Run Cointegration Relationship Research Articles

Does development assistance for health buy better results in maternal health in Tanzania? evidence from Autoregressive Distributed Lag (ARDL) model

This paper establishes whether development assistance for health buy better results in maternal health in Tanzania using annual time series data for the period between 1995 and 2014 based on Autoregressive Distributed Lags (ARDL) and Error Correction Model. A long run cointegration relationship exists between GDP per capita, maternal mortality, unemployment and development assistance for health over examined period of time. The results show that in the long run Development Assistance for Health (DAH) and Economic growth (measured by real GDP per capita) was significant in reducing maternal mortality in Tanzania. In the short run, unemployment was statistically significant on increasing maternal mortality in Tanzania between 1995 and 2014. Furthermore, the short run results show that both DAH and real GDP per capita reduces maternal mortality between 1995 and 2014. The results imply that Development Assistance for Health (DAH) channeled to the health sector is an important component in improvements of maternal health in Tanzania. The findings are robust to sensitivity analyses and estimation methods. Keywords: Maternal Mortality, DAH, Unemployment, Autoregressive Distributed Lags, ARDL

FINANCIAL DEVELOPMENT, INTERNATIONAL FINANCIAL INTEGRATION AND INSTITUTIONAL QUALITY: COINTEGRATION ANALYSIS FOR EMEGING MARKET ECONOMIES

This paper investigates the dynamic relationship between financial development, international financial integration and institutional quality in emerging countries. We employ panel cointegration tests for a panel of 18 emerging economies over the period of 1985-2014 by controlling for cross sectional dependency and structural breaks. The results of this study show that there is a long run cointegration relationship between financial development, international financial integration and institutional quality. We also use the panel causality approach for determining the causal links between variables that are interested. Our results confirm the bidirectional causal relationship between financial development and international financial integration. http://dx.doi.org/10.17130/ijmeb.2017ICMEB1735484

Forecasting, Cointegration and Causality Analysis of Unemployment Using Time Series Models

One of the major issue for policy makers is handling with continues increase in the level of unemployment in Pakistan. Thus forecasting unemployment rate is imperative to policy makers. This study aims to explore the best forecasting model among ARIMA, ARFIMA and exponential smoothing for forecasting unemployment. Secondly this study analyzed unemployment using time series techniques, measured long & short run relationship with population growth, labor force participation rate and crop production, and also investigated the causality between unemployment and other variables. Time series data ranging from 1965 to 2014 is collected from Pakistan Economic Survey for analysis. This study evaluate the forecasting performance of three models by using the forecast accuracy criterion such mean absolute error (MAE), mean absolute percentage error (MAPE), root mean square error (RMSE) and Theil’s U statistics. Double Exponential Smoothing model is chosen as a best forecasted model for unemployment rate on the basis of forecast accuracy criterion. Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) test is used for checking stationarity in the variables. At level the variables were non stationary and become stationary at first difference. The results of Johnson cointegration and Vector Error Correction model (VECM) indicated that there exists long & short run cointegration relationship between unemployment rate and other variables. Granger Causality test shows bi-directional causality running from crop production toward population growth.

An Empirical Analysis of China's International Reserves Demand Function

The study aims to estimate an international reserves demand model for China using economic growth, propensity to import, real effective exchange rate and trade openness variables for quarterly period spanning from 1985Q1 to 2014Q4.The bounds testing technique to cointegration is used to test for a long run relationship, while the autoregressive distributed lag approach is used to estimate short run and long run coefficients. The bounds F-test critical values generated by Pesaran et al. (2001) are used for comparison.A long run cointegration relationship is found among the variables when international reserves demand is the dependent variable; and international reserves demand to be significant at conventional levels with respect to propensity to import and trade openness only in the long run. The error correction term is found negative and statistically significant in the short run.

Determining Real Exchange Rate Fluctuations in the Oil-Based GCC Economies

This paper attempts to empirically determine the relationship between oil price fluctuations and movements in the dollar-pegged Gulf Cooperation Council (GCC) countries? exchange rates. Panel unit root tests are applied, followed by the estimation of a panel co-integration model to identify the long-run equilibrium relationship. Built on the co-integration test results, a Vector Error Correction Model (VECM) is then estimated to determine causality relationships and investigate the short run dynamics. A panel of annual data of real exchange rates, oil prices and three other variables are utilized, which were selected in reference to the literature. The time series cover the 32-year period of 1980 to 2012. Test results indicate that the series are integrated of order one and evidence is found that oil prices and GDP per capita have a long run co-integration relationship with real exchange rates. The estimated VECM confirms the long run relationship and identifies a short run causality running from oil prices to exchange rates. The model also shows that exchange rates correct for short run disequilibria slowly, at the speed of 4% annually. The results confirm the findings of past researchers and recommend reviewing the existing exchange rate regimes to mitigate the impact of oil price fluctuations on these economies.

Carbon emissions, energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy

This study investigates the long and short run relationships among carbon emissions, energy consumption and economic growth in India at the aggregated and disaggregated levels during 1971–2014. The autoregressive distributed lag model is employed for the cointegration analyses and the vector error correction model is applied to determine the direction of causality between variables. Results show that a long run cointegration relationship exists and that the environmental Kuznets curve is validated at the aggregated and disaggregated levels. Furthermore, energy (total energy, gas, oil, electricity and coal) consumption has a positive relationship with carbon emissions and a feedback effect exists between economic growth and carbon emissions. Thus, energy-efficient technologies should be used in domestic production to mitigate carbon emissions at the aggregated and disaggregated levels. The present study provides policy makers with new directions in drafting comprehensive policies with lasting impacts on the economy, energy consumption and environment towards sustainable development.

Confronting two faces of inequality: A panel based evidence from Indian cities

The purpose of this paper is to evaluate the association between inequality in energy intensity and social inequality in Indian cities, as these are the two predominant constituents of inequality in Indian socio-economic scenario. This study uses a bivariate cointegration based error correction model for assessing the causal association between the two inequality parameters, which are derived by using Theil’s second measure. Given the sustainable development objective set by the government of India, interaction between these two parameters may prove out to be significant for achievement of this objective. It has been hypothesized that nature of this interaction varies largely based on the nature of the cities, i.e. semi-urban, urban, and metropolitan. The analysis has been done on the full and segregated dataset to visualize how the interaction changes with the nature of the cities. For analysis purpose, data for 139 Indian cities for the period of 2001-2013 have been selected. From the data of income, population, and energy consumption, two parameters of this study have been designed by using Theil’s second measure. The analysis starts with checking the cross sectional dependence for both of the parameters. Subsequently, the stationarity of the data has been checked by using first generation unit root tests. Then, by employing the cointegration and error correction framework, the long run causal association has been assessed. For checking the short run causal association, Granger causality method has been applied. The data for this study have been collected form Ministry of Power, Govt. of India, Central Statistical Organization, India, and Census, India. Major findings of this study are, (a) for both the parameters and three segments, cross sections are independent, (b) the parameters are stationary at first difference, (c) there is long run cointegration relationship between them, and (d) the causal link between inequality in energy intensity and social inequality is unidirectional for the case of semi-urban cities, and it is bidirectional for the case of metropolitan and urban cities. For full dataset, causal link between inequality in energy intensity and social inequality is unidirectional. The Theil indices calculated for both the parameters show the trends of rising inequality for all the cities taken together. However, no significant trend was visualized for the individual strata of cities, for both of the parameters under consideration. This study summarizes that the economic growth achieved by India is not sustainable in nature. It can be achieved only by considering an inclusive growth framework, where social development will complement the growth objectives. Therefore, the fossil-fuel based economic growth agenda needs reconsideration, viewing the social dimensions of the cities.

A cointegration analysis of price diffusion amid ADRs and dually listed Indian stocks

The aim of this study is to provide empirical support to global investors who are intending participation in stock markets using American Depositary Receipts (ADRs) as the investment vehicle. This study explores the degree of integration between ADRs and dually listed Indian Stocks using daily data for the period from January 2001 to May 2012. Further, the dynamics of price diffusion between the ADRs of Indian stocks pertaining to telecommunication sector cross listed in the US markets is examined by applying econometric tools like cointegration test, vector error correction model and Granger causality test. The findings reveal that both long run cointegration relationships and short run causality relationships exist between domestic stock price series and ADR prices. Further, we find evidence of strong error correction of ADR open and close to domestic stock open and close prices, and weak error correction of domestic market open index returns to foreign market open index returns. This implicates that ADRs appear to overreact to the US market index but underreact to changes in underlying share prices.

Relationship between Urbanisation and Economic Growth: A Causality Analysis for India

The paper investigates the causal relationship between economic growth and urbanisation in India, utilising World Development Indicators (WDI) data over the period 1960–2013. The period is chosen according to availability of data. On the basis of modern econometric techniques, the dynamic causal relationship between economic growth and urbanization has been examined. At the first step each variable was tested for unit root. If the variables contain a unit root, the second step is to test whether there is a long run co-integration relationship between the variables. If a long-run relationship between the variables is found, then VECM Granger Causality Test is subsequently used to examine the direction of causality. The paper found urbanisation deficit in India, indicating level of urbanisation lesser than mandated by per capita GDP level. Our results for India indicated that economic growth had a positive causal effect on urbanisation, but urbanisation, in turn, does not have causal effect on economic growth.

Serious crime in Nigeria: an empirical analysis using time series data (between 2000-2010)

This paper empirically examined the effect of the clearance rate, the unemployment rate, the percentage of females in employment and the percentage of the labour force with tertiary education on Serious Crime in Nigeria for the period 2000-2011. Time-series data from (NBS) National Bureau of statistics and Nigeria police annual reports 2011are used and tests for the existence of a long runcointegration relationship among serious crime, clearance rate and various socio economic indicators is carried out. The cointegration analysis provides strong evidence of the existence of a long-run model. With the normalized coefficients showing a negative effect of the clearance rate, percentage of females in the labourforce and the percentage of the labour force with tertiary education on serious crime, with the exception being the unemployment rate which is found to exert a positive effect.KEYWORDS: Crime, Cointegration, Unit Root, Time-Series.

Price Mediation in Tomato Commerce of Limpopo Province of the Republic of South Africa

The Limpopo Province is home to South Africa’s significant tomato engenderer, which is withal the most immensely colossal engenderer of the commodity in the Southern Hemisphere. Regardless of its consequentiality in the tomato industry of the country, there are few studies analyzing the mechanism through which prices of tomatoes are resolute and transmitted from the farm gate in Limpopo to the sundry provincial, local and international markets. This study endeavors to fill the erudition gap on the performance of Limpopo province’s tomato markets by examining vertical price linkages amongst successive marketing levels. With the aid of both surveys and document analysis, daily tomato prices were accumulated at three levels that reflect the marketing chain of Limpopo engendered tomatoes. Through marketing margin analysis, it was established that the farmers’ portion of the consumer’s Rand is low. About 85.1% of the consumer’s Rand goes to pay for marketing margins. Granger causality tests show that both the wholesale and retail prices are caused by farm gate prices, whereas an independent causal relationship was found between wholesale prices and retail prices. The study additionally found a long run co-integration relationship between farm gate prices and retail level prices, and not identically tantamount for the relationship between farm gate and wholesale prices. Furthermore, it was found that retailers are expeditious to react to increases in farm gate prices and slow in adjusting to price decreases. On the other hand, wholesale prices were found to be symmetrical to farm gate prices. These results suggest that the mediation of price information is more efficient between the farm and wholesale markets than between the farm and retail markets. Nonetheless, there is scope for increasing efficiency of tomato marketing in the province.

Private Capital and Investment Climate for Economic Growth: Empirical Lessons based on ARDL bound test technique

Using time series, autoregressive distributed lags (ARDL)-bound test approach and error-correction model (ECM), this paper aims to analyze how private capital and investment climate contribute to economic growth in African countries: Cameroon, Cote d’Ivoire, Tunisia, South Africa and Zambia. We find that in short-run there is a significant relationship between private capital, economic freedom and economic growth in Cameroon, in Cote d’Ivoire, in South Africa and in Zambia. In long run, we establish that a long term relationship exists between the variables. This implies that there is a long run cointegration relationship among the variables in some equations in Cameroon, Cote d’Ivoire, South Africa and Zambia. Employing the appropriate order of the ARDL specification and multidimensional economic freedom proxies to examine this linkage, the results obtained are not all significant. JEL Classifications : C13, C22, E22, F43, O11, O47 Key-Words : Private capital, Investment climate, Economic freedom, Economic growth, Time series, ARDL bound test approach, Error-Correction Model. Normal 0 14 false false false IT X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:Tabella normale; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:11.0pt; font-family:Calibri,sans-serif; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:Times New Roman; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-bidi-font-family:Times New Roman; mso-bidi-theme-font:minor-bidi;}

Long Run Sustainability of Sarawak - West Kalimantan Cross-Border Trade Flows

This paper is concerned with the time series behaviour of the cross border trade flows between Sarawak (East Malaysia) - West Kalimantan (Indonesia) conducted through regional port of Tebedu custom district with the main focus on the long run sustainability of Sarawak trade deficits. Cross border trade activity has gain much attention due to the dynamic linkages of this unique regional economic activity on industry, investment and employment, yet the study on long-run relationships of cross border trade flows have been largely overlooked. By employing the three stages of modern time series econometric technique, the research found significant long run cointegration relationship for the bilateral trade flows as well as support for the strong form of sustainability condition, suggesting that Sarawak-West Kalimantan bilateral trade is on the sustainable path in governing their trade flows performance. This suggests that the macroeconomic policies of Sarawak and West Kalimantan have been effective in bringing exports and imports into a long run equilibrium.

Analysis of exchange rate fluctuations and external debt: Empirical evidence from Pakistan

The primary purpose of this study is to examine the relationship, with respect to the Pakistani economy, between exchange rates and external debt by utilizing quarterly data from the 1983:Q1 to 2008:Q4 period. Short-run and long-run nominal and real effective exchange rates and their respective equilibrium rates have been assembled. The long run equilibrium exchange rate has been determined by employing the natural real exchange rate (NATREX) model suggested by Stein et al. (1990). We applied the Johanson (1988) cointegration test to examine the long run cointegration relationships among exchange rates and the relevant exogenous variables in the Natrex model. After computing the deviation of exchange rate from its long run, the autoregressive distributive lag model (ARDL) was applied to examine the role of external debt in the fluctuation of exchange rate. The results suggest that there is a long-run cointegration relationship among the relevant variables in the Natrex model and there is a long run cointegration relationship between the exchange rate and external debt variables. We also checked the stability of the functions and performed diagnostic tests. Most of the tests suggested that the functions adopted for the analysis are appropriate and stable over time. Moreover, the obtained results are robust and in according to the predictions of the model. Key words: Exchange rate, external debt, autoregressive distributive lag model (ARDL), methodology.

“Trade Liberalization and Economic Growth: What’s The Empirical Relationship in Bangladesh?”

Bangladesh adopted a liberal economic regime, particularly in the areas of trade, finance, and capital account, since mid-1980s. This paper attempts to investigate empirically the causality relationship between trade liberalization and economic growth in Bangladesh by employing co-integration and granger causality techniques of time series econometrics for the period of 1975-2010. The data on trade liberalization and economic growth are taken from the world development indicators. The empirical results reveal that there exist short run and long run co-integration and causality relationships among variables in the growth model. It implies that trade openness policies may be feasible with sustained economic growth. It is also found that causality runs from economic growth to trade liberalization. The results are also consistent with the growth theories and economic literature.

STRUCTURAL BREAKS AND BILATERAL EXCHANGE RATE PASS-THROUGH: AN EMPIRICAL CASE OF INDONESIA–UNITED STATES

This study estimates the exchange rate pass-through into domestic prices in Indonesia in the two-stage approach. The study focuses on first step pass-through, i.e. ERPT into import prices and second step pass-through, i.e. into consumer prices, using cointegration and error-correction mechanism (ECM) model. This research uses a Zivot-Andrews technique to test for structural breaks and Gregory-Hansen models to tests. The results show that the long run ERPT to import prices with structural breaks is relatively low compared to the results without them. The absolut error correction term values resulted from cointegration are decreased and the error-correction models need period lagged longer than one-period if the estimation included the estimated structural breaks. The main finding is that allowing for possible breaks around the crises in Indonesia, and a shift of the exchange rate management from managed to free floating in 1997 helps to restore a long run cointegration relationship estimation.

The effect of FDI on trade-led growth hypothesis: a co-integrated panel analysis

The paper explores the role of foreign direct investment (FDI) on the trade-led growth hypothesis in three countries, namely Australia, Canada and Israel for the period 1965–2009. The empirical investigation is based on panel co-integration and causality tests. The results provide clear support of a long run co-integration relationship after allowing for the heterogeneous country effect. The causality test confirms the presence of long-run and short-run bidirectional causality between openness and economic growth. It also confirms the presence of unidirectional causality from economic growth to foreign direct investment, but not vice versa. Moreover, at the individual level, foreign direct investment causes economic growth in the Australian economy only. This result indicates that economic growth may harm openness and foreign direct investment in these three countries.

Exploring the causality relationship between trade liberalization, human capital and economic growth: Empirical evidence from Pakistan

There is a rapidly growing literature on the interaction between trade liberalization and economic growth but few have analyzed the relationship between trade liberalization, human capital and economic growth. This paper attempts to investigate empirically the causality relationship between trade liberalization, human capital and economic growth in Pakistan by employing co-integration and granger causality techniques of time series econometrics for the period of 1972-2007. The data on trade liberalization and economic growth are taken from the world development indicators, ESDS international website while human capital index is constructed based on the data from Pakistan economic survey. The empirical results reveal that there exist short run and long run co-integration and causality relationships among variables in the growth model. It implies that education and trade openness policies may be feasible with sustained economic growth. It is also found that causality runs from trade liberalization and human capital to economic growth. The results are also consistent with the growth theories and economic literature. Key words: Trade openness, education, economic growth, co-integration, causality, Pakistan.

An Econometric Estimation of Import demand function for Cote d'ivoire

This paper examines a disaggregated import demand model for Cote d’Ivoire using time series data for the period 1970-2007. An Autoregressive Distributed Lag (ARDL) modeling process is employed to capture the effect of final consumption expenditure, the investment expenditure, the export expenditure and relative prices on import demand. Amongst the key results it is found that a long run cointegration relationship between the variables; and shows inelastic import demand for all the expenditure components and relatives prices. In the long run, investment and exports are the main determinant in Cote d’Ivoire imports. However in the short run both of the components of expenditures are the major determinants of Import demand. Import demand is not sensitive to price changes.

Measuring Long-Run Exchange Rate Pass-Through

Abstract The paper discusses the issue of estimating short- and long-run exchange rate pass-through to import prices in euro area countries and reviews some problems with the measures recently proposed in the literature. Theoretical considerations suggest a cointegrating relationship (between import unit values, the exchange rate and foreign prices), which is typically ignored in existing empirical studies. We use time series and up-to-date panel data techniques to test for cointegration with the possibility of structural breaks and show how the long run may be restored in the estimation. The main finding is that allowing for possible breaks around the formation of EMU and the appreciation of the euro starting in 2001 helps restore a long run cointegration relationship, where over the sample period the fixed component of the pass-through decreased while the variable component tended to increase.