scholarly journals MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

2020 ◽  
Vol 7 (6) ◽  
pp. 66-76
Author(s):  
Md. Rasel Hossain ◽  
Ahsanul Haque ◽  
Md. Abdullah Amir Hamja ◽  
M. Shohel Rana
Keyword(s):  
Causal Relationship ◽  
Unit Root ◽  
Unit Root Test ◽  
Testing Procedure ◽  
Vector Error Correction ◽  
Unit Root Testing ◽  
Vec Model ◽  
Long Run ◽  
Short Run ◽  
Johansen Cointegration Test

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

scholarly journals MEASURING CO-MOVEMENT OF REAL INTEREST RATE AND INFLATION RATE: USING VEC APPROACH

2020 ◽  
Vol 7 (6) ◽  
pp. 66-76
Author(s):  
Md. Rasel Hossain ◽  
Ahsanul Haque ◽  
Md. Abdullah Amir Hamja ◽  
M. Shohel Rana
Keyword(s):  
Causal Relationship ◽  
Unit Root ◽  
Unit Root Test ◽  
Testing Procedure ◽  
Vector Error Correction ◽  
Unit Root Testing ◽  
Vec Model ◽  
Long Run ◽  
Short Run ◽  
Johansen Cointegration Test

It is important to know the future movement of economic variables for the planning and development of a country, Vector Error Correction (VEC) Model has been applied to disclose hidden long run as well as short-run patterns of the selected variables. ADF unit root testing procedure was applied to satisfy the conditions of applying the VEC Model. Using Johansen cointegration test long-run cointegration has been justified. But the VEC model reveals that long run significant causal relationship between the variables whereas there is no short-run causal relationship. The parameter was estimated using the OLS estimation technique. The validity of the model was confirmed by applying different quantitative approaches such as normality test, autocorrelation test, Portmanteau test, Unit root test, and various graphical approaches which suggested model selection and estimation were correct. The result of this present study may help Govt. agencies as well as planners to take an idea.

scholarly journals Do Erratic Rainfalls Hamper Grain Production? Analysis of Supply Response of Rice to Price and Non-Price Factors

Agronomy ◽  
2021 ◽  
Vol 11 (8) ◽  
pp. 1463
Author(s):  
Ghulam Mustafa ◽  
Azhar Abbas ◽  
Bader Alhafi Alotaibi ◽  
Fahd O. Aldosri
Keyword(s):  
Unit Root Test ◽  
Rice Production ◽  
Vector Error Correction ◽  
Supply Response ◽  
Target Time ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
The Impact

Increasing rice production has become one of the ultimate goals for South Asian countries. The yield and area under rice production are also facing threats due to the consequences of climate change such as erratic rainfall and seasonal variation. Thus, the main aim of this work was to find out the supply response of rice in Malaysia in relation to both price and non-price factors. To achieve this target, time series analysis was conducted on data from 1970 to 2014 using cointegration, unit root test, and the vector error correction model. The results showed that the planted area and rainfall have a significant effect on rice production; however, the magnitude of the impact of rainfall is less conspicuous for off-season (season 2) rice as compared to main-season rice (season 1). The speed of adjustment from short-run to long-run for season-1 rice production is almost two-and-a-half years (five production seasons), while for season-2 production, it is only about one-and-a-half year (three production seasons). Consequently, the study findings imply the supply of water to be enhanced through better water infrastructure for both seasons. Moreover, the area under season 2 is continuously declining to the point where the government has to make sure that farmers are able to cultivate the same area for rice production by providing uninterrupted supply of critical inputs, particularly water, seed and fertilizers.

scholarly journals ANALISIS HUBUNGAN PENDAPATAN WISATAWAN DAN HARGA PARIWISATA TERHADAP PERMINTAAN PARIWISATA DENGAN VECM

2016 ◽  
Vol 5 (2) ◽  
pp. 44
Author(s):  
MERARY SIANIPAR ◽  
NI LUH PUTU SUCIPTAWATI ◽  
KOMANG DHARMAWAN
Keyword(s):  
Unit Root ◽  
Unit Root Test ◽  
Cointegration Test ◽  
Tourism Demand ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
The Relationship ◽  
Positive Effect

Tourism demand is focused on estimating variables which influence tourist visit. The tourism demand that we discuss on this research is the tourism demand to Bali of the major tourism-generating country was Australia. The aim of this research is to analyze the relationship between tourist income and tourism price to tourism demand using VECM. VECM requires that the variables in the model must be stationary and fulfilled a cointegration condition. In order to make it valid, the stationarity of variables in the model have to be checked using ADF unit root test. In additon, cointegration between these variables are examined using Johansen’s cointegration test. The results of ADF unit root test show that indicated the tourist income, the tourism price and the tourism demand for Australia data are stationary in first lag or I(1). Cointegration test shows that all variables are cointegrated, i.e. have a long-run relationship. In the long-run, the tourist income and tourism price give positive effect to the tourism demand. This means, the increase of tourist income and tourism price will contribute to the increase in tourism demand. In addition, in the short-run, the tourist income and the tourism price give negative effect to the tourism demand. This means, the increase of tourist income and tourism price will contribute to the decrease in tourism demand.

scholarly journals TOURISM DEMAND FOR BALI-THE HEGY APPROACH FOR SEASONAL UNIT ROOT TEST

2012 ◽  
Vol 11 (1) ◽  
Author(s):  
Ida Bagus Made Wiyasha
Keyword(s):  
Exchange Rates ◽  
Unit Root ◽  
Unit Root Test ◽  
Wald Test ◽  
Cusum Test ◽  
Parameter Instability ◽  
Economic Role ◽  
Long Run ◽  
Inflation Rates ◽  
Short Run

Tourism plays an important economic role for a destination. This study aims to investigate the behavior of seasonal direct tourist arrivals to Bali. To achieve the aforementioned objective archival data of direct tourist arrivals to Bali from 2001 to 2010 were used. Error Correction Model (ECM) and HEGY approach were applied to analyze the behavior of seasonal tourist arrivals. Wald test was applied in joint test for quarterly parameter. Cusum test were applied to examine the parameter stability for the periods mentioned above. USA, UK, and Japan tourist arrivals were the dependent variables while exchange rates and inflation rates for those mentioned countries were independent variables of the model. The findings of the study are as follows. The ECM results for Japan revealed that in the short run and the long run as well the exchange and inflation rates were negatively related to arrivals. For UK, in the short run exchange rates negatively related to arrivals while inflation rates exhibited positive relation to arrivals. For the US, all exchange rate and inflation rates were positively related to arrivals. Cusum test revealed the following. Japan arrivals exhibited relatively stable parameter for the periods of 2001-2010. UK arrivals showed parameter instability; while US arrivals experienced relatively stable parameter for the periods mentioned earlier. Wald test results showed that all arrivals, USA, UK, and Japan contained a unit root for their quarterly data.

THE CAUSAL RELATIONSHIP BETWEEN INSURANCE AND ECONOMIC GROWTH IN NIGERIA (1986-2010)

2012 ◽  
Vol 02 (12) ◽  
pp. 49-57
Author(s):  
TAIWO AKINLO
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Causal Relationship ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run

This study examined the causal relationship between insurance and economic growth in Nigeria over the period 1986-2010. The Vector Error Correction model (VECM) was adopted. The cointegration test shows that GDP, premium, inflation and interest rate are cointegrated when GDP is the edogeneous variable. The granger causality test reveals that there is no causality between economic growth and premium in short run while premum, inflation and interest rate Granger cause GDP in the long run which means there is unidirectional causality running from premium, inflation and interest rate to GDP. This means insurance contributes to economic growth in Nigeria as they provide the necessary long-term fund for investment and absolving risks.

scholarly journals Modelling the Temporal Effect of Terrorism on Tourism in Kenya

2016 ◽  
Vol 8 (12) ◽  
pp. 10 ◽  
Author(s):  
Brian K. Masinde ◽  
Steven Buigut ◽  
Joseph K. Mung'atu
Keyword(s):  
Testing Procedure ◽  
Tourism Industry ◽  
Bounds Testing ◽  
Causality Test ◽  
Vector Error Correction ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Long Run Equilibrium

<p>Terrorist attacks have escalated over the recent years in Kenya, with adverse effects on the tourism industry. This study aims to establish if a long-run equilibrium exists between terrorism and tourism in Kenya between the years 1994 and 2014. To reinforce the robustness of the results, both Autoregressive Distributed Lag (ARDL) bounds testing and the Vector Error Correction Model (VECM) techniques are used to investigate the problem. A Granger causality test is also carried out to ascertain the direction of the relationship if one exists. The evidence from ARDL and the VECM testing procedure suggest that there is no long-run equilibrium between terrorism and tourism in Kenya. Terrorism does not Granger cause tourism and vice versa. However, short-run effect indicates that terrorism negatively and significantly affects tourism.</p>

scholarly journals Does Monetary Policy Induce Economic Growth? An Empirical Evaluation of the Nigerian Economy

2019 ◽  
Vol 2 (4) ◽  
pp. 331
Author(s):  
Anthony Ilegbinosa Imoisi
Keyword(s):  
Economic Growth ◽  
Empirical Evaluation ◽  
Unit Root Test ◽  
Secondary Data ◽  
National Bureau ◽  
Monetary Policies ◽  
Vector Error Correction ◽  
Long Run ◽  
Short Run ◽  
The Government

Monetary and Fiscal policies are instruments which the government of any nation can employ to effectively achieve the desired growth of their respective economies. This study investigates the extent to which monetary policies can promote economic growth in Nigeria from 1980-2017. Secondary data were used from the Statistical Bulletin of the apex bank in Nigeria (CBN) and National Bureau of Statistics. Unit root test, Johansen co-integration and the vector error correction model (VECM) were employed in analyzing the data collected for this study. The result showed that approximately 62% of GDP is explained by variables in the model while 38% is accounted for and explained by other variables not included in the model but are captured by the error term. In addition, monetary policies did not have a significant impact on Nigeria’s economic growth in the short run, but significantly affected the country’s growth in the long run.

scholarly journals Nexus of bank personnel and cost-income ratio (CIR) in Nigeria

2017 ◽  
Vol 12 (4) ◽  
pp. 154-162
Author(s):  
Odunayo Magret Olarewaju ◽  
Olusola Olawale Olarewaju ◽  
Titilayo Moromoke Oladejo ◽  
Stephen Oseko Migiro
Keyword(s):  
Causal Relationship ◽  
Unit Root ◽  
Banking Sector ◽  
Unit Cost ◽  
Unit Root Test ◽  
Secondary Data ◽  
Long Run ◽  
Income Ratio ◽  
The Stability ◽  
The Cost

This study investigates the causal relationship between bank personnel ratio and the cost-income ratio based on performance in Nigeria for the period of 2004–2015. Secondary data collected on a cross section of 15 banks during this period was analyzed using panel unit root, cointegration and Granger causality techniques. A unit root test revealed that the variables are stationary at order one. The result further shows there is an equilibrium relationship or stability in the short and long run; furthermore, there is a bidirectional causal relationship between personnel ratio and cost-income ratio. Therefore, the study recommends that the apex bank should enforce policies in the banking sector that will minimize the unit cost of operation – even though they might hire more staff. This is to enhance the stability of the banks in Nigeria and to avoid any threat to their continuity.

scholarly journals REVISITING KEYNES’ INVESTMENT AND SAVING MODEL IN INDONESIA

2020 ◽  
Vol XVIII (2) ◽  
pp. 45-58
Keyword(s):  
Error Correction ◽  
Causal Relationship ◽  
Granger Causality Test ◽  
Vector Error Correction Model ◽  
Causality Test ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run

This study aims to analyze the Keynes’ investment and saving model in Indonesia from 1981 to 2018. The researchers use the econometric test from the Granger causality test to find the short-run causal relationship and the Vector Error Correction Model to reveal both the short-run and long-run effects in the model. The result of Granger causality test demonstrates that there is no short-run causal relationship between these two variables. In the short-run, the increase in saving affects the consumption loans more compared to the investment loans. Besides, increased consumption compared to saving has more influence in raising investment. However, the Vector Error Correction Model proves that saving negatively affects investment in the long-run. This model empirically supports the long-run Keynes’ investment and saving model. Consequently, the Indonesian government needs to consider saving as a policy instrument to increase investment in the longrun.

Relationship between Inflation and Stock Returns – Evidence from BRICS markets using Panel Co integration Test

2015 ◽  
Vol 1 (1) ◽  
pp. 647 ◽  
Author(s):  
Vanita Tripathi ◽  
Arnav Kumar
Keyword(s):  
Stock Returns ◽  
Unit Root ◽  
Negative Relationship ◽  
Unit Root Test ◽  
Stock Index ◽  
Stationary Characteristic ◽  
Long Run ◽  
Integration Test ◽  
Short Run

Stocks are generally considered to be a good hedge against inflation because of their tendency to move together. This paper examines long term relationship between inflation and stock returns in BRICS markets using panel data for the period from March 2000 to September 2013. Correlation results reveal a significant negative relationship between stock index and inflation rate for Russia and a significantly positive relationship for India & China. ADF, PP and KPSS unit root tests indicate non-stationary characteristic of the data. Further we find no long term co-integrating relationship between stock index values and inflation rates using Pedroni panel co integration test. These findings have important implications for policy makers, regulators and investment community at large. There may seem to be short term contemporaneous relationship between inflation and equity returns but in the long run they do not seem to be significantly integrated. Changes in inflation may bring some short run movement in stock return but certainly equity does not seem to be a good hedge against inflation in long run at least in emerging BRICS markets.                       Keywords:  BRICS, Stock Index, Inflation, Unit root test, Pedroni Panel Co integration Test, Johansen Co integration Test.

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