THE IMMEDIATE IMPACT OF EURO ON INTRA-REGIONAL TRADE: AN EVENT STUDY APPROACH

This article applies the event study approach to assess the immediate impact of Euro on intra-regional trade among the European Union (EU) members. Here, the post-Euro intra-regional trade has been compared with the pre-Euro intra-regional trade, while the implementation of Euro has been considered as the event. The results show that the trade enhancement at the immediate post-event period is 1.2 times of the immediate pre-event period for France, Germany, Italy and Spain, while immediate trade enhancement for all Euro-members is 1.14 times. The estimation has been statistically justified by using the gravity model. This study thus provides the first empirical evidence on the assessment of currency union impact on intra-regional trade by using the alternative method, the event study approach.Currency Union, Intra-Regional Trade, Event Study, Trade Deepening

Purchasing Power Parity (PPP) of Australian Dollar: Do Test Procedures Matter?

This article aims to reexamine whether Australia’s real exchange rate is mean reverting in the long run by using quarterly trade weighted indices of real exchange rate data for the period of June 1970 to September 2009. We use the state of the art of several more recent econometric tests for this purpose. The empirical result shows that the non-stationarity of Australia’s real exchange rate cannot be rejected. Thus, our results support the PPP hypothesis in Australia. Our results are contradictory to those of Cuestas and Regis (2008), but conform to those of Darné and Hoarau (2007 & 2008).Purchasing power parity; Real exchange rate; Unit roots; Fractional integration

Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia

The aim of this paper is to examine whether the commodity prices predict inflation, unemployment and short term interest rate in Australia. Advanced time series econometric modeling such as vector autoregressive model, cointegration and granger causality are used for this purpose. The empirical results show that three commodity prices (COMRL, COMNRL and COMBSMTL) precede inflation. However, no evidence of reverse causation is found. These findings have important implication for monetary authority. Inflation targeting experience has so far been hit by positive supply shocks. In case of negative supply shock, commodity price may be useful in singling out the likely direction of inflation.Commodity price; monetary policy; Cointegration; Error correction model; Granger causality test

Estimating Production Response of Broadacre Farms in Western Australia: The Nexus of Empirics and Economics Revisited

Reliable estimates of elasticities are fundamental requirement to accurate economic forecasting and valid analyses of the impacts of changes in government policies or international events. The aim of this paper is thus, to estimate production response for broadacre farms in Western Australia by using a normalized quadratic profit function for the period 1977/78 to 2005/06. The result reflects the imposition of curvature restrictions for a normalized profit function, and estimated elasticities are found to be less elastic in the short run. The results from this exercise can be used in a number of ways, depending on the policy objective in mind, such as simulation for forecasting agricultural production.Production Response; Duality Production Theory; Nonlinear Inequality Constraints, Flexible Functional Forms.

Explaining the differences in firm level production capacity realization in Bangladesh food manufacturing: a panal data study

The aim of this paper is to examine the impact of a set of firm-specific and policy related variables such as size, age, ownership and effective rate of assistance on the rate of production capacity realization (PCR) of firms. This study uses a panel of 92 food manufacturing firms of Bangladesh over the periods of 1992 - 1994 and 1997 - 1999. Firm size is found to have positive impact while capital intensity and age of firm have negative impact on PCR at the firm level. The striking result is that the policy related variables such as the effective rate of assistance (ERA) and outward orientation (OPN) do not have any significant impact on PCR. These results are confirmed by the extensive test of sensitivity analysis. The insignificance of ERA and OPN may be attributed to piecemeal and partial nature of policy reforms. The results suggest the need for further reform of trade policies, in particular, focusing on reducing nominal and effective protection levels in order to enhance competition and competitiveness so than an efficient production can take a firmer root in the industrial sector of the economy

CAUSALITY AND DYNAMICS OF ENERGY CONSUMPTION AND OUTPUT: EVIDENCE FROM NON-OECD ASIAN COUNTRIES

This article examines the short-run and long-run causal relationship between energy consumption and output in six non-OECD Asian developing countries. Standard time series econometrics is used for this purpose. Based on cointegration and vector error correction modeling, the empirical result shows a bi-directional causality between energy consumption and income in Malaysia, while a unidirectional causality from output to energy consumption in China and Thailand and energy consumption to output in India and Pakistan. Bangladesh remains as an energy neutral economy confirming the fact that it is one of the lowest energy consuming countries in Asia. Both the generalized variance decompositions and the impulse response functions confirm the direction of causality in these countries. These findings have important policy implications for concerned countries. Countries like China and Thailand may contribute to the fight against global warming directly implementing energy conservation measures whereas India and Pakistan may focus on technological developments and mitigation policies. For Malaysia, a balanced combination of alternative policies seems to be appropriate.Energy Conservation, Cointegration, Error Correction Model, Generalized Variance Decompositions, Generalized Impulse Response Functions

Urbanization, energy consumption, and pollutant emission in Asian developing economies: An empirical analysis

This paper aims to investigate the effects of urbanization, renewable and non-renewable energy consumption, trade liberalization, and economic growth on pollutant emissions and energy intensity in selected Asian developing countries from 1980 to 2010. We use both linear and nonlinear panel data econometric techniques and employ the recently introduced mean group estimation methods, allowing for heterogeneity and cross-sectional dependence. However, to check robustness of our panel results, we also apply the autoregressive distributed lag bound testing approach to country-level data. In addition, the relationship between affluence and CO2 emissions is examined in the context of the Environmental Kuznets Curve (EKC) hypothesis. The estimation results identify population, affluence, and non-renewable energy consumption as the main factors in pollutant emissions in Asian countries. However, the results of the EKC hypothesis show that when countries achieve a certain level of economic growth, their emissions tend to decline. Whereas nonlinear results show that renewable energy, urbanization, and trade liberalization reduce emissions, linear estimations do not confirm such outcomes. Thus, substitution of non-renewable for renewable energy consumption, as well as cautious and planned urbanization programs, and more liberal trading regimes may be viable options for the sustainable growth of these emerging Asian economies

The impact of crude oil price volatility on selected Asian emerging economies

This paper empirically investigates the impact of oil price volatility on six major emerging economies of Asia, namely China, India, Indonesia, Malaysia, Philippines and Thailand. Following Andersen et al. (2004) quarterly oil price volatility is measured by using the realized volatility (RV). For China, according to the VAR analysis along with the Granger causality test, generalized impulse response functions and generalized variance decompositions, it can be inferred that oil price volatility impacts output growth in the short run. For India oil price volatility impacts both GDP growth and inflation. In Philippines oil price volatility impacts inflation. For the Indonesian economy oil price volatility impacts both GDP growth and inflation before and after the Asian financial crisis. In Malaysia oil price volatility impacts GDP growth, while there is a very little feedback from the opposite side. For Thailand, oil price volatility impacts output growth for the whole studied period. However, after the Asian financial crisis the impact seems to disappear. It seems that oil subsidization of the Thai Government by introduction of the oil fund plays a significant role in improving economic performance by lessening the adverse effect of oil price volatility on macroeconomic indicators

Is ASEAN trade pattern complementary to AFTA and TAc?

This paper investigates the impact of the ongoing process of ASEAN trade liberalization on trade patterns of the ASEAN members. A modified gravity model incorporating exchange rate volatility and regional integration is estimated for each of the seven major ASEAN economies for the period of 1994 to 2009. The result observes substantial amount of heterogeneity among the members’ trade pattern