the demand for money in an open economy the united kingdom most previous studies have estimated the demand for money without paying too much attention to developments in the foreign exchange markets in light of the fact that any development abroad and in the foreign exchange markets could have implications for domestic stabilization we make an attempt to incorporate such developments into the demand for money in the united kingdom more precisely after incorporating a measure of real effective exchange rate of the british pound into a dynamic money demand function we estimated it for the uk using quarterly data over 1973 87 period by relying upon the akaike final prediction error criteria to select the optimum number of lags it is shown that in addition to income and interest rate the real effective exchange rate exerts significant effect on the uk demand for money in the short run as well as long run

natural gas consumption and economic growth the role of foreign direct investment capital formation and trade openness in malaysia the objective of this paper is to reinvestigate the relationship between natural gas consumption and economic growth by including foreign direct investment capital and trade openness in malaysia for the period of 1971 2012 the structural break unit root test is employed to investigate the stationary properties of the series we have applied combined cointegration test to examine the relationship between the variables in the long run for robustness sake the ardl bounds testing method is also employed to test for a possible long run relationship in the presence of structural breaks we note the validity of cointegration between the variables natural gas consumption foreign direct investment capital formation and trade openness have positive influence on economic growth in malaysia the results support the presence of feedback hypothesis between natural gas consumption and economic growth foreign direct investment and economic growth and natural gas consumption and foreign direct investment the policy implications of these results are provided

the fundamental determinants of interest rate differentials in the erm the paper analyses the sources of persistent interest rate differentials vis a vis germany that have existed in belgium denmark france ireland italy and the netherlands in a target zone system like the erm interest rate differentials mainly reflect devaluation expectations which are measured here by raw 1 month euromarket interest rate differentials drift adjusted 1 month differentials and differentials in long term government bond yields the role of a large set of fundamental macroeconomic variables that may have affected these devaluation expectations is investigated within a vector autoregressive var setting by means of granger causality tests impulse response functions and variance decompositions we find no evidence that fundamentals are more relevant to drift adjusted devaluation risk than for unadjusted interest rate differentials a significant impact of inflation budget deficits and unemployment becomes evident for almost all erm participants

the causality relationship between energy consumption and gdp in g 11 countries revisited abstract this paper explores whether energy conservation policies can be implemented in countries with the same level of development that is is restraining energy consumption without compromising economic growth feasible in all industrialized countries a new granger non causality testing procedure developed by toda and yamamoto 1995 journal of econometrics 66 225 250 is applied to re investigate the relationship if any between energy consumption and income in 11 major industrialized countries the results clearly do not support the view that energy consumption and income are neutral with respect to each other except in the case of the united kingdom germany and sweden where a neutral relationship is found bi directional causality in the united states and uni directional running from energy consumption to gdp in canada belgium the netherlands and switzerland are found this indicates that energy conservation may hinder economic growth in the latter five countries further the causality relationship appears to be uni directional but reversed for france italy and japan which implies that in these three countries energy conservation may be viable without being detrimental to economic growth

electricity consumption real gdp causality nexus evidence from a bootstrapped causality test for 30 oecd countries the goal of this paper is to examine any causal effects between electricity consumption and real gdp for 30 oecd countries we use a bootstrapped causality testing approach and unravel evidence in favour of electricity consumption causing real gdp in australia iceland italy the slovak republic the czech republic korea portugal and the uk the implication is that electricity conservation policies will negatively impact real gdp in these countries however for the rest of the 22 countries our findings suggest that electricity conversation policies will not affect real gdp

job queues discrimination and affirmative action james r fain if employers have different becker type discrimination coefficients for different demographic groups then the implementation of affirmative action may have a differential impact on those groups we estimate two vector autoregressive models of the us economy including the unemployment rates of four demographic groups we find that a job queue existed before the implementation of affirmative action and that affirmative action changed the ordering of the job queue in manner that had a negative impact on nonwhite males we find evidence that affirmative action may have increased the unemployment rate of nonwhite males by increasing their duration of unemployment jel j71 j78 j64 j68 i introduction the relative status of demographic groups in the labor force has been undergoing significant change since the early 1960s throughout this period white females and racial minorities have experienced changes not only relative to white males but also relative to one another one such change is exhibited in relative unemployment rates figure 1 shows differentials in the smoothed unemployment rates using a 12 x 2 centered moving average for white females nonwhite males and nonwhite females for the years 1959 83 one can easily see that the relative unemployment burdens have varied over time focusing first on the two lines that are positive over the entire range one may see that prior to the late 1960s the status of nonwhite individuals especially nonwhite males relative to white females was improving however beginning in the late 1960s this trend reversed the unemployment rate differential between nonwhite males and white females increased from a low of 1 03 in july 1969 to a high of 11 12 in march 1983 similarly after declining during the 1960s the unemployment rate differential between nonwhite females and white females increased from a low of 3 49 in october 1969 to a high of 9 16 in august 1983 these reversals in trend indicate the status of white females relative to both nonwhite males and nonwhite females began improving in the late 1960s figure 1 also shows the status of nonwhite females improved relative to that of nonwhite males during the same time period the unemployment rate differential between nonwhite males and nonwhite females increased from a low of 3 13 in february 1968 to a high of 2 38 in february 1983 these three unemployment rate differentials all declined in the 1960s a time of tremendous social change and strong economic growth but all of these trends reversed direction in the 20 month period from february 1968 to october 1969 after the trend reversal the status of white females improved relative to both nonwhite males and nonwhite females and the status of nonwhite females improved relative to that of nonwhite males to put it another way nonwhite males lost ground relative to both nonwhite females and white females our goal is to examine what role if any the implementation of affirmative action in 1968 had in reversing these trends other possible explanations of the above noted reversal in trends certainly exist but several factors point to affirmative action as a potential cause of these changes first the timing is correct the trends reversed in close proximity to the implementation of affirmative action second whatever caused these reversals affected all minority groups did so within a short 20 month time span and its impact was sustained over a number of years a new federal policy designed to change the way firms hire minorities should have exactly this type of effect finally as we will argue below imposing affirmative action on discriminating employers will not benefit all demographic groups equally discriminating employers will continue to discriminate though the pattern of discrimination may change many of the traditional explanations of changes in relative unemployment rates are unlikely candidates to explain these significant and sustained reversals of longstanding trends

a re examination of the relationship between electricity consumption and economic growth in malaysia abstract the purpose of this study is to re investigate the relationship between electricity consumption and economic growth in malaysia from 1972 1 to 2003 4 this study adopted the newly developed ecm based f test kanioura a turner p 2005 critical values for an f test for cointegration in the multivariate model applied economics 37 3 265 270 for cointegration to examine the presence of long run equilibrium relationship through the autoregressive distributed lag ardl model the empirical evidence suggests that electricity consumption and economic growth are not cointegrated in malaysia however the standard granger s test and mwald test suggest that electricity consumption and economic growth in malaysia granger causes each other this finding provides policymakers with a better understanding of electricity consumption and allows them to formulate electricity consumption policy to support the economic development and to enhance the productivity of capital labour and other factors of production for future economic growth in malaysia

exports and growth is the export led growth hypothesis valid for provincial economies this paper re examines the export led growth hypothesis using provincial data unlike other studies that concentrate on country level data this study investigates the validity of the hypothesis for four largest provinces in korea seoul kyunggee kyungnam and pusan the causal implication of the export led growth hypothesis is generally supported for all provinces in the sample the framework of analysis is two and four variable autoregressive models that include provincial exports provincial output terms of trade and national output shocks granger causal orderings from exports to output growth are generally supported in bivariate causal models in multivariate models variance decompositions and impulse response functions further indicate that export growth has a significant impact on output growth for all provinces although a feedback effect from output to export growth appears in seoul and the kyungnam province

lag length selection and tests of granger causality between money and income one of the most widely accepred relationships in macroeconomics is the positive relationship between the rate of growth of the money supply and the rate of growth of income a diversity of opinion arises however with the attempt to identify a causal relationship between these variables while friedman and schwartz 1963 initiated the empirical investigation of money income causality sims 1972 made the most significant contribution to this literature with a practical application of the criterion developed by granger 1969 for identifying a causal relationship since the appearance of sims s approach and an alternative one advanced by sargent 1976 many researchers have applied these techniques to the investigation of the causal relationship between money and income l with two exceptions hsiao 1981 and mcmillin and fackler 1984 these researchers have arbitrarily chosen the lengths of their distributed lags the purpose of this paper is to test for granger causality between money and income this paper differs from previous work in that considerably more attention is focused on the effect of the lag specification on the test results in particular we investigate the extent to which rules of thumb arbitrary lag specifications and

monetary policy and the informational efficiency of the stock market the evidence from many countries 1987 monetary policy and the informational efficiency of the stock market the evidence from many countries applied economics vol 19 no 11 pp 1521 1532

modelling intra urban location preferences under rational expectations the purpose of this paper is to 1 extend the traditional generalised linear expenditure system as it has been applied in location theory by including rational expectations in the formulation 2 rank intra urban places in accordance with households location preferences 3 investigate the impact of location preferences on housing demand and urban growth and 4 study the role of price and expenditure expectations on the formation of housing demand the theoretical model was tested for seven departments of the region of attica greece using monthly data for the period july 1977 october 1988 the full information maximum likelihood procedure was used to estimate the model the findings provide useful information including guidelines for government policies concerning income housing price and interest rate subsidies

public sector and economic growth the greek experience over the past two decades there has been an increase in the relative size of the public sector accompanied by a decline in the growth performance of the greek economy in an attempt to highlight the contribution of the government size to growth an analytical framework is developed incorporating the possibility that marginal factor productivities are not equal in the public and private sectors econometric analysis utilizing this framework points to a negative relationship between government size and economic growth this seems to derive in part from intersectoral diseconomies generated by the growing share of deft financed government activities

an econometric test of wagner s law for six countries based on cointegration and error correction modelling techniques the present study empirically examined five different versions of wagner s law by employing annual time series data on six countries over the period 1951 1996 three countries are part of the emerging industrialized countries of asia south korea taiwan thailand and three are industrialized countries japan usa and the united kingdom the analysis is an advance over previous work in two ways first the stationarity propertities of the data and the order of integration of the data are empirically investigated using the augmented dickey fuller adf and the kwiatkowski et al journal of econometrics 1 1992 kpss tests and second the hypothesis of a long run relationship between income and government spending is tested using bivariate cointegrated systems and employing the methodology of cointegration analysis as suggested by johansen journal of economic dynamics and control 12 1988 and johansen and juselius oxford bulletin of economics and statistics 52 1990 the results indicate that

devaluation and the trade balance in india stationarity and cointegration a study of devaluation and the trade balance in india corrects the data for nonstationarity previous empirical tests have used non stationary data the trade balance in india is not cointegrated with a number of variables including the exchange rate absorption elasticity and monetary models are compared and the monetary model performs better there has been no j curve in india and devaluations have had no significant long run effect on the trade balance

the inflationary experiences of six developing countries in asia an investigation of underlying determinants this paper investigates major deteminats of the inflation rate in six asian developing countries the sample includes low and moderate high inflation cases for the investigation a monetarist model of the inflation rate adjusted to account for important external factors is used the results show that the growth of the money stock was not a primary source of inflation in all countries however various factors that influence the public s willingness to hold money are behind inflationary pressures across countries among these some are external factors stemming from changes in foreign interst rates and import prices overall the evidence suggests that the success of domestic policy in fighting inflation is highly dependent on the unique inflationary experience of each country

expenditures and receipts in state and local government finances comment the aim of this note has been to show that marlow and manage s 1987 paper suffers from serious methodological problems due to the non stationary data series used and the arbitrary lag lengths employed use of appropriate stationarity tests and optimal lag lengths of the variables change some of the basic conclusions of their paper contrary to their suggestion the presence of a feedback between local tax receipts and expenditures imply that local governments should be concerned with the implication of their spending and revenue enhancing decisions on their budget decisions to increase current expenditures may lead to higher future taxes similarly efforts to impose higher taxes to reduce budget deficits at the local government level may be futile due to a subsequent increase in spending

financial development and economic growth the case of taiwan this paper examines the relationship between financial development and economic growth in taiwan from 1962 to 1998 using a four variable var model the competing hypotheses of demand following versus supply leading are empirically tested the results from granger causality tests based on vector error correction models vecm suggest unidirectional causality running from financial development measured as the ratio of m2 to gdp to economic growth this result supports the supply leading hypothesis for taiwan this finding highlights the importance of financial development in taiwan s recent growth

the influence of energy consumption of china on its real gdp from aggregated and disaggregated viewpoints abstract this paper investigated the causal relationship between energy consumption and gross domestic product gdp in china at both aggregated and disaggregated levels during the period of 1978 2009 by using a modified version of the granger 1969 causality test proposed by toda and yamamoto 1995 within a multivariate framework the empirical results suggested the existence of a negative bi directional granger causality running from aggregated energy consumption to real gdp at disaggregated level of energy consumption the results were complicated for coal empirical findings suggested that there was a negative bi directional granger causality running from coal consumption to real gdp however for oil and gas empirical findings suggested a positive bi directional granger causality running from oil as well as gas consumption to real gdp though these results supported the feedback hypothesis the negative relationship might be attributed to the growing economy production shifting towards less energy intensive sectors and excessive energy consumption in relatively unproductive sectors the results indicated that policies with reducing aggregated energy consumption and promoting energy conservation may boost china s economic growth

policy impacts under rational expectations abstract this paper re examines for the u s the validity of the macro rational expectations mre hypothesis in contrast to most previous studies in this area the paper a considers the potential real effects of both monetary and fiscal policies b allows for possible endogeneity of these policies and c uses a joint non linear estimation methodology to distangle the hypothesis of rationality from that of neutrality the empirical results reject the joint mre hypothesis for both policies the results also indicate that policy non neutrality is the culprit behind such rejection this evidence offers further empirical support for macro rational expectations models where monetary and fiscal policies can due to some rigidities play a key role in stabilizing the real economy

the myth of the east asian miracle the macroeconomic implications of soft budgets gregate risk let us call the aggregate of the high risk projects the risky project and the aggregate of the other projects the low risk project it is easy to imagine that within a broad range of the parameters a rational risk averse investor would diversify her investment portfolio between the assets of these two projects reflecting the desire for a higher return and at the same time the desire to avoid excessive risks meanwhile the total investment savings of the investor should reflect the individual s balance between currenit and future consumption

budget deficits money growth and causality further oecd evidence abstract this paper investigates the causal linkage between budget deficits and money growth in seven major oecd countries using multivariate granger causality tests combined with akaike s aic criterion and zellner s iterative seemingly unrelated regressions the accommodation hypothesis that deficits granger cause positive long run changes in money growth is systematically rejected across all countries the reverse hypothesis that money growth granger causes long run changes in deficits is also rejected across countries these results suggest that monetary and fiscal policies are set independently in each of the oecd countries

the behavior of the stock market in a developing economy abstract applying granger type causality along with akaike s final prediction error criterion on the indian data over 1948 1984 this paper finds a significant causal lagged relationship between stock returns and some selected macro variables including money supply implying market inefficiency in the semi strong sense

exploring the relationship between energy use and economic growth with bivariate models new evidence from g 7 countries abstract there is a rapidly growing literature on the interaction between energy use and economic development with many analysts drawing policy conclusions on the basis of granger causality tests that involve only an energy and an economic variable this paper attempts to demonstrate empirically that such studies although useful for certain applications may be of limited use for policy purposes after outlining theoretical and methodological issues associated with such approaches i apply bivariate energy economy causality tests for canada france germany italy japan the united kingdom and the united states using aggregate and sectoral data and three different modern econometric methods the results which are often contradictory or economically implausible illustrate explicitly that one should be cautious when drawing policy implications with the aid of bivariate causality tests on small samples i therefore underline the importance of utilizing as large sample sizes as possible and using multivariate models which are closer to economic theory accommodate several mechanisms and causality channels and provide a better representation of real world interactions between energy use and economic growth

government spending and taxation what causes what in the past few years as federal deficits have risen to high nominal levels economists have argued about the effect that raising taxes ostensibly to reduce deficits might have on government spending some economists including milton friedman have argued that raising taxes will simply lead to more spending others including james buchanan and richard wagner have said that the high deficits themselves have been responsible for the growth of federal spending and that if that spending had to be financed completely by direct taxes people would demand that the federal government spend less a third group led by robert barro says that increased taxes and borrowing are results of increased government spending in section ii we briefly review various hypotheses about the relationship between federal government spending and revenues section iii describes the testing procedure used to discriminate between these hypotheses the results of four tests are presented in section iv section v contains a summary and major conclusions to foreshadow what follows we find no evidence that higher real federal taxes today lead to either higher or lower federal spending tomorrow on the other hand we find strong evidence that higher spending now will lead to higher taxes later our results support a view of the world in which the political system somehow determines how much to spend and then looks for revenue sources to finance that level of spending including direct taxation borrowing and money creation we also find evidence that real federal revenues are positively affected by real gross national product gnp real federal spending also rises with real gnp but it appears to be independent of the rate of inflation

federal deficits macro stabilization goals and federal reserve behavior the effects of federal deficits on federal reserve behavior as proxied by changes in the growth rate of the monetary base are analyzed in this study multivariate granger causality tests are employed in the analysis the deficit measure that is the focus of the analysis is the change in the real market value of privately held federal debt the tests indicate that the deficit granger causes the monetary base additionally concerns for financial market stability real output and exchange rate movements in the period of floating rates also affect federal reserve behavior

recent theoretical work on the soft budget constraint the soft budget constraint is a syndrome that was identified and studied by janos kornai in his analysis of centrally planned economies see kornai 1980 the syndrome is said to arise when a seemingly unprofitable enterprise is bailed out by the government or the enterprise s creditors in other words the enterprise is not held to a fixed budget but finds its budget constraint softened by the infusion of additional credit when it is on the verge of failure kornai viewed the soft budget constraint as a crucial ingredient for explaining the salient features of socialist economic performance in particular the pervasiveness of shortages one interesting puzzle is why centrally planned economies have been particularly susceptible to the influence of the soft budget constraint the capitalist world is hardly immune as the recent financial crisis in asia attests but on the whole it has proved less vulnerable indeed the very origin of the soft budget constraint and the mechanism by which it gives rise to shortages and other undesirable effects are also obviously important questions although kornai s work has long been well known and appreciated answers to these associated theoretical questions have been hazarded only recently in maskin 1996 i surveyed some of the initial efforts in this direction including mathias dewatripont and maskin 1995 which argues that centralization of credit can give rise to soft budget constraints because it facilitates the refinancing of

lag length selection in vector autoregressive models symmetric and asymmetric lags this study used monte carlo simulations to study the performance of alternative lag selection criterion for symmetric lag and asymmetric lag vector autoregressive models lag models with short lags and with long lags were considered the alternative criteria considered were the aic sic phillips posterior information criterion and keating s modification of the aic and sic the alternative criteria were evaluated by computing the frequency distribution of lags selected by computing the out of sample forecasting performance of models with lags selected using each criterion and by comparing the ability of models with lags selected using each criterion to mimic the true impulse response functions for the lag model

government failure social capital and the appropriateness of the new zealand model for public sector reform in developing countries abstract the policy problems posed by a lack of state capacity in developing societies now attract the attention of a growing number of scholars both the government failure paradigm with its top down emphasis and the social capital theory with its stress on bottom up approaches provide analytical frameworks that can be used to comprehend the symptoms of state incapacity reported by the much broader literature on policy implementation this paper seeks to determine the implications of the government failure and social capital models for policy implementation more specifically the paper considers the contractualist approach to public management reform in new zealand as the epitome of a top down solution to government failure it will also evaluate this model from a social capital perspective and suggest ways in which a balanced approach to public sector reform can take into account elements of both paradigms

the links between international parity conditions and granger causality a study of exchange rates and prices this article investigates granger causality between exchange rates and prices for the us and four of its trading partners canada germany japan and the uk we emphasize the distinction between direct and indirect granger causality exchange rates directly cause prices if movements in exchange rates lead movement in prices and exchange rates indirectly cause prices if deviations from the purchasing power parity ppp condition can help forecast movement in prices but only by including the interest rate differential in our error correction model do we obtain results that align with economic theory the economic theory of ppp suggests that exchange rates and prices are cointegrated with exchange rates moving proportionally to prices in the long run in general we find either direct or indirect feedback mechanisms between exchange rates and prices

the relationship between natural gas consumption and economic growth in opec members the purpose of this study is to examine the relationship between natural gas consumption and economic growth in 12 opec member countries for the period of 1980 2012 the paper adopts the panel granger causality test of dumitrescu and hurlin 2012 21 to assess the causal relationship between natural gas consumption and economic growth the findings show the evidence of feedback relation between natural gas consumption and economic growth in opec members as a panel however diverse results are obtained when the member countries are individually examined the results provide evidence for growth hypothesis in iraq kuwait libya nigeria and saudi arabia but conservation hypothesis in algeria iran united arab emirates and venezuela further evidence suggests the existence of neutrality hypothesis in angola and qatar and feedback hypothesis in ecuador

autoregressive modelling and money income causality detection abstract a step wise procedure based on granger s concept of causality and abaike s final prediction error criterion is suggested as a practical means to identify the order of lags of each variable in a multivariate autoregressive process the model seems useful because it can serve as a reduced form formulation to avoid imposing often spurious or false restrictions of the model it also provides a reasonably powerful test of causality the idea is applied to u s postwar money and income data it is found that between m1 and gnp a bivariate feedback model fits the data best between m2 and gnp a one way causal model from money to income performs better diagnostic checks applied to our model seem to indicate the adequacy of our approach

defence spending and unemployment rates an empirical analysis disaggregated by race this analysis brings u s time series evidence to bear on the relationship of defense spending and unemployment rates results indicate that defense increases during the 1970s were associated with improvements in the overall unemployment rate however during the 1980s such increases were associated with a worsening of the unemployment rate furthermore upon disaggregation into black and white unemployment rates it was found that in general whites were helped by defense spending increases while blacks were hurt this evidence offers support for the claim that an increasing complex military production process will lead to diminished employment gains particularly for minorities who are not proportionately represented in the high tech industries that serve the military copyright 1990 by oxford university press

property tax and inter municipal migration in canada a multivariate test of the tiebout hypothesis this paper tests the causal ordering between property taxes and inter municipal migration using both bivariate and multivariate methods empirical results based on annual data for post war canada 1940 84 support the tiebout tullock hypothesis which implies that differential local tax system and public services induce inter comunity migration inter alia local spending and taxation are not therefore fully capitalized in property values the bivariate tests based on the granger sims test and hsiao s procedure indicate an instantaneous bidirectional causality between property taxes and migration but the multivariate granger test supports only a unidirectional causality from property taxes to migration

discount rates natural resources and the measurement of aggregate economic growth in africa abstract over the last decade there has been a growing interest in depreciation of natural capital in national income accounts within this literature there has been limited discussion of the sensitivity of measurement to the choice of discount rate and the effect of using depreciated measures of growth in empirical analyses without attempting to estimate or justify a specific discount rate this paper presents alternative sets of growth data for 18 african countries based on different assumptions of the appropriate discount rate to apply to natural capital the data sets are then used in a statistical test of the causes of economic growth results of the statistical analysis indicate sensitivity to the choice of discount rate

measuring global money market interrelationships an investigation of five major world currencies abstract this paper extends the study of global money market integration in two primary directions first a technique which combines stationarity and cointegration tests as a basis for constructing an error correction model is applied to assess the existence of long run equilibrium relationships between money market series second analysis for the increasingly significant asian offshore markets of singapore and hong kong is added to traditional european and national markets analysis major findings are 1 the error correction model is an appropriate technique for identifying causality relationships and 2 major domestic markets and included offshore markets are partially segmented

an empirical investigation of the causal relationship between openness and economic growth in china this study investigates the causal relationship between openness and economic growth in china the integration and cointegration properties of the data are analysed and the models of granger sims geweke and hsiao are used to identify a bi directional causal relationship between gnp and exports plus imports this bi directional causation is consistent with china s development strategy of protected export promotion

on the difficulty of eliminating deficits with higher taxes some canadian evidence government budget deficits have increased along with government revenues from direct and indirect taxation both in absolute amounts and as a share of national income in canada as well as in several other countries especially since the 1960s this phenomenon also has coincided particularly since 1980 with skepticism over the notion that government deficit spending stimulates economic growth and employment instead many now expect deficits to produce negative effects on economic activity including high real interest rates reduced real capital formation and production increased unemployment and possible long term inflation 2 these expectations have produced a near concensus on the need to reduce government budget deficits but not on the means of achieving that goal some advocate reductions in government spending as the optimal solution while others call for increases in taxation to raise revenue although either policy in principle may achieve the same result for the deficit they arise from different theories of the determinants of government spending in particular those who advocate expenditure cuts suggest that increased taxation would increase government spending more than it would reduce the deficit arguing that there is a causal direction from increased tax revenues to increased government expenditures although the taxation spending causality hypothesis has assumed increased prominence over the last decade 3 little statistical testing has been done for canada studies by manage and marlow 18 and ram 21 lend support to the argument that expenditures are more responsive to revenues than the reverse on the basis of u s data indeed ram s work contradicts the earlier conclu

structural federal deficits and interest rates some causality and co integration tests the relationship between federal budget deficits and interest rates has been the focus of extensive research recently cebula 4 examined this relationship empirically and concluded that the federal budget deficit does in fact exercise a positive and significant impact upon the nominal moody s aaa rated corporate bond rate 4 208 such a finding is at odds with the great majority of recent empirical studies in this area if valid this finding assigns to large deficits significant adverse effects on both private investment crowding out and on trade balance via an overvalued dollar given these profound public policy implications cebula s finding warrants further examination

stock prices and the effective exchange rate of the dollar the literature on the relation between stock prices and exchange rates is very poor and includes few studies that have argued that exchange rate changes do effect stock prices by relying on the portfolio approach to exchange rate determination it is argued that a change in stock prices could also have an impact on exchange rates i e there could be a two way relationship between exchange rates and stock prices granger concept of causality as well as cointegration technique are employed to support this conjecture the empirical results show that there is bidirectional causality between stock prices measured by s p 500 index and the effective exchange rate of the dollar at least in the short run the cointegration analysis reveals that there is no long run relationship between two variables

simultaneous estimation of production functions and capital stocks for developing countries estimation of production functions is important for both forecasting and planning purposes in developing countries the lack of data especially on capital stocks hampers econometric work and leads to the use of crude methods in the estimation of production functions in this paper we propose a method equally useful for the estimation of production functions when there are no data on capital stock and for the recovery of capital stock from the estimated production function a simulation analysis demonstrates the optimal properties of the technique which is subsequently applied to the estimation of aggregate production functions for a number of countries at different stages of development

estimating the effects of monetary policy shocks does lag structure matter this paper examines the implications of lag structure for estimating the effects of monetary policy shocks in a var a symmetric lag structure in which all variables have the same lag length and an asymmetric lag structure in which the lag length differs across variables but is the same for a particular variable in each equation of the model are examined this is important in light of the fact that the true lag structure is generally not known four commonly used identification schemes are employed to identify monetary policy shocks monte carlo simulations strongly indicate that the lag structure of a var model does matter when assessing the quantitative effects of monetary policy shocks given the inherent uncertainty about the true lag structure in practice it is thus important that one compare the impulse response functions from both symmetric lag and asymmetric lag vars in assessing the effects of monetary policy shocks

causal relationship between energy consumption and gdp growth revisited a dynamic panel data approach abstract this paper uses the panel data of energy consumption and gdp for 82 countries from 1972 to 2002 based on the income levels defined by the world bank the data are divided into four categories low income group lower middle income group upper middle income group and high income group we employ the gmm sys approach for the estimation of the panel var model in each of the four groups afterwards the causal relationship between energy consumption and economic growth is tested and ascertained we discover a in the low income group there exists no causal relationship between energy consumption and economic growth b in the middle income groups lower and upper middle income groups economic growth leads energy consumption positively c in the high income group countries economic growth leads energy consumption negatively after further in depth analysis of energy related data the results indicate that in the high income group there is a great environmental improvement as a result of more efficient energy use and reduction in the release of co2 however in the upper middle income group countries after the energy crisis the energy efficiency declines and the release of co2 rises since there is no evidence indicating that energy consumption leads economic growth in any of the four income groups a stronger energy conservation policy should be pursued in all countries

the causal relationship between electricity consumption and economic growth in the asean countries abstract this paper investigates the causal relationship between electricity consumption and economic growth among the association of south east asian nations asean 4 members namely indonesia malaysia singapore and thailand using modern time series techniques for the period 1971 2002 the results indicate that there is a bi directional causality between electricity consumption and economic growth in malaysia and singapore this means that an increase in electricity consumption directly affects economic growth and that economic growth also stimulates further electricity consumption in the two countries however uni directional causality runs from economic growth to electricity consumption in indonesia and thailand without any feedback effect thus electricity conservation policies can be initiated without deteriorating economic side effects in the two countries

growth and the welfare state in the eu a causality analysis in this paper we test for causality between gdp growth andsocial protection expenditure in the european union to that end we apply hsiao s 1981 sequential procedure to data for twelveeu countries along the 1970 1994 period our results suggestthat for belgium germany ireland luxembourg the netherlands portugal and spain causality runs only from social protectiongrowth to gdp growth while for denmark france greece italy and the united kingdom no causality is found between socialprotection growth and gdp growth

real wages inflation and labour productivity in australia this paper presents an analysis of real wages inflation and labour productivity interrelationships using cointegration granger causality and most importantly structural change tests applications of tests to australian data over the 1965 2007 period corroborate the presence of a structural break in 1985 and show that a 1 percent increase in manufacturing sector real wages led to an increase in manufacturing sector productivity of between 0 5 and 0 8 percent comparable estimates for the effect of inflation on manufacturing sector productivity have limited statistical significance granger causality test results suggest that real wages and inflation both granger cause productivity in the long run

exports growth and causality in ldcs abstract using akaike s optimal lag criterion in a granger causality test the causal relationship between export growth and economic growth and vice versa is re examined for 20 countries it is argued that earlier analyses which ignore optimal lags in granger or sims causality tests suffer from certain shortcomings which are overcome by the present approach the results suggest some support for the export promotion hypothesis especially in the case of well known nics and thus differ from previous applications of granger test which did not adopt an optimum lag criterion and which showed no causality from export growth to economic growth in such cases however they are inconclusive in evaluating competing hypotheses

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

exports and economic growth in industrialized countries the prima facie causal relationships between growth exports and factor inputs capital and labour are investigated in five industrialized countries germany itlay japan united kingdom and united states over the period 1960 87 by analysing a four variable vector autoregressive var model for each country our results indicate that germany and japan experienced export led growth reverse causality between exports and growth is found in the case of the us and uk while to causal relationship between exports and output is found for itlay

energy consumption employment output and temporal causality evidence from taiwan based on cointegration and error correction modelling techniques in this study a cointegration analysis and a vector autoregressive model var are used to examine the causal relationships among energy consumption employment and output for taiwan over the period january 1982 to november 1997 johansen 1988 and johansen and juselius 1990 cointegration test result indicates these three variables are cointegrated with one cointegrating vector the results from granger causality tests based on vector error correction models vecm suggest bidirectional grange causality for employment output and employment energy consumption but only unidirectional causality running from energy consumption to output furthermore the impulse responses and variance decompositions are also incorporated into the analysis the results from impulsive response and variance decomposition analysis tell similar stories energy consumption appears to have led to output growth in taiwan over this period the policy implication of this finding is that energy conservation will restrain the outpu

manufacturing output and labor productivity further evidence for the united states abstract formulating the so called verdoorn s law in terms of cointegration and granger causality between manufacturing output and labor productivity quaterly u s data for 1950 1988 are used to test the pattern implied by the law evidence is lacking to support the predicted pattern

policy inference using var models policy inference using var models i introduction macroeconomics has a long tradition of examining the response of macroeconomic variables to shocks in alternative policy measures much recent work in this area has been based on the empirical regularities between variables found in vector autoregressive var models the var results in turn have been used to investigate the impact of changes in different policy variables var modeling procedures have been used to test the relative effects of changes in money interest rates broad credit measures and fiscal actions on economic activity 1 moreover because var analysis does not require the specification of an underlying theoretical model it also has been used to study the linkages among macroeconomic variables across national borders 2 although debate over the alleged atheoretical nature of vars continues for example see cooley and leroy 1985 leamer 1985 and braun and mittnik 1985 var models are frequently used for policy analysis how the dynamic specification of a var model is generated and how the dynamics may influence the resulting policy recommendation is the subject of this study while modeling the dynamic relationship among macro variables is a longstanding subject relatively few studies have tested for the effects of alternative lag structures on a given model to our knowledge there has been little systematic analysis of the sensitivity of policy effects to changes in the lag structure of a given var model 3 in this paper we investigate this specification problem using a simple four variable var model similar in spirit to sims s 1980b 4 this model consists of quarterly observations for money real output prices and nominal short term interest rates for the period 1960 through 1985 in selecting this model we opt to focus on the impacts of lag specification on policy inferences derived from a given var model in doing so we ignore the effects of altering the specification in terms of variables included or excluded this approach seems reasonable however since our purpose is to investigate the effects of lag structure not specification problems in general to compare the policy conclusions derived from the alternative dynamic structures we use six different lag selection criteria these criteria briefly described in section ii vary the bias efficiency tradeoff inherent in such statistical procedures section iii discusses the estimation of the var model using the alternative dynamic structures comparison of policy recommendations derived from the models is presented in section iv using variance decompositions anticipating that discussion the evidence from our model suggests that policy recommendations are very sensitive to changes in the dynamic structure conclusions close the paper in section v ii lag length selection procedures many previous researchers have chosen to impose equal lag lengths on each of the variables in their models 5 this approach produces parameter estimates that may suffer from bias or inefficiency depending on whether the model is under or over parameterized we use six different approaches to determine the lag specification five are based on statistical criteria with the exact criteria listed in table i for comparability we also employ the nonstatistical ad hoc procedure of arbitrarily fixing the maximum lag on all variables to be four quarters one of the statistical approaches used is the standard f test 6 the f test imposes zero restrictions on lags beyond some point and tests this restricted model against a more general lag structure the f statistic is calculated sequentially until adding another lag does not statistically improve the fit of the model two of the selection procedures use a mean squared error criterion these are mallows s 1973 c sub p statistic and akaike s 1970

economic growth and tax components an analysis of tax changes in oecd the paper examines empirically the changes in the tax mix of the oecd countries in response to economic growth from 1980 to 1999 it is found that economic growth measured by gdp per capita has had a significant effect on the tax mix of the oecd countries analysis reveals that different taxes respond differently to the growth of gdp per capita it is shown that while the shares of personal and property taxes have responded positively to economic growth shares of the payroll and goods and services taxes have shown a relative decline

bank bailouts and the conduct of monetary policy in fulfilling its obligations as a lender of last resort a central bank may encounter conflicts with its responsibility to manage the nation s monetary policy crisis lending through the discount window particularly to save troubled institutions is viewed by critics of federal reserve policy as inflationary and thus undesirable 2 the implicit assumption here is that the lending is not sterilized by open market sales leading to an expansion of bank reserves and monetary aggregates the recent actions of the fed to assist troubled financial institutions while well noted in the financial press have not been systematically analyzed to determine their overall impact if any on monetary policy using data for the period from 1973 through 1990 we examine whether the fed s crisis intervention has been sterilized with defensive open market operations a second question which we examine is whether the appropriate policy tool for studies of federal reserve behavior is nonborrowed reserves or the sum of nonborrowed reserves and extended credit 3

the interactive and causal relationships involving precious metal price movements an analysis of the gold and silver markets to explain the interactive and causal relationships between gold and silver price movements time series procedures are used to identify reduced form parameters corresponding to a general arbitrage model enveloped in a framework of expectations about capital gains current price changes are conjectured to be functions of lagged and present values of the substitute precious metal prices and the interest rate plus lagged values of its own price to determine the appropriate number of lags to identify the appropriate interaction and to examine the exogeneity between the gold and silver prices and the rate of interest we use schwarz s bayesian information criterion and akaike s final prediction error criterion the resultant estimated model is simultaneous and provides information on participants average lead times in forming these expectations

non nested tests of three competing theories of business cycles this paper tests the keynesian new classical and real business cycle theories against each other as non nested hypotheses using quarterly data for the us covering the period 1959 1 1989 2 the results indicate that no one theory stands out as the dominant explanation of the business cycle this contrasts with the findings of earlier work which is mostly concerned with testing the keynesian against the new classical theory we find that the introduction of a third theory the real business cycle theory which accounts of real factors blurs the distinction between the demand sided keynesian and the new classical theories

beyond the purchasing power parity testing for cointegration and causality between exchange rates prices and interest rates abstract this paper reexamines the causality between the dollar and the yen in a multivariate framework with the aid of cointegration and error correcting modeling for the 1951 94 period the phillips perron tests and johansen s tests are performed while causality from interest rates to exchange rates is found in the short run no causality between prices and exchange rates is found in the short run however causality is found running from relative prices to exchange rates along with interest rates between the u s and japan in the long run which supports the long run ppp hypothesis

efficiency of the turkish stock exchange with respect to monetary variables a cointegration analysis in this study we test the semistrong form of the efficient market hypothesis in turkey by using the recently developed techniques in time series econometrics namely unit roots and cointegration the long run relationship between stock prices and inflation is investigated by assuming the possible existence of a proxy effect conclusions are made as to the efficiency of the turkish stock exchange and its possible implications for investors to our knowledge this is among the pioneering studies conducted in an emerging market that uses an updated econometric methodology to allow for an analysis of long run steady state properties together with short run dynamics

tax and spend spend and tax or fiscal synchronization new evidence for ten countries cointegration and vector autoregression are used to test the tax and spend spend and tax and fiscal synchronization for ten countries using annual time series data over the period 1951 to 1996 three of them are part of the newly industrialized countries of asia south korea taiwan and thailand and seven are industrialized countries australia canada japan new zealand south africa uk and the usa this paper includes gdp as a control variable into the model like baghestani and mcnown 1994 ross and payne 1998 and koren and stiassny 1998 the johansen 1988 and johansen and juselius 1990 cointegration test results indicate that these three variables are cointegrated with two cointegrating vectors for south korea one vector for australia canada south africa taiwan uk and the usa and no vector for japan new zealand and thailand the results from granger causality tests suggest unidirectional causality running from revenues to spending supporting the tax and spend hypoth

structural break unit root and the causality between energy consumption and gdp in turkey abstract this paper tries to investigate a series of unit root and causality tests to detect causality between the gdp and energy consumption in turkey employing hsiao s version of granger causality method for the 1950 2000 period the conventional unit root tests indicate the series are i 1 whereas the endogenous break unit root tests proposed by zivot and andrews zivot e and andrews d w k 1992 further evidence on the great crash the oil price shock and the unit root hypothesis journal of business and economics statistics 10 251 270 and perron perron p 1997 further evidence on breaking trend functions in macroeconomic variables journal of econometrics 80 355 385 reveal that the series are trend stationary with a structural break therefore it is inappropriate to take the first difference of the data to achieve stationarity the main conclusion of this study is that there is no evidence of causality between energy consumption and gdp in turkey based on the detrended data

the stylized facts about the behavior of manufacturers inventories and backorders over the business cycle 1959 1980 recent theoretical work has highlighted the role of inventories in propagating business cycles this paper attempts to provide an empirical foundation for current and future research on the role inventories play in business cycles the evidence presented here indicates that inventories and backorders are major variables in predicting output fluctuations further the evidence is that disaggregating inventories by stage of fabrication is important in predicting output in concert with previous findings our results suggest that disaggregated inventories ought to be a component of models of the business cycle

energy consumption and projected growth in selected caribbean countries this paper examines two issues that are central to the understanding of the need to increase efficiency in the use distribution and production of energy in the caribbean region the empirical results of this paper suggest the following first the three caribbean countries provide evidence of short run bi directional granger causality from energy consumption to real gross domestic product per capita second the forecasts with a bvar model indicate that significant growth in energy demand could be expected in haiti jamaica and trinidad and tobago until at least 2010 third the increased growth in energy consumption suggests the need for long term commitments from caribbean countries to undertake a series of policy economic market and research and development measures to advance the adoption and deployment of new energy technologies

the reaction of stock returns to anticipated and unanticipated changes in money a re examination of the evidence in the frequency domain the relationship between money and stock returns is analysed for the 1977 1985 period spectral analysis and a var vector autoregressive model are used in the analysis the preliminary results suggest a positive relationship between stock returns and money supply along a business cycles and high frequency cycles a detailed analysis however suggests the spurious character of this observed relationship the money stock returns relationship over business cycles can be explained by a contemporaneous adjustment of stock returns and anticipated money in response to business cycle anticipations the high frequency relationship on the other hand can be related to contemporaneous adjustment of stock returns and money anticipations in response to expected inflation in a framework characterized by the anticipation of the federal reserve reaction function the empirical results strongly suggest that both stock returns and money anticipations are determined in a forward looking manner incorporating the informat

fiscal deficits and long term interest rates further evidence from annual data much debate has recently centered on the popular view that large u s budget deficits financed by the sale of bonds cause high interest rates if valid this view implies that deficits crowd out efficient private investment and adversely affect economic growth however bailey 2 and barro 3 have challenged this conventional view on theoretical grounds based on the ricardian equivalence proposition bailey and barro contend that rational economic agents interpret government deficits as postponed tax liabilities and thus will have no effects on private wealth or interest rates such theoretical ambiguity in regards to the impact of budget deficits has also been matched by an equally conflicting empirical evidence for example barth iden and russek 4 deleeuw and holloway 8 hutchison and pyle 20 makin 24 makin and tanzi 25 and zahid 35 have found a positive and significant effect of deficits on interest rates on the other hand evans 11 12 13 hoelscher 17 motley 28 and plosser 29 30 have all failed to find any systematic support for a significant positive impact of deficits on interest rates it should be observed that the above empirical studies have employed either monthly or quarterly data however some researchers e g hoelscher 18 have recently charged that monthly or quarterly data bias the results in favor of finding no significant linkage between deficits and interest rates they reasoned that portfolio adjustment lags are too long for monthly or even quarterly observations to reflect the actual correlation between deficits and interest rates to eliminate this problem of periodicity annual data was instead advocated 2 using annual data hoelscher 18 concluded that deficits have caused positive and significant changes in long term interest rates in the united states

the relative importance of foreign and domestic disturbances for aggregate fluctuations in the open economy switzerland 1964 1981 abstract this paper studies whether the advent of floating exchange rates served to insulate switzerland from economic shocks of foreign origin it estimates a vector autoregression comprising four swiss and three world aggregate time series and interprets the results in terms of the properties of the vector moving average representation implied by the estimates the chief finding is that foreign shocks explain most of the systematic variation of the swiss variables in both regimes

are causal relationships sensitive to causality tests 1987 are causal relationships sensitive to causality tests applied economics vol 19 no 4 pp 459 465