Expectations, uncertainty and risk premium

2017 ◽  
Vol 9 (3) ◽  
pp. 338-352 ◽  
Author(s):  
Rexford Abaidoo
Keyword(s):  
Risk Premium ◽  
Inflation Expectations ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Distributed Lag ◽  
Us Economy ◽  
Empirical Estimates ◽  
Long Run ◽  
Distributed Lag Models ◽  
Short Run

Purpose This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending. Design/methodology/approach Empirical estimates are based on error correction and autoregressive distributed lag models. Findings The results suggest that, in the short run, inflation expectations, recession expectations and actual inflationary conditions tend to have a significant impact on risk premium estimates; in the long run, however, only inflation expectations and recession expectations are significant in risk premium estimates on lending. Originality/value This study examines how specific conditions of uncertainty and expectations influence variability in risk premium estimates on lending in the US economy.

The effect of sentiment on commercial real estate returns: investor and occupier perspectives

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ka Shing Cheung ◽  
Joshua Lee
Keyword(s):  
Real Estate ◽  
Investor Sentiment ◽  
Commercial Real Estate ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Short Sale ◽  
Distributed Lag ◽  
Real Estate Returns ◽  
Long Run ◽  
Short Run

PurposeReal estate is an asset that is traded in highly segmented, illiquid and informationally inefficient local markets. A short sale in real estate is almost infeasible and therefore impedes informed rational arbitrageurs to trade against mispricing. Thus, real estate returns are prone to sentiment-driven behaviours. Will the impacts on asset returns be identical for different types of sentiment?Design/methodology/approachThis study argues that not all sentiment effects are created equal. Using the bounds test of the autoregressive distributed lag (ARDL) models, this paper examines how occupier sentiment versus investor sentiment contributes to the short-run and long-run dynamics of commercial real estate returns in Australia.FindingsThe empirical evidence suggests that investor sentiment and occupier sentiment influence return asymmetrically after macroeconomic conditions are controlled for.Practical implicationsThe sectoral analysis further reveals that sector-specific sentiment plays a significant role in explaining commercial real estate returns. Furthermore, notable improvement is found in producing more accurate prediction in returns, given that measures of occupier and investor sentiment are appropriately specified in the forecast.Originality/valueThis study is novel in the sense that it acknowledges the impacts of occupiers' and investors' sentiment may be fundamentally different. The unique innovation and contribution of this study to behavioural finance literature are based on a new dataset from the Royal Institute of Chartered Surveyors which includes a survey-based measure of investor sentiment and occupier sentiment.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

The capital structure decision of Islamic and conventional banks: empirical evidence from Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Ahdi Noomen Ajmi
Keyword(s):  
Capital Structure ◽  
Decision Criterion ◽  
Content Type ◽  
Leverage Ratio ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Main Determinants ◽  
Conventional Banks ◽  
The Capital Structure

PurposeThe purpose of this paper is to investigate how Islamic banks (IBs) and conventional banks (CBs) in Malaysia choose their capital structure and what are the most significant factors that affect their decisions regarding their capital structure.Design/methodology/approachThis study applies the autoregressive distributed lag (ARDL) approach for a sample of 54 Banks listed on Malaysian stock market over the period 2010–2018.FindingsThe study findings show that the capital structure of IBs appears to be driven by similar factors to those previously found in the corporate finance literature. They also provide evidence of the existence of a long-run and short-run relationship between leverage and its main determinants for Islamic and CBs. However, the results show that various independent variables on the capital structure do exhibit different effects (in magnitude of the coefficient) among Islamic and CBs. Moreover, we find that IBs slowly adjust their capital structure toward the desired leverage ratio than CBs.Research limitations/implicationsThis research contributes to the theory in re-validating capital structure theories on IBs. It helps understand the capital structure of IBs in comparison with CBs. If in conventional finance, the standard presiding decisions of an economic agent is optimizing the risk-return ratio, this standard is not the only or the primary decision criterion in the Islamic finance context where spiritual and theological considerations are taken into consideration.Practical implicationsThis research can contribute to managers in understanding the choice of capital structure for IBs within the bound of Sharia requirement. Such an understanding provides managers with applied knowledge of determining their appropriate capital structure to compete locally and globally in which IBs operate.Originality/valueThis paper offers some insights on the determinants of capital structure by investigating Islamic and CBs. It explores the implication of relevant Islamic principles on capital structure. Moreover, it analyses the determinants of capital structure using ARDL method that permits to identify the short-run and long-run relationships between capital structure and its main determinants.

LPG consumption and economic growth, 1975-2016: evidence from Cameroon

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jean Gaston Tamba
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Liquefied Petroleum Gas ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Gas Consumption ◽  
The Government ◽  
Energy Efficiency Policies

Purpose This paper aims to examine the causal relationship between liquefied petroleum gas consumption and economic growth in Cameroon over the period from 1975 to 2016. Design/methodology/approach The methodology of this study is based on the unit root, cointegration and causality tests. Cointegration is performed with both Johansen and autoregressive distributed lag bounds approach, while causality is done with the Granger test based on the error correction model (ECM) and Toda-Yamamoto procedure. Findings The cointegration methods confirm the existence of a level relationship, whereas the causal tests of the ECM reveal the existence of a short-run unidirectional causal relationship ranging from liquefied petroleum gas (LPG) consumption to economic growth and a bidirectional causal relationship between long-term and high-causality variables. With the Toda-Yamamoto procedure, unidirectional causality is found to run from economic growth to liquefied petroleum gas consumption. Research limitations/implications These findings imply that an increase in liquefied petroleum gas consumption leads to an increase in economic growth. As a result, supporting energy efficiency policies that aim to reduce liquefied petroleum gas consumption is not an option for Cameroon. Given that LPG consumption shares are still low in Cameroon, the government ought, thus, to increase LPG subsidization, vulgarize and favor policies aimed at encouraging LPG consumption to increase LPG deposits nationwide. This would help increase LPG consumption and consequently could increase economic growth in Cameroon. Originality/value LPG is a fossil fuel and is the less GHG emitter and it is considered as a modern source of energy for cooking in Cameroon households. It scarcity calls on energy policymakers to question the influence LPG consumption could have on economic growth in the short- and long-run. Thus, this paper could contribute to solving the issue of deforestation in Cameroon, especially in the Sahel zone; through the substitution of firewood consumption by LPG consumption in households.

On productivity differential of export composition: evidence from India

2014 ◽  
Vol 7 (1) ◽  
pp. 38-50
Author(s):  
Avijit Debnath ◽  
Niranjan Roy ◽  
Priyanka Dasgupta ◽  
Nazira Mazumder
Keyword(s):  
Positive Impact ◽  
Secondary Data ◽  
Spillover Effects ◽  
Aggregate Level ◽  
Content Type ◽  
Export Sector ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Export Composition

Purpose – This paper aims to analyse the relationship between exports and non-export gross domestic product (GDP) in the context of Indian economy during 1988-2012. It considers export both at aggregate and disaggregated levels to examine whether export-led growth (ELG) hypothesis is sensitive to types of goods India exports. Design/methodology/approach – The OLS-based autoregressive distributed lag (ARDL) model has been employed to analyse the potential long-run equilibrium relationship. Further, the error correction model within the ARDL framework is applied to examine the short-run and long-run causal relationship between non-export GDP, export and other variables. The study is based on secondary data. Findings – The study indicates that at aggregate level, exports do not have any significant impact on output of non-export sector, and therefore, it is maintained that ELG hypothesis is not valid at aggregate level in India; when the authors disaggregate exports into merchandise and services exports, the latter has been found to have positive spillover effects on non-export sector of the economy. However, the association between merchandise export and non-export GDP is found to be statistically insignificant. When the authors further disaggregated merchandise exports, the authors observed that primary-product export has a negative association with non-export GDP, but export of manufacturing products found to have a significant positive impact on non-export GDP. Finally, export of petroleum product shows a negative long-run association with non-export GDP, but the association is statistically insignificant. Originality/value – It is not the case that India can simply increase its exports per se and be sure of witnessing economic growth, but instead it is the composition and the concentration of these exports that matters.

Determinants of environmental degradation in Saudi Arabia: exploring the unexplored

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Tahir ◽  
Arshad Hayat ◽  
Umar Burki
Keyword(s):  
Saudi Arabia ◽  
Environmental Degradation ◽  
Time Series Data ◽  
Trade Openness ◽  
Negative Relationship ◽  
Series Data ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

Purpose Environmental degradation is recognized as a serious problem globally, and hence, Saudi Arabia is no exception. This paper aims to focus on the economy of Saudi Arabia to identify the determinants of environmental degradation. Design/methodology/approach Time series data spanning from 1971 to 2014 is used and analyzed using the recently developed autoregressive distributed lag modeling approach. Findings The obtained results reflected that natural resources, per person income and urbanization, have impacted environmental degradation both positively and significantly in the long run. Similarly, an insignificant negative relationship is established between trade openness and environmental degradation. Moreover, energy consumption has positively but insignificantly affected environmental degradation. In the short run, only per capita income has positively influenced environmental degradation while the rest of the variables have lost either significance levels or their direction of relationship has reversed. Originality/value As this is a pioneering study on the economy of Saudi Arabia, therefore, the authors assume that policymakers will find the findings of the current study very useful while formulating and implementing policies to control environmental degradation.

Economic hardship and suicides

2017 ◽  
Vol 44 (10) ◽  
pp. 1348-1360 ◽  
Author(s):  
Marko Korhonen ◽  
Mikko Puhakka ◽  
Matti Viren
Keyword(s):  
Economic Theory ◽  
Critical Role ◽  
Generalized Method Of Moments ◽  
Economic Conditions ◽  
Simultaneous Estimation ◽  
Habit Persistence ◽  
Content Type ◽  
Macroeconomic Conditions ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to investigate the determinants of aggregate suicides in 15 OECD countries during 1960-2010 using an economic model where changes in the welfare of consumers play the critical role for determining the number of suicides. Design/methodology/approach The hardship index based on economic theory is developed. In estimating the model, the authors apply the Pesaran et al. (2001) approach that allows the simultaneous estimation of the long-run and short-run parameters. To make sure that the authors’ findings are not specific to their method, the authors also use the generalized method of moments estimation in the panel set-up. Findings The authors found a relatively strong positive relationship between macroeconomic conditions, especially changes in aggregate consumption, and suicides. The relationship appears to be robust also in terms of the various control variables cited in the literature. The hardship index which is based on the habit persistence model of consumption predicts and explains the long-term behavior of suicides in most of the countries. Thus, the hardship index is a better economic explanatory variable than the unemployment rate or other proxies describing economic conditions. Originality/value Marrying the economic theory and econometric methods produces a reasonable empirical model to explain the connection between aggregate economic conditions and suicides.

scholarly journals Fiscal deficit and trade deficit nexus in Pakistan: An econometric inquiry

2020 ◽  
pp. 18-18
Author(s):  
Shujaat Abbas ◽  
Abdul Waheed
Keyword(s):  
Correction Term ◽  
Trade Deficit ◽  
Fiscal Deficit ◽  
Long Term Effects ◽  
Bounds Testing ◽  
Macroeconomic Conditions ◽  
Distributed Lag ◽  
Time Series Estimation ◽  
Long Run ◽  
Short Run

This study is an attempt to explore the short-term and long-term effects of the fiscal deficit along with other macroeconomic variables on the deteriorating trade deficit of Pakistan from 1980 to 2018 by using time series estimation techniques. The result of the autoregressive distributed lag (ARDL) bounds testing approach and error correction term revealed the existence of cointegration among variables of interest. The estimated long-run and short-run results of the ARDL approach showed a significant positive effect of fiscal deficit on Pakistan's trade deficit in the short-run, whereas a significant adverse effect is observed in the long-run. The findings validated the twin deficit hypothesis in the short-run, whereas twin divergence proposition is observed in the long run. The study suggests prudent fiscal and monetary policies to make macroeconomic conditions favorable for the development and competitiveness of domestic production sectors engaged in the international trade.

Growth impact of CO2 emissions caused by tourist arrivals in Turkey

2016 ◽  
Vol 8 (1) ◽  
pp. 19-37 ◽  
Author(s):  
Vedat Yorucu
Keyword(s):  
Error Correction ◽  
Error Correction Models ◽  
Content Type ◽  
Foreign Tourist ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Dynamic Relationships ◽  
Long Run Equilibrium

Purpose – The purpose of this study is to analyze the determinants of changes in carbon dioxide (CO2) emissions for Turkey by utilizing the autoregressive distributed lag approach to investigate the long-run equilibrium relationships of CO2 emissions between foreign tourist arrivals (FTAs) and electricity consumption (ELC). The results reveal that foreign tourists and ELC are significant determinants of a long-run equilibrium relationship with CO2 emissions from electricity and heat production and CO2 emissions from transport for Turkey, respectively. The results of the conditional error correction models (CECM) confirm that there are long-run causal relationships from the growing number of foreign tourist arrivals and the increase of ELC toward the growth of CO2 emissions during 1960-2010. The results of autoregressive distributed lag (ARDL) error correction models for CO2 emissions also validate significant dynamic relationships between CO2 emissions, ELC and tourist arrivals in the short run. Design/methodology/approach – ARDL modeling and Bounds test approach were used in this study. Findings – Rapid tourism development in Turkey has triggered CO2 emissions. The growth of CO2 emissions in Turkey threatens sustainability. The hypothesis of “The growth of CO2 emissions in Turkey” is validated. Tourist arrivals, ELC and CO2 emissions are co-integrated. CECMs confirm the growth of CO2 emissions during 1960-2010. ARDL modeling shows significant relationships between CO2 emissions and other variables. Originality/value – Results of ARDL error correction models for CO2 emissions validate the hypothesis that there are significant dynamic relationships between CO2 emissions, ELC and tourist arrivals in Turkey for the short run.

Foreign inflows and economic growth in Pakistan: some new insights

2020 ◽  
Vol 13 (3) ◽  
pp. 97-113
Author(s):  
Muhammad Tahir ◽  
Ahmad Ali Jan ◽  
Syed Quaid Ali Shah ◽  
Md Badrul Alam ◽  
Muhammad Asim Afridi ◽  
...  
Keyword(s):  
Economic Growth ◽  
Employment Level ◽  
Content Type ◽  
Significance Level ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
External Sources ◽  
The Impact

Purpose The purpose of this paper is to explore the contending role of important external inflows on the economic growth of Pakistan economy. The main purpose behind focusing on Pakistan is that it is receiving significant inflows from different international sources such as International Monetary Fund, World Bank and Asian Development Bank. Design/methodology/approach The study adopted the autoregressive distributed lag cointegration approach for the purpose of exploring the long-run cointegrating relationship among the variables. As Pakistan Government had been implementing some major liberalization policies during 1990s, data from 1976 to 2018 is used to estimate the specified models to reflect the impact of the surge of foreign inflows occurring from that time. In addition, error correction model is estimated for examining the short-run relationships. Findings The findings revealed the significant role played by different inflows in accelerating the economic growth. According to results, in the long run, all inflows, for example, Foreign direct investment (FDI), debt, official developdment assistance and remittances, have influenced significantly and positively the economic growth. The two control variables such as inflation and employment level included in the model have also played their expected role in the growth process. In the short run, some of the variables such as remittances, FDI and inflation rate have lost their significance level while for debt, aid and employment level, the signs of their coefficients become reversed. Practical implications Based on the findings, the study suggests the policymakers of Pakistan economy to liberalize the economy and attract more inflows from the external sources to accelerate economic growth. Originality/value To the best of the authors’ knowledge, this is the first comprehensive empirical study on the role of foreign inflows in the process of economic growth in the context of Pakistan economy.

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