Economic Effects of Oil and Food Price Shocks in Asia and Pacific Countries: An Application of SVAR Model

This study investigates the economic effects of external oil and food price shocks in the context of selected Asia and Pacific countries including Australia, New Zealand, South Korea, Singapore, Hong Kong, Taiwan, India and Thailand. The study is conducted within the framework of SVAR model using quarterly data over the period 1980 to 2010 although start date varies based on availability of data. The study reveals that resource poor countries that specialize in heavy manufacturing industries like Korea and Taiwan are highly affected by international oil price shocks. Oil price shocks negatively affect industrial output growth and exchange rate and positively affect inflation and interest rates. On the other hand, oil poor nations such as Australia and New Zealand with diverse mineral resources other than oil are not affected by oil price shocks. Only exchange rates are affected by oil price shocks in these countries. Furthermore, countries that are oil poor but specialized in international financial services are also not affected by oil price increase. Similarly, developing country Like India with limited reserve of oil is not affected by oil price shock. However, Thailand possessing a number of natural resources other than oil is not accommodative of oil price shocks. Limited impact of food prices can be recorded for India, Korea and Thailand in terms of industrial output, inflation and interest rate. The major impact of food prices is that it helps depreciating real effective exchange rate for almost all countries except Singapore. As a whole, the effects of external oil and food prices depend on the economic characteristics of the countries. The empirical results of this study suggest that oil and food prices should be considered for policy and forecasting purposes especially for Korea, Taiwan and Thailand.oil price, food price, shocks, economic effects, Asia, Pacific, SVAR, Agricultural and Food Policy, Demand and Price Analysis, Livestock Production/Industries,

Time-varying influence of interest rates on stock returns: evidence from China

Whether a stock market should matter or not when monetary policy is concerned seems to be a controversial issue. The purpose of this study is to indicate whether the central bank should use monetary policy to help the stock market or not. Based on macroeconomic data such as interest rate and the stock market, we adopt a novel Bayesian time-varying regression model and determine that the impact of interest rate changes on stock returns varies over time in China, after controlling various macroeconomic factors. Although on average interest rates negatively impact stock price returns, they tend to have an abnormal positive effect at market high points, following a time-varying dynamic pattern. Surprisingly, during periods of overheated economic development, an increase in interest rates cannot suppress the rise in stock prices. Therefore, policymakers need to pay attention when accelerating the marketisation of interest rates and initiating the preventive role of timely and strategic adjustment of interest rates

The Demand for Money in Cote d’Ivoire: Evidence from the Cointegration Test.

This paper demonstrates that there is a long run equilibrium relationship between money supply 〖(M〗_1) and its main determinants, real income (GDP) and interest rate in Cote d’Ivoire. In order to investigate long-term relationship among these variables, we use Juselius and Johansen cointegration test with time series data covering the period of 1980-2007. The results show that there is long-term relationship among these variables as well as the linkage between them. Base from this result we found that only real money balances 〖(M〗_1) has significant long -run economic impact of variations in monetary policy in Cote d’Ivoire. However, the study also revealed that the effect of aggregate 〖(M〗_2) is not so stable linking with it determinants.Cointegration test, Money demand

Oil Price Shocks and American Depositary Receipt Stock Returns

In this paper we examine the impact of oil price shocks on twelve countries American Depositary Receipt (ADR) returns using monthly data from 1999.01 to 2014.12. The results show that oil price shocks have a positive and statistically significant impact on ADR return in all twelve countries. These results are robust to the inclusion of other explanatory variables such as oil price volatility and the spillover of the United States stock market. Further analysis shows that this effect is stronger in the post financial crisis time period compared to the pre-financial crisis time period

Housing price volatility and the capital account in China

This repository item contains a working paper from the Boston University Global Economic Governance Initiative. The Global Economic Governance Initiative (GEGI) is a research program of the Center for Finance, Law & Policy, the Frederick S. Pardee Center for the Study of the Longer-Range Future, and the Frederick S. Pardee School of Global Studies. It was founded in 2008 to advance policy-relevant knowledge about governance for financial stability, human development, and the environment.China experienced significant volatility in its housing market from 2005‐2013. Economists analyzing the determinants of volatility in these markets find that the bubble was largely been driven by factors specific to the Chinese economy and Chinese economic policy. In this paper, we examine the extent to which a) short-­‐ term capital flows may have further impacted the prices and volatility in the Chinese housing market and b) whether China’s 2006 Capital Account Regulations (CARs) on foreign purchases of Chinese real estate were effective in reducing the level and volatility of prices in China’s housing markets. According to our OLS baseline model, we find that short-­‐term capital flows from abroad had a modest impact on price increases in the Chinese housing market, but a more significant impact on increasing market volatility. In terms of Chinese 2006 CAR, the measures did not appear to have impact on reducing housing prices, but had a strong impact on reducing volatility in Chinese housing market. The results from a supplementary quantile regression analysis show that hot money magnified the impacts of capital flows on housing prices during upward surges in the housing price. In terms of market volatility, our quantile regressions suggest that the more volatile the housing market became, the larger the impact short-­‐term capital flows had on accentuating such volatility. Furthermore, we find that the 2006 CARs continued to have a strong impact on reducing volatility in the Chinese housing market during the period under study

Global shocks and their impact on Nigeria: Lessons from global Financial crisis.

Developed a-five variable VAR model of the Nigeria economy for period 1970 – 2010, the study tested the general wisdom, ―Global financial crisis does not impact on Nigeria economy‖. Data were mainly sourced from both the National Bureau of Statistics (NBS) and the publication of the Central Bank of Nigeria (CBN). Augmented Dickey Fuller (ADF) and Philips-Perron (PP) tests were used in testing the null hypothesis that there is a unit root in the time series of interest. The variables considered were (1) log of GDP (2) log of FDI (3) log of REM (4) EXR and (5) CPI. Impulse-response functions were employed to examine the recovery from shocks makes full use of the within-country variation. We introduced the constant term and two lagged values of each variable in each equation and found that the impact of financial crisis on Nigeria was possible through financial links, trade links, remittances and other capital flows.This implies that the common believe about the Nigeria economy that global shocks through financial crisis does not have any impact is not quite accurate, for initially the global shocks made unstable the Nigerian economy through the macroeconomic variables understudied although after the initial instability resulting from the global shocks, the Nigeria economy then dependent less on fluctuations in the global economic crisis. We on that premise opined that the crisis presented an opportunity for Nigeria to unbalance the Nigeria economy by concentrate on leading sectors like power, education, agriculture so that the development of these sector can bring about a locomotive growth and results in balanced sector in the long run

What Can an Open-Economy DSGE Model Tell Us about Hong Kong’s Housing Market?

This paper develops an open-economy DSGE model with a housing-market sector and a borrowing constraint. Contrary to standard conventions, domestic households are allowed to invest in foreign housing and vice versa. Using Bayesian methods, the model is applied to data for Hong Kong. The results show that Hong Kong’s housing market is quite open to foreign investment, and perhaps more significantly, that variations in the loan-to-value ratio and housing preference shocks largely explain business cycle volatility.DSGE models; housing; open economy; Hong Kong

Valuing Ecosystem Services with Fishery Rents: A Lumped-Parameter Approach to Hypoxia in the Neuse River Estuary

Valuing ecosystem services with microeconomic underpinnings presents challenges because these services typically constitute nonmarket values and contribute to human welfare indirectly through a series of ecological pathways that are dynamic, nonlinear, and difficult to quantify and link to appropriate economic spatial and temporal scales. This paper develops and demonstrates a method to value a portion of ecosystem services when a commercial fishery is dependent on the quality of estuarine habitat. Using a lumped-parameter, dynamic open access bioeconomic model that is spatially explicit and includes predator-prey interactions, this paper quantifies part of the value of improved ecosystem function in the Neuse River Estuary when nutrient pollution is reduced. Specifically, it traces the effects of nitrogen loading on the North Carolina commercial blue crab fishery by modeling the response of primary production and the subsequent impact on hypoxia (low dissolved oxygen). Hypoxia, in turn, affects blue crabs and their preferred prey. The discounted present value fishery rent increase from a 30% reduction in nitrogen loadings in the Neuse is $2.56 million, though this welfare estimate is fairly sensitive to some parameter values. Surprisingly, this number is not sensitive to initial conditions.Open access, Predator-prey, Hypoxia, Habitat-dependent fisheries