Long-run Response Research Articles

Hort and long-run response of economic growth to oil prices in algeria: A combined cointegration approach

Oil prices had experienced sharp fluctuations during the last decades. A vast literature has been devoted to analyzing the macroeconomic effects of oil prices. This paper aims to contribute to this research field, by examining the impact of oil prices on economic growth in Algeria, for the period 1976–2019. The novelty of the study is that it employs the combined cointegration technique, to test the presence of long-run relationship between oil prices and economic growth. The empirical analysis revealed that there was long-run cointegrating relationship between the two variables. Moreover, the different estimators indicated that oil prices positively impacted the economic growth in the long-run while the error correction model supports the presence of negative and limited short-run effects, that disappeared after about one year and a half from the occurrence of the oil shock.

Dynamic interactions between oil price and exchange rate

This paper contributes to better understand the dynamic interactions between effective exchange rate (EER) and oil price for an oil-importing country like the U.S. by considering a Time-Varying Parameter VAR model with the use of monthly data from 1974:01 to 2019:07. Our findings show a depreciation after an oil price shock in the short-run for any period of time, although the pattern of long-run responses of U.S. EER is diverse across time periods, with an appreciation being observed before the mid-2000s and after the mid-2010s, and a depreciation between both periods. This diversity of response should lead policy makers to react differently in order to counteract such shocks. Furthermore, the reaction of oil price to an appreciation of U.S. EER is negative and different over time, which may generate different adverse effects on investment. The knowledge of such effects may help financial investors to diversify their investments in order to optimize the risk-return profile of their portfolios.

Nonlinear Responses of An Unbalanced Overhung Rotor-Short Journal Bearing System with Some Bifurcation Results

Both autonomous and non-autonomous nonlinear systems display complex responses including the transient and long run responses. An overhung rotor-short journal bearing system (ORSJB) is the excellent paradigm exhibiting nonlinear responses and of practical importance. The unbalanced overhung rotor-journal bearing system is formulated by using modified Laval-Jeffcott rotor model. The nonlinear fluid forces model of the short journal bearing is adopted and rearranged in a suitable form for numerical analysis. This paper investigates numerically a bifurcation point, transient and long run responses of the ORSJB system. The rotational speed is preferable bifurcation parameter herein. The ORSJB system without unbalanced eccentricity for the selected parameters yields the bifurcation value of Ω = 3.0091. Limits cycles in the long-run responses with eU =0.002 m and without unbalanced eccentricity at long run are presented in the bifurcation regime at the speed of Ω = 6.6869 and Ω = 0.01671 respectively. The transient response with eU =0.002 m at the speed of Ω = 4.7142is elucidated. The evident results in this paper give only a partial view of bifurcation behaviours. Bifurcation analysis is a useful tool for design and operation overhung rotor dynamic systems.

Minimizing Mean Response Time in Nonobservable Distributed Processing Systems with Nodes Operating under Egalitarian Processor-Sharing Policy

Abstract—Consideration is given to the dispatching problem in an almost nonobservable distributed processing system with M, M ≥ 2, single-server queues operating in parallel, each under the processor-sharing discipline. Jobs having the same job size distribution arrive one-by-one to the dispatcher, which immediately routes it to one of the queues. When making a routing decision, the dispatcher has no online information about the system (like current queues sizes, size of arriving job, etc.). The only information available to the dispatcher is job-size distribution, job-interarrival-time distribution, server speeds, time instants of previously arrived jobs, and previous routing decisions. Under these conditions, one is interested in the routing policies that minimize the job long-run mean response time. A new class of dispatching policies is proposed that, according to the numerical experiments, may significantly outperform all classical dispatching policies available for such system: (optimal) probabilistic policy and the round-robin policy.

Sovereign Credit Rating Announcements and Liquidity Shocks in the Lebanese Daily Foreign Exchange Market

Sovereign credit rating announcements are usually unexpected events that can affect local financial markets either favorably or detrimentally. In Lebanon, the credit outlook witnessed a deteriorating trend since the mid of the year 2016. The major hypothesis of this paper is that the reaction to the bad credit rating announcements is statistically significant, although ephemeral, delimited to just a few days. It is through the liquidity channel that these announcements create uncertainty and affect the economy. There are two related hypotheses: (1) illiquidity shocks impact undesirably the financial markets, and (2) credit rating announcements are accompanied by a surge in illiquidity. Since the impact of these announcements is ephemeral it should be assessed by high-frequency data, or at most by daily financial data. The domestic foreign exchange market is an ideal place to study this impact. Fortunately, the central bank of Lebanon has lately made available daily foreign exchange rates for six major currencies beginning in 2010. This defines six multiple regressions that are constructed to differentiate between the short-run and the long-run responses to illiquidity. The empirical results show that the above two hypotheses are strongly supported. Moreover, it matters little whether the event window is 3, 4 or 5 days.
 JEL Classification: G14, F31, C58, C38.

Substitution Effects in Intertemporal Problems

We consider a broad class of intertemporal economic problems and we characterize the short and long-run response of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discounting, we show that dynamic substitution effects can generate price elasticities of opposite sign in the short and in the long run.

Shock matters for estimating monetary policy rules

This study proposes a simple methodology to conditionally estimate monetary-policy rule parameters for underlying structural shocks. The results are summarized as follows. First, the Federal Reserve (Fed) chooses different responses to different types of shocks. Second, the long-run response of policy rates to inflation does not exceed 1 for some shocks. This result suggests that the Fed does not meet the Taylor principle for some shocks.

Computation of Typical Chernozem in Long-Run Response to Primary Tillage Operations

Computation of Typical Chernozem in Long-Run Response to Primary Tillage Operations

Political Risk and Real Exchange Rate: What Can We Learn from Recent Developments in Panel Data Econometrics for Emerging and Developing Countries?

This paper focuses on the analysis of the long-run response of the Real Exchange Rate (RER) to political risks and tests whether non-economic variables have an impact on RER in 31 emerging and developing countries. We use annual data from the International Country Risk Guide database over the 1984 to 2016 period. Based on the recently developed method of Cross- Sectionally Augmented ARDL approach of Chudik and Pesaran (2015b), and the panel threshold estimation of Chudik et al. (2017) our main findings are the following: i) countries experiencing a high degree of corruption, a high risk to investment, or a high degree of political instability tend to experience a real exchange rate depreciation, ii) there exists strong evidence for a threshold effect on the relationship between investment profile-RER, corruption-RER and political instability-RER. Specifically, political instability and corruption adversely affect real exchange rate especially when they exceed the threshold. iii) the effects of bureaucracy, law, and order seem to be statistically insignificant on the RER. Our findings are robust to the inclusion of the Balassa-Samuelson effect in the estimated equations.

Political Risk and Real Exchange Rate: What Can We Learn from Recent Developments in Panel Data Econometrics for Emerging and Developing Countries?

This paper focuses on the analysis of the long-run response of the real exchange rate (RER) to political risks and tests whether non-economic variables have an impact on RER in 31 emerging and developing countries. We use annual data from the International Country Risk Guide database over the 1984–2016 period. Based on the recently developed method of cross-sectionally augmented ARDL approach of Chudik and Pesaran (J Econ 188:393–420, 2015b), and the panel threshold estimation of Chudik et al. (Rev Econ Stat 99(1):135–150, 2017) our main findings are the following: (1) countries experiencing a high degree of corruption, a high risk to investment, or a high degree of political instability tend to experience a real exchange rate depreciation, (2) there exists strong evidence for a threshold effect on the relationship between investment profile-RER, corruption-RER and political instability-RER. Specifically, political instability and corruption adversely affect real exchange rate especially when they exceed the threshold. (3) The effects of bureaucracy, law, and order seem to be statistically insignificant on the RER. Our findings are robust to the inclusion of the Balassa–Samuelson effect in the estimated equations.

Car Travel Demand: Spillovers and Asymmetric Price Effects in a Spatial Setting

A novel analysis framework for the spatial aspects of car travel, measured by vehicle miles traveled (VMT), is introduced in this paper. The specification of a dynamic spatial Durbin model enables the analysis of VMT spatial spillovers and diffusion between neighboring areas in the short and long run. The framework is further developed to capture and introduce to a spatial setting potential asymmetry and hysteresis that can reflect reference dependence and habits. A panel data set is compiled at the subregional level, based on official car mileage recordings in England and Wales. In addition to the inelastic long-run responses of VMT to fuel price (−0.124) and income (0.116) changes, the results illustrate asymmetries and hysteresis in price elasticities with a significant spatial component. The impact magnitude on VMT from a number of factors, such as alternative fuel use, fuel deserts in rural areas, and road network and car fleet characteristics, is also estimated. The results are consistent with the car use saturation hypothesis through the positive impact of motorization rate to VMT. The negative effect of public transport infrastructure on car travel is only significant in the spatial models. The paper demonstrates the applicability and importance of spatial econometrics in transport research.

UK macroeconomic volatility: Historical evidence over seven centuries

Breaking ground from all previous studies, we estimate a time-varying Vector Autoregression model that examines the time-period 1270–2016 — the entire economic history of the U.K. Focusing on permanent and transitory shocks in the economy, we study the fluctuation in conditional volatilities and time-varying long-run responses of output growth and inflation. Unlike all previous studies that use time invariant linear models, our approach reveals that the pre 1600 period is a turbulent economic period of high volatility that is only repeated in the 20th century. The repeating patterns in the conditional volatilities follow from aggregate supply shocks, while most of the inflation responses follow from aggregate demand shocks. Thus, we uncover that despite the technological growth and the various changes in the structure of the U.K. economy in the last century, the recurring patterns call for an examination of the true impact of the various policies on the economy.

Sticker Shocks: Using VAT Changes to Estimate Upper-Level Elasticities of Substitution

We estimate the upper-level elasticity of substitution between goods and services of a nested aggregate CES preference specification. We show how this elasticity can be derived from the long-run response of the relative price of a good to a change in its VAT rate. We estimate this elasticity using new data on changes in VAT rates across 74 goods and services for 25 European Union countries from 1996 through 2015. Depending on the level of aggregation, we find a VAT pass-through rate between 0.4 and 0.7. This implies an upper-level elasticity of 3, at the lowest level of aggregation with 74 categories, and 1 (Cobb–Douglas preferences) at a high level of aggregation that distinguishes 10 categories of goods and services.

Is there an optimal level of housing wealth in the long-run? Theory and evidence

This paper studies the optimal level of housing wealth theoretically and empirically. It first develops a housing model based on the wealth effects on the optimal growth path model of Kurz (1968) and shows that there is an optimal ratio between the housing wealth and income (h-y ratio), housing wealth and consumption (h-c ratio), and housing wealth and total wealth (h-w ratio). The paper next shows that the calibrated h-y, h-c and h-w ratios are markedly consistent with the US data, the benchmark economy. In particular, it confirms that they are about 1.5, 2.2, and 0.35, respectively. Finally, the paper econometrically investigates the long run relationship between h-y, h-c, and h-w in the US economy, using the cointegration approach with structural shift. The empirical analyses show that (i) there is a long-run cointegration relation for the variables of interest, (ii) the estimated long-run response of housing wealth to income, to consumption and to total wealth are consistent with stylized values, and (iii) the time varying responses of housing wealth adequately reflect the effects of some major shocks in the US economy. As a policy implication, we argue that an economy having h-y, h-c, and h-w ratios substantially higher than the optimal values may be considered to indicate a bubble in housing, which may imply waste of its productive resources invested in a non-productive asset, and hence intervention of policy maker with contractionary policies.

Once Bitten, Twice Shy? The Lasting Impact of Enforcement on Tax Compliance

We examine the impact of enforcement on subsequent compliance behavior by taxpayers. Exploiting waves of randomized audits by the Internal Revenue Service from 2006 to 2009, we find three long-run responses by taxpayers. First, audits increase tax payments substantially in following years, but this effect is short-lived when third-party reporting is not available. Second, taxpayers with high income volatility revert to their preaudit behavior quickly. Third, sophisticated taxpayers are affected less by enforcement. These responses reveal how taxpayers perceive the enforcement risk and change their noncompliance according to the dynamics of the information barrier between them and the enforcement agency.

Impacts of Climate Change on Outdoor Recreation Participation: Outlook to 2060

Natural resource managers and planners must consider outdoor recreation’s longrun response to shifting population density, sociodemographic factors, land uses, and climate change. Projected rises in greenhouse gases imply changing minimum/ maximum temperatures, potential evapotranspiration, and precipitation. The strong link between natural resource conditions and outdoor recreation suggests that longand short-term recreation planning requires knowledge of which activities and settings will be impacted by climate change. Climate change response is principally an adaptation strategy, as climate cannot be directly managed like park access. Effective planning requires that adaptation or mitigation strategies should be considered for activities and implemented in advance. We used a two-step approach. The estimation step yielded models of adult participation rates and days-per-participant by activity at regional and national levels. The simulation step combined models with external projections of explanatory variables at 10-year intervals to 2060. Estimates of per capita participation and daysof- participation were combined with population projections to estimate participants and participant-days by activity. Regional and national projections through 2060 were made under three 2010 Resources Planning Act (RPA) Assessment scenarios, varying in population growth rates, socioeconomic conditions, and land uses. Adding in a climate variable generated a second set of projections, accounting for changing temperature, precipitation, or potential evapotranspiration. Nested models allowed comparing the results with and without the climate change, the primary focus of this paper. Climate change impacts within each scenario were computed using the differences in participation and consumption metrics with and without climate effects, expressed as a percentage relative to 2008 baselines. This computation included the magnitude of change between the 2060 futures with and without climate change, as well as impacts relative to the baseline. A range of plausible climate-related shifts in participation and consumption was created by collapsing scenarios and climate models by activity. We focused on sensitivity to climate change, as projections of activity participation and consumption are already detailed elsewhere (Bowker et al., 2012; Bowker et al., 2013; Bowker & Askew, 2013; Bowker & Askew, 2014). Recreation will respond differently to warmer futures, increasing potential evapotranspiration, and mixed precipitation outlooks by activity, location, and for participation versus consumption. Snowmobiling and undeveloped skiing (crosscountry skiing and snowshoeing) were the most negatively affected by climate change. Participation in horseback riding on trails could increase. Horseback riding days-ofparticipation could see negative climate impacts nationally. Participation and daysof- participation for both fishing and motorized water activities in the North should increase. Climate change in the Rocky Mountain region will negatively impact motorized water activities, hunting, and fishing, while swimming should be affected positively. The Pacific Coast region shows the most stability, with either small climateinduced shifts or wider ranges which are ambiguous. Subscribe to JPRA

An Assessment of UK Macroeconomic Volatility: Historical Evidence Using Over Seven Centuries of Data

Breaking ground from all previous studies, we estimate a time-varying Vector Autoregression model that examines the time-period 1270-2016 - the entire economic history of the U.K. Focusing on permanent and transitory shocks in the economy, we study the fluctuation in conditional volatilities and time-varying long-run responses of output growth and inflation. Unlike all previous studies that use time invariant linear models, our approach reveals that the pre 1600 period is a turbulent economic period of high volatility that is only repeated in the 20th century. The repeating patterns in the conditional volatilities follow the approach of aggregate supply shocks, while most of the inflation responses follow from aggregate demand shocks. Thus, we uncover that despite the technological growth and the various changes in the structure of the U.K. economy in the last century, the recurring patterns call for an examination of the true impact of the various policies to the economy.

Shift-Share Instruments and the Impact of Immigration

A large literature exploits geographic variation in the concentration of immigrants to identify their impact on a variety of outcomes. To address the endogeneity of immigrants' location choices, the most commonly-used instrument interacts national inflows by country of origin with immigrants' past geographic distribution. We present evidence that estimates based on this instrument conflate the short- and long-run responses to immigration shocks. If the spatial distribution of immigrant inflows is stable over time, the instrument is likely to be correlated with ongoing responses to previous supply shocks. Estimates based on the conventional shift-share instrument are therefore unlikely to identify the short-run causal effect. We propose a multiple instrumentation procedure that isolates the spatial variation arising from changes in the country-of-origin composition at the national level and permits us to estimate separately the short- and long-run effects. Our results are a cautionary tale for a large body of empirical work, not just on immigration, that rely on shift-share instruments for causal inference.

Sticker shocks: using VAT changes to estimate upper-level elasticities of substitution

We estimate the upper-level elasticity of substitution between goods and services of a nested aggregate CES preference specification. We show how this elasticity can be derived from the long-run response of the relative price of a good to a change in its VAT rate. We estimate this elasticity using new data on changes in VAT rates across 74 goods and services for 25 E.U. countries from 1996 through 2015. Depending on the level of aggregation, we find a VAT pass-through rate between 0.4 and 0.7. This implies an upper-level elasticity of 3, at the lowest level of aggregation with 74 categories, and 1 (Cobb-Douglas preferences) at a high level of aggregation that distinguishes 10 categories of goods and services.

Dynamic provision of public goods under uncertainty

This study investigates the private provision of public goods under uncertainty using a general dynamic equilibrium model with stochastic disturbances. In particular, the model incorporates income shocks governed by a Wiener process with a mean of zero and standard deviation of unity as uncertainty. We analyze how uncertainty and population size affect the supply of public goods. Dynamic analysis shows the importance of attitude toward risk and a contrast between short-run and long-run responses to increases in uncertainty and population size. Results show that under specified conditions, escalating uncertainty reduces the long-run contributions to public goods through the stochastic accumulation of capital but it raises short-run contributions. The average contribution increases to a positive finite value by increasing the population to a certain level, but it declines toward zero if the population size is infinite. These twin results are based on the dynamic behaviors of risk-averse individuals responding to elevated risks.