Econometric Time Series Analysis Research Articles

Specific features of the Russian Economic Growth Model

The article presents the study of the specific features of the Russian economic growth in 1998–2017. The study objective is to substantiate the growth and decline mechanism in business activity in the Russian economy. This mechanism is determined by the gap in the growth rates of wages and labor productivity in the open economy. Four hypotheses have been formulated: 1) significant cause and effect relationship between exchange rate and economic growth in Russia; 2) wage growth outrunning productivity has a depressing effect on the profitability of the commercial sector; 3) significant differences between the Russian economic growth in 1998–2009 and in 2009–2017, determined by the connection between the excess of the domestic interest rate over the world rate and investments; 4) substantial connection between the domestic interest rate and investment in 1998–2009 which disappeared in 2009–2017. The theoretical analysis and the hypotheses have been based on neoclassical synthesis models. Statistical testing of the hypotheses has been carried out by means of statistical and correlation analysis and methods of econometric analysis of time series. A problem related to wage growth outrunning labor productivity has been identified. Probable significant changes in the Russian growth model in 2018–2020 have been forecasted. They will be caused by the infrastructure development and housing construction. The major conclusion of the study is that there will be a positive effect of the ruble depreciation on labor productivity in the medium term. However, it will be over by the end of 2019 and beginning of 2020. Domestic currency strengthening and outrunning wage growth with the slowing labor productivity reduce the profitability of the commercial sector and put brakes on the economic growth.

Macroeconomic Determinants of Islamic Banking Financing

The purpose of this study is to analyze the relationship between Islamic banking financing and macroeconomic variables as well as its response to key economic variables including real output, price level, interest rate and trade for the case of Indonesia. This research uses time series econometric analysis such as Granger Causality and Vector Error Correction Model (VECM). Time series data used are total Islamic banking financing, industrial production index (IPI), customer price index (CPI), Certificate Bank Indonesia (SBI) rate and international trade. The results show that there is bi-directional relationship between Islamic banking financing and price level as well as Islamic banking financing and interest rate. Meanwhile, the uni directional causality occurs between Islamic banking financing and real output as well as Islamic banking financing and trade. In this case, Islamic banking financing is affected by IPI. Islamic banking financing is not affected by trade but trade is significantly affected by Islamic banking financing. In addition, Islamic banking financing is relatively sensitive to the shock of price level, real output and interest rate.

True exogenous shock or just a scapegoat

PurposeSensemaking models generally lack an objective determinant to distinguish between CEO fault and changes in systematic risk caused by exogenous negative shocks like a banking crisis. The interdisciplinary approach of this paper combines attribution theory with econometric time series analyses to provide an objective measure of exogeneity and persistence of a negative shock to an organization. The purpose of this paper is to address the exploratory research question, of how scapegoating by managers can be avoided by the use of an objective and empirical measurement and if the recent financial crisis can be seen as an exogenous shock to manufacturing firms.Design/methodology/approachBy testing for stationarity with a structural break with an econometric time series analysis, the model helps to reduce agency costs during organizational crisis by effectively determining crisis causation and avoid scapegoating by managers.FindingsBy combining the sensemaking models of Haleblian and Rajagopalan (2006), Staw (1980), and Weick (1988), an integrated model of sensemaking in performance crises under the specific context of simultaneously occurring external crises is provided. By applying the authors approach the results suggest that the financial crisis of 2008/2009 has true exogenous adverse effects on US manufacturing firms.Originality/valueThe interdisciplinary approach encourages the integration of econometric time series analysis as an objective determinant in sense making models.

The Economic Significance of Laws Relating to Employment Protection and Different Forms of Employment: Analysis of a Panel of 117 Countries, 1990-2013

The authors use time series econometric analysis applying non‐stationary panel data methods to estimate the relationships between employment protection legislation and legal protection of different forms of employment (part‐time, fixed‐term and agency work), and economic outcomes, with a data set based on the Centre for Business Research Labour Regulation Index (CBR–LRI), covering 117 countries from 1970 to 2013. Findings suggest that these laws have become significantly more protective over time and that strengthening worker protection is associated with an increase in labour's share of national income, rising labour force participation, rising employment, and falling unemployment, although the observed magnitudes are small when set against wider economic trends.

The Economic Significance of Laws Relating to Employment Protection and Different Forms of Employment: Analysis of a Panel of 117 Countries, 1990-2013

This paper presents findings from analysis of a dataset of labour laws, based on the Centre for Business Research Labour Regulation Index (CBR-LRI), which has recently been extended to cover 117 countries and the period from 1970 to 2013. The dataset shows that laws regulating different forms of employment (DFE), including part-time work, fixed-term employment and agency work, have become significantly more protective over time, in particular since the late 1990s. Employment protection laws (EPL), covering individual dismissal, collective consultation and codetermination rights, have become steadily more protective since the 1970s. Europe has seen a decline in the level of EPL since the onset of the sovereign debt crisis in 2008, but this trend is small, on average, by comparison to earlier increases in protection beginning in the 1970s, and has not been replicated in other regions. Time-series econometric analysis using non-stationary panel data methods suggests that strengthening worker protection in relation to DFE and EPL is associated with an increase in labour’s share of national income, rising labour force participation, rising employment, and falling unemployment, although the observed magnitudes are small when set against wider economic trends.

Costing for Elevation in Development Expenditure: Illustrative Evidence from India

Differences in elevation often occur among regions of a country, leading to higher opportunity costs in hill areas with consequent implications for achieving sustainable development in such areas. Additional investment can improve coping capacity, expand capabilities and choices creating opportunities for economic growth to help overcome these constraints. Time series econometric analysis of public expenditure on provision of health, education, and infrastructure in India is used to derive the additional costs attributable to elevation. Study findings indicate that there is a significant relationship between expenditure and attainment of social sector outcomes. The costs of provision are substantially higher in elevated areas than plains. Results suggest that the costs in hill areas are 2.5 times higher than plain areas and are much higher than the current norms used in planning resource allocations for development expenditure. The currently used norms can lead to under-funding of health, education and infrastructure. Higher resource allocations are required for economic development in underdeveloped hill regions. The findings have implications for achieving balanced and sustainable development in such economies.

Cross Border Impacts of Renewable Energy Sources in Central Western Europe

Alongside the remarkable deployment of renewable energy sources for electricity in Europe the power markets are growing together. An analysis focusing not only on domestic but also on cross border impacts is therefore of interest. We consider the interaction between the electricity markets of France, Germany, the Netherlands and Belgium (Central Western Europe region or CWE) which are technically and economically closely connected. More precisely, we study the international impacts of renewable energy sources for electricity and quantify possible spillover effects on prices. We choose two different approaches to tackle the question: A toy model infers causal relationships and an econometric time series analysis with high frequency data quantifies the effects of interest. With rising renewable electricity production from wind and solar in different market areas, challenges in analysis arising from multicollinearities become more pronounced and are addressed. We find that renewable energy sources in one region indeed have a depressing impact on prices of bordering bidding zones even in countries which do not have direct physical interconnections. This effect is quantified in monetary units for the years between 2012 and 2015. The influence of German renewable energy sources over one year on the Netherlands, Belgium and France is of the same order of magnitude than the influence of the corresponding domestic renewables on the respective domestic markets.

Nigerian Pension Scheme and Poverty Reduction in Nigeria: An Empirical Assessment (2004-2015)

This study employed econometric time series analysis to examine the effect of pension scheme contributions into the retirement saving accounts of employees on national, urban and rural poverty levels. Secondary data for the period 2004 to 2015 were collected from the National Pension Commission (PenCom) Annual Reports, National Bureau of Statistics and Worldbank. The study applied the Ordinary Least Square (OLS) regression technique in which variations in national, urban and rural poverty levels were regressed on pension contributions into the retirement saving accounts of employees, gross national income, population growth and unemployment rate. The diagnosed results revealed that pension contributions have no significant effect on national, urban and rural poverty levels. The findings also suggest that 60.19%, 63.05% and 65.37% variation in national, urban and rural poverty level respectively were as a result of joint changes in pension scheme contribution I to retirement savings account of employees, gross national income and population growth. The negative relationship between pension contribution and poverty level validates the life-cycle hypothesis, which envisaged that a good operational pension scheme has the potential of reducing poverty most especially among the elderly population, which in turn affects the general poverty level of a country. On the basis of the findings, Federal government of Nigeria should intensify the efforts to ensure wider coverage of the pension scheme to the lower tiers of government: States and Local Governments Areas. The National Pension Commission should strengthen its surveillance on the private sector to ensure full compliance with the provisions of the Pension Reform Act of 2014. Finally, there should be sustained promotion of wider publicity of the activities of National Pension Commission with the objective of educating and enlightening the general public on the implementation of the contributory pension scheme.

The Hog Cycle of Law Professors: An Econometric Time Series Analysis of the Entry-Level Job Market in Legal Academia.

The (German) market for law professors fulfils the conditions for a hog cycle: In the short run, supply cannot be extended or limited; future law professors must be hired soon after they first present themselves, or leave the market; demand is inelastic. Using a comprehensive German dataset, we show that the number of market entries today is negatively correlated with the number of market entries eight years ago. This suggests short-sighted behavior of young scholars at the time when they decide to prepare for the market. Using our statistical model, we make out-of-sample predictions for the German academic market in law until 2020.

Impact of Fiscal Deficit on Inflation in Sri Lanka: An Econometric Time Series Analysis

There is a relationship between the fiscal deficit and inflation, which was confirmed empirically in several studies conducted in many countries. Sri Lanka has been encountering the problem of inflation for the recent years. But in Sri Lanka, this proposition has not yet been studied scientifically. Therefore, this study was going to fill this gap. The objective of this study was to test the impact of fiscal deficit on inflation in Sri Lanka. For this study, the annual time series data were used during the period of 1959 to 2013. The fiscal deficit, exchange rate, government expenditures and import outflow were used as independent variables while the Colombo consumer price index was considered as dependent variable. In addition, the multiple regressions model was used to test the impact of fiscal deficit on inflation. Based on the regression results, the fiscal deficit preserved the positive relationship with inflation in Sri Lanka at one percent significant level. Therefore, this study confirmed that the fiscal deficit accelerates the inflation in Sri Lanka.

The Contribution of the Nigerian Banks to the Promotion of Non-Oil Exports (1990-2013)

This study examines the contribution of the Nigerian banks to the promotion of non-oil exports. This study adopted econometric time series analysis to examine the contribution of Nigerian banks credit in relation to non-oil exports performance, assess the presence of causal relationship between Nigerian banks credit and non-oil exports performance as well as the direction of the causal relationship. The empirical analyses that were carried out to achieve the objectives include unit root, co-integration and granger causality test, in which changes in non-oil exports performance was regressed against commercial banks credit to non-oil exports, interest rate and inflation using annual series data for the period 1990-2013. The data were sourced from the Central Bank of Nigeria statistical bulletin. The result of the analysis showed that Nigerian banks have not adequately contributed toward the promotion of non-oil exports. The study also found that there is a long run relationship between Nigerian banks credit to non-oil exports and the performance of non-oil exports and no causality between Nigerian banks credit to non-oil exports and non-oil exports performance. Based on the findings, the Central Bank of Nigeria should reduce the current monetary policy rate of 14% to a range of 5%-8% so that when commercial banks add up processing, transaction and other administrative fees, credit would be extended to non-oil exporters at a rate lower than 15%. Furthermore, the Central Bank of Nigeria should as an operational guideline, impose commercial banks to set aside a certain amount of money from their yearly profit for financing of non-oil export as it is the case for small and medium scale enterprises equity scheme.

Path Dependence in the Evolution of the Business Portfolio Configuration of Large Multi-business Firms

Based on learning theory, this study introduces a distinction into three orders (zero, first, second) of path dependence. Applying econometric time series analysis (VAR models), we explore the order of path dependence in firm investment, divestment, and cooperation decisions. An extension to prior research, we not only investigate the order of path dependence for each type of portfolio decision but also investigate the order of path dependence in firms’ collective portfolio decision making. Results show differences in the order of path dependence for the three types of portfolio decisions between firms. Moreover, the collective portfolio activities display a different order of path dependence from the analysis of each portfolio activity separately, which indicates substantial interactions among them. In sum, our empirical analyses indicate the need to distinguish between different orders of path dependence and to demonstrate that an organizational activity is not only dependent on its general conditions, as contingency theory argues, nor is it solely dependent on its own history, as classical path dependence theory argues. Instead, an organizational activity is also dependent on the history of related activities.

The Effect of Environmental Activism on the Long-run Market Value of a Company: A Case Study

This paper investigates the impact of activism on a large, powerful corporation in Tasmania. Gunns Ltd was a large woodchip processor in Tasmania that fought a long-running battle with environmental activists regarding Gunns’ logging and processing activities. The study focuses on events in 2004–2005, when Gunns applied to build a pulp mill in rural northern Tasmania and began a legal case against activists. The research question is whether there is clear statistical evidence that these events were important, as is widely believed, in the ultimate failure of Gunns in (Annual Report 2011, Gunns Ltd, Tasmania, available from: http://www.asx.com.au [11/04/14]), just 6 years after being the largest and one of the most financially successful Tasmanian companies. We use a mixed methods approach that combines a detailed narrative informed by theory, to examine issues of corporate social responsibility (CSR) and ethical behaviour, with an econometric time series analysis of the impact of activism on the market value of Gunns. Our analysis supports the contention that the events in 2004–2005 played a significant part in the decline of the long-run market value of Gunns over the subsequent period, through to its failure in 2011. We discuss the underlying causes for Gunns’ failure in terms of agency, stakeholder, legitimacy and leadership theories. Research frequently assesses effects such as those in the Gunns’ case through solely qualitative means. This paper integrates a quantitative analysis into a detailed qualitative narrative and theoretical interpretation of events, to provide additional precision to its findings. It contributes to research in CSR and the impact of activism.

On Heaven’s Lathe: State, Rule of Law, and Economic Development

AbstractWe propose a theoretical framework for understanding the evolution of the rule of law state, which is conceived as the equilibrium of a societal game in which actors accept the legitimacy of publicly enunciated legal rules. A meta-norm of respect for the sovereign legal power of the state is not self-forming on the basis of private conduct, but requires the coevolution of impersonal market exchange with effective state capacity to constitute and regulate markets. A functioning legal system must acquire the means not just to control private power but to constrain other organs of government. The emergence of such a ‘self-limiting state’ is an historical process which, while complementary to a market order, is also contingent and path-dependent, and is not preordained. Illustrating our argument with empirical evidence drawn from the contemporary experience of middle-income countries, with a focus on China, we argue that alternatives to the rule of law state, including interpersonal trust, closed networks and authoritarian political control, can only achieve limited scale and scope effects, and are prone to high deadweight costs arising from corruption and the capture of the public sphere by private interests. We also discuss the potential of transplants of legal rules and institutions to catalyse the transition to impersonal trade based on the rule of law, and present evidence, from time-series econometric analysis, that the diffusion of shareholder protection laws has the potential to support financial development in emerging markets. Evolution towards the rule of law state is, we conclude, one possible developmental path for middle-income countries.

Exchange rate and oil price interactions in transition economies: Czech Republic, Hungary and Poland

This study investigates causal dynamics between crude oil prices and exchange rates in Czech Republic, Poland and Hungary by employing monthly data from the beginning of flexible exchange regime in each country to December 2011. The study benefits from the recent advance in the time series econometric analysis and carries out linear causality, non-linear causality, volatility spillover and frequency domain causality tests. The frequency domain causality analysis results imply that oil price fluctuations affect real exchange rates in the long run in Poland and Czech Republic. On the other hand, frequency domain causality test results indicate that oil price fluctuations do not affect exchange rate in any period in Hungary despite its economy?s high imported energy dependency.

A Study of Causality between Bank Credit and GDP Growth in India

The factors that cause Economic growth are varied and diverse. Theory has however managed to identify certain key factors, of which finance is one. In recent years, there have been studies using econometric time-series analysis to study the short-run and long-run relationships between finance and growth, for various countries. This paper is a study of the Indian economy, where we try to determine the causal relationship between bank credit and economic growth. Data from 1972 to 2012 for the Indian economy has been used for this study. The results suggest that provision of bank credit leads to economic growth. However, an increase in economic growth may not lead to further provision of bank credit in the economy. In other words, there is unidirectional causality from bank credit to growth.

Impact of Financial Liberalization on Economic Growth: A Case Study of South Africa

Financial liberalization plays a major role in stimulating economic growth. In light of this, the paper examines the impact of financial liberalization on macroeconomic performance in South Africa by using time series econometric analysis over the time period 1990-2011. The study uses GDP, the dependent variable as a measure of economic growth and the following macroeconomic variables: inflation, lending rate exchange rate and financial deepening (M2/GDP) as financial liberalization indices. To confirm the order of integration, the Augmented Dickey-Fuller and Phillips Perron unit root tests are employed. The study uses the Johansen co-integration and the Error Correction Mechanism to obtain long run and short run coefficients. Findings of the study are that inflation, lending rate and financial deepening have positive influence on economic growth whilst exchange rate has a negative impact on economic growth. This study recommends that the government should put in place measures that stimulate investments with fair lending rates so as to deepen the financial system which in turn promotes economic growth. DOI: 10.5901/mjss.2014.v5n23p238

Urbanization and agricultural land loss in India: Comparing satellite estimates with census data

We examine the impacts of urbanization on agricultural land loss in India from 2001 to 2010. We combined a hierarchical classification approach with econometric time series analysis to reconstruct land-cover change histories using time series MODIS 250 m VI images composited at 16-day intervals and night time lights (NTL) data. We compared estimates of agricultural land loss using satellite data with agricultural census data. Our analysis highlights six key results. First, agricultural land loss is occurring around smaller cities more than around bigger cities. Second, from 2001 to 2010, each state lost less than 1% of its total geographical area due to agriculture to urban expansion. Third, the northeastern states experienced the least amount of agricultural land loss. Fourth, agricultural land loss is largely in states and districts which have a larger number of operational or approved SEZs. Fifth, urban conversion of agricultural land is concentrated in a few districts and states with high rates of economic growth. Sixth, agricultural land loss is predominantly in states with higher agricultural land suitability compared to other states. Although the total area of agricultural land lost to urban expansion has been relatively low, our results show that since 2006, the amount of agricultural land converted has been increasing steadily. Given that the preponderance of India's urban population growth has yet to occur, the results suggest an increase in the conversion of agricultural land going into the future.

Service and Construction Sector of Malaysia: Causality Link (1991-2013)

The number of research studies has been conducted over the importance of service and construction sector in an economy and confirmed that these two sectors are always being closely associated to the aggregate economy and play crucial role in the socio economic development of a country. The objective of this study is to examine the link between the construction and service sector of Malaysia during the last two decades by using time series econometric analysis. The Granger causality approach is used to obtain the objective of the study. The results of the study suggest that there is a uni-directional (one way) association between the service and construction sector in Malaysia i.e. construction sector to service sector. The construction sector plays a significant role to motivate the economic activities of the service sector in Malaysia and the service sector take 6 months (two quarters) to absorb the impact of a shock coming from the construction sector. The results of the study are important and useful for developing future policies for the construction and services sectors of Malaysia. The results are also important and informative for interested parties of the sectors.

The Role of Bank Credit as a Determinant of Economic Growth in India

The dynamics of the growth process in any country are varied and diverse. The factors that cause growth, and the processes behind growth itself, have been a very important subject in macroeconomic theory, as well as business studies. Theory has managed to identify certain key factors, of which finance is very important. In recent years, there have been studies using econometric time-series analysis to study the short-run and long-run relationships between finance and growth, for various countries. This paper studies the Indian economy to determine the causal relationship between bank credit and economic growth, using data from 1972 to 2012. The results suggest that provision of bank credit leads to economic growth. However, an increase in economic growth may not lead to further provision of bank credit in the economy. In other words, there is unidirectional causality from bank credit to growth.