The Causal Link Between Savings and Economic Growth in Bosnia and Herzegovina

The causal link between savings and economic growth has been extensively discussed in the economic growth and development literature, but the question of the direction of this link has not yet been clearly defined. The aim of this paper is to determine the direction and intensity of savings causality (components of private savings) and economic growth in Bosnia and Herzegovina. Granger’s causality test, the Toda-Yamamoto procedure, was applied to test for causality between savings and economic growth. The results of Granger’s causality test indicated that there is no causal link between components of private savings with economic growth in Bosnia and Herzegovina. It was found that among the variables there is cointegration, but not causality, which means that the variables have a common stochastic trend. This fully corresponds to the characteristics of the Bosnia and Herzegovina’s economy.

Long-run drivers and integration in interprovincial Canadian housing price relations

Purpose This paper aims to examine the integration of housing markets in Canada by examining housing price data (1999–2016) of six metropolitan areas in different provinces, namely, Calgary, Vancouver, Winnipeg, Toronto, Montreal and Halifax. The authors test for cointegration, driver cities of long-run relationships, long-run Granger causality and instantaneous causality in light of the global financial crisis (GFC) (2007–2008). Design/methodology/approach The authors use Johansen’s system cointegration approach with structural breaks. Moving average representation is used for common stochastic trend(s) analysis. Finally, the authors apply vector error correction model-based Granger causality and instantaneous causality. Findings Cities’ housing prices are in long-run equilibrium. Post-crisis Canadian housing markets became more integrated. The Calgary, Vancouver, Toronto and Montreal markets drive the Canadian housing market, leading all cities toward long-run equilibrium. Strong long-run Granger causality exists, but the authors observe no instantaneous causality. Price information takes time to disseminate, and long-run price adjustments play a significant role in causation. Practical implications The findings of cointegration increasing after the GFC and strong lead–lag can be used by investors to arbitrage and optimize portfolios. This can also help national and local policymakers in mitigating risk. Incorporating these findings can lead to better price forecasting. Originality/value This study presents many novelties for the Canadian housing market: it is the first to use repeat-sales regional pricing indices to test long-run behaviors, conduct common stochastic trend analyzes and present causality relations.

Estimating the Competitive Storage Model with Stochastic Trends in Commodity Prices

We propose a State-Space Model (SSM) for commodity prices that combines the competitive storage model with a stochastic trend. This approach fits into the economic rationality of storage decisions and adds to previous deterministic trend specifications of the storage model. For a Bayesian posterior analysis of the SSM, which is nonlinear in the latent states, we used a Markov chain Monte Carlo algorithm based on the particle marginal Metropolis–Hastings approach. An empirical application to four commodity markets showed that the stochastic trend SSM is favored over deterministic trend specifications. The stochastic trend SSM identifies structural parameters that differ from those for deterministic trend specifications. In particular, the estimated price elasticities of demand are typically larger under the stochastic trend SSM.

The Quantitative Easing Bursts Bitcoin Price

In this paper we analyze the existence of cointegrating relationships between Bitcoin, S&P 500, and the quantity of money M2. We perform our analysis with and without applying time warping pre-processing. In all cases we find strong evidence that, in the period 2016-2021 the three time series show two cointegrating relationships and therefore share a common stochastic trend. In addition, a low correlation between Bitcoin and S&P 500 is detected. These finding justify the increased interest of investors in Bitcoin as an alternative asset class. The economic interpretation is that the stock valuation is primarily determined by financial phenomena, in particular the availability of large quantity of money. Money supporting investment is due both to the actions of Quantitative Easing and to the exchange of creditor/debtor role that took place between households and firms. The price of both Bitcoin and stocks is increasingly influenced by the amount of money in circulation and follows the same stochastic trend.

On the ‘utilisation controversy’: a comment

In a recent contribution, Nikiforos (Nikiforos, M. 2016. On the utilisation controversy: a theoretical and empirical discussion of the Kaleckian model of growth and distribution, Cambridge Journal of Economics, vol. 40, no. 2, 437–67) has claimed that the FED data on capacity utilisation are stationary by construction, and thus, not suitable to test the Neo-Kaleckian model. He then proceeds to provide new series on capital utilisation, which he claims are non-stationary and provide, supposedly, support for the Neo-Kaleckian model. This comment presents two interrelated claims. First, the measurement error that Nikiforos claims to be I(1) in the FED series is I(0), and what is measured with error is only the level of the series. Thus, this series is suitable to test the Neo-Kaleckian model. Secondly, he does not provide unit root tests for the series he suggests as superior to the FED. When this exercise is carried out, almost all unit root tests decidedly reject the existence of a stochastic trend on his three proposed series, which, according to the author, do not lend support to the Neo-Kaleckian model. We conclude that measures of capacity utilisation based on FRB data are a reasonable source to test the implications of a wide variety of macroeconomic models.