Journal articles on the topic 'Volatility impulse response functions'
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1
Jin, Xiaoye, Sharon Xiaowen Lin, and Michael Tamvakis. "Volatility transmission and volatility impulse response functions in crude oil markets." Energy Economics 34, no. 6 (November 2012): 2125–34. http://dx.doi.org/10.1016/j.eneco.2012.03.003.
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Le Pen, Yannick, and Benoît Sévi. "Volatility transmission and volatility impulse response functions in European electricity forward markets." Energy Economics 32, no. 4 (July 2010): 758–70. http://dx.doi.org/10.1016/j.eneco.2009.12.003.
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Jin, Xiaoye. "Volatility transmission and volatility impulse response functions among the Greater China stock markets." Journal of Asian Economics 39 (August 2015): 43–58. http://dx.doi.org/10.1016/j.asieco.2015.05.004.
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Panopoulou, Ekaterini, and Theologos Pantelidis. "Integration at a cost: evidence from volatility impulse response functions." Applied Financial Economics 19, no. 11 (June 2009): 917–33. http://dx.doi.org/10.1080/09603100802112300.
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Hassan, Fatin Aminah. "Dynamic Shocks of Crude Oil Price and Exchange Rate on Food Prices in Emerging Countries of Southeast Asia: A Panel Vector Autoregression Model." Asian Journal of Economic Modelling 10, no. 2 (June 15, 2022): 108–23. http://dx.doi.org/10.55493/5009.v10i2.4517.
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This paper empirically analyzes food price responses to shocks from crude oil price and exchange rate volatility in five emerging Southeast Asian nations between 2000 and 2020 using impulse response functions and variance decomposition analysis of the dynamic panel Vector Autoregression approach. Based on the findings of the impulse response functions analysis, food prices respond positively to both oil price and exchange rate shocks. Meanwhile, the results of variance decomposition analysis show that food prices account for a significant portion of volatility in its own shock. The contribution of oil price shock to food price volatility is found to be greater than the contribution of exchange rate shock. Hence, the study recommends that policymakers in these nations should be vigilant about the impacts of oil price and exchange rate shocks on food prices since these factors may undermine price stability and exacerbate food security.
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Olson, Eric, Andrew J. Vivian, and Mark E. Wohar. "The relationship between energy and equity markets: Evidence from volatility impulse response functions." Energy Economics 43 (May 2014): 297–305. http://dx.doi.org/10.1016/j.eneco.2014.01.009.
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Rahman, Sajjadur, and Apostolos Serletis. "THE ASYMMETRIC EFFECTS OF OIL PRICE SHOCKS." Macroeconomic Dynamics 15, S3 (November 2011): 437–71. http://dx.doi.org/10.1017/s1365100511000204.
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In this paper we investigate the effects of oil price uncertainty and its asymmetry on real economic activity in the United States, in the context of a bivariate vector autoregression with GARCH-in-mean errors. The model allows for the possibilities of spillovers and asymmetries in the variance–covariance structure for real output growth and the change in the real price of oil. Our measure of oil price uncertainty is the conditional variance of the oil price–change forecast error. We isolate the effects of volatility in the change in the price of oil and its asymmetry on output growth and employ simulation methods to calculate generalized impulse response functions and volatility impulse response functions to trace the effects of independent shocks on the conditional means and the conditional variances, respectively, of the variables. We find that oil price uncertainty has a negative effect on output, and that shocks to the price of oil and its uncertainty have asymmetric effects on output.
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Djedović, Edin, and Irfan Djedović. "IMPACT OF CONVENTIONAL STOCK MARKET INDEX ON ISLAMIC STOCK MARKET INDEX IN BOSNIA AND HERZEGOVINA." Journal Human Research in Rehabilitation 9, no. 1 (April 2019): 73–81. http://dx.doi.org/10.21554/hrr.041909.
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This study analyzes the impact of conventional index (SASX-30) on Islamic index (SASE-BBI) in Bosnia and Herzegovina. In the study are used daily index observations spanning in a period from October 2016 until May 2018. The data is obtained from the Sarajevo Stock Exchange database. Vector Auto-regression analysis (VAR) and Impulse response functions are used in order to estimate the impact. The results show that there is a significant negative impact of conventional index volatility (SASX-30) on Islamic index volatility (SASX-BBI) in Bosnia and Herzegovina.
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Okoli, Tochukwu Timothy, Devi Datt Tewari, and Ajibola Rhodaoluwafisayomi. "The Relationship between Oil Price Volatility and Macroeconomic Variables in Nigeria: A Vector Autoregressive (VAR) Approach." Journal of Economics and Behavioral Studies 9, no. 6(J) (January 15, 2018): 237–51. http://dx.doi.org/10.22610/jebs.v9i6(j).2020.
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Nigeria as an oil exporting mono-economy is susceptible to fluctuations in the world oil prices. About 97 percent of the government’s revenues are gotten from proceeds from oil export. The study attempts to assess the behaviors of macroeconomic variables in the face of oil price volatility in Nigeria. The empirical evidences reveal that macroeconomic variables were susceptibility to volatility in Oil Price. The theoretical framework is based on the Mundel-Flaming model and adopts the variance decomposition and impulse response functions to explain the dynamic properties of the VAR methodology. The impulse response results reveal that a one standard deviation in oil price will trigger a significant change in RGDP, GEXP, INFLATION and IMPORT both in the short and long run, and IR and EXR significantly only in the short run. Finally, the variance decomposition of RGDP, GEXP and EXR reveals that the variability in them were significantly explained by oil price volatility and other tests ran reveals a consistent result. Therefore, volatility in oil price has direct impact on real GDP, Government expenditure, inflation, interest rate, exchange rate and import. The researchers therefore recommend diversification of the economy to other sectors, financial prudence, sound fiscal policy and the lowering of interest rate to stimulate domestic investment.
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Okoli, Tochukwu Timothy, Devi Datt Tewari, and Ajibola Rhodaoluwafisayomi. "The Relationship between Oil Price Volatility and Macroeconomic Variables in Nigeria: A Vector Autoregressive (VAR) Approach." Journal of Economics and Behavioral Studies 9, no. 6 (January 15, 2018): 237. http://dx.doi.org/10.22610/jebs.v9i6.2020.
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Nigeria as an oil exporting mono-economy is susceptible to fluctuations in the world oil prices. About 97 percent of the government’s revenues are gotten from proceeds from oil export. The study attempts to assess the behaviors of macroeconomic variables in the face of oil price volatility in Nigeria. The empirical evidences reveal that macroeconomic variables were susceptibility to volatility in Oil Price. The theoretical framework is based on the Mundel-Flaming model and adopts the variance decomposition and impulse response functions to explain the dynamic properties of the VAR methodology. The impulse response results reveal that a one standard deviation in oil price will trigger a significant change in RGDP, GEXP, INFLATION and IMPORT both in the short and long run, and IR and EXR significantly only in the short run. Finally, the variance decomposition of RGDP, GEXP and EXR reveals that the variability in them were significantly explained by oil price volatility and other tests ran reveals a consistent result. Therefore, volatility in oil price has direct impact on real GDP, Government expenditure, inflation, interest rate, exchange rate and import. The researchers therefore recommend diversification of the economy to other sectors, financial prudence, sound fiscal policy and the lowering of interest rate to stimulate domestic investment.
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Chen, Mei-Ling, Kai-Li Wang, Ya-Ching Sung, Fu-Lai Lin, and Wei-Chuan Yang. "The Dynamic Relationship between the Investment Behavior and the Morgan Stanley Taiwan Index: Foreign Institutional Investors' Decision Process." Review of Pacific Basin Financial Markets and Policies 10, no. 03 (September 2007): 389–413. http://dx.doi.org/10.1142/s0219091507001124.
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This research employs VAR models, impulse response function, forecast error variance decomposition and bivariate GJR GARCH models, to explore the dynamic relationship between foreign investment and the MSCI Taiwan Index (MSCI–TWI). The estimations of the VAR, impulse-response functions and predicted error variance decomposition tests show that stronger feedback effects exist between net foreign investment and MSCI–TWI. In particular, our results demonstrate that the MSCI–TWI has the greatest influence over the decision-making processes of foreign investors. Also, we see that exchange rates exert a negative influence on both net foreign investment dollars and the MSCI–TWI. In addition, US–Taiwan interest rate difference has a positive influence on net foreign investment dollars and a negative influence on the MSCI–TWI. As for asymmetric own-volatility transmission, negative shocks in the MSCI–TWI tend to create greater volatility for itself in the following period than positive shocks. Our research indicates an asymmetric information transmission mechanism from net foreign investment to MSCI–TWI markets. Moreover, the estimated correlation coefficient shows that MSCI–TWI and net foreign investment dollar have a positive contemporaneous correlation.
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Moses, Tule Kpughur, Oboh Ugbem Victor, Ebuh Godday Uwawunkonye, Onipede Samuel Fumilade, and Gbadebo Nathaniel. "Does Exchange Rate Volatility Affect Economic Growth in Nigeria?" International Journal of Economics and Finance 12, no. 7 (June 22, 2020): 54. http://dx.doi.org/10.5539/ijef.v12n7p54.
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This study used monthly data from 2003 to 2017 to analyze the effects of USD/NG₦ exchange-rate volatility on Nigeria’s economic growth. The results from generalized autoregressive conditional heteroscedasticity (GARCH) and vector error correction model (VECM) analyses indicated that USD/NG₦ volatility had a significant effect on the country’s gross domestic product (GDP) growth. The results of the Granger causality/block exogeneity Wald tests and impulse-response functions also indicated that USD/NG₦ volatility had a significant negative effect on the country’s GDP growth. Moreover, USD/NG₦ exchange-rate volatility was found to exhibit short-term unidirectional causality for economic growth. However, a bidirectional relationship was confirmed between narrow money supply and economic growth. Yet, it was also found that the interbank exchange rate, which is a semiofficial Forex window, had little effect on Nigeria’s economic growth—a strong indication that a large portion of the productive sector lacks access to this Forex platform.
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Ishfaq, Muhammad, Zhang Bi Qiong, and Awais ur Rehman. "Global Volatility Spillover in Asian Financial Markets." Mediterranean Journal of Social Sciences 9, no. 2 (March 1, 2018): 109–16. http://dx.doi.org/10.2478/mjss-2018-0031.
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AbstractThe present paper accommodates the spillover impact of market volatility index of S & P 500 (VIX) and China exchange-traded fund’s volatility (VXFXI) on the emerging equity (KSE-100 index) and foreign exchange markets of Pakistan. In this context, we use a vector autoregressive (VAR) model and impulse response functions (IRF) to explore link among VIX indices and financial markets of Pakistan for the differential time periods. The study concludes that a rise in both VIX and VXFXI results in price falls of KSE-100 index and deteriorates exchange rate market. This implies that VIX act as ‘fear gauge’ on both stock and exchange rate markets in Pakistan. These outcomes provide an imperative implication on the pattern of currency and stock sensitivities against global volatility. This reveals that adverse movements in global volatility in the USA and Chinese financial market have a significant impact and a rise in VIX causes an outflow of investment from financial markets of Pakistan. Moreover, our results may guide local and global investors to anticipate the potential direction of stock and exchange rate markets based on market volatility index.
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Chabeb, Wafa, and Adel Boubaker. "Liquidity of Tunisian Stock Market: A Panel Var Estimation." Accounting and Finance Research 10, no. 3 (August 22, 2021): 93. http://dx.doi.org/10.5430/afr.v10n3p93.
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The purpose of this paper is to estimate the functions impulsions-response of liquidity on the Tunisian Stock Exchange (TSE). We will use the methodology proposed by Abrigo and Love (2016). Our study is done on an order-driven market. The data is composed of high frequency data of orders listed on the TSE for the period April 2014 to June 2014. Inspired of the study of Jarnecic and Snape (2014), we apply a panel VAR model to stocks traded in continuous in order to examine the dynamic interactions between spread, volatility, size and frequency of transactions. Then we study the liquidity of the TSE through the impulse response function of the Panel VAR model. Our findings show dynamic relationships between spread, volatility, size and frequency of trading. Some differences exist in the dynamics of liquidity when we take into account the trading intensity of the stock. Furthermore, we note that shocks are absorbed after three gaps of 45minutes.
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Iriabije, Alex Oisaozoje, Ubong Edem Effiong, and Nora Francis Inyang. "Capital Market Volatility and Real Sector Expansion in Nigeria." Research in Social Sciences 5, no. 2 (December 6, 2022): 78–93. http://dx.doi.org/10.53935/26415305.v5i2.245.
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This study utilized data from the first quarter of 2010 to the fourth quarter of 2021 to explore how volatility in the capital market can influence the real sector of the Nigerian economy. With the use of the generalized autoregressive conditional heteroscedasticity (GARCH) approach, we realized that there is no volatility clustering in the Nigerian market capitalization given that the estimate of lagged value of residual is negative and significant. Also, the decay of the response function on a quarterly basis being 0.3054 is quite low and is symptomatic of response functions to shock dying at a faster pace. Therefore, a new shock in the Nigerian capital market it will have impact on the market capitalization for a short period making the market less predictable. This makes the Nigerian capital market to be efficient since the market is not easily predictable. The VAR result revealed that the market capitalization put forth a positive and significant influence on economic growth; with the impulse response function indicating that economic growth responded positively to shocks in market capitalization. The paper concludes that the capital market needs be streamlined in order to avoid volatility clustering in the future, in order to maintain the efficiency of the market.
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Wang, Wenbo, Dieu Thanh Le, and Hail Park. "Is Foreign Exchange Intervention a Panacea in Diversified Circumstances? The Perspectives of Asymmetric Effects." Sustainability 12, no. 7 (April 6, 2020): 2913. http://dx.doi.org/10.3390/su12072913.
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Owing to the country’s heavy reliance on exports, the role of foreign exchange intervention in South Korea’s economic development is self-evident. The effectiveness of the intervention is what we are concerned with in this paper. Recently, a growing body of literature has engaged in exploring the asymmetric effects of foreign exchange intervention both theoretically and empirically. Against this background, we employ a threshold vector autoregression (TVAR) model in parallel with its generalized impulse response functions (GIRFs) to show that there are asymmetric effects of the Bank of Korea (BOK)-led interventions regardless of the volatility regimes.
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Floros, Christos, and Enrique Salvador. "Volatility, trading volume and open interest in futures markets." International Journal of Managerial Finance 12, no. 5 (October 10, 2016): 629–53. http://dx.doi.org/10.1108/ijmf-04-2015-0071.
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Purpose The purpose of this paper is to examine the effect of trading volume and open interest on volatility of futures markets. The authors capture the size and change in speculative behaviour in futures markets by examining the role of liquidity variables (trading volume and open interest) in the behaviour of futures prices. Design/methodology/approach The sample includes daily data covering the period 1996-2014 from 36 international futures markets (including currencies, commodities, stock indices, interest rates and bonds). The authors employ a two-stage estimation methodology: first, the authors employ a E-GARCH model and consider the asymmetric response of volatility to shocks of different sign. Further, the authors consider a regression framework to examine the contemporaneous relationships between volatility, trading volume and open interest. To quantify the percentage of volatility that is caused by liquidity variables, the authors also regress the estimated volatilities on the measures of open interest and trading volume. Findings The authors find that: market depth has an effect on the volatility of futures markets but the direction of this effect depends on the type of contract, and there is evidence of a positive contemporaneous relationship between trading volume and futures volatility for all futures contracts. Impulse-response functions also show that trading volume has a more relevant role in explaining market volatility than open interest. Practical implications These results are recommended to financial managers and analysts dealing with futures markets. Originality/value To the best of the authors’ knowledge, no study has yet considered a complete database of futures markets to investigate the empirical relation between price changes (volatility), trading volume and open interest in futures markets.
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Adamczyk, Piotr. "Does the Volatility of Oil Price Affect the Structure of Employment? The Role of Exchange Rate Regime and Energy Import Dependency." Energies 15, no. 19 (September 21, 2022): 6895. http://dx.doi.org/10.3390/en15196895.
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The volatility of oil price as a key energy resource for modern economies has a significant impact on the macroeconomic situation. In addition to affecting aggregated production, consumption, employment and inflation, oil shocks can affect the economy in a more nuanced way. One consequence of the turmoil in the oil market may be a shift in the employment structure between the tradable and non-tradable sectors, which we investigate in this paper. The aim of this study is to test how oil price volatility affects the structure of employment in Central and Eastern European countries. Our main hypothesis is that oil price volatility causes a temporal employment reallocation between tradable and non-tradable sectors. To verify this assumption, we created Interacted Panel VAR (IPVAR), which showed that the shocks of oil price volatility affect the employment structure and this impact is conditioned by the level of dependence on energy imports and the exchange rate regime. The constructed impulse response functions showed that, in general, oil price volatility causes a temporal fall in relative employment in the manufacturing (tradable) sector. For periods of an above-average import of energy, the exchange rate regime does not matter for the response of the structure of employment. Inversely, when countries are less dependent on imports of energy, the exchange rate regime matters for shock absorption—for floats, oil price shocks cause a temporal fall in relative employment in manufacturing, whereas for pegs, there is a slight relative increase in employment in manufacturing.
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Demirhan, Erdal, and Banu Demirhan. "The dynamic effect of exchange-rate volatility on Turkish exports: Parsimonious error-correction model approach." Panoeconomicus 62, no. 4 (2015): 429–51. http://dx.doi.org/10.2298/pan1504429d.
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This paper aims to investigate the effect of exchange-rate stability on real export volume in Turkey, using monthly data for the period February 2001 to January 2010. The Johansen multivariate cointegration method and the parsimonious error-correction model are applied to determine long-run and short-run relationships between real export volume and its determinants. In this study, the conditional variance of the GARCH (1, 1) model is taken as a proxy for exchange-rate stability, and generalized impulse-response functions and variance-decomposition analyses are applied to analyze the dynamic effects of variables on real export volume. The empirical findings suggest that exchangerate stability has a significant positive effect on real export volume, both in the short and the long run.
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Aydemir, Resul, Bulent Guloglu, and Ercan Saridogan. "Volatility spillovers and dynamic correlations among foreign exchange rates and bond markets of emerging economies." Panoeconomicus, no. 00 (2020): 20. http://dx.doi.org/10.2298/pan171017020a.
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In this paper, we first examine how important historical shocks during and after the 2007-2008 global financial crisis affect the size and the persistence of volatilities among exchange rates and the ten-year bond rates of the Fragile Five countries (i.e., Brazil, India, Indonesia, South Africa and Turkey). We then investigate separately the dynamic interactions between exchange rates and the ten-year bond rates of the Fragile Five. We utilize a multivariate GARCH model (FIAPARCH-DCC model) and volatility impulse response functions to achieve these objectives. The results suggest that shocks? positive impacts on expected conditional variances of the variables are largely market-specific and different. Shocks have a more significant impact on bond markets than on foreign exchange markets. We also find that the dynamic conditional correlation series of bonds exhibit much lower correlations than those associated with exchange rate returns.
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Wang, Wenbo, and Hail Park. "How Vulnerable Are Financial Markets to COVID-19? A Comparative Study of the US and South Korea." Sustainability 13, no. 10 (May 17, 2021): 5587. http://dx.doi.org/10.3390/su13105587.
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In this study, we carry out a comparative analysis between the US and South Korea, with a special attention to three key areas, including the stock market, the currency market, and the bond market. By employing a composite model, VAR-GARCH-BEKK, we will attempt to capture both mean and volatility spillovers between the pandemic and financial markets, so as to explore the extent and ways in which the COVID-19 pandemic influences the financial sector. The empirical results provide substantial evidence in the following areas: (i) South Korea seems more vulnerable since all of its financial markets are seen to be statistically associated with the growth in infections. (ii) For the US, only the stock market is negatively impacted by the confirmed cases in terms of a conditional mean spillover model. (iii) According to the impulse response functions (IRFs), apart from the US dollar index, both the TED spread and stock returns respond significantly to innovations from the pandemic. (iv) There is little evidence to support the presence of volatility transmission from the pandemic to the financial markets in the two countries.
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Duasa, Jarita, and Salina H. Kassim. "Foreign Portfolio Investment and Economic Growth in Malaysia." Pakistan Development Review 48, no. 2 (June 1, 2009): 109–23. http://dx.doi.org/10.30541/v48i2pp.109-123.
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This study examines the relationship between foreign portfolio investment (FPI) and Malaysia’s economic performance. In particular, the study analyses the relationship between FPI and real gross domestic product (GDP) using the widely adopted Granger causality test and the more recent Toda and Yamamoto’s (1995) non-causality test to establish the direction of causation between the two variables. Similar method is also applied on the relationship between volatility of FPI and real GDP. Additionally, the study uses an innovation accounting by simulating variance decompositions and impulse response functions for further inferences. Using quarterly data covering the period from 1991 to 2006, the study finds evidence that economic growth causes changes in the FPI and its volatility and not vice versa.. The findings suggest that economic performance is the major pull factor in attracting FPI into the country. Thus, it must be ensured that the Malaysian economy remains on a healthy and sustainable growth path so as to maintain investor confidence in the economy. JEL classification: G15, C32, C12 Keywords: Foreign Portfolio Investment, Economic Growth, Granger Causality, Toda-Yamamoto Non-causality, Variance Decomposition
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Sayim, Mustafa, and Hamid Rahman. "The relationship between individual investor sentiment, stock return and volatility." International Journal of Emerging Markets 10, no. 3 (July 20, 2015): 504–20. http://dx.doi.org/10.1108/ijoem-07-2012-0060.
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Purpose – The purpose of this paper is to examine the impact of Turkish individual investor sentiment on the Istanbul Stock Exchange (ISE) and to investigate whether investor sentiment, stock return and volatility in Turkey are related. Design/methodology/approach – This study used the monthly Turkish Consumer Confidence Index, published by the Turkish Statistical Institute, as a proxy for individual investor sentiments. First, Turkish market fundamentals were regressed on investor sentiments in order to capture the effects of macroeconomic risk factors on investor sentiments. Then, it used the impulse response functions (IRFs) generated from the vector autoregression (VAR) model to examine the effect of unanticipated movements in Turkish investor sentiment to both stock returns and volatility of the ISE. Findings – The generalized IRFs from VAR shows that unexpected changes in rational and irrational investor sentiment have a significant positive impact on ISE returns. This suggests that a positive investor sentiment tends to increase ISE returns. The study also documents that unanticipated increase in the rational component of Turkish investor sentiment has a negative significant effect on ISE volatility. This might indicate that investors have optimistic expectations of the economy overall with respect to market fundamentals in Turkey. This optimism can result in creating positive expectations, reducing uncertainty, and reducing the volatility of stock market returns. Research limitations/implications – The study was applied only for the period 2004-2010 on the ISE stock returns and volatility. Practical implications – Regardless, investors should know the impact of irrational investor sentiments while establishing investment strategies. The results of this study may also help policy makers stabilize investor sentiments to reduce stock market volatility and uncertainty. Originality/value – This paper adds to the limited understanding of investor sentiment impact on stock return and volatility in an emerging market context.
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Herman, Suzana. "TOURISM VOLATILITY TO EXTERNAL SHOCKS." Tourism and hospitality management 28, no. 3 (December 2022): 699–702. http://dx.doi.org/10.20867/thm.28.3.14.
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International tourism of today is considered one of the main levers of job creation, generating income and foreign currency and foreign investment. Over the past few years, international tourism has been growing steadily, but at the same time this same growth is threatened by challenges in the form of various external shocks affecting the volatility of tourism. Volatility is described, according to many authors, as an unpredictable measure of the intensity of variations. These variations are associated with unpredictable crisis situations or events commonly referred to as ‘new shocks’ (e.g. terrorism, epidemics, natural disasters, exchange rate volatility, oil price, political (in)stability, wars, and various forms of criminal activities). Such global events have a profound impact on a wide range of political, legal and social dimensions. Tourism is extremely vulnerable to various external and internal shock e. The appearance of exogenous events in destinations changes the characteristics of tourism at the destination level, affecting the tourist demand, but also on the economic situation of the country. Purpose Based on the presented so far, it is also possible to define the purpose of the research of the doctoral dissertation: to analyse the main(exogenous) factors that influence the volatility of tourism in the form of the number of arrivals and number of overnight stays in selected countries of the world. Despite the obvious economic benefits it brings, tourism is exposed to internal and external shocks leading to a decline in activity. The intensity and duration will depend on the actual and perceived preparedness of the affected countries and the ability to convince that these countries are safe destinations. Knowledge of the factors affecting tourist demand is necessarily necessary for all countries, especially those whose share of tourism in GDP is extremely high. Such information may be useful for macroeconomic analysis and forecasting . The aim of the paper were as follows: systematically define and quantifies variables that can affect the tourism of today (terrorism, health issues, natural disasters, wars, political (in)stability, exchange rate volatility, oil prices, migration), determine the levels of volatility of tourism to external shocks, and point out the levels of volatility of tourism to external shocks, and point out the importance of monitoring phenomena affecting tourism volatility. Methodology The research carried out is quantitative in form since the research process is predefined and structured, while the data collection phase also precedes the data analysis phase. The research starts from the assumption that the panel model of time series can identify the impact of external shocks on tourism. The obtained results of the empirical part of the research, justify expectations based on theoretical assumptions. For the purpose of proving the first hypothesis set, which reads “There is a statistically significant difference in the degree of sensitivity of turzm to selected external shocks”, a panel analysis was carried out. Another hypothesis, “The short- and long-term effects of shocks on tourism are different in type of external shocks”, was tested using PANEL VAR model, impulsive response function and decomposition of variance. Panel VAR model with GMM assessment within one backward shift, with the help of Helmert’s transformation, is defined by two variables within each model. The analysis carried out included seven different panel VAR models. To estimating how much variability of the dependent variable lags behind its own variance as well as which of the independent variables is “stronger” in explaining the variability of dependent variables over time, decomposition of variance has been applied. After the VAR estimation was performed, the structural error terms were identified using Cholesky decomposition and impulse response functions were generated. Within the framework of panel vector auto-regression, an assessment of the impulse response function (impulse-response functions) was carried out, with the help of which the assessment of orthogonal shocks is carried out with the aim of assessing the shock of one variable on another, while keeping all other variables constant. The Granger causality test within the panel VAR was applied to investigate the causal relationship between the variables of interest, that is, to test the third hypothesis, which reads: “There is an interdependence of external shocks and tourism”. Findings The results of the conducted research show that the first hypothesis set, Hypothesis 1: There is a statistically significant difference in the degree of sensitivity of tourism to selected external shocks is fully accepted. With the aim of assessing the impact of external shocks on tourist arrivals, the results of the panel analysis show a strong and significant link in 6 variables of interest (out of 7 tested in total) in order: terrorist attack, natural disasters, health issues, exchange rate volatility, war and political (in)stability. Furthermore, the results of the conducted research show that the second hypothesis, Hypothesis 2: Short-term effects of shocks on tourism, different by type of external shocks, is not accepted. Given that the impulse response function observed the reaction at the time of the shock in relation to the period of 10 years after the shock occurred, these reactions showed that no reaction was statistically significant, i.e., in all seven cases the confidence intervals include both positive and negative values. To prove the third hypothesis (There is an interdependence of external shocks and tourism), the causality test conducted indicates partial acceptance of it. Results (VAR Granger panel) suggest that the interdependence of external shocks was established in both directions in the external shock of a natural disaster. The unusual result of the existence of causation from the direction of tourism to natural disasters can be explained, according to some research, through the intensive development of urbanization, which is a consequence of the development of tourism. Urbanization may lead to an increase in airborne carbon emissions affecting the climate environment. A one-way causality was also established by tourism to health issues. Tourism, thanks to the globalization and stativity of the tourist offer, affects the mobility of tourists and therefore the transmission of various infectious diseases can be caused precisely by tourist movements. The average price of oil is an external shock that also affects tourism, more precisely, the drop in the price of oil will have a positive effect on tourist demand and its movements, and consequently lower prices for transport tickets. Originality of the research The scientific contribution of the doctoral dissertation is determined: in the systematization and conceptual determination of tourism and external shocks (with special emphasis on terrorism, political instability, war, migration, natural disasters, health crises, oil prices and exchange rate volatility), in the analysis and systematization of the positive and negative economic effects of tourism on the world economy, in the analysis of the socio-cultural effects of tourism as its effect on the environment, in the analysis and systematization of the importance of the impact of external shocks on tourism and the affirmation and development of knowledge about the importance and understanding of their interrelationship. Furthermore, the contribution of the work also rests in the development of econometric methodological approaches in assessing the impact of external shocks on tourism as well as quantifying (assessing) the sensitivity of tourism to external shocks and identifying the direction of causation between tourism and external shocks. These contributions should also be added to the analysis of the shortand long-term effects of shocks on tourism. The application contribution of the work rests in the empirical research carried out, which, by modelling the volatility of tourism, can significantly facilitate decision-making for the policymakers of many countries, especially those that depend on tourism to a high degree. The assessment of the impact of external shocks on the volatility of tourism was based on a detailed explanation of the selected variables, and among other things, for the purpose of raising awareness of the presence of external shocks as well as highlighting the need to monitor them. The importance of determining the level of vulnerability to a particular external shock is reflected in the adoption of adequate economic policy measures that should change the structure of a country’s economy, all with the aim of raising the level of resilience to exogenous events. Empirical analysis was carried out on the cause of 168 countries representing the spatial component, and the time dimension covered a period of 25 years. (1995-2019). In view of the unbalanced panel data, during the model assessment, the sample decreased depending on the availability of the data. Independent variables in the model were terrorist attacks, natural disasters, health issues, political instability, war, migration, exchange rate volatility and oil prices, while the dependent variable was total overnight stays.
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Bhat, Aparna Prasad. "The economic determinants of the implied volatility function for currency options." International Journal of Emerging Markets 13, no. 6 (November 29, 2018): 1798–819. http://dx.doi.org/10.1108/ijoem-08-2017-0308.
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Purpose The purpose of this paper is to ascertain the pattern of the implied volatility function for currency options traded on the National Stock Exchange of India (NSE), identify its potential determinants and to investigate any seasonality in the pattern. Design/methodology/approach The paper examines four different specifications for the implied volatility smile of exchange-traded dollar-rupee options. These specifications are tested by running Ordinary Least Squares (OLS) regressions on a daily basis for all options over the entire sample period. Seven potential determinants for the shape of the volatility function are identified. Contemporaneous and lead-lag relationships between these determinants and the shape of the volatility function are examined using OLS and multivariate VAR. Impulse response functions are employed to test the strength and persistence of the lead-lag relations. Seasonality of the smile pattern is tested using OLS. Findings The study shows that the implied volatility function for dollar-rupee options is asymmetric and varies with the time to maturity of the option. Historical volatility, momentum and jumps in the exchange rate, time to maturity, traded volume of options and volatility in the stock market appear to Granger-cause the shape of the volatility smile. Feedback causality is observed from the shape of the smile to the volatility, momentum and jumps in the exchange rate and trading volume of currency options. A weak day-of-the-week effect is observed in the pattern of the volatility smile. Practical implications The study sheds light on the potential determinants of the smile and highlights the predictive power of the smile which findings can be useful to market practitioners for pricing and hedging of dollar-rupee options. The study has strong practical implications during a period of increased volatility in the dollar-rupee pair. Originality/value Most of the existing literature regarding implied volatility smiles has focused either on the volatility smile of US equity index options or that of major liquid currencies. There is a need for such studies in the context of options on emerging market currencies such as the Indian rupee which are characterized by thin trading and frequent central bank intervention and signaling. To the best of the author’s knowledge this study is the first to focus on the volatility smile of exchange-traded options on the US dollar–Indian rupee.
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Applanaidu, Shri Dewi, and Mukhriz Izraf Azman Aziz. "Crude Oil Price and Food Security Related Variables in Malaysia." GATR Global Journal of Business Social Sciences Review 4, no. 2 (April 13, 2016): 17–21. http://dx.doi.org/10.35609/gjbssr.2016.4.2(3).
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Objective - This study analyzes the dynamic relationship between crude oil price and food security related variables (crude palm oil price, exchange rate, food import, food price index, food production index, income per capita and government development expenditure) in Malaysia using a Vector Auto Regressive (VAR) model. Methodology/Technique - The data covered the period of 1980-2014. Impulse response functions (IRFs) was applied to examine what will be the results of crude oil price changes to the variables in the model. To explore the impact of variation in crude oil prices on the selected food security related variables forecast error variance decomposition (VDC) was employed. Findings - Findings from IRFs suggest there are positive effects of oil price changes on food import and food price index. The VDC analyses suggest that crude oil price changes have relatively largest impact on real crude palm oil price, food import and food price index. This study would suggest to revisiting the formulation of food price policy by including appropriate weight of crude oil price volatility. In terms of crude oil palm price determination, the volatility of crude oil prices should be taken into account. Overdependence on food imports also needs to be reduced. Novelty - As the largest response of crude oil price volatility on related food security variables food vouchers can be implemented. Food vouchers have advantages compared to direct cash transfers since it can be targeted and can be restricted to certain types of products and group of people. Hence, it can act as a better aid compared cash transfers. Type of Paper - Empirical Keywords: Crude oil price, Food security related variables, IRF, VAR, VDC
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Gürel, Sinem Pınar. "How the macroeconomic conditions and the global risk factors affect sovereign CDS spreads? New Evidence from Turkey." Business & Management Studies: An International Journal 9, no. 2 (June 25, 2021): 547–60. http://dx.doi.org/10.15295/bmij.v9i2.1800.
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This paper aims to investigate the effects of a set of major country-specific macroeconomic variables and global risk factor on determining Turkey’s sovereign CDS spreads. The industrial production index, consumer price index, nominal exchange rates, policy interest rate, stock market index, and the volatility index as a proxy for global risk appetite are used by employing SVAR methodology with block exogeneity for 2011M01-2020M09 periods. The results reveal that the country's nominal exchange rate is the main driver of sovereign CDS spread. Especially in 2018, the most significant source of the high increase in sovereign CDS spreads is the exchange rates. According to the impulse response functions, to reduce the sovereign CDS spread, economic growth is more effective than the stock market return. Moreover, it is seen that the global risk factor does not play an essential role in the increases in domestic country's sovereign CDS spread.
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Singh, Amanjot, and Manjit Singh. "Intertemporal risk-return relationship in BRIC equity markets after the US financial crisis." International Journal of Law and Management 59, no. 4 (July 10, 2017): 547–70. http://dx.doi.org/10.1108/ijlma-12-2015-0065.
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PurposeThis paper aims to attempt to capture the intertemporal/time-varying risk–return relationship in the Brazil, Russia, India and China (BRIC) equity markets after the global financial crisis (2007-2009), i.e. during a relative calm period. There has been a significant increase in advanced economies’ equity allocations to the emerging markets ever since the financial crisis. So, the present study is an attempt to account for the said relationship, thereby justifying investments made by the international investors. MethodologyThe study uses non-linear models comprising asymmetric component generalised autoregressive conditional heteroskedastic model in mean (CGARCH-M) (1,1) model, generalised impulse response functions under vector autoregressive framework and Markov regime switching in mean and standard deviation model. The span of data ranges from 1 July 2009 to 31 December 2014. FindingsThe ACGARCH-M (1,1) model reports a positive and significant risk-return relationship in the Russian and Chinese equity markets only. There is leverage and volatility feedback effect in the Russian market because falling returns further increase conditional variance making the investors to expect a risk premium in the expected returns. The impulse responses indicate that for all of the BRIC markets, the ex-ante returns respond positively to a shock in the long-term risk component, whereas the response is negative to a shock in the short-term risk component. Finally, the Markov regime switching model confirms the existence of two regimes in all of the BRIC markets, namely, Bull and Bear regimes. Both the regimes exhibit negative relationship between risk and return. Practical implicationsIt is an imperative task to comprehend the relationship shared between risk and returns for an investor. The investors in the emerging economies should understand the risk-return dynamics well ahead of time so that the returns justify the investments made under riskier environment. Originality/valueThe present study contributes to the literature in three senses. First, the data relate to a period especially after the global financial crisis (2007-2009). Second, the study has used a relatively newer version of GARCH based model [ACGARCH-M (1,1) model], generalised impulse response functions and Markov regime switching model to account for the relationship between risk and return. Finally, the study provides an insightful understanding of the risk–return relationship in the most promising emerging markets group “BRIC nations”, making the study first of its kind in all the perspectives.
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Bouazizi, Tarek, Fatma Mrad, Arafet Hamida, and Sawsen Nafti. "Effects of Conditional Oil Volatility on Exchange Rate and Stock Markets Returns." International Journal of Energy Economics and Policy 12, no. 2 (March 20, 2022): 53–71. http://dx.doi.org/10.32479/ijeep.12826.
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The underlying volatility at a given time is called conditional volatility at this particular time and is modeled by various ARMA-GARCH conditional variance equations (GARCH, EGARCH, GJR, APARCH, IGARCH). How important are oil price fluctuations and oil price volatility in foreign exchange markets and stock markets? What is the nature of the relationship between these three markets? What are the political implications if volatility, using appropriate models to determine, turns out to be important? We evaluate these questions empirically, using the specification of Narayan and Narayan (2010). This specification, in our paper, deals with the determination of volatility appropriate models, based on information criteria, of the ARMA-ARCH family conditional volatility of oil returns using daily data for each country independently (i), and revolve around an analysis of the effect of the volatility of black gold price on the returns of the other two markets in Oil Importing Developed Countries category (ii). The selection of appropriate models of oil returns according to the period of the chosen data gives the ARMA(2,2)- GJR(1,2) model for the Germany and the ARMA(2,2)-GJR(2,2) model for the Japan and the USA. The results that the conditional variances of oil returns, foreign exchange market returns and stock market returns are contested and they have a long-term relationship in different countries. In addition, the results of the granger causality tests and the study of impulse response functions have shown that it has a sending effect of the volatility of oil prices on most foreign exchange markets and stock markets, highlighting the strong explanatory power of market volatility, but bidirectional causality is not always present. Our empirical results involved in the prevention of shocks are important for policymakers, for portfolio managers seeking optimal portfolio allocation, for monetary authorities who are studying changes in the exchange rate of the national currency against currencies, for oil-importing countries seeking to minimize their spending on crude oil, and for oil-exporting countries seeking the sound management of oil reserves. They also show that the volatility of crude oil prices on the world market is generally more significant for foreign exchange and stock markets than the volatility of oil price in the local market. This main conclusion gives political implications to policymakers.
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Khyareh, Mohsen, Vahid Omran, and Mohammad Ehsani. "Evaluating the welfare aspects of the simple monetary ruls for Iran." Ekonomski anali 60, no. 206 (2015): 141–66. http://dx.doi.org/10.2298/eka1506141k.
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This paper following a monetary growth rate rule aims to compare the properties of different monetary policy rules in Iran. In that regards, the paper draws on the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models. Within this framework, we rank the different policy rules based on the Impulse response Functions, the volatility of key macroeconomic variables and the welfare loss function. The paper concludes that the effects of alternative monetary rules depend on what shocks affect the economy, the exchange rate regime, and the choice of inflation index. When the economy experiences productivity shocks, domestic iflation targeting is welfare-superior to other monetary rules. However, in the case of other shocks except productivity shock a managed exchange rate is the best policy rule. Finally, the results of welfare loss of alternative monetary policy rules allowed noticing the nature of the shocks affecting the economy dictate the implication and choice of the best monetary policy rule.
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Karn, Arodh Lal, Bhavana Raj Kondamudi, Ravi Kumar Gupta, Denis A. Pustokhin, Irina V. Pustokhina, Meshal Alharbi, Subramaniyaswamy Vairavasundaram, Vijayakumar Varadarajan, and Sudhakar Sengan. "An Empirical Analysis of the Effects of Energy Price Shocks for Sustainable Energy on the Macro-Economy of South Asian Countries." Energies 16, no. 1 (December 28, 2022): 363. http://dx.doi.org/10.3390/en16010363.
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Energy prices (EPs) play an imperative role in South Asian Country (SAC) Gross Domestic Product (GDP). This research empirically examines the influence of sustainable energy price shocks (EPSs) on macroeconomic indicators. The study is to forecast the impact of EPS on macroeconomic indicators from 1980 to 2020. The analysis is carried out by employing the Vector Auto-Regression (VAR) approach. Impulse Response Functions (IRFs) results indicate that EPS decreases Gross Domestic Product (GDP). They exist in the short run and the long run. This research study’s overall findings suggest that high EPSs have a negative impact on GDP. The study implies that policymakers should develop, adopt, and initiate some imperatives to control the unanticipated volatility and movements in EP. The study highlights that policy should be designed to prevent fluctuations in sustainable EP and plan conservative energy policies that motivate discovering alternative energy sources to meet increasing energy demand and improve economic growth.
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Keliuotyte-Staniuleniene, Greta, and Julius Kviklis. "Stock Market Reactions during Different Phases of the COVID-19 Pandemic: Cases of Italy and Spain." Economies 10, no. 1 (December 22, 2021): 3. http://dx.doi.org/10.3390/economies10010003.
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The COVID-19 pandemic and pandemic-induced lockdowns and quarantine establishments have inevitably affected individuals, businesses, and governments. At the same time, the spread of the COVID-19 pandemic had a dramatic impact on financial markets all over the world and caused an increased level of uncertainty; the stock markets were no exception either. Most of the studies on the impact of the COVID-19 pandemic on stock markets are based either on the analysis of a relatively short period (the beginning of pandemic) or a longer period, which, in turn, is very heterogeneous in terms of both the information available on the COVID-19 virus and the measures taken to contain the virus and address the consequences of the pandemic. However, it is very important to assess the impact not only at the beginning of the pandemic but also in the subsequent periods and to compare the nature of this impact; the studies of this type are still fragmentary. Therefore, this research aims to investigate the impact of the COVID-19 pandemic on stock markets of two of the most severely affected European countries—Italy and Spain. To reach the aim of the research OLS regression models, heteroscedasticity-corrected models, GARCH (1,1) models, and VAR-based impulse response functions are employed. The results reveal that the stock market reaction to the spread of the COVID-19 pandemic differs depending on the country and period analyzed: OLS regression and heteroscedasticity-corrected models have not revealed the statistically significant impact of the spread of the COVID-19 pandemic, while impulse response functions demonstrated the non-zero primary response of analyzed markets to the COVID-19 shock, and GARCH models (in the case of Spain) confirmed that the COVID-19 pandemic increased the volatility of stock market return. This research contributes to the literature by providing a comprehensive impact assessment both during the whole pre-vaccination period of the pandemic and during different stages of this period.
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Antosiewicz, Marek, and Piotr Lewandowski. "Labour market fluctuations in GIPS – shocks vs adjustments." International Journal of Manpower 38, no. 7 (October 2, 2017): 913–39. http://dx.doi.org/10.1108/ijm-04-2017-0080.
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Purpose The purpose of this paper is to identify factors behind cyclical fluctuations and differences in adjustments to shocks in Greece, Italy, Portugal and Spain (GIPS) and a reference country – Germany. The authors try to answer the question whether the GIPS countries could have fared differently in the Great Recession if they reacted to shocks affecting them like a resilient German economy would have. Design/methodology/approach The authors use a DSGE model of real open economy with search and matching on the labour market and endogenous job destruction, estimated separately for each country. The authors calculate impulse response functions, historical decompositions and perform counterfactual simulations of the response of the German model to the sequence of shocks identified for each of GIPS. Findings The authors find that all GIPS countries were more vulnerable to productivity and foreign demand shocks than Germany. They would have experienced lower macroeconomic volatility if they reacted to their shocks like Germany. Employment (unemployment) rates in GIPS would have been less volatile and higher (lower) during the Great Recession, especially in Spain and Greece. Real wage volatility would have been higher, especially in Spain and Portugal. Originality/value The trade-off between unemployment and wage adjustments vis-à-vis Germany was the largest in Spain, which also would have experienced lower variability of job separations and hirings. The evolution of the labour market in Greece and Portugal was driven rather by its higher responsiveness to GDP fluctuations than in Germany, whereas Italy emerges as the least responsive labour market within GIPS.
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Blackledge, Jonathan, Derek Kearney, Marc Lamphiere, Raja Rani, and Paddy Walsh. "Econophysics and Fractional Calculus: Einstein’s Evolution Equation, the Fractal Market Hypothesis, Trend Analysis and Future Price Prediction." Mathematics 7, no. 11 (November 4, 2019): 1057. http://dx.doi.org/10.3390/math7111057.
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This paper examines a range of results that can be derived from Einstein’s evolution equation focusing on the effect of introducing a Lévy distribution into the evolution equation. In this context, we examine the derivation (derived exclusively from the evolution equation) of the classical and fractional diffusion equations, the classical and generalised Kolmogorov–Feller equations, the evolution of self-affine stochastic fields through the fractional diffusion equation, the fractional Poisson equation (for the time independent case), and, a derivation of the Lyapunov exponent and volatility. In this way, we provide a collection of results (which includes the derivation of certain fractional partial differential equations) that are fundamental to the stochastic modelling associated with elastic scattering problems obtained under a unifying theme, i.e., Einstein’s evolution equation. This includes an analysis of stochastic fields governed by a symmetric (zero-mean) Gaussian distribution, a Lévy distribution characterised by the Lévy index γ ∈ [ 0 , 2 ] and the derivation of two impulse response functions for each case. The relationship between non-Gaussian distributions and fractional calculus is examined and applications to financial forecasting under the fractal market hypothesis considered, the reader being provided with example software functions (written in MATLAB) so that the results presented may be reproduced and/or further investigated.
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Balina, Signe, and Rita Freimane. "Empirical Assessment of the Eurozone Monetary Policy Transmission in Latvia." New Trends and Issues Proceedings on Humanities and Social Sciences 2, no. 3 (December 7, 2016): 1–8. http://dx.doi.org/10.18844/prosoc.v2i3.1048.
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The purpose of the paper is to evaluate the international transmission effects of euro area monetary policy shocks on the main economic and financial variables in Latvia in period from 2000 to 2014. Empirical assessment is made using a standard structural vector autoregression (SVAR) model of the euro area, augmented by the Latvian variables of interest (real GDP per capita, annual inflation and money market interest rate, and consecutively by additional variables: real private consumption per capita, investments, exports and imports, various loan interest rates and real wages). The estimated SVAR model shows that a negative monetary policy shock in the euro area has a strong and persistent effect on Latvian economy via interest rate and foreign demand channels. The main results shown by impulse response functions suggest that the estimated reaction of Latvian variables is several times stronger than the reaction of euro area aggregates. Volatility of reactions can be explained by the small size and high openness level of Latvian economy.    Keywords: Monetary transmission; Euro area; Structural VARÂ
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Copaciu, Mihai, Joana Madjoska, and Mite Miteski. "A DSGE model with partial euroization: the case of the Macedonian economy." Economy, Business & Development: An International Journal 2, no. 2 (November 30, 2021): 57–118. http://dx.doi.org/10.47063/ebd.00006.
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This paper describes the theoretical structure and estimation results for a DSGE model for the Macedonian economy. Having as benchmark the model of Copaciu et al. (2015), modified to allow for a fixed exchange rate, we are able to match relatively well the volatility observed in the data. Given the monetary policy regime in place, the debt deflation channel is more important relative to the financial accelerator one when compared to the flexible exchange rate case. The lack of balance sheet effects results in no significant differences in terms of net worth evolution across the two types of entrepreneurs when impulse response functions are evaluated. However, the shocks related to the financial sector appear to be especially important for investment, for the domestic interest rate and interest rate spreads, illustrating the relevance of including financial frictions in the model. With the exchange rate not acting as a shock absorber, the external shocks are more relevant for the CPI inflation and the domestic interest rate. The drop in GDP associated with the pandemic mainly reflects the negative innovations to the consumption preference shock and to the permanent technology shock.
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Vo, Duc Hong, Tan Ngoc Vu, Anh The Vo, and Michael McAleer. "Modeling the Relationship between Crude Oil and Agricultural Commodity Prices." Energies 12, no. 7 (April 8, 2019): 1344. http://dx.doi.org/10.3390/en12071344.
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The food-energy nexus has attracted great attention from policymakers, practitioners, and academia since the food price crisis during the 2007–2008 Global Financial Crisis (GFC), and new policies that aim to increase ethanol production. This paper incorporates aggregate demand and alternative oil shocks to investigate the causal relationship between agricultural products and oil markets. For the period January 2000–July 2018, monthly spot prices of 15 commodities are examined, including Brent crude oil, biofuel-related agricultural commodities, and other agricultural commodities. The sample is divided into three sub-periods, namely: (i) January 2000–July 2006, (ii) August 2006–April 2013, and (iii) May 2013–July 2018. The structural vector autoregressive (SVAR) model, impulse response functions, and variance decomposition technique are used to examine how the shocks to agricultural markets contribute to the variance of crude oil prices. The empirical findings from the paper indicate that not every oil shock contributes the same to agricultural price fluctuations, and similarly for the effects of aggregate demand shocks on the agricultural market. These results show that the crude oil market plays a major role in explaining fluctuations in the prices and associated volatility of agricultural commodities.
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Czech, Katarzyna, and Ibrahim Niftiyev. "The Impact of Oil Price Shocks on Oil-Dependent Countries’ Currencies: The Case of Azerbaijan and Kazakhstan." Journal of Risk and Financial Management 14, no. 9 (September 9, 2021): 431. http://dx.doi.org/10.3390/jrfm14090431.
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The paper aims to assess the relationship between Azerbaijani and Kazakhstani exchange rates and crude oil prices volatility. The study applies the structural vector autoregressive (SVAR) model. The paper concentrates on Azerbaijan and Kazakhstan, the post-Soviet countries considered as some of the most oil-dependent countries in the Caspian Sea region. The impulse response functions suggest that the rise of crude oil prices is associated with the exchange rates decrease and thus with an Azerbaijani manat and Kazakhstani tenge appreciation against the U.S. dollar. Moreover, the results suggest that an oil price increase leads to the rise of Azerbaijani international reserves. However, the results are insignificant for the Kazakhstani foreign exchange reserves. Additionally, the study reveals a negative and significant relationship between crude oil prices and USD/KZT in both pre-crisis and the COVID-19 crisis periods. We reveal that the correlation has been stronger during the COVID-19 pandemic. However, the relationship is not significant in the case of the Azerbaijani manat. The USD/AZN exchange rate has been stable since 2017, and the first phase of the COVID-19 pandemic has not caused a change in the exchange rate and a weakening of the Azerbaijani currency, despite significant drops in crude oil prices.
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Sharma, Chandan, and Rajat Setia. "Macroeconomic fundamentals and dynamics of the Indian rupee-dollar exchange rate." Journal of Financial Economic Policy 7, no. 4 (November 2, 2015): 301–26. http://dx.doi.org/10.1108/jfep-11-2014-0069.
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Purpose – This paper aims to examine the relationship between Indian rupee-US dollar exchange rate and the macroeconomic fundamentals for the post-economic reform period. Design/methodology/approach – The authors have used an empirical model which includes a range of important macroeconomic variables based on the basic monetary theories of exchange rate determination. At the first stage of the analysis, they have tested structural break in the data. Subsequently, they have employed the fully modified ordinary least square, Wald’s coefficient restriction and impulse response functions (IRF) to estimate the monetary model in the long- and short-run horizons. Findings – Results of analyses indicate that the macroeconomic fundamentals determine exchange rate in a significant way, but their effect varies sizably across the periods. The IRF illustrate the importance of interest rate in controlling exchange rate volatility. Practical implications – The analysis of the behavior of inter-relationship among macroeconomic variables will help policymakers in a deep-rooted understanding of this complex and time-varying relationship. Originality/value – Most of the existing studies have tested the impact of a single or a few macroeconomic fundamentals on exchange rate. But in the present study, we have tested the impact of a range of important variables, i.e. money supply, real income or output, price level and trade balance. Further, considering the importance of structural breaks in data, they authors have employed standard tests of structural break and incorporated the issue in the cointegration analysis.
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Bonga-Bonga, Lumengo. "Equity Prices, Monetary Policy, And Economic Activities In Emerging Market Economies: The Case Of South Africa." Journal of Applied Business Research (JABR) 28, no. 6 (October 25, 2012): 1217. http://dx.doi.org/10.19030/jabr.v28i6.7337.
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<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none;" class="MsoNormal"><span style="font-family: Times New Roman;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;">This paper investigates the possible influence equity price shocks have on economic activities and inflation in emerging market economies such as South Africa. Moreover, the paper discusses the role monetary policy action should play in preventing or reducing the disruptive effects of equity market volatility in emerging markets. It uses the structural vector error correction (SVEC) model to identify the different shocks and obtain the impulse response functions in a case study of South Africa. The paper finds that positive shocks to equity prices negatively affect expected inflation in the first two quarters before the effect becomes positive. This finding indicates that initially </span><span lang="EN-ZA" style="color: black; font-size: 10pt; mso-themecolor: text1; mso-ansi-language: EN-ZA;">high stock market valuations raise the expectation of high capital and labour productivity by investors. Later on, the possibility of high stock prices increasing economic activity creates an expectation of high inflation rates in the future. From this finding, the paper concludes that the monetary authority in emerging markets in general and South Africa in particular should include equity prices in its reaction function. </span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>
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Kuznyetsova, Angela, Olha Klishchuk, Andrew Lisnyak, Atik Kerimov, and Azer Babayev. "Innovation Mechanism in Monetary Policy Forecasting: Unification of all Macroeconomic Puzzles in SVAR Model." Marketing and Management of Innovations, no. 4 (2020): 219–30. http://dx.doi.org/10.21272/mmi.2020.4-17.
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The article is devoted to developing a forecasting mechanism unifying all macroeconomic puzzles, which violate fundamental macroeconomic relationships among variables of the monetary transmission mechanism in Ukraine. The violations mentioned above caused by breaking one-law price (PPP puzzle), uncovered interest rates rule (UIP puzzle), plausible emergence of new sophisticated financial instruments, and causality of international risk-sharing conditions under the financial capital spillover. The authors calculated the residuals in the VAR model of monetary transmission mechanism (MTM) to analyze the correlations between shocks and disturbances in these variables. Furtherly these correlations were put in constructing the restriction matrix for building a structural vector autoregressive model. The correlations between shocks and disturbances were employed for estimating the impulse response functions used for determining the duration of half-life shocks for the real exchange rate. The obtained results allowed noticing that relationships between macroeconomic variables in the monetary transmission mechanism were not similar if considering the established foreign exchange arrangement. In particular, during 2007-2020, relationships among MTM variables were violated. Besides, the half-life duration of the real exchange rate was far longer. While in cases for Ukraine before switching to floating exchange rate regime and after it became less explicit and half-lives were shorter. The findings allowed confirming the impact of the currency arrangement switching on violation of traditional linkages between the variables of foreign exchange rate channel of MTM. Thus, it showed that during the fixed arrangement, absolutely all reactions were violated. Although after the introduction of a flexible exchange rate, the sign of REER correlation with foreign trade terms has changed to positive and more strengthened. Therefore, it has demonstrated a positive impact on the dynamics of real GDP and lower inflation. The findings of the current study could be used to improve existed methodical approaches for establishing structural constraints on variables responses to the shock of the exchange rate. The algorithm for designing optimal monetary policy strategies could take place in empirical data and forecasting exchange rate volatility. Keywords: PPP puzzle, UIP puzzle, MTM, financial innovations, REER, SVAR.
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Potter, Simon M. "Nonlinear impulse response functions." Journal of Economic Dynamics and Control 24, no. 10 (September 2000): 1425–46. http://dx.doi.org/10.1016/s0165-1889(99)00013-5.
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Montes‐Rojas, Gabriel. "Multivariate Quantile Impulse Response Functions." Journal of Time Series Analysis 40, no. 5 (April 21, 2019): 739–52. http://dx.doi.org/10.1111/jtsa.12452.
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Liu, Xiaochun. "Structural Volatility Impulse Response Function and Asymptotic Inference." Journal of Financial Econometrics 16, no. 2 (October 6, 2017): 316–39. http://dx.doi.org/10.1093/jjfinec/nbx029.
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Allen, David E., Michael McAleer, Robert Powell, and Abhay K. Singh. "Volatility spillover and multivariate volatility impulse response analysis of GFC news events." Applied Economics 49, no. 33 (December 6, 2016): 3246–62. http://dx.doi.org/10.1080/00036846.2016.1257210.
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Lin, Wen-Ling. "Impulse Response Function for Conditional Volatility in GARCH Models." Journal of Business & Economic Statistics 15, no. 1 (January 1997): 15. http://dx.doi.org/10.2307/1392069.
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Lin, Wen-Ling. "Impulse Response Function for Conditional Volatility in GARCH Models." Journal of Business & Economic Statistics 15, no. 1 (January 1997): 15–25. http://dx.doi.org/10.1080/07350015.1997.10524682.
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Tubiello, Francesco N., and Michael Oppenheimer. "Impulse-response functions and anthropogenic CO2." Geophysical Research Letters 22, no. 4 (February 15, 1995): 413–16. http://dx.doi.org/10.1029/94gl03276.
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Breitung, Jörg, and Philip Hans Franses. "Impulse response functions for periodic integration." Economics Letters 55, no. 1 (August 1997): 35–40. http://dx.doi.org/10.1016/s0165-1765(97)00047-5.
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Wickens, Michael R., and Roberto Motto. "Estimating shocks and impulse response functions." Journal of Applied Econometrics 16, no. 3 (2001): 371–87. http://dx.doi.org/10.1002/jae.617.
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