A frequency domain causality investigation between futures and spot prices of Indian commodity markets

This paper examines the direction, strength and extent of causal relationship between futures and spot prices of Indian commodity markets using frequency domain approach of Breitung and Candelon (2006). Frequency domain analysis offers an effective alternative tool by examining the causality in frequency domain, whereas in traditional econometric causality analysis tools focus only on the time domain. Daily futures and spot price series on eight commodities from the Indian commodity exchanges (MCX and NCDEX) were examined for the period 3rd January, 2008 to 31st December, 2012. The results of frequency domain analysis suggest that there is a strong uni-directional relationship from futures to spot in almost all the selected commodities. This indicates that futures market has a powerful price discovery function in all the selected commodities; which in turn indicates the efficiency of Indian commodity futures market.     

消费物价指数与生产者价格指数:谁带动谁?

The consumer price index (CPI) and producer price index (PPI) are interrelated but significantly different concepts. Relationships between the two indices may be that of causality or non-causality. The paper conducts a Granger-causality test on China’s CPI and PPI data for the period from January 2001 to August 2008, and finds that CPI Granger causes the change in PPI, and the latter reacts to the former with a time lag of 1–3 months. The result may suggest that in contemporary Chinese economy, demand-side factors have played a more important role than supply-side factors, although the two sides both have influences on domestic inflation trend which is measured by CPI. __________ Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2008, (11): 16–26     

Does CPI Granger-cause WPI? New extensions from frequency domain approach in Pakistan

The present study significantly contributes to the economic literature by investigating the direction of causality between WPI and CPI by applying frequency domain causality approach developed by Lemmens et al. (2008) based on spectral approach. We use monthly frequency data covering the period of 1961–2010 in case of Pakistan. Our results provide evidence of cointegration between the variables. Furthermore, we find unidirectional causal relationship running from CPI to WPI that varies across frequencies i.e., CPI Granger-causes WPI at lower, medium as well as higher level of frequencies reflecting long-run, medium and short-run cycles. This implies that CPI should be a leading indicator for important policy decisions pertaining to monetary or fiscal policies in Pakistan.     

房价与地价关系的因果检验:1998-2006

文章在考虑通货膨胀的条件下,利用我国1998-2006年的房价和地价的季度数据建立误差纠正模型(ECM),使用Granger因果检验方法对我国的房价和地价的关系进行实证检验,得出结论:短期而言,房价对地价没有影响,而地价是房价的Granger原因;长期来说,房价和地价存在双向因果关系.因此,要控制房价,短期内关键是抑制地价过快上涨;长期则要通过合理安排土地供给,加强住宅的建设规划引导,从而避免房地产价格的大起大落.     

国际资本流动对房地产价格的影响——基于我国的实证检验(1998-2006年)

本文在考虑通货膨胀的条件下,利用我国1998-2006年的实际利用外资和房地产价格的季度数据建立误差纠正模型(ECM),使用Granger因果检验方法对我国的房地产价格和国际资本流动的关系进行实证检验.得出结论,短期而言,房地产价格上涨吸引了外资的流入;长期来说,外资的流入对我国的住房价格上涨产生了影响.在现阶段控制外资过度流入房地产市场,有利于保持我国房地产价格的稳定.     

A revisit on the tax burden distribution and GDP growth: fresh evidence using a consistent nonparametric test for causality for the USA

We revisited the evidence of Karagianni et al. (Int Rev Econ Fin 21:186–194, 2012) and Tiwari (Econ Bull 32:147–159, 2012) by employing a recently developed and more powerful nonlinear Granger-causality test proposed by Nishiyama et al. (J Econ 165:112–127, 2011) to investigate the existence of Granger-causality from a set of alternative tax burden (ratios) to GDP (per capita GDP), for the period 1947:q1–2009:q3 for the United States of America (USA). The nonlinear Granger-causality test provides strong evidence that personal current taxes and taxes on production and imports Granger-cause GDP and weak evidence that CR Granger-cause GDP. As a consequence, in order to influence (rebalance) the USA’s GDP through taxation, it is recommended to the USA government to adjust the tax structure, focusing on PCT and taxes on production and imports’ shocks. In this case, the tax policy is oriented especially on labour supply and investments.     

Revisiting the oil price and stock market nexus: A nonlinear Panel ARDL approach

In this paper, we re-examine the relationship between oil price and stock prices in oil exporting and oil importing countries in the following distinct ways. First, we account for possible nonlinearities in the relationship in order to quantify the asymmetric response of stock prices of these two categories to positive and negative oil price changes. Secondly, in order to capture within group differences, we allow for heterogeneity effect in the cross-sections by formulating a nonlinear Panel ARDL model which is the panel data representation of the Shin et al. (2014) model and also analogous to the non-stationary heterogenous panel data model. Thirdly, we evaluate the relative predictability of the linear (symmetric) and nonlinear (asymmetric) Panel ARDL models using the Campbell and Thompson (2008) test. Our results depict that stock prices of both oil exporting and oil importing groups respond asymmetrically to changes in oil price although the response is stronger in the latter than the former. This finding is further corroborated by the out-of-sample forecast results suggesting that the inclusion of positive and negative oil price changes in the predictive model for stock prices will produce better forecast results only for the oil importing countries. Our results are robust to different oil price proxies, lag structure and in-sample periods. Overall, the dichotomy between oil exporting and oil importing countries has implications on oil price-stock nexus.     

Moore's law and price trends of digital products: the case of smartphones

ABSTRACT

Since the introduction of the iPhone by Apple in 2007 and Google's Android platform in 2009, the two systems have accounted for a total of 90% of the U.S. smartphone market. Apple, however, reaps most of the profit in the industry. In the second quarter of 2016, for example, Apple's iPhone gets 104% of the sector's profit. This suggests that the smartphone market resembles a Stackelberg leadership model. Despite Apple's strong market power, we investigate if the market leader is under pressure to be price competitive. We calculate a quality-adjusted price index for smartphones from 2007 to 2016. Our results show that the average price declines at an average rate of over 27% per year. The price trend is similar to other digit products such as computers, cameras, and portable music players. We observe that the large price decline reflects the effect of Moore's law, which predicts that the capacity of integrated circuits undergoes an exponential growth. The effect of Moore's law is incorporated into the Stackelberg model. We also observe that price trends of other digital products also follow a similar pattern. This suggest that the long-run price trends of digital consumer goods are somewhat independent of the market structures.     

Do sunspot numbers cause global temperatures? Evidence from a frequency domain causality test

This article applies the causality test in the frequency domain, developed by Breitung and Candelon (2006), to analyse whether sunspot numbers (used as a partial approximation to solar irradiance) cause global temperatures, using monthly data covering the time period 1880:1–2013:9. While standard time domain Granger causality test fails to reject the null hypothesis that sunspot numbers do not cause global temperatures for both full and sub-samples (identified based on tests of structural breaks), the frequency domain causality test detects predictability for both the full-sample and the last sub-sample at short (2–2.6 months) and long (10.3 months and above) cycle lengths, respectively. Our results highlight the importance of analysing causality using the frequency domain test, which, unlike the time domain Granger causality test, allows us to decompose causality by different time horizons, and hence, could detect predictability at certain cycle lengths even when the time domain causality test might fail to pick up any causality. Further, given the widespread discussion in the literature, those results for the full-sample causality, irrespective of whether it is in time or frequency domains, cannot be relied upon when there are structural breaks present, and one needs to draw inference regarding causality from the sub-samples, we can conclude that there has been an emergence of causality running from sunspot numbers to global temperatures only recently at cycle length of 10.3 months and above.     

Scale economies with regard to price adjustment costs and the speed of price adjustment in Australian manufacturing

This paper aims to examine the impact of firm size, industry concentration and the length of production on industry speed of price adjustment. To motivate the paper, an industry pricing model in error correction form is derived from firm pricing behaviour. As a new development, firms are assumed to have price adjustment costs that are a function of their size. The empirical model is estimated using two‐digit Australian manufacturing industry data for the period 1994:3 to 2006:1. The results suggest that the industry speed of price adjustment is positively related to firm size and negatively related to industry concentration and the production lag. Implied values for industry speeds of price adjustment are generally small when compared to other country industry studies. However, the industry average median lag of 7.1 quarters indicates a slightly faster speed of price adjustment than the estimate for the Australian consumer price index by Dwyer and Leong (2001 Dwyer, J. and Leong, K. 2001. Changes in the determination of inflation in Australia 1–44. Reserve Bank of Australia Research Discussion Paper 2001‐02 [Google Scholar]).     

Commitment and price competition in a dynamic differentiated-product duopoly

This paper characterizes linear Markov-perfect equilibrium in a duopolistic environment where firms engage in dynamic price competition. Firms have constant (but potentially different) marginal costs and produce differentiated products. We show that, for the case of linear demand, dynamically stable Markov-perfect equilibrium prices are strictly higher than one-shot Nash equilibrium prices, but lower than fully collusive (monopoly) prices. We provide closed-form solutions for the Markov-perfect equilibrium prices which, in principle, can be estimated given data on firm demand and costs. Our results suggest that static two-stage models of price commitment are on reasonably solid ground in that they might be viewed as a reduced form for more complicated dynamic models.     

The interdependence of global oil price,China's stock price and economic policy uncertainty

This investigation examines the interaction among global oil price (OP), China's stock price (SP) and China's economic policy uncertainty (EPU) during the period of 2005:01 and 2017:12. A rolling window Toda‐Yamamoto causality method shows a complex time‐varying relationship. Bilateral causalities between these variables mostly accompany by sharp fluctuations in global or China's economy. Taking into account the inherent consistency of this time‐varying relation, the causal steps approach shows EPU follows a partial but time‐varying mediator process during crisis periods, which suggests EPU is one of mediator variables in this transmission mechanism. The mediator role of EPU in the transmission mechanism of OP and SP has not been paid enough attention before. Our findings provide a new direction for investors from the perspective of policy changes to deal with risks caused by OP and SP fluctuations especially when the financial market experiencing huge fluctuations.     

How house price appreciation affects homeowners' labour force participation

This paper investigates the effects of house price appreciation on homeowners' labour force participation (LFP). Although economic theories predict that housing capital gains will reduce labour supply, empirical evidence from urban China revealed that house price appreciation significantly boosts homeowners' LFP. Heterogeneous analyses indicate that LFP behaviour is more likely to be affected by house price appreciation for female and younger homeowners. Furthermore, homeowners living in provinces with greater house price appreciation tend to be more active in job participation than those living in provinces with lower price appreciation.     

Causality between credit depth and economic growth: evidence from 24 OECD countries

Causality between the ratio of domestic private credit to GDP and growth in real GDP per capita is investigated in a country-by-country time-series framework for 24 OECD economies over the period 1980–2013. The proposed threefold methodology to test for causal linkages integrates (1) lag-augmented VAR Granger causality tests, (2) Breitung–Candelon causality tests in the frequency domain, and (3) testing for causal inference based on a fully modified OLS (FMOLS) approach. For 12 of 24 countries in the sample, the three tests yield uniform results in terms of causality presence (absence) and direction. Causality running from credit depth to economic growth is found for the UK, Australia, Switzerland, and Greece. The findings lend no support to the view that financial development shifts from a supply-leading to demand-following pattern as economic development proceeds. The aggregate results mesh well with the current discussion on “too much finance” and disintermediation effects. However, idiosyncratic country determinants also appear significant.     

普通住宅房价与地价因果关系的检验及其政策含义

本文在综述房价与地价关系研究成果的基础上,结合土地市场与住宅市场二者属性,构建一个认识房价与地价关系的基础。理论研究表明,在不完全竞争的市场中,地价是房价上涨的一个重要但非决定性因素,土地需求作为引致需求受房价影响较大。同时,本文利用1998年至2009年季度数据对房价和地价进行G ranger因果关系检测,计量结果表明：短期内房价与地价互为影响,房价对地价影响更为显著;长期内,房价是地价的G ranger因,而不是相反。计量结果可以揭示房地产市场信号短期与长期传递的机制。在此基础上,本文提出房地产市场治理的应对之策。     

New empirical evidence on the bid-ask spread

In this article, we model the determinants of spread for 734 firms listed on the NYSE over the period 1 January 1998 to 31 December 2008. We propose a panel data model of the determinants of spread. There are four main messages emerging from our work. We find a statistically significant effect of volume on spread inconsistent with the work of Johnson (2008). On price, we find mixed results, consistent with the literature. On the effect of price volatility on spread, our results are completely the opposite of the cross-sectional literature but sides with the relatively recent work of Chordia et al. (2001). We allow for persistence of spread as a determinant of spread and find significant evidence of spread persistence across all 16 sectors. Finally, we examine size effects and find statistically strong evidence of size effects based on the relationship between price and spread, persistence and spread, and volatility and spread.     

The effects of oil price shocks on expenditure category CPI

In this study, we apply a two-block structural vector autoregressive (VAR) model proposed by Kilian and Park (2009) in order to investigate the dynamic effects of changes in oil price on the expenditure category consumer price index (CPI) in the United States and Japan. Our results confirm that each expenditure category price index responded very differently to the same structural shock, and that whether changes in oil price function as a positive stimulus or a negative shock for the individual expenditure category prices also depends on the kind of underlying shock that drives the changes in oil price. Finally, our results also reveal that the manner in which changes in oil price affect each expenditure category price differs between the United States and Japan and these detailed-level differences may lead to aggregate-level differences in the price response of both countries to changes in oil price.     

Uniform price auctions and fixed price offerings in IPOs: an experimental comparison

We compare uniform price auctions with fixed price offerings in Initial Public Offerings (IPO) using laboratory experiments. The experimental environment is based on the Biais and Faugeron-Grouzet (J. Financ. Intermed. 11:9–36, 2002) model. Standard predictions based on tacit collusion equilibria (TCE) suggest lower revenues in uniform price auctions, although alternative equilibria allow for higher revenues. In our experiment, there is no evidence that TCE are played. The experiment suggests that the uniform price auctions are superior to fixed price offerings in terms of raising revenues.

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Bootstrapping asset price bubbles

In this paper we propose a method that allows to test for asset price bubbles. The method is mainly based on a bootstrap methodology which helps to compute the finite sample probability distribution of the asymptotic tests which were recently proposed in Phillips et al. (2011) and Phillips and Yu (2009). We apply the method to the Nasdaq stock price index and Case-Shiller house price index. The results indicate that speculation was behind the upsurge in both asset prices.