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1 – 10 of over 2000
Open Access
Article
Publication date: 31 March 2020

Kamrul Hassan, Ruhul Salim and Harry Bloch

This article examines the impact of population age structure on the real exchange rate. Data on a panel of 22 OECD (Organization of Economic Cooperation and Development) countries…

Abstract

This article examines the impact of population age structure on the real exchange rate. Data on a panel of 22 OECD (Organization of Economic Cooperation and Development) countries over 1980–2015 period are used to estimate the empirical model. Using fixed effect model the paper finds that different age cohorts have a significant influence on the real exchange rates in the sample countries. The results are mostly consistent with the theoretical framework discussed in the paper and also with the findings of previous studies in this area. These results have important policy implications given the fact that the population is ageing in almost all the OECD economies these days.

Details

Journal of International Logistics and Trade, vol. 18 no. 1
Type: Research Article
ISSN: 1738-2122

Keywords

Open Access
Article
Publication date: 25 May 2022

Hock Tsen Wong

The study examines the impact of real exchange rates and asymmetric real exchange rates on real stock prices in Malaysia, the Philippines, Singapore, Korea, Japan, the United…

9015

Abstract

Purpose

The study examines the impact of real exchange rates and asymmetric real exchange rates on real stock prices in Malaysia, the Philippines, Singapore, Korea, Japan, the United Kingdom (UK), Germany, Hong Kong and Indonesia.

Design/methodology/approach

This study uses the asymmetric autoregressive distributed lag (ARDL) approach and non-linear autoregressive distributed lag (NARDL) approach.

Findings

The asymmetric ARDL approach shows more economic variables are found to be statistically significant than the ARDL approach. The asymmetric real exchange rate is mostly found to have a significant impact on the real stock price. Moreover, real output and real interest rates are found to have a significant impact on the real stock price. The Asian financial crisis (1997–1998) and the global financial crisis (2008–2009) are found to have a significant impact on the real stock price in some economies.

Research limitations/implications

Economic variables are important in the determination of stock prices.

Originality/value

It is important to examine the impact of asymmetric real exchange rate on the real stock price as the depreciation of real exchange rate could have different impacts than the appreciation of real exchange rate on the real stock price. The previous studies in the literature mostly found the significant impact of nominal exchange rate on the nominal stock price.

Details

Journal of Economics, Finance and Administrative Science, vol. 27 no. 54
Type: Research Article
ISSN: 2218-0648

Keywords

Open Access
Article
Publication date: 17 November 2023

Sami Zaki Alabdulwahab and Ahmed Sabry Abou-Zaid

This paper aims to empirically investigate the sources of real exchange rate fluctuations in Egypt using structural vector autoregression (SVAR). The data covers the period…

1376

Abstract

Purpose

This paper aims to empirically investigate the sources of real exchange rate fluctuations in Egypt using structural vector autoregression (SVAR). The data covers the period between 1980 and 2016, where exchange regime has been changed more than once.

Design/methodology/approach

This paper investigates the source of real exchange rate fluctuations for the period between 1980 and 2016 using the SVAR method. The SVAR method will incorporate real gross domestic product (GDP), real effective exchange rate (REER) and price level in a multidimensional equations system. However, impulse response function (IRF) and error variance decompositions (EVDC) will be generated by the system to have a behavioral insight of real exchange rate in response to economic shocks.

Findings

The IRF and EVDC results indicate a significant impact of demand shocks over the real exchange rate relative to supply shocks and monetary shocks in the period between 1980 and 2016. On the other hand, monetary shocks will have a negligible effect on the real exchange rate in the short run and converging to its previous level in the covering period of the study.

Originality/value

In the best of the authors' knowledge, the topic of the source of the real exchange rate fluctuations in Egypt has not been discussed in a wide range due to the lack of time series data. However, this study provides constructed data for REER for Egypt with the published method in the International Monetary Fund (IMF). Furthermore, the study involves theoretical and econometric modeling to ensure the reliability of the economic results.

Details

Review of Economics and Political Science, vol. 9 no. 1
Type: Research Article
ISSN: 2356-9980

Keywords

Open Access
Article
Publication date: 2 January 2019

Maher Asal

This paper aims to investigate the presence of a housing bubble using Swedish data from 1986Q1-2016Q4 by using various methods.

7056

Abstract

Purpose

This paper aims to investigate the presence of a housing bubble using Swedish data from 1986Q1-2016Q4 by using various methods.

Design/methodology/approach

First, the authors use affordability indicators and asset-pricing approaches, including the price-to-income ratio, price-to-rent ratio and user cost, supplemented by a qualitative discussion of other factors affecting house prices. Second, the authors use cointegration techniques to compute the fundamental (or long-run) price, which is then compared with the actual price to test the degree of Sweden’s housing price bubble during the studied period. Third, they apply the univariate right-tailed unit root test procedure to capture bursting bubbles and to date-stamp bubbles.

Findings

The authors find evidence for rational housing bubbles with explosive behavioral components beginning in 2004. These bubbles do not continuously diverge but instead periodically revert to their fundamental value. However, the deviation is persistent, and without any policy correction, it takes decades for real house prices to return to equilibrium.

Originality/value

The policy implication is that monetary policy designed to contain mortgage demand and thereby prevent burst episodes in the housing market must address external imbalances, as revealed in real exchange rate undervaluation. It is unlikely that current policies will stop the rise of house prices, as the growth of mortgage credit, improvement in Sweden’s international competitiveness and the path of interest rates are much more important factors.

Details

Journal of European Real Estate Research, vol. 12 no. 1
Type: Research Article
ISSN: 1753-9269

Keywords

Open Access
Article
Publication date: 15 September 2020

Alessandro Bellocchi, Edgar Sanchez Carrera and Giuseppe Travaglini

In this paper, the authors study the long-run determinants of total factor productivity (TFP) in three major European economies over the period 1983–2017, namely Germany, France…

1069

Abstract

Purpose

In this paper, the authors study the long-run determinants of total factor productivity (TFP) in three major European economies over the period 1983–2017, namely Germany, France and Italy.

Design/methodology/approach

The authors focus on the capital misallocation effects, scale effects and labor misallocation effects. To this end, the authors study how real interest rate shocks, real exchange rate shocks, real wage shocks and changes in labor regulation affected TFP in major European countries over the last decades. The authors employ a theoretical and an empirical model to investigate the issue. The empirical results are obtained using a VAR model for estimation.

Findings

A stripped-down model of labor market in open economy with technology progress allows to identify the relevant variables affecting TFP. On the empirical ground, the authors find a positive relationship between TFP and real interest rate in the long run. Importantly, the authors detect a positive relationship between TFP and real exchange rate. Further, the authors show that the TFP can respond positively to a stricter labor market regulation and to a higher real compensation per employee. The results provide support to the idea that TFP has a positive relation with prices in the long run, while it may be biased along the cycle because of price rigidity.

Research limitations/implications

The present model is stylized and may not capture all of the details of reality. The analysis should be extended to a larger number of countries. Technology progress could be proxied using different variables, as the R&D expenditure or the number of patents. Micro data, for specific sectors and industries, can improve the quality of the empirical investigation.

Practical implications

Mainly the authors find that TFP has a positive relationship with price changes in the long run, while it may be biased along the cycle because of price stickiness. Capital misallocation and labor misallocation can negatively affect TFP. Thus, the observed divergences in European TFP can be traced back to the misallocation effects attributable to the decrease of real interest rate and real wages, together with the raising labor flexibility. Mainly, the authors detect a positive long-run relationship between TFP and real exchange rate. This outcome strengthens the supply-side view of the relationship between productivity and real exchange rate.

Social implications

The authors believe that the present setup can be helpful to reflect critically on the nodes at the core of the productivity slowdown and asymmetries in the eurozone. The aim is to implement renewed policies in order to favor economic growth, convergence and stability in the euro area.

Originality/value

This research addresses the issue of asymmetries among European economies by focusing on the role played by real prices in the long run. Traditionally, the dynamics of TFP have been attributed only to technological components, human capital and knowledge. This work shows that the dynamics of prices such as the real interest rate, the real exchange rate and the real wage can also influence the technological process by pushing the production system toward choices that are not always optimal for economic growth. An interesting result of this research concerns the positive relationship between real exchange rates and TFP in the long term, evidence of an important supply-side effect on the technological process.

Details

Journal of Economic Studies, vol. 48 no. 5
Type: Research Article
ISSN: 0144-3585

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.

2814

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: 30 July 2024

Maria Del Carmen Ramos-Herrera

The purpose of this study is to provide empirical evidence on the impact of deviations from the long-run sustainable real exchange rate (RER) equilibrium on real economic growth…

Abstract

Purpose

The purpose of this study is to provide empirical evidence on the impact of deviations from the long-run sustainable real exchange rate (RER) equilibrium on real economic growth rate applying panel autoregressive distributed lag model (ARDL) (Pooled Mean Group, Mean Group and Dynamic Fixed Effects estimators) in a dynamic heterogeneous panel setting and panel NARDL for the largest database covering 104 countries during 1995–2022 period developed by Couharde et al. (2017).

Design/methodology/approach

The EQCHANGE database makes available not only the equilibrium RER but also misalignments according to the Behavioral Equilibrium Exchange Rate approach for each country. One of the main objectives is to examine whether undervaluation or overvaluation RER can imply different responses on economic performance trying to differentiate between short and long run effects. Additionally, the authors consider the World Bank (WB)’s income classifications to compare the asymmetries attending to high-income, upper-middle-income, lower-middle-income and low-income levels.

Findings

Applying the panel ARDL technique, the results suggest that the RER misalignments have a negative but not significant effect on the short-run, nevertheless a negative and highly significant impact on real economic growth rate is detected on the long-run. Considering the panel NARDL, the asymmetric relationship between RER misalignment and economic growth rate is supported considering all countries in the long-run (in the short-term is not significant). In the long run is detected that undervaluation can promote economic growth rate, rather than overvaluation which can harm the economic performance. Additionally, the WB and the International Monetary Fund (IMF) income’s classifications have been applied and the long-run symmetry test is strongly rejected regardless of income group.

Originality/value

To the best of the author knowledge, this is the first time the non-linear panel ARDL methodology has been applied for analyzing the impact of deviations from the long-run sustainable RER equilibrium on real economic growth. This allows us to see the asymmetric effect not seen before. The panel ARDL estimation can efficiently performed regardless of the integration level of the variables, additionally, it is consistent even in the presence of endogeneity. Besides, another advantage of this method is that it is possible to reflect not only the short but also the long-run dynamics. Moreover, this analysis offers a comparison between linear panel ARDL and non-linear to compare the advantages from the former. Additionally, this study covers the largest database, in particular, 104 countries during the 1995–2022 period implemented with the Couharde et al. (2017) EQCHANGE database. Finally, it is compared the asymmetries attending to different income classifications.

Details

Applied Economic Analysis, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2632-7627

Keywords

Open Access
Article
Publication date: 5 December 2017

Maher Asal

This paper aims to assess the long-run drivers and short-term dynamics of real house prices in Sweden for 1986Q1 to 2016Q4. More specifically, the author examines the extent to…

6765

Abstract

Purpose

This paper aims to assess the long-run drivers and short-term dynamics of real house prices in Sweden for 1986Q1 to 2016Q4. More specifically, the author examines the extent to which real house prices are determined by affordability, demographics and asset price factors.

Design/methodology/approach

The author conducts a cointegration analysis and applies a vector autoregression model to examine the long- and short-run responsiveness of Swedish real house prices to a number of key categories of fundamental variables.

Findings

The empirical results indicate that house prices will increase in the long run by 1.04 per cent in response to a 1 per cent increase in household real disposable income, whereas real after-tax mortgage interest and real effective exchange rates show average long-term effects of approximately – 8 and – 0.7 per cent, respectively. In addition, the results show that the growth of real house prices is affected by growth in mortgage credit, real after-tax mortgage interest rates and disposable incomes in the short run, whereas the real effective exchange rate is the most significant determinant of Swedish real house appreciation.

Originality/value

The impact of the two lending restrictions been implemented after the financial crisis – the mortgage cap in October 2010 and the amortization requirement in June 2016 – are ineffective to stabilize the housing market. This suggests that macroprudential measures designed to ease pressure on housing prices and reduce risks to financial stability need to focus on these fundamentals and address the issues of tax deductibility on mortgage rates and the gradual implementation of debt-to-income limits to contain mortgage demand and improve households’ resilience to shocks.

Details

International Journal of Housing Markets and Analysis, vol. 11 no. 1
Type: Research Article
ISSN: 1753-8270

Keywords

Open Access
Article
Publication date: 11 October 2021

Saban Nazlioglu, Mehmet Altuntas, Emre Kilic and Ilhan Kucukkkaplan

This paper aims to test purchasing power parity (PPP) hypothesis for Greece, Italy, Ireland, Portugal and Spain, which are known as the GIIPS countries.

2129

Abstract

Purpose

This paper aims to test purchasing power parity (PPP) hypothesis for Greece, Italy, Ireland, Portugal and Spain, which are known as the GIIPS countries.

Design/methodology/approach

The authors conduct a comprehensive analysis by using unit root approaches without and with structural breaks and non-linearity.

Findings

The PPP is valid for the GIIPS countries. Considering structural breaks in non-linear framework plays a crucial role.

Originality/value

There is no empirical study testing PPP hypothesis by focusing on the GIIPS countries. This study further takes into account for structural breaks and non-linearity in the real exchange rates of these countries.

Details

Applied Economic Analysis, vol. 30 no. 90
Type: Research Article
ISSN: 2632-7627

Keywords

Open Access
Article
Publication date: 13 December 2019

Nan Li and Liu Yuanchun

The purpose of this paper is to summarize different methods of constructing the financial conditions index (FCI) and analyze current studies on constructing FCI for China. Due to…

1357

Abstract

Purpose

The purpose of this paper is to summarize different methods of constructing the financial conditions index (FCI) and analyze current studies on constructing FCI for China. Due to shifts of China’s financial mechanisms in the post-crisis era, conventional ways of FCI construction have their limitations.

Design/methodology/approach

The paper suggests improvements in two aspects, i.e. using time-varying weights and introducing non-financial variables. In the empirical study, the author first develops an FCI with fixed weights for comparison, constructs a post-crisis FCI based on time-varying parameter vector autoregressive model and finally examines the FCI with time-varying weights concerning its explanatory and predictive power for inflation.

Findings

Results suggest that the FCI with time-varying weights performs better than one with fixed weights and the former better reflects China’s financial conditions. Furthermore, introduction of credit availability improves the FCI.

Originality/value

FCI constructed in this paper goes ahead of inflation by about 11 months, and it has strong explanatory and predictive power for inflation. Constructing an appropriate FCI is important for improving the effectiveness and predictive power of the post-crisis monetary policy and foe achieving both economic and financial stability.

Details

China Political Economy, vol. 2 no. 2
Type: Research Article
ISSN: 2516-1652

Keywords

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