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1 – 10 of 356Vasudeva Murthy and Albert Okunade
This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on…
Abstract
Purpose
This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006.
Design/methodology/approach
This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence.
Findings
The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process.
Research limitations/implications
The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study’s conclusions do not apply to non-urban areas.
Practical implications
The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting.
Social implications
Payers (private and public employers) of health-care insurance rates in US urban areas should evaluate the value of benefits received in relation to the skyrocketing rise of health-care insurance premiums.
Originality/value
This is the first empirical research focusing on the shape of urban health-care inflation rates in the USA.
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This paper analyses the possibility of Latin America's (LA) major economies adopting dollarization, considering that in the last decade macroeconomic instability has once again…
Abstract
Purpose
This paper analyses the possibility of Latin America's (LA) major economies adopting dollarization, considering that in the last decade macroeconomic instability has once again challenged the ability of certain economies to properly manage their own currency.
Design/methodology/approach
To determine the feasibility of adopting the US dollar as official currency, the author uses the framework of optimum currency area (OCA) theory, since, in fact, dollarization is an incomplete monetary union. The author uses a structural vector autoregressive (SVAR) model to identify what type of structural shock — country-specific, regional or global — prevails in LA economies. For this purpose, the US output is used to represent the global output and determine how the shocks of the US influence the output trajectory of each LA nation. The higher the influence of the US product, the lower the costs of adopting the US dollar.
Findings
The results of the variance decomposition show that the influence of the US shocks in the gross domestic product (GDP) trajectory of LA countries has significantly decreased over the last two decades, even in the currently dollarized economies. The estimates for Venezuela and Argentina show that the importance of US shocks in the trajectory of their GDP is low. Therefore, the cost of adopting the US dollar as the official currency would be high.
Originality/value
In view of hyperinflation and macroeconomic imbalances in certain LA nations, the dollarization debate has resurfaced in recent years. However, the literature that empirically evaluates the feasibility of adopting dollarization as a monetary system under current economic conditions is limited.
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Kashif Rashid, Yasir Bin Tariq and Mamoon Ur Rehman
This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani stock…
Abstract
Purpose
This study examines the role of behavioural factors, such as confidence, optimism, pessimism and rational expectation, in affecting investment decisions in the Pakistani stock market.
Design/methodology/approach
Using daily trading data of Karachi Stock Exchange-100 index from January 2012 to December 2015, different regression models, including descriptive statistics and stationarity tests, are performed.
Findings
Results indicate that stock market trading has suffered from pessimistic behaviour of investors. In the first model, the authors find a positive sign of confidence and negative sign of optimism with the trading volume. The second model shows a positive role of confidence and rational expectations in affecting the trading volume in daily, Monday and Friday samples. The results of the third model show a negative sign of both optimism and rational expectation with the trading volume. Furthermore, the next model shows a negative sign of confidence combined with pessimism while testing their relationship with the trading volume. Finally, results of the final model suggest that optimism negatively affects the trading volume, and on the other hand, pessimism has a positive impact on the trading volume.
Research limitations/implications
The method and empirical testing of behavioural biases and their relationship with economic variable used in this study seem to be a promising way to better understand the role of psychology in deriving financial decisions for academics and policymakers.
Originality/value
This study uses secondary data for measuring behavioural biases and decomposes the effect between rational expectation and behavioural biases.
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Joseph Mawejje and Nicholas M. Odhiambo
This study investigates the dynamic causality linkages between fiscal deficits and selected macroeconomic indicators in a panel of five East African Community countries.
Abstract
Purpose
This study investigates the dynamic causality linkages between fiscal deficits and selected macroeconomic indicators in a panel of five East African Community countries.
Design/methodology/approach
The research design is based on panel cointegration tests, panel cross-section dependence tests, panel error correction-based Granger causality tests and panel impulse response functions.
Findings
Results show that there is long-run feedback causality among fiscal deficits and each of the variables include gross domestic product (GDP) growth, current account balance, interest rates, inflation, grants and debt service. Short-run Granger causality dynamics indicate that there is feedback causality between fiscal deficits and GDP growth; no causality between fiscal deficits and inflation; no causality between fiscal deficits and current account; no causality between fiscal deficits and interest rates; feedback causality between fiscal deficits and grants; and no causality between fiscal deficits and debt service. Impulse response functions show positive and significant impacts of current account balance, inflation and grants; negative and significant impacts of real GDP growth and lending rates; and insignificant effects of debt service.
Research limitations/implications
While the study examines the dynamic causality between fiscal deficits and selected macroeconomic indicators in the East African Community, the analysis excludes South Sudan due to significant data limitations.
Practical implications
In light of the East African Community's aspirations to achieve convergence on key macroeconomic targets, including the fiscal deficit, this research provides novel insights on fiscal policy determinants and causality dynamics.
Social implications
The dynamic relationships between fiscal policy and macroeconomic variables may have social implications for welfare, equitable growth and distribution of resources.
Originality/value
With a focus on the East African Community, this paper contributes to the literature on the macroeconomic determinants of fiscal deficits in regional economic communities.
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Cosimo Magazzino, Marco Mele and Nicolas Schneider
The purpose of this paper is to empirically test the economic convergence that operate between five selected Asian countries (namely Thailand, Singapore, Malaysia, the Philippines…
Abstract
Purpose
The purpose of this paper is to empirically test the economic convergence that operate between five selected Asian countries (namely Thailand, Singapore, Malaysia, the Philippines and Indonesia). In particular, it seeks to investigate how increased economic integration has impacted the inter-country income levels among the five founding members of ASEAN.
Design/methodology/approach
A new Machine Learning (ML) approach is applied along with a panel data analysis (GMM), and the application of KOF Globalization Index.
Findings
The Generalized Method of Moments (GMM) results highlight that the endogenous growth theory seems to be supported for the selected Asian countries, indicating evidence of diverging forces resulting from unequal growth and polarization dynamics. Overcoming the technical issues raised by the econometric approach, the new ML algorithm brings contrasted but interesting results. Using the KOF Globalization Index, the authors confirm how the last phase of globalization set the conditions for an economic convergence among sample members.
Originality/value
Using the KOF Globalization Index, the authors confirm how the last phase of globalization set the conditions for an economic convergence among sample members. As a matter of fact, the new LSTM algorithm has provided consistent evidence supporting the existence of converging forces. In fact, the results highlighted the effectiveness of the experiments and the algorithm we chose. The high predictability of the authors’ model and the absence of self-alignment in the values showed a convergence be-tween the economies.
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This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through…
Abstract
Purpose
This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through credit to private sector.
Design/methodology/approach
The study sampled 37 selected African economies for the years 1991–2018, and it applied a pooled mean group (PMG) estimator to account for short-run and long-run causal effects, and confirmed short-run adjustments towards the long-run convergences between the variables. Specific suitable tests were also applied.
Findings
Evidence confirms positive impacts of both capital formation and final consumption expenditures on financial development in the short run and long run. The moderation of population structures on expenditure structures help to speed up convergences.
Originality/value
This work attests its innovation by accounting for the separate effects of the expenditure types, the moderation effects of young and mature populations for capital and final consumption expenditure on financial development among selected economies in Africa.
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