Do Regional Integration Agreements Increase Business-Cycle Convergence? Evidence From APEC and NAFTA

Using monthly industrial sector data from January 1971 to March 2004, we test for business cycles convergence among the major APEC members: Japan, South Korea, Malaysia, Mexico, USA, and Canada. In addition, we examine the synchronization of business cycles among Australia, Japan, and South Korea, based on the quarterly data for the 1957-2003 period, as well as among the different economic sectors of the NAFTA countries from January 1970 through March 2004. We apply different techniques to identify business cycles. In particular, we propose a new trend-cycle decomposition method based on wavelet analysis. The results show that convergence of business cycles of Asia-Pacific countries is far from complete, but joining the APEC has increased the mean correlation of industrial production cycles of the member economies. On the other hand, although some economic sectors of the NAFTA countries already exhibited some degree of business cycle co-movement even during pre-NAFTA period, the volatility of pair-wise correlation of business cycles declined during NAFTA. In addition, we conclude that, in general, the transmission of business cycles is relatively slow, and, consequently, business cycles appear to be asynchronous.http://deepblue.lib.umich.edu/bitstream/2027.42/40151/3/wp765.pd

Do Regional Integration Agreements Increase Business-Cycle Convergence? Evidence From APEC and NAFTA

Using monthly industrial sector data from January 1971 to March 2004, we test for business cycles convergence among the major APEC members: Japan, South Korea, Malaysia, Mexico, USA, and Canada. In addition, we examine the synchronization of business cycles among Australia, Japan, and South Korea, based on the quarterly data for the 1957-2003 period, as well as among the different economic sectors of the NAFTA countries from January 1970 through March 2004. We apply different techniques to identify business cycles. In particular, we propose a new trend-cycle decomposition method based on wavelet analysis. The results show that convergence of business cycles of Asia-Pacific countries is far from complete, but joining the APEC has increased the mean correlation of industrial production cycles of the member economies. On the other hand, although some economic sectors of the NAFTA countries already exhibited some degree of business cycle co-movement even during pre-NAFTA period, the volatility of pair-wise correlation of business cycles declined during NAFTA. In addition, we conclude that, in general, the transmission of business cycles is relatively slow, and, consequently, business cycles appear to be asynchronous.business-cycles convergence, wavelets, APEC, NAFTA

International comovement of stock market returns: a wavelet analysis

The assessment of the comovement among international stock markets is of key interest, for example, for the international portfolio diversification literature. In this paper, we re-examine such comovement by resorting to a novel approach, wavelet analysis. Wavelet analysis allows one to measure the comovement in the time-frequency space. In this way, one can characterize how international stock returns relate in the time and frequency domains simultaneously, which allows one to provide a richer analysis of the comovement. We focus on Germany, Japan, UK and US and the analysis is done at both the aggregate and sectoral levels.

Essays on Wavelets in Economics

Doutoramento em EconomiaThe aim of this work is to highlight the usefulness of wavelet analysis in Economics. Wavelet analysis is a very promising tool as it represents a refinement of Fourier analysis. In particular, it allows one to take into account both the time and frequency domains within a unified framework, that is, one can assess simultaneously how variables are related at different frequencies and how such relationship has evolved over time. Despite the potential value of wavelet analysis, it is still a relatively unexplored tool in the study of economic phenomena. The work herein presented intends to contribute to such strand of literature. In particular, wavelet analysis is used to assess the link between money growth and inflation in the euro area, as the European Central Bank at¬tributes a key role to money within the monetary policy strategy. Addi¬tionally, a wavelet-based measure of comovement is proposed and used to study the growth comovement among the major euro area countries. Based on this measure, a measure of cohesion is developed and used to investi¬gate the cohesion among euro area countries and the cohesion within US at both the regional and state levels. Within the financial economics literature, the relationship among international stock market returns is assessed and a wavelet-based approach for measuring market risk is proposed. Finally, one also investigates the usefulness of wavelets for forecasting purposes while bridging such approach with factor-augmented models.O objectivo deste trabalho é realçar a utilidade da análise de onduletas em Economia. A análise de onduletas é uma ferramenta muito promissora, pois representa um refinamento da análise de Fourier. Em particular, permite ter em consideração quer o domínio do tempo quer o domínio da frequência de forma unificada, ou seja, é possível avaliar simultaneamente como é que as variáveis estão relacionadas em diferentes frequências e como é que essa relação tem evoluído ao longo do tempo. Apesar do potencial interesse, a análise de onduletas constitui ainda uma ferramenta relativamente pouco utilizada no estudo de fenómenos económicos. O trabalho aqui apresentado pretende contribuir para essa vertente da literatura. Em particular, a análise de onduletas é usada para avaliar a relação entre o crescimento monetário e a inflação na área do euro, dado que o Banco Central Europeu atribui um papel fundamental para a moeda no contexto da sua estratégia de política monetária. Adicionalmente, é proposta uma medida de co-movimento baseada em onduletas sendo utilizada para estudar o co-movimento, em termos de crescimento, entre as maiores economias da área do euro. Com base nesta medida, também é proposta uma medida de coesão que é usada por sua vez para aferir a coesão entre os países da área do euro e nos Estados Unidos, quer a nível regional quer estadual. No contexto da literatura de economia financeira, a relação entre retornos de acções no mercado internacional é avaliada e é proposta uma abordagem baseada em onduletas para a medição de risco de mercado. Finalmente, a utilidade das onduletas para efeitos de previsão é investigada e a sua interacção com os modelos de factores é explorada

Empirical Evidence of Co-Movement between the Canadian CDS, Stock Market And TSX 60 Volatility Index: A Wavelet Approach

Purpose- The prime objective of this study was to find the co-movement between the Canadian credit default swaps market, the Stock market and volatility index (TSX 60 Index) Design/ Methodology- To achieve this purpose, daily data containing 2870 observations starting from the 1st of January 2009 to the 30th of December 2019 were analyzed. This study employed the wavelet approach to present results in short-term, medium-term, long-term, and very long time. Findings- The findings of this study showed a negative correlation between the CDS market, stock market, and the TSX 60 index in the short-term as well as in the long-term term, while in medium-term and very long-term period correlation is strongly positive. The wavelet co-movement results in the short-term and long-term were negative, while this relationship in the medium-term and very long-term period was strongly positive. Practical Implications- This research provides simultaneous valuable information for investment decisions in the short, medium, and long term time horizons, as well as for the policymakers in the Canadian credit default swaps market, stock market, and the volatility index (TSX 60 Index)

Interest Rate Changes and Islamic Stock Return with Wavelets: the Case of Indonesia

In a global economy, shocks affect many financial sectors including stock market through the discount factor of the cash flow model. As in the conventional stock market where global shocks play a significant role in influencing stock prices, it also occurs in the Islamic stocks. This paper investigates the linkage between interest rate and stock returns for Indonesia with the sample period from January 2005 to December 2012 in the time-frequency domain by using a number of cross-wavelet tools. The results reveal that the similar response of the Islamic and conventional equity finance to the global shock. In turn, the result depicts that the Islamic equity market is also sensitive to the monetary tools used in the conventional system. The results have useful implications for policy makers in the face of a global financial crisis to prevent the steep fall of stock market price by increasing or decreasing the interest rate. In other words, since interest rate changes have an impact in the stock market, harmonisation of monetary policies mainly in developed countries can contribute to a decrease in the contagion potential on the stock market

An analysis of spending behaviour under liquidity constraints with an application to financial hedging

Imperial Users onl

Forecasting Economic Growth and Movements with Wavelet Transform and ARIMA Model

This study uses historical data and modern statistical models to forecast future Gross Domestic Product (GDP) in Jordan. The Wavelet Transformation model (WT) and Autoregressive Integrated Moving Average (ARIMA) model were applied to the time series data and yielded a best-fitting result of (2,1,1) for estimating GDP between 2022-2031. The study concludes that GDP is expected to increase with a positive growth rate of around 3.22%, and recommends government agencies to monitor GDP, strengthen existing policies, and adopt necessary economic reforms to support growth. Additionally, the private sector is encouraged to enhance production tools to achieve economic growth that benefits all sectors of society

The connectedness and hedging between gold and Islamic securities in the short, medium and long term

This paper investigates the dynamic connectedness between gold, sukuk and Islamic equities at multiple investment horizons, it also computes optimal hedge ratios and portfolio weights for these assets. Our findings suggest that gold hedges the risk of sukuk in the short and medium terms. We find also that gold plays an average but stable role in hedging and diversifying Islamic equities across all investment horizons. Moreover, we find that gold–Islamic assets portfolio provided a better risk diversification in the short term. These empirical findings are important as they highlight the role of gold in diversifying and managing the risks of portfolios that invest in Islamic assets