Cointegrated Time Series Research Articles

Finance as a friend, enemy and stranger in the US Economy, 1952–2019

AbstractThis article aimed to illustrate that the role of the finance sector in an economic system can be explained more systemically and systematically in the context of its interaction with macroeconomic governance, based on the case of the USA from 1952Q1 to 2019Q2. The article introduced two modes of economic governance based on negative and positive institutional complementarities, developed its hypotheses built on a structural analysis of the long-run relationship between the finance sector and macroeconomic governance within the frame of these two modes, and quantitatively tested the hypotheses using time-series cointegration analysis. The article concluded that the finance sector enhanced and impaired the US economic performance, respectively, in the periods 1952Q1–1973Q4 and 1980Q1–2007Q4, and that its long-run relationship with the US economic performance disappeared in the period 2008Q1–2019Q2.

The Application of Cointegration Method for Structural Data in the Estate Market Analysis

The article touches upon the topical issues of the residential real estate market, which are proposed to be solved by means of time series cointegration. The study aims to assess the structure of the housing market by types of apartments using price dynamics per one square meter of apartments' total area. The objectives of the study are to develop a methodology of determination of time series cointegration for the data with structural relationships; to analyze the average prices for the types of apartments on the primary and secondary housing market; to study the housing market in the Russian Federation by quarterly data of state statistics for the period 2000–2020 based on the developed methodology.The results of the research showed that the prices at the primary and secondary housing market by types of apartments do not always represent an integrated process of the frst order and cannot be used for building a co-integration equation. This necessitated additional analysis and, as a consequence, the correction of the time period. It was proposed to ensure stationarity of linear combination of nonstationary data corresponding to the integrated process of the frst order by using the generalized least squares method (GLS). The sum of the elements of the cointegrating vector obtained this way tends to unity, and the elements themselves are estimates of the relative indi cators of the structure by types of apartments on the primary and secondary housing markets respectively. Thus, the suggested methodology allows estimating, on average, the share of the sold apartments of each type in the period under consideration, both in the regional context and in the country as a whole.The proposed methodology can be used for the estimation of relative indicators of the structure according to temporal data in different applications.

Multivariate Fractional Components Analysis

Abstract We propose a setup for fractionally cointegrated time series which is formulated in terms of latent integrated and short-memory components. It accommodates nonstationary processes with different fractional orders and cointegration of different strengths and is applicable in high-dimensional settings. In an application to realized covariance matrices, we find that orthogonal short- and long-memory components provide a reasonable fit and competitive out-of-sample performance compared with several competing methods.

The Kuznets curve of the rich

A long-standing interest in the relationship between inequality and sustainable growth continues to fascinate economists among other social scientists. It must be noted, however, that most empirical efforts have focussed on the income inequality–growth nexus, while studies on wealth inequality are much scarcer. This study attempts to fill such a gap in the literature by assessing the correspondence between the top 1 percent's wealth share and economic growth. Employing time series cointegration techniques, we study the experience of France and the United States from 1950 to 2014. Our estimates suggest that the output growth rate is an inverted-U-shaped function of the wealth share of the top 1 percent. The estimated relationship is robust to variations in control variables and estimation methods. We compute the local optimal wealth share, understood as the share of wealth compatible with the maximum growth rate, and show that France is growing close to its long-run potential, while the United States is significantly below its.

Analysing price cointegration of sawmill by-products in the forest-based sector in Austria

Empirical analyses of interlinkages and price dependencies in the forest-based sector support the forecast of market developments and the design of efficient utilization pathways. This article aims at analysing price cointegration between roundwood (sawlogs, pulpwood), sawmill by-products (sawdust, wood chips) and wood products (pellets, particle board) in the forest-based sector in Austria. Monthly price data for the period 2005–2019 were used for the following statistical tests: (1) The Augmented-Dickey-Fuller and Zivot-Andrews unit root tests were conducted to investigate stationarity of the data; (2) The Johansen Cointegration test was pairwise applied to price time series; (3) The Granger Causality test was used for cointegrated time series to examine which one is price leading. Furthermore, sawmill by-product prices were modelled as Vector Error Correction Models (VECM) to analyse their common behaviour. The dataset was divided to a training (2005–2017) and test (2018–2019) subset to assess the prediction accuracy of the models. The training data were used to estimate a VAR model as basis for forecasts, which were compared to the test data. Results show that sawdust prices are cointegrated and thus modelled with pellet and particle board prices. In contrast, wood chips are used for several applications and thus prices are cointegrated and modelled with prices of sawlogs, pulpwood, pellets and particle board. The comparison with the test data showed that forecasts were able to predict data from 2018 to 2019 well. However, a decrease in prices, starting in 2019 and intensified by the Covid-19 pandemic, could not be fully captured by these forecasts.

COINTEGRATING THE LONG-RUN RELATIONSHIP OF ECONOMIC VARIABLES

"The economic non-stationary time series often have long-run relationships. The cointegration relationship of time variables describes the continuous adaptation to their equilibrium in the long-run. This paper presents the ways of analysing and modelling the cointegration of time series. The Error Correction Model, as a main tool, and the Engle-Granger method are used to estimate the cointegration in the case of the long-run relationship between the quarterly GDP and the Final Consumption in Romania during the period 1995 – 2019. The practical importance of applying the cointegrating model consists in knowing the effect of GDP in the long term. "

Intertemporal Cointegration Model: A New Approach to the Lead–Lag Relationship Between Cointegrated Time Series

Intertemporal Cointegration Model: A New Approach to the Lead–Lag Relationship Between Cointegrated Time Series

Человеческий капитал и рост региональных экономик

This study examines the contribution of human capital accumulation to regional economic growth using panel data for 82 subjects of the Russian Federation over 2002–2019. This paper aims to test the hypothesis that in the long-run equilibrium there exists a connection between economic growth and human capital accumulation in the regions of Russia. From the point of view of econometrics, it would mean that we should refute the hypothesis that there is no cointegration of time series describing the aforementioned variables. General theoretical framework was drawn from the neoclassical growth theory, and panel data econometrics suggested the appropriate empirical methodology. Pooled mean group and fully modified least squares estimators were applied to an autoregressive distributed lags model based on the Solow model. The results indicate that accumulation of human capital has a positive and statistically significant long-term impact on the rate of growth of per capita income and that these variables are cointegrated. Such calculations allow us to make the following conclusions: per capita GRP is cointegrated with physical and human capital on the regional level. The cointegrating equation ‘explained’ more than 90% of per capita GRP variance. Human capital accumulation had a significant positive impact on per capita GRP growth in the long run; such impact exceeded the impact of physical capital accumulation. The positive impact of human capital accumulation on per capita GRP growth surpassed the negative elasticity of growth GRP by the amount of resource excluded from the real sector to provide support to students and maintain the regional education system. The paces at which regional economies were heading towards the steady state differed which is an evidence that there exist an incredible manifold of ways and means for regions to adjust to disbalancies

Permanent-Transitory decomposition of cointegrated time series via Dynamic Factor Models, with an application to commodity prices

Permanent-Transitory decomposition of cointegrated time series via Dynamic Factor Models, with an application to commodity prices

Implications of Paradigm Shift in Tourism Policy : An Evidence of Bhutan

The study intended to examine the impact of major changes in the tourism policy of Bhutan adopted in 2005 as a ‘Sustainable Tourism Development Policy.’ A genuine effort was made to investigate the possible presence of a long-run relationship between tourism and economic growth using the Johansen method of cointegration and vector error correction mechanism. The international tourists' arrival and GDP per capita were used as proxies for tourism expansion and economic growth, respectively. The findings confirmed that tourism has expanded significantly after Bhutan’s policy shift from a more restrictive regime to a more pragmatic ‘Sustainable Tourism Development Policy.’ We obtained concrete evidence of a long-run relationship between tourism expansion and economic growth. However, in the short-run, there was no such strong evidence. The move from a restrictive tourism regime to a more open tourism regime is found to be economically beneficial for a small land-locked economy and provides better economic and social integration with the neighboring countries over a long-run period. The study is a novel attempt to apply time series cointegration and vector error correction method for examining the impact of tourism policy change on Bhutan’s economic growth.

Implications of Political Stability and Financial innovations for Sectoral Economic Growth of Pakistan

The economic status of a country plays an important role in the lives of the citizens of both developed and developing countries. With the rapid increase in population, every country is trying to find new ways to boost its growth rate so that it may elicit the maximum number of people from poverty and can compare other countries in the form of improvement. The main objective of the study is to empirically investigate the impact of political stability and financial innovations on economic growth. Furthermore, the study also analyzes the impact of subsectors (Agricultural, Industry, and Services) of the economy on growth. A time-series co-integration autoregressive distributed lag (ARDL) model is used to investigate the general to specific sector's growth. The key empirical finding shows that political stability and financial development has a positive and significant impact on economic growth as well as its sub-sectors in the long-run. Trade liberalization has a positive impact on economic growth but most surprising results have been witnessed in agriculture growth for Pakistan.

Trade and Economic Cooperation of BRICS: Problems and Prospects

The subject of this study is the legal and financial features of the BRICS trade and economic cooperation and the practice of their application in modern conditions. The purpose of this article is to identify problems that impede the effective development of economic relations and put forward proposals for their improvement. The study showed that the BRICS countries have significant reserves for multilateral cooperation and support of trade and economic relations. In this regard, harmonization of trade and economic relations of partner countries is necessary, in order to solve strategic problems and improve the living standards of the population. It is shown that simplifying the access of entrepreneurs to credit, tax incentives for exporters of industrial goods, flexible conditions for direct and indirect financing of projects and programs, expanding the participation of BRICS development banks and institutional investors contributes to the progressive development of national economies and improving trade and economic relations of BRICS. For research purposes, IBOV INDEX (Brazil), CRTX INDEX (Russia), SENSEX INDEX (India), SHCOMP INDEX (China), JALSH INDEX (South Africa) and Bloomberg platform (WEI, DES, GP, XLTP XCIT, MEMB) materials were used. Evaluation of data in key sectors of the BRICS economies showed the existence of interconnectedness and interdependence of the BRICS trading floor indices - sources of direct financing for trade and economic cooperation of partner countries. Correlation analysis and cointegration of time series confirmed a solid foundation for stimulating multilateral cooperation of the BRICS, including on the basis of interstate support for business entities and expanding the participation of institutional investors in ensuring sustainable development of the BRICS. It is concluded that the results of the study can be used in developing measures of interstate support for trade and economic cooperation of BRICS in modern conditions.

Sectoral Contribution to Economic Development in India: A Time-Series Co-Integration Analysis

This research paper examines the causal relationship between India’s economic growth and sectoral contribution to Gross Domestic Product (GDP) and vice versa, in the short-run and long-run, over a 10 years time period. Johansen’s method of cointegration is used to study the cointegration between the sectoral contributions to Indian GDP vis-a-vis India’s economic growth. Further, the route of interconnection between economic growth and sectoral contribution is tested by using Vector Auto Regression (VAR) model. Special attention was given for investigating impulse responses of economic growth depending on the innovations in sectoral contribution using time-series data from 1960 to 2015. This paper highlighted a dynamic co-relationship among industrial sector contribution and agricultural sector contribution and economic development. In the long run, one percent change in industrial sector contribution causes an increase of 3.42 percent in the economic growth and an increase of 1.12 percent in the primary sector contribution, while in the short run industrial and service sector contributions showed significant impact on economic development and agriculture sector. The changing composition of sector contribution is going to be an important activity for the policymakers to monitor and control where the technology and integration of sectors play a significant role in economic development.

Transport infrastructure of the Rostov Oblast: Problems and prospects for development in the context of national projects implementation

Subject. The paper considers national projects in the field of transport infrastructure, i.e. Safe and High-quality Roads and Comprehensive Plan for Modernization and Expansion of Trunk Infrastructure, and the specifics of their implementation in the Rostov Oblast. Objectives. The aim is to conduct a statistical assessment of the impact of transport infrastructure on the region’s economic performance and define prospects for and risks of the implementation of national infrastructure projects in conditions of a shrinking economy. Methods. I use available statistics and apply methods and approaches with time-series data, namely stationarity and cointegration tests, vector autoregression models. Results. The level of economic development has an impact on transport infrastructure in the short run. However, the mutual influence has not been statistically confirmed. The paper revealed that investments in the sphere of transport reduce risk of accidents on the roads of the Rostov Oblast. Improving the quality of roads with high traffic flow by reducing investments in the maintenance of subsidiary roads enables to decrease accident rate on the whole. Conclusions. In conditions of economy shrinking caused by the complex epidemiological situation and measures aimed at minimizing the spread of coronavirus, it is crucial to create a solid foundation for further economic recovery. At the government level, it is decided to continue implementing national projects as significant tools for recovery growth.

The influence of the tax system on the location of holding companies in Spain

Purpose The purpose of this article is to determine the influence of the tax system on the location of holding companies in Spain. Design/methodology/approach To achieve this purpose, we have used an analysis of cointegration in time series. The independent variable used was the number of holding companies under Régimen de Entidades de Tenencia de Valores Extranjeros Spanish regime. The dependent variables were divided into two groups: fiscal and non-fiscal variables. The dependent fiscal variables are effective tax rate and double taxation convention, whereas the non-fiscal dependent variables are government effectiveness and business freedom. Findings The study concludes that the fiscal variables are relevant to establish a holding company in Spain, but there are other variables such as government effectiveness and business freedom that show as well as influence on the location of holding companies. Originality/value In the year 2015, the article The influence of the tax system on the location of holding companies in Switzerland was published in the Competitiveness Review. In this article, the influence of taxation on the decision to locate a holding company in Switzerland was analyzed. Now that the Spanish holding regime is consolidated, thanks to more than twenty years of application in our tax legislation, we consider it important to carry out an analysis of the influence of taxation in the decision to locate a holding company in our country. As already mentioned in the article published in 2015, the study of the taxation of holding companies is a topic related more to law firms and/or tax advisors than to academic research, and it is for this reason that there are few empirical studies on this topic. Hence, the research developed in this paper is important.

Relation of technology and urbanization with electricity consumption in Kazakhstan

We analyze the impact of social, economic and technical factors on power consumption in Kazakhstan. The work uses time series cointegration equation with the Granger causality test for data 1993-2019. The results show that urbanization, income levels and technology levels affect electricity consumption in the long term. Urbanization and economic growth have a strong impact on growth in electricity consumption. In the article, the influence of growth of digital technologies use which can have bi-directional influence on the energy consumption is analyzed. In the long term, the development of digital technologies in Kazakhstan reduces the need for electricity through the use of energy-saving measures. Digitalization should stimulate the efficiency of energy systems by optimizing consumption and metering, reducing losses, generating with the lowest costs and emissions, etc.

SENSITIVITY OF THE AZERBAIJANI MANUFACTURING INDUSTRY TO VOLATILITY OF THE EXCHANGE RATE(CASE OF 2015 YEAR DEPRECIATION)

The goal of this article is to investigate the causes of the inadequate reaction of the manufacturing industry of Azerbaijan to the devaluation of the national currency using the dairy industry as an example. To this end, hypotheses are put forward on the dependence on imports, weak production capacities and export experience, and research is being conducted in this direction. Research methods and methodology. The study was based on the well-known studies of modern economists in the field of modeling open economies. In During the study, the author used the method of statistical analysis, the method of comparative analysis and the hypothesis method. The economic and mathematical tools of the work included methods of conditional optimization, analysis of differential equations, as well as econometric and statistical methods: regression analysis, the study of stationarity and cointegration of time series, vector autoregression. The scientific novelty of this article is the conclusions made by tracking down the fluctuations of the national currency associated with the economic crisis of 2015, when there was a sharp decline in production in the manufacturing industry, the causes of the devaluation of the national currency were determined. It is noted that after two sharp devaluations of the Azerbaijani manat in 2015, the country showed signs of an economic crisis, which in some segments, instead of increasing, there was a decrease in production and export. This indicates the presence of problems in the field of foreign exchange risk management in the country's manufacturing enterprises. In conclusion, the author, summarizing his research, notes that an analysis of the production, consumption, import and export of a number of processed products in the period after the devaluation of the national currency in Azerbaijan allows us to draw the following conclusions: Despite a twofold increase in the equivalent of import prices in manats, there was a significant increase in imports of some goods, and this is due to the following two reasons: 1. Some imported products are important raw materials for the manufacturing industry (for example, milk powder), and their production in Azerbaijan was not organized. 2. The import of certain products has been increased in order to replace other more expensive products (for example, vegetable oils have replaced oil).

A multivariate cointegration time series model and its applications in analysing stock markets in China

This paper explores nonlinear cointegration between Chinese mainland stock markets and Hong Kong stock market in a multivariate framework for the period January, 1998 to December, 2014 by a nonparametric method. The local linear kernel smoothing method is developed to estimate the unknown function, and the practical problem of implementation is also addressed. Then, a simple nonparametric version of a bootstrap test is adapted for testing misspecification. Furthermore, Some Monte Carlo experiments are presented to examine the finite sample performance of the proposed procedure. Finally, the stock markets data set is discussed in detail by using proposed procedures, showing that Shanghai Stock Index (SHSI) and Shenzhen Component Index (SZCI) can affect Hang Seng Index (HSI), and the influence appears to be a strong nonlinear characteristics.

The Unemployment-Labor Force Participation Linkage in Iran's Women Labor Market

During recent years, the long-run relationship between the unemployment rate and the labor force participation rate has been examined in depth in developed and developing economies. This paper explores this relationship for Iranian women in 31 provinces from 2005Q2 to 2019Q1. Using the time series cointegration approach, our findings show that in 25 provinces there is no long-run equilibrium relationship between female unemployment and participation rate. Furthermore, regarding the low power of the univariate cointegration approach, we consider a panel version of the cointegration tests developed by Westerlund (2006). The results of the panel cointegration test also reveal no long-run relationship between the two variables. Therefore, the unemployment invariance hypothesis is supported for the case of women in Iran.

Does Sectoral Composition of Trade Matter for Trade-Energy-Growth Nexus? A VAR/VEC Based Analysis for China in the Presence of Structural Change

This study identifies the differential effect of sectoral composition of trade on trade-energy consumption–economic growth nexus for China from 1992–2015. We divided trade into five broad sectors—high tech (HT), medium tech (MT), low tech (LT), primary products (PP), and resource-based products (RB)—based on technology intensity. VAR and VEC models are applied depending on time series properties and cointegration among the variables. The study finds that trade in different sectors has differential effects on growth and energy consumption. It is also evident that LT and PP trade do not have long-run cointegration with growth and energy consumption, whereas the opposite is true for MT, HT, and RB trade. Regarding growth-energy nexus, the study defends the conservation hypothesis for China. Growth and energy cause LT and PP trade in the short run only, whereas they only cause MT trade in the long run. Trade in HT, MT, and RB sectors strong cause growth but not energy consumption. This study inter alia suggests that to reduce energy consumption while maintaining higher economic growth China should provide greater focus on HT, MT, and RB sectors.