Long-run drivers and integration in interprovincial Canadian housing price relations

Purpose This paper aims to examine the integration of housing markets in Canada by examining housing price data (1999–2016) of six metropolitan areas in different provinces, namely, Calgary, Vancouver, Winnipeg, Toronto, Montreal and Halifax. The authors test for cointegration, driver cities of long-run relationships, long-run Granger causality and instantaneous causality in light of the global financial crisis (GFC) (2007–2008). Design/methodology/approach The authors use Johansen’s system cointegration approach with structural breaks. Moving average representation is used for common stochastic trend(s) analysis. Finally, the authors apply vector error correction model-based Granger causality and instantaneous causality. Findings Cities’ housing prices are in long-run equilibrium. Post-crisis Canadian housing markets became more integrated. The Calgary, Vancouver, Toronto and Montreal markets drive the Canadian housing market, leading all cities toward long-run equilibrium. Strong long-run Granger causality exists, but the authors observe no instantaneous causality. Price information takes time to disseminate, and long-run price adjustments play a significant role in causation. Practical implications The findings of cointegration increasing after the GFC and strong lead–lag can be used by investors to arbitrage and optimize portfolios. This can also help national and local policymakers in mitigating risk. Incorporating these findings can lead to better price forecasting. Originality/value This study presents many novelties for the Canadian housing market: it is the first to use repeat-sales regional pricing indices to test long-run behaviors, conduct common stochastic trend analyzes and present causality relations.

A Comparative Analysis of Dynamic Interactions between European and Indonesian Cocoa Markets during the 2008 Global Financial Crisis and the 2011 European Debt Crisis

This study empirically explores the dynamic interactions between the European and Indonesian cocoa markets during the 2008 global financial crisis (GFC) and the 2011 European debt crisis (EDC) using a battery of time series approaches of cointegration and multivariate Granger causality. The study documented a long-run equilibrium between the European and Indonesian cocoa markets, implying a reciprocal relationship. However, an inefficient adjustment transmission in the Indonesian cocoa prices was recorded throughout the study. The US currency constantly influenced Indonesian cocoa prices, while cocoa markets were independent of fluctuations in world oil prices. Overall, the study recorded a different level of the speed of adjustment of short-run imbalances to long-run equilibrium in the domestic cocoa market across economic crises.

The Impact of Price and Non-Price Factors on Area Allocated to Oilseeds in India: An Application of ARDL Model

The study attempts to investigate the dynamic relationship between acreage allocation of oilseeds and price (own price and prices of competitive crops) and also search for the link between area allocation and other non-price factors including productivity, irrigation, rainfall, technology and a policy-making variable (economic liberalization). The dynamic panel data for the year 1976-77 to 2017-18 have been used in the analysis. The study has used the autoregressive distributive lag (ARDL) model to understand the relationship between the dependent and the independent variables and to investigate the long-run equilibrium relationship between them. To estimate the model, both PMG (Pooled Mean Group) and MG (Mean group) estimation methods have been used. The Hausman test has been conducted to see the difference between the PMG and the MG results. The outcomes show that PMG serves as an efficient estimator here. The error correction terms are negative and significant. The results show strong evidence of area allocation towards oilseed crops, indicate a strong co-integration among their determinants in the long run. The ARDL results indicate that the speed of adjustment towards long-run equilibrium varies from 14.8 to 40.6 percent.

Human capital accumulation, income distribution, and economic growth: a demand-led analytical framework

This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a demand-driven analytical framework of functional distribution and growth of income. Human capital accumulation positively impacts on workers’ productivity in production and their bargaining power in wage negotiations. In the long-run equilibrium, a rise in the tax rate (which also denotes the share of output spent in human capital formation) lowers the pre- and after-tax wage share and physical capital utilization, and thus raises (lowers) the output growth rate when the latter is profit-led (wage-led). The impact of a higher tax rate on the employment rate (which also measures human capital utilization) in the long-run equilibrium is negative (ambiguous) when output growth is wage-led (profit-led). In any case, the supply of higher-skilled workers does not automatically create its own demand.

Impact of Exchange Rate Volatility on Unemployment in Pakistan

Unemployment is an alarming issue for bothdeveloped and developing countries, which sometimesvaries from region to region as well. Unemployment accompaniedwith Exchange Rate Volatility (ERV, hereafter) worsens thesituation. This paper tries to explore the relationship between ERVand unemployment and other selected factors in the case ofPakistan from 1980 to 2018. After necessary simulation, the studysupported the analyses through the autoregressive distributed lagmodel. Where, long-run coefficient reveals that ERV and exportsboth are positively affecting unemployment; whereas, import isinversely related to unemployment. Alternatively, export and GDPare inversely affecting unemployment in the short run; further,stability tests also support the relationship between the selectedvariables to achieve the long-run equilibrium. The study furthersuggests that the Government of Pakistan need to stabilizeexchange rate to control unemployment, which is 8 percent in thelong-run and 11 percent in the short run.

Equilibrium Real Exchange Rate and Misalignment: The Sierra Leone Perspective

This paper estimates the equilibrium real effective exchange rate and determine the level of exchange rate misalignment in Sierra Leone, for the period 1980 to 2018. The paper utilizes the behavioral equilibrium exchange rate methodology within the Johansen maximum likelihood framework to estimate the long run equilibrium real effective exchange rate. The unit root test result shows that all the variables are integrated of order one, whilst the cointegration test establishes the existence of one cointegrating vector as evidenced by both the Trace and Maximum Eigen Statistics. The normalized long run results reveal that openness, government expenditure and money supply were the most significant determinants of the real effective exchange rate in the long run. Furthermore, the findings reveal that the real effective exchange rate experienced sustained deviation from the long run equilibrium real effective exchange rate during the study period, with episodes of overvaluation and undervaluation. Specifically, the real effective exchange rate was overvalued by 3.69 percent during the period between 1980-1985; undervalued by 1.8 percent between 1986-1997, and overvalued by 0.9 percent between 1998-2004, Thus, the paper reveals episodes of misalignment of the real effective exchange rate. Based on these findings, the study recommends that, the monetary authorities should ensure stability of the exchange rate and maintain price stability, through sterilization of capital flows as well as contain money growth within the statutory limit.

Long-run dynamics between CFP and CSP in the GCC banking sector: estimation of non-stationary heterogeneous panels allowing for cross-sectional dependence

Purpose Causality between corporate financial performance (CFP) and corporate social performance (CSP) has been extensively debated in previous research works; however, little research has been done to investigate the long-run dynamics between these two constructs. The purpose of this paper is to enrich the CFP–CSP literature by estimating the long-run equilibrium relationship between financial performance and social performance in the banking sector in the Gulf Cooperation Council countries over the period 2009–2019. Design/methodology/approach The paper adopts an approach that is primarily used in financial economics: first, the authors perform panel long-run Granger causality following Canning and Pedroni’s procedure to indicate the direction of the causal relationship. Second, the authors estimate an error correction model using Chudik and Pesaran’s (2015) dynamic common correlated effects mean group estimator to determine the sign of the relationship. Findings The present research findings prove the existence of a long-run equilibrium relationship between CFP and CSP, while indicating at the same time that panel Granger causality runs positively from CSP to CFP, which means that changes in CSP produce lasting changes in CFP. Practical implications The findings of the paper would guide strategists to build fit for purpose corporate social responsibility (CSR) strategies in their firms and establish a continuous investment in CSR activities in the long run rather than harshly investing in CSR activities in the short run. Originality/value To the best of the authors’ knowledge, this paper is the first one to address heterogeneity in long-run Granger causality tests to estimate the relationship between CSP and CFP.