Short-run Equilibrium Relationship Research Articles

The Dual Impact of Foreign Capital: A Comprehensive Analysis of the Interplay between Foreign Direct Investment and Development Assistance Committee Initiatives in Ethiopia

This study delves into the intricate dynamics of Ethiopia's economic landscape, examining the dual impact of foreign capital through a comprehensive analysis of Foreign Direct Investment (FDI) and Development Assistance Committee (DAC) initiatives. Over the period 1992-2012, a two-part empirical approach is employed, encompassing descriptive statistics and rigorous econometric modeling rooted in time series analysis. The nuanced relationship between foreign capital and economic growth in Ethiopia is unraveled, addressing challenges such as job displacement and potential exploitation, alongside positive outcomes like infrastructure development and increased service accessibility. The econometric analysis utilizes various models to explore the causal relationships between FDI, DAC, economic growth, and self-employment. Sensitivity analysis ensures the robustness of the models by unraveling multicollinearity, while stationarity tests guide appropriate treatment of non-stationary variables. Cointegration tests reveal potential long-term relationships among variables, with specific models suggesting cointegration, further substantiating the intertwined nature of FDI, DAC, and economic growth. Granger causality Wald tests scrutinize short-run equilibrium relationships, unveiling intriguing insights into the direct and indirect effects of FDI, DAC, and self-employment on economic growth. Robust diagnostic tests affirm the reliability of the models, indicating compliance with Ordinary Least Squares (OLS) conditions. In summary, our findings illuminate the dual impact of foreign capital on Ethiopia's economic trajectory, offering nuanced perspectives for policymakers. The study's comprehensive empirical foundation facilitates a deeper understanding of the complex interplay between FDI, DAC initiatives, and economic growth, paving the way for informed decision-making and future research endeavors.

Circular economy, environmental quality and tourism receipts in Europe: A time series data analysis.

The study examines how progress towards a circular economy (CE), patents related to recycling and secondary raw materials as a proxy for innovation, affect tourism receipts. The study uses Autoregressive Distributed Lag (ARDL) and Error Correction Method (ECM) to analyse time series data from EU countries from 2000 to 2020. Our estimates show that there exist long-run and short-run equilibrium relationships. In sum, evidence shows that promoting circular innovative practices, including recycling and using secondary raw materials in tourist destinations, could improve environmental quality and positively impact tourism receipts. The study concludes with policy and practical suggestions for circular economy innovation towards green tourism, destination management, and sustainable tourism.

An Analysis of the Effect of Naira Devaluation on Nigerian Balance Of Trade

This study investigates the effect of naira devaluation on Nigerian balance of trade using time series data from 1986 to 2021. The study examined the long run and short-run equilibrium relationship between devaluation and trade balance over the study period. The study used unrestricted Vector Auto Regression (VAR), Co-integration and Vector Error Correction Mechanism (VECM) technique in the analysis of data. The variables currency devaluation (CDV), Export rate (EXPT), Import rate (IMPT) and Trade balance are found to be 1(1) variables, while Interest rate (INTR) is found to be 1(0) variables. Based on the VAR Co- integration test result, it indicates long-run equilibrium relationship among the variables. The error correction term was correctly signed and statistically significant. The estimates from the VAR model showed both positive and negative shocks running from naira devaluation to trade balance, export rate, import rate and currency devaluation based on the past and current values. The study concluded that, naira devaluation have positive and significant impact on trade balance of Nigeria. The study recommended that, Government should improve this indigenous innovation to meet up with international standard as a means to reduce dependence on import and encourage production of competitive goods and services, as export becomes cheaper after devaluation, it is expected that Nigeria as a country will immensely improve on its exported goods and increase the output of exportable goods which will leads to favorable balance of trade among others.

Analysis of the Impact of Remittance Inflows on Economic Growth: Evidence from Nigeria

This study investigated the impact of remittances on economic growth of Nigeria using time series data from 1986 to 2018 by examining the long -run and short-run equilibrium relationship between remittances and economic growth. The study used unrestricted Vector Auto regression (VAR), granger causality, Auto regressive distributive lag (ARDL), impulse response function and variance decomposition. The result of ARDL bound test, indicates the existence of long-run equilibrium relationship between remittance inflows and economic growth in Nigeria. The impulse response function, as well as variance decomposition result shows the mixture of both positive and negative shocks from GDP per capita to remittance, household consumption expenditure, foreign direct investment and official development assistance based on the past and current values. The study found the existence of unidirectional causality running from GDP per capita to remittances and foreign direct investment. The study recommends that, government should expand and improve the financial sector and make the process of transfer of remittance much easier and less expensive. This will enable the economy to capture remittance inflows that comes in through informal channels which are usually difficult to capture officially, and also remittances inflows need to be invested into productive sector. This is because without such investment the inflows cannot play any significant role in the economy particularly households that do receive remittance.

Analysis of Offset Emission Permit Pricing Factors in the Korean Carbon Market

This study aims to empirically analyze the long-run and short-run equilibrium relationship between the price of Korea Offset Unit (KOC) listed and traded on the Korean Exchange since May 2016, and the variables affecting it, such as Korea Allowance Unit (KAU) price, oil, electricity, economic survey prospect index of the general manufacturing business, heating index and cooling index. In general, research on emission permit prices is conducted on the demand side and the supply side. This study analyzes the relationship in the demand side, and weekly time series data for about 6 years from the end of May 2016 were used with the ARDL model. As a result of the empirical analysis, KOC showed a positive correlation between KAU and oil price, and showed a negative correlation with the prospect of Business Survey Index in the long run. In the short term, KAU, oil price, and electricity price showed a positive correlation, and the prospect of Business Survey Index showed a negative correlation.

Factors influencing export performance of Ginger (Zinbiger officinale) in Nigeria

This study evaluated factors influencing export performance of ginger (Zinbiger officinale) in Nigeria. Specifically, the research study was designed to achieve the following objectives: examine the short run equilibrium relationships between test variables; evaluate the long run equilibrium relationships between test variables; and determine the linear – interdependence between factors influencing export of ginger. The test variables under considerations were export quantity of ginger (Zinbiger officinale), exchange rate, interest rate, ratio of producer price to domestic price, and ratio of producer price to export price. Data were of secondary sources covering 1995 -2020.The statistical and econometrics tools used to achieve the stated objectives were: Augmented Dickey Fuller (ADF), Phillips-Perron (PP), Johansen Co-Integrating Test and Vector Error Correction Model (VECM). The results of Augmented Dickey-Fuller (ADF) unit root test shows that all test variables were non-stationary at level. All test variables were statistically significant at first difference at 5% level of probability. Phillip-Perron (PP) unit root test shows that all test variables were stationary at first difference and were statistically significant. Johansens co-integration test revealed the presence of co-integration among variables and long-term relationships among variables. Vector Error Correction Model (VECM) shows that exchange rate (EXR), interest rate (INR), had negative coefficients and was statistically significant in influencing export performance of ginger (Zinbiger officinale) in Nigeria in the short run. Ratio of producer price to domestic price (PP), producer price to export price (PX), quantity of ginger exported (Y) had positive coefficients and were statistically significant in influencing export performance of ginger (Zinbiger officinale) in Nigeria in the short run. In the long run, exchange rate (EXR), interest rate (INR), ratio of producer price to domestic price (PP), ratio of producer price to export price (PX) were statistically significant in influencing export performance of ginger (Zinbiger officinale) in Nigeria. The coefficients of error correction model (ECM) was negative, this measures the speed of adjustment towards the long run equilibrium. The coefficients of multiple determinations (R^2) was 0.6710. This confirmed presence of goodness of fit. The F-statistics of 43.06 was significant at 1% level of significance. This confirmed the explanatory power of the entire model. The RESET value of VECM was 1.510 (P < 0.01) shows no evidence of misspecification of functional form. The research study recommends policy formulations and implementations that will stabilize exchange rate. Interest rate should be single digit. Export market should be developed along the ginger (Zinbiger officinale) value chains and other crops to expand export market base and earn foreign exchange

Economic Growth and Financial Sector Development: Long-Run Structural Break Cointegration and Short-Run Equilibrium Relationships in the East African Community

The EAC countries in a bid to boost economic growth (RGDP) and reduce poverty in the region, implemented several financial sector reforms, however, empirical findings have indicated that financial development (FSD) can have a positive, negative or no effect on economic growth. This study investigated this relationship for four EAC countries including Uganda, Kenya, Burundi and Rwanda using individual country Gregory-Hansen-Quandt-Andrews-Muwanga (GHQAM) cointegration procedure based on OLS/ FMOLS estimations. The findings indicate that in the long-run: i). a cointegration relationship exists between financial development and economic growth but it has not been stable for the periods covered; and ii). the elasticity of economic growth to financial development was zero before and after the break for Uganda and Burundi but ranged between 0.000 - 0.3208 and between 0.2178 - 0.3063 for Kenya and Rwanda, respectively, implying an inelastic relationship for all four countries. In the short-run, RGDP did not adjust to changes in FSD in Burundi while 46.36%, 46.3% and 40.67% to 67.47% of the adjustment of the former to changes in the later occurred in the short-run in Rwanda, Uganda and Kenya, respectively. These results signal the need to review and enhance the transmission mechanisms through which financial development affects economic growth and put in place a favourable environment to ensure positive and elastic effects on economic growth.

Government Expenditure and Regional Economic Growth: The Direction of Causality

This study examines the link between government expenditure and regional economic growth, over the period 2013 to 2017. Gross County Product per capita growth is used as indicator of regional economic growth. This study used Error Correction Model and Engle and Granger framework two step procedure to investigate the long-run and short-run equilibrium relationship between expenditure and regional growth. The analysis reveals that expenditure and regional growth are co-integrated and, hence a long-run equilibrium relationship exist between them. Non-devolved expenditure is found to be significant in determining regional growth and growth significantly affect non-devolved in short-run. Further, short-run uni-directional causality was detected between capital, recurrent expenditures and growth. This study argues that expansionary government expenditure accelerates regional economic growth in long-run. The absence of a long-run causality moving from growth to components of expenditure implies that economic growth macroeconomic policies can be implemented without adversely affecting the size of government expenditure.

The Effectiveness of Fiscal and Monetary Policy: Case of Uzbekistan

The article examines an effectiveness of government monetary and fiscal policy for Uzbekistan by constricting IS-curve for goods market and LM-curve for money market, simultaneously. For the both markets equilibrium interest rate is also determined. The results show that the variables are co integrated, that the variables have long-run or short-run equilibrium relationship between them. According to the empirical results, the long-run equilibrium interest rate for covered period was 22.0% for Uzbekistan, for the current period we recommend the equilibrium interest rate around 15%.

How to apply the novel dynamic ARDL simulations (dynardl) and Kernel-based regularized least squares (krls)

The application of dynamic Autoregressive Distributed Lag (dynardl) simulations and Kernel-based Regularized Least Squares (krls) to time series data is gradually gaining recognition in energy, environmental and health economics. The Kernel-based Regularized Least Squares technique is a simplified machine learning-based algorithm with strength in its interpretation and accounting for heterogeneity, additivity and nonlinear effects. The novel dynamic ARDL Simulations algorithm is useful for testing cointegration, long and short-run equilibrium relationships in both levels and differences. Advantageously, the novel dynamic ARDL Simulations has visualization interface to examine the possible counterfactual change in the desired variable based on the notion of ceteris paribus. Thus, the novel dynamic ARDL Simulations and Kernel-based Regularized Least Squares techniques are useful and improved time series techniques for policy formulation.•We customize ARDL and dynamic simulated ARDL by adding plot estimates with confidence intervals.•A step-by-step procedure of applying ARDL, dynamic ARDL Simulations and Kernel-based Regularized Least Squares is provided.•All techniques are applied to examine the economic effect of denuclearization in Switzerland by 2034.

International Application Model Short-Long Term Between GDP and Consumption : Case Study Indonesia

SUMMARY More recently, significant fluctuations in the Indonesian economy justify the need to pay more attention to this issue. In this case, the main purpose of this research is to know the relationship between two issues related to Indonesian macro economy called consumption and GDP for data period during 1967 until 2014. This study investigates the relationship between GDP variables and Indonesian consumption consumption variables using the test ARDL, cointegration and Granger causality. The result of the research can be concluded that, there is long-run equilibrium relationship between GDP and consumption with long-term ARDL model, 10% change of consumption will produce long-term change of 44% in GDP. It is not surprising that there is no short-run equilibrium relationship between GDP and consumption. 10% of consumption will result in a short-term ARDL model change of 95% in GDP. The variables and consumption of GDP are cointegrated in the long run significantly at lag interval 10, whereas the use of lag interval 1 and 5 is not credited in the long run. Using a cointegration test with lag interval 1, 5 and 10 indicates significant for all usage slowness. So it can be summarized in the context of GDP and coordinated short-term economic consumption for all the prevailing interval lags. concluded that long-term causality test results between GDP variables and significant consumption with time intervals 5 and 10. intervals 1, 15 and 20 have no long-term causality relationship between GDP variables and consumption variables. a short-term causal model. With lagging intervals of 1, 5, 10 and 15, there is a short-term causal relationship between the variable GDP and consumption. As for the use of delay interval 20 there is no causal relationship in the short term between the variable GDP and consumption in Indonesia.

Futures markets and real estate public equity: Connectivity of lumber futures and Timber REITs

This paper investigates connectivity between lumber futures contracts, Timberland REITs, the FTSE NAREIT U.S. REIT index, spot prices, and timberland capitalization rates, and contributes to this tranche of research by empirically linking the price discovery process of Timberland Real Estate Investment Trusts to lumber futures. We employ VEC and GARCH models, providing evidence that lumber futures have a positive significant long- and short-run equilibrium relationship with publicly traded Timber REIT prices, connecting a specific futures commodity with its theoretically entwined real estate equity index. As such, exogenous factors that influence Timber REIT prices are documented leading to possible diversification/risk reduction strategies.

Dynamic Linkages Between Macroeconomic Factors and Islamic Stock Indices in a Non-Islamic Country India

The interaction between macroeconomic variables and share returns has been a debatable topic since decades. Much of the earlier studies have talked about significant relationships between stock market and macroeconomic indicators. In recent years Islamic finance has shown persistent growth worldwide. India has approximately 177 million Muslims, accounting for 12% of India's total population. Islamic finance differs from conventional investing in different ways like prohibition of gambling, pork, alcohol, entertainment, tobacco, profiting from interest rates etc. This paper aims to explore the long run and short run relationships of macroeconomic indicators and stock returns in the Indian context. The study is unique as it employs Shariah compliant indices to check on the stock market in India, a non - Islamic country. Data spans the period from January 2006 to July 2015. Monthly data is used and the selected macroeconomic variables are inflation rate (wholesale price index), interest rate (365 day government of India T-bill rate), money supply (M3) and exchange rate (US Dollar/Indian Rupee). 'Dow Jones Islamic Market India Total Return Index' is considered to track for the Shariah compliant stock index in Indian equity market. The study employs Johansen's co-integration and VECM to check for long run and short run equilibrium relationships. We check for long run equilibrium relationships through co-integration analysis. Johansen's test is a preferable multivariate cointegration test as it accounts for more than one cointegrating relationships. Granger causality is applied to check for the direction of causality. Variance decomposition in VAR system dynamics is also analyzed. Study reports the presence of a long run equilibrium relation between macroeconomic indicators and Dow Jones Islamic India market index. We are getting a positive and statistically significant relationship between WPI and stock returns as well as money supply and stock returns. Interest rate is showing negative and statistically significant relation with stock returns. Further uni-directional causality is observed from money supply and exchange rate to Dow Jones Islamic India market index. We can say that exchange rate as well as money supply granger causes Dow Jones Islamic India Market Index. Variance decomposition of exchange rate shows that 21.66% of variance in exchange rate is explained by Dow Jones index. Variance decomposition of Dow Jones index shows that money supply M3 explains 16.01% of variation in Dow Jones index. India's Islamic capital markets are showing signs of market inefficiency because of long run equilibrium relationships. This paper caters to the needs of Islamic investors and also to the policy makers as it provides a broad understanding of dynamic relationships between Shariah compliant stock returns and macroeconomic factors in India.

Carbon dioxide emissions, GDP, energy use, and population growth: a multivariate and causality analysis for Ghana, 1971-2013.

In this study, the relationship between carbon dioxide emissions, GDP, energy use, and population growth in Ghana was investigated from 1971 to 2013 by comparing the vector error correction model (VECM) and the autoregressive distributed lag (ARDL). Prior to testing for Granger causality based on VECM, the study tested for unit roots, Johansen's multivariate co-integration and performed a variance decomposition analysis using Cholesky's technique. Evidence from the variance decomposition shows that 21% of future shocks in carbon dioxide emissions are due to fluctuations in energy use, 8% of future shocks are due to fluctuations in GDP, and 6% of future shocks are due to fluctuations in population. There was evidence of bidirectional causality running from energy use to GDP and a unidirectional causality running from carbon dioxide emissions to energy use, carbon dioxide emissions to GDP, carbon dioxide emissions to population, and population to energy use. Evidence from the long-run elasticities shows that a 1% increase in population in Ghana will increase carbon dioxide emissions by 1.72%. There was evidence of short-run equilibrium relationship running from energy use to carbon dioxide emissions and GDP to carbon dioxide emissions. As a policy implication, the addition of renewable energy and clean energy technologies into Ghana's energy mix can help mitigate climate change and its impact in the future.

From Sustainable Tourism to Economic Development

ABSTRACTThis study examines the causal relationship between tourism expansion and exports growth using Thai macroeconomic data. A series of bivariate Vector Autoregressive (VAR) models are estimated. Granger causality tests are conducted in order to investigate short-run equilibrium relationship between international tourist arrivals and exports volume. An evidence of a bi-directional causality does not only suggest that tourism marketing programs can be used to induce international trade growth, but also that exports promotion programs are an alternative means to reinforce tourism industry development. Managerial implications along with the importance of societal marketing to the tourism industry are discussed.

Causality effect of capital market indicators on foreign investment model in Nigeria and South Africa (1980-2013)

This study examined causal effects of economic indicators attracting foreign investment inflows in Nigeria and South Africa. The purpose of the study is to investigate the behavioural pattern of economic indicators and determinants of economic indicators of capital market model influencing foreign investment inflows these two countries. The data were sourced from various economic and statistical bulletins of each country. Diagnostic test and Granger causality tests were the main econometric techniques for the analysis. The findings confirmed that for both countries; total value of transaction (TVT) and market capitalisation (MCAP) are the main economic indicators of capital market model (CMD) attracting foreign investment (FI). The study concluded that the identified economic indicators of CMD influenced FI in a short-run equilibrium relationship except interest rate having long-run equilibrium with foreign investment in South Africa. It is recommended that substantial approach and workable policy formulation and implementation in the stock exchange market to improve quality portfolio is highly needed to attract foreign investors in the global financial market.

Examining the Equilibrium Relationships between Foreign Direct Investment Inflows and Employment in Manufacturing and Services Sectors: Evidence from Malaysia

The current paper examines the long-run and short-run equilibrium relationships between FDI inflows and employment in Malaysian manufacturing and services sectors using ARDL approach for the 19722011 period. It employs ADF and PP tests to detect the stationary levels of above variables. Also, it utilizes the bounds F-statistics test to identify the co-integration among variables. Results of ARDL approach indicate the presence of significant long-run and short-run equilibrium relationships between FDI inflows and employment in manufacturing and services sectors. The paper’s findings are of particular interest and importance to Malaysian policy makers towards increasing FDI inflows and employment in manufacturing and services sectors.

A Study of the Efficiencies of Maize and Wheat Futures Markets in India

This paper studies the futures markets for maize and wheat in India in order to determine their efficiencies. Cointegration and error correction models are used to determine the presence of cointegration and short-run equilibrium relationship between the futures and spot prices. The convergence of the futures and spot price series suggests that futures markets play the expected roles of price discovery and risk management. Although the futures market is found to be an unbiased predictor of future spot price, it is weakly inefficient for both commodities because past futures and spot prices had significant impact on the current spot prices. Also, price volatility clustering is not found in the price series which is an indication that price movements are due to normal fundamentals of demand and supply. On the basis of price discovery and risk management, the study advocates for more participation in the futures market and the formulation of policies that would enhance greater working efficiency of the futures markets.

Assessing the Impact of Incomes Policy: The Italian Experience

The Saint Valentine's decree (1984) and the ensuing hard fought referendum (1985), which reduced the automatisms of scala mobile, started a process of redefinition of wage fixing in Italy, which culminated with the final abolition of scala mobile (1992) and the approval of Protocollo d'intesa (1993). Since then, following New Corporatist principles, a national system of centralised wage bargaining (concertazione) and the so-called institutional indexation have governed the determination of wages. This paper aims to assess the impact of such incomes policy agreements on the long and short run equilibrium relationship between real wages, labour productivity and unemployment. Different time series econometric tools confirm that incomes policy has altered the relationship between real wages and productivity, generating not only a permanent downward impact on prices, but also on real wages. In a sense, incomes policy has caused a new form of (upward) wage rigidity. Interestingly, no impact of incomes policy on the weak relationship between real wages and unemployment is detected. The analysis calls for a careful revision of the 1993 Protocol aimed at: a) better protecting the purchasing power of real wages without losing control on inflation; b) introducing growth generating mechanisms.