Long—run relations in a well—defined statistical model for the data generating process. Cointegration analysis of the PPP and the UIP relations for Denmark and Germany

1991 ◽  
pp. 336-357 ◽  
Author(s):  
Katarina Juselius
Keyword(s):  
Statistical Model ◽  
Cointegration Analysis ◽  
Long Run ◽  
Data Generating Process

Long run apartment price dynamics in Swedish and German cities

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sviatlana Engerstam
Keyword(s):  
Banking Sector ◽  
Cointegration Analysis ◽  
Price Dynamics ◽  
Long Term Effects ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Price Elasticities ◽  
Long Run ◽  
German Cities

PurposeThis study examines the long term effects of macroeconomic fundamentals on apartment price dynamics in major metropolitan areas in Sweden and Germany.Design/methodology/approachThe main approach is panel cointegration analysis that allows to overcome certain data restrictions such as spatial heterogeneity, cross-sectional dependence, and non-stationary, but cointegrated data. The Swedish dataset includes three cities over a period of 23 years, while the German dataset includes seven cities for 29 years. Analysis of apartment price dynamics include population, disposable income, mortgage interest rate, and apartment stock as underlying macroeconomic variables in the model.FindingsThe empirical results indicate that apartment prices react more strongly on changes in fundamental factors in major Swedish cities than in German ones despite quite similar development of these macroeconomic variables in the long run in both countries. On one hand, overreactions in apartment price dynamics might be considered as the evidence of the price bubble building in Sweden. On the other hand, these two countries differ in institutional arrangements of the housing markets, and these differences might contribute to the size of apartment price elasticities from changes in fundamentals. These arrangements include various banking sector policies, such as mortgage financing and valuation approaches, as well as different government regulations of the housing market as, for example, rent control.Originality/valueIn distinction to the previous studies carried out on Swedish and German data for single-family houses, this study focuses on the apartment segment of the market and examines apartment price elasticities from a long term perspective. In addition, the results from this study highlight the differences between the two countries at the city level in an integrated long run equilibrium framework.

scholarly journals The Causality between Education and GDP Growth in Asian Countries

2015 ◽  
Vol 50 ◽  
pp. 28-35 ◽  
Author(s):  
Mohsen Mehrara ◽  
Maysam Musai
Keyword(s):  
Economic Growth ◽  
Formal Education ◽  
Panel Cointegration ◽  
Capital Formation ◽  
Cointegration Analysis ◽  
Point Of View ◽  
Asian Countries ◽  
Variable Model ◽  
Long Run ◽  
Educational Investments

This paper investigates the causal relationship between education and GDP in 40 Asian countries by using panel unit root tests and panel cointegration analysis for the period 1970-2010. A three-variable model is formulated with capital formation as the third variable. The results show a strong causality from investment and economic growth to education in these countries. Yet, education does not have any significant effects on GDP and investment in short- and long-run. It means that it is the capital formation and GDP that drives education in mentioned countries, not vice versa. So the findings of this paper support the point of view that it is higher economic growth that leads to higher education proxy. It seems that as the number of enrollments raise, the quality of the education declines. Moreover, the formal education systems are not market oriented in these countries. This may be the reason why huge educational investments in these developing countries fail to generate higher growth. By promoting practice-oriented training for students particularly in technical disciplines and matching education system to the needs of the labor market, it will help create long-term jobs and improve the country’s future prospects.

scholarly journals Cotton Imports and GDP of Indonesia- Cointegration Analysis

2021 ◽  
pp. 149-154
Author(s):  
P. Soumya ◽  
R. A. Yeledhalli
Keyword(s):  
High Speed ◽  
Cointegration Analysis ◽  
Causality Analysis ◽  
The Real ◽  
Real Gdp ◽  
Use Of Technology ◽  
Long Run ◽  
Negative Effect ◽  
The Government ◽  
The Impact

The study examines the impact of cotton imports on the real GDP (Gross Domestic Product) of Indonesia for a period from 1992 to 2018 using ARDL approach and Granger causality analysis. Results of the study indicated that cotton imports have negative effect on economic growth. For every 1% increase in cotton imports the real GDP decreased by 0.107% in the long run. Any disequilibrium in the model is adjusted with a high speed of adjustment of 107.7% in less than a year. Shocks and the trend are adjusted in less than one year. There is no causality between imports of cotton and the real GDP. The study suggested effort should be taken by the government to increase yield of cotton by the use of technology and also a need to initiate farmers to take up cotton farming. 

scholarly journals A case study of the residual-based cointegration procedure

2003 ◽  
Vol 7 (1) ◽  
pp. 29-48
Author(s):  
Riccardo Biondini ◽  
Yan-Xia Lin ◽  
Michael Mccrae
Keyword(s):  
Time Series ◽  
Financial Time Series ◽  
Real Life ◽  
Arima Models ◽  
Financial Time ◽  
Long Run ◽  
Data Generating Process ◽  
Finance Theory ◽  
The Relationship

The study of long-run equilibrium processes is a significant component of economic and finance theory. The Johansen technique for identifying the existence of such long-run stationary equilibrium conditions among financial time series allows the identification of all potential linearly independent cointegrating vectors within a given system of eligible financial time series. The practical application of the technique may be restricted, however, by the pre-condition that the underlying data generating process fits a finite-order vector autoregression (VAR) model with white noise. This paper studies an alternative method for determining cointegrating relationships without such a pre-condition. The method is simple to implement through commonly available statistical packages. This ‘residual-based cointegration’ (RBC) technique uses the relationship between cointegration and univariate Box-Jenkins ARIMA models to identify cointegrating vectors through the rank of the covariance matrix of the residual processes which result from the fitting of univariate ARIMA models. The RBC approach for identifying multivariate cointegrating vectors is explained and then demonstrated through simulated examples. The RBC and Johansen techniques are then both implemented using several real-life financial time series.

Financial Marketing-Based Role of Exchange Rate to Increase Foreign Trade in Turkey

2020 ◽  
pp. 21-46
Author(s):  
Özgür Kiyak ◽  
Bilge Afşar
Keyword(s):  
Exchange Rate ◽  
Foreign Trade ◽  
Foreign Exchange ◽  
Cointegration Analysis ◽  
Causality Analysis ◽  
Monthly Data ◽  
Decrease Rate ◽  
Long Run ◽  
Causality Relationship

This chapter tries to determine whether there is a causal relationship between exchange rate and foreign trade. The study includes monthly data between February 2003 and December 2018 including dollar foreign exchange selling rate and inflation related real exchange rate for exchange rate, and export amount, import amount, export increase/decrease rate, and import increase. Increase/decrease rate is used for foreign trade among other variables, for a total of 6 variables. According to the obtained results of Engle-Granger cointegration analysis, there is a cointegration between variables in the long run. However, according to the results of the Toda-Yamamoto causality analysis, it was understood that there is no causality relationship between exchange rate and foreign trade.

scholarly journals Arbitrage hedging in markets for the US lean hogs and the EU live pigs

2013 ◽  
Vol 59 (No. 11) ◽  
pp. 505-511
Author(s):  
M. Ziegelbäck ◽  
G. Kastner
Keyword(s):  
Cointegration Analysis ◽  
Monetary Benefit ◽  
Price Adjustments ◽  
Long Run ◽  
Economic Interpretation ◽  
The Us ◽  
Price Differences ◽  
The Relationship ◽  
Insight Into ◽  
The Eu

  The paper describes an attempt to gain insight into the relationship between cash and futures markets for US lean hogs and EU live pigs, and the opportunity of arbitrage hedging. In doing so, the authors use newer methods of threshold cointegration analysis for time series from 1999 until 2008. Besides the existence of a long-run equilibrium, asymmetric price adjustments can be demonstrated. This is especially the case for the EU live pigs, where price variations of the basis are higher and exhibit lower standard deviation. The results also perfectly show that cash prices follow the futures market more than the other way round. Furthermore, a grid search has revealed that the residual-based threshold in either market is near zero and therefore coherent with economic interpretation. Thus, at least theoretically, arbitrageurs in those markets are able to exploit the price differences between the two markets and reap no-risk monetary benefit. Hence, the results are in line with the statement that “speculating the basis” generates a better return.

Testing for bubbles in housing markets: some evidence for Brazil

2018 ◽  
Vol 11 (5) ◽  
pp. 754-770 ◽  
Author(s):  
Cássio da Nóbrega Besarria ◽  
Nelson Leitão Paes ◽  
Marcelo Eduardo Alves Silva
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Housing Prices ◽  
Market Price ◽  
Housing Markets ◽  
Cointegration Analysis ◽  
Small Samples ◽  
Content Type ◽  
Long Run ◽  
Cointegration Tests

Purpose Housing prices in Brazil have displayed an impressive growth in recent years, raising some concerns about the existence of a bubble in housing markets. In this paper, the authors implement an empirical methodology to identify whether or not there is a bubble in housing markets in Brazil. Design/methodology/approach Based on a theoretical model that establish that, in the absence of a bubble, a long-run equilibrium relationship should be observed between the market price of an asset and its dividends. The authors implement two methodologies. First, the authors assess whether there is a cointegration relationship between housing prices and housing rental prices. Second, the authors test whether the price-to-rent ratio is stationary. Findings The authors’ results show that there is evidence of a bubble in housing prices in Brazil. However, given the short span of the data, the authors perform a Monte Carlo simulation and show that the cointegration tests may be biased in small samples. Therefore, the authors should be caution when assessing the results. Research limitations/implications The results obtained from the cointegration analysis can be biased for small samples. Practical implications The information on the excessive increase of the prices of the properties in relation to their fundamental value can help in the decision-making on investment of the economic agents. Social implications These results corroborate the hypothesis that Brazil has an excessive appreciation in housing prices, and, as Silva and Besarria (2018) have suggested, this behavior explains, in part, the fact that the central bank has taken this issue into account when deciding about the stance of monetary policy of Brazil. Originality/value The originality is linked to the use of the Gregory-Hansen method of cointegration in the identification of bubbles and discussion of the limitations of the research through Monte Carlo simulation.

Research Note: Tourism as a Factor of Growth – the Case of Brazil

2011 ◽  
Vol 17 (6) ◽  
pp. 1375-1386 ◽  
Author(s):  
Juan Gabriel Brida ◽  
Lionello F. Punzo ◽  
Wiston Adrián Risso
Keyword(s):  
Dynamic Panel Data ◽  
Cointegration Analysis ◽  
Quality Data ◽  
International Tourism ◽  
Annual Data ◽  
Data Sets ◽  
Real Rate ◽  
Specific Test ◽  
The Real ◽  
Long Run

International tourism is recognized to contribute to long-run growth through a whole list of diverse channels. This belief that tourism can cause long-run growth is known in the literature as the ‘tourism-led growth hypothesis’. This case study of Brazil can be taken as a specific test for such a hypothesis. In the paper, two different econometric methodologies are applied to two distinct data sets, showing that the results are independent of either data or methodology. On the one hand, annual data from 1965 to 2007 for Brazil as a whole are used for a cointegration analysis to look for the existence of a long-run relationship among variables of economic growth, international tourism earnings and the real exchange rate. On the other hand, high-quality data for the 27 Brazilian states, though for a shorter period (from 1990 to 2005), enable the use of the dynamic panel data model proposed by Arellano and Bond (1991). The authors show that the long-run elasticities between real per capita GDP with respect to tourism receipts and the real rate of exchange are 0.13 and 0.30, respectively. Finally, they compare their results with those of similar studies.

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