Dependence structure between money and economic activity: A Markov-switching copula VEC approach

2021 ◽  
pp. 1-17
Author(s):  
Apostolos Serletis ◽  
Libo Xu
Keyword(s):  
Error Correction ◽  
Economic Activity ◽  
Regime Switching ◽  
Markov Switching ◽  
Tail Dependence ◽  
Error Correction Model ◽  
Dependence Structure ◽  
Copula Models ◽  
Correction Model ◽  
Dependence Structures

Abstract This paper examines correlation and dependence structures between money and the level of economic activity in the USA in the context of a Markov-switching copula vector error correction model. We use the error correction model to focus on the short-run dynamics between money and output while accounting for their long-run equilibrium relationship. We use the Markov regime-switching model to account for instabilities in the relationship between money and output, and also consider different copula models with different dependence structures to investigate (upper and lower) tail dependence.

THE BEHAVIOR OF FISCAL POLICY IN INDONESIA IN RESPONSE TO ECONOMIC CYCLES

2017 ◽  
Vol 62 (02) ◽  
pp. 377-401
Author(s):  
ABDUROHMAN ◽  
BUDY P. RESOSUDARMO
Keyword(s):  
Fiscal Policy ◽  
Error Correction ◽  
Economic Activity ◽  
Alternative Model ◽  
Error Correction Model ◽  
The Philippines ◽  
Correction Model ◽  
Economic Cycles ◽  
Asean Countries

The current general wisdom regarding fiscal policy in response to fluctuations in economic cycles is to adopt countercyclical strategies: contractive during a boom to avoid overheating the economy and expansive during a recession to stimulate economic activity. This paper attempts to investigate the practical behavior of fiscal policy in Indonesia in response to economic cycles to establish whether it follows general fiscal wisdom (countercyclical) or amplifies the cycle (procyclical). An error correction model (ECM) and an alternative model to deal with the possible endogeneity problem are utilized. This paper shows that fiscal policy in Indonesia tends to be procyclical. Observations of some other ASEAN countries, namely Malaysia, the Philippines, Singapore and Thailand, indicate that Singapore could be the only country in ASEAN that is able to implement a countercyclical fiscal policy.

Simulation for Mixture of Archimedean Copulas

2012 ◽  
Vol 195-196 ◽  
pp. 738-743
Author(s):  
Shi De Ou
Keyword(s):  
Maximum Likelihood ◽  
Maximum Likelihood Estimation ◽  
Tail Dependence ◽  
Likelihood Estimation ◽  
Numerical Results ◽  
Dependence Structure ◽  
Archimedean Copulas ◽  
Copula Models ◽  
Random Samples ◽  
Dependence Structures

Many dependence structures can consist of mixed copulas. In order to analyze the dependence of stock, we present the method of estimation for mixed copula models. Via generating random samples and using maximum likelihood estimation, the parameters of mixture of Archimedean copulas are estimated. Numerical results show that this method estimates effectively the parameters and tail dependence coefficients. Therefore we can use the method to analyze dependence structure for stocks.

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