"Fiscal Deficit, Capital Formation, and Crowding Out in India: Evidence from an Asymmetric VAR Model"

This paper analyzes the real (direct) and financial crowding out in India between 1970–71 and 2002–03. Using an asymmetric vector autoregressive (VAR) model, the paper finds no real crowding out between public and private investment; rather, complementarity is observed between the two. The dynamics of financial crowding out is captured through the dual transmission mechanism via the real rate of interest—that is, whether private capital formation is interest-rate sensitive and, in turn, whether the rise in the real rate of interest is induced by a fiscal deficit. The study found empirical evidence for the former but not the latter, supporting the conclusion that there is no financial crowding out in India. The differential impacts of public infrastructure and noninfrastruture innovations on the private corporate sector are carried out separately to analyze the nonhomogeneity aspects of public investment. The results of the Impulse Response Function reinforced that no other macrovariables, including cost and quantity of credit and the output gap, have been as significant as public investment—in particular, public infrastructure investment—in determining private corporate investment in the medium and long terms, which has crucial policy implications.

Bayesian inference in a cointegrating panel data model

This paper develops methods of Bayesian inference in a cointegrating panel data model. This model involves each cross-sectional unit having a vector error correction representation. It is flexible in the sense that different cross-sectional units can have different cointegration ranks and cointegration spaces. Furthermore, the parameters which characterize short-run dynamics and deterministic components are allowed to vary over cross-sectional units. In addition to a noninformative prior, we introduce an informative prior which allows for information about the likely location of the cointegration space and about the degree of similarity in coefficients in different cross-sectional units. A collapsed Gibbs sampling algorithm is developed which allows for efficient posterior inference. Our methods are illustrated using real and artificial data

The Taylor Effect on the Performances of the Red Devils’ Football Brand

In this paper we present an impact analysis of the regulation associated to the adoption of the Taylor Report, both on business strategy and sportive and financial performances of the Manchester United Football Club. An econometric approach is presented, by using a Cointegrated Vector Autoregressive (CVAR) model. This aims to analyse the impact of the regulation in terms of the national sportive performance, the value added, and the sales of the club, from 1967 to 1997. The importance of the Taylor Report on better national sportive performances of the football club in study is ratified. The growing importance of generating value added as a precedent mechanism that explains the best national sportive performance is confirmed.

Analysis of Tourism Service Quality in Kołobrzeg Region by Means of Time Series Models

The undertaken study shows that methods that take into account time series can be successfully used in analysis of parameters of tourist comfort and in evaluation of hotel services.Przeprowadzone badania wskazują, że metody szeregów czasowych mogą być skutecznie zastosowane w badaniu wskaźników turystycznych i ocenie jakości usług hotelarskich

Econometrics: A bird's eye view

As a unified discipline, econometrics is still relatively young and has been transforming and expanding very rapidly over the past few decades. Major advances have taken place in the analysis of cross sectional data by means of semi-parametric and non-parametric techniques. Heterogeneity of economic relations across individuals, firms and industries is increasingly acknowledge and attempts have been made to take them into account either by integrating out their effects or by modeling the sources of heterogeneity when suitable panel data exists. The counterfactual considerations that underlie policy analysis and treatment evaluation have been given a more satisfactory foundation. New time series econometric techniques have been developed and employed extensively in the areas of macroeconometrics and finance. Non-linear econometric techniques are used increasingly in the analysis of cross section and time series observations. Applications of Bayesian techniques to econometric problems have been given new impetus largely thanks to advances in computer power and computational techniques. The use of Bayesian techniques have in turn provided the investigators with a unifying framework where the tasks and forecasting, decision making, model evaluation and learning can be considered as parts of the same interactive and iterative process; thus paving the way for establishing the foundation of the "real time econometrics". This paper attempts to provide an overview of some of these developments

Extracting market expectations from yield curves augmented by money market interest rates: the case of Japan

This paper attempts to extract market expectations about the Japanese economy and the BOJ’s policy stance from the yen yield curves augmented by money market interest rates, during the period from the end of the quantitative easing policy in March 2006. We use (i) the swap yield curves augmented by OIS interest rates (OIS/Swap), and (ii) the JGB yield curve augmented by FB/TB interest rates. First, using the Nelson-Siegel [1987] model, we estimate three latent dynamic factors, which can be interpreted as reflecting market expectations. Second, we investigate the relative importance of price discovery for each factor between OIS/Swap and FBTB/JGB, and find that the former has a more dominant role of price discovery for all factors. Third, we estimate the efficient price for each factor common to both yield curves using a time-series structural model, which enables us to decompose each factor into the efficient price and idiosyncratic factor. JEL Classification: E43, E52, G12overnight index swap, price discovery, structural time-series model, swap spread, yield curve

Unemployment Equilibria and Input Prices: Theory and Evidence from the United States

The paper develops an efficiency-wage model, where input prices affect the equilibrium rate of unemployment. We show that a simple framework based on only two prices (the real price of oil and the real rate of interest) is able to explain the main post-war movements in the rate of US joblessness. The equations do well in forecasting unemployment many years out-of-sample, and provide evidence that the oil-price spike associated with Iraq's invasion of Kuwait appears to be a component of the "mystery" recession which followed.WAGES ; UNEMPLOYMENT

GRANGER CAUSALITY AND COINTEGRATION IN ROMANIA’S INFLATIONARY DYNAMICS – AN EMPIRICAL STUDY

One of the most difficult issues that monetary authorities in many developing economies have to deal with is the management of a stable price environment. Inflation can create uncertainty, a low level of investment, and raise costs in general, thus lowering rates of growth. As a result, there exists a widespread need for understanding inflationary dynamics in any country of interest, especially in developing countries, subject to more significant and volatile price changes. This paper develops a VEC model for the Romanian economy, using CPI index and other macroeconomic data, in order to capture the transmission mechanism of inflation.inflation forecasting, monetary policy, developing countries, Romania, VAR model

Is Fiscal Policy Contracyclical in India: An Empirical Analysis

The paper empirically examines the validity of Keynesian philosophy of contracyclical variation in fiscal policy to the macroeconomic activity in India. The macroeconomic activity is proxied by ‘output gap’ a concept defined to estimate the index of economic activity. Applying Johansen’s Full Information Maximum Likelihood test of cointegration, it was found that there exists a long run, stable relationship between fiscal policy stance and macroeconomic activity. Further, the causality detection in asymmetric vector autoregression model revealed that there exists feedback mechanism between fiscal policy stance and output gap, which reinforces the Keynesian theory that fiscal stance is contracyclical in nature. The policy implication of these results points to the fallacy of rule-based fiscal policy to contain fiscal deficit, based on the neo-classical assumption that fiscal deficit has detrimental effects through financial crowding out. The results reinforced the role of fiscal deficit not as an evil but as an instrument of short run demand management and also the significance of pump priming.Fiscal stance, Output gap, Contracyclical fiscal policy, Stationarity, Cointegration, Asymmetric vector autoregression

Equity Price Bubbles in the Middle Eastern and North African Financial Markets

We empirically investigate the existence of periodically collapsing bubbles in seven Middle East and North African (MENA) financial markets for the period ending in May 2009. We use the Taylor and Peel (1998) residual augmented least square Dickey and Fuller test (RALS DF) to detect the bubbles. We find that the hypothesis of a bubble formation cannot be rejected for all seven markets investigated in our study, leading us to believe that in fact there has been a break down in the cointegration relationship between real equity prices and real dividends and also between real market capitalizations and real dividends.Cointegration; Equity prices; Explosive unit root processes; MENA; Periodically collapsing bubbles.