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The recent economic crises have attracted attention to the issue of international equity co-movements and correlations. Using data from 1980 to 2010, the authors examine the international co-movements of both real economic activity, as reflected in industrial production and the gross domestic product (GDP), and financial activity, as reflected in equity market returns. While classic symmetric co-integration tests do not reject the hypothesis of no co-integration, the authors find evidence of asymmetric co-integration in these three variables between the USA and the rest of the Group of Seven (G7) countries. The momentum threshold autoregressive (M-TAR) model captures the nature of the asymmetry most effectively and is the most applicable model for adjustment to long-term equilibrium. This model suggests that the path of adjustment to long-run equilibrium is somewhat different when the price differential is decreasing than when it is increasing. These findings imply that the benefits of asset diversification for investors with a long horizon might be limited in scope.

This work is based on the theory of integrated time series. The authors use symmetric and asymmetric co-integration tests to market indices, as well as to monthly industrial production statistics and quarterly data about the GDP. In line with the financial economic literature, the authors select the GDP as a proxy that reflects the real economy and share prices to mirror the financial sector of the economy. Because no monthly data exist about GDP, the authors use instead the industrial production. Both variables cover the period from January 1980 to June 2010.

The overall findings demonstrate that the USA and the rest of the G7 countries are not symmetrically co-integrated with respect to the GDP. Indeed, they are asymmetrically co-integrated. These findings may explain the additional important result that the majority of equity markets are also asymmetrically co-integrated with the USA.

The co-movements of the equity markets and real economic activity imply that the benefits of asset diversification for investors with a long horizon might be limited in scope. In the short run, however, portfolio diversification can be more beneficial due to the short-term fluctuations that may derive from the asymmetric correction process.

Prior research on co-movements has focused mainly on studying the correlations among international equity markets by analyzing conditional correlations or using symmetric co-integration methods; the authors test the existence of a long-term relationship between economic variables with respect to the USA and the rest of the G7 countries using a threshold co-integration model.

The purpose of this paper is to econometrically investigate the level of financial co-integration of the least developed countries (LDCs) of Asia and Pacific region. In addition, the paper also tested the co-integration of LDCs with the world’s second largest economy “China.” For this, the paper employed the foreign exchange data sets of respective LDCs. It also aimed to assess the dynamic conditional correlation (DCC) between the foreign exchange rates of LDCs and China, and further, examined the past and current level of their co-relational dependence.

The authors created data sets namely LDCs of Asia and Pacific, LDCs of SAARC, LDCs of ASEAN, LDCs of Pacific, LDCs of SAARC and ASEAN, LDCs of ASEAN and Pacific, and LDCs of SAARC and Pacific. In addition, the authors tested the co-integration of these seven groups with China, and thus, making a total of 14 data sets. The analysis was carried out using the Johansen and Gregory-Hansen multivariate co-integration econometric techniques. To assess the DCC, multivariate DCC GARCH model was employed.

It was found that at the intra-regional level, exchange rates of LDCs of SAARC, ASEAN and Pacific were co-integrated and showed the existence of 1-3 co-integrating equations. At inter-regional level SAARC-ASEAN, ASEAN-Pacific and SAARC-Pacific were also co-integrated and showed 1-3 co-integrated equations. However, on the inclusion of China in the study, the degree of co-integration of exchange rate of China with LDCs of SAARC and ASEAN increased, while with Pacific, the result was mixed. Conditional correlation estimated of multivariate DCC GARCH model suggested that except for Afghanistan, there was an upward shift in the correlation dynamics of exchange rates of LDCs with China, post global financial crisis.

Asia and Pacific region constituted of 53 countries, of which 13 were LDCs. Enhanced financial integration among LDCs of Asia-Pacific region and also between LDCs and major economies of the region like China will strengthen economic and financial integration efforts in the region.

The present paper attempted a comparative assessment of the co-movements of the foreign exchange markets of LDCs, the countries which have remained largely neglected in academic discourses on financial integration.

The purpose of this study is to examine the existence of discouraged worker effect hypothesis and unemployment invariance hypothesis in Africa, including its five regional groups. Specifically, the study tests the existence of co-integration between different categories of labour force participation and unemployment rate, total male and female labour force participation and the unemployment rate for age brackets 15–24, 15–64 and 15+, respectively.

The study uses the data of 52 countries in Africa which cover the period from 1991 to 2018. Three co-integration estimation techniques namely, the Kao co-integration test, Pedroni co-integration test and Westerlund co-integration test are used to validate the existence of co-integration between the labour force participation and unemployment rate. The dynamic ordinary least square is further used to explore the impact of the unemployment rate on labour force participation, while the pooled ordinary least squares (POLS) that accounts for individual country and time effects is employed for robustness check.

Except for Southern Africa, it is found that the discouraged worker effect hypothesis holds in Africa and the rest of its regions. This suggests that there is a long-run relationship between labour force participation rate and unemployment rate irrespective of age group and gender classifications. To some extent, the authors discover the existence of cross-sectional dependence in the panel. There is also an inverse relationship between labour force participation and the unemployment rate. This implies that when the unemployment rate is high, labour force participation tends to decline. The results are, however, sensitive to the choice of estimation method.

The study is limited to the examination of linear co-integration between labour force participation and the unemployment rate in Africa and its five regions. The future study can investigate the possibility of a nonlinear or an asymmetric relationship between labour for participation and the unemployment rate.

Thus, a policy framework that would generate employment creation is greatly required in Africa.

To the best of the authors’ knowledge, this is a pioneer work that addresses the issue of co-integration between labour force participation and unemployment rate for Africa and its five regions taking into consideration gender and age brackets of labour force participation and unemployment.

The present study has two objectives. First, one is to clarify the terms, “co-movement” and “co-integration” in the context of stock market indices. Second, to investigate empirically, whether an emerging stock market index represented by Nifty has moved together with DJI and N225 during the study period and whether they are co-integrated or not. This chapter tries to search out an answer for co-movement and co-integration staying within the theoretical framework through an extensive review of the literature. Moreover, the present study is unique because it tries to focus mostly on the pros and cons of financial integration and trade liberalization and the contributing factors responsible for trade and financial integrations leading to co-movement and co-integration among the countries considered in this study. India is taken as a proxy for an emerging economy. Furthermore, this chapter considers America and Japan as proxies for the developed countries around the globe and a significant country among the APAC nations, respectively. The empirical results reveal that not only three indices are highly correlated but they also possess a co-integrating relationship. This establishes the fact that neither is there any scope of international diversification in the short run nor in the long run. However, the Granger causality test results point out the fact that Nifty granger causes DJI and N225 during the study period.

This study examines the co-integration relationships between Association of Southeast Nations (ASEAN) stock indices as a way to assess the feasibility of policy initiatives to strengthen market integration in ASEAN and identify implications for portfolio investors.

The authors employ threshold co-integration tests and a non-linear autoregressive distributed lag (NARDL) model to study the asymmetric dynamics of ASEAN equity markets. The study’s data cover the 2009–2022 period for seven member states: Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The authors find evidence supporting co-integration relationships; adjustment toward equilibrium is asymmetric in the short run and symmetric in the long run for these countries. While co-movement in ASEAN equity markets seems encouraging for initiatives seeking to foster financial integration in regional economies, the benefits for international portfolio diversification appear to be neutralized.

The issue of stock market integration is important among policymakers, investors and academics. This study examines the level of stock market integration in ASEAN during the 2009–2022 period. For this purpose, advanced co-integration techniques are applied to different frequencies of data (daily, weekly and monthly) for comparison and completeness. The empirical analysis of this study is conducted using the Enders and Siklos (2001) co-integration and threshold adjustment procedure. This advanced co-integration technique is superior compared to other co-integration techniques by permitting asymmetry in the adjustment toward equilibrium.

The purpose of this paper is to investigate the relationship between trade openness and economic growth in developing countries. Under this aim, the co‐integration relationship between trade openness and economic growth of 17 developing countries is examined without relying on data stationarity.

The co‐integration relationship between trade openness and economic growth is analyzed by Bounds testing approach developed by Pesaran et al. In addition to this, the causality relationship is tested by causality analysis developed by Toda and Yamamoto.

According to the Bounds test results, co‐integration relationship has been detected for six countries and long‐term coefficients among the variables have been found positive and statistically significant. According to the Toda and Yamamoto causality analysis, causality has been detected for eight countries. In four of these, the direction of causality is from trade openness to economic growth and in the other four, vice versa.

The methodology employed provides an alternative framework for examining relationship among economic variables. The paper shows how to create co‐integration and causality tests without relying on data stationarity, which is a major problem in time series of economic variables. On the empirical side, it adds new empirical results into the literature in the name of identification of relationship between trade openness and economic growth in developing countries.

The purpose of this paper is to analyse the implication of trade on carbon emissions in a panel of eight highly trading Southeast and East Asian countries, namely, China, Indonesia, South Korea, Malaysia, Hong Kong, The Philippines, Singapore and Thailand.

The analysis relies on the standard quadratic environmental Kuznets curve (EKC) extended to include energy consumption and international trade. A battery of panel unit root and co-integration tests is applied to establish the variables’ stochastic properties and their long-run relations. Then, the specified EKC is estimated using the panel dynamic ordinary least square (OLS) estimation technique.

The panel co-integration statistics verifies the validity of the extended EKC for the countries under study. Estimation of the long-run EKC via the dynamic OLS estimation method reveals the environmentally degrading effects of trade in these countries, especially in ASEAN and plus South Korea and Hong Kong.

These countries are heavily dependent on trade for their development processes, and as such, their impacts on CO₂ emissions would be highly relevant for assessing their trade policies, along the line of the gain-from-trade hypothesis, the race-to-the-bottom hypothesis and the pollution-safe-haven hypothesis.

The analysis adds to existing literature by focusing on the highly trading nations of Southeast and East Asian countries. The results suggest that reassessment of trade policies in these countries is much needed and it must go beyond the sole pursuit of economic development via trade.

The purpose of this paper is to examine the relationship between financial development and economic growth in Indian states using annual data from 1993 to 2012.

The stationarity properties are checked by Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The study employed the Pedroni’s panel co-integration test to examine the existence of long-run relationship and the coefficients of co-integration are examined by fully modified ordinary least squares. The short term and long-run causality is checked by panel granger causality.

The co-integration test confirms a long-run relationship between financial development and economic growth for Indian states. The results support the supply leading hypothesis and highlight the importance of financial development in economic growth in Indian states. The findings also indicate that bank-centric financial sector of India has the potential of economic growth through credit transmission.

The present study recommends for appropriate reforms in financial market to attain economic growth in India. The findings will be useful for India’s policymakers in order to maintain the parallel expansion of financial development and economic growth.

Till date, there is no study that includes all 28 states in analyzing the role of financial development in economic growth for Indian economy by applying latest econometric techniques. Further, the study uses gross domestic state product instead of net domestic state product as proxy for economic growth because of the presence of different depreciation rates.

The purpose of this paper is to examine the relationship between financial development and rural-urban income inequality (INQ) in South Asian Association for Regional Cooperation (SAARC) countries using panel data from 1986-2012.

The stationarity properties are checked by the LLC and IPS panel unit root tests. The paper applied the Pedroni’s panel co-integration test to examine the existence of the long-run relationship and coefficients of co-integration are examined by fully modified ordinary least squares. The short-term and long-run causality is examined by panel Granger causality.

The results of Pedroni co-integration test indicate that there exists a long-run relationship among the variables. The findings suggest that financial development increases rural-urban inequality whereas trade openness reduces rural-urban inequality. The empirical results of panel Granger causality indicate evidence of short-run causality confirms that economic growth and financial development causes rural-urban INQ.

The present study recommends for appropriate economic and financial reforms focusing on financial inclusion to reduce rural-urban INQ in SAARC countries. Financial policies geared toward agriculture and rural population should be adopted to reduce the prevailing rural-urban INQ in SAARC region.

Till date, there is hardly any study exploring the causal relationship between financial development and rural-urban INQ for SAARC countries by using panel co-integration and causality techniques. So the contribution of the paper is to fill these research gaps in the literature.

This paper investigates the efficiency of the futures market for Brazilian live cattle to predict prices in the spot market of Argentinian steers. The lack of derivatives related to the beef market in the futures exchange in Argentina was the main factor behind the decision to analyse the efficiency of the Brazilian live cattle futures as a predictor of spot prices of Argentinian steers.

We opted to employ the efficient markets hypothesis to approach the question. The hypothesis that futures prices are non‐biased predictors of spot prices is considered to be a true proposition only if the efficient markets hypothesis is not rejected. In methodological terms, the efficiency of the futures market for Brazilian live cattle relative to the spot market of Argentinian steers was verified using the Johansen co‐integration test. A vector error correction model – which enables verification of the question of bias in the prediction of prices, was used to estimate the long‐term equilibrium between spot and futures prices.

The results provided no evidence of bias in the prediction of prices and found the predictive efficiency of the Brazilian live cattle futures market relative to the spot market of Argentinians steers to be approximately 80 per cent. Thus, the future prices of Brazilian live cattle can expressly assist participants in the Argentinian beef production chain to predict the spot prices of steers.

Esse trabalho verifica a eficiência do mercado futuro do boi gordo brasileiro em relação ao mercado a vista dos novilhos argentinos. A ausência de derivativos relacionados ao mercado da carne bovina em bolsa de futuros na Argentina foi o principal aspecto motivador da análise da eficiência do mercado futuro do boi gordo brasileiro como preditordos preços a vista dos novilhos argentinos.

Assim sendo, optou‐se por uma abordagem à luz da teoria da hipótese dos mercados eficientes. A hipótese de que os preços futuros são preditores não viesados dos preços a vista é tida como uma proposição verdadeira somente se a hipótese de eficiência de mercado não for rejeitada. No contexto metodológico, a eficiência do mercado futuro do boi gordo brasileiro em relação ao mercado a vista dos novilhos argentinos foi verificada a partir do teste de cointegração de Johansen, enquanto que o equilíbrio no longo prazo entre os preços a vista e futuros, que possibilita a verificação da questão do viés na predição dos preços, foi estimado por um modelo vetorial de correção de erro.

Os resultados evidenciaram o não viés na predição dos preços e a eficiência do mercado futuro do boi gordo brasileiro em relação ao mercado a vista dos novilhos argentinos de aproximadamente 80%. Logo, os preços futuros do boi gordo brasileiro podem auxiliar de maneira expressiva os agentes da cadeia produtiva da carne bovina argentina na predição dos preços a vista dos novilhos.