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1 – 10 of over 2000Adian McFarlane, Leanora Brown, Kaycea Campbell and Anupam Das
The purpose of this study is to determine whether causal asymmetries exist between energy consumption and three dimensions of financial development in Jamaica.
Abstract
Purpose
The purpose of this study is to determine whether causal asymmetries exist between energy consumption and three dimensions of financial development in Jamaica.
Design/methodology/approach
The authors use the non-linear autoregressive distributed lag method to identify the long- and short-run associations between energy consumption and different measures of financial development in Jamaica for the period 1980 to 2018.
Findings
There are two central findings. First, cointegrating relationships run from the dimensions of financial development to energy consumption. Second, the authors find asymmetries in these relationships. In the long run, asymmetries are such that rising levels of financial development have a neutral impact on energy consumption. By contrast, falling levels of financial development in the long run are associated with increases in energy consumption. In the short run, the authors find evidence of asymmetries only in changes in the overall level of financial development on energy consumption.
Practical implications
One practical implication is that for Jamaica to avoid some of the potential negative environmental consequences resulting from the positive impact on energy consumption arising from falling levels of financial development, a strong financial development policy will be important.
Social implications
There will be positive social impacts from financial development in the area of climate finance.
Originality/value
To the authors’ knowledge, this is the first study on Jamaica that examines the financial development–energy nexus. Further, the authors use relatively new and comprehensive measures of financial development.
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The purpose of this study is to examine the effect of asymmetric structure inherent in exchange rate volatility on trade in sub-Saharan African countries from 2005 to 2017.
Abstract
Purpose
The purpose of this study is to examine the effect of asymmetric structure inherent in exchange rate volatility on trade in sub-Saharan African countries from 2005 to 2017.
Design/methodology/approach
17 countries in sub-Saharan African Countries are used for the study. Exchange rate volatility is generated using generalised autoregressive conditional heteroscedacity (1,1), while the asymmetric components of exchange rate volatility are generated using a refined approach of cumulative partial sum developed by Granger and Yoon (2002). Two-step generalised method of moments is used as the estimation technique in order to address the problem of endogeneity, commonly found in panel data.
Findings
The result from the study shows the evidence of exchange rate volatility clustering which is strictly persistent in sub-Saharan African countries. The asymmetric components (positive and negative shocks) of exchange rate volatility have negative and significant effect on trade in the region. Meanwhile, the effect of negative exchange rate volatility is higher on trade when compared with the positive exchange rate volatility. Furthermore, real exchange rate has negative and significant effect on trade in sub-Saharan African countries.
Research limitations/implications
The outcomes of this study are important for participants in foreign exchange market. As investors in foreign exchange market react more to the negative news than positive news, investors need to diversify their risk. Also, regulators in the market need to formulate appropriate macroeconomic policies that will stabilize exchange rate in the region.
Originality/value
This study deviates from extant studies in the literature by incorporating asymmetric structure into the exchange rate trade nexus using a refined approach.
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Abdulnasser Hatemi-J and Youssef El-Khatib
This paper investigates the dynamic relationship between the trade-weighted dollar exchange rates and the oil prices in the world market. Monthly data during 1980–2017 are used…
Abstract
Purpose
This paper investigates the dynamic relationship between the trade-weighted dollar exchange rates and the oil prices in the world market. Monthly data during 1980–2017 are used for this purpose.
Design/methodology/approach
The symmetric and asymmetric generalized impulse response functions are estimated for these important economic indicators.
Findings
The empirical findings show that if the dollar rate increases (i.e. the dollar depreciates), the oil price will increase. The reverse relationship is also supported empirically meaning that an increase in the oil price will results in a significant depreciation of the dollar rate. Based on the asymmetric impulses responses, it can also be claimed that the negative interaction is only significant for the positive changes and not for the negative ones. Thus, the underlying variables are negatively interrelated only for the positive shocks since a negative shock from any variable does not seem to have any significant impact on the other variable. These results have implications for cross hedging of price risk.
Originality/value
To the best knowledge, this is the first attempt to investigate the relationship between the dollar weighted exchange rate and the oil pieces via the asymmetric impulse response functions. Both of these variables and their interactions are very important for investors as well as policy makers worldwide.
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Ishfaq Nazir Khanday, Md. Tarique, Inayat Ullah Wani and Muzffar Hussain Dar
The primary objective of the paper is to examine the asymmetric Cointegration and asymmetric causality between financial development and poverty alleviation on annual data in…
Abstract
Purpose
The primary objective of the paper is to examine the asymmetric Cointegration and asymmetric causality between financial development and poverty alleviation on annual data in Indian context over the period from 1980 to 2019.
Design/methodology/approach
First nonlinearity test by Brooks et al. (1999) is applied to ascertain the nonlinear behavior of the variables used. Once the nonlinear behavior of variables is confirmed, asymmetric and nonlinear unit root tests by Kapetanios and Shin (2008) are applied to check for the order of integration of selected variables. Next, nonlinear autoregressive distributed lag model (NARDL) is employed to analyze the asymmetric Cointegration. Finally, Hatemi-j- asymmetric causality tests is applied to work out the direction of asymmetric causality.
Findings
The empirical findings document the existence of asymmetries in the short-run as well as long-run between poverty and financial development. The asymmetry reveals that negative financial development shocks leave a more profound impact on poverty alleviation than their positive equivalents. The findings of Wald's test also confirm the presence of asymmetric Cointegration. The asymmetric cumulative dynamic multipliers used to examine the behavior of asymmetries and adjustments with respect to time lend credence to the results calculated using NARDL estimator. This result exhibits the robustness of the model. Furthermore, the result emanating from recently introduced asymmetric causality test reveals a unidirectional asymmetric causality between negative shocks in financial development and poverty. The findings of the present study necessitate the need for investigating asymmetric and nonlinear effects in finance–poverty nexus, which existent literature has completely neglected, in order to have relevant policy conclusions.
Research limitations/implications
The study used “Per capita consumption expenditure” as a measure for poverty due to lack of continuous time series data on headcount ratio. In future, researchers can extend this study by incorporating headcount ratio as a measure of poverty in their respective works. There is further scope of research on this issue by finding out the impact of formal and informal sources of credit on poverty separately. A panel data study for developing countries over a period of time could further confirm/negate the findings of the present study.
Originality/value
To the best of the authors’ knowledge none of the studies in Indian context has scrutinized asymmetric and nonlinear impact of financial development on poverty. To dredge up asymmetric structures at work, the authors have used the highly celebrated NARDL estimator. To enrich the existent body of knowledge along the lines of asymmetric (nonlinear) linkages, the authors have also used recently introduced asymmetric causality test by Hatemi-j-(2012) to find out the direction asymmetric causality.
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Clement Olalekan Olaniyi and Nicholas M. Odhiambo
This study examines the roles of cross-sectional dependence, asymmetric structure and country-to-country policy variations in the inflation-poverty reduction causal nexus in…
Abstract
Purpose
This study examines the roles of cross-sectional dependence, asymmetric structure and country-to-country policy variations in the inflation-poverty reduction causal nexus in selected sub-Saharan African (SSA) countries from 1981 to 2019.
Design/methodology/approach
To account for cross-sectional dependence, heterogeneity and policy variations across countries in the inflation-poverty reduction causal nexus, this study uses robust Hatemi-J data decomposition procedures and a battery of second-generation techniques. These techniques include cross-sectional dependency tests, panel unit root tests, slope homogeneity tests and the Dumitrescu-Hurlin panel Granger non-causality approach.
Findings
Unlike existing studies, the panel and country-specific findings exhibit several dimensions of asymmetric causality in the inflation-poverty nexus. Positive inflationary shocks Granger-causes poverty reduction through investment and employment opportunities that benefit the impoverished in SSA. These findings align with country-specific analyses of Botswana, Cameroon, Gabon, Mauritania, South Africa and Togo. Also, a decline in poverty causes inflation to increase in the Congo Republic, Madagascar, Nigeria, Senegal and Togo. All panel and country-specific analyses reveal at least one dimension of asymmetric causality or another.
Practical implications
All stakeholders and policymakers must pay adequate attention to issues of asymmetric structures, nonlinearities and country-to-country policy variations to address country-specific issues and the socioeconomic problems in the probable causal nexus between the high incidence of extreme poverty and double-digit inflation rates in most SSA countries.
Originality/value
Studies on the inflation-poverty nexus are not uncommon in economic literature. Most existing studies focus on inflation’s effect on poverty. Existing studies that examine the inflation-poverty causal relationship covertly assume no asymmetric structure and nonlinearity. Also, the issues of cross-sectional dependence and heterogeneity are unexplored in the causal link in existing studies. All panel studies covertly impose homogeneous policies on countries in the causality. This study relaxes this supposition by allowing policies to vary across countries in the panel framework. Thus, this study makes three-dimensional contributions to increasing understanding of the inflation-poverty nexus.
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Mohsen Bahmani-Oskooee and Sujata Saha
While changes in stock prices are said to affect exchange rates, exchange rate changes are also said to affect stock prices. The purpose of this paper is threefold. First, the…
Abstract
Purpose
While changes in stock prices are said to affect exchange rates, exchange rate changes are also said to affect stock prices. The purpose of this paper is threefold. First, the authors review all empirical literature by dividing them into two groups of univariate and multivariate studies. Second, a table which summarizes the main features of each study is provided to help future researchers to have easy access to summary of each study. Finally, a new direction for future research is proposed. This new direction relies upon non-linear ARDL approach and shows how to investigate symmetric vs asymmetric effects of exchange rate changes on stock prices.
Design/methodology/approach
The paper reviews existing published work and provides suggestions for future research.
Findings
The paper reviews existing published work and provides suggestions for future research. An application reveals that exchange rate changes have asymmetric effect on stock prices.
Originality/value
This is the first review paper on the relation between exchange rates and stock prices.
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Olumide Olusegun Olaoye, Ukafor Ukafor Okorie, Oluwatosin Odunayo Eluwole and Mahmood Butt Fawwad
This study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the…
Abstract
Purpose
This study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the response of economic growth to government spending shocks differs according to the nature of shocks on them. In addition, the authors examine whether the stabilizing effects of fiscal policies are dependent on the state of the business cycle.
Design/methodology/approach
The study adopts the linear fiscal reaction function in addition to the nonlinear regression model of Hatemi-J (2011, 2012), Granger and Yoon (2002), which allows us to separate negative shocks from positive shocks to government spending. Similarly, the authors adopt the generalized method of moments (GMM) techniques of Hansen (1982) to account for simultaneity and endogeneity problems inherent in dynamic model.
Findings
The authors’ findings reveal that there is evidence of asymmetry in the government spending–economic growth nexus in Nigeria over the period of study. Specifically, the authors find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the study established that the stabilizing effects of fiscal policies are dependent on the state of the business cycle.
Originality/value
Unlike the traditional method of modeling asymmetry, which adopts the simple inclusion of a squared government spending term or by the inclusion of a cubic government spending term, the model adopted in this study allows us to model shocks and show how the responses of economic growth to government expenditure differ according to the nature of shocks on them.
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The purpose of this paper is to examine the asymmetric behavior between CEO pay and firm performance in Nigeria.
Abstract
Purpose
The purpose of this paper is to examine the asymmetric behavior between CEO pay and firm performance in Nigeria.
Design/methodology/approach
The study adopts a two-step dynamic panel generalized method of moments (GMM) to reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance.
Findings
The research outcomes of a two-step dynamic panel GMM) adopted reveal asymmetric responses of CEO pay to positive and negative shocks in firm performance. This implies that CEOs are handsomely compensated for good performance, but not punished for poor performance.
Originality/value
The study, therefore, suggests that CEO pay fails to serve as an internal corporate governance mechanism to alleviate agency problem in Nigeria’s listed firms.
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Abdulnasser Hatemi-J, Eduardo Roca and Alan Mustafa
In addition to the seminal approach of Markowitz (1952) that is based on finding the optimal budget shares for minimizing risk, the authors also make use of the approach developed…
Abstract
Purpose
In addition to the seminal approach of Markowitz (1952) that is based on finding the optimal budget shares for minimizing risk, the authors also make use of the approach developed by Hatemi-J and El-Khatib (2015), which is built on finding the weights as budget shares for maximizing the risk-adjusted return of the underlying portfolio. For testing the stability of the portfolio benefits, the asymmetric interaction between oil, equity and bonds is tested.
Design/methodology/approach
Oil is a major investment commodity. The literature shows mixed results regarding oils' ability to provide diversification benefits. This paper re-examines this issue by applying a new portfolio optimization approach.
Findings
The authors find that oil still yields portfolio diversification benefits; contrary to the traditional Markowitz portfolio approach, the asymmetric causality test results show that oil does not cause bonds for either positive or negative changes; however, oil does cause stocks but only for stocks' negative changes. Hence, oil can still make the returns of a portfolio of stocks and bonds unstable through oil's effect on stocks.
Originality/value
This is the first attempt to investigate the potential portfolio diversification benefits of stocks, bonds and oil by using the combination of risk and return explicitly in the optimization problem. The new insights provided by this article might be valuable to the investors, financial institutions and policy makers.
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