Engle-Granger Error Correction Model Research Articles

Analysis of the Impact of Monetary Policy Instruments on Economic Growth in Indonesia by 2013 to 2023

Based on quarterly data by 2001Q1 to 2017Q2, this research and study covers theoretical debates and empirical studies on the factors that affect economic stability and their effect on the financial sector's performance. This study applies the Ordinary Least Square (O.L.S.) method to the Cointegration and Engle Granger-Error Correction Model (E.C.M.) methods. E.C.M. is done to assess the long-term validity and balance of the research model and foresee potential flaws and discrepancies among the theoretical and statistical models. Even while the M2 variable has no discernible effect on G.D.P. during the observation period, the research findings demonstrate that, over the long run, there is a balance among changes in G.D.P. and monetary variables, such as interest rates, Inflation, M2, and the rupiah value. On the other hand, the E.C.T. variable has a significant short-term effect on fluctuations in G.D.P. Interest rates, Inflation, M2, and exchange rates had no discernible effect on G.D.P. throughout this time. Thus, changes in monetary variables, particularly interest rates, Inflation, and M2, tend to effect G.D.P. The average quarterly financial deepening in Indonesia for the observation period was 3.80 per cent, according to the outcomes of the financial performance study. Furthermore, M2 growth during the same period was 3.03 per cent, compared to Indonesia's average quarterly economic growth of 1.36 per cent.

The Effects of Various Internal and External Factors on the Movement of the Indonesian Sharia Stock Index on the Indonesia Stock Exchange

This study analyzed several factors that affect the Indonesian Sharia Stock Index. The use of the inflation-currency rate, the availability of money, and the BI rate were all internal factors considered in this study. Meanwhile, the external factors used in this study were international gold and oil prices. The Engle-Granger Error Correction Model was used to analyze time series data in this study. The research used the monthly period started from May 2013 until January 2022. The long-term results of the research variables that could influence the exchange rate, total money supply, world oil prices, and world gold prices were all dependent on the Indonesian Sharia Stock Index. Meanwhile, the factors that influence the short-term movement of the ISSI exchange rates were inflation, and the BI rate variables.

FAKTOR-FAKTOR YANG MEMPENGARUHI STABILITAS EKONOMI SERTA IMBASNYA TERHADAP KINERJA SEKTOR KEUANGAN DI INDONESIA (PENDEKATAN COINTEGRATION, ERROR CORRECTION MODEL DAN FINANCIAL DEEPENING)

The research and study cover a theoretical discussion and empirical study on factors affecting the Economic stability and their impact on the performance of the financial sector based on Quartely data from 2001Q1 to 2017Q2. The research employs the Cointegration and Engle Granger-Error Correction Model (ECM) approach by applying the Ordinary Least Square (OLS) method. The ECM is performed to anticipate the possibility of errors and disparity between the theoretical model and the statistical model as well as to identify long-term balance and validity of the model employed in the research. The research results indicate that within a long-term period, there is balance between changes in the GDP and the monetary variables i.e. interest rate, inflation, M2 and rupiah exchange rate despite the fact that the M2 variable does not significantly affect the GDP within the observed period. On the other hand, within a short-term period changes in the GDP affected significantly by the ECT variable. Within such a period, interest rate, inflation, M2 and exchange rate variables do not significantly affect GDP. Thus, it can be concluded that the GDP tend to respond to changes occurring in monetary variables, especially interest rate, inflation and M2. Currently, the result of financial performance analysis shows that the average of the financial deepening quartely in Indonesia during the observation period is 3.80 percent. In addition, the quartely average of Indonesia's economic growth was 1.36 percent, while M2 growth during the same period was 3.03 percent.

The Stock Market and Exchange Rates in Five South Asian Countries

The composite price index and return of stocks are the important indicators, both as a measure of the company's portfolio performance, as well as an indicator of macroeconomic health and the aggregate investment. In addition, the stock prices are also influenced by macroeconomic variables and one of the most important is the exchange rates. The objective of this study is to determine the behavior of exchange rate affects the stock returns in Southeast Asia, pre and post of the 2008 world financial crisis. By employing the daily stock market return in Indonesia, Malaysia, the Philippines, Thailand, and Singapore more than seventeen years from 1 September 1999 to 31 March 2017, this study utilizes Engle-Granger error correction model and cointegration approach to investigate and compare the long and short run of the structural effect of the exchange rates on stock returns. To differentiate the behavior of variables between pre and post occurrence of 2008 world financial crisis, the estimation of the model is divided into two periods. This study finds that the exchange rate growth influence the stock returns in the long and short run, and proves that the cointegration between the two variables exist in all countries. The study has the implication that the exchange rate, which the one of the fundamental measures of a country's macroeconomic health, is an important determinant of influencing stock return, even its effects are responded by the stock return in one day.

VOLATILITAS NILAI TUKAR RUPIAH TERHADAP DOLAR AS DAN FAKTOR-FAKTOR YANG MEMPENGARUHINYA DI INDONESIA (PENDEKATAN COINTEGRATION DAN ENGLE GRANGER-ERROR CORECTION MODEL)

The research and study cover a theoretical discussion and empirical study on Volatility Of Rupiah Exchange Rate to Us Dollar And Factors that it Influence based on Quartely data from Q12001 to Q42015 . The research employs the Cointegration and Engle Granger-Error Correction Model (ECM) approach by applying the Ordinary Least Square (OLS) method. The ECM is performed to anticipate the possibility of errors and disparity between the theoretical model and the statistical model as well as to identify long-term balance and validity of the model employed in the research. The research results indicate that within a long-term period, there is balance between changes in the rupiah exchange rate and macro-economic variables, i.e. interest rate and inflation within the observed period. On the other hand, within a short-term period changes in the rupiah exchange rate are affected significantly by interest rate, inflation and the ECT variable. Within such a period, PDB, and M2 variables do not significantly affect the volatility of rupiah exchange rate. Thus, it can be concluded that the rupiah exchange rate tend to respond to changes occurring in macro-economic variables, especially interest rate and inflation.

Econometric Analysis of China's Plywood Market

China's primary wood-processing industry and wood-consuming sectors have experienced rapid growth in recent years. Plywood is the most important primary wood product in China in terms of consumption, production, and exports. One of China's most important export destinations is the United States, to which China exports not only plywood but also wood in the form of furniture. In this article, we analyze the development of China's plywood industry since the 1990s; provide an overview of the demand, supply, and exports of Chinese plywood; and present the results of econometric models. The Engle–Granger error-correction model was applied to an analysis of annual time-series data from 1993 to 2007. The results suggest that most of the growth in China's plywood demand was primarily driven by the growth in consumer income, while an increase in product price had only a small negative effect. In contrast, an increase in raw material price had a significant negative impact, but end-use sector activity had no significant effect on China's plywood supply. During the same period, the growth in China's plywood exports was due to consumer income growth in the US market. Knowledge of the elasticities and findings presented here can serve as a useful reference for foreign and domestic wood product companies that plan their investments, as well as government agencies and public authorities that plan economic and forest policies.

ANALISIS FAKTOR-FAKTOR YANG MEMPENGARUHI INVESTASI DALAM NEGERI DI JAWA TENGAH TAHUN 1980-2002

Investment is one of important component for sustainable economic development process. The research objective that want achieved is to estimate influence of labour, inflation, PDRB, and interest rate to domestic investment (PMDN) in Central Java. The research benefit was to clarify factors that influenced domestic investment and gave insight and input for local government in formulating economy policy.One of method for analysing long-run and short run influence was by using dynamic model. In this research, model which applied was ENGLE GRANGER ERROR CORRECTION MODEL (EG-ECM) based on granger representation theoremResult of this research indicated that domestic investment one year ago was variable which influenced significantly in short run while rate of interest influenced in long run.

An examination of the causal relationship between savings and growth in the third world

Past studies reveal a correlation between savings and GDP growth in the Third World. Those studies hypothesize that higher rates of savings cause higher growth rates of real GDP. This paper explores an alternative hypothesis: that higher growth rates of GDP cause increased savings. Higher growth rates of income boost the rate of savings and attract more foreign savings. The difference between these two hypotheses is the direction of causality. This study investigates the direction of causality using the Engle-Granger error-correction model or the Granger causality test, whichever is appropriate. The findings support the latter hypothesis in more cases.

Modelling and forecasting the demand for coal in China

In contrast with developed countries, coal is the major energy source of China. In view of its importance, this paper attempts to analyse and forecast the country's demand for coal as it moves towards the next century. To do this, we have applied three different methods to contrast their performances in fitting the Chinese data: Engle-Granger's error correction model, Hendry's error correction model and Hendry's general-to-specific approach. It is found that the Engle-Granger approach outperforms the other two in terms of having the smallest ex post forecast errors. Using the Engle-Granger approach, the model predicts that the Chinese economy will experience a 5% shortage in the year 2000.

Dynamic specification of demand functions: A cointegration approach

The single-equation approach has been commonly used in the studies of energy demand. However, as most of the data used in the energy demand model are unlikely to be stationary, this factor has to be taken into account when estimating the demand behavior. To overcome this problem, the authors have applied the cointegration and error-correction models to model Chinese coal consumption data. In order to contrast their performance with such traditional models as Hendry's general-to-specific approach, a forecast error comparison exercise has been conducted. In terms ofex post forecast errors, the Engle-Granger error correction model outperforms other chosen models. By using the Engle-Granger approach, it is possible to obtain important information about the behavior of coal demand in China.