Co-Integration Analysis

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Trade Liberalization and Industrial Growth in Pakistan: Co integration Analysis (1990 2017

Trade Liberalization and Industrial Growth in Pakistan: Co integration Analysis (1990 2017

The contemporary effort to make it easy to exchange goods and services capital, labor, information and ideas across the borders is knows as trade openness. This is to integrate economies and societies at global level. Openness has helped movements of resources from developed to developing economies and helped technological advancements (Muhammad 2012). Improvement of transportation and communication has helped rediscover the opportunities at global level and identify new international markets for exchange of goods and services. This paper is motivated by the recent attempts in Pakistan to liberalize her foreign trade regime because after the adoption of Structural Adjustment Program most of the nations are following trade liberalization. Our focus in this study will be on Co-Integration and Error Correction Model because this not only shows the long run relationship but it also tells us about the speed of adjustment that resulted because of the policy shocks and structural changes while the regression methodology appears to encounter spurious regression problems if the variables of interest are non-stationary but the standard growth theories provide the conditions for only long run steady state equilibrium (Ellahi & Mehmood, 2009). The co integration analysis, on the other hand not only searches for a linear combination of non stationary time series that is itself stationary, bur also makes an attempt using an error correction term to investigate the dynamic behavior of the process of adjustments from short run disequilibria to long run equilibrium. With this background in mind, this paper empirically analysis the relationship between trade liberalization and industrial growth in Pakistan during the period 1990-2017.

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The induced innovation test (co integration analysis) of Iranian agriculture

The induced innovation test (co integration analysis) of Iranian agriculture

oniki’s (2000) defy of the clark and Youngblood’s time series method for testing the induced innova- tion hypothesis rested on the argument that the re- sidual of a co-integrated series does not symbolize the technological change effects. instead, the short-run effects (represented by an isoquant) plus the techni- cal change effects are equal to the long-run effects (represented by the iPc). Thus, oniki mentioned that the existence of the iPc is an essential condition for induced innovation, which counters the clark and Youngblood’s (1992) assertion that the existence of the long-run relationship (co-integration) “entails that technical change is neutral”. in oniki’s study, the induced innovation hypothesis was tested by comparing the long-run Allen-Uzawa’s partial elastici- ties of factor substitution (AUES) with the short-run AUES. if the long-run elasticity is greater than the short-run elasticity, the curvature of the isoquant is greater than the curvature of the iPc, which implies that the induced innovation exists in the production procedure. Although the oniki’s procedure for testing the induced innovation hypothesis is an important amendment to the clark and Youngblood’s (1992) time series method, his model did not contain technology variables. Technology variables, such as research and extension investments, could be indispensable for explaining some biases due to the technical change. Based on the oniki’s testing logic and explicitly in- corporating the r&E investments in the model, we test the induced innovation hypothesis on domestic agriculture by the following procedures.

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CO INTEGRATION ANALYSIS OF THE IMPACT OF MANUFACTURING SECTOR ON ECONOMIC GROWTH IN NIGERIA

CO INTEGRATION ANALYSIS OF THE IMPACT OF MANUFACTURING SECTOR ON ECONOMIC GROWTH IN NIGERIA

Thisstudy examined the long run impact of manufacturing sector on economic growth in Nigeria. Secondary data were used in this study. The relevant data were sourced from the publications of the Central Bank of Nigeria. Some of the publications include, CBN’s Annual Reports and Statement of Accounts for the years under review. The variables for which data were sourced include: manufacture output, Economic Growth, investment, non-oil export, non-oil import and exchange rate from 1980 to 2017. Units root test, Johansen co-integration, Vector Error-Correction Model, and Granger causality tests were employed to determine the long run relationship and causality links among the variables. According to Johansen normalization restriction imposed outcome manufacturing sector, investment and export had positive significant effect on GDP in the long run. On the contrary,IMPand EXCH had negative effect on GDP in the long run. There is bi-directional causality between GDP and MANUF, that GDP granger-caused manufacturing sector and vice visa. Iy is concluded that manufacturing sector had positive significant impacts on economic growth in Nigeria in the long run. It is recommended that government should implement policies that will reduce exchange rate so that there will be much returns for manufacturing sector to expand their investment which will invariably increase employment generation, reduce the level of poverty, and improve standard of living in the country.

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Renewable energy consumption and economic growth in Argentina  A multivariate co integration analysis

Renewable energy consumption and economic growth in Argentina A multivariate co integration analysis

Another OECD study that investigated the causal relationship between renewable energy consumption and economic welfare was conducted by Inglesi-Lotz (2013). Employing panel co- integration techniques, Inglesi-Lotz affirmed that renewable energy consumption has a positive and significant impact on economic welfare. Apergis and Payne (2011) studied the six Central American countries in investigating the relationship between renewable energy consumption and economic growth. Using annual data for the period between 1980 and 2004, this study established that there is a presence of a long run relationship between economic growth and renewable energy consumption. It was also found that energy consumption Granger-causes economic growth both in the short run and long run.

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Economic and policy foundations of agricultural exports from Ghana: A co Integration analysis

Economic and policy foundations of agricultural exports from Ghana: A co Integration analysis

By this expression, any increment for the share of cocoa beans in total agricultural exports could lead to a decline in the index, with entirely the opposite being anticipated for a decline in share of cocoa beans in total agricultural exports. This expression renders the index symmetric in that, use of the index as expressed in equation (7), would yield same magnitude of effect but opposite sign when the index is inverted (thus capturing export reliance (share of cocoa beans in total agricultural exports) instead of diversification). As a major player in the cocoa beans market, increment in the value of cocoa beans exports is possibly achieved through either increases in volume of exports or price of exports, each having a likely adverse implicationfor future values of export. Increment in volume of cocoa exports stand inducing an adding-up effect on the global cocoa market which subsequently trigger decline in prices for future exports, while current increments in price of exports lead to declines in future demand. By this, we perceive extreme reliance on cocoa beans a potential inhibitor of agricultural export growth, and diversification as a key stimulator of export growth, hence our a priori expectation about this index. Besides the index of diversification (which we computed), all the other variables were gathered from the agricultural trade database of FAO (FAOSTAT), development indicators of the World Bank, and UNCTAD STAT (United Nations Conference on Trade and Development Statistics) Data Verification Second only to variable selection in relevance, a unit root test is deemed the most important step in co-integration analysis. For variables to be co-integrated, they are expected to be integrated of the same order. The order of variables in a system is however ascertained through

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An Assessment of the Economic Impact of Globalization In Ethiopia: A Co Integration Analysis

An Assessment of the Economic Impact of Globalization In Ethiopia: A Co Integration Analysis

Afzal (2007) has examined the effects of globalization on the economy of Pakistan using an ECM for the periods 1960 to 2006. As others like Ray (2012) and Mete eta’al (2006) have used while studying the economic impact of globalization, Afzal (2007) has also used trade openness and financial integration to estimate the impact of globalization on the economic growth of Pakistan. The explanatory variables included in the model were trade openness, financial integration, human resources development public and private investment and all those variables are found to be cointegrated with the GDP according to the Johansen’s Co - Integration technique. The study has revealed that the proxies of physical capital (public and private investment) have been affecting the economy growth of Pakistan for the time periods under the study. However, both trade openness and financial integration do not have any short-run impact on the economy. Complement to this, the researcher has concluded that if the government of Pakistan be able to initiate and implement rigorous domestic policies then, the country will able to reap the positive impacts of globalization.

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A Co Integration Analysis of the Interdependencies between Crude Oil and Distillate Fuel Prices

A Co Integration Analysis of the Interdependencies between Crude Oil and Distillate Fuel Prices

The residual based E-G test [14] follows in two steps. The first step involves fit- ting the static OLS regression (after confirming that the series are I (1)) which captures any potential long-run relationship between the series and then carry- ing out a stationarity test on the residuals of this OLS regression. The second step describes the dynamic adjustment of the series towards an equilibrium. Since the E-G method produces only one co-integrating vector, it involves pair- wise comparison of two co-integrating regressions and it is affected by the choice of the dependent variable. Testing for co-integration using the E-G test is essentially equivalent to testing for unit roots in the estimated residual series us-

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Fiscal Imbalances and Interest Rate Change in Pakistan: A Co Integration Analysis

Fiscal Imbalances and Interest Rate Change in Pakistan: A Co Integration Analysis

Interest rate is a fundamental element in the monetary policy implication. The pillars of the monetary policy are based on the interest rates. There are many determinants contributing in the interest rate fluctuations but the present study has focused on the four major determinates of interest rate change. These included the overall fis- cal deficit, government debt to GDP ratio, inflation rate and international interest rate. The long-run impacts of these determinants were assessed on the interest rate change in Pakistan by employing the co-integration tech- nique. All the variables were found to have positive and significant impact on interest rate change in Pakistan except the variable of international interest rate change. The international interest rate has no long-run effect on the domestic interest rate. The short-run error correction model depicted that adjustment speed of short-run dy- namics to the long-run equilibrium was 12 percent. It means that about 8 years are required to adjust the disequi- librium to the long-run equilibrium.

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Financial deepening and economic growth in ghana: (a co integration analysis)

Financial deepening and economic growth in ghana: (a co integration analysis)

The coefficient of both β1 - β3 are expected to be signed positive, indicating that if financial deepening improves in the economy, GDP growth rate should improve, all things being equal. Real exchange rate is the price of one currency in terms of another. The exchange rate is the real effective exchange rate from WDI. It is an index of the weighted-average foreign exchange value of the Ghanaian Cedis against foreign currencies of the major trading partners. The real exchange rate appreciation reduces exports since domestic exports become less competitive, ie, more expensive on the foreign market; Conversely, real exchange rate depreciation tends to increase exports volumes since domestic goods are now relatively cheaper, therefore the signing of β4 is indeterminate apriori (Marrewijk, 2000). Arize et al. (2008) suggest that the multivariate analysis may lead to a precise analysis in order to capture the long run and short run relationships between the variables. Therefore, in order to capture these issues, the study applied both cointegration analysis and error correction model.

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Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis

Appraisal of Trade Potency on Economic Growth in Sudan: New Empirical and Policy Analysis

investigated the nexus between exports, imports and economic growth in Malaysia, using annual data for the period 1967- 2010. Cointegration analysis, VAR and Granger causality tests were employed in the empirical analysis. The results show that there is a causal relationship from exports to economic growth and from exports to imports. Sayef and Mohamed (2017) investigate the relationship between exports, imports, and economic growth in Panama. In order to achieve this purpose, annual data for the periods between 1980 and 2015 were tested using the Johansen co-integration analysis of the Vector Auto Regression Model and the Granger-Causality tests. According to the result of the analysis, it was determined that there is a strong evidence of bidirectional causality from imports to economic growth and from exports to economic growth. Bakari and Krit (2017) look into the acquaintance between exports, imports, and economic growth in Mauritania, by using co integration analysis of Vector Error Correction Model and the Granger-Causality tests. According to the Vector Error Correction Model, exports have a positive effect on economic growth. However, imports have a negative effect on economic growth. On the other hand, and according to the Granger-Causality tests, they defined that there is uni-directional causality between imports and economic growth. In addition, the result of the Granger Causality Tests shows that there is no relation of causality between exports and GDP. The nexus between import, export and economic growth, has been a subject matter for a substantial body of empirical work. With regard to methods haven used to determine the importance of exports and imports to economic growth, there are two main methods. The first one employs simple or multiple regressions, while the second method employs the causality technique. Recently, most of studies have attended to focus on VAR and VEC models and cointegration approach.

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Money Supply and Prices Relation in Albanian Economy

Money Supply and Prices Relation in Albanian Economy

In order to examine the casual relation of prices and money supply in Albania, additionally to literature review and conceptual framework, econometric analysis is very important. The study employs monthly data from 2000:M1 to 2015:M1 used so for a 14 year period. Data for this research are obtained from Central Bank of Albania (BoA). All tests are performed using statistical program Eviews 8. Prices are shown through CPI while money supply is presented as M1, which measures the most liquid components of money supply.

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The electricity growth nexus in South Africa: Evidence from asymmetric co integration and co feature analysis

The electricity growth nexus in South Africa: Evidence from asymmetric co integration and co feature analysis

and Shin (2006) nonlinear unit root tests as well as the momentum threshold autoregressive error correction (MTAR-TEC) model as first implemented by Enders and Granger (1998). The empirical composition of our study can generally be described as being two-fold in nature. Firstly, this study examines possible asymmetric integration, cointegration and threshold error correction effects between electricity consumption and economic growth and then in view of significant asymmetric cointegration effects, the paper proceeds to the second objective of devising granger causal testing procedures within the econometric framework. Taking South Africa as a contextual reference, we consider such an empirical undertaking as being worthwhile, since up-to-date and to the best of our knowledge, no empirical studies have investigated possible asymmetric causal effects between electricity consumption and economic growth for the country. In adding to the novelty of our study, we further extend our empirical analysis by decomposing the observed time series variables into their trend and variable components. This allows us to examine the extent to which electricity consumption and economic growth are cointegrated with the business cycle.

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The Feldstein - Horioka Paradox, A Case Study of Turkey

The Feldstein - Horioka Paradox, A Case Study of Turkey

Where the ratios depicted the period averages, and the countries were indexed by i. Their findings of β equal 1 (and statistically significant) denote total absence of mobility while β equal 0 denote presence of perfect capital mobility. This FH finding has been justified by several empirical studies through the tools of cross – sectional regression analysis. In his analysis employed the historical series. Obstfeld (1986) investigated direct correlations between OECD countries (Feldstein and Bachetta, 1991)

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Does Electricity Consumption affect Economic Growth in Bangladesh?

Does Electricity Consumption affect Economic Growth in Bangladesh?

If we look at the case of Bangladesh, a positive relationship between energy consumption and economic growth is found (Asaduzzaman and Billah, 2006). The results of Buysse et al. (2012) shows that unidirectional causality exists from energy consumption to economic growth both in short and long run, while bidirectional long-run causality exists between electricity consumption and economic growth but no causal relationship prevails in short-run. Besides, Alam and Sarker (2010) has applied Granger causality tests to check the relationship between economic growth and electricity generation and found that there exists short-run causal relationship running from electricity generation to economic growth without feedback. On the contrary, Mozumder and Marathe (2007) got quite opposite relationship that is unidirectional causality from GDP to electricity consumption for Bangladesh for the period 1971 to 1999 by employing co-integration and vector error correction model (VECM).

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The tourism led growth hypothesis: empirical evidence from Turkey

The tourism led growth hypothesis: empirical evidence from Turkey

Co-integration, causality and ARDL models are mostly used in papers that investigate the TLGH. This study differentiates itself from existing works by employing the Kalman filter algorithm in order to account for time varying empirical link between the series employed. By doing so, the TLGH is analysed dynamically, different from existing literature. In empirical analysis, first we investigate stationarity of the series. Testing stationarity with conventional unit root tests does not consider the structural breaks. In order to solve Figure 1. Tourist arrivals and income in Turkey (1987 – 2011). 636 H.M. Ertugrul and F. Mangir this problem, we employ both conventional unit root tests including augmented Dickey Fuller (ADF), Phillips – Perron (PP), Kwiatkowski – Phillips – Schmidt – Shin (KPSS) and Ng – Perron tests and unit root tests with structural breaks including Zıvot and Andrews (1992) tests and Lee and Strazicich (2003) tests.

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Revisiting the Tourism-Led Growth Hypothesis in a Dual Model Using Mwald Granger Causality Analysis

Revisiting the Tourism-Led Growth Hypothesis in a Dual Model Using Mwald Granger Causality Analysis

It is commonly believed that tourism expansion has a long-run positive effect on economic growth, and that it promotes economic growth in several ways. First, tourism development is necessary for the accumulation of foreign exchange earnings for developing countries, which in turn can be used to finance the imported capital goods utilized in the production process (Tomohara, 2016). Second, tourism activities can benefit other sectors of the economy such as construction, transportation, and hospitality, as well as cities of environmental improvement. Third, a successful tourism industry has the ability to create market demand and job opportunities, which in turn leads to higher household income and tax revenue for the government through augmented multiplier effects (Tang et al., 2015; Liu et al., 2017). Finally, the tourism industry can be considered as an imperative factor in the transmission of knowledge economy through human capital development. In other words, higher economic growth can be achieved not only by improving the factors of labor and capital but also by escalating tourism expansion. Therefore, the mutual relationship between tourism expansion and economic growth must be considered by policymakers (Balaguer and Cantavella-Jorda, 2002; Matarrita-Cascante, 2010) and the tourism-led growth hypothesis is worthy of analysis.

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VOLATILITY OF AGGREGATE MARKET INDICES

VOLATILITY OF AGGREGATE MARKET INDICES

Johannes co integration test is performed for each of 58 bilateral pairs identifies with in the group of selected indices for each pair, co integration rack of a and I are examined by comparing the trace statistic to corresponding critical values at 5% and 1% if the trace value is higher than critical values, then co integration exist at that level and vice versa the null hypothesis in the test holds that r = 0 (No co- integration exists) while the alterative holds. That r = 1 ( co-integration exists) failure to reject the null hypothesis implies that variables are not co-integrated, where as positive rejection implies that there is at least on co-integrated equation. The result of the Johansen co-integration test for each of the 58 bilateral pair of the selected indices is summarized in Table - 5.

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Co-integration and Causality Analysis of Carbon Intensity and Coal Consumption of China

Co-integration and Causality Analysis of Carbon Intensity and Coal Consumption of China

It can be seen from Table 5 that there is co-integration relation between sequence and sequence , suggesting the validity of the co-integration regression model for carbon intensity and coal consumption built up in this study. In the short term coal consumption will lead to the temporary deviation from equilibrium state of carbon intensity. In the long term, however, coal consumption will bring carbon intensity back to the equilibrium state, facilitating the sustainable economic development. 3.3. Granger Causality Test

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Cross border co operation and European economic integration: an empirical analysis

Cross border co operation and European economic integration: an empirical analysis

denotes in how far needs for a programme were examined jointly, PART denotes the scope and depth of strategic partnership, LOC denotes the depth and nature of co-operation, i.e. the lead partnership activity, location advantages and complexity of co-operation, JOINTP denotes the extent to which projects are truly joint and IMPACT denotes the level of a wider policy related institutional impact. The data are based on either factual quantitative results (e.g. historical duration of cross-border co-operation) or qualitative scoring (e.g. 0-20-40-60-80-100). Of course, qualitative scoring is not strictly based on empirical facts, but rather on self-reported assessment and assumption. There is always emphasis on personal interest (what is important for “me” if “I” view the programme?) and an emotional bias in such statements. However, we can assume that because of the large number of observations among

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Exports and Nigerians Economic Growth: A Co-Integration Analysis

Exports and Nigerians Economic Growth: A Co-Integration Analysis

The study focuses on finding the long run relationship between Export and Economic growth in Nigeria. Granger Causality and Cointegration test were employed in the empirical analysis. Prior to the Cointegration test, it was tested for stationarity of the variables using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP). The variable proved to be integrated of the order one 1(1) at first difference. Johansen and Juselius Cointegration test was used to determine the presence or otherwise of a cointegrating vector in the variables. Both Trace and Maximum Eigenvalue indicated existence of cointegration at 5% level of significance pointing to the fact that the variables have a long-run relationship.

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