Potential Contagion Effects on OECD Countries: A FAVAR Model under Bayesian Framework

This paper studies whether and how US shocks impact the OECD countries in the case of a simulated crisis. Using Bayesian estimation methods we extract constrained factors (global, country and variable type specific) from a sample of 153 economic and financial OECD variables from 1980–2008. These factors are the transmission channels through which national shocks spread to other countries, as in a pandemic. The Bayesian interpretable factors are used to estimate FAVAR models. Our main findings suggest that differences exist in the contagion effects. This implies that no generalizations can be made for OECD countries even of equal economic size and in the same geographic region. In addition, our results show that a large portion of the variance of domestic economic variables is explained by global factors; and that the interest rate shock appears to play an important role in the spillover mechanism from the United States to the rest of the world. More precisely, Australia, the United Kingdom and Scandinavian countries appear to be most sensitive to the US shocks.     

ASEAN Plus Three Stock Markets Integration

This paper examines the role played by local and international factors in the international integration process to stock markets worldwide. Using a sample of ASEAN + 3 (Association of South East Asian Nations + China, Korea and Japan) during the period between 2000 and 2014, we identify the main factors that might influence regional integration of stock markets. We propose an advantageous econometric approach based on a conditional version of the Dynamic International Capital Asset Pricing Model (ICAPM) to explore major sources of time-varying risks. We specifically apply the multivariate BEKK-GARCH process of Cappiello et al. (Journal of Financial Econometrics 25:537–572, 2006) to simultaneously estimate the ICAPM for each country. The study puts in evidence that regional trade openness, regional and world industrial production, dividend yields and commodity prices are among the key determinants of regional integration in the ASEAN + 3 context whatever is the measure of exchange rate risk.

     

Transmission channels of international financial crises to African stock markets: the case of the euro sovereign debt crisis

This article investigates the effects of the European sovereign debt crisis on African stock markets within a Bayesian shrinkage VAR framework. This method allows us to consider both North African and Sub-Saharan African stock markets, and provides a flexible parsimonious specification. The results reveal varying reactions of the impulse response functions. The most exposed African stock markets are those of Egypt, South Africa and Mauritius, while the least affected stock market is, surprisingly, that of Ivory Coast. Our analysis shows that, in addition to direct transmission, several macroeconomic and market channels, such as commodities, exports, and exchange rates, are relevant. Specifically, countries with strong commercial links to European countries will be most impacted by the crisis. The severity of transmission also depends on the country’s dependence on commodities.     

Non-stationarity and the import demand for virgin olive oil in the European Union

The aim of this study is to analyse the importation of virgin olive oil to European Union countries, paying special attention to the Spanish export contribution. The method used is based on the estimation of an imports demand system. The novelty of the paper lies not in the modelling approach but in the explicit consideration of the univariate characteristics of series that is included in the analysis. Since prices are non-stationary, cointegration among them has been tested. Results indicate that they are cointegrated and that homogeneity holds. As a result, relative prices are included in the imports demand system. Structural change is also considered so as to account for the entrance of both Spain and Greece into the EU during the period studied. Results demonstrate the leadership of Spain within the EU virgin olive oil market as well as the increasing competitiveness of Greek oil.     

Exchange rate regimes and prices: The cases of Italy,Spain and the United Kingdom (1874–1998)

This paper studies the relationship among Italian, Spanish and United Kingdom prices over the period 1874–1998, for most of which the currencies of these three countries maintained a floating exchange rate regime. By using cointegration techniques with broken linear trends, we find a single vector for the period 1874–1935 and two vectors and, consequently, a single common trend for the period 1940–1998. Therefore, this paper provides new evidence of no long-run monetary independence under floating regimes. Furthermore, the price differential dynamics captured by deterministic trends in the period 1940–1998, as well as agreeing with the evidence of long-run transmission of interest rates in the floating post-Bretton Woods era, fit in perfectly with the new de facto taxonomies on exchange rates.