Search results

Allyn Young′s lectures, as recorded by the young Nicholas Kaldor, survey the historical roots of the subject from Aristotle through to the modern neo‐classical writers. The focus throughout is on the conditions making for economic progress, with stress on the institutional developments that extend and are extended by the size of the market. Organisational changes that promote the division of labour and specialisation within and between firms and industries, and which promote competition and mobility, are seen as the vital factors in growth. In the absence of new markets, inventions as such play only a minor role. The economic system is an inter‐related whole, or a living “organon”. It is from this perspective that micro‐economic relations are analysed, and this helps expose certain fallacies of composition associated with the marginal productivity theory of production and distribution. Factors are paid not because they are productive but because they are scarce. Likewise he shows why Marshallian supply and demand schedules, based on the “one thing at a time” approach, cannot adequately describe the dynamic growth properties of the system. Supply and demand cannot be simply integrated to arrive at a picture of the whole economy. These notes are complemented by eleven articles in the Encyclopaedia Britannica which were published shortly after Young′s sudden death in 1929.

The purpose of this paper is to analyze the influences of real share prices on aggregate consumption for Malaysia with the focus on whether there is asymmetry in the long‐run relation of the two variables.

The paper specifies aggregate consumption to depend on real income and real share prices. Alternatively, imposing long‐run budget constraint, the paper specifies the relation between aggregate consumption and real share prices as ratio to real income. Then, it applies an asymmetric cointegration and error correction modeling.

The cointegration tests indicate the presence of a long‐run relation between consumption‐income ratio and share price‐income ratio. More interestingly, while changes in share prices exert short‐run causal influences on Malaysia's private consumption, evidence is found for the adjustments of consumption – income ratio to the long‐run equilibrium path only when it is above its long‐run value. The paper interprets the finding as suggesting downward revisions in the consumption patterns when there are adverse shocks in share prices and, accordingly, supports the existence of especially negative wealth effect for Malaysia.

Owing to data limitations, the paper relies on aggregate consumption and aggregate income data. It acknowledges that the sum of non‐durable consumption and flow‐of‐services from durable purchases and labor income are more appropriate measures of, respectively, consumption and real income.

The findings have important implications for understanding consumption behavior in a developing country and can provide insight on the effectiveness of monetary policy.

The US real estate investment trust (REIT) market experienced a structural change in the early 1990s. This paper aims to examine the following two issues: is the equity REIT market movement positively linked with the stock market movement in the long‐run? If so, how does the long‐run relation between the two markets change after the early 1990s?

This paper examines the long‐run relation between REIT prices and common stock prices within a four‐price system, i.e., REIT prices, common stock prices, bond prices, and private real estate prices, for two sub‐periods: 1978‐1993 and 1994‐2008. This study uses the more advanced Johansen procedure, which is more robust than the Engle‐Granger procedure, to test the co‐integrated relation.

The results show that REITs behave like common stocks during the earlier 1978‐1993 sub‐period. In contrast, REITs become less like common stock and more like private real estate after the early 1990s structural change. These results are at odds with the conclusion of Glascock et al., who examine the relationship between REITs and common stocks within a bi‐variate system with the Engle‐Granger procedure.

The paper, as far as the authors are aware, is the first study focusing on the long‐run relation between REIT prices and other asset prices within a multi‐price system. With a more complete price system and a more robust estimation method, this study is the first to document formally that the impressive growth and maturation of the REIT market since the early 1990s has made REITs less like common stocks and more like private real estate in the long‐run. The immediate implication is that REITs are capable of providing investors, such as immature defined benefit pension plans, real estate exposures in the long‐run.

The author aims to examine the long-run dynamic relation between gold price and inflation in the Indian context from 1982 to 2015. The author measures inflation using consumer price index and wholesale price index (WPI). However, this study focuses on the long-run dynamic relation between gold price–WPI inflation.

The author uses Johansen’s cointegration technique (Johansen, 1991); single equation error correction model based on Pesaran et al. (2001) and Kanioura and Turner (2005); and the Saikkonen and Lütkepohl (2000) approach. The author also uses a time-varying regression framework in level form based on Kalman filter to examine the dynamic nature of gold–WPI relation.

The author finds no evidence of cointegration between gold and WPI. However, The author reports a significant dynamic relation between gold and inflation using a Kalman filter framework, and the comovement between these variables has in fact increased in the past decade. The results further indicate that variation in gold’s sensitivity to inflation can be explained by real effective exchange rate which supports the notion of using gold as an alternative to paper currency. Moreover, the WPI beta of gold is found to be predicted by both short- and long-term interest rate changes highlighting the monetary value of gold as a valuable asset.

From an emerging economy point of view, the results have implications for policy makers, particularly the central banks. The results of this paper caution the Reserve Bank of India against increasing its gold holdings as a reserve asset presuming that gold would preserve its purchasing power parity, at the same time providing a hedge against inflation.

To the best of the author’s knowledge, this is the first study to examine the gold price–inflation relation in the Indian market for such a long period of time. More importantly, the study shows that the changes in gold’s long-term sensitivity to WPI can be forecast using fundamental variables like interest rates.

In continuation to Chapter 3, the present chapter tries to quantify the impact of credit upon GDP and HDI as the first attempt and the linkages of NPA and security investments with credit, GDP and HDI of the countries as the second attempt. For these purposes, this chapter starts with the measurements of credit elasticity with respect to GDP and HDI to know the impact of credit on the private sectors upon the income and human development of the countries. Then, it focuses on the implications of common banking operating tools such as their investments in the governments’ securities in relation to credit to the private sectors, GDP and HDI of the selected countries in a panel data format. The results of the credit elasticity of GDP show that it has taken the positive sign in all of the countries and the negative changes are very little in number. Furthermore, the results on the linkages show that all the variables are mostly cointegrated and therefore maintain stable and equilibrium relationships in the long run among them. But the short-run results show that investment and credit make a cause to NPA, and investment and NPA make a cause to GDP. No variables make any interrelationships with the HDI in either the long-run or short-run systems. Thus, the countries in the list should put more emphasis on the working of the financial sectors as the key partner in the income-generating activities.

This chapter advances a panel vector autoregressive/vector error correction model (PVAR/PVECM) framework for purposes of examining the sources and determinants of cross-country variations in macroeconomic performance using large cross-country data sets. Besides capturing the simultaneity of the potential determinants of cross-country variations in macroeconomic performance and carefully separating short- from long-run dynamics, the PVAR/PVECM framework advanced allows to capture a variety of other features typically present in cross-country macroeconomic data, including model heterogeneity and cross-sectional dependence. We use the PVAR/PVECM framework we advance to reexamine the dynamic interrelation between investment in physical capital and output growth. The empirical findings for an unbalanced panel of 90 countries over the time period from at most 1950 to 2000 suggest for most regions of the world surprisingly strong support for a long-run relationship between output and investment in physical capital that is in line with neoclassical growth theory. At the same time, the notion that there would be even a long-run (let alone short-run) causal relation between investment in physical capital and output (or vice versa) is strongly refuted. However, the size of the feedback from output growth to investment growth is estimated to strongly dominate the size of the feedback from investment growth to output growth.

A number of earlier studies have examined whether extensive labour market programmes (ALMPs) contribute to upward wage pressure in the Swedish economy. Most studies on aggregate data have concluded that they actually do. In this paper we look at this issue using more recent data to check whether the extreme conditions in the Swedish labour market in the 1990s and the concomitant high levels of ALMP participation have brought about a change in the previously observed patterns. We also look at the issue using three different estimation methods to check the robustness of the results. Our main finding is that, according to most estimates, ALMPs do not seem to contribute significantly to an increased wage pressure.

The purpose of this paper is to analyze the oil price pass‐through into consumer price inflation for a developing country: Malaysia. The focus is on whether aggregate consumer prices and different consumer price components or sub‐price indexes are related in different ways to oil price in the long run and in the short run.

The analysis adopts the Phillips curve framework augmented to include the oil price. In modeling, a proper consideration is given to the integration and cointegration properties of the variables under consideration. Moreover, the asymmetric effects of oil price changes are also examined.

The paper finds evidence for a long run relation or cointegration of the oil price with only the aggregate consumer price and food price indexes. Moreover, in the short run, the oil price changes have significant bearings on the consumer price inflation, the food price inflation, the rent, fuel and power price inflation and the transportation and communication price inflation. In addition, the short‐run asymmetry in the oil price – food price inflation is also evident. Finally, the authors observe the neutrality of the medical care and health price index to the oil price changes.

The result that the inflationary consequence of oil price hikes is likely to work mainly through the food prices has important implications on the effects of oil price changes on the poor and policy directions to contain inflation.

The paper contributes to existing literature that has a predominant focus on the inflationary effect of oil prices at the aggregate level by looking at the relations between oil price and disaggregated good prices in the long run, short run, or both.

The authors reinforce the existing literature on the effect of overall globalization on institutional quality (IQ), while incorporating the effects of economic, political and social aspects of globalization, human capital, government expenditure and population growth. To this end, the authors estimate panel data models for a sample of 36 member countries of the Organization of Islamic Cooperation (OIC) during 1984–2016.

The authors employ the cross-sectional autoregressive distributed lags (CS-ARDL) approach.

The study’s investigation affirms the presence of an inverted U-shaped (nonlinear) relation between overall globalization and IQ indexes for the sample countries, which suggests no additional room for improvement in IQ. It also underpins the existence of an inverted-U-shaped (nonlinear) relation between political globalization and IQ. In contrast, economic and social globalizations have a U-shaped relation with IQ, implying more scope for improvement.

The findings have key policy implications. First, policy makers should consider a long-run approach for improving IQ and globalization over time. Second, quick reforms in the short run may not improve IQ.

The results suggest that policy makers should approach the globalization process from a long-run perspective as well by designing appropriate strategies to provide a continuous but gradual increase in globalization so as to systematically monitor the threshold limits to IQ from improving globalization

To the best of the authors’ knowledge, this work is the first to empirically investigate the overall role of globalization in promoting IQ under the conditions of short-run heterogeneity and long-run homogeneity. The authors focus on the member countries of the OIC, many of which are ruled by authoritarian regimes and suffer from a poor domestic institutional setting.