Cointegration Relationship Research Articles

Is West Africa single currency a tool for economy transition?

Economy integration among countries of the world is seen as a key to drive economic growth and development through favourable policies among members. The study examines the impact of a single currency on the economy of West Africa States. Findings show that gross domestic product growth rate, degree of openness, and political stability have impacted the single currency competitiveness both among the member countries and globally. However, the possible advantage of a single currency would be annihilated by unfavourable terms of trade, government ineffectiveness, and weak regulatory quality. The study thereby recommended that the single currency in the region would not benefit member countries in the short run but a possibility exists in the long run as a result of the cointegration relationship among variables used in the study.

Does Twin Deficit Hypothesis Exist in India? A Structural Break Co-integration Analysis

The primary focus of this study is to examine the long-term and short-term impact of fiscal deficit (FD) on the current account deficit (CAD) in India over the period of 1980 to 2021 in the presence of inflation and exchange rate. For the estimation of data series, the study employed autoregressive distributed lag (ARDL) co-integration test and Gregory Hansen (GH) co-integration test with endogenous structural break. The empirical results from ARDL bounds tests fail to provide a long-run relationship for the variables. The threshold co-integration test (GH) estimation suggests a strong evidence of a co-integration relationship for the variables and the break year is found in 2005. Thus, the findings validate the twin deficit hypothesis in the long-run as the FD has a positive significant effect on a CAD in India. Similarly, the long-run estimates of inflation have a positive significant effect on the CAD. It implies that an increase in rate of inflation distorts the CAD in the long-run. Consequently, the government of India should control the price hike and make macroeconomic situations favourable for domestic tradable sectors. The results from the Granger causality technique show bidirectional causality between FD and CAD implies the twin deficit in India. Based on the empirical findings, it may be argued that the Central Bank of India should try to reduce the prolonged CADs and retain stability in the domestic currency.

Analyzing the volatility spillover and cointegration relationship between daily spot West Texas intermediate crude oil price and US dollar

In the study, it is aimed to analyze the diffusion and cointegration relationship between WTI and US Dollar in the period of 2016-2021. In the study, after a comprehensive literature review of the theoretical review, the econometric analysis section was started. In the first part of the analysis, the short and long-term relationships between the variables were examined with the autoregressive distributed lag methodology and the existence of a cointegration relationship was reached. According to the findings, the effect of WTI on foreign exchange volatility in the long run is statistically significant and negative. In the short-term evaluation, ECT is negative and significant within expectations. In this context, the changes between the variables approach the long-term equilibrium level. According to the results obtained in the causality and variance causality analyzes applied in the last part of the analysis, it is understood that there is a volatility spillover effect from WTI to foreign currency.

Pengaruh Variabel Makroekonomi terhadap Investasi Asing Langsung di Indonesia

This study aims to analyze the short-term and long-term relationships between macroeconomic variables and the flow of Foreign Direct Investment (FDI) in Indonesia from 1982 to 2021. The analysis model used is johansen-juselius co-integration and error correction model (ECM. This study found a cointegration relationship between macroeconomic variables and FDI inflows. Money supply is a factor that influences FDI inflows in the short and long term. Meanwhile, inflation and trade openness have a negative effect in the long term. Market size affects FDI inflows only in the short term. This finding has implications that the government needs to maintain the stability of macroeconomic variables to increase FDI inflows.

Measuring the Potential Integration of Indonesian Sharia Capital Market with the OIC Member Countries

The Indonesian Composite Index (ICI) experienced a critical session, the data showed the ICI fell by 6.58% which was the biggest decline in the last 9 years. The prevailing notion was that this pressure stemmed from the prevalence of the Covid-19 concern and is anticipated to be alleviated once Covid-19 disseminates further. The purpose of this study is to determine the causality and long-term cointegration relationship between sharia stock in Indonesia and the Organization of Islamic Cooperation (OIC) member countries, as well as to determine the contribution of shares of OIC member countries, such as Egypt, Oman, Saudi Arabia, Kuwait, Turkey, Bahrain, and Malaysia in the collapse of the Islamic capital market in Indonesia. The method used in this research is quantitative by using secondary data in the form of daily prices of the Sharia index sourced from the website www.investing.com. The population of the countries related to this research is 56 members of the OIC that are active until 2021. For data analysis, several tests were conducted, such as; Testing Time Series Data, Vector Autoregressive (VAR), Granger Causality Test, Johansen Model Cointegration Test, and Contagion Effect Test. The study found that; has not been able to prove the existence of cointegration between the Indonesian Islamic stock exchange and the stock exchanges of OIC member countries other than the Malaysian stock exchange. However, this study proves the interdependence between the Malaysian and Indonesian Islamic stock exchanges, but in the long term, the contribution of the Indonesian stock exchange is greater than the Malaysian Islamic stock index. In addition, another finding was that during the Covid-19 shock, the Malaysian stock position index showed more independence, whereas the decline that occurred at the beginning of the pandemic was caused without the JII or ISSI intervention index.

Cointegration of Asian Developed and Frontier Stock Markets: An investigation of Diversification Opportunities

This study examines the cointegration relationship of the Colombo Stock Exchange (CSE) with developed Asian markets (Hong Kong, Japan, Singapore). The main objective of the study is to identify potential diversification benefits that exist in Sri Lankan stock market. The stock market indices are Hang Seng Index (HSI), Nikkei 225(N225), Straits Times Index (STI) and All Share Price Index (ASPI). Daily closing prices of stock market indices were selected for the period of 2013- 2019. The main theoretical base forthe stock market integration was the Law of One Price. The Autoregressive-Distributed Lag (ARDL) bound test used toanalyze data, revealed an insignificant cointegration relationship between CSE and developed stock markets. The ASPI has statistically significant short-run relationships with the STI. HSI and N225 did not provide any evidence of a long-run relationship with the ASPI. A negative insignificant correlation between ASPI and HSI indicates a good combination to have a well-balancedportfolio gain both long and short-run diversification benefits. In conclusion, the non-existence of cointegration among the above stock markets provides opportunities for international diversification of portfolios and possibilities for risk hedging.
 Keywords: Cointegration, Frontier and Developed, Stock Markets, Portfolio Diversification

Modelling and forecasting of primary healthcare utilisation, perceived quality of care and non‐emergency referrals to hospitals in a national health insurance pilot district of South Africa


 
 
 Background. The first phase of the National Health Insurance (NHI) pilot programme focusing on primary healthcare has been implemented in Tshwane and 10 other districts of South Africa since 2012. This was envisaged to improve the quality of healthcare at primary healthcare level, and offset the burden of non-emergency healthcare at hospital outpatient level. However, there are no population-level studies that have been done to determine the relationship and interdependence of primary healthcare and hospital outpatient-level indicators that are needed to forecast utilisation of health services. This information is key to plan for roll-out of NHI, in setting benchmarks to guide health policy and allocation of resources.
 Objectives. To determine the interdependence and relationships between primary healthcare and hospital outpatient-level indicators in a NHI pilot district, and forecast the utilisation of services to 2030.Methods. This was a quasi-experimental ecological study design, making use of selected primary healthcare and outpatient department indicators in the District Health Information System monthly reports between January 2010 and December 2019 for Tshwane district. We used the vector error correction model to determine the interdependence and relationships between these indicators, and used these to forecast utilisation of services to 2030.
 Results. The study found that most non-emergency care is provided at primary healthcare level by professional nurses. It confirmed the influence of selected primary healthcare and outpatient department headcounts on each other by finding the existence of four co-integration relationships between the variables. Both long-run and short-run causality exists between them. Based on these relationships, we forecasted that by the end of 2030, the outpatient department follow-up headcounts would have doubled, but both primary healthcare total and clients seen by a professional nurse will marginally decline.
 Conclusion. Our findings confirm that there is a relationship between primary healthcare and outpatient department indicators, which can be used to plan for provision of services in the future. Based on this relationship and current trends, we found that implementation of the NHI pilot programme will not attain the envisaged goal by 2030.
 
 

Co-integrating relation between pay, board governance and performance: evidence from Indian banking

Purpose The purpose of the paper is to explore the long-run impact of board governance and bank performance on executive remuneration. More specifically, the study addresses two objectives. First, the authors investigate the long-run relationship between pay and performance hold for the Indian banking industry. Second, the authors explore the moderating role of the board in explaining the relationship between executive pay and performance. Design/methodology/approach The study uses multivariate panel co-integration approaches, i.e. fully modified and dynamic ordinary least square, to explain the co-integrating relationship between executive pay, governance and performance of Indian banks. The analysis is conducted for the period from 2005 to 2018. Findings The results of co-integration tests reveal a long-run relationship between executive pay, board governance and bank performance. The long-run estimates produce evidence in favour of the dynamic agency theory, suggesting that the implications of asymmetric information can be mitigated by associating the current executive pay with the bank performance in the previous periods. The finding of this study reveals that improvements in the board quality serve as a monitoring tool to constrain excessive pay and moderate the executives’ pay. Furthermore, the interaction of performance and board governance negatively impacts pay, supporting a substitution approach. It implies that setting optimal pay packages for executives necessitates enhanced and efficient board governance practices. Practical implications The study recommends significant policy implications for regulators and the board of directors that executive pay significantly responds to the bank’s performance and good board governance practices in the long run. Originality/value This paper provides novel evidence of long-run pay-performance-governance relation using a panel co-integration approach.

Does Financial Development Alleviate Poverty? Empirical Evidence from Indonesia

This study examines the contribution of financial development to poverty reduction in Indonesia using the autoregressive distributed lag (ARDL) bound testing approach to the cointegration framework. It also employs annual data of several financial development measures such as domestic credit, broad money, and financial development indexes from 1986 to 2018. Our findings suggest that financial development and poverty reduction have a cointegration relationship, regardless of the financial development indicators used. Furthermore, we find that domestic credit, broad money, financial institution depth, financial market depth, financial market access, and financial market efficiency reduced poverty. It suggests that financial development reduced poverty through its indirect channel, i.e., the economic growth effect.

Asymmetric and nonlinear comovements of credit default swap and bond markets: evidence from an emerging market

ABSTRACT This study examines the equilibrium and price discovery relationships between credit default swap (CDS) and bond markets through the symmetric and non-symmetric cointegration approaches, focusing on Turkish sovereign markets. While the findings, obtained using the threshold autoregressive (TAR) and momentum threshold autoregressive (MTAR) models, confirm the asymmetric and nonlinear cointegration relationship between CDS and bond markets described in a limited number of studies in the relevant literature, they also, in contrast to other relevant studies, reveal the importance of data frequency and structural breaks in price discovery research. In this context, the results show that the CDS market is the leader in price discovery in high-frequency data and after the first sub-period, and the bond market is the leader in price discovery in low-frequency data and before the first sub-period.

The Cointegration Relationship Between Money Supply, Exchange Rate and Economic Growth In Iraq (2004-2020)

This study aims to analyze the cointegration relationships between money supply, exchange rate, and economic growth in Iraq, through the use of quarterly data during the period from 2004 to 2020, as well as the use of Johansson's cointegration test, The Vector Error Correction Model (VECM), and Granger's causality test, the economic growth equation has revealed the following results: the exchange rate and money supply in the long term have a positive and significant impact on the economic growth during the period 2004-2020. However, in the short term, the real gross domestic product is positively affected by its value and money supply in lag periods and negatively by the real exchange rate, interest rate on lending, and inflation, but the interest rate effect is not significant. As for the exchange rate equation, the relationship between gross domestic product and money supply showed that it is direct with the exchange rate in Iraq during the period 2004-2020 in the long term and that the exchange rate is positively affected by its lag value during previous periods, and the effect of the interest rate on lending and inflation is positive on the exchange rate, but not significant in the short term. The money supply equation showed that the gross domestic product is directly related to the money supply, while the latter is related to an inverse relationship with the exchange rate in Iraq during the period 2004-2020 in the long term, whereas the money supply is related to a direct relationship with the real exchange rate and is negatively affected by the rate of inflation. As for the interest rate on lending, its impact is positive, but not significant, on the exchange rate in the short term. The study recommended that the mutual influence between the real exchange rate and the gross domestic product should be taken into account when drawing and formulating the monetary policy of the exchange rate in Iraq.
 

The reform of university English education inspired by cultural differences between China and foreign countries

Abstract Aiming at the different levels of college English education, and finding problems and countermeasures in time, this paper puts forward a research on college English education reform under the cultural differences between China and foreign countries. Exploring the cultural background behind the learning of English knowledge, China and foreign countries have formed two completely different cultural forms, resulting in differences in language communication, behavioral expression, way of thinking, and living habits between China and foreign countries. Advocate and motivate students to learn Chinese and Western cultures, cultivate students’ cross-cultural awareness, actively explore English language and culture, and apply modern teaching methods to college English teaching. Mining high-quality parameters to quickly obtain target data, set reasonable control factors, and calculate the information gain of data attributes. Using differentiated information reorganization, a distributed recursive statistical analysis model of students’ English grades was established, the characteristic parameters of grade differences were analyzed, the optimal lag order was selected for the prediction error index, and the co-integration relationship of test variables of students’ grade differences was realized. The results of the study show that the classes that have undergone reformed education combined with Chinese and foreign countries have significantly improved their college English, with an average score of over 89.

Nonlinear nexus between infectious diseases and tourism

ABSTRACT This study investigates the nexus between infectious diseases and tourism. We study the nonlinear relationship between the number of tourists, pandemic index, and gross domestic product in eleven European countries from January 1996 to March 2021. We propose a nonlinear cointegration approach based on a panel-switching transition model; this allows the tourism variable to switch smoothly between regimes after incorporating an endogenous change in the pandemic variable. The findings reveal a nonlinear cointegration relationship between the variables. Furthermore, a nonlinear error-correction mechanism between tourism and infectious diseases is identified, provided that the pandemic index remains below a certain threshold. These results can help professionals and researchers construct strategies to restore tourism following an epidemic.

Crowding-in or crowding-out? The linkage between private investment and public debt of India using symmetric and asymmetric cointegration methodology

The study aims to examine the asymmetric effect of public debt on private Investment in India. For examining the asymmetric effect of public debt on private Investment in India, this study used the NARDL approach. The study used annual time series data for the period of 1980 to 2019. Results from the symmetric co-integration model demonstrate that there is a long-term relationship between private investment and measures of public debt, with the exception of external debt and private investment, which exhibit an asymmetric reaction to changes in long-term public debt. The long-run asymmetries show that positive changes in debt do not crowd out private investment while negative changes in debt crowd in private investment. The present study on asymmetric public debt-investment link may have important policy implications. The long-run asymmetries indicates that negative shocks in debt have more crowding effects in India which shows that reduction in borrowings may lead to growth in private investment in long-run. The present study is different from the previous studies and is contributing to the existing literature in two ways. The first study focused on the role of interest rates in affecting private investment in India and looked at this hypothesis in Nonlinear ARDL co-integration relationship.

Effects of public expenditures on environmental pollution: evidence from G-7 countries.

In this study, the effect of public expenditures and, their sub-components on environmental pollution is discussed in G-7 countries. Two different periods were used in the study. These are the period 1997-2020 for general public expenditure, and the period 2008-2020 for public expenditure sub-components. For cointegration, Westerlund cointegration test was used, and according to the analysis result there is a cointegration relationship between general government expenditure and environmental pollution. Panel Fourier Toda-Yamamoto causality test was used to determine the causality relationship between public expenditures and environmental pollution and the result indicates that there is bidirectional causality between public expenditures and CO2 on a panel basis. For models estimation, System the Generalized Method of Moments (GMM) method was used. The findings of the study indicate that general public expenditures decrease environmental pollution. Considering at the results of the sub-components of public expenditures, housing and community amenities, social protection, health expenditure, economic affairs, recreation, culture & religion expenditures have a negative effect on environmental pollution. Other control variables generally have a statistically significant effect on environmental pollution. Energy consumption and population density increase environmental pollution but environmental policy stringency index, renewable energy and GDP per capita reduce environmental pollution.

Natural Gas–Electricity Price Linkage Analysis Method Based on Benefit–Cost and Attention–VECM Model

In recent years, frequent linkage events of natural gas and electricity prices have seriously affected the stability of the energy supply market. In view of the increasingly close linkage relationship between gas and electricity prices, a gas–electricity price linkage analysis method considering the benefit–cost and price transmission of gas units is proposed. Firstly, a benefit–cost model of gas units based on risk premium theory is constructed to reflect the willingness of gas units to offer prices in different market environments. Secondly, a vector error correction model (VECM)-based gas–electricity price conduction analysis method was proposed to study the long-term co-integration relationship between gas–electricity prices and the short-term fluctuation conduction process. Then, aiming at the problem of delay in price transmission, a time-delay analysis method of gas–electricity price based on the attention mechanism is proposed. Finally, the gas price index and average gas power price data of China from August 2020 to November 2022 are used to verify the validity of the proposed model; the numerical results show that the proposed method can determine the long-term stable fitting relationship between gas and electricity prices, and can also analyze and judge the conduction direction of gas and electricity price fluctuations in different time periods.

DEMOCRACY AND ECONOMIC GROWTH IN MIST COUNTRIES: AN EMPIRICAL ANALYSIS

Studies on institutions, which are one of the main determinants of economic growth, have been increasing intensively in recent years. In this context, despite many empirical and theoretical studies on the relationship between democracy and economic growth, there is no consensus about the effect of democracy on economic growth. This study analyzes the relationship between democracy and economic growth for MIST (Mexico, Indonesia, South Korea, and Turkey) countries. Firstly, the cross-sectional dependence was examined in the study for the 1973–2021 period. The second generation panel unit root test (Pesaran CADF (2007)) was chosen because of the cross-sectional dependence among the series. The stationarity of the variables at I(1) is ensured. Having determined the cointegration relationship (Westerlund Durbin-H test (2008)) between the series, the Panel CCE estimator was used to estimate the cointegration coefficients. Kónya causality test was used for the causality between democracy and economic growth. It is found that an increase in the level of democracy boosts the economic growth. It is suggested that the MIST nations continue to undertake policies targeted at establishing democratic institutions that contribute to economic progress.

Examining the symmetrical effect of traditional energy resources, industrial production, and poverty lessening on ecological sustainability: Policy track in the milieu of five neighboring Asian economies

Adopting the Westerlund, Kao, Pedroni, Fisher cointegration test, pooled mean group (PMG-ARDL) model and Dumitrescu Herlin granger causality method, the penetrating objectives of the current study is to investigate the long-run relationship, dynamical causality and symmetrical effect of each regressor individually, like traditional energy use, lessening of poverty, real exchange rate, and industrial production on environmental sustainability in the longer and smaller run epoch of time in five neighboring (Bangladesh, China, India, Pakistan, and Thailand) Asian economies from 1990 to 2018. Primarily, the estimated results of the study revealed strong evidence of co-integration among study variables. The PMG model's numerical outcomes further indicate that increased use of traditional energy and industrial production adversely influence environmental sustainability. On the contrary, an uplift in the exchange rate and lessening poverty enhances environmental sustainability in the long run. Nevertheless, in a smaller epoch of time, the impact of all the variables has been insignificant on environmental sustainability. Moreover, outcomes of the Dumitrescu Herlin granger causality method reveal uni (bi) direction causality from industrial production and exchange rate (lessening of poverty and traditional energy use) to environmental sustainability. By summing up the discussion, overall calculations of co-integration under four different tests conclude that there is a strong and stable indication of a co-integration relationship among variables. Whereas, under the PMG-ARDL model, traditional energy use & industrial production (exchange rate & lessening of poverty) declines (upsurges) environmental sustainability. These calculations recommend various policy suggestions that environmental sustainability can be achieved in five neighboring economies by replacing traditional energy with modern one, converting old industrial technology with advanced one, and reducing poverty.

The Relationship Between Geopolitical Risk and Credit Default Swap Premium: Evidence from Turkey*

This study investigates the relationship between the geopolitical risk in Turkey arising out of the war and terror incidents happened in the region during the period 2003:01-2020:06 with the CDS premium. A two-step approach is undertaken for this assessment, in which an ARDL limit test and then a time-varying symmetric and asymmetric causality test are applied to study the possible causality vis-a-vis the subperiods. The ARDL limit test does not reject the hypothesis that there is a co-integrated relationship between CDS premium and geopolitical risk index. In addition, the time-varying symmetric and asymmetric test also identifies causality between CDS premium and geopolitical risk, and establishes periods where the latter influences the former variable both in a positive and negative way. In summary, both the ARDL limit test and the time-varying symmetric and asymmetric test deduce a causal relationship between the studied variables.

Asymmetric linkage between copper-cobalt productions and economic growth: Evidence from Republic Democratic of Congo

This study analyzed the nonlinear asymmetric link between copper-cobalt productions on economic development, and to which extent these variables exert growth concerning capital and labor in the Democratic Republic of Congo (DRC) for 26 years. Correlation, unit root, and cointegration tests were used for the testing framework, while nonlinear Autoregressive Distributed Lags, causality test, variance decomposition, and impulse response analysis were employed for the estimation framework. The main findings showed a strong correlation between variables, and selected variables integrated in 1st order, indicate the availability of long-run cointegration relations. The long-run nonlinear asymmetric relationships were noted between economic growth and both shocks (positive and negative) to copper and negative shock to cobalt production. Capital has the highest extent of economic growth, copper contributes more than cobalt, while labor is the least contributor to economic growth in terms of variations. This study suggested the potential policy implications, which can reflect on the possible cause-led nonlinear and negative impact of the mining sector on economic growth, and strengthen the link between copper and cobalt production and growth concerning micro-economic indicators.