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11 – 20 of over 27000Oil market VAR models have become the standard tool for understanding the evolution of the real price of oil and its impact on the macro economy. As this literature has expanded…
Abstract
Oil market VAR models have become the standard tool for understanding the evolution of the real price of oil and its impact on the macro economy. As this literature has expanded at a rapid pace, it has become increasingly difficult for mainstream economists to understand the differences between alternative oil market models, let alone the basis for the sometimes divergent conclusions reached in the literature. The purpose of this survey is to provide a guide to this literature. Our focus is on the econometric foundations of the analysis of oil market models with special attention to the identifying assumptions and methods of inference.
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Zeqi Liu, Zefeng Tong and Zhonghua Zhang
This study examines the differences in the economic stimulus effects, transmission mechanisms, and output multipliers of government consumption, government traditional investment…
Abstract
Purpose
This study examines the differences in the economic stimulus effects, transmission mechanisms, and output multipliers of government consumption, government traditional investment, and government science and technology investment.
Design/methodology/approach
This study constructs and estimates a New Keynesian model of endogenous technological progress embedded in the research and development (R&D) and technology transfer sectors. Using Chinese macroeconomic time series data from 1996 to 2019, this study calibrates and estimates the model and analyzes the impulse response function and a counterfactual simulation of expenditure structure adjustment.
Findings
The results show that compared with the traditional dynamic stochastic general equilibrium (DSGE) model, the endogenous process of technological progress amplifies the impact of government consumption shock and traditional government investment shock on the macroeconomy, leading to greater economic cycle fluctuations. As government investment in science and technology has positive external spillover effects on firm R&D activities and the application of innovation achievements, it can promote more sustainable economic growth than government consumption and traditional investment in the long run.
Originality/value
This study constructs an extended New Keynesian model with different types of government spending, which includes endogenous technological progress within the R&D and technology transfer sectors, thereby linking fiscal policy, business cycle fluctuations and long-term economic growth. This model can study the macroeconomic impact of fiscal expenditure structure adjustment when fiscal expansion is limited. In the Bayesian estimation of model parameters, this study not only uses macroeconomic variables but also adds a sequence of private R&D investment.
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– The purpose of this paper is to examine the effects of the 2007-2009 uncertainty shocks on policymakers’ behavior.
Abstract
Purpose
The purpose of this paper is to examine the effects of the 2007-2009 uncertainty shocks on policymakers’ behavior.
Design/methodology/approach
Uncertainty shocks in the US credit, financial and production markets are represented by extraordinary events. As in Bloom (2009), these events are associated with significant economic and political shocks (e.g. Lehman Brothers’ collapse). Credit markets uncertainty shocks, which played a crucial role in the aftermath of the house prices collapse in the USA, are first analyzed in a bivariate VAR context, and then, embodied in a simple theoretical framework.
Findings
The empirical evidence suggests that the US credit, financial and production markets have been affected by a relative large number of uncertainty shocks (i.e. rare events). In a Brainard’s (1967) uncertainty scenario, it is shown that a bizarre money-liquidity relationship exacerbates the “policymakers’ cautiousness-aggressiveness trade-off.” In addition, the model suggests that a “double” dose of policy, in presence of a global credit crunch, might be useless.
Originality/value
This paper improves the existing literature in two main directions. First, it provides novel empirical evidence on the unusual dynamics of the US credit market and its effects on the real economic activity during the crisis. Second, in a very simple theoretical framework accounting for parameter uncertainty, it addresses whether a bizarre money-credit relationship affects policymakers’ behavior (i.e. cautiousness vs aggressiveness).
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Zhi Lu Xu, Bert D. Ward and Christopher Gan
Ng (2002), and Lim and McAleer (2003) explained that if the national economies are not converging, or if the responses of national economies to random shocks are asymmetric, the…
Abstract
Ng (2002), and Lim and McAleer (2003) explained that if the national economies are not converging, or if the responses of national economies to random shocks are asymmetric, the cost of premature monetary integration would be high. This chapter investigates the feasibility of adopting a single currency for ASEAN-5 countries. The research uses the Kalman Filter procedure to test the economic convergence among ASEAN-5 countries, relative to Japan and the US. In addition, the symmetry of underlying structural shocks is also examined by applying a structural vector autoregression (SVAR) model. The research findings showed that Singapore, Malaysia, and Thailand (ASEAN-3) appear to be relatively suitable for forming an Optimum Currency Area. However, the results did not show significance evidence whether the Japanese Yen or the US dollar will be a suitable currency for the ASEAN-3 countries to adopt commonly.
Luccas Assis Attílio, Joao Ricardo Faria and Mauricio Prado
The authors investigate the impact of the US stock market on the economies of the BRICS and major industrialized economies (G7).
Abstract
Purpose
The authors investigate the impact of the US stock market on the economies of the BRICS and major industrialized economies (G7).
Design/methodology/approach
The authors construct the world economy and the vulnerability between economies using three economic integration variables: bilateral trade, bilateral direct investment and bilateral equity positions. Global vector autoregressive (GVAR) empirical studies usually adopt trade integration to estimate models. The authors complement these studies by using bilateral financial flows.
Findings
The authors summarize the results in four points: (1) financial integration variables increase the effect of the US stock market on the BRICS and G7, (2) the US shock produces similar responses in these groups regarding industrial production, stock markets and confidence but different responses regarding domestic currencies: in the BRICS, the authors detect appreciation of the currencies, while in the G7, the authors find depreciation, (3) G7 stock markets and policy rates are more sensitive to the US shock than the BRICS and (4) the estimates point out to heterogeneities such as the importance of industrial production to the transmission shock in Japan and China, the exchange rate to India, Japan and the UK, the interest rates to the Eurozone and the UK and confidence to Brazil, South Africa and Canada.
Research limitations/implications
The results reinforce the importance of taking into account different levels of economic development.
Originality/value
The authors construct the world economy and the vulnerability between economies using three economic integration variables: bilateral trade, bilateral direct investment and bilateral equity positions. GVAR empirical studies usually adopt trade integration to estimate models. The authors complement these studies by using bilateral financial flows.
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Jonas Hahn, Verena Keil, Thomas Wiegelmann and Sven Bienert
The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting…
Abstract
Purpose
The purpose of this paper is to estimate the impact of changes in macro-economic conditions going forward, focusing on a change in interest policy, with regard to office letting and investment markets.
Design/methodology/approach
For this analysis, the authors constructed two vector-autoregressive models, measuring the response of office rents and capital values in Germany to economic impulses. The authors isolated effects of unique exogenous positive shocks (such as economic growth or interest leaps) on the basis of impulse-response functions in order to understand the complex dynamic interdependence between several economic factors and office performance changes.
Findings
The authors initially find a moderately positive development of both office performance components even although supposing an increase in interest level. In terms of capital values, the authors find that they do not drop before 1.5 years after the interest impulse and the negative effect peaks after approximately nine quarters. Furthermore, the reaction to a change in GDP is significantly lower than a reaction to the interest rate, but impulses in other macro-economic factors provoke stronger reactions. Finally, the authors find that a positive interest shock leads to a comparably robust development and economic sustainability in office rents throughout a consideration horizon of 24 quarters.
Research limitations/implications
Estimations are based on observations from a time period containing two rather extraordinary market phases. As they included bubble growth and the low-interest environment, the authors find that certain patterns in both phases neutralize each other when looking at the total time frame. The authors constructed sub-samples to compensate for this. However, the research does not provide to what extent the measured impulse-responses stay forecast-proof, if the market moves into a phase of short-term normalization.
Practical implications
This paper provides insights into estimated impulse-response patterns on a hypothetical sudden increase of several macro-economic determinants. On this basis, the probable reaction to an increase in, for example, the interest rate level can be approximated. Also, the paper provides a fundamental understanding of the economic sustainability of German office properties in terms of their value and rent performance in the case of exogenous shocks.
Originality/value
This paper contains the first vector-autoregressive, impulse-response analysis of office markets in Germany in the context of several macro-economic drivers, including the interest level. It delivers insights into market reaction patterns on the basis of simulated one standard deviation shocks in all included variables.
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Alina Stundziene, Vaida Pilinkiene and Andrius Grybauskas
This paper aims to identify the economic stimulus measures that ensure stability of the Lithuanian housing market in the event of an economic shock.
Abstract
Purpose
This paper aims to identify the economic stimulus measures that ensure stability of the Lithuanian housing market in the event of an economic shock.
Design/methodology/approach
The econometric analysis includes stationarity test, Granger causality test, correlation analysis, autoregressive distributed lag models and cointegration analysis using ARDL bounds testing.
Findings
The econometric modelling reveals that the housing price in Lithuania correlates with quarterly changes in the gross domestic product and approves that the cycles of the real estate market are related to the economic cycles. Economic stimulus measures should mainly focus on stabilizing the economics, preserving the cash and deposits of households, as well as consumer spending in the case of economic shock.
Originality Value
This study is beneficial for policy makers to make decisions to maintain stability in the housing market in the event of any economic shock.
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Amrita Kulshreshtha, Sk Raju, Sai Manasa Muktineni and Devlina Chatterjee
The purpose of this study was to investigate the relationship between income shock suffered during the coronavirus pandemic and subsequent financial well-being (FWB) of Indian…
Abstract
Purpose
The purpose of this study was to investigate the relationship between income shock suffered during the coronavirus pandemic and subsequent financial well-being (FWB) of Indian adults, mediated by financial resilience (FR) and psychological resilience (PR).
Design/methodology/approach
The authors propose a conceptual model for the relationship between income shock and FWB, with FR and PR as mediator variables. The authors consider four dimensions of financial resilience: economic resources, financial inclusion, financial knowledge and social capital. This study uses a unidimensional scale for PR. Data were collected from 370 respondents from 11 cities across India. Structural equation models were built to test the proposed hypotheses.
Findings
Income shock was negatively associated with FWB. Estimated path coefficients for FR and PR were statistically significant and confirmed a mediating role. Among the four dimensions of financial resilience, only economic resources were positively associated with FWB. The mediation relation between economic resources and FWB was larger than PR.
Research limitations/implications
Since convenience sampling was used to collect data, the results of this study are indicative but not generalizable.
Social implications
For individuals who suffered income shocks during the pandemic, adequate economic resources are crucial for FWB. Governmental disbursements, personal savings and medical or life insurance could provide an adequate safety net.
Originality/value
There are no extant studies that examine the association between income shocks and FWB in the pandemic, and this study contributes to the literature.
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Romina Gambacorta, Alfonso Rosolia and Francesca Zanichelli
In 2020, household incomes were severely hit by the lockdowns imposed across the world in response to the COVID-19 pandemic. Using data from the last available wave of the…
Abstract
In 2020, household incomes were severely hit by the lockdowns imposed across the world in response to the COVID-19 pandemic. Using data from the last available wave of the euro-area harmonized Household Finance and Consumption Survey for 2016, this chapter documents European households’ financial resilience to this shock, based on pre-shock balance sheets, potential exposure to COVID-19, and in the absence of government interventions. The results highlight that there are large and similar shares of the population across European countries that are likely to suffer from the economic fallout of containment measures – albeit through different channels.