Structural Break Tests Research Articles

Institutional quality and digitalization: Drivers in accessing European funds at regional level?

Today, when smart development is increasingly mentioned in public policies, the way digitalization, as a key component of it, will transform the world in which we are living is gaining great interest. States have to resort to the mastery of various technological tools in order to keep up with global trends and, therefore, the consequences of digitalization, whether positive or negative, will be better inventoried once time passes. The changes deriving from these realities will be felt at all levels of society. Since the path towards cohesion among the less developed countries and regions in the European Union (EU) is facilitated by its financial support, through a variety of funds, a key question emerges: how much do the elements of an institutional nature, coupled with aspects that revolve around digitalization, matter in differentiating the regions when it comes to attracting European funds? To provide answers to this question, in our study we explore the dynamics of European funds, in the 2007–2018 time frame, under the influence of several factors that lead, on the one hand, to characteristics that define institutional quality, and on the other hand, to a slightly ignored facet, at least in socio-economic sciences, namely digitalization. The examined period covers the entire financial framework 2007–2013 and a significant part of that which started in 2014. Unfortunately, the data related to the following years were not available when this article was written, and, thus, it was impossible to design a more comprehensive scoreboard on the absorption of European funds in the 2014–2020 cycle. The sample includes 56 regions from Central and Eastern European (CEE) countries and the funds addressed in this research are: the Cohesion Fund (CF), the European Regional Development Fund (ERDF) and the European Social Fund (ESF). Applying, initially, a panel structural break test and a baseline scenario that considers the trilateral relationship between institutions, digitalization and the absorption of funds, we build, subsequently, two interaction scenarios between certain indicators integrated in the analysis. Proceeding in such manner, we obtained results highlighting the fact that institutional quality (regional governance), as well as digitalization, have a particular impact on accessing European funds. In fact, the proposed approach along the two dimensions (institutions and digitalization), set in connection with European funds, enable one to X-ray and better understand the particularities of the regions so that the latter can capitalize more intensively on their potential to faster diminish development disparities and induce inclusiveness.

A changepoint analysis of exchange rate and commodity price risks for Latin American stock markets

Focusing on countries whose economies are exposed to fluctuations in commodity prices and exchange rates, we study the vulnerability of these stock market returns to exchange rate and commodity price shocks using non-parametric structural break tests for volatility and dependence. The return distributions are modeled using a Copula-GARCH model incorporating the estimated changepoints and we measure risk-spillovers with the conditional Value-at-Risk. We find evidence for various changepoints at different points in time, implying changes in risk and spillovers. In particular, there is evidence of increased spillover risk after the outbreak of the global financial crisis in 2008, as well as higher conditional risk following the Covid-19 outbreak.

Portuguese Agrifood Sector Resilience: An Analysis Using Structural Breaks Applied to International Trade

In the last two decades, Portugal suffered the effects of two global crises, the financial crisis and the COVID-19 pandemic, as well as the Common Agriculture Policy reforms. These crises had a great impact on the Portuguese economy, but it is completely unclear how they affected the dynamics of the Portuguese agrifood sector. This study’s objective is to analyze the resilience of this sector to European and global socks, testing the effects on international trade. Secondary data from the Portuguese Statistics Institute were used for the exports and imports trade series of animal and vegetable products and food industries from 2000 to 2020. The methodology was based on the structural xtbreak model, stability analysis, and tests for structural breaks. Some volatility was observed in the trade series, particularly in imports, without consistency among years, trade sectors, or imports versus exports trade. In the case of exports, one or two structural breaks in the different sectors occurred in different years. The most relevant dynamics occurred after the sovereign debt crisis. It was concluded that CAP reforms and global crises seem to not have caused new relevant dynamics in the Portuguese international agrifood trade. This revealed the resilience of the sector to external shocks.

Quaternion attitude and disturbance observer mass estimation with low-cost sensors for industrial vehicles with trailers

Information about the vehicle mass and ground slope is important for many assistance functions in road and logistics vehicles. In intralogistics, safe speed limits for tractors depend on both slope and trailer mass. This work presents an estimation procedure for the attitude of a vehicle and the mass of a trailer attached to it. The estimator works in two steps. First, the attitude is estimated using an extended Kalman filter based on acceleration and angular rate measurements complemented by a single track vehicle model. In the second step, this information is used together with velocity and motor torque data to estimate the trailer mass and friction coefficient. A Kalman filter based disturbance observer for parameter estimation is compared to a recursive least squares identification. The mass estimation is extended by a structural break test to detect sudden mass changes when hitching and unhitching trailers. Multiple variants of the estimation scheme are implemented on an intralogistics vehicle. The performance of the proposed attitude and mass estimation solutions is demonstrated in comparison to state of the art reference algorithms in a large number of experiments. Compared to state of the art estimators, the proposed estimator yields a median 54 % reduction of pitch estimation RMSE and 40 % reduction of the mass estimation error. The structural break detection is able to detect all instances of hitching and unhitching of trailers with few false positives.

How does US tariff policy affect the relationship among crude oil, the US dollar and metal markets?

This study aims to investigate two questions: a) what are the relationships among crude oil and metal markets with respect to fluctuations in the US dollar (USD) index? and b) have these relationships changed in response to the US trade tariff policies on aluminum and steel imports (on March 8, 2018)? The structural break test shows that after the institution of the import tariff policy, there was a significant change in the behavior of the aforementioned markets, especially in the metal markets. The spillover effects were measured using the vector autoregressive moving average asymmetric generalized conditional heteroskedasticity (VARMA-AGARCH) model along with the quantiles and frequencies methods. The analysis period being from April 1, 2016 to December 30, 2019. The findings revealed that there was a spillover effect from the USD index and crude oil market to the aluminum and steel markets. After the tariff policy, the negative spillover from the USD index into the aluminum and steel markets changed to positive, and its impact increased in the post-break period. Furthermore, the positive impacts of the crude oil price on aluminum and steel decreased after the tariff policy. According to the quantile regression results, metals could act as a safe haven and hedge against the USD index under different investment horizons (short-, mid-, and long-term) and market conditions (bearish, normal, bullish).

The relationship between renewable energy and economic growth in European countries: Evidence from panel data model with sharp and smooth changes

In recent years, there has been a rapid increase in the trend towards environmental sustainability through the adoption of renewable energy resources. However, the main concern revolves around whether renewable energy consumption contributes to economic growth. Thus, this study aims to investigate the relationship between renewable energy and economic growth in European countries from 1970 to 2019 using panel data analysis with structural breaks. Additionally, this study demonstrates the influence of renewable energy consumption, capital stock, and the human capital index on economic growth performance in European countries. To control for structural breaks with sharp and smooth changes in the model, Bai & Perron's [10–11] structural breaks test and Sun et al.'s [66] time-varying fixed effects model are applied. The findings indicate that modeling significant structural breaks helps to consider nonlinearity in the model structure, define time dynamics in relationships, and gain new insights. Moreover, new modeling approaches reveal the validity of the time-varying effect of renewable energy on economic growth. Based on the obtained results, this study provides policy implications for governors and researchers.

Investors’ reactions on the publication of integrated reports. Evidence from European stock markets

The last decades brought to stock market investors’ attention several key issues regarding companies’ activity, besides the financial statements. These issues, such as environmental, social, or corporate governance policies are nowadays included in integrated reports issued by many listed companies worldwide. Although these topics seem to currently attract a high interest in the media, our study’s aim is to determine whether the listed firms’ release of Integrated Reports has any bearing on the issuers’ performance on the capital market as assessed by market value, return, and risk. In this respect, we analysed three different stock market time series’ reactions – daily close prices, daily logarithmic returns, and risk measured by the Expected Shortfall – to the publication of integrated reports, for a sample of 48 companies, listed on various European stock markets. In order to identify any sudden changes in the analysed time series behaviour, immediately after the publication date, we used the Bai-Perron multiple structural breaks test. Our results show that no consistent, significant reactions occur within the analysed time series immediately after the publication of integrated reports, but only isolated, circumstantial reactions seem to appear. Moreover, it seems that the markets show common significant reactions to certain events, marked by major structural breaks, but none of these events could be related to the publication of integrated reports. Within this context, our paper manages to prove that although it currently constitutes a hot topic worldwide, integrated reporting is not a key feature in the investors’ short-term decisionmaking process.

Investment Hysteresis: An Empirical Essay Turkish Case.

After the 2008 World Crisis, there is a view that the economic recovery has not been adequate. In this context, the debate on hysteresis and especially investment hysteresis has increased in the last decade. The aim of this study is to analyze the investment hysteresis and the basic dynamics of hysteresis in the Turkish economy. Structural break tests are used to identify hysteresis. Traditional and asymmetric causality tests are used to identify the fundamental dynamics of hysteresis. Investment, GDP, interest rate, and productivity variables are used to analyze investment hysteresis. Structural break tests were applied to the variables, while conventional and asymmetric causality tests were applied between investments and their determinants. Structural break tests prove the existence of hysteresis. According to the Granger causality test, there is no causality from interest rates, GDP and productivity to investments. The fact that interest rates have no effect on investments proves hysteresis. According to the asymmetric causality test, there is no relationship between interest rates and investments. There is an inverse relationship between GDP and investments. There is an asymmetric relationship between productivity and investments. The fact that productivity shocks cause asymmetric effects on investments makes productivity shocks the main dynamic of hysteresis. In addition, there is considerable evidence that the strong hysteresis and high uncertainty of TFP exacerbate investment hysteresis. Therefore, productivity shocks should be taken into account in policymaking for hysteresis.

On IVX-based structural break tests in univariate predictive regressions

ABSTRACT Testing for structural break in predictive regressions is important for empirical finance. In this article, we contribute to the literature by exploring asymptotic and finite-sample properties of three tests built upon IVX estimator proposed by Kostakis, Magdalinos and Stamatogiannis. Although they are shown to be non-pivotal, simulation studies suggest that limit distributions are highly insensitive to the variation of nuisance parameters. Furthermore, satisfactory small-sample size control and power performance can be achieved by applying critical values already tabulated in the literature. These tests are therefore easy to implement for practitioners and can serve as handy complements to other more sophisticated approaches. An empirical application concerning the break in the predictability of US stock returns is provided as an illustration.

Evaluation of the Impact of the Covid-19 Pandemic on Consumer Spending in Turkey by Structural Break Analysis

The purpose of this study is to investigate and evaluate the impact of the global Covid-19 crisis on consumer spending tendencies in Turkey. The data of the study, which are weekly data, consists of the "Debit Card and Credit Card Expenditure" amounts of the Central Bank of the Republic of Turkey (CBRT) for the period 6/3/2015–5/8/2022. Changes in consumer expenditures during the Covid-19 pandemic process were examined with the help of structural break tests. The main contribution of this article subsists in an empirical study to examine structural breaks in Turkey using personal debit and credit card disaggregated total expenditure data during the Covid-19 period. According to the research findings; the change observed at the beginning of the Covid-19 period in card expenditures is less than the change observed at the end of the period. With the end of the pandemic, an upward breakout was observed in most of the expenditure items.

Impact of an exogenous shock (COVID-19) on the performance of Portuguese wine firms: a structural break analysis

ABSTRACT The COVID-19 pandemic crisis was responsible for disruptions in most industries worldwide, being the wine industry a good example of how changes in the economic and social environment impacted firm performance. This research investigates whether such impacts represent a structural change to firms’ profitability and explore the internal sources of such change. We consider firm-level data from Portuguese wineries, from 2014 to 2020 and apply a series of structural break tests to the period. The results allow us to conclude that the entire profitability function suffered significant changes, being COVID-19 indeed a game-breaker for wineries’ profitability.

Price Dynamics and Integration in India’s Staple Food Commodities—Evidence from Wholesale and Retail Rice and Wheat Markets

Uncertain price movement in staple food commodities puts agrarian economies at risk if not monitored and managed consistently. Hence, an attempt has been made to analyze the price behavior and integration across major wholesale and retail markets for rice and wheat in India. Monthly data (July 2000 to June 2022) on prices viz. wholesale and retail were sourced from the Food and Agriculture Organization and analyzed using growth rate, instability index, seasonal price index, Bai-Perron’s test for structural breaks, Johansen’s test on cointegration, Granger causality test, and impulse response function. Findings indicated strong evidence of price dynamics in the selected markets in terms of spatial and temporal variation, clear-cut seasonality linking to production, and price divergence between wholesale and retail markets. Johansen’s test indicated a strong cointegration between wholesale and retail prices after accounting for structural breaks, exhibiting unidirectional-, bidirectional- and no causality. Impulse response analysis revealed that the selected wheat and rice markets are efficient in terms of ‘price discovery’ which takes place initially in the wholesale market, and is then transmitted to the retail market. The study advocates decision-making information to the producers, traders, and consumers who are interested in taking advantage of the price movement. It is concluded that strengthening the market intelligence and reducing the distortion in markets will improve the existing overall performance.

Interrogating the environmental accountability of foreign oil and gas companies in Basra, Iraq: a stakeholder theory perspective

PurposeThis paper aims to interrogate the accountabilities of the foreign companies which have directly invested in the Iraqi oil and gas industry.Design/methodology/approachUsing both qualitative and quantitative methodologies, the authors first map the stakeholder accountabilities (qualitative) of foreign oil and gas companies and second, the authors seek to demonstrate quantitatively – through structural break tests and publicly available sustainability reports – whether these companies have accounted for their environmental and social impacts both to Iraqi people and to the global community.FindingsThe authors find that the Western democratic values embedded in stakeholder theory, in terms of sustainability, do not hold the same meaning in cultural contexts where conceptions and application of Western democratic values are deeply problematic. This paper identifies a crucial problem in the global oil supply chain and problematises the application of traditional theoretical approaches in the context of the Iraqi oil and gas industry.Practical implicationsImplications of this study include the refocus of attention onto the local and global environmental impacts of the Iraqi oil and gas industry by foreign direct investments. Such a refocus highlights the reasons and ways that decision makers should accommodate these less salient stakeholders.Originality/valueThe primary contribution is the critique of the lack of environmental accountability of foreign direct investment companies in the Iraqi oil and gas industry. The authors also make theoretical and methodological contributions via the problematisation of the cultural bias inherent in traditional stakeholder theories, and by introducing a quantitative method to evaluate the accountabilities of companies.

Carbon Pricing in Current Global Institutional Changes

Global institutional changes (GICs), having influenced energy prices, led to a steady upward trend in carbon prices on the EU ETS. The aim of the article is to assess the changes in the relationship between carbon prices and energy prices under GICs. The Bai–Perron tests for structural breaks identified two dates as the breakpoint, 21 April 2016 and 21 September 2020. We test the hypothesis that powerful external factors (GIC) are changing the trend pattern of the carbon price time series. New pricing rules of the carbon price are being formed after the breakpoint. We use daily observations from 4 January 2010 to 1 September 2022. We use GARCH models with multiple stationary time series to discover a relationship energy price with the carbon price before and after the break points. We found that three models for two breakpoints better describe the relationship between carbon prices and energy prices than two models for one breakpoint, much less one model for the entire period. We find that the carbon price depends on energy prices, especially on the price of oil, in a statistically significant way, but the gas price is not statistically significant after 21 September 2020.

Economic Analysis of Iran’s Health System Transformation Plan Using the Structural Break Tests

Background and Objectives: Health system transformation plan (HSTP) of Iran, with three main goals of financial protection of patients, justice in access to health services, and improving the quality of services was implemented since 2014 which has had some achievements and challenges. Considering the large amount of financial resources used in this plan and the limitation of resources in Iran, this study aims to examine the performance of this plan in improving some health-related and financial indicators. Methods: Econometric tools were used in this study. The data of health-related and financial indicators related to the performance of HSTP from 2004 to 2019 were first collected. Then, using the ordinary and generalized least squares estimation methods, the effect of the transformation of HSTP on the selected indicators was examined. Finally, by using the structural break tests of Perron, Zivot-Andrews and Lee-Strazicich, the success of the HSTP in causing positive changes in the indicators and creating structural breaks was examined. Results: According to the ordinary and generalized least squares regression models, the coefficients of all indicators was significant and the positive effect of the costs of HSTP on the improvement of these indicators were confirmed. The greatest effect was reported on the out-of-pocket payment rate with a coefficient of 0.7 and the lowest effect was on the total death rate with a coefficient of -0.006. According to the results of the structural break tests, all indicators had recorded structural breaks before implementing the plan, while only six indicators showed structural breaks after the implementation. Conclusion:The HSTP was effective in improving the selected indicators at the beginning. All indicators showed structural break points before implementation of the HSTP, due to their reduction at the related time points, which emphasized the necessity of implementing the HSTP; however, after implementation, no positive structural break points are observed to indicate a considerable improvement in the indicators.

Two theories of endogenous money: an empirical study of Korea

This study tests Korea’s two endogenous money supply channels: the accommodationist and structuralist channels. The main analytic tools are the Fully Modified OLS, Maki’s structural break test, Error Correction Model, and Impulse Response Function (IRF) analysis. The primary purpose of this study is to propose analytical methods to compare the two endogenous money supply channels. The analytic models also consider the impact of fiscal policy and the current account balance on reserves. The test results reveal a unilateral causality from loan to reserve and a bilateral causal relationship between loan/reserve and Lf/deposit ratio. These results suggest that both accommodationist and structuralist channels coexist in Korea. However, the structuralist channel explains a relatively small portion of the endogenous money supply process. The IRF analysis does not provide evidence for the pressure on the interest rate spread exerted by financial institutions’ portfolio adjustment. This result can be attributed mainly to the central bank’s growing accommodative attitude toward the reserve demand.

The Relationship between Energy Consumption, CO2 Emissions, Economic Growth, and Health Indicators.

The health and wellness of people through life expectancy, mortality rate improvement, and sustaining the productivity of labor contributes a lot to national income. Infrastructure development consumes energy and releases carbon dioxide at different stages of the construction process. The current study explores the nexus between CO2 emission, energy consumption, mortality, life expectancy, and GDP in the top five carbon-emitting countries by using time series data from 1975 to 2015. The study used a cointegration technique to find the long- and short-run relationships between study variables. The study also used a structural break test to identify the break time. The results of the correlation matrix show strong positive correlation between CO2 emissions and energy consumption. It also reflects a weak correlation with mortality and life expectancy in Japan and Russia. The results of the ADF test indicated that the series are stationary at first difference and provided evidence to use Johansen cointegration test for long- and short-run relationships between independent series. Vector error correction term and ECT method are used to find long-run relationships between cointegrated series and adjustment parameters. For the structural breaks of health indicators and energy consumption study, we used the Gregory Hanson structural break. Mortality rate and life expectancy rate of China, U.S., Russia, India, and Japan show relevant policy changes with economic policies of each country.

Risks in Major Cryptocurrency Markets: Modeling the Dual Long Memory Property and Structural Breaks

This study estimates the effects of the dual long memory property and structural breaks on the persistence level of six major cryptocurrency markets. We apply the Bai and Perron structural break test, Inclán and Tiao’s iterated cumulative sum of squares (ICSS) algorithm, and the fractionally integrated generalized autoregressive conditional heteroscedasticity (FIGARCH) model, with different distributions. The results show that long memory and structural breaks characterize the conditional volatility of cryptocurrency markets, confirming our hypothesis that ignoring structural breaks leads to an underestimation of the persistence of volatility modeling. The ARFIMA-FIGARCH model, with structural breaks and a skewed Student-t distribution, fits the cryptocurrency market’s price dynamics well.

The effect of political and bureaucratic regime changes on Australia's real interest rate

We attempt to find out if changes in political and bureaucratic regimes lead to significant mean shifts in the Australian short-term real interest rate, using quarterly data for the period 1970:3 to 2019:1. Utilising a sophisticated structural break test, three distinct structural breaks are found in Australia's real interest rate. The empirical results show that a model estimated to consider the shifts in the political regime explains more of the variation in the real interest rate compared to a model that incorporates shifts in the bureaucratic regime. Results from several non-nested model selection tests also confirm this finding.

ANALYSIS OF SHOCK PERSISTENCE IN BRAZILIAN ORANGE JUICE EXPORT

The present work aims to analyze the behavior of orange juice exports, in volume and monetary value, considering its main destinations, aiming to understand how these series behaved in the face of market shocks between 1997 and 2019. For that, the methodology used was based on the method proposed by Robinson et al. (1995a), which tests the presence of long memory across time series data, and on the structural break test proposed by Andrews and Ploberger (1994). According to the results, all analyzed series show no long memory. This result indicates that shocks that occurred in the period had a temporary effect on the flow of Brazilian orange juice exports, with no long-term effect on the trajectory of the series. These results allow us to conclude that the destinations analyzed here are solid markets for Brazilian orange juice export, and that short-term variations in export flows indicate a search for bargain prices among agents who purchase the Brazilian drink.