Real interest rate parity in Asian countries: evidence from the quantile unit root test

This article studies the real interest rate parity (RIP) for several Asian countries. This is done by examining the stationarity in the real interest rate differentials (rids) with respect to the US using the quantile unit root test. Our results show that rids exhibits unit-root behaviours in the lower quantile levels, and mean reversion in the upper quantile levels. Furthermore, large positive shocks tend to induce strong mean reversion and the adjustment towards the long-run equilibrium level is faster as rids gets larger, with shorter half-lives in the extreme quantile levels.     

Fourier nonlinear quantile unit root test and PPP in Africa

We test the PPP hypothesis in 29 African countries using a newly developed nonlinear Quantile unit root test with a Fourier function which accounts for smooth breaks. Simulation indicates that the proposed new test has higher power than the conventional Quantile unit root test as proposed by Koneker and Xiao (2004). Our empirical results provide support for the PPP hypothesis in 21 out of 29 African countries, a unique discovery using their real effective exchange rates. It appears that incorporating Fourier function to nonlinear Quantile unit root test gets us closer and closer to solving the PPP puzzle in Africa.     

Non-linear quantile unit root test and PPP: more evidence from Africa

It is now a common practice to establish stationarity of the real exchange rate as a sign of purchasing power parity (PPP) hypothesis. In this article, we consider the real effective exchange rates of 29 African countries. When we apply conventional linear unit root tests, we find support for the PPP in eight countries. However, when we shift to the newly introduced non-linear quantile unit root test, support for the PPP increases to 15 countries.     

A new test for analysing hysteresis in European unemployment

This article proposes a new unit root test to analyse unemployment hysteresis. The test is able to incorporate cross-sectional dependence, unattended nonlinearity and unknown structural breaks in the time-series data. This study used data on unemployment in five European countries. The findings indicated that conventional unit root tests failed to reject the null hypothesis of hysteresis for all countries. However, the newly proposed unit root test was able to reject the null hypothesis for the Spanish unemployment rate.     

Unemployment persistence in EU countries: new evidence using bounded unit root tests

We apply a series of bounded unit root tests to revisit the unemployment persistence in eight European Union (EU) countries. We find strong evidence in favour of the hysteresis hypothesis in all the cases. This result can be explained by a reduced labour mobility, a decreasing wage inflation and a high uncertainty regarding the future level of unemployment in the EU countries.     

Panel asymmetric nonlinear unit root test and PPP in Africa

This study revisits purchasing power parity (PPP) theory for 20 African countries using panel asymmetric nonlinear unit root test proposed by Emirmahmutoglu and Omay (2014), through the sequential panel selection method of Chortareas and Kapetanios (2009). While standard panel unit root tests fail to support the PPP, the empirical results from panel asymmetric nonlinear unit root test do support the PPP. However, additional tests reveal that support in all 20 African countries is mostly due to stationarity of the real effective exchange rates of Ghana and Rwanda where the adjustment process towards equilibrium is nonlinear and asymmetric.     

PPP in the 34 OECD countries: evidence from quantile-based unit root tests with both smooth and sharp breaks

Conventional unit root tests have mostly failed to validate the PPP. Quantile-based unit root tests by previous research have provided some support for the PPP. In this article, we take an additional step and incorporate sharp shifts and smooth breaks into the quantile-based unit root test and re-examine the PPP in each of the 34 OECD countries over the period 1994:01–2016:03. We find support for the PPP in 18 countries of Austria, Chile, Estonia, Finland, France, Germany, Italy, Korea, Mexico, Netherlands, New Zealand, Poland, Portugal, Slovenia, Sweden, Switzerland, Turkey and the United Kingdom.     

Testing for weak-form efficiency of crude palm oil spot and future markets: new evidence from a GARCH unit root test with multiple structural breaks

There is a sizeable literature that tests for weak-form efficiency in commodity and energy spot and future prices. While many studies now allow for multiple structural breaks to address the criticism that conventional unit root tests have low power to reject the unit root null in the presence of structural change, the extant literature overlooks the fact that conventional unit root tests are biased in the presence of conditional heteroscedasticity. We apply a recently developed generalized autoregressive conditional heteroscedasticity (GARCH) unit root test with multiple structural breaks to crude palm oil spot and future prices and find much more evidence against weak-form efficiency than that found using tests that fail to allow for conditional heteroscedasticity. Our results point to the importance of allowing for heteroscedasticity when testing for efficiency in commodity and energy spot and future prices.     

美中贸易收支与人民币汇率关系:实证分析

针对美中贸易收支与人民币汇率问题,经研究发现,汇率变动对贸易收支的影响是值得怀疑的,仅仅依靠人民币汇率变动是无法解决美中贸易逆差问题的。1994—2002年年度数据实证显示,美中贸易收支与人民币汇率(名义或实际汇率)之间没有稳定的关系;1998—2003年月度数据计量表明,美中贸易收支与人民币汇率之间没有长期稳定的协整关系。并且,依据美中两国月度统计数据计量的结论是相一致的。因此,“人民币升值论”或许更多的是基于政治而非经济因素,人民币汇率浮动并不能解决美中贸易逆差问题。     

Asymmetric behavior of inflation differentials in the euro area: Evidence from a threshold unit root test

This paper tests the existence of persistent inflation rate differentials in the euro area by employing linear as well nonlinear unit root tests. Besides linear unit root tests, a two-regime threshold unit root test examines the conjecture that inflation rate differentials follow a nonlinear two-regime process towards a threshold, switching from the persistent regime to the transitory one and vice versa. The results imply that threshold nonlinearity is confirmed in 10 out of the 16 cases. However, we have found unit root regime-switching behavior only in six out of the 16 cases under investigation. This finding implies that these inflation rate differentials were persistent when they were low (regime 1), but transitory when they were high (regime 2). This asymmetric behavior can possibly be explained by the different degree of pressure exercised on governments, which is accompanied with different inflation rate differentials. On the contrary, despite the evidence of nonlinearity, the majority of the inflation rate differentials are found to be monotonically persistent. Our results have strong implications for policy makers. In particular, the documented persistency in the inflation rate differentials might have long-run costs in terms of price and macroeconomic stability.     

Effects of food and agricultural imports on domestic factors in the U.S. agricultural sector: a translog cost function framework

The translog cost function of the U.S. agricultural sector unveils dynamic relationships between foreign and domestic inputs. On average, capital and labour are weak substitutes, but they are strong substitutes to food and agricultural imports. Therefore, enhancing trade policies on food and agricultural products should be supplemented by strategic policies aiming at protecting domestic factors' income.     

On the effects of income volatility on income distribution: Asymmetric evidence from state level data in the U.S.

A previous study that tried to assess the impact of income volatility on income inequality in the U.S. used state level data and a balanced panel model to conclude that increased volatility worsens income distribution in the U.S., which implies that decreased volatility should reduce inequality. We use the same data set that is extended by nine years and revisit the issue using linear and nonlinear ARDL time-series models to show that the above conclusion does not hold in every state. While we discover short-run asymmetric effects of income volatility on a measure of inequality in most states, they translate to long-run asymmetric effects only in 16 states. Both increased volatility and decreased volatility are found to have unequalizing effects on income distribution in these states.     

U.S. foreign direct investment in Latin America and the Caribbean: a case of remittances and market size

This article investigates the effect of remittances on U.S. foreign direct investment (FDI) flows to Latin America and the Caribbean (LAC). It covers 26 countries for the period 1983–2010. The results show a positive and significant impact of remittances on U.S. FDI flows. However, this effect depends upon the level of gross domestic product (GDP) per capita of the host country. On average, the results show that increasing remittances by one standard deviation increases U.S. FDI flows by 0.44 percent a year. Also, host country demand positively affects U.S. FDI flows, which supports the market size hypothesis.