Did financial deregulation help consumers? Access to market-yield instruments

The maturity effect (ME) of futures prices postulated by Samuelson (1965) is re-examined using three nonparametric tests. The consistent entropy asymmetry test by Racine and Maasoumi (2007) indicates that variance is an appropriate risk or uncertainty measure for ME, and value-at-risk and expected shortfall are also adopted. The Kolmogorov–Smirnov dominance test and Wilcoxon rank sum and signed rank test are employed to rank the estimates of the three risk measures under a moving-window framework. The testing outcomes are contingent on futures type, testing method and risk measures. The testing outcomes show mild support for ME.     

Environmental policy in the European Union: Fostering the development of pollution havens?

A pollution haven occurs when dirty industries from developed nations relocate to developing nations in order to avoid strict environmental standards or developed nations imports of dirty industries expand replacing domestic production. The purpose of this study is to determine whether the European Union (EU) has increased its imports of “dirty” goods from poorer, less democratic countries during a period of more stringent environmental standards. Previous empirical studies such as those by Levinson and Taylor [Levinson, A., and Taylor, M.S., in press. Unmasking the Pollution Haven Effect. International Economic Review.], Ederington, Levinson and Minier [Ederington, J., Levinson, A., and Minier, J., 2005. Footloose and Pollution-Free. Review of Economics and Statistics., 87: 92-99.], Kahn and Yoshino (2004), and Ederington and Minier [Ederington, J., and Minier. J., 2003. Is Environmental Policy a Secondary Trade Barrier? An Empirical Analysis. Canadian Journal of Economics., 36: 137-54.] find evidence that United States imports are responsive to changes in environmental stringency, but the effects of EU policy have not been examined as thoroughly. Our study follows Kahn [Kahn, M.E., 2003. The Geography of Us Pollution Intensive Trade: Evidence from 1958 to 1994. Regional Science and Urban Economics., 33: 383-400.] and examines the impact of industry energy intensity and toxicity, measured by an energy index and a Toxic Release Inventory (TRI) index, on imports into the EU, at the 2-digit industry level from 1970 to 1999. We use the signing of the Maastricht Treaty to signify a period of more uniform and stringent community wide environmental standards (1993-1999), and identify the level of per capita GDP within an EU trading partner. We find an increased amount of EU energy intensive trade with poorer countries during the period with more stringent EU environmental standards. This result is not robust, however, when poorer countries are defined by OECD membership and geographic region. We do not find an increased amount of EU toxic intensive trade with poorer countries although there is some evidence of increased EU imports of toxic goods from poorer OECD and non-EU European countries. For our full sample of trading partners in all regions, the evidence supports the PHH for EU energy intensive trade, but not for toxic intensive trade. Results for regional trade analysis are less clear.     

Is Asian per capita GDP panel stationary?

The goal of this paper is to examine whether per capita GDP for 15 Asian countries is panel stationary. We apply a panel test for stationarity that allows for multiple structural breaks developed by Carrion-i-Silvestre et al. (Econ J 8: 159–179, 2005). Our main findings are: (1) when we apply conventional tests, such as the ADF and KPSS univariate tests without structural breaks, we find little evidence for stationarity; (2) when we apply the KPSS univariate test with multiple structural breaks, we find evidence of stationarity for 10 out of 15 countries; and (3) when we apply the KPSS panel test with multiple structural breaks, we find overwhelming evidence of panel stationarity of per capita real GDP for different panels of Asian countries.      

Stochastic convergence of per capita carbon dioxide emissions and multiple structural breaks in OECD countries

This research applies an innovative panel data stationarity testing procedure developed by Carrion-i-Silvestre et al. [Carrion-i-Silvestre, J.L., Barrio-Castro, T.D. and Lopez-Bazo, E., 2005. Breaking the panels: An application to the GDP per capita, Econometrics Journal 8, 159–175.], which has the advantage of recognizing multiple structural breaks and the presence of cross-section dependence in order to re-investigate the hypothesis that per capita carbon dioxide (CO₂) emissions stochastically converge for 21 OECD countries from 1950 to 2002. Remarkably, the evidence clearly indicates that the panel dataset of relative per capita CO₂ emissions is stationary after the structural breaks and cross-sectional dependence are introduced into the model. These findings offer strong policy implications for governments, regardless of whether they are in “convergent group” or “divergent group” countries. We also find that the structural breaks in the 1960s and over the 1970–1982 period are associated with time periods of fossil fuel becoming the main source of productivity, higher oil prices, and the development of nuclear power.     

Is real GDP stationary? Evidence from a panel unit root test with cross-sectional dependence and historical data

We use historical data that cover more than one century on real GDP for industrial countries and employ the Pesaran panel unit root test that allows for cross-sectional dependence to test for a unit root on real GDP. At first, we find strong evidence against the unit root null. Our results seem to be robust to the chosen group of countries and, in most cases, the sample period. However, the sequential panel selection method reveals that the rejection of the unit root null is due to the stationarity of real GDP in a few countries only. Real GDP is less stationary mostly in fixed exchange rate regimes like the Gold Standard and the Bretton Woods system.     

Economic development and CO2 emissions: A nonparametric panel approach

We examine the empirical relation between CO₂ emissions per capita and GDP per capita during the period 1960–1996, using a panel of 100 countries. Relying on the nonparametric poolability test of Baltagi et al. [Baltagi, B.H., Hidalgo, J., Li, Q., 1996. A nonparametric test for poolability using panel data, Journal of Econometrics 75, 345–367], we find evidence of structural stability of the relationship. We then specify a nonparametric panel data model with country-specific effects. Estimation results show that this relationship is upward sloping. Nonparametric specification tests do not reject monotonicity but do reject the polynomial functional form which leads to the environmental Kuznets curve in several studies.     

Asymmetric Loss and the Rationality of Inflation Forecasts: Evidence from South Korea

We examine asymmetry in the loss functions of South Korean consumers' and the Bank of Korea's (BOK) inflation forecasts, and test the rationality of these forecasts under the assumption of a possible asymmetric loss function. Under an asymmetric loss function, we find evidence of asymmetry and support for rationality. We also examine whether the BOK's forecasts incorporate respective forecasts and consensus forecasts efficiently. They broadly use available information efficiently, and their results are robust to inflation‐targeting measures and the recent global financial crisis. However, our results suggest that the information efficiency of the BOK's forecasts for consumers was affected during the period 2007–2008.     

State dependent asymmetric loss and the consensus forecast of real U.S. GDP growth

It has been well documented that the consensus forecast from surveys of professional forecasters shows a bias that varies over time. In this paper, we examine whether this bias may be due to forecasters having an asymmetric loss function. In contrast to previous research, we account for the time variation in the bias by making the loss function depend on the state of the economy. The asymmetry parameter in the loss function is specified to depend on set state variables which may cause forecaster to intentionally bias their forecasts. We consider both the Lin–Ex and asymmetric power loss functions. For the commonly used Lin–Ex and Lin–Lin loss functions, we show the model can be easily estimated by least squares. We apply our methodology to the consensus forecast of real U.S. GDP growth from the Survey of Professional Forecasters. We find that forecast uncertainty has an asymmetric effect on the asymmetry parameter in the loss function dependent upon whether the economy is in expansion or contraction. When the economy is in expansion, forecaster uncertainty is related to an overprediction in the median forecast of real GDP growth. In contrast, when the economy is in contraction, forecaster uncertainty is related to an underprediction in the median forecast of real GDP growth. Our results are robust to the particular loss function that is employed in the analysis.     

Strategic policies and growth: an applied model of R&D-driven endogenous growth

We introduce and explore a general equilibrium model with R&D-driven endogenous growth, whose antecedents are the models of Romer (1990) [Romer, P.M., 1990. Endogenous technological change. Journal of Political Economy, 98, S71-102] and Grossman and Helpman (1991) [Grossman, G.M., Helpman E., 1991. Innovation and Growth in the Global Economy, The MIT Press, Cambridge]. Utilizing evidence from recent econometric studies on sources of growth, the model also accounts explicitly for cross-border technological spillovers. The model is specified and calibrated to data from Japan, and is solved to obtain both the transitional and the steady-state equilibria. We explore the effects of selective trade and R&D promotion policies on long-run growth and social welfare. The model results suggest that while a strategic trade policy has little effect on re-allocating resources into domestic R&D activities, it can significantly affect the cross-border spillovers of technological knowledge, which, in turn, stimulates growth. We find that trade liberalization may cause the growth rate to fall and lead to a loss of social welfare in the long-run, although it improves welfare in the short-run. R&D promotion policies stimulate growth by inducing private agents to allocate more resources to domestic R&D, as well as to take greater advantage of global R&D spillovers. Here, we find significantly high growth effects together with sizable gains in social welfare at low incidence to tax payers.     

The energy consumption-real GDP nexus revisited: Empirical evidence from 93 countries

In this paper, we analyse the long-run relationship between energy consumption and real GDP for 93 countries. We find mixed results on the impact of energy consumption on real GDP, with greater evidence at the country level supporting energy consumption having a negative causal effect on real GDP. For the G6 panel of countries, we find significant evidence that energy consumption negatively Granger causes real GDP. This means that for countries where energy consumption has a negative long-run causal effect on real GDP, energy conversation policies should not retard economic growth. We identify these countries and regional panels. We argue that these countries/regions should play a greater role in reducing carbon dioxide emissions.     

EXAMINING THE ASYMMETRIC BEHAVIOUR OF MACROECONOMIC AGGREGATES IN ASIAN ECONOMIES

Abstract. The goal of this paper is to test for asymmetric behaviour of macroeconomic aggregates for three Asian economies; namely, Malaysia, Hong Kong and Korea. Whether macroeconomic aggregates can be characterised as asymmetric has important implications for policy‐making and econometric modelling including forecasting. We examine two forms of asymmetries; specifically deepness, which arises when a detrended time series contains an asymmetric distribution, and steepness, which arises when the first difference of a series contains an asymmetric distribution. Overall, our findings suggest that for all three countries, the bulk of the series display asymmetry behaviour.     

Measuring asymmetry and persistence in conditional volatility in real output: evidence from three East Asian tigers using a multivariate GARCH approach

We search for evidence of conditional volatility in the quarterly real Gross Domestic Product (GDP) growth rates of three East Asian tigers: Singapore, Hong Kong and Taiwan. The widely accepted Exponential Generalized Autoregressive Conditional Heteroscedasticity (EGARCH)-type model is used to capture the existence of asymmetric volatility and the potential structural break points in the volatility. We find evidence of asymmetry and persistence in the volatility of GDP growth rates. It is noted that the structural breakpoints of volatility correspond reasonably well to the historical economic and political events in these economies. Policy implications from our findings are discussed.     

Are international value premiums driven by the same set of fundamentals?

This paper investigates the long-run behaviour of international value premium price indices for G7 countries using data from January 1975 to December 2002. We use Johansen [Johansen, S., 1991. Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica 59, 1551–1580; Johansen, S., 1995. Likelihood-based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press] cointegration methodology and find one cointegrating vector for the period of December 1987 to December 2002. The results are robust to local currencies and a common currency. The cointegrating vector may reflect expectations about future economic activity since investors can adjust demand for either value or growth stocks depending on expected economic growth. Our results show that the cointegrating relationship can predict both future changes in the growth of logged industrial production and future stock market returns.     

Business Cycle Asymmetries and Nonlinearity in UAE Macroeconomic Time Series

This study investigates the dynamic behaviour of macroeconomic time series variables of the United Arab Emirates. We first examined whether there are non‐Gaussian characteristics associated with the macroeconomic variables of the United Arab Emirates. Through application of the BDS nonlinearity test, our results indicated that there is a substantial nonlinear dependence in the data set for all the variables. We also assessed the asymmetric behaviour of these variables by exploring whether they exhibit two particular forms of asymmetry, which are deepness and steepness asymmetries. These results have shown that there is no empirical evidence of business cycle asymmetry in all the variables at any conventional level of significance in the sample period. Also, through application of further robust testing, our findings indicate the presence of pro‐cyclical asymmetry in some of the variables and at the same time indicate the presence of asymmetries in the volatility.     

Expansions and contractions in Brazil, Colombia and Mexico: A view through nonlinear models

The study of asymmetric behavior of macroeconomic variables over business cycles has had a long tradition in economics. In this present work, we find evidence in favor of the hypothesis of having a STAR-type nonlinear asymmetric behavior of the economic activity, over the last two decades, in three Latin American countries: Brazil, Colombia, and Mexico. For Chile and Venezuela, the null hypothesis of a linear process could not be rejected under the method established by Granger and Teräsvirta [Granger, C.W.J., Teräsvirta, T., 1993. Modelling Nonlinear Relationships. Oxford University Press, New York]. Economic activity is proxied by monthly based industrial production indexes. Evidence of asymmetric behavior is also found according to the generalized impulse response functions analysis for the three countries.     

Market volatility and retail interest rate pass-through

Using the asymmetric threshold cointegration test proposed by Enders and Siklos [Enders, W., Siklos, P., 2001. Cointegration and threshold adjustment. Journal of Business and Economic Statistics 19, 166–176] and the EC-EGARCH (1, 1)-M model, this study examines the interest rate pass-through mechanism between the money market rate and the retail interest rate. In addition, we also investigate the impact of the interest rate volatility on the interest rates of the U.S. and nine Asian countries. We find that the complete pass-through only exists in the U.S. deposit rate. The threshold cointegration test results show that the asymmetric cointegration relation exists in the deposit interest rate in five countries and in the lending rate in three countries. The symmetric cointegration relation exists in two countries. Besides, an estimation of the conditional means using the EC-EGARCH (1, 1)-M model shows that the effect of interest rate volatility on the retail interest rate differs from country to country. Among the eight countries that exhibit asymmetric adjustments in the short run, five of them are found to have upwards rigid adjustments in the deposit interest rate and three downwards rigid adjustments in the lending rate. The empirical results of Hong Kong, Taiwan, and the Philippines support the hypothesis of collusive pricing arrangements. As to the estimation of the conditional variance, among the seven countries that exhibit asymmetric volatility, the leverage effect in the lending rate exists in two of them.     

Cyclical asymmetry in fiscal variables in the EU

In this paper we present a stylised framework of fiscal policy determination that considers both structural targets and cyclical factors. We find significant cyclical asymmetry in the behaviour of fiscal variables in a sample of fourteen EU countries over 1970–2007, with budgetary balances (both overall and primary) deteriorating in contractions without correspondingly improving in expansions. Analysis of budget components reveals that cyclical asymmetry comes from expenditure. We find no evidence that fiscal rules introduced in 1992 with the Treaty of Maastricht affected the cyclical behaviour of fiscal variables. Numerical simulations show that cyclical asymmetry inflated average deficit levels, contributing significantly to debt accumulation.     

Further evidence on business cycle asymmetries in G7 countries

This paper tests for business cycle symmetry in G7 countries during the post-World War II period using a number of tests, each reflecting alternative definitions of business cycle asymmetry. The tests are applied to monthly coincident economic indicators of business cycles. This found that business cycles in the US are characterized by both longitudinal (deepness) and transversal (steepness and sharpness) asymmetries: further, it is found that asymmetric transition probabilties and time irreversibility are due to nonlinearities. On the contrary, business cycles in Germany exhibits a symmetric behaviour. Between these extremes are the other countries, for which at least one of the tests here considered rejects the null of cyclical symmetry. Particularly, business cycle is characterized by deepness and sharpness in Canada, asymmetry in persistence in France and Japan, and asymmetric transition probabilities in France and United Kingdom.     

Business Cycle Asymmetries: International Evidence

This paper uses the Triples test of Randles et al. (1980, Journal of the American Statistical Association, 75, 168–172) to detect asymmetries in U.S. as well as international GDP fluctuations. The test does not detect any asymmetry in the distribution of the U.S. GDP, which is consistent with previous empirical findings. However, significant asymmetries are found in international data. Detection of asymmetries is a first step toward model-selection process such that stylized facts can be replicated. Journal of Economic Literature Classification Numbers: E3, E32, C14.     

Is real GDP per capita a stationary process? Smooth transitions,nonlinear trends and unit root testing

The aim of this article is to provide additional evidence about the order of integration of constant price GDP per capita in a selection of countries. It does so by taking into account the possibility of non-linear deterministic trends and of asymmetric adjustment towards equilibrium. We find evidence of a global stationary ESTAR process around a nonlinear deterministic trend in almost half of the selected countries. These results show that nonlinearities affect real GDP series. By neglecting them, one can draw misleading conclusions from unit root tests. Specifically, the article questions the so-called stylised fact of a near unit root which has so influenced macroeconomic thought over the past two decades.