Can stock market liquidity and volatility predict business cycles?

2018 ◽  
Vol 35 (1) ◽  
pp. 81-96 ◽  
Author(s):  
Benjamin Carlston
Keyword(s):  
Business Cycles ◽  
Price Index ◽  
Common Factor ◽  
Consumer Price Index ◽  
Market Liquidity ◽  
Gdp Growth ◽  
Content Type ◽  
Uncertainty Factor ◽  
Real Gdp ◽  
Out Of Sample

Purpose The purpose of this paper is to predict real gross domestic product (GDP) growth and business cycles by using information from both liquidity and volatility measures. Design/methodology/approach The paper estimates liquidity and volatility measures from over 5,000 NYSE rms and extracts a common factor, which the paper calls uncertainty. In-sample and out-of-sample forecasting tests are used to determine the ability of the uncertainty factor to predict growth in real GDP, industrial production, consumer price index, real consumption and changes in real investment. Findings The paper finds that on average, positive shocks to the uncertainty factor occur in the quarters preceding and at the beginning of a recession. During the quarters toward the end of recessions, there are negative shocks to uncertainty on average. Originality/value Previous research has explored using either liquidity or volatility to forecast economic activity. The paper bridges the two branches of research and finds a link to real GDP growth and business cycles.

scholarly journals Occupational Profile of Poverty in Pakistan

2001 ◽  
Vol 40 (4II) ◽  
pp. 1093-1104 ◽  
Author(s):  
Rashida Haq
Keyword(s):  
Development Process ◽  
Price Index ◽  
Consumer Price Index ◽  
Food Prices ◽  
Vulnerable Groups ◽  
Gdp Growth ◽  
Real Gdp ◽  
Occupational Profile ◽  
Long Run ◽  
Labour Absorption

The issue of poverty in Pakistan has its significance for sustainable development. Long run development is not possible without protecting the rights of the vulnerable groups and the participation of the entire population in the development process. A notable development in the last decade in Pakistan’s economic scene has been the sharp pick up in the incidence of poverty. It can be attributed to several factor. The real GDP growth fell from 6 percent in the 1980s to 5 percent in the first half of the 1990s and declined further to just over 4 percent in the second half of the decade. The rate of inflation remained in single digits throughout the 1980s but had a rapid increase of 12 percent during the first half of the 1990s. It is significant to note that food prices generally rose more sharply than overall consumer price index. The unemployment rate increased by 2 percent in the 1990s as compared to in the 1980s reflecting the deceleration of labour absorption in the economy in response to the significant decrease in the economic growth during the nineties.

Development Growth Models for Singapore and Malaysia: A Geweke Causality Analysis

2015 ◽  
Vol 8 (2) ◽  
pp. 165-186 ◽  
Author(s):  
Tan Khee Giap ◽  
Nguyen Le Phuong Anh ◽  
Ye Ye Denise
Keyword(s):  
Economic Growth ◽  
Linear Dependence ◽  
Growth Models ◽  
Growth Dynamics ◽  
Gdp Growth ◽  
Multiple Time ◽  
Causality Analysis ◽  
Content Type ◽  
Real Gdp ◽  
Long Run

Purpose Nearly five decades after undergoing a structural transformation and navigating several external shocks, both Singapore and Malaysia are now grappling with some crucial policy challenges that necessitate a course-correction in order to sustain their growth momentum, going forward. In light of the renewed interest in understanding the growth constraints faced by the two countries, this paper aims to empirically explore the drivers of economic growth in both Singapore and Malaysia, using data from 1975 to 2012. Design/methodology/approach The paper employs a novel empirical approach-the Geweke causality analysis-to investigate the causal drivers of economic growth in Singapore and Malaysia. Intuitively, the Geweke causality analysis helps us understand and measure the linear dependence and feedback between multiple time series variables. To that effect, we perform both a bi-variate as well as a multi-variate causality analysis. Findings The empirical results established using Geweke causality analysis suggest that Malaysia's new development trajectory should lie in rebalancing the economy toward greater domestic demand and building a robust services sector. The results also suggest that Singapore, on the other hand, should embrace a growth model that goes beyond relying heavily on foreign direct investment (FDI) as a source of economic growth as the linear dependence between FDI and real GDP growth appears to be weaker compared to the linear dependence between the remaining variables and the real GDP growth. Originality/value While the traditional growth accounting framework provides useful insights at the aggregate level, there is a growing literature that discusses the importance of sectoral analysis to understand structural transformations in the economies which become important to sustain productivity growth in the long-run. This is immensely relevant in the case of Malaysia and Singapore, as well, especially with the changing policy focus in these countries to overcome structural growth issues. In light of this growing discussion on the importance of understanding the growth dynamics at the sectoral level, this paper presents new empirical evidence on the growth drivers in Singapore and Malaysia with a sectoral focus.

Greek economy could slip into recession again

2017 ◽  
Keyword(s):  
Private Investment ◽  
The United States ◽  
Gdp Growth ◽  
Investment Climate ◽  
Content Type ◽  
Goods And Services ◽  
Real Gdp ◽  
Greek Economy ◽  
Target Set ◽  
The Government

Subject Greece’s stagnating economy. Significance The economy failed to turn a corner in 2016, registering zero real GDP growth. The ambitious 2.7% GDP growth target, set for 2017 by the government and Greece’s lenders, now looks hard to achieve. However, the economy’s stabilisation, albeit at a level much lower than before the crisis, is evident. Impacts A swift end to the bailout review might lift uncertainty and improve the investment climate, allowing both domestic and private investment. Inclusion into the ECB’s quantitative easing programme would help inject additional liquidity into the economy, stimulating credit growth. Over the medium term, rising protectionism in the United States and Europe might restrict trade, reducing Greek goods and services exports.

Iran will struggle to create a ‘resistance economy’

2017 ◽  
Keyword(s):  
Central Asia ◽  
Fiscal Year ◽  
Gdp Growth ◽  
Crowding Out ◽  
Medium Term ◽  
Content Type ◽  
Investor Confidence ◽  
Real Gdp ◽  
Defence Spending ◽  
Supreme Leader

Subject The Iranian budget. Significance Speeches marking the Iranian New Year (Nowruz) on March 21 highlighted disagreements between Supreme Leader Ali Khamenei and President Hassan Rouhani. While both promoted a ‘resistance economy’, each meant something different. The recently published budget for the 2017-18 fiscal year highlights divisions and linkages between the two philosophies. Impacts Real GDP growth in 2017 will not be much above 3.0% and will rise to 4.5% in the medium term. Rising tensions with Washington will further boost defence spending, crowding out development. Additional US congressional sanctions, or even threat of sanctions, are likely to depress investor confidence. New transport links to Central Asia may significantly increase trade.

scholarly journals Pakistan, Politics and Political Business Cycles

2012 ◽  
Vol 51 (2) ◽  
pp. 153-166
Author(s):  
Gernot Sieg ◽  
Irem Batool
Keyword(s):  
Business Cycles ◽  
Budget Deficit ◽  
Banking Sector ◽  
Dynamic Behaviour ◽  
Jel Classification ◽  
Price Regulation ◽  
Gdp Growth ◽  
Political Business Cycles ◽  
Real Gdp ◽  
Investment Growth

This paper studies whether in Pakistan the dynamic behaviour of unemployment, inflation, budget deficit and real GDP growth is systematically affected by the timing of elections. We cover the period from 1973-2009. Our results can be summarised as follows: (1) Unemployment tends to be lower in pre-election periods and tends to increase immediately after elections, perhaps as a result of politically motivated employment schemes. (2) Inflation tends to be lower in pre-election periods, perhaps as a result of pre-electoral price regulation. (3) We find increase in the governmental budget deficit, financed by heavy government borrowings from the central bank and banking sector during election year. (4) Real GDP growth and real governmental investment growth declines during pre and post election terms possibly as a result of inefficient resource allocation. JEL Classification: D72, D78, H50, H61, E51 Keywords: Opportunistic Political Business Cycle, Fiscal Policy, Macroeconomics, Elections, Pakistan

scholarly journals Investor Sentiment, Sovereign Debt Mispricing, and Economic Outcomes

2020 ◽  
Vol 20 (166) ◽  
Author(s):  
Ramzy Al Amine ◽  
Tim Willems
Keyword(s):  
Sovereign Debt ◽  
Investor Sentiment ◽  
Strong Support ◽  
Gdp Growth ◽  
Sovereign Spreads ◽  
Real Gdp ◽  
Long Run ◽  
Out Of Sample ◽  
The Business Cycle ◽  
Future Outcomes

We find that countries which are able to borrow at spreads that seem low given fundamentals (for example because investors take a bullish view on a country's future), are more likely to develop economic difficulties later on. We obtain this result through a two-stage procedure, where a first regression links sovereign spreads to fundamentals, after which residuals from this regression are deployed in a second stage to assess their impact on future outcomes (real GDP growth and the occurrence of fiscal crises). We confirm the relevance of past sovereign debt mispricing in several out-of-sample exercises, where they reduce the RMSE of real GDP growth forecasts by as much as 15 percent. This provides strong support for theories of sentiment affecting the business cycle. Our findings also suggest that countries shouldn't solely rely on spread levels when determining their fiscal strategy; underlying fundamentals should inform policy as well, since historical relationships between spreads and fundamentals often continue to apply in the medium-to-long run.

Belarus recovery will depend on external conditions

2016 ◽  
Keyword(s):  
Agricultural Production ◽  
Capital Investment ◽  
Price Index ◽  
Consumer Price Index ◽  
Social Spending ◽  
Industrial Output ◽  
Content Type ◽  
Parliamentary Elections ◽  
Structural Problems ◽  
External Conditions

Subject Chronic problems in the Belarusian economy. Significance After three years of sluggish growth, the Belarusian economy contracted by 3.9% in 2015, with industrial output, agricultural production and capital investment all in decline. Consumer price index (CPI) inflation was slower than in the previous three years, but remained in double digits. The GDP and inflation data, taken together, reflect structural problems that can only be reversed by comprehensive reforms or external developments, such as higher oil prices. Impacts The need for loans and investment will prompt more accommodating policies towards the West. The gradual shift away from economic dependence on Moscow will undermine this close historical alliance and undermine the Eurasian union. Significant cuts in social spending could create popular discontent. Growing public dissatisfaction could give opposition parties a rare chance to win seats in the September parliamentary elections.

Argentina currency crisis highlights policy vacuum

2018 ◽  
Keyword(s):  
Exchange Rate ◽  
Gdp Growth ◽  
External Shocks ◽  
Foreign Investors ◽  
Content Type ◽  
Electoral Success ◽  
Real Gdp ◽  
Weak Exchange ◽  
Capital Outflows ◽  
Financial Environment

Significance In recent days a severe currency run drove a 12.2% depreciation of the peso and an estimated fall of nearly 5 billion dollars in international reserves (8% of that stock). The Bank has raised rates by 600 bp in only a few days, but this has not stopped the run. The crisis highlights Argentina’s vulnerability to external shocks, but has also been driven by domestic errors, such as the BCRA’s loss of reputation and the implementation of a tax on Lebacs (BCRA notes), an asset that had attracted many foreign investors. Impacts The weak exchange rate will boost inflation, while capital outflows will drive real GDP growth estimates down. A less benign global financial environment will limit the government’s gradualist strategy. The government’s ability to overcome the crisis will condition its chances of electoral success in 2019.

Impact of macroeconomic indicators on housing prices

2019 ◽  
Vol 12 (6) ◽  
pp. 1055-1071 ◽  
Author(s):  
Satish Mohan ◽  
Alan Hutson ◽  
Ian MacDonald ◽  
Chung Chun Lin
Keyword(s):  
Price Index ◽  
Time Series Data ◽  
Statistical Significance ◽  
Housing Prices ◽  
Consumer Price Index ◽  
New York State ◽  
Housing Price ◽  
Series Data ◽  
Content Type ◽  
Macroeconomic Indicators

Purpose This paper uses statistical analyses to quantify the effects of five major macroeconomic indicators, namely crude oil price, 30-year mortgage interest rate (IR), Consumer Price Index (CPI), Dow Jones Industrial Average (DJIA), and unemployment rate (UR), on housing prices over time. Design/methodology/approach Housing price is measured as housing price index (HPI) and is treated as a variable affecting itself. Actual housing sale prices in the Town of Amherst, New York State, USA, 1999-2008, and time-series data of the macroeconomic indicators, 2000-2017, were used in a vector autoregression statistical model to examine the data that show the greatest statistical significance and exert maximum quantitative effects of macroeconomic indicators on housing prices. Findings The analyses concluded that the 30-year IR and HPI have statistically significant effects on housing prices. IR has the highest effect, contributing 5.0 per cent of variance in the first month to 8.5 per cent in the twelfth. The UR has the next greatest influence followed by DJIA and CPI. The disturbance from HPI itself causes the greatest variability in future prices: up to 92.7 per cent in variance 1 month ahead and approximately 74.5 per cent 12 months ahead. This result indicates that current changes in house prices heavily influence people’s expectation of future prices. The total effect of the error variance of the macroeconomic indicators ranged from 7.3 per cent in the first month to 25.5 per cent in the twelfth. Originality/value The conclusions in this paper, along with related tables and figures, will be useful to the housing and real estate communities in planning their business for the next years.

Establishing finance-growth linkage for India: a financial conditions index (FCI) approach

2019 ◽  
Vol 14 (5) ◽  
pp. 1032-1059 ◽  
Author(s):  
A.K. Giri ◽  
Deven Bansod
Keyword(s):  
Economic Growth ◽  
Global Financial Crisis ◽  
Gdp Growth ◽  
Data Sets ◽  
Content Type ◽  
Real Gdp ◽  
Financial Conditions ◽  
Multiple Markets ◽  
Long Run ◽  
The Global Financial Crisis

Purpose The global financial crisis of 2008 emphasized the need for monetary policy authorities to have a more comprehensive view of the conditions prevailing in the economy before deciding their policy stance. The purpose of this paper is to outline the construction of a financial conditions index (FCI) and investigate the possible co-integrating relationship between the economic growth and FCI. Design/methodology/approach The study employs the PCA methodology, with appropriate augmentations to handle the unbalanced panel data-sets and constructs a FCI for India. It tests the growth-predicting power of FCI by applying the auto regressive distributed lags approach to co-integration and verifies if the FCI is co-integrated with real GDP growth. It also discusses construction of a financial development index (FDI) which tracks the financial markets through M3, market capitalization and credit amount to residents. Findings The constructed FCI has a quarterly frequency and is available starting 1998q2. The long-run coefficient of FCI while predicting the real GDP growth is significant at 10 percent. The results confirm that a more-broader index FCI outperforms a narrower index FDI in growth prediction. Research limitations/implications By showing that FCI is a better growth predictor than FDI, the study establishes the importance of including the foreign exchange markets, bond markets and stock markets while summarizing the conditions in the economy. The authors hope that the FCI would be helpful to the monetary authorities in their policy decisions. Originality/value The paper adds to the few existing studies studies dealing with FCI for Indian economy and constructs a more comprehensive index which tracks multiple markets simultaneously. It also fills the gap in literature by evaluating the correlating relationship between FCI and economic growth.

Sign in / Sign up

Export Citation Format

Share Document