Showing papers on "Cointegration published in 2002"
TL;DR: In this paper, the authors examined the role of tourism in the Spanish long-run economic development and confirmed the tourism-led growth hypothesis through cointegration and causality testing.
Abstract: This paper examines the role of tourism in the Spanish long-run economic development. The tourism-led growth hypothesis is confirmed through cointegration and causality testing. The results indicate that, at least, during the last three decades, economic growth in Spain has been sensible to persistent expansion of international tourism. The increase of this activity has produced multiplier effects over time. External competitivity has also been proved in the model to be a fundamental variable for Spanish economic growth. From the empirical analysis it can be inferred the positive effects on income that government policy, in the adequacy of supply as well as in the promotion of tourist activity, may bring about.
1,225 citations
TL;DR: The authors examined the Granger causality between electricity consumption per capita and Gross Domestic Product (GDP) per capita for India using annual data covering the period 1950-51 to 1996-97.
636 citations
TL;DR: In this paper, the causal links between trade, economic growth and inward foreign direct investment (FDI) in China at the aggregate level were investigated and the integration and cointegration properties of quarterly data were analyzed.
Abstract: This study investigates the causal links between trade, economic growth and inward foreign direct investment (FDI) in China at the aggregate level. The integration and cointegration properties of quarterly data are analysed. Long-run relationships between growth, exports, imports and FDI are identified in a cointegration framework, in which this paper finds bi-directional causality between economic growth, FDI and exports. Economic development, exports and FDI appear to be mutually reinforcing under the open-door policy.
473 citations
TL;DR: In this paper, the authors investigated the dynamic interdependence of the major stock markets in Latin America using data from 1995 to 2000, and found that there is one cointegrating vector which appears to explain the dependencies in prices.
Abstract: This study investigates the dynamic interdependence of the major stock markets in Latin America. Using data from 1995 to 2000, we examine the stock market indexes of Argentina, Brazil, Chile, Colombia, Mexico and Venezuela. The index level series are non-stationary and so we employ cointegration analysis and error correction vector autoregressions (VAR) techniques to model the interdependencies. We find that there is one cointegrating vector which appears to explain the dependencies in prices. The results are robust to sensitivity tests based on translating indexes to US dollars (i.e., a common currency for all the markets) and to partitioning the sample into periods before and after the Asian and Russian financial crises of 1997 and 1998, respectively. Our results suggest that the potential for diversifying risk by investing in different Latin American markets is limited.
465 citations
TL;DR: In this paper, the authors explored the two-way link between foreign direct investment and growth for India using a structural cointegration model with vector error correction mechanism and found the existence of two cointegrating vectors between GDP, FDI, the unit labour cost and the share of import duty in tax revenue.
Abstract: The two-way link between foreign direct investment and growth for India is explored using a structural cointegration model with vector error correction mechanism. The existence of two cointegrating vectors between GDP, FDI, the unit labour cost and the share of import duty in tax revenue is found, which captures the long run relationship between FDI and GDP. A parsimonious vector error correction model (VECM) is then estimated to find the short run dynamics of FDI and growth. Our VECM model reveals three important features: (a) GDP in India is not Granger caused by FDI; the causality runs more from GDP to FDI; (b) trade liberalization policy of the Indian government had some positive short run impact on the FDI flow; and (c) FDI tends to lower the unit labour cost suggesting that FDI in India is labour displacing.
364 citations
TL;DR: The findings support the Newhouse conjecture that technological change is a major escalator of health care expenditure and confirm a significant and stable long-run relationship among per capita real health care Expenditure, per capitareal income and broad-based R&D expenditures.
315 citations
TL;DR: In this article, the authors investigated the dynamic structure of nine major stock markets using an error correction model and directed acyclic graphs (DAG) to provide a structure of causality among these markets in contemporaneous time.
Abstract: This study investigates the dynamic structure of nine major stock markets using an error correction model and directed acyclic graphs (DAG). The DAG representation provides a structure of causality among these markets in contemporaneous time. Building on this contemporaneous structure and the estimated error correction model, innovation accounting techniques are applied. The results show that the Japanese market is among the most highly exogenous and the Canadian and French markets among the least exogenous in our nine-market study. The U.S. market is highly influenced by its own historical innovations, but it is also influenced by market innovations from the U.K., Switzerland, Hong Kong, France and Germany. The U.S. market is the only market that has a consistently strong impact on price movements in other major stock markets in the longer-run.
301 citations
TL;DR: In this paper, the authors examined the short and long-term relationships between the US stock market and three Central European markets and found that low short-term correlations between these markets and the US are found.
277 citations
TL;DR: In this paper, the relation between two competing definitions of the contribution to price discovery in market microstructure models: (i) the information share and (ii) the common factor component weight was clarified.
235 citations
TL;DR: In this paper, the authors employ threshold cointegration tests that allow for asymmetric adjustment towards a long-run equilibrium relationship to examine the relationship between producer and retail pork prices in Switzerland.
Abstract: This paper employs threshold cointegration tests that allow for asymmetric adjustment towards a long-run equilibrium relationship to examine the relationship between producer and retail pork prices in Switzerland. The short-run adjustments are also examined with asymmetric error correction models that are compared to the conventional symmetric error correction models. The results indicate that price transmission between the producer and retail levels is asymmetric, in the sense that increases in producer prices that lead to declines in marketing margins are passed on more quickly to retail prices than decreases in producer prices that result in increases in the marketing margins.
219 citations
TL;DR: In this article, the existence and extent of cointegration in fractionally integrated systems is investigated in the setting of stationary series, with some discussion of extension to nonstationarity.
TL;DR: In this article, market efficiency and unbiasedness are tested in four agricultural commodity futures markets (live cattle, hogs, corn, and soybean meal) using cointegration and error correction models with GQARCH-in-mean processes.
Abstract: Market efficiency and unbiasedness are tested in four agricultural commodity futures markets - live cattle, hogs, corn, and soybean meal - using cointegration and error correction models with GQARCH-in-mean processes. Results indicate each market is unbiased in the long run, although cattle, hogs and corn futures markets exhibit short-run inefficiencies and pricing biases. Models for cattle and corn outperform futures prices in out-of-sample forecasting. Results also suggest short-run time-varying risk premiums in cattle and hog futures markets.
TL;DR: In this article, the authors provided new evidence on the long-run convergence between imports and exports in 50 countries over the quarterly period 1973:2 to 1998:1, based on the Johansen [Johansen, S. (1995). Likelihood-based inference in cointegrating vector autoregressive models.
TL;DR: In this article, the authors empirically examined five different versions of Wagner's law by employing annual time-series data on six countries over the period 1951-1996, three countries are part of the emerging industrialized countries of Asia (South Korea, Taiwan, Thailand) and three are industrialized countries (Japan, USA, and the United Kingdom).
Abstract: The present study empirically examined five different versions of Wagner's law by employing annual time-series data on six countries over the period 1951–1996. Three countries are part of the emerging industrialized countries of Asia (South Korea, Taiwan, Thailand) and three are industrialized countries (Japan, USA, and the United Kingdom). The analysis is an advance over previous work in two ways: first, the stationarity propertities of the data and the order of integration of the data are empirically investigated using the Augmented Dickey-Fuller (ADF) and the Kwiatkowski et al. (Journal of Econometrics, 1, 1992) (KPSS), tests and second, the hypothesis of a long-run relationship between income and government spending is tested using bivariate cointegrated systems and employing the methodology of cointegration analysis as suggested by Johansen (Journal of Economic Dynamics and Control, 12, 1988) and Johansen and Juselius (Oxford Bulletin of Economics and Statistics, 52, 1990). The results indicate that ...
TL;DR: In this article, the authors used two different estimation approaches to demonstrate that equity markets in South East Asia have shown signs of converging during the 1990s, but this process appears to have been abruptly halted and somewhat reversed by the recent financial crisis.
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TL;DR: In this paper, the authors extended the model of Cunningham (1992) and used multivariate cointegration techniques to develop a vector error correction model useful for investigating the long-run effects of external debt service on GNP level.
TL;DR: In this paper, the authors used time series and panel cointegration techniques and showed that the B-S effect works reasonably well in the transition economies under study during the period from 1991:Q1 to 2001:Q2.
Abstract: This paper studies the Balassa-Samuelson (B-S) effect in the Czech Republic, Hungary, Poland, Slovakia and Slovenia. We use time series and panel cointegration techniques and show that the B-S effect works reasonably well in the transition economies under study during the period from 1991:Q1 to 2001:Q2. However, we find, that productivity growth does not fully translate into price increases because of the construction of the CPI indexes. We therefore argue that productivity growth will not hinder meeting the Maastricht criterion on inflation in the medium term. In addition, the observed appreciation of the CPI-deflated real exchange rate is found to be systematically higher compared with the real appreciation the B-S effect could justify, especially in the cases of the Czech Republic and Slovakia. This can be partly explained by the trend appreciation of the tradable price-based real exchange rate, increases in non-tradable prices due to price liberalization and demand-side pressures and the evolution of the nominal exchange rate determined by the nature of the exchange rate regime and the magnitude of capital inflows.
JEL classification: E31, F31, O11, P17,
TL;DR: In this article, the determinants of trade balances of seven East Asian countries, using cointegration technique, error correction model, and impulse response function, were examined and the results showed that there are significant differences in the duration and the extent of the J-curve effect across countries.
Abstract: This paper examines the determinants of trade balances of seven East Asian countries, using cointegration technique, error correction model, and impulse response function. Among other things, our investigation confirms the existence of J-curve effect and the results show that there are significant differences in the duration and the extent of the J-curve effect across countries. Several explanations consistent with those findings are advanced in the paper, including differences in exchange rate and trade regimes across sample countries. It is likely that liberalization of an exchange rate regime coupled with liberalization of trade may act to dampen the J-curve effect.
TL;DR: In this article, the authors examined the linkages between the South-east Asian stock markets following the opening of the stock markets in the 1990s and found that the stock market returns of Indonesia, the Philippines and Thailand had all become more closely linked with that of Singapore.
Abstract: The present paper examines the linkages between the South–East Asian stock markets following the opening of the stock markets in the 1990s. No evidence was found to indicate a long–run relationship among the South–East Asian stock markets over the period 1988–1997; however, correlation analyses indicate that the South–East Asian stock markets are becoming more integrated. The results from the time–varying parameter model also show that the stock market returns of Indonesia, the Philippines and Thailand had all become more closely linked with that of Singapore.
TL;DR: In this article, the authors performed an empirical analysis of cointegration between public expenditures and revenues as ratios of GDP in 11 member states of the European Union during the period 1960-2000.
TL;DR: In this paper, the authors proposed a score test for univariate time series with a limiting normal distribution, which is similar to the Dickey-Fuller test for multivariate cointegration tests.
TL;DR: In this paper, the authors present an empirical analysis of the aggregated import demand behavior for Malaysia, and estimate the long-term relationship between import demand and its determinants, namely income and relative prices, using a robust estimation method known as the Unrestricted Error Correction Model - Bounds Test Analysis.
Abstract: This paper presents an empirical analysis of the aggregated import demand behaviour for Malaysia. The study involved a small sample of annual data from 1970 to 1998. To estimate the long-term relationship between import demand, and its determinants, namely income and relative prices, a robust estimation method known as the Unrestricted Error Correction Model - Bounds Test Analysis was used. The results show that import volume, income and relative prices are cointegrated. The estimated long-run elasticites of import demand with respect to income and relative prices are 1.5 and -1.3 respectively. This implies that monetary, fiscal and exchange rate policies can be used as instruments to maintain favourable trade balance.
TL;DR: In this paper, the effects of economic variables on electricity demand in the GCC countries were investigated using co-integration and error-correction methodologies, and it was shown that both income and price have an impact on electricity consumption.
TL;DR: In this article, the authors studied the internal transmission mechanism of the Balassa-Samuelson effect in 9 CEECs and found that productivity growth in the open sector is the main cause of non-tradable inflation.
Abstract: This paper studies the Balassa-Samuelson effect in 9 CEECs. Using panel cointegration techniques, we find strong empirical evidence in favour of what we call the internal transmission mechanism since productivity growth in the open sector is found to bring about non-tradable inflation. However, we also shed new light on the fact that the impact of the internal transmission mechanism on overall inflation is considerably attenuated by the low share of non-tradables in the consumer price index. Furthermore, we argue that because of this and the high share of food items and regulated prices, the CPI may be misleading when analysing the Balassa-Samuelson effect. The paper also shows that the appreciation of the transition economies' real exchange rate, which has become something of a stylised fact over the last decade is only partly caused by the Balassa-Samuelson effect. Instead, we argue that a trend increase in tradable prices is behind this phenomenon.
TL;DR: In this paper, two competing hypotheses, namely demand-following and supply-leading, were empirically tested using multivariate VAR models for Mainland China over the period 1987Q1 to 1999Q4.
Abstract: In this note two competing hypotheses are empirically tested, namely those of the demand-following and supply-leading, using multivariate VAR models for Mainland China over the period 1987Q1 to 1999Q4. Johansen cointegration results indicate that there exists one cointegrating vector among GDP, financial development and the degree of openness of three variables. The results from Granger causality tests based on multivariate error-correction models (ECM) suggest independence between financial development and economic growth. This empirical result supports neither the demand-following nor the supply-leading hypothesis for Mainland China.
TL;DR: In this article, the authors reestimate the Hendershott, Lizieri and Matysiak (HLM 1999) model and present evidence that changes in real interest rates were not capitalized into Sydney and London real land prices.
Abstract: Rental adjustment equations have been estimated for a quarter century. In the United States, models have used the deviation of the actual vacancy rate from the natural rate as the main explanatory variable, while in the United Kingdom, drivers of the demand for space have dominated the estimation. The recent papers of Hendershott (1996) and Hendershott, Lizieri and Matysiak (HLM 1999) fall into the former category. We reestimate these equations using alternative formulations and present evidence that changes in real interest rates were not capitalized into Sydney and London real land prices. We then derive a model incorporating supply and demand factors within an Error Correction framework and show how the U.S. and U.K. traditions are special cases of this more general formulation. We next estimate a two-equation variant with a separate vacancy rate equation using data from the City of London office market. This model allows calculation of the underlying price (rent) and income (employment) elasticities and explains the data marginally better than the HLM model. Importantly, our model passes standard modern econometric requirements for unit roots and cointegration.
TL;DR: In this article, the authors provided new evidence on the question of the effect of defense spending on aggregate output in the United States and revealed that there is a quantitatively important and positive relation between defense spending and aggregate output.
Abstract: This paper provides new evidence on the question of the effects of defense spending on aggregate output in the United States. Earlier studies of this basic issue relied on traditional econometric techniques and the neoclassical production function theory. In this paper, recently developed cointegration methodology and modeling that is inspired by new macroeconomic theory is employed. The results from earlier studies concerning the effects of defense spending are mixed. The findings presented in this paper reveal that there is a quantitatively important and positive relation between defense spending and aggregate output in the United States.
TL;DR: In this paper, the authors used co-egration and vector autoregression to test the tax-and-spend, spend-and tax, and fiscal synchronization for ten countries using annual time-series data over the period 1951 to 1996.
Abstract: Cointegration and vector autoregression are used to test the ‘Tax-and-Spend’, ‘Spend-and-Tax’, and ‘Fiscal Synchronization’ for ten countries using annual time-series data over the period 1951 to 1996. Three of them are part of the newly industrialized countries of Asia (South Korea, Taiwan, and Thailand) and seven are industrialized countries (Australia, Canada, Japan, New Zealand, South Africa, UK, and the USA). This paper includes GDP as a control variable into the model like Baghestani and Mcnown (1994), Ross and Payne (1998), and Koren and Stiassny (1998). The Johansen (1988) and Johansen and Juselius (1990) cointegration test results indicate that these three variables are cointegrated with two cointegrating vectors for South Korea, one vector for Australia, Canada, South Africa, Taiwan, UK, and the USA, and no vector for Japan, New Zealand, and Thailand. The results from Granger causality tests suggest unidirectional causality running from revenues to spending, supporting the ‘Tax-and-Spend’ hypoth...
TL;DR: In this paper, the authors focus on the time adjustment paths of the exchange rate and prices in response to unanticipated monetary shocks and show that agricultural prices adjust faster than industrial prices to innovations in the money supply, affecting relative prices in the short run, but strict long run money neutrality does not hold.
Abstract: This article's focus is on the time adjustment paths of the exchange rate and prices in response to unanticipated monetary shocks. First, we expand the theoretical specification of the overshooting hypothesis by generalizing Dornbusch's model to include a third sector (i.e., agricultural prices). Second, we employ Johansen's cointegration test along with a vector error correction model to investigate whether agricultural prices overshoot in an open economy. The empirical results indicate that agricultural prices adjust faster than industrial prices to innovations in the money supply, affecting relative prices in the short run, but strict long-run money neutrality does not hold. Copyright 2002, Oxford University Press.
TL;DR: In this paper, a singular value decomposition of the unrestricted long-run multiplier matrix of a vector autoregressive model is used to construct a parameter that reflects the presence of rank reduction, which leads to a complete Bayesian framework for cointegration analysis.