Existence Of Long-run Relation Research Articles

Effect of Energy Utilization on Pakistan’s Economic Development: A Time Series Analysis

The present research has been conducted to study the causal relation among GDP, electricity utilization, exports, real capital and labor force for Pakistan. Time dependent data for the mentioned parameters have been used for the time period of 1980 to 2022. Inter-relations among the above-mentioned variables have been studied in this work by the method of cointegration using bounds test. The results illustrate that there is an existence of long run relation among the parameters where GDP has been taken into consideration as the dependent variable. Granger causation analysis has also been performed for the variables. Results show that Granger causality between GDP and electricity utilization runs in both directions. Moreover, the study discloses that Electricity utilization granger cause exports and per capita real capital. Exports granger cause per capita real capital. Per capita real capital granger cause GDP. Labor force granger cause GDP and exports. The long run relation equation of GDP, Electricity utilization, exports, real capital and labor force has also been examined for parameter stability. The parameters are found to be stable with the significance level of 5%. The research also suggests some significant strategy recommendations.

Integration and Interdependence Among Equity Markets in South Asia: Measuring Through ARDL Bounds Approach

This article examines the degree of integration among the financial markets in South Asia at regional and extra-regional levels by using monthly data collected for the period 2010–2018. It uses autoregressive distributed lag (ARDL) bounds test approach of cointegration, and short-run causalities are obtained under the error correction framework. The bounds testing procedure finds the existence of long-run relations among the four markets when the equity market of India is taken as the dependent variable. Although the bounds testing procedure finds some evidence of integration at the regional level, evidence suggests that integration at the global level is much higher than the integration at the regional level for this region. Another interesting finding is that Pakistan does not exhibit cointegrating relations with the rest of the equity markets in South Asia, and results are inconclusive when developed countries’ equity markets are introduced to the estimated models, which can be attributed to the political instability that Pakistan is consistently plagued with and also its strained relationship with India, thereby hampering capital inflows.

Effects of Exchange Rate on Foreign Direct Investment Inflow in Nigeria

Aims: This study examined the place of exchange rate in determining foreign direct investment inflow into the Nigerian economy using time series data from 1980 to 2017.
 Study Design: Historical research design method was adopted for the study, it uses secondary sources and a variety of primary documentary evidence.
 Place and Duration of Study: Department of economics, faculty of social sciences, Nnamdi Azikiwe University, between September 2010 and May 2018.
 Methodology: The method adopted for this study was the Autoregressive Distributed Lag (ARDL) estimation approach and error correction mechanism within the framework of dynamic OLS (DOLS) estimation. The analysis began with a verification of the unit root properties of the variables. The Augmented Dickey Fuller (ADF) and Philips-Perron (PP) unit root procedures were employed and both tests indicate that the variables were integrated of either order I(0) or order I(1). This warranted the use of Bounds testing approach in determining the cointegration among the variables in the various equations in the selected countries. Analysis using the Bounds testing approach to cointegration confirmed the existence of long run relation among the variables of the models. In determining the impact of exchange rate on foreign direct investment inflow in Nigeria, we estimated an ARDL model.
 Results: The results indicate that exchange rate affects FDI in both the long and short run. The result also reveals that the impact of exchange rate on FDI in the short run continuous up to three periods after the initial disturbance.
 Conclusion: This study concluded that exchange rate appreciation will lead to increases in foreign direct investment inflow. The study therefore recommended, amongst others, that government should apply exchange rate regime that is competitive at the international market so as to attract more FDI inflow to the Nigeria economy.

Biofuels and Food Prices: Searching for the Causal Link

We analyze the relationship between the prices of ethanol, agricultural commodities and livestock in Nebraska, the U.S. second largest ethanol producer. The paper focuses on long-run relations and Granger causality linkages between ethanol and the other commodities. The analysis takes possible structural breaks into account and uses a set of techniques that allow to draw inferences about the existence of long-run relations and of short-run in-sample Granger causality and out-of-sample predictive ability. Even after taking breaks into account, evidence that the price of ethanol drives the price dynamics of the other commodities is extremely weak. It is concluded that, on the basis of a formal, comprehensive and rigorous causality analysis we do not find evidence in favour of the Food versus Fuel debate.

Biofuels and Food Prices: Searching for the Causal Link

We analyze the relationship between the prices of ethanol, agricultural commodities and livestock in Nebraska, the U.S. second largest ethanol producer. The paper focuses on long-run relations and Granger causality linkages between ethanol and the other commodities. The analysis takes possible structural breaks into account and uses a set of techniques that allow to draw inferences about the existence of long-run relations and of short-run in-sample Granger causality and out-ofsample predictive ability. Even after taking breaks into account, evidence that the price of ethanol drives the price dynamics of the other commodities is extremely weak. It is concluded that, on the basis of a formal, comprehensive and rigorous causality analysis we do not find evidence in favour of the Food versus Fuel debate.

AN EMPIRICAL GROWTH MODEL FOR MAJOR OIL EXPORTERS

This paper develops a long-run output relation for a major oil-exporting economy where the oil income-to-output ratio remains sufficiently high over a prolonged period. It extends the stochastic growth model developed in Binder and Pesaran (1999) by including oil exports as an additional factor in the capital accumulation process. The paper distinguishes between the two cases where the growth of oil income, go, is less than the natural growth rate (the sum of the population growth, n, and the growth of technical progress, g), and when go ≥ g + n. Under the former, the effects of oil income on the economy's steady growth rate will vanish eventually, while under the latter oil income enters the long-run output equation with a coefficient which is equal to the share of capital if it is further assumed that the underlying production technology can be represented by a Cobb–Douglas production function. The long-run theory is tested using quarterly data on nine major oil economies. Overall, the test results support the long-run theory, with the existence of long-run relations between real output, foreign output and real oil income established for six of the nine economies considered. Copyright © 2012 John Wiley & Sons, Ltd.

The exchange rate and purchasing power parity: extending the theory and tests

This paper analyzes the exchange rate in a “no-arbitrage” or “real business cycle” equilibrium model and provides empirical evidence for this model vis-a-vis PPP. Our contribution is to show, based on a generalization of the equilibrium model of exchange rates, that (i) the test equation linking the exchange rate to fundamentals should allow for international heterogeneity in time preferences and risk attitudes, as well as noise—that is, the model should not be tested as an exact relation; (ii) empirical work should use levels of variables rather than first differences; and (iii) tests on the existence of long-run relations should be complemented by test on the signs of the coefficients. Our empirical work shows that, as a long-run relation, the generalized model outperforms PPP; moreover, under the generalized model, quarterly deviations from the estimated long-term relation have a half-life of only four to five quarters.

The exchange rate and purchasing power parity: extending the theory and tests

This paper analyzes the exchange rate in a “no-arbitrage” or “real business cycle” equilibrium model and provides empirical evidence for this model vis-a-vis PPP. Our contribution is to show, based on a generalization of the equilibrium model of exchange rates, that (i) the test equation linking the exchange rate to fundamentals should allow for international heterogeneity in time preferences and risk attitudes, as well as noise—that is, the model should not be tested as an exact relation; (ii) empirical work should use levels of variables rather than first differences; and (iii) tests on the existence of long-run relations should be complemented by test on the signs of the coefficients. Our empirical work shows that, as a long-run relation, the generalized model outperforms PPP; moreover, under the generalized model, quarterly deviations from the estimated long-term relation have a half-life of only four to five quarters.