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1 – 10 of 77This paper aims to examine two hypotheses that have not been well investigated in the existing literature. One hypothesis is that the real interest rates of industrial countries…
Abstract
Purpose
This paper aims to examine two hypotheses that have not been well investigated in the existing literature. One hypothesis is that the real interest rates of industrial countries tend to be mean‐reverting during the current floating exchange rate period. Another hypothesis is that the real interest rates of the countries involved in forming the Euro area are more likely to behave as nonlinear stationary series than those of other industrial countries.
Design/methodology/approach
The study applies the conventional linear unit root tests and recently developed nonlinear unit root tests, as well as the tests of specifying nonlinearity in time series, to the short‐term real interest rates of 16 industrial countries.
Findings
The results of the study provide support for both hypotheses.
Practical implications
The results imply that, having adopted target‐zone type stabilization policies for years, the central banks of European Monetary Union (EMU) countries were likely to have exercised monetary policies in a nonlinear way, especially in the process of meeting the requirements of joining EMU.
Originality/value
The study provides stronger evidence than previous studies for the theory that real interest rates of industrial countries tend to have mean‐reverting behavior. The study suggests that more active monetary policies for inflation control in the floating exchange rate period may have enhanced mean reversion in real interest rates.
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Rudra P. Pradhan, Mak B. Arvin, Neville R. Norman and Sahar Bahmani
The paper investigates whether Granger causal relationships exist between bond market development, stock market development, economic growth and two other macroeconomic variables…
Abstract
Purpose
The paper investigates whether Granger causal relationships exist between bond market development, stock market development, economic growth and two other macroeconomic variables, namely, inflation rate and real interest rate. The study aims to expand the domain of economic growth by including a more in-depth analysis of the possible impact that bond market and stock market development has on economic growth than is normally found in the literature.
Design/methodology/approach
This paper uses a panel data set of the G-20 countries for the period 1991-2016. It uses a panel vector auto-regression model to reveal the nature of any Granger causality among the five variables.
Findings
The paper provides empirical insights that both bond market development and stock market development are cointegrated with economic growth, inflation rate and real interest rate. The most robust result from the panel Granger causality test is that bond market development, stock market development, inflation rate and real interest rate are demonstrable drivers of economic growth in the long run.
Research limitations/implications
Because of the chosen research approach, the research results may lack theoretical foundations. Therefore, perhaps the more fully grounded interactive findings of this study can inspire theorists to fill the missing gap.
Practical implications
This paper includes lessons for policymakers in the G-20 countries seeking to stimulate economic growth in the long run and how they need to ensure greater stability of the interest rate and inflation rate as well as fully developing their financial markets, as both bond markets and stock markets are obvious drivers of economic growth.
Originality/value
This paper fulfills an identified need to study causal relationships between bond market development, stock market development, economic growth and two other macroeconomic variables, i.e. inflation rate and real interest rate.
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Liya A, Qian Qin, Hafiz Waqas Kamran, Anusara Sawangchai, Worakamol Wisetsri and Mohsin Raza
This study purposes to measure the influencing relations between macroeconomic indicators and the prices of gold. Further study measures several factors with the gold price in the…
Abstract
Purpose
This study purposes to measure the influencing relations between macroeconomic indicators and the prices of gold. Further study measures several factors with the gold price in the context of the United States.
Design/methodology/approach
The secondary data are collected to measure relationship and fluctuation of gold prices the data collected from the website world development indicators (WDI) for the period of 31 years 1990–2019. This paper uses different econometric analysis such as analytical unit root test for stationary of data, descriptive statistical analysis for description of data, correlation coefficient test for measuring the inter correlation, and ordinary least square regression analysis for determine the impact of dependent and independents variables. In this research paper, gross domestic product (GDP), inflation rate (IR), unemployment rate (UR), real interest rate (RIR), gross national product (GNP), standard trade value (STV) are included in macroeconomic indicators and consider as independent. The gold prices are considered as dependent variable.
Findings
This study's overall results show an important and optimistic association between GDP, IR and STV with the gold price. Moreover, the RIR shows negative and does not show significant relation with the gold prices.
Originality/value
Since several economic crises were included during the data selection studied in this research paper, data error may be present, resulting in the instability of the overall data. However, the study still hopes to find the guiding role of these macro gold price factors in the price of gold from the limited data set. The basic scope of research is that research is limited in the United States.
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The purpose of this paper to identify the asymmetric effect of real interest rate on housing return.
Abstract
Purpose
The purpose of this paper to identify the asymmetric effect of real interest rate on housing return.
Design/methodology/approach
It tests empirically the impacts of positive and negative real interest rate on housing return in Hong Kong by time series regression analyses on series from 1984Q1 to 2009Q2, keeping other macroeconomic factors constant.
Findings
It shows that negative real interest rate imposes a much stronger, negative and significant effect on housing return than a positive one.
Research limitations/implications
The results imply that the two housing bubbles in Hong Kong could be largely explained by the negative real interest rate. Although it is theoretically sound, empirical evidence on this asymmetric effect of real interest rate on housing return has seldom been found, because negative real interest rate is very rare in other countries in the past.
Practical implications
It provides a good signal for housing bubbles in the future and helps understand the underlying causes of housing bubbles.
Originality/value
The currency board arrangement in Hong Kong enables the first empirical study on this issue.
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Faris Alshubiri, Samia Fekir and Billal Chikhi
The present study aimed to examine the effect of received remittance inflows on the price level ratio of the purchasing power parity conversion factor to the market exchange rate…
Abstract
Purpose
The present study aimed to examine the effect of received remittance inflows on the price level ratio of the purchasing power parity conversion factor to the market exchange rate in 36 developed and developing countries from 2004 to 2020.
Design/methodology/approach
The panel data conducted a comparative analysis and used panel least squares, regression with Driscoll-Kraay standard errors of fixed effect, random effect, feasible generalised least squares and maximum likelihood robust least squares to overcome the heterogeneity issue. Furthermore, the two-step difference generalised method of moments to overcome the endogeneity issue. Diagnostic tests were used to increase robustness.
Findings
In the studied countries, there was a statistically significant negative relationship between received remittance inflows and the price-level ratio of the purchasing power parity conversion factor to the market exchange rate. This relationship explains why remittance flows depreciate the real exchange rate. The study’s results also indicated that attracting investments can improve the quality of institutions despite high tax rates, leading to low tax revenue.
Originality/value
The current study findings enrich the understanding of policies of how governments should minimise tariff rates on capital imports and introduce export-oriented incentive programmes. The study also revealed that Dutch disease can occur due to differences in the demand structure and manufacturing development policy.
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Ashima Goyal and Abhishek Kumar
The purpose of this paper is to estimate the relationship between the current account (CA) and fiscal deficit (FD), and the real exchange rate for India, for the managed float…
Abstract
Purpose
The purpose of this paper is to estimate the relationship between the current account (CA) and fiscal deficit (FD), and the real exchange rate for India, for the managed float period 1996 Q2 to 2015 Q4, after controlling for output growth and oil shocks. It also examines the cyclicality of the CA, the size of each shock, and assesses whether aggregate demand, forward-looking smoothing, or supply shocks dominate outcomes.
Design/methodology/approach
The authors use several variants of structural vector autoregression (SVAR), implemented with quarterly Indian data, to control for effects of oil prices, and the output cycle, and then see how FD shocks affect the current account deficit (CAD) and the real exchange rate. For robustness, the authors tried different identifications, changed variable definitions, added new variables, or substituted with other variables. The cyclicality issue is addressed by examining the effect of growth shocks. The relative size of each shock is assessed through co-movement decompositions of the forecast errors. Responses to shocks help identify dominant influences on India’s CAD.
Findings
The CAD is found to be countercyclical. A FD shock raises the CAD, but high impact growth shocks and large variance oil shocks lead to overall divergence of the deficits. There is some support for the aggregate demand channel, but it is moderated by supply shocks and compositional effects. Consumption is sticky rather than forward-looking.
Originality/value
The paper contributes to the literature by including supply shocks, compositional effects, cyclicality, real interest and exchange rate in a theoretically and empirically consistent way for the analysis of twin deficits. The large empirical literature on twin deficits in EMs has not yet done this. There is no study using quarterly data in an SVAR allowing the dynamic relationship between the variables to be explored. The extensions bring in the supply side and compositional effects qualify the working of both the channels, with empirical exercises supporting theoretical predictions.
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The discussion on international migration has become a significant part of globalization and a topical issue in international relations, especially in developing economies which…
Abstract
Purpose
The discussion on international migration has become a significant part of globalization and a topical issue in international relations, especially in developing economies which mostly relies on migrant remittances. The purpose of the study is to examine whether financial market development (equity market development and banking sector development) really drives migrant remittance flow in Sub-Saharan Africa (SSA).
Design/methodology/approach
The study employs the dynamic heterogeneous panel data approach-the pool mean group (PMG) and the mean group (MG) techniques in analyzing the model based on data obtained from 27 SSA countries covering the period 2000–2020.
Findings
The findings of the study revealed that financial market development (equity market development and banking sector development) is a key driver of migrant remittances flows in the SSA region. In addition, the study revealed that the following macroeconomic variables such as real interest rate, unemployment rate, global growth, emigration, and economic growth are also determinants of migrant remittances flows in the SSA region.
Originality/value
The reviewed empirical literature revealed that several studies documents that the macroeconomic determinants of migrant remittances include inflation, GDP, interest rate, exchange rate, population growth, financial sector development and unemployment rate. Most of these studies fail to capture both equity market development and robust banking sector development (financial market development) as critical drivers of migrant remittances flow in SSA. Also, this study uses a robust measure of equity market development and banking sector development, unlike previous studies.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2023-0361
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The purpose of this paper is to construct a financial development index (FDI) for the Indian economy and also examine the relationship between FDI and economic growth.
Abstract
Purpose
The purpose of this paper is to construct a financial development index (FDI) for the Indian economy and also examine the relationship between FDI and economic growth.
Design/methodology/approach
Augment Dickey Fuller, Phillips Perron and Ng Perron unit root tests are employed in order to determine the level of integration. The long‐ and short‐run dynamics are obtained by using auto‐regressive distributed lag approach to cointegration and rolling window approach to estimate coefficient of each observation.
Findings
The results indicate that long‐run relationship is presented among the economic growth, FDI, real‐interest rate (RIR), labor force and capital. But FDI negatively associated with economic growth in the case of long‐ and short‐run and RIR also negatively determine the economic growth only in the long run. The rolling regression result confirms that FDI negatively associated to growth in the years of 1978, 1979, 1984‐1987, 1990, 1996‐2000, 2004 and 2005 and RIR is impede economic growth in the years of 1978, 1979, 1986, 1988‐1997, 2001, 2002, 2006 and 2008.
Originality/value
The paper constructs an FDI for the Indian economy by using the four indicators of financial development. The findings are useful for India's policy makers in order to maintain the parallel expansion of financial development and economic growth.
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This research study aims to delve into the enduring relationship between housing property prices and economic policy uncertainty across eight major Indian cities.
Abstract
Purpose
This research study aims to delve into the enduring relationship between housing property prices and economic policy uncertainty across eight major Indian cities.
Design/methodology/approach
Using the panel non-linear autoregressive distributed lag model, this study meticulously investigates the asymmetric impact of economic policy uncertainty on apartment and house (unit) prices in India during the period from 2000 to 2022.
Findings
The findings of this study indicate that economic policy uncertainty exerts a negative influence on property prices, but noteworthy asymmetry is observed, with positive changes in effect having a more pronounced impact than negative changes. This asymmetrical effect is particularly prominent in the case of unit prices.
Originality/value
This research reveals that long-run price trends are also influenced by factors such as interest rates, building costs and housing loans. Through a comprehensive analysis of these factors and their interplay with property prices, this research paper contributes valuable insights to the understanding of the real estate market dynamics in Indian cities.
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The purpose of this paper is to identify the indicators of currency crises in Egypt. Using the annual data over the period 1977–2017, the paper attempts to establish which…
Abstract
Purpose
The purpose of this paper is to identify the indicators of currency crises in Egypt. Using the annual data over the period 1977–2017, the paper attempts to establish which economic variable(s) are more useful in predicting currency crises and to improve the predictability of such crises.
Design/methodology/approach
Probit analysis is employed to identify the indicators that are most effective in predicting the probability that a currency crisis episode will occur. This is enabled through the estimation of a market turbulence index (MTI) which measures currency crises in terms of eight “threshold” points at which a crisis is detected or not detected.
Findings
The estimates of the probit model suggest that five variables: the domestic interest rate spread; domestic current account; USA interest rate; real exchange rate; and the real interest rate have the strongest predictive power among the 16 indicators identified in the empirical literature.
Research limitations/implications
There are a number of limitations associated with this paper. First the data are annual and not monthly which limits the ability of the estimated model to accurately predict the crisis episodes. There is limited open access to monthly data on the Central Bank of Egypt website especially for the period before the 2000s. Were such data available this would allow for much more robust in-sample and out of sample forecasts.
Practical implications
The analysis and results in the paper suggest that the modelling strategy employed represents a potentially useful tool for Central Banks and policy makers in forecasting currency crises.
Social implications
There are several such implications but mainly in relation to the possibility of avoiding high social costs resulting from a currency crisis that may have been avoided if forecast correctly.
Originality/value
The paper builds on previous theoretical and empirical work in this field while adding to the literature in terms of the problems in previous literature and modelling approaches. It also strongly advocates the use of the MTI instead of other indices to identify such crises.
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