REVISITING THE EFFICIENT MARKET HYPOTHESIS FOR AFRICAN COUNTRIES: PANEL SURKSS TEST WITH A FOURIER FUNCTION

This study applies the panel seeming unrelated regression of the Kapetanios‐Shin‐Snell (SURKSS) test with a Fourier function to investigate the time‐series properties of stock prices in five African countries (i.e. Egypt, Kenya, Morocco, South Africa and Tunisia) over the period of January 2000–April 2011. The empirical results from the univariate unit root and panel‐based unit root tests indicate that unit root hypothesis can not be rejected for these five countries under study. However, results from the panel SURKSS test with a Fourier function indicate that unit root hypothesis can be rejected for Egypt and Morocco, two countries under study. Our results indicate that the weak‐form efficient market hypothesis holds in the other three countries, namely, Kenya, South Africa and Tunisia.     

我国是否存在失业回滞效应？——基于第一、二代面板单位根检验的实证分析

就业是民生之本,然而自上世纪九十年代以来我国失业率逐年攀升,日益严峻的失业问题已引起政策当局和学术界的广泛关注与高度重视。有鉴于此,本文在第一代面板单位根检验的基础上,结合最新发展的第二代面板单位根检验方法,对我国是否存在失业回滞效应展开深入研究,进而为我国促进就业的政策选择提供重要的参考依据。研究结果表明,我国存在着显著的失业回滞效应,这就使得经济周期波动等外部冲击对我国失业产生永久性影响,从而在很大程度上造就了我国失业率逐年攀升、高居不下的局面,现阶段政府实施干预性的宏观调控政策显得十分必要。在此基础上,本文对降低乃至消除失业回滞效应、完善我国治理失业的宏观调控机制提出了若干政策建议。     

The Unit Root Hypothesis for Aggregate Output May Not Hold after All: New Evidence from a Panel Stationarity Test with Multiple Breaks

This paper investigates the hypothesis of a unit root in output for four panels of real gross domestic product (GDP) and real GDP per capita series in the Organization for Economic Cooperation and Development (OECD). For that purpose, a panel stationarity test is employed that assumes a highly flexible trend function by incorporating an unknown number of breaks in level and slope. This analysis renders clear-cut evidence in favor of regime-wise trend stationarity in OECD output for the three data sets of annual data, while evidence of nonstationarity is found for the data set based on quarterly data, which is composed of only seven countries over the shortest time span. Overall, the results herein stand in stark contrast to previously published results that do not control for the existence of structural change in the trend function, but accord well with those that employ panel unit root tests that allow for a single homogeneous break in the trend function.     

台湾经济结构突变、周期波动和经济增长

本文运用结构突变理论,在检验台湾GDP序列的平稳性后,建立台湾GDP序列的拟合模型,实证检验支持台湾GDP序列在1974、1981、2001年产生结构突变,且潜在GDP函数发生了变化。通过分离GDP序列的趋势成分和周期成分,运用周期成分对台湾经济周期波动进行分析。研究发现,台湾经济周期波动主要受世界经济景气和台湾经济发展策略的影响。发生结构突变后台湾经济增长趋势发生变化,这与台湾经济的发展阶段和相应采取的经济发展策略密切相关。论文最后对未来台湾经济增长趋势做出预测。     

Are G7 per capita real GDP levels non-stationary, 1870–2001?

In this paper we examine whether or not G7 per capita income can be classified as a stationary process using data for over a century. The unit root null hypothesis is tested using the recently developed Lagrange multiplier test which allows for at most two structural breaks. We are able to reject the unit root null hypothesis for all the countries at the 5 percent level or better, except for Italy and Germany.     

Public Revenue‐Expenditure Nexus in South Africa: Are there Asymmetries?

This paper re‐examines the government revenue and expenditure relationship in South Africa using Enders and Siklos' Threshold adjustment and Granger causality tests. The paper allows for structural breaks in the unit root and cointegration tests. The results indicate the absence of any asymmetries in both the threshold autoregression and momentum threshold autoregression specifications of adjustments in the South African's budgeting process. The estimated symmetric error‐correction models provide support for the fiscal synchronization hypothesis of government revenues and expenditures for long‐run and short‐run dynamic equilibrium. These findings indicate that the South African fiscal authorities should try to maintain or even improve the control of their fiscal policy instruments to sustain the prudent budgetary process.     

Testing PPP for the South African Rand/US Dollar Real Exchange Rate at Different Data Frequencies

This paper tests the PPP hypothesis for the South African rand/US dollar real exchange rate using a fractional integration framework. The results suggest that the real exchange rate of the South African rand with respect to the US dollar is a highly dependent variable with an order of integration very close to 1. This finding is not affected by the data frequency considered (daily, weekly or monthly). Also, there appears to be a single break in December 2001 (possibly corresponding to a change in the monetary policy framework), with the unit root null being rejected in favour of d > 1 for the periods before the break, but not afterwards. Thus, our results strongly reject the PPP hypothesis for the South African rand/US dollar rate across data frequencies, since shocks are found to affect the exchange rate forever.     

IS THERE AN ASYMMETRIC BEHAVIOUR IN AFRICAN INFLATION? A NON‐LINEAR APPROACH

In this paper we test the inflation persistence hypothesis as well as model the long‐run behaviour of inflation rates in a pool of African countries using a non‐linear framework. In order to do so, we rely on unit root tests applied to non‐linear models and fractional integration. The results show that the hypothesis of inflation persistence does not hold empirically for most of the countries. In addition, the estimated models (logistic smooth transition autoregressions) are stable in the sense that the variable tends to remain in the regime (low inflation or high inflation) once reached, and changes between regimes are only achieved after a shock. The results also indicate that the effects of the shocks on inflation tend to die out; exogenous factors, i.e. supply shocks and inertia may be causing this outcome, as they play a substantial role in the determination of the inflation rates for our selected African countries.     

Money Demand and Economic Liberalization in a Small Open Economy—Trinidad and Tobago

Economic liberalization creates potential instability in money demand. The introduction of liberalization in the early 1990s coincided with instability in the long-run demand for broad money (M2). OLS estimates confirm the presence of a structural break in the M2 model. Monetary policy should be based on a narrow definition of money. Moreover, the demand for money function must take explicit account of the openness of the economy. The results have important implications for policymakers in other Caribbean countries that are contemplating economic liberalization.     

The Role of Monetary Policy in Japan: A Break in the 1990s?

This article documents time series evidence suggesting the case for a possible structural break in the role of Japan's monetary policy during the 1990s. It uses a simple vector autoregressive framework and offers some suggestive results: While a persistent effect of monetary policy on real output is detected over the full sample of 1975–1998 and the subsample that ends in 1993, such effect disappears with the recent subsample of the 1990s. The stability analysis also provides more specified evidence that there is a break in the reduced form dynamic system in 1995. Some interpretations are offered to intuitively support these findings. J. Japan. Int. Econ., December 2000, 14(4), pp. 366–384. Research Institute for Economics and Business Administration, Kobe University, Rokko, Nada, Kobe 657-8501, Japan Copyright 2000 Academic Press.Journal of Economic Literature Classification Numbers: E52, E32.     

TESTING FOR FRACTIONAL INTEGRATION IN SOUTHERN AFRICAN DEVELOPMENT COMMUNITY REAL EXCHANGE RATES

This paper utilises “a class test for fractional integration” associated with the seminal contribution of Hinich and Chong to appraise the possibility that Southern African Development Community (SADC) real exchange rates can be treated as long memory processes. The justification for considering fractional integration is that the general failure to reject the unit‐root hypothesis in real exchange rates is caused by the restrictiveness of standard unit‐root tests regarding admissible low‐frequency dynamic behaviour. The paper presents evidence that, except for South Africa, none of the SADC real exchange rates are fractionally integrated. However, the results are found to be sensitive to the size of the sample.     

THE REVENUE-EXPENDITURE NEXUS: HISTORICAL EVIDENCE FOR SOUTH AFRICA

Results from unit root and cointegration tests suggest that, allowing for structural breaks, government revenue and expenditure in South Africa during 1895‐2005 were I(1) series and cointegrated. Results from Granger‐type causality tests suggest that a bidirectional Granger‐causal relation existed between revenue and expenditure for the full sample period and for sub‐periods up to the 1960s, consistent with the so‐called “fiscal synchronisation hypothesis”. However, in the 1960s the causal relation appears to have shifted to run from expenditure to taxation, consistent with Peacock and Wiseman's “displacement effect”. In the context of the recent fiscal consolidation literature, the South African fiscal experience would appear to be generally consistent with either revenue‐ or expenditure‐led fiscal consolidation efforts, but with the more recent evidence favoring expenditure‐led consolidations.     

Non-linear Co-integration between Nominal Interest Rates and Inflation: An Examination of the Fisher Hypothesis for Asian Countries

Abstract

This paper examines the long-run relationship between nominal interest rates and inflation for a group of Asian countries over the period February 1973–April 2007. We argue that the empirical failure to find evidence supporting the Fisher effect in previous studies may be attributed to the presence of non-linearities in the long-run relationship between nominal interest rates and inflation. We present evidence that the Fisher relation contains significant logistic smooth transition autoregression (LSTAR)-type non-linearity. This type of non-linearity is consistent with inflation targeting and the opportunistic behavior of policy-makers. Applying a non-linear unit root test to the residuals obtained from the Fisher relation decisively rejects the null hypothesis of a unit root against the alternative of non-linear but globally stationary in all the cases.     

TESTING FOR STATIONARITY OF INFLATION RATES WITH COVARIATES

This paper distinguishes between the stationarity and nonstationarity of inflation in 18 OECD countries through several unit root tests with covariates. These covariate tests are more powerful than the conventional ones through correlated covariates. Both unit root and stationarity null hypotheses are tested in this study. Our empirical results indicate that the efficient univariate unit root tests fail to reject the unit‐root hypothesis for 15 countries, whereas the covariate tests provide strong evidence in support of mean reversion in inflation for almost all countries. Overall, the findings unveil new evidence in favor of stationarity in international inflation. Policy implications on the empirical results are provided as well.     

Testing purchasing power parity for Japan and the US: A structural-break approach

In this work we empirically assess the weak and strong forms of purchasing power parity (PPP) hypothesis for the economies of Japan and US. Monthly data for the, traded-goods price indices and the JPY/USD exchange rate are employed for the, period from January 2000 to October 2012. This period includes large shocks, such as, the US subprime crisis and the 2011 Tsunami in Japan. We take into account possible, structural shifts and breaks by employing the class of Lee and Strazicich, 2003, Lee and Strazicich, 2004 unit, root tests. Empirical analysis suggests that a break corresponding to the start of the US subprime crisis is not rejected. Furthermore, utilizing the Gregory and Hansen (1996) and, Hatemi (2008) cointegration methodologies, the weak form of PPP is not rejected. We, also test the strong PPP hypothesis by using Dynamic Ordinary Least Squares, (DOLS). The empirical evidence rejects the strong form of PPP for the period, preceding the US subprime crisis in contrast to the period after.     

The productivity–wage relationship in South Africa: an empirical investigation

This article investigates the relationship between labour productivity, average real wages and the unemployment rate in South Africa at the macroeconomic level, using time‐series econometric techniques. There is strong evidence of a structural break in 1990, after which time all three variables rose rapidly. The break appears to have negatively affected the level of employment in the first instance, and subsequently fed through into per worker wages and productivity. A long‐term equilibrium (cointegrating) relationship was found between real wages and productivity, but unemployment was apparently unconnected to the system, which lends support to the insider–outsider theory. A long‐term wage–productivity elasticity of 0,58 indicates that productivity has grown more rapidly than wages, which is consistent with the finding that labour's share of gross output has been shrinking over the past decade. These trends may be explained plausibly by the adoption of job‐shedding technology and capital intensification.     

Capital requirement and financial crisis: The case of Japan and the 1997 Asian crisis

This study investigates the direct link between the implementation of the 1988 Basel capital requirement in Japan and the shrinkage of banks’ foreign assets, particularly in Thailand in the 1990s. The empirical analysis proceeds in two stages. The first stage investigates the hypothesis that the capital crunch in Japan induced Japanese banks to alter their portfolios and reduce their foreign assets. The second step tests the hypothesis that the change in behaviour of the Japanese banks induced the increase of the probability of financial crisis in Asia. Our results support the responsibility of the Japanese capital requirement, among other factors, in triggering the 1997 Asian financial crisis as an external common shock and give a new angle on the financial crisis literature.     

Structural changes and unit roots in Japan’s macroeconomic time series: is real business cycle theory supported?

This paper aims to detect temporal and continuous structural changes in the major Japanese macroeconomic time series by means of Yamamoto’s (1996) augmented step-wise Chow test, and to clarify the stationarity and/or non-stationarity of these series by conducting unit root tests. It also aims to verify empirically that a model assuming no structural change is not likely to reject a null hypothesis even when a true model contains a structural change. Structural changes are assumed to contain not only changes in the parameters of the drift term and the time trend, but also changes in other parameters. The results favor the existence of real business cycles.     

Are Real GDP Levels Trend,Difference, or Regime-Wise Trend Stationary? Evidence from Panel Data Tests Incorporating Structural Change

The unit root hypothesis for international real GDP and real GDP per capita has been the subject of extensive investigation. Using panel methods that incorporate structural change, we reject the unit root null in favor of the alternative of trend stationarity, with one or two changes in the slope for two panels with postwar data and one or two changes in both the slope and the intercept for a panel with long-horizon data. We conclude that real GDP levels are better characterized as regime-wise trend stationary than as either trend stationary without structural change or difference stationary with unit roots.     

Shift from Input‐based Growth to Productivity‐based Growth in Korean Manufacturing Industry

The Korean economy has entered a period of relatively sluggish growth after experiencing very dynamic and high economic growth since the 1970s. The recent growth rate has been around 3 percent, which is similar to that in many advanced countries. According to growth accounting, economic growth is possible because of input increases and productivity increases. Productivity growth is much more important than input increases for long‐term economic growth. We investigated whether there was a structural break in the Korean manufacturing industry and whether the main factor contributing to economic growth shifted from input to productivity. Using various econometric methods, we tested this question and found some interesting results. First, there was an important change in the 1990s, and the productivity trend seemed to show a big structural break at that time. Second, an input increase was the main factor contributing to economic growth before the break and productivity became more important after the break. Third, there was also a major change in the relationship between international trade and productivity.