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This paper aims to assess the effects of housing market shocks on real output in South Africa, by focusing on the real private consumption channel.
Abstract
Purpose
This paper aims to assess the effects of housing market shocks on real output in South Africa, by focusing on the real private consumption channel.
Design/methodology/approach
It measures housing market shocks as non-monetary housing shocks, uses a data set covering the period 1969Q4-2014Q4 and uses the agnostic identification procedure.
Findings
The paper finds that 20 per cent of the variation in house prices is explained by these shocks. The paper also finds that the effects of housing demand shocks on real private consumption are short-lived and generate a transitory real output response. Overall, housing demand shocks have managed to explain nearly 13 per cent and 14 per cent of the variation in real private consumption and real output respectively, over 20-quarters ahead forecast revision.
Research limitations/implications
This finding suggests that shocks emanating from the housing market in the country are essential and should be considered when making macroeconomic policy decisions.
Originality/value
None of the existing studies, to our knowledge, have empirically assessed the effects of housing market shocks on real output directly. This paper attempts to contribute to the literature by assessing the direct impact of housing market shocks on the real output, using South Africa as a case study.
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This article investigates the pre‐planning of consumer purchasing for a low‐involvement product group. Evidence is presented from the field of chocolate confectionery on consumer…
Abstract
This article investigates the pre‐planning of consumer purchasing for a low‐involvement product group. Evidence is presented from the field of chocolate confectionery on consumer intentions to purchase two new brands and on their actual reported purchases. Previously a very high level of impulse purchasing had been assumed to occur in this market but this evidence suggests more routinised behaviour which implies pre‐planning. Suggestions are made for forecasting the sales of new brands from consumer intention to purchase data on the basis of the relationships presented here. Implications for management decision making are summarised and the need for further research investigation is stressed.
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Masoud Mohammed Albiman, Najat Nassor Suleiman and Hamad Omar Baka
The purpose of this study is to investigate the dynamic relationship that exists between energy consumption, environmental pollution and per capita economic growth in Tanzania…
Abstract
Purpose
The purpose of this study is to investigate the dynamic relationship that exists between energy consumption, environmental pollution and per capita economic growth in Tanzania. The energy consumption is represented by electricity usage in kilowatt hours (kWh) per capita, while environmental pollution is represented by carbon emission per metric tons and economic growth by gross domestic product (GDP) per capita.
Design/methodology/approach
This investigation is made based on the Environmental Kuznets Curve using time series annual data from 1975 to 2013 by applying the more robust causality technique of Toda and Yamamoto non-Causality test (1995), Impulse response and Variance Decomposition, Augumented and Dickey–Fueller test and Philips and Perron Test of unit root tests.
Findings
Economic growth rate (LGDP) and energy consumption per capita (LENGY), both being unidirectional, cause environmental pollution through carbon emission (LCO2) in Tanzania. Interestingly, after using impulse response, a significant and positive economic growth (GDP per capita) was found due to shocks from electricity per capita (energy consumption) and carbon emission (LCO2) with time. The Variance Decomposition suggested that the percentage of the variations due to shocks or innovations of economic growth (LGDP) and energy consumption (LENGY) to carbon emission is very high and significant, accounting to 46 and 41 per cent, respectively, in 10 years to come.
Research limitations/implications
The study recommends that, in the future, the relationship be examined using super-exogeneity causality tests that takes into consideration the changes in policy or regime in contrast to Toda and Yamamoto. Furthermore, the addition of other variables such as fixed capital formation and labor force, which were not considered in this study, may result in strong correlation.
Practical implications
The results imply that the government of Tanzania can adopt environment conservation and energy saving policies without affecting its economic growth. As a matter of fact, to put a stop to persistent environmental pollution in Tanzania, the energy saving policy should be put in place rather quickly. It is imperative that the government implements policies and strategies that ensure continuous economic growth without forsaking the environment.
Originality/value
Despite the increase in carbon emissions, energy consumption and economic growth in Tanzania since 2000, to date, no previous work has been done to investigate their multivariate relationship. This is the first study that uses the Toda and Yamamoto non-Causality test, Impulse Response and Variance Decomposition Analysis to investigate a trivariate relationship of the variables mentioned above.
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The purpose of this paper is to explore and analyse the dynamic relationship between remittances inflows of Egyptians working abroad and asymmetric oil price shocks.
Abstract
Purpose
The purpose of this paper is to explore and analyse the dynamic relationship between remittances inflows of Egyptians working abroad and asymmetric oil price shocks.
Design/methodology/approach
This study uses a vector autoregressive (VAR) model to explain the impulse response functions (IRFs) and the forecast error variance decomposition (FEVD). The rationale behind using these tools is its ability to examine the dynamic effects of our variables of interest.
Findings
The impulse response functions confirmed that remittance inflows have various responses to asymmetric oil price shocks. For instance, inflowing remittances increase in response to positive oil price shocks, while it decreases in response to negative oil price shocks. Also, the results indicate that the responses are significant in the short and medium-run and insignificant in the long run. The magnitude of these responses reaches its peak or trough in the third year. Further, the variance decomposition reveals that oil price decreases are more influential than oil price increases.
Originality/value
This means that remittances inflows in Egypt are pro-cyclical with oil price shocks. That explained by the fact that more than one-half of those remittances sent from GCC countries where real economic growth is very pro-cyclical with the oil prices. This empirical assessment will help policymakers to determine the behaviour of remittances and highlights the impact of different kinds of oil prices shocks on remittances. Unlike the little existing literature, this study is the first study applied the VAR model using a novel dataset spanning 1960-2016.
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Mehmet Balcilar, Rangan Gupta and Charl Jooste
The authors analyse the relationship between the South African real exchange rate and economic fundamentals – demand, supply and nominal shocks. The paper aims to discuss these…
Abstract
Purpose
The authors analyse the relationship between the South African real exchange rate and economic fundamentals – demand, supply and nominal shocks. The paper aims to discuss these issues.
Design/methodology/approach
The authors use a time-varying parameter VAR to study the coherence, conditional volatility and impulse responses of the exchange rate over specific periods and policy regimes. The model is identified using sign-restrictions that allow for some neutrality of impulse responses over contemporaneous and long horizons.
Findings
The results suggest that the importance of fundamental shocks on the exchange rate is time dependent. Hence there is a loss in information when using standard linear models that average out effects over time. The response of the exchange rate to demand and supply shocks have weakened over the 1994-2010 period.
Research limitations/implications
The period following financial crisis has strengthened the relationship between supply and demand shocks to the exchange rate, but has weakened the relationship between interest rate shocks and the exchange rate response.
Practical implications
This paper provides deeper insight as to how the exchange rate responds to fundamental shocks. This should help monetary policy understand the consequences of interest rate decisions on the exchange rate and the indirect effect of inflation on the exchange rate.
Originality/value
This application is new to the South African literature. The authors propose that the use of interest rates is limited in affecting the value of the rand exchange rate over particular periods. Isolating fundamental shocks to exchange rates over time helps policy makers make clearer and more informed decisions.
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Franz Fuerst and Patrick McAllister
The purpose of this paper is to investigate the relationships between supply and demand in 19 European office markets in the period 1991‐2006. It estimates the variations in the…
Abstract
Purpose
The purpose of this paper is to investigate the relationships between supply and demand in 19 European office markets in the period 1991‐2006. It estimates the variations in the price elasticity of supply across the different markets. The paper tests whether developers display evidence of myopic or rational expectations in their behaviour.
Design/methodology/approach
The paper draws upon a time series of rental, take‐up and new completions for 20 European office markets. A static measurement of price elasticity is calculated for each office market. To measure this expected supply response in the empirical analysis, the paper applies an impulse response analysis.
Findings
There is an evidence of positive and negative price elasticity. In a significant proportion of cities, supply increases following falls in rental levels. As a result, there is some evidence of myopic behaviour in a proportion of the markets examined, there is little evidence to support the hypothesis that real estate developers systematically display myopic expectations. The diversity in developer responses to price signals is surprising. It is concluded that idiosyncratic rather than systematic factors may dominate supply‐side responses to market signals.
Research limitations/implications
This paper is essentially exploratory and raises a number of questions for further investigation. There is scope to address the research questions using better data series, in particular, net absorption rates, construction starts, real rental growth rates and different geographical definitions. There is also scope to extend the research to examine the causal factors underlying differences in supply elasticity, for instance, the relative contribution of constraining variables such regulatory restrictions and limitations in physical capacity. It is also possible to model the supply adjustment process more dynamically in an error‐correction framework.
Practical implications
The findings would suggest that the complexity and diversity of economic, institutional and capital market influences affecting European commercial real estate markets seem to be far too numerous for any single model of market or developer behaviour to explain.
Originality/value
This is the first paper to examine supply elasticity across a broad range of European office markets.
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This study investigates the relationship between the inflation targeting (IT) framework and the exchange rate pass-through (ERPT) to consumer prices in the emerging ASEAN…
Abstract
This study investigates the relationship between the inflation targeting (IT) framework and the exchange rate pass-through (ERPT) to consumer prices in the emerging ASEAN economies (i.e., Indonesia, the Philippines, and Thailand) using a vector autoregressive (VAR) model with monthly data covering the sample period from January 1990 to July 2020. The empirical analysis is divided into two subperiods – pre-IT and post-IT periods. The impulse response analysis identified the existence of the ERPT during the pre-IT period and the loss of the ERPT during the post-IT period in all sample economies. The study speculated that the loss of the ERPT is attributable to the conformity to the Taylor principle in the IT framework in all sample economies.
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L.L. Leachman, Christie H. Paksoy and J.B. Wilkinson
This research applies vector autoregression to estimate a system composed of market share and relative advertising expenditures of the seven major competitors in the U. S…
Abstract
This research applies vector autoregression to estimate a system composed of market share and relative advertising expenditures of the seven major competitors in the U. S. replacement passenger tire market between 1972 and 1983. The results of the study suggest that a company's market share in this market cannot be predicted from its relative advertising expenditures.
Analyses the empirical relation between the one‐month interest rate, the long‐term interest rate and the motgage rate in The Netherlands. To study the dynamic interactions between…
Abstract
Analyses the empirical relation between the one‐month interest rate, the long‐term interest rate and the motgage rate in The Netherlands. To study the dynamic interactions between these variables, vector autoregressive techniques are used. Concentrates on the question of whether the mortgage rate dynamics can correctly be described by a one‐factor interest rate model. One‐factor interest rate models allow mathematical derivations of deterministic equations to price interest rate derivatives. Finds, however, that a single factor does not correctly describe the interest rate term structure. Hence, to model the mortgage rate dynamics accurately more factors should be included.
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Elva Bova and Violeta Klyviene
This study analyses the impact of fiscal shocks on GDP, inflation and interest rates in Portugal over 1995–2017.
Abstract
Purpose
This study analyses the impact of fiscal shocks on GDP, inflation and interest rates in Portugal over 1995–2017.
Design/methodology/approach
Multipliers are estimated using a structural VAR (SVAR) a' la Blanchard and Perotti (2002) using OECD elasticities. Changes in direct and indirect taxes are considered for fiscal shocks on the revenue side and changes in public consumption, investment and transfers for fiscal shocks on the expenditure side.
Findings
The analysis finds small tax multipliers and larger government consumption multipliers for growth, while short-term responses to shocks in transfer and investment spending are found to be negligible. Fiscal shocks have an ambiguous impact on inflation, and fiscal shocks of an expansionary nature are found to trigger declines in interest rates. The results are robust to different orderings of variables, to the selection of an alternative time period which excludes the financial crisis and to an alternative estimation technique.
Research limitations/implications
A major limitation of the study relates to the relatively short time period which does not allow capturing the impact of possible structural breaks.
Practical implications
This analysis is relevant for countries, like Portugal, that display high debt levels and volatile market sentiment and lack an independent monetary policy.
Originality/value
Overall, the analysis of output multipliers compares well with some other studies conducted on the Portuguese economy and confirms the importance of the disposable income channel in the transmission of fiscal shocks to the rest of the economy. The study is one of the first to focus also on the implications of fiscal shocks on inflation and long-term interest rates. It is the first to apply the local projection method to estimate multipliers in Portugal.
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