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Book part
Publication date: 13 December 2013

Nikolay Gospodinov, Ana María Herrera and Elena Pesavento

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare…

Abstract

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be most robust when the magnitude of the roots is not known. The pretest specification works well only when the restrictions imposed by the model are satisfied. Its performance deteriorates even for small deviations from the exact unit root for one or more model variables. We illustrate the practical relevance of our results through simulation examples and an empirical application.

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VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims
Type: Book
ISBN: 978-1-78190-752-8

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Book part
Publication date: 21 August 2019

Peter Huaiyu Chen, Kasing Man, Junbo Wang and Chunchi Wu

We examine the informational roles of trades and time between trades in the domestic and overseas US Treasury markets. A vector autoregressive model is employed to assess…

Abstract

We examine the informational roles of trades and time between trades in the domestic and overseas US Treasury markets. A vector autoregressive model is employed to assess the information content of trades and time duration between trades. We find significant impacts of trades and time duration between trades on price changes. Larger trade size induces greater price revision and return volatility, and higher trading intensity is associated with a greater price impact of trades, a faster price adjustment to new information and higher volatility. Higher informed trading and lower liquidity contribute to larger bid–ask spreads off the regular daytime trading period.

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Advances in Pacific Basin Business, Economics and Finance
Type: Book
ISBN: 978-1-78973-285-6

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Article
Publication date: 7 January 2014

Richard A. DeFusco, Lee M. Dunham and John Geppert

– The purpose of this paper is to examine the dynamic relationships among investment, earnings and dividends for US firms. The sample period is 1950-2006.

Abstract

Purpose

The purpose of this paper is to examine the dynamic relationships among investment, earnings and dividends for US firms. The sample period is 1950-2006.

Design/methodology/approach

The authors use a firm-level vector auto-regression (VAR) framework to examine the firm-level dynamics among investment, earnings and dividends. The firm-level VAR yields Granger causality results, impulse response functions, and variance decompositions characterizing the dynamics of these three variables at the firm level.

Findings

For the average firm in the sample, Miller and Modigliani dividend policy irrelevance is not supported, even in the long run; the shocks to dividends do have long-run consequences for investment and vice versa. Dividend changes are an ineffective signal of future earnings in both the short and long-term. The cost of an increased dividend is on average an immediate decrease of $3 in investment for every dollar increase in dividends and the effect is persistent up to six years after the increase in dividends.

Research limitations/implications

The firm-level VAR used in the study requires that sample firms have long histories of investment, earnings and dividend data. The study addresses the interaction between dividends and investment and therefore necessitates examining dividend-paying firms. By the nature of the research question, the sample firms will not be representative in all respects to the universe of firms. The most striking difference between the sample and the universe of firms is firm size. As such, the study's conclusions are most applicable to larger, stable, dividend-paying firms. The study is also limited to dividend payout. Alternative payout policies, such as share repurchases, are not considered in this work.

Practical implications

In theory, increases in dividends can signal higher future earnings; however, the evidence does not support this hypothesis. When capital markets are constrained or incomplete, increases in dividends come at a cost to investment. Firms should consider alternative methods of signaling future earnings that have less of an impact on investment. Investors should carefully evaluate the possible impact of an increase in dividends on investment and future earnings growth.

Originality/value

This study is the first to examine the dynamics of earnings, dividends and investment at a firm level and over such a long sample period. By including the dynamics of earnings, the authors emphasize the potential opportunity costs that increasing dividends has on investment when capital markets are imperfect. The dynamic system also allows the authors to consider long-run effects as well as immediate responses to system shocks.

Details

Managerial Finance, vol. 40 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 11 November 2019

Nazneen Ahmad and Sandeep Kumar Rangaraju

The purpose of this paper is to investigate the impact of a consumer confidence shock on GDP and different types of consumer spending during a slack state as well as a…

Abstract

Purpose

The purpose of this paper is to investigate the impact of a consumer confidence shock on GDP and different types of consumer spending during a slack state as well as a non-slack state of an economy.

Design/methodology/approach

The authors use the US quarterly data from 1960Q1 to 2014Q4 and apply Jorda’s (2005) local projection method to compute the impulse responses of macroeconomic variables to a consumer confidence shock. The local projection method allows us to include non-linearities in the response function.

Findings

In general, the response of output, following a consumer confidence shock, is similar in slack and non-slack states and indicate that an unfavorable confidence shock is contractionary. However, the intensity and duration of impact of a confidence shock on different components of spending are state dependent. Overall, a negative confidence shock appears to have a stronger impact on non-slack time than on a slack time.

Practical implications

Policy makers should be careful about undertaking a policy action that may affect consumer confidence adversely, particularly during an economic good time. An adverse confidence shock can trigger a downfall in a well-functioning economy and the dampening effect may last for several quarters before the economy rebounds.

Originality/value

US economy is subject to fluctuations; however, the literature on the impact of confidence shock in different economic states is limited. The incremental contribution of this paper is that it investigates how the consumers respond to the confidence shock in a state-dependent model. Furthermore, the authors use a more robust and alternative estimation method that tackles any non-linear problems.

Details

Journal of Economic Studies, vol. 46 no. 7
Type: Research Article
ISSN: 0144-3585

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Book part
Publication date: 1 January 2004

Helmut Lutkepohl

Abstract

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New Directions in Macromodelling
Type: Book
ISBN: 978-1-84950-830-8

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Abstract

Identification of shocks of interest is a central problem in structural vector autoregressive (SVAR) modeling. Identification is often achieved by imposing restrictions on the impact or long-run effects of shocks or by considering sign restrictions for the impulse responses. In a number of articles changes in the volatility of the shocks have also been used for identification. The present study focuses on the latter device. Some possible setups for identification via heteroskedasticity are reviewed and their potential and limitations are discussed. Two detailed examples are considered to illustrate the approach.

Details

VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims
Type: Book
ISBN: 978-1-78190-752-8

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Article
Publication date: 27 September 2011

Matthew Kofi Ocran

This paper aims to examine the effects of fiscal policy associated with increases in government expenditures, tax revenue and budget deficit on the South African economy.

Abstract

Purpose

This paper aims to examine the effects of fiscal policy associated with increases in government expenditures, tax revenue and budget deficit on the South African economy.

Design/methodology/approach

Structural VARs based on the Blanchard‐Quard decomposition identification scheme were used in the empirical analysis. With the aid of quarterly data covering the period 1990:1 to 2008:4, the identified true models are used to estimate various impulseresponse functions. The impulseresponse functions represent the responses of real output and interest rates to shocks from tax revenue, budget deficit and government consumption and investment expenditures.

Findings

The results suggest that the fiscal policy instruments have varied effects on output and interest rates. The effect of the fiscal policy on output appears to be quite modest but persistent; however, the response from interest rate is temporary and substantial most cases.

Originality/value

The debate on the efficacy of fiscal policy in stimulating growth seems to have assumed new prominence in the wake of the recent global financial crisis. This paper contributes to the discourse from a South African focused empirical effort. Other fiscal policy authorities may find the paper valuable.

Details

Journal of Economic Studies, vol. 38 no. 5
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 16 April 2018

Diptiranjan Behera, Hong-Zhong Huang and Smita Tapaswini

Recently, fractional differential equations have been used to model various physical and engineering problems. One may need a reliable and efficient numerical technique…

Abstract

Purpose

Recently, fractional differential equations have been used to model various physical and engineering problems. One may need a reliable and efficient numerical technique for the solution of these types of differential equations, as sometimes it is not easy to get the analytical solution. However, in general, in the existing investigations, involved parameters and variables are defined exactly, whereas in actual practice it may contain uncertainty because of error in observations, maintenance induced error, etc. Therefore, the purpose of this paper is to find the dynamic response of fractionally damped beam approximately under fuzzy and interval uncertainty.

Design/methodology/approach

Here, a semi analytical approach, variational iteration method (VIM), has been considered for the solution. A newly developed form of fuzzy numbers known as double parametric form has been applied to model the uncertainty involved in the system parameters and variables.

Findings

VIM has been successfully implemented along with double parametric form of fuzzy number to find the uncertain dynamic responses of the fractionally damped beam. The advantage of this approach is that the solution can be written in power series or compact form. Also, this method converges rapidly to have the accurate solution. The uncertain responses subject to impulse and step loads have also been computed and the behaviours of the responses are analysed. Applying the double parametric form, it reduces the computational cost without separating the fuzzy equation into coupled differential equations as done in traditional approaches.

Originality/value

Uncertain dynamic responses of fuzzy fractionally damped beam using the newly developed double parametric form of fuzzy numbers subject to unit step and impulse loads have been obtained. Gaussian fuzzy numbers are used to model the uncertainties. In the methodology using the alpha cut form, corresponding beam equation is first converted to an interval-based fuzzy equation. Next, it has been transformed to crisp form by applying double parametric form of fuzzy numbers. Finally, VIM has been applied to solve the same for the general fuzzy responses. Various numerical examples have been taken in to consideration.

Details

Engineering Computations, vol. 35 no. 2
Type: Research Article
ISSN: 0264-4401

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Article
Publication date: 1 December 2005

M. Condon, E. Dautbegovic and C. Brennan

To provide an efficient and accurate model for interconnect networks characterised by frequency‐domain scattering or admittance parameters. The parameters are derived from…

Abstract

Purpose

To provide an efficient and accurate model for interconnect networks characterised by frequency‐domain scattering or admittance parameters. The parameters are derived from measurements or rigorous full‐wave simulation.

Design/methodology/approach

Initially, Hilbert transform relationships are enforced to ensure causality. A reverse Fourier series representation of the discrete data is then converted to the z‐domain and from this a state‐space formulation is determined. This enables the application of a judiciously chosen model reduction algorithm to obtain an efficient time‐domain representation of the network.

Findings

Sample results from both simulated and measured data indicate the efficacy of the proposed modelling strategy. For successful implementation of the strategy, it is necessary to employ the Hilbert transform to ensure that a causal impulse response is obtained.

Practical implications

The method is applicable to the interconnect networks for which the analytical models cannot be obtained due to the complexity and inhomogeneity of the geometries involved.

Originality/value

The work combines in a novel manner aspects from several existing techniques proposed for network simulation and model reduction. The end result is a highly efficient causal, stable and passive representation of the network in question for implementation in a time‐domain circuit simulator.

Details

COMPEL - The international journal for computation and mathematics in electrical and electronic engineering, vol. 24 no. 4
Type: Research Article
ISSN: 0332-1649

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Book part
Publication date: 1 March 2021

Fiona Keegan, Elaine L. Ritch and Noreen Siddiqui

By the end of this chapter, you should be able to demonstrate an understanding of:The way in which consumers use mobile devices to engage with fashion retailers online.

Abstract

By the end of this chapter, you should be able to demonstrate an understanding of:

The way in which consumers use mobile devices to engage with fashion retailers online.

What external and internal stimuli can be used to engage with consumers and encourage online interaction?

The lens in with the Stimulus–Organism–Response (SOR) model is applied to understand consumer behaviour.

How marketing can used both to trigger consumption activities and to encourage more sustainable behaviours?

Details

New Perspectives on Critical Marketing and Consumer Society
Type: Book
ISBN: 978-1-83909-554-2

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