scholarly journals Testing the Validity of the Long Run Neutrality of Money in Nigeria

2021 ◽  
Vol 21 (2) ◽  
pp. 148-167
Author(s):  
Ephraim Ugwu ◽  
Christopher Ehinomen ◽  
Philip Nwosa ◽  
Olubunmi Efuntade
Keyword(s):  
Error Correction ◽  
Money Supply ◽  
Phillips Curve ◽  
Correction Term ◽  
Negative Sign ◽  
Fine Tuning ◽  
Annual Data ◽  
Long Run ◽  
Effect Model ◽  
Short Run

Abstract Research background: There is no consensus among scholars on the interaction effect between money supply, price, and wages despite various studies conducted to that effect. Purpose: This study investigates whether the neutrality of money assumption holds in the long run in Nigeria, using annual data from 1970 to 2018. Research methodology: The study utilized the Johansen cointegration test and the Vector Error Correction (VECM) approach for estimation. Results: The results from the Phillips curve model contradict the classical school of economics assumption that money is neutral in the long run. This implies that in the Nigerian economy, money is not neutral in the long run. The long run Fishers’ effect model shows that the coefficient of LOG (CPI) exhibits a negative sign and is statistically significant at a 5% significant level, thus contradicting the hypothesis which states that a one percent increase in consumer prices will lead to an increase in the rate of interest by one percent. The coefficient of nominal money supply indicates a negative sign and insignificant statistically on the interest rate. The Short-run estimated results showed that the coefficient of the error correction term ECM (–1) indicates a negative sign and is significant statistically in the Fishers’ effect model. The result shows the actual and equilibrium values are corrected with adjustment speeds equal to 31% yearly. Novelty: The study recommends that the Central Bank of Nigeria should ensure an effective implementation of monetary targeting measures in fine-tuning the economy and curbing inflationary pressures.

Money Supply and Equity Price Movements During the Liberalized Period in India

2018 ◽  
Vol 21 (1) ◽  
pp. 108-123
Author(s):  
Tarak Nath Sahu ◽  
Krishna Dayal Pandey
Keyword(s):  
Error Correction ◽  
Money Supply ◽  
Stock Prices ◽  
Function Analysis ◽  
Correction Term ◽  
Impulse Response Function ◽  
Decomposition Analysis ◽  
Causality Test ◽  
Long Run ◽  
Short Run

This study attempts to contribute towards the prevalent understanding and the extant literatures on the effect of changes in money supply as an important monetary policy shock on the stock prices of India by using a time-varying parameter models with vector autoregressive specification during the period 1996 to 2016. The result of Johansen’s cointegration test suggests a significantly positive long-run co-movement between the growth of money supply and stock prices in India but the result of vector error correction model (VECM) does not exhibit any significant relationship in short run. Further, the error correction term of the VECM reveals a long-run unidirectional causality from money supply to stock prices. However, the Granger causality test confirms that the growth rate of money supply does not cause the stock market movement in India in short run. Finally, the variance decomposition analysis reveals that both the Indian stock markets are strongly exogenous in the sense that shocks to money supply explain only a small portion of the forecast variance error of the market indices. Again, the impulse response function analysis indicates that a positive shock in money supply has a small but persistently positive effect on stock prices in India.

The Impact of Foreign Aid on Economic Growth in Ethiopia

2020 ◽  
Author(s):  
Belay Asfaw Gebresilassie ◽  
Girma Gezmu Gebre
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Error Correction ◽  
Negative Impact ◽  
Correction Term ◽  
Annual Data ◽  
Close Monitoring ◽  
Long Run ◽  
Short Run ◽  
The Impact

Abstract This study analyzes the impact of foreign aid on economic growth in Ethiopia based on time series annual data for the period of 1974 to 2017. Autoregressive distributed lag Approach to Co-integration and Error Correction Model was applied in order to investigate the long-run and short-run relationship between dependent and the independent variables. The empirical results from econometrics model reveal that foreign aid has negative impact on economic growth in both long run and short run and statistically significant at 1 percent significant level. The negative and significant error correction term shows that the short run disequilibrium adjusts to its long run equilibrium by 84.6 percent each year. The important policy implication of this study suggests that more effort has to be made to improve the negative impact of foreign aid, mainly because of existence of poor institutional arrangement that contributes the fund to unproductive sectors. The government has to ensure, a close monitoring and consistent management strategies, which is used to avoid misallocation and mismanagement problems and has to ensure that foreign aid is linked to the productive sectors to optimize the benefits.

Money Supply-Economic Growth Nexus: Evidence from a Landlocked Country

2020 ◽  
Vol 2 (1) ◽  
pp. 106-115
Author(s):  
Tilak Singh Mahara
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Correction Term ◽  
Policy Instruments ◽  
Special Role ◽  
Real Gdp ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
The Impact

Background: There is special role of money in the economy due to its astonishing importance as change in the amount of it can have a significant effect on the major macroeconomic variables. Money supply is generally considered as policy-determined phenomenon. Like in all the nations, macroeconomic stability of Nepal also depends on the variation in the quantity of money. Objective: The principle objective of the study is to examine the impact of money supply on the economic growth of Nepal. Methodology: This study applies the ARDL approach to cointegration. Bounds test (F-version) has been carried out to determine the existence of long-run relationship between variables. Results: The empirical results pointed out that there is positive and significant long-term relationship between money supply and real economic growth in Nepal. Causality result reveals that there is unidirectional causality from money supply (M2) to Real GDP. The error correction term is found negative and statistically significant suggesting a correction of short-run disequilibrium within two and a half years. Conclusions: The study concludes that increase in the money supply helps to increase the real economic growth in Nepal. So, money supply and real GDP are associated in the long-run.  Implications: The implication of the study is that, real economic growth in Nepal can be achieved if Nepal Rastra Bank emphasized on monetary policy instruments which help to increase the flow of money supply both in the short and long run.

scholarly journals DETERMINAN TRANSAKSI NONTUNAI DI INDONESIA DENGAN PENDEKATAN ERROR CORRECTION MECHANISM (ECM) MODEL

2019 ◽  
Vol 3 (1) ◽  
pp. 62-77 ◽  
Author(s):  
Zulfa Nur Fajri Ramadhani ◽  
Siskarossa Ika Oktora ◽  
Indonesian Journal of Statistics and Its Applications IJSA
Keyword(s):  
Error Correction ◽  
Money Supply ◽  
Secondary Data ◽  
Long Run ◽  
Error Correction Mechanism ◽  
Short Run ◽  
Cash Transaction ◽  
Monthly Period ◽  
Private Savings ◽  
Positive Effect

Consumption is an activity that must be done by everyone. In order to consume something, a transaction is needed to get the goods or services desired. One kind of transaction that is used by many people nowadays is non-cash transaction. Since Bank Indonesia established Gerakan Nasional Non Tunai (GNNT) in August 2014, the value of non-cash transactions exceeds the value of cash transactions. It happenned because people prefer non-cash to cash transaction which is easier, safer, more practical, and more economical. Besides, an increase in non-cash transactions can also be influenced by other factors. Therefore, a study is conducted to analyze the determinants of non-cash transactions from the macro side by using Error Correction Mechanism (ECM). The data used in this study are secondary data from Bank Indonesia and Badan Pusat Statistik with monthly period from January 2010 until December 2017. The results showed that in the long run, private savings and BI rate have positive effect on non-cash transactions. In the short run, private savings and money supply have positive effect on non-cash transactions. While inflation does not affect non-cash transactions, both in the short and long run.

scholarly journals Analysis of Indonesian Tax Revenue

2017 ◽  
Vol 1 (01) ◽  
pp. 71
Author(s):  
Amalia Wijayanti ◽  
Firmansyah Firmansyah
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Government Spending ◽  
Inflation Rate ◽  
Correction Term ◽  
Error Correction Model ◽  
Tax Revenue ◽  
Correction Model ◽  
Long Run ◽  
Short Run

<p>This study analyzes the long-run and short-run effect of macroeconomic factors, such as real Gross Domestic Product (GDP), inflation rate, exchange rate and government spending on Indonesia’s tax revenue during 1976-2013, by utilizing the Error Correction Model (ECM). The finding of the study demontrates that in the long-run; the real GDP, exchange rate, and government spending affect Indonesia’s tax revenue, except the inflation rate. In short-run, Indonesia’s tax revenue statisically affected by government spending, while others variable do not influence Indonesia’s tax revenue. Error Correction Term (ECT) coefficient is 0.221, explains incompatibility tax revenue occur in long-run is corrected of 22 percent in one period.</p><p><br />JEL Classification: E01, E20, H20<br />Keywords: Error Correction Model, Macroeconomic, Tax revenue</p>

scholarly journals Effect of Money Supply on Inflation in Nepal: Empirical Evidence from ARDL Bounds Test

2021 ◽  
Vol 2 (1) ◽  
pp. 84-98
Author(s):  
Uttam Lal Joshi
Keyword(s):  
Money Supply ◽  
Correction Term ◽  
Policy Makers ◽  
Ardl Bounds Test ◽  
Long Run ◽  
Short Run ◽  
Bounds Test ◽  
Monetary And Fiscal Policy ◽  
Relationship Of ◽  
The Impact

This study explores the long-run and short-run relationship of money supply and inflation in the context of Nepal. Data are extracted from Economic Survey of Nepal since 1964/65 to 2018/19 to obtain the relationship. ARDL Bounds test is used for cointegration test where the dependent variable is inflation and money supply and Indian inflation are taken as independent variables to estimate the model. Result shows the long-run cointegration between the variables reveals long-run relationship and the error correction term is found to be negative (-0.98) and significant (p=0.02). The study suggests that policy makers can reduce the impact of money supply on inflation and should focus on the control of inflation adopting monetary and fiscal policy mechanism. Creeping inflation in the pace of economic growth is desirable and successful cure of inflation will help in stability and growth of the country.  

scholarly journals Inflation and Economic Growth Paradox: A Co-integration Analysis in Nepal

2021 ◽  
Vol 2 (3) ◽  
pp. 1-12
Author(s):  
Uttam Lal Joshi
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Correction Term ◽  
Unit Roots ◽  
Threshold Level ◽  
Long Run ◽  
Augmented Dickey Fuller ◽  
Short Run ◽  
Lag Model ◽  
Monetary And Fiscal Policy

The empirical study investigates the relationship between economic growth, inflation and broad money supply in Nepal. Data since 1965 to 2020 are taken from World Bank and Autoregressive Distributive Lag Model is used to find cointegration between the variables to show long run and short run dynamics. Augmented Dickey- Fuller and Philips- Perron tests are conducted to find the unit roots in the model. Result shows the error correction term is negative (-0.75) and significant (0.0043) where bounds test supports the long run cointegration and error correction model suggest the speed of adjustment. The estimated regression equation is found robust and stable (serial correlation and heteroskedacity tests).  The research shows inflation has short run and long run impact on economic growth so inflation should be kept within its threshold level from sound monetary and fiscal policy mechanism.

scholarly journals THE STUDY OF RELATIONSHIP BETWEEN TOBIN’S Q AND US STOCK PERFORMANCE OF SELECTED FIRMS

2020 ◽  
Vol 1 (2) ◽  
pp. 85-94
Author(s):  
Papiya Ghosh ◽  
Brishti Guha
Keyword(s):  
Stock Prices ◽  
Correction Term ◽  
Unit Roots ◽  
Annual Data ◽  
Upward Movement ◽  
Tobin’S Q ◽  
Tobin's Q ◽  
Long Run ◽  
Cointegration Tests ◽  
Short Run

The objective of study was to test the dynamic effects of changes in Tobin’Q on stock prices of selected 249 US public companies of different industry categories. Panel unit roots tests and cointegration tests are implemented. Next, DOLS and GMM models are estimated. Annual data for the 2004-2012 period are used for the above selected US companies. Panel unit root tests provide somewhat mixed evidence of non-stationarity of both variables. There is clear evidence of cointegration between the above variables. The negative coefficient of the error-correction term shows convergence toward long-run equilibrium, though at slow pace. The estimates also reveal shortrun net positive interactive feedback effects between the variables. Both DOLS and GMM estimates display similar picture of overvaluation of stocks in terms of upward movement in Tobin’s Q beyond 0-to-1 range. For most parts of the sample period, the US stock market was in declining mode due to heightening of economic uncertainties during the Great Recession and several years beyond. Tobin’s Q should be improved to boost stock prices. This is more of a long-run phenomenon. In the short run, both reinforce each other. The topic is unique and the existing literature on this topic is scant. Relatively new econometric techniques have been applied for estimation using panel data. The results are quite insightful, in our view.

scholarly journals Do Diaspora Remittances Guarantee Food Security in Nigeria?

2021 ◽  
pp. 36-53
Author(s):  
Onime, Bright Enakhe ◽  
E. Kalu, Ijeoma
Keyword(s):  
Food Security ◽  
Error Correction ◽  
Correction Term ◽  
Secondary Data ◽  
Vector Error Correction ◽  
Current Period ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Security Challenge

The burgeoning remittances into Nigeria and their effect on the economy have received renewed attention in recent times. Literature has suggested the existence of a relationship between remittances and food security. The extent to which this is true for Nigeria is uncertain. Using Vector Error Correction Model (VECM), this study examined the link between remittances and food security using secondary data for the period 1980 to 2018. Findings revealed a robust long and short-run relationship between remittances and food security. In the short-run, a positive and significant relationship was found between remittances and food security in the current period such that a 1 per cent increase in remittances was associated with a 5.08 per cent improvement in food security. In the long-run, a cointegrated relationship was observed as the error correction term depicting this relationship was well-behaved, properly signed and significant indicating that any previous period deviation in long-run equilibrium is corrected in the current period at an adjustment speed of 28.8 per cent. In addition, the Granger test suggests a unidirectional causality running from remittances to food security such that past values of remittances determined food security during the period investigated. Consequent to the findings, the study recommended with a caveat, the design and proper implementation of a diaspora and remittances policy to cater for the welfare of Nigerians in the diaspora to improve remittance receipts and by implication, food security. However, since remittances alone cannot guarantee food security in Nigeria, this study further recommends a holistic and multidimensional approach to address the food security challenge and close the food deficit gap.

scholarly journals KETERKAITAN INDIKATOR MONETER SYARIAH TERHADAP PENDAPATAN DOMESTIK BRUTO

2012 ◽  
Vol 1 (1) ◽  
Author(s):  
Yunie Fitriani ◽  
Roikhan Mochamad Aziz ◽  
Fitri Amalia
Keyword(s):  
Gross Domestic Product ◽  
Error Correction ◽  
Money Supply ◽  
Islamic Banking ◽  
Short Term ◽  
Correction Model ◽  
Independent Variables ◽  
Long Run ◽  
Short Run

The purpose of this research is to analyze in the short term and long term between the four independent variables including: the financing of Islamic banking, the Jakarta Islamic Index (JII), the Islamic Bank Indonesia certificates (SBIS), and the money supply (JUB) to gross domestic product (GDP). This research uses the test to notice any indications of Granger was awarded a long-term relationship and Error Correction Model to see the existence of a short-term relationship. The result shows that in the short-run only SBIS that have a short-run relationship to GDP. In the long-run all the independent variables can explain the long-run relationship to GDPDOI: 10.15408/sjie.v1i1.2595 

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