Cointegrating Regression Model Research Articles

Estimation for generalized linear cointegration regression models through composite quantile regression approach

This paper introduces a meaningful approach employing composite quantile regression (CQR) to estimate generalized linear cointegration regression models. We elucidate the fundamental structure of the proposed model by presenting its underlying expressions and derive the asymptotic distribution of the estimates of model parameters. Through extensive simulations, our findings demonstrate the superior robustness and precision of the CQR method compared to ordinary least squares (OLS) and quantile regression (QR) approaches. The application of the model to economic and financial variables highlights its significant academic and practical value.

Statistical Models to Measure the Impact of Intellectual Property Rights Protection on Foreign Trade in Egypt

This study aims to estimate the relationship between the Protection of intellectual property rights indices and the foreign trade index in Egypt from 1995 to 2022. The comparison has been made between many models such as full modified ordinary least squares (FMOLS) model, dynamic ordinary least squares (DOLS) model , canonical co-integration regression (CCR) model and autoregressive distributed lag (ARDL) model. The results of the study showed that the best model was the ARDL model to increase its interpretive capacity. The study also showed that the most important property rights protection indicators affecting the foreign trade index are the number of applications and registrations of brands, the number of patents registered and granted, the number of applications and registrations of industrial designs, and the proportion of expenditure on research and development as a proportion of gross domestic product (GDP). The estimated model also passed all diagnostic tests and showed that there was no autocorrelation, no Heteroskedasticity. In addition, it was found to follow a normal distribution and to be stable.

Properties of Test Statistics for Nonparametric Cointegrating Regression Functions Based on Subsamples

Nonparametric cointegrating regression models have been extensively used in financial markets, stock prices, heavy traffic, climate data sets, and energy markets. Models with parametric regression functions can be more appealing in practice compared to non-parametric forms, but do result in potential functional misspecification. Thus, there exists a vast literature on developing a model specification test for parametric forms of regression functions. In this paper, we develop two test statistics which are applicable for the endogenous regressors driven by long memory and semi-long memory input shocks in the regression model. The limit distributions of the test statistics under these two scenarios are complicated and cannot be effectively used in practice. To overcome this difficulty, we use the subsampling method and compute the test statistics on smaller blocks of the data to construct their empirical distributions. Throughout, Monte Carlo simulation studies are used to illustrate the properties of test statistics. We also provide an empirical example of relating gross domestic product to total output of carbon dioxide in two European countries.

High-dimensional IV cointegration estimation and inference

A semiparametric triangular systems approach shows how multicointegrating linkages occur naturally in an I(1) cointegrated regression model when the long run error variance matrix in the system is singular. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure that makes them useful in many empirical settings. Earlier work shows that such systems may be analyzed and estimated without appealing to the associated I(2) system but with suboptimal convergence rates and potential asymptotic bias. The present paper develops a robust approach to estimation and inference of such systems using high dimensional IV methods that have appealing asymptotic properties like those known to apply in the optimal estimation of cointegrated systems (Phillips, 1991). The approach uses an extended version of high-dimensional trend IV (Phillips, 2006, 2014) estimation with deterministic orthonormal instruments. The methods and derivations involve new results on high-dimensional IV techniques and matrix normalization in the limit theory that are of independent interest. Wald tests of general linear restrictions are constructed using a fixed-b long run variance estimator that leads to robust pivotal HAR inference in both cointegrated and multicointegrated cases. Simulations show good properties of the estimation and inferential procedures in finite samples. An empirical illustration to housing stocks, starts and completions is provided.

Assessment of Tourism-Led Growth Risks in Resource-Rich Countries: Evidence from Azerbaijan

Abstract The COVID-19 pandemic has provided important lessons in determining future development strategies for countries whose economies are largely dependent on natural resources. The following study was conducted to analyze the potential for tourism to contribute to economic growth and sustainability of economic development in countries rich in natural resources during the post-resource period. Using data from the Republic of Azerbaijan, a co-integrated regression model was used in the analyses. Findings showed that (1) tourism has a positive effect on economic growth and can play a role in ensuring its sustainability; (2) a decrease in revenues from tourism carries more risk for the economy than revenues from oil (coefficient of variation); (3) if an oil and gas country chooses a tourism-based development path in the post-oil and gas era, it may face very serious challenges (due to the fact that tourism sector is highly vulnerable to direct and indirect events); (4) dominance of the tourism sector in the economy carries more risk than dominance of the oil and gas sector. However, combining two different approaches showed that choosing tourism as one of the priority sectors in the post-oil and gas era can reduce risks and will contribute more to the diversification of the economy.

전력 수요 시계열 분석과 장기예측

This study considers the time series characteristics in residential electricity demand function and forecasts long-run electricity demand in Korea. It is widely known that electricity demand and its determinants are unit root processes, so that estimating and forecasting the electricity demand function based on cointegration relationship are common in empirical analyses. We apply unit root tests on monthly time series data for the period 2006:01-2022:12. Korea has experienced the rapid development and social changes over this period, which provides convincing evidence of the possibility of structural changes. The unit root test of Dickey, Fuller (1979) tends to be biased in favor of non-rejection of the unit root null hypothesis if the process considered is trend-stationary with a slope change. What we found is that electricity demand and its determinants are trend-stationary processes allowing for a slope change, whereby there is no need to invoke either cointegration regression model or error-correction model under the unit root assumption. We apply a regression model with a structural change to estimate the residential electricity demand function and forecast the long-run electricity demand for the period 2023-2050.

Government Budgets and Economic Development in Nigeria: An Empirical Investigation

This study investigates the impact of government spending on Nigeria's economic growth. The study used ex-post facto and longitudinal research approaches to examine the role of several government budgetary factors on Nigeria's economic development as measured by gross national product during 21 years (2001-2021). For this research, secondary data were gathered from the Federal Ministry of Finance's Budget Office publications and the Central Bank of Nigeria's Statistical Bulletin and Bulletin. The analysis used a cointegrating regression model with a fully modified ordinary least squares model. The fully modified least square model was used to ascertain the combined impact of yearly budgeting drivers on GNP in Nigeria. The study found that CEX, INFR, and REX significantly influenced GNP, but DS and EXCHR did not significantly influence GNP. According to the study, Nigeria's economic growth and development are greatly influenced by government budgets. In order to guarantee that the budget's advantages are realised and to support economic development in Nigeria, the research advised that the government assess the performance of the yearly budgeting variables, system, and execution.

VAT elasticity on Nepalese economy without agriculture

This paper seeks to examine the elasticity of Value added tax (VAT) on Nepalese economy without agriculture. It, therefore, analyzes the impact of VAT on GDP in aggregate level without agriculture. This study adopts explanatory research design and attempts to determine the relationship between VAT and the GDP, exchange rate, market capitalization money supply and government spending being the intervening variables included in the model. In order for the specification of a model of cointegrated regression model with a time series data of the variables are employed for the study period of 20 years, from 1998/99 to 2017/18. The values of all the variables are converted into real price (constant price) by GDP deflator. The GDP deflator and CPI year 2013/14 have been assumed equivalent to the base year 2013/14 according to Nepalese fiscal year. Since it is observed that residuals are not normally distributed, autocorrelation and multicollinearity problem in the model, it is necessary to improve the non-normal distribution, autocorrelation and multicollinearity problem in the model. Therefore, the data are transposed into first difference and run the model with error correction model. The diagnostic test suggests that the residuals do not violet classical assumptions. The lagged residuals from 5.7.2 equation of Table 5.9 are statistically significant indicating the acceptable ground to take variable as cointegrated set. The result allows long-run and short-run dynamics of all the relationship between GDPWA and VAT. The estimated coefficient of VAT in error correction model shows that one percent point rise in VAT has led to 0.438 percent point increase in real GDPWA in short-run, whereas it is found 0.558 percent point in long-run. It means that short-run marginal productivity of VAT is 0.438 percent point, whereas its long-run percent point is 0.558.

Fiscal Policy, Oil Price, Foreign Direct Investment, and Renewable Energy—A Path to Sustainable Development in South Africa

Since South Africa is in pursuit of accomplishing the 2030 Sustainable Development Goals, it has become pertinent to accelerate the desired energy transition. Against this background, this work aims to evaluate the effects of oil prices, fiscal policy, and foreign direct investment on renewable energy consumption in South Africa from 1979 to 2019. Using the novel Augmented Autoregressive Distributed Lag approach, this study finds that economic growth and taxation revenues positively promote renewable energy in South Africa. In contrast, the findings show that an increase in oil prices has a negative impact on renewable energy in both short and long periods. Likewise, the research shows that foreign direct investment was not found to enhance renewable energy. The findings from fully modified-OLS, dynamic ordinary least squares, and canonical cointegrating regression models corroborate the findings of the Autoregressive Distributed Lag method. For the Granger causality inference, the findings demonstrate that there is a one-way causal connection detected from economic growth to the consumption of renewable energy. Based on these outcomes, a policy framework has been offered to help South Africa to attain the sustainable development goals.

The Effect of Crude Oil Price and Inflation on Algae Export in Indonesia

The aim of this study is to test and analyze the long-term and short-term effects of crude oil prices and inflation on algae export in Indonesia. The effects were tested using multiple cointegration regression and error correction models. Furthermore, annual time series data from 2012 to 2021 was used in this study and the results of the analysis show that in the long term, crude oil price and inflation have a positive effect on algae export. While in the short term, only crude oil price positively influences its exportation.

The Nexus Between Urbanization, Renewable Energy, Financial Development, and Economic Growth: Evidence from Turkey

This study aims to analyze the relationship between renewable energy production and financial development, urbanization, and economic growth in the 1980-2020 period of the Turkish economy, which draws attention to its high growth rate. Methodology: To determine the relationship between financial development, economic growth, urbanization, and renewable Energy, ARDL cointegration analysis, cointegration regression models, and Toda Yamamoto causality analysis will be applied using 1980-2020 period data. Results/Findings: The ARDL boundary test shows a long-run relationship between financial development, economic growth, urbanization, and energy consumption under structural breaks. According to the cointegration regression model results, renewable energy production is determined by financial development and per capita GDP. Toda Yamamoto causality analysis shows the existence of causality running from financial development, per capita GDP, and urbanization variables to renewable energy production. The results reveal that in determining Turkey long-term energy demand projections and strategies of Turkey's, it is necessary to consider both the impact of financial development and economic growth and the supply of energy needs with sustainable resources by minimizing foreign dependency. Originality and Practical Implications: According to the government's estimates, electricity consumption is expected to reach 370 TWh in 2025 and 591 TWh in 2040. These developments reveal the importance of energy consumption in the Turkish economy and make it necessary to investigate the factors affecting energy production.

KREDİ KULLANDIRMA ETKİNLİĞİ VE SERMAYE YETERLİLİĞİ ARASINDAKİ ETKİLEŞİM ÜZERİNE AMPİRİK TESPİTLER: 2013-2019 DÖNEMİ TÜRKİYE ÖRNEĞİ

This paper primarily aims to explore the causal relationship between lending efficiency and capital adequacy through panel cointegration analysis and regression. The effects on that relationship of both such specific financial variables as total asset value and the volume of hedging transactions and two additional categorical variables separating the banks as state-owned versus privately owned and as foreign versus domestic are also investigated. It is further debated whether the duration of operating in the sector significantly influences the assumed efficiency-capital adequacy relationship. For this purpose, panel cointegration tests have been conducted on and some cointegration models have been constructed for the quarterly data of 13 deposit banks in Turkey for the 2013-2019 period. The panel cointegration test results suggest a significant cointegration only from banks’ lending efficiency scores calculated via Data Envelopment Analysis to their capital adequacy ratios. The panel cointegration regression models provide some evidence that capital adeqaucy is positively affected by lending efficiency. Furthermore, there exists no connection between total asset value (size) and relative capital adequacy performance. However, it is evident that more engagement in hedging transactions improves the bank’s capital adequacy performance. The state-owned and privately owned banks are not superior to one another in terms of efficient-based capital adequacy performance while the domestic banks outperform the foreign banks. Finally, no significant association is conluded between the duration of operation and relative capital adequacy performance.

Impact of Oil Exports on Imports of Food and Agricultural Products

This research reveals the impact of oil export on some food and agricultural products from January 2013 to August 2021. For this purpose, we used ARDL model to evaluate short −term and long−term relations between variables. Moreover, we also used FMOLS and DOLS dynamic models as well as CCR canonic cointegration regression model to get reliable data from the empirical research. The outcomes confirm the existence of cointegration among the variables. ARDL unveils that oil export has a positive impact on some food and agricultural products in a long term. Besides, the positive relations between the growth of food −agrarian products and oil export show the importance of these data for the diversification of the non −oil sector and the economy in Azerbaijan.

Revisiting fiscal deficit sustainability in South Africa

PurposeThis study reexamines fiscal deficit sustainability in South Africa.Design/methodology/approachThe study applies three cointegration testing approaches, namely testing for multiple structural changes in a cointegrated regression model, time-varying cointegration test and asymmetric cointegration test.FindingsThe results point to the existence of a level relationship between government revenue and spending. In addition, the long-run equilibrium relationship between government revenue and spending in South Africa is found to be characterized by breaks. As such, assuming a constant cointegrating slope may be misleading. Results from time-varying cointegration and an estimation of a cointegrated two-break model indicate that cointegrating coefficient has been time-varying but has remained less than 1 for the entire study period, indicating that fiscal deficits have been weakly sustainable. This finding is also confirmed by the results from an estimated asymmetric error correction model.Practical implicationsIn view of the findings, authorities should put in place policies to improve the fiscal budgetary stance and reinforce the sustainability of the fiscal deficits in South Africa. Among other things, South Africa could undertake reforms to state-owned companies to reduce their reliance on public funds, slow down the pace of the public sector wage growth and devise effective economic measures to boost long-term growth. In addition, tax compliance and other revenue collection measures should be enhanced for additional tax revenue.Originality/valueThe contribution of this study is twofold; first, the study uses a long series of annual data spanning over a century, from 1913 to 2020. Indeed, cointegration is better modeled using long spans of time series data. Second, to examine the existence of a level relationship between spending and revenue, the study uses cointegration tests which allow capturing time-variation in the cointegrating slope coefficient, and accounting for asymmetries in the relationship between government spending and revenue. It is important to allow for time-variation in the cointegrating slope coefficient, especially when it has been hardly treated in the empirical literature on fiscal deficit sustainability. Allowing for time-variation in the cointegrating slope coefficient helps us to analyze fiscal deficit sustainability by periods of time. Indeed, the degree of fiscal sustainability can change from one time period to another.

О снижении эластичности ВВП, потребления и инвестиций в России по ценам на нефть

The article evaluates cointegrating regression models with time‐varying parameters to describe the relationship between real GDP, gross fixed capital formation and household consumption in the Russian Federation with oil prices. In the early 2000s there was an increase in the elasticities of the analyzed macroeconomic indicators with respect to oil prices, the peak of the elasticities occurred in the second half of the 2000s, after the crisis of 2008–2009 significant declines in elasticities have been identified, and in recent years the oil price elasticity of real GDP has been about 0.05, while for real investment and consumption it has been about 0.12.

Cointegration with structural changes and classical model of inflation in Spain, 1830–1998

In this article, we test a classical model of inflation with rational expectations for the case of Spain during the period 1830–1998. The principal testable implication is that money growth and inflation are cointegrated ruling out speculative bubbles. First, to detect episodes of potential explosive behaviour in the Spanish inflation rate, we use the recursive unit root tests for explosiveness recently proposed by Phillips et al. (2011), and Phillips et al. (2015a, 2015b). Second, we consider the possibility that a linear cointegrated regression model with multiple structural changes would provide a good empirical description of the classical model of inflation for Spain over this long period. Our methodology is based on the instability tests recently proposed in Kejriwal and Perron (2008, 2010) as well as the cointegration tests developed in Arai and Kurozumi (2007) and Kejriwal (2008).

Do globalization progress and sectoral growth shifts affect income inequality? An exploratory analysis from India

AbstractThis paper examines the effects of globalization (i.e., economic, social, and political) and sectoral growth shifts (i.e., changes in relative shares of agriculture, industry, and services) on income inequality in India from 1976 to 2012. We have used two unique datasets: the Standardized World Income Inequality Database (SWIID) and the KOF Globalization Index – Revisited, and employed the Stock and Watson Dynamic Ordinary Least Square cointegrating regression model for empirical estimation. This study finds that economic globalization reduces income inequality, while social and political globalization increases income inequality in India. Additionally, socioeconomic factors, such as per capita income, fiscal spending, and agricultural dependency are pertinent factors that reduce income inequality. On the contrary, factors such as rapid urbanization, changes in society, international interference in public policy, and rapid services sector growth that have been triggered by the social and political globalization processes show a detrimental effect on income inequality, which merits special attention in future development policies and actions. Additionally, the growth in agricultural value added helps reduce income inequalities in India, which is a desirable trend and justified on the grounds of continued rural dependence on the sector for income and employment. This underscores the need to strengthen the agricultural sector through strategies including crop diversification, value‐added processing, and investments for expansion of rural infrastructure, so that growth in the primary sector is sustained despite the decline in its relative contribution to gross domestic product (GDP).

HOW DID COVID-19 PANDEMIC AFFECT THE TOURISM INDEX IN BORSA ISTANBUL?

This study aims to determine how and to what extent the Covid-19 pandemic impacted the Turkish tourism sector index in Borsa İstanbul. Daily data for the period from March 27th 2020 to December 31st 2020 were used to find the relationship between the dependent variable (BIST tourism stock index) and the independent variables (Covid-19 cases and deaths in Turkey). The cointegration relationship between the Covid-19 pandemic and the BIST tourism index was investigated with the ARDL bound test. In addition, the effect of the Covid-19 pandemic on the BIST tourism index was tested with the Cointegrating Regression Models. As a result of the ARDL bound test, it was determined that there is a long-term cointegration relationship between the Covid-19 pandemic and the BIST tourism index. In addition, it has been determined that the impact of the short-term shocks caused by Covid-19 on the BIST tourism index will disappear in the long term and will balance again in about a week. According to the Cointegrating Regression Models (FMOLS, DOLS and CCR) results, it is seen that the deaths from Covid-19 significantly affect the tourism index. According to the models, a 1% increase in the number of deaths causes the BIST tourism index to decrease by 0.08%, 0.06% and 0.08%, respectively. The coefficient of the number of Covid-19 cases is not significant, showing that the number of cases does not have a sufficient effect on the tourism index. The findings of the paper have some implications for stock investors, policy makers, academicians and the company owners in the tourism index of Borsa Istanbul.

Impact of unemployment by sex and marriage rate on fertility decline: Estimates for Turkey and Greece using CCR model

The article analyses the effect of unemployment by sex and marriage rate on fertility changes in Greece and Turkey. The empirical part of the study is based on annual time series data retrieved from the World Bank and National Statistical Offices of Turkey and Greece for 1991–2019. Canonical Cointegrating Regression model is applied for the two countries separately, allowing to quantify the effects of the determinants (crude marriage rate and unemployment rate by sex) on the variation of fertility rate. CCR models show these determinants to be the most significant factors of fertility dynamics in both countries. The results from Engle-Granger and the Phillips-Ouliaris tau (t-statistics) tests confirm the cointegration, i.e., long-term relationship between the variables only for Turkey’s CCR model. However, it was found that in Greece, female unemployment impacts fertility rate negatively and male unemployment has a positive effect on fertility rate; for Turkey modelling shows the opposite relationship. The results of the study suggest that economic uncertainties might be one of the factors contributing to fertility decline in these countries, long-term or in the coming years.

Does Stock Market Respond to Disease Pandemic? A Case of COVID-19 in Nigeria

Abstract This paper investigates whether stock markets respond to disease pandemic referencing the case of COVID-19 in Nigeria. The paper employs three cointegrating regression models: Fully Modified Ordinary Least Squares, Dynamic Ordinary Least Squares, and Canonical Cointegrating Regression to analyse the effect of growth in total COVID-19 confirmed cases and related deaths in Nigeria and across the globe from 27 February 2020 to 4 September 2020 on the stock market performance. Key findings support the presence of long-run association between stock market returns and COVID-19 in Nigeria. The stock market is found to respond negatively to both domestic and global growths in total confirmed cases and deaths of COVID-19. Consequently, affected businesses in Nigeria should be assisted and bailed out by the government through practices such as tax filing, subsidies, targeted spending, and credit.