Main Macroeconomic Variables Research Articles

The long-run relationship between the stock market and main macroeconomic variables in Poland

The investigation concerns the problem of whether some macroeconomic variables and the EUR/PLN exchange rate might affect the performance of the Warsaw Stock Exchange. The answer to this question can be obtained from a cointegration analysis. The advantage of testing for cointegration is the identification of a stable long-run relationship between the stock price index, some macroeconomic variables, and the EUR/PLN exchange rate, which can be implemented using various cointegration methodologies. Analysis of the response of one variable to an impulse of another variable is also performed to show the importance of a given variable in a system.

Do Macro-Economic Variables Affect Foreign Trade of India? Panel Regression Approach

After the crisis in 1991, the Indian government introduced some changes in its Policy on trade, foreign investment, tariffs, and taxes under the name of New Economic Reforms. The main focus of these reforms has been on liberalization, openness, and export promotion activity. The paper focuses on the impact of development variables on export from India. Developmental variables include infrastructure, human resource, openness, production & market, research & development, resources, and taxation. Each development variable consists of a set of related variables. The paper has used principal component analysis (PCA), composite index and panel regression model. These help to know impact of individual developmental variable on Indias export. The period of study is 1990 2013. The value of KMO is over 0.6 indicating the samples are adequate and the value of Bartletts test is less than 0.05 ensure suitability of PCA. The overall growth rate Indian foreign trade is 3 percent during last more than two decades. Main macro-economic variables are infrastructure, resources, and taxation. The government should strengthen and incorporate these macro-economic variables while making foreign trade policy (i.e. EXIM policy) policy under the umbrella of WTO.

Dynamic Factor Models & Bayesian Averaging of Classical Estimates in Forecasting Macroeconomic Indicators with Application of Survey Data

In this article we present four diversified approaches to forecasting main macroeconomic variables without a priori assumptions concerning causality. We include tendency survey data in both the Bayesian averaging of classical estimates (BACE) and the dynamic factor models (DFM) frameworks. With respect to the forecasting models based on BACE we propose two methods of regressors’ selection: frequentist (FMA) and averaging (BMA). Our approaches are a priori atheoretical and we refrain from the theory-based selection of exogenous variables. For comparison between forecasts we apply ARIMA method as well. Our approach is comprehensive with respect to the datasets used. We apply data from the tendency surveys conducted at the Research Institute for Economic Development (RIED) at the Warsaw School of Economics (WSE), Poland, on sentiment in the manufacturing industry, trade and construction as well as among households. We additionally include data from foreign and domestic institutes that construct their own leading indicators. We also use the Purchasing Managers’ Index (PMI) for Polish industry in order to assess the quality of results we check in-sample and out-of-sample performance. The results show that, although the results does not significantly differ, the best results are observed in Bayesian models with frequentist approach.

The Eurosystem's Asset Purchase Programmes for Monetary Policy Purposes

This paper analyzes the operation of the Eurosystem’s public and private assets purchases programmes for monetary policy purposes, quantifying the potential effect on the Italian economy. First we give an exhaustive account of the main transmission channels by which the purchases can be expected to affect economic activity and inflation. Then we assess the effects on the main channels of transmission to the economy and measure the impact on the main macroeconomic variables, applying the Bank of Italy’s quarterly model. For 2015-16 the purchase programme can be expected to make a significant contribution to the growth of output and of prices, of more than 1 percentage point in both cases. Among the channels examined, the largest contribution is judged to come through the depreciation of the euro and the reduction in the interest rates on government securities and bank loans. These effects are comparable in magnitude to those found by studies on the securities purchase programmes conducted in the United States and the United Kingdom.

Mutual fund flows: an analysis of the main macroeconomic factors

This paper analyzes whether some macroeconomic factors (country risk, IBrX volatility and Interbank Certificate of Deposit) are related to mutual fund flows for the period between January 2005 and August 2014. In order to investigate whether the flow series behaved differently during this period, the Chow test was conducted for September 2008 (the month in which the Lehman Brothers investment bank collapsed). The regressions were performed and the parameters were estimated through the OLS method for both periods, the first running from January 2005 to August 2008 and the second from September 2008 to August 2014. For the period between January 2005 and August 2008, all the variables, except for the Interbank Certificate of Deposit, proved significant, at a significance level of 10%. For the subsequent period, none of the variables proved significant and the R² was very low, which may merely indicate that investors failed to analyze the main macroeconomic variables for mutual fund allocations or redemptions and simply considered other aspects, such as manager performance.Keywords: Investment Funds. Flow. Macroeconomic Factors.

Taxing fossil fuels under speculative storage

Long-term environmental consequences of taxing fossil fuel usage have been extensively studied in the literature. However, these taxes may also impose several short-run macroeconomic policy challenges, the nature of which remains underexplored. This paper investigates the mechanisms through which environmental taxes on fossil fuel usage can affect the main macroeconomic variables in the short-run. We concentrate on a particular mechanism: speculative storage. Formulating and using a dynamic stochastic general equilibrium (DSGE) model, calibrated for the United States, with an explicit storage facility and nominal rigidities, we show that in designing environmental tax policies it is crucial to account for the fact that fossil fuel prices are subject to speculation. The existence of forward-looking speculators in the model improves the effectiveness of tax policies in reducing fossil fuel usage. Improved policy effectiveness, however, is costly: it drives inflation and interest rates up, while impeding output. Based on this tradeoff, we seek an answer to the question how monetary policy should interact with environmental tax policies in our DSGE model of fossil fuel storage. We show that, in an environment with no speculative storers, monetary policy should respond to output along with CPI inflation in order to minimize the welfare losses brought by taxes. However, when the storage facility is activated, responding to output in the monetary policy rule becomes less desirable.

The Effects of Fiscal Policy Shocks in Romania. A SVAR Approach

Abstract There has always been an interest in analyzing the effects of fiscal policy on the main macroeconomic variables such as GDP, inflation, interest rate, employment, but compared with the empirical literature on the effects of monetary policy on economic activity, fiscal policy has received less attention. With the recent economic recession fiscal policy was regarded with more interest since it was expected to be effective in economic recovery. An approach commonly used to estimate the effects of fiscal policy shocks on economic activity is based on vector autoregressive (VAR) models with different scheme of identification of the shocks. This paper analyzes the effects of a government expenditure shock and tax revenue shock on economic activity by applying a VAR methodology to Romanian data. For identification of fiscal policy shocks I first used a recursive approach (Cholesky decomposition) and second I apply the methodology proposed by Perotti (2002), based on Blanchard and Perotti (1999). The results obtained are consistent with other studies on emergent economies. The impact of fiscal shocks on macroeconomic variable is reduced and the fiscal multipliers are very small.

Shifting Horizons: Assessing Macro Trends Before, During, and Following Systemic Banking Crises

This paper assesses the trends of some main macroeconomic and macro-financial variables across different time horizons related to systemic banking crises. Specifically, by gradually shifting the observation horizon of the same statistical model across time, it observes how these variables are associated with banking crises in the past, present and future. The associations vary considerably when shifting horizons. Domestic house price growth increases the probability of observing a crisis in the future, but its effect disappears when moving closer to a crisis. The inverse holds true for the effect of the global credit gap, while global credit growth consistently and significantly increases the probability of a future banking crisis. Also, banking crises seem to be spatially correlated in the very short run. In all, the results can help policy makers by shedding light on the temporal horizon of the variables they monitor in addition to evaluating their predictive power.

Macroeconomic Fundamentals of Poverty and Deprivation: An Empirical Study for Developed Countries

This study provides a relevant contribution to literature on the macroeconomic determinants of multidimensional deprivation in developed countries; this type of analysis is not as frequent in the literature as that explaining poverty stricto sensu. After a review of the macroeconomic mechanisms of poverty, we propose a composite index to capture multidimensional poverty as to allow a comparative assessment of deprivation across European Union countries. Relying on the macroeconomic transmission mechanisms that influence poverty, a panel data econometric approach is implemented to study the relation between the proposed composite index and macroeconomic variables. Results show that a multidimensional poverty concept is relevant for assessing deprivation in Europe and that the dynamics of main macroeconomic variables crucially affect deprivation performances. The latter result is robust, holding for different poverty measures.

REDUCE EMPLOYERS’ SOCIAL SECURITY CONTRIBUTIONS AND CONTROL LABOR FRAUD: REMEDIES FOR SPAIN'S AILING ECONOMY?

The aim of this paper is to quantify the impact of the reduction on social security contributions (SSCs) of employers recently claimed by the Spanish enterprisers’ organizations on the main macroeconomic variables. The effects of this tax reform are evaluated with a Computable General Equilibrium model with the neoclassical closure rule. The model is calibrated with a Social Accounting Matrix for the year 2000 (SAMES-00) elaborated by the authors. Results show that lower SSCs of employers raise employment, households’ welfare and real gross domestic product (GDP) but also increase the public deficit. These positive effects remain when the reduction is compensated with personal income taxes to keep the public deficit/GDP ratio constant and also when the compensating variable is value-added tax (VAT). Unlike in previous studies, the most positive effects are obtained when the lower public revenues are compensated via lower coverage of unemployment benefits.

National security, military spending and the business cycle

This paper develops a Dynamic Stochastic General Equilibrium model where national security is an argument in the agent’s utility function and the government chooses optimally the level of military spending to maximize social welfare. National defense depends on military expenditure and on the strategic environment reflecting a potential hostile external threat. We use aggregate data on consumption, investment, and military spending for the US economy to estimate the parameters of the model. Estimation results suggest that consumption and national defense are complements and that military spending variability is mainly explained by external threat shocks although it also depends on the macroeconomic conditions. We compute impulse response functions of the main macroeconomic variables to several shocks: a total factor productivity shock, a defense technology shock, and a strategic environment shock. Surprisingly, we find that the optimal response to an increase in the external threat (a worsening in the strategic environment) will rise output by reducing consumption and increasing investment.

Liquidity Traps and Monetary Policy: Managing a Credit Crunch

We study a model with heterogeneous producers that face collateral and cash in advance constraints. These two frictions give rise to a non-trivial financial market in a monetary economy. A tightening of the collateral constraint results in a credit-crunch generated recession. The model can suitable be used to study the effects on the main macroeconomic variables - and on welfare of each individual - of alternative monetary - and fiscal - policies following the credit crunch. The model reproduces several features of the recent financial crisis, like the persistent negative real interest rates, the prolonged period at the zero bound for the nominal interest rate, the collapse in investment and low inflation, in spite of the very large increases of liquidity adopted by the government. The policy implications are in sharp contrast with the prevalent view in most Central Banks, based on the New Keynesian explanation of the liquidity trap.

The Effects of Oil Price Volatility on the Sudanese Economy

After the oil exploitation in 1999, Sudan has relied primarily on oil revenues, which rendered its economy highly vulnerable to the international oil price shocks. This study examines the dynamic impact of crude oil price fluctuations on the key macroeconomic variables in Sudan, using quarterly data over 1999:Q4–2009:Q4. The study employs impulse response functions and variance decompositions techniques based on unrestricted the vector autoregressive approach. The empirical results reveal that oil price shocks have significant effects on the main macroeconomic variables such as, real GDP, inflation and exchange rate. Moreover, the study found an evidence of asymmetry relationship between oil prices changes and macro variables.

Taxing Fossil Fuels Under Speculative Storage

This paper investigates the mechanisms through which environmental taxes on fossil fuelusage can affect the main macroeconomic variables in the short-run. We concentrate on aparticular mechanism: speculative storage. The existence of forward-looking speculators inthe model improves the effectiveness of tax policies in reducing fossil fuel usage. Improvedpolicy effectiveness, however, is costly: it drives inflation and interest rates up, whileimpeding output. Based on this tradeoff, we seek an answer to the question how monetarypolicy should interact with environmental tax policies in our DSGE model of fossil fuelstorage.

Taxing Fossil Fuels under Speculative Storage

This paper investigates the mechanisms through which environmental taxes on fossil fuel usage can affect the main macroeconomic variables in the short-run. We concentrate on a particular mechanism: speculative storage. The existence of forward-looking speculators in the model improves the effectiveness of tax policies in reducing fossil fuel usage. Improved policy effectiveness, however, is costly: it drives inflation and interest rates up, while impeding output. Based on this tradeoff, we seek an answer to the question how monetary policy should interact with environmental tax policies in our DSGE model of fossil fuel storage.

On the role of policy interventions in structural change and economic development: The case of postwar Japan

In this paper, we study the structural change occurring in Japan's post-World War II era of rapid economic growth. We use a two-sector neoclassical growth model with government policies to analyze the evolution of the Japanese economy in this period and to assess the role of such policies. Our model is able to replicate the empirical behavior of the main macroeconomic variables. Three findings emerge from our analysis. First, neither price and investment subsidies to the agricultural sector, nor industrial policy plays a crucial role in the rapid postwar growth. Second, had there existed a labor migration barrier, the negative long-run level effect on output would have been substantial. Finally, TFP in non-agricultural sector is mostly responsible for the rapid growth of Japan in the post-war period.

The Impact of Macroeconomic Variables on the Non Performing Loans in the Albanian Banking System During 2005 - 2012

The aim of this paper is to analyze the impact of the main macroeconomic variables in the non performing loans’ level in the Albanian banking system. This study is motivated by the hypothesis that macroeconomic variables have an effect on the non performing loans’ level. The paper will be focused to find out the relations of the non performing loans ratio and the GDP, inflation rate, exchange rate euro/all and base interest rate by using a simple regression model. The Albanian banking system from 2008 is suffering from an ongoing growth level of the non performing loans and this is a big problem for the individual banks and for the banking system as a whole. Actually the level of non performing loans in the Albanian banking system is very concerning reaching up to 23.1% of the total loans. The Bank of Albania during the global financial crises has to be more vigilant of potential weaknesses of our banking system. This study is meant to be added to the actual field of research papers in the non performing loans issue. DOI: 10.5901/ajis.2013.v2n9p335

The influence of ownership structure on performance of Ghanaian insurance and banking firms

As at 2005, Ghana diversified 351 state-owned enterprises (either fully or partially owned), which attracted a substantial foreign direct investment into the country. This was to introduce efficiency into the management of these public enterprises, hence, the belief that ownership and, in particular, specific type of composition of corporate ownership structure has an impact on a firm's performance. This paper examines the influence of ownership structure on firm performance in Ghana as one of the buoyant and emerging economies in Sub-Saharan Africa. Using data from a period of2000-2010, panel regression was employed to analyze the impact of three major types of ownership structure and the determinants of performance. The ownership structures that are employed in this study are: (1) foreign ownership, (2) Government ownership, and (3) Close corporations. Using two accounting-based measures of financial performance (i.e. return on equity (ROE) and return on asset (ROA), and based on the sample of banks and insurance firms the result showed that both closed corporations and government-owned firms did not perform better than the foreign owned firms. The study also found that inflation and exchange rate are the two main macroeconomic variables that influence firm performance.

Education is essential for economic growth in Pakistan

The role of enhanced schooling, a fundamental part of most development strategies, has become contentious because spreading out of school achievement has not assured improved economic setting. This paper reviews the role of education in promoting economic interests that spotlight the role of educational eminence. Much evidence from developing countries suggests that education has strapping persuasion on economic expansion. The main purpose of this study was to look at the consequences of some of the key macroeconomic variables on Pakistan’s economic growth during 1980-2009 taking four different education levels including Primary, Middle, High school, and other school enrollment as a ratio to total employed labor force. Other variables include exports, Basic health unit (BHUs), as main macroeconomic variables. Primary education is well thought-out to be an important precondition for accelerating growth. Key words: Primary school enrolment, secondary school enrolment, literacy rate, economic growth.

Evaluating a computer-based simulator program to teach the principles of macroeconomic equilibria

General equilibrium macroeconomic models are a basic tool for understanding how the economy functions, how the main macroeconomic variables are related, and the final outcome of economic policies. The teaching of these models is essentially achieved through a system of mathematical equations accompanied by the use of concatenated graphs representing the markets involved in the economy. However, the way these graphs are traditionally taught does not allow the learner to easily understand how they are related or for changes in a model's graphical outputs (curves) to be visualized. Here, a simulation program is presented and the effectiveness of its application to a group of macroeconomics students at the University of Seville during the 2011/12 academic year is evaluated. Analysis of variance (ANOVA) of all students' scores and some complementary statistical tests were applied with a view to distinguishing between students who used the simulator with the aid of a teacher, students who used the simulator without this assistance, and students who studied the topic in a conventional manner in the classroom. The average score obtained by the first-mentioned group in a model comprehension test was significantly higher than that of the second group, which in turn was higher than that of the third group taught using the conventional approach.