Long-run estimates of money demand: new evidence from East Asian countries and the presence of structural breaks

Purpose – The purpose of this paper is to analyse the implication of trade on carbon emissions in a panel of eight highly trading Southeast and East Asian countries, namely, China, Indonesia, South Korea, Malaysia, Hong Kong, The Philippines, Singapore and Thailand. Design/methodology/approach – The analysis relies on the standard quadratic environmental Kuznets curve (EKC) extended to include energy consumption and international trade. A battery of panel unit root and co-integration tests is applied to establish the variables’ stochastic properties and their long-run relations. Then, the specified EKC is estimated using the panel dynamic ordinary least square (OLS) estimation technique. Findings – The panel co-integration statistics verifies the validity of the extended EKC for the countries under study. Estimation of the long-run EKC via the dynamic OLS estimation method reveals the environmentally degrading effects of trade in these countries, especially in ASEAN and plus South Korea and Hong Kong. Practical implications – These countries are heavily dependent on trade for their development processes, and as such, their impacts on CO2 emissions would be highly relevant for assessing their trade policies, along the line of the gain-from-trade hypothesis, the race-to-the-bottom hypothesis and the pollution-safe-haven hypothesis. Originality/value – The analysis adds to existing literature by focusing on the highly trading nations of Southeast and East Asian countries. The results suggest that reassessment of trade policies in these countries is much needed and it must go beyond the sole pursuit of economic development via trade.

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On the long-run dynamics of income and wealth inequality

Empirical Economics ◽

10.1007/s00181-021-02043-1 ◽

2021 ◽

Author(s):

Atanu Ghoshray ◽

Issam Malki ◽

Javier Ordóñez

Keyword(s):

Structural Breaks ◽

Wealth Inequality ◽

Anglo Saxon ◽

Asian Countries ◽

Long Run ◽

Top Income Shares ◽

Share Data ◽

Level Shifts ◽

Trend Breaks ◽

Almost All

AbstractWe analyse top income and wealth shares data, by conducting a robust estimation of trends, tests for structural breaks, and tests for determining persistence. We include Anglo-Saxon countries, continental Europe and Asian countries, grouped under different percentiles and deciles, spanning a period that is at least close to a century. We find that the top income shares for almost all countries are characterised by broken trends, or level shifts. The preponderance of trend breaks appears in the 1970s and 1980s where after a negative trend changes in magnitude or direction. Finally, shocks to the top income share data are not transitory, which have consequences for policy such as advocating redistributive measures.

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Structural Breaks, Stability and Demand for Money in South Africa

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v7i5(j).608 ◽

2015 ◽

Vol 7 (5(J)) ◽

pp. 79-90

Author(s):

Sambulo Malumisa

Keyword(s):

South Africa ◽

Money Demand ◽

Structural Breaks ◽

Demand Function ◽

Money Demand Function ◽

Correction Model ◽

Cointegrating Vector ◽

Long Run ◽

Maximum Likelihood Procedure ◽

Policy Shifts

The paper tests the null hypothesis of a stable long-run money demand in South Africa over the period 1970-2013. We employ the Gregory-Hansen (GH) method to test for the possibility of structural breaks in the money demand function. The Johansen Maximum likelihood procedure is carried out to determine the cointegration vector from which existence of one cointegrating vector is supported. Also based on the GH criterion, there is existence of one cointegrating vector. GH proposes three structural breaks for the money demand function. Results suggest that endogenous breaks occurred in 1991 and 1994. The GH cointegration equations reject M1 whilst M2 and M3 pass and we proceed to estimate the error-correction model. Complemented by the CUSUM and CUSUM of squares, the tests carried out suggest that monetary policy shifts did not introduce instability.

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Financial Liberalization and the Stability of Short-run and Long-run Money Demand in Iran

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v5i1.377 ◽

2013 ◽

Vol 5 (1) ◽

pp. 24-37

Author(s):

Maryam Zare

Keyword(s):

Money Demand ◽

Structural Breaks ◽

Structural Changes ◽

Financial Liberalization ◽

Time Series Data ◽

Structural Break ◽

Unit Root Test ◽

Series Data ◽

Long Run ◽

Demand Stability

Money demand is one of the most important macro-economic variables that could be of great importance to the economic prospect of a country. Therefore, awareness on how this function behaves and by adoption of appropriate economic policies, it is possible, by and large, to avoid the emergence of disorder. The present study, employing the annual time series data related to Iranian economy during 1973-2009, tries to investigate possible relationships between financial liberalization and money demand stability in Iran, in the form of 4 models. To do so, Zivot-Andrews (1992) Unit Root Test was applied in order to clarify endogenous structural changes and Gregory-Hansen (1996) Cointegration Test was administered to investigate the long-run relationships between financial liberalization and money demand stability in Iran, with an emphasis on the structural breaks during the period under study. The results of the study show that by taking the structural break into consideration, there is a significant short and long run relationship between financial liberalization and money demand stability in Iran.

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ECONOMIC GROWTH OF SELECTED EAST ASIAN COUNTRIES: A MACROECONOMIC VIEW OF THEIR DEPENDENCE ON THE US AND EUROPE

The Singapore Economic Review ◽

10.1142/s0217590815500666 ◽

2016 ◽

Vol 61 (05) ◽

pp. 1550066

Author(s):

EU CHYE TAN ◽

CHOR FOON TANG

Keyword(s):

East Asian ◽

The United States ◽

The Other ◽

Asian Countries ◽

Modeling Framework ◽

Long Run ◽

The Us ◽

The World ◽

Short Run ◽

The One

This paper aims to ascertain whether direct macroeconomic linkages exist between some East Asian (EA) countries on the one hand and the United States (US) and Europe on the other, based upon quarterly real gross domestic product (GDP) series spanning from the early 1990s. Long-run and short-run lead-lag relations are explored within a trivariate modeling framework. Contrary to popular belief, the empirical evidence suggests generally either very nominal or no direct links at all between these EA countries and the US in terms of GDP. Direct links with Europe are completely ruled out. All these would allude to a very limited susceptibility of these EA economies to shocks in the US and Europe, barring a global economic crisis of catastrophic proportions. The growing belief that if China sneezes, the world catches the flu is also not borne out by the empirical results.

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Revisiting Money Demand Stability in India: Some Post-reform Evidence (1996–2016)

The Indian Economic Journal ◽

10.1177/0019466220938930 ◽

2018 ◽

Vol 66 (3-4) ◽

pp. 326-346

Author(s):

Masudul Hasan Adil ◽

Salman Haider ◽

Neeraj R. Hatekar

Keyword(s):

Monetary Policy ◽

Money Demand ◽

Inflation Targeting ◽

Structural Breaks ◽

Policy Formulation ◽

Policy Implications ◽

Policy Framework ◽

Reform Era ◽

Distributed Lag ◽

Long Run

In the evidence of the globalised world economy and changing economic structure, the traditional policies require a close examination. This is particularly true in the case of emerging economies like India, which have experienced a rapidly changing policy environment since 1991. The demand for money is an important ingredient for monetary policy formulation. Therefore, the present study re-examines the stability and specification issues of money demand in India’s post-reform era. The study takes care of structural breaks in the macroeconomic series while using a unique quarterly dataset from 1996: Q2 to 2016: Q3. Despite the structural breaks, the application of Gregory and Hansen (1996) and autoregressive distributed lag models demonstrate the existence of a stable short-and long-run relationships between real money balances and their determinants. These empirical findings are having a lot of policy implications in the current monetary policy framework of India—inflation targeting framework.

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Gold and US money demand

Economics and Business Letters ◽

10.17811/ebl.7.3.2018.108-114 ◽

2018 ◽

Vol 7 (3) ◽

pp. 108

Author(s):

Samih Antoine Azar

Keyword(s):

Money Demand ◽

Structural Breaks ◽

Economies Of Scale ◽

Equation Model ◽

Real Money ◽

The Real ◽

Long Run ◽

The Us ◽

Short Run ◽

Real Dollar

This letter is about the long run cointegration relation of the US money demand function that incorporates a gold price variable. A three-equation model is jointly constructed and estimated. The first equation has real gold prices, as a dependent variable, and real money, the real dollar index, a scale variable, and the lagged cointegration residual as independent variables. All the variables are in first-differences of the logs except the cointegration residual. The second equation is the cointegration regression with the same variables in log levels. And the third equation is a GARCH model of the conditional variance of residuals. Two different scale variables are chosen: the industrial production index and the real personal disposable income. Both variables produce close estimates. All coefficients are of the correct expected sign and are statistically different from zero. The evidence presented is highly supportive of the model. In particular we find long run money neutrality, and long run constant economies of scale for both scale variables. Moreover, both the short run and long run elasticities of the real dollar index are also unitary. Surprisingly real money and each one of the two scale variables, have no short run effects on the log of real gold prices, but have only long run effects. One can no more exclude gold from the US money demand without incurring a mis-specification. In this regard gold may be the missing variable that produces the structural breaks found in the literature.

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Are Shocks to Petroleum Products Consumption Permanent or Temporary: A New Evidence from LM Unit Root Tests with Structural Breaks

Emerging Science Journal ◽

10.28991/esj-2021-01279 ◽

2021 ◽

Vol 5 (3) ◽

pp. 322-329

Author(s):

Sameh A. Ajlouni ◽

Abdallah M. Ghazo ◽

Ziad M. Abu-Lila

Keyword(s):

Unit Root ◽

Energy Demand ◽

Structural Breaks ◽

Demand Management ◽

Path Following ◽

Petroleum Products ◽

Conservation Policies ◽

Long Run ◽

The Government ◽

New Evidence

The purpose of this paper is to examine whether shocks to the consumption of petroleum products in Jordan have permanent or temporary effects. This has been accomplished by applying Lee and Strazicich (2003) test of unit root with structural breaks to investigate the stationarity properties related to the time series of petroleum products consumption over the period 1961 to 2019. Empirical findings lend evidence that the consumption of petroleum products is a unit root process, implying that shocks to petroleum products consumption has permanent impact, and this consumption does not turn back to its time trend path following a shock. This indicates that there are high possibilities of energy demand management and conservation policies targeted towards achieving the intended goals in the long-run. In fact, this is compatible with the government energy strategies aimed at reducing the consumption of fossil oils. Doi: 10.28991/esj-2021-01279 Full Text: PDF

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Investigating the Stability of Money Demand in Ghana

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis ◽

10.11118/actaun201664062075 ◽

2016 ◽

Vol 64 (6) ◽

pp. 2075-2079

Author(s):

Dennis Nchor ◽

Václav Adamec

Keyword(s):

Error Correction ◽

Money Demand ◽

Structural Breaks ◽

Correction Term ◽

Demand For Money ◽

Long Run ◽

Short Run ◽

The Interest Rate ◽

The Stability ◽

Cusum Tests

The study examined the demand for broad money and its stability in Ghana. Johansen’s cointegration approach reveals that the variables were non stationary and cointegrated, therefore, an error correction model, ECM was used to determine the factors that influence real money aggregate in Ghana from 1990 to 2014. The study estimated the results using two set of variables for real demand for money: M1 and M2+. This was done given the assumption that the demand for money was equal to the supply of money. The results show that, GDP affects the level of demand for money in the long run while the interest rate affects it in the short run. The error correction term in each of the cases shows that, 18 % of deviations in the real demand for money is corrected annually. The CUSUM tests of parameter stability showed that, the money demand function was stable over the period and the Chow test indicated that there were no structural breaks.

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