scholarly journals Cointegration test for the long-run economic relationships of East Africa community: evidence from a meta-analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yussuf Charles Yussuf
Keyword(s):  
East Africa ◽  
Meta Analysis ◽  
Policy Implications ◽  
Cointegration Test ◽  
Member States ◽  
Content Type ◽  
Economic Relationships ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run

PurposeThe purpose of the paper is to test and analyze the equilibrium economic relationships of the East Africa Community (EAC).Design/methodology/approachTo attain the study's purpose the authors applied the Johansen cointegration test, including long-run structural modeling (LRSM), vector-error-correlation-model (VECM) and variance-decomposition (VDC).FindingsAt I(1), both Philips‐Peron (PP) and Kwiatkowski–Phillips–Schmidt–Shin (KPSS) tests show that the East Africa member states' economies are cointegrated. The result was further substantiated by the tests based on Johansen cointegration and VECM procedures, showing significant long-run and short-run economic relations. The result further reveals that despite some uncommon issues among member states such as Tanzania and Kenya, however, their economic relationships remain significant though it is negative. Moreover, the finding revealed positive and significant short-run economic relationships between Kenya, Burundi and Rwanda.Originality/valueThe paper applies the cointegration techniques in the context of EAC. The result is likely to be adding value to the policymaker and also to the existing literature on the subject. This may trigger policy implications and open new research direction within the region and out.

The force of globalization reshaping the local institutions: evidence from the Organization of Islamic Cooperation member countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nahla Samargandi ◽  
Kazi Sohag ◽  
Ali Kutan ◽  
Maha Alandejani
Keyword(s):  
Government Expenditure ◽  
Policy Implications ◽  
Institutional Setting ◽  
Cross Sectional ◽  
Policy Makers ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Nonlinear Relation ◽  
Political Globalization

PurposeThe 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.Design/methodology/approachThe authors employ the cross-sectional autoregressive distributed lags (CS-ARDL) approach.FindingsThe 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.Research limitations/implicationsThe 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.Practical implicationsThe 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 globalizationOriginality/valueTo 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.

scholarly journals New empirics of monetary policy dynamics: evidence from the CFA franc zones

2016 ◽  
Vol 7 (2) ◽  
pp. 164-204 ◽  
Author(s):  
Simplice Asongu
Keyword(s):  
Monetary Policy ◽  
Granger Causality ◽  
Money Supply ◽  
Monetary Union ◽  
Policy Implications ◽  
Content Type ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
Cfa Franc

Purpose – A major lesson of the European Monetary Union crisis is that serious disequilibria in a monetary union result from arrangements not designed to be robust to a variety of shocks. With the specter of this crisis looming substantially and scarring existing monetary zones, the purpose of this paper is to complement existing literature by analyzing the effects of monetary policy on economic activity (output and prices) in the CEMAC and UEMOA CFA franc zones. Design/methodology/approach – VARs within the frameworks of Vector Error-Correction Models and Granger causality models are used to estimate the long- and short-run effects, respectively. Impulse response functions are further used to assess the tendencies of significant Granger causality findings. A battery of robustness checks are also employed to ensure consistency in the specifications and results. Findings –H1. monetary policy variables affect prices in the long-run but not in the short-run in the CFA zones (broadly untrue). This invalidity is more pronounced in CEMAC (relative to all monetary policy variables) than in UEMOA (with regard to financial dynamics of activity and size). H2. monetary policy variables influence output in the short-term but not in the long-run in the CFA zones. First, the absence of cointegration among real output and the monetary policy variables in both zones confirm the neutrality of money in the long term. With the exception of overall money supply, the significant effect of money on output in the short-run is more relevant in the UEMOA zone, than in the CEMAC zone in which only financial system efficiency and financial activity are significant. Practical implications – First, compared to the CEMAC region, the UEMOA zone’s monetary authority has more policy instruments for offsetting output shocks but fewer instruments for the management of short-run inflation. Second, the CEMAC region is more inclined to non-traditional policy regimes while the UEMOA zone dances more to the tune of traditional discretionary monetary policy arrangements. A wide range of policy implications are discussed. Inter alia: implications for the long-run neutrality of money and business cycles; implications for credit expansions and inflationary tendencies; implications of the findings to the ongoing debate; country-specific implications and measures of fighting surplus liquidity. Originality/value – The paper’s originality is reflected by the use of monetary policy variables, notably money supply, bank and financial credits, which have not been previously used, to investigate their impact on the outputs of economic activities, namely, real GDP output and inflation, in developing country monetary unions.

scholarly journals Effects of Foreign Debt and Foreign Aid on Economic Growth in Somalia

2018 ◽  
Vol 10 (11) ◽  
pp. 95
Author(s):  
Ali Yassin Sheikh Ali ◽  
Mohamed Saney Dalmar ◽  
Ali Abdulkadir Ali
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Unit Root ◽  
Foreign Debt ◽  
Ordinary Least Squares ◽  
Policy Implications ◽  
Cointegration Test ◽  
Long Run ◽  
Johansen Cointegration ◽  
Johansen Cointegration Test

This paper aims to assess the effects of foreign debt and foreign aid on economic growth in Somalia from 1970 to 2014. The ordinary least squares (OLS) method was used and basic model assumption tests were also employed. We used the Augmented Dickey−Fuller (ADF) and Philip-Perron (PP) tests for the unit root and the Johansen cointegration test to determine the long-run relationship between the variables. The results of the study show that, in Somalia, foreign debt has an insignificant effect on economic growth, while the foreign aid has positive significant effect on economic growth. The results also indicate that the cointegration method confirms the incidence of long-run association among the variables. There is little research regarding the exact relationship between increasing foreign debt and foreign aid on economic growth in Somalia. This study is also different from previous studies as we used ADF and PP tests for the unit root and the Johansen cointegration test for the long-run relationship between the variables. Additionally, the study used multivariate techniques. The paper concludes that foreign aid is essential in economic growth and several policy implications are proposed.

The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region

2019 ◽  
Vol 12 (2) ◽  
pp. 161-184
Author(s):  
Anwar Hasan Abdullah Othman ◽  
Syed Musa Alhabshi ◽  
Salina Kassim ◽  
Ashurov Sharofiddin
Keyword(s):  
Central Banks ◽  
Cointegration Test ◽  
Gulf Region ◽  
Content Type ◽  
Market Capitalization ◽  
Bank Deposits ◽  
Long Run ◽  
Better Regulation ◽  
Short Run ◽  
The Impact

Purpose With the continuing development of the financial technology revolution, a better understanding of bank deposits variability has become necessary for bank management and policymakers, especially central banks. This is because the novel innovations of cryptocurrencies operate beyond the realm of the banking system, which may impact the performance of banks and their deposits variability. This study aims to investigate the long- and short-run effects of cryptocurrencies’ market capitalization development on the banks’ deposit variability in the Gulf Cooperation Council (GCC) region. Design/methodology/approach In this study, the Johansen–Juselius (1990) cointegration test with vector error correction model was applied to examine the long-run relationships, while the Engle and Granger (1987) and the Granger (1969) causality tests were used to detect causal relationships in the short term. Findings The findings of Johansen–Juselius cointegration test indicate that the banks’ deposits variability in all six states of the Gulf region share negative long-run equilibrium association with the development of global cryptocurrencies market capitalization, but with different statistically significant levels. For the short-run analysis, the study found that the development of cryptocurrencies market capitalization has significant unidirectional causal effects on bank deposits variabilities in only four states, namely, UAE, Qatar, Kuwait and Bahrain. The findings of the study therefore suggest that to eradicate the effects of cryptocurrencies industry and its threats to the banking industry, banks in GCC region are encouraged to either consider cryptocurrencies as an alternative investment asset for their portfolio investment diversification strategies or adopt the blockchain technology in their operation system to facilitate their customers with low transaction cost, high level of security and ease of use and real-time settlement. Research limitations/implications The empirical findings of the study will provide valuable input for policymakers, especially central banks and bank managements, to evaluate the current situation and the threats of the cryptocurrencies market growth and its effect on the banking industry’s performance, future survival and their deposits variability for better regulation and policy planning and investment strategies. Originality/value This is a pioneering study that empirically explores the phenomenon of bank deposits variability as a consequence of expansion in cryptocurrencies market capitalization, where the findings proved evidence of a drastic decline in banks’ deposits size due to the substantial growth in cryptocurrencies market capitalization.

Foreign aid and economic growth in sub-Saharan Africa

2019 ◽  
Vol 11 (1) ◽  
pp. 147-168 ◽  
Author(s):  
Nihar Ranjan Jena ◽  
Narayan Sethi
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Sub Saharan Africa ◽  
Cointegration Test ◽  
Modeling Framework ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Sub Saharan ◽  
The Impact

Purpose The purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the sub-Saharan Africa (SSA) region from 1993 to 2017. Design/methodology/approach A sample of 45 SSA countries for the period 1993–2017 is considered for this study. The study uses various econometrics tools such as Pedroni and Kao’s cointegration test, Johansen-Fisher Panel cointegration test, FMOLS and PDOLS in order to ascertain the long-run and short-run dynamics among the variables under consideration. Findings The empirical results find that long-run and short-run relationships exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the SSA economies. The authors also find unidirectional causality running from foreign aid to economic growth. The policymakers in these countries are well-advised to implement suitable policy measures to build on the growth momentum created by foreign aid inflows. Originality/value The study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in the SSA region. Taking into account the diversity of level of growth experienced by the 45 countries in the region, the study uses an appropriate regression technique, i.e., panel dynamic OLS whose results are robust. The finding is also supported by the Granger-causality test and robust cointegration techniques.

scholarly journals Climate change impacts on cereal crops production in Pakistan

2020 ◽  
Vol 12 (2) ◽  
pp. 257-269 ◽  
Author(s):  
Faiza Ahsan ◽  
Abbas Ali Chandio ◽  
Wang Fang
Keyword(s):  
Energy Consumption ◽  
Positive Impact ◽  
Labour Force ◽  
Cointegration Test ◽  
Cereal Crops ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Johansen Cointegration ◽  
Johansen Cointegration Test

Purpose This paper aims to examine the effects of CO2 emissions, energy consumption, cultivated area and the labour force on the production of cereal crops in Pakistan from the period 1971-2014. Design/methodology/approach The study used the Johansen cointegration test, the autoregressive distributed lag (ARDL) approach and Granger causality test to estimate the long-run cointegration and direction of the relationship between the dependent and independent variables. Findings The outcomes of the Johansen cointegration test confirmed the existence of a long-term cointegrating relationship between the production of cereal crops, CO2 emissions, energy consumption, cultivated area and the labour force. The results of the long-run coefficients of CO2 emissions, energy consumption, cultivated area and labour force have a positive impact on cereal crops production. The long-run relationships reveal that a 1 per cent increase in CO2 emissions, energy consumption, cultivated area and labour force will increase cereal crops production by 0.20, 0.11, 0.56 and 0.74 per cent, respectively. Moreover, the findings show that there is a bidirectional causality running from CO2 emissions and cultivated area to cereal crops production. Moreover, there is a unidirectional causality running from energy consumption to cereal crops production. Originality/value The present study also fills the literature gap for applying the ARDL procedure to examine this relevant issue for Pakistan.

scholarly journals MODELLING VOLATILITY SPILLOVER BETWEEN CONVENTIONAL AND ISLAMIC STOCK INDEX IN MALAYSIA

2020 ◽  
Vol 10 (2) ◽  
pp. 26-32
Author(s):  
Edin Djedović ◽  
◽  
Ugur Ergun ◽  
Irfan Djedović ◽  
◽  
...  
Keyword(s):  
Garch Model ◽  
Stock Index ◽  
Cointegration Test ◽  
Volatility Spillover ◽  
Long Run ◽  
Johansen Cointegration ◽  
Short Run ◽  
Two Indices ◽  
Johansen Cointegration Test ◽  
The Relationship

This paper analyzes the vollatility spillover between the conventional index in Malaysia FTSE Malaysia KLCI (KLSE) and the Islamic index in Malaysia FTSE Bursa Malaysia Shariah Index (FTFBMHS). Monthly observations spanning in a period from 2002 to 2018 are obtained from investing.com database. GARCH model and Johansen cointegration test are used to investigate volatility spillover and the relationship between two indices. The results of the analysis indicate that in the short-run there is volatility spillover between FTSE Malaysia KLCI and FTSE Bursa Malaysia Shariah Index, while in the long-run there is no relationship between the two indices. The methodology of compiling Islamic indeces is based on Shariah law. Keywords: Conventional

scholarly journals The nexus between Islamic banking and industrial production

2020 ◽  
Vol 12 (1) ◽  
pp. 103-114 ◽  
Author(s):  
Khemaies Bougatef ◽  
Mohamed Sahbi Nakhli ◽  
Othman Mnari
Keyword(s):  
Industrial Production ◽  
Industrial Development ◽  
Time Lag ◽  
Policy Implications ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Data Set ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to investigate the relationship between Islamic banking and industrial production by decomposing Islamic financing (IF) into profit and loss sharing (PLS) and non-profit and loss sharing (non-PLS) modes of financing. Design/methodology/approach This paper applies the autoregressive distributed lag (ARDL) approach and Toda and Yamamoto causality test on the monthly data set for Malaysia from 2010M1 to 2018M6. Findings The results reveal that IF plays an important role in boosting industrial production in the short run, as well as in the long run. Moreover, this positive effect mainly comes from non-PLS financing. In contrast, no significant relationship was found between PLS financing and industrial development neither in the short run nor in the long run. Practical implications The results have several policy implications. The existence of a time lag between the pooling of funds through PLS contracts and their channeling to industrial activities imply that Malaysian Islamic banks should maintain a long-term relationship with investment account holders. In addition, Islamic banks are called to increase the portion of PLS financing. The positive relationship between the industrial production index and IF (through non-PLS techniques) in the short and the long runs implies that policymakers in Malaysia should multiply their efforts to further expand the Islamic banking industry. Originality/value The originality of this study lies in decomposing Islamic banks’ financing into PLS financing (muḍārabah and mushārakah) and non-PLS financing to assess the contribution of each mode of financing in industrial development.

A fresh look at the inflation-hedging attributes of residential property investments in emerging markets: evidence from Nigeria

2021 ◽  
Vol 39 (3) ◽  
pp. 419-438
Author(s):  
Benjamin Gbolahan Ekemode
Keyword(s):  
Emerging Markets ◽  
Cointegration Test ◽  
Residential Property ◽  
National Bureau ◽  
Ols Regression ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Inflation Hedging ◽  
Unexpected Inflation

PurposeThis study reinvestigates the short-run and long-run inflation-hedging attributes of residential property assets in the Nigerian property market, based on variations in property types and location.Design/methodology/approachData used for this study comprised the holding period returns of three residential property types, namely bungalow, block of flats and detached house during 1999–2018. These were obtained from property practitioners in Lagos, Abuja and Port Harcourt, respectively. The inflation values obtained from the National Bureau of Statistics were split into actual, expected and unexpected components. Fama and Schwert’s (1977) ordered least square (OLS) regression was used to assess the short-term inflation hedging efficacy. Afterwards, the long-run link between residential property and inflation was examined using the Johansen and Juselius cointegration test.FindingsThe results showed that despite the variations in hedging behaviour across property types in the three locations, residential property assets significantly provided protection over actual, expected and unexpected inflation in the short run based on the OLS regression analysis. The result of the Johansen and Juselius cointegration test also established a long-term link between the residential property assets and actual inflation. However, mixed results were found on the link between residential property and expected and unexpected inflation, as some of the assets did not effectively hedge these inflation components in the long run.Practical implicationsThe study implied that the differences in property types and geographic locations are crucial in establishing the short-run and long-run inflation-hedging attributes of residential property assets and should be factored into consideration.Originality/valueThe paper complements the existing body of knowledge on the inflation-hedging attributes of residential property in emerging markets by determining the effects of variation in house types and geographic differences on the analysis.

Fish Exports and Economic Growth: The Pakistan’s Experience

2019 ◽  
Vol 20 (2) ◽  
pp. 279-296 ◽  
Author(s):  
Syed Tehseen Jawaid ◽  
Mohammad Haris Siddiqui ◽  
Zeeshan Atiq ◽  
Usman Azhar
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Positive Impact ◽  
Impulse Response Function ◽  
Policy Implications ◽  
Sensitivity Analyses ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

This study attempts to explore first time ever the relationship between fish exports and economic growth of Pakistan by employing annual time series data for the period 1974–2013. Autoregressive distributed lag and Johansen and Juselius cointegration results confirm the existence of a positive long-run relationship among the variables. Further, the error correction model reveals that no immediate or short-run relationship exists between fish exports and economic growth. Different sensitivity analyses indicate that initial results are robust. Rolling window analysis has been applied to identify the yearly behaviour of fish exports, and it remains negative from 1979 to 1982, 1984 to 1988, 1993 to 1999, 2004 and from 2010 to 2013, and it shows positive impact from 1989 to 1992, 2000 to 2003 and from 2005 to 2009. Furthermore, the variance decomposition method and impulse response function suggest the bidirectional causal relationship between fish exports and economic growth. The findings are beneficial for policymakers in the area of export planning. This study also provides some policy implications in the final section.

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