scholarly journals Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach

2021 ◽  
Vol 14 (6) ◽  
pp. 277
Author(s):  
Muhammad Azmat Hayat ◽  
Huma Ghulam ◽  
Maryam Batool ◽  
Muhammad Zahid Naeem ◽  
Abdullah Ejaz ◽  
...  
Keyword(s):  
Interest Rate ◽  
Granger Causality ◽  
Wavelet Transformation ◽  
Multi Scale ◽  
Long Run ◽  
Causality Tests ◽  
Short Run ◽  
The Interest Rate ◽  
The Relationship ◽  
Cross Wavelet

This research is the earliest attempt to understand the impact of inflation and the interest rate on output growth in the context of Pakistan using the wavelet transformation approach. For this study, we used monthly data on inflation, the interest rate, and industrial production from January 1991 to May 2020. The COVID-19 pandemic has affected economies around the world, especially in view of the measures taken by governmental authorities regarding enforced lockdowns and social distancing. Traditional studies empirically explored the relationship between these important macroeconomic variables only for the short run and long run. Firstly, we employed the autoregressive distributed lag (ARDL) cointegration test and two causality tests (Granger causality and Toda–Yamamoto) to check the cointegration properties and causal relationship among these variables, respectively. After confirming the long-run causality from the ARDL bound test, we decomposed the time series of growth, inflation, and the interest rate into different time scales using wavelet analysis which allows us to study the relationship among variables for the very short run, medium run, long run, and very long run. The continuous wavelet transform (CWT), the cross-wavelet transform (XWT), cross-wavelet coherence (WTC), and multi-scale Granger causality tests were used to investigate the co-movement and nature of the causality between inflation and growth and the interest rate and growth. The results of the wavelet and multi-scale Granger causality tests show that the causal relationship between these variables is not the same across all time horizons; rather, it is unidirectional in the short-run and medium-run but bi-directional in the long-run. Therefore, this study suggests that the central bank should try to maintain inflation and the interest rate at a low level in the short run and medium run instead of putting too much pressure on these variables in the long-run.

Effects of Government Expenditure on Private Investment in Nigerian Economy (1980–2016)

2018 ◽  
Vol 4 (2) ◽  
pp. 147-156
Author(s):  
Taiwo Akinlo ◽  
Olusola Joel Oyeleke
Keyword(s):  
Interest Rate ◽  
Positive Impact ◽  
Government Expenditure ◽  
Private Investment ◽  
Correction Model ◽  
Long Run ◽  
Short Run ◽  
The Government ◽  
The Interest Rate ◽  
The Relationship

This study examined the effect of government expenditure on private investment in Nigeria during the period 1980–2016. The error correction model analysis was used in the study to analyze the relationship between the two variables. The study found that there is a long-run relationship among the variables and that the interest rate and inflation have negative but significant impact on private investment in the long run. On the other hand, government expenditure has positive but insignificant impact on private investment in the long run. In the short run, government expenditure and interest rate have a significant positive impact on private investment in Nigeria, while GDP per capita and inflation negatively impact private investment. The study concluded that there is the need for the government to increase its expenditure particularly on the provision of more infrastructural facilities as this will attract more investment from within and outside the country.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

scholarly journals INFLASI DARI SUDUT PANDANG MONETER DAN FISKAL (STUDI KASUS SUMATERA BARAT)

2019 ◽  
Vol 1 (1) ◽  
pp. 131
Author(s):  
Zul Azhar ◽  
Alpon Satrianto ◽  
Nofitasari Nofitasari
Keyword(s):  
Interest Rate ◽  
Money Supply ◽  
Government Spending ◽  
Descriptive Research ◽  
Distributed Lag ◽  
Long Run ◽  
Negative Effect ◽  
Short Run ◽  
The Interest Rate ◽  
Positive Effect

This study aims to analyze the effect of money supply M2, interest rate, government spending and local tax on the inflation in West Sumatera. This type of research is descriptive research and secondary datain the form of time-series from quartely 1 2007 to 2017 quartely 4 using the method of Autoregresive Distributed Lag analysis. The results of this study indicate that money supply in the long run have a significant and positive effect on inflation West Sumatera. In the short run  and long run the interest rate has a significant and positive effect on inflation in West Sumatera. Government spending in the Long run has a significant and negative effect on inflation in West Sumatera. Based on the result of this study can be concluded that there is inflation in West Sumatera is monetery of phenomenon in the long run. 

scholarly journals Dynamic Relationship Between Energy and Economic Growth: Evidence from D8 Countries.

2011 ◽  
Vol 50 (4II) ◽  
pp. 437-458 ◽  
Author(s):  
Sarwat Razzaqi ◽  
Faiz Bilquees ◽  
Saadia . Sherbaz
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Energy Use ◽  
Demand And Supply ◽  
Dynamic Relationship ◽  
Long Run ◽  
Production And Consumption ◽  
Short Run ◽  
Oil Embargo ◽  
The Relationship

Energy sector has a vital influence on an economy, on both demand and supply sides. Therefore, energy production and consumption bear great importance for the developing world. The oil embargo of 1970‘s and its impact on major macroeconomic variables throughout the world attracted many economists to examine the relationship between energy and economic prosperity. The researchers have been unable to establish a definitive direction of causality between the two variables. The purpose of this study is to empirically investigate the dynamic relationship between energy use and economic growth in the D8 countries. The evidence gathered through application of VAR Granger Causality, Johansen Cointegration and VECM proves existence of short-run and long-run correlation between energy use and economic development in all countries. The results supported either uni-directional or bi-directional causality in the D8 countries except for Indonesia in short-run where non-causality was established between the two variables. JEL classifications: C22; Q43. Keywords: Energy Use, Economic Growth, D8, VAR Granger Causality, Cointegration, VECM

scholarly journals Effects of Interest Rate on Stock Market Returns in Kenya

2017 ◽  
Vol 9 (8) ◽  
pp. 40
Author(s):  
Donald A. Otieno ◽  
Rose W. Ngugi ◽  
Nelson H. W. Wawire
Keyword(s):  
Interest Rate ◽  
Stock Market ◽  
Granger Causality ◽  
Moving Average ◽  
Market Returns ◽  
Treasury Bills ◽  
Stock Market Returns ◽  
Long Run ◽  
Lending Rate ◽  
Short Run

Debate on the stochastic behaviour of stock market returns, 3-month Treasury Bills rate, lending rate and their cointegrating residuals remains unsettled. This study examines the stochastic properties of the macroeconomic variables, stock market returns and their cointegrating residuals using an Autoregressive Fractionally Integrated Moving Average (ARFIMA) model. It also investigates Granger causality between the two measures of interest rate and stock market returns. The study uses monthly data from 1st January 1993 to 31st December 2015. The results indicate that the 3-month Treasury Bills rate, lending rate and stock market returns are fractionally integrated which implies that shocks to the variables persist but eventually disappear. The results also reveal that the cointegrating residuals are fractionally integrated which suggests that a new and harmful long-run equilibrium might be established when each of the measures of interest rate is driven away from stock market returns. Additionally, the results indicate that the 3-month Treasury Bills rate and lending rate negatively Granger cause stock market returns in the long run. This suggests that stocks and Treasury Bills are competing investment assets. On the other hand, ARFIMA-based Granger causality reveals that stock market returns lead the 3-month Treasury Bills rate and lending rate with a negative sign in the short run. This implies that a prosperous stock market results into a favorable macroeconomic environment. A key contribution of this study is that it is the first to empirically examine fractional cointegration and ARFIMA-based Granger Causality between interest rate and stock market returns in Kenya.

scholarly journals The Interest Rate, Learning, and Inventory Investment

2004 ◽  
Vol 94 (5) ◽  
pp. 1303-1327 ◽  
Author(s):  
Louis J Maccini ◽  
Bartholomew J Moore ◽  
Huntley Schaller
Keyword(s):  
Interest Rate ◽  
Regime Switching ◽  
Real Interest Rate ◽  
Decision Rules ◽  
Negative Relationship ◽  
The Real ◽  
Long Run ◽  
Inventory Investment ◽  
Short Run ◽  
The Interest Rate

This paper presents a model that provides an explanation, based on regime switching in the real interest rate and learning, of why tests based on stock-adjustment models, Euler equations, or decision rules—which emphasize short-run fluctuations in inventories and the interest rate—are unlikely to uncover a negative relationship between inventories and the real interest rate. The model, however, predicts that inventories will respond to long-run movements, that is, to regime shifts in the real interest rate. Tests emphasizing cointegration techniques confirm this prediction and show a significant long-run relationship between inventories and the real interest rate.

New Evidence of Dynamic Links between Tourism and Economic Growth Based on Mixed-Frequency Granger Causality Tests

2017 ◽  
Vol 57 (7) ◽  
pp. 899-907 ◽  
Author(s):  
Han Liu ◽  
Haiyan Song
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Large Body ◽  
P Value ◽  
Mixed Frequency ◽  
Causality Tests ◽  
Short Run ◽  
Empirical Regularities ◽  
Granger Causality Tests ◽  
The Relationship

The relationship between tourism and economic growth has created a large body of literature investigating the hypotheses of tourism-led economic growth (TLEGH) and economy-driven tourism growth (EDTGH). In this article, we use mixed-frequency Granger causality tests to investigate the relationship between the two types of growth in Hong Kong from 1974 to 2016. Our analysis reveals the following empirical regularities. First, the hidden short-run causality of TLEGH is detected, and EDTGH is proved in the short run and also in the long run when Granger causality tests are performed in a mixed-frequency framework. Second, mixed-frequency Granger tests demonstrate more power in testing the TLEGH and EDTGH via the rejection frequencies (bootstrap p value). Finally, rolling Granger causality tests reveal an unstable relationship between tourism and economic growth in both magnitude and direction, and the relationship is highly economic- and tourism-event-dependent.

scholarly journals The Effect of Higher Education on Growth: A Cointegration Analysis

2013 ◽  
Author(s):  
Murat Mustafa Kutlutürk ◽  
Hakan Kasım Akmaz ◽  
Ahmet Çetin
Keyword(s):  
Higher Education ◽  
Granger Causality ◽  
Cointegration Analysis ◽  
Annual Data ◽  
Causality Test ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

In this study the relationship between higher education and economic growth was investigated using annual data between 1988 and 2012 for Turkey. To see short and long run effects of higher education on growth the Autoregressive Distributed Lag (ARDL) testing approach was used. In this investigation ratio of higher education graduates in employment was used as an explanatory variable. Zivot and Andrews test was implemented for the variables. The long and short run effects of higher education on growth was found significant. Granger causality test was implemented and one way Granger causality from higher education to growth was determined.

scholarly journals ANALISIS KEBIJAKAN MONETER DALAM MENGENDALIKAN INFLASI DI INDONESIA

2012 ◽  
Vol 1 (2) ◽  
pp. 103
Author(s):  
Suriani Suriani
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Unit Root Test ◽  
Good Choice ◽  
Causality Test ◽  
Long Run ◽  
Short Run

The objective of this research is to analize the effects of the variables interest rate, and exchange as one of monetary mecanisme for controlling inflation. The correlation among those variables is cointgration in the long run and short run equilibrium analyzed. In Indonesia, the monetary policy is run by monetary instruments (i.e. interest rates or monetary aggregates) to achieve price stability. This research used Unit Root Test , Cointegration Test, Granger causality and VECM (Vector Error Correction Model) Test. The results of estimation showed that have cointegration among interest rate, exchange rate and inflation in the long run. Granger causality test showed that between inflation and interest rate have no causality relationship, but for inflation and exchange rate have two directions relationship of causality. It’s means, monetary of mecanisme transmition through exchange rate channel can be good choice in making monetary policy to control inflation in Indonesia.

Bank competition, financial innovations and economic growth in Ghana

2014 ◽  
Vol 5 (1) ◽  
pp. 30-51 ◽  
Author(s):  
Anthony Adu-Asare Idun ◽  
Anthony Q.Q. Aboagye
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Innovation ◽  
Bank Competition ◽  
Content Type ◽  
Financial Innovations ◽  
Long Run ◽  
Short Run ◽  
The Relationship ◽  
Finance Growth Nexus

Purpose – This paper takes the finance-growth nexus further by looking at the relationship between bank competition, financial innovations and economic growth in Ghana. The purpose of this paper is to find the causality among bank competition, financial innovations and economic growth in Ghana. Design/methodology/approach – The relationship between bank competition, financial innovations and economic growth was established through the framework of the endogenous growth model. In addition, the paper employed the bound testing ARDL cointegration procedures to enable us to establish both short-run and long-run relationship between bank competition, financial innovations and economic growth. Granger causality test were also estimated to determine the direction of causality. Findings – The results showed that, in the long run, bank competition is positively related to economic growth while financial innovation is negatively related to economic growth. In the short run, bank competition is negatively related to economic growth. By the same token, financial innovation is positively related to economic growth in the short run. In terms of causality, the results showed that there is unidirectional Granger causality from bank competition to economic growth. However, there is bidirectional Granger causality between financial innovation and economic growth. Practical implications – The study therefore, recommends for more regulations toward a more competitive banking system with more innovative products tailored toward mobilization of savings and investment to growth induced sectors of the economy. Originality/value – This paper provides a time series perspective to the finance-growth nexus and highlights the potential contribution of effective banking development to the economic welfare of the Ghanaian citizens.

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