Existence Of Long-run Relationship Research Articles

Forecasting mortality rate improvements with a high-dimensional VAR

Forecasting mortality rates is a problem which involves the analysis of high-dimensional time series. Most of usual mortality models propose to decompose the mortality rates into several latent factors to reduce this complexity. These approaches, in particular those using cohort factors, have a good fit, but they are less reliable for forecasting purposes. One of the major challenges is to determine the spatial–temporal dependence structure between mortality rates given a relatively moderate sample size. This paper proposes a large vector autoregressive (VAR) model fitted on the differences in the log-mortality rates, ensuring the existence of long-run relationships between mortality rate improvements. Our contribution is threefold. First, sparsity, when fitting the model, is ensured by using high-dimensional variable selection techniques without imposing arbitrary constraints on the dependence structure. The main interest is that the structure of the model is directly driven by the data, in contrast to the main factor-based mortality forecasting models. Hence, this approach is more versatile and would provide good forecasting performance for any considered population. Additionally, our estimation allows a one-step procedure, as we do not need to estimate hyper-parameters. The variance–covariance matrix of residuals is then estimated through a parametric form. Secondly, our approach can be used to detect nonintuitive age dependence in the data, beyond the cohort and the period effects which are implicitly captured by our model. Third, our approach can be extended to model the several populations in long run perspectives, without raising issue in the estimation process. Finally, in an out-of-sample forecasting study for mortality rates, we obtain rather good performances and more relevant forecasts compared to classical mortality models using the French, US and UK data. We also show that our results enlighten the so-called cohort and period effects for these populations.

THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND RENEWABLE ENERGY PRODUCTION: EVIDENCE FROM BRAZIL, RUSSIA, INDIA, CHINA, SOUTH AFRICA AND TURKEY

This paper aims to investigate the relationship between foreign direct investment and renewable energy production in BRICS countries and Turkey. For this purpose, the annual data from 1996 to 2015 is examined using with Pedroni co-integration test and panel ARDL test. Test results indicate the existence of long run relationship between renewable energy production and foreign direct investments in BRICS countries and Turkey. Policy makers should adopt appropriate incentive policies to attract foreign direct investments into the renewable energy sector.Keywords: Foreign direct investment, renewable energy production, Panel ARDL methodJEL Classifications: F21, Q42, C23DOI: https://doi.org/10.32479/ijeep.7879

Private Sector Investments and Unemployment in Nigeria (1986-2016)

This research work examined private sector investments and unemployment in Nigeria. The period covered by the study is from 1986 -2016. The study aimed at identifying the impact of private sector investments on unemployment level in Nigeria. Times series data on Private Domestic Investment (PDI), Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI) and Unemployment rate were collected from secondary sources via the Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators. The Johansen co-integration, analysis, Vector Error Correction (VECM) and Pairwise Granger causality analysis were employed in the data analysis. The Johansen cointegration result indicated the existence of long-run relationship between private sector investment variables and unemployment rate in Nigeria. In the same vein, the Vector Error Correction Model (ECM) estimate equation is properly signed with a negative coefficient of -0.006644 but with an insignificant t-statistic probability value of 0.7376 at 5% significance level. The insignificant t-statistic implies that private sector investments do not granger cause unemployment rate in the long-run. However, a significant but negative relationship was found between past unemployment rate and private domestic investment lagged one period and unemployment rate in Nigeria. The study therefore recommended that sustainable policies that will ensure and encourage growth of private sector investments should be vigorously pursued by stakeholders in the industry. These policies could come in form of access to cheap funds (through reduced interest rates or cost of funds), subsidization of inputs in the production process, tax waivers or newly established firms among other policy initiatives. Keywords: Private Sector, Investments, unemployment rate. DOI : 10.7176/RJFA/10-14-07 Publication date :July 31 st 2019

PRODUCTIVITY AS A DETERMINANT OF LABOUR WAGE IN NEW ZEALAND’S CONSTRUCTION SECTOR

The empirical relationships between labour wages, unemployment rate and the labour productivity index in New Zealand’s construction sector (for the period of 1983–2017) were investigated. The Johansen cointegration test and vector error correction mechanism were used to determine the existence of long-run relationships between the variables and the adjustment process of the short-run disequilibrium into the long-run equilibrium. The results show that the labour productivity index positively affects the labour wage, while the effect of unemployment rate is negative in the long run. That is, the more productive the labour, the more the wages earned. Related statistical tests on the residuals proved that the model and its findings are reliable.

Conventional and Islamic banks deposit rates as inflation hedges: the case of Malaysia

Purpose The purpose of this paper is to examine the extent to which conventional and Islamic bank fixed deposit rates can protect depositors against inflation in the Malaysia context. Design/methodology/approach Nominal interest rates are represented by commercial bank fixed deposit and investment bank fixed deposit rates. The authors use monthly data over the period 2000–2016. The authors apply the autoregressive distributed lag bounds testing methodology to test the existence of long-run relationship between nominal rates and inflation, and the error-correction model to test for the short-run dynamics. Findings The results show that the nominal interest rate and inflation are cointegrated for all the data series. The evidence indicates that all the fixed deposit rates, for both conventional and Islamic banks are effective inflation hedges in the long-run thereby supporting the Fisher hypothesis. There is no difference in the inflation hedging ability between conventional bank rates and Islamic bank rates. However, the authors find no evidence of the short-run relationship between interest rates and inflation for either bank. Practical implications Bank regulators should be concerned on the similarities in behaviour towards inflation between conventional and Islamic rates, given that the deposit rates for both banks are supposedly set based on different premises. Bank customers, they should deposit their money for the long horizon in order to protect themselves against inflation. Depositors worrying about inflation should be indifferent between conventional or Islamic as both banks provide similar inflation hedging characteristics. Originality/value The novelty of this study is in using the bank fixed deposit rates to study the Fisher effect in an emerging market and in comparing the conventional and Islamic bank rates in terms of their inflation hedging ability.

MESUEARING THE IMPACT OF RENEWABLE ENERGY CONSUMPTION ON ECONOMIC GROWTH IN EGYPT

This research aims to examine the Impact of Renewable Energy Eonsumption on Economic Growth in Egypt. It depended on using quantitative method. Vector Auto Regressive (VAR) analysis was adopted based on yearly data for the period (1990-2017). Time series stationarty are checked by Augmented Dicky Fuller (ADF) test, and co- integration existence tested by Johansen co- integration test. The vector Error Correction model (VECM) utilized to check the existence of long run relationship between Real Gross Domestic Product (RGDP) as a dependent variable and Renewable Energy Consumption (REC) as explanatory variable. Finally this research conducted positive relationship between the consumption of renewable energy, in accordance with the literature and the results of applied studies.

Inflation and Fiscal Deficit in India: An ARDL Approach

Global financial crisis of 2008 which marked its 10th anniversary recently has intensified the problem of fiscal deficit and inflation which happen to be the two foremost macroeconomic challenges confronting the Indian economy. In the light of unsettled debate pertaining to the inflationary tendencies of fiscal deficit, the present study attempts to empirically examine the important macroeconomic determinants of inflation in India and investigates whether the proposition of a positive effect of fiscal deficits on inflation can be verified in the particular case of the Indian economy using quarterly data from Q1: 1996–1997 to Q1: 2016-2017. The ARDL Bounds approach to cointegration reveals the existence of long-run relationship between inflation; gross fiscal deficit; money supply; exchange rate; crude oil prices; and output gap. The long-run and short-run dynamics indicate that gross fiscal deficit and money supply generate negative impact on inflation in India. From the supply side, crude oil prices and exchange rate are found to be playing an important role in determining domestic prices. From the demand side, in the absence of a stronger output-inflation relationship, the support for flexible inflation targeting framework does get encumbered as the case for the existence of Phillips curve in India further weakens through our analysis. This result bears significance especially in the context of a switch to a rule based anti-inflationary strategy in India.

Economic Growth and Environmental Pollution in Brunei: ARDL Bounds Testing Approach to Cointegration

Aims: This study examined the short run and long run dynamic relationship between economic growth and environmental pollution in Brunei. We adoptedAuto Regressive Distributed Lag (ARDL) model to scrutinize the existence of the Environmental Kuznets Curve (EKC) among the studying variables by using time series data cover the period of 1974 to 2014.
 Methodology: The ARDL bound test revealed the existence of long-run relationship among the integrated variables when CO2 chosen as a dependent variable.
 Results: The results support the existences of EKC hypotheses in the long-run whereas in the short-run an inverted U-shaped curve was not confirmed between GDP and CO2 in Brunei. The results of Granger causality based on VECM analysis have shown unidirectional causality runs from economic growth to CO2 in the short run. Further analysis through stability test indicates the coefficients in the model are stable and do not suffers with structural break within the time taken in the study.
 Conclusion: The government of Brunei should proceed to target the sustainable means of production, which has an environmental friendly and consumes less energy to enhance economic growth and maintain environmental quality in the long run.

Effects of Global Oil Price on Exchange Rate, Trade Balance, and Reserves in Nigeria: A Frequency Domain Causality Approach

This study investigated the relative Granger causal effects of oil price on exchange rate, trade balance, and foreign reserve in Nigeria. We used seasonally adjusted quarterly data from 1986Q4 to 2018Q1 to remove predictable changes in the series. Given the non-stationarity of our variables, we found cointegration to exist only between oil price and foreign reserve. The presence of cointegration implied the existence of long run relationship between the variables. The Granger causality result showed that oil price strongly Granger caused foreign reserve in the short period. However, no Granger causal relationships were found between oil price and trade balance and for oil price and exchange rate. The implication of the result is that Nigerian government should not rely solely on oil price to sustain her reserve but to diversify the economy towards non-resource production and export for foreign exchange generation.

EKC and Macroeconomics Aspects of Well-being: a Critical Vision for a Sustainable Future

This paper aims to investigate a modified version of the environmental Kuznets curve by including human development and governance as a macroeconomics determinant of sustainability. For this purpose, our study uses the Johansen panel cointegration testing to verify the existence of long-run relationships and we employed the fixed effects models which founded on the panel-based error correction ones using data for 26 African countries over the period 1990–2013. Our findings highlight that there exists a quadratic relationship among the negative genuine saving (GS−) and the human development variable. This implies that the assumed EKC hypothesis is verified for the modified version of EKC. The empirical evidence records the fact that the ecological issue in the Millennium Development Goals background is deeply influenced by the sustainability aspects. Further, our findings recommended that African countries should take seriously the human aspect. Further, the academic researchers, policymakers, and international organizations should unify around a specific and clear definition of the sustainability notion to reach a verdict consensus about his measure and the way of computing by taking into consideration the diversity and the specificities of each region.

The Economic Impact of Road Accidents: The Case of Sri Lanka

The purpose of this study is to disclose accident-related indices and investigate the extent to which the road accidents impact on the economic performance of Sri Lanka during the period from 1977 to 2016. Annual time-series data are used to evaluate the accident indices for econometric analysis. Augmented Dickey–Fuller (ADF) unit root analysis and Johansen’s maximum likelihood estimator of the parameters of a cointegrating vector error correction model (VECM) are employed to test the stationary properties of the time series and to examine the long-run relationship between the variables, respectively. The results derived from the analysis confirm the existence of long-run relationship between the accident-related indices and macroeconomic indicators. The long-run elasticity values imply the signs and magnitude of impact of the accident indices on macroeconomic indicators. JEL: R41, H510, I310, I32

Renewable and fossil energy, terrorism, economic growth, and trade: Evidence from France

To the best of our knowledge, there is no econometric study on the causal relationship between renewable or fossil energies and terrorism, nor on terrorism in France. This paper tries to fill this gap and considers other variables as economic growth and trade openness. The autoregressive distributed lag approach and Granger causality are used for annual data on France covering the period 1980–2015. The Wald test confirms the existence of long-run relationships between the considered variables. Granger causality reveals long-run bidirectional causalities between all the variables. Interestingly, in the short-run, there are unidirectional causalities running from renewable energy to terrorism, and from terrorism to trade openness, and there is bidirectional causality between terrorism and economic growth. Long-run parameter estimates show that more renewable energy consumption and more trade increase both terrorism and economic growth. However, economic growth reduces terrorism in the long-run and appears as a powerful tool to combat terrorism in France. In addition, France is recommended to continue encouraging the use of renewable energies, and at the same time, to make more diplomatic efforts to resolve political and military conflicts in the world, and particularly in the Middle East.

The Dynamic Long Run and Short Run Linkages between Exchange Rates and BSE Sensex Return

The present study explored the dynamic effects of Exchange rates on BSE Sensex return over a period of April 2002 to March 2017. The study analyzes the long run relationship between exchange rates and BSE Sensex return, and examine short run effect of exchange rates on BSE Sensex return. The study employed statistical techniques namely, ADF Test, Correlation, OLS Regression, Co-integration Test, Granger Causality Test, VAR model and GARCH. The exchange rates play a curial role in BSE Sensex returns and deprecation of exchange rate affects growth of stock market and economy of a country. The study results found that exchange rates were negative correlated on BSE Sensex return. In regression results revealed that exchange rates were 26 percent influenced on BSE Sensex returns, especially US exchange rate recorded high negative impact on BSE Sensex return compared to other exchange rates. The results exhibited that existence of co-movement relation between exchange rates and BSE Sensex return. There was no causal effect from exchange rates to BSE Sensex returns. In VAR results exhibited that there was short run effect and GARCH results revealed that exchange rates were significantly volatile on BSE Sensex return. The results concluded that exchange rates were significant impact on BSE Sensex return and there was existence of long run relationship between exchange rates and BSE Sensex return. The study results suggested to investor’s community should aware about the movements of exchange rates; particularly in US XR because it has highly interaction with Indian stock market and it may reduce the risk from the high fluctuation of exchange rates. Policy maker should improve the policy regime and need to increases the exports comparatively import, reduce the rate of inflation, increases the production index, and government policy would positive effect the stock market and the growth of economy of a country.

Investigate on the Determinants of Economic Growth in Ethiopia

The study examines the macroeconomics determinants of economic growth in Ethiopia measured by real gross domestic product (RGDP). We used time series data for a period of 27 years that is 1991 to 2017. Augmented Dickey-Fuller (ADF) test was used for the unit root test and the Autoregressive Distributed Lag under Bound test was also conducted to establish short and long run relationships between economic growth and its macroeconomics determinants. The result shows that there is co-integration, which establishes the existence of long run relationship among the variables. The results show that gross fixed capital formation, total labor force, total government expenditure and foreign direct investment are the main determinants of Ethiopia economic output in the long run where us total labor force and foreign direct investment are the main determinants of economic growth in Ethiopia in the short run. The study recommended that there is need for government to consciously develop the business environment by provision of necessary infrastructure, which will lower the cost of doing business in Ethiopia. There is also the need for the government to retain tight monetary and fiscal policies in order to fight inflation in the Ethiopian economy, since inflation have negative influence on investment and Ethiopia economic growth and finally, There is needs to put stringent policy in place to minimized strike in Ethiopia labor sector in order to enhance their performance to the nation economy. Keywords : Macroeconomics; Unit Root; Cointegration; Ethiopia; Real Gross Domestic Product. DOI : 10.7176/JESD/10-1-04

Determinants of Economic Growth in Ethiopia: Evidence from ARDL Approach Analysis

Ensuring sustained real growth in national income is a primary concern to both developed and developing countries. It is that sustained growth in real national income to potentially explain an economy’s development path and people’s wellbeing. Though Ethiopia records double digit growth rate for last few years, it has been found to be unstable due to various internal and emerging global influences. Besides, recent home side political condition is also another challenge to the economic sector of the country at large. The present study examines factors potentially explaining the economic growth of Ethiopia using annual time series observations for the period running from 1981 to 2016. Individual variables were all subjected to both the ADF and PP unit root tests; and that, the existence of mixed order of integration has been confirmed with both approaches. For Cointegration issues, the ARDL approach was employed and the existence of long run relationship among variables entered the growth model has been confirmed too. Besides, none of the diagnostic tests was revealed invalid thereby ensuring the relevance of inferences made based on the ARDL estimates. The current and lagged impact of foreign aids is found to be important in explaining the economic growth of Ethiopia. Its current period impact was estimated to be positive and significant too as expected. Besides, the last year economic status of the country has also been suggested significant determinant of the current economic growth rate. Therefore, economic benefit of aids should be recognized and policy focus must be directed towards its efficient utilization. Keywords: , ARDL, Cointegration, Determinant Economic Growth, Ethiopia, Stationarity DOI : 10.7176/DCS/9-1-05

Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria

While there are numerous studies on the relationship between monetary policy and economic growth, evaluating the policy nexus between the two phenomena remain inconclusive. Undeniably, monetary policy is believe to influence the employment level, price stability, growth of aggregate output and equilibrium in the balance of payment- for the case of developing economies. But the magnitude of its influence largely depends on how it is conducted through various channels and the independency of the apex bank to select the appropriate instruments for formulating the monetary policy. In lieu of that, this study examines the relationship between monetary policy and economic growth in Nigeria using time series data covering the period of 1980 to 2017. The study employs the Cointegration test and the Ordinary Least Square (OLS) technique with the view to estimating the model coefficients and showcase the policy nexus between the variables. Result indicates the existence of long-run relationship between monetary policy indicators and economic growth. Further empirical findings show that money supply has positive effect, while both exchange rate and interest rate have negative effect on the real GDP. As such, monetary authorities in Nigeria should adequately managed and monitored the growth level of money supply in order to realise the desired growth level. Given the socio-economic and political conditions in Nigeria, there is growing needs to formulate appropriate monetary measures which might encourage borrowing through sound and productive interest rate as well as stable exchange rate.

Validating the dynamic relationship between technological innovation and economic growth in Malaysia

Technological innovation is a dynamic growth factor to achieve sustainable development. This study aims to explore the long- and short-run relationship between technological innovation and Malaysia's sustainable growth from 1980 to 2015. Augmented Cobb-Douglas production function is used to scale the technological innovation and economic growth link. The F-bounds test and VECM Granger causality are employed. The dynamic relationships among the gross domestic product, capital, employment, electricity consumption, technological innovation, technological innovation squared and governance institution quality variables; and the nonlinear relationship between technological innovation and economic growth are studied. The study confirms the existence of long-run relationship among the variables and the link between technological innovation and economic growth has an inverted U-shape. Also, technological innovation, technological innovation squared, and governance institution quality Granger-cause economic growth in the long and short run, together with capital, employment and electricity consumption. Therefore, continuous plans and policies are very much needed to drive technological innovation evolution in Malaysia, so the tide is slowly turning.

Determinants of the Real Equilibrium Exchange Rate in Albania: An Estimation Based on the Co-Integration Approach

Problem/Relevance: Investigation of exchange rate behaviour has been an important topic in international monetary economics because of the impact of exchange rates on economies. One strand of the literature has focused on explaining the observed movement of the nominal or real exchange rate in terms of macroeconomic variables. Another strand of the literature has evaluated the behaviour of the real exchange rates in relation to the equilibrium exchange rate, which is the real exchange rate that is consistent with macroeconomic balances. Albania implements a free floating exchange rate regime; therefore, evaluating whether the actual real exchange rate is too strong or too weak compared with the real equilibrium exchanges rate has great relevance for the Albanian economy. Research Objective/Questions: Generally, the real exchange rate is defined as the nominal exchange rate adjusted for the relative price differential between domestic and foreign goods and services. So, an appreciation of the nominal exchange rate or higher inflation at home relative to other countries may lead to an appreciation of the real exchange rate. Such appreciation weakens the competitiveness of a country, widens the current account deficit and increases vulnerability to financial crises. The opposite holds true when the real exchange rate depreciates. The aim of this paper is, first, to estimate the equilibrium real exchange rate for the Albanian currency against the euro and, second, to assess the total exchange rate misalignment during the period of 2001Q1-2017Q1. Thus, the equilibrium real exchange rate is used as a benchmark for evaluating the misalignment of the actual real exchange rate. Methodology: This paper explores the determinants of the real exchange rate for Albania, during the period of 2001Q1-2017Q1, based on the stock-flow approach, the so called Behavioural Equilibrium Exchange Rate (BEER), which effectively employs reduced-form modelling of the exchange rate based on standard co-integration techniques. The stock of net foreign assets and productivity changes has been considered fundamental for the real exchange rate. We have used the Johansen co integration technique to test the existence of long-run relationships between our main variables and to evaluate the path of the equilibrium real exchange rate based on vector error correction model (VECM) results. Then the analysis is completed by calculating the degree of misalignment as the difference between the actual real exchange rate and the equilibrium real exchange rate. Major Findings: Based on the Johansen co-integration approach, we find one long-run relationship between the real exchange rate of the Albanian lek against the euro, relative productivity and net foreign assets during the period of 2001Q1 to 2017Q1. The model implies that the real exchange rate is affected, as we expected, by relative productivity and net foreign assets, confirming that an increase in both variables leads to an appreciation of the real exchange rate in the long run. Our results show that the behaviour of the actual real exchange rate is similar to the path of the equilibrium exchange rate and that the degree of misalignment throughout the period is estimated to be moderate. Implications: Our empirical results confirm that the degree of misalignment is reasonable, suggesting a consistency between macroeconomic (especially monetary) policies and the free floating exchange rate regime. Assessing real exchange rate misalignment is a very important issue for policy makers because of the severe welfare and efficiency costs that such misalignment can have for an economy.

International trade, foreign direct investment, economic growth and CO<SUB align="right">2 emissions: a study of India

This paper examines the relationship of CO2 emissions with economic growth (EG); foreign direct investment (FDI); and international trade indicators, i.e., imports and exports; in Indian context. Johansen cointegration methodology is used to examine the existence of long-run relationship between variables. Results indicate the existence of an inverted U-shaped curve in India, i.e., the EKC hypothesis and of the N-shaped curve too, as far as the CO2-EG relationship is concerned. Results also indicate that FDI is one of the determinants of CO2 emissions in India. Imports have negative effects on CO2 emissions, while exports contribute to CO2 emissions in India.

Poverty and environmental degradation nexus in Rwanda: any empirical evidence

This study explores the nexus between poverty and environmental degradation with a focus on deforestation in Rwanda for the period 1980-2016. To recognise the nexus between the variables, a time series, cointegration and Granger causality tests have been employed. The results confirm the existence of long-run relationship among the variables of the concerned models. In addition, the Granger causality test results confirm a bi-directional causal relationship between poverty and deforestation in Rwanda. Therefore, the study recommends the government authorities to take effective measures besides exploring the environmental allegation of investment in poverty reduction strategies and suitable shapes of a policy aiming at accomplishing poverty reduction and sustainable environmental management should be strengthened. Although poverty reduction is positively hard to be established in a short period, the continuous environmental awareness system aiming the poor is an alternative but preferably should be integrated into poverty reduction programs.