Johansen Cointegration Test Research Articles

Which Index is More Affected by CDS Premium and VIX Index: BIST-30 or Participation-30?

Purpose: This study aims at determining the existence and, if any, the extent of comparative effects of the CDS premium and the VIX index on the BIST-30 and the Participation-30 indices before and during the pandemic. Methodology: The study explores the relationships of the CDS premium and VIX index to the BIST-30 index and the Participation-30 index for two time periods, as pre-pandemic and pandemic. The date range is set as 02.01.2018-10.03.2020 for the pre-pandemic period and as 11.03.2020-31.12.2021 for the pandemic period. Following the Johansen cointegration and ARDL tests employed to detect the long run relationships between the variables, FMOLS regression tests were used to determine the effect sizes. Results: As a result of the cointegration tests, long-term cointegration relationships of both the BIST-30 and the Participation-30 indices with the variables of the CDS premiums and the VIX index were determined before and during the pandemic period. FMOLS regression results posited that the VIX index had greater effect on the Participation 30 index in both periods. Originality and Practical Implications: The fact that the literature review does not reveal the existence of any study providing the comparative effects of the CDS premiums and the VIX index on both the BIST-30 and Participation-30 indices contributes to the originality of this paper.

Modeling Dynamic Correlation and Volatility of the Visegrad Group Fuel Markets

The paper focuses on investigating the correlation and volatility of fuel markets in four countries of the Visegrad region, namely Hungary, the Czech Republic, Poland, and Slovakia. The primary objective of the paper is to explore regional fuel markets and retail prices in these countries by employing VAR models and Johansen procedures to analyze the interrelationships between Visegrad fuel markets. Additionally, the paper uses multivariate dynamic conditional GARCH (DCC GARCH-M) models to examine the volatility and covariance of fuel prices in these nations. The results of the study indicate that there are no long-term connections between Visegrad gasoline prices. The performance of the domestic price is independent of other markets. The research also shows long-term relations of diesel prices only among some countries. Overall, the size of these relations is small and mostly statistically insignificant. These findings provide valuable insights into the fuel markets of the Visegrad countries and can be useful in formulating policies related to energy and fuel price regulation. Overall, the study contributes to the literature on fuel markets in the Visegrad region and provides policymakers and stakeholders with essential information necessary for making informed decisions.

Impact of Capital Expenditure on Economic Growth: A Study of Nepal

In countries like Nepal, government spending objectives range from promoting market-driven stability to intervening for alleviating suffering and preventing business loss, reflecting the tension between laissez-faire and interventionist approaches in economic development. The study explores government expenditure's role in Nepal's economic growth using econometric models like the Engle-Granger Cointegration Test and Error Correction Model. Recurrent, capital, and total expenditures are compared with GDP as indicators of Nepal's economic growth, showing significant positive relationships. The Unit Root Test indicates all variables becoming stationary after differencing once. The Johansen Test reveals 2 co-integrating equations, indicating enduring relationships among variables. Co-integrating Relation analysis demonstrates RE, CE, TE, and C's significant impact on GDP, with a low Durbin-Watson statistic suggesting possible autocorrelation. The Error Correction Term analysis highlights the significance of D(RE), D(CE), D(TE), and C, while ECT(-1) is significant at a 10% level. While the model explains a significant portion of GDP variation, additional factors must be considered for policymaking.

DOES THE SUKUK ISSUANCE IN TURKIYE IMPACT ON ECONOMIC GROWTH?

This study examines the impact of sukuk issued by participation banks and the state on economic growth in Türkiye. In this direction, econometric analysis was conducted between 2013Q1-2022Q4 using Johansen cointegration and VECM Granger causality tests. Our findings show that sukuk issuance and economic growth move together in the long run. Subsequently, according to the long-term coefficient results, the effect of sukuk issued by participation banks on economic growth was found to be positive and significant, while the sukuk issued by the state did not have a significant effect on economic growth. In addition, according to the Granger causality test results, it was determined that there is a one-way causality relationship from GDP to participation banks’ sukuk issuance. Our results show that the issuance of sukuk both contributes to and benefits from economic growth.

The Relationship between Macroeconomic Variable in Indonesia: Study of Economic Growth, Export, Import, Labor and Inflation

The objective of this study is to assess the potential for mutual relationships and co-integration among variables such as economic growth, exports, imports, labor, and inflation in Indonesia, using secondary time series data covering the period from 1985 to 2022. The approach applied in this research involves the use of Vector Autoregression (VAR), encompassing Granger Causality and Johansen Co-Integration Test. Subsequently, Vector Error Correction Model (VECM) estimation and forecast analysis are conducted using Impulse Response Function, Variance Error Decomposition, and Forecasting. The results of the Granger Causality test indicate that there is only a unidirectional relationship between economic growth to imports, while there is no significant unidirectional relationship from other variables. The results of the Johansen Co-Integration test suggest that these variables have long-term relationships or are co-integrated. Based on the forecasting results, the research can be applied over the period from 1985 to 2037.

Domestic Debt and Price Stability in Nigeria

The impact of domestic debt on price stability in Nigeria from 2008 to 2023 is being analyzed in the research. The study employed an ex post-facto research design. Data from the Central Bank of Nigeria's statistical bulletin 2023 and Debt Management Office reports 2023 were used, specifically quarterly time series data. The dependent variable of price stability was inflation rate, while the independent variables were banking sector debt and non-banking sector debt. The Johansen cointegration test estimation was used based on the unit root test result which shows that domestic debt had no cointegration with inflation rate in Nigeria. Based on regression analysis, it was found that the banking sector debt had a positive significant effect on inflation rate in Nigeria, while non-banking sector debt had a negative significant effect on inflation rate in Nigeria. Therefore, the study recommended that banking sector debt should be properly channeled to productive financing of working capital in the agricultural sector for seedlings and fertilizers that will enhance price stability by reducing food inflation. Government should give more priority to domestic debt through non-banking sector debts such as the Sukuk loans which are tied to capital projects like roads, rails, and many other infrastructural developments.

Foreign Aids and Sustainable Development in Nigeria: An Application of Dynamic Least Squares Approach

The impact of foreign aid in donor and recipient countries is largely unsettled amongst existing studies, as well as, literature. This is attributed to the various arguments for and against the benefits of foreign aid, as it relates to sustainable development. As such, the study examined the effect of foreign aids on sustainable development in Nigeria from 1986-2021. The study used Augmented Dickey Fuller (ADF) unit root test, Johansen Co-integration test, Dynamic Least Squares (DOLS) and Granger Causality test. The ADF result showed that sustainable development, foreign aids, exchange rate, inflation rate and trade openness were stationary at first level difference. Also Johansen co-integration test confirmed a long-run relationship between the variables. The DOLS result revealed that, foreign aid, exchange rate and trade openness were significant with each exhibiting a direct link with sustainable development at 5%; while, that of foreign aid was at 10%. This suggests that inflow of foreign aids in different forms is essential for resource conservation. Also, inflation rate showed an inverse and significant link with sustainable development at 5%. In addition, a bi-directional causality was established between foreign aid and sustainable development. The study concluded that foreign aids in different forms, exchange rates stability and high exportation that comply with environmental sustainability boost Nigeria's sustainable development growth, but spiral inflation worsens it. Thus, it is advised that government should declare an emergency over environmental issues in order to guarantee an increase in the flow of foreign aid into environmental sustainability.

OIL PRICES AND THEIR LONG-TERM RELATIONSHIP WITH MACROECONOMIC AND FINANCIAL INDICATORS

The objective of this paper is to find out whether there is a long-term relationship or in other words cointegration, between the prices of oil futures and the following factors: the consumer price index (CPI), the exchange rate of the USD to the EUR, the prices of gold, and the price of Bitcoin. This research was conducted using monthly data, extracted from both Refinitiv and Yahoo Finance, in the period 2014- 2022. In order to find the cointegrating relationship between the above mentioned variables, the Johansen test was used, after which, the Vector Error Correction Model (VECM) system was composed to formulate a set of equations that explain all the variables. The results of this research show that only one cointegrating relationship exists between the previously mentioned variables. Namely, in a state of long-term equilibrium, only the prices of gold have a statistically significant effect on oil prices.

EMERGING STOCK MARKET INTEGRATION: EVIDENCE FROM THE PRE- AND POST-FINANCIAL CRISIS OF 2007-2009

We investigate the interdependence between the US and seven emerging economy stock markets in Brazil, China, India, Malaysia, Mexico, Taiwan, and Thailand. Specifically, we examine how the 2007-2009 financial crisis influenced the dynamics of stock market integration between the US and seven emerging countries by analyzing the short-run and long-run effects of the crisis over pre-crisis (January 1995 to November 2007) and post-crisis (July 2009 to December 2018) periods. The results of Johansen co-integration tests confirm presence of co-integration in both sample periods. Short-run Vector Error Correction Model (VECM) results indicate a significant influence of the US market on the seven markets except for Brazilian and Chinese markets in the pre-crisis period. The pre-crisis long-run results demonstrate significant cointegrating relationships between the US market and the Indian, Malaysian, Mexican, and Thai markets. Only the Mexican market had the same cointegrating relationship with the US market in both periods. The insignificant pre-crisis period cointegrating relationships between the US and Brazilian, Chinese, and Taiwanese markets become significant post-crisis. Although the Indian stock market was cointegrated with the US market in the pre-crisis period, the relationship is insignificant post-crisis. Overall, our findings confirm that the US and seven emerging economy equity markets exhibit some degree of short-run and long-run cointegration. We also find that a negative shock such as a financial crisis may significantly change co-movements among the stock markets. We contribute to the existing literature on financial market integration by examining recent data around the global financial crisis.

The investigations of long and short-term relationships between macroeconomic variables and stock markets: Evidence from China and Pakistan

The motivation behind this research study is the pragmatic examination of associations existing between the stock markets of (SSE), (KSE-100) and macroeconomic variables (Balance of trade, Unemployment rate, Inflation rate, Broad supply of money, and Foreign direct investment) using the annually time series informational data set for the period cover from January 1995 to December 2019. The key objectives of this examination are to check the long and short-term association between the macroeconomic variables and both stock market returns by utilizing different methods and strategies. The results of the unit root test specified the primary series is not stationary at a level and becomes stationary in the first difference. On an annual basis through utilizing the Fisher combined Johansen co-integration test and Vector Error Correction (VCM) technique, it shows that both stock markets had a long-term equilibrium association with macro variables and short-run dis equilibrium adjusted at 6.78%. These findings are valuable for stock exchange editors, financial analysts, policymakers, shareholders, and investors as well as for the Government.

Price Behaviour and Market Integration Amongst the Major Potato Markets in India

Variation in potato output over time causes wide price fluctuations, subjecting its producers to a high-risk situation. Using a monthly wholesale price of potato from January 2012 to December 2020, the current study examined the price behaviour of major potato-producing and consuming markets. The study employed correlation analysis, the Johansen Co-integration Test, the Vector Error Correction Model, and Granger Causality Test. As determined by the seasonality index, farmers received higher-than-average prices between June and December. Johansen's co-integration result demonstrated that all the selected markets were well integrated in the long run. The Patna market had the fastest adjustment rate (80 per cent), followed by the Mumbai market. Most states had uni-directional price transmission, with Patna being the only state to establish a bidirectional flow of potato prices with the Kolkata market. The Delhi market was discovered to be the key market influencing the prices of all other markets.

The Impact of Foreign Direct Investment on Poverty Reduction: Evidence from Bangladesh

This study aims to identify the contribution of foreign direct investment on poverty reduction in Bangladesh with a data period of 32 years starting from FY 1991 to FY 2022 with annual observations in real term. Besides foreign direct investment, gross domestic product, government expenditure on education, employment, and trade openness are used as control variables. Per capita consumption is used as a proxy for poverty reduction. The study goes for Johansen Co-integration test and then Vector Error Correction Model rather than Ordinary Least Squares Regression to avoid any spurious result as indicated by Augmented Dickey-Fuller test. This study finds that FDI has significantly negative relationship while Employment has almost indifferent effect on poverty reduction in the long run. However, other control variables, i.e., GDP, Govt. Expenditure on education and Trade openness have long run positive relationship in this regard. The short run causality of FDI toward poverty reduction is also insignificant in Bangladesh.

THE NEXUS BETWEEN FOREIGN DIRECT INVESTMENT AND NOMINAL EXCHANGE RATE, REAL GDP, AND CAPITAL STOCK IN TANZANIA

Aim: The paper aims to examine the relationship between FDI and the nominal exchange rate, real GDP, and capital stock in Tanzania using quantitative research methods and an econometric analysis. The analysis aims to provide insights into the factors that affect FDI and contribute to the existing literature on the relationship between FDI and economic growth. Methods: This study examines the relationship between FDI inflow, real GDP, capital stock, and the normal exchange rate in Tanzania using a robust research methodology. The study employs STATA 15 software and Akaike’s Information Criteria (AIC), Schwarz Information Criteria (SC), Final Prediction Error (FPE), and the Hannan Quinn (HQ) Information Criteria. In addition, the autoregressive model, the Johansen co-integration test, and the Toda-Yamamoto Granger causality (modified WALD) test were employed to determine the optimal lag. Results: The results indicate a bidirectional relationship between the nominal exchange rate and FDI in Tanzania, with FDI inflows influencing the nominal exchange rate volatility and vice versa. Furthermore, the results indicate that real GDP, capital stock, and the nominal exchange rate exert a unidirectional influence on FDI influx in Tanzania. Conclusions: The nominal exchange rate and capital stock have positive and negative correlations with foreign direct investment. Like many other African economies, Tanzania remains vulnerable to external forces despite making significant strides in stabilizing the exchange rate. It is recommended that the Central Bank of Tanzania – along with those of other African nations with similar economic structures – maintain a stable nominal exchange rate level as an incentive for foreign investors in order to increase the inflow of foreign direct investment.

G20 Economic Growth Analysis Using VECM

This study analyzes the effect of Gross Fixed Capital Formation (GFCF), Imports, Exports, and Government Expenditure of selected G20 member countries on Gross Domestic Product (GDP) using historical data from 1981 to 2021. The detailed analysis aims to explore the relationship between short-term and long-term causality that begins with examining and testing the degree of integration, Unit Root Test, Johansen cointegration test, and causality test. The Vector Error Correction Model (VECM) test results with a 95% confidence interval show that Gross Fixed Capital Formation causes Australia’s and South Africa’s long-term GDPs to have reached a balance point. In addition, Government Spending also causes the European Union’s Gross Domestic Product to achieve a balance point. Imports affect the GDP of the United States, China, and South Africa towards a balance point, and exports affect the GDP of Australia, China, and South Africa. The test results using VECM also conclude that GDP, GFCF, exports, and imports affect GDP growth in the short term. However, on the contrary, on the Australian continent, only GDP, GFCF, and imports which in the previous year had an impact on Australia’s GDP in the short term—concluded that differences in government policies in each country in regulating the economy could affect the causal relationship between the independent variable and GDP in the short and long term.

Contribution of Indirect Taxes on Goods to Economic Growth of Pakistan (1972-2022)

PURPOSE Economic growth is influenced by the changes in indirect taxes imposed by the government on the production/consumption of goods. This paper aims to identify the empirical relationship between indirect taxes – i.e., federal sales tax, federal excise duty, and customs duty – and the economic growth of Pakistan. METHODOLOGY For this purpose, annual time series data from 1972 to 2018 are used. The objective of the study is to evidence the long-run and short-run relationships of federal sales tax, federal excise duty, and customs duty with economic growth. The Augmented Dickey-Fuller unit root tests are used to check the stationarity of each variable. The Johansen Cointegration Test is performed to identify the cointegration among variables. The Vector Error Correction Model (VECM) is used to estimate the long-run and short-run relationships among these variables. FINDINGS The results of the study show that there are two cointegrating equations among variables. GDP Lag5, GDP Lag6, ST Lag1, ST Lag5, and FE Lag4 possess a positive impact on the economic growth of Pakistan. However, GDP Lag2, FE Lag6, and CD Lag7 have a negative impact on the economic growth of Pakistan. Previous years’ deviations from long-run equilibrium are corrected in the current year at an adjustment speed of 33% and 18% for GDP and ST, respectively. CONTRIBUTION/IMPLICATIONS Since the sales tax has a positive impact on economic growth, whereas federal excise duty and customs duty have a negative relation, it is advisable to form policies that contribute to economic growth instead of restricting it. As of the published statistical records of 2018, sales tax, federal excise duty, and customs duty contribute 65 per cent, 9 per cent, and 26 per cent, respectively, to the total indirect taxes. This collection structure is required to be rationalised to boost economic growth.

Leveraging Islamic Economic To Alleviate Poverty In Indonesia : A Promising Pathway

This empirical study explores the relationship between Islamic banking development, social justice promotion, and poverty reduction in Indonesia, using annual time series data from 1991 to 2021.. Methodology/approach The analysis encompasses unit root tests, Johansen cointegration tests, and Vector Error Correction Models (VECM) to assess short and long-term causality among the variables. The results provide robust evidence that expanding Islamic financial institutions and increasing spending on Islamic philanthropy significantly contribute to reducing national poverty levels over both the short and long-run. Islamic finance, characterized by equity-based principles, facilitates financial access for marginalized groups, while instruments of Islamic philanthropy such as zakat and sadaqah directly assist the disadvantaged, enabling pathways out of poverty. Findings – The findings underscore the potential of Islamic economics to foster equitable, inclusive, and sustainable growth, validating the need for policy support to harness its impact

Assessing the Impact of Futures Trading Availability on Spot Market Dynamics of Indian Pepper

Modern agricultural tools boost productivity across crops. Pepper, a lucrative cash crop, attracts global cultivation, bolstering yields. However, heightened productivity brings risks like price fluctuations and supply-demand imbalances, impacting the market's stability and success. Utilizing futures contracts is a common strategy to mitigate risks, yet the challenge lies in ensuring the availability of futures aligned with the specific commodity and contract size. In the Indian context, where pepper futures have been introduced and withdrawn multiple times, this study seeks to examine the impact of the presence or absence of pepper futures trading on pepper spot prices. Econometric techniques such as the Johansen cointegration test, VECM, Granger causality test, and ARIMA modeling were employed to analyze market integration and price autocorrelation. Findings indicate short-term cointegration between pepper spot and futures markets, striving for long-term equilibrium. Futures were found to influence the pepper spot market. ARIMA modeling recommended ARIMA(11,1,7) during futures presence and ARIMA(1,2,2) during absence for representing distinct periods.

Scedasticity descriptor of terrestrial wireless communications channels for multipath clustering datasets

Fifth-generation (5G) wireless systems increased the bandwidth, improved the speed, and shortened the latency of communications systems. Various channel models are developed to study 5G. These channel models reproduce the stochastic properties of multiple-input multiple-output (MIMO) antennas by generating wireless multipath components (MPCs). The MPCs that have similar properties in delay, angles of departure, and angles of arrival form clusters. The multipaths and multipath clusters serve as datasets to understand the properties of 5G. These datasets generated by the Cooperation in Science and Technology 2100 (COST 2100), International Mobile Telecommunications-2020 (IMT-2020), quasi deterministic radio channel generator (QuaDRiGa), and wireless world initiative new radio II (WINNER II) channel models are tested for their homoscedasticity based on Johansen's procedure. Results show that the COST 2100, QuaDRiGa, and WINNER II datasets are heteroscedastic, while the IMT-2020 dataset is homoscedastic.

Factors Affecting NIFTY 50 and its Returns

The key objective of the present study is to explore the impact of different macroeconomic variables on the stock prices in India using annual data from 2014-15 to 2022-23. A multiple regression model is designed to test the effects of macroeconomic variables on the stock prices and granger causality test is conducted to examine whether there exists any causal linkage between stock prices and macro-economic variables. The project will use a variety of methods to analyze the impact of these factors on Nifty returns. These methods may include regression analysis, seasonality regression, Johnasens Cointegration, Unit Root Tetsts and ANNOVA. This study provides evidence of a variation between Nifty stock returns and the values of various global indices. This finding has implications for investors and policymakers. Investors should be aware of the relationship between Nifty stock returns and global indices when making investment decisions. The Johansen test determines if two or more non-stationary time series are cointegrated. Augmented Dickey-Fuller test was also conducted to test whether the data was non stationery or not. Cointegration is a time series quality that indicates that they have a long-run equilibrium relationship even if they are not stationary in the short run. Through regression we try to understand if macro economic factors like currency conversion rate and the returns of indices of foreign countries have an impact on the NIFTY 50, whereas through seasonality regression we try to determine if NIFTY gets affected due to seasonal trends in different quarter or months.

NAVIGATING THE NEXUS: UNRAVELING THE CO-INTEGRATION AND CAUSAL BONDS BETWEEN NASDAQ AND NIFTY

The intertwining realms of global financial markets have become increasingly complex and interconnected, with indices serving as barometers of economic health and indicators of market dynamics. This study aims to look into the complicated link between the NASDAQ and the NIFTY, attempting to untangle the nuanced relationships that control their co-movements. To meet this objective historical time series data for both indices has been collected for a period ranging from 1st April 2021 to 31st March 2023, for a comprehensive investigation. The data has been collected from BSE website and Yahoo finance. The study utilizes econometric tools like Johansen Co-integration test and Grangers causality in EViews Software. The analysis reveals that the past value of NIFTY granger causes NASDAQ and both the indices have a long-term equilibrium relationship. This study provides valuable insights for investors, analysts, and policymakers navigating the complexities of the global financial landscape.