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1 – 10 of 18
Open Access
Article
Publication date: 20 June 2023

Françoise Okah Efogo and Boniface Ngah Epo

This paper appraises the effects of monetary policy on trade in value-added (TiVA) using a panel of 38 developing countries spanning the period 1990 to 2019. Specifically, the…

Abstract

Purpose

This paper appraises the effects of monetary policy on trade in value-added (TiVA) using a panel of 38 developing countries spanning the period 1990 to 2019. Specifically, the authors subsequently summon the theory of trade in intermediate products within the New Keynesian framework for open economies that comprises price rigidity to verify this relationship and thereon control for robustness by correcting for endogeneity and unbalanced panel effect.

Design/methodology/approach

The authors mobilize the within estimator corrected for cross sectional dependence as well as the two-stage-least squares fixed effect estimator which corrects for endogeneity. For robustness, the authors also use the Hausman–Taylor estimator to control for endogeneity and random effects in annualized data and the least squares dummy variable corrected estimator.

Findings

Results suggest that the monetary policy instruments such as inflationary gaps and anticipatory inflationary outcomes significantly affect TiVA in developing countries only in the short term with no long-term effect. In addition to contributing to the scanty empirical literature, the authors provide relevant insights on monetary policy tools that can be mobilized in fashioning a global value chain penetration and upgrading strategies.

Originality/value

The authors convoke the theory of trade in intermediate products casted into the New Keynesian framework comprising price rigidity to verify the relationship between TiVA and monetary policy (b) verify for robustness by correcting for endogeneity and unbalanced panel effect.

Details

Journal of International Logistics and Trade, vol. 21 no. 3
Type: Research Article
ISSN: 1738-2122

Keywords

Open Access
Article
Publication date: 19 July 2023

José Antonio Romero Tellaeche and Rodrigo Aliphat

This study estimated total import demand elasticities concerning income, import prices and domestic prices. A high propensity to import constitutes a significant obstacle to…

Abstract

Purpose

This study estimated total import demand elasticities concerning income, import prices and domestic prices. A high propensity to import constitutes a significant obstacle to economic growth in Mexico since the benefits of increased exports or any other aggregate demand expansion leak to the rest of the world.

Design/methodology/approach

This paper estimated a Vector Error Correction Model of the total import demand elasticities concerning income, import prices and domestic prices. Total imports are a dependent variable, while Gross Domestic Product (GDP) and import and domestic prices are the independent variables.

Findings

The principal finding is that an increase of 1 peso in the Mexican GDP leads to a rise of 0.50 pesos in Mexican imports; the elasticity of import demand for prices is low. Still, the elasticity of import demand for domestic prices is 2.14 times greater than that for import prices. These results have significant economic policy implications, such as promoting the expansion of the domestic market and the national content of exports.

Research limitations/implications

It is tempting to estimate the import demand function for the entire 1993–2019 period since such data is available. But by doing so, the authors would overestimate the propensity to import, given that from 1993 to 2019, the proportion of imports as a percentage of GDP went from 11.37 in 1993 to 29.66 in 2019. Therefore, it makes more sense to estimate the import demand function from 2000 to 2019, a period with a stable proportion of imports to GDP.

Originality/value

A high level of imports in developing countries means that much of their aggregate demand is filtered abroad. Therefore, the low impact of its exports on GDP is related to the Mexican economy’s high imports. The authors calculate this relationship with new data and methods.

Details

Journal of Economics, Finance and Administrative Science, vol. 28 no. 56
Type: Research Article
ISSN: 2077-1886

Keywords

Open Access
Article
Publication date: 6 December 2022

Mesbah Fathy Sharaf and Abdelhalem Mahmoud Shahen

This paper investigates the asymmetric impact of the real effective exchange rate (REER) on Egypt's real domestic output from 1960 to 2020.

2444

Abstract

Purpose

This paper investigates the asymmetric impact of the real effective exchange rate (REER) on Egypt's real domestic output from 1960 to 2020.

Design/methodology/approach

A Nonlinear Autoregressive Distributed Lag (NARDL) model is utilized to isolate real currency depreciations from appreciations and account for the potential asymmetry in the impact of the REER. The analyses account for the various channels via which the REER could affect domestic output.

Findings

Results show evidence of a long-run asymmetry in the output effect of REER changes in which only real currency depreciations have a contractionary impact on output, while the REER has no impact on output in the short run.

Practical implications

The Egyptian monetary authority cannot rely on domestic currency depreciation as a policy instrument to boost domestic output.

Originality/value

Unlike most of the previous studies, which assume linearity in the impact of the REER on output, we relax this assumption and hypothesize that the REER changes have an asymmetric effect on the Egyptian domestic output in Egypt. We use a long time span from 1960 to 2020 and control for the potential structural breaks in the REER-output nexus and the various channels through which the REER can affect domestic output.

Details

International Trade, Politics and Development, vol. 7 no. 1
Type: Research Article
ISSN: 2586-3932

Keywords

Open Access
Article
Publication date: 23 August 2019

Luciano Campos

This paper aims to estimate the impact of the 2000s commodity boom in the major Latin American economies.

1922

Abstract

Purpose

This paper aims to estimate the impact of the 2000s commodity boom in the major Latin American economies.

Design/methodology/approach

The author used a structural vector autorregresive analysis where the selection of variables is conditional on a New Keynesian Model for a small open economy.

Findings

The evidence indicates that the Argentinean nominal exchange rate appreciated less while its output and inflation grew more than those of the other nations when subjected to commodity shocks. These results are interpreted as a more aggressive leaning-against-the-wind intervention by Argentina, probably to avoid the Dutch disease. Although the effects with regard to output were indeed stronger in Argentina, this was only at the expense of higher inflation and volatility suffered during the boom.

Originality/value

At the time of the writing of this paper, no work had evaluated Argentinean underperformace to the manner in which its exchange rate policy was handled in comparison with the rest of the region during the boom. This paper intends to fill this gap.

Details

Applied Economic Analysis, vol. 27 no. 79
Type: Research Article
ISSN: 2632-7627

Keywords

Open Access
Article
Publication date: 24 September 2020

Boubekeur Baba and Güven Sevil

The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea.

1052

Abstract

Purpose

The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea.

Design/methodology/approach

The authors in this paper apply the Bayesian threshold vector autoregressive (TVAR) model to estimate the regimes of large and low inflows of foreign capital. Then, structural impulse-response analysis is used to check whether the responses of the variables differ across the estimated regimes. The model is estimated using quarterly data of foreign capital inflows, gross domestic product (GDP), consumer price index, credit to the private non-financial sector, real effective exchange rate (REER), stock returns and house prices.

Findings

The main findings suggest that large inflows of gross foreign capital, foreign direct investments (FDI) and foreign portfolio investments (FPI) are ineffective to boost economic growth, but large inflows of other foreign investments (OFIs) significantly contribute to GDP. The decreases in the foreign capital inflows are associated with larger depreciation of REER. The large inflows of gross foreign capital, FDI and OFIs are associated with further expansion of credit supply to private non-financial sectors.

Research limitations/implications

The policy implications of foreign capital inflows are of particular importance to all the emerging markets alike. However, the empirical analysis is limited to the case of South Korea due to various reasons. The experience with international capital inflows among emerging markets is heterogeneous. Therefore, it would be better to take each case of emerging market individually. In addition, TVAR analysis requires a long data sample, which unfortunately is not available for most of the emerging markets.

Originality/value

The foreign capital inflows are shown to be procyclical and notoriously volatile in many studies. Nevertheless, this topic has commonly been studied using linear VAR models, which do not properly deal with the cyclical characteristics of foreign capital inflows. This study attempts to resolve these methodological limitations by examining a non-linear VAR model that is capable of capturing the structural breaks associated with the cyclical behaviors of foreign capital inflows.

Details

Asian Journal of Economics and Banking, vol. 4 no. 3
Type: Research Article
ISSN: 2615-9821

Keywords

Open Access
Article
Publication date: 7 July 2021

Alfonso Camba-Crespo, José García-Solanes and Fernando Torrejón-Flores

This study aims to identify structural breaks in the current account and the periods between these breaks, which the authors name stability spells, and study their characteristics…

1022

Abstract

Purpose

This study aims to identify structural breaks in the current account and the periods between these breaks, which the authors name stability spells, and study their characteristics and determinants.

Design/methodology/approach

Using data from the IMF and the World Bank, this study applies the Lee and Strazicich test to endogenously identify breaks and the Heckman selection model to simultaneously study the determinants of structural breaks and current-account changes after breaks.

Findings

This study identifies 212 significant structural breaks and 341 stability spells. These spells become shorter and more volatile the further they are from equilibrium, and half of them last 10 years or less. The results show that economic growth and foreign-exchange piling are particularly useful to prevent breaks, while lower per capita income increases exposure to break risks.

Originality/value

This study introduces the concept of current-account stability spells to refer to the periods between structural breaks. These spells are then studied to determine their main characteristics. The authors also apply a global perspective in their analysis, using a wide sample of 181 economies between 1980 and 2018 and considering positive and negative breaks in both level and trend.

Open Access
Article
Publication date: 14 July 2020

Trinh Thi Tuyet Pham and Nhan Phan Ai Le

This paper aims to analyse the asymmetric impacts of world oil price on macroeconomic variables in Vietnam, including domestic oil price, inflation and output growth.

Abstract

Purpose

This paper aims to analyse the asymmetric impacts of world oil price on macroeconomic variables in Vietnam, including domestic oil price, inflation and output growth.

Design/methodology/approach

The mixed data sampling (MIDAS) approach is employed to examine the impact of world oil price changes on macroeconomic variables as the former is high-frequency data (daily), and the latter is low-frequency data, usually monthly or quarterly.

Findings

Changes in world oil price cause asymmetric impacts on domestic oil price and inflation, but no significant effects on output growth. In terms of magnitude, a positive change in world oil price causes a stronger effect than a negative change in world oil price. In terms of timing, a positive change in world oil price causes a slow pass-through impact on domestic oil price and inflation. Meanwhile, domestic oil price and inflation decrease quickly following a negative change in world oil price.

Originality/value

This study investigates the asymmetric impact of oil price on the Vietnam economy in terms of both magnitude and timing, which is not explored by previous studies. In addition, it exploits daily information of oil price changes to analyse macroeconomic variables in lower frequency by employing MIDAS approach.

Details

Journal of Economics and Development, vol. 22 no. 2
Type: Research Article
ISSN: 1859-0020

Keywords

Open Access
Article
Publication date: 20 May 2022

Hoai Nguyen, Toan Luu Duc Huynh and Anh Ngoc Quang Huynh

472

Abstract

Details

Journal of Asian Business and Economic Studies, vol. 29 no. 2
Type: Research Article
ISSN: 2515-964X

Keywords

Open Access
Article
Publication date: 19 September 2023

Cleyton Farias and Marcelo Silva

The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies…

Abstract

Purpose

The authors explore the hypothesis that some movements in commodity prices are anticipated (news shocks) and can trigger aggregate fluctuations in small open emerging economies. This paper aims to discuss the aforementioned objective.

Design/methodology/approach

The authors build a multi-sector dynamic stochastic general equilibrium model with endogenous commodity production. There are five exogenous processes: a country-specific interest rate shock that responds to commodity price fluctuations, a productivity (TFP) shock for each sector and a commodity price shock. Both TFP and commodity price shocks are composed of unanticipated and anticipated components.

Findings

The authors show that news shocks to commodity prices lead to higher output, investment and consumption, and a countercyclical movement in the trade-balance-to-output ratio. The authors also show that commodity price news shocks explain about 24% of output aggregate fluctuations in the small open economy.

Practical implications

Given the importance of both anticipated and unanticipated commodity price shocks, policymakers should pay attention to developments in commodity markets when designing policies to attenuate the business cycles. Future research should investigate the design of optimal fiscal and monetary policies in SOE subject to news shocks in commodity prices.

Originality/value

This paper contributes to the knowledge of the sources of fluctuations in emerging economies highlighting the importance of a new source: news shocks in commodity prices.

Details

EconomiA, vol. 24 no. 2
Type: Research Article
ISSN: 1517-7580

Keywords

Open Access
Article
Publication date: 2 November 2023

Izabela Pruchnicka-Grabias, Iwona Piekunko-Mantiuk and Scott W. Hegerty

The Polish economy has undergone major challenges and changes over the past few decades. The country's trade flows, in particular, have become more firmly tied to the country’s…

Abstract

Purpose

The Polish economy has undergone major challenges and changes over the past few decades. The country's trade flows, in particular, have become more firmly tied to the country’s Western neighbors as they have grown in volume. This study examines Poland's trade balances in ten Standard International Trade Classification (SITC) sectors versus the United States of America, first testing for and isolating structural breaks in each time series. These breaks are then included in a set of the cointegration models to examine their macroeconomic determinants.

Design/methodology/approach

Linear and nonlinear and nonlinear autoregressive distributed lag models, both with and without dummies corresponding to structural breaks, are estimated.

Findings

One key finding is that incorporating these breaks reduces the significance of the real exchange rate in the model, supporting the hypothesis that this variable already incorporates important information. It also results in weaker evidence for cointegration of all variables in certain sectors.

Research limitations/implications

This study looks only at one pair of countries, without any third-country effects.

Originality/value

An important country pair's trade relations is examined; in addition, the real exchange rate is shown to incorporate economic information that results in structural changes in the economy. The paper extends the existing literature by conducting an analysis of Poland's trade balances with the USA, which have not been studied in such a context so far. A strong point is a broad methodology that lets compare the results the authors obtained with different kinds of models, both linear and nonlinear ones, with and without structural breaks.

Details

Central European Management Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2658-0845

Keywords

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