Cointegration Test Results Research Articles

The nature of the relationship between the money supply and inflation in the Jordanian economy (1980–2019)

This study aims to investigate the relationship between the money supply (M1) and inflation in the Jordanian economy during the period of 1980–2019.To achieve the goal of the study, the methodology of econometric analysis of time series was used through the following tests: Augmented Dickey-Fuller (ADF) test – to test the stability of the study variables, Johansen’s Cointegration Approach – to determine the long-term equilibrium relationship between the study variables, and the Granger Causality Test – to determine the direction of the causal relationship if it exists in the short term.The study results demonstrate that inflation has stabilized at the level, while the money supply M1 was unstable at the level and stabilized after taking the first difference. The Cointegration test results indicated that there was no causal link between the money supply M1 and inflation in the long term. Finally, the results of Granger Causality presented a unidirectional causality running from the money supply M1 to inflation in the short term, meaning that money supply causes inflation, not vice versa; this means that the money supply M1 can explain the changes that occur in the consumer price index (CPI) in the Jordanian economy.The study recommends that the monetary authority in Jordan should have greater control over the money supply due to its impact on the stability of the general level of prices, in order to avoid a repeat of the 1989 crisis represented by the sharp decline of the dinar exchange rate against other currencies and an increase in inflation that year to 25.6%.

Economic Growth and Health Expenditure Analysis for Turkey: Evidence from Time Series

This study aims to investigate the effects of health expenditure on economic growth in Turkey. For this purpose, time series data of Turkey over the period 1975–2018 were evaluated. Moreover, household consumption, life expectancy at birth, trade, and foreign direct investments were added as control variables. Cointegration analysis was performed to test whether all variables are cointegrated in the long term. Causality test was successfully employed to investigate the relationship between health expenditure and economic growth in the short term. The achieved results exhibited that Johansen Cointegration test results suggest the existence of cointegration among all variables in the long term. In addition, the Granger causality test results indicate unidirectional causality from health expenditure to economic growth in the short term. Existence of a long-term relationship among related variables and a short-term relationship between health expenditure and economic growth displays the importance of investments on health care services in Turkey. Therefore, investments in the health sector should be encouraged and the share allocated by the government for health expenditures from the budget should be increased in Turkey.

Tourism and Economic Growth in Turkey: Fourier Approach

This study deals with the relationship between tourism revenues and economic growth in Turkey over the period 2003Q1-2019Q3 within the framework of Fourier approach. The results of the Fourier ADF unit root test show that the two variables are I(1). Upon this, the Fourier ADL and the Hidden Fourier ADL cointegration tests are applied to investigate the existence of long-term relationship among the aforementioned variables. According to the results of cointegration tests, there is a unidirectional long-term relationship running from economic growth to tourism revenues. Finally, long-term coefficients are estimated through the FMOLS method. A one percent increase in economic growth causes a 0.67 percent increase in tourism revenues considering raw data. According to the asymmetric components of the variables, a one percent increase in economic growth leads to a 1.41 percent increase in tourism revenues.

Causality of Dual System Monetary Policy to Inflation in Indonesia

The paradigm shift from a conventional economy to an Islamic economy has encouraged the development of Islamic finance. This development will change the direction of monetary policy, in which the Islamic monetary magnitude will more or less affect the achievement of inflation in the economy. This research aims to identify the causality of dual system monetary policy with inflation in Indonesia during the observation period. The research method used is descriptive quantitative. The data used are monthly data from January 2016 to November 2020. This study uses secondary data published by Bank Indonesia, OJK, BPS, and various literature that will be used to answer research questions. VECM is used to answer the causality between dual system monetary policy and inflation. From the model estimation results, it is found that there is only a one-way relationship between the dual system monetary policy (SBIS) and inflation. However, the cointegration test results show that there is a cointegration relationship between the dual system monetary policy variables and inflation. This indicates that the dual system monetary policy tends to short-term and long-term relationships.

SURVIVAL OF THE FITTEST: A NATURAL EXPERIMENT FROM CRYPTO EXCHANGES

This paper explores the applicability of universal cryptocurrency exchange by analyzing crypto exchanges of Binance, Latoken, Kucoin and Qash, which also have their own cryptocurrencies in the crypto market. Results of the recursive Johansen cointegration test proved that even though all of the cryptocurrencies have cointegration among each other, Binance positively disassociated itself from the others after it moved to Malta on 23 March 2018. Based on the daily prices of cryptocurrencies over the period from 6 November 2017 to 10 November 2019, taken from coinmarketcap, we conclude that Binance can be considered as a survival of the fittest among all of the crypto exchanges in this natural experiment.

Dynamics of Output Growth and Convergence in the Middle East and North African Countries: Heterogeneous Panel ARDL Approach

The present study investigates the convergence process of per-worker output for a panel of 15 countries in the Middle East and North African (MENA) region over the period 1970–2016. Further, the study discusses the dynamic impact of various productive factors (physical capital, human capital and total factor productivity) on per-worker output. In order to estimate the long-run relationship, the paper employs various dynamic panel autoregressive distributed lag (ARDL) models. The econometric approach controls for cointegration, nonstationarity, heterogeneity and cross-sectional dependence in the variables and residuals. The results suggest the presence of cross-sectional dependence and mixed order of integration of the variables. The statistical results of Pedroni and Westerlund cointegration tests indicate that per-worker output, physical capital stock, human capital stock and total factor productivity tend to have a long-run relationship. The four-step methodology adopted in the present study consistently accepts the conditional β-convergence towards steady state of output per worker. Besides, the paper finds a positive impact of physical capital and total factor productivity on long-run economic growth.

Testing the long-run effects of economic growth, financial development and energy consumption on CO2 emissions in Turkey: new evidence from RALS cointegration test.

This study analyses the long-run effects of economic growth, energy consumption and financial development on carbon dioxide (CO2) emissions in Turkey using annual time series data for the period 1965-2018. This research investigates the relationship between the variables using a RALS-EG (residual augmented least squares-Engle and Granger) cointegration test procedure developed by Lee et al. Stud Nonlinear Dyn Econ 19:397-413, (2015). In addition, this study uses a bootstrap causality analysis developed by Hacker and Hatemi-J J Econ Stud 39:144-160, (2012) to specify the causal relationship between the series. RALS cointegration test results show a long-run relationship between CO2 emissions and economic growth, energy consumption and financial development. According to a dynamic ordinary least squares estimation, economic growth has a negative and statistically significant effect on CO2 emissions, whereas energy consumption and financial development have positive and statistically significant effects on CO2 emissions in the long run. In particular, energy consumption is the most effective parameter of environmental pollution in Turkey. However, the causality test results indicate a unidirectional causal relationship from financial development to CO2 emissions, economic growth and energy consumption. Increasing the investment in renewable energy sources will be an effective policy tool to improve the environmental quality in Turkey.

The Relationship between Health Expenditures and Economic Growth: Evidence from Turkey

This study examines the relationship between health expenditures and economic growth in Turkey during the period 1975-2019 by using the Fourier Engle-Granger cointegration and the Fourier Toda-Yamamoto causality tests. Firstly, the Fourier ADF unit root test with fractional frequency is employed in order to investigate the stationary of the variables, and it is determined that both are I(1). Then, the Fourier Engle-Granger cointegration test revealed that there is a unidirectional long-run relationship from real GDP per capita to health expenditures. Accordingly, a one percent increase in economic growth causes a 0.32 percent increase in health expenditures. The findings from the Fourier Toda-Yamamoto causality test also support results of the Fourier Engle-Granger cointegration test. As a result, this study indicates that income view hypothesis and Wagner's law are valid for Turkey.

The relationship between tourism and economic growth among BRICS countries: a panel cointegration analysis

Tourism has become the world’s third-largest export industry after fuels and chemicals, and ahead of food and automotive products. From last few years, there has been a great surge in international tourism, culminates to 7% share of World’s total exports in 2016. To this end, the study attempts to examine the relationship between inbound tourism, financial development and economic growth by using the panel data over the period 1995–2015 for five BRICS (Brazil, Russia, India, China and South Africa) countries. The results of panel ARDL cointegration test indicate that tourism, financial development and economic growth are cointegrated in the long run. Further, the Granger causality analysis demonstrates that the causality between inbound tourism and economic growth is bi-directional, thus validates the ‘feedback-hypothesis’ in BRICS countries. The study suggests that BRICS countries should promote favorable tourism policies to push up the economic growth and in turn economic growth will positively contribute to international tourism.

IMPACT OF DOMESTIC DEBT ON PRIVATE SECTOR INVESTMENT AND ECONOMIC GROWTH IN NIGERIA (2000-2019)

This study examined the impact of domestic debt on private sector investment and economic growth in Nigeria, covering the period 2000-2019. The causal research design was employed. Unit root and cointegrated tests were carried out and the unit root test results showed that the variables were non-stationary at level but became stationary after first differencing. Cointegration test results revealed that the variables are cointegrated meaning that they have long-run equilibrium relationship. Using the ordinary least squares (OLS) method to estimate the specified multiple regression models, findings showed that domestic debt and interest on domestic debt negatively and significantly impacted on private sector investment and economic growth in Nigeria during the period under consideration. The negative impact of domestic debt on private sector investment indicates that government domestic borrowing crowd-out private sector investment. In lieu of the fact that government borrowing (especially domestic borrowing) stifles (crowd-out) private sector investment and retards economic growth in Nigeria, it is recommended that since government borrowing especially through the money market is exerting adverse effects on private sector investment and economic growth, government should endeavor to borrow domestically through the capital market by further developing the Nigerian equity and bond markets in order to enable these markets have the capacity to provide the needed funds. Also, to avoid stunt economic growth and crowding-out effect of government borrowing, government should endeavor to put in place fiscal prudent measures that would favor the private investor by discouraging high government spending in areas that don’t have direct positive impact on private sector investment growth and economic growth.

Drivers of agricultural productivity: Evidence from transforming economies

Abstract This study empirically investigates the drivers of agricultural productivity in transforming economy. The study used a 35-year period (1980–2014) panel data sourced from World Development Indicators, Penn World Table, United States Department of Agriculture and Statistics on Public Expenditure for Economic Development. Data used for the study include Agricultural Productivity (AP), Real Gross Domestic Product (GDP), Government Agricultural Expenditure (EXP), Agricultural Trade Barrier (ATB), Consumer Price Index (CPI), Farm Machinery (MACH), Fertiliser (FERT), Human Capital (HCAP) and Irrigation (IRRG). Data were analysed using Impulse Response Function, Levin-Lin-Chu unit root test, Johansen-Fisher Panel Cointegration test and Panel Least Squares regression technique. Impulse Response Function revealed that ln (GDP)reacted negatively to a shock from ln (Agricultural Productivity). Levin-Lin-Chu unit root test revealed that the variables were stationary either at level or at first difference. The result of the Johansen-Fisher panel cointegration test showed that for every case at 5 percent level of significance, we reject null hypothesis of no cointegration. Panel Least Squares revealed that Agricultural Trade Barrier (α = 0.0531, p < 0.05), Human Capital (α = 1.2409, p < 0.01) and Irrigation (α = 0.0771, p < 0.01) increased Agricultural Productivity. However, Fertilizer (α = −0.0730, p < 0.01) decreased Agricultural Productivity. This study therefore concluded that Agricultural Productivity will grow in transforming economy with trade restriction on imported agricultural tradable commodities, increased investment in human capital and expansion in irrigation application. The study therefore recommends measures that will protect domestic agriculture, capacity building of the farmers and improved irrigation infrastructure that will enhance small scale farmers for all-season cropping.

Crude Oil Price Changes and Inflation: Evidence for Asia and the Pacific Economies

This paper examines the influence of crude oil price on inflation in seven Asian and two of the pacific economies. The period of investigation is from 1987M5 to 2019M12. The results of cointegration tests reveal that there is stable positive long-run relationship between consumer price index and crude oil price in these countries. In the short run, there is unidirectional causality running from crude oil price change to inflation in most cases. The findings suggest accommodative monetary policy measures to combat high inflation rate.

An analysis of export of indian agriculture commodities

The present work has attempted to examine the relationship between agricultural export and the effective factors influencing the same relationship in India. The review of literature has provided an overview of growth of agricultural exports across the countries and different methods used to calculate the export supply function of agricultural products. This study is based on the neoclassical trade theory which is evaluated in a neoclassical production function framework, incorporating an additional factor of production (exports) into the production function. The study has attempted to analyze the long run and the short run relationship between agricultural exports as dependent variable and exchange rate, export price index, gross domestic product and domestic production of agricultural product as independent variables based on annual data during 1980- 2010. Also, World Trade Organization as a dummy variable has been taken as a determinant of India's agricultural exports. The autoregressive distributed lag model and error correction model are used to determine the long run and short run relationship between the variables. Further, paired t-test is used to investigate the impact of WTO on growth of agricultural export in India. Dynamic econometric model is estimated to test for time series properties, unit root test and cointegration (ARDL procedure). The results of cointegration test showed that the variables are cointegrated. The results of long-run estimated coefficients of export supply function showed that exchange rate had a statistically significant and negative impact on agricultural export. The long-run coefficient of domestic production of agricultural product and export price index have positive sign and are significant at 5% level respectively. The long-run coefficients of Gross Domestic Product (GDP) and WTO as dummy variable had positive and negative sign respectively but are insignificant. In brief, the coefficient of the ECM is very high at (−) 0.54 implying a fairly high speed of adjustment to the long-run disequilibrium after a shock. The Coefficient of the ECM term suggested that adjustment process was fast and 54% of the previous year's disequilibrium in equity prices from its equilibrium path will be corrected in the current year. It is also observed that dummy variable is not significant in long run but it is statistically significant in short term.

Kırılgan Ekonomilerde Finansal Gelişme Düzeyinin Ekonomik Büyüme Üzerindeki Etkisi

This study aims to analyse the impact of financial development on economic growth for fragile five economies, which are based on the country classification by Morgan Stanley. Accordingly, Shin cointegration, Fourier Shin cointegration, and Toda-Yamamoto causality analyses were performed for the annual observations from 1980 to 2017. Fourier Shin cointegration test results reveal the existence of a long-run relationship between economic growth and financial development, capital stock, and human development index for four countries, namely Brazil, India, South Africa, and Turkey. On the other hand, Shin cointegration test results indicate the existence of cointegration relationship between series for Brazil, Indonesia, and South Africa. Dynamic Least Squares estimator shows that financial development has positive and statistically significant coefficients for four countries, namely India, Indonesia, South Africa, and Turkey (except Brazil). Finally, Toda-Yamamoto causality analyses reveal that there is only a unidirectional causality running from financial development to economic growth for Indonesia and South Africa. The findings reveal that the level of financial development is a significant parameter in fragile economies' sustainable growth processes.

Statistical Analysis on the Relationship Between Exports and Economic Growth in Sierra Leone (1990-2019)

In order to boost up the economic growth of any country, Exports should be considered as key factor as it contributes immensely in which Sierra Leone as a nation is no exception. Therefore, this research paper target to investigate the effect of export on the economic growth of Sierra Leone using time series data of exports and the gross domestic products ranging from 1990- 2019 which was source from the World Bank Indicators. In order to accomplish the aim of this paper, descriptive statistics, regression, correlation, Augmented Dickey- Fuller Unit root test, Johansen cointegration test, Vector Auto regression model, diagnostic test and the Pair- wise Granger causality test were the tools used to analyze the data. Based on the results from both regression analysis, it can be seen that export has a significant positive effect on the economic growth of Sierra Leone. Augmented Dickey-Fuller unit root test results shows existence of stationarity at first difference was detected, while the cointegration test results revealed that, there is no relationship between the exports and economic growth. However, the Vector Auto regressive model test revealed that, exports have a significant effect on the economic growth as well. Granger causality test, shows that both exports influence the Gross Domestic Product of Sierra leone.

Analysis on the Contribution of Agricultural Sector on the Economic Development of Ghana

The study empirically examines the impact of agricultural sector on the economic GDP growth of Ghana, using time series data from 1984 to 2018. The cointegration test results showed the non-existence of long-run relationships existing between the overall GDP and agricultural output. In its set-up, the error correction method estimates the long-run relationship between economic growth and agricultural output as well as fluctuation in the short-run. Based on the basic regression model, agricultural output exhibits a significantly positive impact on the overall GDP growth of the country. Similarly, the industrial and service sector also contributed positively to overall GDP growth. The results indicate the need to promote value added agricultural export expansion policies to achieve high economic GDP growth.

The impact of foreign direct investments on Turkish economy

Purpose- In this study, inflation rate, unemployment rate and the index of industrial production, foreign direct investment coming to Turkey are examined on whether this is effective. Methodology :The data analyzed are FDI, unemployment rate, inflation rate and industrial production index with the highest share in GDP. Monthly data covering the period between January 2005 and May 2020 were used. The data in the tests have been obtained from the CBRT EDDS, TURKSTAT and the World Bank. Findings- The series are found out to be stationary at level. According to the cointegration test result, cointegration could found between all our data. Impulse response graphs indicate that all variables respond in a reducing way to reducing shocks occurred in each indicator. Shocks have lost their effect on average in 3 days. Conclusion- In the Turkish economy, it is seen that there is a close relationship between foreign direct investment and economic growth indicators inflation, unemployment, Industrial Production Index in the long term.

The Effect of Macroeconomic Fundamentals and Demographic Change on Housing Price

This paper studies the effect of macroeconomic fundamentals and demographic change on housing price in Korea. A housing price model is specified as the function of GDP, interest rate, housing construction permit, and working age population to examine the effect. Based on the observation that the variables are non-stationary, unit root and cointegration tests are performed. Unit root test indicates that the variables are non-stationary and first-order integrated. Cointegration test, however, shows that the variables are co-integrated, implying that a stable long-run relationship exists among the variables. Based on the cointegration test result, a vector error correction model is constructed and estimated. The VECM estimation result shows that while GDP and interest rate significantly affect housing price, the effects of housing construction permit and working age population are statistically insignificant. Empirical result of this paper suggests that the macroeconomic fundamentals that affect the demand side of the housing market are important determinants of housing price in Korea.

The impact of macroeconomic variables on the budget deficit in Bangladesh: an econometric analysis

PurposeThis paper aims to investigate the impact of selected macro-economic variables like real effective exchange rate (REER), GDP, inflation (INF), the volume of trade (TR) and money supply (M2) on-budget deficit (BD) in Bangladesh over the period of 1980–2018.Design/methodology/approachBy using secondary data, the paper uses the Vector Error Correction Model (VECM) and Granger Causality test. Johansen’s cointegration test is used to examine the long-run relationship among the variables under study.FindingsJohansen’s cointegration test result shows that there exists a positive long-run relationship of selected macroeconomic variables (real effective exchange rate, inflation, the volume of trade and money supply) with the budget deficit, whereas GDP has a negative one. The short-run results from the VECM show that GDP, inflation and money supply have a negative relationship with the budget deficit. The Granger Causality test results reveal unidirectional causal relationships running from BD to REER; TR to BD; M2 to BD; GDP to REER; M2 to REER; INF to GDP; GDP to TR; M2 to GDP and bidirectional causal relationship between GDP and BD; TR and REER; M2 and TR.Originality/valueBangladesh has been experiencing a budget deficit since 1972 due to a decline in sources of revenue. This study contributes to the empirical debate on the causal nexus between macroeconomic variables and budget deficits by employing VECM and Granger Causality approaches.

A study of the interrelation between inflation and BSE consistency

This study examines the relationship between WPI measured inflation and BSE market consistency proxied by market capitalization, BSE Sensex 30 and trading turnover-both value and volume, during the period April, 2000 to March, 2014. The investigation has been made by applying the vector error correction model and Johansen co-integration test. The study analysed the correlation between the variables by using Karl Pearson Coefficient of correlation matrix, further confirmed through the test of significance. All the findings of the study were justified through the correlated variables. In addition the Johansen co-integration test results show that there is a long run, but there is a negative relationship between WPI measured inflation and selected proxies of BSE consistency during the evaluated period. However, no short run interrelation between the variables also observed during the study period. Keywords: Capital markets, Financial intermediation, Correlation, Co-integration, Vector error correction, Inflation, Market capitalization, BSE sensex 30.