Search Results (16)

This research seeks to evaluate the effects of the preceding cyclical indicators and macroeconomic variables on the performance of the Brazilian stock market from January 2011 to December 2022. The objective is to identify how these factors influence the behavior of the main index representing this market. In this way, it was analyzed how shocks in the composite leading indicator of the economy (IACE) as well as the basic interest rate of the economy (SELIC), the broad national consumer price index (IPCA), the nominal exchange rate (in reals per dollar—BRL/USD) and the central bank economic activity index (IBC-Br) impact the performance of Brazilian stock market index (IBOVESPA). Using the vector autoregression (VAR) model with vector error correction (VEC), positive shocks were simulated in the IACE and the aforementioned macroeconomic variables to identify and compare their impacts on the index. The results obtained, through generalized impulse response functions, indicated that the shocks to the IACE, the exchange rate, and the inflation variables influenced the IBOVESPA in different and statistically significant ways. However, shocks to the economic activity index and the interest rate did not exert a statistically significant influence on the index, partially confirming the hypothesis, which was initially raised, that these factors influence the stock index in different ways. Full article

In this study, the impact of arbitrage resulting from Covered Interest Parity (CIP) deviations on Korea’s long-term interest rates was analyzed, utilizing Vector Error Correction (VEC) models for Granger Causality and Impulse Response Function analyses. This analysis covered the period from February 2002 to September 2023, with a comparative analysis of the periods before and after the Global Financial Crisis (GFC). The Granger Causality analysis indicated that changes in the swap basis reflecting CIP deviation presented a significant Granger causal relationship with the variations in domestic long-term interest rates. Notably, in the post-GFC period, when CIP deviations were relatively pronounced, the incentives for arbitrage trading exhibited a stronger leading effect in terms of inducing changes in domestic long-term interest rates. The Impulse Response Function analysis showed that domestic long-term interest rates significantly and negatively responded to the positive shocks in the swap basis. This response was even more pronounced during the period following the GFC. Additionally, foreign long-term interest rates and monetary policy variables also demonstrated a significant impact on domestic long-term interest rates. These findings imply that the adjustment path back to equilibrium from CIP deviations, driven by arbitrage, was developed more through changes in domestic interest rates rather than exchange rate fluctuations, especially after the GFC. Full article

The oil and gas sector remains pivotal in supplying energy globally. The COVID-19 pandemic and the Russia–Ukraine crisis intertwined the energy supply and demand, incurred the volatility of energy prices and disrupted the world economic order with profound effects on global political and economic paths in the long run. To investigate the impact of global COVID-19 on the energy prices of oil and natural gas for the period 2020–2022, a type of vector autoregressive (VAR) model, the vector error correction (VEC) model and the ordinary least squared (OLS) method were used for empirical analysis, producing the following main results. (i) COVID-19 significantly Granger caused both oil prices and natural gas prices to fluctuate at the 5% level. (ii) Oil prices significantly Granger caused natural gas prices to fluctuate at the 1% level because of the relations of substitutes for each other. (iii) OLS estimation validated that the cumulative number of COVID-19 confirmed cases was positively correlated with both oil prices and natural gas prices. However, the effect diminished in the long term as the pandemic was eventually brought under effective control. Exploring the effects of global issues including the pandemic and the war in Ukraine on the energy market is crucial to understanding the relationship between the supply shock and the energy sector green transitions and the global economy recovery. Full article

Agricultural commodity markets are critical to the global economy. This study investigates the price discovery mechanism, lead-lag relationship, and volatility spillover between spot prices on the National Agriculture Market (E-NAM) and futures and spot prices on the National Commodity and Derivative Exchange (NCDEX) in the Indian agricultural commodity market. The Johansen Cointegration, Vector Error Correction (VEC), Granger causality tests, and bivariate GARCH models were applied to daily data from April 2016 to December 2020 for twelve agricultural commodities traded on the E-NAM and NCDEX. We discovered the long-run relationship using the Johansen Cointegration test and concluded that the NCDEX spot and futures market is dominant in the price discovery mechanism, and the NCDEX futures and spot markets lead the E-NAM spot prices having a unidirectional or bidirectional relationship. Furthermore, the bivariate GARCH model suggested a volatility spillover from E-NAM spot prices to NCDEX futures and spot markets for most commodities, except for bajra, barley, and jeera, which have no volatility spillover. The study’s findings have important implications for various stakeholders, including policymakers, farmers, investors, traders, and others who want to reduce price risks by using information from the E-NAM market’s spot prices. Full article

In the last decade, much of the attention of public expenditures in education has been focused on improving the offer to the labor market to minimize unemployment rates among young people. Since education directly affects human capital, investing in higher education is considered a benefit to future employment. Therefore, it is the purpose of this paper to investigate whether the government-allocated share of funds to total public expenditures in education affects the unemployment rates of youth in Albania. A quantitative analysis of total public expenses in education and of the country’s economic growth rates is used to investigate their effects on youth unemployment rates in the country. This is followed by another deeper investigation of public expenses in higher education and the country’s economic growth rates analysis on the youth unemployment rates of tertiary education graduates in Albania. Time series data are used in a set of econometric analyses such as the Augmented Dickey–Fuller test, Johansen test, and vector error correction (VEC) model to test for short-run dynamics and long-run causalities among the variables. The study results reveal that there is a short-term causality between the real economic growth rate and the youth unemployment rate, while there is a long-term causality between total public expenditures in education and the youth unemployment rate. If total public expenditures in education increase by 1%, the youth unemployment rate would decrease by 10.81%. Similarly, but not so strong, there is a long-term causality between public expenditures in higher education and the graduated youth unemployment rate. If public expenditures in higher education increase by 1%, the graduated youth unemployment rate would decrease by 5.85%. The speed of adjustment from the short-run to long-run equilibrium, in a quarter time, of the youth unemployment rate is 22%, while of the graduated youth unemployment rate is 53%—showing a faster convergence. Full article

The purpose of this paper is to investigate how well contemporary exchange rate theories explain fluctuations in exchange rates of emerging economies, before and after the Global Financial Crisis (GFC). As an example, the EUR/PLN exchange rate in 1999–2015 was selected as the currency pair that was the most liquid in the region; it had a stable exchange rate regime in the given period. The whole analysis was performed within the selected linear vector error correction (VEC) model framework. VEC models incorporate such well-known theories as purchasing power parity (PPP), the uncovered interest rate parity (UIP), the Harrod–Balassa–Samuelson (HBS) effect, the terms of trade (TOT), the net financial asset (NFA) theory and risk premium. The results indicate the greater importance of external factors—in particular, the Euro Area (EA) short-term interest rates and EA price shocks after the GFC. The main sources of EUR/PLN variability were found to be exchange rate shocks, terms of trade shocks and foreign and domestic short-term interest rate shocks, as well as foreign price shocks. These results are of particularly high importance for our own exchange rate shocks and indicate that a large part of exchange rate fluctuations in EUR/PLN still remains unexplained. Full article

One of the primary difficulties we have recently is environmental degradation. The deterioration of the environment was visible in the rise in carbon dioxide emissions, which has a detrimental impact on various life matters. A variety of factors caused this growth. Inappropriate human behaviors caused the majority of them. This study aimed to ascertain how energy consumption and economic growth with its components in the Czech Republic, affected ${\mathrm{CO}}_2$ emissions. The relationship between ${\mathrm{CO}}_2$ emissions, economic growth, agriculture, and energy consumption was studied using econometric analysis, specifically the Johansen, Vector Error Correction (VEC) Model, and granger causality. The findings revealed that all variables are cointegrated. Economic growth, agricultural, and energy consumption output are all positively correlated with ${\mathrm{CO}}_2$ emissions. There is a unidirectional Granger Causality between economic growth, and Agriculture towards carbon dioxide emissions. A unidirectional Granger Causality agriculture towards economic growth, and energy consumption. In addition, there is no Granger Causality between energy consumption and ${\mathrm{CO}}_2$ emissions, and economic growth. This is the first study to use the most recent data to empirically evaluate the environmental impact of economic growth and energy use in the Czech Republic. This study includes pertinent advice for reducing emission ns and supporting the environment by increasing renewable energy sources and adhering to the Czech Ministry of Environment’s strategy. Full article

The U.S. imports about two billion dollars of fresh bananas, accounting for over 99 percent of domestic banana consumption annually. The COVID-19 pandemic disrupted the fresh banana supply chain and caused unexpected price movements along the marketing channel. This research investigated the impact of the COVID-19 pandemic on price adjustments in the U.S. fresh banana market. A Vector Error Correction (VEC) model was employed to evaluate the speeds of price adjustments along the U.S. banana marketing channel at the import and retail levels, and historical decomposition graphs were used to investigate the magnitude of price adjustments caused by the COVID-19 shock. The results show that the deviation from the long-run equilibrium caused by the shock was corrected faster for the import prices than retail prices. Hence, the speeds of price adjustments were asymmetric in the period of the COVID-19 shock. Additionally, the magnitudes of price changes caused by the pandemic shock were different, leading to increased price margins. These results point to the inefficiency of the banana marketing channel with welfare, policy, and agribusiness implications. Full article

Economic development is mainly dependent on fossil fuels. The massive use of fossil fuels has led to changes in the climate environment, in which the deterioration of air quality has affected people’s daily lives. This paper introduces the green growth level as a control variable to explore the connection between carbon dioxide emissions and the level of economic growth. It uses the EKC algorithm and VEC model to analyze Nanjing city’s data from 1993 to 2018. Given the data availability, the ARIMA algorithm was used to project carbon emissions for 2019–2025. It is found that the EKC curve of Nanjing City shows an N-shape, and the growth of economic level will cause the enhancement of carbon dioxide emissions. Carbon emissions will reach 7,592,140 tons in 2025. At present, we are in an essential stage of transition from N-shape to inverted U-shape, and this paper makes several recommendations based on the findings. Full article

The motivation behind the current research is to check the effect of the recent introduction of value added tax (VAT) and Vision 2030 on the economy of Saudi Arabia. To check this, those variables are added to the analysis which contribute to economic development including labor, capital, oil price, financial development, and trade openness to examine that how economic transformation affects the role of these variables in economic growth. According to the vector error correction (VEC) model, the impact of labor becomes negative after VAT, however, the impact of capital and financial development becomes significant by this transformation. The coefficients of oil prices, for positive and negative shocks, are significant and negative. Financial development and trade openness are reporting surprising results; positive shocks have shown negative coefficients. However, after Vision 2030, trade openness has a significant and positive coefficient. Policy implications include diversification of exports, reviving the private financing mechanism and restructuring the export/import policies. Full article

This study examines the integration of regional dairy markets in Poland, which is a major European dairy producing country. The analysis of prices is important, as many dairy farmers are members of dairy processing cooperatives, and their incomes are affected by the prices of two popular products: butter and curd. Moreover, the period of study included significant fluctuations in the world market and the termination of the milk quota system in the European Union (EU). The price records used in this study are from the two main milk-producing regions in the country: Northern and Central. The data were tested for stationarity and Granger causality before estimating a Vector Error Correction (VEC) model. Estimation results show that the removal of the milk quota lowered prices of butter and curd in the two regions. The relationships of the prices in both regions for butter markets were nearly perfect during the period January 2010–November 2017, but curd prices were found unintegrated. Impulse response analysis showed that the effect of shocks was mostly absorbed in a two-week period and prices returned to full equilibrium in about four to five weeks. This fast price adjustment indicates that both markets operate properly and no market participant can obtain gains above those offered at equilibrium. Full article

How strongly are foreign exchange markets linked in terms of their similarities in long-run fluctuations? Are they cointegrating? To analyze such “comovements,” we present a time-varying cointegration model for the foreign exchange rates of the currencies of Canada, Japan, and the UK vis-à-vis the U.S. dollar from May 1990 through July 2015. Unlike previous studies, we allow the loading matrix in the vector error-correction (VEC) model to be varying over time. Because the loading matrix in the VEC model is associated with the speed at which deviations from the long-run relationship disappear, we propose a new degree of market comovement based on the time-varying loading matrix to measure the strength or robustness of the long-run relationship over time. Since exchange rates are determined by macrovariables, cointegration among exchange rates implies these variables share common stochastic trends. Therefore, the proposed degree measures the degree of market comovement. Our main finding is that the market comovement has become stronger over the past quarter-century, but at a decreasing rate with two major turning points: one in 1995 and the other one in 2008. Full article

With the growth of an economy, the banking industry expands and the competitiveness becomes intense with the increased number of banks in the economy. The objective of this research was to discover the influence of industry-specific and macroeconomic determinants of non-performing loans (NPLs) in the entire banking system of Bangladesh. We performed an analysis for the period from 1979 to 2018 by an autoregressive distributed lag (ARDL) model and checked the robustness of the results in the vector error correction (VEC) model. The outcomes of this research suggest that both industry-specific and macroeconomic factors influence NPLs significantly. Among the industry-specific determinants, bank loan growth, net operating profit, and deposit rates negatively impact NPLs with statistical significance while bank liquidity and lending rates have a significant positive affiliation with NPLs. Gross domestic product (GDP) growth and unemployment, among the macroeconomic variables, have a negative connection with NPLs. Whereas, domestic credit and exchange rates have a significant positive association with NPLs. The contribution of this research is that the outcomes found by means of econometric models can be used for predicting and measuring NPLs in upcoming years, not only for Bangladesh but also for developing and emerging economies. Individual banks, as well as the banking sector, by and large, can get a guideline from this research. Full article

This paper explores the relationship between export, import, and output for Thailand over the period from 1990 to 2017. The threshold vector autoregressive (VAR) and threshold vector error correction (VEC) models were applied. The empirical evidence confirms that the export-led growth hypothesis is valid, implying feedback within the export–output growth nexus. During business cycles, the export–output characteristics in economic cycles can be classified by the two-threshold VAR and VEC models. These relevant variables converge from the long-run equilibrium. As for the thresholds which are correlated, gross domestic product (GDP) vs. export and GDP vs. import exist as a long-run equilibrium relationship, while there does not seem to be a relationship of export vs. import. Furthermore, a five-year forecast was created (the period of 2018–2022). The export–output growth scenarios appear to swing upward continuously throughout the short-term trend. Therefore, policy-makers should highlight countercyclical macroeconomic policies at lower, medium, and upper regimes to strengthen the state of recovery and encourage the state of short recession. Full article

In recent years, food security, especially supply, has been an important issue in China’s agricultural production. The stability of grain prices is related to the stability and development of the grain market. Based on agricultural production data from 1970 to 2015, this paper explores the influence of agricultural product price fluctuation on grain production by using the cobweb theory and vector error correction (VEC) model. The results show that changes in grain production in China are affected by fluctuations in agricultural product prices, that the production change lags behind the price change, and that there is a long-term equilibrium relationship between grain yield and agricultural product price. A Granger causality test shows that the change in agricultural product price is the Granger cause of grain yield change. Full article