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Article
Publication date: 3 April 2017

Koon Nam Henry Lee

This study aims to investigate the cointegration and causality relationships between Hong Kong’s residential property price and stock price, using quarterly data, from the…

Abstract

Purpose

This study aims to investigate the cointegration and causality relationships between Hong Kong’s residential property price and stock price, using quarterly data, from the 1st quarter of 1980 to the 3rd quarter of 2015.

Design/methodology/approach

In contrast to other studies, the cointegration test used is the autoregressive distributed lag (ARDL) cointegration (bounds testing) approach of Pesaran et al. (2001) that based on the estimation of an unrestricted error correction model and the causality test is based on non-causality test of Granger et al. (2000). Moreover, this research employs recursive least square procedures and Chow (1960) breakpoint test to detect unknown structural break and variation of relationships between residential property and stock price over the whole sample period.

Findings

The results of ARDL cointegration tests running from stock to residential property markets provide strong evidence to support the hypothesis that the stock and residential properties are cointegrated. The results of Granger et al. (2000) non-causality test support the view of wealth effect that stock price has an important causal effect on residential property price in Hong Kong but not vice versa. In addition, the results of recursive ordinary least squares coefficients estimates and Chow (1960) test (breakpoint test) for structural instability confirm the variation of the relationships between stock and residential property markets over the sample period.

Research limitations/implications

The empirical results from cointegration and causality tests suggest that the residential asset returns are better predicted by including the lagged difference values of stock price.

Originality/value

This is the pioneering study to examine the cointegration and causality study of stock and residential property price in Hong Kong by employing Pesaran ARDL cointegration approach and Granger non-causality approach. Investors are able to perform an effective evaluation to assist in allocating investment funds, and the government bodies can implement supplement housing policy in response to the public needs.

Details

International Journal of Housing Markets and Analysis, vol. 10 no. 2
Type: Research Article
ISSN: 1753-8270

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Book part
Publication date: 30 May 2018

Albert A. Okunade, Xiaohui You and Kayhan Koleyni

The search for more effective policies, choice of optimal implementation strategies for achieving defined policy targets (e.g., cost-containment, improved access, and…

Abstract

The search for more effective policies, choice of optimal implementation strategies for achieving defined policy targets (e.g., cost-containment, improved access, and quality healthcare outcomes), and selection among the metrics relevant for assessing health system policy change performance simultaneously pose continuing healthcare sector challenges for many countries of the world. Meanwhile, research on the core drivers of healthcare costs across the health systems of the many countries continues to gain increased momentum as these countries learn among themselves. Consequently, cross-country comparison studies largely focus their interests on the relationship among health expenditures (HCE), GDP, aging demographics, and technology. Using more recent 1980–2014 annual data panel on 34 OECD countries and the panel ARDL (Autoregressive Distributed Lag) framework, this study investigates the long- and short-run relationships among aggregate healthcare expenditure, income (GDP per capita or per capita GDP_HCE), age dependency ratio, and “international co-operation patents” (for capturing the technology effects). Results from the panel ARDL approach and Granger causality tests suggest a long-run relationship among healthcare expenditure and the three major determinants. Findings from the Westerlund test with bootstrapping further corroborate the existence of a long-run relationship among healthcare expenditure and the three core determinants. Interestingly, GDP less health expenditure (GDP_HCE) is the only short-run driver of HCE. The income elasticity estimates, falling in the 1.16–1.46 range, suggest that the behavior of aggregate healthcare in the 34 OECD countries tends toward those for luxury goods. Finally, through cross-country technology spillover effects, these OECD countries benefit significantly from international investments through technology cooperations resulting in jointly owned patents.

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Article
Publication date: 14 October 2021

Sami Ullah, Muhammad Nadeem, Kishwar Ali and Qaiser Abbas

In this paper, the authors investigate that the increasing level of fossil fuel combustion in the industrial sector has been considered the prime cause for the emissions…

Abstract

Purpose

In this paper, the authors investigate that the increasing level of fossil fuel combustion in the industrial sector has been considered the prime cause for the emissions of greenhouse gas. Meanwhile, the research focusing on the impact of fossil fuel consumption on the emission of CO2 is limited for the developing countries containing Vietnam. This study applied the autoregressive distributed lag (ARDL) approach with structural breaks presence, and the Bayer–Hanck combined cointegration method to observe the rationality of the environmental Kuznets curve (EKC) hypothesis in the dynamic relationship between the industrialization and carbon dioxide (CO2) emission in Vietnam, capturing the role of foreign direct investment (FDI) inflows and the fossil fuel consumption over the period of 1975–2019. The outcomes revealed the confirmation of cointegration among the variables and both short and long-run regression parameters indicated the evidence for the presence of a U-shaped association between the level of industrial growth and CO2 emission that is further confirmed by employing the Lind and Mehlum U-test for robustness purpose. The results of Granger causality discovered a unidirectional causality from FDI and fossil fuel consumption to CO2 emission in the short run. For the policy points, this study suggests the use of efficient and low carbon-emitting technologies.

Design/methodology/approach

In order to test for consistency and robustness of the cointegration analysis, this study also applied the ARDL bound testing method to find out long-run association among variables with the existence of the structural break in the dataset. The ARDL method was preferred to other traditional cointegration models; because of the smaller dataset, the results obtained from the ARDL method are efficient and consistent and equally appropriate for I(1) and I(0) variables.

Findings

The short-run and long-run causal associations among variables have been observed by employing the error correction term (ECT) augmented Granger-causality test that revealed the presence of the long-run causality among variables only when the CO2 emission is employed as a dependent variable. The outcomes for short-run causality indicated the presence of unidirectional causality between consumption of fossil fuel and CO2 emission, where the fossil fuel consumptions Granger-cause CO2 emission. Industrial growth has also been found to have an impact on fossil fuel consumptions, however not the opposite. This advocates that the policies aimed at reducing the fossil fuel consumptions would not be harmful to industrial growth as other energy efficient and cleaner technology could be implemented by the firms to substitute the fossil fuel usage.

Originality/value

The study explored the dynamic relationship among FDI, consumption of fossil fuel, industrial growth and the CO2 emission in Vietnam for the time period 1975–2019. The newly established Bayer–Hanck joint cointegration method and the ARDL bound testing were employed by taking into account the structural breaks in the dataset.

Details

Management of Environmental Quality: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1477-7835

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Article
Publication date: 13 August 2018

Dinabandhu Sethi and Susanta Kumar Sethy

The purpose of this paper is to examine the relationship between financial inclusion (FI) and economic growth in India.

Abstract

Purpose

The purpose of this paper is to examine the relationship between financial inclusion (FI) and economic growth in India.

Design/methodology/approach

To measure FI, a multidimensional time-varying index is proposed following the Human Development Index method. The long-run relationship between FI and economic growth is examined by using the autoregressive distributed lag (ARDL) approach to cointegration and nonlinear ARDL approach. Further, the direction of causality is investigated by employing the Toda–Yamamoto Granger causality test.

Findings

The linear cointegration test confirms a long-run relationship between FI and economic growth for India. The improvement in both demand-side and supply-side financial services has a positive impact on economic growth. These results suggest that India can attain long-run economic growth by improving the coverage of FI. However, there is no evidence of nonlinear cointegration, indicating that there is no asymmetric effect of FI on economic growth. Further, the causality test shows that FI granger causes economic growth but not vice versa.

Research limitations/implications

The major limitation of the study is the availability of time series data for all important variables. The index for both demand- and supply-side indicators can be extended with several other important variables in later date once the data are available for those variables.

Practical implications

As the study confirms that FI is one of the main drivers of economic growth, it is suggested that the policy maker emphasizing on financial sector reforms can enjoy economic growth in the long run, especially in developing countries. Therefore, the government and policy makers need to address the issues involved in access to financial services to spur economic growth.

Originality/value

The study examines the long-run relationship between FI and economic growth employing ARDL bound testing approach and nonlinear ARDL approach, separately for demand-side and supply-side indicators. Further, the study uses the Toda–Yamamoto granger causality to find the direction of causal flow between FI and economic growth.

Details

International Journal of Social Economics, vol. 46 no. 1
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 22 June 2021

Ahamed Lebbe Mohamed Aslam and Sabraz Nawaz Samsudeen

The objective of this study is to explore the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka over the period of 1960–2018.

Abstract

Purpose

The objective of this study is to explore the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka over the period of 1960–2018.

Design/methodology/approach

Both exploratory and inferential data analysis tools have been employed to examine the objective of this study. The exploratory data analysis covered the scatter plots, confidence ellipse with kernel fit. The inferential data analysis included the augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) unit root tests, the autoregressive distributed lag (ARDL) Bounds co-integration technique and the Granger causality test.

Findings

The test result of exploratory data analysis indicates that there is a positive relationship between foreign aid and economic growth. The ADF and PP unit root tests results indicate that the variables used in this study are stationary at their 1st difference. The co-integration test result confirms the presence of long-run relationship between foreign aid and economic growth in Sri Lanka. The estimated coefficient of foreign aid in the long-run and the short-run shows that foreign aid has a positive relationship with economic growth in Sri Lanka. The estimated coefficient of error correction term indicates that approximately 26.6% of errors are adjusted each year and further shows that the response variable of economic growth moves towards the long-run equilibrium path. The Granger causality test result shows that foreign aid in short-run Granger causes economic growth in Sri Lanka which means that one-way causality from foreign aid to economic growth is confirmed. Further, the estimated coefficient of error correction term confirms that there is the long-run Granger causal relationship between foreign aid and economic growth in Sri Lanka.

Practical implications

The findings of this study have some important policy implications for the design of efficient policy related to foreign aid and economic growth, the knowledge of which will help follow sustainable foreign aid and growth nexus.

Originality/value

This study contributes to the existing literature by using the newly introduced ARDL Bounds cointegration technique to investigate the dynamic inter-linkage between foreign aid and economic growth in Sri Lanka.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 30 July 2020

Ahamed Lebbe Mohamed Aslam and Selliah Sivarajasingham

The objective of this study is to examine the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka over the period of…

Abstract

Purpose

The objective of this study is to examine the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka over the period of 1975–2017 using the annual time series data.

Design/methodology/approach

To test the order of integration of the variables used in this study, the augmented Dickey–Fuller (ADF) and Phillips and Perron (PP) unit root tests were employed. The autoregressive distributed lag (ARDL) bounds cointegration technique was used to examine the long-run relationship between the variables. The Granger causality test was used to examine the causal relationship between the variables.

Findings

The unit root tests confirm that the variables are stationary at 1st difference I(1). Meanwhile, the ARDL test results show that workers' remittances have a positive long-run relationship with consumption expenditure in Sri Lanka. The coefficient of the error correction term indicates that 9.3% of disequilibrium error is adjusted each year and the response variable of the consumption expenditure moves towards the long-run equilibrium path. Further, the results of the Granger causality test indicate that workers' remittances Granger cause consumption expenditure in the short-run.

Practical implications

The findings have some important policy implications for the design of efficient policy related to workers' remittances and consumption expenditure pattern, the knowledge of which will help promote the macroeconomic stability and welfare of people in Sri Lanka.

Originality/value

This study contributes to the existing literature by using newly developed ARDL bounds cointegration techniques to investigate the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka. Furthermore, to our knowledge, this study is the first research in examining the inter-temporal relationship between workers' remittances and consumption expenditure in Sri Lanka.

Details

Journal of Economic and Administrative Sciences, vol. 37 no. 2
Type: Research Article
ISSN: 1026-4116

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Article
Publication date: 6 November 2007

Tuck Cheong Tang

The purpose of this paper is to empirically investigate the money demand function for five Southeast Asian countries, viz. Malaysia, Thailand, Singapore, the Philippines…

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Abstract

Purpose

The purpose of this paper is to empirically investigate the money demand function for five Southeast Asian countries, viz. Malaysia, Thailand, Singapore, the Philippines, and Indonesia.

Design/methodology/approach

The ARDL modeling approach is employed because of its ability to incorporate both I(0) and I(1) regressors.

Findings

The results reveal that real M2 aggregate, real expenditure components, exchange rate, and inflation rate are cointegrated for Malaysia, the Philippines, and Singapore. The statistical significance of real income components suggests the bias of using single real income variable in money demand (M2 aggregate) specification of both short‐ and long‐run. The CUSUM and CUSUMSQ tests show that the estimated parameters are stable for the five Southeast Asian economies, except for Indonesia which is based on short‐run specification.

Practical implications

These findings are important for policy makers in formulating monetary policy.

Originality/value

Besides conventional determinants of money demand such as exchange rate and interest rate variables, this study considers the major components of final expenditure (GDP) – final consumption expenditures (private and government sectors), expenditures on investment goods, and exports as scale variables.

Details

Journal of Economic Studies, vol. 34 no. 6
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 8 November 2021

Masudul Hasan Adil, Neeraj R. Hatekar and Taniya Ghosh

One of the most significant changes in monetary economics at the beginning of the twenty-first century has been the virtual disappearance of what was once a dominant…

Abstract

One of the most significant changes in monetary economics at the beginning of the twenty-first century has been the virtual disappearance of what was once a dominant focus, the role of money in monetary policy, and parallelly, the disappearance of the liquidity preference-money supply (LM) curve. Economists used to consider monetary policy with the help of the LM curve as part of the analytical framework which captures the demand for money. However, the workhorse model of modern monetary theory and policy, the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) framework, only comprises the dynamic investment-savings (IS) curve, the New Keynesian (NK) Phillips curve, and a monetary policy rule. The monetary policy rule is generally known as the Taylor rule. It relates the nominal interest rate to the output-gaps and inflation-gaps, but typically not to either the quantity or the growth rate of money. This change in the modern monetary model reflects how the central banks make monetary policy now. This study provides a detailed discussion on the role of money in monetary policy formulation in the context of the NK and the New Monetarist perspectives. The pros and cons of abandonment of money or the LM curve from monetary policy models have been discussed in detail.

Details

Environmental, Social, and Governance Perspectives on Economic Development in Asia
Type: Book
ISBN: 978-1-80117-594-4

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Article
Publication date: 7 May 2020

Hummera Saleem, Malik Shahzad Shabbir and Muhammad Bilal khan

The purpose of this study is to analyze the dynamic causal relationship between foreign direct investment (FDI), gross domestic product (GDP) and trade openness (TO) on a…

Abstract

Purpose

The purpose of this study is to analyze the dynamic causal relationship between foreign direct investment (FDI), gross domestic product (GDP) and trade openness (TO) on a set of five selected South Asian countries.

Design/methodology/approach

This study used newly developed bootstrap auto regressive distributed lags (ARDL) cointegration test to examine the long-run relationship among FDI, GDP and TO for selected South Asian countries for 1975–2016.

Findings

The economic growth (EG) is significantly related to TO for Bangladesh, India and Sri Lanka and the expansion of TO is crucial for growth in these countries. The results show that all countries (except Bangladesh) found the existence of long-run cointegration between FDI, GDP and TO, whereas FDI is a dependent variable. These results concluded that FDI and TO are contributing to EG in these selected countries.

Originality/value

This study is one of the first attempts to investigate the causal relationship and address the short and long dynamic among FDI, GDP and TO regarding five south Asian countries such as Bangladesh, India, Nepal, Pakistan and Sri Lanka.

Details

South Asian Journal of Business Studies, vol. 9 no. 2
Type: Research Article
ISSN: 2398-628X

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Article
Publication date: 12 March 2018

Javaid Ahmad Dar and Mohammad Asif

The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence…

Abstract

Purpose

The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence of possible regime shifts over a period of 1960-2013.

Design/methodology/approach

Along with the conventional unit root tests, Zivot-Andrews unit root test with structural break has been employed to check the stationarity of variables. The cointegrating relationship between variables is investigated by using the autoregressive distributed lag bounds test and Hatemi-J threshold cointegration test.

Findings

The results confirm a cointegrating relationship between the variables. The long-run relationship between the variables has gone through two endogenous structural breaks in 1976 and 1986. Development of financial sector improves environmental quality whereas energy use and economic growth degrade it. The results challenge the validity of environmental Kuznets curve hypothesis in Turkish economy.

Research limitations/implications

The study uses domestic credit to private sector as a proxy for development of financial sector. The model can be improved by constructing an index of financial development instead of using a single determinant as a proxy for financial development.

Practical implications

The study may pave the way for policy makers to capture important environmental pollutants in better way and develop effective and efficient energy and economic policies. This may make significant contribution to curbing CO2 emissions while sustaining economic growth.

Originality/value

This is the only study to examine long-run impact of financial sector development on carbon emissions, using the threshold cointegration approach. Hence, the study is a gentle request to reduce the possible omitted variable econometric estimation bias and fill the gap in the existing literature.

Details

Management of Environmental Quality: An International Journal, vol. 29 no. 2
Type: Research Article
ISSN: 1477-7835

Keywords

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