Maximum Eigenvalue Tests Research Articles

Research and Development-Driven Foreign Direct Investment and Its Ramifications on Turkey's Economic Landscape: "A VECM Approach"

The purpose of this study is to empirically investigate the impact of research and development on economic growth in Turkey. Data for this study comes from the popular World Development Indicator spanning the period from 1973 to 2022. The study employed different econometric approaches such as ADF unit root, Granger causality, and VECM. The estimate of the Johansen test revealed that there is a long-run relationship among the variables as the trace test shows two cointegrations while the maximum Eigenvalue Test indicates one cointegration test result. The Granger Causality test indicates that there is a presence of causality, which runs from economic growth to the independent variables. Turkey's diverse economies account for the variations in the estimated findings of the impulse response and variance decomposition. Furthermore, the study's conclusions suggest that the Turkish government boost its R&D spending in order to promote economic expansion. Turkey can achieve sustainable economic development by putting policies in place that reward innovation and technological advancements. The potential for economic growth in the nation can also be increased by encouraging cooperation in R&D projects between the public and private sectors.

An Assessment of Price Transmission in Major Pulses Markets in Karnataka

"The purpose of present study was to estimate the price transmission processes of pulses markets in Karnataka state. For that 30 years secondary data on the prices of pulses especially redgram and bengalgram were collected from 1989-90 to 2018-19 and analyzed by using techniques such as CAGR, Johansen Co-integration approach, VAR Model, Granger Causality test to fulfil the objectives. The study concluded that the results of both trace and maximum eigen-value tests indicated that the selected major pulses market such as Kalaburagi, Bidar, Bellary, Raichur and Koppal are cointegrated with each other in the long run and indicated that these markets are efficiently running and they are competitive in nature. The study showed that market pairs in redgram such as Bidar-Kalaburagi, and Raichur-Bidar are exhibiting bidirectional causality, whereas market pairs such as Kalaburagi-Raichur, Koppal-Kalaburagi, Bidar-Bellary, Koppal-Bidar and Koppal-Raichur are expressed unidirectional causality. In case of bengalgram, markets pairs such as Bidar-Kalaburagi, Kalaburagi-Raichur, Bellary-Bidar, Raichur-Bellary are expressed the bidirectional causality."

Market Integration and Price Transmission Analysis of Onion in Wholesale Markets of India

The present study was done in seven major onion wholesale markets in India, namely Pimpalgaon, Lasalgaon, Solapur, Pune, Bangalore, Hyderabad and Indore to explore the interdependence of wholesale prices amongst Indian onion markets. The study was conducted in all India perspective and the study period involves the seventeen years data of onion wholesale prices (January 2004 to December 2020). The study was majorly based on the prices of onion obtained through secondary source. These data were collected from various portals such as FAO, NHRDF, Agmarknet and NHB. The current study employs co-integration analysis of wholesale monthly onion prices in selected marketplaces to determine the degree of market integration. The Trace and Maximum Eigen-value tests results showed that the onion prices in India moves together in the long run equilibrium. As a result, it may be stated that India's onion markets are well-functioning. The direction of information flow was determined by using Granger Causality test. It was found that in few markets pairs, price transmissions were bi-directional whereas between Bangalore and Pune market, no transmission was found. The study reveals that Lasalgaon market is dominating in terms of price determination. The empirical study also recommends keeping a careful eye on diverse market behavioural patterns, since "news" in one market might have an influence on other markets due to the numerous interdependencies.

On the Measurement of Cointegration Relations Between the Indicators of the Time Series of the Current Account of the Balance of Payments and GDP (On the Example of the Republic of Azerbaijan)

The article solves the problem of constructing an econometric model (based on time series of macroeconomic indicators) that reflects the relationship between changes in the current account of the balance of payments and GDP dynamics (on the example of the Republic of Azerbaijan).In order to assess the correctness of the application of mathematical and statistical methods for analyzing the impact of foreign economic activity on the final results of the country's economic activity, the constructed model was tested. So, to test the hypotheses about the normal distribution of the series, the Jarque–Bera test, the augmented Dickey–Fuller test (ADF), the Kwiatkowski–Phillips–Schmidt–Shin (KPSS) test were used, and histograms and correlograms were constructed.In the process of studying the time series of the indicators under consideration, their non-stationarity was revealed both according to the results of descriptive statistics, the Jarque–Bera test, histograms, plots of the sample autocorrelation function (ACF) and partial autocorrelation function (PACF), and according to the Dickey–Fuller test. The transition to absolute increments, that is, to the first differences, was applied. In addition, the Johansen test was performed to identify cointegration relationships. Based on its results, when comparing linear and quadratic trends with similar characteristics, a linear one was chosen, indicating the presence of a cointegration relationship. After carrying out the Trace and Maximum Eigenvalue tests, an alternative hypothesis about the presence of one cointegration vector was accepted.The results obtained allow us to conclude that the relationship between the indicators of the current account of the balance of payments and Azerbaijan's GDP is of a long-term nature. They can also serve as a basis for building an error correction model.

A Study of Interlinkages among Exchange Rate and Stock Price for India

This paper is an attempt to examine the empirical relation between exchange rate and Indian stock price using the monthly time series data over the period 2011-2021. Johansen’s cointegration test has been applied to test the long run relationship between exchange rate and stock price. Both the trace and Maximum Eigenvalue test statistic are less than the 0.05 critical values. Thus, the null hypothesis of no cointegration is accepted and no long run stable equilibrium relation was found to exist between exchange rate and stock price. The analysis further reveals the prevalence of unidirectional causal relationship from stock price to exchange rate by employing the Granger causality test. Thus, the study is found to support the Stock oriented model. So, regulators can predict the trends in exchange rate from the past values of stock prices which can induce profitable trading in the currency market. This study would be of immense importance for various stakeholders like investors, practitioners and policy makers to reduce the information symmetry owing to the volatile nature of the two variables.

The Interrelation between Stock Prices and the Exchange Rate in Kazakhstan

A strong economical link has arisen between stock markets and exchange rates as a consequence of increased capital flows between international financial markets. This correlation between stock returns and exchange rates is particularly intriguing for developing countries such as Kazakhstan, whose economies are quite sensitive to capital flows. In the evolving global financial system, comprehension of the correlation between exchange rates and stock prices is vital for policymakers and investors. Knowing this relationship enables the manager to manage risk effectively, contrariwise, it is applied by investors to predict future trends. However, economic and financial policymakers and regulators need to know the interrelation between conversion rate and asset prices, such as stock markets, in order to articulate respective policies. Nevertheless, there are plenty of empirical studies on the interrelation between exchange rates and the stock market in developed and developing countries. This correlation has not been explored in Kazakhstan. The purpose of this study is to explore the correlation between stock prices and exchange rates in Kazakhstan. The relationship between the variables was analyzed via Johansen Cointegration Test and the VECM model. Upon the results of the analysis, the presence of a long-term correlation between the variables is proved. According to the results of the causality test, the Granger exchange rate is the reason for stock prices in Kazakhstan. There is no causality from stock prices to exchange rates. The results of the study also have a guiding quality in guiding investment decisions for both equity market and foreign money exchange market investors.The null hypothesis that there is nocointegration connection between the variablesis rejected, according to the Trace and MaximumEigenvalue test data in Table 4. In other words,it has been established that the variables have along-term connection. Granger causality test basedon VAR model cannot be used when there is acointegration connection. The VECM (6) modelwill be estimated first, followed by the causalitytest. The results of the causality test predicted usingthe error correction model are presented in Table 5.The exchange rate is the Granger cause of stockprices in Kazakhstan, according to the findings ofthe causality test. There is no relationship betweenstock prices and currency rates.

The Conundrum of Stock Market Performance and Gross Domestic Product: An Empirical Evidence from Kenya

The main objective of this study was to establish is the difficult question among researchers on the direction of relationship between the stock market performance and the gross domestic product using an empirical evidence from Kenya. Both theoretical and empirical reviews have presented a puzzle especially in the long run relationship between the two variables and empirical investigations in various country contexts , time varying longitudinal periods and other settings have continued to provide conflicting results. The study employed quarterly statistics of the Nairobi All Share Index (NASI) obtained from the Capital Markets Authority Bulletins and quarterly Gross Domestic Product rates from 2012-2019 obtained from Kenya National Bureau of Statistics and applied the Engle granger causality test and establish the link between stock market performance and economic growth in the long run (i.e. whether stock market performance causes economic growth or itself is a consequence of increased economic activity). The statistical techniques used included the unit root Augmented Dickey Fuller (ADF) test in order to test the stationarity for all the time series in their levels and first differences. The Johansen co-integration test to investigate whether the variables are cointegrated of the same order taking into account the trace statistics and the maximum eigen-value tests. The data was transformed into natural logarithms and normalized for further analysis. Both GDP and NASI were found to be stationery at level and upon first difference after ADF tests. The findings were that there was none directional/No causal relationship between the two variables after conducting a pairwise granger causality test, however there was a significant cointergrating equation on the variables, signifying the long run relationship between the two variables. From the results, it was inferred that the movement of stock prices in the Nairobi stock exchange reflect the macroeconomic condition in the long run of the country and can therefore be used to predict the future path of economic growth however the puzzle continues on causality.

Cointegration and Unit Root Tests: A Fully Bayesian Approach.

To perform statistical inference for time series, one should be able to assess if they present deterministic or stochastic trends. For univariate analysis, one way to detect stochastic trends is to test if the series has unit roots, and for multivariate studies it is often relevant to search for stationary linear relationships between the series, or if they cointegrate. The main goal of this article is to briefly review the shortcomings of unit root and cointegration tests proposed by the Bayesian approach of statistical inference and to show how they can be overcome by the Full Bayesian Significance Test (FBST), a procedure designed to test sharp or precise hypothesis. We will compare its performance with the most used frequentist alternatives, namely, the Augmented Dickey–Fuller for unit roots and the maximum eigenvalue test for cointegration.

Testing Causality and Cointegration of Savings and Investment In Ghana

This paper sought to identify the causal relationship between saving and investment in Ghana as these econometric indicators serve as a measure for the economic development and wellbeing of developing countries. Annual time series of Saving and Investment in Ghana spanning from 1980 to 2017 were considered. First, the Augmented Dickey-Fuller (ADF) and the Elliott-Rothenberg-Stock (ERS) tests are carried out to determine the integration order of saving and investment data series. The Johansen's trace and maximum eigenvalue tests for cointegration were performed to ascertain the level of cointegration which suggested a long-run relationship between the saving and investment in Ghana despite potential deviations in the short-run. Finally, the Granger Causality test suggested saving as having a causal relationship with investment, while the reverse indicated no relationship. The study, therefore, recommended intensifying saving, both at the national and household level as a crucial direction for consideration if Ghana intends to finance her investments rather than relying mostly on foreign aid.

Testing Causality and Cointegration of Savings and Investment In Ghana

This paper sought to identify the causal relationship between saving and investment in Ghana as these econometric indicators serve as a measure for the economic development and wellbeing of developing countries. Annual time series of Saving and Investment in Ghana spanning from 1980 to 2017 were considered. First, the Augmented Dickey-Fuller (ADF) and the Elliott-Rothenberg-Stock (ERS) tests are carried out to determine the integration order of saving and investment data series. The Johansen's trace and maximum eigenvalue tests for cointegration were performed to ascertain the level of cointegration which suggested a long-run relationship between the saving and investment in Ghana despite potential deviations in the short-run. Finally, the Granger Causality test suggested saving as having a causal relationship with investment, while the reverse indicated no relationship. The study, therefore, recommended intensifying saving, both at the national and household level as a crucial direction for consideration if Ghana intends to finance her investments rather than relying mostly on foreign aid.

Monetary – Fiscal Policy Mix: A Tool for Economic Stabilization in Nigeria

The study examined empirically the relationship between monetary-fiscal policy mix and Nigeria’s economic stability. The Johansen co-integration technique complemented with VECM were employed to achieve the objective of the study. The result of the descriptive statistics revealed that the variables were normally distributed and the degree of variability of them was good as evident from the Jarque-Bera statistics and standard deviation. The Johansen and Juselius co-integration results revealed that both the trace statistic and maximum Eigenvalue statistic confirmed the existence of co-integrating equations among the variables of interest. It was evident that the trace test indicated six co-integrating equations while maximum Eigenvalue test revealed four co-integrating equations in the model, as the null hypothesis of no co-integration was rejected. These results suggested that there was a unique long run equilibrium relationship among the variables. The VECM result indicated that there was a long run relationship between the variables concerned. The result further showed that monetary-fiscal indicators have not made much significant contributions to the growth of the Nigerian economy as well as economic stabilization in Nigeria. The study recommended the entrenchment of fiscal discipline as a result of destabilizing effect of government’s fiscal activities due to its fiscal irresponsibility in Nigeria. Also recommended was that monetary policies should be structured to lower lending interest rate and raise interest rate on saving deposits so as to increase the availability of loanable funds which will in turn boost investment and stimulate economic growth.

Extreme canonical correlations and high-dimensional cointegration analysis

We prove that the extreme squared sample canonical correlations between a random walk and its own innovations almost surely converge to the upper and lower boundaries of the support of the Wachter distribution when the sample size and the dimensionality go to infinity proportionally. This result is used to derive previously unknown analytic expressions for the Bartlett-type correction coefficients for Johansen’s trace and maximum eigenvalue tests in a high-dimensional VAR(1). An analysis of cointegration among a large number of log exchange rates illustrates the usefulness of our theoretical results.

HOUSEHOLD DEBT AND PRIVATE CONSUMPTION IN MALAYSIA

Previous studies on the relationship between household debt and private consumption have produced mixed results. Despite the intense debate about the effects of household debt on private consumption, no studies have explicitly taken the disaggregate level of household debt into consideration. Therefore, this study aims to extend the relationship between household debt and private consumption beyond the standard investigation on by taking a more meticulous view of the effect of property and consumer debt in Malaysia. This study employed several time series econometric approaches and utilized quarterly data for Malaysia from 1997 to 2016. The Augmented Dickey Fuller test was used in this study to test the stationarity of the variables and found all the variables were stationary in first difference. Therefore, it then proceeds to the Johansen cointegration test. The cointegration test result shows the existence of three cointegrations for both the Trace test and the Maximum Eigenvalue test whereby there are long run relationships among the variables. Furthermore, the granger causality results show there is bilateral relationship between consumer debt and private consumption while property debt has no impact on private consumption. Although the cointegration test has shown that there are cointegration relationships between the variables, it does not present the dynamic interactions between the variables. Hence, this study involved variance decomposition and impulse response analyses to examine the effects of household debt on private consumption. The findings of variance decomposition and impulse response reveal that that there is a negative relationship between consumer debt and private consumption. More importantly, it shows that consumer debt is the major cause for private consumption while property debt shows no significant effect on private consumption. Contemporaneously, this study also contributes to the literature by assessing the role of household debt in the changes of aggregate private consumption by using the factor decomposition analysis method. Although higher household debts have threatened Malaysian economic growth, the results reveal that household debt plays an important role in the changes of aggregate private consumption.

Recent Issues on Human Capital Formation and Development of the Nigerian Economy

The role of human capital formation in economic growth and development has been highly underestimated in Nigeria. The study at this moment attempts to create an insight into the importance of human capital formation using real GDP per capita, government expenditure on health, government expenditure on education and primary school enrolment in the case of Nigeria. It used time series data from 1980 to 2017 and employed OLS regression technique, Johanssen cointegration and Granger causality test. The results from the various methods utilized affirmed the importance of human capital formation towards actualizing economic growth and development in Nigeria. The ordinary least square regression result showed a positive relationship between Government capital expenditure on health, Education and primary school enrolment. The Johanssen cointegration result showed cointegrating vectors in both the trace and maximum Eigenvalue test. The results from the Granger causality test indicated a bi-directional between primary school enrolment and Real GDP, a Uni-directional relationship between real GDP and government capital expenditure on health and education. The study strongly recommends a more budgetary capital allocation to health and education. The study went further to suggest strategies that would ensure the increase in primary school enrolment.

EMPIRICAL EXAMINATION OF THE TURKISH TRADE DEFICIT

The objective of this study is to investigate Turkey’s trade deficit through examining the dynamics of trade balance in order to understand which of the variables deteriorate this deficit and also in what manner these variables affect trade balance. In this respect, the real exchange rate effect on trade balance both in the short run and long run has been examined by using quarterly data set from 1992 to 2011 for Turkey. The Vector Error Correction Model (VECM) is applied with Johansen co-integration analysis, Granger causality test and generalized impulse response analysis. According to Johansen cointegration analysis, under trace and maximum eigenvalue tests variables found cointegrated which means there is long run relationship among variables. This result enables us to apply VECM.

An Empirical Analysis of Stable Demand for Money in India with Co-Integration Approach

The recent macroeconomics and emerging market economics have contributed to the growing integration of financial innovation; financial markets integration, and financial dis intermediaries. This study investigates the long run and short run stability demand for money in India and relationship among M3 (Broad money), income level (Y), interest rate (call money) and exchange rate. The empirical results have analyzed from CUSUM test, CUSUMSQ test, co-integration, and VECM (vector error correction model) by taking the financial year data from 1970-71 to 2013-14. The results reveal that three co-integrating vectors at 5% significance level whereas the maximum eigenvalue test indicates the presence of two co-integrating vectors at 5% level of significance. VECM explains the speed of adjustment. Equation 1,

Foreign Private Investment and the Nigeria's Economic Growth ( 1980 - 2013 )

Despite the influx of foreign investments into sub-Saharan African economies, there seem to be no improved growth and development found in them. As a result, many scholars have been asking whether Foreign Private Investment has any good to offer African developing economies especially Nigeria. This work therefore intends to look at the impact of foreign Private Investment on the Nigeria’s economic growth from 1980 to 2013. In order to actualise this, the relationship between real GDP and foreign private investment and other selected macro economic variables such as inflation, exchange rate and interest rate were considered. From the tests conducted, there is presence of unit roots at their first difference which conformed with the Augmented Dickey Fuller (ADF) result as well. The terrace test and maximum Eigen value test on the variables identified one co integrating vector at 5% and 1% critical levels. Also, the ECM showed a long run relationship between real GDP and other variables in the model. All these suggest the activities of FPI have impacted favourably in boosting economic activities in Nigeria within the period of study. The researcher therefore, recommends that efforts and policies should be geared towards increase in foreign private investment in Nigeria.

Testing Causality and Cointegration Between Saving and Investment in Bangladesh

Interaction between saving and investment has been a major concern to the economists and there exists substantial debate over the nature of long run relationship between them. Thus, the main objective of this paper is to examine the dynamic linkages between saving and investment in Bangladesh using annual time series data covering the period from 1980 to 2014. The stationarity of the data is examined by using the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests. This paper applied the Johansen-Juselius cointegration test to examine the long run relationship between saving and investment. In order to show the direction of causal relationship between saving and investment, the widely used Granger causality test has been used. The unit root tests revealed that both saving and investment are non-stationary at level forms and they become stationary after taking their first difference. The Johansen-Juselius cointegration analysis suggests that, there exists a long run relationship between saving and investment as it is confirmed by both the Trace and Maximum Eigen-value test statistics. Results found from the Granger causality test suggests that unidirectional causality running from saving to investment existed in Bangladesh over the sample period for a lag length of two periods. Based on the results, pursuance of policy measures towards mobilizing domestic saving is recommended.

Causal Relationship between Exports and Agricultural GDP in India

This article is an attempt to investigate the causal relationships between agriculture gross domestic product (GDP) and exports in India on the basis of time series data for forty year from 1970–1971 to 2010–2011. The empirical evidence reveals that the null hypothesis that the variables have a unit root is not rejected in the case of all the variables under study. However, the null hypothesis that the first-differences of these variables have a unit root is rejected. Hence we conclude that these variables are integrated of order one (I (1)). On the basis of trace and maximum eigenvalue tests of Johansen technique of cointegration, the study found that agricultural GDP and total exports of India were found cointegrated. The findings of the study have significant implications for India’s economic policy as both the variables have shown a strong long-run relationship. The study further found the existence of uni-directional Granger-causality between the total exports and agricultural GDP of India, which is running from total exports to Agricultural GDP.

Residual-based block bootstrap for cointegration testing

We propose a new testing procedure to determine the rank of cointegration. This new method is based on the nonparametric resampling procedure, so-called Residual-Based Block Bootstrap (RBB), which is developed by Paparoditis and Politis (2003) in the context of unit root testing. Through Monte Carlo experiments we show that, in small samples, the RBB cointegration test has good power properties in relation to the other two well-known tests for cointegration, such as the Augmented Dickey–Fuller (ADF), applied to the residual of a cointegrating regression, and the Johansen's maximum eigenvalue tests. Likewise, this article looks at the influence played by the correlation of the ‘X’ variables with the errors of the cointegrating regression on the size and power properties of the above cointegration tests. In particular, we show that, when this correlation decreases, the RBB test for cointegration is the most powerful one.