scholarly journals Asset Prices and Velocity Decline: An Empirical Investigation

2021 ◽  
Vol 5 (1) ◽  
pp. 191-214
Author(s):  
Hina Shafiq ◽  
Wasim Shahid Malik
Keyword(s):  
Asset Prices ◽  
Asset Price ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Time Period ◽  
Velocity Of Money ◽  
Negative Effect ◽  
Financial Transactions

The quantity theory of money lost much of its significance in 1980s due to the phenomenon of velocity decline and consequent instability of the money demand function; missing financial transactions and asset prices were believed to be responsible (Borio, Kennedy and Prowse, 1994; and Werner, 2012). This study, therefore, uses asset prices for Pakistan to explain the velocity decline phenomenon in a regression model as well as in Vector Error Correction Model (VECM) using quarterly data for the time period 1981Q1-2018Q2. The study finds significant role of asset price index in explaining income velocity of money with a negative effect. Moreover, the sub-sample regressions show that asset prices are helpful in explaining velocity decline phenomenon for the time period 1981-1998 and 2008-2018 but not for 1998-2008. Moreover, there are brief periods in the sample when velocity actually increased despite an overall declining trend. To explain those short term reversals in velocity trend, the study uses indicator function. Results show that the increase in velocity for brief periods is also explained by asset prices

Enhancing Economic Growth and Government Revenue Generation in Nigeria: The Role of Diaspora Remittances

2021 ◽  
pp. 003464462110256
Author(s):  
Dal Didia ◽  
Suleiman Tahir
Keyword(s):  
Economic Growth ◽  
Parameter Estimates ◽  
Gross Domestic Product Growth ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Empirical Analysis

Even though remittances constitute the second-largest source of foreign exchange for Nigeria, with a $24 billion inflow in 2018, its impact on economic growth remains unclear. This study, therefore, examined the short-run and long-run impact of remittances on the economic growth of Nigeria using the vector error correction model. Utilizing World Bank data covering 1990–2018, the empirical analysis revealed that remittances hurt economic growth in the short run while having no impact on economic growth in the long run. Our parameter estimates indicate that a 1% increase in remittances would result in a 0.9% decrease in the gross domestic product growth rate in the short run. One policy implication of this study is that Nigeria needs to devise policies and interventions that minimize the emigration of skilled professionals rather than depending on remittances that do not offset the losses to the economy due to brain drain.

scholarly journals The Impact of Bank Indonesia Regulation No. 17/3/2015 on Exchange Rate: Analysis Using Vector Error Correction Model (VECM)

2021 ◽  
Vol 12 (2) ◽  
pp. 131-141
Author(s):  
Muhamad Yudi Setiawan ◽  
Tanti Novianti ◽  
Mukhamad Najib
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Negative Effect ◽  
The Exchange Rate ◽  
The Impact

The weakening of the Rupiah against the US dollar has encouraged Bank Indonesia to issued Bank Indonesia Regulation (Peraturan Bank Indonesia - PBI) No. 17/3/2015. The research aimed to analyze the factors that affected the Rupiah exchange rate, the effect of PBI No. 17/3/2015 on the movement of the Rupiah exchange rate, and the behavior of exchange rate movement to the shocks on the variables that influenced it. The research applied secondary data, namely monthly data from January 2008 to April 2019 taken from reliable sources such as National Development Planning Agency (Bappenas), Bank Indonesia (BI), and Statistics Indonesia (BPS). It was explanatory research with a quantitative approach. The studied data were processed with the Vector Error Correction Model (VECM) method to identify long and short-term effects. The results of the long-term equation show that export-import has a negative effect on the exchange rate. Similarly, inflation has no significant effect on the exchange rate. Then, the money supply has a significantly negative effect on the exchange rate. However, the interest rate of Bank Indonesia positively affects the exchange rate. Next, the implementation of PBI No. 17/3/2015 has a significant and positive impact on the exchange rate. Last, the crisis condition does not affect the changes in exchange rates.

scholarly journals Does Uncertainty Matter for Trade - Economic Growth Nexus in Indonesia?

2021 ◽  
Vol 67 (1) ◽  
pp. 147
Author(s):  
Panky Tri Febiyansah ◽  
Bintang Dwitya Cahyono ◽  
Rio Novandra
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Output Growth ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
The Impact ◽  
The Relationship

This paper aims to test the impact of uncertainty on the causal relationship among exports, imports, and economic growth in Indonesia. The relationship is constructed by examining the presence of FDI-adjusted exports and imports (trade) and the output link using conditional variances-covariances derived from the generalized autoregressive conditional heteroskedastic (GARCH) process in a vector error correction model (VEC-GARCH model). Using evidence in Indonesia, the model exposes the uni-directional nexus from trade performance to trade-adjusted output growth in the absence of uncertainty. The volatility effects are evident in the causal relationship between trade and output. The finding shows that the uncertainty effects hamper the trade-economic growth nexus. Incorporated with the long-run causality, trade still causes output even after containing the contributions of volatility. The significant role of imports highlights the higher demand for intermediate capital products and the inclusion of technology in strengthening economic growth.

CO2 EMISSIONS AND REGIONAL INCOME DISPARITY: EVIDENCE FROM CHINA

2014 ◽  
Vol 59 (01) ◽  
pp. 1450007 ◽  
Author(s):  
LIN GUO
Keyword(s):  
Environmental Kuznets Curve ◽  
Kuznets Curve ◽  
Income Disparity ◽  
Regional Income ◽  
Correction Model ◽  
Vector Error Correction ◽  
Inequality Measures ◽  
Vector Error ◽  
Negative Effect ◽  
Regional Income Inequality

In this paper, we propose the hypothesis: Given the environmental Kuznets curve (EKC) hypothesis, regional income inequality has a negative, indirect impact on the average level of CO 2 emissions through decreasing marginal emission propensities (MEP) of GDP. We have employed a vector error correction model and three inequality measures in our empirical analysis. The empirical results support the hypothesis in China. The main findings of this paper suggest that a trade-off exists between reducing CO 2 emissions and narrowing regional income disparity and that the MEP contributes to this negative effect.

scholarly journals ELECTRONIC PAYMENT AND ECONOMIC GROWTH IN INDONESIA

2021 ◽  
Vol 6 (2) ◽  
pp. 287
Author(s):  
Wasiaturrahma Wasiaturrahma ◽  
Anita Lucky Kurniasari
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Electronic Payment ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Cash Payment ◽  
Velocity Of Money

The purpose of this study is to investigate the effect of non-cash payment transactions on economic growth in Indonesia and to see the responses from supporting variables, such as the velocity of money and the price of transactions. This study involves a Vector Error Correction Model (VECM) analysis tool, using monthly time series data during 2009: 1 – 2017: 12. The results show that the payment instrument affects economic growth, especially the Card-Based Payment Instrument (CBPI). In addition, there are changes to the velocity of money and prices caused by the increase in the use of non-cash payment instruments. Keywords: Electronic Payment, Economic Growth, Vector Error Correction Model (VECM)JEL: E4; C51 

scholarly journals Price Discovery Mechanism in Spot and Futures Market of Agricultural Commodities: The Case of India

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Minakshi .
Keyword(s):  
Price Discovery ◽  
Emerging Market ◽  
Futures Prices ◽  
Correction Model ◽  
Vector Error Correction ◽  
Spot Prices ◽  
Vector Error ◽  
Long Run ◽  
The Relationship

There has been increasing focus by emerging market researchers, policymakers and regulators for investigating price discovery, relationship between future and physical market and accessible trading and risk management instruments for the benefit of various stakeholders and thus contributing to the development of literature. The central question of this paper is examining the role of influence of one market on the other and the role of each market segment in price discovery in the Indian context. Johansen Vector Error Correction Model (VECM) has been employed to examine the relationship between the spot and futures prices. The cointegration results do not confirm the existence of long-run relationship between spot and futures prices. It is thus, implied that futures prices unlikely serve as market expectations of subsequent spot prices of selected agri-commodities in India and do not help in price discovery process.

scholarly journals On cointegration and cryptocurrency dynamics

2021 ◽  
Author(s):  
Georg Keilbar ◽  
Yanfen Zhang
Keyword(s):  
Correction Model ◽  
Vector Error Correction ◽  
Statistical Arbitrage ◽  
Dynamic Setting ◽  
Vector Error ◽  
Out Of Sample ◽  
Joint Dynamics ◽  
Arbitrage Trading

AbstractThis paper aims to model the joint dynamics of cryptocurrencies in a nonstationary setting. In particular, we analyze the role of cointegration relationships within a large system of cryptocurrencies in a vector error correction model (VECM) framework. To enable analysis in a dynamic setting, we propose the COINtensity VECM, a nonlinear VECM specification accounting for a varying systemwide cointegration exposure. Our results show that cryptocurrencies are indeed cointegrated with a cointegration rank of four. We also find that all currencies are affected by these long term equilibrium relations. The nonlinearity in the error adjustment turned out to be stronger during the height of the cryptocurrency bubble. A simple statistical arbitrage trading strategy is proposed showing a great in-sample performance, whereas an out-of-sample analysis gives reason to treat the strategy with caution.

scholarly journals An Assessment of House Loans Cointegration with Macro Variables in Selected Euro Zone Countries

Ekonomika ◽  
2020 ◽  
Vol 99 (2) ◽  
pp. 39-58
Author(s):  
Kazys Kupčinskas ◽  
Arvydas Paškevičius
Keyword(s):  
Interest Rates ◽  
Correction Model ◽  
Monthly Data ◽  
Vector Error Correction ◽  
Vector Error ◽  
Time Period ◽  
Long Time ◽  
Macro Variables ◽  
The Relationship

This paper performs an empirical study on house loans, interest rates, unemployment, and house rent prices relationship in Germany, France, Spain and Italy from the year 2003 to 2018. We look for the cointegration and causality relationship between the house loans and macro variables with the help of the Vector error correction model (VECM) and Granger causality methods. We investigate whether variables with monthly data explain better the relationship and causal effects between the variables. We find a long term cointegrating relationship between the real house loans and interest rates, unemployment and house rent prices for France, Spain, and Italy, but not for Germany. On average the equilibrium in house loan development is reached from 4 to 8 years, meaning that long term equilibrium exists, but the variables reach it in a rather long time period. The ECB deposit facility rate included as an exogenous variable in four countries gained no significant power in explaining the short term changes of house loans in any of the country. We reveal a complex interaction between the bank’s credits and unemployment, interest rates, house rental prices in the paper. 

scholarly journals IS GOLD INVESTMENT A SAFE HAVEN OR A HEDGE FOR THE MALAYSIAN INFLATION?

2017 ◽  
Vol 18 (1) ◽  
Author(s):  
M. S. M. Khair Afham ◽  
Siong -Hook Law ◽  
W. N. W. Azman -Saini
Keyword(s):  
Consumer Price Index ◽  
Short Term ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Time Period ◽  
Asymmetric Causality ◽  
Linearity Test ◽  
Inflation Hedging

This study examines the long and short term abilities of gold to hedge against inflation in Malaysia during the period from 1971 to 2011. The Johansen cointegration results reveal that there is a long term relationship between gold price and consumer price index. Using the Tsay’s linearity test, the findings demonstrate the nonlinear relationship between gold return and inflation rate. Thus, the nonlinear threshold vector error-correction model (TVECM) analysis is employed to analyze the causal relationship and gold’s hedging ability in short term. Gold is proven to be effective as a hedging tool against inflation, but effectiveness varies on different price momentums (based on threshold) and the time period. It is found that during high momentum regimes, gold return is able to hedge against inflation in Malaysia better than during low momentum regimes. Keywords: Gold; Inflation; Hedging Ability; Asymmetric Causality; TVECM.

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