Money and banking in a mature Walrasian economy

All financial transactions in the original Walrasian economy, as written in the édition définitive of the éléments, occur in the markets for short-term money services (the short-term bond market) and commodity E (the equity market). However, introduction of the long-term bond and the deposit markets requires only minor surgery to the original and they are now supplied, inspiring the name mature Walrasian economy. Transactions in numeraire then entail all institutions of the banking system and provide completely for money and credit. Into this economy the condition of inconvertibility, a discretionary numeraire with reserve requirements, and a central bank are introduced and clarified. Finally, multiple monetary subsystems in the same global economy are recognized and reconciled, thus establishing a global economy with a single numeraire commodity.     

Money demand in China and time-varying cointegration

Many studies analyze the money demand using a (fixed coefficient) cointegrating regression model, which may not be appropriate to deal with the money demand of a transition economy like China. This paper investigates this issue using a time-varying cointegration approach based on the quarterly data from 1996 to 2009. We find some interesting results: (i) the estimates of the income elasticities are between 0.60 and 0.75, which are comparable with the previous studies; (ii) the estimated interest rate elasticity supports the argument that the overall effect of the interest rate on the money holding is weak although there are some mild evidences that it has been strengthened in recent years; (iii) the substitution effect of equity asset dominates the wealth effect, especially, during the bullish market period. Our result is robust to the alternative choices of the scale or opportunity cost variables and shows that omission of the stock prices in the money demand function would possibly yield a misspecification problem.     

A cointegration analysis of dynamic externalities

This paper presents a cointegration analysis on the effects of dynamic externalities upon economic growth using time-series data from 1975 to 2003 on the one-digit industries of the Tokyo metropolitan area in Japan. Some new time-series econometric methods that have been recently developed to conduct unit root and cointegration tests are used in the analysis, allowing for an endogenously determined structural change in the time period studied. It also proposes a new type of dynamic externalities, called Network dynamic externalities, to represent knowledge spillovers resulting from the whole agglomerated area via transportation networks, and shows that they have cointegrated relations with the total factor productivity (TFP) of the manufacturing, finance, wholesale and retail trade, as well as the overall industries. In addition, evidence is also found that Marshall–Arrow–Romer (MAR) dynamic externalities, which are associated with own industrial production concentration, affect the TFP of most industries selected for estimation. However, Jacobs dynamic externalities, which are represented by the diversity of industrial production, only contribute to the TFP of the services industry, and Porter dynamic externalities, which are expressed by the competitiveness within industries, do not influence the selected industrial TFP.     

Growth,exports and cointegration: An empirical investigation

Zusammenfassung Wachstum, Exporte und Ko-Integration. Eine empirische Untersuchung. — In diesem Aufsatz wird Johansens multivariate Ko-Integrationsanalyse auf viertelj?hrliche Daten für das BIP, den Konsum, die Investitionen und die Exporte von sechs L?ndern angewandt. Es zeigt sich, da\ in vier F?llen der Export keine ko-integrativen Beziehungen zu den anderen drei Variablen eingeht. Demgem?\ gibt es keine starke empirische Evidenz für die Hypothese vom exportinduzierten Wachstum.

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Resumen Crecimiento, exportaciones y cointegración: una investigatión empirica. — La aplicación del análisis de cointegración multivariado de Johansen al PBI trimestral, al consumo, a la inversión y a las exportaciones de seis paises industrializados indica que en cuatro casos las exportaciones no forman parte de las relaciones de cointegración entre las tres otras variables. Por ello, no se obtiene evidencia empírica importante en favor de la hipótesis del crecimiento dirigido por las exportaciones.

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Résumé Accroissement, exportation et co-intégration: une analyse empirique. — L’application de l’analyse de co-intégration multivariate de Johansen aux données trimestrielles du produit national brut, de la consommation, de l’investissement et de l’exportation de six pays industrialisés indique qu’en quatre cas l’exportation n’influence pas les relations de co-intégration entre les trois autres variables. Par conséquence, l’évidence empirique ne supporte pas fortement l’hypothèse que la croissance économique soit stimulée par l’exportation.

     

Factor price equalization: a cointegration approach

Factor Price Equalization: A Cointegration Approach. — Previous studies of factor price equalization have generated mixed results. It is argued that the limited success often results from the fact that labor cost time series are nonstationary, and hence traditional OLS models are misspecified. In this paper, the cointegration approach is utilized to test for the existence of a long-run relationship between factor prices. It is shown that indices of labor cost per unit of manufacturing output for six major industrialized nations are indeed cointegrated. These results support the hypothesis that factor prices possess a long-run equilibrium relationship.     

Oil and gold price dynamics in a multivariate cointegration framework

This study delivers further insights into oil and gold price dynamics and their relation to U.S. prices and the dollar exchange rate. Previous studies have frequently analyzed this issue regarding the price either of gold or of oil; however, the role of both quantities has not been analyzed simultaneously in a broader context. To tackle this caveat, we use monthly data for the nominal effective dollar exchange rate, oil, gold and U.S. prices from 1976:01 to 2011:11. We carefully analyze the long-run as well as the short-run dynamics and the long-run impact in terms of shocks, applying a cointegrated VAR model. The main conclusion we reach is that although gold and oil are both important commodities, their economic impact in terms of their shocks differs significantly. In the long-run, both quantities seem to be positively related and shocks to the gold price drive the system. In addition, the gold-oil spread is positively related to U.S. consumer prices, which implies a stronger relationship of consumer prices to the former.     

Factor price equalization? The cointegration approach revisited

Conclusions Absolute factor price equalization across countries is a key prediction of the Heckscher-Ohlin-Samuleson model of international trade, one of the more influential “workhorse” models in economics. Despite its theoretical might, the factor price equalization hypothesis has received surprisingly little empirical support. In an important exception to the rule, Burgman and Geppert (1993) argue that this might be due to the neglect of the non-stationarity of the time series under consideration. And indeed, applying a cointegration approach to (nominal) unit labor costs in six major industrialized countries (Canada, France, Germany, Japan, the United Kingdom, and the United States), they find evidence of long-run factor price co-movement. This finding can be interpreted as being in line with equalization of factor prices amongst these countries.     

Price convergence among Indian cities: A cointegration approach

Price dynamics in Indian cities were examined using cointegration analysis. We identified and calculated a common trend for prices in 25 major cities in India. Impulse response functions were obtained to calculate the rates of convergence to the prices and we found that the half-life of any shock is very small for Indian cities. Although a close to 3-month half-life seems too fast, there is some indication in the literature that half-life can be much smaller than the conventional rates of 3–5 years. We have calculated half-life using the panel unit root method, and found that estimates of half-life from cointegration analysis provide a faster convergence rate than estimates using the panel unit root method. We also analyzed how shock can be transmitted from one city to another and found no systematic behavior of transmission from one city to another.     

Bayesian analysis of a Markov switching temporal cointegration model

This paper introduces a Bayesian approach to a Markov switching cointegration model that allows the cointegration relationships to be switched on and off depending on the regime. Unlike a classical method for nonlinear cointegration model that uses the cointegrating vector based on a linear cointegration model, the proposed Bayesian method allows for estimation of the cointegrating vector within a nonlinear framework conditional on the regime variables through the Gibbs sampling so that it generates more reliable estimation. The Bayes factors are applied to test for Markov switching and model specifications. The purchasing power parity (PPP) relationship between UK and US is investigated using the proposed model for illustration.     

Income distribution and total factor productivity: a cross-country panel cointegration analysis

International Economics and Economic Policy - This study investigates the relationship between income inequality and total factor productivity (TFP) across countries for a period covering the years...     

Divorce and female labor force participation: Evidence from times-series data and cointegration

The divorce rate in the United States has increased over the last 40 years. This increase was accompanied both by growing female labor force participation and rising female income. These changes were accompanied by a significant reduction in the birth rate for married women. This article uses time-series data and cointegration techniques to determine the direction of causality between these variables. Analysis of the impulse functions show that the divorce rate will increase if either female labor force participation or income increases. Positive innovations to the divorce rate increase the labor force participation rate of married women. Rising levels of income lead to greater female participation in the labor market.     

Canadian foreign exchange policies: Intervention,control, cointegration

Zusammenfassung Kanadische Wechselkurspolitik: Intervention, Kontrolle, Kointegration. - Die Verfasser testen unter Rückgriff auf die Kointegrationstechnik und den Ansatz der optimalen Kontrolle, wie sich die offiziellen Interventionen der Bank of Canada auf den Devisenkurs zwischen dem kanadischen und amerikanischen Dollar ausgewirkt haben. Wenn sich die Bank des Ansatzes der optimalen Kontrolle bedient, um ihre Interventionen zu steuern, und keine Sterilisierungsma?nahmen anwendet, dann sind Wechselkurs, sein Zielwert und der kanadische Zinssatz im dynamischen Gleichgewicht miteinander verbunden. Die Existenz dieser dynamischen Gleichgewichtsbeziehung wird mit Hilfe von multivariaten Kointegrationsmethoden getestet und best?tigt.

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Résumé Les politiques canadiennes du taux de change: intervention, contr?le, et co-intégration. - Les méthodes de contr?le optimal et de co-intégration sont utilisés pour tester l’effet de l’intervention officiel par la Banque de Canada sur le cours dollar canadien/dollar américain. Si la Banque utilise l’approche de contróle optimal pour diriger ses interventions et ne prend pas de mesures de stérilisation, il existe une relation d'équilibre dynamique entre le taux de change actuel, le taux de change désiré et le taux d'intérêt canadien. En utilisant les méthodes de co-intégration aux variables multiples, on a affirmé l’existence d'une relation d'équilibre dynamique.

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Resumen Las politicas de cambio canadienses: intervention, control, cointegración.- En este trabajo se utiliza un enfoque mixto de control óptimo y cointegración para llevar a cabo un test del impacto de una interventión oficial por parte del Banco del Canada en el mercado de cambios Canadá-EE UU. Si el banco utiliza control óptimo para guiar sus politicas de interventión y no emplea procedimientos de esterilización existe una relación de equilibrio dinámica entre la tasa de cambio, su valor meta y la tasa de interés canadiense. La existencia de una relación de equilibrio dinámica es verificada empíricamente aplicando métodos multivariantes de cointegración. La hipótesis nula de no cointegración es rechazada, con lo cual se implica la existencia de un equilibrio dinámico.

     

A cointegration approach to capital mobility: Evidence for Belgium

This paper provides a method for measuring capital mobility through the analysis of causality direction between the exchange rate and the interest rate. Empirical evidence is provided for Belgium. Cointegration and Granger causality tests show that the direction of causality between both variables reverses in 1979 when an increase in the degree of European financial integration took place.     

The domestic term structure and international interest rate linkages: A cointegration analysis

The Domestic Term Structure and International Interest Rate Linkages. A Cointegration Analysis. -This paper analyzes cointegration relations between domestic interest rates with different maturities and between the US and German interest rates of the same maturity by means of the Johansen procedure and single-equation error correction models. It analyzes also the implied common stochastic trends. The author concludes that in the long run, interest spreads within both countries strongly dominate and linkages between the interest rates of both countries are only important in the short run.     

A regional perspective on inequality and growth in Portugal using panel cointegration analysis

This paper examines the relationship between inequality and economic growth for thirty Portuguese NUTS3 regions within a multivariate panel framework over the period 1995–2007, using panel cointegration techniques to test for the existence of a relationship between inequality and real GDP per capita. The results point to the existence of a relationship between the variables, where the effect of inequality, measured as the Gini index of the earnings distribution, on per capita output is negative. This negative influence seems to be determined by the behaviour of the bottom of the earnings distribution, most likely by dampening investment in human capital, with the results pointing to the coexistence of a positive impact of inequality at the top of the distribution, supporting the incentives argument for the inequality-growth nexus. Additionally, the results confirm the predicted positive relationship between human capital and output, lending support to both the exogenous and endogenous growth models predictions on the importance of human capital for production both as an input in the production of final goods and in the production of technology. Another interesting result concerns structural funds: we found a negative relation of this variable with regional output. We believe that EU structural funds were a source of Dutch disease for Portugal, which resulted mainly in a lack of external competitiveness of the Portuguese economy due to the excessive specialization in non-tradable goods made possible by the European funds.     

Dynamic panel cointegration approaches to the estimation of money demand functions

This paper investigates properties of the money demand functions of Group of Six (G6) member countries (Canada, France, Italy, Japan, U.K., and U.S.) using the estimation and inference techniques of panel cointegration. Empirical analyses are conducted by estimating money demand equations of G6 countries individually and as a whole, allowing heterogeneity in individual specific fixed effects across countries through dynamic, nonstationary panel estimation techniques. By using recently developed panel cointegration techniques, the paper contributes to the literature of money demand studies by improving the power performance of the relevant estimation and inference procedures. It reports fully modified OLS (FMOLS) estimation results of the money demand model for different data frequencies, to find varying signs and magnitudes of real income, interest rates and inflation elasticities of money demand for G6 nations.