scholarly journals The causal relationship between current account and financial account balance in Western Balkan countries: The case of Serbia

Bankarstvo ◽  
2020 ◽  
Vol 49 (4) ◽  
pp. 9-41
Author(s):  
Radovan Kovačević
Keyword(s):  
Current Account ◽  
Global Financial Crisis ◽  
Western Balkans ◽  
Causality Test ◽  
Vec Model ◽  
Long Run ◽  
Financial Account ◽  
Causality Relationship ◽  
Johansen Cointegration Test ◽  
The Global Financial Crisis

The Western Balkans (WB) countries registered an increase in the current account (CA) deficit and net capital inflow in the period before the outbreak of the global financial crisis of 2008. The external debt of these countries has increased. The aim of this paper is to examine the causality relationship between the CA and financial accounts (FA) balance of Serbia. A framework for the empirical analysis is the vector autoregression (VAR) model and the vector error correction (VEC) model. Using the Johansen cointegration test, we find the existence of a long-run causality relationship between these two variables. The estimated long-run coefficient on the FA variable as an independent variable shows that an increase of Serbia's FA balance by 1% leads to an increase in the CA deficit of Serbia by 0.58%. Applying the Granger causality test, it was found that causality runs from FA to the CA, which implies recommendations for economic policymakers. The finding indicates the need to continuously check the sustainability of the CA deficit of Serbia, as well as to monitor the level of presence of foreign capital in the Serbian economy.

scholarly journals An examination of the causality relationship between current and financial accounts in Turkey

2020 ◽  
Vol 65 (224) ◽  
pp. 7-28
Author(s):  
Özcan Karahan ◽  
Olcay Çolak
Keyword(s):  
Current Account ◽  
Capital Inflows ◽  
Current Account Balance ◽  
Vector Error Correction ◽  
Vector Error ◽  
Vec Model ◽  
Financial Account ◽  
Causality Relationship ◽  
Johansen Cointegration Test ◽  
The Current Account

In today?s economies, where commerce and the economy are strongly interrelated, the relationship between current account and financial account has become crucial. However, economists have not reached a consensus regarding the direction of the causality relationship between capital and current accounts. Our study aims to contribute to the literature by determining the direction of the causality relationship between current and financial accounts in Turkey, applying the Johansen Cointegration Test and the Vector Error Correction (VEC) model to quarterly data for 2002-2018. The empirical results show that the causality relationship in Turkey runs from the financial account to the current account. This means that capital inflows to Turkey have the potential to deteriorate the current account balance. Therefore, it is of crucial importance that Turkey implement policies to manage the financial account in order to provide a current account balance.

Causal Nexus Between Crude, Gold, Dollar and Stock Markets in India: Empirical Explorations Before, During and After the Global Recession

2021 ◽  
pp. 001946622110360
Author(s):  
T. G. Saji
Keyword(s):  
Stock Markets ◽  
Global Financial Crisis ◽  
Asset Markets ◽  
Asymmetric Structure ◽  
Causality Test ◽  
Portfolio Returns ◽  
Global Recession ◽  
Long Run ◽  
Short Run ◽  
The Global Financial Crisis

This research study empirically examines the price linkages among oil, dollar, gold and stock markets in India over period from 1999:1 to 2019:12. We employ cointegrated vector error correction model (VECM) and Granger causality test to study the long-run and short-run relationships between commodity and financial markets before, during and after the global financial crisis. Our analysis finds the dependency on price movements in asset markets is time-varying and countercyclical in India. Findings suggest the asymmetric structure of price correlations among asset markets across three temporal periods on either side of the crisis. Our study offers useful insights into the strategic asset allocations to investors in response to economic cycles, to help optimise potential portfolio returns and provide protection towards some downside risks. JEL Codes: C58, D53, F51

Effect of economic indicators, biomass energy on human development in China

2021 ◽  
pp. 0958305X2110220
Author(s):  
Ngo Thai Hung
Keyword(s):  
Human Development ◽  
Global Financial Crisis ◽  
Trade Openness ◽  
Biomass Energy ◽  
Wavelet Coherence ◽  
Causality Test ◽  
Frequency Domains ◽  
Bidirectional Relationship ◽  
The Global Financial Crisis

Previous studies ignored the distinction between short, medium, and long term by decomposing macroeconomic variables and human development index at different time scales. We re-visit the causal association between biomass energy (BIO), economic growth (GDP), trade openness (TRO), industrialization (IND), foreign direct investment (FDI), and human development (HDI) in China on a quarterly scale by scale basis for the period 1990 to 2019 using the tools of wavelet, i.e., wavelet correlation, wavelet coherence and scale by scale Granger causality test. The main findings uncover that IND, TRO, GDP, and BIO positively drive the HDI at low and medium frequencies, while FDI negatively impacts HDI during the sample period. Additionally, there is a bidirectional relationship between GDP and HDI at different time and frequency domains. Specifically, we discover that the positive co-movement is more robust in the aftermath of the global financial crisis, particularly for HDI, BIO, GDP, and TRO at medium frequencies throughout the period under research. Our empirical insights have significant implications for achieving human development sustainability in China.

scholarly journals Cointegration of Stock Market and Exchange Rate in Indonesia

2019 ◽  
Vol 2 (2) ◽  
pp. 125 ◽  
Author(s):  
Pribawa E Pantas ◽  
Muhamad Nafik Hadi Ryandono ◽  
Misbahul Munir ◽  
Rofiul Wahyudi
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Capital Market ◽  
Global Financial Crisis ◽  
The Us ◽  
Us Dollar ◽  
The Exchange Rate ◽  
Johansen Cointegration Test ◽  
The Global Financial Crisis

This study aims to determine the long-term relationship between stock market and exchange rate in Indonesia. The research method used is Johansen cointegration test. The results of this study found no cointegration between the variables tested. Thus the exchange rate, JII, and IHSG have no relationship in the long term. The fluctuation of the rupiah exchange rate in recent years did not generally affect the performance of stock indices especially after the global financial crisis of 2008. This shows the capital market in Indonesia has a good performance so that it is not so sensitive to the sentiment of the decline in the rupiah against the US dollar. This finding is in line with the findings of Syahrer (2010) which states the exchange rate has no effect on the stock market.

scholarly journals THE IMPACT OF MONEY ON OUTPUT IN CZECH REPUBLIC AND ROMANIA

2018 ◽  
Vol 19 (1) ◽  
pp. 20-41 ◽  
Author(s):  
Mihaela SIMIONESCU ◽  
Adam P. BALCERZAK ◽  
Yuriy BILAN ◽  
Anna KOTÁSKOVÁ
Keyword(s):  
Czech Republic ◽  
Global Financial Crisis ◽  
Causality Test ◽  
Developed Country ◽  
Developed Economies ◽  
Long Run ◽  
Short Run ◽  
Almost All ◽  
Vector Error Correction Models ◽  
The Impact

The problem of relationship between output and money has become again a subject of special interests of economists after the most recent global financial crisis and monetary stabilization policies applied by central banks of almost all developed economies. In this context, the main aim of this paper is to assess the relation between GDP and the most important monetary variables in two countries: Romania and Czech Republic over the period of 1995:Q1 – 2015:Q4. The choice of these economies was deliberate. The selected countries are different from the viewpoint of rate and results of transformation from the centrally planned to market economy, which have influenced their current economic environment stability. Czech Republic is currently classified as middle or even developed country, whereas Romania is still considered as a developing economy. Thus, differences between these two countries make them interesting in the case of comparative studies. In the empirical part of our research the vector error correction models (VECM) were applied. The main findings of the article are the following: in Romania, there is a short-run causality from money supply (M3) to GDP and a long-run relationship between GDP, internal credit and M3. According to Granger causality test, the rate of M3 in Romania was a cause for economic. In Czech Republic, there is a short-run causality from M3 to GDP and a long-run causality between GDP, internal credit and M3. Thus, the results contradict the money neutrality hypothesis in post-transformation Central European economies.

scholarly journals Relationship Economic Growth with Foreign Direct Investment

2020 ◽  
Vol 3 (3) ◽  
pp. 49-68
Author(s):  
Prince Charles Heston Runtunuwu
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Positive Impact ◽  
Secondary Data ◽  
Causality Test ◽  
Long Run ◽  
Causality Relationship ◽  
The One

This study aims to determine the one-way causality relationship between foreign investment and economic growth, a one-way causality relationship between economic growth and foreign investment, and a two-way causality relationship between foreign investment and economic growth in Indonesia. This was conducted in Indonesia, the data are secondary data taken using the method time series from 1971 to 2018 from the official websites, the Investment Coordinating Board, and literature sources, Foreign Investment and Gross Domestic Product. (1) in the long run the Economic Growth variable has a significant effect on Foreign Direct Investment, and vice versa; and (2) the Foreign Direct Investment variable has a significant effect on Economic Growth; (3) in the short term, the Economic Growth variable has an influence on Foreign Direct Investment, and vice versa; and the Foreign Direct Investment variable has an influence on Economic Growth. It is possible to have a better long-term relationship, bringing positive impact on economic growth in Indonesia when investment in Indonesia increases. Conversely, when economic growth decreases, it means that foreign investment is also low. Granger Causality test, shows a two-way causality relationship between Economic Growth and Foreign Direct Investment and vice versa. It is necessary to maintain growth to attract foreign direct investment, as well as foreign investment. Investment climate needs to be improved enabling to invest in Indonesia.

scholarly journals The Determinants of CDS Spreads in Multiple Industry Sectors: A Comparison between the US and Europe

Risks ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 89 ◽  
Author(s):  
Jatin Malhotra ◽  
Angelo Corelli
Keyword(s):  
Interest Rates ◽  
Global Financial Crisis ◽  
Causality Test ◽  
Macroeconomic Variables ◽  
Credit Default ◽  
The Us ◽  
Before And After ◽  
The Global Financial Crisis ◽  
Industry Sectors ◽  
The Relationship

The paper analyzes the relationship between the credit default swaps (CDS) spreads for 5-year CDS in Europe and US, and fundamental macroeconomic variables such as regional stock indices, oil prices, gold prices, and interest rates. The dataset includes consideration of multiple industry sectors in both economies, and it is split in two sections, before and after the global financial crisis. The analysis is carried out using multivariate regression of each index vs. the macroeconomic variables, and a Granger causality test. Both approaches are performed on the change of value of the variables involved. Results show that equity markets lead in price discovery, bidirectional causality between interest rate, and CDS spreads for most sectors involved. There is also bidirectional causality between stock and oil returns to CDS spreads.

scholarly journals Explaining India’s current account deficit: a time series perspective

2019 ◽  
Vol 26 (1) ◽  
pp. 117-138
Author(s):  
Harendra Kumar Behera ◽  
Inder Sekhar Yadav
Keyword(s):  
Current Account ◽  
Unit Root ◽  
Current Account Deficit ◽  
Structural Break ◽  
Current Account Balance ◽  
Fiscal Deficit ◽  
Causality Test ◽  
Content Type ◽  
Financial Account ◽  
Cointegration Tests

Purpose The purpose of this paper is to examine the issue of high current account deficit (CAD) from various perspectives focussing its behaviour, financing pattern and sustainability for India. Design/methodology/approach To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger non-causality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM. Findings The study found that the widening of CAD is due to fall in household financial savings and corporate investments. Also, it was found that a large part of India’s CAD has been financed by FDI and portfolio investments which are partly replaced by short-term volatile flows. The unit root and cointegration tests indicate a sustainable current account for India. Further, econometric analysis reveals that India’s current account is driven by fiscal deficit, terms of trade growth, inflation, real deposit rate, trade openness, relative income growth and the age dependency factor. Practical implications Since India’s CAD has widened and is expected to widen primarily due to rise in gold and oil imports, policy makers should focus on achieving phenomenal export growth so that a sustainable current account is maintained. Also, with rising working-age and skilled population, India should focus more on high-value product exports rather than low-value manufactured items. Further, on the structural side it is important to correct fiscal deficit as it is one of the important factors contributing to large CAD. Originality/value The paper is an important empirical contribution towards explaining India’s CAD over time using latest and comprehensive data and econometric models.

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