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1 – 10 of 268Hayelom Yrgaw Gereziher and Naser Yenus Nuru
This paper aims to examine the asymmetric effects of exchange rate shocks on inflation for a small open economy, namely South Africa, over the period 1970Q1–2020Q1.
Abstract
Purpose
This paper aims to examine the asymmetric effects of exchange rate shocks on inflation for a small open economy, namely South Africa, over the period 1970Q1–2020Q1.
Design/methodology/approach
A threshold vector autoregressive model that allows parameters to switch according to whether a threshold variable crosses an estimated threshold is employed to address the objective of this paper. The threshold value is determined endogenously using the Hansen (1996) test. Generalized impulse responses introduced by Koop et al. (1996) are used to study the effects of exchange rate shocks on inflation depending on their size, sign and timing to the inflation cycle. The authors also employed a Cholesky decomposition identification scheme to identify exchange rate shocks in the non-linear model.
Findings
The results show that there is a non-linearity effect of the exchange rate shock on inflation. In particular, the effects of 1 or 2 standard deviations of positive (appreciation) or negative (depreciation) exchange rate shock on inflation are small in the long run but a bit larger in the high inflation regime than the low inflation regime.
Originality/value
This paper contributes to the literature on the non-linear effects of exchange rate pass-through (ERPT) to inflation for Sub-Saharan African economies in general and the South African economy in particular by incorporating the size and timing of the exchange rate shocks to the inflation cycle.
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Nadia Assidi, Ridha Nouira, Sami Saafi, Walid Abdelfattah and Sami Ben Mim
The purpose of this study is to assess the impact of the shadow economy on three sustainable development indicators while considering the moderating effect of the governance…
Abstract
Purpose
The purpose of this study is to assess the impact of the shadow economy on three sustainable development indicators while considering the moderating effect of the governance quality, and to highlight the non-linearity of the considered relationship.
Design/methodology/approach
A sample of 82 countries covering the period from 1996 to 2017. The dynamic first-differenced generalized method of moments (FD-GMM) panel threshold model is implemented to control for non-linearity.
Findings
The shadow economy hinders sustainable development in countries with low-governance quality, while the opposite result holds in countries with high-governance quality. The critical thresholds triggering the switch from one regime to another vary across the sustainable development indicators. Boosting growth requires enhancing the legal system and the economic dimension of governance, while promoting environmental quality requires the implementation and enforcement of specific environment-friendly regulations.
Originality/value
The study addresses non-linearity and the moderating effect of governance quality. The use of six governance indicators allows to gauge the ability of each governance dimension to curb the negative effects of the shadow economy. Considering the three objectives of sustainable development allows to identify specific policy recommendations for each of them.
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Stephanie Fabri, Lisa A. Pace, Vincent Cassar and Frank Bezzina
The European Innovation Scoreboard is an important indicator of innovation performance across European Member States. Despite its wide application, the indicator fails to…
Abstract
Purpose
The European Innovation Scoreboard is an important indicator of innovation performance across European Member States. Despite its wide application, the indicator fails to highlight the interlinkages that exist among innovation measures and focuses primarily on the linear relationship between the individual measures and the predicted outcome. This study aims to address this gap by applying a novel technique, the fuzzy-set qualitative comparative analysis (fsQCA), to shed light on these interlinkages and highlight the complexity of the determinants underlying innovation performance.
Design/methodology/approach
The authors adopted a configurational approach based on fsQCA that is implemented on innovation performance data from European Member States for the period 2011–2018. The approach is based on non-linearity and allows for the analysis of interlinkages based on equifinality, that is, the model recognises that there are different potential paths of high and low innovation performance. In addition, the approach allows for asymmetric relations, where a low innovation outcome is not the exact inverse of that which leads to high innovation outcome.
Findings
The results clearly indicate that innovation outcomes are not based on simple linear relations. Thus, to reap the desired effects from investments in innovation inputs, the complex set of indicators on which innovation performance is based should be taken into consideration. The results clearly indicate the elements of equifinality and asymmetric relations. Different paths lead to high innovation performance and low innovation performance.
Originality/value
The method applied to investigate the determinants of innovation performance is the prime original factor of this study. Thus, the study contributes to literature by highlighting the complexity involved in understanding innovation. By recognising and attempting to detangle this complexity, this study will assist not just academics but also policymakers in designing the necessary measures required to reach this important outcome for a country’s competitive edge.
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Sylvester Senyo Horvey, Jones Odei-Mensah and Albert Mushai
Insurance companies play a significant role in every economy; hence, it is essential to investigate and understand the factors that propel their profitability. Unlike previous…
Abstract
Purpose
Insurance companies play a significant role in every economy; hence, it is essential to investigate and understand the factors that propel their profitability. Unlike previous studies that present a linear relationship, this study provides initial evidence by exploring the non-linear impacts of the determinants of profitability amongst life insurers in South Africa.
Design/methodology/approach
The study uses a panel dataset of 62 life insurers in South Africa, covering 2013–2019. The generalised method of moments and the dynamic panel threshold estimation technique were used to estimate the relationship.
Findings
The empirical results from the direct relationship reveal that investment income and solvency significantly predict life insurance companies' profitability. On the other hand, underwriting risk, reinsurance and size reduce profitability. Further, the dynamic panel threshold analysis confirms non-linearities in the relationships. The results show that insurance size, investment income and solvency promote profitability beyond a threshold level, implying a propelling effect on life insurers' profitability at higher levels. Below the threshold, these factors have an adverse effect. The study further points to underwriting risk, reinsurance and leverage having a reduced effect on life insurers' profitability when they fall above the threshold level.
Practical implications
The findings suggest that insurers interested in boosting their profit position must commit more resources to maintain their solvency and manage their assets and returns on investment. The study further recommends that effective control of underwriting risk is critical to the profitability of the life insurance industry.
Originality/value
The study contributes to the literature by providing first-time evidence on the determinants of life insurance companies' profitability by way of exploring threshold effects in South Africa.
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Abstract
This chapter considers the estimation of a parametric single-index predictive regression model with integrated predictors. This model can handle a wide variety of non-linear relationships between the regressand and the single-index component containing either the cointegrated predictors or the non-cointegrated predictors. The authors introduce a new estimation procedure for the model and investigate its finite sample properties via Monte Carlo simulations. This model is then used to examine stock return predictability via various combinations of integrated lagged economic and financial variables.
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Olufemi Gbenga Onatunji, Oluwayemisi Kadijat Adeleke and Akintoye Victor Adejumo
This study reinvestigates the validity of the Phillips curve in Nigeria for the period 1980–2020 by considering the asymmetric nexus between unemployment and inflation.
Abstract
Purpose
This study reinvestigates the validity of the Phillips curve in Nigeria for the period 1980–2020 by considering the asymmetric nexus between unemployment and inflation.
Design/methodology/approach
The nonlinear autoregressive distributed lag (NARDL) technique was used to decompose the unemployment variable into two components: tight and loosened labour markets.
Findings
The empirical outcome shows that unemployment has a significant negative effect on inflation when the labour market is tight and a weakly negative and significant effect on inflation when the labour market is loose. The study confirms an asymmetric Phillips curve in Nigeria since the positive (tight) unemployment rate exerts a greater effect on inflation than the negative (loosened) unemployment rate.
Practical implications
The findings of this study have important implications for implementing monetary policy in Nigeria.
Originality/value
To the best of the authors’ knowledge, this is the first study to investigate the existence of a nonlinear Phillip curve in Nigeria.
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Sedki Zaiane, Halim Dabbou and Mohamed Imen Gallali
The purpose of this study is to examine the nonlinear relationship between financial constraints and the chief executive officer (CEO) stock options compensation and to analyze…
Abstract
Purpose
The purpose of this study is to examine the nonlinear relationship between financial constraints and the chief executive officer (CEO) stock options compensation and to analyze whether the impact of financial constraints on the CEO stock options compensation changes at certain level of financial constraints or not.
Design/methodology/approach
This study is based on a sample of 90 French firms for the period extending from 2008 to 2019. To deal with the non-linearity, the authors use a panel threshold method.
Findings
Using different measures of financial constraints [KZ index (Baker et al., 2003), SA index (Hadlock and Pierce, 2010) and FCP index (Schauer et al., 2019)], the results reveal that the impact of the financial constraints (SA index and FCP index) is positive below the threshold value and it becomes negative above.
Research limitations/implications
The non-linearity between financial constraints and CEO stock options shows that the level of financial constraints can be a major determinant of the CEO compensation structure. More specifically, this study sheds light on the key role played by the level of financial constraints and how this latter influence management decisions.
Originality/value
This paper is the first to the best of the authors' knowledge to examine the nonlinear relationship between financial constraints and the CEO stock options compensation using a panel threshold model.
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Juan Carlos Cuestas, Luis A. Gil-Alana and María Malmierca
In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation…
Abstract
Purpose
In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends.
Design/methodology/approach
The authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks.
Findings
This study’s results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern.
Research limitations/implications
Policy implications of the results obtained are discussed at the end of the manuscript.
Originality/value
The authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of order d, where d can be any real value.
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Ellen A. Donnelly, Madeline Stenger, Daniel J. O'Connell, Adam Gavnik, Jullianne Regalado and Laura Bayona-Roman
This study explores the determinants of police officer support for pre-arrest/booking deflection programs that divert people presenting with substance use and/or mental health…
Abstract
Purpose
This study explores the determinants of police officer support for pre-arrest/booking deflection programs that divert people presenting with substance use and/or mental health disorder symptoms out of the criminal justice system and connect them to supportive services.
Design/methodology/approach
This study analyzes responses from 254 surveys fielded to police officers in Delaware. Questionnaires asked about views on leadership, approaches toward crime, training, occupational experience and officer’s personal characteristics. The study applies a new machine learning method called kernel-based regularized least squares (KRLS) for non-linearities and interactions among independent variables. Estimates from a KRLS model are compared with those from an ordinary least square regression (OLS) model.
Findings
Support for diversion is positively associated with leadership endorsing diversion and thinking of new ways to solve problems. Tough-on-crime attitudes diminish programmatic support. Tenure becomes less predictive of police attitudes in the KRLS model, suggesting interactions with other factors. The KRLS model explains a larger proportion of the variance in officer attitudes than the traditional OLS model.
Originality/value
The study demonstrates the usefulness of the KRLS method for practitioners and scholars seeking to illuminate patterns in police attitudes. It further underscores the importance of agency leadership in legitimizing deflection as a pathway to addressing behavioral health challenges in communities.
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Oscar Claveria and Petar Sorić
The purpose of this paper is to investigate the adjustment of government redistributive policies in Scandinavian and Mediterranean countries following changes in income inequality…
Abstract
Purpose
The purpose of this paper is to investigate the adjustment of government redistributive policies in Scandinavian and Mediterranean countries following changes in income inequality over the period 1980–2021.
Design/methodology/approach
The authors first modelled the time-varying dynamics between income inequality and redistribution and then used a non-linear framework to test for the existence of asymmetries and cointegration in their long-run relationship. The authors used two complementary measures of inequality – the share of total income accruing to top percentile income holders and the ratio of the share of total income accruing to top decile income holders divided by that accumulated by the bottom 50% – and computed redistribution as the difference between the two inequality indicators before and after taxes and transfers.
Findings
The authors found that the sign of the relationship between income inequality and redistribution is mostly positive and time-varying. Overall, the authors also found evidence that the impact of increases in inequality on redistributive measures is higher than that of decreases. Finally, the authors obtained a significant long-run relationship between both variables in all countries except Denmark and Spain. These results hold for both Scandinavian and Mediterranean countries.
Originality/value
To the best of the authors’ knowledge, this is the first paper to account for the potential existence of non-linearities and to examine the asymmetries in the adjustment of redistributive policies to increases in income inequality using alternative income inequality metrics.
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