Do denominations of origin provide useful quality signals? The case of Bordeaux wines

This paper investigates whether the existing Denominations of Origin (DOs) provide useful quality signals for wine consumers. To test our conjecture that the large number of existing DOs is too many for the typical consumer, we investigate the patterns of co-movement among average monthly wholesale prices for red wines from the 11 main DOs in Bordeaux over 16 years, 1999–2014. Our results indicate that consumers substitute among these wines according to the similarity of semantic elements in the names of DOs on the labels, and not according to prices or terroir that could reflect intrinsic quality where the names as such cannot. This finding suggests that the current DOs are too numerous and complex to provide helpful quality signals to consumers. A substantial reduction of the number of DOs might be warranted to better address the broader informational issue in wine markets.     

A fractional cointegration var analysis of exchange rate dynamics

In their seminal work, Baillie and Bollerslev (1994) carried out an analysis of deviations from the cointegrating relationship of seven important exchange rates. They suggested that the exchange rate series possess long memory and therefore such processes could be well described as fractionally integrated processes. Hence, the influence of shocks to the equilibrium exchange rates may only vanish at very long horizons. In this work we analyze the cointegrating structure of five exchange rates to the US dollar, namely the British pound, the Euro, the Swedish Krona, the Canadian Dollar and the Swiss Franc. The series possess long memory and we show that they can be modeled through fractional integration. In fact, standard cointegration is rejected with the more traditional Johansen CVAR methodology. By using the recently introduced Fractionally Cointegrated VAR by Johansen and Nielsen (2012) we provide a cointegrating relationship taking into account fractional integration.     

Exchange rate sensitivity of US bilateral trade flows

The traditional way of assessing the impact of currency depreciation on the trade balance has been to estimate the elasticity of trade volume to relative prices. To this end, most previous studies used aggregate trade data. To avoid aggregation biases potentially hidden in aggregate data, recent studies have relied on bilateral trade data. Since import and export price data is not available on bilateral level, this study proposes an alternative way of assessing the impact of currency depreciation on bilateral trade flows. The models are applied between the US and her 19 industrial trading partners using recent advances in time-series modeling.     

Testing the forward rate unbiasedness hypothesis during the 1920s

This paper reexamines the forward rate unbiasedness hypothesis (FRUH) during the 1920s and it contributes to the literature as follows: first, it utilizes a database that includes currencies not studied before, as well as the 3 month forward rates; second, it applies three different approaches to test for cointegration and it shows that the choice of the technique is not of crucial importance; third, it tests for the temporal stability of the cointegration results; finally, it tests for the existence of the FRUH in the short run, by means of error correction models, whereas previous studies focused on cointegrated vectors only. Our analysis shows that for countries that did not undergo major financial turmoil during that period, there exists more favorable evidence for the FRUH.     

Long-run equilibrium, short-term adjustment, and spillover effects across Chinese segmented stock markets and the Hong Kong stock market

This paper adopts a novel FIVECM-BEKK GARCH approach to examine the bilateral relationships among the A-share and B-share stock markets in China and the Hong Kong stock market. The evidence shows that these stock markets are fractionally cointegrated. Analyses of the spillover effects across these markets indicate that the A-share markets are most influential. The relaxation of government restrictions on the purchase of B shares by domestic residents accelerates the market integration process of A-share markets with the B-share and Hong Kong markets. The effects of the Asian crisis on the stock-return dynamic correlations vary across these markets.     

银行竞争与经济增长的协整和因果关系分析

文章运用中国1979—2006年的时间序列数据,从中国金融变革路径的角度,分析了经济增长和银行集中度的关系,考虑到中国金融体制改革的轨迹,用非国有银行的信贷余额占整个信贷余额的份额作为银行竞争的指标。利用协整和因果关系分析得出：非国有银行信贷余额的份额和经济增长存在长期的协整关系．其信贷余额的增加能够促进经济增长;非国有银行信贷余额比例的增加是促进经济增长的原因,而反之则不是。说明了由政府主导而不是由市场诱发的中国高度集中的银行体制改革促进了我国经济的发展,尤其在中国的劳动密集型行业大发展阶段。考虑到我国地区发展不平衡及沿海产业转移的背景,本文提出中西部地区应该发展中小银行,而东部地区应该适当加大银行的集中度等政策建议。     

Is integration I(d) applicable to observed economics and finance time series?

The method of cointegration in regression analysis is based on an assumption of stationary increments. Stationary increments with fixed time lag are called ‘integration I(d)’. A class of regression models where cointegration works was identified by Granger and yields the ergodic behavior required for equilibrium expectations in standard economics. Detrended finance market returns are martingales, and martingales do not satisfy regression equations. We ask if there exist detrended processes beyond standard regression models that satisfy integration I(d). We show that stationary increment martingales are confined to the Wiener process, and observe that martingales describing finance data admit neither the integration I(d) nor the ergodicity required for long time equilibrium relationships. In particular, the martingales derived from finance data do not admit the time (or ‘space’) translational invariance required for increment stationarity. Our analysis explains the lack of equilibrium observed earlier between FX rates and relative price levels.     

The Feldstein–Horioka puzzle in Latin American and Caribbean countries: a panel cointegration analysis

In this paper, the recently developed panel unit root and the Pedroni cointegration tests are applied to empirically examine the validity of the Feldstein–Horioka puzzle (F–H puzzle) for a heterogeneous panel of 14 Latin American and five Caribbean countries over the period, 1960–2002. The findings indicate that in these countries, the long-run solvency condition is maintained. Finally, employing the Pedroni panel group FM-OLS estimator (2000, 2001), it is found that the statistically significant estimated savings-retention coefficient for the panel is relatively small indicating that the F–H Puzzle is not valid and thus implying the prevalence of a moderate degree of capital mobility.

An empirical analysis of international labour migration in the Philippines

This study empirically investigates the impact of economic, demographic, and political factors on the size of emigration from the Philippines. In 2007, overseas workers from the Philippines sent remittances in excess of US$14 billion annually to their families back home. Although these remittances are an important source of foreign exchange and play an important role in economic development, the determinants of emigration in the Philippines are not well established. A simple unrestricted error correction model of migration was specified and estimated using data spanning the period 1975–2005. Results indicate that the level of unemployment, adult literacy and population density are the key determinants of emigration in the Philippines. The result also indicates that government instability impacts negatively on emigration in the Philippines. The policy implications of the results are discussed.     

Cointegration networks in stock markets

We use a novel approach based on a combination of network and cointegration analysis to examine linkages between stock markets across market cycles. Our results show that long-run linkages are likely to be global rather than regional and that market turbulence increases linkages. However, we find no widespread common stochastic trends between markets and neither are we able to draw a conclusion that major financial markets display influences network linkages.