Key Macroeconomic Indicators Research Articles

Prediction of Financial Crisis with Artificial Neural Network: An Empirical Analysis on Turkey

Prediction of economic crisis, financial distress or bankruptcy has attracted great deal of attention in financial literature and in many other fields among the researchers over the past few decades. Although there are a variety of different methods that can be used to predict the future financial crisis, due to the complexity of the existing factors, prediction of financial crisis is a very difficult case. With the advent of Artificial Neural Networks (ANNs), researchers had the chance to solve various problems in finance. ANN approach is the application of artificial intelligence, which has been improved by the simulation of cognitive learning process of human brain. ANNs are commonly used in recent years, due to major advantages that they offer such as their ability to perform nonlinear statistical modeling that provides new alternative to other statistical methods and to learn directly from examples without needing or providing an analytical solution to the problem. In this study, a monthly dataset covering the period of 1990 and 2014 that belong to the Turkish economy will be used. The purpose of this study is to develop an early-warning system to predict financial crisis. To realize this aim, multi-layered feedforward neural networks (MLFNs) will be used. By using monthly data of 7 key macroeconomic and financial indicators of Turkish economy during 1990 and 2014, we find that predictive power of ANN is quite striking. Our out-of-sample forecasts indicate that the Turkish economy remains at high risk due to major negative developments and potential political instability between 2014 and 2016.

Household Satellite Account for France

We estimate in a household satellite account (HHSA) the value of French domestic production in 2010 and 1998, using the input method and following Eurostat's recommendations. In line with previous studies, we find that extending the system of national accounts (SNA) frontier of production to domestic activities (house chores, cooking, care …) has a sizeable effect on key macroeconomic indicators (+33 percent GDP, −5 p.p. GDP growth, +50 percent disposable income, +58 percent consumption, and −10 p.p. of purchasing power growth). We conduct a sensitivity analysis to various methodological issues which have not yet been settled by an international benchmark. Quantitatively, the two most important issues are the boundary of household production—we favor a relatively narrow definition—and the use of a gross or a net wage—we prefer gross wage‐. However, estimates are much less sensitive to otherwise greatly debated issues such as which substitute wage to use.

The Effectiveness of Tax Incentives for Business R&D in Russia and Abroad

Aim. The article presents the international experience of introducing tax incentives for research and development in the business sector, the investigation of the possibility of assessing the effectiveness of tax incentives and their impact on the share of expenditure on research and development in the country's GDP. Some recommendations for the improvement of tax support for enterprises conducting research and development are done on the example of Russia.Method. In the article the analysis of existing tax measures to support enterprises is presented. Evaluation of the influence of the introduction of indirect tax incentives for the increase in the share of expenditure on research and development in the country's GDP was performed by the method of correlation-regression analysis.Results. The study showed that not all cases of indirect tax incentives lead to an increase in the share of research and development in the cost structure of enterprises. Tax incentives should be reviewed regularly in accordance with the analysis of changes in key macroeconomic indicators showing the level of innovativeness of the economy. The introduction of tax incentives for R&D expenditure of business may give a positive socio-economic impact.Conclusion. Tax incentives are one of the instruments to encourage the market development of the RIA, which can have a positive impact on the supply of new products and technologies, as well as on their demand. DOI: 10.5901/mjss.2015.v6n3p331

PROBLEMS AND PROSPECTS OF SUSTAINABLE ECONOMIC DEVELOPMENT OF MEMBER COUNTRIES OF OPEC

In article problems and prospects of sustainable economic development of member countries of OPEC are considered. The carried-out comparison of member countries of OPEC among themselves showed their heterogeneity on the level of social and economic development. Understanding stability of positive dynamics of parameters of development of the country and high rates of development as sustainable economic development of the country, the tools of an assessment of stability of economic development of member countries of OPEC allowing with application of procedure of normalization of quantitative indices of stability of development and the accounting of their dynamics are offered to calculate the integrated level of stability of economic development of member countries of OPEC in spatial (when comparing member countries of OPEC among themselves) and temporary (when comparing by years) aspects. Taking into account the offered tools the integrated level of a sustainable development of each of 12 member countries of OPEC in dynamics for 2008-2013 is calculated, the class of stability is defined and ranging of the countries is carried out. With application of economic-mathematical methods (the correlation and regression analysis, the factorial analysis, scenario approach) forecasting of key macroeconomic indicators and indicators of development of an oil and gas complex of 12 member countries of OPEC is carried out. By results of calculations calculation of expected level of a sustainable development of member countries of OPEC for 2015-2016 is perfromed, key problems and prospects of a sustainable development of member countries of OPEC are defined. Taking into account the carried-out analysis the key factors defining nature of development of member countries of OPEC are allocated (resource providing, inflow of investments, innovative activity, institutional transformation, greening, legislative rule-making, social infrastructure, staffing, etc.) that allowed to prove a dot orientation of actions for ensuring sustainable economic development with emphasis on an oil and gas component (deepening of process of processing of the got hydrocarbonic raw materials, decrease in waste, energy saving, etc.).

(The Role of Money and Credit Aggregates in Conduct of Monetary Policy in Korea)

Korean Abstract: 글로벌 금융위기를 계기로 그동안 경시되어 왔던 통화·신용량의 중요성이 학계 및 중앙은행을 중심으로 재인식되고 있다. 그러나 양적지표를 실제 금리중심의 인플레이션 타게팅 운용체계에 어떻게 접목시킬 것인가에 관한 연구는 이제 시작단계이다. 이와 관련하여 본고는 한국은행 금융통화위원회의 월별 의사록 내용을 토대로 금통위원들이 통화·신용량을 언급하며 표명한 금리결정 의사 및 강도를 지수화(indexation)하고 동 지수를 이용하여 우리나라가 인플레이션 타게팅 제도를 도입한 이후 통화/신용량을 금리결정에 어떻게 반영해 왔는지를 분석하였다. 분석결과 금융통화위원회는 통화·신용량의 움직임에도 유의하면서 기준금리를 결정한 것으로 나타났는데, 이는 한국은행이 자산가격과 신용경색 등을 고려하여 인플레이션 타게팅 제도를 신축적으로 운용해 왔음을 시사한다. English Abstract: After having been de-emphasized from around the early 1990s, the importance of financial factors such as the money and credit aggregates in the implementation of monetary policy under inflation targeting regimes has gained renewed attention since the recent global financial crisis that erupted in August 2007. Further discussions and rigorous analysis are however needed, to reach a broadly shared consensus among academia and policymakers on the issue of when and how the central bank should incorporate these quantity variables into its actual conduct of interest rate-focused inflation targeting.Our aim in this paper is to address the issue of how the Monetary Policy Committee (MPC) of the Bank of Korea took into consideration the actual money and credit aggregates in its policy decisions under inflation targeting over the period 2003-2011. A novelty of our empirical analysis is its construction of an index as a measure for capturing, using the monthly Committee meeting minutes for the period concerned, how many MPC members mentioned their intentions with regard to the policy stance by taking the current movements of money and credit aggregates into consideration just prior to their policy decisions. For the analysis we set up a discrete choice framework for the index. We assign integer values of from 4 through -4, depending upon how many MPC members show their intentions that the policy stance be “tight,” “neutral,” or “easy,” in consideration of the movements of money and credit aggregates for a specific month. The integer value 4 denotes that more than five MPC members mentioned favoring a policy rate hike while the value 2 indicates that it was less than two MPC members. The same classification applies to the negative integer values. A zero value indicates that no MPC member has shown any favoring of a “tight” or “easy” policy stance at all, implying an intended “neutral” stance of the MPC members.We conduct OLS estimation of the effects of the index on the actual policy rate decisions by the Committee members, using an equation controlling for two key macroeconomic indicators such as the inflation gap and the output gap that the Committee considers in setting policy. Interestingly, the estimated index coefficient turns out to be positive and statistically significant. The regression suggests that when the MPC members frequently and strongly mentioned the need to take notice of the movements of money and credit aggregates around the time of the Committee meeting, monetary policy was dominated by concerns over the stabilization of asset prices or massive credit squeezes in the financial markets. We, in addition, estimated two different equations, as a way of checking the robustness of the OLS estimates. The first specification is an ordered probit model in which we estimated the effects of the index on the policy changes in discrete increments. The integer values assigned for the policy changes range from -2 through 2. The values of 2(-2) and 1(-1) correspond to 50 bp and 25 bp hikes (cuts) in the policy rate, respectively, while a value of 0 indicates no policy change. It seems more accurate to use this five-stage classification of policy rate changes as the dependent variable, because the evolution of changes in the policy rate does not follow a smooth process but a step function. In a second experiment, we first estimated the standard Taylor rule over the period concerned, and then the effects of the index on its residual estimates. In both cases, the estimated index coefficients are positive and significant, implying that the results support the OLS estimates mentioned above.To summarize, the evidence suggests that the Bank of Korea has been implementing flexible inflation targeting.

The dynamics of economic growth, oil prices, stock market depth, and other macroeconomic variables: Evidence from the G-20 countries

This paper examines the linkages between economic growth, oil prices, depth in the stock market, and three other key macroeconomic indicators: real effective exchange rate, inflation rate, and real rate of interest. We employ a panel vector autoregressive model to test Granger causality for the G-20 countries over the period 1961–2012. A novel approach to this study is that we clearly demarcate the long-run and short-run relations between the economic variables. The results show a robust long-run economic relationship between economic growth, oil prices, stock market depth, real effective exchange rate, inflation rate, and real rate of interest. In the long run, real economic growth is found to respond to any deviation in the long-run equilibrium relationship that is found to exist between the different measures of stock market depth, oil prices, and the other macroeconomic variables. In the short run we find a complex network of causal relationships between the variables. While the empirical evidence of short-run causality is mixed, there is clear evidence that real economic growth responds to various measures of stock market depth, allowing for real oil price movements and changes in the real effective exchange rate, inflation rate, and real rate of interest.

Russian Economy in the Context of World Trends

Analyzing the changes of key macroeconomic indicators in the context of global trends, the authors conclude that the prolonged stagnation of the Russian economy, deeply integrated into global economic processes, is a natural consequence of weakening its competitiveness and reducing investment attractiveness. “Moderately tight” monetary policy conducted against the background of large-scale monetary expansion in developed countries has made its contribution.

FEATURES OF INFLUENCE OF MACROECONOMIC MEASURES OF TRANSFORMATION ON THE STATE DEBT POLICY

The objective is to study the relationship between the debt policy and vector of macroeconomic measures which is reflected in the transformation of structure of budget deficiency payments. Also, the article defines and characterizes three main phases of the government debt policy: pre-stabilization, stabilization and post-stabilization. The author analyzes main aspects of the relationship between dept policy and monetary one. Methodology. The study is based on the works of domestic and foreign scientists engaged in research of the given problem. Theoretical concepts are supported by statistical data of key macroeconomic indicators of Ukraine’s economy. Results of the survey showed that the relationship between the debt policy and measures of macro-regulation during the transformation has the stable and permanent nature, and the use of certain instruments of government debt management is exclusively possible for a definite direction of macro policy on the one hand, and they are the elements in the system of measures for its implementation on the other hand. In the pre-stabilization phase of transformation the debt policy synthesizes the expansive solutions of monetary and fiscal authorities, and a direct link between them mediate the expansion of demand in the public sector and the preservation of soft budget constraints for micro-units; in the stabilization phase the relationship between fiscal, monetary and debt policy becomes more indirect, but are direct in that part of the borrowing purposes, subordinated to the creation of macro-stabilization mechanism of transformation; in the poststabilization period the role of indirect interconnection between the debt measures and fiscal and monetary decisions increases, but the lack of a deep micro-restructuring and deep systemic and structural reforms cause the deterioration in the macro-economic state of the system, due to which the vector of government borrowing again gravitates toward the field of formation of the mechanism of stabilization. In the post-stabilization period the following contradictions are especially intensely manifested: firstly, the contradictions between the expansive fiscal policy and relatively restrained monetary policy, which is why the maintenance of the exchange rate and inflation on the equilibrium level takes place with the higher interest rates; secondly, there is an enhancement of contradictions within the system of fiscal policy and monetary policy. The formation of consumer-oriented reproduction proportions of GDP is one of the consequences of such a situation.

ECONOMETRIC MODELS OF THE IMPACT OF MACROECONOMIC PROCESSES ON THE STOCK MARKET IN THE BALTIC COUNTRIES

The article examines the dependencies of individual sectoral stock price indices of OMX Baltic security market on macroeconomic indicators, using econometric methods. Regression models are constructed using quarterly time series of 2000–2011 years while the methodology is backed with the findings of Lithuanian and foreign scientists from an extensive overview of specific literature. Regression equations, obtained in the paper, allows us to identify the key macroeconomic and global indicators that statistically significantly affect the Baltic securities market and to quantify their impact on the stock price indices of individual sectors in the Baltic countries. Econometric analysis of OMX Baltic security market proves the hypothesis that the set of macroeconomic regressors may vary considerably depending on the individual sector's price indices, especially in the case of small open economy with immature stock markets. The paper provides investors who are shaping their portfolios taking into account the macroeconomic forecasts with additional opportunities on the basis of sectoral stock price indices regression equations.

Paradoxes Of The «Natural Resource Curse» Regional Development In The Post-Soviet Space

1The article presents the results of the study, which purpose was to test the hypotheses reflecting the interaction of the development of the commodity sector with the socio-economic dynamics. The regional comparative studies and concepts reflecting different views on the relationship of the commodity sector and national development were the methodological basis. The 15 former Soviet republics, united among themselves in four regions: countries with rich natural resources; the country is not rich with natural resources; new EU countries and Russia — were the object of the study. In the context of the selected groups, the key macroeconomic indicators, human and institutional developments were analyzed in comparison. In the conclusion, the authors believe that today, countries having a rich natural resource potential, have the problem of the choice of the natural resources rational using model. While the country is in a state of search, it is very difficult to say clearly about the influence of the raw materials sector on economic development.

Srovnání měnových transmisních mechanismů České republiky a Polska pomocí funkcí odezvy

For the purpose of monetary policy analyses dynamic multivariate models are usually applied. The reason is the presence of significant lags between an action and the appropriate effects in the economy. We use the concept of structural VAR models, widely used approach next to the DSGE and simultaneous equations models. We estimate four and five variable VAR containing the key macroeconomic indicators and identify monetary transmission mechanism using SVAR. Using different identification schemes and impulse response functions we compare the effect of a restrictive monetary policy shock on the set of analysed variables, especially price level. We also compare the results of defined models for the Czech and Polish economies, that both intend to enter EMU. To avoid the possibility of a price puzzle effect, as a result of mixing policy regimes in the sample period, we use data from single monetary policy regime starting 1998, when the Czech central bank switched to the inflation targeting regime. The results indicate high sensitivity to the identification schemes in SVAR and not significant differences between responses to monetary policy shock in CR and Poland.

Macroeconomic Consequences of Accounting: The Effect of Accounting Conservatism on Macroeconomic Indicators and the Money Supply

ABSTRACTThis study investigates the macroeconomic consequences of firm-level accounting conservatism. Consistent with conditional conservatism extending to the aggregate level, I demonstrate that annual estimates of aggregate corporate profits and gross domestic product compiled by the U.S. Bureau of Economic Analysis are more sensitive to negative aggregate news than to positive aggregate news. Next, I estimate the dollar value impact of conservatism on measurements of macroeconomic fundamentals. Finally, I show that incorporating the dollar value impact of conservatism increases the explanatory power of a monetary policy reaction function that describes U.S. Federal Reserve interest rate decision behavior. These results suggest that accounting can impact social welfare by altering the measurement attributes of key macroeconomic indicators and by shaping monetary policy decisions that regulate the money supply.JEL Classifications: M41; E43; E52.

Estimating Volatility Shocks

This paper proposes a framework and a model-consistent estimation approach for the analysis of the dynamic consequences of changes in volatility. The proposed model is a Vector Autoregression in which time-varying volatility has a first-order impact on the observable variables. The volatility process is estimated within the model, and therefore, the proposed estimation approach does not rely on proxy measures of aggregate uncertainty as it has been generally done in the literature extant. Estimates of the proposed model using data from the United States show important quantitative and qualitative departures from estimates incorporating non-model-consistent measures of volatility. In particular, an increase in overall volatility similar to the one experienced during the Great Recession is predicted to have a strong negative and persistent impact on key macroeconomic indicators, including output, investment and the unemployment rate, and to worsen financial conditions. Moreover, a decomposition of the estimated volatility time series shows that fiscal volatility shocks are associated with important deflationary pressures, have a strong crowding out effect on investment and increase the cost of borrowing. Finally, the estimated model predicts that volatility has an asymmetric effect on the economy so that only rare shocks matter.

Cointegration-causality analysis between terrorism and key macroeconomic indicators

Purpose – The purpose of this paper is two folds: first, to analyze the long-run relationship between terrorism and key macroeconomic indicators (GDP growth, GDP per capita, inflation and unemployment) and second, to determine the direction of causality between these variables in Pakistan. Design/methodology/approach – The relationship between terrorism and various macroeconomic indicators is analyzed by applying Johansen cointegration analysis. Furthermore, the causality between terrorism and macroeconomic indicators is tested by applying Toda Yamamoto Granger causality test. Findings – The results show that there exists a long-run relationship between terrorism and key macroeconomic indicators. Furthermore, the results suggest that there exists a bi-directional causality between terrorism and inflation. The causality between GDP per capita, unemployment, GDP growth and terrorism is unidirectional. Originality/value – There is a lack of research work conducted to analyze the long-run relationship and direction of causation between terrorism and various macroeconomic indicators specifically for Pakistan. The current paper fills the gap in the literature by using sophisticated econometric techniques and recent data set to provide the evidence of the relationship between terrorism and various macroeconomic indicators.

IMPACT OF THE EUROPEAN PAYMENT INDEX ON KEY MACROECONOMIC AND SOCIAL INDICATORS OF A COUNTRY

The EPI (European Payment Index) reflects the debt risk of corporations in each EU country. This index is widely used for evaluation of the ability of a business to settle with market participants. This article seeks to identify the impact of the EPI on national macroeconomic and social indicators in order to assess the impact made by late payments among business units on the economy of Lithuania. The findings reveal the macroeconomic and social indicators that are most affected by the EPI. Correlation and regression analysis helps to find causal relationships and allows the risks of financial processes in enterprises to be assessed; to reform the national tax system responsibly; and to find appropriate financial instruments to manage late payment threats.

A small macroeconometric model of the Nigerian economy

This study develops and uses for forecast a small-scale macro-econometric model of the Nigerian economy. The effects of three policy scenarios built around the assumptions of the changes that the Central Bank of Nigeria is likely to make to the Monetary Policy Rate are proposed and analyzed. Trade-off among the scenarios is identified in terms of their potential impacts on key macroeconomic indicators like inflation, exchange rate, output and lending rate. The results show that the monetary authority has to make a choice between the objectives of maintaining a stable exchange rate and lowering the lending rate.

Linking Entrepreneurial Activity to Economic Meltdown in Zimbabwe

Understanding the relationship between entrepreneurship and key macroeconomic growth indicators is critical for generating growth and development in a normal or meltdown economy. The purpose of this study is to develop a model that best describes the relationship between the economic meltdown and the growth of micro and small-scale enterprises (MSEs) in Zimbabwe and to test the presence of refugee effects. Using annual data from 1980 to 2010, a multivariate Vector Error Correction Model (VECM) with the total number of MSEs, unemployment rate, inflation rate, liquidity (proxied by money supply) and real GDP as the dependent variables was run. The main finding of this study indicates the presence of refugee effects, albeit minimal, and that the growth in MSEs was partly because of the shortage of liquidity. Secondly, the relationship between unemployment and entrepreneurship is not linear but squared and positive in both instances. DOI: 10.5901/mjss.2014.v5n3p42

Rethinking Economic Growth Theory from a Biophysical Perspective

Neoclassical growth theory is the dominant perspective for explaining economic growth. At its core are four implicit assumptions: 1) economic output can become decoupled from energy consumption; 2) economic distribution is unrelated to growth; 3) large institutions are not important for growth; and 4) labor force structure is not important for growth. Drawing on a wide range of data from the economic history of the United States, this book tests the validity of these assumptions and finds no empirical support. Instead, connections are found between the growth in energy consumption and such disparate phenomena as economic redistribution, corporate employment concentration, and changing labor force structure. The integration of energy into an economic growth model has the potential to offer insight into the future effects of fossil fuel depletion on key macroeconomic indicators, which is already manifested in stalled or diminished growth and escalating debt in many national economies. This book argues for an alternative, biophysical perspective to the study of growth, and presents a set of ‘stylized facts’ that such an approach must successfully explain. Aspects of biophysical analysis are combined with differential monetary analysis to arrive at a unique empirical methodology for investigating the elements and dependencies of the economic growth process. Book page on Springer's site: http://link.springer.com/book/10.1007%2F978-3-319-12826-9 DOI 10.1007/978-3-319-12826-9

ИССЛЕДОВАНИЕ ЗАКОНОМЕРНОСТЕЙ ТЕРРИТОРИАЛЬНЫХ ТРАНСФОРМАЦИЙ В НОВЕЙШЕЙ ЭКОНОМИЧЕСКОЙ ИСТОРИИ РЕГИОНОВ РОССИИ

The article reviews the dynamics (for the Post-Soviet period as a as a whole and its stages) of key macroeconomic indicators by the example of regions of the Russian Federation. Three stages - 1991-1997, 1998-2002, 2003-2012 - are characterized by their own structural changes in economy, import substitution and economic growth features. Recovering from the 2008 financial crisis and shift in regional development trends are described. Spatial regression model is constructed based on data of 2009 that define dominant influence on the gross regional product (GRP) time series of consumer demand trend compared with the trend in investment demand.

Forecasting financial and macroeconomic variables using data reduction methods: New empirical evidence

In this paper, we empirically assess the predictive accuracy of a large group of models that are specified using principle components and other shrinkage techniques, including Bayesian model averaging and various bagging, boosting, least angle regression and related methods. Our results suggest that model averaging does not dominate other well designed prediction model specification methods, and that using “hybrid” combination factor/shrinkage methods often yields superior predictions. More specifically, when using recursive estimation windows, which dominate other “windowing” approaches, “hybrid” models are mean square forecast error “best” around 1/3 of the time, when used to predict 11 key macroeconomic indicators at various forecast horizons. Baseline linear (factor) models also “win” around 1/3 of the time, as do model averaging methods. Interestingly, these broad findings change noticeably when considering different sub-samples. For example, when used to predict only recessionary periods, “hybrid” models “win” in 7 of 11 cases, when condensing findings across all “windowing” approaches, estimation methods, and models, while model averaging does not “win” in a single case. However, in expansions, and during the 1990s, model averaging wins almost 1/2 of the time. Overall, combination factor/shrinkage methods “win” approximately 1/2 of the time in 4 of 6 different sample periods. Ancillary findings based on our forecasting experiments underscore the advantages of using recursive estimation strategies, and provide new evidence of the usefulness of yield and yield-spread variables in nonlinear prediction model specification.