scholarly journals Interest rate pass-through: a nonlinear vector error-correction approach

2017 ◽  
Vol 21 (5) ◽  
Author(s):  
Michal Ksawery Popiel
Keyword(s):  
Error Correction ◽  
Mortgage Market ◽  
Correction Model ◽  
Vector Error Correction ◽  
Market Rate ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Nonlinear Vector ◽  
Pass Through

AbstractThis paper analyzes pass-through from money market rates to consumer retail loan and deposit rates in Canada from 1983 to 2015 using a nonlinear vector error-correction model. This model permits estimation of long-run pass-through coefficients while simultaneously accounting for asymmetric adjustments and short-run dynamics. In contrast to empirical frameworks used in previous studies, it also allows testing of commonly made assumptions such as exogeneity of the market rate, making inference more robust. I find that pass-through was complete for all rates before the financial crisis although only after the mid 1990s for the 1 year mortgage rate. Since the end of the 2008–2009 recession, pass-through remains complete in the mortgage market but has significantly declined for deposit rates. Furthermore, many rates adjust asymmetrically but the direction of rigidity differs among rates and time periods.

scholarly journals REVISITING KEYNES’ INVESTMENT AND SAVING MODEL IN INDONESIA

2020 ◽  
Vol XVIII (2) ◽  
pp. 45-58
Keyword(s):  
Error Correction ◽  
Causal Relationship ◽  
Granger Causality Test ◽  
Vector Error Correction Model ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run

This study aims to analyze the Keynes’ investment and saving model in Indonesia from 1981 to 2018. The researchers use the econometric test from the Granger causality test to find the short-run causal relationship and the Vector Error Correction Model to reveal both the short-run and long-run effects in the model. The result of Granger causality test demonstrates that there is no short-run causal relationship between these two variables. In the short-run, the increase in saving affects the consumption loans more compared to the investment loans. Besides, increased consumption compared to saving has more influence in raising investment. However, the Vector Error Correction Model proves that saving negatively affects investment in the long-run. This model empirically supports the long-run Keynes’ investment and saving model. Consequently, the Indonesian government needs to consider saving as a policy instrument to increase investment in the longrun.

scholarly journals Exchange rate Pass-through in russia

2014 ◽  
pp. 21-35 ◽  
Author(s):  
Y. Ponomarev ◽  
P. Trunin ◽  
A. Ulyukayev
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Exchange Rate Volatility ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Pass Through

The article provides estimates of short-run and medium-run exchange rate pass-through in Russia during the period of 2000-2012 using vector error correction model. Estimates of asymmetry of exchange rate pass-through, its assessments in different sub-periods and exchange rate volatility effect are also presented.

scholarly journals Assessment of cassava supply response in Nigeria using vector error correction model (VECM)

Agricultura ◽  
2016 ◽  
Vol 13 (1-2) ◽  
pp. 79-86
Author(s):  
Oluwakemi Adeola Obayelu ◽  
Samuel Ebute
Keyword(s):  
Error Correction ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Agricultural Commodities ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Cassava Production

Abstract The response of agricultural commodities to changes in price is an important factor in the success of any reform programme in agricultural sector of Nigeria. The producers of traditional agricultural commodities, such as cassava, face the world market directly. Consequently, the producer price of cassava has become unstable, which is a disincentive for both its production and trade. This study investigated cassava supply response to changes in price. Data collected from FAOSTAT from 1966 to 2010 were analysed using Vector Error Correction Model (VECM) approach. The results of the VECM for the estimation of short run adjustment of the variables toward their long run relationship showed a linear deterministic trend in the data and that Area cultivated and own prices jointly explained 74% and 63% of the variation in the Nigeria cassava output in the short run and long-run respectively. Cassava prices (P<0.001) and land cultivated (P<0.1) had positive influence on cassava supply in the short-run. The short-run price elasticity was 0.38 indicating that price policies were effective in the short-run promotion of cassava production in Nigeria. However, in the long-run elasticity cassava was not responsive to price incentives significantly. This suggests that price policies are not effective in the long-run promotion of cassava production in the country owing to instability in governance and government policies.

Enhancing Economic Growth and Government Revenue Generation in Nigeria: The Role of Diaspora Remittances

2021 ◽  
pp. 003464462110256
Author(s):  
Dal Didia ◽  
Suleiman Tahir
Keyword(s):  
Economic Growth ◽  
Parameter Estimates ◽  
Gross Domestic Product Growth ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Empirical Analysis

Even though remittances constitute the second-largest source of foreign exchange for Nigeria, with a $24 billion inflow in 2018, its impact on economic growth remains unclear. This study, therefore, examined the short-run and long-run impact of remittances on the economic growth of Nigeria using the vector error correction model. Utilizing World Bank data covering 1990–2018, the empirical analysis revealed that remittances hurt economic growth in the short run while having no impact on economic growth in the long run. Our parameter estimates indicate that a 1% increase in remittances would result in a 0.9% decrease in the gross domestic product growth rate in the short run. One policy implication of this study is that Nigeria needs to devise policies and interventions that minimize the emigration of skilled professionals rather than depending on remittances that do not offset the losses to the economy due to brain drain.

Innovation, ICT penetration, trade and economic growth in developing and developed countries: a VECM approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Parul Singh ◽  
Areej Aftab Siddiqui
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Developing Nations ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Short Run ◽  
Developed Nations

Purpose The development in information communication and technology (ICT) has led to many changes such as reorganization of economics, globalization and trade. With more innovation processes being organized and adopted across technologies, trade, etc., these are getting more closely related and needs fresh research perspective. This study aims to empirically investigate the interrelationship between ICT penetration, innovation, trade and economic growth in 20 developed and developing nations from 1995 to 2018. Design/methodology/approach The present paper examines both long-run and short-run relationships between the four variables, namely, innovation, ICT penetration, trade and economic growth, by applying panel estimation techniques of regression and vector error correction model. ICT penetration and innovation indices are constructed using principle component analysis technique. Findings The findings of the study highlight that for developed nations, growth, trade and innovation are significantly interlinked with no significant role of ICT penetration While for developing nations, significant relationship is present between growth and trade, ICT penetration and innovation. With respect to trade, in case of developed nations, significant relationship is present with ICT penetration. While for developing nations there is no significant result for trade promotion. On further employing the vector error correction model, the presence of short run causality between growth, trade and innovation in case of developed nations is established but no such causality between variables for developing nations is seen. Originality/value The present paper adds to the existing strand of literature examining interlinkage between innovation and growth by introducing new variables of ICT penetration and innovation.

scholarly journals Dampak Perubahan Nilai Tukar terhadap Indeks Harga Konsumen Bahan Makanan di Indonesia

2016 ◽  
Vol 17 (1) ◽  
pp. 1-14
Author(s):  
Siti Suarsih ◽  
Noer Azam Achsani ◽  
Nunung Nuryartono
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Price Index ◽  
Consumer Price Index ◽  
Error Variance ◽  
Correction Model ◽  
Vector Error Correction ◽  
Forecasting Error ◽  
Vector Error ◽  
Pass Through

Exchange Rate Change Effects on Indonesia’s Foodstuff Consumer Price IndexThe fluctuation in exchange rate Indonesia may have an impact on the price of imported goods both consumer goods (finished goods) and raw materials. The aim of this study is to analyze the impact of exchange rate changes on the Consumer Price Index (CPI) of foods categories and analyze the role of the exchange rate in explaining fluctuations in the CPI of food category in Indonesia. Econometric analysis using vector error correction model, indicates that the greatest degree of pass-through occurs in the consumer price index groups of milk and eggs. Contributions of exchange rate as the result of decomposition of forecasting error variance is largest in the meat category.Keywords: Exchange Rate Pass-Through; Consumer Price Index of Foodstu; Vector Error Correction ModelAbstrakPerubahan nilai tukar dapat berdampak pada harga barang-barang yang diimpor baik barang konsumsi (barang jadi) maupun bahan baku. Penelitian ini bertujuan untuk menganalisis dampak perubahan nilai tukar terhadap Indeks Harga Konsumen (IHK) kelompok bahan makanan dan menganalisis peranan nilai tukar dalam menjelaskan fluktuasi IHK bahan makanan di Indonesia. Analisa ekonometri menggunakan vector error correction model, menunjukkan bahwa derajat pass-through terbesar terjadi pada kelompok indeks harga konsumen susu dan telor. Kontribusi nilai tukar hasil decomposition of forecasting error variance terbesar terjadi pada kelompok daging.

scholarly journals Analysis of Internal and External Determinant Variables towards Profitability of Islamic Banking in Indonesia (2014-2020)

2021 ◽  
Vol 4 (1) ◽  
pp. 18-34
Author(s):  
Febri Ramadhani ◽  
Muhammad Rizkan
Keyword(s):  
Negative Relationship ◽  
Banking System ◽  
Islamic Banking ◽  
Correction Model ◽  
Factors Affecting ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Relationship Of

Indonesia is a country that adheres to a dual banking system, namely conventional and Islamic Banking. The growth rate of Islamic banking in the last three years is higher than conventional banking. However, in total assets, Islamic banking is still far behind conventional banking. Therefore, it is necessary to study further the performance of Islamic banking reflected in its profitability. So, it becomes an alternative input in determining Islamic banking policies. This study aims to know the factors affecting the profitability (ROA) of Islamic Banking in Indonesia. The data used are the 2014-2020 monthly data in the amount of 79 data. The method used in this study is a Vector Error Correction Model (VECM) to determine the effect of long-run and short-run relationships. The results of the study showed that the long-run relationship of the NPF variable affected and was significant positive toward ROA, CAR affected and was significant negative toward ROA, while the inflation variable had a negative relationship and not significant toward ROA. The results of the short-run relationships showed that the NPF and CAR variables positively affected ROA, while the inflation variable did not significantly affect the ROA.

Public debt, corruption and shadow economy in Africa: an empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Victor Owusu-Nantwi ◽  
Gloria Owusu-Nantwi
Keyword(s):  
Public Debt ◽  
Shadow Economy ◽  
African Countries ◽  
Correction Model ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Policies And Programs

PurposeThe purpose of this paper is to examine the effect of corruption and shadow economy on public debt in 51 African countries. In addition, the study explores the causal linkage between corruption, shadow economy and public debt.Design/methodology/approachThe study employs vector error correction model and Kao cointegration test to examine the long-run relationship between corruption, shadow economy and public debt in Africa.FindingsThe study finds a positive and statistically significant relationship between corruption and public debt. Further, the study reports a positive and statistically significant effect of shadow economy on public debt. In the short run, the study finds a unidirectional causal relationship between corruption, shadow economy and public debt with the direction of causality running from corruption and shadow economy to public debt, respectively.Practical implicationsThis study recommends that countries should pursue policies and programs that would provide resources to agencies tasked with the responsibility of fighting corruption. This would ensure that countries have effective institutions that curb vulnerabilities to corruption and reduce the size of the shadow economy and public debt.Originality/valueThis study contributes to the literature by showing how corruption and shadow economy affects public debts of African countries. To the best of the author's knowledge, this is the first attempt to examine this relationship in the context of Africa.

scholarly journals PENGARUH STRUKTUR KEPEMILIKAN DAN STRUKTUR MODAL TERHADAP HARGA SAHAM

2018 ◽  
Vol 14 (2) ◽  
pp. 89
Author(s):  
Rani Raharjanti ◽  
Nur Setyowati
Keyword(s):  
Stock Price ◽  
Panel Cointegration ◽  
Managerial Ownership ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Cointegration Tests ◽  
Short Run ◽  
Equity Ratio

This paper aims to investigate the short and long run behavior of ownership structure, capital structure and Indonesian Stock Price over the period from 2007 to 2016. To capture the long run relationships, we used the panel cointegration by Pedroni (1999, 2000, 2004), while the short run relationship are measured by Vector Error Correction Model (VECM). The main findings are as follows. First, the result of most results of Pedroni’s panel cointegration tests, suggest the null hypothesis of no cointegration is rejected. In consequence, this result suggests that there is a cointegration between stock price, managerial ownership, institutional ownership, public ownership, debt to equity ratio and earnings per share. Second, the results of VECM indicate that in the short run, only managerial ownership that will influence the stock price.

scholarly journals An Econometric Analysis of Inflation and Unemployment in Lebanon: A Vector Error Correction Model (VECM)

2018 ◽  
Vol 10 (2) ◽  
pp. 133
Author(s):  
Mohammad Khanssa ◽  
Wafaa Nasser ◽  
Abbas Mourad
Keyword(s):  
Phillips Curve ◽  
Vector Error Correction Model ◽  
Econometric Modeling ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Causality Relationship ◽  
The Relationship

This paper uses econometric modeling to test the nature of the relationship between unemployment and inflation in Lebanon throughout the period 1993-2014. It takes the Phillips curve relationship as a reference for the tests. Cointegration, Granger causality and VECM were used to test the relationship both in the short and in the long run. The study resulted in finding out that the Phillips curve relationship doesn’t hold in Lebanon in the short run and came to a conclusion that there is a one-way causality relationship in the long run from unemployment to inflation and not in the opposite direction.

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