scholarly journals Cointegration and Causality: An Application to Major Mango Markets in Pakistan

2009 ◽  
Vol 14 (1) ◽  
pp. 85-113 ◽  
Author(s):  
Abdul Ghafoor ◽  
Khalid Mustafa ◽  
Khalid Mushtaq ◽  
Abedullah Abedullah
Keyword(s):  
Error Correction ◽  
Granger Causality Test ◽  
Response Analysis ◽  
Model Data ◽  
Causality Test ◽  
Correction Model ◽  
Price Signals ◽  
Long Run ◽  
Livestock Marketing ◽  
The Stability

Mangoes are one of Pakistan’s most important fruits; the country is the world’s fourth largest producer and exporter of mangoes. Integrated markets are those where price signals are transferred from one to another, allowing physical arbitrage to adjust any disturbances in these markets; integrated markets are thus a sign of efficiency. From this viewpoint, we investigate domestic integration among ten major mango markets, i.e., Lahore, Faisalabad, Multan, Gujranwala, Sargodha, Karachi, Hyderabad, Sukkur, Peshawar, and Quetta employing Johansen’s cointegration approach and error correction model. Data on monthly wholesale prices data (PRs/100 kg) were obtained from the agricultural and livestock marketing advisor, Government of Pakistan. The results of the study confirm the presence of integration among major mango markets in Pakistan. These markets were able to adjust for 16 to 68% of disequilibrium in one month, implying that it takes almost two to six months to remove any disequilibrium and to move back to long-run equilibrium. The Granger causality test shows that the Karachi market has bidirectional causality with Lahore, Faisalabad, Multan, Hyderabad, and Sukkur, and a unidirectional relationship with the rest. An impulse response analysis was also conducted to check the stability of these markets given a standard error shock to the Karachi base market.

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.

Exports, financial development and economic growth in Pakistan

2014 ◽  
Vol 13 (2) ◽  
pp. 155-170 ◽  
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Error Correction Model ◽  
Causality Analysis ◽  
Bounds Testing ◽  
Causality Test ◽  
Correction Model ◽  
Content Type ◽  
Long Run

Purpose – This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan. Design/methodology/approach – The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach. Findings – The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. Originality/value – This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.

scholarly journals Exchange rate and Export of Bangladesh: Does Marshall-Lerner condition holds?

2022 ◽  
Vol 10 (1) ◽  
pp. 09-16
Author(s):  
Shovon Roy ◽  
Jonaed
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Error Correction Model ◽  
Series Data ◽  
Causality Test ◽  
Correction Model ◽  
Short Run ◽  
The Exchange Rate

Export is expected to have a favorable impact on GDP growth, and the exchange rate is expected to have a major impact on export and thus export earnings. The relationship between exchange rate and export is a hotly debated topic in macroeconomics, and the goal of this research is to see if the Marshall-Lerner condition holds incase of Bangladesh that is if devaluation of domestic currency increase export earnings. Explanatory variables of the model in the study are the exchange rate, foreign income (WGDP), and domestic income (DGDP). Cointegration approaches; Error Correction model, Granger Causality test are used in this study to estimate the long and short-run impacts. With time series data from 1973Q3 to 2018Q2, we used the Error Correction Model and the Granger Causality Test. The findings of VECM support short-run exchange rate and export adjustments. The bidirectional causality between exchange rate and export is established using the Granger causality test.

scholarly journals ANALISIS PENGARUH INDEKS HARGA KONSUMEN, JUMLAH UANG BEREDAR (M1), KURS RUPIAH, DAN INDEKS S&P 500 TERHADAP INDEKS HARGA SAHAM GABUNGAN: STUDI EMPIRIS PADA BURSA EFEK INDONESIA

2014 ◽  
Vol 3 (2) ◽  
Author(s):  
Heriyanto Heriyanto ◽  
Ming Chen
Keyword(s):  
Error Correction ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Error Correction Model ◽  
Vector Error Correction Model ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Spurious Regression ◽  
Vector Error

Penelitian ini bertujuan untuk menguji hubungan keseimbangan jangka panjang antara variabel makroekonomi (yang diproksi dengan variabel indeks harga konsumen, jumlah uang beredar, kurs rupiah terhadap dollar, dan Indeks S&P 500) dengan indeks harga saham gabungan (IHSG). Data bulanan variabel makroekonomi dan IHSG selama periode Januari 2005 – Desember 2013 digunakan untuk pengujian hubungan keseimbangan jangka panjang. Data penelitian dikumpulkan dengan metode dokumentasi yang terdiri dari variabel indeks harga konsumen, jumlah uang beredar, kurs rupiah terhadap dollar, Indeks S&P 500, dan IHSG. Setelah data dikumpulkan, data selanjutnya akan dianalisis dengan menggunakan analisis regresi berganda. Analisis pengujian residual (dari model regresi berganda) dengan pendekatan Granger Residual Test digunakan untuk memastikan tidak terjadi spurious regression (regresi palsu). Selanjutnya, analisis data dengan pengujian Johannsen Cointegration Test digunakan untuk menguji keberadaan hubungan keseimbangan jangka panjang antara variabel makroekonomi dan IHSG. Tahap akhir analisis data dilakukan dengan pengujian vector error correction model (VECM) dan Granger Causality Test yang bertujuan untuk menguji kemungkinan adanya hubungan biderectional (dua arah) antara variabel makroekonomi dan IHSG. Hasil pengujian menggunakan analisis regresi berganda menunjukkan bahwa variabel kurs rupiah terhadap dollar dan Indeks S&P 500 berpengaruh signifikan terhadap pergerakan indeks harga saham gabungan, sedangkan variabel indeks harga konsumen dan jumlah uang beredar tidak berpengaruh signifikan. Hasil pengujian dengan menggunakan Granger Residual Test menunjukkan bahwa tidak terdapat spurious regression. Sementara itu, hasil pengujian dengan menggunakan Johannsen Cointegration Test menunjukkan bahwa terdapat hubungan keseimbangan jangka panjang antara variabel makroekonomi dan IHSG. Terkait dengan kemungkinan adanya hubungan biderectional antara variabel makroekonomi dan IHSG, hasil pengujian dengan menggunakan Vector Error Correction Model (VECM) dan Granger Causality Test menunjukkan bahwa hubungan antara variabel makroekonomi dan IHSG adalah hubungan satu arah. Kata Kunci: spurious regression, granger residual test, granger causality test, vector error correction model.

scholarly journals Research on Influencing Factors of Tourism Income in Qinghai Province-Based on error correction model and Granger causality test

2021 ◽  
Vol 275 ◽  
pp. 02032
Author(s):  
Yi Chen ◽  
Jingqi Liu ◽  
Songkui Yin
Keyword(s):  
Error Correction ◽  
Granger Causality ◽  
Influencing Factors ◽  
Granger Causality Test ◽  
Error Correction Model ◽  
Causality Test ◽  
Correction Model ◽  
Qinghai Province ◽  
Tourism Revenue

As an important growth point of Qinghai’s economic development, tourism has become increasingly prominent in its contribution to the development of the national economy and has become one of the most dynamic industries in the province. Based on the relevant data from 2001 to 2018, this paper explores the influencing factors of tourism revenue in Qinghai Province by constructing an error correction model and combining Granger causality test. The research results show that there is a significant correlation between the total number of tourist visits, per capita GDP and traffic conditions, and the growth of tourism income in Qinghai Province. Among them, every 1% increase in the total number of tourist arrivals drives an average increase of 1.566% in tourism revenue; and the short-term elasticity of tourism revenue to the total number of tourist arrivals is slightly greater than the long-term elasticity.

scholarly journals Empirical Evidence of a Long-Run Relationship Between Agriculture and Manufacturing Industry Output in Nigeria

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824401989904
Author(s):  
Eze Simpson Osuagwu
Keyword(s):  
Manufacturing Industry ◽  
Agricultural Productivity ◽  
Granger Causality Test ◽  
Vector Error Correction Model ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Industry Output

This study investigates a long-run relationship between agriculture and manufacturing industry output in Nigeria using annual time series data from 1982 to 2017. The study employs Granger causality test, vector error correction model, and co-integration techniques to estimate the interdependence between agricultural productivity and manufacturing industry output. Empirical evidence from Granger causality test reveals a bidirectional relationship between agricultural productivity and manufacturing industry output. Although a positive and significant relationship exists in the short- and long-run estimates, a long-run divergence from the vector error correction model indicates that changes in agricultural productivity are not restored to equilibrium, given that macroeconomic factors distort the linkage. Policy implications suggest that macroeconomic stability is a necessary condition for agriculture and manufacturing industry output to foster economic growth.

An empirical study on the dynamic relationship between oil prices and Indian stock market

2014 ◽  
Vol 40 (2) ◽  
pp. 200-215 ◽  
Author(s):  
Tarak Nath Sahu ◽  
Kalpataru Bandopadhyay ◽  
Debasish Mondal
Keyword(s):  
Stock Market ◽  
Error Correction ◽  
Oil Prices ◽  
Granger Causality Test ◽  
Oil Price ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Indian Stock Market

Purpose – This study aims to investigate the dynamic relationships between oil price shocks and Indian stock market. Design/methodology/approach – The study used daily data for the period starting from January 2001 to March 2013. In this study, Johansen's cointegration test, vector error correction model (VECM), Granger causality test, impulse response functions (IRFs) and variance decompositions (VDCs) test have been applied to exhibit the long-run and short-run relationship between them. Findings – The cointegration result indicates the existence of long-term relationship. Further, the error correction term of VECM shows a long-run causality moves from Indian stock market to oil price but not the vice versa. The results of the Granger causality test under the VECM framework confirm that no short-run causality between the variables exists. The VDCs analysis revealed that the Indian stock markets and crude oil prices are strongly exogenous. Finally, from the IRFs, analysis revealed that a positive shock in oil price has a small but persistence and growing positive impact on Indian stock markets in short run. Originality/value – The study would enhance the understandings of the interaction between oil price volatilities and emerging stock market performances. Further, the study would enable foreign investors who are interested in Indian stock market helps in understanding the conditional relationship between the variables.

scholarly journals Monetary Policy and Long Run Economic Growth in Nigeria: An Application of the Vector Error Correction Mechanism

2021 ◽  
Vol 2 (2) ◽  
pp. 71-83
Author(s):  
Vincent Iorja GISAOR
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Error Correction ◽  
Money Supply ◽  
Granger Causality Test ◽  
Causality Test ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Error Correction Mechanism

The inability of most developing economies to use monetary policy to engender real economic growth in their countries prompted the researchers to empirically assess the impact of monetary policy on economic growth in Nigeria between 1980 and 2014. The study employed an econometrics approach making use of the ADF unit root test, Johansen cointegration, Vector error correction model, Pairwise granger causality test and variance decomposition. The Vector Error Correction Mechanism result shows a positive short and long run relationship between both narrow money supply and broad money supply and economic growth in Nigeria with model strength of 75%. The Pairwise granger causality test shows a bi-directional causality between broad money supply and economic growth in Nigeria and was statistically significant at 5% level of confidence. Recommendations were for the government to use her contractionary monetary efforts and implement relevant policies to curtail the inverse effect of the persistent variation in the value of exchange rate, price level and interest rate in Nigeria and adequate regulation of the quantity of money in circulation to avoid hyperinflation and other unpredictable monetary volatilities.

scholarly journals The Causality between Gross Fixed Capital Formation, Trade Deficit, Exchange Rate, and the Economic Growth of Pakistan

2020 ◽  
Vol 9 (4) ◽  
pp. 138-147
Author(s):  
SALMA ZAHIR ◽  
KAUSER HAYAT ◽  
AFTAB HAIDER
Keyword(s):  
Exchange Rate ◽  
Gross Domestic Product ◽  
Error Correction ◽  
Granger Causality ◽  
Trade Deficit ◽  
Granger Causality Test ◽  
Fixed Capital ◽  
Causality Test ◽  
Correction Model ◽  
Fixed Capital Formation

The research paper studies the causal link between gross domestic product, gross fixed-capital formations, exchange rate, and trade deficits in Pakistan from 1986 to 2013 with time serial data. ADF and Phillip Perron tests are recycled for stationary and at the first difference, each variable is unified. According to the Johansen Co-integration test, the presence of longer-term Co-integration among variables is displayed, and the Error Correction model expresses that 49.27 % of short-term uncertainty is adjusted in long-term equilibrium. Moreover, the Granger causality test presented causality among the variables. While the conclusion showed that such variables have unidirectional causation. Keywords: Trade Deficit, Exchange Rate, Gross Fixed Capital Formation, Gross Domestic Product, ADF, Phillip Perron, Johansen Co-integration, Error Correction model, & Granger Causality test.

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