Short-run Effects Research Articles

Do public account financial statements matter? Evidence from Japanese municipalities

Many governments are introducing business-like accounting systems. This paper examines the fiscal effects of compiling business-like financial statements on the expenditures of local governments in Japan as a complement to cash-based reporting. Using the variation in the deadlines for compiling new statements given by the central government in a difference-in-differences instrumental variable approach, we found that business-like financial statements have limited effects on municipalities’ expenditures but have short-run effects on social assistance expenses. This might be a part of the reconstruction of their expenditure structure.

Does Exchange Rates Swings Affect Trade? Evidence from an Emerging Open Economy

The volatility of the exchange rate is commonplace for every open economies. If excessive, it would have severe implications for the country’s international trades. Using the ARDL and cointegration bound tests on quarterly data [2000:Q2–2022:Q3], the study empirically explore how exchange rate volatility and other macroeconomic variables impacts real exports and imports demands for Nigeria. The evidence identify cointegration and the trade’ parsimonious models disclose a negative as well as significant short run effects of the exchange rate volatility. The estimated convergence ECM regressions indicate that exchange rates volatility cause significant decline in real exports and imports in the long run. Under this circumstance, the study supposes measures that will curb fluctuations beyond economic fundamentals. In particular, monetary authority should expand periodic exchange rate intervention to curtail excessive swings. This should be maintained intuitively and regularly appraise to avoid creating any counter-productive response.

Strategic Management of Risk by Multinational Banks in Sub Saharan Africa

In their search for profit maximization, multinational enterprises should adopt strategies that neutralize country risk effects. This paper seeks to establish whether country risk affects profitability of multinational banks in sub-Saharan Africa, and whether strategic decisions regarding ‘where to go’ for investment in terms of geographic diversification, and the ‘source of capital’ in terms of debt or equity financing, help mitigate country risk effects. Using panel data (2006-2020) of multinational banks in sub-Saharan Africa, and a two-step Systems Generalized Method of Moments (S-GMM) estimation technique, results find both short run and long run negative effect of country risk on profitability. Augmenting country risk with the two corporate strategy constructs, results show: first, a positive long run hedging effect of geographic diversification on country risk implying that increased geographic diversification strategy maximizes the bank’s long run profits irrespective of the level of country risk confronted. Second, on the source of funds strategy, augmenting country risk with equity financing raises profitability of banks than debt financing. This is so probably because equity finances hedge banks from risks from nationalization and expropriation. For multinational banks to guard from country risk, their geographic expansion should be financed using equity funds than debt.

Does loadshedding affect the housing market in South Africa? Some empirical evidence

PurposeThe purpose of this study is to quantify the impact of electricity power outages on the local housing market in South Africa.Design/methodology/approachThis study uses the autoregressive distributive lag (ARDL) and quantile autoregressive distributive lag (QARDL) models on annual time series data, for the period 1971–2014. The interest rate, real income and inflation were used as control variables to enable a multivariate framework.FindingsThe results from the ARDL model show that real income is the only factor influencing housing price over the long run, whereas other variables only have short-run effects. The estimates from the QARDL further reveal hidden cointegration relationship over the long run with higher quantile levels of distribution and transmission losses raising the residential price growth.Research limitations/implicationsOverall, the findings of this study imply that the South African housing market is more vulnerable to property devaluation caused by power outages over the short run and yet remains resilient to loadshedding over the long run. Other macro-economic factors, such as real income and inflation, are more influential factors towards long-run developments in the residential market.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine the empirical relationship between power outages and housing price growth.

The Determinants of International Tourism: Evidence from European Countries and China’s Provinces

Tourism has been reported as one of the largest economic sectors in the world. It is shown by more than hundreds of jobs involved in this sector which directly escalate the welfare and economic growth of a country. Thus, government will support any actions that could improve competitiveness and profitability of tourism industry. The main objective of this paper is to determine the significant factors of international tourism receipts by 18 European countries and 12 provinces of Western China between 1995 and 2019. Based on data, Europe known as the world’s largest international tourist receipt in 2019 followed by Asia and the Pacific including China. It is interesting to note that China, particularly in western part, has contributed more on achieving tourism receipt. China has potential to grow its tourism sector in significant trend due to its large land size and massive human resources that might further defeat Europe’s total tourist receipt. By using panel Autoregressive Distributed lag (ARDL) model, there would be different responses related to determinant factors of tourism over long run and short run. The result revealed that population, carbon dioxide emission and trade openness have positive effect to the international tourism receipt in Europe in the long run while the rest explanatory variables such as transportation infrastructure and energy consumption have negative effect to the international tourism receipt in Europe. While in case of China, population and energy consumption are statistically significant and positive to international tourism receipt in the long-run correlation, but the rest variables are having negative effect. Unfortunately, in the short-run effect, it was found that all variables are not statistically significant at least at the ten percent significance level in both Europe and China. From the result, the Europe and Chinese policy makers can evaluate the policy based on each result. For instance, the fact that the high level of population density could reach larger tourism receipt is not always true, government need to provide some training for the party who will be involved in tourism industry to gain knowledge and encourage them to be more creative and innovative. Hence the good quality of listed tourism destination would attract more tourist to the destination country

The short run effects of childbirth on parents’ earnings in the Baltics

ABSTRACT Having a child can have a heavy toll on parents' earnings, especially in the first years after childbirth, with mothers often being more affected than fathers. This is particularly true in the three Baltic states, with relatively generous parental leave benefits compared to the EU and norms encouraging mothers to care for children. I carry out an event study to estimate the effect of having a child on the earnings of both genders and find that the earnings of females reduce by half in the first calendar year after childbirth and by 20% to 33% in the second, while male earnings do not change in either period. This results in a widening earnings gap in the Baltics, more so than in several comparison countries (Denmark, Finland, Sweden, the Netherlands, and Norway), in the first two years after the birth of the first child.

Insurance Penetration and Interest Rate Nexus in Nigeria; an Autoregressive Distributed Lag Approach

This study investigated the effect of interest rate on insurance penetration in Nigeria. Interest rate is a vital monetary instrument that helps in macroeconomic stability through proper mobilization and distribution of capital. It’s adjustment affects both banking industry as well as the non – banking financial institutions such as the insurance industry. For developing countries like Nigeria with social and economic problems, the issue of risk management and insurance services as related to economic stability is relatively determined by the structural arrangement of the insurance sector and such arrangement is relative to the performance of all economic actors and the overall social environment The study used Auto Regressive Distributed Lag (ARDL) bounds test approach. Data was sourced from the central bank of Nigerian statistical bulletin for the period of 1985 to 2019. The result indicated that an increase in interest rate significantly decrease the rate of insurance penetration in both short run and long run. Other control variables used are exchange rate and inflation rate, and the result for this variables indicates that exchange rate has a significant relationship whereas inflation rate has an insignificant relationship with insurance penetration. The result of the co-integrating equation indicates that every movement into disequilibrium is corrected for within one period at a significant rate. The study therefore suggested that prior to any adjustment in the monetary policies or other economic policy, a detailed investigation should be carried out to ensure a favorable compliance of the short run and long run effect of adjusting such on the macroeconomic indices and insurance penetration.

Effects of Exchange Rate, Output Gap, and Output Gap Volatility on Inflation Volatility in Turkey

Abstract This study first investigates the short and long-run effects of exchange rate, output gap and output gap volatility on inflation volatility in Turkey by using the ARDL bounds testing approach. Second, we also examine the causal relationship among these variables by using Toda-Yamamoto and frequency domain causality tests developed by Breitung and Candelon. The results of the ARDL estimates indicate that the exchange rate, output gap and output gap volatility have statistically significant effects on inflation volatility. Also, causality tests results indicate that changes in the exchange rate, output gap volatility, and output gap will have permanent and temporary causal effects on inflation volatility. The policymakers should carefully consider these results to implement appropriate policies to reduce inflation volatility. The finding that the shocks are of temporary nature will have particularly important implications on the policies fighting against the inflation. This study contributes to the empirical inflation literature by identifying both short run and long run effects of the exchange rate and output gap volatility and output gap together, as well as by providing evidence about the structure of the shocks created by these variables on inflation volatility. This study also identifies the sources of temporary and permanent shocks of inflation volatility.

Factors Influencing the Lao PDR Import Value of Processed Agricultural Products from Thailand during the Covid-19 Pandemic

This study investigates the impact of the Lao macroeconomic factors of real gross domestic product, the Openness Index, and the exchange rate between the Thai and Lao currencies on the Lao import value of agricultural processed products from Thailand. Using product classifications and data from the International Trade Centre, this research examined the total import value (IM) and value of the imported product categories of sugar (HS17), flour (HS19), miscellaneous edible preparations (HS21), beverages (HS22), and animal fodder (HS23) (as dependent variables). The analysis employed the Autoregressive Distributed Lag approach, and the Vector Error Correction Model was applied to analyze the level relationship and test causal relationships among variables by using quarterly time series data from Q1 2012 to Q3 2021. Results show long-run and short-run relationships between GDP and both IM and HS17, but only a long-run relationship with HS22 and a short-run effect on HS19. Following the effects of COVID-19, HS22 will be the fastest market to recover. GDP has the greatest effect on IM in the long run. Granger causality of real GDP was seen running to imports on IM, HS17, and HS19; Openness running to IM and HS19; and exchange rate running to HS17, HS19, HS21, and HS22, with only HS23 unaffected by any factor.

Revisiting the Energy Consumption, Economic Growth and the Environmental Kuznets Curve in Developing Countries

Though economic development improves human lives and living standards, it poses seri-ous environmental challenges. In recent decade, this has attracted the attention of researchers and pol-icymakers aiming to find a balance between economic development and environment quality. The study examines the long and short-run effects of renewable energy, non-renewable energy, economic growth (gross domestic product) and carbon dioxide (CO2) emissions in 16 developing countries. Using a panel dataset from 1990 to 2020, we tested the Environmental Kuznets Curve (EKC) by employing the pooled mean group (PMG) and Mean group (MG) estimators. The empirical results provide evidence of a positive long and short-run nexus between economic development and environmental degradation when envi-ronmental degradation is made the dependent variable, confirming the EKC hypothesis. However, when economic development is made the dependent variable, the result elucidates the existence of the nega-tive long and short-run effects. Further, whereas renewable energy abates environmental degradation in both the long and short run, it promotes economic development in both periods. Finally, non-renewable energy increases environmental degradation in both the long and short run but promotes economic de-velopment only in the long run. Based on the findings of the study, we provide potential policy measures that can help to improve the environmental quality.

Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe

Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe

Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children

Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children

Revisiting the Energy-Growth nexus with debt channel. A wavelet time-frequency analysis for a panel of Eurozone-OECD countries

<abstract> <p>In this paper, continuous wavelet decompositions regarding the notions of coherence and phase are used to analyze the time-frequency dynamics of the existing relationships between energy supply and economic growth for a group of European countries. The objective is to identify both the intensity and the direction of the relationship over time and across frequencies. We also study the existence of a debt channel implying an indirect relationship between energy and growth. Our results show the complexity of the energy supply-growth relationship composed by direct effect at the short run and indirect effects through debt channel at the mid and long run. The countries with the highest debt/GDP ratio are more subject to such direct and indirect effects than others where only short run direct effect is noted.</p> </abstract>

Monetary Policy and People’s Socio-Economic Welfare in Nigeria

This study examined the effect of monetary policy on the socio-economic welfare of Nigerians between1980 and 2021 from three perspectives: income, health and education. We assessed the short and long run effects of six monetary policy variables (lending rate, savings deposit rate, liquidity ratio, monetary policy rate, loan deposit ratio and private sector credit to gross domestic product ratio) and inflation (control variable on three different socio-economic welfare variables (gross domestic product per capita, child mortality rate and primary and secondary school enrolment) during the study period.Results of the auto-regressive distributed lag (ARDL) technique show thatrevealed interest rate, liquidity rate and private sector credit have negative and significant effect on the per capita income while savings deposit rate, monetary policy rate, loan deposit rate and inflationhvesa positive and significant on per capita income. In the long run liquidity ratio and monetary policy rate have significant positive effect on income per capita while the ratio of private sector credit to GDP has a significant negative effect on it. Inflation has a positive but insignificant effect on per capita income. Furthermore, in the short run, all the selected monetary policy variables have significant effects on child mortality rate. While the effect of interest rate, liquidity ratio and monetary policy rate is negative, that of savings deposit rate, loan deposit ratio, private sector credit and inflation is positive. On the long run, interest rate, private sector credit and inflation have positive effect on child mortality but whereas the effect of interest rate is insignificant, the other two have significant effect. Regarding number of school enrolment, in the short run, interest rate has a negatively significant effect while liquidity ratio, loan deposit ratio and inflation have direct positive effect on it. Savings deposit rate has an insignificant positive effect on it while private sector credit has a negative insignificant effect on it. On the long run, interest rate, private sector credit and inflation have an insignificant positive effect on the number of primary and secondary school enrolment. Savings deposit rate, monetary policy rate and loan deposit ratio have insignificant negative effect on it. The effect of liquidity ratio is significantly positive. The study concluded that monetary policy has significant effect the socio-economic welfare life of Nigerians both in the short and long run. The study recommends the sustenance of the existing liquidity ratio and monetary policy rate due to their favourable effects on the people’s welfare.

Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe

Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe

Τhe short-run effects of fiscal adjustment in OECD countries

Τhe short-run effects of fiscal adjustment in OECD countries

China and deglobalization of the world economy

<abstract> <p>This paper analyses the causes of the downward trend in three key cohesion aspects of the world economy: international trade, foreign investment and global value chains. The paper shows that the causes of these trends are not cyclical, but structural; that is, it is the process of deglobalization of the international market, and transformation of the very foundation of the international economic system is underway. The specific aim of the study was to investigate the impact of current trends on China's economy. The question is whether the Chinese economy, which has developed due to globalization processes, will be negatively affected by reverse processes, and to what extent. To capture the short-run effect of globalization-related factors on China's economy, an autoregressive distributed lag (ARDL) model was used. For estimation of the long-run linkage, the ARDL bounds testing approach to cointegration was launched. The results of testing the short-term effects showed that the new Chinese development strategy, aimed at protecting domestic economy from external disturbances, has produced excellent results. Significant changes in the Chinese development paradigm, as based on domestic production to meet domestic demand and financed by internal resources, have led to a decrease in the share of all international indicators in the Chinese economy. This is shown by both the statistical description of changes in the globalization-related variables, and it is confirmed by the results of conducted empirical research. Testing of long-term relationships has given conflicting results, so it is not possible to identify the long-term impact with certainty. Nevertheless, the parts of bounds testing that are statistically indisputable indicate a long-term, strong cumulative impact of these variables on the Chinese economy, while the direction and intensity of the action of individual variables are unpredictable. A new paradigm enables China to take a better international position as a global investor instead of a recipient of investments, to take over growing parts of global product chains instead of being their production link and to initiate a new form of globalization in the Chinese way.</p> </abstract>

New evidence of extreme risk transmission between financial stress and international crude oil markets

We aim to analyze the risk transmission between financial stress and crude oil under different shocks, with applying a novel Granger causality test. Recent works suggest that this risk transmission is mixed, however, scholars mainly focus on their average causality but neglect the extreme causality and its time-varying characteristic. Using the weekly data of the financial stress index and WTI prices spanning from 1994 to 2020, we employ the extreme time-domain and frequency-domain Granger causality test to conduct our research. Results obtained from the time-domain test imply that their causality generally originates from extreme shocks rather than non-extreme shocks, which hasn’t been found before. For further distinguishing the long-run and short-run effects of these shocks, we apply the frequency-domain test and discover that these causalities are mainly found for long the run. Thus, investors and policy-makers may benefit from monitoring financial stress, especially under long-term extreme conditions.

Household and contextual indicators of poverty in the Gauteng province of South Africa: A multilevel analysis

This study aims to analyse the socio-economic factors contributing to poverty reduction in South Africa using time series data from 2006 to 2019. The stationarity of the variables will be assessed by applying the Augmented Dickey Fuller (ADF) test. The Autoregressive Distributed Lag (ARDL) analytical technique will be adopted to analyse the cointegration amongst variables pertaining to different orders of cointegration amongst lower bound [I(0)] and upper bound [I(1)]. The study will analyse the long-term and short-term effects of the socio-economic factors contributing to poverty reduction in South Africa. If the calculated F-statistic is greater than the upper bound [I(1)], the Error Correction Model will be adopted to assess the short-run effects. Diagnostic tests will be performed to test the robustness of the model. The tests will performed will include: (1) the Breusch-Godfrey test for serial correlation; (2) the Jarque-Bera test for normality; (3) the Breusch-Pagan-Godfrey technique to test for heteroscedasticity; and (4) the cumulative sum chart to detect deviation from the average associated with a subgroup.

Nexus between Industry 4.0 and environmental sustainability: A Fourier panel bootstrap cointegration and causality analysis

The paper aims at investigation of the nexus between Industry 4.0 (I4.0) and environmental sustainability in addition to exploring the long-run and short-run effects of Industry 4.0 on CO2 emissions. For this end, energy consumption, internet and communication technology (ICT) exports, research and development (R&D), artificial intelligence (AI), ICT technology patents and bitcoin are taken as control variables of Industry 4.0 for a panel of 9 countries that contribute to 62% of the total CO2 emissions in the world. For this purpose, the paper follows two approaches. First, the paper proposes utilization of AI and ICT technology patents, technology-related R&Ds and ICT exports as variables of I4.0 in addition to investigating the effects of economic growth, energy consumption and bitcoin. Second, to control structural changes and nonlinearity in the cointegrating relations and existence of degenerate cointegration, Fourier panel bootstrap autoregressive distributed lag model (FPBARDL) is utilized. Afterwards, FPBARDL based long, short and strong causality analyses are conducted. The empirical findings revealed positive impacts of all I4.0-related variables on emissions in the long-run. Though I4.0 related AI and ICT innovation has no direct effect in the short-run, its effects are determined through increased energy consumption towards emissions. The strong positive effects of energy consumption and positive effects of economic growth, ICT exports and R&D are observed both in the short and long-run. In addition to positive impacts of I4.0 on environment, the findings favor insufficiency of policies focusing on lowering emissions in I4.0 context.Policy recommendations include strong commitment to energy efficiency and renewable energies and trade policies with environmental concerns.