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•Granger causality tests performed for GDP and energy consumption (EC) in US states.•Panel Granger causality is tested for the US and for regions within the US.•Wide variation between ...US states and regions.•Including capital and labor changes direction of Granger causality in 35/50 states.•Energy conservation policy design should accommodate within-country variation.
Does energy consumption lead to economic growth or does economic growth cause energy consumption? Arguments can be made either way and empirical studies have been inconclusive. Most of the existing studies relating Gross Domestic Product (GDP) and Energy Consumption (EC) use countries as the unit of observation which complicates the interpretation and generalization of results because countries differ greatly in their stage of economic development, culture, technology and so forth. This study focuses on states within the U.S.A. which avoids many of these complications. Specifically, the relationship between state energy consumption and state GDP for the country is analyzed. Empirical results using panel cointegration and panel causality tests which allows for heterogeneity and structural breaks are applied to the country as a whole and regions within the country. There are significant regional differences within the U.S. especially for two regions; in the Rocky mountain region energy consumption Granger causes state GDP and in the Southwest it is opposite, GDP Granger causes energy consumption. The full results suggest that federal energy policy needs to be flexible to be most beneficial to the different regions.
A nonparametric procedure for identifying the differencing operator of a non-stationary time series is presented and tested. Any proposed differencing operator is first applied to the time series, ...and the spectral density is tested for zeroes corresponding to the polynomial roots of the operator. A nonparametric tapered spectral density estimator is used, and the subsampling methodology is applied to obtain critical values. Simulations explore the effectiveness of the procedure under a variety of scenarios involving non-stationary processes.
Domestic trade is an essential contributor to economic growth and an indicator of the people’s welfare. It is vulnerable to the COVID-19 crisis due to the pandemic itself and the government’s ...measures against it. An accurate estimation of the pandemic influence on domestic trade is needed for effective economic intervention in support of the economic recovery and improvement of the well-being of the population. The aim of this paper is to estimate the magnitude and timing of the COVID-19 impact on domestic trade in Bulgaria. The data used in the study covered the period 2000–2020 with monthly data for the indicator “Turnover for wholesale and retail trade and repair of motor vehicles and motorcycles in Bulgaria.” This paper employed unit root tests, autocorrelation function analysis, building, estimating, forecasting ARIMA and ARCH models, and intervention analysis. The results revealed that Bulgarian domestic trade followed the difference-stationary process as unit root tests failed to reject the random walk hypothesis. The COVID-19 impact on domestic trade proved to be long-lasting and has permanently decreased its level since March 2020. The timing of the impact coincided with the government’s measures against the pandemic. The drop in the volume of domestic trade was substantial and estimated at 19.3%. Following the nature of domestic trade, determined and decisive intervention is necessary if the Bulgarian government seeks to expand domestic demand and successfully procure economic recovery.
The effect of the single currency on the Purchasing Power Parity (PPP) hypothesis is examined in this study for the 15 EU countries, vis a vis the US dollar, before and after the advent of the euro. ...Standard as well as nonlinear unit root tests are employed on the time series dimension. Unit root tests reject PPP and the highest half-lives are observed after the introduction of the single currency. Panel unit root (Pesaran, 2007) and stationarity tests (Hadri and Kurozumi, 2008) that take into account cross-sectional dependence are also estimated. The results remain inconclusive as panel stationarity tests fail to support PPP whereas panel unit root tests fail to reject PPP for the whole sample and for the period before the introduction of the single currency.
LONG MEMORY VIA NETWORKING Schennach, Susanne M.
Econometrica,
November 2018, Letnik:
86, Številka:
6
Journal Article
Recenzirano
Odprti dostop
Many time series exhibit "long memory": Their autocorrelation function decays slowly with lag. This behavior has traditionally been modeled via unit roots or fractional Brownian motion and explained ...via aggregation of heterogeneous processes, nonlinearity, learning dynamics, regime switching, or structural breaks. This paper identifies a different and complementary mechanism for long-memory generation by showing that it can naturally arise when a large number of simple linear homogeneous economic subsystems with short memory are interconnected to form a network such that the outputs of the subsystems are fed into the inputs of others. This networking picture yields a type of aggregation that is not merely additive, resulting in a collective behavior that is richer than that of individual subsystems. Interestingly, the long-memory behavior is found to be almost entirely determined by the geometry of the network, while being relatively insensitive to the specific behavior of individual agents.
This paper proposes unit root tests for dynamic heterogeneous panels based on the mean of individual unit root statistics. In particular it proposes a standardized t-bar test statistic based on the ...(augmented) Dickey–Fuller statistics averaged across the groups. Under a general setting this statistic is shown to converge in probability to a standard normal variate sequentially with T (the time series dimension) →∞, followed by N (the cross sectional dimension) →∞. A diagonal convergence result with T and N→∞ while N/T→k,k being a finite non-negative constant, is also conjectured. In the special case where errors in individual Dickey–Fuller (DF) regressions are serially uncorrelated a modified version of the standardized t-bar statistic is shown to be distributed as standard normal as N→∞ for a fixed T, so long as T ¿ 5 in the case of DF regressions with intercepts and T ¿ 6 in the case of DF regressions with intercepts and linear time trends. An exact fixed N and T test is also developed using the simple average of the DF statistics. Monte Carlo results show that if a large enough lag order is selected for the underlying ADF regressions, then the small sample performances of the t-bar test is reasonably satisfactory and generally better than the test proposed by Levin and Lin (1993).
The nonlinear unit root test of Kapetanios, Shin, and Snell (2003) (KSS) has attracted much recent attention. However, the KSS test relies on the ordinary least squares (OLS) estimator, which is not ...robust to a heavy-tailed distribution and, in practice, the test suffers from a large power loss. This study develops three kinds of quantile nonlinear unit root tests: the quantile t-ratio test; the quantile Kolmogorov-Smirnov test; and the quantile Cramer-von Mises test. A Monte Carlo simulation shows that these tests have significantly better power when an innovation follows a non-normal distribution. In addition, the quantile t-ratio test can reveal the heterogeneity of the asymmetric dynamics in a time series. In our empirical studies, we investigate the unit root properties of U.S. macroeconomic time series and the real effective exchange rates for 61 countries. The results show that our proposed tests reject the unit roots more often, indicating that the series are likely to be asymmetric nonlinear reverting processes.
•M1 velocity is, approximately, the permanent component of the short-term rate.•Agents-in deciding how much wealth to allocate to non interest-bearing M1, as opposed to interest-bearing assets-almost ...uniquely react to permanent shocks to the opportunity cost, ignoring transitory shocks.•Money-demand models must be modified to allow for such distinct reaction to permanent and transitory shocks to the opportunity cost.•Under monetary regimes making inflation stationary, permanent fluctuations in velocity uniquely reflect, to a close approximation, permanent shifts in the natural rate of interest.
M1 velocity is, approximately, the permanent component of the short-term rate. This implies that agents—in deciding how much wealth to allocate to non interest-bearing M1, as opposed to interest-bearing assets—almost uniquely react to permanent shocks to the opportunity cost, essentially ignoring transitory shocks. This suggests that money-demand models must be modified to allow for such distinct reaction to permanent and transitory variation in the opportunity cost of holding M1. Under monetary regimes making inflation stationary, permanent fluctuations in M1 velocity uniquely reflect, to a close approximation, permanent shifts in the natural rate of interest.
This study probes the role of disaggregated financial development and renewable energy in carbon emissions by incorporating gross fixed capital formation and economic growth in the function of carbon ...emissions. The financial development is measured through the stock market and banking sector development. We also examine the validity of the EKC hypothesis, using the data of G-7 and N-11 countries spanning from 1990 to 2016. The integration properties of the considered variables are examined through second generation unit roots tests. The Lagrange Multiplier (LM) bootstrap panel cointegration method has confirmed the long-run equilibrium relationship among the variables for all the four models used. The long-run elasticity results suggest that renewable energy increases environmental quality by reducing carbon emission intensity for both groups of panel countries. Banking development index decreases carbon emissions in G-7 countries, while increases carbon emissions in N-11 countries. Similarly, stock market development index increases carbon emissions in G-7 countries, while decreases in N-11 countries. Overall, economic growth and fixed capital formation impede environmental quality by accelerating the intensity of carbon emissions. This study suggests policy implications based on the empirical results for both groups of countries.
•This study examines the effect of stock market, banking sector development and renewable energy on carbon emissionsin G-7 and N-11 countries.•The Lagrange Multiplier (LM) bootstrap panel Cointegration approach used to find cointegration.•Banking development index decreases carbon emissions in G-7 countries, while increases carbon emissions in N-11 countries.•Stock market development index increases carbon emissions in G-7 countries, while decreases in N-11 countries.•Renewable energy increases environmental quality by reducing carbon emission intensity for both groups of panel countries.
This study aims to investigate the initial effectiveness of the international trade in the Belt and Road Initiatives (BRI), which encompasses 64 countries along the Belt and Road as part of China's ...political and economic network for the years beginning with 2013. To determine the initial effectiveness in the international trade associated with the BRI, we adopt the traditional augmented Dickey-Fuller (ADF) test and the one-time structural breakpoint in the bilateral trade data between China and these 64 countries along the Belt and Road from 2010 to 2017. The results show that, for 46 (72%) countries, the trade flows with unit roots and the shocks of trade flows appear to occur more frequently following the announcements of the initiatives among these countries. As for the remaining countries, the trade flows exhibit stationary time series over the 2010-2017 period. Both the 21st century maritime silk road and the silk road economic belt initiatives have affected the bilateral trade volumes of these countries along with the belt and road initiatives, and bilateral commerce mechanisms are able to serve as a stabilizing force in accelerating the economic integration of countries along the route.
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