Major Macroeconomic Variables Research Articles

An economic policy uncertainty index for Portugal

This paper investigates the effects of policy uncertainty on major macroeconomic variables in Portugal, employing a Structural Vector Autoregression (SVAR) approach. I develop an Economic Policy Uncertainty (EPU) index utilizing data from over twenty news sources, which captures key moments such as elections, budget negotiations, and various crises. In response to a rise in policy uncertainty, firms delay projects, leading to a decline in industrial output and a rise in unemployment. Consumers, in turn, reduce their non-essential spending, resulting in a gradual decline in retail sales. On the financial side, rising policy uncertainty drives down equity prices and widens credit spreads, reflecting the concerns of investors and lenders.

The impact of oil prices, foreign direct investment and trade openness on unemployment rates in an oil-exporting country: The case of Saudi Arabia

This study analyzes the effects of major macroeconomic variables (oil price, foreign direct investment inflows, real gross domestic product and trade openness) on the unemployment rate in Saudi Arabia. The study adopted the ARDL model and bounds testing for co-integration approach and other diagnostic econometric techniques to check potential issues resulting from the use of time series data, from 1991 to 2019. Findings show that changes in the four variables exhibit a significant negative long-run effect on the unemployment rate. Additionally, we detected a non-linear relationship between unemployment and oil prices. The oil price effect is positive only if it exceeds $41.2 per barrel. A per-barrel price of oil below this threshold appears to worsen the labor market situation in Saudi Arabia. Revenues from oil exports account for major source of income for the country; unfortunately, oil prices are subject to factors beyond the control of the country (inconsistencies in global oil prices). The country needs to diversify its economy especially in growth-enhancing sectors of the economy to generate employment and moderate unemployment.

부산 경남지역의 지역내총생산 동조성에 관한 연구

This study examined the synchronicity of economic activities between Busan and Gyeongnam (including Ulsan) using per capita regional gross domestic product data from Busan and Gyeongnam from 1985 to 2020. Synchronization of economic activities is a phenomenon in which major macroeconomic variables move similarly at the same time or over time, and can be analyzed through cointegration analysis and Granger causality analysis. First, we examined whether a long-term equilibrium relationship exists between the regional gross domestic product of Busan and Gyeongnam through a cointegration test considering structural changes. In addition, we examined the mutual predictive power between regional GDP growth rates through the Markov regime-switching model. As a result, a structural change occurred in the long-run stable relationship was found. In the case of the cointegration test method reflecting the structural change, it was found that there is a long-run stable relationship between GRDP of Busan and Gyeongnam. In the Markov phase-switching model, GRDP of the two regions had synchrony in the long run regardless of the economic phase, and there was synchronicity with high mutual predictive power between the rates of change in the GRDP of Busan and Gyeongnam. The synchronicity of economic activities in Busan and Gyeongnam is adequately explained by the method considering the structural change and the nonlinear model.

Nexus between Macroeconomic Factors and Economic Growth in Malaysia: An Autoregressive Distributed Lag Approach

This study digs into the complex relationship that exists between the development of GDP in Malaysia and major macroeconomic variables. It is of the utmost importance to gain an understanding of the elements that influence GDP development to reduce the risk of sociopolitical instability. Because nations are becoming more aware of the various elements that could potentially affect economic growth, this study was prompted to determine the precise mechanisms that are at play because of this awareness. This study employs the Autoregressive Distributed Lag (ARDL) methodology to yield robust statistical insights into the nexus between macroeconomic variables and economic growth in Malaysia. We have used quarterly data ranging from the initial quarter (Q1) of 2000 to the last quarter (Q4) of 2020 for our analysis. The findings of this study provide important insights into the dynamic links between GDP growth and the selected macroeconomic determinants. As a result, the findings provide policymakers, academics, and practitioners with significant information that can be used to design economic plans that are informed by relevant data. In addition, this study emphasizes the necessity for future research endeavors to go deeper into this topic, bringing attention to the requirement for new views and the active participation of new academics, politicians, and practitioners. This concerted effort is necessary to promote sustainable economic growth and stability in Malaysia and elsewhere.

Spillover effects of liquidity management in major economies and China's digital economy-driven countermeasures

PurposeThis paper aims to enhance the Global Projection Model (GPM) developed by the International Monetary Fund by constructing a GPM4 model that includes the United States of America, the Eurozone, Japan and China.Design/methodology/approachThis article introduces the United States of America, the Eurozone, Japan and China into a comprehensive global forecasting model, analyzing the impact of liquidity management in G3 economies on nine key macroeconomic variables in China.FindingsThe findings reveal that the liquidity management strategies employed by major economies do exert a certain influence on China's major macroeconomic variables. Different types of liquidity shocks elicit varying effects. Monetary shocks exhibit the strongest instantaneous impact, while credit conditions and policy rate shocks contribute more significantly to China's long-term macroeconomic fluctuations. However, no single shock stands out as the dominant factor.Originality/valueThis paper attempts to expand the GPM model developed by the International Monetary Fund and build a GPM4 model including China, the United States of America, the Eurozone and Japan. For the first time, the GPM model was used to analyze the spillover effects of liquidity management in major economies on China's macroeconomy and revealed the impact of non-price factors such as credit conditions on China's macroeconomic variables.

Investigating the Nexus Between Militarization and Inflation in Turkey

The importance of military expenditure in terms of establishing national security constitutes the main excuse for public expenditures made by states in this field. Yet, a special importance should be attached to military expenditure in terms of ensuring the efficiency of the public sectors of developing countries and rational use of resources. In fact, there is no consensus about the effect of these types of expenditures on the economy in general or the trade-offs they cause. Therefore, their effects on major macroeconomic variables and efficiency in resource allocation, production, and distribution deserve to be comprehensively addressed. To this end, this study aims to investigate the long- term effect of militarization on inflation in Turkey. By incorporating the annual data from the period 1970 to 2020 and employing the combined approach to cointegration suggested by Bayer and Hanck (2013), the presence of long-term interplay between militarization and inflation can be analyzed. After detecting the presence of cointegration, the findings of the long run model reveal that inflation is spurred by military expenditure and arms imports besides the other determinants of inflation.

Macroeconomic uncertainty and firms’ investment in China

This paper constructs macroeconomic uncertainty indices for China from 2009 to 2021 based on the distribution of forecast errors of major macroeconomic variables. The indices effectively capture the economy’s deep slump and rebound in 2020. This study reveals a negative relationship between macroeconomic uncertainty and firms’ investment, with downside uncertainty having a larger negative impact than upside uncertainty.

전국 주택구매력지수(HAI)의 변화가 지방 주택매매시장에 미치는 영향에 관한 연구

This study analyzed the effect of changes in the national housing purchasing power index on the local housing sales market, which is recognized as a heterogeneous market with the metropolitan area. The analysis method used the Vector Error Correction Model in consideration of the time-series observation characteristics of the main variables of this study. The summary and implications of this study are as follows.
 First, if housing prices in the metropolitan area soar and housing investors' investment capacity in the metropolitan area decreases, it is estimated that they are interested in the local housing market with relatively high price benefits. In particular, the effect of the change in housing purchasing power is expected to occur mainly in the housing market in local hub cities. Second, it can be seen that the local housing market is most affected by income increase through economic growth in the long run. Third, the total population of Jeollabuk-do is expected to gradually flow out due to the concentration of the economy in the metropolitan area, and the trend of aging is expected to increase rapidly. However, Jeonju, a hub city, is expected to show a significant difference in the housing sales market depending on regional characteristics, such as the continuous influx of population. Finally, unlike the results of a study conducted on the housing market in the Seoul metropolitan area, changes in major macroeconomic variables such as interest rates excluding economic growth did not have a significant effect. This result is judged to be because local housing prices have a very low price level compared to the metropolitan area, so the merit as investment goods or inflation hedging is not high.

The impact of macroeconomic variables on foreign direct investment in Nigeria

This study's main goal is to determine the effect that specific macroeconomic factors have on the amount of foreign direct investment (FDI) flowing into Nigeria. The ex post facto research design was adopted, and it used exchange rate, inflation rate, monetary policy rate (MPR), and gross domestic product growth (GDP) rate as the macroeconomic variables. The quantity of inflow between 1986 and 2020 was made up of FDI (dependent variable). Because the model variables were integrated in a mixed order of both level and first difference, the autoregressive distributed lag (ARDL) technique was used. The selected macroeconomic variables and FDI were bound by a long-run connection, according to the results of the ARDL bounds test for cointegration. The calculated short-run coefficients showed that GDP growth rate and monetary policy rate were the primary macroeconomic variables that considerably increased FDI inflow in Nigeria, whereas inflation and exchange rate were the major macroeconomic variables that significantly decreased FDI inflow. In the long term, the GDP growth rate and the exchange rate had a beneficial influence on FDI influx, whereas the monetary policy rate had a large negative effect. According to these empirical findings, it is advised that Nigeria's monetary authorities should support strong GDP growth, exchange rate stability, and efficient monetary policy rates in order to draw FDI into the country and create efficient foreign exchange policies that will attract foreign investors.

Import Tariff Reduction and Fiscal Sustainability: A Macro-Econometric Modelling for Ethiopia

The main objective of this study is to examine the dynamic impact of import tariff reduction on major macroeconomic variables and its long-run implications for the fiscal sustainability of Ethiopia. In addition, it estimates the increase in the average consumption tax required to compensate for the possible tax revenue loss and fiscal sustainability. A Recursive Dynamic Computable General Equilibrium Model (RDCGEM) is used to assess the dynamic impact on macroeconomic variables of import tariff reduction and examine the increased consumption tax required. The study is novel as there are no studies in general, and for Ethiopia in particular in this regard. We use the available 2013/2014 base year macroeconomic data from national income accounts, fiscal accounts, and balance of payments accounts of Ethiopia. The RDCGEM is calibrated to the base year data, checked for correctness, and tested for robustness using sensitivity analysis. The model then is simulated for the import tariff reduction under the base case and under various tariff reduction scenarios based on which the macroeconomic impacts of tariff reduction are analyzed. Based on the RDCGM outputs, the fiscal sustainability impact of import tariff reduction is verified, and using a cointegration method, we examine the sustainability of fiscal policy. The results suggest a 95 percent import tariff reduction that negatively impacts the major macroeconomic variables. It also leads to long-term fiscal unsustainability. The joint reform of the country has relatively better impacts on major macroeconomic variables but slightly negative effects on household income and consumption.

Does macroeconomic environment stimulate herding behaviour among investors in Malaysia stock market? an empirical evidence

Herding behaviour could cause stock prices to deviate from the fundamentals, resulting in market instability. One of the influencing factors that stimulate herding behaviour amongst investors is macroeconomic environment. Among the major macroeconomic variables that play important role in influencing herding behaviour are economic growth, exchange rate, interest rates and inflation rate. However, empirical evidence on this is still lacking especially in the case of emerging markets such as Malaysia. Therefore, the main objective of this paper is to empirically examine the influence of macroeconomic variables on the existence of herding behaviour in the Malaysian stock market.  In this study, two measures of herding behaviour have been used: Cross-Sectional Standard Deviation (CSSD) and Cross-Sectional Absolute Deviation (CSAD).  The estimation used daily data of 346 companies listed on the Malaysian stock market from the year 2000-2019. The regression estimation results using CSSD with individual macroeconomic variable found that herding behaviour is detected in the case of interest rate and inflation. Meanwhile, for CSAD, the results demonstrate that herding behaviour is present in the case of interest rate, inflation rate and growth. Meanwhile, for the regression that consists of all macroeconomic variables, both measures are negatively and significantly related to interest rates and inflation rates. The findings offer additional evidence in supporting the existence of herding behaviour in Malaysia under the influence of selected macroeconomic variables.  Therefore, establishing better routes for economic information dissemination could assist investors to make a better investment decision. With a better understanding about herding behaviour could assist regulators to detect price efficiency issues hence to maintain market stability and efficiency.

해외직접투자가 경제성장에 미치는 영향

Purpose – The purpose of this study is to shed new light on the impacts of FDI by multinational corporations on the economic growth of the host country. Design/Methodology/Approach – This study compares and analyzes the different impacts of existing FDI inflows and local added value creation of multinational corporations on the per capita national income of the host country. In addition, this study conducted a fixed-effects panel model analysis on a sample of 42 countries from 2005 to 2016 of the OECD's Analytical AMNE database. Findings – First, as a result of panel analysis of a fixed-effect model that controlled for the effects of individual countries and major macroeconomic and policy variables, the share of local value-added creation of subsidiaries of multinational corporations had a significant positive impact on the growth of per capita income in each country, but the share of FDI inflows did not have a statistically significant impact on the growth of per capita national income. Second, the results of analysis by dividing the sample into developed and developing countries also confirmed that the share of local value-added creation of subsidiaries of multinational corporations has a positive effect on economic growth in both developed and developing countries. In addition, the impact of FDI on economic growth is greater in developing countries than in developed countries. On the other hand, the share of FDI inflows had a positive effect on the economic growth of developing countries, but had no significant effect on the economic growth of developed countries. Research Implications – In identifying the relationship between FDI and national economic growth, it was confirmed that the use of the OECD's Analytical AMNE statistics is more appropriate than traditional FDI data.

The Stochastic Model of Technical Change and Profit Rates: Korean Economy (Manufacturing Sector: 1970–2015)

This article aims to reconstruct major macroeconomic variables, including the profit rate in the Korean economy, by using the stochastic model of technical change. This model needs no a priori technological patterns concerning available technologies, such as the neoclassical production function or fixed coefficient technologies. This article provides a summary of the rate of profit, the productivity of capital, and labor productivity in the Korean manufacturing sector between 1970 and 2015. A multiple structural break model detects possible regime changes in the growth rate of each type of productivity. The innovation sets for the simulation are created based on this test. Furthermore, the article reconstructs the rate of profit, the productivity of capital, and labor productivity in Korea’s manufacturing sector and discusses a catching-up process by Korea with the United States, which the model reproduces. JEL Classification: E11, E17, O14, O33

Major Macroeconomic Variables, Monetary Policy, and the Determination of the Neutral Interest Rate in Brazil

This research used ARDL methodology to explore relevant macroeconomic variables influence on the Brazilian neutral interest rate. As a non-observable variable, we used this approach to identify the determinants of neutral interest rate in the Brazilian economy not only in the short term but also in the long run. Our descriptive analysis highlights that the trend of the real interest rate in Brazil has also been decreasing in recent years. In this paper we attempt to identify which variables could have driven such a fall. We used monthly data from January/2003 to June/2021 and the macroeconomic variables investigated are described as follows: neutral real interest rate (NRI), inflation rate (INF), 3-month treasury bill rate (TB3MS), real exchange rate (EER), Economic Activity Index (IBC-Br). All data were collected from IBGE, IPEADATA and Central Bank of Brazil (BACEN). We achieve that the variables that positively influence the long-term real interest rate are the inflation rate followed by the global interest rate trajectory and the real exchange rate, respectively. On the other hand, economic growth according to its potential level has a negative and relevant impact on the real long-term interest rate.

Macroeconomic impacts of increasing the minimum wage: The case of Korea

In the late 2010s, the Korean government substantially increased the minimum wage to help low-income workers and stimulate the economy. This study quantifies the long-run effect of increasing the minimum wage on major macroeconomic variables in Korea by using a large-firm search and matching model. Results indicate that increasing the minimum wage reduces employment, primarily among workers with low productivity. However, the average labor productivity for employed workers increases, thereby facilitating firms to increase capital investment. The latter effect is not substantially large to dominate the former effect. The results imply that increasing the real minimum wage by 15%, as in 2018, eventually reduces the total employment and gross output by 3.5% and 1.0%, respectively.

Islamic banking and economic growth: fresh insights from Nigeria using autoregressive distributed lags (ARDL) approach

PurposeThe paper examines the relationship between Islamic banking and the growth of the economy in Nigeria in both the short run and long run.Design/methodology/approachThe study employs quarterly secondary time series data for Islamic banking as well as major macroeconomic variables to study the contribution of Islamic banking to the economy of Nigeria. It employs autoregressive distributed lags (ARDL) and error correction model (ECM) approaches from 2013 quarter 1 up to 2020 quarter 2.FindingsThe results show that Islamic banking has a positive contribution to Nigeria's economy in both short run and long run, but this contribution is insignificant.Practical implicationsPolicymakers should endeavor to redesign the country's financial architecture and come up with policies that can support the growth of Islamic finance sector. This will significantly strengthen Nigeria's position as one of the leading Islamic finance hubs in Africa.Originality/valueThis is the first study to examine the contribution of Islamic banking to the Nigerian economy according to the best knowledge of the authors.

Forecasting with Economic News

The goal of this article is to evaluate the informational content of sentiment extracted from news articles about the state of the economy. We propose a fine-grained aspect-based sentiment analysis that has two main characteristics: (a) we consider only the text in the article that is semantically dependent on a term of interest (aspect-based) and, (b) assign a sentiment score to each word based on a dictionary that we develop for applications in economics and finance (fine-grained). Our dataset includes six large U.S. newspapers, for a total of over 6.6 million articles and 4.2 billion words. Our findings suggest that several measures of economic sentiment track closely business cycle fluctuations and that they are relevant predictors for four major macroeconomic variables. We find that there are significant improvements in forecasting when sentiment is considered along with macroeconomic factors. In addition, we also find that sentiment matters to explains the tails of the probability distribution across several macroeconomic variables.

The nexus between digital economy and carbon dioxide emissions in China: The moderating role of investments in research and development

Since the signing of the Paris Agreement, it is necessary for the signatories to report their nationally determined contributions regarding the adoption of domestic strategies that are to be adopted to achieve emission-reduction commitments. Accordingly, the Chinese government has also declared the target of turning carbon-neutral by 2060. In this regard, the digitalization of the Chinese economy can be hypothesized to attain the carbon-neutrality agenda since an emerging digital economy has immense potential in ensuring environmentally-sustainable economic growth. Besides, it is also argued that investments in research and development can also facilitate this cause by developing the latest technologies that can limit emissions of carbon dioxide in China. Against this backdrop, this study aimed to check whether digitalization and research and development investments can help China achieve low carbon growth. In this regard, this study utilized annual data of 30 Chinese provinces between 2006 and 2017. The findings revealed long-run cointegrating relationships between carbon dioxide emissions, digitalization, research and development investments, and other major macroeconomic variables. Besides, digitalization is found to curb the provincial emission figures. Moreover, research and development investments are evidenced to not only curb the emission levels but also perform the role of a moderator between digitalization and carbon dioxide emissions. Similar direct and moderating effects of technological innovation are also discovered. Furthermore, economic growth, financial development, and energy use boost higher carbon dioxide emissions in China. In light of these findings, this study recommends the Chinese government integrate the digitalization and environmental development policies by enhancing investments in research and development. In addition, China should also look forward to green its economic growth, financial development, and energy transition policies.

On the heterogeneous effects of tax policy on labor market outcomes

AbstractMany recent studies have documented the heterogeneous effects of government‐spending shocks on major macroeconomic variables, particularly on output. We delve deeper into the heterogeneous effects of fiscal policy innovations, but focus on the tax policy innovations and their impact on the labor market, while accounting for gender, race, ethnicity, and the business cycle. Using microlevel data from the United States, we find that: (i) Tax shocks have varying employment effects depending on gender, race, and the stage of the business cycle; (ii) Sector, industry, and occupational segregation in labor markets by gender, race, and ethnicity can explain most of the variation in response to fiscal policy shocks.

How the macroeconomic conditions and the global risk factors affect sovereign CDS spreads? New Evidence from Turkey

This paper aims to investigate the effects of a set of major country-specific macroeconomic variables and global risk factor on determining Turkey’s sovereign CDS spreads. The industrial production index, consumer price index, nominal exchange rates, policy interest rate, stock market index, and the volatility index as a proxy for global risk appetite are used by employing SVAR methodology with block exogeneity for 2011M01-2020M09 periods. The results reveal that the country's nominal exchange rate is the main driver of sovereign CDS spread. Especially in 2018, the most significant source of the high increase in sovereign CDS spreads is the exchange rates. According to the impulse response functions, to reduce the sovereign CDS spread, economic growth is more effective than the stock market return. Moreover, it is seen that the global risk factor does not play an essential role in the increases in domestic country's sovereign CDS spread.