Revisiting purchasing power parity in G6 countries: an application of smooth time-varying cointegration approach

This study revisits purchasing power parity (PPP) for the G6 countries (i.e., Canada, Italy, Japan, France, Germany, the UK) using smooth time-varying cointegrating approach, proposed by Park and Hahn (Econom Theory 15:664–703, 1999). Using monthly data over the 1971M1–2013M12 period, our empirical results indicate that PPP holds in two out of six countries (i.e., France and Germany).     

Economic uncertainty,monetary uncertainty and the Korean demand for money

Economic uncertainty and monetary uncertainty are said to affect public’s holding of money in either direction. In this paper, we consider the Korean demand for money, and after including two GARCH-based measures of output uncertainty and monetary uncertainty, we show that both measures exert significant effects on the demand for money in Korea in the short run. However, only the adverse effects of output uncertainty lasts into the long run. Indeed, including the two uncertainty measures yield a stable demand for money in Korea.     

Do exchange rate changes have symmetric or asymmetric effects on the demand for money in Turkey?

As a result of the research conducted by Nobel Laureate Robert Mundell (1963), most studies estimating the demand for money today do include the exchange rate in their specification to account for currency substitution. Previous studies that did this for the Turkish demand for money assumed that exchange rate changes do have symmetric effects on the demand for money in Turkey. In this article, we question this assumption. By using the nonlinear ARDL approach, we show that indeed exchange rate changes do have short-run and long-run asymmetric effects on the M1 demand for money. Introducing nonlinearity also yields a stable money demand.     

Is PPP sensitive to time-varying trade weights in constructing real effective exchange rates?

While the use of real effective exchange rates in stationarity tests of purchasing power parity (PPP) avoids the problems created using bilateral rates, these rates are often constructed using trade shares that are fixed at a single base year. This method fails to take into account the fact that trade shares can change drastically in parts of the world that are undergoing dramatic transformations. In this study, we apply linear as well as nonlinear stationarity tests to 52 currencies’ real effective rates, which were constructed using time-varying weights. Incorporating a time trend, we are also able to assess whether breakdowns in PPP are due to productivity differentials. We find that while nonlinear tests provide more evidence of “productivity bias” than do linear tests, they do not provide much more evidence of PPP. A comparison to a previous study that used fixed-weight data shows that there is somewhat more evidence of productivity bias using the new dataset, especially in Eastern Europe and Asia. We can conclude that PPP and a key cause of its breakdown are somewhat sensitive to the use of time-varying weights in these stationarity tests.     

The effects of currency fluctuations and trade integration on industry trade between Canada and Mexico

Since studies of North American trade flows tend to focus on the United States as the main trading partner, trade between Canada and Mexico has received relatively little attention. Here, we examine bilateral trade flows for 62 Canadian export industries to Mexico and 45 import industries from Mexico to assess the effects of currency fluctuations and trade integration on these individual trade flows. We find that Mexico’s largest export industries respond to depreciation more than Canada’s largest export industries do. Both countries’ trade flows are influenced even more by trade integration. Since there is evidence of strong intra-industry trade between these two countries, we can attribute this effect to the exploitation of economies of scale.     

Asymmetry effects of exchange rate changes on domestic production in Japan

Previous studies that assessed the effects of currency depreciation on the domestic production of Japan did not find any significant long-run effects. Using the linear ARDL approach we first confirm previous findings. We then argue and show that failure to find any significant link between the value of the yen and Japanese domestic production is due to assuming a linear adjustment mechanism or symmetric effects of exchange rate changes. Once we use the nonlinear ARDL approach we show that indeed exchange rate changes do have asymmetric effects on domestic production in Japan. Not only we observe adjustment asymmetry, but also short-run asymmetry that lasts into the long run. In the long run while strong yen seems to hurt domestic production in Japan, weak yen seems to have no effect.     

On the asymmetric effects of exchange-rate volatility on trade flows: Evidence from US–UK Commodity Trade

We consider the response of each of the 67 industries that trade between the United States and United Kingdom to the volatility of the real dollar–pound exchange rate. When we follow previous research and estimate a linear ARDL model for each industry, we find short-run effects of volatility in 22 US exporting industries to the United Kingdom that last into the long run only in nine industries. As for the UK exports to the United States, we find short-run effects in 18 industries that last into the long run in 15 industries. However, when we estimate a nonlinear model for each industry, we find short-run effects of volatility on 41 US exporting industries and on 43 UK exporting industries, all in an asymmetric manner. Short-run asymmetric effects lasted into long-run asymmetric effects in 24 US exporting industries to the United Kingdom and in 33 UK exporting industries to the United States. While total trade shares of industries from the linear models were negligible, those of the industries from the nonlinear models were significant in size, in the tune of one-third of the trade.     

Immigrants and Workplace Training: Evidence from Canadian Linked Employer–Employee Data

Job training is one of the most important aspects of skill formation and human capital accumulation. In this study, we use longitudinal Canadian linked employer–employee data to examine whether white/visible minority immigrants and Canadian-born emplooyees experience different opportunities in two well-defined measures of firm-sponsored training: on-the-job training and classroom training. While we find no differences in on-the-job training between different groups, our results suggest that visible minority immigrants are significantly less likely to receive classroom training, and receive fewer and shorter classroom training courses, an experience that is not shared by white immigrants. For male visible minority immigrants, these gaps are entirely driven by their differential sorting into workplaces with fewer training opportunities. For their female counterparts, however, they are mainly driven by differences that emerge within workplaces. We find no evidence that years spent in Canada or education level can appreciably reduce these gaps. Accounting for potential differences in career paths and hierarchical level also fails to explain these differences. We find, however, that these gaps are only experienced by visible minority immigrants who work in the for-profit sector, with those in the nonprofit sector experiencing positive or no gaps in training. Finally, we show that other poor labor market outcomes of visible minority immigrants, including their wages and promotion opportunities, stem in part from these training gaps.     

Third-Country Exchange Rate Volatility and Pakistan-U.S. Trade at Commodity Level

We add to the literature on the “Third-Country” effect by assessing the impact of rupee-dollar volatility on 116 U.S. industries that export to Pakistan and 53 U.S. industries that import from Pakistan. As two measures of “Third-Country” effects, we include volatility measures of rupee-yuan and dollar-yuan rates due to the increased role of China in the global economy. We find evidence of “Third-Country” effects in more than half of the industries. Among affected industries are many of the large U.S. exporting industries, but not large U.S. importing industries.     

Asymmetric effects of exchange rate changes on Turkish bilateral trade balances

Previous studies that have assessed the short-run and the long-run effects of exchange rate changes on Turkey’s trade balance with its major partners relied upon a linear adjustment process that could not find much support for favorable effects of exchange rate changes. In this paper, once we separate real appreciations from real depreciations via the partial sum concept and introduce nonlinearity into the estimation and testing procedure, we show that the effects of exchange rate changes are asymmetric. More precisely, while lira appreciation does not have any significant effects on Turkey’s bilateral trade balances, lira depreciation has significantly favorable effects on Turkey’s trade balance with its European partners (France, Germany, Italy, Portugal, and Great Britain).