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Book part
Publication date: 25 September 2020

Berna Kaçar and Huriye Gonca Diler

Introduction: Monetary policy resolutions issued by central banks play effective role in economy when accompanied with interest variable. In Keynesian approach to finance…

Abstract

Introduction: Monetary policy resolutions issued by central banks play effective role in economy when accompanied with interest variable. In Keynesian approach to finance, interest is treated as the main determinant underlying financial policy resolutions. Thus interest is a pivotal factor in monetary transmission mechanism. Tight monetary policy practices, essentially decreasing money supply, eventually lead to a slump in investments, total demand and national income due to the increase in real interest rates.

Objective: The aim of this study is to determine what type of effects do monetary policy practitioner in Turkey have on macroeconomic variables via the interest channel of monetary transmission mechanism.

Methodology: Based on this objective, variables that could help in unveiling CBT overnight interest rates, direct fixed capital investment (GSSO), real gross domestic product (RGDP), industry production index (SUE) and domestic producer price index (YUFE) variables and that could explain monetary functions of transmission mechanism’s interest channel were selected. For the variables constituting the research topic, collected data belong the period of 2003Q1–2018Q3.

Findings: In the study relation between the variables has been analyzed under two parts via harnessing TodaYamamoto casualty test. In the first part, results of TodaYamamoto causality test from RGDP, GSSO and interest rate (FO) variables have been presented. The results manifest that interest channel directly affects direct fixed capital investment and RGDP. Interest channel was found to be effective on these variables of the analysis. In the second part, TodaYamamoto causality test was harnessed for SUE, YUFE and FO variables. Interest channel did not provide a result that affected YUFE and SUE.

Details

Uncertainty and Challenges in Contemporary Economic Behaviour
Type: Book
ISBN: 978-1-80043-095-2

Keywords

Article
Publication date: 14 August 2009

Alper Ozun and Erman Erbaykal

The purpose of this paper is to analyze cointegration and causality relationships between spot and futures markets in Turkish foreign‐exchange markets.

Abstract

Purpose

The purpose of this paper is to analyze cointegration and causality relationships between spot and futures markets in Turkish foreign‐exchange markets.

Design/methodology/approach

The research employs Bounds cointegration test and TodaYamamoto causality test to detect a possible risk transmission between spot and futures markets. Time series of Turkish spot and futures foreign‐exchange markets from January 2, 2006 to March 25, 2008 on a daily basis are used for empirical analysis.

Findings

The empirical tests suggest that there is unidirectional causality running from future exchange‐rate market to spot market implying that foreign‐exchange markets have informational efficiency in Turkey.

Originality/value

The paper has originality in both employing Bounds test and TodaYamamoto test to examine the relationship between spots and derivative markets, and in being one of the first empirical papers examining Turkish futures markets. In addition, the paper presents a guide on how Bounds and TodaYamamoto tests can be applied to detect interactions among markets without data stationarity.

Details

The Journal of Risk Finance, vol. 10 no. 4
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 23 June 2021

Niharika Sinha and Swati Shastri

This paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.

Abstract

Purpose

This paper empirically examines the impact of financial development on domestic investment in India for the period 1989–2017.

Design/methodology/approach

This study employs the autoregressive distributed lag (ARDL) bounds testing approach to co-integration to test the long-run relationship between financial development and domestic investment. To test the direction of causality, TodaYamamoto causality test and vector error correction model (VECM) Granger causality/Block Exogeneity Wald test have been employed. Investment has been measured by Gross Capital Formation. To capture various aspects of financial development in India, eight alternative indicators (both bank based and market based) have been used. With the help selected indicators, a composite index (FINDEX) of financial development has been constructed using principal component analysis (PCA).

Findings

The estimated result finds evidence in favour of positive, short-run and long-run impact of financial development on investment in the Indian economy. Both bank-based and market-based indicators are found to significantly affect the level of investment. The significant effect of efficiency-based financial development indicators (both bank based and market based) upon domestic investment implies that there is a need to implement policies that ensure the efficiency of financial intermediation.

Originality/value

To the best of authors' knowledge, not much research has been done to explore the relationship between financial development and domestic investment, especially in the case of Indian economy. This study also tries to find the impact of bank-based and market-based financial development indicators upon domestic investment to explore banks vs market issue.

Details

South Asian Journal of Business Studies, vol. 12 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

Article
Publication date: 5 October 2020

Isaac Cliford Queku, Seth Gyedu and Emmanuel Carsamer

The purpose of the paper is to investigate the causal relationships and speed of adjustment of stock prices to changes in macroeconomic information (MEI) in Ghana from 1996 to…

Abstract

Purpose

The purpose of the paper is to investigate the causal relationships and speed of adjustment of stock prices to changes in macroeconomic information (MEI) in Ghana from 1996 to 2018 using monthly data. The paper seeks to conduct the investigation at individual MEI level rather than the composite MEI.

Design/methodology/approach

Quantitative approach was used in this paper. Monthly data span of 1996–2018 was used. The delay and half-life technique was used to determine the speed with which the information resulting from the changes in the macroeconomic are evident in the stock price. Thereafter, TodaYamamoto Granger no-causality approach was used to examine the causal relationship amongst variables.

Findings

The paper revealed that although the market adjustment to MEI has improved, the speed is till slow. The exchange rate exhibited the slowest speed in respect of the market reaction while the market reaction to money supply was the fastest. TodaYamamoto Granger no-causality estimation also revealed a bi-directional causality between MEI (gross domestic product, interest rate and money supply) and stock price and uni-directional relationship flowing from MEI (the exchange rate and foreign direct investment) to stock price. The paper also found no causality between inflation and stock price.

Research limitations/implications

The findings although revealed improved level of market efficiency in comparison with the earlier data, the speed of adjustment is still undesirable. Rigorous approach should be adopted for the implementation of major reforms such as alternative market so as to increase the number of share listing and to increase the scope of investors' participation to enhancing trading volume and marketability and ultimately speed up information diffusion.

Practical implications

The practical implication of the low level of information processing rate of Ghana Stock Exchange (averagely more than a month) is that astute investors and market analysts could employ MEI to outperform the market prior to their infusion onto the stock market.

Originality/value

This study is one of the few studies in the Ghanaian literature that has extended the investigation of the speed of adjustment beyond composite or aggregate macroeconomic level estimation to estimation at individual variable level. This contribution is very relevant since each macroeconomic variable has unique characteristics and require specific policy framework, it is important to consider the speed of adjustment from the perspective of each of the individual variables.

Details

International Journal of Emerging Markets, vol. 17 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 9 March 2012

H. Aydin Okuyan, Alper Ozun and Erman Erbaykal

The purpose of this paper is to investigate the relationship between trade openness and economic growth in developing countries. Under this aim, the co‐integration relationship…

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Abstract

Purpose

The purpose of this paper is to investigate the relationship between trade openness and economic growth in developing countries. Under this aim, the co‐integration relationship between trade openness and economic growth of 17 developing countries is examined without relying on data stationarity.

Design/methodology/approach

The co‐integration relationship between trade openness and economic growth is analyzed by Bounds testing approach developed by Pesaran et al. In addition to this, the causality relationship is tested by causality analysis developed by Toda and Yamamoto.

Findings

According to the Bounds test results, co‐integration relationship has been detected for six countries and long‐term coefficients among the variables have been found positive and statistically significant. According to the Toda and Yamamoto causality analysis, causality has been detected for eight countries. In four of these, the direction of causality is from trade openness to economic growth and in the other four, vice versa.

Originality/value

The methodology employed provides an alternative framework for examining relationship among economic variables. The paper shows how to create co‐integration and causality tests without relying on data stationarity, which is a major problem in time series of economic variables. On the empirical side, it adds new empirical results into the literature in the name of identification of relationship between trade openness and economic growth in developing countries.

Details

International Journal of Commerce and Management, vol. 22 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 3 April 2019

Pradipta Kumar Sahoo, Dinabandhu Sethi and Debashis Acharya

The purpose of this paper is to examine the price–volume relationship in the bitcoin market to validate near-stock properties of bitcoin.

Abstract

Purpose

The purpose of this paper is to examine the price–volume relationship in the bitcoin market to validate near-stock properties of bitcoin.

Design/methodology/approach

Daily data of bitcoin returns, returns volatility and trading volume (TV) are utilized for the period August 17, 2010–April 16, 2017. Linear and non-linear causality tests are employed to examine price–volume relationship in the bitcoin market.

Findings

The linear causality analysis indicates that the bitcoin TV cannot be used to predict return; however, the reverse causality is significant. In contrast, the non-linear causality analysis shows that there are non-linear feedbacks between the bitcoin TV and returns. The bitcoin TV, which represents new information, leads to price changes, and large positive price changes lead to increased trading activity. Similarly, in recent periods (post-break period), the results of the non-linear causality test show a unidirectional causality from TV to the volatility of returns.

Research limitations/implications

This study uses the average index value of major bitcoin exchanges. But further research on this relationship using data from different bitcoin exchanges may provide further insights into the price–volume relationship of bitcoin and its near-stock properties.

Practical implications

These findings from the non-linear causality analysis, therefore, suggest that investors cannot simply base their decisions on the linear dynamics of the bitcoin market. This is because new information in terms of the TV is neither linearly related to the price nor it is a one-to-one kind of relationship as most investors commonly understand it to be. Rather, investors’ decisions should be based on non-linear models, in general, and the best-fitting non-linear model, in particular.

Originality/value

The study examines bitcoin’s near-stock properties in a price–volume relationship framework with the help of both linear and non-linear causality tests, which to the best of the authors’ knowledge remains unexplored.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 23 March 2022

S. Belgin Akçay, Cagin Karul and Mert Akyuz

The purpose of this study is to examine whether there is a causal relationship between mortgage credit and house prices in Turkey.

Abstract

Purpose

The purpose of this study is to examine whether there is a causal relationship between mortgage credit and house prices in Turkey.

Design/methodology/approach

Granger causality test, TodaYamamoto causality test, Fourier Granger causality test and Fourier TodaYamamoto causality tests are applied.

Findings

The findings show that there is a strong one-way causality between mortgage credit and house prices and that the developments in credit markets are more decisive in the relationship between mortgage credit and house prices than the developments in the housing markets.

Practical implications

Considering a causal relationship between mortgage credit and house prices may contribute to more efficient use of the tools of both macroeconomic and microeconomic policies for the mortgage credit and housing markets in Turkey. Furthermore, by understanding the importance of the direction of causality between both dynamics, it may be possible to prevent and/or mitigate the negative effects of large house price movements on both Turkish housing and mortgage markets as well as on Turkish economy.

Originality/value

To the best of the authors’ knowledge, the contribution of this study is to examine for the first time whether the causal relationship between mortgage credit and house prices in Turkey is mutual as well as to apply four different causality tests and to compare their results for the first time.

Details

International Journal of Housing Markets and Analysis, vol. 16 no. 2
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 27 November 2020

Dervis Kirikkaleli, Korhan Gokmenoglu and Siamand Hesami

This study aims to answer the following questions which have not been investigated in the literature to the best knowledge: Is there any bubble in the German housing sector…

Abstract

Purpose

This study aims to answer the following questions which have not been investigated in the literature to the best knowledge: Is there any bubble in the German housing sector between 2005–2009 and 2012–2017? and Is there any linkage between economic policy uncertainty and the housing sector price index?

Design/methodology/approach

This study aims to shed some light on the German’s housing sector by investigating the housing sector bubble and the causal link between the housing sector index and economic policy uncertainty in Germany, using GSADF, Granger causality, Toda Yamamoto causality and wavelet coherence tests.

Findings

The findings reveal that there are some bubbles in the housing sector in Germany for the periods investigated, there is a positive correlation between economic policy uncertainty and housing sector price index at different frequencies and different periods and between 2008 and 2009 and between 2011 and 2013, economic policy uncertainty leads housing sector price index. The consistency of the findings from wavelet coherence is confirmed by the outcomes of Granger causality and Toda Yamamoto causality tests.

Originality/value

To the best knowledge, this is the first study that empirically investigates the relationship between the housing sector and EPU using a novel wavelet econometric method. In addition, this paper extends the research focused on the associations between the housing sector and EPU, by checking the bubbles in the market in different time horizons by using the longest available data span. Furthermore, the consistency of the findings from wavelet causality is confirmed by the outcomes of Granger causality and Toda Yamamoto causality tests. Finally, compared to the previous literature on the relationship between housing and EPU, the study uses a hedonic index for housing for the first time in the case of Germany.

Details

International Journal of Housing Markets and Analysis, vol. 14 no. 5
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 11 February 2021

Dervis Kirikkaleli

This study aims to close a gap in the relevant literature by investigating the causal linkage between financial risk (FR) and economic risk (ER) in China for the period…

Abstract

Purpose

This study aims to close a gap in the relevant literature by investigating the causal linkage between financial risk (FR) and economic risk (ER) in China for the period 1985Q1–2018Q4.

Design/methodology/approach

Based on the aim of the present study, Toda Yamamoto causality and wavelet coherence tests are used to capture the relationship between FR and ER in China.

Findings

The findings from wavelet coherence reveal that there is feedback causality between FR and ER in China at different frequencies and different periods between 1985 and 2018. The consistency of the findings from wavelet coherence is confirmed by the outcomes of Toda Yamamoto causality test.

Research limitations/implications

Although this study provides strong and consistent empirical findings for China, further studies should consider advancing the argument by focusing on different emerging markets.

Practical implications

Results are crucial for policy decision-making and can be used by researchers and macro-economic policymakers to take an action, if necessary, by implementing more appropriate or alternative economic and financial decisions.

Originality/value

To the best of the author’s knowledge, this relationship in China has not been comprehensively explored by using newly developed econometrics techniques. Therefore, this study is likely to open a debate about the literature as the study concludes with a discussion on short- and long-run implications for policymakers in China.

Book part
Publication date: 6 April 2021

Shahriyar Mukhtarov and Javid Aliyev

This study investigates the causal relationship between financial innovation (FI) as proxied by the bank credits to private sector, as percentage of GDP and economic growth in…

Abstract

This study investigates the causal relationship between financial innovation (FI) as proxied by the bank credits to private sector, as percentage of GDP and economic growth in case of Azerbaijan using annual data covering the period from 1992 to 2018. For this purpose, the TodaYamamoto causality test with the framework of vector autoregressive (VAR) model is utilized to test causal relationship between the variables. The estimation results reveal that there is bidirectional causal relationship between FI and economic growth. The findings of the study suggest the researchers and policy makers to understand the role of FI in economic growth for macroeconomic stability and sustainable development purposes in Azerbaijan and other developing oil-rich countries.

Details

Strategic Outlook in Business and Finance Innovation: Multidimensional Policies for Emerging Economies
Type: Book
ISBN: 978-1-80043-445-5

Keywords

1 – 10 of 291