Short-run Effects Research Articles

Asymmetric Effects of Exchange Rate Volatility on Taiwan-China Trade: A Non-Linear ARDL Analysis of 20 Industries

Abstract This study investigates the long-run and short-run effects of exchange rate volatility on Taiwan's exports to and imports from China across 20 industries, employing a non-linear autoregressive distributed lag (NARDL) approach. The analysis covers the period from January 2004 to December 2022 and highlights industry-specific sensitivities and asymmetric impacts of exchange rate fluctuations. Our findings reveal the critical role of exchange rate volatility in shaping export and import performance across industries, with both positive and negative shocks exerting significant short-run and long-run effects. Asymmetric impacts of exchange rate fluctuations affect 87.96% of Taiwan's total exports to China in the long run and 72.11% in the short run. In contrast, the asymmetric impacts on imports influence 77.12% of Taiwan's total imports from China in the long run and 13.21% in the short run, demonstrating varying sensitivity across industries. These findings accentuate the necessity for industry-tailored trade policies and strategic considerations to better manage the risks and opportunities presented by exchange rate volatility in cross-strait trade. JEL classification numbers: F14, F31, C22. Keywords: Exchange rate volatility, Taiwan-China trade, Non-linear ARDL, Asymmetric effects.

Ardl: Estimating autoregressive distributed lag and equilibrium correction models

We present a command, ardl, for the estimation of autoregressive distributed lag (ARDL) models in a time-series context. The ardl command can be used to fit an ARDL model with the optimal number of autoregressive and distributed lags based on the Akaike or Bayesian (Schwarz) information criterion. The regression results can be displayed in the ARDL levels form or in the error-correction representation of the model. The latter separates long-run and short-run effects and is available in two different parameterizations of the long-run (cointegrating) relationship. The popular bounds-testing procedure for the existence of a long-run levels relationship is implemented as a postestimation feature. Comprehensive critical values and approximate p-values obtained from response-surface regressions facilitate statistical inference.

Estimating the impact of economic globalization on economic growth of Ghana: Wavelet coherence and ARDL analysis

Considering the importance of economic globalization in shaping Ghana’s economic growth trajectory, examining the relationship between these two variables is crucial for policymakers to develop strategies aimed at maximizing the benefits of economic globalization and minimizing the challenges associated with it. Therefore, this study investigates the long-run and short-run effects of economic globalization on economic growth of Ghana. The autoregressive distributed lag (ARDL) is employed for the analysis. This paper further employs the Phillips-Oliar’s residual-based cointegration test and the continuous wavelet coherence test to examine the causality between economic growth and its determinants. The results from the ARDL model suggest that economic globalization has not promoted economic growth. Specifically, a 1% increase in economic globalization reduces economic growth by 1.80% and 3.90% in the short- and long run periods respectively at a 1% significance level. The results further reveal capital, government expenditure and labour as key determinants of economic growth. The wavelet causality test reveals a one-way causality from economic growth to economic globalization. Based on the findings, policy suggestions have been highlighted for stakeholders’ consideration with the aim of enhancing economic growth of Ghana.

Bank Credits and Economic Growth

This study examined the effect of bank credit on the growth of the Nigerian economy. The study was specifically meant to assess the impact of bank credit to the agricultural sector on the growth of the Nigerian economy; to determine the effect of bank credit to the manufacturing sector on the growth of the Nigerian economy and lastly to assess the effect of bank credit to the mining and quarrying sector on the growth of the Nigerian economy. To achieve these objectives, the study employed the ex-post facto research approach. Time-series data were collected from the CBN Statistical Bulletins using the desk survey method from 1985 to 2018. The data were analysed using various econometric techniques such as the descriptive statistics test, the Augmented Dickey-Fuller (ADF) unit root test, Correlation matrix, and Autoregressive Distributive Lag (ARDL). Findings from the analyses showed that there was an insignificant short-run effect of bank credit on the growth of the Nigerian economy. It was also revealed that there was a significant long-run effect of bank credit on the growth of the Nigerian economy. Based on these findings, the study recommend the establishment of an agency were all commercial farmers would be registered with responsibilities to interface with banks to ensuring that loans are free from collateral requirements, interest rate charges and loan administration bottlenecks in order to encourage commercial farming and towards enhanced economic growth in Nigeria. Also, policies targeted at reducing the interest rate charged on bank credit to the manufacturing sector in Nigeria should be implemented by the CBN through the conscious subsidy of all bank credit to the manufacturing sector as this is required to trigger productivity and enhance short term economic growth.

Handling asymmetries in the trade balance

The existing literature in the US-Mexico trade balance reports mixed evidence on the effects of exchange rate shocks. In this paper we propose a new approach of studying exchange rate effects that allows for asymmetries in the balance of trade. Our results show that using either linear modelling or non-linear modelling and zero threshold, there is no evidence of co-integration for the US-Mexico trade. However, using a quantile analysis and median threshold, for the first time in the literature on trade balance, we obtain evidence of co-integration. Indeed, our findings show the existence of a long-run relation between the trade balance and its determinants except for periods of significant deficits, where the trade balance is detached from underlying fundamentals and follows a random walk. A USD depreciation, especially a small one, is effective in the short run in improving the trade balance, while in the long run, any depreciation worsens the trade balance. These findings hold due to the complementarity of the US and Mexican economies and the change in the structure of the Mexican economy towards higher value-added products that have led to income effects outweighing in the long run, any intending short-run effects, of exchange rate depreciation.

Impact of climate change on household development resilience: Evidence from rural China

The adverse impacts of climate change have emerged as one of the primary threats to human development; however, the climate change economic impact evaluation literature has mostly estimated effects under an assumption of full certainty. This article aims to estimate the long-run impact of climate change on household development resilience. To do so, we use the China Health and Nutrition Survey, which contains detailed longitudinal socioeconomic information from 1989 to 2015, and matches them to weather data. We find that climate change negatively impacts household development resilience. This negative impact stems from both a decline in upward mobility of households and an increase in downside risks. In other words, the rise in temperatures not only reduces the pace of household economic growth but also amplifies economic volatility, elevating consumption risk for households. The effects are driven by the decrease in agricultural production output and the risk of off-farm income. However, longer-run adaptation has offset 22.09% of the short-run effects of climate change on household development resilience. In contrast, climate adaptation mitigates household welfare loss to a greater extent through agricultural input adjustments and income diversification in the long run.

Asymmetric Effects of World Energy Prices on Inflation in Indonesia

This study analyzes the asymmetric effect of changes in world energy prices, which include crude oil, natural gas, and coal prices, and the exchange rate on consumer price index (CPI) inflation in Indonesia. The models used in the analysis are quantile regression and dynamic ordinary least squares. The period studied is monthly in the period 2001M01 - 2022M12. The study results show that world crude oil prices have asymmetrically positive effects on CPI inflation when world oil prices increase and decrease. The fall in the price of crude oil has a more significant effect than the increase. The asymmetric impact of world crude oil prices on CPI inflation was also found between lower and middle quantiles. However, the short-run impact of rising crude oil prices is only found in the 7th quartile. So, the long-run effect is more dominant than the short-run effect. The role of the fuel subsidy policy, which the government manages, is beneficial in reducing inflationary fluctuations originating from fluctuations in world crude oil prices. Efforts to develop oil refineries in Indonesia that need to be done to reduce imports of crude oil and fuel are expected to be able to reduce the impact of world oil price fluctuations on domestic inflation in the future.

Is agricultural production detrimental to Greece's ecological sustainability? Evidence from the dynamic ARDL simulations and bootstrap causality analysis

AbstractAgricultural production (AP) can play a prominent role in establishing food security. However, AP has an innate relationship with nature's demand and supply sides. Furthermore, unsustainable AP can harm a country's ecological sustainability by increasing the ecological deficit (i.e., the disparity between ecological footprint and biocapacity). In that respect, this research econometrically examines the AP–ecological deficit link in Greece for the 1965–2018 period. The following findings are revealed in this study. First, the ecological deficit and AP in Greece have a cointegrating relationship. Second, besides energy use and income, AP significantly contributes to Greece's ecological deficit in the long run. Third, the dynamic autoregressive distributed lag simulations show that the short run effect of a positive (negative) shock in AP on Greece's ecological deficit is insignificant. However, in the long run, the impact of a positive (negative) shock in AP gradually becomes significant and intensifies (decreases) the ecological deficit in Greece. Last, the bootstrap causality test with the Fourier approximation generally confirms these findings, revealing that unidirectional causality runs from AP to the ecological deficit. These results indicate that unless sustainability measures are strictly followed in the energy and agricultural sectors, AP could continue undermining Greece's long‐run ecological sustainability.

Moving toward sustainable agriculture: The nexus between clean energy, ICT, human capital and environmental degradation under SDG policies in European countries

The United Nation's adaptation of the 2030 sustainable Development Goals (SDG) agenda has swung the attention toward sustainability. However, in achieving SDGs, this study investigates the nexus between agricultural productivity, renewable energy, ICT, human capital, CO2 emissions, and natural resources in a panel of ten European Union (EU) countries from 1996 to 2019. Our study uses the panel autoregressive distributed lag (ARDL) model of the Pool Mean Group (PMG) to estimate the long-run and short-run effects and heterogeneous causality approach. The empirical results ratify that a 1 % upsurge in the coefficient of renewable energy, ICT, and human capital increases agricultural productivity by 0.174 %, 0.030 %, and 2.158 % in the long run. Whereas, CO2 emission and natural resources decrease agricultural productivity. Finally, various causality exists among variables for EU countries. Our empirical results for the EU countries are notionally reliable and offer important policy implications accordingly.

Asymmetric effects of third-country exchange rate risk: A Markov switching approach

The standard tourism demand models consider the effects of the bilateral real exchange rate between origin and destination in a linear context. Our study contributes to the literature by incorporating the asymmetric effects of real exchange rate volatility of home and third-countries. We propose a Markov Switching ARDL model to estimate outbound tourism demand over the period of 2002–2019. This model allows us to examine both the short- and long-run effects in the likely presence of asymmetric effects and structural breaks. The results reveal that there are nonlinear asymmetric long- and short-run effects of the third-countries exchange rate volatility. We also identify relevant structural changes coinciding with major events.

Asymmetric connectedness between oil price, coal and renewable energy consumption in China: Evidence from Fourier NARDL approach

This paper examines the asymmetric effects of oil price shocks on coal and renewable energy consumption in China over long and short periods. The novelty of this study is to investigate whether the consumption of coal and renewable energy are asymmetrically affected by the oil price in a time–frequency framework by performing a Fourier nonlinear ARDL model which is robust to overcome the multiple smooth structural changes in data. The bounds test of the FNARDL specification provide strong evidence of cointegration among variables, including coal energy consumption, renewable energy consumption, oil price, and economic growth. Results reveal the following: First, the oil price-coal energy consumption and oil price-renewable energy consumption relationships are nonlinear. Second, oil price increases have significant short-run effects on coal energy consumption. However, oil price increases induce an increase in renewable energy consumption in China in both the short and the long term. Finally, the relationship between coal energy consumption and economic growth is U-shaped. Hence, increasing oil prices boost China’s prospects for coal in the short term and its usage of renewable energy in the long run.

News and noise in crime politics: The role of announcements and risk attitudes

We examine the process of intertemporal decision-making among potential offenders by analyzing their response to announcements of future changes in anticrime policies. We specify the utility function of potential criminals based on Epstein-Zin preferences to explicitly account for risk attitudes. In this setting, news shocks in anticrime policies can bring about immediate changes in delinquency, but heterogeneous risk attitudes among potential offenders may cause unintended outcomes in the short run. We further show that short-run effects may solidify in the event that the announced policy changes are not ultimately implemented (noise shocks). We demonstrate that rising uncertainty about policy changes may be beneficial in crime prevention, but only among risk-averse agents. Hence, this paper highlights potential pitfalls that result from neglecting the importance of risk attitudes in crime prevention – and potentially other policies.

Exploring the dynamic effect of economic growth on carbon dioxide emissions in Africa: evidence from panel PMG estimator

The relationship between economic growth and environmental pollution continues to attract significant research interest for researchers, practitioners, and policymakers all over the globe. Theoretically, the environmental benefit of economic growth should be greater than its negative externality with higher level of development. However, from the African perspective, countries with higher economic performances often face several environmental challenges, which raises the doubt whether economic growth helps or constrains environmental quality improvement. Under the environmental Kuznets curve (EKC) hypothesis, this study re-examined the effect of economic growth on CO2 emissions conditional on the dynamics of urbanization, renewable energy, and good governance across 47 African countries using panel data from 1996 to 2019. We employ panel cointegration tests to establish whether there is a long-run equilibrium relationship among our variables. We also apply pooled mean group ARDL (PMG-ARDL) techniques and the Dumitrescu-Hurlin causality test to determine the long- and short-run effects of economic growth, urbanization, renewable energy consumption, and good governance on CO2 emissions. The results from the PMG estimator validate the EKC hypothesis since a 1% surge in GDP per capita increases emissions by 0.61% in the long run, while a 1% increase in its square decreases emissions by 0.03%. In the short-run, economic growth does not exercise any significant effect on emissions. Furthermore, results indicate a significantly negative and positive long-run effect of renewable energy and governance, respectively. Finally, our causality test shows bidirectional relationship between CO2 emissions and all the explanatory variables. Henceforth, we provided policy implications based on the study’s results.

Pension Fund Investments and Capital Market Development in Nigeria: The Moderating Role of Inflation

Pension fund investment is a significant source of finance for the capital market in Nigeria. It increases the availability of funds for firms to acquire for expansion, stimulating economic growth and development. However, high inflation rates can have a negative impact on the effectiveness of pension fund investment in the capital market in Nigeria. This study investigates whether inflation enhances or reduces the effect of pension fund investment on capital market development in Nigeria. Monthly time series data from January 2013 to February 2020 were utilized using the ARDL model. The findings revealed that pension fund investments have a long- and short-run effect on capital market development in Nigeria. Our study also established that inflation reduces the negative impact of total domestic debt securities on total market capitalization both in the long- and short-run, which is the novelty of this study. The study contributes to the Modern Portfolio Theory, thereby establishing the role of inflation in determining the effect of pension fund investment on capital market development in Nigeria. JEL Classification G10, G23

Climate trends and maize production nexus in Mississippi: empirical evidence from ARDL modelling

Climate change poses a significant threat to agriculture. However, climatic trends and their impact on Mississippi (MS) maize (Zea mays L.) are unknown. The objectives were to: (i) analyze trends in climatic variables (1970 to 2020) using Mann–Kendall and Sen slope method, (ii) quantify the impact of climate change on maize yield in short and long run using the auto-regressive distributive lag (ARDL) model, and (iii) categorize the critical months for maize-climate link using Pearson’s correlation matrix. The climatic variables considered were maximum temperature (Tmax), minimum temperature (Tmin), diurnal temperature range (DTR), precipitation (PT), relative humidity (RH), and carbon emissions (CO2). The pre-analysis, post-analysis, and model robustness statistical tests were verified, and all conditions were met. A significant upward trend in Tmax (0.13 °C/decade), Tmin (0.27 °C/decade), and CO2 (5.1 units/decade), and a downward trend in DTR ( − 0.15 °C/decade) were noted. The PT and RH insignificantly increased by 4.32 mm and 0.11% per decade, respectively. The ARDL model explained 76.6% of the total variations in maize yield. Notably, the maize yield had a negative correlation with Tmax for June, and July, with PT in August, and with DTR for June, July, and August, whereas a positive correlation was noted with Tmin in June, July, and August. Overall, a unit change in Tmax reduced the maize yield by 7.39% and 26.33%, and a unit change in PT reduced it by 0.65% and 2.69% in the short and long run, respectively. However, a unit change in Tmin, and CO2 emissions increased maize yield by 20.68% and 0.63% in the long run with no short run effect. Overall, it is imperative to reassess the agronomic management strategies, developing and testing cultivars adaptable to the revealed climatic trend, with ability to withstand severe weather conditions in ensuring sustainable maize production.

Electricity and Firm Productivity: A General-Equilibrium Approach

Many policymakers view power outages as a major constraint on firm productivity in developing countries. Yet empirical studies find modest short-run effects of outages on firm performance. This paper builds a dynamic macroeconomic model to study the long-run general-equilibrium effects of power outages on productivity. Outages lower productivity in the model by creating idle resources, depressing the scale of incumbent firms and reducing entry of new firms. Consistent with the empirical literature, the model predicts small short-run effects of eliminating outages. However, the long-run general-equilibrium effects are much larger, supporting the view that eliminating outages is an important development objective. (JEL D22, D24, G32, L94, O13, O14)

Long run non-linearity in CO2 emissions: the I(2) cointegration model and the environmental Kuznets curve

I utilize the I(2) cointegration model to assess the empirical relevance of the environmental Kuznets curve for CO2 emissions in the US between 1960 and 2014. This takes the non-linearity of CO2 emissions into account by directly incorporating data that are integrated of order two, I(2). As a result, it enables an extensive dynamic analysis of the relationship between emissions and economic growth, as postulated by the environmental Kuznets curve both in the short, medium, and long run. The results indicate that the primary drivers behind the non-linear shape of US CO2 emissions in the long run are an increase in emissions caused by energy use and a decrease caused by more trade and the utilization of less polluting energy sources. GDP only exhibits short run effects. Hence, I do not find evidence in favor of a long-run relationship between economic development and the concave shape of emissions, as suggested by the environmental Kuznets curve.

The Effect of the Pandemic on the RMG Export of Bangladesh: Exploring the Economic Channels of Transmission

This study aims to empirically analyse the potential long-run and short-run effects of the COVID-19 pandemic on the ready-made garments (RMG) export growth of Bangladesh. We distinguish two transmission channels: credit growth and degree of openness to trade, through which the pandemic could affect the RMG export, using monthly time series data from June 2009 to August 2020. We employ a bounds test approach to the autoregressive distributed lag (ARDL) cointegration method. The bounds test specifies long-run and short-run relationships between credit growth, openness, and RMG exports. We found that the pandemic has a significant negative effect in the short run but a positive impact on export through these transmission channels in the long run. Thus, more credit support to this sector and opening up the economy for international trade is essential for the total recovery of the RMG export.

International Capital Inflow and Human Capital Development in A Developing African Economy: A Study Of Nigerian Economy 1987- 2018

Extant literatures show that savings gaps in developing countries constitute critical constraints to investments in human capital and this has propelled the scramble by developing countries for international capital to fill the gaps. The paper principally examines the effect of international capital inflows (ICI) on human capital development (HCD) in a developing African economy with Nigeria as case study. The specific objectives are to investigate, determine, assess, examine and ascertain the effects of foreign portfolio investment (FPI), foreign direct investment (FDI), official development assistance (ODA), foreign remittance (RMT) and external debt stock (EXDSK) respectively on HCD. Ex-Post Facto research design on data from the Central Bank of Nigeria Statistical Bulletin and Annual Reports and the World Bank Development Indicators were adopted using Descriptive Statistics, Augmented Dicker Fuller tests for unit roots and diagnostics. The results of the Autoregressive Distributive Lag indicated that FPI had positive and significant long run and short run effect on HCD while FDI, ODA, RMT and EXDSK, only have positive and significant short run effects on HCD. The study concluded that ICI has only short run significant effects on HCD with the exception of FPI. Some of the recommendations are that: government should strengthen and deepen the capital market system in Nigeria to sustain existing FPI and attract new ones; government should avoid using ODA for long term project financing in Nigeria and that EXDSK should be contracted solely for short term investments with economic reasons as against white elephant projects without economic justifications.

Macro-economic indicators and housing price index in Spain: fresh evidence from FMOLS and DOLS

Purpose This study aims to determine how changes in macroeconomic indicators and the housing prices index (HPI) are related. These factors can cause short-term and long-term changes in the housing market in Spain. Design/methodology/approach The study used cointegrating regression, fully modified ordinary least squares and dynamic ordinary least squares methodologies. The models are trained using quarterly time series data for these parameters from 2010 to 2022. A comprehensive examination is conducted to explore the relationship between macroeconomic issues and fluctuations in the HPI. Findings The results indicate statistically significant short-run effects (p < 0.05) of economic growth, inflation, Spanish stock indices, foreign trade and the interest rate on HPI. The inflation variables, Spain’s stock indices, interest rate and monetary rate, have statistically significant long-run effects (p < 0.05) on HPI. The exchange rate, unemployment and money supply have no substantial impact on HPI in Spain. Originality/value The study’s findings significantly contribute to increased information concerning the level of investing activity in the Spanish housing sector. After conducting an in-depth study of both the long-run and short-run connections with HPI, the study proved to be highly effective in formulating appropriate policies.