Revisiting the Government Revenue-Expenditure Nexus: Evidence from 15 OECD Countries Based on the Panel Data Approach

This paper utilizes panel unit root, panel cointegration, and panel Granger causality test techniques to examine the inter-temporal relationship between government revenues and government expenditures in a panel of 15 OECD countries over the period 1992–2006. The authors find evidence of bidirectional causality between government revenues and government expenditures, supporting the fiscal synchronization hypothesis. The findings of this paper have important implications for fiscal policy decision-making in these 15 OECD countries after the signing of the EU Treaty in Maastricht on February 7, 1992.government revenues; expenditures; panel unit root; panel cointegration; panel Granger causality; tax-and-spend hypothesis; spend-and-tax hypothesis; fiscal synchronization hypothesis; institutional separation hypothesis

Equity Diversification in Two Chinese Share Markets: Old Wine and New Bottle

This study provides evidence that there exist long-run benefits for investors from diversifying in two Chinese share markets over the period January 5, 2000 to December 31, 2005. The evidence is based on tests for pairwise cointegration between the Shanghai and Shenzhen¡¦s A-share and B-share stock price indexes, using five cointegration tests, namely PO, HI, JJ, KSS, and BN approaches. The results from these five tests are robust and consistent in suggesting that these two Chinese share markets are not pairwise cointegrated with each other. These findings could be valuable to individual investors and financial institutions holding long-run investment portfolios in these two Chinese share markets.

A Note on Testing ¡°Tax-and-Spend, Spend-and-Tax or Fiscal Synchronization¡±: The Case of China

The hypothesis of tax-and-spend, spend-and-tax, or fiscal synchronization was tested using annual time series data for China over the period 1977 to 1999. We include GDP as a control variable into the model like Baghestani and Mcnown (1994), Koren and Stiassny (1998), and Chang et al. (2002). The results from Granger causality test based on the corresponding multivariate error-correction models (MVECM) suggest feedback between government revenues and government expenditures, supporting the fiscal synchronization hypothesis for China.

Is volume index of gdp per capita stationary in oecd countries? panel stationary tests with structural breaks

The purpose of this paper is to investigate whether volume index of GDP per capita is stationary for 24 OECD countries during the period 1970 to 2006. We utilize a panel stationary tests that allow for multiple structural breaks, developed by Carrion-i-Silvestre et al. (2005). The empirical findings are threefold: (1) when we employ univariate unit tests, such as ADF and KPSS without structural breaks, we hardly find evidence of I(0) stationarity, except for Switzerland (2) when we employ KPSS stationarity test with multiple structural breaks, we find evidence of I(0) stationarity for 22 out of 24 countries and (3) when we employ KPSS panel I(0) stationarity test with multiple structural breaks and the assumption of cross-section dependence, we find significant evidence of panel I(0) stationarity of per capita GDP for these OECD countries. The findings of this paper have implications for policymaking and econometric modeling for these 24 OECD countries.Volume Index of GDP per Capita Panel Stationary Tests with Structural Breaks OECD Countries

Are Real Exchange Rates Nonlinear with a Unit Root? Evidence on Purchasing Power Parity for China: A Note

This article applies the threshold autoregressive model proposed by Caner and Hansen (2001) to examine both linearity and stationarity of China's real exchange rate vis-à-vis her 9 trading partner countries over the period of January 1986 to October 2009. Two main conclusions are drawn. Firstly, the empirical results indicate that China's real exchange is a nonlinear process. Secondly, a unit root in real exchange rate was found for most of the cases under study. This result provides no support for purchasing power parity for China relative to their major trading partner countries.Threshold Autoregressive Model; Linearity and Stationarity, Purchasing Power Parity; Threshold Unit Root Test

An Empirical Note on Testing the Cointegration Relationship Between the Real Estate and Stock Markets in Taiwan

This note studies the long-run relationship between real estate and stock markets in the Taiwan context over the 1986Q3 to 2006Q4 period, using standard cointegration test of Johansen and Juselius (1990) and that of Engle-Granger (1987) as well as the fractional cointegration test of Geweke and Porter-Hudak (1983). The results from both types of cointegration tests strongly indicate that these two markets are not cointegrated with each other. With respect to risk diversification, it is obvious that investors and financial institutions should have included both assets in the same portfolio during that period.

Long-Run Purchasing Power Parity with Asymmetric Adjustment: Evidence from Mainland China and Taiwan

This study applies threshold cointegration test advanced by Enders and Siklos (2001) to investigate the properties of asymmetric adjustment in long-run purchasing power parity (PPP) for both Mainland China and Taiwan during the January 1986 to October 2009 period. Although there is evidence of long-run PPP for both Mainland China and Taiwan, the adjustment mechanism is asymmetric. These results have important policy implications for both Mainland China and Taiwan under study.threshold cointegration test; Purchasing Power Parity; asymmetric adjustment; Mainland China; Taiwan

Is Per Capita Real GDP Stationary? Evidence from Selected African Countries Based on More Powerful Nonlinear (Logistic) Unit Root Tests

In this study we use a more powerful nonlinear (logistic) unit root test advanced by Leybourne et al. (1998) to investigate the time-series propertities of per capita real GDP for 26 selected African countries for the period 1960-2000. We strongly reject the null of unit root process for over one-third the countries. These empirical results have important policy implications for selected African countries.

Purchasing power parity in G-7 countries: Further evidence based on ADL test for threshold cointegration

This study applies a newly-developed Autoregressive Distributed Lag (ADL) test for threshold cointegration, proposed by Li and Lee (2010) to test the validity of long-run purchasing power parity (PPP) for G-7 countries over the January 1994 to April 2010. The empirical results indicate that PPP only holds true for Canada and France two countries. Our results have important policy implications for the G-7 countries under study.Purchasing Power Parity; G-7 Countries; ADL Test; Threshold Cointegration

A REEXAMINATION OF SOUTH KOREA¡¯S AGGREGATE IMPORT DEMAND FUNCTION: THE BOUNDS TEST ANALYSIS

This paper uses a robust estimation method referred to as the unrestricted error correction model - the bounds test analysis to re-analyze the long-term relationships between the demand for imports and it¡¯s determinants for South Korea over the period 1980-2000. Our results show that the volume of imports, income, and relative prices are all cointegrated. The estimated long-run (short-run) elasticities of import demand with respect to income and relative price are 1.86 (0.86) and -0.2 (-0.05), respectively. The major implication of our study is that neither monetary nor fiscal policies may be used as instruments to maintain the trade balance in South Korea¡¯s favor during this sample period.Aggregate Import Demand Function, UECM, Bounds Test Analysis