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1 – 10 of over 6000Vidhi Agarwal and Taniya Ghosh
Inflation targeting started in 1990 and since then, many industrial and emerging market economies have adopted it. This chapter attempts to study the impact of adoption of…
Abstract
Inflation targeting started in 1990 and since then, many industrial and emerging market economies have adopted it. This chapter attempts to study the impact of adoption of inflation targeting on major macroeconomic outcomes across the emerging market countries, by running a panel data study from 1980 to 2018. This chapter obtains mixed results with respect to different macroeconomic indicators. The empirical results indicate that inflation targeting has been successful in bringing down inflation, inflation volatility and GDP growth rate volatility, while inconclusive results are obtained for volatility in exchange rates.
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Renuka Mahadevan and Sandy Suardi
This paper seeks to revisit the highly debated trade‐growth hypothesis by considering the effects of trade and output volatility on the relationship between trade and economic…
Abstract
Purpose
This paper seeks to revisit the highly debated trade‐growth hypothesis by considering the effects of trade and output volatility on the relationship between trade and economic growth.
Design/methodology/approach
The relationship is modeled by testing for the existence of output and trade (export and imports separately) using the conditional variances of the variables and then specifying an autoregressive conditional heteroskedastic (ARCH) process in a vector error correction model.
Findings
Using Singapore as a case study, the paper finds the two‐way relationship between export growth and trade‐adjusted GDP growth is robust even after controlling for the effects of income and export volatility. In addition, neither trade nor GDP volatility bears any impact on the bi‐directional causality between imports and unadjusted GDP growth thereby highlighting the crucial role of imports as intermediate inputs and embodying foreign technology in promoting economic growth. There is also evidence that output volatility impedes output and trade growth, while trade volatility exerts a negative influence on the trade‐adjusted income growth.
Practical implications
Ignoring the presence of trade and output volatility in modeling the trade‐growth relationship provides biased empirical results which have serious implications for trade‐oriented growth strategies that policy makers cannot afford to ignore.
Originality/value
This is the first attempt to explicitly model output, export and import volatility in empirically testing the trade‐growth hypothesis. Second, the robustness of the hypothesis is also tested by considering GDP and non‐trade GDP as it has been argued that use of GDP may lead to the problems of simultaneity and specification bias since exports and imports are themselves a component of GDP.
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The purpose of this paper is to predict real gross domestic product (GDP) growth and business cycles by using information from both liquidity and volatility measures.
Abstract
Purpose
The purpose of this paper is to predict real gross domestic product (GDP) growth and business cycles by using information from both liquidity and volatility measures.
Design/methodology/approach
The paper estimates liquidity and volatility measures from over 5,000 NYSE rms and extracts a common factor, which the paper calls uncertainty. In-sample and out-of-sample forecasting tests are used to determine the ability of the uncertainty factor to predict growth in real GDP, industrial production, consumer price index, real consumption and changes in real investment.
Findings
The paper finds that on average, positive shocks to the uncertainty factor occur in the quarters preceding and at the beginning of a recession. During the quarters toward the end of recessions, there are negative shocks to uncertainty on average.
Originality/value
Previous research has explored using either liquidity or volatility to forecast economic activity. The paper bridges the two branches of research and finds a link to real GDP growth and business cycles.
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Teresia Kaulihowa and Katrina Kamati
This paper aims to test the volatility and analyses the macroeconomic determinants of house price volatility in Namibia over the period 2007 Quarter 1 to 2017 Quarter 2. It…
Abstract
Purpose
This paper aims to test the volatility and analyses the macroeconomic determinants of house price volatility in Namibia over the period 2007 Quarter 1 to 2017 Quarter 2. It further explores the causal relations between house price volatility and its determinants.
Design/methodology/approach
The study used autoregressive conditional heteroskedastic and generalized autoregressive conditional heteroskedastic models to test for volatility. The vector error correction model was used to analyse the determinants and causal relations.
Findings
The results support the hypothesis that house prices in Namibia exhibits persistent volatility. It was further established that past period volatility’ GDP and mortgage loans are the key determinants of house price volatility. Additionally’ there exists unidirectional causality from GDP and mortgage loans to house price volatility.
Practical implications
Policy implications emanating from the study implies that macroeconomic fundamentals should be monitored closely to mitigate the issues of house price volatility.
Originality/value
The study is the first of its kind in Namibia to address the pertinent issues of ever increasing housing prices.
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This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where macroeconomic…
Abstract
Purpose
This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where macroeconomic risk is proxied by the conditional variance for a default risk premium and real gross domestic product (GDP) growth.
Design/methodology/approach
A generalised autoregressive conditional heteroscedastic model is used to generate the conditional volatilities and bivariate Granger causality tests are used to examine the empirical relationship between the risk measures.
Findings
Past values of the conditional variance for a default risk premium have information that is precedent to the conditional volatility for value premium and the small stock risk premium, and the conditional variance for the market risk premium has information about the future volatility of macroeconomic risk, as proxied by the conditional variance for GDP growth.
Research limitations/implications
The implications are that conditional volatility associated with default is related to current and future volatility in value premium; however, volatility associated with the market risk premium appears to be a predictor of future macroeconomic risk. A caveat is that the results are dependent on the proxies used for macroeconomic risk and more refined measures of macroeconomic risk may yield different results.
Practical implications
This paper suggests that examination of the relationship between the volatility of macroeconomic factors and the explanatory factors in asset‐pricing models will help to further understanding of the relationship between risk and expected return.
Originality/value
This paper focuses directly on the links between risk associated with the Fama–French factors and macroeconomic risk. This added knowledge is beneficial to practitioners and academics whose interest lies in asset price modelling.
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Nhung Thi Nguyen, Lan Hoang Mai Nguyen, Quyen Do and Linh Khanh Luu
This paper aims to explore factors influencing apartment price volatility in the two biggest cities in Vietnam, Hanoi and Ho Chi Minh City.
Abstract
Purpose
This paper aims to explore factors influencing apartment price volatility in the two biggest cities in Vietnam, Hanoi and Ho Chi Minh City.
Design/methodology/approach
The study uses the supply and demand approach and provides a literature review of previous studies to develop four main hypotheses using four determinants of apartment price volatility in Vietnam: gross domestic product (GDP), inflation rate, lending interest rate and construction cost. Subsequently, the Vector Error Correction Model (VECM) is used to analyze a monthly data sample of 117.
Findings
The research highlights the important role of construction costs in apartment price volatility in the two largest cities. Moreover, there are significant differences in how all four determinants affect apartment price volatility in the two cities. In addition, there is a long-run relationship between the determinants and apartment price volatility in both Hanoi and Ho Chi Minh City.
Research limitations/implications
Limitations related to data transparency of the real estate industry in Vietnam lead to three main limitations of this paper, including: this paper only collects a sample of 117 valid monthly observations; apartment price volatility is calculated by changes in the apartment price index instead of apartment price standard deviation; and this paper is limited by only four determinants, those being GDP, inflation rate, lending interest rate and construction cost.
Practical implications
The study provides evidence of differences in how the above determinants affect apartment price volatility in Hanoi and Ho Chi Minh City, which helps investors and policymakers to make informed decisions relating to the real estate market in the two biggest cities in Vietnam.
Social implications
This paper makes several recommendations to policymakers and investors in Vietnam to ensure a stable real estate market, contributing to the stability of the national economy.
Originality/value
This paper provides a new approach using VECM to analyze both long-run and short-run relationships between macroeconomic and sectoral independent variables and apartment price volatility in the two biggest cities in Vietnam.
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Mamdouh Abdelmoula Mohamed Abdelsalam
This paper aims to explore the extreme effect of crude oil price fluctuations and its volatility on the economic growth of Middle East and North Africa (MENA) countries. It also…
Abstract
Purpose
This paper aims to explore the extreme effect of crude oil price fluctuations and its volatility on the economic growth of Middle East and North Africa (MENA) countries. It also investigates the asymmetric and dynamic relationship between oil price and economic growth. Further, a separate analysis for each MENA oil-export and oil-import countries is conducted. Furthermore, it studies to what extent the quality of institutions will change the effect of oil price fluctuations on economic growth.
Design/methodology/approach
As the effect of oil price fluctuations is not the same over different business cycles or oil price levels, the paper uses a panel quantile regression approach with other linear models such as fixed effects, random effects and panel generalized method of moments. The panel quantile methodology is an extension of traditional linear models and it has the advantage of exploring the relationship over the different quantiles of the whole distribution.
Findings
The paper can summarize results as following: changes in oil price and its volatility have an opposite effect for each oil-export and oil-import countries; for the former, changes in oil prices have a positive impact but the volatility a negative effect. While for the latter, changes in oil prices have a negative effect but volatility a positive effect. Further, the impact of oil price changes and their uncertainty are different across different quantiles. Furthermore, there is evidence about the asymmetric effect of the oil price changes on economic growth. Finally, accounting for institutional quality led to a reduction in the impact of oil price changes on economic growth.
Originality/value
The study concludes more detailed results on the impact of oil prices on gross domestic product growth. Thus, it can be used as a decision-support tool for policymakers.
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Dimitar Eftimoski and Dushko Josheski
The impact of remittances on household consumption stability and economic growth is not quite clear. This paper attempts to reopen the debate on the relationship among these three…
Abstract
Purpose
The impact of remittances on household consumption stability and economic growth is not quite clear. This paper attempts to reopen the debate on the relationship among these three variables. The current remittance literature suggests that a decrease in household consumption volatility, induced by remittances, automatically leads to economic growth. This paper challenges these arguments by stating that, under certain circumstances, there is no automatic relationship among remittances, household consumption stability and growth.
Design/methodology/approach
The authors approach the question from the perspective of emerging Central, Eastern and Southeastern European (CESEE) countries. The authors use the two-step system generalized method of moments (GMM) estimator with the Windmeijer (2005) finite-sample correction. To test the existence of the possible non-linear effects of remittances on household consumption stability and economic growth, the authors use threshold regressions.
Findings
The authors find that remittances significantly reduce household consumption volatility. They exhibit a consumption-smoothing effect on recipient households. This stabilizing effect happens not through the preventive role of remittances, but rather through their compensatory role. Remittances produce a weaker stabilizing effect on household consumption when the remittance to GDP ratio of the recipient country is above the estimated threshold level of 4.5%. The authors also find that there is a negatively significant and linear impact of remittances on growth. There is no evidence to suggest that remittances can foster productive investment and therefore promote economic growth in CESEE countries, which means that: (1) the remittances cannot be treated as a source of funds to invest in human and physical capital and (2) the remittances are compensatory rather than profit-oriented.
Originality/value
As far as the authors are aware, this is the first study that investigates the impact of remittances on both household consumption stability and economic growth simultaneously.
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Roland Craigwell, Mahalia Jackman and Winston Moore
Remittances are the fastest growing source of foreign exchange earnings for developing countries. The purpose of this paper is to assess the impact of remittances on economic…
Abstract
Purpose
Remittances are the fastest growing source of foreign exchange earnings for developing countries. The purpose of this paper is to assess the impact of remittances on economic volatility of the receiving country.
Design/methodology/approach
A panel of 95 countries over the period 1970‐2005 is employed in the analysis. To assess the impact of remittances on volatility a multivariate model is estimated using a panel fixed effects approach with cross‐section weights.
Findings
The study reports that remittances can play a key role in mitigating the effect of adverse output shocks but exert no significant influence on consumption and investment volatility. Moreover, important differential impacts exist across the various country groupings.
Practical implications
Countries that are dependent on remittances may have to monitor and forecast future remittance flows and take these projections into account when making changes to either their monetary or fiscal policy stance.
Originality/value
The findings provided in this paper should be of use to policymakers in developing countries.
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Rexford Abaidoo and Elvis Kwame Agyapong
The study examines the impact of macroeconomic risk and volatility associated with key macroeconomic indicators on financial market uncertainty; and the extent to which governance…
Abstract
Purpose
The study examines the impact of macroeconomic risk and volatility associated with key macroeconomic indicators on financial market uncertainty; and the extent to which governance and institutional structures moderate such relationships.
Design/methodology/approach
The study employs data from 33 countries in Sub-Saharan Africa (SSA) for the period between 1996 and 2019. Variable derivation techniques such as the generalized autoregressive conditional heteroskedasticity (GARCH) for deriving volatility data, and the principal component analysis (PCA) for index construction were employed. The data is examined using the two-step system generalized method of moments (TS-SGMM) technique.
Findings
Empirical results suggest that macroeconomic risk and exchange rate volatility heighten financial market uncertainty among economies in the sub-region. Further empirical estimates show that institutional quality and government effectiveness have a negative moderating effect on the nexus between macroeconomic risk, inflation uncertainty, GDP growth, exchange rate, and financial market uncertainty.
Practical implications
The key macroeconomic conditions with the propensity to foment financial market uncertainty are worth monitoring with adequate buffers to mitigate their impacts on the financial market.
Originality/value
Compared to related studies, this study focuses on uncertainty associated with financial markets among emerging economies in sub-Saharan Africa (SSA) instead of the performance of the financial markets or specific financial market indicators such as the stock market; and the extent to which a host of macroeconomic conditions influence such uncertainty. For instance, Abaidoo and Agyapong (2023) focused on the impact of macroeconomic indicators or conditions on the performance of the financial market and the efficiency of financial institutions respectively instead of the uncertainty or risk associated with the financial market as pursued in the current study. This differing approach is pursued with the goal of proffering appropriate strategies for policy makers towards assuaging the financial market risk (uncertainty) due to macroeconomic dynamics. We further examine how the various fundamental relationships may be moderated by effective governance and institutional quality.
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