Adjustment Asymmetry Research Articles

Asymmetric effects of uncertainty on investment: Empirical evidence from India

Investment is envisaged as a prerequisite for improving productivity and growth in any economy. In India, investment has decelerated during the global financial crisis (GFC) of 2008, especially after 2011–12, which has spurred a heated discussion regarding causes accountable for elongated slowdown. To this end, we empirically examine the causal nexus between investment and its covariates in an asymmetric framework. The present study finds asymmetric cointegration along with short-run impact asymmetry, long-run reaction asymmetry, and adjustment asymmetry between investment and its covariates. Furthermore, evidence of asymmetric Granger causality is also established. Our study's conclusions have important policy outcomes to combat the economy's downturn in investment.

Image plane wavefront sensing and Kalman filtering for automated alignment of off-axis aspherics.

Automated alignment can significantly increase optical system precision and flexibility, and reduce time and labor costs in system setup and maintenance. We present an automated alignment technique on a double off-axis parabolic mirror system, which poses challenging alignment problems due to the mirrors' high sensitivity to aberrations, rotational asymmetry, and non-orthogonality in stage adjustments. In our methodology, we use focal plane wavefront sensing to eliminate the non-common path error, increase optical throughput, and reduce cost and system complexity. We incorporate model-based optimal estimation and control to better handle the nonlinearity, model uncertainty, and noise. Using either an iterated extended Kalman filter or a square-root unscented Kalman filter as the optimal nonlinear misalignment state estimator, we are able to consistently reduce the linear misalignment from around 1mm to <5µm and the angular misalignment from around 500 to <6a r c s e c in simulation, achieving a final wavefront error of <5∗10-5 waves in the field of view when tested at wavelength 635nm. We discover a multi-state coupling effect, which implies that different misalignment states have compensating effects on system measurements, thus interfering with the estimator's observation of misalignment state changes. We further investigate the coupling's effects on alignment quality through observability analysis.

Analyzing different types of asymmetric responses in terminal gate prices of petrol and diesel across major Australian seaports: Implications for fuel price monitoring strategies

This paper examines the sign and size-dependent asymmetry in wholesale petrol and diesel prices in the long and short run across seven major distribution centres in Australia using daily data from 1 January 2004 to 18 November 2022. This study adopts a composite threshold mean model that is augmented with an asymmetric power autoregressive conditional heteroskedasticity (APARCH) model or an exponential general autoregressive conditional heteroskedastic (EGARCH) model to capture volatility clustering in high-frequency data. Inter alia, the results reveal that the long-run (adjustment) asymmetry is more widespread for unleaded petrol prices than diesel prices. Melbourne and Perth are the only two outport terminals that do not exhibit short- or long-run asymmetry for both diesel and petrol. In terms of the adjustment asymmetry, terminal gate prices for petrol in Darwin, Hobart, and Sydney are the least competitive, whereas the opposite is true for Adelaide, Brisbane, and Perth.

Asymmetric price transmission along the supply chain of perishable agricultural commodities: A nonlinear ARDL approach

This study aims to evaluate the asymmetric price transmission in terms of magnitude and speed between the wholesale and retail levels of the Sri Lankan fruit and vegetable markets. Using monthly data of wholesale and retail prices of 12 vegetable and three fruit varieties in Sri Lanka for the period 2005–2019, the study estimates a Nonlinear Autoregressive Distributed Lag (NARDL) model. Almost all food commodities used in this study (fruit and vegetables) show significant positive vertical asymmetry in price adjustments in the long run. The results indicate that the transmission rate of price increases in the wholesale market is greater than in the retail level when compared to price reductions in the wholesale market. This study suggests relevant policy options to explore and address this issue.

Spot–Futures Price Adjustments in the Nikkei 225: Linear or Smooth Transition? Financial Centre Leadership or Home Bias?

This paper studies price discovery in Nikkei 225 markets through the nonlinear smooth transition price adjustments between spot and future prices and across all three futures markets. We test for smooth transition nonlinearity and employ an exponential smooth transition error correction model (ESTECM) with exponential generalised autoregressive conditional heteroscedasticity (EGARCH), allowing for the effects of transaction costs, heterogeneity, and asymmetry in Nikkei price adjustments. We show that the ESTECM-EGARCH is the appropriate model as it offers new insights into Nikkei price dynamics and information transmission across international markets. For spot–futures price dynamics, we find that futures led spot prices before the crisis, but spot prices led afterwards. This can be explained by the lower level of heterogeneity in the underlying spot transaction costs after the crisis. For cross-border futures prices, the foreign exchanges (Chicago and Singapore) lead in price discovery, which can be attributed to their roles as global information centres and their flexible trading conditions, such as a more heterogeneous structure of transaction costs. The foreign leadership is robust to the use of linear or nonlinear models, the time differences between Chicago and the other markets, and the long-run liquidity conditions of the Nikkei futures markets, and strongly supports the international centre hypothesis.

Tax Salience and Cyclical Asymmetry in Tax Rate Adjustments: Testing the Indirect Tax Hypothesis

In this paper, we explore the hypothesis that politicians prefer using direct taxes with relatively high salience for tax cuts during booms, while they prefer using indirect taxes with relatively low salience for tax increases during recessions. Using a panel data set of U.S. states from 1992 to 2014, we analyzed how cyclical fluctuations in resource availability affect the statutory rates of five major state taxes: general sales tax, personal income tax, corporate income tax, and two excise taxes (gasoline and cigarette taxes). Our results suggest that cyclical improvements in resource availability during booms lead to reductions in personal income tax rates, whereas cyclical deteriorations in resource availability during recessions result in increases in general sales tax rates.

Asymmetries in Perceptual Adjustments to Non-Canonical Pronunciations

This paper examines two plausible mechanisms supporting sound category adaptation: directional shifts towards the novel pronunciation or a general category relaxation of criteria. Focusing on asymmetries in adaptation to the voicing patterns of English coronal fricatives, we suggest that typology or synchronic experience affect adaptation. A corpus study of coronal fricative substitution patterns confirmed that North American English listeners are more likely to be exposed to devoiced /z/ than voiced /s/. Across two perceptual adaptation experiments, listeners in test conditions heard naturally produced devoiced /z/ or voiced /s/ in critical items within sentences, while control listeners were exposed to identical sentences with canonical pronunciations. Perceptual adaptation was tested via a lexical decision test, with devoiced /z/ or voiced /s/, as well as a novel alveopalatalized pronunciation, to determine whether adaptation was targeted in the direction of the exposed variant or reflected a more general relaxation. Results indicate there was directional and word-specific adaptation for /z/-devoicing with no evidence for generalization. Conversely, there was evidence of /s/-voicing generalizing and eliciting general category relaxation. These results underscore the role of perceptual experiences, and support an evaluation stage in perceptual learning, where listeners assess whether to update a representation.

Downward interest rate rigidity

Empirical evidence suggests that bank lending rates are downward rigid: banks tend to adjust their rates more slowly and less completely to short-term market rates decreases than to increases. We investigate the macroeconomic consequences of this downward interest rate rigidity by introducing asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. Calibrating the model to the euro area economy, we find that the difference in the initial response of GDP to positive and negative economic shocks of similar amplitude can reach up to 25%. This means that a central bank would have to cut its policy rate much more to obtain a symmetric medium-run impact on GDP. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions.

Symmetric and asymmetric effects of crude oil price and exchange rate on stock market performance in Nigeria: Evidence from multiple structural break and NARDL analysis

This study explores the linear and non-linear impact of Nigeria's oil price and exchange rate on stock market performance from January 1995 to December 2019 using the non-linear autoregressive distributed lag (NARDL) method. The results from the linear ARDL show a long and short-run positive relationship between the Nigerian stock market and crude oil prices while, the exchange rate show an insignificant in the long-run effect but a significant positive relationship in the short run. The non-linear ARDL front, the tests show that the impact of positive shocks in crude oil price has a significant increasing effect on stock market performance in Nigeria, while negative shocks in crude oil prices have a significant increasing effect on stock market performance. The exchange rate has an insignificant relationship with stock market performance both in short- and long-run asymmetric test. The adjustment asymmetry from the dynamic multiplier graphs shows that the response of stock market performance to a negative change in oil price is stronger than that in response to a positive change. Overall, the result provides the need to diversify investment portfolios through the international equity market, keeping a close watch on the oil price fluctuation which is of importance in formulating risk–return portfolios of stock market performance.

Mean reversion in Asia-Pacific stock prices: New evidence from quantile unit root tests

We investigate the stationarity of the daily real stock prices in 12 Asia-Pacific countries over the period 1991–2020. The methodology employed is driven by the need to address three key concerns: (i) the identification of association between the size of shocks and stationarity; (ii) the identification of different speeds of adjustment towards long-run equilibrium; and (iii) the identification of mean reversion and potential asymmetric speed of adjustment before and after the 2008–2009 global financial crisis. To meet these concerns, we examine the time series properties of high frequency data within a quantile unit root testing framework. Our results generally indicate that stock prices are stationary at the higher quantiles. There is also evidence of asymmetries in stock price dynamic adjustments at the upper quantiles, in which larger shocks are associated with faster mean reversion, and conversely, smaller shocks are associated with non-stationarity. Further analysis indicates that stock prices became much more mean reverting and with a faster speed of adjustment after the global financial crisis for all sample countries.

Downward Interest Rate Rigidity

Empirical evidence suggests that bank lending rates are downward rigid: banks tend to adjust their rates more slowly and less completely to short-term market rates decreases than to increases. We investigate the macroeconomic consequences of this downward interest rate rigidity by introducing asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. Calibrating the model to the euro area economy, we find that the difference in the initial response of GDP to positive and negative economic shocks of similar amplitude can reach up to 25%. This means that a central bank would have to cut its policy rate much more to obtain a symmetric medium-run impact on GDP. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions.

한국 무역수지의 비대칭적 J-곡선 효과에 대한 실증적 분석

This study investigates the asymmetric effect of real exchange rate on trade balance in Korea. The nonlinear ARDL model of Shin et al. (2014) is employed as econometric methodology. While the linear ARDL model fails to find cointegration relationship between variables, nonlinear ARDL model captures cointegration relationship which is robust to lags and restrictions. We found there exist J-curve effect and the three types of asymmetries in relationship of trade balance and real exchange rate. First, long-run reaction asymmetry: depreciation improves trade balance, but appreciation does not work. Second, short-run impact asymmetry: contemporaneous change of exchange rate affects trade balance differently. Third, adjustment asymmetry: adjustment process on long-run equilibrium with face to appreciation and depreciation is not equal.

Global economic activity, crude oil price and production, stock market behaviour and the Nigeria-US exchange rate

This paper investigates the dynamic relationship among oil price, Nigeria-US exchange rate, stock market activity, Kilian's global economic activity index, and global oil production. We develop a robust, stable single-equation error correction model where the exchange rate solely bears the burden of short-run adjustments with causal influences from the rest of the variables included in the model. We find a role for asymmetry in the long run, confirming the presence of equilibrium-path adjustment asymmetry and suggesting that the positive and negative variations must be accounted for in designing the policymaking process to enforce stable exchange rate movement. By comparing the linear and nonlinear models, we find that the two models are complementary and that each is horizon-bound in its forecasting ability. • Link between oil price, Nigeria exchange rate, equity, global activity index and oil production. • A robust, stable single-equation error correction model is developed. • We find a role for asymmetry in the long-run, confirming the presence of equilibrium-path. • Find that the positive and negative variations must be adopted in model building. • We find linear and nonlinear models as complementary.

A Dynamic Network Comparison Analysis of Crude Oil Trade: Evidence from Eastern Europe and Eurasia

Abstract This article characterizes a dynamic crude oil trade network of Eastern Europe and Eurasia using the network connectedness measure of Diebold and Yilmaz (2014, 2015) and asymmetric reaction of crude oil bilateral trade flow in response to the positive and negative changes of its key determinants using the nonlinear panel ARDL model. Results indicate the existence of large and time-varying spillovers with a considerable explanatory power among the crude oil trade flow volatility of Iran, Russia, US and Saudi Arabia in Eastern Europe and Eurasia crude oil trade network. The findings also show that crude oil trade flow of Eastern Europe and Eurasia experiences net volatility transmission to Iran, Russia and US respectively, whereas it is a net volatility receiver from Saudi Arabia. Also based on gravity models, the analysis confirms the existence of impact, reaction and adjustment asymmetry through different magnitude among network participants.

The impact of financial development on carbon, non-carbon, and total ecological footprint in Nigeria: new evidence from asymmetric dynamic analysis.

This study investigates the asymmetric dynamic effects of financial development on ecological footprint in Nigeria over the period 1971-2014 using the nonlinear autoregressive distributed lag (NARDL) framework. Ecological footprint in Nigeria is classified into carbon footprint, non-carbon footprint, and total ecological footprint. The results show that in Nigeria, a positive shock in financial development (an increase in financial development) has significant reducing effect on ecological footprint (i.e., improves environmental sustainability) while a negative shock in financial development (a decline in financial development) has significant increasing effect on ecological footprint (i.e., deteriorates environmental sustainability). Asymmetry test shows that a significant difference exists in how negative and positive shocks in financial development impact on carbon footprint and total ecological footprint, but not for non-carbon footprint. On the basis of the total ecological footprint, the adjustment asymmetry from the dynamic multiplier graph shows that the response of ecological footprint to a negative shock in financial development is stronger. Further findings from the analysis show that economic growth, energy consumption, urbanization, and economic globalization are all drivers of environmental sustainability in Nigeria. Overall, the results highlight the need for a deepened financial system, as part of the strategies for achieving sustainable development in Nigeria.

Asymmetric Effects of Exchange Rate and Its Relationship with Foreign Investments: A Case of Indian Stock Market

Emerging markets, including India, are witnessing an influx of foreign capital. The article investigates the role of exchange rate which influences both the net foreign institutional investments (FIIs) and the stock markets, using monthly data, from January 2008 to May 2018. The effects of real effective exchange rate are studied through non-linear ARDL co-integration. The long-run relationship is found in all the three models constructed. The results highlight the nature of FII flows in relation to exchange rate asymmetry. Real rupee depreciation has a long-run effect on their debt flows. The ‘adjustment asymmetry effect’ of exchange rate is found for equity flows in the long run. The similar effect is observed for the Nifty 50 model. Due to high volatility, even positive stock returns do not attract equity FII flows. In the short run, rupee depreciation in real terms negatively influences Nifty returns. The S&amp;P 500 returns explain FII flows indicating information asymmetry. These outcomes serve a vital input for key stakeholders such as potential FIIs, domestic traders, regulators and policymakers.

Asymmetric cointegration and the J-curve: new evidence from commodity trade between the U.S. and Canada

Previous research that investigated asymmetric effects of exchange rate changes on the bilateral trade balance of the U.S. with Canada using their aggregate bilateral trade flows did not find support for such effects. In this paper we disaggregate the trade flows of the two countries by commodity and consider experiences of 161 industry that trade between them. After estimating the linear and nonlinear ARDL models we find support for the asymmetric short-run effects in all industries, short-run adjustment asymmetry in 69 industries, significant short-run cumulative or impact asymmetry in 37 industries and significant long-run asymmetric effects in 62 industries. Small as well as large industries were in the list.

Asymmetric cointegration and the J-curve: evidence from commodity trade between Turkey and EU

In this paper, we assess the asymmetric effects of exchange rate changes on the trade balance of 57 industries that trade between Turkey and EU. Since the analysis introduces nonlinear adjustment of the exchange rate, we find results that are different than previous research. More precisely, we find short-run asymmetry effects in all industries, short run adjustment asymmetry in 24 industries, short-run impact asymmetry in 17 industries, and long-run asymmetry effects in 23 industries. Small and large industries seem to be subject to the same asymmetry effects.

Size and sign asymmetries in house price adjustments

ABSTRACTLong-run mean-reversion in real house prices is determined by the relative strength of fundamental factors against the short-run influences. This article suggests that the adjustment towards the long-run trend in house prices could display non-linear behaviour due to some intrinsic characteristics of the housing market. Accordingly, sign and size asymmetries as well as possible structural breaks are taken into account in a unit root testing exercise for twenty-nine countries. Our results suggest that mean-reversion exists for seventy percent of the countries in our sample. Moreover, the out-of-sample forecasting performance of our non-linear models in predicting house prices is better than a simple auto-regressive benchmark for some countries.

An analysis of the asymmetric impact of exchange rate changes on G.D.P. in Pakistan: application of non-linear A.R.D.L.

Exchange rate fluctuations play a vital role in influencing macroeconomic variables including economic growth via the channels of net exports and investments. This study claims to be the first in assessing the asymmetric effect of exchange rate fluctuations on G.D.P. in Pakistan whose currency had the title of ‘worst currency of South Asia’ in 2018 after more than 20% depreciation in just three months. In this study, we employ a recently developed technique of Non-linear A.R.D.L. by Shin, Yu, and Greenwood-Nimmo (2014) to test for possible asymmetric effect of exchange rate on G.D.P. along with the proxies of fiscal and monetary policies. Both A.R.D.L. and N.A.R.D.L. are applied on annual data range from 1972 to 2014. The results of A.R.D.L. are found poor and co-integration relationship lost when the assumption of symmetry is taken into consideration. On the contrary, Non-linear A.R.D.L. technique carry more rich information related to the issue at hand and co-integration relationship is confirmed. From the results we found that week currency hurts G.D.P. growth, while strong currency adds to growth. Besides these, we confirm asymmetric impact of exchange rate on G.D.P. growth in Pakistan and find the evidence of short-run, long-run and adjustment asymmetry. To achieve the objective of sustained growth, exchange rate management should focus to restore stability and go for more strong currency in Pakistan. Future research needs to consider capital flows and exchange rate regimes in the form of ‘Sudden Stop hypothesis’ when investigating the asymmetric impact of exchange rate.