Search results for "Error Correction Model"
showing 10 items of 17 documents
A Dynamic Analysis of S&P 500, FTSE 100 and EURO STOXX 50 Indices Under Different Exchange Rates
2017
The persistence analysis of short- and long-term interaction and causality in the international financial markets is a key issue for policy makers and portfolio investors. This paper assesses the dynamic evolution of short-term correlation, long-term cointegration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets over the period of 1980--2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the ti…
Investigating Aid Effectiveness in Developing Countries: The Case of Nepal
2020
Foreign aid serves as an important source of capital for any developing or under-developed country. It is very important to see how the recipient country can utilize this aid in the economic upliftment of the nation. Taking a case of Nepalese economy, this paper investigates the effectiveness of foreign aid in developing countries. The result from Johansen’s cointegration test reveals that foreign aid independently is not adequate for the economic growth. Increased capital and technological infrastructures, improved skills on human capital, on the other hand, significantly changes the result for the positive aid impact on growth in the long run. Therefore, we can conclude that a good policy…
Stock earnings and bond yields in the US 1871–2017 : The story of a changing relationship
2021
Abstract Using historical data spanning almost 150 years, we examine whether there is a long-run equilibrium relationship between the stock's earnings and bond yields. The novelty of our econometric methodology consists in using a vector error correction model where we allow multiple structural breaks in the equilibrium relationship. The results of our analysis suggest the existence of an equilibrium relationship over 1871–1932 and 1958–2017. On the two historical segments, our analysis finds that the stock's earnings yield followed the bond yield in both the short run and long run, but not the other way around. Perhaps the most important and surprising finding of our empirical study is tha…
Price and volatility dynamics between electricity and fuel costs: Some evidence for Spain
2012
Abstract The purpose of this study is to investigate the causal linkages between the Spanish electricity, Brent crude oil and Zeebrugge (Belgium) natural gas 1-month-ahead forward prices. Following Lutkepohl et al. (2004), we control for the presence of a structural change in the series and then we use the Johansen cointegration test and a vector error correction model (VECM) to embrace the analysis. Additionally, a multivariate generalized autoregressive conditional heteroskedastic (GARCH) model is applied to explore volatility interactions between the three markets involved in the study. Our findings reveal that Brent crude oil and Zeebrugge natural gas forward prices play a prominent rol…
Wage leadership models: A country-by-country analysis of the EMU
2014
Abstract According to the theory of wage leadership, if there is free inter-sectoral labor mobility, changes in the level of the wage in the leading sector cause changes in the same direction in other sectors' wage. Moreover, since the traded sector (i.e. Industry) is affected by international competitive pressure, it should act as the leader, because this would be conducive to wage restraint. We apply a Vector Error Correction Model on four macro sectors (Industry, Services, Construction and the Public Sector) in ten EMU countries to test for wage leadership and wage adaptability. Our results show significant cross-country differences, with the Public Sector acting as the leader in Germany…
The Euro-Dollar Exchange Rate: Is it Fundamental?
2002
In this paper we have applied two approaches to the study of the dollar real exchange rate in relation with the Euro-area currencies. First, using dynamic panel techniques, we estimate an error correction model for the dollar real exchange rate versus seven developed countries, four of them Euro-area members. Second, we aggregate the European variables and estimate a model for the Euro-dollar real exchange rate using time series techniques. After identification and model selection, the same specification can be adopted in the two cases, in an eclectic model including real interest rate and productivity differentials, together with relative fiscal policy and net foreign asset positions. This…
Stock Earnings and Bond Yields in the US 1871 - 2016: The Story of a Changing Relationship
2018
Using historical data that spans almost 150 years, we examine whether there is a long-run equilibrium relationship between the stock's earnings and bond yields. The novelty of our econometric methodology consists in using a vector error correction model where we allow multiple structural breaks in the equilibrium relationship. The results of our analysis suggest the existence of equilibrium relationship over 1871-1929 and 1958-2017. On the two historical segments, our analysis finds that the stock's earnings yield followed the bond yield in both the short- and long-run, but not the other way around. Perhaps the most important and surprising finding of our empirical study is that, after the …
Demography and Economic Growth in Spain: A Time Series Analysis
2003
In this paper, advanced time series econometric tools are employed to test the existence of relationships among demographic and macroeconomic variables in Spain along the 1960-2000 period. Annual data for the total fertility rate, infant mortality rate, per capita gross domestic product and wages are used in the empirical analysis. We first examine the bivariate Granger causality to look for short run relations. Then, a multivariate cointegration analysis is carry out, showing that two long run relationships among the variables exist with statistically significant coefficients. From these cointegration vectors, the vector error correction model is estimated to test the endogenous or exogeno…
Impact of Foreign Aid on Economic Growth in Nepal
2019
Master's thesis Business Administration BE501 - University of Agder 2019 Nepal, being one of the least developed countries,has beenreceiving aid for more than six decades. It is very important to see how the country is being able to utilize the aid receipts in the economic developmentof the nation.Using annual time series data from 1983 to 2013, the effect of foreign aid oneconomic growth of Nepal has been analysed.The empirical work has beenperformed in two phases(1983-2002 and 1983-2013). The result from Johansen’s cointegrationtest for the shorter time interval, when there was relatively a poor economic situationin the country,revealsthat aid has a negative long-run effect on per capita …
The Role of Assumptions in Ohlson Model Performance: Lessons for Improving Equity-Value Modeling
2021
In this paper, we test whether the short-run econometric conditions for the basic assumptions of the Ohlson valuation model hold, and then we relate these results with the fulfillment of the short-run econometric conditions for this model to be effective. Better future modeling motivated us to analyze to what extent the assumptions involved in this seminal model are not good enough approximations to solve the firm valuation problem, causing poor model performance. The model is based on the well-known dividend discount model and the residual income valuation model, and it adds a linear information model, which is a time series model by nature. Therefore, we adopt the time series approach. In…