Impact Of Negative Shocks Research Articles

Exploring asymmetric influence of R&D expenditures on CO2 emissions in China: evidence from nonlinear ARDL model.

R&D spending upsurges technological advancement and innovation which results in lowering energy consumption and environmental degradation. The current study investigates the asymmetrical impact of R&D spending on CO2 emissions in China via employing annual data from 1980 to 2021 and the NARDL model for empirical analysis. The estimated results of the NARDL model confirmed that there are asymmetries in positive and negative coefficients of R&D spending in China. The results depict that the positive shock in R&D spending exerts a negative and statistically significant impact on CO2 emissions in both runs implying that an increase in R&D spending lowers CO2 emissions. However, the negative coefficient of R&D spending yields a positive and statistically significant impact on CO2 emissions revealing the fact that a negative shock in R&D spending results in the upsurge of CO2 emissions in China. According to these findings, the impact of positive and negative shocks in R&D spending on CO2 emissions is asymmetric. The findings also show that the impact of a negative shock in R&D spending is greater than the impact of a positive shock on CO2 emissions. In addition to the negative shock in R&D spending, increases in energy consumption, economic growth, and FDI inflows also contribute to an upsurge in CO2 emissions in China. The robustness of the estimated results is assessed using standard fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS) models. The FMOLS and DOLS results have been confirmed to be sound and consistent with the results of the NARDL model. The study suggests that the economic strategies should aim at investing in R&D spending to foster environment-friendly technological innovations and to lower environmental degradation in China.

THE IMPACT OF MONETARY SHOCKS ON INFLATION IN SELECTED WEST ASIAN COUNTRIES

The impact of monetary policies on inflation has always been one of the goals of monetary policymakers. To what extent a monetary shock can be effective on inflation, or that both positive and negative monetary shocks can be effective in aggravating or controlling inflation are among the important issues in monetary economics, which scientific research is aimed at It is very necessary to answer them. Therefore, in this research, the impact of positive and negative shocks on the inflation rate in selected West Asian countries has been investigated. In this research, panel data has been used in the period of 2000-2020 for the countries of the West Asian region, including Iran, Armenia, Jordan, Azerbaijan, Pakistan, Oman, Saudi Arabia, Kyrgyzstan, Kazakhstan, Qatar, Kuwait and Georgia. GLS method is used to estimate the model. The results showed that the impact of monetary shocks on the general level of prices are different from each other in the countries of the West Asian region, both in terms of the level of significance and in terms of the level of influence. In the countries of Iran, Pakistan, Kyrgyzstan, Kuwait and Georgia, monetary shocks had a symmetrical effect on the general level of prices, and in the countries of Jordan, Azerbaijan and Qatar, the effect of monetary shocks was asymmetric. Of course, in the countries of Saudi Arabia, Oman and Kazakhstan, only negative shocks have an effect on the general level of prices, as a result, the impact of monetary shocks on the general level of prices is asymmetric in these countries as well. Also, the results showed that in all the studied countries, the impact of negative shocks on prices is greater than positive shocks.

Modeliranje volatilnosti globalne cene zlata primenom ARCH/GARCH modela

The purpose of this article is to analyse the trend of global gold price yields and volatility with the aim of making effective financial decisions about investments in this precious metal, by applying and comparing the results of ARCH and GARCH competing models, using the lowest values of the chosen information criteria. ARCH and GARCH models are intended for the time series' analysis, with the observed instability of the conditional variance. Gold usually has the function of a safe haven, also serving as a warrantor of monetary stability, especially in times of crisis. On the example of 1,151 daily observations on the gold global price and yield rates, the E-GARCH model was applied, the results of which suggest investors to be cautious in their decision-making since the impact of negative shocks (losses) on yield volatility has a strong long-memory effect, making this investments highly risky, especially in bad economic circumstances.

Bihevioralne finansije - testiranje hipoteze efikasnog tržišta na Beogradskoj berzi

The goal of this paper is to highlight the limitations and reasons for the failure in modeling and materialization of scientific findings due to the assumption of rational behavior by investors. The confirmed inefficiency in the capital market affects investors in such a way that their decisions are not based on a proper evaluation of financial instruments. The results of the conducted empirical research disprove the hypothesis of traditional finance, which assumes rational decision-making. Therefore, to comprehend the process of investment decision-making, it is necessary to adopt the approach offered by behavioral finance, which incorporates a component of irrationality. The purpose is to analyze Belex15 yields and volatility with the aim of making effective investment decisions by applying and comparing the results of ARCH and GARCH models. These models are designed for time-series analysis, considering the observed instability of conditional variance. Using 2,517 daily logarithmic returns of Belex15, the E-GARCH model was selected, and the results suggest that investors must be cautious in their decision-making as the impact of negative shocks on yield volatility has a strong long-memory effect, making these investments highly risky, especially during unfavorable economic conditions.

NON-LINEARITY IN SUSTAINABILITY OF CURRENT ACCOUNT BALANCE IN TURKEY

This study aims to test current account deficits (CAD) sustainability for Turkish data of 1992Q1-2021Q1. To this end, an empirical model that relates real exports to real imports plus interest payments on external debt is estimated using both linear and non-linear ARDL (NARDL) technique, and linear and asymmetric cointegration among the model variables is tested with the bound test for cointegration approach. While the bound test result of the linear ARDL model provides no evidence to support the sustainability of the current account, the NARDL bound test results indicate that Turkey’s current account balance is sustainable. Moreover, the study results have shown that both positive and negative shocks to imports affect exports significantly and asymmetrically in the short-run and the long-run. Although the impact of positive shocks to imports on exports is significantly higher than the impact of negative shocks, in the long run, the negative shocks cause export growth to decrease at a higher rate than positive shocks in the short-run.

Exploring the asymmetries between trade and consumption-based carbon emissions: evidence from NPARDL approach.

Global warming is one of the most serious environmental problems that the world faces today. Millions of human lives are at risk, hence the subject has gained enormous attention within academia and the research arena. Literature shows that the primary cause of global climate change or global warming is carbon (CO2) emissions. In the literature, a number of studies have investigated the factors affecting the overall level of carbon emission. However, in recent years, consumption-based carbon emissions have occupied the center stage in research related to international trade and environmental concerns. The recently emerged idea of carbon emissions based on consumption differs from conventional accounting (i.e., carbon emissions based on production) in that it highlights the importance of international trade in national carbon emissions. Unlike the previous studies that examined the symmetric effect of international trade on consumption-based carbon emission, the present study examines the asymmetric effect of international trade on consumption-based carbon emissions of emerging economies. To get empirical estimates, the study applies a Nonlinear Panel Autoregressive Distributive Lag (NPARDL) approach. The estimates show that both in the short and long run, a positive shock in exports significantly reduces consumption-based carbon emissions in developing economies. Whereas, a negative shock in exports has an insignificant impact on carbon emissions. For imports, the results show that, over time, positive shocks in imports significantly increase consumption-based carbon emissions, while the impact of negative shocks is insignificant. Finally, it is recommended for the policymakers to target the export industries for relevant policy interventions, which are less polluting but crucial for economic growth.

The non-linear relationship between volatility and sovereign credit risk: evidence from emerging countries

Purpose- This study investigates the nexus between the volatility index of VIX, and sovereign credit risk of CDS spread, in emerging markets, namely China, Russia, Brazil, Turkey, and Mexico. The emerging markets are in the center of investors’ interest due to high return opportunities. The research aims to find out the relationship between the VIX index and the CDS spread of the abovementioned countries in the nonlinear level. Methodology- The relationship between volatility and sovereign credit risk has been studied many times via linear models. However, financial series exhibit asymmetric dynamics, as volatility clustering, excess kurtosis, and others. Thus we use nonlinear autoregressive distributed lags (NARDL) analysis to capture nonlinear relations between the volatility and the sovereign credit risks of these countries by using daily data from 04.01.2010 to 29.11.2019. The linear ARDL model, that assumes symmetric dynamics of the variables, is not able to model the potential nonlinearity between CDS spreads and volatility movements. That is why we employ a nonlinear approach at this paper. Findings- We apply the Wald test to check the cointegration between CDS and VIX, and find that all time series cointegrated and asymmetric dynamics. The bounds test of the NARDL model confirms the cointegration between VIX and CDS spreads of the countries under study. The analysis of estimated NARDL parameters shows that negative shocks of the volatility index have a long-lasting impact on CDS spreads. Chinese CDS spread are more sensitive to VIX index changes in the short run. The effect of a decrease in volatility on Russian CDS spread is higher than the effect of an increase. Turkish and Brazilian CDS spreads are more reactive to increase in the VIX, whereas Mexican CDS is less sensitive. Analyse outputs show there are asymmetric relations evident both in short-run and long-run periods. Conclusion- Findins show that the impact of the shocks is asymmetric, and the impact of negative shocks on CDS spreads are higher than positive shocks of the same magnitude. These findings allow investors to consider global indicators when taking a position on sovereign bonds of emerging markets. Thus watching the VIX index, they may buy or sell the government bonds of these countries and they must consider its asymmetric impact.

Short- and long-run asymmetric effect of oil prices and oil and gas revenues on the real GDP and economic diversification in oil-dependent economy

Abstract The aim of this paper is to explore the short- and long-run asymmetric impact of oil prices shocks and oil and gas revenues changes on the total real GDP, and the level of economic diversification of the Qatar economy. To this end, two econometric approaches have been used: (1) the A-B structural vector autoregressive (AB − SVARX) model with exogenous variables where four different asymmetric oil prices and oil and gas revenues measures have been employed, and (2) the nonlinear autoregressive distributed lag (NARDL) model. The results show that, in the short-run, the responses of both total real GDP and non-oil real GDP to negative shocks on real oil prices and real oil and gas revenues are higher than the impact of positive shocks, indicating evidence for the existence of asymmetric impact of shocks in the short-run. However, the results suggest that the impact of shocks do not last more than three quarters. This evidence for the existence of asymmetric behavior is also confirmed by the NARDL analysis, which shows that, in the long-run, positive oil prices shocks and oil and gas revenues changes have higher impact on the two proxies of economic activity than negative changes do. A result that confirms the resilience of the Qatar economy to negative shocks and the positive role played by the energy sector in improving the Qatar economic diversification degree. Finally, the results show that the non-oil sector is completely resilient to negative shocks in the long-run as the impact of negative shocks are insignificant on the non-oil real GDP. Several policies aimed to improve the level of economic diversification of the country and delink the government revenues from oil and gas revenues are proposed and discussed.

Indian Fiscal Policy: A DSGE Primer

This paper reviews contemporary literature on theoretical modelling of fiscal policy in India, and highlights the inadequacy of studies focusing on fiscal issues through the lens of Dynamic Stochastic General Equilibrium (DSGE) modelling. Next, in order to stimulate further discussion, the paper proposes a ‘primer’ DSGE model calibrated for the Indian economy with focus on exploring fiscal policy transmission, and the economy-wide impact of shocks in various fiscal instruments is evaluated and compared. Finally, drawing from this primer model, the paper discusses areas of future research in context of recent developments in India’s fiscal policy framework. This includes rethinking the modelling of the fiscal rule, and honing the estimation methodology. The paper proposes a small open economy New Keynesian DSGE framework, with the building blocs of households, producing, assembling, and investment firms, government and the central bank. The government has a number of fiscal instruments at its disposal – government consumption, government investment, transfers, public employment, consumption tax, and labor income tax – governed by a fiscal rule for fiscal deficit. The parameters are calibrated from data, past studies on the Indian economy, and formulation from steady state relationships and the model is simulated with the motivation of examining the impact of fiscal shocks. The study finds that while output and employment increases in response to positive spending shocks, the impact on consumption is mixed, while private investment stimuli uniquely leads to increase in private investment. The impact of tax stimuli differ – a negative consumption tax shock is disinflationary and positively impacts consumption, while the study observes asymmetric impact of negative shock in labor income tax cut, given its limited tax coverage. From the perspective of policy relevance, these results highlight the pros and cons of various forms of fiscal intervention based on the nuances of their policy transmission. Within spending shocks, public investment stimulus avoids crowding out of private investment, while a cut in consumption tax offers a more direct impact on household consumption. Finally, while the model herein offers an intuitive framework for assessing Indian fiscal policy transmission using DSGE modelling, the paper concludes by outlining areas of further research.

Gross domestic product growth, volatility and regime changes nexus: the case of Portugal

This paper provides evidence of the behavior of GDP growth volatility in Portugal over the period from 1961 to 2016 with the main objective of measuring the degree of asymmetry of GDP growth rates volatility across the business cycles and its persistence over time. The methodological setting benefits from the most recent developments that recommend the consideration of structural changes in both the mean and variance and asymmetric reactions of volatility to positive and negative shocks. The results document structural changes and significant reductions of GDP growth rates volatility consistent with the “Great Moderation” phenomenon and reveal that the impact of negative shocks on volatility exceeds that of positive shocks more than 4 times over the sample period. Moreover, these asymmetries follow a rather stable pattern over the sample period, suggesting that the Portuguese economy has not been able to reduce its growth vulnerability to cyclical fluctuations.

Borrowing constraints and international risk sharing: evidence from asymmetric error-correction

We analyse the adjustment process of consumption growth after disequilibrating output shocks in a sample of Organization for Economic Cooperation and Development (OECD) countries. In particular, we test the hypothesis that consumption is smoothed to a lesser degree after negative shocks, whereas the impact of a positive shock is delayed for a longer period of time. Our analysis is based on an error-correction framework that allows for asymmetric adjustment. We find that the mean adjustment lag after a negative shock is significantly shorter than after a positive shock, especially since the beginning of the 1980s. This result is consistent with the interpretation that borrowing constraints limit the degree to which the impact of negative shocks on consumption can be smoothed.

Price Volatility, Trading Volume, and Market Depth: Evidence from Futures Markets

The relations between volume, volatility, and market depth in eight physical and financial futures markets are examined. Evidence suggests that linking volatility to total volume does not extract all information. When volume is partitioned into expected and unexpected components, the paper finds that unexpected volume shocks have a larger effect on volatility. Further, the relation is asymmetric; the impact of positive unexpected volume shocks on volatility is larger than the impact of negative shocks. Finally, consistent with theories of market depth, the study shows large open interest mitigates volatility.