Asymmetric Causality Research Articles

Investigating the asymmetry between economic growth and unemployment in Turkey: a hidden cointegration approach

Purpose- The purpose of this study is to investigate whether there is an asymmetric relationship between economic growth and unemployment in Turkey. Methodology- In assessing this relationship, quarterly unemployment rate and GDP data for the period between 2000-2019 were examined. Assessment of the relationship between these variables (aggregate values) was first analyzed using a Johansen cointegration test based on a system approach. While no evidence of a cointegration relationship was found, the possibility of a hidden cointegration was assessed and these variables were decomposed into positive and negative values as suggested by Granger and Yoon (2002). The asymmetric causality relationship between these variables was then evaluated using the decomposition process approach suggested by Hatemi-J and Irandoust (2012) approach. Findings- The results of this research demonstrate an asymmetric cointegration and an asymmetric one-way causality relationship between these variables. Conclusion- The fact that the unemployment that emerged during the contraction periods of the economy did not recover even after the economy transitioned to an expansion phase demonstrates the critical importance of the economic policies that should be implemented in times of crisis

Asymmetric causality between stock returns and usual hedges: An industry-level analysis

Assets such as gold, silver, government bonds are widely considered good hedges against adverse movements in the stock market. At times, market participants move between these markets in order to hedge against any immediate risks. The shifts from one market to another likely create a dynamic relationship between the stock market and other assets. We investigate short-run and long-run causality between the industry returns and the prices of the four assets: gold, silver, oil, and 10-year Treasury bonds. Using symmetric and asymmetric Granger causality, we try to identify different industries within the S&P500 that are caused by movement in the prices of these four assets. Although we were able to find short-run and long-run bidirectional causality between the four asset prices and share returns in many industries, our findings are industry-specific. We discover overwhelming and robust evidence of symmetric and asymmetric causality between 10-Year Treasury yield and returns of almost all 18 industries we considered.

Healthcare expenditure and carbon footprint in the USA: evidence from hidden cointegration approach.

The priority aim of this study is to investigate the effect of carbon footprint, which is an indicator of environmental degradation, on health expenditures for the USA. In the study, cointegration analysis was performed for the period 1970-2016 by using health expenditures, carbon footprint, gross domestic product per capita and life expectancy at birth variables. According to the results of standard cointegration analysis, only cointegration relationship between health expenditures and income was found. In the models with carbon footprint, no cointegration relationship was discovered between the original values of the variables. This result was approached with suspicion, and it was thought that there might be a hidden cointegration between healthcare expenditures and carbon footprint. For this purpose, the hidden cointegration analysis and crouching error correction model proposed by Granger and Yoon [18] were employed among the positive and negative components of the variables of healthcare expenditures and carbon footprint. The results of the hidden cointegration analysis revealed that there was a hidden cointegration relationship between the positive components of healthcare expenditures and the positive components of carbon footprint. Analysis results show that a 1% increase in carbon footprint will cause a 2.04% increase in healthcare expenditures in the long term in the USA. When the positive components of the variables were considered, it was concluded that there was a one-way long-term asymmetric causality relationship between carbon footprint and healthcare expenditures. As a result of the study, it was proposed that the carbon footprint should be diminished to prevent the increasing burden of the healthcare expenditures on the budget.

The Nexus Between Electricity Consumption, Economic Growth, and CO2 Emission: An Asymmetric Analysis Using Nonlinear ARDL and Nonparametric Causality Approach

This article examines the asymmetric relationship between electric consumption, economic growth, and carbon dioxide emission in 15 countries over the period 1971–2014. We employed a nonlinear auto-regressive distribution Lag (NARDL) model approach to investigate the asymmetric cointegration between variables. Additionally, we applied the asymmetric causality approach to determine the causal relationship between variables. Results confirm nonlinear cointegration between variables in Cameroon, Congo Republic, Zambia, Canada, and the UK. The Wald test results confirm a long-run asymmetric link between electricity consumption, economic growth, and carbon emission in Canada and Cameroon, while a short-run asymmetric effect in the Congo Republic and the UK. Findings from the granger causality test are volatile across variables. The result provides strong support for the symmetric relationship between electric consumption, economic growth, and carbon emission in the short and long run. This study provides new evidence for policymakers to formulate country-specific policies to obtain better environmental quality while achieving sustainable economic growth.

Economic growth, renewable and nonrenewable energy consumption nexus in India

PurposeThe purpose of this paper is to examine the nexus among economic growth, nonrenewable energy consumption and renewable energy consumption in India over the period 1971-2017.Design/methodology/approachThis study uses nonlinear autoregressive distributed lags model and asymmetric causality test to explore nonlinearities in the dynamic interaction among the variables.FindingsThe findings indicate that the impact of nonrenewable energy consumption and renewable energy consumption on the economic growth is asymmetric in both long run and short run. In long run, a positive shock in nonrenewable energy consumption and renewable energy consumption exerts a positive impact on growth. However, the negative shocks in nonrenewable energy consumption produce larger negative effects on the growth. The results of nonlinear causality test indicate a unidirectional causality from nonrenewable energy consumption and renewable energy consumption to economic growth and thus support “growth hypothesis” in context of India.Practical implicationsThe findings imply that policy measures to discourage nonrenewable energy consumption may produce deflationary effects on economic growth in India. Further, the findings demonstrate the potential role of renewable energy consumption in promoting economic growth.Originality/valueTo the best of the authors’ knowledge, this study is the first attempt to explore nonlinearities in the relationship between economic growth and the components of energy consumption in terms of renewable and nonrenewable energy consumption.

Asymmetric impact of energy consumption and economic growth on ecological footprint: Using asymmetric and nonlinear approach

The main objective of this article is to examine the impacts of energy consumption and economic growth on environmental quality in Pakistan. We use the ecological footprint (environmental quality) as a target variable, the control variables of gross domestic products are a proxy of economic growth, and energy consumption and gross fixed capital formation are proxies of capital from 1971 to 2014. For this purpose, a unit root test with break dates is employed for a stationary check, and a BDS test is used for nonlinearity. The nonlinear autoregressive distributed lag approach is employed to assess the asymmetric co-integration among the variables. These results confirm the asymmetric co-integration among the variables. The asymmetric causality technique is also applied to scrutinize the causal link between the variables. The asymmetric feedback effect is observed between positive shocks to environmental quality and energy consumption, and symmetrically, environmental quality causes energy consumption. By contrast, the neutral effect is observed among environmental quality, economic growth, and capital. Based on these findings, current energy portfolios should be diversified by either enhancing or incorporating renewable energy technologies, and this is indispensable to support the existing successful strides of environmental policies. Thus, policymakers must buttress their commitments to reduce emissions by sustaining and decarbonizing the trajectory of economic growth.

Saving, Financial Development and Economic Growth Nexus in Turkey: New Evidence from Asymmetric Causality Analysis

Bu çalışmanın amacı, Türkiye ekonomisi için tasarruf, finansal gelişme ve ekonomik büyüme arasındaki dinamik nedensellik ilişkilerini analiz etmektir. Bunun için 1980:Q1–2015:Q4 dönemine ait veriler kullanılarak zaman serisi nedensellik testlerinden yararlanılmıştır. Granger nedensellik analizi sonuçları finansal gelişme ve ekonomik büyüme arasında çift yönlü nedensellik olduğunu gösterirken, Toda ve Yamamoto nedensellik analizi finansal gelişmeden ekonomik büyümete tek yönlü nedensellik olduğunu ortaya koymaktadır. Asimetrik nedensellik analizi bulgularına göre, finansal gelişmeden tasarruflar ve ekonomik büyümeye ve ayrıca tasarruflardan da ekonomik büyümeye doğru nedensellik olduğuna işaret etmektedir. Bu bulgu, Türkiye üzerine olan literatüre yeni bir bilgi sunmakta ve literatürü böylece genişletmektedir.

The foreign exchange and stock market nexus: New international evidence

This study attempts to re-examine the exchange rate-stock price nexus for a group of advanced and emerging countries. To this end, we employ the symmetric and asymmetric bootstrap panel Granger non-causality tests, which allows us to untangle the symmetric and asymmetric causations between exchange rates and stock prices under considerations of the cross-sectional dependence and asymmetry of the data at the same time. Among the main results, it is found that, first, the stock prices are helpful for predicting the exchange rates, but not vice versa. Second, the results show weak evidence in support of unidirectional asymmetric causality running from exchange rates to stock prices, and vice versa. Third, the empirical results of the Hatemi-J (2012) symmetric panel Granger non-causality tests show that there is a causation from stock prices to exchange rates, and vice versa. The hypotheses of the Hatemi-J asymmetric panel Granger non-causality from stock prices to exchange rates or from exchange rates to stock prices are not rejected, which are in line with the Emirmahmutoglu and Kose (2011) test. Fourth, when we adopt the raw data to conduct the Emirmahmutoglu and Kose (2011) test, the causal relations are in line with the results using the log of data. Moreover, by using the raw data, the causal relations predicted by using the Hatemi-J (2012) panel Granger non-causality test echo the causal relations predicted by using the Emirmahmutoglu and Kose (2011) test.

Seeking causality between liquidity risk and credit risk: TED-OIS spreads and CDS indexes

Since the Global Financial Crisis, credit risk and its management have become one of the most appealing topics in finance literature. In this study, we investigate the interaction of credit risk and liquidity risk through the TED and the OIS spreads and various credit default swap indexes from the CDX and the iTraxx family (CDXIG, CDXHY, ITEEU, and ITEXO). The empirical analysis is conducted through the Kapetanios unit root test, the EGARCH model, the Bootstrap Toda-Yamamoto modified Wald test and the asymmetric causality analysis. The results of symmetric and asymmetric causality methods reveal that liquidity risk appears to play an important role in credit risk, and in most cases, the TED and the OIS spreads dominate the CDS indexes. It can, thus, be concluded that the TED and the OIS spreads are superior to the CDS indexes as an early warning indicator in the credit market.

Clean energy consumption and economic growth nexus: asymmetric time and frequency domain causality testing in China

ABSTRACT This article examines the symmetric and asymmetric causal relationships between clean energy consumption and economic growth in time and frequency domains for China. The results of both symmetric and asymmetric causality analysis suggest that clean energy consumption does not cause economic growth. This implies that the level of clean energy consumption in China seems to be optimal and beyond this level, it does not affect the growth level of the country. However, examination of the causality linkage from economic growth to clean energy consumption indicates medium and long-run evidence of a frequency-based symmetric causal relationship. Our asymmetric analysis makes this relation clearer such that only the adverse shocks to economic growth lead to a decline in the clean energy consumption level. This inference is complemented with the estimated causal parameter of 0.13, indicating that a 1% decrease in economic growth results in a 0.13% reduction in the level of clean energy consumption.

The impact of maritime transport costs on export and import rates by transport modes in Turkey

This study aims to determine the impact of price changes in maritime transport, which is one of the most important elements in international trade, on the monetary rate of transport mode usage of Turkey in export and import activities. The maritime transport cost items used are represented by China Containerized Freight Index (CCFI), Shanghai Containerized Freight Index (SCFI) and Istanbul Freight Index (ISTFIX). Asymmetric causality analysis is used to determine the causal relationships between the variables, which allows to determine causalities between the shocks by separating them as positive and negative. The data set used in this study covers the periods between November 2010 and July 2018 and consists of 93 monthly observations. According to the results obtained, there are significant asymmetric causalities from maritime transport costs to all modes of transport except for railway. These results play a complementary role in the related literature by providing an econometric determination of the importance of transportation costs in transportation mode selection decisions.

Asymmetric causality from commodity prices to shipping markets: an empirical research on ISTFIX region

Dry bulk shipping is influenced mainly by demand for commodities due to its derived demand structure. As one of the main determinants of the commodity demand is the price, interactions between commodity prices and freight rates are inevitable. However, the relevant literature is limited and information asymmetry is not taken into account. The aim of this study is to examine the asymmetric causality from the prices of the commodities mostly transported in Istanbul Freight Index (ISTFIX) region to the freight rates by method developed by Hatemi-J (2012a). The dataset consists of 122 monthly observations covering the dates between January 2008 and February 2018. The results reveal that positive and negative shocks in coal and steel prices are symmetrically causes of the positive and negative shocks in ISTFIX while negative shocks in wheat prices are cause of positive shocks in the index, and positive shocks in the commodity are the causes of negative shocks in the index.

Nexus between Economic Volatility, Trade Openness and FDI: An Application of ARDL, NARDL and Asymmetric Causality

The motivation behind this study is to examine whether regional economic volatility and trade openness has influenced the pattern of foreign direct investment (FDI) inflows in select South Asian countries during the period 1975–2019. In order to do so, we applied several nonlinear tests, including the unit root test, ordinary least squares (OLS) test, autoregressive distributed lag (NARDL) test, and causality test. The findings of the nonlinear unit root test suggested that the variables are stationary at the first deviation, following nonlinear systems. Furthermore, the presence of nonlinearity in empirical estimations has been proven through nonlinear OLS and Brock Dechert Scheinkman (BDS) tests. Referring to the results of the Wald test with NARDL, a long-term asymmetrical relationship between the research variables has been confirmed, and long-term and short-term asymmetry was also observed in all tested empirical models. Furthermore, the results of the study on directional causality and asymmetric assumption support the feedback hypothesis in explaining the directional causality between regional economic volatility, trade openness, and inflows of FDI.

The impact of maritime transport costs on export and import rates by transport modes in Turkey

This study aims to determine the impact of price changes in maritime transport, which is one of the most important elements in international trade, on the monetary rate of transport mode usage of Turkey in export and import activities. The maritime transport cost items used are represented by China Containerized Freight Index (CCFI), Shanghai Containerized Freight Index (SCFI) and Istanbul Freight Index (ISTFIX). Asymmetric causality analysis is used to determine the causal relationships between the variables, which allows to determine causalities between the shocks by separating them as positive and negative. The data set used in this study covers the periods between November 2010 and July 2018 and consists of 93 monthly observations. According to the results obtained, there are significant asymmetric causalities from maritime transport costs to all modes of transport except for railway. These results play a complementary role in the related literature by providing an econometric determination of the importance of transportation costs in transportation mode selection decisions.

Asymmetric causality from commodity prices to shipping markets: an empirical research on ISTFIX region

Dry bulk shipping is influenced mainly by demand for commodities due to its derived demand structure. As one of the main determinants of the commodity demand is the price, interactions between commodity prices and freight rates are inevitable. However, the relevant literature is limited and information asymmetry is not taken into account. The aim of this study is to examine the asymmetric causality from the prices of the commodities mostly transported in Istanbul Freight Index (ISTFIX) region to the freight rates by method developed by Hatemi-J (2012a). The dataset consists of 122 monthly observations covering the dates between January 2008 and February 2018. The results reveal that positive and negative shocks in coal and steel prices are symmetrically causes of the positive and negative shocks in ISTFIX while negative shocks in wheat prices are cause of positive shocks in the index, and positive shocks in the commodity are the causes of negative shocks in the index.

Relationship between Oil Prices and Economic Growth in GCC Countries

This study explores the relations between Oil Prices (OP) and Gross Domestic Product (GDP) per capita in Gulf Cooperation Council (GCC) countries using the asymmetric causality test for the period of 1996-2018. The results of the standard bootstrap causality test reveal bidirectional causality between the OP and the GDP per capita in Qatar and Saudi Arabia. The results of asymmetric causality tests are different for some countries, which demonstrate the unidirectional causality running from OP+ to GDP+ in Oman and Saudi Arabia. Whereas, the bidirectional causality exists between the GDP- and OP- in Kuwait and Oman and unidirectional causality exists between the OP- and the GDP- per capita in Bahrain, Qatar, and UAE. The results support the Real Business Cycle Theory (RBC Theory), which states that external positive or negative shocks have significant impact on GDP per capita through consumption and investment channels. GCC countries should channelize the huge revenues towards other private sectors, which will create more prospects for the GDP and will provide substitution in case of arising any crisis. In addition, the GCC countries must diversify their economic activities since the OP are quite volatile and uncertain and the revenues of these countries are dependent on the OP to a large extent. Sustainable development can be achieved through a balanced path between government expenditures and future savings.

Sektörel Güven Endeksleri ve BİST Sektör Endeksleri Arasındaki İlişkilerin Simetrik ve Asimetrik Nedensellik Analizi

Bu çalışmada Ocak 2011-Haziran 2019 dönemi için, güven ve borsa endeksleri arasındaki sektörel bazlı ilişkiler araştırılmaktadır. Finansal hizmet güven endeksi, hizmet sektörü güven endeksi, inşaat sektörü güven endeksi, perakende ticaret sektörü güven ve borsa endeksleri değişkenlerine ait aylık veriler, ilgili dönemde ilk olarak, Hacker ve Hatemi-J (2006) testiyle simetrik nedensellik, ikinci olarak, Hatemi-J (2012) testiyle asimetrik nedensellik ilişkisi açılarından incelenmiştir. Yapılan testler sonucunda edinilen bulgulara göre; Türkiye’de sektörel güven endeksleri ile ilgili Borsa İstanbul (BİST) sektör endeksleri arasında simetrik bir nedensellik ilişkinin varlığı tespit edilememiştir. Buna karşın, bu değişkenler arasında asimetrik bir nedensellik ilişkisi saptanmıştır. Diğer bir ifadeyle, sektörel güven endeksleri ile borsa sektör endeksleri arasında doğrudan bir nedensellik ilişkisi bulunmazken, bu değişkenlerin bileşenleri üzerinden bir nedensellik ilişkisi bulunmaktadır. Anahtar Kelimeler: Güven Endeksi, Borsa Sektör Endeksi, Simetrik Nedensellik, Asimetrik Nedensellik JEL Sınıflandırması: G19, G23, G40

Relationship between price and volume in the Bitcoin market

PurposeBitcoin has recently become the focal point of investors as a digital currency and an alternative payment method. Despite Bitcoin being in the spotlight, a gap in the literature on its price-setting behaviors has been observed. This study aims to contribute to the literature by investigating the relationship between Bitcoin price and volume in the period between January 1, 2012 and April 7, 2018 through a symmetric and asymmetric causality test.Design/methodology/approachDaily price and volume data relevant to Bitcoin traded in the Bitstamp market were obtained from www.bitcoincharts.com. Within the framework of data applicable for analysis, the data set for this study includes a total of 2,286 observations for the period between January 1, 2012 and April 7, 2018.FindingsBased on the results of the standard causality test, a causality relationship was determined from price to volume. Based on the results of the asymmetric causality test between positive and negative shocks of variables, a unilateral causality relationship was determined from negative shocks in Bitcoin prices to negative shocks in trading volume as well as from positive shocks in trading volume to positive shocks in prices. Furthermore, it was found that the relationship between Bitcoin price and volume is cointegrated.Practical implicationsThe empirical results can be used by investors and portfolio managers to make trading decisions.Originality/valueThe contribution of this paper to the literature is that it is the first study on the symmetric and asymmetric causality relationship between Bitcoin price and volume. Moreover, this paper reveals short- and long-term behaviors of Bitcoin using the cointegration test used for determining the long-term relationship between Bitcoin price and volume.

Should central banks use the currency futures market to manage spot volatility? Evidence from India

The Reserve Bank of India has declared a policy of intervening in the retail currency futures market to manage volatility in the over-the-ounter (OTC) currency spot market, indicating its belief of underlying linkages between these two markets. This paper examines the dynamic interactions between volatility and volume across currency futures and spot markets in India. High-frequency five-minute level data for a year-long period are used to study the nonlinear symmetric and asymmetric causality (Kyrtsou–Labys, 2006) between volatility and volume within and across markets. The findings suggest that an increase (decrease) in volumes in either market causes a corresponding increase (decrease) in volatility in both markets. Specifically of interest is the observation that futures volume causes co-movement in spot market volatility. The study has implications for currency market participants, especially the Reserve Bank of India, in managing exchange rate volatility through the currency futures market.

Does an asymmetric nexus exist between financial deepening and natural resources for emerging economy? Evidence from multiple break cointegration test

This study investigates the asymmetric nexus between financial deepening and natural resources by incorporating the real gross domestic product, capital, education and natural resources using quarterly data from 1990Q1 to 2016Q4. This study applies the Carrion-i-Silvestre et al. (2009) five structural break test in addition to the conventional unit root test. Furthermore, the Maki (2012) cointegration technique is applied to determine the long-run relationship up to 5 structural breaks. In addition, the NARDL cointegration is further applied to determine the asymmetric long-run relationship among the variables. Moreover, the long-run results confirm a positive and insignificant impact of natural resources on financial deepening in both long-run positive and negative effects. Additionally, education has a positive and significant impact on financial deepening in a long-run positive effect, while capital has a negative and significant impact on financial deepening in the long-run negative effect. Moreover, the existence of an asymmetric relationship has been confirmed in a long-run asymmetry in all variables, in addition to the short-run asymmetry except natural resources. Finally, the asymmetric causality suggests the evidence of a bidirectional causality between the positive shock of financial development and the positive shock of natural resources. This suggests that significant investment in the banking sector for Turkey can leverage the natural resource sector.