Simultaneous Equations Approach Research Articles

Costs of Adjustment, Portfolio Separation, and the Dynamic Behavior of Bank Loans and Deposits – Revised

AbstractWe revise the solutions of the dynamic optimization model of Elyasiani, Kopecky, and Van Hoose (1995), and show that the optimal policy function for the case of adjustment costs and no portfolio separation is a vector autoregressive model of order 1, and not of order 2. In addition, the empirical approach of Elyasiani, Kopecky, and Van Hoose (1995) is incorrect. The optimal policy functions for the no portfolio separation case have to be estimated with a panel vector autoregression model and not with a simultaneous equation approach. We also describe how the portfolio separation hypothesis can be tested empirically based on the correct policy functions.

A Simultaneous Equation Approach to Examining Linkages Between Income Inequality and Environmental Degradation in Lower Middle-Income Economies in ASEAN

A Simultaneous Equation Approach to Examining Linkages Between Income Inequality and Environmental Degradation in Lower Middle-Income Economies in ASEAN

Simultaneous Models for the Estimation of Main Forest Parameters Based on Airborne LiDAR Data

This study aimed to develop simultaneous models with universal applicability for the estimation of the main factors of forest stands based on airborne LiDAR data and to provide a reference for standardizing the approach and evaluation indices of main forest factor modeling. Using airborne LiDAR and field survey data from 190 sample plots in spruce (Picea spp.), fir (Abies spp.), and spruce–fir mixed forests in Northeast China, the simultaneous models for estimating the main factors of forest stands were developed. To develop the models, the relationships between mean tree height, stand basal area, stand volume, and the main metrics of the LiDAR data and the correlations between eight quantitative factors of forest stands were considered, and the error-in-variable simultaneous equations approach was employed to fit the models. The results showed that the mean prediction errors (MPEs) of eight forest stand factors estimated by the simultaneous models were mostly within 5%, and only the MPE of the number of trees per hectare exceeded 5%. The mean percentage standard errors (MPSEs) of the estimates, including the mean diameter at the breast height (DBH), mean tree height, and mean dominant tree height, were within 15%; the MPSEs of the estimates of the stand basal area, volume, biomass, and carbon stock per hectare were within 25%; and only the MPSE of the estimated number of trees per hectare exceeded 30%. The coefficients of determination (R2) of the core prediction models for the volume, biomass, and carbon storage were all greater than 0.7. It can be concluded that estimating the main factors of forest stands based on the combination of LiDAR and field survey data is technically feasible, and the simultaneous models developed in this study for the estimation of the eight main stand factors of spruce–fir forests can meet the precision requirements of forest resource inventory, except for the number of trees, indicating that the models can be applied in practice.

Capturing The Dynamics of Environmental Degradation and Economic Growth in Selected Developing Countries: Using Simultaneous Equation Approach

The current study aims to investigate the dynamic nexus between environmental degradation and economic growth in selected developing countries. To analyze the impact of control of corruption as a measure of governance, FDI, renewable energy and urbanization on economic growth and carbon emissions, the simultaneous equation modeling is applied. A panel of 18 selected developing countries for the time period 1995-2022 is taken for empirical verification of the relationship. This study employs descriptive analysis and for diagnostic checking the normality of residual is also tested for the possibility of any model misspecification. Correlation matrix is used to check the degree of multicollinearity among the independent variables. The nature of study indicate the use of simultaneous equation model where economic growth and carbon emission, as a measure of environmental degradation are indigenous variables. The statistical package EVIEWS is used in estimation and obtaining results. In the long run estimation model of CE, URBAN and PG are positively correlated with CE, and GDP, REEC, COC are inversely related to CE in selected developing countries. In model of GDP, CE, FDI and COC are positively correlating with GDP and REEC and PG are negatively affecting the GDP.

E-government, Economic Growth and Trade: A Simultaneous EquationApproach

Does e-government promote trade and economic growth? This paper attempts to answer this question by employing simultaneous equation estimation approach and using a crosssection data of 147 countries. This is first study which has empirically estimated the bilateral relationships between economic growth and e-government, trade and e-government and trade and economic growth. The findings indicate that e-government is a stimulant of both economic growth and trade. The results predict the presence of a bilateral relationship between egovernment and economic growth, trade and e-government, and unilateral causality exists from trade to growth.

Reforms and political instability in attracting foreign direct investment: a simultaneous equations approach

Reforms and political instability in attracting foreign direct investment: a simultaneous equations approach

UV- Spectrophotometric technique- based method development and validation for simultaneous estimation of Ciprofloxacin HCl and Quercetin in bulk powder

Antibiotic resistance is increasing worldwide, especially among ocular pathogens and one of the major reasons for this severity is the formation of biofilm which causes antibacterial specialists like Ciprofloxacin HCl to be ineffective, but combining it with substances that inhibit quorum sensing, a process that leads towards the development of biofilm, such as Quercetin, in a single formulation is an effective way to treat these infections. Aiming to develop and approve a new analytical method for the simultaneous evaluation of ciprofloxacin HCl and quercetin in their mass powder, the current examination is expected to accomplish this. Two strategies—the simultaneous equation approach (I) and the absorbance ratio method (II)—were created and validated in accordance with ICH guidelines for specificity, selectivity, linearity, precision, and accuracy. Quercetin's and Ciprofloxacin HCl's absorbance maxima (λmax) were determined to be at 327 nm and 271 nm, respectively, with coefficient correlation values of 0.999 and 0.997. Their isosbestic point was noticed at a maximum wavelength of 283 nm. Both Ciprofloxacin HCl and Quercetin demonstrated linearity in the focus range from 1 µg/ml to 10 µg/ml when absorbances were measured at any of the aforementioned levels. It was discovered that the developed processes were exact and precise with less than 2% relative standard deviation (%RSD). %Recovery studies were found to be 98.62-101.15% for Ciprofloxacin HCl at 271nm, 99.34-100.94% for Quercetin at 327nm, 99.63-104.62%, and 101.23-102.64% for Ciprofloxacin HCl and Quercetin respectively at their isosbestic point. Because it was discovered to be simple, rapid, specific, selective, linear, exact, and based on absorptivity measurements, the established UV Spectrophotometric technique can be used for in vitro depiction and contemporaneous assessment of Ciprofloxacin HCl and Quercetin.

Stress and retirement

This paper examines the bidirectional causal relationship between retirement and stress. We use data from the PSID for the period 2007–2015. By employing a simultaneous equations approach, we find that experiencing stress increases the likelihood of retirement by approximately 34.8 percentage points, whereas retirement lowers the probability of feeling stress by 19.6 percentage points. We obtain consistent results when we disaggregate data according to various individual characteristics, including gender, occupation, wealth, and ethnicity. To determine actual retirement age, we use official retirement ages and a proxy of health stock as instruments, while lagged physical activity levels serve as a non-linear instrument for perceived stress. Our findings are particularly relevant in terms of policy, and further research is needed to assess the impact of physical activity on economic and well-being outcomes for older individuals.

The moderating effect of environmental performance on the relationship between sustainability assurance quality and firm value: a simultaneous equations approach

PurposeThis study elucidates the interactive relationship of sustainability assurance (SA) quality with corporate environmental sustainability performance (CESP) and firm value and explores the moderating impact of CESP on the SA quality–firm value relationship.Design/methodology/approachThe sample comprises 320 firm-year observations of 40 companies listed on the Cotation Assistée en Continu (CAC 40) from 2010 to 2019. The authors use the simultaneous equations model to capture the CESP and SA quality–firm value relationship and apply the three-stage regression and generalised method of moments approaches to address possible endogeneity.FindingsThe results show that CESP, as assessed by International Organisation for Standardisation (ISO) 14001 certification, has a significant positive effect on firm value, the relevance of which implies that in the case of good environmental performance, society's perception of a firm is much more favourable; consequently, the firm is likely to be rewarded with a premium value in capital markets. In addition, environmental performance has a stronger interaction with SA quality, acting as a moderator variable; thus, greater SA quality signals credibility owing to increased eco-efficiency. The authors interpret their findings within a multi-theoretical framework that draws insights from legitimacy, stakeholders and signalling theoretical perspectives.Originality/valueThis study contributes to the literature by re-examining the relationship between SA quality and firm value. It also provides new evidence of the moderating effect of CESP on the SA quality–firm value nexus. Specifically, this study explores the joint effects of credibility and eco-efficiency on market confidence in sustainability information. The authors use a simultaneous equation model to capture the reciprocal association between SA quality and firm value, whereas prior studies on SA quality and market performance have frequently used single-equation regression. The authors also find that CESP positively moderates the relationship between SA quality and firm value. Including CESP and exploring the moderating impact of eco-efficiency on the SA quality–firm value relationship is a novel approach.

Interaction between liquidity risk and bank solvency, a crucial effect in a framework of simultaneous equations

The “2008-09” global financial crisis has underlined that the interaction between liquidity risk and bank solvency forms an important factor that makes banks particularly vulnerable to a global crisis. At the same time, stress-testing models do not consider the dynamics between solvency and liquidity risk the possibility of reducing the impact of stress on bank solvency and financial stability. In this context, the aim of this paper is to examine this highly relevant issue in the financial literature, and answer to the main question: Is the interaction between solvency and liquidity risk empirically significant in the context of the Algerian banks? Based on an econometric model using a simultaneous equation approach on panel data of 19 banks over 6 years running from (2016 to 2021). Our results validate our hypothesis about the interaction and show that these two risks are determined simultaneously. Building on this finding, we suggest that the authorities should emphasise developing integrated liquidity and solvency stress tests. Our results also show the need of the Algerian banks to set up a regulatory framework for liquidity in line with the international prudential regulations to enhance the performance of this sector.

Production, Consumption, Export and Carbon Emission for Coal Commodities: Cases of Indonesia and Australia

The contribution of this study is to analyze the impact of a series of economic activities from the coal commodity on carbon emission. This research specifically focuses on coal exporting countries in Asia Pacific, including Indonesia and Australia during the period 2000 to 2022. The purpose of this study is to investigate the influence between production, consumption and export of coal and its determinants, and also the effect on carbon emission. This study applies the simultaneous equation approach and panel regression. The main findings of this study are that coal consumption, coal export, technological innovation and coal price have a positive and significant effect on coal production. Furthermore, coal production, domestic income and domestic investment have a positive and significant effect on coal consumption, while coal export has a negative and significant effect. Then, coal production and coal stock have a positive and significant effect on coal export, while coal consumption and domestic investment have a negative and significant effect. Finally, production, consumption and export of coal commodities contribute to increasing carbon emission. We recommend the coal exporting countries analyzed in this study to implement coal energy control in addressing increasing carbon emission at the global level.

A simultaneous equations approach to analyze the sustainable water–energy–food nexus in South Korea

Factors such as climate change, economic development, population growth, pandemics, and geopolitical instability threaten water, energy, and food (WEF) security, which consequently put sustainability at risk. However, studies that simultaneously consider WEF security and sustainability aspects still need improvement. This research aimed to build a sustainable WEF nexus framework and analyze the interrelationships among water consumption, electricity demand, food production, and ecological footprint, considering the Environmental Kuznets curve (EKC) hypothesis and external factors of the WEF nexus. For the empirical analysis, this study employed the three-stage least squares method to identify synergies and trade-offs in the sustainable WEF nexus in South Korea using panel data from 2005 to 2019. The results indicated that rice production causes excessive use of agricultural water, thereby deteriorating water availability and quality. This phenomenon leads to scarce water resources and environmental degradation, which negatively impact energy production and sustainability. Although increased agricultural productivity through automation improves food security, it can pose a threat to energy security by increasing electricity demand and energy imports. The EKC hypothesis test revealed that environmental problems cannot be solved through economic development. However, the indicators related to WEF security influence environmental sustainability rather than economic growth. These results indicate that WEF security and sustainability can be improved simultaneously by maximizing synergies and minimizing trade-offs within a sustainable WEF nexus. Therefore, this research provides a roadmap for policymakers regarding efficient ways to improve environmental quality and WEF security.

Quadratic effect of bank size on capital regulation and risk-taking behavior: Evidence from the Central Europe

This paper primarily examines the quadratic effect of banks’ size on capital regulation and risk-taking behavior by using simultaneous equation approach. This paper primarily examines the quadratic effect of banks’ size on capital regulation and risk-taking behavior by using simultaneous equation approach. To carry out the objective, this study has been built on the two-stage least squares (2SLS) method for a dynamic unstructured panel data of 85 banks from the Central European banks for the period 2012–2017. There is a positive and significant relation between regulatory capital and risk. Also, higher risk-taking behavior causes banks to sacrifice their stability. This study also finds that there is a negative correlation between bank size and capital, indicating that larger the bank size lower tendency to keep capital more. In similar way, there is also a negative association between bank size and risk taking, indicating that lower tendency of taking risk by large banks and vice-versa. Finally, this paper can be used as a medium of information for the stakeholders of banks and others financial institutions of the country. There is a dearth of literature which was built on the quadratic effect of bank size regarding recent financial regulation and risk.

Liquidity, interbank network topology and bank capital

PurposeWhile previous literature has emphasized the causal relationship from liquidity to capital, the impact of interbank network characteristics on this relationship remains unclear. By applying the interbank network simulation, this paper aims to examine whether the causal relationship between capital and liquidity is influenced by bank positions in the interbank network.Design/methodology/approachUsing the sample of 506 commercial banks established in 28 European countries from 2001 to 2013, the author adopts the generalized method of moments simultaneous equations approach to investigate whether interbank network characteristics influence the causal relationship between bank capital and liquidity.FindingsDrawing on a sample of commercial banks from 28 European countries, this study suggests that the interconnectedness of banks within interbank loan and deposit networks shapes their decisions to establish higher or lower regulatory capital ratios in the face of increased illiquidity. These findings support the implementation of minimum liquidity ratios alongside capital ratios, as advocated by the Basel Committee on Banking Regulation and Supervision. In addition, the paper underscores the importance of regulatory authorities considering the network characteristics of banks in their oversight and decision-making processes.Originality/valueThis paper makes a valuable contribution to the current body of research by examining the influence of interbank network characteristics on the relationship between a bank’s capital and liquidity. The findings provide insights that add to the ongoing discourse on regulatory frameworks and emphasize the necessity of customized approaches that consider the varied interbank network positions of banks.

How Do Women on Board Reduce a Firm’s Risks to Ensure Sustainable Performance during a Crisis?

The research applies the Upper Echelons Theory and the Lehman Sisters Hypothesis to explain how women board members use investment, financial, and liquidity techniques to reduce risk and increase a firm’s value. An original dataset of listed US companies is analyzed to show how women strategists contribute to value creation and mitigate stock volatility and bankruptcy. A simultaneous equations approach captures the interplay between a company’s use of debt and financial derivatives. According to this research, organizations that employ derivative instruments benefit more from having women in advisory roles because women encourage proactive risk management and develop effective risk control measures. The research implies that businesses should actively promote gender equality on their boards rather than merely recognizing the need for diversity.

Analysis of Catch and Fishermen Family Welfare in West Sumatra Province: Simultaneous Equation Approach

Analysis of Catch and Fishermen Family Welfare in West Sumatra Province: Simultaneous Equation Approach

Relationship of Marketing Mix, Brand Equity to Purchase Decision and Loyalty with Digital Wallet as Moderating during the Covid 19 Pandemic Period

This study aims to examine the relationship between Marketing Mix, Brand Equity with Purchase Decisions, and Loyalty with Digital Wallets to reinforce the relationship between Brand Equity and purchasing decisions. This research is included in cross-sectional research because it was conducted at a particular time and was not compared with other studies. The sample selection technique used non-probability sampling, namely convenience samples, and questionnaires were distributed via e-link via Whatsapp and Facebook. The sample of this study is the population aged 17 years and over who live in Jakarta, Bogor, Depok, Tangerang, and Bekasi. The number of research samples is 271 respondents. This study uses a simultaneous equation approach model with two-stage least square (2SLS) estimation techniques and data processing with SPSS version 26.00. The results showed that marketing mix, brand equity, and customer loyalty positively and significantly affected customer satisfaction. Digital wallets played a moderating factor, statistically, do not influence purchasing decisions. Purchase decisions and customer satisfaction positively and significantly influence customer loyalty. The findings of this study are that in improving smartphone purchasing decisions, the best effort is to prioritize aspects of the marketing mix and brand equity. The digital wallet is not a factor that drives consumer purchasing decisions. Furthermore, customer loyalty can be built in the long term through efforts to optimize purchasing decisions and customer satisfaction

The interaction effect between public environmental concern and air pollution: Evidence from China

Prior studies have explored the relationship between public environmental concerns and air pollution, but the interaction effects and spatial factors under a systematic framework have been ignored. This paper investigates the interaction effect between public environmental concern and air pollution, moreover, a spatial panel simultaneous equation approach is employed to reduce the endogenous interference and the potential impact of spatial factors. Based on the balanced panel data of 269 prefecture-level cities in China from 2011 to 2017, we find that a 1% increase in public environmental concern will lead to a 0.049% decrease in PM2.5 concentration, while a 1% increase in PM2.5 concentration will lead to a 1.398% increase in public environmental concern. Meanwhile, there is a significantly spatial spillover effect of both public environmental concern and air pollution to the surrounding areas. Furthermore, our findings suggest that public environmental concern reduces air pollution by promoting government environmental regulation, and air pollution promotes public environmental concern by threatening the health of the residents. In addition, the results of heterogeneity analysis show that the interaction effect of public environment on air pollution significantly differs across regions with different heating characteristics and economic development levels. Practicable policies to promote favorable feedback on public environmental concern and air pollution are suggested.

Working Capital Management, Firm’s Performance and Sustainable Growth of Firms in India: A Simultaneous Equation Approach

Working Capital Management, Firm’s Performance and Sustainable Growth of Firms in India: A Simultaneous Equation Approach

Impact of the COVID-19 Pandemic on the Economic Performance in Indonesia: Simultaneous Equations Approach

This study explains the relationship between economic performance and tax revenues in Indonesia and the impact of COVID-19 on Indonesia's economic performance using a new approach, namely the three-stage least squares model. This approach is used based on the alleged simultaneous relationship that occurs between economic performance variables and tax revenue variables. The results of the analysis prove that the variables of economic performance and tax revenue have a simultaneous relationship, so that the two variables influence one another. Additionally, the results of the analysis show that the COVID-19 pandemic has had a negative effect on economic performance in Indonesia. Therefore, the implementation of economic protection policies for vulnerable groups in society, namely the poor and near-poor, needs to be carried out properly. The novelty of the results is the use of the three-stage least-squares model to determine the relationship between economic performance variables and tax revenues simultaneously. Keywords: COVID-19, economic performance, Indonesia, simultaneous equations, three-stage least squares. DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.60.47