Search Results (16)

This study investigates volatility spillovers from the stock markets of the United States, Germany, China, and Japan to the UK stock market using daily data from major benchmark indices (FTSE 100, S&P 500, DAX, Shanghai Composite, and Nikkei 225) and Brent crude oil prices. Using a novel two-stage bootstrap framework, we first model time-varying conditional volatilities with GARCH-family models and compare them with long-memory FIGARCH specifications to account for persistent volatility dynamics. These volatilities are then incorporated into a VAR-X model, treating Brent crude oil price volatility as an endogenous or exogenous variable in robustness checks. To overcome limitations of traditional VARs, bootstrap-corrected GIRFs are employed to trace dynamic, order-invariant impacts across key sub-periods: the global financial crisis, Brexit, COVID-19, and the Ukraine war. We also benchmark our results against the Diebold–Yilmaz connectedness index and conduct rigorous out-of-sample forecasting and Value-at-Risk backtesting. Results reveal heterogeneous spillovers: US and German shocks trigger strong, immediate, and persistent UK market volatility, reflecting deep integration; Chinese shocks are delayed and gradual, while Japanese shocks are muted or short-lived. Spillover intensity is time-varying, peaking during global crises. Our model outperforms standard benchmarks in out-of-sample volatility forecasting and risk management applications. The study offers critical insights for investors seeking international diversification and for policymakers aiming to manage systemic risk in an interconnected global financial system. Full article

Construction price indices play a critical role in shaping construction activity and determining the economic success of building projects in Germany, where they can serve as central inputs to cost planning and to updating trade-level project budgets over the planning and construction horizon. This paper develops a forecasting framework for 35 sub-construction price indices for office buildings, providing granular inputs for cost escalation and risk assessment. We employ regularized vector autoregressive models with exogenous variables (VARX) implemented via the BigVAR package and estimate them in a model-vintage design for an unbalanced panel. These high-dimensional models are benchmarked against compact VARX and vector error-correction models (VECM) that jointly forecast each target index with a small macroeconomic block consisting of the gross domestic product (GDP) and the three-month interbank rate. Candidate specifications are evaluated using mean absolute percentage error (MAPE) and out-of-sample root mean square error (RMSE), and the final forecasting model for each index is selected based on ex post MAPE. The results show that regularized VARX models capture dynamic interdependencies among the sub-indices and, for most series, outperform the VARX and VECM benchmarks. The resulting forecasts provide practitioners with trade-specific escalation factors that can support budgeting, contract design, and the mitigation of cost risk in office-building projects. Full article

Policymakers in small open economies need reliable signals of incipient private consumption downturns, yet traditional indicators are revised, noisy, and often arrive too late. This study develops a Romanian-specific early warning system that combines a time-varying parameter VAR with stochastic volatility and exogenous drivers (TVP-SV-VARX) with modern machine learning classifiers. The structural layer extracts regime-dependent anomalies in the macro-financial transmission to household demand, while the learning layer transforms these anomalies into calibrated probabilities of short-term consumption declines. A strictly time-based evaluation design with rolling blocks, purge and embargo periods, and rare-event metrics (precision–recall area under the curve, PR-AUC, and Brier score) underpins the assessment. The best-performing specification, a TVP-filtered random forest, attains a PR-AUC of 0.87, a ROC-AUC of 0.89, a median warning lead of one quarter, and no false positives at the chosen operating point. A sparse logistic calibration model improves probability reliability and supports transparent communication of risk bands. The time-varying anomaly layer is critical: ablation experiments that remove it lead to marked losses in discrimination and recall. For implementation, the paper proposes a three-tier WATCH–AMBER–RED scheme with conservative multi-signal confirmation and coverage gates, designed to balance lead time against the political cost of false alarms. The framework is explicitly predictive rather than causal and is tailored to data-poor environments, offering a practical blueprint for demand-side macroeconomic early warning in Romania and, by extension, other small open economies. Full article

The TSpVARX model can be used in inflation and money outflow forecasting by accommodating the reciprocal relationship among endogenous variables, the influence of exogenous variables, inter-regional linkages, and the nonlinearity of the relationship between endogenous and predetermined variables. However, the impact of some events, such as Eid al-Fitr and fuel price adjustments, still cannot be accommodated in the TSpVARX model. This condition causes inflation and money outflow forecasting using TSpVARX to be unsatisfactory. Our study is to improve the forecasting performance of the TSpVARX model by adding subset and dummy variables. We use a 12th lag subset variable to capture seasonal effects and a dummy variable to represent fuel price changes. These additions enhance the model’s accuracy in forecasting inflation and money outflow by accounting for recurring patterns and specific events, like fuel price changes. Based on the RMSE values of the training and testing data, we can conclude that forecasting inflation and money outflow using TSpVARX with the addition of subset and dummy variables is better than the regular TSpVARX. The inflation and money outflow forecasting generated after the addition of subset and dummy variables are also more fluctuating as in the movement of the actual data. Full article

The S&P 500 Index is considered the most popular trading instrument in financial markets. With the rise of cryptocurrencies over the past few years, Bitcoin has grown in popularity and adoption. This study analyzes the daily return distribution of Bitcoin and the S&P 500 Index and assesses their tail probabilities using two financial risk measures. As a methodology, we use Bitcoin and S&P 500 Index daily return data to fit the seven-parameter General Tempered Stable (GTS) distribution using the advanced fast fractional Fourier transform (FRFT) scheme developed by combining the fast fractional Fourier transform algorithm and the 12-point composite Newton–Cotes rule. The findings show that peakedness is the main characteristic of the S&P 500 Index return distribution, whereas heavy-tailedness is the main characteristic of Bitcoin return distribution. The GTS distribution shows that $80.05\%$ of S&P 500 returns are within $-1.06\%$ and $1.23\%$ against only $40.32\%$ of Bitcoin returns. At a risk level ($\alpha$), the severity of the loss ($AVa{R}_{\alpha }\left(X\right)$) on the left side of the distribution is larger than the severity of the profit ($AVa{R}_{1-\alpha }\left(X\right)$) on the right side of the distribution. Compared to the S&P 500 Index, Bitcoin has $39.73\%$ more prevalence to produce high daily returns (more than $1.23\%$ or less than $-1.06\%$). The severity analysis shows that, at $\alpha$ risk level, the average value-at-risk ($AVaR\left(X\right)$) of Bitcoin returns at one significant figure is four times larger than that of the S&P 500 Index returns at the same risk. Full article

In a global society that is increasingly interrelated and focused on mobility, carbon monoxide emissions derived from internal combustion vehicles remain the most important factor that must be addressed to improve environmental quality. Certainly, air pollution generated by internal combustion engines threatens human health and the well-being of the planet. In this regard, this paper aims to address the urgent need to understand and face the CO emissions produced by internal combustion vehicles; therefore, this work proposes a mathematical model based on Auto-Regressive Exogenous that predicts the CO percentages produced by an internal combustion engine during its start-up. The main goal is to establish a strategy for diagnosing excessive CO emissions caused by changes in the engine temperature. The proposed CO emissions modeling is evaluated under a real dataset obtained from experiments, and the obtained results make the proposed method suitable for being implemented as a novel diagnosis tool in automotive maintenance programs. Full article

The changing climate has a serious bearing on agriculture, particularly livestock production in Botswana. Therefore, studying the relationship between climate and livestock, which at present is largely missing, is necessary for the proper formulation of government policy and interventions. This is critical in promoting the adoption of relevant mitigation strategies by farmers, thereby increasing resilience. The aim of this research is to establish associations between climate variability and livestock production in Botswana at the national level. The paper employs time series data from 1970 to 2020 and the Vector Autoregression with Exogenous Variables (VARX) model for statistical analysis. The trend shows that both cattle and goat populations are decreasing. The VARX model results reveal that cattle and goat populations are negatively associated with increasing maximum temperatures. Cattle respond negatively to increased minimum temperatures as well, while goats tend to respond positively, implying that livestock species react differently to climatic conditions due to their distinct features. The results of the roots of the companion matrix for cattle and goat production meet the stability condition as all the eigenvalues lie inside the unit circle. The study recommends further intervention by the government to deal with increasing temperatures, thereby addressing the dwindling populations of goats and cattle, which have significant contributions to the household economies of smallholders and the national economy, respectively. Full article

In the aftermath of the COVID-19 pandemic, the dramatic increase in maritime transport costs might potentially exert detrimental impacts on the macroeconomy, especially for countries that heavily rely on international trade for their consumption and production activities. Our study employs a small open economy DSGE (Dynamic Stochastic General Equilibrium) model to analyze the impact of maritime transport costs on the South Korean macroeconomy, where maritime transport costs are considered as key factors impacting the law of one price. Positive shocks in maritime transport costs, according to the impulse response function, have positive repercussions on the Consumer Price Index (CPI), terms of trade, nominal exchange rates, and nominal interest rates, but can negatively affect real output and real exchange rate. To verify the validity of the our DSGE model, we utilize a Vector autoregression with exogenous variables (VARX) model to examine the dynamic relationship between maritime transport costs and South Korean macroeconomic variables, based on quarterly data from the first quarter of 2002 to the fourth quarter of 2022. The results of the VARX model coincide with those of the DSGE model. Our findings underline the importance of maritime transport costs in the macroeconomy and hold substantial implications for the considered design and selection of policies to mitigate such shocks. Full article

Amid the outbreak of the COVID-19 pandemic in the year 2020, educational platforms have been forced to change and adapt from conventional physical learning to virtual learning. Nearly all higher learning institutions worldwide are forced to follow the new educational setting through virtual platforms. Sabah is one of the poorest states in Malaysia with the poorest infrastructure, with the technology and communication facilities in the state remaining inept. With the changes in virtual platforms in all higher education institutions in Malaysia, higher learning institutions in Sabah are expected to follow the lead, despite the state lagging in its development. This has certainly impacted the overall productivity and performance of students in Sabah. Therefore, this study aims to explore the challenges of the implementation of virtual learning among students in Sabah. More specifically, this study seeks to identify vulnerable groups among students based on their geographical location. To achieve the objective of this study, a survey has been conducted on a total of 1,371 students in both private and public higher learning institutions in Sabah. The sample selection for this study was determined using a purposive sampling technique. Based on Principal Component Analysis (PCA), it was found that there are five challenges in virtual learning faced by students in higher learning institutions in Sabah. These are the unconducive learning environment (var(X) = 20.12%), the deterioration of physical health (var(X) = 13.40%), the decline of mental health (var(X) = 12.10%), the limited educational facilities (var(X) = 10.14%) and social isolation (var(X) = 7.47%). The K-Means Clustering analysis found that there are six student clusters in Sabah (Cluster A, B, C, D, E & F), each of which faces different challenges in participating in virtual learning. Based on the assessment of location, almost half of the total number of districts in Sabah are dominated by students from Cluster A (9 districts) and Cluster B (4 districts). More worryingly, both Cluster A and Cluster B are classified as highly vulnerable groups in relation to the implementation of virtual learning. The results of this study can be used by the local authorities and policymakers in Malaysia to improve the implementation of virtual learning in Sabah so that the education system can be more effective and systematic. Additionally, the improvement and empowerment of the learning environment are crucial to ensuring education is accessible and inclusive for all societies, in line with the fourth of the Sustainable Development Goals (SDG-4). Full article

The aim of this study is to propose appropriate models to forecast Return on Asset (ROA) and financing of Indonesia Islamic Commercial Banks during COVID-19 pandemic. In particular, we study the models which involve reciprocal relation between ROA and financing and incorporate COVID-19 pandemic’s impact. It is crucial because the government would benefit from forecasting results to formulate the policy for the banks related to ROA and financing. We consider two models: Vector Autoregressive with exogenous variable (VARX) and spline regression, since both models are able to exploit the multivariate structure of ROA and financing and to include COVID-19 impact as predictor. The results show that the VARX outperforms spline regression in terms of RMSE. Using VARX, we deduce that ROA and financing have a positive reciprocal relationship, meaning that when ROA increases, financing would increase, and vice versa. In addition, the pandemic has significant impact on the decline of the ROA. We recommend that banks conduct an in-depth analysis to determine the appropriate form of restructuring for debtors so that it does not have a significant impact on the decrease in ROA. Full article

This study was conducted to investigate the applicability of measuring internet traffic as an input of short-term electricity demand forecasts. We believe our study makes a significant contribution to the literature, especially in short-term load prediction techniques, as we found that Internet traffic can be a useful variable in certain models and can increase prediction accuracy when compared to models in which it is not a variable. In addition, we found that the prediction error could be further reduced by applying a new multivariate model called VARX, which added exogenous variables to the univariate model called VAR. The VAR model showed excellent forecasting performance in the univariate model, rather than using the artificial neural network model, which had high prediction accuracy in the previous study. Full article

In spite of the development of the Prognostics and Health Management (PHM) during past decades, the reliability prognostics of engineered systems under time-varying external conditions still remains a challenge in such a field. When considering the challenge mentioned above, a hybrid method for predicting the reliability index and the Remaining Useful Life (RUL) of engineered systems under time-varying external conditions is proposed in this paper. The proposed method is competent in reflecting the influence of time-varying external conditions on the degradation behaviour of engineered systems. Based on a subset of the Commercial Modular Aero-Propulsion System Simulation (C-MAPSS) dataset as case studies, the Cox Proportional Hazards Model (Cox PHM) with time-varying covariates is utilised to generate the reliability indices of individual turbofan units. Afterwards, a Vector Autoregressive model with Exogenous variables (VARX) combined with pairwise Conditional Granger Causality (CGC) tests for sensor selections is defined to model the time-varying influence of sensor signals on the reliability indices of different units that have been previously generated by the Cox PHM with time-varying covariates. During the reliability prediction, the Fourier Grey Model (FGM) is employed with the time series models for long-term forecasting of the external conditions. The results show that the method that is proposed in this paper is competent for the RUL prediction as compared with baseline approaches. Full article

In the last years, the huge amount of data available in many disciplines makes the mathematical modeling, and, more concretely, econometric models, a very important technique to explain those data. One of the most used of those econometric techniques is the Vector Autoregression Models (VAR) which are multi-equation models that linearly describe the interactions and behavior of a group of variables by using their past. Traditionally, Ordinary Least Squares and Maximum likelihood estimators have been used in the estimation of VAR models. These techniques are consistent and asymptotically efficient under ideal conditions of the data and the identification problem. Otherwise, these techniques would yield inconsistent parameter estimations. This paper considers the estimation of a VAR model by minimizing the difference between the dependent variables in a certain time, and the expression of their own past and the exogenous variables of the model (in this case denoted as VARX model). The solution of this optimization problem is approached through hybrid metaheuristics. The high computational cost due to the huge amount of data makes it necessary to exploit High-Performance Computing for the acceleration of methods to obtain the models. The parameterized, parallel implementation of the metaheuristics and the matrix formulation ease the simultaneous exploitation of parallelism for groups of hybrid metaheuristics. Multilevel and heterogeneous parallelism are exploited in multicore CPU plus multiGPU nodes, with the optimum combination of the different parallelism parameters depending on the particular metaheuristic and the problem it is applied to. Full article

This paper aims to trace the monthly responses of equity prices, long-term interest rates, and exchange rates in Asian developing markets to the US unconventional monetary policy (UMP). The main research question is to explore whether UMP shocks exist in those markets. We also consider the differences in the mean responses of those asset prices between traditional and non-traditional monetary policy phases. To address such concerns, we employ a panel vector autoregression with exogenous variables (Panel VARX) model and estimate the model by the least-squares dummy variable (LSDV) estimator in three different periods spanning from 2004M2 to 2018M4. The first finding is that UMP shocks from the US are associated with a surge in equity prices, a decline in long-term interest rates, and an appreciation of currencies in Asian developing markets. In contrast, the conventional monetary policy shocks from the US seem to exert adverse effects on these recipient countries. These empirical results suggest that the policymakers in Asian developing countries should cautiously take into account the spillover effects from the US unconventional monetary policy once it is executed. Full article

Foreign investors’ interest in Korean local currency bonds, and especially in Korea Treasury Bonds (KTBs) has increased significantly since the mid-2000s. This paper examines the determinants of foreign investors’ KTB investments by means of a lag-augmented vector autoregressive model with exogenous variables (LA-VARX). The model specification includes variables capturing the domestic, international, and risk factors. The risk factors are especially important in the context of South Korea since geopolitical tensions and economic policy uncertainty might adversely affect all investment decisions by foreigners. We find that expected return rates, country default risks, and global economic conditions have a significant impact on foreign investors’ KTB investment, but geopolitical risks have only a short-term negative impact. Our findings not for only provide a better understanding of the determinants of financial investments in South Korean financial markets, but they have broader implications in terms of the economic and social aspects of sustainability in South Korea. This is because KTBs provide a source of funding for the South Korean government for social projects and that KTBs are also held largely by long-term investors such as pension funds and insurers which require stable and sustainable investments. Full article