Do Commercial Banks, Stock Market and Insurance Market Promote Economic Growth? An analysis of the Singapore Economy

Size: px
Start display at page:

Download "Do Commercial Banks, Stock Market and Insurance Market Promote Economic Growth? An analysis of the Singapore Economy"

Transcription

1 Do Commercial Banks, Stock Market and Insurance Market Promote Economic Growth? An analysis of the Singapore Economy Tan Khay Boon School of Humanities and Social Studies Nanyang Technological University 50 Nanyang Avenue, Singapore Republic of Singapore Tel: (65) Fax: (65) Abstract This paper conducts within sample and out-of-sample causality tests between finance and growth in the Singapore economy. It uses bank loans, stock market capitalization value and insurance funds as financial indicators with real GDP per capita and real gross fixed capital formation per capita as growth indicators. The results show that the direction of causality is dependent on both financial and growth indicators. The loan market is largely demand following and the insurance market is supply leading. The stock market is demand following in the short term and supply leading in the long term. In addition to highlighting the benefits of using disaggregated financial data, the findings also demonstrate that causality patterns vary with indicators used and therefore emphasizes on the danger of very few and restrictive indicators in individual country studies. 1. Introduction The relationship between financial economic development and economic growth is highly controversial. The supply leading theories consider the development of financial sector as the precondition for economic growth, while the demand following theories consider financial development as merely responsive to economic growth. Understanding the relationship may allow appropriate government policies to be implemented which will facilitate economic development. Yet empirical evidence provided so far are inconclusive and contradictory. This study hopes to add on empirical evidence to resolve this controversy. Singapore is chosen because of its characteristics that may be able to shed more light in the relationship between finance and growth. Being a small and high growth economy without any natural resources, its growth is obtained through manufacturing and service sectors and these sectors are closely link to the financial sector. Moreover, the lack of internal monetary policy means there is no ad hoc change in monetary aggregates and the bank loan becomes a better indicator of financial deepening. Finally, it has a welldeveloped financial sector with many different financial indicators available. Section 2 provides a discussion of the theoretical foundation and the empirical evidence between financial development and economic growth. Section 3 brings in the empirical methodology of the research in this area and Section 4 explains the measurement and data sources in detail. Section 5 presents the empirical findings and Section 6 concludes. 1

2 2. Theoretical Discussion and Empirical Evidence In the early days, Schumpeter (1911) had highlighted the importance of finance in promoting entrepreneurship and economic growth. Several models were built to incorporate the roles of financial development in economic growth. This includes the growth model by Solow (1956) which shows that the development of financial sector can encourage saving and lead to a higher output per worker. More recently, the endogenous growth models by Greenwood and Jovanovic (1990), Bencivenga and Smith (1991) and King and Levine (1993a) among others suggest that both the growth level and rate can be affected by financial development. Pagano (1993) summarizes their finding succinctly and explained that financial development promotes economic growth via three paths: channel more savings to investment, raise the marginal productivity of capital and encourage saving. 1 However, there is also theory considers financial sector as following economic development. This theory, suggested initially by Robinson (1952), believe that as economic progresses, there will be increasing needs for sophisticated financial services and this lead to the development of financial sector 2. There are also economists such as Lucas (1988) who believe that finance is not important at all. All these theories are feasible and hence this issue can only be resolved empirically. The exact relationship between finance and growth can only be resolved through empirical analysis. However, the evidence so far is inconclusive. Although King and Levine (1993b) use cross-sectional data on 80 countries to show finance causes growth, their methodology is questionable. Evidence from time series individual countries studies, such as by Jung (1986), Murinde and Eng (1994), Ahmed and Ansari (1998) and Fase and Abma (2003) provide evidence of finance causes growth in developing countries. Similarly, Wachtel and Rousseau (1996) and Rousseau and Wachtel (1998) also show finance causes growth in developed countries. However, the empirical work involving 16 countries provided by Demetriades and Hussein (1996) shows considerable evidence of bi-directional causality and some evidence of growth causes finance. As for stock market analysis, Levine (1991) and Levine and Zervos (1998) show that stock market positively predicts growth. But Harris (1997) studies find no evidence of stock market explains growth in per capita output. The conflicting results highlight the danger of using aggregated data and inappropriate financial indicators in performing causality test between finance and growth. Most of the studies use highly aggregated data, such as M3 or domestic credit which did not distinguish between bank loans, insurance funds and stock market funds. These data do not exhibit the pathways which finance affects growth. This is an omission in the existing work and it presents a gap worth covering. 1 The sign of this relationship is ambiguous. The effect on saving rates on economic development can be positive or negative depends on risk sharing, household borrowing and interest rate effects. 2 Joan Robinson declares that "where enterprise leads finance follows" in her 1952 publication, p 86. 2

3 3. Empirical Methodology The conventional method in solving the causality issue between finance and growth is using the Granger causality method on time series data. This method involves regressing growth or finance indicators with lagged finance indicator and lagged growth indicator and then apply F test in hypothesis testing. This method can test for finance causes growth; growth causes growth, bi-directional causality or no causality. The Granger causality method involves running the following two regression models: m n Y t = Σ α i F t-i + Σ β j Y t-j + U 1t i=1 j=1 m n F t = Σ γ i F t-i + Σ δ j Y t-j + U 2t i=1 j=1 (1a) (1b) where Y is an indicator of economic development, F is an indicator of financial development and U 1t and U 2t are the disturbances which are assumed to be uncorrelated. In this framework, there are four possible cases: Case 1: Unidirectional causality from F to Y. This is indicated if Σα i 0 and Σδ j = 0. This outcome supports the view of Schumpeter. Case 2: Unidirectional causality from Y to F. This is indicated if Σα i = 0 and Σδ j 0. This outcome is consistent with the view of Robinson. Case 3: Bilateral causality. This is indicated if Σα i 0 and Σδ j 0. This outcome supports both Schumpeter and Robinson. Case 4: Independence. This is indicated if Σα i = 0 and Σδ j = 0. This is consistent with the view of Lucas. However, this type of causality test is only suitable if both data series are stationary. It the data series are non-stationary, then appropriate level of differencing must be done to make the series stationary before the test can be carry out. But Granger (1988) has pointed out that complication will arise if the two series are cointegrated. By differencing the series alone may actually lead to specification bias of the model that produce spurious results. The appropriate method is to convert the model into an error correction model (ECM) framework by including an error correction term. In the models below, α and β are the estimates from the cointegrating vector and the term in parenthesis is the error correction term. m n Y t = µ + θ(y t-1 - α - βf t-1 ) + Σ α i F t-i + Σ β j Y t-j + U t (2a) i=1 j=1 3

4 m n F t = µ + φ(y t-1 - α - βf t-1 ) + Σ γ i F t-i + Σ δ j Y t-j + U t i=1 j=1 (2b) When Y t and F t are cointegrated, F t can Granger cause Y t in two ways. One is through the lagged short run dynamic terms Σα i 0 and this can be tested using F test. The other is through the lagged error correction term if θ 0 and this can be tested using using t- test. This link also represents the long run dynamics between finance and growth. Failure to include the error correction term with cointegrated process will result in models that are misspecified and the causality testing can lead to erroneous. The ECM based causality tests offer the additional advantage that the source of causation can be identified, in the form of either short run dynamics or long run disequilibrium adjustment. Two methods to test for cointegration are commonly used in applied research. The first method, suggested by Engle and Granger (1987), involves using Augmented Dickey Fuller (ADF) test on the residual series of a cointegrated model. If the series are cointegrated the residual series should not have unit root. The second method, suggested by Johansen (1988), is a multivariate maximum likelihood estimation technique. It involves estimating a vector error correction model (VECM) of the form: Z t = µ + Γ 1 Z t-1 + Γ 2 Z t-2 + Γ 3 Z t Γ p-1 Z t-p+1 + Π Z t-p + ε t where Z t is a nx1 vector of I(1) variables indicating financial development and economic growth, Γ 1, Γ 2,, Γ p and Π are nxn matrices of parameters to be estimated. Existence of cointegration implies that the matrix Π has non-zero rank r < n, equal to the number of linear combinations of the variables in Z t that are stationary. Two tests can be used to test for cointegration. One is the λ trace statistic while the other is the λ max statistic. The statistic tests the null hypothesis of at most r cointegration vectors against an alternative of at least r+1. 3 Thus Granger causality test can be used on the level series (if series are stationary), on the differenced series (if series are non-stationary and non-cointegrated), formulated in an error correction model framework (if series are cointegarted) or using Johansen test. The problem with this methodology is the difficulty in obtaining the appropriate framework due to low power of unit root test and cointegration test, and also inability to detect causal effect due to low power of Granger causality test. It is not necessary to perform differencing on non-stationary series in order to test for causality. Sims et al. (1990) have shown that in a tri-variate system, if there is a single cointegrating relationship the Wald tests for Granger causality are asymptotically distributed as chi-square. Thus Granger causality test can be done on the level for all the three series. This is the method adopted by Rousseau (1999) in analyzing Japan and Bell and Rousseau (2001) in analyzing India. In both papers, VAR models involving a finance indicator, a growth indicator and a money supply indicator are used. However, 3 A full discussion of the test statistics is given in Johansen and Juselius (1990). 4

5 Toda and Phillips (1993) have doubted the usefulness of unrestricted levels Vector autoregressions as it is valid only asymptotically and hence subject to many uncertainties. They suggest the use of Johansen-type ECM which is more valid. In a different perspective, Masih and Masih (1998) suggest the use variance decompositions (VDC) and impulse response functions (IRF) to unearth deeper insights of Granger causality test. The problem with the VECM, F- and t-tests is that they are within-sample causality tests. These tests do not allow us to gauge the relative strength of the Granger-causal chain among the variables beyond the sample period. The VDCs and IRFs can be considered as out-of sample causality tests. The VDC involves partitioning the variance of the forecast error of a certain variable into proportions attributable to innovations in each variable in the system including its own. The IRF maps out the dynamic response path of a variable due to a one-period standard deviation shock to another variable. Thus in the analysis of VDC if a large portion of the forecast error of the growth variable is explained by the finance variable, this provides further evidence of finance cause growth. Similarly, using IRF if the responses of the growth variable to shocks in the finance variables are positive and strong, it is more likely that finance causes growth. 4. Measurement and Data Sources This paper investigates the relationship between financial development and economic growth by using individual country time series data. This is also in line with the approach by Arestis and Demetriades (1997) and Wachtel and Rousseau (1996). Singapore is chosen because of its well-developed financial sector and its impressive economic growth rate and it will be interesting to establish the causal effect between the two. Although Masih and Masih (1996) recommend using annual data in this type of research, quarterly data is used in this paper due to its relatively short history of development and most of the required data are available on a quarterly basis. Since there are different functions performed by financial sector and they influence growth differently 4, it is necessary to use different financial indicators and growth indicators to study the linkage between finance and growth. The indicators used to measure financial development and economic growth will have significant effect on the outcome of research. Based on the model by Pagano (1993), the growth indicators should reflect an improvement in productivity, an increase in investment or an increase in saving rate. Since the saving rate has an ambiguous effect on growth rate and the measurement of total factor productivity tend to be unreliable, the seasonal adjusted real gross domestic product per capita is used to approximate these two effects. The increase in investment 4 The survey by Levine (1997) highlights that financial sector performs five important roles that can promote economic development. They are (i) facilitating the trading, hedging, diversifying and pooling of risk, (ii) allocating resources; (iii) monitoring managers and exert corporate control, (iv) mobilizing savings and (v) facilitating the exchange of goods and services. 5

6 can be captured by an increase in real gross fixed capital formation per capita and this is the second growth indicator. The data for both series are available from March 1985 to September The problem of using aggregate financial data is that it will not explain how finance affects growth. In this paper, three types of financial indicators are used to represent three financial markets. The first type is the ratio of commercial bank loans to nominal gross domestic product. This indicator will capture the functions of commercial banks and the data is available from March 1985 to September The second indicator is to represent the development of the stock market. It is proxied by the ratio of market capitalization of the Singapore stock market to nominal GDP and the data runs from December 1987 to September The final financial indicator is to represent the development of the insurance market and this is proxied by the total insurance funds. 7 The data runs from March 1991 to September Empirical Results The investigation begins with testing for unit root on all the growth and financial development series. Using ADF test, the null hypothesis is there is unit root and the alternative hypothesis is the absence of unit root. Tests on all the series are conducted on the level as well as the first difference. A visual inspection on the series is done to decide on the inclusion of intercept and time trend in the ADF test. Table 1 below shows the results of unit root test. The ADF test does not reject the null of a unit root for the data in levels and rejects the null for each of the differenced series. The findings imply that it is reasonable to model all of the relevant variables as non-stationary. Table 1 : ADF Test for Unit Root Data Series Level 1 st differences Real gross domestic product per capita (GDP) * Real gross fixed capital formation per capita (GFCF) * Ratio of bank loans to nominal GDP (BANK) * Ratio of stock market capitalization to nominal GDP (STOCK) * Insurance funds (INSUR) * A* denote rejections of unit root at 1% level. All variables are in log, with the exception of BANK and STOCK. As Singapore is a small open economy, whatever effects between real and financial sector tends to reflect rapidly in the data. Thus a maximum of 8 lags is considered in the Johansen test for cointegration. Table 2 below shows the results of cointegration test. Rejectionn of the null hypothesis of no cointegration (r=0) coupled with a failure to reject 5 The data for bank loan are available monthly and hence aggregate of three months data is used. 6 The stock market capitalization is available monthly. Thus the data on the month of March, June, September and December are used. 7 The insurance fund is not normalized with nominal GDP because of its small value. 6

7 the null of one cointgerating vector (r=1) provides evidence of a single long-run relationship in a given system. Table 2: Johansen Test for Cointegration System Trace Maximum eigenvalue r=0 r=1 r=0 r=1 GDP and BANK (k=2) 19.01** ** 3.07 GFCF and BANK (k=1) 207** ** 21 GDP and STOCK (k=8) 214* ** 75 GFCF and STOCK (k=2) 165** GDP and INSUR (k=8) 15.97** ** 0.78 GFCF and INSUR (k=6) 160** The term k is the lag at which the levels terms enter the test regressions. A * and ** denote rejection of the null hypothesis of no cointegration at the 1% and 10% respectively. Out of the six systems considered, the results show the presence of cointegartion in four systems conclusively. The other two systems, GFCF and STOCK and GFCF and INSUR have ambiguous results. While the trace test indicates the presence of cointegration, the maximum eigenvalue test shows otherwise. In view of the low power of cointegration test, these two systems are also treated as cointegrated. Thus the VECM models are constructed (equation 2a and 2b) for the six systems. In all cases, the lag length is selected using AIC criteria. 5 Bank Loans and Economic Growth In Singapore, the commercial banks are the most important sources of finance for enterprises. The regression results between GDP, GFCF and BANK are shown below. The t statistics values are shown in parenthesis. GDP t = GDP t BANK t-1-07(gdp t BANK t-1 ) (31) (15) (0.613) (-01) (-44) BANK t = GDP t BANK t (GDP t BANK t-1 ) (1.73) (-2.6) (09) (39) (-44) GFCF t = GFCF t BANK t (GFCF t bank t-1 ) (0.92) (-33) (-01) (2.74) (-55) BANK t = GFCF t BANK t (GFCF t bank t-1 ) (01) (01) (08) (29) (-55) The results clearly indicate the direction of causality is from BANK to GDP in both the short run and the long run. But there is a long run bi-directional causality between GFCF and BANK. The IRF also shows that BANK response vigorously to one standard deviation shock in the GDP and GFCF. 7

8 R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s.024 R e s p o n s e o f G D P t o G D P.024 R e s p o n s e o f G D P t o B A N K R e s p o n s e o f B A N K t o G D P R e s p o n s e o f B A N K t o B A N K R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s R e s p o n s e o f G F C F t o G F C F R e s p o n s e o f G F C F t o B A N K R e s p o n s e o f B A N K t o G F C F R e s p o n s e o f B A N K t o B A N K

9 5 Stock Market and Economic Growth The stock market provides an alternative source of funds for companies. The regression results between GDP, GFCF and STOCK are shown below. GDP t = GDP t STOCK t (gdp t stock t-1 ) (3.75) (-01) (0.74) (-15) (-3.88) STOCK t = GDP t STOCK t (GDP t stock t-1 ) (04) (-6.73) (05) (1.79) (-3.88) GFCF t = 0-01 GFCF t STOCK t (gfcf t stock t-1 ) (18) (-21) (-06) (29) (-3.62) STOCK t = GFCF t STOCK t (GFCF t stock t-1 ) (04) (04) (07) (19) (-3.62) The results shown that there is a short term causality effect from GDP to STOCK but no long term disaggregate adjustment between GDP and STOCK. However, there is a long term causality effect from STOCK to GFCF. The IRF shows that the reaction of STOCK on a standard deviation shock in GDP and GFCF is stronger than vice versa. R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s R e s p o n s e o f G D P t o G D P R e s p o n s e o f G D P t o S T O C K.8 R e s p o n s e o f S T O C K t o G D P.8 R e s p o n s e o f S T O C K t o S T O C K

10 R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s.0 6 R e s p o n s e o f G F C F t o G F C F.0 6 R e s p o n s e o f G F C F t o S T O C K R e s p o n s e o f S T O C K t o G F C F.9 R e s p o n s e o f S T O C K t o S T O C K Insurance Market and Economic Growth The role of insurance market is mainly risk hedging. With sufficient hedging, a firm may be more willing in committing investment projects that are more risky but returns are higher. The regression results between GDP, GFCF and INSUR are shown below. GDP t = GDP t INSUR t-1-013(gdp t INSUR t-1 ) (1) (06) (08) (-27) (-4.0) INSUR t = GDP t INSUR t (gdp t INSUR t-1 ) (42) (05) (1.06) (-01) (-4.0) GFCF t = GFCF t INSUR t (gfcf t INSUR t-1 ) (-0.03) (-28) (01) (2.05) (1.67) INSUR t = GFCF t INSUR t (gfcf t INSUR t-1 ) (46) (-09) (15) (-0.83) (1.67) The results show that there is a long term causality effect from INSUR to GDP and also both a short and long term effects from INSUR to GFCF. It seems that only the insurance market show conclusive evidence of finance causes growth. The IRF shows that GDP and GFCF respond positively to a one standard deviation shock in INSUR but the respond the other way round is much weaker. 10

11 R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s R e s p o n s e o f G D P t o G D P R e s p o n s e o f G D P t o I N S U R R e s p o n s e o f I N S U R t o G D P R e s p o n s e o f I N S U R t o I N S U R R e s p o n s e t o C h o l e s k y O n e S. D. I n n o v a t i o n s.06 R e s p o n s e o f G F C F t o G F C F.06 R e s p o n s e o f G F C F t o I N S U R R e s p o n s e o f I N S U R t o G F C F R e s p o n s e o f I N S U R t o I N S U R

12 6. Summary and Concluding Remarks The main purpose of this paper is to discern the causal relationship (in the Granger sense) between financial indicators and growth indicators in the Singapore economy. The methodology involves using ADF test for unit roots and Johansen's test for cointegration, followed by either unrestricted vector autoregression (if cointegration is absent) or vector error-correction model (if cointegration is present). The impulse response functions are also constructed to further capture the out-of-sample Granger causality. The evidence suggests that in the presence of cointegration, the causality usually occurs in the long run dynamics (the lagged error correction term). There are fewer cases where causality solely occurs in the short run dynamics. This suggests that the relationship between finance and growth is more likely to be a long term one. Thus it is important to determine whether unrestricted VAR or VECM framework should be used in the causality studies. The evidence from the IRF is largely consistent with the within sample Granger causality test, thus enhances the conclusions obtained from the former. This study did support the role of insurance market and stock market (over the long term) in promoting economic growth. But it is more likely that the commercial banks responsive passively to economic development to the need of enterprises, as predicted by Robinson (1952). This contrasts with the evidences obtained by Murinde and Eng (1994) and also by Fase and Abma (2003) which support the supply leading role. The differences could be attributed to the use of disaggregated financial data since our methodology is quite similar. This highlights the value of using suitable disaggregated data in the study of financial development and economic growth as suggested by Pagano (1993). Another obvious outcome from the research is that the results are very much dependent on the indicator used. If only one type of growth or financial indicator is used in the study, the conclusion could be totally different. This also highlights the danger of deriving conclusions based on very few indicators in multi-countries study. As different countries have different institutional characteristics and policies, the pathway which finance and growth affecting each other could be different. One should analyze the institutional characteristics of each country and select the appropriate financial indicators in a multi-countries study. 12

13 References Ahmed, S.M. and Ansari, M.I., Financial Sector Development and Economic Growth: The South-Asian Experience, Journal of Asian Economics, 9 (1998), Arestis, P. and Demetriades, P., "Financial Development and Economic Growth: Assessing the Evidence," The Economic Journal, 197 (1997), Bell, C. and Rousseau, P.L., "Post-independence India: A Case of Finance-led Industralization?" Journal of Development Economics, 65 (2001) Bencivenga, V.R. and Smith, B.D., Financial Intermediation and Endogenous Growth, Review of Economic Studies, 58 (1991), Demetriades, P. O., and Hussein, K. A., Does Financial Development Cause Economic Growth? Time-series Evidence From 16 Countries, Journal of Development Economics, 51 (1996), Engle, R.E. and Granger, C.W.J., "Cointegration and Error-Correction: Representation, Estimation, and Testing," Econometrica, 55 (1987) Fase, M.M.G., and Abma, R.C.N., "Financial Environment and Economic Growth in Selected Asian Countries," Journal of Asian Economics,14 (2003), Granger, C.W.J., "Some Recent Developments in a concept of Causality," Journal of Econometrics, 39 (1988), Greenwood, J. and Jovanovic, B., "Financial Development, Growth and the Distribution of Income," Journal of Political Economy, 98 (1990), Harris, R.D.F., "Stock Markets and Development: A Re-assessment," European Economic Review, 41(1997), Johansen, S., "Statistical Analysis of Cointegrating Vectors," Journal of Economic Dynamics and Control, 12 (1988), Johansen, S. and Juselius, K., "Maximum Likelihood Estimation and Inference on Cointegration with Application to the Demand for Money," Oxford Bulletin of Economics and Statistics, 52 (1990), Jung, W.S., Financial Development and Economic Growth : International Evidence, Economic Development and Cultural Change, 34 (1986), King, R.G., and Levine R., Finance, Entrepreneurship, and Growth: Theory and Evidence, Journal of Monetary Economics, 32 (1993a),

14 King, R.G., and Levine R., Finance and Growth: Schumpeter Might Be Right, Quarterly Journal of Economics, 108 (1993b), Levine R., "Stock Market, Growth, and Tax Policy," Journal of Finance, 46 (1991), Levine, R., "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, 35 (1997), Levine, R. and Zervos, S., Stock Markets, Banks, and Economic Growth, American Economic Review, 88, (1998), Lucas, R.E., On the Mechanics of Economic Development, Journal of Monetary Economics, 22 (1988), Masih, R. and Masih, A.M.M., "Macroeconomic Activity Dynamics and Granger Causality: New evidence from a Small Developing Economy Based on a Vector Errorcorrection Modelling Analysis," Economic Modelling, 13 (1996), Murinde, V. and Eng, F.S.H., Financial Development and Economic Growth in Singapore: Demand-following or Supply-leading? Applied Financial Economics, 4 (1994), Pagano, M., Financial Markets and Growth: An Overview, European Economic Review, 37 (1993), Robinson, J., "The Generalisation of the General Theory," in The Rate of Interest and Other Essays, London: Macmillan, (1952). Rousseau, P.L., "Finance, Investment, and Growth in Meiji-era Japan," Japan and the World Economy, 11 (1999) Rousseau, P.L. and Wachtel, P., "Financial Intermediation and Economic Performance: Historical Evidence from Five Industrial Countries," Journal of Money, Credit and Banking, 30 (1998), Schumpeter, J.A., The Theory of Economic Development, Cambridge: Harvard University Press, (1911). Sims, C.A., Stock, J.H. and Watson, M.W., "Inference in Linear Time Series with Some Unit Roots," Econometrica, 58 (1990), Solow, R.M., "A Contribution to the Theory of Economic Growth," Quarterly Journal of Economics, 70 (1956),

15 Toda, H. and Phillips, P.C.B., "Vector Autoregressions and Causality," Econometrica, 61(1993) Wachtel, P. and Rousseau, P.L., "Financial Intermediation and Economic Growth: A Historical Comparison of the United States, United Kingdom and Canada," In Anglo- Americal Financial System: Institutions and Markets in the Twentieth Century, Edited by Bordo, M.D. and Sylla, R., pp , New York: Irwin,

THE EFFECT OF MONETARY GROWTH VARIABILITY ON THE INDONESIAN CAPITAL MARKET

THE EFFECT OF MONETARY GROWTH VARIABILITY ON THE INDONESIAN CAPITAL MARKET 116 THE EFFECT OF MONETARY GROWTH VARIABILITY ON THE INDONESIAN CAPITAL MARKET D. Agus Harjito, Bany Ariffin Amin Nordin, Ahmad Raflis Che Omar Abstract Over the years studies to ascertain the relationship

More information

ENDOGENOUS GROWTH MODELS AND STOCK MARKET DEVELOPMENT: EVIDENCE FROM FOUR COUNTRIES

ENDOGENOUS GROWTH MODELS AND STOCK MARKET DEVELOPMENT: EVIDENCE FROM FOUR COUNTRIES ENDOGENOUS GROWTH MODELS AND STOCK MARKET DEVELOPMENT: EVIDENCE FROM FOUR COUNTRIES Guglielmo Maria Caporale, South Bank University London Peter G. A Howells, University of East London Alaa M. Soliman,

More information

TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND

TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND I J A B E R, Vol. 13, No. 4, (2015): 1525-1534 TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND Komain Jiranyakul * Abstract: This study

More information

Energy consumption and GDP: causality relationship in G-7 countries and emerging markets

Energy consumption and GDP: causality relationship in G-7 countries and emerging markets Ž. Energy Economics 25 2003 33 37 Energy consumption and GDP: causality relationship in G-7 countries and emerging markets Ugur Soytas a,, Ramazan Sari b a Middle East Technical Uni ersity, Department

More information

Financial Integration of Stock Markets in the Gulf: A Multivariate Cointegration Analysis

Financial Integration of Stock Markets in the Gulf: A Multivariate Cointegration Analysis INTERNATIONAL JOURNAL OF BUSINESS, 8(3), 2003 ISSN:1083-4346 Financial Integration of Stock Markets in the Gulf: A Multivariate Cointegration Analysis Aqil Mohd. Hadi Hassan Department of Economics, College

More information

The price-volume relationship of the Malaysian Stock Index futures market

The price-volume relationship of the Malaysian Stock Index futures market The price-volume relationship of the Malaysian Stock Index futures market ABSTRACT Carl B. McGowan, Jr. Norfolk State University Junaina Muhammad University Putra Malaysia The objective of this study is

More information

Does Capital Market Development Predict Investment Behaviors in a Developing Country? --- Evidence from Nigeria

Does Capital Market Development Predict Investment Behaviors in a Developing Country? --- Evidence from Nigeria Journal of Contemporary Management Submitted on 15/December/2011 Article ID: 1929-0128-2012-01-27-08 Okey O. Ovat Does Capital Market Development Predict Investment Behaviors in a Developing Country? ---

More information

IS THERE A LONG-RUN RELATIONSHIP

IS THERE A LONG-RUN RELATIONSHIP 7. IS THERE A LONG-RUN RELATIONSHIP BETWEEN TAXATION AND GROWTH: THE CASE OF TURKEY Salih Turan KATIRCIOGLU Abstract This paper empirically investigates long-run equilibrium relationship between economic

More information

The VAR models discussed so fare are appropriate for modeling I(0) data, like asset returns or growth rates of macroeconomic time series.

The VAR models discussed so fare are appropriate for modeling I(0) data, like asset returns or growth rates of macroeconomic time series. Cointegration The VAR models discussed so fare are appropriate for modeling I(0) data, like asset returns or growth rates of macroeconomic time series. Economic theory, however, often implies equilibrium

More information

Testing for Granger causality between stock prices and economic growth

Testing for Granger causality between stock prices and economic growth MPRA Munich Personal RePEc Archive Testing for Granger causality between stock prices and economic growth Pasquale Foresti 2006 Online at http://mpra.ub.uni-muenchen.de/2962/ MPRA Paper No. 2962, posted

More information

COINTEGRATION AND CAUSAL RELATIONSHIP AMONG CRUDE PRICE, DOMESTIC GOLD PRICE AND FINANCIAL VARIABLES- AN EVIDENCE OF BSE AND NSE *

COINTEGRATION AND CAUSAL RELATIONSHIP AMONG CRUDE PRICE, DOMESTIC GOLD PRICE AND FINANCIAL VARIABLES- AN EVIDENCE OF BSE AND NSE * Journal of Contemporary Issues in Business Research ISSN 2305-8277 (Online), 2013, Vol. 2, No. 1, 1-10. Copyright of the Academic Journals JCIBR All rights reserved. COINTEGRATION AND CAUSAL RELATIONSHIP

More information

Examining the Relationship between ETFS and Their Underlying Assets in Indian Capital Market

Examining the Relationship between ETFS and Their Underlying Assets in Indian Capital Market 2012 2nd International Conference on Computer and Software Modeling (ICCSM 2012) IPCSIT vol. 54 (2012) (2012) IACSIT Press, Singapore DOI: 10.7763/IPCSIT.2012.V54.20 Examining the Relationship between

More information

On the long run relationship between gold and silver prices A note

On the long run relationship between gold and silver prices A note Global Finance Journal 12 (2001) 299 303 On the long run relationship between gold and silver prices A note C. Ciner* Northeastern University College of Business Administration, Boston, MA 02115-5000,

More information

DEPARTMENT OF ECONOMICS CREDITOR PROTECTION AND BANKING SYSTEM DEVELOPMENT IN INDIA

DEPARTMENT OF ECONOMICS CREDITOR PROTECTION AND BANKING SYSTEM DEVELOPMENT IN INDIA DEPARTMENT OF ECONOMICS CREDITOR PROTECTION AND BANKING SYSTEM DEVELOPMENT IN INDIA Simon Deakin, University of Cambridge, UK Panicos Demetriades, University of Leicester, UK Gregory James, University

More information

Testing The Quantity Theory of Money in Greece: A Note

Testing The Quantity Theory of Money in Greece: A Note ERC Working Paper in Economic 03/10 November 2003 Testing The Quantity Theory of Money in Greece: A Note Erdal Özmen Department of Economics Middle East Technical University Ankara 06531, Turkey ozmen@metu.edu.tr

More information

Does Insurance Promote Economic Growth? Evidence from the UK

Does Insurance Promote Economic Growth? Evidence from the UK Does Insurance Promote Economic Growth? Evidence from the UK Maurice Kugler and Reza Ofoghi * July 2005 Abstract The first conference of UNCTAD in 1964 acknowledged the development of national insurance

More information

EXPORT INSTABILITY, INVESTMENT AND ECONOMIC GROWTH IN ASIAN COUNTRIES: A TIME SERIES ANALYSIS

EXPORT INSTABILITY, INVESTMENT AND ECONOMIC GROWTH IN ASIAN COUNTRIES: A TIME SERIES ANALYSIS ECONOMIC GROWTH CENTER YALE UNIVERSITY P.O. Box 208269 27 Hillhouse Avenue New Haven, Connecticut 06520-8269 CENTER DISCUSSION PAPER NO. 799 EXPORT INSTABILITY, INVESTMENT AND ECONOMIC GROWTH IN ASIAN

More information

THE EFFECTS OF BANKING CREDIT ON THE HOUSE PRICE

THE EFFECTS OF BANKING CREDIT ON THE HOUSE PRICE THE EFFECTS OF BANKING CREDIT ON THE HOUSE PRICE * Adibeh Savari 1, Yaser Borvayeh 2 1 MA Student, Department of Economics, Science and Research Branch, Islamic Azad University, Khuzestan, Iran 2 MA Student,

More information

The Effect of Infrastructure on Long Run Economic Growth

The Effect of Infrastructure on Long Run Economic Growth November, 2004 The Effect of Infrastructure on Long Run Economic Growth David Canning Harvard University and Peter Pedroni * Williams College --------------------------------------------------------------------------------------------------------------------

More information

Population Growth and Economic Development: Empirical Evidence from the Philippines

Population Growth and Economic Development: Empirical Evidence from the Philippines Philippine Journal of Development Number 68, First Semester 2010 Volume XXXVII, No. 1 Population Growth and Economic Development: Empirical Evidence from the Philippines Fumitaka Furuoka 1 Abstract In

More information

An Empirical Investigation of the Causal Relationship among Monetary Variables and Equity Market Returns

An Empirical Investigation of the Causal Relationship among Monetary Variables and Equity Market Returns The Lahore Journal of Economics 14 : 1 (Summer 2009): pp. 115-137 An Empirical Investigation of the Causal Relationship among Monetary Variables and Equity Market Returns Arshad Hasan * and M. Tariq Javed

More information

Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach.

Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach. Is Infrastructure Capital Productive? A Dynamic Heterogeneous Approach. César Calderón a, Enrique Moral-Benito b, Luis Servén a a The World Bank b CEMFI International conference on Infrastructure Economics

More information

Chapter 6: Multivariate Cointegration Analysis

Chapter 6: Multivariate Cointegration Analysis Chapter 6: Multivariate Cointegration Analysis 1 Contents: Lehrstuhl für Department Empirische of Wirtschaftsforschung Empirical Research and und Econometrics Ökonometrie VI. Multivariate Cointegration

More information

ANALYSIS OF EUROPEAN, AMERICAN AND JAPANESE GOVERNMENT BOND YIELDS

ANALYSIS OF EUROPEAN, AMERICAN AND JAPANESE GOVERNMENT BOND YIELDS Applied Time Series Analysis ANALYSIS OF EUROPEAN, AMERICAN AND JAPANESE GOVERNMENT BOND YIELDS Stationarity, cointegration, Granger causality Aleksandra Falkowska and Piotr Lewicki TABLE OF CONTENTS 1.

More information

Chapter 4: Vector Autoregressive Models

Chapter 4: Vector Autoregressive Models Chapter 4: Vector Autoregressive Models 1 Contents: Lehrstuhl für Department Empirische of Wirtschaftsforschung Empirical Research and und Econometrics Ökonometrie IV.1 Vector Autoregressive Models (VAR)...

More information

Dynamics of Real Investment and Stock Prices in Listed Companies of Tehran Stock Exchange

Dynamics of Real Investment and Stock Prices in Listed Companies of Tehran Stock Exchange Dynamics of Real Investment and Stock Prices in Listed Companies of Tehran Stock Exchange Farzad Karimi Assistant Professor Department of Management Mobarakeh Branch, Islamic Azad University, Mobarakeh,

More information

The Relationship between Current Account and Government Budget Balance: The Case of Kuwait

The Relationship between Current Account and Government Budget Balance: The Case of Kuwait International Journal of Humanities and Social Science Vol. 2 No. 7; April 2012 The Relationship between Current Account and Government Budget Balance: The Case of Kuwait Abstract Ebrahim Merza Economics

More information

Why the saving rate has been falling in Japan

Why the saving rate has been falling in Japan MPRA Munich Personal RePEc Archive Why the saving rate has been falling in Japan Yoshiaki Azuma and Takeo Nakao January 2009 Online at http://mpra.ub.uni-muenchen.de/62581/ MPRA Paper No. 62581, posted

More information

The Engle-Granger representation theorem

The Engle-Granger representation theorem The Engle-Granger representation theorem Reference note to lecture 10 in ECON 5101/9101, Time Series Econometrics Ragnar Nymoen March 29 2011 1 Introduction The Granger-Engle representation theorem is

More information

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia

Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia Relationship between Commodity Prices and Exchange Rate in Light of Global Financial Crisis: Evidence from Australia Omar K. M. R. Bashar and Sarkar Humayun Kabir Abstract This study seeks to identify

More information

CHAPTER-6 LEAD-LAG RELATIONSHIP BETWEEN SPOT AND INDEX FUTURES MARKETS IN INDIA

CHAPTER-6 LEAD-LAG RELATIONSHIP BETWEEN SPOT AND INDEX FUTURES MARKETS IN INDIA CHAPTER-6 LEAD-LAG RELATIONSHIP BETWEEN SPOT AND INDEX FUTURES MARKETS IN INDIA 6.1 INTRODUCTION The introduction of the Nifty index futures contract in June 12, 2000 has offered investors a much greater

More information

Co-movements of NAFTA trade, FDI and stock markets

Co-movements of NAFTA trade, FDI and stock markets Co-movements of NAFTA trade, FDI and stock markets Paweł Folfas, Ph. D. Warsaw School of Economics Abstract The paper scrutinizes the causal relationship between performance of American, Canadian and Mexican

More information

The Long-Run Relation Between The Personal Savings Rate And Consumer Sentiment

The Long-Run Relation Between The Personal Savings Rate And Consumer Sentiment The Long-Run Relation Between The Personal Savings Rate And Consumer Sentiment Bradley T. Ewing 1 and James E. Payne 2 This study examined the long run relationship between the personal savings rate and

More information

The Impact of Foreign Direct Investment on the Growth of the Manufacturing Sector in Malaysia

The Impact of Foreign Direct Investment on the Growth of the Manufacturing Sector in Malaysia International Applied Economics and Management Letters 1(1): 41-45 (2008) The Impact of Foreign Direct Investment on the Growth of the Manufacturing Sector in Malaysia Hooi Hooi Lean Economics Program,

More information

The Impact of Macroeconomic Fundamentals on Stock Prices Revisited: Evidence from Indian Data

The Impact of Macroeconomic Fundamentals on Stock Prices Revisited: Evidence from Indian Data Eurasian Journal of Business and Economics 2012, 5 (10), 25-44. The Impact of Macroeconomic Fundamentals on Stock Prices Revisited: Evidence from Indian Data Pramod Kumar NAIK *, Puja PADHI ** Abstract

More information

A Trading Strategy Based on the Lead-Lag Relationship of Spot and Futures Prices of the S&P 500

A Trading Strategy Based on the Lead-Lag Relationship of Spot and Futures Prices of the S&P 500 A Trading Strategy Based on the Lead-Lag Relationship of Spot and Futures Prices of the S&P 500 FE8827 Quantitative Trading Strategies 2010/11 Mini-Term 5 Nanyang Technological University Submitted By:

More information

COURSES: 1. Short Course in Econometrics for the Practitioner (P000500) 2. Short Course in Econometric Analysis of Cointegration (P000537)

COURSES: 1. Short Course in Econometrics for the Practitioner (P000500) 2. Short Course in Econometric Analysis of Cointegration (P000537) Get the latest knowledge from leading global experts. Financial Science Economics Economics Short Courses Presented by the Department of Economics, University of Pretoria WITH 2015 DATES www.ce.up.ac.za

More information

The Causal Relationship between Producer Price Index and Consumer Price Index: Empirical Evidence from Selected European Countries

The Causal Relationship between Producer Price Index and Consumer Price Index: Empirical Evidence from Selected European Countries The Causal Relationship between Producer Price Index and Consumer Price Index: Empirical Evidence from Selected European Countries Selçuk AKÇAY Afyon Kocatepe University, Faculty of Economics and Administrative

More information

The Role of Stock Market Development in Economic Growth: Evidence from Some Euronext Countries

The Role of Stock Market Development in Economic Growth: Evidence from Some Euronext Countries The Role of Stock Market Development in Economic Growth: Evidence from Some Euronext Countries Ake Boubakari (Corresponding author) Shanghai University of Finance and Economics PO. Box. 200083, Shanghai,

More information

Economic Growth Centre Working Paper Series

Economic Growth Centre Working Paper Series Economic Growth Centre Working Paper Series The Impact of Oil Price Fluctuations on Stock Markets in Developed and Emerging Economies by Thai-Ha LE and Youngho CHANG Economic Growth Centre Division of

More information

Dynamic Relationship between Interest Rate and Stock Price: Empirical Evidence from Colombo Stock Exchange

Dynamic Relationship between Interest Rate and Stock Price: Empirical Evidence from Colombo Stock Exchange International Journal of Business and Social Science Vol. 6, No. 4; April 2015 Dynamic Relationship between Interest Rate and Stock Price: Empirical Evidence from Colombo Stock Exchange AAMD Amarasinghe

More information

Does A Long-Run Relationship Exist between Agriculture and Economic Growth in Thailand?

Does A Long-Run Relationship Exist between Agriculture and Economic Growth in Thailand? Does A Long-Run Relationship Exist between Agriculture and Economic Growth in Thailand? Chalermpon Jatuporn (Corresponding author) Department of Applied Economics, National Chung Hsing University 250,

More information

Unit Labor Costs and the Price Level

Unit Labor Costs and the Price Level Unit Labor Costs and the Price Level Yash P. Mehra A popular theoretical model of the inflation process is the expectationsaugmented Phillips-curve model. According to this model, prices are set as markup

More information

An Empirical Study on the Relationship between Stock Index and the National Economy: The Case of China

An Empirical Study on the Relationship between Stock Index and the National Economy: The Case of China An Empirical Study on the Relationship between Stock Index and the National Economy: The Case of China Ming Men And Rui Li University of International Business & Economics Beijing, People s Republic of

More information

Jim Gatheral Scholarship Report. Training in Cointegrated VAR Modeling at the. University of Copenhagen, Denmark

Jim Gatheral Scholarship Report. Training in Cointegrated VAR Modeling at the. University of Copenhagen, Denmark Jim Gatheral Scholarship Report Training in Cointegrated VAR Modeling at the University of Copenhagen, Denmark Xuxin Mao Department of Economics, the University of Glasgow x.mao.1@research.gla.ac.uk December

More information

The Impact of Capital Expenditure in the Nigeria Public Sector on Economic Growth

The Impact of Capital Expenditure in the Nigeria Public Sector on Economic Growth 16 The Impact of Capital Expenditure in the Nigeria Public Sector on Economic Growth By VINCENT E. AGUNUWA Department of Banking and Finance, Delta State Polytechnic, Otefe Oghara. And JUDE O. NOMUOJA

More information

European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.5, No.30, 2013

European Journal of Business and Management ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.5, No.30, 2013 The Impact of Stock Market Liquidity on Economic Growth in Jordan Shatha Abdul-Khaliq Assistant Professor,AlBlqa Applied University, Jordan * E-mail of the corresponding author: yshatha@gmail.com Abstract

More information

Working Papers. Cointegration Based Trading Strategy For Soft Commodities Market. Piotr Arendarski Łukasz Postek. No. 2/2012 (68)

Working Papers. Cointegration Based Trading Strategy For Soft Commodities Market. Piotr Arendarski Łukasz Postek. No. 2/2012 (68) Working Papers No. 2/2012 (68) Piotr Arendarski Łukasz Postek Cointegration Based Trading Strategy For Soft Commodities Market Warsaw 2012 Cointegration Based Trading Strategy For Soft Commodities Market

More information

Impact of foreign portfolio investments on market comovements: Evidence from the emerging Indian stock market

Impact of foreign portfolio investments on market comovements: Evidence from the emerging Indian stock market Impact of foreign portfolio investments on market comovements: Evidence from the emerging Indian stock market Sunil Poshakwale and Chandra Thapa Cranfield School of Management, Cranfield University, Cranfield,

More information

Economic Globalization and its Impact on Poverty and Inequality: Evidence From Pakistan

Economic Globalization and its Impact on Poverty and Inequality: Evidence From Pakistan Economic Globalization and its Impact on Poverty and Inequality: Evidence From Pakistan Abid Hameed ECO-Trade and Development Bank Anila Nazir Fatima Jinnah Women University ABSTRACT Proponents of economic

More information

Implied volatility transmissions between Thai and selected advanced stock markets

Implied volatility transmissions between Thai and selected advanced stock markets MPRA Munich Personal RePEc Archive Implied volatility transmissions between Thai and selected advanced stock markets Supachok Thakolsri and Yuthana Sethapramote and Komain Jiranyakul Public Enterprise

More information

Normalization and Mixed Degrees of Integration in Cointegrated Time Series Systems

Normalization and Mixed Degrees of Integration in Cointegrated Time Series Systems Normalization and Mixed Degrees of Integration in Cointegrated Time Series Systems Robert J. Rossana Department of Economics, 04 F/AB, Wayne State University, Detroit MI 480 E-Mail: r.j.rossana@wayne.edu

More information

Economic Growth Centre Working Paper Series

Economic Growth Centre Working Paper Series Economic Growth Centre Woring Paper Series Oil and Gold Prices: Correlation or Causation? by Thai-Ha LE and Youngho CHANG Economic Growth Centre Division of Economics School of Humanities and Social Sciences

More information

THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN THE MANUFACTURING INDUSTRY OF MALAYSIA. Wong Hock Tsen *

THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN THE MANUFACTURING INDUSTRY OF MALAYSIA. Wong Hock Tsen * Journal of Economic Cooperation 26, 2 (2005) 91-110 THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN THE MANUFACTURING INDUSTRY OF MALAYSIA Wong Hock Tsen * Malaysia received, over the past decades, substantial

More information

THE U.S. CURRENT ACCOUNT: THE IMPACT OF HOUSEHOLD WEALTH

THE U.S. CURRENT ACCOUNT: THE IMPACT OF HOUSEHOLD WEALTH THE U.S. CURRENT ACCOUNT: THE IMPACT OF HOUSEHOLD WEALTH Grant Keener, Sam Houston State University M.H. Tuttle, Sam Houston State University 21 ABSTRACT Household wealth is shown to have a substantial

More information

The information content of lagged equity and bond yields

The information content of lagged equity and bond yields Economics Letters 68 (2000) 179 184 www.elsevier.com/ locate/ econbase The information content of lagged equity and bond yields Richard D.F. Harris *, Rene Sanchez-Valle School of Business and Economics,

More information

VI. Real Business Cycles Models

VI. Real Business Cycles Models VI. Real Business Cycles Models Introduction Business cycle research studies the causes and consequences of the recurrent expansions and contractions in aggregate economic activity that occur in most industrialized

More information

Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate?

Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate? Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate? Emily Polito, Trinity College In the past two decades, there have been many empirical studies both in support of and opposing

More information

TOURISM AS A LONG-RUN ECONOMIC GROWTH FACTOR: AN EMPIRICAL INVESTIGATION FOR GREECE USING CAUSALITY ANALYSIS. Nikolaos Dritsakis

TOURISM AS A LONG-RUN ECONOMIC GROWTH FACTOR: AN EMPIRICAL INVESTIGATION FOR GREECE USING CAUSALITY ANALYSIS. Nikolaos Dritsakis TOURISM AS A LONG-RUN ECONOMIC GROWTH FACTOR: AN EMPIRICAL INVESTIGATION FOR GREECE USING CAUSALITY ANALYSIS Nikolaos Dritsakis Department of Applied Informatics University of Macedonia Economics and Social

More information

Cointegration And Causality Analysis of Government Expenditure And Economic Growth In Nigeria

Cointegration And Causality Analysis of Government Expenditure And Economic Growth In Nigeria Cointegration And Causality Analysis of Government Expenditure And Economic Growth In Nigeria Chiawa, M. M, Torruam, J. T, Abur, C. C Abstract:- The study investigates government expenditure and economic

More information

Chapter 5: Bivariate Cointegration Analysis

Chapter 5: Bivariate Cointegration Analysis Chapter 5: Bivariate Cointegration Analysis 1 Contents: Lehrstuhl für Department Empirische of Wirtschaftsforschung Empirical Research and und Econometrics Ökonometrie V. Bivariate Cointegration Analysis...

More information

Non-Stationary Time Series andunitroottests

Non-Stationary Time Series andunitroottests Econometrics 2 Fall 2005 Non-Stationary Time Series andunitroottests Heino Bohn Nielsen 1of25 Introduction Many economic time series are trending. Important to distinguish between two important cases:

More information

Internet Appendix to Stock Market Liquidity and the Business Cycle

Internet Appendix to Stock Market Liquidity and the Business Cycle Internet Appendix to Stock Market Liquidity and the Business Cycle Randi Næs, Johannes A. Skjeltorp and Bernt Arne Ødegaard This Internet appendix contains additional material to the paper Stock Market

More information

Fiscal Deficit, Trade Deficit, and Financial Account Deficit: Triple Deficits Hypothesis with the U.S. Experience

Fiscal Deficit, Trade Deficit, and Financial Account Deficit: Triple Deficits Hypothesis with the U.S. Experience DEPARTMENT OF ECONOMICS ISSN 1441-5429 DISCUSSION PAPER 06/14 Fiscal Deficit, Trade Deficit, and Financial Account Deficit: Triple Deficits Hypothesis with the U.S. Experience Tuck Cheong TANG Abstract:

More information

How budget deficit and current account deficit are interrelated in Indian economy

How budget deficit and current account deficit are interrelated in Indian economy Theoretical and Applied Economics FFet al Volume XXIII (2016), No. 1(606), Spring, pp. 237-246 How budget deficit and current account deficit are interrelated in Indian economy U.J. BANDAY Jamia Millia

More information

Permanent Link: http://espace.library.curtin.edu.au/r?func=dbin-jump-full&local_base=gen01-era02&object_id=137679

Permanent Link: http://espace.library.curtin.edu.au/r?func=dbin-jump-full&local_base=gen01-era02&object_id=137679 Citation: Salim, Ruhul A. and Bloch, Harry. 2007. Business expenditures on R&D and trade performances in Australia: is there a link? Applied Economics. 41 (3): pp. 351-361. Additional Information: If you

More information

LONG-TERM DISABILITY CLAIMS RATES AND THE CONSUMPTION-TO-WEALTH RATIO

LONG-TERM DISABILITY CLAIMS RATES AND THE CONSUMPTION-TO-WEALTH RATIO C The Journal of Risk and Insurance, 2009, Vol. 76, No. 1, 109-131 LONG-TERM DISABILITY CLAIMS RATES AND THE CONSUMPTION-TO-WEALTH RATIO H. J. Smoluk ABSTRACT Aframeworkforlinkinglong-termdisability(LTD)claimsratestothemacroeconomy

More information

This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and

This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and education use, including for instruction at the authors institution

More information

FDI and Domestic Investment in Malaysia

FDI and Domestic Investment in Malaysia DOI: 10.7763/IPEDR. 2014. V76. 4 FDI and Domestic Investment in Malaysia Azlina Hanif 1+ and Suhanis Jalaluddin 2 1 Arshad Ayub Graduate Business School, Universiti Teknologi MARA, 40450 Shah Alam, Malaysia

More information

Business cycles and natural gas prices

Business cycles and natural gas prices Business cycles and natural gas prices Apostolos Serletis and Asghar Shahmoradi Abstract This paper investigates the basic stylised facts of natural gas price movements using data for the period that natural

More information

REASSESSMENT OF SUSTAINABILITY OF CURRENT ACCOUNT DEFICIT IN INDIA

REASSESSMENT OF SUSTAINABILITY OF CURRENT ACCOUNT DEFICIT IN INDIA South-Eastern Europe Journal of Economics 1 (2012) 67-79 REASSESSMENT OF SUSTAINABILITY OF CURRENT ACCOUNT DEFICIT IN INDIA AVIRAL KUMAR TIWARI * ICFAI University, Tripura Abstract In this study, we examined

More information

ijcrb.com INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS AUGUST 2014 VOL 6, NO 4

ijcrb.com INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS AUGUST 2014 VOL 6, NO 4 RELATIONSHIP AND CAUSALITY BETWEEN INTEREST RATE AND INFLATION RATE CASE OF JORDAN Dr. Mahmoud A. Jaradat Saleh A. AI-Hhosban Al al-bayt University, Jordan ABSTRACT This study attempts to examine and study

More information

The effect of Macroeconomic Determinants on the Performance of the Indian Stock Market

The effect of Macroeconomic Determinants on the Performance of the Indian Stock Market The effect of Macroeconomic Determinants on the Performance of the Indian Stock Market 1 Samveg Patel Abstract The study investigates the effect of macroeconomic determinants on the performance of the

More information

IIMK/WPS/155/ECO/2014/13. Kausik Gangopadhyay 1 Abhishek Jangir 2 Rudra Sensarma 3

IIMK/WPS/155/ECO/2014/13. Kausik Gangopadhyay 1 Abhishek Jangir 2 Rudra Sensarma 3 IIMK/WPS/155/ECO/2014/13 FORECASTING THE PRICE OF GOLD: AN ERROR CORRECTION APPROACH Kausik Gangopadhyay 1 Abhishek Jangir 2 Rudra Sensarma 3 1 Assistant Professor, Indian Institute of Management Kozhikode,

More information

THE MAIN DETERMINANTS OF ECONOMIC GROWTH: AN EMPIRICAL INVESTIGATION WITH GRANGER CAUSALITY ANALYSIS FOR GREECE. University of Macedonia

THE MAIN DETERMINANTS OF ECONOMIC GROWTH: AN EMPIRICAL INVESTIGATION WITH GRANGER CAUSALITY ANALYSIS FOR GREECE. University of Macedonia THE MAIN DETERMINANTS OF ECONOMIC GROWTH: AN EMPIRICAL INVESTIGATION WITH GRANGER CAUSALITY ANALYSIS FOR GREECE Nikolaos Dritsakis 1 Erotokritos Varelas 2 - Antonios Adamopoulos 1 1 Department of Applied

More information

How do oil prices affect stock returns in GCC markets? An asymmetric cointegration approach.

How do oil prices affect stock returns in GCC markets? An asymmetric cointegration approach. How do oil prices affect stock returns in GCC markets? An asymmetric cointegration approach. Mohamed El Hedi AROURI (LEO-Université d Orléans & EDHEC, mohamed.arouri@univ-orleans.fr) Julien FOUQUAU (ESC

More information

Fractionally integrated data and the autodistributed lag model: results from a simulation study

Fractionally integrated data and the autodistributed lag model: results from a simulation study Fractionally integrated data and the autodistributed lag model: results from a simulation study Justin Esarey July 1, 215 Abstract Two contributions in this issue, Grant and Lebo (215) and Keele, Linn

More information

Keywords: Baltic stock markets, unit root, Engle-Granger approach, Johansen cointegration test, causality, impulse response, variance decomposition.

Keywords: Baltic stock markets, unit root, Engle-Granger approach, Johansen cointegration test, causality, impulse response, variance decomposition. Department of Economics Master thesis January 28 Dynamic linkages between Baltic and International stock markets Author: Julija Moroza Supervisor: Hossein Asgharian Abstract 1 The fact is that high integration

More information

American University of Beirut Institute of Financial Economics

American University of Beirut Institute of Financial Economics American University of Beirut Institute of Financial Economics Lecture and Working Paper Series No. 3, 2004 Portfolio Diversification and Financial Integration of MENA Stock Markets Simon Neaime American

More information

IMPACT OF FOREIGN EXCHANGE RESERVES ON NIGERIAN STOCK MARKET Olayinka Olufisayo Akinlo, Obafemi Awolowo University, Ile-Ife, Nigeria

IMPACT OF FOREIGN EXCHANGE RESERVES ON NIGERIAN STOCK MARKET Olayinka Olufisayo Akinlo, Obafemi Awolowo University, Ile-Ife, Nigeria International Journal of Business and Finance Research Vol. 9, No. 2, 2015, pp. 69-76 ISSN: 1931-0269 (print) ISSN: 2157-0698 (online) www.theibfr.org IMPACT OF FOREIGN EXCHANGE RESERVES ON NIGERIAN STOCK

More information

Relationship between Stock Futures Index and Cash Prices Index: Empirical Evidence Based on Malaysia Data

Relationship between Stock Futures Index and Cash Prices Index: Empirical Evidence Based on Malaysia Data 2012, Vol. 4, No. 2, pp. 103-112 ISSN 2152-1034 Relationship between Stock Futures Index and Cash Prices Index: Empirical Evidence Based on Malaysia Data Abstract Zukarnain Zakaria Universiti Teknologi

More information

Business Cycles and Natural Gas Prices

Business Cycles and Natural Gas Prices Department of Economics Discussion Paper 2004-19 Business Cycles and Natural Gas Prices Apostolos Serletis Department of Economics University of Calgary Canada and Asghar Shahmoradi Department of Economics

More information

Revisiting Share Market Efficiency: Evidence from the New Zealand Australia, US and Japan Stock Indices

Revisiting Share Market Efficiency: Evidence from the New Zealand Australia, US and Japan Stock Indices American Journal of Applied Sciences 2 (5): 996-1002, 2005 ISSN 1546-9239 Science Publications, 2005 Revisiting Share Market Efficiency: Evidence from the New Zealand Australia, US and Japan Stock Indices

More information

Testing for Cointegrating Relationships with Near-Integrated Data

Testing for Cointegrating Relationships with Near-Integrated Data Political Analysis, 8:1 Testing for Cointegrating Relationships with Near-Integrated Data Suzanna De Boef Pennsylvania State University and Harvard University Jim Granato Michigan State University Testing

More information

Is the Basis of the Stock Index Futures Markets Nonlinear?

Is the Basis of the Stock Index Futures Markets Nonlinear? University of Wollongong Research Online Applied Statistics Education and Research Collaboration (ASEARC) - Conference Papers Faculty of Engineering and Information Sciences 2011 Is the Basis of the Stock

More information

The Various Facets of Credit Card Debt

The Various Facets of Credit Card Debt The Various Facets of Credit Card Debt Dr. William Chow 13 May, 2014 Executive Summary This paper looks at consumer borrowings using data of credit card debt and evaluates the various economic implications

More information

The Trade Balance Effects of U.S. Foreign Direct Investment in Mexico

The Trade Balance Effects of U.S. Foreign Direct Investment in Mexico The Trade Balance Effects of U.S. Foreign Direct Investment in Mexico PETER WILAMOSKI AND SARAH TINKLER* This paper examines the effect of U.S. foreign direct investment (FDI) in Mexico on U.S. exports

More information

The Relationships between Economic Growth and Environmental Pollution Based on Time Series Data:An Empirical Study of Zhejiang Province

The Relationships between Economic Growth and Environmental Pollution Based on Time Series Data:An Empirical Study of Zhejiang Province Journal of Cambridge Studies 33 The Relationships between Economic Growth and Environmental Pollution Based on Time Series Data:An Empirical Study of Zhejiang Province Lixia YANG 1 Shaofeng YUAN 2 * Le

More information

SUSTAINABILITY OF THE US CURRENT ACCOUNT DEFICIT: AN ECONOMETRIC ANALYSIS OF THE IMPACT OF CAPITAL INFLOW ON DOMESTIC ECONOMY

SUSTAINABILITY OF THE US CURRENT ACCOUNT DEFICIT: AN ECONOMETRIC ANALYSIS OF THE IMPACT OF CAPITAL INFLOW ON DOMESTIC ECONOMY Journal of Applied Economics, Vol. VII, No. 2 (Nov 2004), 249-269 SUSTAINABILITY OF THE US CURRENT ACCOUNT DEFICIT 249 SUSTAINABILITY OF THE US CURRENT ACCOUNT DEFICIT: AN ECONOMETRIC ANALYSIS OF THE IMPACT

More information

CARDIFF BUSINESS SCHOOL WORKING PAPER SERIES

CARDIFF BUSINESS SCHOOL WORKING PAPER SERIES CARDIFF BUSINESS SCHOOL WORKING PAPER SERIES Cardiff Economics Working Papers Lucun Yang An Empirical Analysis of Current Account Determinants in Emerging Asian Economies E2011/10 Cardiff Business School

More information

Do Heating Oil Prices Adjust Asymmetrically To Changes In Crude Oil Prices Paul Berhanu Girma, State University of New York at New Paltz, USA

Do Heating Oil Prices Adjust Asymmetrically To Changes In Crude Oil Prices Paul Berhanu Girma, State University of New York at New Paltz, USA Do Heating Oil Prices Adjust Asymmetrically To Changes In Crude Oil Prices Paul Berhanu Girma, State University of New York at New Paltz, USA ABSTRACT This study investigated if there is an asymmetric

More information

THE IMPACT OF EXCHANGE RATE VOLATILITY ON BRAZILIAN MANUFACTURED EXPORTS

THE IMPACT OF EXCHANGE RATE VOLATILITY ON BRAZILIAN MANUFACTURED EXPORTS THE IMPACT OF EXCHANGE RATE VOLATILITY ON BRAZILIAN MANUFACTURED EXPORTS ANTONIO AGUIRRE UFMG / Department of Economics CEPE (Centre for Research in International Economics) Rua Curitiba, 832 Belo Horizonte

More information

TAX REVENUE AND EXPENDITURE - THE CAI@&

TAX REVENUE AND EXPENDITURE - THE CAI@& CHAPTER IV TAX REVENUE AND EXPENDITURE - THE CAI@& NEXUS The size of the government is influenced by both demand and supply factors of government spending. Among the demand factors, growth of population,

More information

Import and Economic Growth in Turkey: Evidence from Multivariate VAR Analysis

Import and Economic Growth in Turkey: Evidence from Multivariate VAR Analysis Journal of Economics and Business Vol. XI 2008, No 1 & No 2 Import and Economic Growth in Turkey: Evidence from Multivariate VAR Analysis Ahmet Uğur, Inonu University Abstract This study made an attempt

More information

Interest Rate and Loan Supply: Islamic Versus Conventional Banking System

Interest Rate and Loan Supply: Islamic Versus Conventional Banking System Jurnal kollomi Malaysia 35 (2001) 61-68 Interest Rate and Loan Supply: Islamic Versus Conventional Banking System Liza Marwati Mohd Yusoff Aisyah Abdul Rahman Norazlan Alias ABSTRACT This paper attempts

More information

Chapter 1. Vector autoregressions. 1.1 VARs and the identi cation problem

Chapter 1. Vector autoregressions. 1.1 VARs and the identi cation problem Chapter Vector autoregressions We begin by taking a look at the data of macroeconomics. A way to summarize the dynamics of macroeconomic data is to make use of vector autoregressions. VAR models have become

More information

Money Supply, Interest Rate, Liquidity and Share Prices: A Test of Their Linkage

Money Supply, Interest Rate, Liquidity and Share Prices: A Test of Their Linkage Money Supply, Interest Rate, Liquidity and Share Prices: A Test of Their Linkage Tin-fah Chung, M. Ariff and Shamsher M. University Putra Malaysia, Bond University Australia and INCEIF University Mohamed

More information

Are the US current account deficits really sustainable? National University of Ireland, Galway

Are the US current account deficits really sustainable? National University of Ireland, Galway Provided by the author(s) and NUI Galway in accordance with publisher policies. Please cite the published version when available. Title Are the US current account deficits really sustainable? Author(s)

More information

PITFALLS IN TIME SERIES ANALYSIS. Cliff Hurvich Stern School, NYU

PITFALLS IN TIME SERIES ANALYSIS. Cliff Hurvich Stern School, NYU PITFALLS IN TIME SERIES ANALYSIS Cliff Hurvich Stern School, NYU The t -Test If x 1,..., x n are independent and identically distributed with mean 0, and n is not too small, then t = x 0 s n has a standard

More information

Relationships between loans granted and interest spreads in the UK: Empirical research on panel data from 2004 2011

Relationships between loans granted and interest spreads in the UK: Empirical research on panel data from 2004 2011 Relationships between loans granted and interest spreads in the UK: Empirical research on panel data from 2004 2011 Tomáš Heryán Silesian University in Opava School of Business Administration in Karviná

More information