scholarly journals Can gold hedge against inflation in the UAE? A nonlinear ARDL analysis in the presence of structural breaks

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nassar S. Al-Nassar
Keyword(s):  
United Arab Emirates ◽  
Structural Breaks ◽  
Consumer Price Index ◽  
Testing Procedure ◽  
Cointegration Analysis ◽  
Policy Implications ◽  
Sufficient Evidence ◽  
Content Type ◽  
Unit Root Testing ◽  
Long Run

PurposeThe purpose of this study is to explore the role of gold as a hedge against inflation in the case of the United Arab Emirates.Design/methodology/approachThe study utilizes monthly data on the local sharia-compliant spot gold contract traded on the Dubai Gold and Commodity Exchange (DGCX) and the corresponding consumer price index series over the period December 2015 to January 2021. The econometric approach employed by the study involves a unit root testing procedure that allows the timing of significant breaks to be estimated. A cointegration analysis is then conducted using a nonlinear autoregressive distributed lag (NARDL) model, taking into consideration the presence of structural breaks in addition to short- and long-run asymmetries.FindingsThe results reveal that consumer and gold prices are cointegrated, which implies that investing in gold can hedge against inflation in the long run. No sufficient evidence, nonetheless, is found in support of the ability of gold to serve as a hedge against inflation in the short run.Originality/valueThe findings have several important policy implications for policymakers and investors that are further discussed in the study.

Long run apartment price dynamics in Swedish and German cities

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sviatlana Engerstam
Keyword(s):  
Banking Sector ◽  
Cointegration Analysis ◽  
Price Dynamics ◽  
Long Term Effects ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Price Elasticities ◽  
Long Run ◽  
German Cities

PurposeThis study examines the long term effects of macroeconomic fundamentals on apartment price dynamics in major metropolitan areas in Sweden and Germany.Design/methodology/approachThe main approach is panel cointegration analysis that allows to overcome certain data restrictions such as spatial heterogeneity, cross-sectional dependence, and non-stationary, but cointegrated data. The Swedish dataset includes three cities over a period of 23 years, while the German dataset includes seven cities for 29 years. Analysis of apartment price dynamics include population, disposable income, mortgage interest rate, and apartment stock as underlying macroeconomic variables in the model.FindingsThe empirical results indicate that apartment prices react more strongly on changes in fundamental factors in major Swedish cities than in German ones despite quite similar development of these macroeconomic variables in the long run in both countries. On one hand, overreactions in apartment price dynamics might be considered as the evidence of the price bubble building in Sweden. On the other hand, these two countries differ in institutional arrangements of the housing markets, and these differences might contribute to the size of apartment price elasticities from changes in fundamentals. These arrangements include various banking sector policies, such as mortgage financing and valuation approaches, as well as different government regulations of the housing market as, for example, rent control.Originality/valueIn distinction to the previous studies carried out on Swedish and German data for single-family houses, this study focuses on the apartment segment of the market and examines apartment price elasticities from a long term perspective. In addition, the results from this study highlight the differences between the two countries at the city level in an integrated long run equilibrium framework.

Dynamic interactions between stock markets and the real economy

2016 ◽  
Vol 11 (4) ◽  
pp. 715-746 ◽  
Author(s):  
Nikiforos T. Laopodis ◽  
Andreas Papastamou
Keyword(s):  
Economic Development ◽  
Stock Market ◽  
Methodological Approach ◽  
Financial System ◽  
Cointegration Analysis ◽  
Policy Implications ◽  
Real Economy ◽  
Dynamic Interactions ◽  
Content Type ◽  
The Real

Purpose The purpose of this paper is to re-examine the relationship between a country’s aggregate stock market and general economic development for 14 emerging economies for the period from 1995 to 2014. Design/methodology/approach The methodological approach of the paper is multifold. First, the authors use cointegration analysis to determine the simple dynamics among the variables. Second, the authors utilize vector autoregression analysis to study the dynamics among the variables for the 14 countries. Third, the authors employ panel analysis to determine common variations among the variables and across countries. Findings When examining the linkage between the stock market and economic development, proxied by gross domestic product growth or with gross fixed capital formation growth, the authors did not find a meaningful relationship between them. However, when the authors included additional control variables strong, dynamic interactions between the two magnitudes surfaced. Specifically, it was found that the stock market is positively and robustly correlated with contemporaneous and future real economic development and, thus, it directly contributed to a country’s economic development either through the production of goods and services or the accumulation of real capital. Thus, it can be inferred that the stock market alone is not capable of boosting economic development in these countries unless being part of a comprehensive financial system (which includes banks) as well as investment in real capital. Research limitations/implications The policy implications are clear. Government authorities must recognize that the stock market alone is not a driver of economic development and that a sound, efficient financial system (which includes banks) must be present in order to contribute and foster economic development. Originality/value The study is original in the sense that it examines various financial and economic variables to determine the degree of (or dynamic interactions among) the stock market and the real economy for each and all emerging markets in the sample.

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.

Testing for bubbles in housing markets: some evidence for Brazil

2018 ◽  
Vol 11 (5) ◽  
pp. 754-770 ◽  
Author(s):  
Cássio da Nóbrega Besarria ◽  
Nelson Leitão Paes ◽  
Marcelo Eduardo Alves Silva
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Housing Prices ◽  
Market Price ◽  
Housing Markets ◽  
Cointegration Analysis ◽  
Small Samples ◽  
Content Type ◽  
Long Run ◽  
Cointegration Tests

Purpose Housing prices in Brazil have displayed an impressive growth in recent years, raising some concerns about the existence of a bubble in housing markets. In this paper, the authors implement an empirical methodology to identify whether or not there is a bubble in housing markets in Brazil. Design/methodology/approach Based on a theoretical model that establish that, in the absence of a bubble, a long-run equilibrium relationship should be observed between the market price of an asset and its dividends. The authors implement two methodologies. First, the authors assess whether there is a cointegration relationship between housing prices and housing rental prices. Second, the authors test whether the price-to-rent ratio is stationary. Findings The authors’ results show that there is evidence of a bubble in housing prices in Brazil. However, given the short span of the data, the authors perform a Monte Carlo simulation and show that the cointegration tests may be biased in small samples. Therefore, the authors should be caution when assessing the results. Research limitations/implications The results obtained from the cointegration analysis can be biased for small samples. Practical implications The information on the excessive increase of the prices of the properties in relation to their fundamental value can help in the decision-making on investment of the economic agents. Social implications These results corroborate the hypothesis that Brazil has an excessive appreciation in housing prices, and, as Silva and Besarria (2018) have suggested, this behavior explains, in part, the fact that the central bank has taken this issue into account when deciding about the stance of monetary policy of Brazil. Originality/value The originality is linked to the use of the Gregory-Hansen method of cointegration in the identification of bubbles and discussion of the limitations of the research through Monte Carlo simulation.

Cointegration-causality analysis between terrorism and key macroeconomic indicators

2014 ◽  
Vol 41 (8) ◽  
pp. 664-682 ◽  
Author(s):  
Aisha Ismail ◽  
Shehla Amjad
Keyword(s):  
Research Work ◽  
Cointegration Analysis ◽  
Gdp Per Capita ◽  
Gdp Growth ◽  
Data Set ◽  
Content Type ◽  
Long Run ◽  
Macroeconomic Indicators ◽  
Per Capita ◽  
The Relationship

Purpose – The purpose of this paper is two folds: first, to analyze the long-run relationship between terrorism and key macroeconomic indicators (GDP growth, GDP per capita, inflation and unemployment) and second, to determine the direction of causality between these variables in Pakistan. Design/methodology/approach – The relationship between terrorism and various macroeconomic indicators is analyzed by applying Johansen cointegration analysis. Furthermore, the causality between terrorism and macroeconomic indicators is tested by applying Toda Yamamoto Granger causality test. Findings – The results show that there exists a long-run relationship between terrorism and key macroeconomic indicators. Furthermore, the results suggest that there exists a bi-directional causality between terrorism and inflation. The causality between GDP per capita, unemployment, GDP growth and terrorism is unidirectional. Originality/value – There is a lack of research work conducted to analyze the long-run relationship and direction of causation between terrorism and various macroeconomic indicators specifically for Pakistan. The current paper fills the gap in the literature by using sophisticated econometric techniques and recent data set to provide the evidence of the relationship between terrorism and various macroeconomic indicators.

scholarly journals The nexus between stock market index and apartment and villa prices

2017 ◽  
Vol 10 (3) ◽  
pp. 450-467 ◽  
Author(s):  
Peter Öhman ◽  
Darush Yazdanfar
Keyword(s):  
Stock Market ◽  
Housing Prices ◽  
Consumer Price Index ◽  
Causal Link ◽  
Stock Market Index ◽  
Monthly Data ◽  
Content Type ◽  
Market Index ◽  
Long Run ◽  
Causality Tests

Purpose The purpose of this study is to investigate the Granger causal link between the stock market index and housing prices in terms of apartment and villa prices. Design/methodology/approach Monthly data from September 2005 to October 2013 on apartment prices, villa prices, the stock market index, mortgage rates and the consumer price index were used. Statistical methods were applied to explore the long-run co-integration and Granger causal link between the stock market index and apartment and villa prices in Sweden. Findings The results indicate that the stock market index and housing prices are co-integrated and that a long-run equilibrium relationship exists between them. According to the Granger causality tests, bidirectional relationships exist between the stock market index and apartment and villa prices, respectively, supporting the wealth and credit-price effects. Moreover, variations in apartment and villa prices are primarily caused by endogenous shocks. Originality/value To the authors’ best knowledge, this study represents a first analysis of the causal nexus between the stock market and the housing market in terms of apartment and villa prices in the Swedish context using a vector error-correction model to analyze monthly data.

scholarly journals A macro assessment of China effects on Malaysian exports and trade balances

2014 ◽  
Vol 7 (1) ◽  
pp. 18-37 ◽  
Author(s):  
Tze-Haw Chan ◽  
Hooi Hooi Lean ◽  
Chee-Wooi Hooy
Keyword(s):  
Trade Balance ◽  
Structural Breaks ◽  
Structural Break ◽  
Analytical Framework ◽  
Trade Integration ◽  
Content Type ◽  
Regional Collaboration ◽  
Long Run ◽  
Cointegration Tests ◽  
The Impact

Purpose – This paper aims to focus on the impact of China's export expansion on Malaysian monthly trading with to her 12 major trading partners over the liberalization era. Design/methodology/approach – The analytical framework comprises of both the export and trade balance models. Unit root and cointegration tests with break and error correction modeling are employed in the analyses. Findings – Regime shifts are evident in the long run where structural break(s) found mostly coincides with the Asia crisis and China's accession into WTO. While the income effects are more apparent in most cases, the real exchanges are rather insignificant and incorrectly signed for Malaysian bilateral trading. Besides, the trade balance estimation is generally more consistent that the Chinese exports have exhibited complementary effects in the long-run, mainly for advanced export destination such as Australia, Germany, Japan, the UK and the USA. On the whole, there is insufficient evidence to support the “PRC competitive threat”. Practical implications – The empirical evidence disfavors currency devaluation for current account correction and reveals that the fear for China effect might be over-projected. Closer regional collaboration and trade integration between the two nations are well expected. Originality/value – The paper assesses the China's crowding out effect and magnitudes of Malaysian export and trade balance elasticities with model specifications that consider structural breaks. The paper also assesses the macro dimension of income and real exchanges effects.

Dynamic linkages among developed, emerging and frontier capital markets of Asia-Pacific region

2017 ◽  
Vol 14 (3) ◽  
pp. 332-351 ◽  
Author(s):  
Nisha Mary Thomas ◽  
Smita Kashiramka ◽  
Surendra S. Yadav
Keyword(s):  
Unit Root ◽  
Unit Root Test ◽  
Cointegration Analysis ◽  
Asia Pacific ◽  
Thin Body ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Content Type ◽  
Long Run ◽  
Global Investors

Purpose The purpose of this paper is to investigate the long-run equilibrium relationship between developed, emerging and frontier markets of the Asia-Pacific region during January 2000 to June 2016. Design/methodology/approach Zivot and Andrews’ unit root test is used to examine the existence of unit root in index series in the presence of a structural break. Gregory and Hansen’s test of cointegration is employed to examine the stable long-run relationship between the indices under study. Findings The results suggest that the emerging markets of China and Thailand and the frontier markets of Sri Lanka and Pakistan are fairly segmented from most of the markets in the Asia-Pacific region. Hence, these markets provide good diversification opportunities to global investors. Bidirectional cointegration analysis indicates that emerging and frontier markets influence developed markets. Hence, it can be inferred that the de facto position that only bigger markets influence small markets no longer holds true in the current environment. Practical implications The findings of this study will provide valuable inputs to global investors for creating an optimal investment portfolio. Originality/value This study does a comprehensive examination of market integration in the Asia-Pacific region. It also contributes to the thin body of work done on frontier markets. Unlike past studies, this paper analyzes the bidirectional cointegration relationship to examine if the notion that only bigger markets influence smaller markets holds true or not. Finally, this study employs advanced techniques of unit root test and cointegration test that consider structural breaks in the models.

Does financial development improve environmental quality in Turkey? An application of endogenous structural breaks based cointegration approach

2018 ◽  
Vol 29 (2) ◽  
pp. 368-384 ◽  
Author(s):  
Javaid Ahmad Dar ◽  
Mohammad Asif
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Environmental Quality ◽  
Unit Root ◽  
Structural Breaks ◽  
Energy Use ◽  
Financial Sector ◽  
Content Type ◽  
Long Run ◽  
Endogenous Structural Breaks

Purpose The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence of possible regime shifts over a period of 1960-2013. Design/methodology/approach Along with the conventional unit root tests, Zivot-Andrews unit root test with structural break has been employed to check the stationarity of variables. The cointegrating relationship between variables is investigated by using the autoregressive distributed lag bounds test and Hatemi-J threshold cointegration test. Findings The results confirm a cointegrating relationship between the variables. The long-run relationship between the variables has gone through two endogenous structural breaks in 1976 and 1986. Development of financial sector improves environmental quality whereas energy use and economic growth degrade it. The results challenge the validity of environmental Kuznets curve hypothesis in Turkish economy. Research limitations/implications The study uses domestic credit to private sector as a proxy for development of financial sector. The model can be improved by constructing an index of financial development instead of using a single determinant as a proxy for financial development. Practical implications The study may pave the way for policy makers to capture important environmental pollutants in better way and develop effective and efficient energy and economic policies. This may make significant contribution to curbing CO2 emissions while sustaining economic growth. Originality/value This is the only study to examine long-run impact of financial sector development on carbon emissions, using the threshold cointegration approach. Hence, the study is a gentle request to reduce the possible omitted variable econometric estimation bias and fill the gap in the existing literature.

Foreign direct investments, democracy, and economic growth in Turkey

2017 ◽  
Vol 44 (2) ◽  
pp. 232-252 ◽  
Author(s):  
Nazif Durmaz
Keyword(s):  
Positive Impact ◽  
Small Sample Size ◽  
Emerging Market ◽  
Spillover Effects ◽  
Small Sample ◽  
Cointegration Analysis ◽  
Foreign Direct Investments ◽  
Bounds Testing ◽  
Content Type ◽  
Long Run

Purpose In the last decade, foreign direct investment (FDI) flows have increased dramatically in the world, especially in the emerging economies. Some of these countries make changes in their market conditions that will improve the civil rights and liberties to attract better FDI flows. The purpose of this paper is to test the linkage between democracy and FDI flows to Turkey. Design/methodology/approach The present study employs a bounds testing procedure developed (Pesaran et al., 2001) for cointegration analysis on six different long-run models with selected determinants of FDIs with yearly data from 1977 to 2011. Findings The intuition the paper empirically provides how improvements in democracy have a significant positive impact on FDI flows to Turkey. The results may also put forward that, in the long run, FDI inflows will have spillover effects in Turkey’s economy. Research limitations/implications Although one drawback in the study is having a small sample size of 35 observations, estimating six different long-run models is one way to overcome it. Thus presented results may be in short of simplification for some readers. This, however, opens an opportunity for future studies to further the proposal by employing in different models and/or longer data sets if possible. Practical implications A stable government policies, more civil freedom, and sustained institution politics should not be ignored in Turkey given its geopolitical location. Originality/value This paper satisfies the established need to study of democracy and FDI flows link is necessary in an emerging market such as Turkey.

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