Journals
Journal:
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
ISSN:
0275-5319
Year:
2024
Vol.:
67
N°:
A
pp.
102087
This paper analyses the stochastic behaviour of private equity returns (a measure of profitability) applying fractional integration to an extensive dataset including quarterly data spanning the last four decades for various geographical areas (US, Europe, Asia/Pacific, the Rest of the World and Total) and investment types (Buyout & Growth Equity, Venture Capital & Fund of Funds, Infrastructure, Natural Resources, Real Estate, Subordinated Capital & Distressed as well as the aggregate category All Types). The results support the hypothesis of stationarity and mean reversion in all cases; however, there are differences in the degree of persistence across regions, the series for Europe being the closest to a short-memory process, while those for the US exhibit long memory, which implies that shocks have long-lived effects. Differences are also found in the results by asset class. The implications of these findings for private equity management, profit smoothing and return benchmarking are briefly discussed.
Authors:
Claudio-Quiroga, G. (Autor de correspondencia); Gil, Luis Alberiko; Gil-López, A.; et al.
Journal:
JOURNAL OF SUSTAINABLE TOURISM
ISSN:
0966-9582
Year:
2023
Vol.:
31
N°:
8
pp.
1818 - 1830
This paper analyses how the COVID-19 pandemic has influenced employment in the Spanish tourism sector from a gender perspective and aims to infer its impact on sustainability. We use employment data from 2002 (Q1) to 2020 (Q4) on women and men in the Spanish hospitality sector and employ fractional integration methods to determine the temporary scope of the shock. Our results suggest that the impact of the pandemic will have a permanent effect, unless strong policy measures are adopted to resume pre-crisis trends. We also found that persistence is higher for women's than for men's employment. Therefore, women seem to be more vulnerable to the shocks of COVID-19, making sustainable development of tourism in Spain more difficult. Based on our results, we offer policy recommendations to counter the impact of the COVID-19 pandemic on gender equality and tourism sustainability.
Authors:
Gil, Luis Alberiko; Martín-Valmayor, M. A. (Autor de correspondencia); Hube-Antoine, C.
Journal:
STOCHASTIC ENVIRONMENTAL RESEARCH AND RISK ASSESSMENT
ISSN:
1436-3240
Year:
2023
Vol.:
37
N°:
7
pp.
2713 - 2724
This paper deals with the study of stationarity and mean reversion in the temperature anomalies series in the southwestern American cone. In particular, monthly temperatures in 12 Chilean meteorological stations were studied (from the 1960's to nowadays), examining if temperature shocks are expected to remain in the long term or if they are reversible. The results clearly show a significant relationship between the latitude, climate, and the order of integration of the temperatures. The orders of integration tend to be smaller in colder southern parts, therefore impacts of climate change are expected to be more reversible. However, in northern desert areas the orders of integration are larger than 0.5, thus impacts are expected to be maintained for a longer time.
Journal:
JOURNAL OF ECONOMIC STUDIES
ISSN:
0144-3585
Year:
2023
Vol.:
50
N°:
3
pp.
448 - 463
Purpose In particular, in this article, the authors investigate the degree of persistence in the credit-to-gross domestic product (GDP) ratio in 44 Organisation for Economic Co-operation and Development (OECD) economies in the context of nonlinear deterministic trends. Design/methodology/approach The authors use Chebyshev's polynomials in time, which allow us to model changes in the data in a smoother way than by structural breaks. Findings This study's results indicate that approximately one-quarter of the series display non-linear structures, and only Argentina displays a mean reverting pattern. Research limitations/implications Policy implications of the results obtained are discussed at the end of the manuscript. Originality/value The authors use an approach developed that allows for non-linear trends based on Chebyshev polynomials in time, with the residuals being fractionally integrated or integrated of order d, where d can be any real value.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2023
Vol.:
82
pp.
103546
This paper deals with the behavior of energy price changes and how their shocks exert an impact on suppliers and consumers in different markets. For this purpose, a fractional integration model is used to evaluate the persistence and mean reversion in prices across the major European markets (Germany, France, Italy, UK, Spain). We compare the results with other major players as the US and Japan, to understand, first, if the European behavior is different, and second, if geopolitical shocks that are affecting this market are expected to be permanent. Empirical results show evidence of mean reversion properties in European prices, though some minor differences arise from market to market that apparently, are not associated with the energy generation strategies followed by each country. Thus, it will likely be expected following the current energy shocks the series will recover due to natural market forces, without the need for additional policies.
Authors:
Ayestaran, R.; Infante, J.; Tenorio, J. J.; et al.
Journal:
MATHEMATICS
ISSN:
2227-7390
Year:
2023
Vol.:
11
N°:
10
pp.
2365
This paper deals with the analysis of the persistence in the Harmonized Indices of Consumer Prices in France, Germany, Italy, and Spain. The degree of persistence is measured through fractional integration or I (d) techniques, using monthly data from January 2010 to February 2023. We first conducted the analysis with data ending in December 2019, that is, with data prior to the COVID-19 pandemic. Then, we extended the sample, first up to December 2021 and finally to February 2023. Our results show that the findings of our series are highly persistent, with values of the differencing parameter about one or higher than one in the majority of cases. In fact, mean reversion is only observed in the case of Germany with pre-pandemic data. Generally, we observed an increase in the degree of persistence of the series as a consequence of both the COVID-19 pandemic and the Russia-Ukraine war, with the only exception being Spain, where we observe a reduction in the order of integration when including 2022-2023 data.
Authors:
Adekoya, O. B.; Abakah, E. J. A.; Oliyide, J. A.; et al.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2023
Vol.:
88
pp.
92 - 106
The market for green bonds has grown dramatically over the past several years, necessitating an understanding of the variables that might forecast its performance. Studies on how the green bond market interacts with other markets are widely discussed in the literature, but little is known about the variables that improve predictions of green bond returns. In this study, we use data on commodity and financial asset prices, as well as speculative factors, to predict the returns on green bonds using the Feasible Quasi-Generalized Least Squares (FQGLS) and the causality-inquantiles estimators. The findings demonstrate that most factors are significant predictors of the returns on green bonds, with speculative factors having a detrimental predictive influence, and commodity and financial asset prices having a mixed predictive impact. When asymmetries are taken into account, the asymmetric predictive model performs better at predicting the returns on green bonds than its symmetric counterpart in most instances. Finally, all the factors, except investors' sentiment, affect the returns on green bonds in a variety of market situations. The interdependence among the global financial and commodity markets, as well as economic uncertainties justify the established predictive influence, since green bonds are a component of the broader investment bonds.
Journal:
PLOS ONE
ISSN:
1932-6203
Year:
2023
Vol.:
18
N°:
3
This paper investigates whether gold and silver can be considered safe havens by examining their long-run linkages with 13 stock price indices. More specifically, the stochastic properties of the differential between gold/silver prices and 13 stock indices are analysed applying fractional integration/cointegration methods to daily data, first for a sample from January 2010 until December 2019, then for one from January 2020 until June 2022 which includes the Covid-19 pandemic. The results can be summarised as follows. In the case of the pre-Covid-19 sample ending in December 2019, mean reversion is found for the gold price differential only vis-a-vis a single stock index (SP500). whilst in seven other cases, although the estimated value of d is below 1, the value 1 is inside the confidence interval and thus the unit root null hypothesis cannot be rejected. In the remaining cases the estimated values of d are significantly higher than 1. As for the silver differential, the upper bound is 1 only in two cases, whilst in the others mean reversion does not occur. Thus, the evidence is mixed on whether these precious metals can be seen as safe havens, though it appears that this property characterises gold in a slightly higher number of cases. By contrast, when using the sample starting in January 2020, the evidence in favour of gold and silver as possible safe havens is pretty conclusive since mean reversion is only found in a single case, namely that of the gold differential vis-a-vis the New Zealand stock index.
Journal:
ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
ISSN:
0944-1344
Year:
2023
Vol.:
30
N°:
12
pp.
35384 - 35397
This paper deals with the analysis of mean reversion and convergence of the ecological footprint (EF) in the MENA region. Using a long memory model based on fractional integration, we find that the results are very heterogeneous across countries depending on the assumptions made on the error term and the use of original versus logged data. Nevertheless, some conclusions can be obtained. Thus, mean reversion is decisively found in the case of Tunisia, and other countries showing some degree of reversion to the mean include Israel, Syria, Yemen, and Iran. Dealing with the issue of convergence within the MENA countries, similar conclusions hold and only Tunisia reports statistical evidence of convergence for the two types of errors. Additional evidence is found in the case of Syria, Yemen, and Jordan with uncorrelated errors and for Iran with autocorrelation. It is recommended that environmental policies targeted at stabilizing the trends in EF in the MENA region should not be indiscriminately applied in consideration of the heterogeneous nature of the series in the region.
Authors:
Claudio-Quiroga, G. (Autor de correspondencia); Gil, Luis Alberiko; Maiza-Larrarte, A.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2023
Vol.:
82
pp.
103433
In this paper we examine price persistence in a set of minerals critical for the production of new energy vehicles. We implement techniques based on fractional integration also allowing for non-linearities and structural breaks at unknown periods of time. The results show that the series are generally very persistent, with orders of integration equal to or higher than 1 in practically all cases. The only exceptions being cobalt, tin and zinc if breaks are permitted and only for a given subsample. These findings are extremely relevant to initiate a discussion about the challenges that the new energy vehicle industry faces in China. China's government has already enforced some relevant initiatives to stabilise prices, but we conclude that additional measures will be necessary considering the high degree of uncertainty of certain supply-demand factors.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1076-9307
Year:
2023
Vol.:
28
N°:
2
pp.
1488 - 1496
The motivation of this article is that despite the rising geopolitical events across the globe, several aspects of geopolitical risks have not been sufficiently explored in the literature including the persistence and dependence in the geopolitical risks. This article examines geopolitical risk in terms of time series persistence. In doing so, we are able to determine the nature of the shocks, which are either transitory or permanent depending on the integration order of the series. We examine 19 countries from January 1985 to February 2020. Our results show evidence of positive time trends in the cases of Mexico and Venezuela, and negative ones for South Africa and Argentina. These results are robust across seasonal and non-seasonal data and for different modelling assumptions for the error term. With respect to the degree of persistence, the different parameter is found to be in the range (0, 1) although we also observe heterogeneity across all countries.
Authors:
Gil, Luis Alberiko; Infante, J.; Martín-Valmayor, M. A. (Autor de correspondencia)
Journal:
THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE
ISSN:
1062-9769
Year:
2023
Vol.:
89
pp.
347 - 357
This paper investigates long memory, persistence and co-movements in the most representative stock markets from all over the world. We look at seven stock market indices from Europe, Asia and North America, first individually, by looking at the order of integration of the series from a fractional point of view and comparing different sampling periods (daily, weekly and monthly) for the time period 2009-2020. Then, co-movements across the series are examined by looking at the differences between them. The results indicate that all the individual series are highly persistent, with orders of integration close to 1 in most cases; evidence of a small degree of mean reversion is found in the two American indices (S & P500 and Dow Jones) and, generally, lower orders of integration are found at lower sampling frequencies. Focusing on the co-movements across the series, we observe a reduction in the degree of persistence in the one-by-one differential comparison of the series. Even though the differencing parameter is small compared with what we should have obtained under standard cointegration, this factor still shows long-memory as it ranges in the interval (0.5, 1) in the majority of cases; and appears to be greater when comparing markets from the same geographic region, showing evidence that the convergence process between the stocks is slower between markets of the same continents.& COPY; 2022 The Author(s). Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois.This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2023
Vol.:
55
N°:
30
pp.
3498 - 3513
In this article, we investigate the statistical features of the CO2 emissions and CO2 emissions per capita in a group of 45 African countries by looking at their degree of persistence and also testing for the existence of trends in the data. In addition, we also investigate if this level of emissions is related to the Chinese FDI in Africa. The results are very heterogeneous across countries, observing orders of integration statistically below 1 in a group of countries; in others, the majority of them, the values are around 1, while for some others, the degree of integration is statistically significantly above 1. Linear time trends are observed in approximately half of the countries. These results imply that, in the long term, public measures to reduce CO2 emissions may be required in the majority of the countries since in the event of shocks the series will not return by themselves to their original levels. If we look at Chinese FDI in these countries, we observe that there seems to be no relationship between the Chinese investment in Africa and the CO2 emission persistence, though this result needs to be contrasted in future research.
Authors:
Caporale, G. M.; Infante, J.; del Rio, M.; et al.
Journal:
POPULATION RESEARCH AND POLICY REVIEW
ISSN:
0167-5923
Year:
2023
Vol.:
42
N°:
4
pp.
66
This paper provides estimates of persistence in historical UK data on life expectancy applying fractional integration methods to both an annual series from 1842 to 2019 and a 5-year average from 1543 to 2019. This method is the most appropriate for our purposes since it is more general and flexible than the classical methods based on integer differentiation. The results indicate that the former exhibits an upward trend and is persistent but mean reverting; the same holds for the latter, though its degree of persistence is higher. Similar results are obtained for the logged values. On the whole, this evidence suggests that the effects of shocks to the series are transitory though persistent, which is useful information for policy makers whose task is to take appropriate measures to increase life expectancy.
Authors:
Gil, Luis Alberiko; Adebola Solarin, S. (Autor de correspondencia); Balcilar, M.; et al.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2023
Vol.:
64
N°:
3
pp.
1219 - 1246
The degree of persistence of the real gross domestic product per capita, total factor productivity and labour productivity has been examined in a group of 23 developed and developing nations, as well as the overall Euro Area, by evaluating the order of integration of the macroeconomic series over the annual period from 1890 to 2019. As against the conventional use of using integer degrees of differentiation (i.e. 0 for stationary processes and 1 in case of unit roots), fractional values have been utilized. The empirical findings provide evidence for mean reversion in both total factor productivity and the real gross domestic product per capita in Chile, Germany, the Netherlands and New Zealand. The results further suggest that mean reversion only occurs in labour productivity of Australia. The non-linearity analysis shows that non-linearity is also present in the majority of the series. The policy implications of the results are enumerated in the body of the paper.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2023
Vol.:
47
N°:
2
pp.
458 - 471
This paper deals with the analysis of the statistical properties of the profitability yielded by Private Equity from a fractionally integrated viewpoint. Using quarterly data from 1981q2 to 2021q3, the results support the hypothesis of stationarity and mean reversion in all cases; however, we observe differences in the degree of persistence across regions, Europe being the closest to short memory while the US shows the highest degree of long range dependence and thus the longer lasting effects of shocks. Some policy recommendations of the results obtained are included at the end of the manuscript.
Journal:
HELIYON
ISSN:
2405-8440
Year:
2023
Vol.:
9
N°:
4
pp.
e15084
We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques. The evidence suggests that stock markets generally follow a synchronized movement before and the stages of the pandemic shocks. We find while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices in whole sample analysis covering the period of August 02, 2019 and July 09, 2020. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management.
Authors:
Abakah, E. J. A.; Caporaleb, G. M. (Autor de correspondencia); Gil, Luis Alberiko
Journal:
HELIYON
ISSN:
2405-8440
Year:
2023
Vol.:
9
N°:
5
pp.
e15422
This paper analyses the effects of containment measures and monetary and fiscal responses on US financial markets during the Covid-19 pandemic. More specifically, it applies fractional integration methods to analyse their impact on the daily S & P500, the US Treasury Bond Index (USTB), the S & P Green Bond Index (GREEN) and the Dow Jones (DJ) Islamic World Market Index (ISLAM) over the period 1/01/2020-10/03/2021. The results suggest that all four indices are highly persistent and exhibit orders of integration close to 1. A small degree of mean reversion is observed only for the S & P500 under the assumption of white noise errors and USTB with autocorrelated errors; therefore, market efficiency appears to hold in most cases. The mortality rate, surprisingly, seems to have affected stock and bond prices positively with autocorrelated errors. As for the policy responses, both the containment and fiscal measures had a rather limited impact, whilst there were significant announcement effects which lifted markets, especially in the case of monetary announcements. There is also evidence of a significant, positive response to changes in the effective Federal funds rate, which suggests that the financial industry, mainly benefiting from interest rises, plays a dominant role.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2023
Vol.:
269
pp.
126779
The impact of geopolitical risk on energy markets has drawn attention to the need for better statistical modeling, especially of the crude oil markets and the shipping industry. In this work, the West Texas Intermediate crude oil price and the Baltic Dry Index behavior under the assumption of geopolitical risks are examined by using monthly data from January 1985 until May 2021. Using fractional integration methods, the results indicate that geopolitical risk and the Baltic Dry Index series will return to their original trends in the event of an exogenous shock, in contrast to the West Texas Intermediate behavior. These results are supported by analyzing the long-term relationship of the time series using the Fractional Cointegration Vector AutoRegressive approach. Finally, we use Bai and Perron (2003) and wavelet transform approaches to detect breaks in the prices paid for the maritime transport and for the crude oil prices caused by geopolitical risks.
Authors:
Abakah, E. J. A.; Tiwari, A. K.; Arthur, E. K.; et al.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2023
Vol.:
55
N°:
29
pp.
3404 - 3421
We contribute to the literature by studying the impact of economic policy uncertainty shocks on returns in the global art market, the global paintings market and the U.S.A art market from 1998:Q1 to 2018:Q3. Based on the frequency domain Granger causality test and continuous wavelets analysis, the results show that an increase in policy uncertainty shocks significantly reduces returns on art and paintings and that the effect is stronger during extreme volatility periods. Policy implications are derived at the end of the article.
Journal:
ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
ISSN:
0944-1344
Year:
2023
Vol.:
30
N°:
3
pp.
5603 - 5620
The degree of persistence in daily data for PM2.5 in 20 relevant megacities such as Bangkok, Beijing, Mumbai, Calcutta, Canton, Dhaka, Delhi, Jakarta, London, Los Angeles, Mexico City, Moscow, New York, Osaka. Paris, Sao Paulo, Seoul, Shanghai, Tientsin, and Tokyo is examined in this work. The analysis developed is based on fractional integration techniques. Specifically, the differentiation parameter is used to measure the degree of persistence in the series under study, which collects data on daily measurements carried out from January 1, 2018, to December 31, 2020. The results obtained show that the estimated values for the differentiation parameter are restricted to the interval (0, 1) in all cases, which allows us to conclude that there is a mean reverting pattern and, therefore, transitory effects of shocks.
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2023
Vol.:
26
N°:
6
pp.
1679 - 1693
This study examines the changes in the persistence and seasonality inherent in the Croatian tourism sector in light of the onset of the COVID-19 pandemic. First, we differentiate between the changes in the persistence and seasonal behavior with respect to domestic and foreign tourist arrivals and overnight stays. Second, with nearly 90% of the Croatian tourism sector tied to the seven counties along the Adriatic coast we investigate the differential regional impact on persistence and seasonal behavior. Our results indicate the disruption was much more prominent for foreign tourist arrivals and overnight stays relative to domestic tourist arrivals and overnight stays with respect to the increased persistence associated with the onset of the pandemic along with the seasonal autoregressive component reduced considerably.
Journal:
PLOS ONE
ISSN:
1932-6203
Year:
2023
Vol.:
18
N°:
7
pp.
e0287302
This paper deals with the analysis of trends in road accidents on highways in Brazil. We use time series techniques based on fractional integration that allow us to determine if exogenous shocks in the data have transitory or permanent effects depending on the order of integration of the series. Our results indicate that a low degree of long memory was detected in the series with shocks having thus transitory effects over time. We further find that the number of accidents have been reducing over time, though in the presence of negative shocks, the recovery is not going to be immediate due to the long memory nature of the data. Despite the absence of relevant investment relating to infrastructure expansion, it is worth mentioning the consolidation of a nationwide tolled road system in Brazil involving concessions to private administrators, alongside more severe traffic laws that can impose limitations on driving licences.
Authors:
Martín-Valmayor, M. A. (Autor de correspondencia); Gil, Luis Alberiko; Pardo Martín, Asís
Journal:
ECONOMIC ANALYSIS AND POLICY
ISSN:
0313-5926
Year:
2023
Vol.:
78
pp.
648 - 660
This paper investigates the market persistence and mean reversion properties for corn, bioethanol and gasoline prices in the US biofuel industry, evaluating long memory effects with fractional integration techniques from January 1982 to May 2022 with USDA data. Empirical results show evidence of no mean reversion properties for the prices in the three series though some support of it is found when the differences of bioethanol and gasoline are taken with respect to corn. Thus, external shocks in the original series are expected to remain persistent and would require additional policy measures to recover the original trend. Furthermore, the impact of Covid on the time series has been analyzed by comparing the scenarios pre and post pandemic, finding evidence of no major changes in the integration orders in all the series under analysis. (c) 2023 Economic Society of Australia, Queensland. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Journal:
INTERNATIONAL ADVANCES IN ECONOMIC RESEARCH
ISSN:
1083-0898
Year:
2023
Vol.:
29
N°:
1 - 2
pp.
79 - 90
This paper uses fractional integration methods to examine persistence, trends and structural breaks in United States house prices, more specifically the monthly Federal Housing Finance Agency House Price Index for census divisions, and the United States as a whole over the period from January 1991 to August 2022. The full sample estimates imply that the order of integration of the series is above one in all cases, and is particularly high for the aggregate series, implying high levels of persistence. However, when the possibility of structural breaks is taken into account, segmented trends are detected. The subsample estimates of the fractional differencing parameter tend to be lower, with mean reversion occurring in a number of cases. This means that shocks in the series are expected to be transitory in these subsamples, disappearing in the long run by themselves. In addition, the time trend coefficient is at its highest in the last subsample, which in most cases starts around May 2020 coincident with the beginning of the coronavirus pandemic. The results provide clear evidence of differences between census divisions, which implies that appropriate housing policies should be designed at the local (rather than at the federal) level.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2023
Vol.:
55
N°:
3
pp.
283 - 292
This paper uses fractional integration to assess the impact of US policy responses to the COVID-19 pandemic on 10 US sectoral stock indices from 1 January 2020 to 11 June 2021. The results provide evidence of mean reversion in most cases and suggest that the Effective Federal Funds Rate and monetary and fiscal announcements are the most effective policy tools.
Authors:
Bermejo, L.; Malmierca-Ordoqui, M. (Autor de correspondencia); Gil, Luis Alberiko
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2023
Vol.:
55
N°:
39
pp.
4511 - 4521
This paper examines the degree of persistence in monthly unemployment rates for a group of 24 European countries along with the global rate for the Euro area, the European Union, the G7 and the OECD countries. For this purpose, fractionally integrated methods are employed. Using data from January 2010 to November 2020, our results indicate that fractional integration is present in all countries examined, with the orders of integration of the series ranging in the (0, 1) interval. Comparing the data before COVID-19 with those including it, the significant time trend coefficient and the mean reverting property disappear in most cases when COVID-19 data are considered. This implies that governments should consider that, after the pandemic, shocks on the labour market will have permanent effects. Thus, policies should address unemployment accordingly. Our work, however, does not focus on the analysis of nonlinearities, what could provide a more complete understanding of the series behaviour.
Journal:
PLOS ONE
ISSN:
1932-6203
Year:
2023
Vol.:
18
N°:
2
pp.
e0281906
In this paper, the sales of vehicles in the US are examined to understand if the shock caused by the current COVID-19 pandemic has had permanent or transitory effects on its subsequent evolution. Using monthly data from January 1976 until April 2021 and fractional integration methods, our results indicate that the series reverts and the shocks tend to disappear in the long run, even when they appear to be long lived. The results also indicate that the COVID-19 pandemic has not increased the degree of persistence of the series but, unexpectedly, has slightly reduced its dependence. Thus, shocks are transitory, long lived but, as time goes by, the recovery seems to be faster, which is possibly a sign of the strength of the industry.
Journal:
ENERGY STRATEGY REVIEWS
ISSN:
2211-467X
Year:
2022
Vol.:
43
pp.
100924
The main cause of climate change are carbon dioxide emissions. In the context of the COVID-19 pandemic, the number of emissions has been significantly reduced for the first time in many years. Now it is necessary to answer the question of whether CO2 emissions are stationary or not, because the results will let us know whether environmental policies have to be strengthened rather than relaxed in intensity. To this end, this paper in-vestigates the persistence in CO2 emissions in a group of countries to determine if shocks in the series have permanent or transitory effects. The results, based on fractional integration indicate evidence of mean reversion, with values of the differencing parameter constrained between 0 and 1 in all cases, independently of the assumption made about the error term (white noise or autocorrelation). Focusing on the areas under examina-tion, it is obtained that the EU27+UK, Japan and the US present the lowest degrees of integration, while Russia, China and India display the highest values. Decreasing time trends are only observed for the EU27+UK and US.
Journal:
JOURNAL OF ECONOMIC STUDIES
ISSN:
0144-3585
Year:
2022
Vol.:
49
N°:
2
pp.
379 - 393
Purpose Using data from 1820 onwards in a group of seven countries, namely, Australia, Chile, Denmark, France, the UK, Italy and the USA, the authors investigate if there is a long-run equilibrium relationship between the two variables (GDP and population). Design/methodology/approach Using fractional integration and cointegration methods, this paper deals with the analysis of the relationship between GDP and population using historical data. Findings The authors' results show first that the two series are highly persistent, presenting orders of integration close to or above 1 in practically all cases. Testing cointegration between the two variables, the results are quite variable depending on the methodology and the bandwidth numbers used, but if cointegration takes places, it only occurs in the cases of France, Italy and the UK. Research limitations/implications The fact that the orders of integration of all series is close to 1 indicate high levels of persistence with shocks having permanent effects and requiring strong measures to recover the original trends. Practical implications Any shock affecting the series will have a permanent nature, persisting forever. Originality/value Updated time series techniques based on concepts such as fractional integration and cointegration are used.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2022
Vol.:
63
N°:
5
pp.
2331 - 2355
This paper investigates whether the real interest rate parity (RIRP) is valid during the three waves of globalizations that occurred in the last 150 years (1870-1914, 1944-1971, 1989 to the present). If any, these periods should favor RIRP, since globalization is a process where economies and financial markets become increasingly integrated into a global economic system. In contrast to the existing literature, we model the departures from RIRP as a long-term memory process and apply fractional integration methods on a sample of real interest rate differentials of seven developed countries: France, Germany, Holland, Italy, Japan, Spain, and the UK across the three globalization waves paired against the USA. We compute impulse response functions (IRF) to gain further insight into the memory characteristics of the RIRP differential processes and provide half-life estimates. We find that deviations from RIRP are mean reverting, providing robust evidence of real interest rate convergence during the three globalization waves. We shed further light on financial and commodity market integration during the three globalization waves by assessing the memory properties of uncovered interest rate parity (UIP) and relative purchasing power parity (PPP) differential processes. We find that deviations from relative PPP and UIP are not always mean-reverting processes. RIRP, relative PPP, and UIP hold simultaneously only in 7 out of 21 cases; RIRP and UIP hold in 11 out of 21 cases; RIRP hold without the support of relative PPP and UIP in 3 out of 21 cases. Thus, the evidence in favor of real interest rate convergence appears to be driven more by UIP than relative PPP. All these results are, to the authors knowledge, new to the literature.
Journal:
SOCIAL INDICATORS RESEARCH
ISSN:
0303-8300
Year:
2022
Vol.:
164
N°:
2
pp.
711 - 725
This paper investigates inequality persistence in a group of 21 OECD countries using linear and non-linear fractionally integrated methods. Using linear models, the results show that the series are strongly persistent which implies lack of average reversal and permanency of shocks. Mean reversion is only found in the case of Finland and partial evidence of mean reversion is detected for Belgium, Greece, Austria and the Netherlands. The results are similar using non-linear methods. Mean reversion is only found in the case of Finland, Belgium, Greece and Spain. Although, most countries show no evidence of non-linear structures except for four countries, namely, Finland, Spain, the United Kingdom and the United States. The implications of the empirical findings are reported at the end of the manuscript.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2022
Vol.:
78
pp.
141 - 152
This paper examines volatility persistence in leverage loan market price series for Australia, Canada, Europe, Japan, Singapore, UK and USA in the presence of structural breaks. To the best of our knowledge, this is the first empirical study to examine volatility persistence in the leveraged loan markets. To this end, using fractional integration methods, the results indicate that both absolute and squared returns display long memory features, with orders of integration confirming the long memory hypothesis. However, after accounting for structural breaks, we find a reduction in the degree of persistence in the leveraged loan market. The evidence of persistence in volatility implies that market participants who want to make gains across trading scales need to factor the persistence properties of leveraged loan price series in their valuation and forecasting models since that will help improve long-term volatility market forecasts and optimal hedging decisions.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2022
Vol.:
29
N°:
4
pp.
366 - 370
This note examines the stochastic behaviour of US monthly 10-year government bond yields. Specifically, it estimates a fractional integration model suitable to capture both persistence and non-linearities, these being two important properties of interest rates. Two series are analysed, one from Bloomberg including end-of-the-month values over the period January 1962-August 2020, the other from the ECB reporting average monthly values over the period January 1900-August 2020. The estimation results indicate that both are highly persistent and exhibit non-linearities, the latter being more pronounced in the case of the ECB series. Also, there is no conclusive evidence of the presence of structural breaks.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1076-9307
Year:
2022
Vol.:
27
N°:
1
pp.
439 - 454
This paper examines the degree of persistence in UK inflation by applying long-memory methods to historical data that span the period from 1660 to 2016. Specifically, we use both parametric and non-parametric fractional integration techniques, that are more general than those based on the classical I(0) vs. I(1) dichotomy. Further, we carry out break tests to detect any shifts in the degree of persistence, and also run rolling-window and recursive regressions to investigate its evolution over time. On the whole, the evidence suggests that the degree of persistence of UK inflation has been relatively stable following the Bretton Woods period, despite the adoption of different monetary regimes. The estimation of an unobserved¿components stochastic volatility model sheds further light on the issues of interest by showing that post¿Bretton Woods changes in UK inflation are attributable to a fall in the volatility of permanent shocks. The same type of analysis carried out for US inflation, for comparison purposes, leads to broadly similar conclusions.
Journal:
THEORETICAL AND APPLIED CLIMATOLOGY
ISSN:
0177-798X
Year:
2022
Vol.:
148
N°:
1-2
pp.
481 - 489
This paper deals with the relationship between the CO2 emissions and the global temperatures across the various pandemic episodes that have been taken place in the last 100 years. To carry out the analysis, first we conducted unit root tests finding evidence of nonstationary I(1) behavior, which means that a shift in time causes a change in the shape of distribution. However, due to the low statistical power of unit root tests, we also used a methodology based on long memory and fractional integration. Our results indicate that the emissions display very heterogeneous behavior in relation to the degree of persistence across pandemics. The temperatures are more homogeneous, finding values for the orders of integration of the series smaller than 1 in all cases, thus showing mean reverting behavior.
Journal:
AUSTRALIAN ECONOMIC PAPERS
ISSN:
0004-900X
Year:
2022
Vol.:
61
N°:
4
pp.
738 - 750
This paper analyses the persistence of research intensity in the OECD over the period 1870-2018. The goal is to test if the conclusion of the study conducted by Ang and Madsen (Ang, J. B., & Madsen, J. B. (2011). Can second-generation endogenous growth models explain the productivity trends and knowledge production in the Asian miracle economies? The Review of Economics and Statistics 2011, 93(4), 1360-1373), namely that the Schumpeterian growth models predict that research intensity is stationary, is correct. Using fractional integration methods on annual research intensity from 16 OECD countries, we observe that the series are very persistent. The order of integration is observed to be statistically higher than 1 in all the countries except Spain, rejecting thus the hypothesis of stationarity. When the likelihood of non-linear trends is considered in the analysis, the results are not materially different. An implication of the results is that policies aimed at boosting research activities will have a long-term impact on research intensity.
Journal:
JOURNAL OF AGRICULTURAL AND RESOURCE ECONOMICS
ISSN:
1068-5502
Year:
2022
Vol.:
47
N°:
2
pp.
262 - 277
This paper deals with the analysis of world commodity prices by examining 15 categories ofcommodity prices using fractional integration and including thus fractional points. We use datacorresponding to the 1960-2018 period obtained from the World Bank, and the results indicatehigh degrees of persistence in the majority of the series, especially when using parametricmethods. However, mean reversion is obtained in many cases when using semiparametricapproaches. The possibility of structural breaks is also considered, and our results confirm thehigh degree of persistence in the data, which seems to have increased across time
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2022
Vol.:
28
N°:
6
pp.
1676 - 1682
This research note examines the change in the degree of persistence in the Croatian tourism indicators, foreign arrivals, and overnight stays, due to the COVID-19 pandemic using recursive estimation of a fractional integration model. The results indicate that the shock from the COVID-19 pandemic can be viewed as permanent in nature. The policy response to restore tourism to its original trend should consider whether such policies proceed as in the past with the promotion of the traditional tourism growth model or support the transformation toward a more sustainable tourism model.
Authors:
Caporale, G. M. (Autor de correspondencia); Gil, Luis Alberiko; Plastun, A.; et al.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2022
Vol.:
46
N°:
4
pp.
678 - 703
This paper uses R/S (Rescaled Range) analysis and fractional integration techniques to examine the persistence of two sets of 12 ESG (Environmental, Social and Governance) and conventional stock price indices from the MSCI ((Morgan Stanley Capital International) database over the period 2007-2020 for a large number of both developed and emerging markets. Both sets of results imply that there are no significant differences between the two types of indices in terms of the degree of persistence and its dynamic behaviour. However, higher persistence is found for the emerging markets examined (especially the BRICS, i.e. Brazil, Russia, India, China and South Africa), which suggests that they are less efficient and thus offer more opportunities for profitable trading strategies. Possible explanations for these findings include different type of companies' 'camouflage' and 'washing' (green, blue, pink, social, and Sustainable Development Goals-SDG) in the presence of rather lax regulations for ESG reporting.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2022
Vol.:
45
pp.
102189
This paper investigates the persistence in the US Treasury bond rate returns from 1946 to 2019 by using fractional integration. It is shown that the degree of integration of the series (and thus the level of persistence) reduces as we increase the time of the maturity rate from the 1-and 2-year rates to the 20-and 30-year bond rates.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2022
Vol.:
603
pp.
127860
This article investigates the statistical properties of the economic complexity data in a group of 29 OECD countries, testing for their degree of persistence by looking at the order of integration of the series from a fractional integration viewpoint. The results vary substantially depending on the assumptions made on the error term; in particular, mean reversion is only found in the case of Chile if the errors are uncorrelated; however, if autocorrelation is permitted, mean reversion is found in a group of ten countries, namely, Australia, Canada, Colombia, France, Greece, Ireland, Israel, Norway, New Zealand and South Korea. Robust estimation is conducted by means of non-parametric methods and non-linear structures, which are also incorporated in the model. Policy implications are derived at the end of the article.
Journal:
AUSTRALASIAN JOURNAL OF ENVIRONMENTAL MANAGEMENT
ISSN:
1448-6563
Year:
2022
Vol.:
29
N°:
4
pp.
386 - 404
Two features in time series data: the existence of time trends and the degree of persistence, are examined in this work on the nitrogen oxides emissions from 37 OECD countries. Updated techniques in time series are used that allow for fractional degrees of differentiation in the data. Thus, if the number of differences required is one, nitrogen oxides emissions are not mean reverting in the sense that if there is an exogenous shock (resulting from a technological advancement to change nitrogen oxides emissions), the effect of such shock on nitrogen oxides emissions will be permanent. Time trends are observed in half of the series. For these countries the trend coefficient is found to be positive in all cases. This is an indication that continuous technological progress is needed in taming NOx emissions. In addition to developing their own local technologies, less technologically endowed OECD countries should engage in collaboration with the more technologically endowed countries in order to facilitate increase in trans-border transfer of technology. The technologically advanced countries should also strive to continue to introduce better technologies in a bid to reduce NOx emissions. Most of the results show evidence for persistence of nitrogen oxides emissions.
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2022
Vol.:
28
N°:
3
pp.
654 - 660
This research note examines data on US citizens' overseas air passenger travel with respect to the degree of persistence, seasonality, nonlinearities, and fractional integration. Based on seasonally differenced data with allowance for autocorrelated errors, we find evidence of nonlinearity with moderate persistence and mean reversion in US overseas air travel. The results suggest that shocks to US overseas air travel will dissipate over time, and as such, the observed persistence and nonlinearity can provide useful information in the modeling and forecasting of future behavior.
Authors:
Abakah, E. J. A.; Tiwari, A. K.; Alagidede, I. P.; et al.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2022
Vol.:
47
pp.
102535
This study re-examines the empirical relationship between risk and return from 1994m12 to 2020m08 in fifteen international equity markets employing the novel time-varying Markov switching copula models. We provide first-time insightful evidence of time-varying Markov tail dependence structure and dynamics between risk and return in international equity markets. Results show that the dependence structure is positive for USA, UK, Germany, Italy, Brazil, Australia, Taiwan, Canada, Mexico, Japan, France and South Africa and negative for Singapore, India, Japan and China. Finally, we document the effects of policy uncertainty, geopolitical risk and VIX conditional on different markets states.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2022
Vol.:
78
pp.
102910
This paper investigates the long memory properties of the prices series of two major precious metals (gold and silver) and six non-precious metals (aluminium, copper, lead, zinc, tin and nickel) by using a fractional integration modelling framework, while controlling for structural breaks and non-linearities. We use daily data in a range from November 01, 2007 to March 20, 2020. From the results, Copper and Tin exhibit a very small degree of mean reversion. However, if autocorrelation is permitted, the unit root null hypothesis cannot be rejected in any of the series. We also account for structural breaks and non-linearities. We observe that all the series under investigation are exposed to multiple breaks. Results obtained under white noise errors shows some evidence of mean reversion for silver aluminium, copper, tin and zinc in some of the subsamples. However, under the assumption of Bloomfield autocorrelated errors the confidence intervals are so wide that we cannot confirm this evidence in any single case.
Journal:
EMERGING MARKETS FINANCE AND TRADE
ISSN:
1540-496X
Year:
2022
Vol.:
58
N°:
5
pp.
1502 - 1514
This paper examines stock market integration between the five ASEAN countries and both the US and China in turn, over the period from November 2002 to August 2020. The linkages between both aggregate and financial sector stock indices (both weekly and monthly) are analyzed using fractional integration and fractional cointegration methods. Further, recursive cointegration analysis is carried out for the weekly series to study the impact of the 2007-8 global financial crisis and the 2015 China stock market crash on the pattern of stock market co-movement. The main findings are the following. All stock indices exhibit long-range dependence. There is cointegration between the five ASEAN countries and the US but almost none between the former and China, except between Indonesia and China in the case of the financial sector. The 2007-8 global financial crisis and the 2015 Chinese stock market plunge weakened the linkages between the ASEAN five and both China and the US. The implications of these results for market participants and policy makers are discussed.
Journal:
THEORETICAL AND APPLIED CLIMATOLOGY
ISSN:
0177-798X
Year:
2022
Vol.:
150
N°:
3 - 4
pp.
1731 - 1744
This paper investigates the time series properties of the temperature and precipitation anomalies in the contiguous USA by using fractional differentiation. This methodology allows to capture time trend components along with properties such as long-range dependence and the degree of persistence. For aggregated data, we find out that long memory is present in both precipitation and temperature since the integration order is significantly positive in the two cases. The time trend is also positive, being higher for the temperature. In addition, observing disaggregated data by states, for the temperature, there are only seven states where the time trend is not significant, with most of them located in Southeast areas, while for the rest of cases, the time trend is significantly positive. All cases exhibit long-range dependence, though the differencing parameter substantially changes from one state to another, ranging from 0.09 in Nebraska and Kansas to 0.18 in Florida and Michigan. For precipitation, the time trend is insignificant in a large number of cases, and the integration order is smaller than for the temperature. In fact, short memory cannot be rejected in fourteen states, and the highest orders of differencing are obtained in Arizona (d = 0.11) and Texas (0.12). In general, we highlight that one cannot draw conclusions about persistence and trends in these two climate-related variables based on aggregate information of the overall USA, given widespread heterogeneity across the states. Tentatively, the degree of dependence across the states seems to be negatively correlated with their level of climate-related risks and the associated preparedness in terms of handling climate change, but this conclusion requires more elaborate research in the future.
Journal:
THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE
ISSN:
1062-9769
Year:
2022
Vol.:
86
pp.
118 - 123
This paper analyses the possible effects of the Covid-19 pandemic on the degree of persistence of US monthly stock prices and bond yields using fractional integration techniques. The model is estimated first over the period January 1966-December 2020 and then a recursive approach is taken to examine whether or not persistence has changed during the following pandemic period (up to February 2021). We find that the unit root hypothesis cannot be rejected for stock prices while for bond yields the results differ depending on the maturity date and the specification of the error term. In general, bond yields appear to be more persistent, although there is evidence of mean reversion in case of 1-year yields under the assumption of autocorrelated errors. The recursive analysis shows no impact of the Covid-19 pandemic on the persistence of stock prices, whilst there is an increase in the case of both 10- and 1- year bond yields but not of their spread.(c) 2022 The Author(s). Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois. CC_BY_4.0
Authors:
Claudio-Quiroga, G. (Autor de correspondencia); Gil, Luis Alberiko; Maiza-Larrarte, A.
Journal:
EMERGING MARKETS FINANCE AND TRADE
ISSN:
1540-496X
Year:
2022
Vol.:
58
N°:
6
pp.
1753 - 1770
This paper deals with the relationship between Foreign Direct Investment from China in Africa and the growth level in five African countries. Based on the high degrees of persistence observed in the data, we use techniques based on long memory models, and our results indicate that of the five countries examined, namely Kenya, Zimbabwe, Zambia, Nigeria and South Africa, only for Nigeria do we find a significant positive relationship between the two variables though under some assumptions, this evidence is also found in the cases of Kenya and South Africa. Several arguments are put forward at the end of the article to justify these results.
Journal:
COGENT ECONOMICS & FINANCE
ISSN:
2332-2039
Year:
2022
Vol.:
10
N°:
1
pp.
2159736
This paper assesses the impact of US policy responses to the Covid-19 pandemic on various technology-related assets such as cryptocurrencies, financial technology, and artificial intelligence stocks using fractional integration techniques. More precisely, it analyzes the behavior of the percentage returns in the case of nine major coins (Bitcoin-BITC, Stella-STEL, Litecoin-LITE, Ethereum-ETHE, XRP (Ripple), Dash, Monero-MONE, NEM, Tether-TETH) and two technology-related stock market indices (the KBW NASDAQ Technology Index-KFTX, and the NASDAQ Artificial Intelligence index-AI) over the period 1 January 2020-5 March 2021. The results suggest that fiscal measures such as debt relief and fiscal policy announcements had positive effects on the series examined during the pandemic, when an increased mortality rate tended instead to drive them down; by contrast, monetary measures and announcements appear to have had very little impact and the Covid-19 containment measures none at all.
Authors:
Yucel, A. G.; Koksal, C. (Autor de correspondencia); Acar, S.; et al.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2022
Vol.:
54
N°:
27
pp.
3074 - 3087
The aim of this paper is to analyze whether the profound effects of COVID-19 on Turkey's tourism sector will be permanent or transitory. Such an investigation deserves attention during the ongoing pandemic due to the importance of Turkey in the international tourism industry. To better understand and analyze the dynamics of tourism, we examine a long period of time spanning from January 1977 to March 2021 using a fractional integration approach. The findings provide clear-cut evidence that the shocks to the tourism sector display very low degrees of persistence in the pre-pandemic period whereas degrees of persistence in the post-pandemic period are very high. We also identify the changes in the persistence of tourism month by month. Overall, the impacts of COVID-19 on Turkey's tourism will not be transitory. Therefore, the government should be actively involved in the recovery process of the tourism sector if Turkey wants to reach the number of tourist arrivals it once used to host. Also, the methodology employed in this study could be used as a benchmark to explore the impacts of the ongoing pandemic on other sectors (JEL: C22: I15: L83: Z32).
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2022
Vol.:
28
N°:
3
pp.
646 - 653
We examine in this note the impact of COVID-19 on the Spanish tourism sector by using a strong dependence model. Daily data from five equity markets are used and we find that the coronavirus crisis has increased the persistence in the data, moving in some of the series from a mean reverting process to a non-mean reverting one. Thus, shocks that were expected to be transitory have become permanent, implying the need of strong policy measures to come the series back to their long-term projections.
Authors:
Caporale, G. M. (Autor de correspondencia); Gil, Luis Alberiko; Arrese-Lasaosa, I.
Journal:
HELIYON
ISSN:
2405-8440
Year:
2022
Vol.:
8
N°:
11
pp.
e11560
This paper analyses the impact of the Covid-19 pandemic on the degree of persistence of European stock markets. Specifically, it uses fractional integration methods to estimate persistence at the daily, weekly and monthly frequencies in the case of ten major European stock market indices; the effects of the pandemic are assessed by comparing the pre-pandemic estimates (over the period 2005-2019) to those from a sample extended until July 2021 which includes the pandemic period. The approach used is more general than the standard one based on the stationarity versus non-stationarity dichotomy and allows for a wider range of dynamic processes. Three different model specifications are considered, and these are estimated under two alternative assumptions for the disturbances (white noise and autocorrelation). The findings indicate that there has not been any significant impact of the Covid-19 pandemic on the degree of persistence of the European stock market indices, though their volatility persistence has decreased.
Authors:
Tiwari, A. K.; Abakah, E. J. A.; Karikari, N. K.; et al.
Journal:
THE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1062-9408
Year:
2022
Vol.:
62
pp.
101735
The outbreak of the novel corona virus has heightened concerns surrounding the adverse financial effects of the outbreak on stock market liquidity and economic policies. This paper contributes to the emerging strand of studies examining the adverse effects of the virus on varied aspect of global markets. The paper examines the causality and co-movements between COVID-19 and the aggregate stock market liquidity of China, Australia and the G7 countries (Canada, France, Italy, Japan, Germany, the UK and the US), using daily three liquidity proxies (Amihud, Spread and Traded Value) over the period December 2019 to July 2020. Our empirical analysis encompasses wavelet coherence and phase-differences as well as a linear Granger causality test. Linear cau-sality test results suggest that a causal relationship exists between the number of cases of COVID 19 infections and stock market liquidity. To quantitatively examine the degree of causality be-tween COVID-19 outbreak and stock market liquidity, we employ the continuous wavelet coherence approach with results revealing the unprecedented impact of COVID-19 on stock market liquidity during the low frequency bands for countries that were hard hit with the COVID-19 outbreak, i.e., Italy, Germany, France, the UK and the US. Further, evidence shows that there is a heterogeneous lead-lag nexus across scales for the entire period of the study.
Journal:
INTERNATIONAL JOURNAL OF ENVIRONMENTAL RESEARCH
ISSN:
1735-6865
Year:
2022
Vol.:
16
N°:
3
pp.
27
This paper analyses US sea level data using long memory and fractional integration methods. Specifically, monthly data for 41 US stations covering the period from January 1950 to December 2018 are examined. Fractional integration methods suggest that all series exhibit orders of integration in the interval (0, 1), which implies long-range dependence with positive values of the differencing parameter; further, significant positive time trends are found in the case of 29 stations located on the East Coast and the Gulf of Mexico, and negative ones in the case of four stations on the North West Coast, but none for the remaining 8 on the West Coast. The highest degree of persistence is found for the West Coast stations and the lowest for the East Coast ones. Thus, in the event of shocks, more decisive action is required in the case of West Coast stations for the series to revert to their original trend.
Journal:
BULLETIN OF ECONOMIC RESEARCH
ISSN:
0307-3378
Year:
2022
Vol.:
74
N°:
1
pp.
123 - 134
This paper proposes a new modeling framework capturing both the long-run and the cyclical components of a time series. As an illustration, we apply it to four US macro series, namely, annual and quarterly real gross domestic product (GDP) and GDP per capita. The results indicate that the behavior of US GDP can be captured accurately by a model incorporating both stochastic trends and stochastic cycles that allows for some degree of persistence in the data. Both appear to be mean reverting, although the stochastic trend is nonstationary, while the cyclical component is stationary, with cycles repeating themselves every 6-10 years.
Journal:
HELIYON
ISSN:
2405-8440
Year:
2022
Vol.:
8
N°:
2
pp.
e08898
This paper investigates unemployment persistence in the 27 EU member states by applying fractional integration methods to quarterly data (both seasonally adjusted and unadjusted) from 2000q1 to 2020q4. The obtained evidence points to high levels of persistence in all cases. With seasonally adjusted data, a small degree of mean reversion is found in the case of Belgium, Luxembourg and Malta, but this evidence disappears under the assumption of weakly correlated disturbances. More cases of mean reversion are found instead when analysing the unadjusted series. In particular, countries such as Belgium, France, Croatia, Italy, Luxembourg and Malta display orders of integration significantly lower than 1. In addition, significant negative time trends are found in the case of Bulgaria, Croatia, Malta and Romania, and a positive one for Luxembourg. Finally, the Covid-19 pandemic had mixed effects, with (seasonal) persistence increasing in some countries whilst decreasing in others and not changing in a minority of cases. On the whole, our results support the hysteresis hypothesis for the European economies.
Journal:
ANNALS OF OPERATIONS RESEARCH
ISSN:
0254-5330
Year:
2022
Vol.:
313
N°:
1
pp.
191 - 229
In this paper, we analyze the temporal dependence in energy prices and demand using daily data of Portugal and Spain over the period 2007-2017. The methodology used is based on a stochastic Hidden Markov Model and the results indicate first that all significant relationships between energy prices and demands were found to be positive; second, spot prices are only time dependent on future prices and spot energy, while future energy is solely time dependent on spot energy behavior; third, future prices are not only autocorrelated but also time-dependent with spot energy and future energy demands level; and finally, spot energy is autocorrelated and time-dependent with future prices and future energy. Policy implications of the results obtained are presented at the end of the article.
Journal:
WATER POLICY
ISSN:
1366-7017
Year:
2022
Vol.:
24
N°:
9
pp.
1383 - 1393
In this article, we carry out a study of the degree of persistence of a time series of data on freshwater use in the long term, using fractional integration or I(d) techniques. Using annual data from 1901 to 2014, we observe that the order of integration of the series is close to 1 if the errors are not correlated, and if they are correlated, then it is greater than 1. This shows that the series is highly persistent. On the other hand, we detect two structural breaks, one at 1951 and the other one at 1980. In these cases, we observe a reversion to the mean since the integration orders are much lower in the subsamples. This supports the hypothesis that when these breaks are not taken into account, there is an overestimation of the differentiation parameter, misspecifying the reversion to the mean of the data. The series also shows segmented trends with the higher time trend coefficient observed during the years 1951 and 1980.
Authors:
Yaya, O. S. (Autor de correspondencia); Ogbonna, A. E. ; Furuoka, F.; et al.
Journal:
OXFORD BULLETIN OF ECONOMICS AND STATISTICS
ISSN:
0305-9049
Year:
2021
Vol.:
83
N°:
4
pp.
960 - 981
This paper proposes a nonlinear unit root test based on the autoregressive neural network process for testing unemployment hysteresis. In this new unit root testing framework, the linear, quadratic and cubic components of the neural network process are used to capture the nonlinearity in a given time series data. The theoretical properties of the test are developed, while the size and the power properties are examined in a Monte Carlo simulation study. Various empirical applications with unemployment and inflation rates across a number of countries are carried out at the end of the article.
Authors:
Caporale, G. M. (Autor de correspondencia); Claudio-Quiroga, G.; Gil, Luis Alberiko
Journal:
JOURNAL OF INNOVATION AND ENTREPRENEURSHIP
ISSN:
2192-5372
Year:
2021
Vol.:
10
N°:
1
pp.
32
This paper examines the relationship between the logarithms of carbon dioxide (CO2) emissions and real Gross Domestic Product (GDP) in China by applying fractional integration and cointegration methods. These are more general than the standard methods based on the dichotomy between stationary and non-stationary series, allow for a much wider variety of dynamic processes, and provide information about the persistence and long-memory properties of the series and thus on whether or not the effects of shocks are long-lived. The univariate results indicate that the two series are highly persistent, their orders of integration being around 2, whilst the cointegration tests (using both standard and fractional techniques) imply that there exists a long-run equilibrium relationship between the two variables in first differences, i.e. their growth rates are linked together in the long run. This suggests the need for environmental policies aimed at reducing emissions during periods of economic growth.
Journal:
HELIYON
ISSN:
2405-8440
Year:
2021
Vol.:
7
N°:
10
pp.
e08105
The degree of persistence in daily PM25 and O-3 in the ten most populated US cities, namely New York, Los Angeles, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas and San Jose is examined in this work. We employ a methodology based on fractional integration, using the order of integration as a measure of the degree of persistence. Using data for the time period from January 1, 2019 to December 31, 2020, our results indicate that fractional integration and long memory features are both present in all the examined cases, with the integration order of the series being constrained in the (0, 1) interval. Based on this, the estimation of the coefficients for the time trend produces results which are substantially different from those obtained under the I (0) assumption.
Authors:
Li, X. X.; Sang, Y. F.; Sivakumar, B.; et al.
Journal:
JOURNAL OF HYDROLOGY
ISSN:
0022-1694
Detection of the type of trend in temperature data, by distinguishing between deterministic and stochastic trends, has important implications for understanding climate change. The Unit root tests (URTs) have been widely used for detecting the type of trend, but they do not consider the possibility of fractional integration and its influences. In this study, we detected the type of trends in observed surface air temperature during 1960-2019 at 558 stations across China, by considering fractional integration. The whole period was divided into three sub-periods by two structural breakpoints (denoted as SBP1 and SBP2). The fractional differencing parameter d was estimated by the Local Whittle (LW) function, and then three URTs (namely PP, KPSS, and ZA) were used to detect the type of trends in the temperature data during different sub-periods. The results indicated that the de-seasoned monthly temperature (DMT) series were fractionally integrated and, thus, exhibited long-range dependence characteristics, which significantly influenced the estimation of the slope of trend and detection of the type of trend. Compared with the LW function, the ordinary least squares method yielded biased estimation of the slope of trend, as it could not eliminate the influence of long-range dependence of the DMT series. The DMT series with weak long-range dependence or anti-persistent characteristics during 1960-SBP1, SBP1-SBP2, and SBP2-2019 were accurately detected as deterministic trends. However, the DMT series with strong long-range dependence during SBP1-2019 and 1960-2019 were detected to have stochastic trends by the KPSS test. Following the results of the fractional integration and URTs together, temperature over short periods in China were detected to have deterministic trends, but those at long periods were detected to have a combination of long-range dependence and deterministic trends.
Journal:
REVIEW OF FINANCIAL ECONOMICS
ISSN:
1058-3300
This paper uses fractional integration techniques to explore the stochastic properties of the Financial Stress Indices (FSIs) of 10 Asian countries, further investigating the bilateral linkages between them to ascertain how financial stress spreads among countries in the region. For the FSIs of each country, the results show that all the estimated orders of integration are in the interval (0, 1) implying fractional integration and a long memory pattern. Thus, shocks will have transitory though long-lasting effects. For the cross-country spillovers of the FSIs, we find that convergence is satisfied in all cases with values of the differencing parameter around 0 and thus showing short memory behavior. It is worth noting that for the larger economies in the region, Japan and China, financial stress transmission between Japan and the smaller economies was faster than with respect to China. Overall, the results provide valuable information on the financial market activity of the countries in the region. To check for the robustness of the baseline results we also use systemic risk measures for these countries, CoVaR with the results showing evidence of fractional integration for the individual series, with all values of the differencing parameter in the range (0, 1). For convergence, there is a substantial reduction in the degree of integration, though the results are not as clear as with the FSIs.
Journal:
TELLUS. SERIES A: DYNAMIC METEOROLOGY AND OCEANOGRAPHY (ONLINE)
ISSN:
1600-0870
Year:
2021
Vol.:
73
N°:
1
pp.
1 - 9
This paper deals with the time series analysis of precipitation patterns in Africa's most populated nation using recently developed flexible modelling techniques to study the monthly precipitation data of some major economically viable and highly populated regions in Nigeria. The results indicate that there is a significant trend for Lagos rainfall data, implying that precipitations have systematically increased over time in this city. Additionally, the seasonal component is more prominent in the cases of Kano and Kaunda than for Ibadan and Lagos. The findings of this study have relevant policy implications for forecasting, agricultural planning, relating precipitation variability in Nigeria with standard climate drivers, as well as for disaster or risk reduction in the context of climate change, global warming and migration in the post-pandemic era.
Journal:
SOCIAL INDICATORS RESEARCH
ISSN:
0303-8300
Year:
2021
Vol.:
155
pp.
563 - 581
This paper examines income poverty in Africa by looking at the time series properties of the series corresponding to the household consumer expenditures in 53 African countries. Using fractional integration the results indicate that the series are highly persistent, displaying orders of integration in the interval (0, 1) in some countries or values equal to or higher than 1 in some others. The main implication of the empirical findings is that long term policies aimed at addressing income poverty in the continent such as the policies on expansion of infrastructure and social amenities will have have long-lasting effects on poverty reduction.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2021
Vol.:
72
pp.
175 - 190
This paper examines GDP per capita in sub-Saharan Africa, studying its properties through fractional integration. This approach enables us to study issues such as trends, mean-reversion, nonstationarity and breaks in a more flexible way than standard methods. We find negative relationships between level of income and persistence, implying that countries with higher levels of GPD display lower degrees of integration, and thus effects of shocks disappearing faster than those in poorer countries. The paper examines the comparative institutional characteristics underpinning the time series growth properties of the selected African countries also contributing to the literature on institutions and growth.
Journal:
JOURNAL OF ECONOMIC INTEGRATION
ISSN:
1225-651X
Year:
2021
Vol.:
36
N°:
2
pp.
185 - 202
This paper investigates if financial markets in emerging Asia have become more globally or regionally integrated since the Asian financial crisis in the late 1990s. It employs a price-based measure of integration, namely, stock return differentials, between 10 emerging Asian economies and the United Stated (US) (as an indicator of global integration), as well as Japan and the Asian region (as two alternative indicators of regional integration), to test for mean reversion and draw inferences regarding financial integration. This paper makes a three-fold contribution to the literature. It uses not only aggregate but also industry-level data on stock returns, it examines the impact of the 2008 crisis, and it adopts a more general fractional integration approach. The evidence suggests that in emerging Asia, on both the aggregate and industry (especially for the financial sector) levels, there is more regional than global integration, and that the former became even stronger during the post-2008 crisis period. Furthermore, Japan's influence has been declining and the Chinese stock market has become more integrated, both regionally and globally.
Journal:
FRONTIERS IN PHYSICS
ISSN:
2296-424X
Year:
2021
Vol.:
9
pp.
797402
Global mean sea level data are examined in this work by looking at the presence of time trends in the context of long memory or long range dependent processes. By looking at both seasonal signals retained and seasonal signals removed data from 1992 to 2020, the results show that the two series display significant time trend coefficients and high levels of persistence.
Authors:
Monge, M. (Autor de correspondencia); Cristóbal Santamaría, E.; Gil, Luis Alberiko
Journal:
REVIEW OF DEVELOPMENT FINANCE
ISSN:
1879-9337
Year:
2021
Vol.:
11
N°:
1
pp.
26 - 34
Is lithium affecting business strategies in the sector? We employ methodologies based on Continuous Wavelet Transform (CWT) and fractional integration and cointegration vector autoregressive models (FCVAR) models to analyze how lithium prices influence mergers and acquisitions (M&A) in the lithium industry over the world. The univariate and the multivariate results obtained using long memory methods support the nonstationary nature of the data, but they seem to be linked in the long-term through a fractional cointegrated relationship. In addition, analysis in the time-frequency domain indicates that both series are highly correlated from 2015 to 2017, finding that the lithium prices explain the M&A behavior after mid-2016 until early 2017.
Journal:
OECONOMIA COPERNICANA
ISSN:
2083-1277
Year:
2021
Vol.:
12
N°:
4
pp.
863 - 888
Research background: China's economic growth, however remarkable, is due to the Harrod-Domar nature of economic growth and, therefore, limited. The main limitation lies in the extension of the neoclassical growth model and the government need to decrease regional disparities using new migration, urbanization and social policy. Purpose of the article: It is the rising regional disparity in the total factor productivity to cause the income inequality increase (measured by GINI index) in China from 1952-2017. Our paper brings new insight into the main inequality determinants and causes in China, using a fractional integration modeling framework. Methods: Using fractional integration, we find total factor productivity (TFP), real gross domestic product per capita and growth and expenditures for the social safety net and employment effort to have a statistically significant impact on GINI. Income inequality in China is of a persistent nature with the effects of the shocks affecting the GINI index enduring over time. Findings & value added: The results of this study highlight the importance for model/policy changes by the policy makers and practitioners in China to deal with the inequality issue. This involves improving the growth model through innovation and technological advancement, relaxing TFP dependence on the physical inputs (labor and capital) to reduce income inequality.
Journal:
JOURNAL OF RISK AND FINANCIAL MANAGEMENT
ISSN:
1911-8066
Year:
2021
Vol.:
14
N°:
12
The economic literature provides evidence that inflation rates can co-move across nations because of a host of reasons, ranging from low frequency changes in monetary policy to similar high frequency shocks. Hence, this paper investigates inflation rate co-movements between nine (9) African countries and their bilateral linkages with five (5) developed economies using continuous wavelets at different time scales or frequencies. Specifically, we examine the coherency and the phase relationship in time-frequency space in inflation rates of the selected countries. Several findings are documented. First, inflation rates co-movements in the nine African countries are time varying, multi-scale, and characterized by structural breaks. In addition, we find that inflation co-movements across countries in the Africa sub-region is weak at low frequencies. Furthermore, we find evidence of inflation co-movement between Africa and developed economies, suggesting that central banks and policy-makers in Africa need to monitor international price developments, and analyze their implications for their domestic economies. Second, we find that inflation rates in the selected African countries explain, on average, almost 80% of their own inflation variance over the whole sample period. Spillover analysis reveals that China and Canada account for a greater percentage of inflation variation in Africa.
Authors:
Antonakakis, N.; Christou, C. (Autor de correspondencia); Gil, Luis Alberiko; et al.
Journal:
INTERNATIONAL ECONOMICS
ISSN:
2110-7017
Year:
2021
Vol.:
167
pp.
29 - 38
Existing empirical evidence on the effect of inflation-targeting on inflation volatility is, at best, mixed. However, comparing inflation volatility across alternative monetary policy regimes, i.e., pre- and post-inflation-targeting, begs the question. The question is not whether the volatility of inflation has changed, but instead whether the volatility is different than it otherwise would have been. Given this, our paper uses the cosine-squared cepstrum to provide overwhelming international evidence that inflation targeting has indeed reduced inflation volatility in 22 out of the 24 countries considered in our sample of established inflation-targeters, than it would have been the case if the central banks in these countries did not decide to set a target for inflation.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2021
Vol.:
72
pp.
102040
This paper analyzes the dynamics of U.S. lithium mining companies, the lithium industry and West Texas Intermediate (WTI) crude oil prices using a Fractional Cointegration Vector AutoRegressive model (FCVAR model) and a Continuous Wavelet Transform (CWT) for its resolution. The results indicate evidence of a negative relationship between FMC Corp with Albermale and SQM stock prices. These results are similar if we analyze the risk based on the beta term structure of each company. Analyzing the fractional differencing parameter for the stock prices and their logs, we observe that they are very persistent, and there are no long-term deviations in the stock prices. The same happens when analyzing the beta term structure. Based on Continuous Wavelet Transform (CWT) methods, our results show that lithium mining companies and the lithium industry are weakly correlated with WTI crude oil prices at higher frequencies (short-run) and persist through the sample period. At lower frequencies (long-term) the time series reached a high level of dependence between late 2012 to mid 2016, concluding that the lithium mining companies and the lithium industry reflect and foreshadow the responsiveness of the WTI crude oil prices during the period mentioned above.
Authors:
Barani, S. (Autor de correspondencia); Cristofaro, L.; Taroni, M.; et al.
Journal:
FRONTIERS IN EARTH SCIENCE
ISSN:
2296-6463
Year:
2021
Vol.:
9
pp.
563649
The present study aims at proving the existence of long memory (or long-range dependence) in the earthquake process through the analysis of time series of induced seismicity. Specifically, we apply alternative statistical techniques borrowed from econometrics to the seismic catalog of The Geysers geothermal field (California), the world's largest geothermal field. The choice of the study area is essentially guided by the completeness of the seismic catalog at smaller magnitudes (a drawback of conventional catalogs of natural seismicity). Contrary to previous studies, where the long-memory property was examined by using non-parametric approaches (e.g., rescaled range analysis), we assume a fractional integration model for which the degree of memory is defined by a real parameter d, which is related to the best known Hurst exponent. In particular, long-memory behavior is observed for d > 0. We estimate and test the value of d (i.e., the hypothesis of long memory) by applying parametric, semi-parametric, and non-parametric approaches to time series describing the daily number of earthquakes and the logarithm of the (total) seismic moment released per day. Attention is also paid to examining the sensitivity of the results to the uncertainty in the completeness magnitude of the catalog, and to investigating to what extent temporal fluctuations in seismic activity induced by injection operations affect the value of d. Temporal variations in the values of d are analyzed together with those of the b-value of the Gutenberg and Richter law. Our results indicate strong evidence of long memory, with d mostly constrained between 0 and 0.5. We observe that the value of d tends to decrease with increasing the magnitude completeness threshold, and therefore appears to be influenced by the number of information in the chain of intervening related events. Moreover, we find a moderate but significant negative correlation between d and the b-value. A negative, albeit weaker correlation is found between d and the fluid injection, as well as between d and the annual number of earthquakes.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2021
Vol.:
53
N°:
13
pp.
1572 - 1584
In this paper we examine the statistical properties of the monetary aggregates in Chile in order to know if the time series display mean reverting behaviour. For this purpose, we use techniques based on fractional integration. Monthly data of various Chilean monetary aggregates from January 1986 until August 2019 are used, and the results indicate very weak evidence of mean reversion. In fact, this property is only found in the case of the currency on circulation and M1 for some of the series examined; however, for M2 and M3 the results clearly show high persistence with orders of integration substantially higher than 1. Thus, shocks are expected to have a permanent nature in these cases. Another remarkable feature observed in the results is that the level of persistence in the series seems to grow with the amount of the monetary aggregate. In a multivariate context, performing a FCVAR model, evidence of cointegration is found among the monetary aggregates, finding a long run equilibrium relationship between them.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2021
Vol.:
41
pp.
101865
Global financial markets experienced distinct collapses during the global financial crisis in 2008 and the COVID-19 pandemic in 2020, and similarity in the underlying nature is still a hot topic to be investigated. This paper investigates their degree of persistence in order to detect whether the shocks affecting them have temporary or permanent effects by examining the closing prices of the Shanghai and Shenzhen Composite Indices from 1991 to 2020. The results before the coronavirus indicate large degrees of persistence with shocks having permanent effects, while during the coronavirus the results indicate a mean reversion with shocks having temporary effects.
Journal:
AIR QUALITY, ATMOSPHERE AND HEALTH
ISSN:
1873-9318
Year:
2021
N°:
14
pp.
1097 - 1102
This paper examines the statistical properties of daily PM10 in eight European capitals (Amsterdam, Berlin, Brussels, Helsinki, London, Luxembourg, Madrid and Paris) over the period 2014-2020 by applying a fractional integration framework; this is more general than the standard approach based on the classical dichotomy between I(0) stationary and I(1) non-stationary series used in most other studies on air pollutants. All series are found to be characterised by long memory and fractional integration, with orders of integration in the range (0, 1), which implies that mean reversion occurs and shocks do not have permanent effects. Persistence is the highest in the case of Brussels, Amsterdam and London. The presence of negative trends in Brussels, Paris and Berlin indicates some degree of success in reducing pollution in these capitals.
Journal:
URBAN STUDIES
ISSN:
0042-0980
Year:
2021
Vol.:
58
N°:
1
pp.
53 - 72
This paper provides a new and unique look at the dynamics and persistence of historical house prices in the USA and the UK using fractional integration techniques not previously applied to housing markets. Unlike previous research, we consider two components of persistence of house prices: the component associated with the long-run trend and the component associated with the cycle. We find evidence of cyclical and long-run persistence in the UK housing markets. In contrast, we fail to find evidence of cyclical persistence for the USA. For the sub-samples, which account for a structural break in each series, an important difference is the asynchronous pattern of the breaks, an indication of heterogeneity in the house price dynamics of the two countries and a sign that national rather than global events have played an important role. Although the house price movements of the last decade are dramatic, the greatest structural changes in the overall nominal and real price dynamics of the UK and the USA appear to have taken place much earlier, in the late 1970s and early 1980s in the UK and in the mid-1950s and early 1970s in the USA. An important result, common to the whole and sub-samples, is that long-run persistence plays a greater role than cyclical persistence in explaining the dynamics of house prices in both countries. These findings have substantial implications for policy decisions.
Journal:
ECOLOGICAL INDICATORS
ISSN:
1470-160X
Year:
2021
Vol.:
123
N°:
107372
This paper deals with the analysis of the degree of persistence and non-stationarity in the built-up land footprint time series referring to 89 countries all over the world. Using long memory and fractional integration methods the results indicate the existence of positive trends in 57 of the countries examined, while 7 series display negative trends. Dealing with persistence we observe a large of degree of heterogeneity across countries, with some countries displaying short memory patterns, while others showing orders of integration significantly higher than 1.
Journal:
SCIENCE OF THE TOTAL ENVIRONMENT
ISSN:
0048-9697
Year:
2021
Vol.:
751
N°:
141594
This paper focusses on the examination of the fishing ground footprint in a group of 89 countries using fractional integration. The fishing ground footprint is one of the components of the ecological footprint. Nevertheless, it has not been investigated verymuch froman empirical viewpoint. Wecontribute to the existing literature on fishing ground footprint by using fractional integration techniques to examine the persistence of the series. Our results are very heterogeneous across countries thoughwe find that most of the series are nonstationary and non-mean reverting, with most of the countries belonging to the upper-middle and high income levels. On the other hand, most of the 14.4% of countries that show a stationary pattern belong to lower-middle and low income countries. One of the implications of the study is that policies aimed at reducing fishing grounds footprint are likely to be effective in most of the investigated countries. (C) 2020 Elsevier B.V. All rights reserved.
Authors:
Caporale, G. M. (Autor de correspondencia); Gil, Luis Alberiko; Martín-Valmayor, M.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2021
Vol.:
45
N°:
3
pp.
413 - 427
This paper provides evidence on the degree of persistence of one of the key components of the CAPM, namely the market risk premium, as well as its volatility. The analysis applies fractional integration methods to data for the US, Germany and Japan, and for robustness purposes considers different time horizons (2, 5 and 10 years) and frequencies (monthly and weekly). The empirical findings in most cases imply that the market risk premium is a highly persistent variable which can be characterized as a random walk process, whilst its volatility is less persistent and exhibits stationary long-memory behaviour. There is also evidence that in the case of the US the degree of persistence has changed as a results of various events; this is confirmed by both endogenous break tests and the associated subsample estimates. Market participants should take this evidence into account when designing their investment strategies.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2021
Vol.:
53
N°:
43
pp.
5018 - 5027
This paper investigates the degree of persistence of the private debt-to-GDP ratio in 43 OECD countries by estimating the fractional integration parameter of each series. Almost all of them are found to be highly persistent, with orders of integration around or above 1. The only exception is Argentina, where the series appears to be mean-reverting. These results highlight the key importance of macroprudential policy as one of the pillars of macro policy.
Journal:
ENVIRONMENTAL MODELING AND ASSESSMENT
ISSN:
1420-2026
Year:
2021
Vol.:
26
N°:
4
pp.
497 - 509
Anthropogenic methane emission is the most important greenhouse gas, after CO2 emission. However, various aspects of methane emission have not been adequately examined in the existing literature including its persistence, methane emission, which is a measure of the extent to which short-term shocks (resulting from new government initiatives) are able to generate permanent future changes. It is important to determine the persistence of methane emissions. The existence of persistence of methane emissions implies that any temporary shock will have a permanent impact on methane emissions and the methane emission level will not move back to its steady long-term growth path. The persistence of the methane emissions in a group of 36 OECD countries has been examined in this work for the time period 1750-2014 using techniques based on fractional integration. This allows us to determine the degree of persistence of the series and the potential presence of trends in the data. Our results indicate that all series are highly persistent, with orders of integration above 1 in the majority of the cases. Linear (positive) trends are observed in approximately half of the cases. One of the implications of these findings is that policies designed for decreasing methane emissions will have a long-term impact in these countries. The methane emission policies include improvement in the equipment employed to generate, store and convey natural gas and oil; changing manure management policies; modifications to animal feeding strategies and introduction of emission controls that capture landfill methane.
Journal:
INTERNATIONAL JOURNAL OF ENVIRONMENTAL RESEARCH
ISSN:
1735-6865
Year:
2021
Vol.:
15
N°:
4
pp.
701 - 708
In this paper, the degree of persistence of the sulfur dioxide emissions in a group of 37 OECD countries is examined by looking at the order of integration of the series. However, instead of using integer degrees of differentiation (i.e., 1 in case of unit roots and 0 for stationarity), fractional values are also considered. The results indicate high degrees of persistence and very little evidence of mean reversion. This property only holds for the three Latin American countries examined, namely Chile, Colombia and Mexico if the error follows a white noise process. If autocorrelation is permitted, however, the confidence intervals are wider and mean reversion is not found in any single case. Thus, shocks in the series are expected to be permanent in the majority of the cases examined.
Journal:
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
ISSN:
1057-5219
Year:
2021
Vol.:
74
pp.
101678
The finance literature provides substantial evidence on the dependence between international bond markets across developed and emerging countries. Early works in this area were based on linear models and multivariate GARCH models. However, based on the limitations of these models this paper re-examines the non-linearity, multivariate and tail dependence structure between government bond markets of the US, UK, Japan, Germany, Canada, France, Italy, Australia and the Eurozone, from January 1970 to February 2019 using ARMA-GARCH based pair-copula models. We find that the bond markets in our sample tend to have both upper tail dependence in terms of positive shocks and lower tail dependence in terms of negative shocks. The estimated C-vine shows Eurozone has the highest average dependency. The D-vine, with optimal chain dependency structure shows the best order of connectedness to be the UK, the USA, Italy, Japan, Eurozone, France, Canada, Germany and Australia. The R-vine copula results underline the complex dynamics of bond market relations existing between the selected economies. The estimated R-vine shows Eurozone, Germany and Australia are the most inter-connected nodes. The multivariate distribution structure (interdependency) of bond markets for all countries were modelled with the C-vine, D-vine and R-vine copulas. In this application, the R-vine copula allows for detailed modelling of all bond markets and hence provides a more accurate goodness of fit and mean square error for the interdependency between all markets. In light of the changing volatility in bond markets, we conduct additional tests using time-varying copulas and find that the dependence structure among the bond markets examined is time-varying with the dynamic dependence parameter plots revealing that the nature of the dependence structure is intense during crisis periods.
Journal:
IATSS RESEARCH
ISSN:
0386-1112
Year:
2021
Vol.:
45
N°:
3
pp.
317 - 325
Traffic accidents involve great costs both at an economic and a human level. This demands that governments implement strategies to reduce their number and impact. The knowledge of the nature of the phenomenon through the study of time series of accidents enables the design of suitable policies for the desired objectives to be achieved. Thus, this paper deals with the analysis of the statistical properties of the number of road accidents on Spanish roads by using time series techniques based on the concept of fractional integration. The results indicate that the series examined display very low degrees of persistence, with the orders of integration being around 0 and thus showing a short memory pattern. This implies that shocks will be transitory, disappearing fast, and requiring strong policy measures in the case of positive shocks that reduce the number of deaths if we want to maintain that effect in the long run.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2021
Vol.:
232
pp.
121034
This paper deals with the analysis of (spatial) crude oil production divergence in the United States, paying particular attention to the domestic crude oil production between PADD 2 and PADD 3, which are the areas in which the bottleneck occurs and has a direct implication on the price of West Texas Intermediate (WTI). To this purpose, we use techniques based on fractional integration, fractional cointegration VAR (FCVAR) and wavelet analysis. Monthly data related to the oil production in the U.S. by regions (Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian) from January 2007 to June 2020 are used. The results, using fractional integration and cointegration techniques, indicate that the time series analyzed are highly persistent and there is evidence of long run equilibrium relationships in some of the series. Finally, using wavelet analysis, we conclude that the most affected areas are Anadarko, Appalachia, Haynesville and Niobrara where an increase in the shale oil production is followed a decrease in WTI crude oil prices. (c) 2021 Elsevier Ltd. All rights reserved.
Journal:
JOURNAL OF APPLIED STATISTICS
ISSN:
0266-4763
Year:
2021
Vol.:
48
N°:
13 - 15
pp.
2542 - 2559
In this paper, we present a testing procedure for fractional orders of integration in the context of non-linear terms approximated by Fourier functions. The test statistic has an asymptotic standard normal distribution and several Monte Carlo experiments conducted in the paper show that it performs well in finite samples. Various applications using real life time series, such as US unemployment rates, US GNP and Purchasing Power Parity (PPP) of G7 countries are presented at the end of the paper.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2021
Vol.:
568
pp.
125698
In the wake of the recent global financial crisis, Arab spring, serial crises in the Eurozone, and ongoing trade wars among the leading countries in the world, concerns about economic policy uncertainty have heightened. However, there are several aspects of economic policy uncertainty that have not been adequately researched including the persistence of the series. The examination of the persistence of economic policy uncertainty is important. For instance, the size of the uncertainty' persistence will determine how big the negative effect of an uncertainty shock is on the financial market as well as on the economy. This paper deals with the analysis of economic policy uncertainty for 23 countries, which include developed and developing ones. We focus on persistence by using fractional integration. This is a more general approach than the standard methods based on integer differentiation. The results indicate that the orders of integration are in the interval (0, 1) in all countries, implying long memory and mean reverting behaviour. Thus, shocks will have temporary though long lasting effects. Nevertheless, substantial differences are observed across the countries. (C) 2020 Elsevier B.V. All rights reserved.
Journal:
INTERNATIONAL JOURNAL OF CLIMATOLOGY
ISSN:
0899-8418
Year:
2021
Vol.:
41
N°:
9
pp.
4619 - 4636
This paper looks at the level of persistence in the temperature anomalies series of 114 European cities. Once this level of persistence has been identified, the time trend coefficients are estimated and the results indicate that most of the series examined display positive trends, supporting thus climate warming. Moreover, the results obtained confirm the hypothesis that long-memory behaviour cannot be neglected in the study of temperature time series, changing, therefore, the estimated effect of global warming.
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2021
Vol.:
27
N°:
4
pp.
614 - 625
In this article, we examine the statistical properties of the time series corresponding to the number of national and international visitors in Spain using fractional integration. This methodology allows us to examine the degree of persistence of the series, and thus, infer some conclusions about the nature of the shocks. According to the results reported in this work, seasonality matters in both cases, being more important in international tourism. Moreover, we observe significant differences in the degree of persistence between national and international tourism. Although both series seem to be mean reverting, with shocks having a transitory nature, higher orders of integration are observed in the case of the international arrivals.
Journal:
THE NORTH AMERICAN JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1062-9408
Year:
2020
Vol.:
51
pp.
100848
In their seminal work, Baillie and Bollerslev (1994) carried out an analysis of deviations from the cointegrating relationship of seven important exchange rates. They suggested that the exchange rate series possess long memory and therefore such processes could be well described as fractionally integrated processes. Hence, the influence of shocks to the equilibrium exchange rates may only vanish at very long horizons. In this work we analyze the cointegrating structure of five exchange rates to the US dollar, namely the British pound, the Euro, the Swedish Krona, the Canadian Dollar and the Swiss Franc. The series possess long memory and we show that they can be modeled through fractional integration. In fact, standard cointegration is rejected with the more traditional Johansen CVAR methodology. By using the recently introduced Fractionally Cointegrated VAR by Johansen and Nielsen (2012) we provide a cointegrating relationship taking into account fractional integration.
Journal:
THEORETICAL AND APPLIED CLIMATOLOGY
ISSN:
0177-798X
Year:
2020
Vol.:
142
N°:
1-2
pp.
103 - 115
The poor air quality in the London metropolis has sparked our interest in studying the time series dynamics of air pollutants in the city. The dataset consists of roadside and background air quality for seven standard pollutants: nitric oxide (NO), nitrogen dioxide (NO2), oxides of nitrogen (NOx), ozone (O-3), particulate matter (PM(10)and PM2.5) and sulphur dioxide (SO2), using fractional integration to investigate issues such as persistence, seasonality and time trends in the data. Though we notice a large degree of heterogeneity across pollutants and a persistent behaviour based on a long memory pattern is observed practically in all cases. Seasonality and decreasing linear trends are also found in some cases. The findings in the paper may serve as a guide to air pollution management and European Union (EU) policymakers.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2020
Vol.:
541
pp.
123705
This paper deals with the analysis of the world, OPEC and non-OPEC oil production by testing the degree of persistence of the series throughout fractional integration. The analysis is relevant in the sense that it allows us to determine if shocks in the series have permanent or transitory effects. The results indicate evidence of mean reversion in the three series, especially for the world and OPEC production. We also notice evidence of multiple breaks though the degree of persistence seems to be relatively stable across the subsamples, with most of the values in the range [0.5, 1) implying non-stationary and mean reverting behavior. (C) 2019 Elsevier B.V. All rights reserved.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2020
Vol.:
195
pp.
116933
Despite the rising profiles of both shale oil and shale gas plays in the U.S. and the importance of testing for their persistence, no study has examined the persistence of the availability of shale oil and shale gas plays in the country. This paper focuses on the analysis of shale oil and shale gas production using long range dependence techniques in the U.S. for the period, January 2000 to April 2019. The empirical findings illustrate that the series examined are highly persistent, finding very little evidence of mean reverting patterns. Among the implications of the results, which are discussed in the paper, is that there is a hysteresis in shale oil and gas production in U.S., and therefore shocks resulting from new government policies relating to shale oil and gas in U.S. will have lasting impacts on their production. Besides, it will not be feasible to use forecasting as a basic instrument for unconventional energy sources as the previous values of shale oil and gas production cannot be utilised to accurately forecast their subsequent values. (C) 2020 Elsevier Ltd. All rights reserved.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2020
Vol.:
52
N°:
57
pp.
6171 - 6182
We analyse bilateral linkages between Central Bank Policy Rates in Africa and the US, the UK, Japan, Canada, China and the Eurozone using fractional integration and cointegration. Univariate analysis documents evidence of higher than 1 integration for the African countries. For the developed countries, the orders of integration are also above 1 in all markets except for Japan. On bivariate relationships among the countries, we find evidence of cointegration in a number of cases. The article reinforces the view that it will be difficult for many African countries to pursue independent monetary policies that do not consider global policy rate developments.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2020
Vol.:
52
N°:
22
pp.
2339 - 2352
The structure of the nominal exchange rates in South Africa is examined by using fractional integration. We investigate the levels and the volatilities against the US dollar, the British pound, the Euro, the Japanese yen, the Chinese yuan, the Australian dollar, and the Botswanan pula. The results indicate that most series are unit root, I(1) and though there is some evidence of mean reversion, the orders of integration are close to 1, implying high levels of persistence. However, there is evidence of mean reversion for Bostwana Pula in various subsamples. For the volatilities, the stationary long memory is observed in all cases.
Journal:
ECONOMIC PAPERS
ISSN:
0812-0439
Year:
2020
Vol.:
39
N°:
2
pp.
162 - 166
This note examines the degree of persistence of UK inflation by applying fractional integration methods to historical data spanning the period 1210-2016; the chosen approach is more general than the popular ARMA models based on the classical I(0) vs. I(1) dichotomy. The full-sample results do not suggest that UK inflation is a persistent process; however, the recursive analysis indicates an increase in the degree of persistence in the 16th century and more recently after WWI and in the last quarter of the 20th century. On the whole, monetary and exchange rate regime changes do not appear to have had a significant impact on the stochastic behaviour of inflation if one takes a long-run, historical perspective.
Journal:
INTERNATIONAL JOURNAL OF CLIMATOLOGY
ISSN:
0899-8418
Year:
2020
Vol.:
40
N°:
15
pp.
6603 - 6611
This paper deals with the analysis of the relationship between CO2 emissions and temperatures. For this purpose, global CO2 emissions and four measures of global temperatures (land, land and ocean, northern and southern temperatures) are used. We used techniques based on fractional integration and cointegration. The results indicate first that the orders of integration differ in the two variables. Thus, while emissions are I(1) or I(d) with d higher than 1, temperatures display orders of integration strictly smaller than 1 and thus invalidating the hypothesis of cointegration between the two variables. Due to this, another approach is conducted where we suppose that the emissions are weakly exogenous in relation to the temperatures. The results using this approach show a significantly positive relationship between the two variables with a long memory pattern.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2020
Vol.:
540
pp.
123093
Using annual data spanning the period of 1258-2018, we test the safe haven characteristic of gold in the wake of global crises. We find that, when we allow for regime-switching to capture nonlinearity and structural breaks, gold serves as a strong hedge against crises, especially during the bullish regime of the market, and in particular from the however, does not seem to possess the safe haven property over the historical period of 1688-2018. Finally, we also find that global crises can accurately predict real gold returns over a long-span (1302-2018) out-of-sample period. (C) 2019 Elsevier B.V. All rights reserved.
Journal:
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
ISSN:
0275-5319
This paper uses fractional integration techniques to examine the stochastic behaviour of high and low stock prices in Europe and then to test for the possible existence of long-run linkages between them by looking at the range, i.e., the difference between the two logged series. Specifically, monthly, weekly and daily data on the following five European stock market indices are analysed: DAX30 (Germany), FTSE100 (UK), CAC40 (France), FTSE MIB40 (Italy) and IBEX35 (Spain). In all cases, the order of integration of the range is lower than that of the original series, which implies the existence of a long-run equilibrium relationship between high and low prices. Further, multiple breaks are found in the high and low-price series but no breaks in the range, and the estimated fractional differencing parameter is positive in all cases, which represents evidence of long memory.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2020
Vol.:
69
pp.
93 - 101
This paper investigates BRICS markets' integration and segmentation between real estate indices and stock indices, and the possibility of establishing "wealth" and "credit" effects. The analysis of the relationship is based on updated techniques in time series using the concepts of fractional integration and cointegration and Granger causality. This allows us to look at market efficiency and bi-directional long-run equilibrium relationships between the two variables in the five countries. The results indicate that all the series are highly persistent, with orders of integration around 1 implying the possibility of markets to be efficient. However, we do not find any evidence suggesting long run equilibrium relationships between the real estate stock indices and the stocks indices. Meanwhile, causality is bi-directional in the case of South Africa, thus both "wealth effect" and "credit effect" exist, while only "credit effect" is established in India and Russia.
Journal:
JOURNAL OF APPLIED METEOROLOGY AND CLIMATOLOGY
ISSN:
1558-8424
Year:
2020
Vol.:
59
N°:
8
pp.
1351 - 1367
This paper focuses on the analysis of the time series behavior of the air quality in the 50 U.S. states by looking at the statistical properties of particulate matter (PM10 and PM2.5) datasets. We use long daily time series of outdoor air quality indices to examine issues such as the degree of persistence as well as the existence of time trends in data. For this purpose, we use a long-memory fractionally integrated framework. The results show significant negative time trend coefficients in a number of states and evidence of long memory in the majority of the cases. In general, we observe heterogeneous results across counties though we notice higher degrees of persistence in the states on the west with respect to those on the east, where there is a general decreasing trend. It is hoped that the findings in the paper will continue to assist in quantitative evidence-based air quality regulation and policies.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2020
Vol.:
27
N°:
10
pp.
831 - 835
Researchers utilizing the U.S economic policy uncertainty index and its sub-categories need to be cognizant of the unique persistence profile of each index. We use fractional integration techniques to estimate the degree of persistence in the U.S. economic policy uncertainty index and its 11 sub-categories. The results indicate the estimated values of the differencing parameter, d, are in the interval (0, 1) supporting fractional integration and rejecting the classical models based on stationarity (d = 0) or unit roots (d = 1). Though there is a fair amount of heterogeneity across indices, shocks will be persistent, but mean reverting.
Journal:
REVIEW OF DEVELOPMENT FINANCE
ISSN:
1879-9337
Year:
2020
Vol.:
10
N°:
2
pp.
31 - 37
Lithium has a strategic role as a natural resource as more and more clean technologies emerge. This paper aims to analyze the time-series properties of the mergers and acquisitions (M&A) activity in the behavior of the lithium sector, applying statistical methods based on long memory and fractional integration models. Our results indicate that the series has a long memory and fractionally integrated behavior with an order of integration strictly smaller than 1, thus we can conclude that the impacts will be transient and are expected to disappear on their own in the long term.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2020
Vol.:
58
N°:
4
pp.
1491 - 1511
We consider two important features of the historical US price data (1774-2015), namely the data's persistence and cyclical structure. We first consider the persistence of the series and focus on standard long-memory models that incorporate a peak at the zero frequency. We examine different models with respect to the deterministic terms, including nonlinear deterministic trends of the Chebyshev form. Then, we investigate a more general model that includes both persistence and cyclicality of the series and, thus, includes two fractional integration parameters, one at the zero (long-run) frequency and the other at the nonzero (cyclical) frequency. We model the cyclical structure as a Gegenbauer process. This specification outperforms the standard long-memory specifications. We find that the order of integration at the zero frequency is about 0.5, and the one at the cyclical frequency is about 0.2 with cycles repeating approximately every 6 years, producing mean-reverting long-memory effects at both the zero and cyclical frequencies. Fitting the values to this model, however, we discover the presence of a break that, according to the methods employed, takes place at around 1940-1941. The results indicate the prevalence of the long-run or zero component with a much higher degree of persistence during the second post-1940-1941 subsample, suggesting important implications for monetary policy.
Journal:
INTERNATIONAL ADVANCES IN ECONOMIC RESEARCH
ISSN:
1083-0898
Year:
2020
Vol.:
26
N°:
3
pp.
303 - 315
Infant mortality rates in 34 Sub-Saharan African countries (1960-2016), obtained from the Federal Reserve Bank of St. Louis database, were examined in this paper by focusing on the degree of persistence and non-linearities in the growth rate series. Persistence deals with the degree of association between the observations. Non-linearity occurs when departing from the linear assumption as in a time trend. These two issues are relevant in this context because they are intimately related. Based on the high degree of persistence observed in the series examined, instead of investigating structural breaks, which produce abrupt changes in the data, a non-linear approach was used based on Chebyshev polynomials in time, producing smooth rather than abrupt changes. This approach has never been examined in a unified framework in the treatment of infant mortality rates. The results indicate that half of the countries examined display non-linearities and the orders of integration of the series are extremely large in all cases, being around two in the majority of them. Looking at the growth rate series, significant negative trends were observed for: Chad, Equatorial Guinea and Mozambique. Evidence of mean reversion and thus transitory shocks, were observed for Lesotho, Rwanda, Botswana and Mozambique. Time dynamics of the series were expected to persist in order to ascertain the decline in mortality rates. Therefore, serious government interventions are required in managing infant health in these countries.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2020
Vol.:
69
pp.
101857
This paper deals with the analysis of silver prices and the influence of solar energy on its behaviour. For this purpose, the analysis uses long memory methods based on fractional integration and cointegration. The results indicate that the two variables are very persistent, though any long run equilibrium relationship between them is not observed. Nevertheless, the results illustrate some short-run negative effects from solar energy capacity on silver prices.
Journal:
SOCIAL INDICATORS RESEARCH
ISSN:
0303-8300
Year:
2020
Vol.:
147
N°:
3
pp.
825 - 841
This paper deals with the analysis of the misery index in a group of 55 African countries by using fractional integration or I(d) techniques. In doing so, we can measure the degree of persistence of the index in a more flexible way than with other methods that simply use integer degrees of differentiation (zero or one). Our results indicate a large degree of heterogeneity across the countries, with some showing short memory behaviour (d = 0); others long memory mean reverting behaviour (0 < d < 1) and others indicating the presence of unit roots (d = 1). Thus, shocks will have different effects depending on the country examined. Generally, we also find a positive relationship between the levels of persistence and income.
Journal:
THE QUARTERLY REVIEW OF ECONOMICS AND FINANCE
ISSN:
1062-9769
Year:
2020
Vol.:
77
pp.
50 - 61
This paper examines persistence, structural breaks and non-linearities in the case of five European stock market indices, namely the FTSE100 (UK), DAX30 (Germany), CAC40 (France), IBEX35 (Spain) and FTSE MIB40 (Italy), using fractional integration methods. The empirical results provide no evidence of non-linearities in either prices or returns; the former are found to exhibit unit roots and the latter to be I(0) in most cases. Further, between 2 and 4 structural breaks are found for each of the return series, and mean reversion in some subsamples. (C) 2020 The Author(s). Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois.
Journal:
SOUTH AFRICAN JOURNAL OF ECONOMICS
ISSN:
0038-2280
Year:
2020
Vol.:
88
N°:
2
pp.
174 - 185
This paper examines generalised purchasing power parity (G-PPP) and business cycle synchronisation in the East Africa Community with the aim of assessing the prospects for a monetary union. The univariate fractional integration analysis shows that the individual series exhibit unit roots and are highly persistent. The fractional bivariate cointegration tests suggest that there exist bivariate fractional cointegrating relationships between the exchange rate of the Tanzanian shilling and those of the other EAC countries, and also between the exchange rates of the Rwandan franc, the Burundian franc and the Ugandan shilling. The Fractionally Cointegrated Vector AutoRegressive (FCVAR) results imply the existence of a single cointegrating relationship between the exchange rates of the EAC countries. On the whole, there is evidence in favour of G-PPP. In addition, there appears to be a high degree of business cycle synchronisation between these economies. On both grounds, one can argue that a monetary union should be feasible.
Journal:
EMPIRICA
ISSN:
0340-8744
Year:
2020
Vol.:
47
pp.
181 - 204
In this paper we aim to analyse the degree of mean reversion of public expenditure, revenue and the difference between them, over GDP for 27 European Union (EU) countries. To gain flexibility in the analysis of the order of integration of the variables we apply fractional integration techniques. In general, we find evidence of mean reversion in all countries.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2020
Vol.:
52
N°:
5
pp.
459 - 474
Full employment remains at the center of any economic policy. Following Okun's conclusion regarding the trade-off relation between unemployment and real gross national product growth, new studies on different aspects of variable and methodological issues have brought new light to the theory. The purpose of this paper is to investigate the unemployment/GDP relationship, i.e. Okun's Law, in order to test the basic Okun's assumption taking into account modern economic circumstances and new methodological specifications. This study analyzes the series for 24 selected countries using fractionally integrated methods. Using these techniques, the results substantially change across countries and also depending on the specification of the error term. Unemployment and output growth rates series show some degree of long memory behavior for most countries while the stability of Okun's coefficient is also challenged since it changes drastically. Estimated gaps are quite high, not only for -0.30 standard coefficient values but also when compared with other studies' results. Policy makers can be assisted with these techniques in their efforts to design optimal economic policy to achieve full employment.
Journal:
RISKS
ISSN:
2227-9091
Year:
2020
Vol.:
8
N°:
4
pp.
130
According to a statement made in the BP Energy Outlook report in 2017, most of the world's liquid fuel (petroleum) is being consumed by the transportation industry. The mechanisms used to stimulate changes in the energy markets are affected by government policies that act in more ambitious ways than purely market-driven forces; different governments have promoted incentives involving electric mobility, especially in urban areas. The substitution for crude oil by renewable energy inputs in the transport sector is a major concern for oil producers. Among the different types of clean energies, lithium (Li) is currently assuming an increasingly strategic role. The goals of this paper are two-fold: First, we study the dynamics of the lithium industry and then the beta risk behavior of the 10 largest oil companies in the world for the time period between 11 February 2008 and 10 January 2019. We use an approach based on the continuous wavelet transform (CWT) method. The results indicate that there is a period of dependence between late 2013 and 2016 that occurs in the long-run frequencies of between 32 and 198 days for all cases, except for in the case of PetroChina, thereby demonstrating that the beta term is time-varying. We also find evidence that the beta term reflects and advances oil companies' responsiveness to movements in the lithium market. In the second part of the paper, we study the dynamics of the beta series by using long-run dependence approaches. The results indicate that the betas are highly persistent, with the order of integration found to be significantly above 1 in all cases.
Journal:
ENERGY STRATEGY REVIEWS
ISSN:
2211-467X
Year:
2020
Vol.:
31
pp.
100522
Slow economic recovery, market concentration, and scant alternative energy sources make the Iberian energy market quite idiosyncratic when compared to the rest of the EU. This paper focusses on the Iberian energy market by dealing with the analysis of the relationship between energy consumption and energy prices by using fractional integration in the Iberian market. This technique is used in order to examine the degree of persistence of the series, looking at the spot and futures markets in Spain and Portugal. The results indicate that all the series are fractionally integrated, showing long memory and mean reverting behaviour. Moreover, a close relation between energy consumption and energy prices is found in the spot market whereas it is not found in the futures market. In fact, there is a weak relationship between the futures market and energy consumption. However, regarding energy pricing, the relationship is stronger but with the spot market itself.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2020
Vol.:
52
N°:
46
pp.
5077 - 5087
Issues such as seasonality, persistence and trends are examined in the series referring to the number of UK arrivals and departures using techniques based on fractional integration. This methodology is much more flexible than others based on integer degrees of differentiation and permits us to describe in a more general way the effects of shocks in the series. Our results indicate that the series display significant time trends; they show high persistence with orders of integration in the fractional range, thus showing long-lasting effects of shocks; seasonality is an important issue, and in removing the seasonality through seasonal differentiation, the time trends disappear though persistence remains as a relevant feature of the data. Policy implications of the results obtained are displayed at the end of the article.
Journal:
SOCIAL INDICATORS RESEARCH
ISSN:
0303-8300
Year:
2020
Vol.:
152
N°:
3
pp.
1177 - 1196
The paper examines the relationship between the unemployment rate and the fertility rate in a number of European countries along with Japan and the US. We use fractional integration and cointegration techniques to establish this long run relationship. The analysis shed some light on the degree of persistence of the series, and on whether policy actions are required for highly persistent series. The evidence suggests that these two variables (unemployment and fertility rates) are not related in the long run. However, in the short run, assuming that unemployment rate is weakly exogenous, the coefficient relating the two variables is found to be negative in four countries: the Netherlands, Portugal, Spain and the US.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2020
Vol.:
69
pp.
680 - 691
This paper deals with the analysis of volatility persistence in 12 main cryptocurrencies (Bitcoin, Bitshare, Bytecoin, Dash, Ether, Litecoin, Monero, Nem, Ripple, Siacoin, Stellar and Tether) taking into account the possibility of structural breaks. Using fractional integration methods, the results indicate that both absolute and squared returns display long memory features, with orders of integration confirming the long memory hypothesis. However, after accounting for structural breaks, we find a reduction in the degree of persistence in the cryptocurrency market. The evi-dence of persistence in volatility imply that market participants who want to make gains across trading scales need to factor the persistence properties of cryptocurrencies in their valuation and forecasting models since that will help improve long-term volatility market forecasts and optimal hedging decisions.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
This paper applies a fractional integration framework to analyse the stochastic behaviour of two Russian stock market volatility indices (namely the originally created RTSVX and the new RVI that has replaced it) using daily data over the period 2010-2018. The empirical findings are consistent and imply in all cases that the two series are mean-reverting, i.e. they are not highly persistent and the effects of shocks disappear over time. This is true regardless of whether the errors are assumed to follow a white noise or autocorrelated process; this is confirmed by the rolling window estimation, and it holds for both subsamples, before and after the detected break. On the whole, it seems shocks do not have permanent effects on volatility in the Russian stock market.
Journal:
WATER POLICY
ISSN:
1366-7017
Year:
2020
Vol.:
22
N°:
6
pp.
1200 - 1216
Time series referring to water prices at different regions all over the world are examined in this paper by using fractionally integrated methods. We look at series corresponding to the following regions: Asia Pacific and Russia, Europe, United States and Latin America as well as global data. The results indicate large degrees of persistence, with the values of the differencing parameter being close to one in all cases and higher under the assumption of uncorrelated errors. If autocorrelation is permitted, a small degree of mean reversion is found in all except the Latin American series. The possibility of structural breaks is also investigated and the results indicate the presence of multiple breaks in the data: three in the case of Latin America and global data; four in Europe and USA and five for the Asian Pacific and Russia. Nevertheless, we do not observe a significant change in the degree of persistence across subsamples and once more mean reversion is found if autocorrelation is permitted.
Journal:
INTERNATIONAL ECONOMICS
ISSN:
2110-7017
Year:
2019
Vol.:
158
pp.
64 - 76
Since recent literature has quantified the persistence of changes in the real exchange rate (RER) using trade-weighted data, in this paper we ask whether the trade-weighted RER is mean reverting. We focus on post-Bretton Woods data for the G7 countries and, after revising the strong correlation between the RER and the nominal exchange rate over that period, we follow a fractional integration approach. We consider different assumptions for the residuals and allow for breaks at unknown dates. We conclude that the nonstationary behaviour of the RER is mean reverting (i.e., it is integrated of order ) for about half of the G7 countries and that allowing for structural breaks affects the test results obtained in absence of breaks but do not invalidate them.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2019
Vol.:
26
N°:
13
pp.
1104 - 1110
In this paper, we focus on the stochastic (chaotic) attributes of the US dollar-based exchange rates for Brazil, Russia, India, China and South Africa (BRICS) using a long-run monthly dataset covering 1812M01-2017M12, 1814M01-2017M12, 1822M07-2017M12, 1948M08-2017M12, and 1844M01-2017M12, respectively. For our purpose, we consider the Lyapunov exponents, robust to nonlinear and stochastic systems, in both full - samples and in rolling windows. For comparative purposes, we also evaluate a long-run dataset of a developed currency market, namely British pound over the period of 1791M01-2017M12. Our empirical findings detect chaotic behavior only episodically for all countries before the dissolution of the Bretton Woods system, with the exception of the Russian ruble. Overall, our findings suggest that the establishment of the free floating exchange rate system have altered the path of exchange rates removing chaotic dynamics from the phenomenon, and hence, the need for policymakers to intervene in the currency markets for the most important emerging market bloc, should be carefully examined.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2019
Vol.:
169
pp.
489 - 495
This paper deals with the analysis of persistence in the prices of two technologically important metals, namely, lithium and cobalt. Along with them, we also examine four additional series corresponding to World, European, US and Japanese automobiles and component indices. For this purpose, we use long memory techniques based on fractional integration and cointegration. The results indicate that all the series are highly persistent, though we do not find any evidence supporting long run equilibrium relationships between the variables examined. (C) 2018 Elsevier Ltd. All rights reserved.
Journal:
JOURNAL OF INTERNATIONAL DEVELOPMENT
ISSN:
0954-1748
Year:
2019
Vol.:
31
N°:
1
pp.
101 - 116
This paper decomposes the term spread into the expectation and the term premium components using a fractional integration approach and subsequently uses same with the economic policy uncertainty index to forecast the probability of recession in South Africa. We use different specifications of the probit model and quarterly data from 1990:1 to 2012:1. Our out-of-sample results show that the model that incorporates the expectation component and economic policy uncertainty provides the best forecast of recession. All three recession periods in our sample were accurately dictated by the prediction models and the best forecast occurred at the four quarters ahead horizon. A robustness check with a longer sample from 1946q1 to 2017q4 but excluding the factors and economic policy uncertainty due to data limitation provided justification for decomposing the term spread as the model with the expected spread turned out to be the best. We draw the implications of these findings. (c) 2018 John Wiley & Sons, Ltd.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2019
Vol.:
523
pp.
1227 - 1236
This paper deals with the analysis of the relationship between cryptocurrencies and gold prices. In particular, we use fractional integration and cointegration techniques to examine the degree of persistence of the series and the possibility of short and long run equilibrium relationships between them. Our results indicate that there is evidence of mean reversion in gold prices and also in some of the cryptocurrencies; however, cointegration is only found in a few cases with a very small degree of cointegration in the long run relationship. Testing the hypothesis of convergence throughout the ratios, again we only found evidence of mean reversion in the cases of Bytecoin, Dash, Ether, Monero and Ether. (C) 2019 Elsevier B.V. All rights reserved.
Journal:
EASTERN ECONOMIC JOURNAL
ISSN:
0094-5056
Year:
2019
Vol.:
45
N°:
2
pp.
204 - 223
This paper deals with the analysis of the persistence in the inflation rate in Argentina. For this purpose, we use fractionally integrated techniques based on monthly and annual data. The results show evidence of fractional integration and long memory behavior in both cases, being especially noticeable in the case of monthly data with shocks having long-lived effects.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2019
Vol.:
43
pp.
398 - 408
This paper investigates the behavior of the inflation rate in Iran for the time period 1992¿2017 using fractional integration. The results indicate an extremely large degree of persistence in the series, with an order of integration of about 2. The consequences of such a degree of dependence are examined in the paper along with some suggestions to reduce it in the future.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2019
Vol.:
60
pp.
198 - 202
Understanding the behavior of the lithium supply and the estimated consumption and flows is important for social and economic development. We focus on estimating persistence and for this purpose, we use techniques based on fractional integration. The empirical results provide evidence of mean reversion for the data corresponding to the global lithium production from 1925 to 2014 but not for U.S. lithium-related series such as production (1900-2008), estimated consumption (1900-2014), imports (1960-2015), and exports (1971-2015).
Journal:
JOURNAL OF STATISTICAL COMPUTATION AND SIMULATION
ISSN:
0094-9655
Year:
2019
Vol.:
89
N°:
10
pp.
1763 - 1779
This paper investigates persistence in financial time series at three different frequencies (daily, weekly and monthly). The analysis is carried out for various financial markets (stock markets, FOREX, commodity markets) over the period from 2000 to 2016 using two different long memory approaches (R/S analysis and fractional integration) for robustness purposes. The results indicate that persistence is higher at lower frequencies, for both returns and their volatility. This is true of the stock markets (both developed and emerging) and partially of the FOREX and commodity markets examined. Such evidence against the random walk behaviour implies predictability and is inconsistent with the Efficient Market Hypothesis (EMH), since abnormal profits can be made using trading strategies based on trend analysis.
Journal:
EMERGING MARKETS FINANCE AND TRADE
ISSN:
1540-496X
Year:
2019
Vol.:
55
N°:
1
pp.
201 - 217
In this article we have examined the unemployment rate series in Turkey by using long memory models and in particular employing fractionally integrated techniques. Our results suggest that unemployment in Turkey is highly persistent, with orders of integration equal to or higher than 1 in the majority of the cases. This implies lack of mean reversion and persistence of the shocks. We found evidence in favor of mean reversion in the case of female unemployment and this happens for all the groups of non-agricultural, rural, urban, and youth unemployment series. The possibility of nonlinearities are observed only in the case of female unemployment and the degree of persistence is higher in the cases of female and youth unemployment series. Important policy implications emerge from our empirical results. Thus, for example, positive shocks reducing unemployment will have permanent effects being good for the economy, but negative shocks increasing unemployment will also have permanent effects and strong measures should then be adopted to reduce it. Labor and macroeconomic policies will most likely have long-lasting effects on the unemployment rates.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS AND FINANCE
ISSN:
1059-0560
Year:
2019
Vol.:
61
pp.
170 - 178
This paper uses fractional integration/cointegration techniques to examine the stochastic behaviour of long-term interest rates (on government securities with 10-year maturity) in 23 European countries as well as their long-run linkages on a pairwise basis over the period January 2001-February 2018. The results are mixed and sensitive to the (parametric and semi-parametric) estimation methods. Evidence is found for both unit roots and mean reversion in the series analysed. Various rates (especially in the case of smaller economies) appear to be fractionally cointegrated, but interestingly German, French and UK rates are not found to be linked to any other European rates.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2019
Vol.:
43
N°:
4
pp.
657 - 680
This paper examines long-term price overreactions in various financial markets (commodities, US stock market and FOREX). First, a number of statistical tests are carried out for overreactions as a statistical phenomenon. Second, a trading robot approach is applied to test the profitability of two alternative strategies, one based on the classical overreaction anomaly, the other on a so-called ¿inertia anomaly¿. Both weekly and monthly data are used. Evidence of anomalies is found predominantly in the case of weekly data. In the majority of cases strategies based on overreaction anomalies are not profitable, and therefore the latter cannot be seen as inconsistent with the EMH.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1076-9307
Year:
2019
Vol.:
24
N°:
1
pp.
412 - 426
Motivated by the emergence of Bitcoin as a speculative financial investment, the purpose of this paper is to examine the persistence in the level and volatility of Bitcoin price, accounting for the impact of structural breaks. Using parametric and semiparametric techniques, we find strong evidence in favour of a permanency of the shocks and lack of mean reversion in the level series. We also reveal evidence of structural changes in the dynamics of Bitcoin. After accounting for the structural breaks in the level series, evidence of mean reversion is uncovered in some cases. Further analyses show evidence of a long memory in the two measures of volatility (absolute and the squared returns), whereas some cases of short memory are revealed in the squared returns series in particular. Practical implications are discussed on the inefficiency in the Bitcoin market and its importance for Bitcoin users and investors.
Journal:
CARBON MANAGEMENT
ISSN:
1758-3004
Year:
2019
Vol.:
10
N°:
4
pp.
405 - 415
The existing studies on persistence of ecological footprint have largely concentrated on the aggregate ecological footprint without adequately considering its components. The aim of this paper is to contribute to the existing papers on ecological footprint by examining the persistence of carbon footprint emissions for a group of 92 countries. Unlike the extant papers, this paper uses fractional integration, which allows the consideration of stationary I(0) and nonstationary I(1) cases as particular models of interest, being therefore more general and flexible than these two classical representations. The results indicate that only 25 of the 92 countries display mean reversion, with orders of integration strictly below 1 and showing transitory shocks, most of them belonging to lower middle- and low-income countries. In these 25 countries it might not be easy to change the long-run path of the carbon footprint as any policy shocks will have temporary effects. The foregoing findings can help policymakers in each nation to design efficient emission-reducing policies.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2019
Vol.:
514
pp.
345 - 354
This study examines the persistence in gold and silver prices covering the historical periods of 1257 to 2016 and 1687 to 2016 respectively, by means of simultaneously estimating two differencing parameters for the long run trend and the cyclical behavior in a fractional integration framework. As opposed to many previous papers in the literature, once the cyclical differencing parameter is taken into account, mean reversion is detected in the long run trend of both gold and silver prices. The same result is obtained when structural breaks are taken into account. As far as the cyclical behavior of gold and silver prices is concerned, we find that cycles have a higher periodicity for gold (around 7 years) than for silver (4-5 years). (C) 2018 Elsevier B.V. All rights reserved.
Journal:
MANCHESTER SCHOOL
ISSN:
1463-6786
Year:
2019
Vol.:
87
N°:
1
pp.
24 - 36
This study examines inflation over one century of data for 29 countries based on fractional integration incorporating nonlinearities to account for structural breaks and asymmetry in the process of inflation. The results suggest that the degree of persistence is that, while there is evidence of long-memory behavior in the inflation rates of 17 countries, barring Russia, none of the remaining 28 countries indicate evidence of unit roots. The result implies that monetary authorities in these countries can play a role in controlling inflation, though the extent of intervention required will tend to vary, with the strongest being in Russia.
Journal:
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
ISSN:
0275-5319
Year:
2019
Vol.:
49
pp.
269 - 281
In this paper we study the presence of rational bubbles in the IGP and IAR real housing stock indexes of Chile during the period 2003:01 to 2016:03 using a methodology based on fractionally integrated and cointegrated processes. Our findings suggest strong evidence in favour of bubbles in the Chilean housing stock market when no breaks are taken into account. Testing for structural breaks, three break dates are detected at 2007, 2011 and 2014, and the same evidence in favour of bubbles holds. This can be explained by the high level of debt of the Chilean people.
Journal:
JOURNAL OF ATMOSPHERIC AND OCEANIC TECHNOLOGY
ISSN:
0739-0572
Year:
2019
Vol.:
36
N°:
12
pp.
2257 - 2266
This paper addresses analysis of the global monthly sea surface temperatures using a reconstructed dataset that goes back to 1884. We use fractional integration methods to examine features such as persistence, seasonality, and time trends in the data. The results show that seasonality is a relevant issue, finding evidence of seasonal unit roots. With the seasonal component removed, persistence is also very significant, and, when looking at the data month by month, evidence of significant linear trends is detected in all cases. According to these results, monthly sea surface temperatures increase by between 0.07 degrees and 0.11 degrees C every 100 years.
Journal:
TOURISM MANAGEMENT
ISSN:
0261-5177
Year:
2019
Vol.:
74
pp.
207 - 211
This paper analyzes the structural pattern of Brazilian monthly tourism revenue over the course of 20 years. This research contributes to the literature on the benefits of sports mega-events by showing that in developing countries the benefits derived from them may be jeopardized by economic structural problems reflected in currency fluctuation. Policy implications in terms of a specific tourism exchange rate for developing countries that host mega sport events are derived.
Journal:
CLIMATIC CHANGE
ISSN:
0165-0009
Year:
2019
Vol.:
157
pp.
355 - 364
This paper deals with the analysis of the temperatures in a group of 29 stations located in twelve European countries by looking at the coefficients in a linear time trend regression model and allowing for long memory patterns in the error term. The results indicate that long memory is present in practically all cases, and the time trend coefficients are statistically significant in the majority of the cases implying evidence of increasing warming trends. This pattern is particularly noticeable in the case of several stations located across Italy and France, which might be related with micro climates affecting these regions.
Journal:
INTERNATIONAL ECONOMICS
ISSN:
2110-7017
Year:
2019
Vol.:
159
pp.
140 - 150
This paper revisits the Fisher hypothesis concerning the determination of real rates by estimating fractional integration and cointegration models for nominal interest rates and expected inflation in the G7 countries. Two sets of results are obtained under the alternative assumptions of white noise and Bloomfield (1973) autocorrelated errors respectively. The univariate analysis suggests that the differencing parameter is higher than 1 for most series in the former case, whilst the unit root null cannot be rejected for the majority of them in the latter case. The multivariate results imply that there exists a positive relationship, linking nominal interest rates to inflation; however, there is no evidence of the full adjustment of the former to the latter required by the Fisher hypothesis.
Journal:
INTERNATIONAL REVIEW OF FINANCE
ISSN:
1369-412X
Year:
2019
Vol.:
19
N°:
1
pp.
237 - 244
We assess the persistence of the credit¿to¿GDP ratio over more than 130¿years of data for 11 advanced economies, employing an approach based on fractional integration and allowing for nonlinearities. We show how the time series properties of the data changed around World War II (WWII). Moreover, our findings are consistent with the idea that the supply of mortgage loans has been particularly strong since WWII, in the sense that the degree of integration of the leverage ratio obtained with only these loans is larger than that of the ratio obtained with the total loans for almost all the studied countries. Nevertheless, it is generally the case that both types of ratios show a higher degree of integration after WWII than before it, though often insignificantly, and that their time trends are significant only after WWII.
Journal:
ECONOMICS LETTERS
ISSN:
0165-1765
Year:
2019
Vol.:
181
pp.
182 - 185
In this paper, we examine the cyclical structure of the UK inflation rate using historical data dating back to 1210. Based on a methodology that allows for fractional orders of integration at a non-zero frequency and stochastic cycles, the results indicate the presence of cycles that repeat themselves approximately every 4 years and that the order of integration is constrained between 0.10 and 0.20, implying long memory. Moreover, this pattern seems to be stable over time. (C) 2019 Elsevier B.V. All rights reserved.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2019
Vol.:
51
N°:
50
pp.
5482 - 5489
This article deals with the modelling of growth rate time series in Nigeria with a view of detecting its statistical properties, structural breaks and non-linearities. We employ both fractional integration and structural break time series techniques in modelling the annual growth rate series of the Nigerian GDP growth rate for about 55 years. The data span between 1960 and 2017. The results show that Nigerian growth rate is unstable with non-linearities and long-range dependence structures. We also investigate what might explain these features and conclude that erratic political institutions, associated with poor economic management and insecurity in Nigeria, among others, in the decades after independence are the root causes of non-linearities observed, which have also led to the subsequent recent economic recession in Nigeria.
Journal:
THEORETICAL AND APPLIED CLIMATOLOGY
ISSN:
0177-798X
Year:
2019
Vol.:
137
N°:
1-2
pp.
61 - 76
In this paper, we examine the statistical properties of rainfall data and temperature in six sub-Saharan African countries in the western, eastern, and southern regions (Botswana, Ethiopia, Ghana, Nigeria, Uganda, and South Africa) using time series data spanning between 1900 and 2012. By using linear trends, seasonality, and long-range dependence models, in fractional or I(d) frameworks, the results first indicate that time trends are required in most cases to explain the time series properties of the climatic series. Evidence of anti-persistence (d<0) or I(0) behavior is found for the rainfall data, while long memory (d>0) is found for the temperature data. Evidence of structural breaks are only found in the cases of Ethiopia, Ghana, and Uganda for the temperature data. With both series displaying significant evidence of seasonality and by working with the seasonally differenced data, the results show evidence of I(0) behavior or anti-persistence (d<0) for the rainfall data but long memory (d>0) for the temperature data. Testing the causality between the two variables, the results indicate evidence of causality in the two directions in all cases except for the case of the temperature on the rainfall in South Africa. The implication of the results obtained here is that erratic or constant rainfall is expected in Africa in the future while temperature is likely to continue to increase, and these subsequently lead to future warming experiences.
Journal:
ENVIRONMENTAL AND RESOURCE ECONOMICS
ISSN:
0924-6460
Year:
2019
Vol.:
73
N°:
1
pp.
213 - 228
We analyze the evolution across time of CO2 emissions in the European Union (EU) using advanced econometric techniques in time series analysis. We estimate the time trends along with the orders of integration of series corresponding to global CO2 emissions in EU member states using both parametric and semiparametric methods. The results show that there is a significantly negative trend only in the case of the UK, this being also a country where the trend shows mean reversion. At the other extreme, Spain, Italy, Greece and Bulgaria are some of the countries where CO2 emissions show positive trends and orders of integration that are substantially above unity. Moreover, we examine the CO2 emissions of the EU as a whole, China and the US, finding some support for mean reversion only in the second case. Therefore, there is less urgent need for policy reforms in the U.K. and somehow China than in the rest of the EU or the US.
Journal:
CLIMATE RESEARCH
ISSN:
0936-577X
Year:
2019
Vol.:
79
N°:
1
pp.
55 - 62
This paper deals with the analysis of time trends for European average temperature anomalies for the period from 1655 to 2017 using a dataset based on the Central England Temperatures (CET) and other meteorological stations. The reason for this study is to determine first if long memory is present in the data, and then to estimate the time trends in a more rigorous way. The results indicate that the series display long memory behavior. Based on this and using recursive methods, we show that the time trend becomes statistically significant when the data from 2010 onwards is incorporated, indicating the importance of the last few years in the evidence for warming. It should be noted, however, that this last result may be a consequence of the statistical method employed and should, therefore, be treated with caution.
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2019
Vol.:
25
N°:
5
pp.
827 - 831
This article analyses seasonality and persistence in the number of UK overseas visitors applying a fractional integration framework to (monthly and quarterly) data from 1986 to 2017. The results indicate that long memory is present in the series and the degree of persistence is higher for seasonally adjusted data, with shocks having transitory but long-lasting effects.
Journal:
INTERNATIONAL JOURNAL OF CLIMATOLOGY
ISSN:
0899-8418
Year:
2019
Vol.:
39
N°:
13
pp.
5091 - 5103
This paper investigates the time trend coefficients in the temperatures in 48 US states using monthly data from January 1895 to December 2017, as well as in their anomalies with respect to the base period 1901-2000. For this purpose, we use techniques based on fractional integration, which is a more general approach than the standard methods used in the literature based on integer differentiation. The results indicate that with the exception of 10 states, in the remaining 38, the temperature anomalies have increased across time, with the increase being higher than the one expected under the other more standard approaches. The highest increases correspond to New Jersey and Rhode Island, with an increase of approximately 2.9 degrees C over the last 100years.
Journal:
EUROPEAN JOURNAL OF POPULATION
ISSN:
0168-6577
Year:
2019
Vol.:
35
N°:
4
pp.
675 - 694
This paper deals with the analysis of the under-5 mortality rate series in the G7 countries by using fractional integration techniques, including structural breaks and potential nonlinearities in the data. Several features were detected in the results: Firstly, we observed that for the neonatal data, the order of integration is equal to or higher than one in all cases, contrary to what happens for the remaining cases (< 1- < 5 years) where mean reversion is found in many cases, especially as we increase the age of death. Thus, shocks affecting the neonatal (< 1 month from delivery) mortality rates will have permanent effects requiring special attention to recover the original trends. As expected, all the time trend coefficients were significantly negative and the highest reduction in the mortality rates was obtained in Japan, which might be related with the 17-year increase in life expectancy for the country. Due to the sensitivity of the methodological approaches, the use of robust time series approaches when analyzing child mortality rates is highly recommended.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2018
Vol.:
25
N°:
13
pp.
941 - 944
This article examines the relationship between selected monetary aggregates and inflation and output in Brazil. Impulse responses under VAR and local projections were used to discover the leading or lagging role of the monetary aggregates. In addition, the information provided by the monetary aggregates as predictors of output and inflation was examined. This was assessed by examining their predictive power for subsequent observations on an in-sample basis. Overall, the results indicate that in order to control inflation rates, Brazilian authorities should focus on restricting money supply rather than increasing interest rates.
Journal:
INTERNATIONAL JOURNAL OF FINANCIAL STUDIES
ISSN:
2227-7072
Year:
2018
Vol.:
6
N°:
1
pp.
21 - 29
This paper applies long-memory techniques (both parametric and semi-parametric) to examine whether Brexit has led to any significant changes in the degree of persistence of the FTSE (Financial Times Stock Index) 100 Implied Volatility Index (IVI) and of the British pound's implied volatilities (IVs) vis-a-vis the main currencies traded in the FOREX (foreign exchange market), namely the euro, the US dollar and the Japanese yen. We split the sample to compare the stochastic properties of the series under investigation before and after the Brexit referendum, and find an increase in the degree of persistence in all cases except for the British pound-yen IV, whose persistence has declined after Brexit. These findings highlight the importance of completing swiftly the negotiations with the European Union (EU) to achieve an appropriate Brexit deal.
Journal:
TOURISM ECONOMICS
ISSN:
1354-8166
Year:
2018
Vol.:
24
N°:
1
pp.
41 - 50
This research note examines the change in data measurement for international tourist arrivals to the United States due to the requirement that all tourists must complete the INS I-94 entry form and its impact on tourist arrivals in the aftermath of the September 2001 terrorist attacks. Using fractional integration techniques, we find that the majority of tourist arrivals from various regions around the world are mean reverting, but the degree of persistence increased in the post-September 2001 period.
Journal:
INTERNATIONAL JOURNAL OF ENERGY SECTOR MANAGEMENT
ISSN:
1750-6220
Year:
2018
Vol.:
12
N°:
4
pp.
566 - 580
Purpose This paper aims to investigate the production of sugar cane ethanol in Brazil for the time period 1983-2016, separating the data by geographical location. Design/methodology/approach For this purpose, the authors use techniques based on the concept of fractional integration. Findings The authors show that the data corresponding to the total production is highly persistent, with an integration order smaller than 1 but close to it. In fact, the unit root hypothesis cannot be rejected implying that shocks have a permanent nature, and thus requiring policy measures to recover the level from exogenous shocks. Separating the data into two sub-regions, namely, North-Northeast and Central-South, higher levels of persistence are detected in the latter, while the former presents some evidence of mean reverting behavior, implying that shocks will disappear by themselves in the long run in the former regions. These results are obtained from all the different methods used. Originality/value The originality is based on the time series techniques used in the paper that departs from the classical methods based on unit roots and integer degrees of differentiation.
Journal:
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
ISSN:
0275-5319
Year:
2018
Vol.:
44
pp.
227 - 238
This paper investigates whether the RMB is in the process of replacing the US dollar as the anchor currency in nine ASEAN countries, and also the linkages between the ASEAN currencies and a regional currency unit. A long-memory (fractional integration) model allowing for endogenously determined structural breaks is estimated for these purposes (Gil-Alana, 2008). The results suggest that the ASEAN currencies are much more interlinked than previously thought, whether or not breaks are taken into account, which provides support for a regional currency index as an anchor. Moreover, incorporating a break shows that the linkages between these currencies and the RMB and the US dollar respectively are equally important, and in fact in recent years the former have become stronger than the latter. Therefore including the RMB in the regional index should be considered.
Journal:
ATMOSPHERIC POLLUTION RESEARCH
ISSN:
1309-1042
Year:
2018
Vol.:
9
N°:
1
pp.
53 - 60
This paper deals with the analysis of the global and per capita NOx and VOC emissions in the U.S. and the evaluation of the effectiveness of a number of environmental policies conducted by the government during the last 50 years. For this purpose we have employed fractional integration techniques, which are more flexible than other standard approaches based on the dichotomy between stationary I(0) and nonstationary I(1) behavior. Using the I(d) class of models, our results indicate first that the two NOx series display orders of integration substantially higher than 1, and though the VOC series display smaller orders, the unit root hypothesis cannot be rejected, indicating lack of mean reversion in the four series examined. Including dummy variables for each of the breaks referring to the environmental policies, the results show that the five policies investigated (at 1965, 1967, 1970, 1977 and 1990) were effective in reducing the number of emissions, being particularly important the one that was adopted in 1970.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2018
Vol.:
54
N°:
2
pp.
547 - 565
Though not working toward an imminent transition to a monetary or currency union, the Central American Monetary Council (or CMCA, from Spanish Consejo Monetario Centroamericano) serves as an institution promoting economic and financial stability among five Central American countries (Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) and the Dominican Republic. Econometric studies conducted by researchers from CMCA have mostly focused on studying inflation levels of these countries, making use of econometric tools such as VECM and cointegration. We expand the study of inflation stability in the member countries of the CMCA by adopting a long memory and fractionally integrated approach and implementing cointegration methods that have not yet been used in the study of the Central American Monetary Council. Our results first show that all the series of prices are nonstationary, with orders of integration equal to or higher than 1 in all cases. Looking at long-run equilibrium relationships among the countries, we only found strong evidence of a cointegration relationship in the case of Honduras with El Salvador. All the other vis-a-vis relationships seem to diverge in the long run. Policy implications of the results obtained are also derived in the paper.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2018
Vol.:
27
pp.
140 - 147
This paper investigates the degree of persistence of market fear in the VIX index over the sample period 2004-2016, as well as some sub-periods. The findings indicate that its properties change over time: in normal periods it exhibits anti-persistence, whilst during crisis period the level of persistence is increasing. These results can be informative about the nature of financial bubbles and anti-bubbles, and provide evidence on whether there exist market inefficiencies that could be exploited to make abnormal profits by designing appropriate trading strategies.
Journal:
ENERGY SOURCES. PART B. ECONOMICS, PLANNING, AND POLICY
ISSN:
1556-7249
Year:
2018
Vol.:
13
N°:
9-10
pp.
392 - 403
Is lithium affecting the US oil and gas industry strategies? Lithium has an increasingly strategic role as clean technologies emerge, affecting the strategies of oil and gas companies in response to energy trends. This paper contributes to this literature, studying the dynamics of lithium industry and mergers and acquisitions in the US oil and gas industry in time-frequency domain. Methodologies based on continuous wavelet transform and vector autoregression models are used, and the results indicate that both time series are correlated in the long term, where mergers and acquisitions' US oil and gas industry dependence on lithium industry has increased, starting in the early 2014 until the end of the sample. Evidence of causality is not found between both time series.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2018
Vol.:
50
N°:
29
pp.
3148 - 3155
This article examines the long-run Purchasing Power Parity (PPP) hypothesis for 12 Latin American Real Effective Exchange Rates (REERs) using fractional integration techniques. The empirical results, applying parametric approaches, provide evidence of mean reversion in the REERs in the cases of Nicaragua, Belize, Costa Rica, Guyana and Paraguay and lack of it for the remaining seven countries. Employing semiparametric methods, the evidence of mean reversion covers the following countries: Belize, the Dominican Republic, Ecuador and Mexico. Thus, only for Belize and Guyana do we obtain consistent evidence of mean reversion in the real exchange rates. At the other extreme, lack of mean reversion, and thus, lack of PPP, is obtained with both methods in Bolivia, Brazil, Colombia and Venezuela. For the remaining six countries, the results are ambiguous. The results for the PPP theory in Belize and Guyana may show the importance of promoting policies based on exchange rate flexibility and economic liberalization to reach a long-run stability scenario that leads to greater international competitiveness and lower external vulnerability.
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2018
Vol.:
511
pp.
251 - 262
We investigate financial market efficiency in the time series of four daily Baltic stock market indices, namely: Baltic Benchmark Gross Index (OMXBBGI), all share index of Tallin-Lithuanian (OMXT), all share index of Riga (OMXR) and all share index of Vilnius (OMXV), based on historical data from 1 January, 2000 to 22 January 2016. We use fractional integration methods to test the hypothesis of market efficiency. Realizing that long-memory estimation could be spurious in the presence of structural breaks, we identify bull and bear market phases from each of the time series. Applying the fractional integration approach, we find that the random walk hypothesis of market efficiency is generally rejected in the overall, and at two bull and one bear sub-samples of the four Baltic stock indices. The volatility at the bear markets of these stocks persists more than the volatility at the bull markets. Our results therefore provide evidence for weak form of market efficiency in the Baltic stock markets, with some exceptions. As a way of policy, the results are relevant to portfolio managers and policy makers in a number of ways. (C) 2018 Elsevier B.V. All rights reserved.
Journal:
ATMOSPHERIC SCIENCE LETTERS
ISSN:
1530-261X
Year:
2018
Vol.:
19
N°:
4
pp.
e810
We investigate the time trends in the maximum and minimum temperatures in the United States from 1895 to 2017 using techniques that allow for fractional integration in the detrended series. In doing so we get more accurate estimates of the trends than those obtained using standard methods that impose either stationarity I(0) or nonstationarity I(1). Our results reveal evidence of significant positive trends in both maximum and minimum temperatures, while the difference between them show a significant negative trend as a consequence of the higher increase in the minimum temperatures. Evidence of stationary long memory behavior is also found in the three series examined.
Authors:
Boateng, A.; Lesoana, M.; Siweya, H.; et al.
Journal:
JOURNAL OF DEVELOPING AREAS
ISSN:
0022-037X
Year:
2018
Vol.:
52
N°:
1
pp.
157 - 168
Keeping a low steady rate of inflation is one of the government¿s most important responsibilities. Inflation is an important determinant of economic growth. Consequently, it has been one of the most examined areas in economics, from both theoretical and empirical perspectives. Indeed, economists have shown continued interest in this essential economic variable. The most important question related to inflation is: Does non-linearity exist in inflation? The answer to this question, which has important policy implications, can support or endanger the validity of several important economic models. Hence, a clear understanding of the changing aspects of inflation is crucial to any economy because it is regarded as a significant variable in a number of economic models, whose legitimacy critically relies on whether or not this variable is stationary. In practice, many economic time series models rely on linearity. Nonetheless, it has often been found that simple linear time series models regularly leave certain aspects of economic and financial data inexplicable. This paper proposes a model that combines fractional integration with non-linear deterministic terms based on the Chebyshev polynomials in time for the analysis of CPI inflation rates of Ghana and South Africa in Sub-Saharan Africa. Firstly, we tested for non-linear deterministic terms in the context of fractional integration. The estimates of the differencing parameter, d, were found to be 1.11 and 1.32, respectively for t
Journal:
ECONOMIC SYSTEMS
ISSN:
0939-3625
Year:
2018
Vol.:
42
N°:
1
pp.
164 - 173
The aim of this paper is to examine the effect of oil price movements on unemployment in Central and Eastern Europe. We do this by disentangling oil prices movements by their sign and from there we analyse the separate effects of positive and negative movements of oil prices on unemployment rates, We find that, although oil prices and unemployment are not correlated very much in the short run, the effect of oil price shocks on the natural rate of unemployment goes in the same direction, so that increases or decreases in oil prices increase or decrease the natural rate of unemployment.
Journal:
COMPUTATIONAL STATISTICS
ISSN:
0943-4062
Year:
2018
Vol.:
33
N°:
1
pp.
443 - 465
This paper examines the implications of the seasonal adjustment by an ARIMA model based (AMB) approach in the context of seasonal fractional integration. According to the AMB approach, if the model identified from the data contains seasonal unit roots, the adjusted series will not be invertible that has serious implications for the posterior analysis. We show that even if the ARIMA model identified from the data contains seasonal unit roots, if the true data generating process is stationary seasonally fractionally integrated (as it is often found in economic data), the AMB seasonal adjustment produces dips in the periodogram at seasonal frequencies, but the adjusted series still can be approximated by an invertible process. We also perform a small Monte Carlo study of the log-periodogram regression with tapered data for negative seasonal fractional integration. An empirical application for the Spanish economy that illustrates our results is also carried out at the end of the article.
Journal:
REVIEW OF DEVELOPMENT FINANCE
ISSN:
1879-9337
Year:
2018
Vol.:
8
N°:
2
pp.
96 - 105
This paper uses fractional integration and cointegration for the period of January 2000-June 2018 to investigate the stochastic properties of the bilateral linkages between stock markets in Africa and selected international markets to establish if markets in Africa co-move with the rest of the world. Results from the univariate analysis show that there exists a high degree of persistence with orders of integration about 1 or higher than 1, implying that shocks to these stock markets have significant permanent effects. Concerning bivariate results and testing for cointegration, evidence of cointegration is found for Egypt and Kenya against the UK and the Europe Zone. There are some other cases where partial evidence of cointegration is found, though in general, in all cases, we observe that the degree of cointegration is very low, implying very long periods of convergence. (C) 2018 Africagrowth Institute. Production and hosting by Elsevier B.V.
Journal:
RESEARCH IN INTERNATIONAL BUSINESS AND FINANCE
ISSN:
0275-5319
Year:
2018
Vol.:
46
pp.
141 - 148
This paper examines persistence in the cryptocurrency market. Two different long-memory methods (R/S analysis and fractional integration) are used to analyse it in the case of the four main cryptocurrencies (BitCoin, LiteCoin, Ripple, Dash) over the sample period 2013-2017. The findings indicate that this market exhibits persistence (there is a positive correlation between its past and future values), and that its degree changes over time. Such predictability represents evidence of market inefficiency: trend trading strategies can be used to generate abnormal profits in the cryptocurrency market.
Journal:
COMPUTATIONAL ECONOMICS
ISSN:
0927-7099
Year:
2018
Vol.:
51
N°:
4
pp.
913 - 940
This paper examines short-term price reactions after one-day abnormal price changes and whether they create exploitable profit opportunities in various financial markets. Statistical tests confirm the presence of overreactions and also suggest that there is an "inertia anomaly", i.e. after an overreaction day prices tend to move in the same direction for some time. A trading robot approach is then used to test two trading strategies aimed at exploiting the detected anomalies to make abnormal profits. The results suggest that a strategy based on counter-movements after overreactions does not generate profits in the FOREX and the commodity markets, but in some cases it can be profitable in the US stock market. By contrast, a strategy exploiting the "inertia anomaly" produces profits in the case of the FOREX and the commodity markets, but not in the case of the US stock market.
Journal:
ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
ISSN:
0944-1344
Year:
2018
Vol.:
25
N°:
18
pp.
17289 - 17299
In this article, we have examined the hypothesis of convergence of renewable energy consumption in 27 OECD countries. However, instead of relying on classical techniques, which are based on the dichotomy between stationarity I(0) and nonstationarity I(1), we consider a more flexible approach based on fractional integration. We employ both parametric and semiparametric techniques. Using parametric methods, evidence of convergence is found in the cases of Mexico, Switzerland and Sweden along with the USA, Portugal, the Czech Republic, South Korea and Spain, and employing semiparametric approaches, we found evidence of convergence in all these eight countries along with Australia, France, Japan, Greece, Italy and Poland. For the remaining 13 countries, even though the orders of integration of the series are smaller than one in all cases except Germany, the confidence intervals are so wide that we cannot reject the hypothesis of unit roots thus not finding support for the hypothesis of convergence.
Journal:
EMPIRICA
ISSN:
0340-8744
Year:
2018
Vol.:
45
N°:
4
pp.
801 - 820
The disconnection between productivity and workers' compensation after 1980 is a fact not only for the U.S., Canada, Japan but also for Europe. The level of the decoupling between labor productivity and real hourly compensation is highest in the U.S. and Japan and lowest in Norway and Germany. This study investigates the great decoupling phenomena between 1950 and 2014 for eight economies with available time series data. The results should assist policy makers in developing efficient wage-setting mechanisms and help researchers in the field of wage moderation policy and the great decoupling. For this purpose we use fractional integration and cointegration techniques. Countries with stagnating minimum wages, rigid wage moderation policy and a high level of technological progress (strong total factor productivity growth) register higher wage stagnation in relation to labor productivity. Policy makers should be extremely careful when using wage moderation policy to improve a country's competitiveness and should monitor the wage stagnation behind labor productivity (great decoupling) since workers have been producing more but receiving significantly less since 1980. The great decoupling is more prominent today and it is constantly increasing not just in the U.S. and Japan but worldwide.
Journal:
FINANCE RESEARCH LETTERS
ISSN:
1544-6123
Year:
2018
Vol.:
24
pp.
34 - 41
This paper analyses the main statistical properties of the Emerging Market Bond Index (EMBI), namely long-range dependence or persistence, non-linearities, and structural breaks, in four Latin American countries (Argentina, Brazil, Mexico, Venezuela). For this purpose it uses a fractional integration framework and both parametric and semi parametric methods. The evidence based on the former is sensitive to the specification for the error terms, whilst the results from the latter are more conclusive in ruling out mean reversion. Further, non-linearities do not appear to be present. Both recursive and rolling window methods identify a number of breaks. Overall, the evidence of long-range dependence as well as breaks suggests that active policies might be necessary for achieving financial and economic stability in these countries. (C) 2017 The Authors. Published by Elsevier Inc.
Journal:
THE EMPIRICAL ECONOMICS LETTERS
ISSN:
1681-8997
Year:
2018
Vol.:
17
N°:
5
pp.
563 - 567
This paper examines the PPP hypothesis analysing the behaviour of the real exchange rates vis-a-vis the US dollar for four major currencies (namely, the Canadian dollar, the euro, the Japanese yen and the British pound). An innovative approach based on fractional integration in a multivariate context is applied to annual data from 1970 to 2011. Long memory is found to characterise the Canadian dollar, the British pound and the euro, but in all four cases the results are consistent with the relative version of PPP.
Journal:
ECONOMICS BULLETIN
ISSN:
1545-2921
Year:
2018
Vol.:
38
N°:
1
pp.
98 - 104
One of the key features of unemployment rate is its persistence, normally described as hysteresis. This note applies fractional integration techniques to show that Spanish unemployment is highly persistent and exhibits asymmetric behaviour, specifically its degree of persistence is higher during recessions (when unemployment is going up) compared to expansions (when it is going down). Further work should investigate whether this is a stylised fact also in other countries exhibiting hysteresis.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1076-9307
Year:
2018
Vol.:
23
N°:
2
pp.
111 - 121
This paper deals with the growth rate in Kenya, examining its statistical properties and investigating the factors that may explain the slow growth rates observed during the last 50years. The results show that Kenyan growth rate is unstable with non-linearities and long range dependence structures. We also investigate what might explain these features. In this regard, we conclude that the development of anomalous political institutions in Kenya in the decades after independence is the root cause that has led to subsequent weak economic institutions and macroeconomic mismanagement and the vulnerability of the Kenyan economy to domestic and external shocks.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2018
Vol.:
55
N°:
3
pp.
913 - 935
This study examines the relationship between healthcare expenditure and disposable income in the 50 US states over the period 1966-2009 using fractional integration and cointegration techniques. The degree of integration and nonlinearity of both series are found to vary considerably across states, while the fractional cointegration analysis suggests that a long-run relationship exists between them in only 11 out of the 50 US states. The estimated long-run income elasticity of healthcare expenditure suggests that health care is a luxury good in these states. By contrast, the short-run elasticity obtained from the regressions in first differences is in the range (0, 1) for most US states, which suggests that health care is a necessity good instead. The implications of these results for health policy are also discussed.
Journal:
ENERGY SOURCES. PART B. ECONOMICS, PLANNING, AND POLICY
ISSN:
1556-7249
Year:
2018
Vol.:
12
N°:
12
pp.
1066 - 1073
This study applies fractional integration techniques (parametric and semi-parametric) to examine the time series behavior of US retail gasoline prices using weekly data from January 2, 1995, to May 22, 2017. The results based on both parametric and semi-parametric methods provide conflicting evidence. Using parametric methods, the orders of integration are significantly greater than 1; however, with the semi-parametric approach, there is some evidence of mean reversion (d < 1). These conflicting results could be due to the existence of structural breaks. Indeed, endogenous structural break tests indicate breaks in 2005 and 2010. The estimation of the orders of integration within each of the subsamples reveals the absence of mean reverting behavior in retail gasoline prices.
Journal:
ANNALS OF TOURISM RESEARCH
ISSN:
0160-7383
Year:
2018
Vol.:
68
pp.
20 - 29
This paper analyses tourism in Iceland using fractional integration and taking into account the seasonality and the degree of persistence in the data. Using annual data, the unit root hypothesis cannot be rejected, implying permanency of shocks. However using, monthly data, a break is found at 2009m7 and the orders of integration are in the interval (0, 0,5) suggesting mean reversion. The conclusion is that exogenous shocks impacting inbound tourism do not persist and tend to disappear relatively fast. The key policy implications thereof are reported at the end of the paper, critiquing the classical response to perceived slumps in inbound tourism that include marketing and promotion instead of developing infrastructure in anticipation of resumed growth in inbound tourism.
Journal:
SOUTH AFRICAN JOURNAL OF ECONOMICS
ISSN:
0038-2280
Year:
2018
Vol.:
86
N°:
1
pp.
76 - 81
This paper estimates long-memory models to analyse the stochastic behaviour of unemployment in eleven African countries (Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania and Zambia) from the 1960s until 2010. The empirical results provide very strong evidence of lack of mean reversion in all series under examination. This suggests that hysteresis models are the most relevant for the African experience (not surprisingly, given the rigidities in their labour markets). Therefore in such countries shocks hitting the unemployment series will have permanent effects, and policy makers should take appropriate action to reverse the effects of negative shocks.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2017
Vol.:
49
N°:
45
pp.
4579 - 4587
This article analyses the technical efficiency of Mozambican banks from 2005 to 2014 with a Bayesian stochastic frontier model. The intermediate approach is adopted and the results reveal that efficiency varies amongst the banks analysed. Foreign ownership of Mozambican banks is also analysed, as is public ownership, the role of mergers and acquisitions, big banks and active dividend policy within the context of bank costs. Policy implications are then derived.
Journal:
INTERNATIONAL JOURNAL OF CLIMATOLOGY
ISSN:
0899-8418
Year:
2017
Vol.:
37
N°:
5
pp.
2354 - 2363
In this article, we presented a variety of modelling approaches for the El Niño Southern Oscillation (ENSO) time series data trying to capture two features that are present in the data, in particular the persistence and the seasonal structure. For this purpose, we use long memory models based on fractional integration. The results indicate that the four ENSO series examined (El Niño 1¿2; El Niño 3, El Niño 4 and El Niño 3.4) can be described in terms of a seasonal I(d) model with an order of integration higher than 0 and smaller than 1 in all four cases. The lowest degree of persistence is found in the series corresponding to El Niño 1.2, with an order of seasonal integration of 0.39. This seasonal fractional differencing parameter, however, is found to be higher than 0.5 (and thus non¿stationary) for the remaining three series.
Journal:
ENERGY SOURCES. PART B. ECONOMICS, PLANNING, AND POLICY
ISSN:
1556-7249
Year:
2017
Vol.:
12
N°:
5
pp.
420 - 427
This paper contributes to the literature on crude oil price behavior and examines how this affects mergers and acquisitions (M&A) in the petroleum industry in the US. The paper analyzes the relationship of these two series by studying its dynamic in the time¿frequency domain. The novelty of this study¿s approach lies in the application of wavelet tools for its resolution. Monthly data are used in this study, covering the period January 1980¿June 2012. It was observed that there was a shift to higher frequencies of the wavelet coherency during the mid-1990s and the late 2000s. The results also indicate that during the mid-1990s and the late-2000s, an increase in M&A took place that was led by the increase in West Texas Intermediate crude oil prices.
Journal:
INTERNATIONAL ECONOMICS
ISSN:
2110-7017
Year:
2017
Vol.:
150
pp.
72 - 79
This paper deals with the analysis of inflation in Kenya. We use data from the Consumer Price Index and inflation to examine, among other issues, features such as the presence of structural breaks, non-linearities and time dependence or persistence in the data. The results indicate the presence of a structural break in the inflation rate taking place in 1994, observing a level shift and a reduction in the degree of integration of the series. However, the results change depending on the assumptions made on the error term. Thus, under no autocorrelation the unit root hypothesis cannot be rejected in any of the two subsamples; however, under the more realistic assumption of autocorrelation, mean reversion takes places in the two subsample, with a slightly reduction after the break. These results are explained in terms of the policy reform and intervention during the last two decades, and some policy recommendations are also presented in the paper.
Journal:
INTERNATIONAL ECONOMICS
ISSN:
2110-7017
Year:
2017
Vol.:
152
pp.
116 - 123
This paper analyses the stochastic properties of the bilateral linkages between the central bank policy rates of the US, the Eurozone, Australia, Canada, Japan and the UK using fractional integration and cointegration techniques respectively. The univariate analysis suggests a high degree of persistence in all cases: the fractional integration parameter d is estimated to be above 1, ranging from 1.26 (US) to 1.48 (UK), with the single exception of Japan, for which the unit root null cannot be rejected. Concerning the bivariate results, Australian interest rates are found to be cointegrated with the Eurozone and UK ones, Canadian rates with the UK and US ones, and Japanese rates with the UK ones. The increasing degree of integration of international financial markets and the coordinated monetary policy responses following the global financial crisis might both account for such linkages.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2017
Vol.:
120
pp.
79 - 91
Crude oil price behaviour depends on all the events that have the potential to disrupt the flow of oil. We understand that these causes could be geopolitical issues and/or military conflicts in/with the producer countries and a problem relating to demand and supply. In the paper we first investigate the statistical properties of the real oil prices as well as its log-transformation, along with the absolute and squared returns values. Then, we also address the following issue: Does the crude oil price behave in the same way before and after a military conflict or geopolitical problem in the producer countries? To answer this question we analyse the real oil prices of West Texas Intermediate (WTI) before and after the different military conflicts and political events that occurred after World War II. For this purpose we use techniques based on unit roots and fractional integration. The empirical results provide evidence of persistence and breaks in the oil prices series and stationary long memory in the absolute returns. However, we do not observe significant differences before and after the conflict and geopolitical events. (C) 2016 Elsevier Ltd. All rights reserved.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2017
Vol.:
54
pp.
53 - 57
This paper examines the inflation hedging ability of gold in the UK based on a fractional integration and cointegration framework. This gives more flexibility as it does not restrict the order of integration between zero and 1. Annual time series data covering 1257¿2016 were used. We conducted both full sample and sub-sample analysis. Using the full sample, the findings shows that gold and retail price index (RPI) are both I(1). However, based on the sub-sample analyses, gold is I(1) for most sub-periods while RPI is mean reverting (d < 1) for most periods. However, both series exhibit the same degree of integration, I(1), during the last sub-sample, specifically between 1903 and 2016. We also find the existence of cointegration between gold and RPI but this is exclusively due to the data from the last century. It is therefore concluded that gold provides protection against inflation since its value would be maintained in the presence of inflation.
Journal:
JOURNAL OF POLICY MODELING
ISSN:
0161-8938
Year:
2017
Vol.:
39
N°:
5
pp.
775 - 789
This study examines the time series behavior of U.S. short- and long-run real ex-post interest rates within a long memory approach with non-linear trends using a long span of monthly and annual data. Overall, our results suggest that U.S. real interest rates are not as persistent as suggested in the literature. The implications of this result are relevant to evaluate both the effectiveness of policy interventions and the theoretical implications of different macroeconomic and financial models. For example, our results are consistent with the main implications of the consumption-based asset pricing models and the Fisher effect. Furthermore, the results point out to the difficulties of the monetary policy to influence interest rates, mainly in the long-run, and thus, highlighting varied interest rate policies across short and long-runs when it comes to affecting the real economy.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2017
Vol.:
24
N°:
14
pp.
991 - 994
This article examines the interaction between fractional integration and nonlinear structures by using for the latter the Chebyshev polynomials in time that can be taken as an alternative, less abrupt way of modelling breaks in time series data. A Lagrange multiplier test, developed for testing the order of integration in the context of nonlinear deterministic trends, is implemented in three well-known and previously studied time series data: the Nile river data, the temperatures in the Northern hemisphere and CO2 emissions in the US. The results suggest that the second and especially the third time series display nonlinear behaviour still with fractional degrees of differentiation.
Journal:
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
ISSN:
1057-5219
Year:
2017
Vol.:
52
pp.
1 - 8
This paper uses long-range dependence techniques to analyse two important features of the US Federal Funds effective rate, namely its persistence and its cyclical behaviour. It examines annual, monthly, bi-weekly and weekly data, from 1954 until 2017. Two models are considered. One is based on an I(d) specification with AR(2) disturbances and the other one on two fractional differencing structures, one at the zero and the other at a cyclical frequency. Thus, the two approaches differ in the way the cyclical component of the process is modelled. In both cases we obtain evidence of long memory and fractional integration with cycles repeating approximately every 8 years. The in-sample goodness-of-fit analysis supports the second specification in the majority of cases. An out-of-sample forecasting experiment also suggests that the long-memory model with two fractional differencing parameters is the most adequate one, especially over long horizons. (C) 2017 The Author(s). Published by Elsevier Inc.
Journal:
ENVIRONMENTAL AND RESOURCE ECONOMICS
ISSN:
0924-6460
Year:
2017
Vol.:
67
N°:
4
pp.
869 - 883
This study examines the time-series behaviour of emissions within a long-memory approach with non-linear trends and structural breaks, using a long span of data for the BRICS and G7 countries. The main results show significant differences both in the degree of integration and the non-linearities among the analysed countries. Thus, in most of the cases, the emissions series display orders of integration equal to or higher than 1, implying that there are permanent effects of shocks for emissions. The only exceptions are Germany, the US and the UK, where shocks will have transitory effects. With respect to the non-linearities, more evidence of non-linear behaviour was obtained for the G7 countries, especially in the cases of the US, the UK, Germany and France. Partial evidence was also found in Canada and India. The significantly different results obtained for emerging and developed economies have important policy implications.
Journal:
JOURNAL OF HOUSING AND THE BUILT ENVIRONMENT
ISSN:
1566-4910
Year:
2017
Vol.:
32
N°:
4
pp.
787 - 804
This study focuses on the determinants of the prices of houses in Nairobi, Kenya. The study finds housing prices to have positive relationships with GDP, diaspora remittances, lending rates, loans to real estate sector and cost of construction. A negative relationship exists between the house prices and inflation. Results of the cointegration tests indicate the existence of stable long-run relationships between house prices and each of GDP and NSE Index, while unstable relationships are reported for diaspora remittances and building costs. Using fractional integration, the results show higher orders of integration for the house price series compared with the other variables, though the study is indifferent about the existence of a house price bubble. Granger causality tests indicate there are no causal relationships between house prices and diaspora remittances. However, there are two way causalities between house prices and each of GDP, building costs and NSE Index. This negates the existence of a house price bubble.
Journal:
COMPUTATIONAL ECONOMICS
ISSN:
0927-7099
Year:
2017
Vol.:
49
N°:
3
pp.
405 - 432
This paper develops a new pair trading method to detect inefficiencies in exchange rates movements and arbitrage opportunities using a convergence/divergence indicator (CDI) belonging to the oscillatory class. The proposed technique is applied to 11 exchange rates over the period 2010-2015, and trading rules based on CDI signals are obtained. The CDI indicator is shown to outperform others of the oscillatory class and in some cases (for EURAUD and AUDJPY) to generate profits. The suggested approach is of general interest and can be applied to different financial markets and assets.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2017
Vol.:
124
pp.
521 - 530
We conduct a fractional integration and cointegration study of several Kenyan electricity price series in order to determine whether signs of persistence or mean reversion can eventually be discovered. Such features can be considered as relevant when considering the possibilities of shocks affecting the energy market of Kenya, which has recently been subjected to major debate. We conclude that electricity prices in Kenya contain unit roots, implying permanent shocks lasting forever. Among the factors affecting electricity prices, we find oil prices and interest rates have significant positive effects on electricity, and based on the fact that all the series are I(1), long run relationships are examined by means of fractional cointegration. The recently introduced FCVAR model is implemented, with results showing that the series under study are fractionally cointegrated, with oil price shocks affecting electricity prices. (C) 2017 Elsevier Ltd. All rights reserved.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2017
Vol.:
41
N°:
2
pp.
408 - 420
This paper analyses Angola¿s long-run and short-run money demand, identifying its determinants using data from January 2000 to August 2013. A theoretical model is presented and the estimated results show that money mass, income, inflation, exchange rate and interest rates are cointegrated, revealing a long-run equilibrium relationship between these variables. The cointegration relationship is unstable in the short run. The results are in line with the monetary policy undertaken by the Central Bank of Angola and also in line with published papers on money demand. Policy implication is derived.
Journal:
INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
ISSN:
1873-8036
Year:
2017
Vol.:
51
pp.
283 - 294
This paper investigates the weak-form efficiency hypothesis for the art market. We consider 15 art price indices namely: Contemporary, Drawings, France, Global index (Euro), Global index (USD), Modern art, Nineteenth century, Old Masters, Paintings, Photographies, Postwar, Prints, Sculptures, UK and US. We use quarterly data from 1998:1 to 2015: 1. We employ both standard and non-parametric single and joint variance ratio tests while accounting for small sample bias through the use of the wild bootstrapping. We show that the majority of the art markets are inefficient with the exception of the Old Masters that consistently prove efficient under both individual and joint variance ratio tests. To a lesser extent Contemporary, US and UK markets are also efficient. However, confronting the data with both linear and nonlinear long memory models as robustness check, we observe that Paints, Prints, Photographies, Nineteenth century, Modern Art, US, France and Drawings have unit roots and are therefore efficient. Others such as Post war Sculpture, and Contemporary have values of the fractional parameter d significantly different from 0 to 1 and they may be considered efficient as well in a number of cases. The US and Contemporary art markets appear to be efficient irrespective of the method used.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2017
Vol.:
41
N°:
2
pp.
343 - 353
This paper examines the Fisher relationship in the case of Nigeria by carrying out standard unit root tests and applying fractional integration techniques to 1-month, 3-month, 6-month and 12-month deposit rates and inflation. The evidence indicates that this relationship only holds for very short-term (1-month) interest rates, and therefore only these nominal rates are a useful predictor of the inflation rate. For other short-term rates the lack of a Fisher effect suggests that they could be used as a monetary policy tool.
Journal:
JOURNAL OF DEVELOPING AREAS
ISSN:
0022-037X
Year:
2017
Vol.:
51
N°:
4
pp.
29 - 47
As a result of the dependency of United States (US) on Nigerian oil exports, coupled with her greatest share in Nigerian foreign direct investment, the recent global financial crisis of 2008/09 which emanated from the country spilled over to the Nigerian capital market, affecting majorly the financial sectors. Since the period of the crisis, the interests of the researchers have been gingered towards studying the interdependencies in financial market series of nations that are trading partners, particularly in relation to technological advanced economies like the US and the United Kingdom. This paper examines the effects of the global financial crisis on the Nigerian stock market. We use daily US stocks (S&P500, Nasdaq and Dow Jones industrial stock indices) and All Share Index (ASI) of Nigerian Stock Exchange, testing for long run equilibrium relationships between the Nigerian ASI and each of the US indices. Apart from the initial nonstationarities displayed by the stock time series, plots of a US stock index and ASI also display the possibility of possible co-movement over time, particularly during the crisis period. That called for possible test for cointegration. However, instead of restricting ourselves to integer degrees of differentiation we allow for the possibility of fractional values. Thus, we test for fractional integration, and the results (...)
Journal:
ECONOMIC CHANGE AND RESTRUCTURING
ISSN:
1573-9414
Year:
2017
Vol.:
50
N°:
1
pp.
45 - 58
This study examines the impact of the anti-inflation stabilization policies on the behavior of inflation in Croatia in the early 1990s and through the subsequent post-stabilization period using fractional integration techniques. Indeed, the implementation of the stabilization program in October 1993 brought immediate deflation with a relative high degree of inflation stability in the post-stabilization period. With allowance for a structural break corresponding to the stabilization program in October 1993, the degree of persistence was substantially reduced with the fractional differencing parameter being positive but close to zero in the post-stabilization period.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2017
Vol.:
53
pp.
117 - 124
This paper deals with the relationship between oil prices and gold prices using some recently developed techniques in time series analysis, and based on the concepts of fractional integration and cointegration. We show first, that using standard methods of unit roots and cointegration with integer degrees of differentiation, the two series seem to be individually I(1) though cointegrated. However, using fractional techniques, we show that there exists a fractionally cointegrated relationship between the two variables, with an order of integration in the long run relationship of about 0.46. Moreover, shocks in the price of gold seem to have an effect on the price of oil that persists in time.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2017
Vol.:
53
pp.
117 - 124
This paper deals with the relationship between oil prices and gold prices using some recently developed techniques in time series analysis, and based on the concepts of fractional integration and cointegration. We show first, that using standard methods of unit roots and cointegration with integer degrees of differentiation, the two series seem to be individually I(1) though cointegrated. However, using fractional techniques, we show that there exists a fractionally cointegrated relationship between the two variables, with an order of integration in the long run relationship of about 0.46. Moreover, shocks in the price of gold seem to have an effect on the price of oil that persists in time.
Journal:
ENERGY
ISSN:
0360-5442
Year:
2017
Vol.:
141
pp.
12 - 19
The aim of this paper is to relate the shale oil revolution in the United States with WTI oil price behavior. Since the development of the combination of horizontal drilling techniques together with hydraulic fracturing in the 1970s, known as shale oil, oil markets have undergone a significant transformation with the unexpectedly strong rise in the United States production affecting oil prices. The goal of this paper is two-fold: first, we analyze the relationship of total United States crude oil production and WTI crude oil prices by studying its performance in the time-frequency domain applying wavelet tools for its resolution. Using wavelet methodologies, we observe a shift to higher frequencies of the wavelet coherency for the time period 2003-2009 and lower frequencies for the period 2009-2014. The results also indicate that during the period 2003-2009 the U.S. oil production and WTI oil prices time series are in phase; they move together, with total United States oil production leading. During the period 2009-2014 oil production and WTI oil prices time series are out of phase (negatively correlated), suggesting that oil production increases precede a decrease in WTI oil prices. In the second part of the paper and to give greater credibility to the results obtained through the wavelet transform, we analyze the behavior of WTI crude oil before and after the shale oil boom in the United States employing methodologies based on long run dependence. The results indicate that mean reversion takes place only for the data corresponding to the first subsample, ending at 2003. For the second subsample, as well as for the whole sample, lack of mean reversion is detected with orders of integration equal to or higher than 1 in all cases. (C) 2017 Elsevier Ltd. All rights reserved.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2017
Vol.:
24
N°:
2
pp.
136 - 139
This article analyses the duration of cycles in the unemployment rate series in a group of EU countries. It extends the model by Bierens (2001) and follows Gil-Alana (2001) by allowing for fractional cyclical integration. Once cycles are introduced in the model, we have more evidence of mean reversion than in previous studies.
Journal:
JOURNAL OF INTERNATIONAL DEVELOPMENT
ISSN:
0954-1748
Year:
2016
Vol.:
28
N°:
2
pp.
214 - 232
This paper analyses the implicit dynamics underlying the interest rate structure in Kenya. For this purpose, we use data on four interest rates of commercial banks (deposits, savings, lending and overdraft) together with the 91-day Treasury Bill rate, for the period July 1991 to August 2010, and apply various techniques based on long-range dependence and, in particular, on fractional integration. The results indicate that all series examined are nonstationary with orders of integration equal to or higher than 1 when using parametric techniques and slightly smaller than 1 when using semiparametric methods. The analysis of various spreads suggests that lending¿savings and deposits¿savings are also nonstationary I(1) variables; however, the spreads vis-à-vis the Treasury Bill rate may be mean reverting if the errors are autocorrelated. The high level of dependence observed in some of these series could be the result of an incorrect interest rate policy, implying the desirability of a policy aimed at reducing interest rate volatility.
Journal:
ECONOMICS LETTERS
ISSN:
0165-1765
Year:
2016
Vol.:
148
pp.
55 - 58
This study examines the inflation persistence using both online and official price indexes in Argentina, Brazil, China, Japan, Germany, South Africa, the UK and the US, using fractional integration technique. The main results suggest that the degree of persistence, estimated by the long-memory parameter, is smaller when using online price indexes (believed to be a more realistic measure of inflation), mainly in the cases of Argentina, Brazil, China and the UK. Monetary policy implications are discussed.
Journal:
JOURNAL OF DEVELOPING AREAS
ISSN:
0022-037X
Year:
2016
Vol.:
50
N°:
3
pp.
287 - 304
Journal:
ENERGY SOURCES
ISSN:
0090-8312
Year:
2016
Vol.:
11
N°:
2
pp.
137 - 149
The rise of oil prices is a main issue in contemporary economics. This study examines the monthly, weekly and daily structure in several oil prices series using a modeling approach based on fractional integration and long-range dependence. The results indicate that oil prices series are highly persistent, with orders of integration equal to or higher than 1. Breaks in the series do not alter the main conclusions of this study. That means that shocks have a permanent nature and strong policy measures must be implemented to return the series to their original long-term projections.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2016
Vol.:
48
N°:
29
pp.
2675 - 2696
We suggest a Monte Carlo simulation-based unit root test of the purchasing power parity theory for Latin American countries. Under the null hypothesis, we use a Markov regime-switching (MS) model with unit root in the conditional location and MS volatility dynamics. Under the alternative hypothesis, the proposed test incorporates Markov regime-switching autoregressive moving average (MS-ARMA) plus MS volatility dynamics. Under both the null and alternative hypotheses, one of the volatility models estimated is Beta-t-EGARCH, which is a recent dynamic conditional score volatility model. We use data on real effective exchange rate time series for 14 Latin American countries. For each country, we estimate by Monte Carlo simulation the critical values of the unit root test. We provide an economic discussion of the unit root test results and also study the robustness of MS-ARMA plus MS volatility with respect to smooth transition autoregressive models with Fourier function.
Journal:
JOURNAL OF FINANCIAL ECONOMETRICS
ISSN:
1479-8409
Year:
2016
Vol.:
14
N°:
2
pp.
331 - 352
Stationary I(0) models employed in yield curve analysis typically imply an unrealistically low degree of volatility in long-run, short-rate expectations due to fast mean reversion. In this article, we propose a novel multivariate affine term structure model with a two-fold source of persistence in the yield curve: long memory and short memory. Our model, based on an I( d ) specification, nests the I(0) and I(1) models as special cases and the I(0) model is decisively rejected by the data. Our model estimates imply both mean reversion in yields and quite volatile long-distance, short-rate expectations, due to the higher persistence imparted by the long-memory component. Our implied term premium estimates differ from those of the I(0) model during some relevant periods by more than 3 percentage points and exhibit a realistic counter-cyclical pattern.
Journal:
JOURNAL OF ECONOMIC STUDIES
ISSN:
0144-3585
Year:
2016
Vol.:
43
N°:
4
pp.
646 - 660
Purpose: The purpose of this paper is to investigate whether there exist multiple bubbles in the Brazil, Russia, India, China and South Africa (BRICS) stock markets. Design/methodology/approach: In this study, the authors apply the generalized sup Augmented Dickey-Fuller test, a new recursive test proposed by Phillips et al. (2015) and use monthly data on stock price-dividend ratio. Findings: The empirical results indicate that there exist multiple bubbles in the stock markets of the BRICS. Further, the dates of the bubbles also correspond to specific events in the stock markets of these economies. This finding has important economic and policy implications. Originality/value: The authors declare that this paper is original and has not been published by another journal previously.
Journal:
JOURNAL OF APPLIED ECONOMICS
ISSN:
1514-0326
Year:
2016
Vol.:
19
N°:
1
pp.
95 - 112
his paper investigates the empirical relevance of both the hysteresis and the natural rate hypothesis on unemployment in three major economies, namely the UK, the US and Japan, by estimating the degree of dependence in the unemployment series. Both univariate and multivariate long memory methods are used. The results vary depending on whether the former or the latter approach is followed. Specifically, when taking a univariate approach, the unit root null cannot be rejected in case of the UK and Japanese unemployment series, and some degree of mean reversion (d < 1) is found in the case of the US unemployment rate. When applying multivariate methods instead, higher orders of integration are still found for the UK and Japanese series, but the natural rate hypothesis cannot be rejected in the case of the US.
Journal:
JOURNAL OF INTERNATIONAL TRADE AND ECONOMIC DEVELOPMENT
ISSN:
0963-8199
Year:
2016
Vol.:
25
N°:
7-8
pp.
978 - 991
The Feldstein¿Horioka (FH) puzzle, that is the strong correlation between saving and investment in a world where obstacles to capital mobility are limited, has been studied extensively since it was exposed in 1980. Even though the theoretical and empirical literature has examined many of its potential causes, the puzzle persists. This paper aims at shedding further light on the issue by investigating the relationship between saving and investment in South Africa since 1946 using fractional integration and cointegration techniques to account for high persistence in the series. We find evidence of fractional cointegration between saving and investment, indicating some degree of persistence in the gap between the two variables. We also find a structural break in saving and investment ratios to GDP around 1980, which roughly coincides with the start of a financial deregulation process in South Africa. While fractional cointegration holds before the break, it does not thereafter. In other words, while the FH puzzle is observed before the start of financial deregulation, it subsequently disappears. This suggests that financial deregulation may have loosened the link between saving and investment.
Journal:
HABITAT INTERNATIONAL
ISSN:
0197-3975
Year:
2016
Vol.:
56
pp.
103 - 108
This paper analyses long range fractional dependence of China pollution in four major cities, namely Beijing, Shanghai, Guangzhou and Shenzhen from September 28 of 2013 to December 12 of 2015. Unit roots hypotheses are tested by using fractional integration methods using both uncorrelated and autocorrelated errors. The results reveal that the pollution is persistent, meaning that it will continue until strong anti-pollution measures are adopted. Policy implication is derived.
Journal:
JOURNAL OF ECONOMIC STUDIES
ISSN:
0144-3585
Year:
2016
Vol.:
43
N°:
6
pp.
954 - 965
Purpose - The purpose of this paper is to provide some new empirical evidence on the weekend effect (one of the best known anomalies in financial markets) in Ukrainian futures prices. The analysis uses various statistical techniques. Design/methodology/approach - The analysis uses various statistical techniques (average analysis, Student's t-test, dummy variables, and fractional integration) to test for the presence of this anomaly, and then a trading simulation approach to establish whether it can be exploited to make extra profits. Findings - The statistical evidence points to abnormal positive returns on Fridays, and a trading strategy based on this anomaly is shown to generate annual profits of up to 25 per cent. The implication is that the Ukrainian stock market is inefficient. Originality/value - This paper provides some new empirical evidence on the weekend effect (one of the best known anomalies in financial markets) in Ukrainian futures prices. The analysis uses various statistical techniques (average analysis, Student's t-test, dummy variables, and fractional integration) to test for the presence of this anomaly, and then a trading simulation approach to establish whether it can be exploited to make extra profits. The statistical evidence points to abnormal positive returns on Fridays, and a trading strategy based on this anomaly is shown to generate annual profits of up to 25 per cent. The implication is that the Ukrainian stock market is inefficient.
Journal:
URBAN STUDIES
ISSN:
0042-0980
Year:
2015
Vol.:
52
N°:
16
pp.
3123 - 3143
This paper analyses comovement in housing prices across the Euro area. We use techniques based on the concepts of fractional integration and cointegration. Our results indicate that all the individual log-real price indices display orders of integration which are above one, implying long memory in their corresponding growth rates. Further, looking at the cointegration relationships, we observe that the series for the Euro area is cointegrated with those of Belgium, Germany and France. Focusing on the individual countries, we find cointegration relationships between Belgium and Spain, Belgium and the Netherlands, Germany and Spain, Germany and Ireland, France and Spain, and Ireland and the Netherlands. Other bilateral cointegration relationships can either clearly be rejected or the results are ambiguous. Finally, prices in Germany seem to move in the opposite direction from other countries, which may be related to capital flows associated with current account imbalances.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1947-2757
Year:
2015
Vol.:
20
N°:
3
pp.
276- 290
This paper is a follow-up to another paper by the same authors. In that paper, fractional integration and symmetric volatility modelling were considered on monthly frequency data, while the present paper considers high-frequency data on an asymmetric volatility model. The data were first identified within the respective bull and bear phases following earlier results in the previous paper. Then, fractional integration and the asymmetric volatility model of Glosten, Jaganathan and Runkle were applied on the stock returns. Long-range dependence was detected in the squared stock returns at each market phase, and they were more persistent than those obtained in the monthly frequency data. The estimates of asymmetry of the Glosten, Jaganathan and Runkle model actually detected the different patterns of the bad news (bear phases) and the good news (bull phases).
Journal:
JOURNAL OF APPLIED STATISTICS
ISSN:
0266-4763
Year:
2015
Vol.:
42
N°:
3
pp.
589 - 602
This paper examines the existence of time trends in the infant mortality rates in a number of countries in the twentieth century. We test for the presence of deterministic trends by adopting a linear model for the log-transformed data. Instead of assuming that the error term is a stationary I(0), or alternatively, a non-stationary I(1) process, we allow for the possibility of fractional integration and hence for a much greater degree of flexibility in the dynamic specification of the series. Indeed, once the linear trend is removed, all series appear to be I(d) with 0<d<1, implying long-range dependence. As expected, the time trend coefficients are significantly negative, although of a different magnitude from those obtained assuming integer orders of differentiation.
Journal:
GLOBAL ECONOMY JOURNAL
ISSN:
1553-5304
Year:
2015
Vol.:
15
N°:
4
pp.
507 - 524
In this study we have examined the inflation convergence hypothesis in the five countries that belong to the East African Community and which recently signed a protocol outlining their plans for launching a monetary union within ten years. We check for common patterns in the persistence in the inflation levels. As it is argued in the literature, countries hoping to form a monetary union should present similar inflation patterns. Our study shows that the inflation rates in these countries present orders of integration equal to higher than one in all cases, confirming that shocks will most certainly not recover in the long run. Moreover, fractional cointegration relationships are also found across all the countries with the exception of Tanzania, suggesting that this country displays a different pattern compared to the remaining four, presenting also some evidence of a break in the data.
Journal:
JOURNAL OF APPLIED STATISTICS
ISSN:
0266-4763
Year:
2015
Vol.:
42
N°:
7
pp.
1531 - 1546
This paper deals with the analysis of the MET Office Hadley Centre's sea surface temperature data set (HadSST3) by using long-range dependence techniques. We incorporate linear and segmented trends using fractional integration, and thus permitting long memory behavior in the detrended series. The results indicate the existence of warming trends in the three series examined (Northern and Southern Hemispheres along with global temperatures), with orders of integration which are in the range (0.5, 1) and thus implying nonstationary long memory and mean reverting behavior. This is innovative compared with other works that assume short memory behavior in the detrended series. Allowing for segmented trends two features are observed: increasing values in the degree of dependence of the series across time and significant warming trends from 1940 onwards.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2015
Vol.:
47
N°:
46
pp.
4901 - 4917
This study examines the degree of persistence in foreign tourist arrivals and overnight stays for seven Croatian coastal counties over the period January 1998 to December 2013 using fractional integration techniques. Our findings reveal that the respective regional tourism indicators exhibit seasonal unit roots which require seasonal first differences to render the respective time series stationary. With respect to the long-run evolution of the respective time series, both the parametric and semi-parametric fractional integration approaches show the degree of persistence is greater than zero, but significantly less than one for the majority of the coastal counties. Impulse response analysis reveals indeed shocks to the deseasonalized time series, either foreign tourist arrivals or foreign tourist overnight stays, appear short-lived with the exception of Istria and Primorje-Gorski kotar counties. Policy implications of the results are also discussed.
Journal:
JOURNAL OF HOUSING RESEARCH
ISSN:
1052-7001
Year:
2015
Vol.:
24
N°:
1
pp.
87 - 106
In this study, we analyze state and metropolitan housing prices in the United States, focusing on the long range dependence of price volatility proxied by squared and absolute returns based on the fractional integration approach. We use quarterly data on state house price indices from each of the 50 U.S. states and the S&P/Case-Shiller house price indices for 20 U.S. metropolitan areas. Using parametric and semi-parametric long memory methods, we observe that most of the estimates of the fractional differencing parameter in the squared and absolute returns values are positive and constrained between 0 and 0.5, implying stationary long memory behavior.
Journal:
REVIEW OF DEVELOPMENT FINANCE
ISSN:
1879-9337
Year:
2015
Vol.:
5
N°:
2
pp.
91 - 97
This paper models time-varying volatility in one of the Indian main stock markets, namely, the National Stock Exchange (NSE) located in Mumbai, investigating whether it has been affected by the recent global financial crisis. A Chow test indicates the presence of a structural break. Both symmetric and asymmetric GARCH models suggest that the volatility of NSE returns is persistent and asymmetric and has increased as a result of the crisis. The model under the Generalized Error Distribution appears to be the most suitable one. However, its out-of-sample forecasting performance is relatively poor.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2015
Vol.:
44
pp.
57 - 64
This paper analyses the statistical properties of five major precious metal prices (gold, silver, rhodium, palladium and platinum) based on a fractional integration modelling framework while identifying structural breaks. We use monthly data from 1972:1 to 2013:12. Our results indicate orders of integration that are equal to or greater than 1 (long memory) in all cases except for silver and palladium where we find strong evidence of mean reversion with a parametric and semiparametric method, respectively. Given some inconsistencies between the parametric and semiparametric results, we suspect the possibility of structural breaks and our results show evidence of structural breaks in almost all cases except palladium. However, after accounting for structural breaks, we find evidence of an increase in the degree of persistence across time in the majority of cases. This implies that in general, shocks to these precious metals will be permanent requiring strong policy measures to return the series to their equilibrium levels in the event of negative shocks.
Journal:
ENERGY ECONOMICS
ISSN:
0140-9883
Year:
2015
Vol.:
52
N°:
Part A
pp.
240 - 245
Studying variations of natural gas prices in relation to consumer prices may give us better indicators for the analysis of economic activity. This paper deals with the analysis of natural gas spot prices using fractional integration techniques in the context of non-linear deterministic trends. We find nonstationarity with mean reverting coefficients (i.e., orders of integration in the range (0.5, 1)) in the daily and monthly series, as well as in their logarithmic transformations. Evidences of non-linearities are only obtained in the monthly series which may be a consequence of the higher degree of volatility associated with this frequency.
Journal:
AFRICAN JOURNAL OF ECONOMIC AND SUSTAINABLE DEVELOPMENT
ISSN:
2046-4770
Year:
2015
Vol.:
4
N°:
3
pp.
254 - 277
This paper examines the statistical properties of the NSE-20 index in the Kenyan stock market over the period 2001 to 2009. The analysis applies both unit root tests and long-range dependence techniques based on the concept of fractional integration. The results indicate that the order of integration of stock prices is significantly above 1, which implies the presence of long memory. This is also detected in the absolute and squared returns. The lowest degrees of integration (very close to zero) are found for Mondays and Fridays, and therefore, a day-of-the-week-effect appears to be present.
Journal:
INTERNATIONAL JOURNAL OF LEARNING AND INTELLECTUAL CAPITAL
ISSN:
1479-4853
Year:
2015
Vol.:
12
N°:
4
pp.
342 - 371
This study empirically examines the effect of the intellectual capital efficiency on firms' financial performance in selected Bombay Stock Exchange listed and permitted Indian companies. Using Pulic's (1998) value added intellectual coefficient (VAIC™) as the efficiency measure of capital employed and intellectual capital, the authors fit panel models to examine the effect of intellectual capital efficiency on firms' financial performance. The result suggests that the component based intellectual capital models explain better than the composite VAIC models. However comparing across the models, it is observed that the physical capital (VACA) positively influences the firms' ROA, which suggests that the physical capital has no doubt remained a key driving force for competitive business performance for firms' in India. The innovative capital efficiency captures additional information on structural capital which positively influences firms' financial performance. The results extend the understanding of the role of intellectual capital in creating corporate value and building sustainable advantages and financial performance for companies in emerging economies, where different technological advancements may bring different implications for the valuation of intellectual capital.
Journal:
JOURNAL OF HOUSING RESEARCH
ISSN:
1052-7001
Year:
2015
Vol.:
24
N°:
1
pp.
73 - 86
In this paper, we examine the relationship between disposable personal income (DPI) in the United States and a house price index (HPI) during the last twenty years applying fractional integration and long-range dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that cointegration cannot hold, as mean reversion occurs in the case of DPI but not of HPI. Also, recursive analysis shows that the estimated fractional parameter is relatively stable over time for DPI while it increases throughout the sample for HPI. Interestingly, the estimates tend to converge toward the unit root after 2008 once the housing bubble had burst.
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2014
Vol.:
22
N°:
7
pp.
521 - 524
This empirical note employs fractional integration techniques with allowance for seasonality to infer the degree of persistence in US self-employment rate using monthly data from 2000:01 to 2014:05. The results indicate orders of integration in the range of [0.5,1] implying nonstationary, but mean-reverting behaviour.
Journal:
PEACE ECONOMICS, PEACE SCIENCE AND PUBLIC POLICY
ISSN:
1079-2457
Year:
2014
Vol.:
20
N°:
4
pp.
565 - 574
Using a fractional integration approach, we find that developing countries recover their economic growth faster than developed countries in response to a shock. The main finding is that longer civil conflicts are associated with a faster recovery process. To investigate deeper on this issue, we explore correlations with components of GDP. Higher government spending is correlated with faster recoveries post longer conflicts and higher consumption and investment are linked to faster recoveries following shorter conflicts.
Journal:
BIOMASS AND BIOENERGY
ISSN:
0961-9534
Year:
2014
Vol.:
63
pp.
313 - 320
This paper investigates the consumption of sugar cane ethanol in Brazil for the time period from January 2000 to December 2012. We examine ethanol and gasoline consumption along with the price ratio series. Two important features of the data are analyzed, in particular, its degree of persistence and the seasonality. The results show that the two series of consumption are fractionally integrated with orders of integration smaller than 1 implying that shocks in the series will disappear in the long run. On the other hand, the price ratio series displays an order of integration higher than 1 implying lack of mean reversion behavior. This suggests that strong policy measures must be adopted on prices in the event of shocks since they do not recover by themselves in the long run.
Journal:
AFRICAN JOURNAL OF ECONOMIC AND SUSTAINABLE DEVELOPMENT
ISSN:
2046-4770
Year:
2014
Vol.:
3
N°:
3
pp.
179 - 199
This paper examines the time series behaviour of three variables (GDP, price level of consumption and population) in the eight countries that belong to the West African Economic and Monetary Union (WAEMU), which are Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. The reason for carrying out this study lies on the considerable heterogeneity that can be perceived in the data from these countries. We conduct a long memory and fractional integration modelling framework and we also identify potential breaks in the data. The aim of the study is to perceive up to which degree the eight West African countries that belong to the same monetary union follow the same stability economic patterns. Testing for mean reversion we only found strong evidence of it in the case of Senegal for the price level of consumption, and in the cases of Benin, Burkina Faso and Senegal for GDP.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2014
Vol.:
47
pp.
1389 - 1410
This paper examines several US monthly financial time series using fractional integration and cointegration techniques. The univariate analysis based on fractional integration aims to determine whether the series are I(1) (in which case markets might be efficient) or alternatively I(d) with d < 1, which implies mean reversion. The multivariate framework exploiting recent developments in fractional cointegration allows to investigate in greater depth the relationships between financial series. We show that there might exist many (fractionally) cointegrated bivariate relationships among the variables examined, for some of which only standard cointegration tests had previously been carried out.
Journal:
REVIEW OF DEVELOPMENT FINANCE
ISSN:
1879-9337
Year:
2014
Vol.:
5
N°:
1
pp.
13 - 23
The paper employs both fractional integration and structural break techniques in studying the daily share prices structure of the banking sector in Nigeria. Our data span between 2001 and 2012, covers periods before and after the global financial crisis. The results obtained using both parametric and semiparametric methods indicate little evidence of mean reversion since most of the orders of integration are equal to or higher than 1. Long memory is found in the absolute and squared return series. The possibility of structural breaks is also taken into account and the results show a different number of breaks depending on the bank examined. In general, an increase in the degree of dependence across time is noticed, and the most common break took place in December 2008, probably being related with the world financial crisis affecting also the banking system in Nigeria.
Journal:
ECONOMICS LETTERS
ISSN:
1873-7374
Year:
2014
Vol.:
124
N°:
1
pp.
64 - 66
This paper seeks to shed light on possible changes in the government debt dynamics for the first 12 euro area countries. Structural breaks are present around the global financial crisis for most countries, but not for Germany and France, the two core countries in the euro area. The properties of the government debt dynamics differ markedly across the countries receiving bailouts.
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2014
Vol.:
46
N°:
21
pp.
2545 - 2555
This article investigates inflation in Mozambique using long-range dependence (LRD) techniques in monthly data from December 1995 to October 2012. Two important features of the data are analysed: persistence and seasonality, looking at aggregated and disaggregated data. The stability of the parameters across the sample is also investigated. The results indicate a high degree of persistence in the data along with a strong seasonal pattern. Policy implications are discussed.
Journal:
AFRICAN DEVELOPMENT REVIEW
ISSN:
1017-6772
Year:
2014
Vol.:
26
N°:
1
pp.
59 - 73
This study examines the time series behaviour of several Angolan macroeconomic variables, using monthly data from August 1996 to June 2011. The series are the inflation rate, M1, M2, the exchange rate at the beginning and the end of the period, and the monthly average exchange rate. In the first stage univariate fractional integration models are estimated in order to determine whether shocks to the variables have transitory or permanent effects. In the second stage fractional cointegration techniques are applied to test for the existence of long-run equilibrium relationships between the variables of interest. The results suggest a high degree of persistence in the individual series (that are not mean-reverting) and the existence of bivariate long-run cointegrating relationships between prices and money, and prices and nominal exchange rates.
Journal:
JOURNAL OF FORECASTING
ISSN:
0277-6693
Year:
2014
Vol.:
33
N°:
2
pp.
147 - 161
This paper uses fractional integration to examine the long-run dynamics and cyclical structure of US inflation, real risk-free rate, real stock returns, equity premium and price/dividend ratio, annually from 1871 to 2000. It implements a procedure which allows consideration of unit roots with possibly fractional orders of integration both at zero (long-run) and cyclical frequencies. When focusing exclusively on the former, the estimated order of integration varies considerably, and non-stationarity is found only for the price/dividend ratio. When the cyclical component is also taken into account, the series appear to be stationary but to exhibit long memory with respect to both components in almost all cases. The exception is the price/dividend ratio, whose order of integration is higher than 0.5 but smaller than 1 for the long-run frequency, and is between 0 and 0.5 for the cyclical component. Also, mean reversion occurs in all cases. Finally, six different criteria are applied to compare the forecasting performance of the fractional (at both zero and cyclical frequencies) models with others based on fractional and integer differentiation only at the zero frequency. The results, based on a 15-year horizon, show that the former outperforms the others in a number of cases.
Journal:
INTERNATIONAL ADVANCES IN ECONOMIC RESEARCH
ISSN:
1083-0898
Year:
2014
Vol.:
20
N°:
4
pp.
385 - 398
This paper deals with the analysis of several commodity prices in India using an approach based on fractional integration and focusing on the degree of persistence of the series. We examine seven agricultural prices: rice, wheat, maize, bajra, jowar, black gram and arhar. The results can be summarized as follows: in five of the series examined (rice, wheat, maize, bajra and jowar) we find evidence of mean reversion with the effect of the shocks disappearing in the long run. On the contrary, in two of the series (black gram and arhar) we cannot reject the null of a unit root with the implication that shocks have a permanent nature. Thus, in the event of a negative shock, strong measures must be adopted in these two series since the effect of the shocks will persist forever.
Journal:
RESOURCES POLICY
ISSN:
0301-4207
Year:
2014
Vol.:
41
pp.
31 - 39
This paper deals with the analysis of the volatility persistence and the leverage effect across six non-ferrous metals spot and futures series in India. Data for aluminium, copper, lead, nickel, zinc and tin were collected from 1st January, 2009 to 30th June, 2012. Volatility persistence was determined throughout the ARCH/GARCH class of models. The leverage effect was tested using TARCH and EGARCH models. Out of the twelve non-ferrous metals series including both spot and futures, TGARCH captures asymmetric effects in seven series and EGARCH captures leverage effect in ten series. Other long memory features of the data were also examined. Testing fractional integration our results show that the series are I(1) but the squared returns display long memory features.
Journal:
JOURNAL OF INTERNATIONAL MONEY AND FINANCE
ISSN:
0261-5606
Year:
2014
Vol.:
40
pp.
149 - 162
In this paper we examine the statistical properties of several stock market indices in Europe, the US and Asia by means of determining the degree of dependence in both the level and the volatility of the processes. In the latter case, we use the squared returns as a proxy for the volatility. We also investigate the cyclical pattern observed in the data and in particular, if the degree of dependence changes depending on whether there is a bull or a bear period. We use fractional integration and GARCH specifications. The results indicate that the indices are all nonstationary I(1) processes with the squared returns displaying a degree of long memory behaviour. With respect to the bull and bear periods, we do not observe a systematic pattern in terms of the degree of persistence though for some of the indices (FTSE, Dax, Hang Seng and STI) there is a higher degree of dependence in both the level and the volatility during the bull periods.
Journal:
ENERGY ECONOMICS
ISSN:
0140-9883
Year:
2014
Vol.:
45
pp.
511 - 516
This paper deals with the analysis of two observed features in historical oil price data; in particular, persistence and cyclicity. Using monthly data from September 1859 to October 2013, we observe that the series presents two peaks in the spectrum, one occurring at the long run or zero frequency and the other at a cyclical frequency. These features can be well described in terms of a long memory model that incorporates both peaks in the spectrum. It is found that the order of integration at the zero frequency is about 0.6, and the one at the cyclical frequency is substantially smaller (of about 0.3) with the length of the cycles being approximately of about 74 periods (months), which is consistent with the length suggested by the business cycle theory.
Journal:
ANNALS OF TOURISM RESEARCH
ISSN:
0160-7383
Year:
2014
Vol.:
46
pp.
89 - 101
This article investigates the statistical properties of the total number of arrivals and departures in Kenya for the time period 1975Q1¿2011Q4 by looking at the degree of persistence of the series. We use long range dependence techniques and given the quarterly nature of the series seasonality is also taken into account. Moreover, the potential presence of breaks is also considered. The tourism sector in Kenya is especially sensitive to political shocks, and this is particularly exemplified by the shocks in 1992Q4 and 2008Q1 that were associated with crucial election periods in Kenya. Our results, however, show that the series are fractionally integrated with orders of integration strictly below 1. Thus, shocks are expected to be transitory and disappearing relatively quickly.
Journal:
IMA JOURNAL OF MANAGEMENT MATHEMATICS
ISSN:
1471-678X
Year:
2014
Vol.:
25
N°:
3
pp.
367 - 386
The management of retail sales is of paramount importance for retail organizations and retail policy-makers. This study examines the degrees of persistence and seasonality of various retail sectors using innovative seasonal and non-seasonal fractional integration and auto-regressive models. Adapting data from both the Australian and the US retail sectors, the results indicate that the impacts of seasonality and persistence are not consistent across the various retail sectors. It is also clear that retail sales forecasts are better explained in terms of a long memory model that incorporates both persistence and seasonal components.
Journal:
ENVIRONMENTAL AND RESOURCE ECONOMICS
ISSN:
0924-6460
Year:
2014
Vol.:
63
N°:
1
pp.
45 - 56
This paper examines the stationarity of global carbon dioxide emissions and its components¿gas, liquids, solids, cement production and gas flaring, as well as global per capita emissions¿for a long span of data using long range dependence techniques. The empirical results suggest that the series are highly persistent with orders of integration which are above 1 in practically all cases. Disaggregating the data by components, cement production displays the highest persistence, and allowing for structural breaks, two breaks are detected (at 1830 and 1946) for the total series and solids, and one single break (at 1946) for gas, liquids and cement production. In general, higher orders of integration are detected after the break at World War II.
Journal:
JOURNAL OF HOUSING RESEARCH
ISSN:
1052-7001
Year:
2014
Vol.:
23
N°:
1
pp.
73 - 88
In this study, we examine the degree of persistence in the ratio of state house price to U.S. house price indices using fractional integration and autoregressive models with quarterly data from 1975:1 to 2010:7. The results indicate that house prices are explained in terms of a long memory model that incorporates persistence and seasonality. The degree of integration and persistence varies widely across states; there is nonstationarity with mean reverting behavior in some states, while there is nonstationarity without mean reverting behavior for other. The results provide mixed evidence on the degree of convergence in housing prices across the U.S.
Journal:
ECONOMIC MODELLING
ISSN:
0264-9993
Year:
2014
Vol.:
42
pp.
296 - 300
This paper analyzes housing sales delay in Beijing, China. In the housing market, new properties sometimes experience delays before they are sold. Such delays reflect the preferences of buyers with regard to the characteristics of the housing. Therefore, it is important for managerial purposes to identify the causes of housing sales delays. It is concluded that delays are largely explained by the dwellings' characteristics and location. Policy implications of the research findings, particularly those related to means of shortening the delays, are discussed.
Journal:
ECONOMIC MODELLING
ISSN:
0264-9993
Year:
2014
Vol.:
38
pp.
463 - 469
This paper considers the persistence and asymmetric volatility at each market phase of the Nigerian All Share Index (ASI). The estimate of the fractional difference parameter is used as a stability measure of the degree of persistence in the level of the series and in the absolute/squared returns, which are used as proxies for the volatility. Both semi-parametric and parametric methods are applied. Forms of Generalized Autoregressive Conditionally Heteroscedastic (GARCH) models, which include fractional integration and asymmetric variants are estimated at each market phase of the stock returns. The results show that the level of persistence differs between the two market phases in both level and squared/absolute return series. Apart from general asymmetry and persistence in Nigerian stocks, each market phase still presents significant persistence and asymmetry.
Journal:
ENERGY ECONOMICS
ISSN:
0140-9883
Year:
2014
Vol.:
46
pp.
328 - 333
We examine the relationship between oil prices and the stock market in Nigeria. We focus on the degree of persistence of the series, and based on the similarities observed between the two series, a fractionally cointegrated framework is proposed. The results indicate that the two series display a similar order of integration, which is close to, although above 1. Testing for cointegration, this is decisively rejected since the order of integration in the equilibrium relationship was similar to that of the individual series. However, testing for long memory with oil prices acting as a weakly exogenous regressor, we obtained significant evidence of a positive relationship between the two variables though with a short memory effect, this relation being significant only during the following three months.
Journal:
COMPARATIVE ECONOMIC STUDIES
ISSN:
1478-3320
Year:
2014
Vol.:
56
N°:
4
pp.
581 - 591
This paper investigates the statistical features and the macroeconomic determinants of youth unemployment in a number of European countries. First, it explores its short and long memory properties by estimating both autoregressive and fractional integration. This analysis sheds light on the degree of persistence of the series, and on whether policy actions are required for highly persistent series. Second, it investigates the main determinants of youth unemployment in Europe by estimating fractional cointegration models. The evidence suggests that this series is highly persistent in all the countries examined, and that in some of them there is a significant long-run equilibrium relationship linking it to macroeconomic variables such as GDP and inflation.
Journal:
HABITAT INTERNATIONAL
ISSN:
0197-3975
Year:
2013
Vol.:
39
pp.
36 - 42
This paper analyses the duration of housing project sales in the city of Beijing, China. In the housing market, new properties sometimes experience delays before they are sold. Such delays reflect the preferences of buyers with regard to the characteristics of the dwelling. Therefore, it is important for managerial purposes to identify the causes of delays in the sales of housing projects. A survival model with heterogeneity is adopted in the present research. The principal finding of this study is that delays are largely explained by the characteristics and the location of the housing project. Policy implications of the research findings, particularly those related to means of reducing the delays, are discussed.
Journal:
ENERGY SYSTEMS
ISSN:
1868-3967
Year:
2013
Vol.:
4
N°:
1
pp.
99 - 107
This study examines the degree of time persistence in U.S. nuclear electricity net generation using innovative fractional integration and autoregressive models with monthly data from 1973:1 to 2011:10. The results indicate that nuclear electricity net generation is better explained in terms of a long memory model that incorporates persistence components and seasonality. The degree of integration is above 0.5 but significantly below 1.0, suggesting nonstationarity with mean reverting behavior. Policy implications are discussed as well.
Journal:
AFRICAN DEVELOPMENT REVIEW
ISSN:
1017-6772
Year:
2013
Vol.:
25
N°:
1
pp.
91 - 104
This paper forecasts inflation in Angola with an ARFIMA (autoregressive fractionally integrated moving average) model. It is found that inflation in Angola is a highly persistent variable with an order of integration constrained between 0 and 1. Moreover, a structural break is found in August 1996. Using the second subsample for forecasting purposes, the results reveal that inflation will remain low, assuming that prudent macroeconomic policies are maintained.
Journal:
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
ISSN:
1057-5219
Year:
2013
Vol.:
29
pp.
1 - 9
This paper analyses the long-memory properties of a high-frequency financial time series dataset. It focuses on temporal aggregation and other features of the data, and how they might affect the degree of dependence of the series. Fractional integration or I(d) models are estimated with a variety of specifications for the error term. In brief, we find evidence that a lower degree of integration is associated with lower data frequencies. In particular, when the data are collected every 10 min there are several cases with values of d strictly smaller than 1, implying a mean-reverting behaviour; however, for higher data frequencies the unit root null cannot be rejected. This holds for all four series examined, namely Open, High, Low and Last observations for the US dollar/British pound spot exchange rate and for different sample periods.
Journal:
EMPIRICAL ECONOMICS
ISSN:
0377-7332
Year:
2013
Vol.:
44
N°:
2
pp.
591 - 611
This article analyses the long memory properties of quarterly real output per capita in the US (1948Q1-2008Q3) using non-parametric, semi-parametric and parametric techniques. The results vary substantially depending on the methodology employed. Evidence of mean reversion is obtained in a parametric context if the underlying disturbances are weakly autocorrelated. We also examine the possibility of a structural break in the data and the results indicate that there is a slight reduction in the degree of persistence after the break that is found to occur in the second quarter of 1978.
Journal:
JOURNAL OF ECONOMICS AND FINANCE
ISSN:
1055-0925
Year:
2013
Vol.:
40
N°:
2
pp.
235 - 257
This paper examines persistence in the Ukrainian stock market during the recent financial crisis. Using two different long memory approaches (R/S analysis and fractional integration) we show that this market is inefficient and the degree of persistence is not the same at different stages of the financial crisis. Therefore trading strategies might have to be modified. We also show that data smoothing is not advisable in the context of R/S analysis.
Journal:
ASIAN JOURNAL OF EMPIRICAL RESEARCH
ISSN:
2224-4425
Year:
2013
Vol.:
3
N°:
7
pp.
785 - 807
his study examines the time series behaviour of housing prices series for 69 cities in China. The general housing price index, the index of newly constructed buildings and the price index of second hand buildings from 2005:7 to 2010:12 are examined. The univariate fractionally integrated models are employed in order to determine whether shocks to the variables have transitory or permanent effects. Persistence is accepted for the general housing price index and for the newly constructed buildings. In particular Shanghai, Haikou and Sanya have persistent effects signifying that shocks will be permanent and the series will be very persistent. Mean reversion is accepted in most of the second hand building price indices. Based on the suspicion that there are bubbles in some of the series corresponding to the housing market of China, this paper enables us to understand what the possible consequences are for housing market management in the case of an eventual bubble in the China housing market.
Journal:
JOURNAL OF TIME SERIES ANALYSIS
ISSN:
0143-9782
Year:
2013
Vol.:
34
N°:
3
pp.
405 - 421
This article proposes a general time series framework to capture the long-run behaviour of financial series. The suggested approach includes linear and segmented time trends, and stationary and non-stationary processes based on integer and/or fractional degrees of differentiation. Moreover, the spectrum is allowed to contain more than a single pole or singularity, occurring at both zero but non-zero (cyclical) frequencies. This framework is used to analyse five annual time series with a long span, namely dividends, earnings, interest rates, stock prices and long-term government bond yields. The results based on several likelihood criteria indicate that the five series exhibit fractional integration with one or two poles in the spectrum, and are quite stable over the sample period examined
Journal:
APPLIED ECONOMICS
ISSN:
0003-6846
Year:
2013
Vol.:
45
N°:
22
pp.
3220 - 3229
This article investigates the real convergence of 17 Latin American countries to the US economy for the period 1950 to 2011. Time series methods are used to test stochastic and beta-convergence. These methods include the possibility of one or two structural changes. The results show that when endogenous structural changes are considered several Latin American countries exhibit stochastic convergence. Nevertheless, real convergence to the US is found only for three Latin American countries: Chile, Costa Rica and Trinidad and Tobago, with these countries also presenting evidence of stochastic and beta-convergence
Journal:
PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
ISSN:
0378-4371
Year:
2013
Vol.:
392
N°:
15
pp.
3198 - 3212
This paper deals with the analysis of long range dependence in the US stock market. We focus first on the log-values of the Dow Jones Industrial Average, Standard and Poors 500 and Nasdaq indices, daily from February, 1971 to February, 2007. The volatility processes are examined based on the squared and the absolute values of the returns series, and the stability of the parameters across time is also investigated in both the level and the volatility processes. A method that permits us to estimate fractional differencing parameters in the context of structural breaks is conducted in this paper. Finally, the 'day of the week' effect is examined by looking at the order of integration for each day of the week, providing also a new modeling approach to describe the dependence in this context
Journal:
JOURNAL OF REAL ESTATE LITERATURE
ISSN:
0927-7544
Year:
2013
Vol.:
21
N°:
2
pp.
293 - 314
This study examines the time series behavior of South African house prices within a fractional integration modeling framework while identifying potential breaks and outliers. We used quarterly data on the six house price indexes, namely affordable, luxury, middle-segment (all sizes, large, medium, and small sizes), covering 1966: Q1-2012:Q1 for the different middle-segments, 1966:Q3-2012:Q1 for the luxury segment, and 1969:Q4-2012:Q1 for the affordable segment. In general, there is persistence in South African house prices with breaks identified. Our results show that in the cases of affordable and luxury, shocks will be transitory, disappearing in the long run, while for the remaining four series of the middle-segment, shocks will be permanent. Hence, for the middle-segment series, strong policy measures must be adopted in the event of negative shocks, in order to recover the original trends.
Journal:
JOURNAL OF AFRICAN STUDIES AND DEVELOPMENT
ISSN:
2141-2189
Year:
2013
Vol.:
5
N°:
4
pp.
57 - 63
This paper examines the Purchasing Power Parity (PPP) hypothesis in a number of Sub-Saharan countries by testing the order of integration in the log of their real exchange rates vis-à-vis the US dollar. I(d) estimation techniques based on both asymptotic and finite sample results are used. The test results led to the rejection of PPP in all cases: orders of integration below 1 are found in fourteen countries, but the unit root null cannot be rejected.
Journal:
REVIEW OF ECONOMICS & FINANCE
ISSN:
1923-7529
Year:
2013
Vol.:
3
N°:
4
pp.
19 - 32
This paper analyses house prices in Spain and Portugal over the last twenty years. In recent decades, housing prices have increased dramatically in the two countries; However, in 2007 the US subprime mortgage crisis broke out, which had worldwide influences, including Spain and Portugal. The purpose of this research is to study the time series persistence and the potential presence of breaks in these two countries. From this viewpoint, it is interesting to see how housing policy makers design reforms to adjust the real estate market, an issue of real concern for both
citizens and institutions.
Journal:
INTERNATIONAL JOURNAL OF FINANCE AND ECONOMICS
ISSN:
1076-9307
Year:
2013
Vol.:
18
N°:
1
pp.
82 - 92
This article deals with the analysis of the purchasing power parity (PPP) hypothesis in China using fractional integration or I(d) techniques. Using real exchange rates data between the Chinese Yuan and the US dollar, the results indicate that the estimated integration order d is generally larger than 1, which means that the PPP hypothesis in China does not hold in the long run over the sample period January 1994 to November 2010. Moreover, to check the stability of d across the sample period, we reestimated it recursively over different subsample periods with 5-year and 10-year data frequencies, respectively. The recursive estimated results show that after the structural change at the beginning of the sample period, the fractional differencing parameter d remains stable and generally larger than 1.
Journal:
ENERGY ECONOMICS
ISSN:
0140-9883
Year:
2013
Vol.:
40
pp.
425 - 432
This study examines the degree of time persistence in U.S. disaggregated renewable energy consumption (hydropower, geothermal, solar, wind, wood, waste, and biofuels) using innovative fractional integration and autoregressive models with monthly data for the period 1994:2 to 2011:10. The results indicate that in the case of hydropower, solar, wind, waste, and biofuels the estimates of fractional integration are higher than 0.5 but less than 1.0 implying nonstationary, but mean reverting behavior. In the case of geothermal and waste the estimates of fractional integration are around 0.5 and in the boundary case between stationarity and nonstationarity. For wood, the estimate of fractional integration is significantly smaller than 0.5 and thus showing stationary behavior with long memory behavior. Furthermore, the study incorporates the presence of breaks in the data with the absence of breaks in hydropower, geothermal, solar, wind, wood, and biofuels, but a single break in the case of waste due to the inclusion of non-renewable waste from non-biogenic sources through 2000. The results reveal that U.S. disaggregated renewable energy consumption measures are better explained in terms of a long memory model that incorporates persistence components and seasonality.
Journal:
ECONOMICS BULLETIN
ISSN:
1545-2921
Year:
2013
Vol.:
33
N°:
3
pp.
1978 - 1982
This paper deals with the analysis of US unemployment by means of I(d) techniques and using two different measures, the unemployment rate and the initial claims at different data frequencies. The results indicate that the unemployment rate series are I(d) with d constrained between 0.5 and 1, while the initial claim series display orders of integration close to 1. Thus, mean reversion is only obtained in case of the unemployment rate while the hysteresis hypothesis seems to be supported by the claimant counts.
Journal:
STATISTICS AND COMPUTING
ISSN:
0960-3174
Year:
2012
Vol.:
22
N°:
2
pp.
349-358
This paper considers a general model which allows for both deterministic and stochastic forms of seasonality, including fractional (stationary and nonstationary) seasonal orders of integration, and also incorporating endogenously determined structural breaks. Monte Carlo analysis shows that, in the case of a single break, the suggested procedure performs well even in small samples, accurately capturing the seasonal properties of the series, and correctly detecting the break date. As an illustration, the model is estimated using four US series (output, consumption, imports and exports). The results suggest that the seasonal patterns of these variables have changed over time: specifically, in the second subsample the systematic component of seasonality becomes insignificant, whilst the degree of persistence increases.
Journal:
INTERNATIONAL JOURNAL OF SUSTAINABLE TRANSPORTATION
ISSN:
1556-8318
Year:
2012
Vol.:
6
N°:
2
pp.
111-126
Journal:
ECONOMIC MODELLING
ISSN:
0264-9993
Year:
2012
Vol.:
29
N°:
3
pp.
936-942
This study investigates the relationship between U.S. state housing prices and overall U.S. housing prices as well as the relationship among state housing prices using fractional integration and cointegration techniques. The results based on parametric and semiparametric estimators reveal that some states contain unit roots though we fail to find cointegrating relations between U.S. states housing prices and the overall U.S. housing prices as well as among state housing prices. The results raise doubts regarding the long-run convergence in U.S. state housing prices and the presence of the ripple effect. (C) 2012 Elsevier B.V. All rights reserved.
Journal:
JOURNAL OF INTERNATIONAL ENERGY POLICY
ISSN:
2165-252X
Year:
2012
Vol.:
41
pp.
822 - 826
This study examines the degrees of time persistence in U.S. total renewable energy consumption using innovative fractional integration and autoregressive models with monthly data from 1981:1 to 2010:10. The results indicate that renewable energy consumption is better explained in terms of a long memory model that incorporates persistence components and seasonality. The degree of integration is above 0.5 but significantly below 1.0, suggesting nonstationarity with mean reverting behavior. The presence of long memory behavior (persistence) in renewable energy consumption suggests that random shocks may very well move renewable energy consumption from pre-determined target levels for a period of time.
Journal:
JOURNAL OF FORECASTING
ISSN:
0277-6693
Year:
2012
Vol.:
31
N°:
6
pp.
524 - 539
Journal:
APPLIED ECONOMICS LETTERS
ISSN:
1350-4851
Year:
2012
Vol.:
19
N°:
5
pp.
431 - 434
This article examines the stochastic properties of US term spreads with parametric and semi-parametric fractional integration techniques. Since the observed data (rather than the estimated residuals from a cointegrating regression) are used for the analysis, standard methods can be applied. The results indicate that US Treasury maturity rates are I(1) in most cases, although the order of integration decreases with maturity. Furthermore, mean reversion occurs for the 5-, 7- and 10-year rates as well as for several term spreads, suggesting that the expectation hypothesis of the term structure is supported empirically in these cases.
