondents divided into two groups. Each group received a different questionnaire that varied with respect to the order of the choices. Over 30% of respondents provided at least one ‘irrational’ response. Such respondents did not differ significantl...
82 citations
TL;DR: This paper examined the relationship between age and individual job satisfaction using a uniquely detailed dataset on Scottish academics and found that male academics under the age of 36 have significantly higher job satisfaction than the female under 36 cohort.
Abstract: Previous studies of job satisfaction in the labour force as a whole have found that women generally express themselves as more satisfied at work than men. This paper examines the relationship between age and individual job satisfaction using a uniquely detailed dataset on Scottish academics. The insignificant gender effect on job satisfaction for the whole sample of academics is found to be made up of two offsetting effects. Male academics under the age of 36 are found to have significantly higher job satisfaction than the female under 36 cohort. Men over 36 however have a significantly lower satisfaction than their female academic equivalents.
81 citations
TL;DR: In this article, the relationship between inflation and stock returns is examined for the emerging economy of Greece, during the 1990s, and the relationship seems to be negative and significant, but only for the period until 1995.
Abstract: Theory suggests that equities are a good hedge against inflation. However, most of the empirical evidence suggests that the relationship between stock returns and inflation is negative. One explanation is the negative correlation between inflation and real output growth. In this paper the relationship between inflation and stock returns is examined for the emerging economy of Greece, during the 1990s. To anticipate the results, the relationship seems to be negative and significant, but only for the period until 1995. Since then, the relationship is not statistically significant, and it is argued that this may be due to the increased role of monetary fluctuations.
80 citations
TL;DR: In this article, the authors used an autoregressive return-generating process and an asymmetric conditional variance specification, both also including deterministic day of the week dummies.
Abstract: The paper tests four hypotheses at the same time using an autoregressive return-generating process and an asymmetric conditional variance specification, both also including deterministic day of the week dummies. The daily stock index returns from 19 countries are employed to test: (H1) predictable time variation in conditional volatility; (H2) asymmetry in volatility and leverage effect; (H3) effects of estimated volatility on returns; and (H4) day of the week effects on both returns and their volatility. Evidence is provided for predictable time varying daily volatility in all markets among which eight also exhibit a significant leverage effect. There is a significantly positive relationship between returns and their conditional volatility in only three countries. The nature of the day of the week effects on returns and their conditional volatility differs greatly among countries and across days. Thirteen countries exhibit seasonality in either mean returns (seven countries) or volatility (eight countrie...
TL;DR: In this article, the authors analyzed the relationship between size and growth for a group of Italian newborn firms in the instruments industry and found that Gibrat's Law of proportionate effect exhibits a behavior dependent on the firm's life cycle.
Abstract: This paper analyses the relationship between size and growth for a group of Italian newborn firms in the instruments industry. The main finding is that Gibrat's Law of Proportionate Effect exhibits a behaviour dependent on the firm's life cycle. In particular, even if in the years immediately following start-up the law could be rejected, since smaller firms have to rush in order to survive in the market, in subsequent years growth rates seem to converge towards a Gibrat-like pattern. This result is confirmed by the separate analyses carried out for micro-firms and larger firms.
TL;DR: In this article, a test for stationarity in the presence of a structural break is proposed, and an unknown break point is endogenously determined at the value minimizing the test statistic.
Abstract: A test for stationarity in the presence of a structural break is proposed. An unknown break point is endogenously determined at the value minimizing the test statistic. The break point can be estimated reasonably well under the null hypothesis of stationarity, especially when the magnitude of the break is large.
TL;DR: A panel of EU member states' data reveals that their health care expenditures exhibit β-convergence, which indicates that the European Union's common policies for market integration have had an impact on the health care sectors.
Abstract: The European Union's common policies for market integration have also had an impact on the health care sectors. A panel of EU member states' data reveals that their health care expenditures exhibit β-convergence.
TL;DR: In this paper, the authors employ variance ratio tests with both homoscedastic and heterogeneous error variances to examine the random walk hypothesis for the Hang Seng Index on the Hong Kong Stock Exchange.
Abstract: This paper employs variance ratio tests with both homoscedastic and heteroscedastic error variances to examine the random walk hypothesis for the Hang Seng Index on the Hong Kong Stock Exchange. The empirical investigation leads us to suggest that the Hang Seng follows a random walk model and consequently that the index is weak form efficient. This conclusion offers both confirmatory and conflicting support for the conclusions of previous research, which has investigated the presence of random walks in the indices of both developed and emerging markets.
TL;DR: In this article, the power of the test statistics using the consistent estimate of the threshold were compared to those of Enders-Granger and of Dickey-Fuller using a lag-augmented data generating process.
Abstract: Enders and Granger provide critical values to test the null hypothesis of a unit-root against the alternative of threshold adjustment. However, in obtaining their critical values, Enders and Granger did not use a consistent estimate of the threshold nor did they use a lag-augmented data generating process. This note remedies both of these problems. The power of the test statistics using the consistent estimate of the threshold are compared to those of Enders-Granger and of Dickey-Fuller. Surprisingly, the original Enders-Granger statistic often has the highest power. As such, the Enders-Granger statistic using a lag-augmented data generating process is calculated.
TL;DR: In this paper, the authors argue that the movement towards increased competition occurred much earlier than the establishment of the amateur draft or the introduction of free agency, and they use the Gini coefficient to measure inequity.
Abstract: Numerous empirical studies of competition within Major League Baseball (MLB) have highlighted the recent rise in competitive balance. While most explanations for the increased competitiveness have revolved around the establishment of the amateur draft or the introduction of free agency, the present paper maintains that the movement towards increased competition occurred much earlier. In particular, it is an outgrowth of the move to expand beyond the original 16 teams. The results from estimating the time-series behaviour of competitive balance within the two leagues suggests that the movement toward greater competitive balance occurred quickly after the two leagues began expanding. Finally, rather than use the conventional standard deviation measure for competitive balance, the present paper incorporates a more traditional measure of inequity, the Gini coefficient.
TL;DR: In this paper, the authors analyzed the effects of physical attributes, namely, height and weight, on the wages of males and females in professional and blue-collar occupations using data from the National Longitudinal Survey of Youth (1993).
Abstract: Using data from the National Longitudinal Survey of Youth (1993), this study analyses the effects of physical attributes, namely, height and weight, on the wages of males and females in professional and blue-collar occupations. A parallel theme of analysis is whether physical attributes have any impact on the wages of workers with high mathematics and computational skills. The results of this study show that among professionals and blue-collar workers, physical attributes significantly affect the wages of women and have no impact on the wages of men. Taller women enjoy wage premiums, while overweight women experience significant wage penalties. Another important finding is that among women with above average quantitative skills, the effects of physical attributes on wages are insignificant.
TL;DR: In this article, the authors analyzed the cost and profit efficiency of 14 countries of the European Union, as well as Japan and the USA, and found that since the start of the 1990s increasing competition has led to gains in profit efficiency in the USA and Europe but not so in the Japanese banking system.
Abstract: This study analyses the cost and profit efficiency of a sample of 14 countries of the European Union, as well as Japan and the USA. The results obtained show that since the start of the 1990s increasing competition has led to gains in profit efficiency in the USA and Europe but not so in the Japanese banking system. The results also show that the inequalities of profitability between countries would be considerably reduced if inefficiency were eliminated, efficiency gains thus being a very important source of improvement in profitability.
TL;DR: In this paper, the authors considered the possibility of estimating a Dickey-Fuller regression, constraining the autoregressive parameter to be at most one, and imposing prior knowledge of the sign of the drift parameter.
Abstract: This study considers the possibility of estimating a Dickey-Fuller regression, constraining the autoregressive parameter to be at most one, and imposing prior knowledge of the sign of the drift parameter. In spite of apparently encouraging asymptotic results, it emerges that no feasible test of the unit root null hypothesis with superior finite sample properties follows from such inequality-restricted estimation.
TL;DR: In this paper, the non-linearity in a conventional earnings equation is tested with respect to schooling and the findings suggest that the assumption of linearity is not robust and that there are well-determined positive returns to the completion of educational levels.
Abstract: Using a dataset that allows consistent cross-country comparisons the non-linearity in a conventional earnings equation is tested with respect to schooling. The findings suggest that the assumption of linearity is not robust and that there are well-determined positive returns to the completion of educational levels. However, inferences are sensitive to the choice of functional form.
TL;DR: In this paper, an applied general equilibrium model is utilized to provide an initial assessment and to obtain the second best policy options to mitigate the negative effects of the 1999 Turkish earthquake, which was one of the most damaging natural disasters during this century.
Abstract: The devastating earthquake that struck the most densely populated and industrialized area of Turkey on 17 August, 1999 was one of the most damaging natural disasters during this century. This paper is a first attempt to estimate the transition path of the Turkish economy to its new equilibrium after the earthquake. An applied general equilibrium model is utilized to provide an initial assessment and to obtain the second best policy options to mitigate the negative effects of the earthquake. The analytical foundations of the model rest upon intertemporal dynamics as laid out in neoclassical growth theory. Simulation results suggest that the initial impact of the earthquake on GDP may range from −4.5% to + 0.8% of GDP, conditional upon policies followed by the government and international donors. The policy implication of the paper is that best outcomes might be reaped via a negative indirect tax (a subsidy financed by foreign aid) to individual sectors to recover their capital losses. On the other hand, an...
TL;DR: In this article, the relationship between real income and real exports was examined for the Spanish economy in the last century (1901-1999) using annual data, and the export-led growth hypothesis was supported during the economic liberalization period whereas for the protectionist and autarkic period neither a long-run nor a short-run relationship between those two variables are found.
Abstract: The relationship between real income and real exports is examined for the Spanish economy in the last century (1901–1999) using annual data. The significant changes of the Spanish economy during this period have made of the analysis a mixed one. The export-led growth hypothesis is supported during the economic liberalization period whereas for the protectionist and autarkic period neither a long-run nor a short-run relationship between those two variables are found. When the century as a whole is considered, then, a unidirectional causality running from income to exports is exhibited.
TL;DR: In this paper, the authors assess the extent to which public infrastructures have contributed to output in the Chilean economy over the period 1960-1995, using a vector error correction model for cointegration tests.
Abstract: This study assesses the extent to which public infrastructures have contributed to output in the Chilean economy over the period 1960–1995. For the long-run, it uses a vector error correction model for cointegration tests, while for the short-run, it resorts to the use of impulse response functions and variance decompositions. The results appear to show that public infrastructures in Chile have been significantly productive.
TL;DR: This paper examined the influence of exchange rate variability on UK exports in the period of "floating" sterling 1973Q2-1990Q3 using the most recently developed bounds tests (appropriate when the cointegrating vector incorporates both I(1) or I(0) variables).
Abstract: This paper examines the influence of exchange rate variability on UK exports in the period of ‘floating’ sterling 1973Q2-1990Q3 Using the most recently developed bounds tests (appropriate when the cointegrating vector incorporates both I(1) or I(0) variables) the long-run demand for UK exports invariant to exchange rate variability is found
TL;DR: In this article, a modified Levene statistic and a switching GARCH(1, 1)-MA(1) model are employed to examine the impact of index futures contracts on the volatility of the spot market.
Abstract: A modified Levene statistic and a switching GARCH(1,1)-MA(1) model are employed to examine the impact of index futures contracts on the volatility of the spot market. The findings suggest that, following the introduction of index futures, the volatility of stock returns in the USA, France, Japan and Australia, rose significantly, while no significant changes in the volatility were found in the UK and Hong Kong. The different results might be attributed to macroeconomic factors and the structure of the various markets.
TL;DR: In this article, a sample of 153 films from the UK top 15 chart was examined to test the hypothesis of increasing returns to information and the results were consistent with those presented by De Vany and Walls, suggesting that increasing return to information is a general feature of the film market.
Abstract: A sample of 153 films from the UK top 15 chart is examined to test the hypothesis of increasing returns to information. The results are consistent with those presented by De Vany and Walls, suggesting that increasing returns to information is a general feature of the film market.
TL;DR: In this paper, a non-parametric analysis suggests the presence of such an inverse relationship between inequality and development, while a regression with a second-degree polynomial finds mixed support for the inverted U hypothesis.
Abstract: Simon Kuznets hypothesized that inequality in a country's distribution of income worsens in the early stages of its economic development and that the inequality improves as the country reaches higher stages of development (the ‘inverted U hypothesis’). Empirical support for the inverted U hypothesis has been mixed. In testing Kuznets hypothesis, analysts have specified a variety of parametric forms for the relationship between inequality and development, including a quadratic form (a second-degree polynomial). Using data on income distributions on Native American reservations in the USA, the present analysis indicates that non-parametric estimates of the relationship can inform a parametric analysis. Specifically, while a regression with a second-degree polynomial finds mixed support for the hypothesis, the non-parametric analysis suggests the presence of such an inverse relationship. Indeed, the non-parametric form suggests that a polynomial of greater degree might better capture the relationship between...
TL;DR: In this paper, the determinants of location-specific language capital and its impact upon the employment prospects of male and female ethnic minority immigrants in Britain are investigated. And it is found that lack of English language fluency reduces average predicted employment probabilities by 20-25 percentage points.
Abstract: Using data from the Fourth National Survey of Ethnic Minorities, the determinants of location-specific language capital and its impact upon the employment prospects of male and female ethnic minority immigrants in Britain are investigated. It is found that lack of English language fluency reduces average predicted employment probabilities by 20–25 percentage points. Increasing the provision of English language training directly or indirectly, by requiring immigrants to obtain UK qualifications, would go a long way to eliminating the 10% employment gap between Britain's white and ethnic minority communities.
TL;DR: In this article, a sampling scheme for Bayesian analysis of correlated censored data using the seemingly unrelated Tobit regressions model is developed, and posterior inference is performed via the Gibbs sampler with data augmentation algorithm.
Abstract: This paper develops a practical sampling scheme for Bayesian analysis of correlated censored data using the seemingly unrelated Tobit regressions model. Posterior inference is performed via the Gibbs sampler with data augmentation algorithm. In particular, the relevant full conditional distributions needed in the use of Gibbs sampler are derived. The method is then applied to a real data set on the determination of the payments of cash and stock dividends.