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Open Access
Article
Publication date: 26 October 2020

Ebru Çağlayan Akay, Zamira Oskonbaeva and Hoşeng Bülbül

This study aims to examine the hysteresis hypothesis in unemployment using monthly data from 13 countries in transition.

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Abstract

Purpose

This study aims to examine the hysteresis hypothesis in unemployment using monthly data from 13 countries in transition.

Design/methodology/approach

Stationarity in the unemployment rate of selected transition economies was analyzed using four different group unit root tests, namely, linear, structural breaks, non-linear and structural breaks and non-linear.

Findings

The empirical results show that the unemployment hysteresis hypothesis is valid for the majority of transition economies, including Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, the Kyrgyz Republic, Latvia, Lithuania, Poland, Romania and Slovenia. However, the results strongly reject the null hypothesis of unemployment hysteresis for the Kazakhstan and the Slovak Republics.

Originality/value

This study revealed that, for countries in transition, advanced unit root tests exhibit greater validity when compared to standard tests

Details

Applied Economic Analysis, vol. 28 no. 84
Type: Research Article
ISSN: 2632-7627

Keywords

Open Access
Article
Publication date: 26 February 2018

Vasudeva Murthy and Albert Okunade

This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data…

1620

Abstract

Purpose

This study aims to investigate, for the first time in the literature, the stochastic properties of the US aggregate health-care price inflation rate series, using the data on health-care inflation rates for a panel of 17 major US urban areas for the period 1966-2006.

Design/methodology/approach

This goal is undertaken by applying the first- and second-generation panel unit root tests and the panel stationary test developed recently by Carrion-i-Silvestre et al. (2005) that allows for endogenously determined multiple structural breaks and is flexible enough to control for the presence of cross-sectional dependence.

Findings

The empirical findings indicate that after controlling for the presence of cross-sectional dependence, finite sample bias, and asymptotic normality, the US aggregate health-care price inflation rate series can be characterized as a non-stationary process and not as a regime-wise stationary innovation process.

Research limitations/implications

The research findings apply to understanding of health-care sector price escalation in US urban areas. These findings have timely implications for the understanding of the data structure and, therefore, constructs of economic models of urban health-care price inflation rates. The results confirming the presence of a unit root indicating a high degree of inflationary persistence in the health sector suggests need for further studies on health-care inflation rate persistence using the alternative measures of persistence. This study’s conclusions do not apply to non-urban areas.

Practical implications

The mean and variance of US urban health-care inflation rate are not constant. Therefore, insurers and policy rate setters need good understanding of the interplay of the various factors driving the explosive health-care insurance rates over the large US metropolitan landscape. The study findings have implications for health-care insurance premium rate setting, health-care inflation econometric modeling and forecasting.

Social implications

Payers (private and public employers) of health-care insurance rates in US urban areas should evaluate the value of benefits received in relation to the skyrocketing rise of health-care insurance premiums.

Originality/value

This is the first empirical research focusing on the shape of urban health-care inflation rates in the USA.

Details

Journal of Economics, Finance and Administrative Science, vol. 23 no. 44
Type: Research Article
ISSN: 2077-1886

Keywords

Article
Publication date: 14 September 2015

Ioannis A Venetis and Paraskevi K Salamaliki

The purpose of this paper is to examine the time series behavior of Greek labor market series by providing an empirical perspective on trend breaks and unit roots. Trend…

Abstract

Purpose

The purpose of this paper is to examine the time series behavior of Greek labor market series by providing an empirical perspective on trend breaks and unit roots. Trend breaks represent aggregate behavior responses to “infrequent” changes in economic fundamentals, including changes in fiscal or labor market conditions, as have been perceived in Greece during the last years. Unit roots reveal whether “regular” shocks have significant effects on the level of the series over a specified finite horizon.

Design/methodology/approach

The authors employ recent procedures that deal with the “circular testing problem” between tests on the parameters of the trend function and unit root tests that often arises in empirical applications. These techniques assess trend function stability and are robust regardless of whether the noise component is stationary or having a unit root. Then, conditional on the presence of breaks, the authors test whether the series can be characterized by a stochastic trend.

Findings

The analysis provides evidence of “infrequent” trend breaks that appear to coincide with the recent global economic crisis and the implementation of the counteraction (fiscal) measures to the Greek debt crisis. Allowing for trend breaks does not lead to a rejection of the unit root hypothesis, which might reflect the low flexibility of the country’s labor market operation.

Practical implications

The procedures employed can be viewed as new tools that might help empirical researchers to explore more accurately the characteristics of individual time series and to find reasonable approximations to the true processes of the time series examined.

Originality/value

The paper provides new information on the presence of structural changes in the Greek labor market, and on whether the “aggressive” and “occasional” nature of fiscal measures can be approximated by infrequent changes in the slope of the trend function.

Details

Journal of Economic Studies, vol. 42 no. 4
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 13 December 2013

Nikolay Gospodinov, Ana María Herrera and Elena Pesavento

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare…

Abstract

This article investigates the robustness of impulse response estimators to near unit roots and near cointegration in vector autoregressive (VAR) models. We compare estimators based on VAR specifications determined by pretests for unit roots and cointegration as well as unrestricted VAR specifications in levels. Our main finding is that the impulse response estimators obtained from the levels specification tend to be most robust when the magnitude of the roots is not known. The pretest specification works well only when the restrictions imposed by the model are satisfied. Its performance deteriorates even for small deviations from the exact unit root for one or more model variables. We illustrate the practical relevance of our results through simulation examples and an empirical application.

Details

VAR Models in Macroeconomics – New Developments and Applications: Essays in Honor of Christopher A. Sims
Type: Book
ISBN: 978-1-78190-752-8

Keywords

Article
Publication date: 29 April 2020

Andisheh Saliminezhad and Pejman Bahramian

This paper aims to examine the stochastic convergence of the per capita CO2 emissions among the top four crude oil exporter countries, namely, Canada, Iraq, Russia and…

Abstract

Purpose

This paper aims to examine the stochastic convergence of the per capita CO2 emissions among the top four crude oil exporter countries, namely, Canada, Iraq, Russia and Saudi Arabia, from 1960 to 2017. Assessing the stationarity and unit root properties of the environmental series in these countries is important as their large fossil fuel resources increases the potential for rising CO2 emissions compared to other countries.

Design/methodology/approach

In addition to implementing the conventional unit root tests, the authors also benefit from the application of three nonlinear unit root tests, namely, wavelet unit root test, nonlinear unit root test of Güriş (2019) and the Fourier quantile unit root test. These methods are robust to the presence of possible structural breaks and other forms of nonlinearities, while the wavelet unit root test enables us to examine the stochastic behavior of the variables in both time and frequency domains. Hence, they all provide more reliable inferences on the convergences of the CO2 emissions compared to their standard competitors.

Findings

The standard unit root test results show strong evidence in favor of non-stationarity in all countries. This conclusion supports the results of the other nonlinear unit root tests and the overall findings of the Fourier quantile unit root test. The wavelet unit root test provides a controversial finding. However, due to its limitations, its findings must be interpreted with caution. The details of the Fourier quantile unit root test indicate that per capita CO2 emissions follow mean-reverting properties in middle quantile ranges for Canada, Russia and Iraq. This validates the asymmetric behaviors of per capita CO2 emissions in these countries.

Originality/value

The novelty of the work can be stated in two ways. First, among the available studies, this is the first paper to emphasize the importance of examining the convergence of per capita CO2 emissions among the top four oil exporters. Second, to the best of the knowledge, no study has yet been undertaken in which all these methods have been simultaneously applied. Sustainable environmental policies depend heavily on the CO2 series’ properties. Thus, the findings can provide significant environmental and economic implications for policymakers to construct feasible and optimal policies in climate change mitigation.

Details

International Journal of Energy Sector Management, vol. 14 no. 6
Type: Research Article
ISSN: 1750-6220

Keywords

Article
Publication date: 22 May 2007

Dimitris K. Christopoulos and Miguel A. León‐Ledesma

The paper aims to re‐examine the stationarity properties of unemployment rates in 12 European Union (EU) countries over the period 1988: I‐1999: IV.

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Abstract

Purpose

The paper aims to re‐examine the stationarity properties of unemployment rates in 12 European Union (EU) countries over the period 1988: I‐1999: IV.

Design/methodology/approach

This paper applies a battery of second‐generation panel unit root tests that allow for cross‐sectional correlation.

Findings

The study shows that, contrary to previous empirical literature, hysteresis does not characterise EU unemployment.

Originality/value

This paper uses recent advances in the econometrics of panel unit root tests. The new tests have more power than the traditional ones in detecting the null hypothesis of a unit root.

Details

Journal of Economic Studies, vol. 34 no. 2
Type: Research Article
ISSN: 0144-3585

Keywords

Book part
Publication date: 21 November 2014

Cheng Hsiao

This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and…

Abstract

This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and over time to obtain valid inference for “structures” that are common across individuals and over time. We consider issues of (i) estimating vector autoregressive models; (ii) testing of unit root or cointegration; (iii) statistical inference for dynamic simultaneous equations models; (iv) policy evaluation; and (v) aggregation and prediction.

Details

Essays in Honor of Peter C. B. Phillips
Type: Book
ISBN: 978-1-78441-183-1

Keywords

Article
Publication date: 9 December 2022

Malika Neifar and Leila Gharbi

The purpose of this paper is to test the weak form of the efficient market hypothesis (EMH) using monthly data from 2004M08 to 2018M04 for two Canadian stock indices: the…

Abstract

Purpose

The purpose of this paper is to test the weak form of the efficient market hypothesis (EMH) using monthly data from 2004M08 to 2018M04 for two Canadian stock indices: the Islamic (DJICPI) and the conventional (CCSI). This paper investigates whether Islamic and/or conventional stock market would be efficient through the non-stationarity test of the stock indices.

Design/methodology/approach

The authors conduct the linearity test of Harvey et al. (2008) to identify whether the considered series has linear or nonlinear behavior. If the time series exhibits nonlinear evolution, then the authors apply nonlinear unit root tests (three KSS type tests and Sollis tests).

Findings

Linearity test results say that LCCSI has nonlinear behavior, while Dow Jones Islamic Canadian Price Index, LDJICPI, is a linear process. Then, the findings of this paper show that only Canadian Islamic Price Index (DJICPI) has the characteristics of random walk indicating that only conventional stock markets are inefficient. The major implication is that in Canada, fund managers and investors can (cannot) enjoy excess returns to their investment in conventional (Islamic) stock market.

Originality/value

Numerous empirical studies of the weak EMH are carried out within a linear framework. However, stock indices can show nonlinear behavior as a result of 2008 global financial crisis. To contribute to the existing literature on the Islamic and conventional stock market efficiency, the authors take into account both structural breaks and nonlinearity. Thus, as a testing strategy for weak EMH, the authors perform (Harvey et al., 2008) linearity test to examine the presence of nonlinear behavior and correct for outliers effect when it is needed.

Details

Journal of Islamic Accounting and Business Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 4 September 2020

Veli Yilanci and Muhammed Sehid Gorus

In this study, we aim to test the stochastic convergence of per capita clean energy use in 30 OECD (Organization for Economic Co-operation and Development) countries for…

Abstract

Purpose

In this study, we aim to test the stochastic convergence of per capita clean energy use in 30 OECD (Organization for Economic Co-operation and Development) countries for the period of 1965–2017.

Design/methodology/approach

This study employed both linear and nonlinear panel unit root tests, and unlike other studies, this study allowed fractional values in addition to integer values for frequencies in the Fourier functions. Integer values of frequency indicate temporary breaks, while fractional values show permanent breaks.

Findings

The results of the linear panel unit root test indicate that clean energy use does not converge to group average for almost all OECD countries. However, the results of nonlinear panel unit root tests provide evidence that the stochastic convergence hypothesis of clean energy consumption cannot be rejected for most countries. This study does not find any evidence for stochastic convergence of clean energy use in Australia, Canada, Denmark, Ireland, Norway or Sweden. Therefore, the policies regarding clean energy are mandatory in these countries due to their effectiveness. This study also reveals that there are permanent structural breaks in the convergence process of clean energy consumption in approximately half of OECD countries.

Originality/value

This study considers temporary and permanent smooth structural shifts in addition to nonlinearity when testing the stationarity of clean energy consumption in a country i relative to the group average. This new method eliminates deficiencies of the previous panel data techniques. Thus, it provides more reliable results compared to existing literature.

Details

Management of Environmental Quality: An International Journal, vol. 32 no. 2
Type: Research Article
ISSN: 1477-7835

Keywords

Book part
Publication date: 21 November 2014

Yixiao Sun

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual…

Abstract

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual fixed-smoothing asymptotics under weak dependence to allow for near-unit-root and weak-unit-root processes. As the locality parameter that characterizes the neighborhood of the autoregressive root increases from zero to infinity, the new fixed-smoothing asymptotic distribution changes smoothly from the unit-root fixed-smoothing asymptotics to the usual fixed-smoothing asymptotics under weak dependence. Simulations show that the new approximation is more accurate than the usual fixed-smoothing approximation.

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