94 research outputs found
The relationship between inflation, output growth, and their uncertainties: Nonlinear Multivariate GARCH-M evidence
In this paper, we propose a nonlinear multivariate GARCH-M model. We have illustrated the actual modelling by applying the models to inflation and output growth variables and found that the effects of real and nominal uncertainties are regime-dependent.Nonlinear multivariate GARCH-M, STVAR-GARCH, inflation, growth, uncertainty
A Nonlinear New Approach to Investigating Crisis: A Case from Malaysia
In this paper, we have investigated the effects of Asia 97 crisis on Malaysian stock exchange market by using a nonlinear approach which gives a detailed analysis with respect to linear counterparts. Specifically, we are using generalized impulse response function (GIRF) in order to see the effects of crisis on stock indices. In order to employ GIRF analysis, we need further investigation on potential nonlinearities in conditional mean and variance equation for Malaysia stock market. Specifically, we use STAR-STGARCH family models for modeling daily returns of the Investable and Non-Investable Malaysia stock indices, covering the period 1995.06.30-2003.09.05. The analysis of this paper shows that individual markets of Malaysia have strongly been affected from the Asia 97 crisis. In addition, the Asia 97 crisis has increased the variability of the Malaysia stock market and affected foreign investors more than the domestic investors.STAR-STGARCH, Generalized Impulse Response Function. 1997 Asia Crisis, stock markets
The Term Structure of Interest Rate as a Predictor of Inflation and Real Economic Activity: Nonlinear Evidence from Turkey
This study investigates whether the term structure of interest rates contains useful information about future real economic activity and inflation in Turkey during the 1991:7-2004:3 periods. In order to analyze these relationships, we have employed the Generalized Impulse Response (GIRF) analysis to the Logistic Smooth Transition Vector Autoregressive (LSTVAR) model. We have determined that the results of a GIRF analysis are consistent with the recursive Chow test and parameter stability tests. Besides, we have found out that the relationships between spread-real economic activity and spread-inflation are negative. These negative relationships have also been examined by GIRF analysis; because of a negative reverse relationship between Expectation Hypothesis and Interest Transmission Channel, a negative correlation between real economic activity and spread has occurred.Term Structure of Interest Rates; Monetary Policy; LSTVAR; GIRF; Real Economic Activity; Inflation
Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests
In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency.Market Efficiency, Non-linear models, transition markets
The relationship between inflation, output growth, and their uncertainties: Evidence from selected CEE countries
In this paper, we examine causal relationships among inflation rate, output growth rate, inflation uncertainty and output uncertainty for ten Central and Eastern European transition countries. For this purpose, we estimate a bivariate GARCH model that includes output growth and inflation rates for each country. Then we use conditional standard deviations of inflation and output to proxy nominal and real uncertainty, respectively, and perform Granger-causality tests. Our results suggest that inflation rate induces uncertainty about both inflation rate and output growth rate, which is detrimental for real economic activity. On the other hand, we find that output growth rate reduces macroeconomic uncertainty in some countries. In addition, we also examine and discuss causal relationships among remaining variables.Inflation, output growth, uncertainty, Granger-Causality tests, transition countries
A nonlinear estimation of monetary policy reaction function for Turkey
In this paper we have estimated the monetary reaction function of the Central Bank of Republic of Turkey. The originality of the paper is that we have used smooth transition functions (STR) that allow for proper modelling of nonlinearities and asymmetries in the relationship between variables under consideration. The estimated models suggest that the backward-looking instead of foreward-looking models best characterise the CBRT’s reaction function, that is, the CBRT reacted to past inflation rates rather than to future rates. This finding is in conformity with earlier research. We have found that the main purpose of expansionary policy of the CBRT is to stabilise output whereas contractionary policies aimed only at reducing the inflation rate. The fact that the CBRT has disregarded inflation in conducting expansionary policy and focused only on output stabilisation may explain why the CBRT was not successful in fighting inflation. Besides, neither in expansionary policy regime nor in contractionary policy regime, real exchange rate is not targeted by CBRT. Moreover, budget deficit is targeted only in the contractionary policy regime.para politikası reaksiyon fonksiyonu; STR modeli; asimetri; IV teknigi.
Controlling Heterogeneous Structure of Smooth Breaks in Panel Unit Root and Cointegration Testing
This study aims to show the consequences of a restrictive homogeneity assumption of frequency in heterogeneous panel unit root and cointegration testing with Flexible Fourier Form. For this purpose, we use a simple panel unit root and residual based cointegration test with Flexible Fourier Form in a heterogeneous frequency setting using a bootstrap algorithm. The power of the test statistics and empirical analysis results indicate that failing to take into account a heterogeneous frequency may lead to misleading inferences, thereby leading to misspecified tests and erroneous conclusions concerning the stochastic behavior of the data in the panel sample
The relationship between output growth and inflation: Evidence from Turkey
In this study, a bi-variate Generalized Autoregressive Conditional Heteroscedasticty model is used in order to investigate the Granger causality relationships between output growth, inflation rate and their uncertainties. Our test results show that the existence of Granger-causality is observed from nominal uncertainty to inflation, from nominal uncertainty to real uncertainty, from output growth to real uncertainty, from output growth to nominal uncertainty and from inflation to nominal uncertainty. These findings prove that theoretical predictions of Cuikerman and Meltzer (1986), Okun (1971) and Friedman (1977) are valid for the period 1986:6-2007:1 for Turkey. On the other hand, ‘Short-run Phillips Curve’ and ‘Taylor Effect’ have proven empirically to be invalid for Turkey for this sample period. Moreover, we deduce that Turkish inflation is affected by the output growth through the nominal uncertainty channel.Inflation; output growth; uncertainty; Granger-Causality; bi-variate GARCH.
Behavior of foreign investors in the Malaysian stock market in times of crisis: A nonlinear approach
© 2018 Elsevier Inc. This study investigates the response to crisis of foreign investors versus domestic investors in the Malaysian stock market. The econometric-modeling involves a nonlinear approach which allows for investor responses to differ in up and down markets. Specifically, the smooth-transition autoregressive (STAR-STGARCH) family of models and generalized impulse response function (GIRF) analysis are employed. The 1997 Asian Crisis is analyzed using daily data for the period 1995–2003, and the 2008 Global Financial Crisis for a period extended to 2015 with allowance for structural breaks. The results indicate that foreign investors exhibited herding behavior during the Asian Crisis and responded to the shock more quickly than domestic investors, but that foreigners did not act differently from their domestic counterparts during the Global Financial Crisis. These findings suggest that even as foreign capital flows may be desirable for economic growth, they can be unstable and may increase volatility during crises that are locally rooted
Türkiye için reaksiyon fonksiyonunun doğrusal olmayan modelle tahmin edilmesi
In this paper we have estimated the monetary reaction function of the Central Bank of Republic of Turkey. The originality of the paper is that we have used smooth transition functions (STR) that allow for proper modelling of nonlinearities and asymmetries in the relationship between variables under consideration. The estimated models suggest that the backward-looking instead of foreward-looking models best characterise the CBRT’s reaction function, that is, the CBRT reacted to past inflation rates rather than to future rates. This finding is in conformity with earlier research. We have found that the main purpose of expansionary policy of the CBRT is to stabilise output whereas contractionary policies aimed only at reducing the inflation rate. The fact that the CBRT has disregarded inflation in conducting expansionary policy and focused only on output stabilisation may explain why the CBRT was not successful in fighting inflation. Besides, neither in expansionary policy regime nor in contractionary policy regime, real exchange rate is not targeted by CBRT. Moreover, budget deficit is targeted only in the contractionary policy regime
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