Relevant Macroeconomic Variables Research Articles

Energy-efficient growth for sustainability: an empirical analysis of its determinants in industries

Purpose In the process of industrial growth, when existing industries go for technology upgradation and new modernised industries emerge, both capital intensity and energy demand of overall industry tend to rise steadily. This poses a serious challenge for sustainable development objectives. Towards this end, enhancing energy efficiency of individual industries is the only remedy. Against this backdrop, the study aims to probe the trends in capital intensities and energy efficiencies of individual industries in India. Design/methodology/approach This study uses panel data regression analysis on data of two-digit industries from 1980/1981–2016/2017. The statistical analysis includes relevant macroeconomic variables derived from the literature to ascertain the drivers of energy efficiency in industries. Findings The results brought out that capital deepening due to technology upgradation and modernisation and capital productivity growth are the decisive determinants of energy efficiency growth. Furthermore, the ever-increasing fuel price motivated industries to conserve energy on a steady basis, supplemented by energy conservation-specific policy interventions. Research limitations/implications This study recommends policy initiatives to ascertain and address technology gaps industry-wise, so that its subsequent efficient capital utilisation, and energy conservation measures of industries would result in energy efficiency growth in industry. The policy must focus on energy-efficient capital intensification in fabricated metals, leather, textile and wood industries that are found less-energy-efficient despite being less-capital-intensive. Originality/value This study empirically explores the capital efficiency of industries by investigating the interaction between capital intensity and energy efficiency at a two-digit industry level. It explores the determinants of energy efficiency and proposes industry-specific policies for energy-efficiency-enhancement of the overall industry.

The story of dividend payment and corporate cash flow in Ghana

AbstractThe thorny issue and contradictory conclusions on dividend payments and firm value are not ending any time soon. The existence of a divergence of findings in the literature suggests the need for further empirical studies on this subject matter. Therefore, this study focuses on how a firm's cash flow influences dividend payments in Ghana. Using data from 2015 to 2020, pooled ordinary least squares and random effects estimation, this study provides evidence of dividend payments in Ghana. The results show that dividend payments are influenced by a firm's net cash flow from operations, free cash flow to equity, firm size, and age. The relevant macroeconomic variables for dividend payments are inflation and gross domestic product growth. Another finding is that the more nonfinancial firms take on the characteristics of financial firms, the less dividends they pay. Managers of listed firms in Ghana should grow the size of their firms; however, this should be done in a manner not to expropriate value to managers as predicted in the Jensen agency problem associated with free cash flow.

Assessing Economic Activities by Using Term Spreads

Both linear and non-linear models have been used in literature in developed countries to assess the forecasting power of the term spread on output.  When it comes to developing economies, however, a gap in research exists.  As such, the main objective of this research work is to assess the predicting capacity of the variable term spread on economic growth in the context of a developing country, namely, Mauritius. In this regard, an extended production function is designed that includes major relevant macroeconomic variables such as Spread, Investment, Human Capital, Openness to Trade, Foreign Direct Investment, and Inflation.  Following the test of stationarity, where a mixture of I(0) and I(1) variables are obtained but no I(2), the autoregressive distributed lag (ARDL) model is chosen for regression purposes.  We found that the spread variable has a positive impact on economic growth though being weakly significant and very low. A major limitation when dealing with Treasury Bills in Mauritius is the lack of data on medium to long-term securities, hence, restricting the longest term security use to the 1-year Treasury Bills.  This research can be viewed as a pioneering work in assessing term spread on economic activity in developing economies.

Relationship between housing, oil, gold and stock markets: evidence from UK and Norway

Purpose The purpose of this study is to explore the intricate relationship between oil prices, house prices in the UK and Norway, and the mediating role of gold and stock prices in both the short- and long-term, unraveling these complex linkages by employing an empirical approach. Design/methodology/approach This study benefits from a comprehensive set of econometric tools, including a multiequation vector autoregressive (VAR) system, Granger causality test, impulse response function, variance decomposition and a single-equation autoregressive distributed lag (ARDL) system. This rigorous approach enables to identify both short- and long-run dynamics to unravel the intricate linkages between Brent oil prices, housing prices, gold prices and stock prices in the UK and Norway over the period from 2005:Q1 to 2022:Q2. Findings The findings indicate that rising oil prices negatively impact house prices, whereas the positive influence of stock market performance on housing is more pronounced. A two-way causal relationship exists between stock market indices and house prices, whereas a one-way causal relationship exists from crude oil prices to house prices in both countries. The VAR model reveals that past housing prices, stock market indices in each country and Brent oil prices are the primary determinants of current housing prices. The single-equation ARDL results for housing prices demonstrate the existence of a long-run cointegrating relationship between real estate and stock prices. The variance decomposition analysis indicates that oil prices have a more pronounced impact on housing prices compared with stock prices. The findings reveal that shocks in stock markets have a greater influence on housing market prices than those in oil or gold prices. Consequently, house prices exhibit a stronger reaction to general financial market indicators than to commodity prices. Research limitations/implications This study may have several limitations. First, the model does not include all relevant macroeconomic variables, such as interest rates, unemployment rates and gross domestic product growth. This omission may affect the accuracy of the model’s predictions and lead to inefficiencies in the real estate market. Second, this study does not consider alternative explanations for market inefficiencies, such as behavioral finance factors, information asymmetry or market microstructure effects. Third, the models have limitations in revealing how predictors react to positive and negative shocks. Therefore, the results of this study should be interpreted with caution. Practical implications These findings hold significant implications for formulating dynamic policies aimed at stabilizing the housing markets of these two oil-producing nations. The practical implications of this study extend to academics, investors and policymakers, particularly in light of the volatility characterizing both housing and commodity markets. The findings reveal that shocks in stock markets have a more profound impact on housing market prices compared with those in oil or gold prices. Consequently, house prices exhibit a stronger reaction to general financial market indicators than to commodity prices. Social implications These findings could also serve as valuable insights for future research endeavors aimed at constructing models that link real estate market dynamics to macroeconomic indicators. Originality/value Using a variety of econometric approaches, this paper presents an innovative empirical analysis of the intricate relationship between euro property prices, stock prices, gold prices and oil prices in the UK and Norway from 2005:Q1 to 2022:Q2. Expanding upon the existing literature on housing market price determinants, this study delves into the role of gold and oil prices, considering their impact on industrial production and overall economic growth. This paper provides valuable policy insights for effectively managing the impact of oil price shocks on the housing market.

Windfall revenues and structural balance in the Czech Republic

ABSTRACT Analysis of the structural balance is a crucial element for assessing the character of fiscal policy. However, this approach entails potential shortcomings, where some tax revenues may be affected by the development of variables other than the economic cycle. This can lead to skewed assessments of the fiscal effort because of the existence of windfall revenues/losses. We address this issue and identify windfall revenues in the Czech Republic. First, we calculate the elasticities of individual taxes on relevant macroeconomic variables. Then we test these variables for sensitivity to the economic cycle. The absence of such sensitivity suggests the possibility of windfall revenue. Further, we quantify the volume of the windfall revenue for 2007–2019. We found that the development of the rental market is the main factor influencing windfall revenue in the Czech Republic. The windfall revenue range is around 0.15% of GDP per year.

Pengaruh Variabel Makroekonomi (SBIS, Inflasi, dan Nilai Tukar) Terhadap Harga Saham Syariah Sektor Properti yang Terdaftar di Jakarta Islamic Index Tahun 2018-2021

Understanding market conditions and their impact on equity is crucial for investment decisions. This study examines the influence of macroeconomic variables on the stock prices of shariah-compliant property sector companies listed on the Jakarta Islamic Index (JII) from 2018 to 2021. The variables analyzed include Shariah Bank Indonesia Certificates (SBIS), inflation, and exchange rates.This research explores the impact of these macroeconomic variables on stock prices in the shariah-compliant property sector, providing insights for investors and policymakers to understand stock price determinants. Panel regression analysis using the Random Effect Model equation is conducted. Monthly data from JII-listed property sector stock issuers and relevant macroeconomic variables are collected. Eviews 10 software is used for econometric analysis.The findings indicate that SBIS has a positive influence on stock prices (coefficient = 0.017568, probability = 0.0000), while inflation and exchange rates do not have significant effects.Understanding the influence of macroeconomic variables, particularly SBIS, is crucial for investment decisions in the shariah-compliant property sector. Further research can explore additional variables and time periods for a comprehensive understanding of stock price dynamics. This research explores the impact of these macroeconomic variables on stock prices in the shariah-compliant property sector, providing insights for investors and policymakers to understand stock price determinants. Panel regression analysis using the Random Effect Model equation is conducted. Monthly data from JII-listed property sector stock issuers and relevant macroeconomic variables are collected. Eviews 10 software is used for econometric analysis. The findings indicate that SBIS has a positive influence on stock prices (coefficient = 0.017568, probability = 0.0000), while inflation and exchange rates do not have significant effects. Understanding the influence of macroeconomic variables, particularly SBIS, is crucial for investment decisions in the shariah-compliant property sector. Further research can explore additional variables and time periods for a comprehensive understanding of stock price dynamics.

BUEN VIVIR IN ECUADOR: HAS THE CONSTITUTIONAL PRINCIPLE BEEN REFLECTED IN STRUCTURAL CHANGE FOR DEVELOPMENT?

This paper aims to investigate the economic dynamics between 2007 and 2017 in Ecuador considering the adoption — as a constitutional principle — of an ecological ideal, which emerged from the indigenous peoples of Latin America: Buen Vivir. The historical process that enshrined this concept made the Ecuadorian experience stand out in the recent history of South America. Economic planning was defined as a fundamental dimension to diversifying the productive structure. However, the dependence on oil extraction represented major obstacles to Buen Vivir, since its funding was based on fiscal policies enabled by resources from a non-sustainable activity. We analyze this process based on a theoretical background from Latin-American structuralism to Buen Vivir, examining the Ecuadorian economic plans and actual dynamics during Rafael Correa's administration, considering the following relevant macroeconomic variables: industrial composition of value-added, exports profile, public investment, foreign direct investment, energetic matrix, and structure of employment. The conclusion is that the evolution of the Ecuadorian economy has not allowed for development strictly according to the parameters of Buen Vivir.

Determinants of non-performing loans in North Macedonia

This paper aims to examine macroeconomic and bank-specific determinants of non-performing loans (NPLs) in the case of the Republic of North Macedonia. Following the respective literature review that indicates the GDP and the unemployment rate as the most relevant macroeconomic variables, and weighted average interest rate, gross loans, and lagged NPLs as the bank bank-specific ones, we apply an ARDL bounds testing approach to investigate the determinants of NPLs of this landlocked, new NATO member country that seeks access to the EU. The studied period is from the first quarter of 2005 to the second quarter of 2022, which includes apart from the severe financial crises, i.e. the Global Financial Crisis (GFC) of 2007–2009 and the European Sovereign Debt Crisis of 2010–2012, the Pandemic Covid-19 period and the Russian Invasion of Ukraine. Our research output provides statistical evidence that the strongest long-run impact on NPLs comes from unemployment, GDP and interest rates; while Gross Loans seem not to have any significant effect. Our findings, holding both in the short- and the long-run, bear signs that are consistent with the economic theory. Overall, we add in the understanding, measuring, and forecasting of NPLs in a country under transition, and propose corrective macroeconomic policy measures in mitigating the related pressure and shocks, especially under periods of prolonged uncertainty.

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.

Impact of Manufacturing Value Added on Environmental Degradation: empirical evidence from India

In recent years, the manufacturing sector in India has been witnessing a continuous growth in output production due to increase in investment in the sector and the government’s commitment to reduce reliance on imports and boost exports considering the country’s huge domestic market. However, this development is not environmentally friendly as increase in production entails increase in energy consumption, which result in an increased carbon emission that damage the environment. In view of the foregoing situation, this study is set out to investigate the impact of manufacturing value-added on environmental degradation in India over the 1965-2016 period. The study used autoregressive and distributed lag (ARDL) model to achieve its objective. Carbon dioxide emission was used to proxy environmental degradation in the model. In order to serve as control variables in the model, some selected relevant macroeconomic variables such as energy use, trade openness, and economic growth were employed. The estimated result showed that manufacturing value added has positive impact on environmental degradation in India. It infers that the increasing production in the manufacturing sector is degrading the environment through carbon emission. This suggests that an increase in manufacturing sector value added contributes to reducing the quality of environmental in India. Also, the environmental Kuznets curve (EKC) hypothesis was tested and found to be invalid and non-existent. Since the manufacturing sector consumes a lot of energy in its productive activities, the result does not come as a surprise. Thus, we suggest that policymakers in India should apply appropriate measures to improve the quality of the environment through adoption of new technology that will ensure energy efficiency and reduce carbon emission from the country’s manufacturing sector.

The stabilizing effect of the zero lower bound: A perspective of interest rate target zones

This study first sets up a simple stochastic macro model embodying rational expectations, and then develops a graphical presentation to examine whether the zero lower bound (ZLB) tends to stabilize or destabilize relevant macroeconomic variables from the viewpoint of interest rate target zones. Within the standard IS−LM&AD−AS framework, this paper finds that in response to an increase in supply or demand shocks, the ZLB leads to a decline in the public’s inflation expectations. We also find that, when the economy experiences an aggregate supply shock, the ZLB will raise the variability of both prices and nominal interest rates, but reduce the variability of output. However, when the economy experiences a money demand shock, the ZLB tends to raise the variability of nominal interest rates, but reduce the variability of both prices and output.

Real Exchange Rates and Fundamentals in a new Markov‐STAR Model*

AbstractWe propose a new nonlinear Markov‐STAR model to capture both the Markov switching and smooth transition dynamics for real exchange rates. We derive stationarity conditions for the model and apply it to the real exchange rates of 17 countries. We relate switching equilibrium rates and volatilities to a set of relevant macroeconomic variables and find, consistent with economic intuitions, that an economy deteriorating relative to the US economy tends to see a significantly increased likelihood of real exchange rate depreciation. Moreover, we document significant connections between rising economic uncertainties and real exchange rate changes as well as exchange rate volatility.

The effect of macroeconomic variables on the robustness of the traditional Fama–French model. A study for Mexico using different portfolios

PurposeFama–French model (FFM) has been successful in helping to predict the financial markets, but investors have been interested in creating more sophisticated models to better predict the performance of the stock market. The objective of the extended version is to create a more robust econometric model to better predict the performance of the Mexican Stock Market.Design/methodology/approachThe study divides the Mexican Stock Market into six different portfolios. The criteria to build those portfolios are the same one used in Fama–French (1992). The study comprises 78 stocks listed in the Mexican Stock Market that are analyzed monthly during 1997–2018. The study analyzes the period before and after the 2008–2009 financial crisis to identify whether there are important changes. The estimation applies the traditional and an extended version of the FFM that include macroeconomic variables such as country risk, economic activity, inflation rate, and exchange rate and some financial variables recommended in the literature.FindingsResults indicate that classic FFM variables are statistically significant in most cases, but relevant macroeconomic variables such as the interest rate, exchange rate and country risk stand out for being weakly relevant in most of the portfolios. However, it is noticed that some of these macroeconomic variables became relevant for different portfolios only after the 2008–2009 crisis, especially in portfolios which include small market capitalization firms.Research limitations/implicationsThe study includes the stocks listed in the Mexican Stock Market. One limitation is the small number of stocks available, which reduces the possibility of creating well diversified portfolios. This study includes 78 stocks. The stocks removed from the sample are from firms that were not listed during six consecutive months or whose market capitalization did not change in the same period. Outlier data were removed from the sample to capture in better way the general performance of the stock market.Practical implicationsThe objective of the extended version is to create a more robust econometric model than the traditional model. It is expected that such estimations can be helpful to investors to make better decisions when they try to predict performance in the stock market.Social implicationsAn extended version of the FFM can be helpful to investors to make better decisions when they try to predict performance in the stock market.Originality/valueTo the best of our knowledge there are no more studies in the literature of the Mexican financial market that apply the same methodology.

Coupling Macro-Sector-Micro Financial Indicators for Learning Stock Representations with Less Uncertainty

While the stock movement prediction has been intensively studied, existing work suffers from weak generalization because of the uncertainty in both data and modeling. On one hand, training a stock representation on stochastic stock data in an end-to-end manner may lead to excessive modeling, which involves model uncertainty. On the other, the analysis of correlating stock data with its relevant factors involves data uncertainty. To simultaneously address such uncertainty both from data and modeling perspectives, a fundamental yet challenging task is to learn a better stock representation with less uncertainty by considering hierarchical couplings from the macro-level to the sector-and micro-level. Accordingly, we propose a copula-based contrastive predictive coding (Co-CPC) method. Co-CPC first models the dependence between a certain stock sector and relevant macroeconomic variables that are sequential and heterogeneous, e.g., macro-variables are associated with different time intervals, scales, and distributions. Then, by involving a macro-sector context, stock representations are learned in a self-supervised way that can further be used for downstream tasks like stock movement prediction. Extensive experiments on two typical stock datasets verify the effectiveness of our Co-CPC method.

Does ESG Matter for Sovereign Debt Investing?

ESG has become a hot topic in investment circles. In this article, we train the ESG lens on sovereign debt. We carry out an empirical analysis to assess whether environmental, social, and governance factors drive pricing and investment returns of sovereign external debt. Our major finding is that ESG considerations matter for sovereign bond investing, even after relevant macroeconomic and credit variables are taken into consideration. This is particularly the case for emerging markets, where we document evidence of an additional ESG risk premium relative to developed markets. Furthermore, by testing an ESG-focused investment strategy, we examine the hypothesis that ESG could potentially detract from investment returns. We find no evidence over our historical time frame that an ESG-focused investment strategy results in any investment disadvantage. In addition, our results suggest support for potential advantages of an active approach to ESG portfolio management. TOPICS:ESG investing, fixed income and structured finance, portfolio construction, performance measurement Key Findings ▪ Our research shows that ESG (environmental, social, and governance) scores are significant drivers of sovereign credit spreads. Debt issued by countries with high social and governance scores in particular, tend to have tighter credit spreads. ▪ The relationship between ESG scores and credit spreads is particularly strong for emerging market countries, where we find evidence of an additional ESG risk premium relative to developed markets. ▪ We find no evidence that investors are penalized for ESG-aware investment strategies in the form of lower returns, but our analysis does support the case for in-depth ESG analysis in the context of an active approach to portfolio management.

Rent-seeking in an emerging market: A DSGE approach

Due to the fact that rent-seeking is by definition an unobservable variable, measuring its size and evolution over the business cycle can be a daunting challenge. In this article, by embedding rent-seeking behavior in an otherwise standard open-economy DSGE model, we are able to derive a quarterly time series of this variable (expressed as a percentage deviation from the trend) for an emerging economy such as Brazil. The estimated series, spanning the period 2002Q1−2017Q4, shows a strong positive correlation with the “Commodity Super Cycle” of the 2000 decade and falls as a result of some political scandals and their ensuing investigations, among other driving forces. We also rely on the same model to assess how several shocks hitting the economy affect both rent-seeking and the relevant macroeconomic variables in our model. Barring monetary expansions, increased exports and higher income transfers to households, expansionary shocks are associated with lower rent-seeking activity. Factoring in these two sets of results, the upshot is that rent-seeking behavior shows a pattern of procyclicality in the Brazilian economy.

Long Term Effects of Major Macroeconomic Variables on the Brazilian Stock Market: A nonlinear ARDL application

This research used NARDL methodology to investigate relevant macroeconomic variables influence on the Brazilian stock market index. We used monthly data from January/2000 to July/2020 and the six macroeconomic variables investigated are described as follows: net government's debt/GDP (DEBT), exports (EXPORT), consumer confidence (ICC), liquidity ratio (M4_PIB), interest rate (SELIC) besides the stock market index (IBOV). All monthly data were collected from IPEADATA. The main conclusions are that there is long run effect of IBOVESPA due to a decrease of government debt is clear and statistically significant, the long run effect in the liquidity ratio also affects IBOVESPA index. Moreover, the most outstanding result was the long run effect of decrease in the interest rate over the IBOVESPA index. Sustainable reductions in the interest rate would consistently stimulate the stock market index. Research outcomes also indicate that long run asymmetries of government debt, liquidity ratio and interest rate are reliable and statistically significant.

FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: TWO EQUALLY DESIRABLE DILEMMAS OF POLICY MAKERS IN INDIA

The study aims to analyze the importance of economic growth that has more relevance than Foreign Direct Investment (FDI) inflow for a stable development in India. The article takes the period of 1978 to 2019 to analyze the same. It applies Auto Regressive Distributed Lag Modelling Approach to find out the impact of economic growth. It is proved that there is a cointegration between FDI and economic growth in long run. In short run, both economic growth and FDI granger cause each other. Also, there exists a negative effect of FDI on economic growth in short run. Hence, the study recommends a threefold development process in India. The policy makers are suggested aligning the economic policies in a way to focus at the first stage only on economic growth which will bring FDI in India. At the second stage, they need to find relevant macroeconomic variables that will be positively influenced by FDI so that, at the third stage, these variables will ultimately contribute to growth of Indian economy.

Adoption of Inflation Targeting in Sierra Leone: An Empirical Discourse

The main research question of this paper is to assess Sierra Leone’s preparedness for adopting a fully-fledged or lite Inflation Targeting (IT) framework amid macroeconomic and structural bottlenecks experienced in the domestic economy. Several theoretical and empirical perspectives were reviewed to bring out cogent insights on the subject matter. With the use of the Unrestricted Vector Autoregression (VAR) model, relevant macroeconomic variables ranging from 2010Q2 to 2019Q4 were utilised to assess plausible outcomes, aided with some iterative shock impulses, variance decomposition, and historical decomposition, to explain the reaction of inflation to specific factors in Sierra Leone. The study outcome suggests that Sierra Leone as a supply-driven economy is inducing a high level of inflation on account of the pass-through effect of high prices to consumers in the domestic economy. This to a greater extent is undermining monetary policy management, which gives credence to the fact that authorities at the Bank of Sierra Leone should not switch to inflation targeting in the short and medium-term on the basis that monetary policy actions could instigate further price increases of goods and services, underpinned by weak real sector operations and a somewhat dollarized domestic market. At best, there is a need for BSL to continue its current policy methodology, while working in ensuring monetary policy actions are transparent and well communicated at all times to getting inflation to a single-digit.

Relationship between Money Supply & Financial Bailout of Small Scale Agribusiness Firms in Nigeria

The study was carried out to determine the macro-economic correlates of public capital supply for agribusiness financial bailout and its implications for agricultural development in Nigeria. Secondary data was obtained from Central Bank of Nigeria (CBN) statistical bulletin,(2018) and it covered from 1992-2018. Simple regression, correlation matrix and descriptive statistics were used to analyze the collected data. The descriptive statistics indicates that the mean capital injection into the agribusiness firms amounted to 39.3 million. The simple regression shows that money supply has a positive and significant relationship with the financial bailout of agribusiness firms. Correlation matrix shows that money supply has a close relationship with reserve requirement, interest rate, discount rate and exchange rate. The study concludes that the mean capital injection into agricultural sector is low, money supply have a positive and significant relationship with the financial bailout of agribusiness firms and the relevant macro-economic variables significantly have a close relationship with money supply. The study therefore recommends that Policy makers should develop policies that will stabilize the injection of capital into the agribusiness sector, and the stabilization of the relevant macro economic variables. This will further lead to the overall development of agricultural value chain in the Nigerian economy.