Copper Price Behaviour and the London Metal Exchange

This paper examines how variables which describe the expectations of consumers can contribute to the explanation of observed expenditure patterns and how measured series of such expectations can be used in a forecasting model to improve the prediction of short-term consumer expenditures. The expectations data are based on the British Market Research Bureau's Financial Expectations Survey and the respective series that are derived are tested in correlation and regression exercises against quarterly aggregate consumer expenditure series. The exercise finds that the information contained in these financial expectations has significant value for predicting expenditures in the period 1 to 12 months ahead. The forecasting models based on the expectational data generally perform as well as those based on conventional economic variables and the leading indicator properties of the expectations, combined with their rapid availability, enhance their value as a potential source of forecasting information.     

The semi-strong form efficiency of the London Metal Exchange

This paper uses vector autoregressions to investigate the interdependence of the monetary policies of the central banks of Germany, Japan and the United States. Granger–Sims causalities and innovation accounting mechanisms suggest that tri-lateral linkages are strong and complex. The results imply that the influence of foreign central banks' policies limit each central bank's capacity to determine an independent domestic policy.     

The weak form efficiency of the London Metal Exchange

Filter techniques are used to test for dependency and weak form efficiency on the London Metal Exchange. They are applied to daily cash and futures prices for copper, lead, tin and zinc, for the period 1972-1982. The results are adjusted for the bias in filter tests caused by the upward trend of prices. An exact test statistic is derived; doubts are raised however about its reliability. The results show strong evidence of inefficiency for copper, weaker but positive evidence for lead and zinc, and no evidence at all for tin.     

Cointegration and causality in the exports-GDP nexus: The post-war evidence for Canada

This paper tests for unit roots, cointegration, and Granger-causality in the exports-GDP nexus in Canada 1947–96, using both bivariate and trivariate models. Contrary to previous studies we cannot conclude that economic growth is either export-led, or output-driven, but rather that strong bi-directional causality exists between Canadian exports and GDP, and the GDP of its main trading partner, the United States. First version received: April 1998/final version received: March 1999     

Cointegration,structural breaks and monetary fundamentals of the Dollar/Yen Exchange

This paper reexamines the empirical performance of monetary exchange rate models for the dollar/yen exchange rate. We focus on the character of a potential long-run relationship between exchange rates and fundamentals. Using monthly data from 1976:01 to 2007:12 this paper applies a novel time-varying coefficient approach which allows a distinction between breaks in the cointegration vector and instabilities in the adjustment coefficients. We are able to show that most of the observed breakpoints can be traced back to major policy changes or specific economic developments. Our findings also show that macroeconomic fundamentals do matter for the U.S. dollar/Japanese yen exchange rate, but in different ways over different periods of time.     

The nonlinear dynamic relationship of exchange rates: Parametric and nonparametric causality testing

The present study investigates the linear and nonlinear causal linkages among six currencies denoted relative to United States dollar (USD), namely Euro (EUR), Great Britain Pound (GBP), Japanese Yen (JPY), Swiss Frank (CHF), Australian Dollar (AUD) and Canadian Dollar (CAD). The data spans two periods between 3/20/1991 and 3/20/2007. We apply a new nonparametric test for Granger non-causality by Diks and Panchenko [Diks, C., Panchenko, V., 2005. A note on the Hiemstra–Jones test for Granger noncausality. Studies in Nonlinear Dynamics and Econometrics 9 (art. 4); Diks, C., Panchenko, V., 2006. A new statistic and practical guidelines for nonparametric Granger causality testing. Journal of Economic Dynamics & Control 30, 1647–1669] and the linear Granger test on the return time series. To detect strictly nonlinear causality, we examine the pairwise VAR-filtered residuals as well as in a six-variate formulation. We find remaining significant bi- and uni-directional causal nonlinear relationships in the series. Finally, we investigate causality after controlling for conditional heteroskedasticity using a GARCH–BEKK model. Whilst the nonparametric test statistics are smaller in some cases, significant nonlinear causal linkages persisted even after GARCH filtering during both periods. This indicates that currency returns may exhibit asymmetries and statistically significant higher-order moments.     

Real Exchange Rate and Real Interest Rate Differential: A Cointegration Approach with Structural Shifts

Journal of Quantitative Economics - Long term determinants of the movements in exchange rate have been an active interest area for both theoretical and empirical research. In this paper, we...     

FDIC Coverage on bank failures: Cointegration analysis using annual data, 1942–91

The present study empirically investigates whether in the U.S. federal government-provided deposit insurance, which was intended to prevent runs on banks and to protect depositors of modest means, has acted to induce increased bank failures. This issue has been investigated earlier, but only with regression analysis, and it remains unresolved since results vary sharply from one study to the next. By contrast, the present study uses cointegration techniques to investigate this problem. The cointegration analysis finds strong evidence of a cointegrating relationship between the bank failure rate and the extent of central government-provided deposit insurance, as well as other variables. Maximum eigenvalue and trace test results, along with normalized cointegrating vectors and likelihood ratio test results, are provided for examination.     

Cointegration analysis and the UK demand for nitrogen fertilizer

Nitrogen fertilizer taxes have been proposed as a means of controlling agricultural ‘over-production’ and nitrate pollution of water courses in the EC. This paper constructs time-series models of fertilizer demand which provide quantitative information relevant to this issue. Time-series data on the use of nitrogen fertilizer in UK agriculture is found to have a unit root with non-zero drift coupled with a one-time change in drift after testing against the alternative hypothesis that the process is trend-stationary with a break in trend. The stochastic component of the nitrogen use series is cointegrated with the ratio of the price of nitrogen fertilizer to the price of agricultural output. Appropriate error correction models are estimated. Both the short-run and long-run price elasticities of the response of nitrogen use are found to be rather low. Some brief policy conclusions are drawn.     

Financial variables and euro area growth: A non-parametric causality analysis

This paper investigates the predictive ability of financial variables for euro area growth through bivariate and multivariate non-parametric Granger causality tests. Apart from assessing the within-country forecasting ability of commonly-employed financial variables, such as the term spread, the stock market returns and the growth of real money supply, we also test for cross-country influences. In this way, we reveal the countries that are more useful in predicting growth in other member countries along with the ones that are more receptive to other countries' financial developments. Our results suggest that financial variables are useful leading indicators for euro area growth at a joint level, albeit at different horizons, ranging from one to six quarters. Our finding of overall increased levels of receptivity among member states provides useful information for policy makers, especially in the case of monetary union such as the euro area.     

基本面因素与人民币汇率的协整和方差分析——基于行为均衡汇率理论

在行为均衡汇率理论的基础上,选择对美净出口额、国内生产总值、广义货币供给量和实际利率作为影响人民币汇率的基本面因素,进行协整和方差分析。协整回归结果表明:在长期,广义货币供给量和对美贸易是影响人民币汇率的两个重要因素,广义货币供给量的弹性大于对美贸易量的弹性。但方差分析结果显示:对美贸易量对人民币汇率的贡献程度却大于广义货币供给量对人民币汇率的贡献程度。     

Cointegration analysis with structural breaks and deterministic trends: an application to the Canadian dollar

This article applies recent developments in cointegration analysis with structural breaks and deterministic trends to analyse the relationship between the real Canada–US exchange rate and commodity prices. Previous empirical studies disagree on whether these variables are cointegrated. The root of disagreement could be in the handling of deterministic trends and potential structural breaks. I find that even after controlling for these matters, the question of whether the real exchange rate and commodity prices are cointegrated for Canada remains unresolved.     

Modeling nonlinear Granger causality between the oil price and U.S. dollar: A wavelet based approach

In this paper, we use a wavelet approach to study the linear and nonlinear Granger causality between the real oil price and the real effective U.S. Dollar exchange rate. Instead of analyzing the time series at their original level, as it is usually done, we first decompose the two macroeconomic variables at various scales of resolution using wavelet decomposition and then we study the relationships among the decomposed series on a scale by scale basis. A major finding of this paper is that the linear and nonlinear causal relationships between the real oil price and the real effective U.S. Dollar exchange rate vary over frequency bands as it depends on the time scales. Indeed, there is a strong bidirectional causal relationship between the real oil price and the real dollar exchange rate for large time horizons, i.e. corresponding to fundamentalist traders, especially fund managers and institutional investors. But, for the first frequency band which corresponds to a class of traders whom investment horizon is about 3-months and whom trading is principally speculative (noise traders), the causality runs only from the real oil prices to real effective U.S dollar exchange rate.     

Relationships among democratic freedoms in the former Soviet Republics: a causality analysis

Empirical studies often use Freedom House ratings for Political Rights and/or Civil Liberties as institutional proxies for the degree of democracy. In this study, Granger-causality tests are used which reveal that Political Rights tend to precede Civil Liberties, but not the reverse, in a panel data set of former Soviet Republics. For transition nations, Freedom House also publishes a separate breakdown of democratic characteristics. Empirical tests suggest Civil Society and Judicial Framework Granger-cause Electoral Process, Governance Granger-causes Civil Society, and all four components Granger-cause Independent Media. Each measure of democracy is related to at least one other but no evidence for dual causation is found.     

Information and the persistence of private-order contract enforcement institutions: An experimental analysis

We study an experimental market in which some sellers are prone to moral hazard, and in which a private-order contract enforcement institution exists that can mediate trade and prevent sellers from reneging on their contractual obligations. Using the institution to resolve the moral-hazard problem is costly. We demonstrate that in this market, the utilization of the private-order contract enforcement institution may make public and private market signals uninformative and inhibit learning. We study whether this potential information externality can limit adaptation away from the private-order institution when it is efficient to do so. Consistent with theory, we find inefficient persistence when the institution is used, but by contrast, efficient adaptation in other situations. Providing information to individuals who are using the private-order institution allows them to partially adapt.     

A time series analysis of causality between aggregate merger and stock prices: the case of Canada

It is widely agreed that a positive relationship exists between measures of aggregate merger activity and measures of stock market performance, at least for the USA. Evidence from other countries is relatively sparse. in this paper we pursue the causality question using Canadian data. Most of the previous studies used only a bivariate system (merger and stock prices). We have extended the analysis to trivariate system (merger, stock prices and interest rate) to better reflect the capital market conditions argument for changes in merger activity. The results suggest a bidirectional causality between mergers and stock prices.     

Exports and growth: Granger causality analysis on OECD countries with a panel data approach

This paper investigates the possibility of Granger causality between the logarithms of real exports and real GDP in twenty-four OECD countries from 1960 to 1997. A new panel data approach is applied which is based on SUR systems and Wald tests with country specific bootstrap critical values. Two different models are used. A bivariate (GDP–exports) model and a trivariate (GDP–exports–openness) model, both without and with a linear time trend. In each case the analysis focusses on direct, one-period-ahead causality between exports and GDP. The results indicate one-way causality from exports to GDP in Belgium, Denmark, Iceland, Ireland, Italy, New Zealand, Spain and Sweden, one-way causality from GDP to exports in Austria, France, Greece, Japan, Mexico, Norway and Portugal, two-way causality between exports and growth in Canada, Finland and the Netherlands, while in the case of Australia, Korea, Luxembourg, Switzerland, the UK and the USA there is no evidence of causality in either direction.     

Exports, imports, and economic growth in Portugal: evidence from causality and cointegration analysis

This paper investigates the Granger-causality between exports, imports, and economic growth in Portugal over the period 1865–1998. The role of the import variable in the investigation of exports–output causality is emphasized, enabling one to test for the cases direct causality, indirect causality, and spurious causality between export growth and output growth. The empirical results do not confirm a unidirectional causality between the variables considered. There is a feedback effect between exports–output growth and imports–output growth. More interestingly, there is no kind of significant causality between import–export growth. Both results seem to support the conclusion that the growth of output for the Portuguese economy during that period revealed a shape associated with a small dual economy in which the intra-industry transactions were very limited.