Electricity Consumption and Exports Growth: Revisiting the Feedback Hypothesis

The dynamic relationship between exports and energy has been an interesting area of research in macroeconomics. This paper contributes to the extant literature by examining the relationship between electricity consumption and exports revenue for forty different economies as from 1980-2012. The study commences by examining the time series for unit roots using the Augmented Dickey-Fuller (ADF) test. The results of the Johansen cointegration test reveal that twenty-one economies under investigation exhibited statistically long run affiliations between exports income and electricity consumption. Comparatively, the Saikkonen and Lu ̈tkepohl test proved that exports and electricity consumption are statistically cointegrated in the long run for all economies. The Granger causality test showed that exports income promote an increase in electricity consumption. However, exports in some economies were induced by electricity consumption. Most importantly, the validity of the feedback hypothesis is affirmed as bidirectional causal relationships between exports and electricity consumption surface in multiple economies

Sensitivity Of Stock Prices To Money Supply Dynamics

Financial theory models typically relate stock prices with inflationary shocks that emanates from an expansionary monetary policy. Literature generally supports the causality relationship between money supply and stock prices due to price volatilities in the real interest rate. This paper attempts to determine causality between money supply and stock prices using monthly share prices and money supply quantities from 2011- 2013. The results of the study support the recent evidence against the positive affiliation between money supply and stock prices. The study uses the Johansen cointegration test and the Vector Error Correction Models (VECM) models for testing causality relationship between money supply and stock prices. While the expectation was that there should exist a statistically significant positive affiliation between money supply and stock prices, results of the tests reject this ideal. However, the results are plausible when interest rate factors are included in the analysis. It is concluded that money supply shocks provide robust changes in the stock prices

Is China’s Target of a 40-45% Reduction in Carbon Dioxide Emissions Plausible?

In the early days of industrialisation, economists believed that the ramifications of economic growth will far outweigh the potential damage to the environment. Today the concern is the rising magnitude of emissions. Many economies are under immense pressure to reduce carbon dioxide emissions. Carbon taxation and absorption technologies seem to be the main mechanisms controlling emissions in different nations. China proposed her target of reducing carbon dioxide emissions by 40-45% by 2025. The purpose of this study is to determine if China’s ambition of reducing its carbon dioxide emissions is feasible. This investigation also examines the potential effects of China's emissions on the economic growth of other countries. The study demonstrates that China’s target may not only reduce her output, but may also adversely affect the economic growth of others. This article further reveals that unemployment in China is likely to soar during the reduction in emissions and energy consumption. Additionally, this paper evaluates the effects of green taxation on carbon dioxide emissions. In conclusion, there is a possibility that China may reach her emissions target by 2025. However, the country faces a dilemma between economic growth and environmental preservation. It is recommended that China should explore techniques which will reduce emissions but not impinge negatively on economic growth

Exports Multiplicity and The Dutch Disease

Following macroeconomics, an increase in exports should raise the Gross Domestic Product (GDP). However, the extant literature regarding comovement and causality between exports and GDP has not been consistent. Previous studies mostly attempted to link exports with GDP without attempting to relate each individual export commodity with economic growth. This study attempts to fill this gap using statistics for the Botswana economy by examining the country’s major seven export commodities namely: diamonds, gold, beef, soda ash, vehicles, copper-nickel, and textiles for the period 2006Q1-2013:Q4. The evaluation uses the popular Granger causality test and the Johansen cointegration procedure to examine statistical drifts between each merchandise and GDP. While the expectation was that all export commodities would trend together with GDP for the period under examination, the cointegration tests only affirmed long run affiliations between GDP, copper- nickel and textiles. The Granger causality test results were also not consistent in terms of causal relations, revealing causality only between GDP, textiles and Gold. The study then goes ahead in providing several recommendations for the Botswana scenario particularly considering Dutch disease effect

Sensitivity Of Stock Prices To Money Supply Dynamics

Financial theory models typically relate stock prices with inflationary shocks that emanates from an expansionary monetary policy. Literature generally supports the causality relationship between money supply and stock prices due to price volatilities in the real interest rate. This paper attempts to determine causality between money supply and stock prices using monthly share prices and money supply quantities from 2011- 2013. The results of the study support the recent evidence against the positive affiliation between money supply and stock prices. The study uses the Johansen cointegration test and the Vector Error Correction Models (VECM) models for testing causality relationship between money supply and stock prices. While the expectation was that there should exist a statistically significant positive affiliation between money supply and stock prices, results of the tests reject this ideal. However, the results are plausible when interest rate factors are included in the analysis. It is concluded that money supply shocks provide robust changes in the stock prices

The Impossible Trinity and Financial Markets – An Examination of Inflation Volatility Spillovers

According to studies on the impossible trinity, under conditions of high financial integration, the domestic interest rate is closely linked to the foreign one if the possibility of maneuvering interest rates is absent in this transaction. The Fisher effect is brought in to this escapade because interest rates generally trend positively with inflation. Botswana has set her inflation target between 3-6% and this study attempts to determine inflation spillover effects from the United Kingdom, United States of America, Canada, Japan, China, Belgium, France, Germany, South Africa, Nigeria, and Ghana using data from 1980-2012. Comparatively, the attempts made by previous studies to examine spillovers generally lacked a long run focus and channeled much attention to periods of financial crisis. This study deviates from other studies by using the Augmented Dickey Fuller (ADF) test to examine unit roots for the countries under examination. The study further applies the Johansen cointegration procedure as well as the Granger causality test and results show that Botswana’s inflation dynamics trend positively with all the countries under scrutiny except South Africa in a long run framework. However, the Granger causality test only proved that Botswana’s inflation lead China’s inflation dynamics. In conclusion, Botswana’s inflation is not driven by other countries' inflation dynamics

The Export-Led Growth Hypothesis: New Evidence and Implications

Previous studies on economic growth have shown that countries that relied on exports to propel their economies have been successful in achieving robust economic growth. This study considers Botswana’s mineral exports production from 2003Q1 to 2012Q4 and relates each export commodity with the GDP. This study applies the Johansen cointegration test and the Granger causality test to determine the applicability of the export-led growth hypothesis for the Botswana economy. The cointegration test shows that there is long run comovement between GDP and four of Botswana’s mineral exports namely: matte; diamonds; copper; nickel and soda ash. In addition, the Granger causality test shows that Botswana’s economy propels exports production.From these results, the study nullifies the export-led growth hypothesis and postulates that the Botswana economy rather follows the growth-driven exports hypothesis (GDE). The study further postulates recommendations and also potential areas of research

The Effects of Chinese Interest Rates and Inflation: A Decomposition of The Fisher Effect

China’s economic growth as well as global influence has been escalating in the last decades. The purpose of this investigation is to determine the impact of Chinese interest rates and inflation on other economies. The study uses data from 1982 to 2013 and applies the Toda and Yamamoto approach to Granger causality. Using data for nineteen countries, the results show that China has significant influence on interest rates and inflation dynamics of Costa Rica, Kenya and Nigeria. The study further shows that Japan and South Africa induce China’s interest rates as well as inflation. It is projected that as China’s economy continues to grow, her influence in global financial matters and other economies will also intensify

On The Fisher Effect: A Review

The Fisher effect proposes that in the long run, nominal interest rates trend positively with inflation. In numerous studies the long run Fisher effect has been proved several times as compared to the short run Fisher effect phenomenon. The reason is in the long run, interest rates exhibit minimum volatility therefore resulting in the long run association. Even though the literature has been impressive in terms of validating the hypothesis, many central banks and policy makers have been lost in the lurch regarding the overall standpoint of the Fisher parity. This paper reviews the Fisher effect and examines factors that impinge on the hypothesis namely: inflation targeting, data set range and the regulation of the financial system

On the Effects of the BRICS on World Economic Growth

The purpose of this empirical study is to examine the potential effects of the BRICS on other economies’ economic growth over the period 1960-2013. This investigation deploys the Saikkonen and Lu ̈tkepohl cointegration methodology to validate long run relations between Brazil and China’s economic growth and other nation’s output growth. The study further uses the Toda and Yamamoto approach to Granger causality to examine long run causal links between the BRICS economic growth. The results show that all countries exhibit long run relations with China and Brazil’s economic growth. In addition, the results prove that Brazil’s economic growth is induced by South Africa, China and India’s economic growth