Search results

The authors provide a way to represent spatial and temporal equilibria in terms of error correction models in a panel setting. This requires potentially two different processes for spatial or network dynamics, both of which can be expressed in terms of spatial weights matrices. The first captures strong cross-sectional dependence, so that a spatial difference, suitably defined, is weakly cross-section dependent (granular) but can be non-stationary. The second is a conventional weights matrix that captures short-run spatio-temporal dynamics as stationary and granular processes. In large samples, cross-section averages serve the first purpose and the authors propose the mean group, common correlated effects estimator together with multiple testing of cross-correlations to provide the short-run spatial weights. The authors apply this model to the 324 local authorities of England, and show that our approach is useful for modeling weak and strong cross-section dependence, together with partial adjustments to two long-run equilibrium relationships and short-run spatio-temporal dynamics. This exercise provides new insights on the (spatial) long-run relationship between house prices and income in the UK.

The purpose of this paper is to examine the structure and dynamics of Singapore's Central Area office market. A long-run equilibrium relationship is tested and a short-run adjustment error correction model are estimated, incorporating appropriate serial error correction. The long-run equation is estimated for office rent, with office employment and available stock.

With the vector error correction model (VECM), the lagged rent, available stock, office employment, vacancy and occupied stock (OS) can impact the rental adjustment process. Equilibrium rent on the whole reacts positively to lagged rents, available stock, office employment, OS and negatively to vacancy rates (VC). Past levels of positive change in VC and rental growth can have negative effects on current OS.

While good economic conditions signaled by increases in rents increase the supply of new stock (available space), higher rents and VC dampen the long-term occupied space (space absorption) in accordance with economic theory. Available stock can be forecasted by past rent and absorption levels owing to the developer's profit-driven nature.

An understanding of the interaction between the macroeconomic variables and the Central Area office market is useful to domestic and foreign investors and developers, who then can better evaluate their decision making in commercial real estate investment and development projects.

It is implicit that the Singapore Central Area office market requires at least a year before any rental increase can potentially dampen the space demanded. Firms are attracted to locate there owing to agglomeration economies and they are willing to pay premium office rents in conjunction with office space intensification in the Central Area. Newly built space is positively affected by past rents. Urban Redevelopment Authority and private real estate developers should be wary of excess office sector vacancies by avoiding over supply, even though an increase in the supply of office space in the Central Area can have a positive impact on office rent in the longer term. Most of the office space development would tend to meet the demand in the long run. Rental stickiness is exemplified as rental changes are affected by lagged rent.

Policy makers are better enabled to stabilize the office sectors of the real estate market if so required.

The paper adopts the VECM and validated by empirical evidence, to investigate the long-run equilibrium relationship and short-term corrections underlying the dynamics of the Singapore Central office market. Delay in the restoration of equilibrium in real estate markets is attributed to factors like lease terms and supply lags.

The purpose of the paper is to test and analyze the equilibrium economic relationships of the East Africa Community (EAC).

To attain the study's purpose the authors applied the Johansen cointegration test, including long-run structural modeling (LRSM), vector-error-correlation-model (VECM) and variance-decomposition (VDC).

At I(1), both Philips‐Peron (PP) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests show that the East Africa member states' economies are cointegrated. The result was further substantiated by the tests based on Johansen cointegration and VECM procedures, showing significant long-run and short-run economic relations. The result further reveals that despite some uncommon issues among member states such as Tanzania and Kenya, however, their economic relationships remain significant though it is negative. Moreover, the finding revealed positive and significant short-run economic relationships between Kenya, Burundi and Rwanda.

The paper applies the cointegration techniques in the context of EAC. The result is likely to be adding value to the policymaker and also to the existing literature on the subject. This may trigger policy implications and open new research direction within the region and out.

The purpose of this paper is to empirically analyse how different exchange rate regimes affect the links between monetary fundamentals and exchange rates in Sub-Saharan Africa.

Using the Pedroni method for panel cointegration, mean group and pooled mean group and the panel vector autoregressive technique, this study empirically investigates whether monetary fundamentals impact exchange rates similarly in both regimes. Thus, the author acquires needed and credible empirical data.

The result suggests that the impact is dissimilar. In the floating regime, an increase in relative money supply and relative real output depreciates and appreciates the nominal exchange rate in the long run whereas in the non-floating regime, the evidence is mixed. Thus, exchange rates bear a theoretically consistent relationship with monetary fundamentals across SSA countries with floating regimes but fails under non-floating regimes. This provides evidence that regime choice is important if the relationship between monetary fundamentals and exchange rates in SSA are to be theoretically consistent.

This study empirically incorporates the dissimilarities in exchange rate regimes in a panel framework and study the links between exchange rates and monetary fundamentals. The focus on how exchange rate regimes might alter the equilibrium relationships between exchange rates and monetary fundamentals in SSA is a pioneering experiment.

The purpose of this paper is to examine the pricing efficiency of the Malaysian crude palm oil (CPO) market before and after the structural break. This study uses the daily closing price of CPO and CPO futures (CPO-F) for the period ranging from June 2009 to August 2016 while taking structural breaks into account.

In this study, symmetric and asymmetric long-run relationship model are employed, such as the Johansen cointegration, VECM, TAR and M-TAR models, to examine the impact of structural breaks on the pricing efficiency of the Malaysian CPO market.

This finding establish that Malaysian CPO price is efficient before and after the structural break. The consistent efficiency of the Malaysian CPO market supports the trading of the CPO-F in Globex and the use of Malaysian CPO pricing as the reference price. This study establishes that a structural break in the Malaysian CPO price series does not affect the pricing efficiency of the market.

This study shows that using Malaysian CPO price as a reference price is sustainable even in the event of a structural break. Therefore, market participants in the Malaysian CPO market have less to worry about the CPO price as it supports the weak form of efficiency. Price deviation in the short run may not lead to arbitrage profit as transaction cost may not be covered.

This study implies that if there is distortion in the price due to shocks, both manufacturers and producers need to hedge their positions in the futures market (subject to their positions in the underlying market). By entering into the futures market, pricing is locked in advance; hence, price risk is eliminated. Such a distortion could also affect the efficiency of the CPO price, therefore this study also addresses the issue of efficiency of the local CPO market.

Previous studies on Malaysian CPO pricing efficiency did not take the effect of structural break into consideration, making it difficult for these studies to show consistency in the efficiency of the Malaysian CPO market.

There has been declining home ownership and increased acceptance of long-term renting in many western countries including Australia; this has created a problem when examining housing markets as there are dual demand and include both owner-occupiers and investors. The purpose of this paper is to examine the long-run relationship between house prices, housing supply and demand, and to estimate the effects of the two types of demand (i.e. owner-occupier and investor) on house prices.

The econometric techniques for cointegration with vector error correction models are used to specify the proposed models, where the housing markets in the Australian states and territories illustrate the models.

The results highlight the regional long-run equilibrium and associated patterns in house prices, the level of new housing supply, owner-occupier demand for housing and investor demand for housing. Different types of markets were identified.

The findings suggest that policies that depress the investment demand can effectively prevent the housing bubble from further building up in the Australian states. The empirical findings shed light in the strategy of maintaining levels of housing affordability in regions where owner-occupiers have been priced out of the housing market.

There has been declining home ownership and increased acceptance of long-term renting in many western countries including Australia; this has created a problem when examining housing markets as there are dual demand and include both owner-occupiers and investors. This research has given to the relationship between supply and dual demand, which includes owner-occupation and investment, for housing and the influence on house prices.

The aims of the paper are to investigate IT software and service export function for India. First, cointegration tests have been used to investigate the long-run equilibrium relationship of the given variables. Second, long-run coefficients and associated error correction mechanism are estimated.

Annual time series data on IT software and service exports, human capital, exchange rate, investment in IT, external demand and openness index have been used for the present study during the period 1980–2017. The data are collected from the National Association of Software and Service Companies (NASSCOM), Planning Commission of India, University Grants Commission (UGC) of India, real effective exchange rate (REER) database and World Bank development indicators. Auto regressive distributed lag (ARDL) model is used to analyze both short-run and long-run dynamic behaviour of economic variables with appropriate asymptotic inferences.

Results of the analysis show the stable long-run equilibrium relationship among the given variables. It is found that external demand, exchange rate, human capital and openness index have a substantial long-run impact on the IT software and service exports. We also found that the coefficient of error correction term is negative and significant at 1% of the level of significance, which confirms the existence of stable long-run relationship which means adjustment will take place when there is a short-run deviation to its long-run equilibrium after a shock.

There may be other determinants of software and service exports apart from those considered by the present study. Due to the non-availability of data, the study considers only important determinants that determine the software and service exports in India. The IT exports are an emerging and dynamic field of economic activity and the rate of change is so rapid that the relevance of individual factors may change over time. The study period is also limited to available data.

The paper has implications for achieving sustainability in IT software and service exports growth. It is recommended that policies directed at improving the performance of IT software and service exports should largely consider the long-run behaviour of these variables.

This paper focuses on originality in the analysis of the relationship among the given variables including IT software and service exports, human capital, exchange rate, investment in IT, external demand and openness index in India. All the work has been done in original by the authors, and the work used has been acknowledged properly.

The aim of the study is to utilize cointegration techniques and analyze the degree of linkages among four key property types (retail, office, industrial, and residential) of eight major countries throughout North America and Europe. Additionally, the study evaluates whether investors can attain greater diversification benefits by investing across specific property sectors within their own nations in the long‐run. Finally, the study examines whether certain property sectors can be considered the “leader” that drives the remaining sectors over time.

Multivariate cointegration tests developed by Johansen and Johansen and Juselius are utilized to evaluate whether long‐run equilibrium relationship(s) exist among the four property sectors. If evidence of cointegration is found, hypothesis tests are implemented to separate out the markets that can be excluded from the cointegrating relationships and to identify the markets that are the sources of the common trends (weakly exogenous), respectively.

Long‐run cointegration results indicate that the four property sectors of the USA, Canada, Netherlands, and the UK have fully converged implying limited diversification possibilities. The property sectors of Finland, France, Germany and Sweden, however, have only partially converged. Further analysis reveals that for these four countries, the industrial sectors provide the greatest long‐run diversification benefits. Finally, weak exogeneity tests indicate that for an overwhelming majority of the countries under consideration, the residential sectors are the sources of the common stochastic trends, that “lead” the remaining property types towards the long‐run equilibrium relationships.

The conclusions from this study should be beneficial to investors, portfolio managers, pension fund managers and other institutional investors in the USA and abroad who are contemplating to invest across property sectors within their own countries in making more informed portfolio allocation decisions. The findings also highlight the importance of implementing time‐series econometric techniques to accurately and appropriately model interactions among property sectors over time.

This is one of the few studies that utilize modern‐day timeseries techniques to analyze the dynamic interactions among the property sectors of eight major nations throughout North America and Europe. Prior studies, have been limited to modeling interrelationships between the property sectors of the USA and UK, with little attention given to other major real estate markets.

The purpose of this study is to analyze the determinants of changes in carbon dioxide (CO₂) emissions for Turkey by utilizing the autoregressive distributed lag approach to investigate the long-run equilibrium relationships of CO₂ emissions between foreign tourist arrivals (FTAs) and electricity consumption (ELC). The results reveal that foreign tourists and ELC are significant determinants of a long-run equilibrium relationship with CO₂ emissions from electricity and heat production and CO₂ emissions from transport for Turkey, respectively. The results of the conditional error correction models (CECM) confirm that there are long-run causal relationships from the growing number of foreign tourist arrivals and the increase of ELC toward the growth of CO₂ emissions during 1960-2010. The results of autoregressive distributed lag (ARDL) error correction models for CO₂ emissions also validate significant dynamic relationships between CO₂ emissions, ELC and tourist arrivals in the short run.

ARDL modeling and Bounds test approach were used in this study.

Rapid tourism development in Turkey has triggered CO₂ emissions. The growth of CO₂ emissions in Turkey threatens sustainability. The hypothesis of “The growth of CO₂ emissions in Turkey” is validated. Tourist arrivals, ELC and CO₂ emissions are co-integrated. CECMs confirm the growth of CO₂ emissions during 1960-2010. ARDL modeling shows significant relationships between CO₂ emissions and other variables.

Results of ARDL error correction models for CO₂ emissions validate the hypothesis that there are significant dynamic relationships between CO₂ emissions, ELC and tourist arrivals in Turkey for the short run.

This paper addresses the question “Does the growth of nonperforming loan ratio (GNPL) have a temporal impact on private credit growth (PCG)?” for the Bangladesh banking industry during and after the global financial crisis of 2008.

It employs the autoregressive distributed lag (ARDL) model to examine the temporal equilibrium relationship and causality between PCG and GNPL.

The results of ARDL bound tests confirm the existence of a single cointegrating vector and temporal equilibrium relationship between variables of interest. According to the error correction mechanism (ECM), there is unidirectional causality from GNPL to PCG in the long run and short run. In the long run, higher GNPL curtails PCG since bankers use the nonperforming loan ratio as a signal and indicator of credit risk in their loan decision-making. In the short run, GNPL positively impacts PCG. It may be because banks go through a rigorous process before declaring a loan as nonperforming that takes time. At the same time, bankers' loan decisions may also be guided by the banks myopic concern of reputation in the short run.

The paper recommends policy prescriptions for the bank risk management, regulatory bodies and the legal authorities. The lending policy of banks should consider the legacy of bad assets. The efficiency of the legal system can also aid in effectively implementing the regulatory guidelines.

The paper inaugurates a bivariate cointegration analysis between PCG and GNPL in the literature. It has utilized quarterly aggregate data in the context of a developing economy like Bangladesh.