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The recent economic crises have attracted attention to the issue of international equity co-movements and correlations. Using data from 1980 to 2010, the authors examine the…
Abstract
Purpose
The recent economic crises have attracted attention to the issue of international equity co-movements and correlations. Using data from 1980 to 2010, the authors examine the international co-movements of both real economic activity, as reflected in industrial production and the gross domestic product (GDP), and financial activity, as reflected in equity market returns. While classic symmetric co-integration tests do not reject the hypothesis of no co-integration, the authors find evidence of asymmetric co-integration in these three variables between the USA and the rest of the Group of Seven (G7) countries. The momentum threshold autoregressive (M-TAR) model captures the nature of the asymmetry most effectively and is the most applicable model for adjustment to long-term equilibrium. This model suggests that the path of adjustment to long-run equilibrium is somewhat different when the price differential is decreasing than when it is increasing. These findings imply that the benefits of asset diversification for investors with a long horizon might be limited in scope.
Design/methodology/approach
This work is based on the theory of integrated time series. The authors use symmetric and asymmetric co-integration tests to market indices, as well as to monthly industrial production statistics and quarterly data about the GDP. In line with the financial economic literature, the authors select the GDP as a proxy that reflects the real economy and share prices to mirror the financial sector of the economy. Because no monthly data exist about GDP, the authors use instead the industrial production. Both variables cover the period from January 1980 to June 2010.
Findings
The overall findings demonstrate that the USA and the rest of the G7 countries are not symmetrically co-integrated with respect to the GDP. Indeed, they are asymmetrically co-integrated. These findings may explain the additional important result that the majority of equity markets are also asymmetrically co-integrated with the USA.
Research limitations/implications
The co-movements of the equity markets and real economic activity imply that the benefits of asset diversification for investors with a long horizon might be limited in scope. In the short run, however, portfolio diversification can be more beneficial due to the short-term fluctuations that may derive from the asymmetric correction process.
Originality/value
Prior research on co-movements has focused mainly on studying the correlations among international equity markets by analyzing conditional correlations or using symmetric co-integration methods; the authors test the existence of a long-term relationship between economic variables with respect to the USA and the rest of the G7 countries using a threshold co-integration model.
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Thai-Ha Le, Long Hai Vo and Farhad Taghizadeh-Hesary
This study examines the co-integration relationships between Association of Southeast Nations (ASEAN) stock indices as a way to assess the feasibility of policy initiatives to…
Abstract
Purpose
This study examines the co-integration relationships between Association of Southeast Nations (ASEAN) stock indices as a way to assess the feasibility of policy initiatives to strengthen market integration in ASEAN and identify implications for portfolio investors.
Design/methodology/approach
The authors employ threshold co-integration tests and a non-linear autoregressive distributed lag (NARDL) model to study the asymmetric dynamics of ASEAN equity markets. The study’s data cover the 2009–2022 period for seven member states: Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Findings
The authors find evidence supporting co-integration relationships; adjustment toward equilibrium is asymmetric in the short run and symmetric in the long run for these countries. While co-movement in ASEAN equity markets seems encouraging for initiatives seeking to foster financial integration in regional economies, the benefits for international portfolio diversification appear to be neutralized.
Originality/value
The issue of stock market integration is important among policymakers, investors and academics. This study examines the level of stock market integration in ASEAN during the 2009–2022 period. For this purpose, advanced co-integration techniques are applied to different frequencies of data (daily, weekly and monthly) for comparison and completeness. The empirical analysis of this study is conducted using the Enders and Siklos (2001) co-integration and threshold adjustment procedure. This advanced co-integration technique is superior compared to other co-integration techniques by permitting asymmetry in the adjustment toward equilibrium.
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Yu‐Shan Wang, Chung‐Gee Lin and Shih‐Chieh Shih
The purpose of this paper is to investigate the long‐term and short‐term asymmetric effects of the price transmission relationships between agricultural futures and the…
Abstract
Purpose
The purpose of this paper is to investigate the long‐term and short‐term asymmetric effects of the price transmission relationships between agricultural futures and the agriculture index in China.
Design/methodology/approach
The paper adopts a threshold autoregressive (TAR) model and momentum‐TAR (M‐TAR) model that test the prices of futures and spots in the special trading system.
Findings
The paper indicates that during different stages of the economic cycle, agricultural futures and the agriculture index exhibit different correlations. During the initial stages of economic upturns and downturns, the addition of futures of agricultural products helps to diversify risk. In contrast, during the late stages of economic upturns and downturns, such additions do not really help to diversify risk. Soybean meal futures and the agriculture index are more strongly correlated with each other. If investors use soybean meal futures to predict the trends in the agriculture index, they will obtain more accurate conclusions.
Practical implications
The soybean futures have leading effects in a single range and a lower correlation with the agriculture index. This paper provides a point of reference for investors devising investment strategies and for the Chinese Government in its execution of macro‐control policies. It provides a clear review about the estimation methods. It also provides information about China's soybean, soy meal industry.
Originality/value
The paper contains updated information about China's soybean and soybean meal trading. It uses new estimation methods (TAR, M‐TAR) to examine the co‐integration between soybean, soybean meal and the agricultural index.
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– The purpose of this paper is to examine asymmetric co-integration effects between nutrition and economic growth for annual South African data from the period 1961-2013.
Abstract
Purpose
The purpose of this paper is to examine asymmetric co-integration effects between nutrition and economic growth for annual South African data from the period 1961-2013.
Design/methodology/approach
The authors deviate from the conventional assumption of linear co-integration and pragmatically incorporate asymmetric effects in the framework through a fusion of the momentum threshold autoregressive and threshold error correction (MTAR-TEC) model approaches, which essentially combines the adjustment asymmetry model of Enders and Silkos (2001); with causality analysis as introduced by Granger (1969); all encompassed by/within the threshold autoregressive (TAR) framework, a la Hansen (2000).
Findings
The findings obtained from the study uncover a number of interesting phenomena for the South Africa economy. First, in coherence with previous studies conducted for developing economies, the authors establish a positive relationship between nutrition and economic growth with an estimated income elasticity of nutritional intake of 0.15. Second, the authors find bi-direction causality between nutrition and economic growth with a stronger causal effect running from nutrition to economic growth. Lastly, the authors find that in the face of equilibrium shocks to the variables, policymakers are slow to responding to deviations of the variables from their co-integrated long run steady state equilibrium.
Originality/value
In the study, the authors make a novel contribution to the literature by exploring asymmetric modelling in the correlation between nutrition intake and economic growth for the exclusive case of South Africa.
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Peter Öhman and Darush Yazdanfar
The purpose of this study is to investigate the Granger causal link between the stock market index and housing prices in terms of apartment and villa prices.
Abstract
Purpose
The purpose of this study is to investigate the Granger causal link between the stock market index and housing prices in terms of apartment and villa prices.
Design/methodology/approach
Monthly data from September 2005 to October 2013 on apartment prices, villa prices, the stock market index, mortgage rates and the consumer price index were used. Statistical methods were applied to explore the long-run co-integration and Granger causal link between the stock market index and apartment and villa prices in Sweden.
Findings
The results indicate that the stock market index and housing prices are co-integrated and that a long-run equilibrium relationship exists between them. According to the Granger causality tests, bidirectional relationships exist between the stock market index and apartment and villa prices, respectively, supporting the wealth and credit-price effects. Moreover, variations in apartment and villa prices are primarily caused by endogenous shocks.
Originality/value
To the authors’ best knowledge, this study represents a first analysis of the causal nexus between the stock market and the housing market in terms of apartment and villa prices in the Swedish context using a vector error-correction model to analyze monthly data.
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This study aims to explore the relationship between the growth threshold effect on renewable energy consumption (REC) in the major oil-producing countries in sub-Saharan Africa…
Abstract
Purpose
This study aims to explore the relationship between the growth threshold effect on renewable energy consumption (REC) in the major oil-producing countries in sub-Saharan Africa (SSA) over the period 1990–2018.
Design/methodology/approach
This article used a dynamic panel threshold regression model introduced by Hansen (1996, 1999 and 2000) threshold (TR) models. The procedure is achieved using 5,000 bootstrapping replications and the grid search to obtain the asymptotic distribution and p-values. For the long-run relationship among our variables, the author followed the process in Pesaran et al. (1999) pooled mean group (PMG) for heterogeneous panels. Furthermore, for the robustness of our empirical results due to the sensitivity of the results to outliers, the author used the approach by Cook (1979) distance measure. The author applied quantile (QR) regression to explore the distribution of dependent variables following Bassett and Koenker (1982) and Koenker and Bassett (1978) approaches.
Findings
The results from the threshold effect test and threshold regression revealed a significant single threshold effect of growth level on REC. Furthermore, the result from the PMG estimation showed the growth of the variable, energy intensity, consumer prices and CO2 emissions play a significant role in REC in major oil-producing countries in SSA. The growth threshold estimation results indicated one significant threshold value of 1.013% at one period lagged of real growth. The outlier’s sensitivity detention greatly influenced our empirical results.
Originality/value
The article filled the literature gap by applying a combined measure that is robustness to detect outliers in the data, which none of the studies in the literature addresses hitherto. Further, the article extends the quantile regression to growth – REC literature.
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Mario Domingues Simões, Marcelo Cabus Klotzle, Antonio Carlos Figueiredo Pinto and Leonardo Lima Gomes
The purpose of this study is to ascertain whether nonlinearities could be present in electricity loads observed in subtropical environments, where none or little heating is…
Abstract
Purpose
The purpose of this study is to ascertain whether nonlinearities could be present in electricity loads observed in subtropical environments, where none or little heating is required, and whether threshold autoregressive (TAR)-type regime switching models could be advantageous in the modeling of those loads.
Design/methodology/approach
The actual observed load of a Brazilian regional electricity distributor from January 2013 to August 2012 was modeled using a popularly employed ARMA model for reference, and smooth and non-smooth TAR transition (non-linear) models were used as non-linear regime switching models.
Findings
Evidence of nonlinearities were found in the load series, and evidence was also found on the intrinsic resistance of this type of models to structural breaks in the data. Additionally, to reacting well to asymmetries in the data, these models avoid the use of exogenous variables. Altogether, this could prove to be a definite advantage of the use of such model alternatives.
Research limitations/implications
However, even if the present work may have been limited by the observation frequency of the available data, it appears TAR models appear to be a viable alternative to forecasting short-term electricity loads. Nonetheless, additional research is required to achieve a higher accuracy of forecast data.
Practical implications
If such models can be successfully used, it will be a great advantage for electricity generators, as the computational effort involved in the use of such models is not significantly larger than regular linear ones.
Originality/value
To our knowledge, this type of research has not yet been made with subtropical/tropical electricity load data.
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Neha Saini and Monica Sighania
The purpose of this paper is to organize the detailed review of economic growth, carbon emission and foreign capital inflows and its impact on the environment. Another objective…
Abstract
Purpose
The purpose of this paper is to organize the detailed review of economic growth, carbon emission and foreign capital inflows and its impact on the environment. Another objective of the study is to provide the comprehensive bibliography and to analyze the findings and results of the studies undertaken in review.
Design/methodology/approach
This paper examined 111 research papers from a sample of thousands of papers, based on inclusion criteria, in this area of research. These 111 research papers are categorized on the basis of several factors to know the status of research on this topic.
Findings
This study is based on economic development and carbon emission and its impact on the environment. We tried to gather all the available facts based on this topic and found that the topic is gaining high relevance in the present scenario because of the growing pace of development in developing countries. Most of the studies supported the environmental Kuznets curve hypothesis and we also found that significant amount of literature is available which supports cleaner FDI as a measure to mitigate the negative effects of economic growth on the ecological environment.
Originality/value
Based on the literature review from various sources, this study provides the collection, classification and comprehensive bibliography on this topic, which may be helpful for stakeholders such as academicians, researchers and policymakers working particularly in this area of research.
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This paper aims to examine the relationship between performance and some macro and micro variables in the Argentine commercial banking industry. Included are the profitability and…
Abstract
Purpose
This paper aims to examine the relationship between performance and some macro and micro variables in the Argentine commercial banking industry. Included are the profitability and interest variables; return on assets (ROA) and net interest margin (NIM) over the period of 1994 to 2011.
Design/methodology/approach
The empirical construct is guided by recent theories of banking performance that employ an industrial organization framework and two dependent variables (with identical control variables) to assure robustness and comparability in findings. The variables for the panel estimated generalized least square (panel EGLS) are constructed using income statements of 62 commercial banks (firm‐level data) as well as a number of industry‐specific and macroeconomic indicators.
Findings
Factors such as expense management (operating cost efficiency/inefficiency), leverage and liquidity appear to be important forces behind the net interest margins (NIM) and profits (ROA) in the Argentine banking industry. Higher return on assets (ROA) is associated with banks carrying less leverage and therefore displaying a lower ratio of debt to total assets. Higher interest margin (NIM) is associated with higher operating expenses. Regarding the macroeconomic variables, inflation negatively affects profitability but is positively and significantly related to net interest margin. Banking environment has a positive effect on performance, reflecting the complementarity between banking performance and stock market capitalization.
Originality/value
The paper's value lies in showing that a firm's specific variables reveal better insights when analyzed in relation to banking environment. Indirectly, some of the value of this work lies in highlighting the Central Bank's accommodative monetary policy that has been driving Argentina's economic recovery and credit boom arising in an inflationary environment.
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Abubakar Musah, Peter Kwasi Kodjie and Munkaila Abdulai
This paper examines the short- and long-run effects of foreign direct investment (FDI) on tax revenue in Ghana.
Abstract
Purpose
This paper examines the short- and long-run effects of foreign direct investment (FDI) on tax revenue in Ghana.
Design/methodology/approach
The paper adopts the autoregressive distributed lag approach to estimate FDI’s long-run and short-run effects on tax revenue. The study uses time-series data from 1983 to 2019 for Ghana, mainly obtained from The Bank of Ghana, the World Bank and the IMF.
Findings
The results show that, in the short-run, FDI has no significant effect on direct tax revenue and total tax revenue but significantly hurts indirect tax revenue. In the long run, however, the results show that FDI has significant positive effects on indirect tax revenue and total tax revenue but no significant effect on direct tax revenue.
Originality/value
Empirical studies often fail to analyse the short-run and long-run effects of FDI on tax revenue. This study contributes to the mixed literature by analysing the short-run and long-run effects of FDI on tax revenue in an emerging market context. Additionally, this study employs three tax revenue measures in analysing the nexus.
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