Orthogonal Impulse Response Research Articles

Cointegration of Timberland Value in the United States, South and Central America, and Oceania

Abstract In this article, we examine whether the United States, South and Central America, and Oceania timberland markets have integrated per acre timberland values. The vector error correction model and orthogonal impulse response functions provide strong evidence of a long-run relationship regarding per acre timberland value between South and Central America, the United States, and Oceania. The comovement of per acre timberland values and lack of arbitrage opportunities among regions may induce investors to invest locally or diversify portfolios through other industries. Study Implications: This article explores the relationship between timberland price/value in geographically separate timberland markets to help timberland investors in their portfolio decisions.

The Supermultiplier Model and the Role of Autonomous Demand: An Empirical Test for European Countries

ABSTRACT In recent years, Supermultiplier models have attracted rising attention, highlighting the role of autonomous components of demand in shaping the long-run growth path of the economy. This paper aims to empirically test the implications of this approach in selected European economies, grouped according to the literature on welfare model classification. First, we outline the short-run adjustments and long-run relations between autonomous demand growth and output by estimating a vector error-correction model (VECM). Second, we assess if a causal relationship between the variables can be identified by estimating a structural model and computing the orthogonalized impulse response functions, focusing in particular on the effects of a demand shock on output. The empirical results confirm a positive and significant relation between autonomous demand and output in the long run for all countries considered. Moreover, we find that the causal direction runs from the former to the latter, corroborating the idea that autonomous demand shocks permanently affect the growth path of the economies under scrutiny.

The macroeconomic impact of oil price volatility and import volumes

Nowadays, oil is not only a necessary energy for industrial development but also an important strategic resource for the international economy. Previously, many factors led to a sharp rise in international crude oil prices. Therefore, it is of great significance to explore the influence mechanism between oil price fluctuation and the macroeconomy. In this paper, the VAR model is used to quantitatively analyze the dynamic relationship between oil price, China’s GDP, China’s CPI and oil import volume, and the orthogonal impulse response analysis and Granger causality test are carried out.The results show that China’s crude oil import volume is the granger factor of GDP, that is, the early changes in China’s crude oil import can effectively explain the changes in China’s GDP. China’s CPI and GDP show a short-term inverse response, and the change in the data is more dependent on the data of the previous quarter. Given the above problems, this paper proposes that China should attach importance to the long-term stability of oil exploitation, reserves, and oil market, and maintain the stability of the oil trade market by adjusting macroeconomic and gasoline prices when necessary.

Research on the Innovation-Driving Mechanism for the Synergistic Development of Two-Way FDI in China’s Manufacturing Industry: Based on the Perspective of the New Development Pattern of “Dual Circulation”

The new pattern of “dual circulation” is a new development model for China to seek mutual promotion between international and domestic markets in the new era. In this context, this paper explores the synergistic relationship between two-way FDI and its impact mechanism on the improvement of China’s manufacturing innovation capability. By taking 27 segments of the Chinese manufacturing industry as data samples from 2003 to 2018, we use the Granger cause, orthogonalized impulse response function, and physical capacity coupling system to verify the two-way FDI synergistic development relationship in the Chinese manufacturing industry and measure its degree of synergy. In addition, we empirically explore the mediating role of industrial structure upgrading in the impact of two-way FDI synergistic development on innovation capability in the Chinese manufacturing industry, and further analyze the industrial heterogeneity of this mediating role among labor-intensive, capital-intensive, and technology-intensive manufacturing segments. The study finds that firstly, there are different degrees of synergistic development in the Chinese manufacturing segments, and this synergistic development significantly contributes to the innovation capability and industrial structure upgrading of the Chinese manufacturing industry. Secondly, industrial structure upgrading of the Chinese manufacturing industry plays an essential mediating effect in the innovation-driving process of the two-way FDI synergistic development, and the mediating effect shows significant industrial heterogeneity. More specifically, the mediating effects in labor-intensive and technology-intensive industries are significantly positive, and the mediating effect in technology-intensive industries is more prominent. However, the mediating effect in capital-intensive industries is significantly negative. The paper provides empirical evidence to clarify the innovation-driving mechanism of the two-way FDI synergistic development in China’s manufacturing industry from the perspective of the new development pattern of “dual circulation” and provides valuable references for research in related fields.

Impact of the Covid19 Pandemic on Remittances to Mexico

This paper seeks to show the impact of the COVID-19 pandemic on remittances from the United States to Mexico. Using monthly data from January 2014 to May 2021, it shows that there is a structural break in the long and short run equations that explain remittances. Using evidence from orthogonalized impulse response functions, we find that before COVID 19 there was evidence in favor of the altruistic, the risk sharing and the investment motive hypotheses for sending remittances. During the COVID 19 period, there is evidence that remittances became more a necessity reducing space for investment motives and the preferences of the sender households and increasing the role of the risk sharing motive. The main limitation of the study is that we do not show results specific to remittances corridors due to the lack of data. Further research is needed to understand if the COVID 19 has long run impacts over the remittance flow and the usage that receiving households give to the remittances.

Daily associations between affect and cognitive performance in older adults with depression and cognitive impairment: a series of seven single-subject studies in the Netherlands

BackgroundComorbidity between depression and cognitive impairment is common in older adults, increases the disease burden disproportionally, and leads to diagnostic uncertainty. Insight into individual daily associations between affect and cognitive performance may help in personalizing diagnosis and treatment decisions. Our objective was to get insight into the daily associations between affect and cognitive performance within individual older adults.MethodsIn this single-subject study seven older adults with both depression and cognitive impairment filled in electronic diaries daily for 62-93 consecutive days evaluating positive affect (PA), negative affect (NA), working memory (WM) and visual learning (VL). Time-series analyses using vector autoregressive modelling, Granger causality tests and cumulative orthogonalized impulse response function analyses were performed for each individual separately.ResultsIn one patient higher NA was associated with better WM the next day. For another patient days with higher NA and lower PA were days with worse WM. For a third patient better VL was associated with lower NA and higher PA the next day. No associations were found for four patients.ConclusionsThese results highlight heterogeneity in the daily associations between affect and cognitive performance and stress the relevance of single-subject studies. These studies may be an important step towards personalized diagnosis and treatment in old age psychiatry.

Container Freight Rates and International Trade Causality Nexus: Evidence from Panel VAR Approach for Shanghai and ASEAN‐6 Countries

Container shipping drives the development of international trade, yet previous studies have not fully appreciated the possible bidirectional causal relationship between container freight rates and international trade. In the context of the “twenty‐first Century Maritime Silk Road,” we use data on export container freight rates and import/export data from Shanghai to ASEAN‐6 countries (Singapore, Vietnam, Thailand, Philippines, Malaysia, and Indonesia) from February 2017 to January 2020 and apply a panel VAR to explore the relationship between maritime transport costs and international trade in the container shipping market. We use the freight rate data are from the Southeast Asia Freight Index, which is used for the first time in an empirical study. The quality and reliability of the freight rate data allow this paper to better identify causal relationships. The results of the panel Granger causality test and the orthogonal impulse response function suggest a bidirectional causal relationship between freight rates and export trade; to further explain, an increase in export trade lowers export freight rates, but an increase in export freight rates hinders export trade, and a growth in import trade unidirectionally raises export freight rates. We believe that international trade may impact freight rates through economies of scale and trade imbalances.

Predicting Water Availability in Water Bodies under the Influence of Precipitation and Water Management Actions Using VAR/VECM/LSTM

Recently, awareness about the significance of water management has risen as population growth and global warming increase, and economic activities and land use continue to stress our water resources. In addition, global water sustenance efforts are crippled by capital-intensive water treatments and water reclamation projects. In this paper, a study of water bodies to predict the amount of water in each water body using identifiable unique features and to assess the behavior of these features on others in the event of shock was undertaken. A comparative study, using a parametric model, was conducted among Vector Autoregression (VAR), the Vector Error Correction Model (VECM), and the Long Short-Term Memory (LSTM) model for determining the change in water level and water flow of water bodies. Besides, orthogonalized impulse responses (OIR) and forecast error variance decompositions (FEVD) explaining the evolution of water levels and flow rates, the study shows the significance of VAR/VECM models over LSTM. It was found that on some water bodies, the VAR model gave reliable results. In contrast, water bodies such as water springs gave mixed results of VAR/VECM.

318 - Does one size fit all? Evaluating individual temporal associations between affect and cognitive function in older adults using a single-subject design

IntroductionDepression and cognitive impairments often co-occur in older adults and account for a high disease burden. Insight into how affect and cognitive function influence one another on a daily basis could be helpful in the diagnostic process and treatment decisions for individual patients. However, little is known about the daily associations between affect and cognitive function in older adults and it is unknown whether these associations differ per person. Therefore, the objective of this study was to get insight into the temporal associations between affect and cognitive function within individual older adults.Materials & MethodsFor this single-subject study eight older adults with depression and cognitive impairments filled in electronic diaries for 63 consecutive days in their home environment. The diaries included a questionnaire evaluating positive affect (PA), negative affect (NA) and a computerized cognitive test battery assessing working memory reaction time (WMRT) and visual learning accuracy (VLA). Time-series analyses using Vector Autoregressive (VAR) modelling were conducted for each individual separately. Granger causality tests were used to determine the temporal direction of the individual associations. Cumulative Orthogonalized Impulse Response Function (COIRF) analyses were performed in order to determine the cumulative effect size over a 10-day period. The contemporaneous associations were derived from the correlation between the residuals in the VAR model.ResultsFor one out of eight participants higher NA was associated with better WMRT the next day (cumulative effect size=0.345; p=0.005). For another participant higher NA and lower PA were associated with worse WMRT at the same time (r=-0.369; p=0.003 and r=0.352; p=0.005, respectively). For a third participant better VLA was associated with lower NA (cumulative effect size=-0.569; p<0.001) and higher PA the next day (cumulative effect size=0.223; p=0.001). The other five participants showed no contemporaneous or lagged association between affect and cognitive function.ConclusionFor the majority of individuals we found no contemporaneous or temporal association between affect and cognitive functioning. For the others, the associations differed in direction, sign and size. This highlights heterogeneity even in a small and relatively homogeneous sample. Future studies should evaluate how individual data can be used in personalizing diagnoses and treatments.

International interdependency of macroeconomic activities: a multivariate empirical analysis

Given the international interdependency of macroeconomic activities, this study attempts to examine three fundamental questions; (i) what is the time pattern of international interdependency?, (ii) what is the magnitude of international interdependency?, and (iii) which are the major channels through which international interdependency occur?. These questions are investigated among major economies viz. the US, Japan, Germany, China, India and Russia. Employing generalized impulse response of unrestricted VAR model, the Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) spillover method and orthogonal impulse response of restricted VAR model, the study found that the global economies are highly interdependent. Therefore, we strongly argue that channels through which interdependency between countries occur are based on economic structure of respective economies. From the findings, it explicitly indicates that if there is rise or fall of macroeconomic activity in any specific economy, it may lead to rise or fall in economic activity of other individual economies. It shows a positive correlationship between the movement of economic actvities among the countries. Given the higher degree of international interdependency, it may sometimes lead to larger cost for the individual economies. Therefore, it suggests that the formulation and implementation of rigorous macroeconomic policies are the need of the hour for respective economies. Considering the gaps in the previous literature, this study tries to contribute to the literature by investigating cross-country time profile of interactions, magnitude of interactions and channels through which interactions occur.

Time series analysis of meteorological factors and air pollutants and their association with hospital admissions for acute myocardial infarction in Korea

BackgroundWe assessed the association between multiple meteorological factors and air pollutants and the number of acute myocardial infarction (AMI) cases using a multi-step process. MethodsDaily AMI hospitalizations matched with 16 meteorological factors and air pollutants in 7 metropolitan provinces of the Republic of Korea from 2002 to 2017 were analyzed. We chose the best fit model after conducting the Granger causality (GC) test and examined the daily lag time effect on the orthogonalized impulse response functions. To define dose-response relationships, we performed a time series analysis using multiple generalized additive lag models based on seasons. ResultsA total of 196,762 cases of AMI in patients older than 20 years admitted for hospitalization were identified. The distribution of meteorological factors and air pollutants showed characteristics of a temperate climate. The GC test revealed a complex interaction between meteorological factors, including air pollutants, and AMI. The final selected factors were NO2 and temperature; these increased the incidence of AMI on lag day 4 during summer (NO2: population-attributable fraction [PAF], 3.9%; 95% confidence interval [CI], 3.6–4.0; mean temperature: PAF, 3.3%; 95% CI, 2.7–3.9). ConclusionsThis multi-step time series analysis found that average temperature and NO2 are the most important factors impacting AMI hospitalizations, specifically during summer. Based on the model, we were able to visualize the effect-time association of meteorological factors and air pollutants and AMI.

Impact of real exchange rate fluctuations on aggregate cocoa and coffee exports in Sierra Leone

The regression and the vector autoregressive VAR models have been employed in this analysis. I use the autodistributed lag regression model to estimate both the short and the long-run impacts. In the VAR model, orthogonalized impulse response functions are employed to estimate the short-run. The regression result shows that while depreciation of the RER increases aggregate cocoa and coffee exports AGX in the current year, this variable is not significant in determining AGX in Sierra Leone. This is due to the fact that AGX have long gestation periods and until this period is over, suppliers cannot actually raise their output and hence exports. The negative effect of the one period lag of RER variable on AGX can be attributed to the fact that in the long run, depreciation in the nominal exchange rate leads to real exchange rate depreciation. This will lead to increase in cost of imported farming inputs in domestic currency terms. The reduction in imports that follows decreases the output and hence cocoa and coffee exports. However, this variable is not significant in determining AGX in Sierra Leone. An increase in the orthogonalized shock to the first difference of log RER causes a short series of increases in first difference of log AGX followed by a decrease, followed by an increase that dies out after four periods. The null hypothesis that the lag of first difference of log RER does not Granger-cause the lag of first difference of AGX cannot be rejected. The paper concluded that in the short and long-run, the RER should not be taken as policy variable to influence AGX in Sierra Leone.

Money demand and seignorage maximization before the end of the Zimbabwean dollar

The delayed end to Zimbabwe's hyperinflation in 2009 gave rise to an official dollarization. Before then, the Reserve Bank of Zimbabwe (RBZ) operated on the correct side of the inflation tax Laffer curve. Estimated seignorage maximizing rates derive from Bayesian, time-varying parameter, structural vector autoregressions. Monthly changes in the ratio of prices for the Old Mutual insurance company's shares, which trade in London and Harare, serve as the measure of inflation from 1999 to 2008. Orthogonalized impulse response functions indicate that monthly seignorage maximizing rates ranged from 242% to 315% and exceeded all monthly inflation rates.

Ethanol Prices and Agricultural Commodities: An Investigation of Their Relationship

Brazil is an important player when it comes to biofuel and agricultural production. The knowledge of the price relationship between these markets has increasing importance. This paper adopts several tools, namely the Bai–Perron test of breakpoints, the Johansen cointegration test and the vector error correction model exploited by the orthogonal impulse response and the forecast error variance decomposition, for investigating the price transmission among the ethanol and the main Brazil’s agricultural commodities (sugar, cotton, arabica coffee, robusta coffee, live cattle, corn and soybean). The data series cover the period from January 2011 up to December 2018. The results suggest a stronger price transmission from the ethanol commodity to the agricultural commodities, rather than the opposite situation.

Corporate Social Responsibility Disclosure, Financing Constraints and Investment-Cash Flow Sensitivity

Purpose - The purpose of this paper is to investigate the relationship between corporate social responsibility disclosure (CSRD) and investment-cash flow sensitivity, which is a surrogate for financing constraints. Research design, data, and methodology - Taking China's A-share listed companies between 2009 and 2016 as a sample, this paper empirically tests the relationship between CSRD and investment-cash flow sensitivity by Panel VAR model. By introducing the orthogonal impulse response function, this paper distinguishes the fundamental factors and financial ones that affect corporate investment behavior. Results - Findings indicate that: (1) investment-cash flow sensitivity of firms with low level of CSRD is significantly lower than that of firms with high level of CSRD; (2) the orthogonal impulse response of corporate investment to cash flow in firms with high level of CSRD is significantly different from zero, but it is not significant in firms with low level of CSRD; (3) for firms with low level of CSRD, 0.7% of corporate investment volatility can be explained by the change in cash flow, which is lower than that of firms with high level of CSRD (1.1%). Conclusions - Corporations disclosing more and higher quality CSRD are often those faced with financing constraints. Voluntary disclosure can help them alleviate information asymmetry and financing constraints.

The foreign exchange regime in a small open economy: Armenia and beyond

PurposeOffering an example of a small open developing economy, the purpose of this paper is to explore the reasons for relative stability in Armenia’s foreign exchange market. Relying on a single currency and derived cross-currency exchange rates, the paper models short-term effects between exchange market pressure and financial and macroeconomic factors.Design/methodology/approachFollowing a literature review, the paper sets the macroeconomic context with an initial variance comparison of standard currency pairs and derived cross-currency exchange rates. Then, the core analysis is carried out with a vector error correction model, focusing on short-term cross-dynamics in monthly data. The orthogonal impulse response function analyses help solidify and further inform relevant conclusions.FindingsThree broad factors influence Armenia’s foreign exchange market: external push factors; domestic banking sector competition, and foreign currency risk perceptions; and domestic macroeconomic and dual, cross-pair, exchange rate target priorities. The central bank’s implicit management of the foreign exchange market’s expectations, pull factor, is consistent with trader market power’s contribution to lower volatility. Yet, the risk of financial and real-sector decoupling remains.Originality/valueThe results are relevant for emerging markets attempting to leverage the global liquidity and low interest rates, while being exposed to external pressures in the post-crisis environment, in which international reserves may be scarce while currency stability is an implied priority. This study can be further adapted to a more comprehensive structural short-term analysis of currency determination or similar dynamics in other small open economies.

Method of Image Channel Suppression with Digital Orthogonal Finite Impulse Response Filters in Software Defined Radio

Background/Objectives: The objective of this study is to develop the architecture of software defined receiver featuring high noise resistance and to find a possibility for full suppression of the image channel. Methods: The principal approach to the investigation of this problem is represented by the application of mathematical simulation that makes it possible to comprehensively consider the possibility of employing digital orthogonal Finite Impulse Response filters (FIR filters) for image channel suppression. Findings: The study presents the methodology of the image channel phase suppression with digital orthogonal FIR filters and the results of its application in the implementation of software defined radio. Applications/Improvements: The materials of the study will be of practical value for the designers of the software defined radio equipment.

An analysis of wine and food consumption dynamics in Japan using a vector error correction model

ABSTRACTThis article provides an analysis of long-term equilibrium relationships between wine and food-related consumptions in Japan through the vector error correction model. Utilizing longitudinal data from 1970 to 2009, the analysis suggests that wine consumptions and food-related consumptions are co-integrated. The investigation of orthogonal impulse response functions suggests that food-related items, such as bread, vegetables and eating out are positive factors for wine consumptions. With the expansion of wine consumption and diversification of food consumption patterns, wine is deemed to have gained its place in Japanese ordinary life, regardless of the general state of economy. The estimated results also provide a supporting evidence for previous cross-sectional study findings by others that wine consumers tend to have healthier diet. Despite the downward forecasts for economic performance and some food items, wine consumption is predicted to grow continuously.

Design of DPSS based fiber bragg gratings and their application in all-optical encryption, OCDMA, optical steganography, and orthogonal-division multiplexing.

The future information infrastructure will be affected by limited bandwidth of optical networks, high energy consumption, heterogeneity of network segments, and security issues. As a solution to all problems, we advocate the use of both electrical basis functions (orthogonal prolate spheroidal basis functions) and optical basis functions, implemented as FBGs with orthogonal impulse response in addition to spatial modes. We design the Bragg gratings with orthogonal impulse responses by means of discrete layer peeling algorithm. The target impulse responses belong to the class of discrete prolate spheroidal sequences, which are mutually orthogonal regardless of the sequence order, while occupying the fixed bandwidth. We then design the corresponding encoders and decoders suitable for all-optical encryption, optical CDMA, optical steganography, and orthogonal-division multiplexing (ODM). Finally, we propose the spectral multiplexing-ODM-spatial multiplexing scheme enabling beyond 10 Pb/s serial optical transport networks.

The impact of global oil price shocks on the Lebanese stock market

This study investigates the dynamic linkages between oil prices and stock markets, also known as the oil price–stock price nexus. Within the framework of a VAR (vector autoregression) we examine dynamic interactions between daily Brent spot prices and several Lebanese stock prices. As expected, we find evidence of oil prices Granger causing stock prices, but no evidence of the opposite relationship. To better understand how shocks in the oil market are transmitted to the stock market, the orthogonalized impulse response function is examined. The behavior of all stocks examined is very similar; they all respond positively to a shock in crude oil prices on the same day and the day after the shock, with the impact of the shock disappearing thereafter. As for the variance decomposition analysis, it shows that the forecast errors of the stocks are largely attributable to their own innovations and the percentages do not change much with time. Only around 1% is attributable to oil shocks, increasing to around 3% after a few days and remaining at that level. Thus, our main conclusion is that the estimated level of the impact of an oil price shock on the Lebanese stock market is positive but marginal.