Commenced in January 2007
Frequency: Monthly
Edition: International
Paper Count: 7364

Search results for: granger causality test

7364 The Influence of Oil Price Fluctuations on Macroeconomics Variables of the Kingdom of Saudi Arabia

Authors: Khalid Mujaljal, Hassan Alhajhoj


This paper empirically investigates the influence of oil price fluctuations on the key macroeconomic variables of the Kingdom of Saudi Arabia using unrestricted VAR methodology. Two analytical tools- Granger-causality and variance decomposition are used. The Granger-causality test reveals that almost all specifications of oil price shocks significantly Granger-cause GDP and demonstrates evidence of causality between oil price changes and money supply (M3) and consumer price index percent (CPIPC) in the case of positive oil price shocks. Surprisingly, almost all specifications of oil price shocks do not Granger-cause government expenditure. The outcomes from variance decomposition analysis suggest that positive oil shocks contribute about 25 percent in causing inflation in the country. Also, contribution of symmetric linear oil price shocks and asymmetric positive oil price shocks is significant and persistent with 25 percent explaining variation in world consumer price index till end of the period.

Keywords: Granger causality, oil prices changes, Saudi Arabian economy, variance decomposition

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7363 Foreign Direct Investment, Economic Growth and CO2 Emissions: Evidence from WAIFEM Member Countries

Authors: Nasiru Inuwa, Haruna Usman Modibbo, Yahya Zakari Abdullahi


The purpose of this paper is to investigate the effects of foreign direct investment (FDI), economic growth on carbon emissions in context of WAIFEM member countries. The Im-Pesaran-Shin panel unit root test, Kao residual based test panel cointegration technique and panel Granger causality tests over the period 1980-2012 within a multivariate framework were applied. The results of cointegration test revealed a long run equilibrium relationship among CO2 emissions, economic growth and foreign direct investment. The results of Granger causality tests revealed a unidirectional causality running from economic growth to CO2 emissions for the panel of WAIFEM countries at the 5% level. Also, Granger causality runs from economic growth to foreign direct investment without feedback. However, no causality relationship between foreign direct investment and CO2 emissions for the panel of WAIFEM countries was observed. The study therefore, suggest that policy makers from WAIFEM member countries should design policies aim at attracting more foreign direct investments inflow as well the adoption of cleaner production technologies in order to reduce CO2 emissions.

Keywords: economic growth, CO2 emissions, causality, WAIFEM

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7362 Income-Consumption Relationships in Pakistan (1980-2011): A Cointegration Approach

Authors: Himayatullah Khan, Alena Fedorova


The present paper analyses the income-consumption relationships in Pakistan using annual time series data from 1980-81 to 2010-1. The paper uses the Augmented Dickey-Fuller test to check the unit root and stationarity in these two time series. The paper finds that the two time series are nonstationary but stationary at their first difference levels. The Augmented Engle-Granger test and the Cointegrating Regression Durbin-Watson test imply that the two time series of consumption and income are cointegrated and that long-run marginal propensity to consume is 0.88 which is given by the estimated (static) equilibrium relation. The paper also used the error correction mechanism to find out to model dynamic relationship. The purpose of the ECM is to indicate the speed of adjustment from the short-run equilibrium to the long-run equilibrium state. The results show that MPC is equal to 0.93 and is highly significant. The coefficient of Engle-Granger residuals is negative but insignificant. Statistically, the equilibrium error term is zero, which suggests that consumption adjusts to changes in GDP in the same period. The short-run changes in GDP have a positive impact on short-run changes in consumption. The paper concludes that we may interpret 0.93 as the short-run MPC. The pair-wise Granger Causality test shows that both GDP and consumption Granger cause each other.

Keywords: cointegrating regression, Augmented Dickey Fuller test, Augmented Engle-Granger test, Granger causality, error correction mechanism

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7361 Health Outcomes and Economic Growth Nexus: Testing for Long-run Relationships and Causal Links in Nigeria

Authors: Haruna Modibbo Usman, Mustapha Muktar, Nasiru Inuwa


This paper examined the long run relationship between health outcomes and economic growth in Nigeria from 1961 to 2012. Using annual time series data, Augmented Dickey-Fuller (ADF) test is conducted to check the stochastic properties of the variables. Also, the long run relationship among the variables is confirmed based on Johansen Multivariate Cointegration approach whereas the long run and short run dynamics are observed using Vector Error Correction Mechanism (VECM). In addition, VEC Granger causality test is employed to examine the direction of causality among the variables. On the whole, the results obtained revealed the existence of a long run relationship between health outcomes and economic growth in Nigeria and that both life expectancy and crude death rate as measures of health are found to have a long run negative and statistically significant impact on the economic growth over the study period. This is further buttressed by the results of Granger causality test which indicated the existence of unidirectional causality running from life expectancy and crude death rate to economic growth. The study therefore, calls for governments at various levels to create preconditions for health improvements in Nigeria in order to boost the level of health outcomes.

Keywords: cointegration, economic growth, Granger causality, health outcomes, VECM

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7360 Co-Integration and Error Correction Mechanism of Supply Response of Sugarcane in Pakistan (1980-2012)

Authors: Himayatullah Khan


This study estimates supply response function of sugarcane in Pakistan from 1980-81 to 2012-13. The study uses co-integration approach and error correction mechanism. Sugarcane production, area and price series were tested for unit root using Augmented Dickey Fuller (ADF). The study found that these series were stationary at their first differenced level. Using the Augmented Engle-Granger test and Cointegrating Regression Durbin-Watson (CRDW) test, the study found that “production and price” and “area and price” were co-integrated suggesting that the two sets of time series had long-run or equilibrium relationship. The results of the error correction models for the two sets of series showed that there was disequilibrium in the short run there may be disequilibrium. The Engle-Granger residual may be thought of as the equilibrium error which can be used to tie the short-run behavior of the dependent variable to its long-run value. The Granger-Causality test results showed that log of price granger caused both the long of production and log of area whereas, the log of production and log of area Granger caused each other.

Keywords: co-integration, error correction mechanism, Granger-causality, sugarcane, supply response

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7359 An Empirical Investigation into the Effect of Macroeconomic Policy on Economic Growth in Nigeria

Authors: Rakiya Abba


This paper investigates the effect of the money supply, exchange and interest rate on economic growth in Nigeria through the application of Augmented Dickey-Fuller technique in testing the unit root property of the series and Granger causality test of causation between GDP, money supply, the exchange, and interest rate. The results of unit root suggest that all the variables in the model are stationary at 1, 5 and 10 percent level of significance, and the results of Causality suggest that money supply and exchange granger cause IR, the result further reveals two – way causation existed between M2 and EXR while IR granger cause GDP the null hypothesis is rejected and GDP does not granger cause IR as indicated by their probability values of 0.4805 and confirmed by F-statistics values of 0.75483. The results revealed that M2 and EXR do not granger causes GDP, the null hypothesis is accepted at 75percent 18percent respectively as indicated by their probability values of 0.7472 and 0.1830 respectively; also, GDP does not granger cause M2 and EXR. The Johansen cointegration result indicates that despite GDP does not granger cause M2, IR, and EXR, but there existed 1 cointegrating equation, implying the existence of long-run relationship between GDP, M2 IR, and EXR. A major policy implication of this result is that economic growth is function of and money supply and exchange rate, effective monetary policies should direct on manipulating instruments and importance should be placed on justification for adopting a particular policy be rationalized in order to increase growth in economy

Keywords: economic growth, money supply, interest rate, exchange rate, causality

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7358 Dynamic Interaction between Renwable Energy Consumption and Sustainable Development: Evidence from Ecowas Region

Authors: Maman Ali M. Moustapha, Qian Yu, Benjamin Adjei Danquah


This paper investigates the dynamic interaction between renewable energy consumption (REC) and economic growth using dataset from the Economic Community of West African States (ECOWAS) from 2002 to 2016. For this study the Autoregressive Distributed Lag- Bounds test approach (ARDL) was used to examine the long run relationship between real gross domestic product and REC, while VECM based on Granger causality has been used to examine the direction of Granger causality. Our empirical findings indicate that REC has significant and positive impact on real gross domestic product. In addition, we found that REC and the percentage of access to electricity had unidirectional Granger causality to economic growth while carbon dioxide emission has bidirectional Granger causality to economic growth. Our findings indicate also that 1 per cent increase in the REC leads to an increase in Real GDP by 0.009 in long run. Thus, REC can be a means to ensure sustainable economic growth in the ECOWAS sub-region. However, it is necessary to increase further support and investments on renewable energy production in order to speed up sustainable economic development throughout the region

Keywords: Economic Growth, Renewable Energy, Sustainable Development, Sustainable Energy

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7357 Environmental Impact of Trade Sector Growth: Evidence from Tanzania

Authors: Mosses E. Lufuke


This paper attempted to investigate whether there is Granger-causality running from trade to environment as evidenced in the changing climatic condition and land degradation. Using Tanzania as the reference, VAR-Granger-causality test was employed to rationalize the conundrum of causal-effect relationship between trade and environment. The changing climatic condition, as the proxy of both nitrous oxide emissions (in thousand metric tons of CO2 equivalent) and land degradation measured by the size of arable land were tested against trade using both exports and imports variables. The result indicated that neither of the trade variables Granger-cause the variability on gas emissions and arable land size. This suggests the possibility that all trade concerns in relation to environment to have been internalized in domestic policies to offset any likely negative consequence.

Keywords: environment, growth, impact, trade

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7356 An Empirical Study on Growth, Trade, Foreign Direct Investment and Environment in India

Authors: Shilpi Tripathi


India has adopted the policy of economic reforms (Globalization, Liberalization, and Privatization) in 1991 which has reduced the trade barriers and investment restrictions and further increased the economy’s international trade, foreign direct investment (FDI) inflows and Gross Domestic Product (GDP) growth. The paper empirically studies the relationship between India’s international trades, GDP, FDI and environment during 1978-2012. The first part of the paper focuses on the background and trends of FDI, GDP, trade, and environment (CO2). The second part focuses on the literature regarding the relationship among all the variables. The last part of paper, we examine the results of empirical analysis like co integration and Granger causality between foreign trade, FDI inflows, GDP and CO2 since 1978. The findings of the paper revealed that there is only one uni- directional causality exists between GDP and trade. The direction of causality reveals that international trade is one of the major contributors to the economic growth (GDP). While, there is no causality found between GDP and FDI, FDI, and CO2 and International trade and CO2. The paper concludes with the policy recommendations that will ensure environmental friendly trade, investment and growth in India for future.

Keywords: international trade, foreign direct investment, GDP, CO2, co-integration, granger causality test

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7355 Causality between the Construction Industry and the GDP in the United Arab Emirates

Authors: Hasan S. Mahmoud, Salwa M. Beheiry, Vian Ahmed


In light of the repercussions of the 2008 global economic crisis, the response of the United Arab Emirates economy and growth, and the vast construction activities that are undergoing, there is a need to investigate the relationship between construction activities and the Gross Domestic Product (GDP). This study aims to investigate the causality relationship between the construction industry in the United Arab Emirates and the GDP of the country in the last decade. For that, this study will investigate the relationship between the growth of the GDP and the growth of construction activities and their value addition to the economy. To ascertain this relationship, Granger Causality method is used to identify the causality between the time-dependent series.

Keywords: construction value addition, Granger causality, growth of gross domestic product, United Arab Emirates

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7354 Relationship between Electricity Consumption and Economic Growth: Evidence from Nigeria (1971-2012)

Authors: N. E Okoligwe, Okezie A. Ihugba


Few scholars disagrees that electricity consumption is an important supporting factor for economy growth. However, the relationship between electricity consumption and economy growth has different manifestation in different countries according to previous studies. This paper examines the causal relationship between electricity consumption and economic growth for Nigeria. In an attempt to do this, the paper tests the validity of the modernization or depending hypothesis by employing various econometric tools such as Augmented Dickey Fuller (ADF) and Johansen Co-integration test, the Error Correction Mechanism (ECM) and Granger Causality test on time series data from 1971-2012. The Granger causality is found not to run from electricity consumption to real GDP and from GDP to electricity consumption during the year of study. The null hypothesis is accepted at the 5 per cent level of significance where the probability value (0.2251 and 0.8251) is greater than five per cent level of significance because both of them are probably determined by some other factors like; increase in urban population, unemployment rate and the number of Nigerians that benefit from the increase in GDP and increase in electricity demand is not determined by the increase in GDP (income) over the period of study because electricity demand has always been greater than consumption. Consequently; the policy makers in Nigeria should place priority in early stages of reconstruction on building capacity additions and infrastructure development of the electric power sector as this would force the sustainable economic growth in Nigeria.

Keywords: economic growth, electricity consumption, error correction mechanism, granger causality test

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7353 Short-Long Term between Gross Domestic Product and Consumption in Indonesia

Authors: Teguh Sugiarto, Ahmad Subagyo, Ludiro Madu, Amir Mohammadian Amiri


Recently, the significant fluctuations accosiated with Indonesian economy justifies the need for paying more attention to this issue. In this regard, the main objective of this study is to investigate the relationship between two issues related to the macro Indonesia economy called consumption and GDP during the period of 1967 to 2014. This research method exploits short term and long term relationships using Granger and subsequently, models them by the causality method . However, using analysis of Granger with Johansen shows that there is not only a long term, but also a short-long relationship between GDP and consumption using lags the interval 5.

Keywords: cointegration, Granger causality, GDP, consumption

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7352 A Study of Islamic Stock Indices and Macroeconomic Variables

Authors: Mohammad Irfan


The purpose of this paper is to investigate the relationship among the key macroeconomic variables and Islamic stock market in India. This study is based on the time series data of financial years 2009-2015 to explore the consistency of relationship between macroeconomic variables and Shariah Indices. The ADF (Augmented Dickey–Fuller Test Statistic) and PP (Phillips–Perron Test Statistic) tests are employed to check stationarity of the data. The study depicts the long run relationship between Shariah indices and macroeconomic variables by using the Johansen Co-integration test. BSE Shariah and Nifty Shariah have uni-direct Granger causality. The outcome of VECM is significantly confirming the applicability of best fitted model. Thus, Islamic stock indices are proficiently working for the development of Indian economy. It suggests that by keeping eyes on Islamic stock market which will be more interactive in the future with other macroeconomic variables.

Keywords: Indian Shariah Indices, macroeconomic variables, co-integration, Granger causality, vector error correction model (VECM)

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7351 Economic Growth and Transport Carbon Dioxide Emissions in New Zealand: A Co-Integration Analysis of the Environmental Kuznets Curve

Authors: Mingyue Sheng, Basil Sharp


Greenhouse gas (GHG) emissions from national transport account for the largest share of emissions from energy use in New Zealand. Whether the environmental Kuznets curve (EKC) relationship exists between environmental degradation indicators from the transport sector and economic growth in New Zealand remains unclear. This paper aims at exploring the causality relationship between CO₂ emissions from the transport sector, fossil fuel consumption, and the Gross Domestic Product (GDP) per capita in New Zealand, using annual data for the period 1977 to 2013. First, conventional unit root tests (Augmented Dickey–Fuller and Phillips–Perron tests), and a unit root test with the breakpoint (Zivot-Andrews test) are employed to examine the stationarity of the variables. Second, the autoregressive distributed lag (ARDL) bounds test for co-integration, followed by Granger causality investigated causality among the variables. Empirical results of the study reveal that, in the short run, there is a unidirectional causality between economic growth and transport CO₂ emissions with direction from economic growth to transport CO₂ emissions, as well as a bidirectional causality from transport CO₂ emissions to road energy consumption.

Keywords: economic growth, transport carbon dioxide emissions, environmental Kuznets curve, causality

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7350 Determining the Direction of Causality between Creating Innovation and Technology Market

Authors: Liubov Evstigneeva


In this paper an attempt is made to establish causal nexuses between innovation and international trade in Russia. The topicality of this issue is determined by the necessity of choosing policy instruments for economic modernization and transition to innovative development. The vector auto regression (VAR) model and Granger test are applied for the Russian monthly data from 2005 until the second quartile of 2015. Both lagged import and export at the national level cause innovation, the latter starts to stimulate foreign trade since it is a remote lag. In comparison to aggregate data, the results by patent’s categories are more diverse. Importing technologies from foreign countries stimulates patent activity, while innovations created in Russia are only Granger causality for import to Commonwealth of Independent States.

Keywords: export, import, innovation, patents

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7349 Nexus of Pakistan Stock Exchange with World's Top Five Stock Markets after Launching China Pakistan Economic Corridor

Authors: Abdul Rauf, Xiaoxing Liu, Waqas Amin


Stock markets are fascinating more and more conductive to each other due to liberalization and globalization trends in recent years. China Pakistan Economic Corridor (CPEC) has dragged Pakistan stock exchange to the new heights and global investors are making investments to reap its benefits. So, in investors and government perspective, the study focuses co-integration of Pakistan stock exchange with world’s five big economies i-e US, China, England, Japan, and France. The time period of study is seven years i-e 2010 to 2016 and daily values of major indices of corresponding stock exchanges collected. All variables of that particular study are stationary at first difference confirmed by unit root test. The study Johansen system co integration test for analysis of data along with Granger causality test is performed for result purpose. Co integration test asserted that Pakistan stock exchange integrated with Shanghai stock exchange (SSE) and NIKKEI stock exchange in short run. Granger causality test also proclaimed these results. But NASDAQ, FTSE, DAX not co integrated and Granger cause at a short run but long run these markets are bonded with Pakistan stock exchange (KSE). VECM also confirmed this liaison in short and long run. Investors, therefore, need to be updated regarding co-integration of world’s stock exchanges to ensure well diversified and risk adjusted high returns. Equally, governments also need updated status so that they could reduce co-integration through multiple steps and hence drag investors for diversified investment.

Keywords: CPEC, DAX, FTSE, liberalization, NASDAQ, NIKKEI, SSE, stock markets

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7348 Stability or Instabilty? Triplet Deficit Analysis In Turkey

Authors: Zeynep Karaçor, Volkan Alptekin, Gökhan Akar, Tuba Akar


This paper aims to review the phenomenon of triplet deficit which is called interaction of budget balance that make up the overall balance of the economy, investment savings balance and current accounts balance in terms of Turkey. In this paper, triplet deficit state in Turkish economy has been analyzed with vector autoregressive model and Granger causality test using data covering the period of 1980-2010. According to VAR results, increase in current accounts is perceived on public sector borrowing requirement. These two variables influence each other bilaterally. Therefore, current accounts increase public deficit, whereas public deficit increases current accounts. It is not possible to mention the existence of a short-term Granger causality between variables at issue.

Keywords: internal and external deficit, stability, triplet deficit, Turkey economy

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7347 Long-Run Relationship among Tehran Stock Exchange and the GCC Countries Financial Markets, Before and After 2007/2008 Financial Crisis

Authors: Mohammad Hossein Ranjbar, Mahdi Bagheri, B. Shivaraj


This study attempts to investigate the relationship between stock market of Iran and GCC countries stock exchanges. Eight markets were included: the stock market of Iran, Kuwait, Bahrain, Qatar, Saudi Arabia, Dubai, Abu Dhabi and Oman. Daily country market indices were collected from January 2005 to December 2010. The potential time-varying behaviors of long-run stock market relationship among selected markets are tested applying correlation test, Augmented Dick Fuller test (ADF), Bilateral and Multilateral Cointegration (Johansen), and the Granger Causality test. The findings suggest that stock market of Iran is negatively correlated with most of the selected markets in the whole duration. But contemporaneous correlations among the eight selected markets are increased positively in period of financial crises. Bilateral Cointegration between selected markets suggests that there is no integration between Tehran stock exchange and other selected markets. Among other markets, except the stock market of Dubai and Abu Dhabi as a one pair, are not cointegrated in whole, but in duration of financial crises integration between selected markets are increased. Finally, investigation of the casual relationship among eight financial markets suggests there are unidirectional and bidirectional causal relationship among some of stock market indices.

Keywords: financial crises, Middle East, stock market integration, Granger Causality test, ARDL test

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7346 Foreign Exchange Volatilities and Stock Prices: Evidence from London Stock Exchange

Authors: Mahdi Karazmodeh, Pooyan Jafari


One of the most interesting topics in finance is the relation between stock prices and exchange rates. During the past decades different stock markets in different countries have been the subject of study for researches. The volatilities of exchange rates and its effect on stock prices during the past 10 years have continued to be an attractive research topic. The subject of this study is one of the most important indices, FTSE 100. 20 firms with the highest market capitalization in 5 different industries are chosen. Firms are included in oil and gas, mining, pharmaceuticals, banking and food related industries. 5 different criteria have been introduced to evaluate the relationship between stock markets and exchange rates. Return of market portfolio, returns on broad index of Sterling are also introduced. The results state that not all firms are sensitive to changes in exchange rates. Furthermore, a Granger Causality test has been run to observe the route of changes between stock prices and foreign exchange rates. The results are consistent, to some level, with the previous studies. However, since the number of firms is not large, it is suggested that a larger number of firms being used to achieve the best results. However results showed that not all firms are affected by foreign exchange rates changes. After testing Granger Causality, this study found out that in some industries (oil and gas, pharmaceuticals), changes in foreign exchange rate will not cause any changes in stock prices (or vice versa), however, in banking sector the situation was different. This industry showed more reaction to these changes. The results are similar to the ones with Richards and Noel, where a variety of firms in different industries were evaluated.

Keywords: stock prices, foreign exchange rate, exchange rate exposure, Granger Causality

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7345 Governance and Economic Growth: Evidence for Ten Asian Countries

Authors: Chiung-Ju Huang


This study utilizes a frequency domain approach over the period of 1996 to 2013 to examine the causal relationship between governance and economic growth in ten Asian countries, which have different levels of democracy; classified as “Free”, “Partly Free”, and “Not Free” countries. The empirical results show that there is no Granger causality running from governance to economic growth in “Not Free” countries and “Partly Free” countries with the exception of Singapore. As for “Free” countries such as South Korea and Taiwan, there is a one-way causality running from governance to economic growth. The findings of this study indicate that policy makers in South Korea, Taiwan, and Singapore could use governance index to improve their predictions of the future economic growth.

Keywords: economic growth, frequency domain, governance, granger causality

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7344 Modeling Residential Electricity Consumption Function in Malaysia: Time Series Approach

Authors: L. L. Ivy-Yap, H. A. Bekhet


As the Malaysian residential electricity consumption continued to increase rapidly, effective energy policies, which address factors affecting residential electricity consumption, is urgently needed. This study attempts to investigate the relationship between residential electricity consumption (EC), real disposable income (Y), price of electricity (Pe) and population (Po) in Malaysia for 1978-2011 periods. Unlike previous studies on Malaysia, the current study focuses on the residential sector, a sector that is important for the contemplation of energy policy. The Phillips-Perron (P-P) unit root test is employed to infer the stationary of each variable while the bound test is executed to determine the existence of co-integration relationship among the variables, modeled in an Autoregressive Distributed Lag (ARDL) framework. The CUSUM and CUSUM of squares tests are applied to ensure the stability of the model. The results suggest the existence of long-run equilibrium relationship and bidirectional Granger causality between EC and the macroeconomic variables. The empirical findings will help policy makers of Malaysia in developing new monitoring standards of energy consumption. As it is the major contributing factor in economic growth and CO2 emission, there is a need for more proper planning in Malaysia to attain future targets in order to cut emissions.

Keywords: co-integration, elasticity, granger causality, Malaysia, residential electricity consumption

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7343 The Relationship between Value-Added and Energy Consumption in Iran’s Industry Sector

Authors: Morteza Raei Dehaghi, Mojtaba Molaahmadi, Seyed Mohammad Mirhashemi


This study aimed to explore the relationship between energy consumption and value-added in Iran’s industry sector during the time period 1973-2011. Annual data related to energy consumption and value added in the industry sector were used. The results of the study revealed a positive relationship between energy consumption and value-added of the industry sector. Similarly, the results showed that there is one-way causality between energy consumption and value-added in the industry sector.

Keywords: economic growth, energy consumption, granger causality test, industry sector

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7342 Causal Relationship between Macro-Economic Indicators and Fund Unit Price Behaviour: Evidence from Malaysian Equity Unit Trust Fund Industry

Authors: Anwar Hasan Abdullah Othman, Ahamed Kameel, Hasanuddeen Abdul Aziz


In this study, an attempt has been made to investigate the relationship specifically the causal relation between fund unit prices of Islamic equity unit trust fund which measure by fund NAV and the selected macro-economic variables of Malaysian economy by using VECM causality test and Granger causality test. Monthly data has been used from Jan, 2006 to Dec, 2012 for all the variables. The findings of the study showed that industrial production index, political election and financial crisis are the only variables having unidirectional causal relationship with fund unit price. However, the global oil prices is having bidirectional causality with fund NAV. Thus, it is concluded that the equity unit trust fund industry in Malaysia is an inefficient market with respect to the industrial production index, global oil prices, political election and financial crisis. However, the market is approaching towards informational efficiency at least with respect to four macroeconomic variables, treasury bill rate, money supply, foreign exchange rate and corruption index.

Keywords: fund unit price, unit trust industry, Malaysia, macroeconomic variables, causality

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7341 The Impact of Foreign Direct Investment on Economic Growth of Ethiopia: Econometrics Cointegration Analysis

Authors: Dejene Gizaw Kidane


This study examines the impact of foreign direct investment on economic growth of Ethiopia using yearly time-series data for 1974 through 2013. Economic growth is proxies by real per capita gross domestic product and foreign direct investment proxies by the inflow of foreign direct investment. Other control variables such as gross domestic saving, trade, government consumption and inflation has been incorporated. In order to fully account for feedbacks, a vector autoregressive model is utilized. The results show that there is a stable, long-run relationship between foreign direct investment and economic growth. The variance decomposition results show that the main sources of Ethiopia economic growth variations are due largely own shocks. The pairwise Granger causality results show that there is a unidirectional causality that runs from FDI to economic growth of Ethiopia. Hence, the researcher therefore recommends that, FDI facilitate economic growth, so the government has to exert much effort in order to attract more FDI into the country.

Keywords: real per capita GDP, FDI, co-integration, VECM, Granger causality

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7340 Agriculture, Food Security and Poverty Reduction in Nigeria: Cointegration and Granger Causality Approach

Authors: Ogunwole Cecilia Oluwakemi, Timothy Ayomitunde Aderemi


Provision of sufficient food and elimination of abject poverty have usually been the conventional benefits of agriculture in any society. Meanwhile, despite the fact that Nigeria is an agrarian society, food insecurity and poverty have become the issues of concern among both scholars and policymakers in the recent times. Against this backdrop, this study examined the nexus among agriculture, food security, and poverty reduction in Nigeria from 1990 to 2019 within the framework of the Cointegration and Granger Causality approach. Data was collected from the Central Bank of Nigeria Statistical Bulletin and the World Development Indicators, respectively. The following are the major results that emanated from the study. A long run equilibrium relationship exists among agricultural value added, food production index, and GDP per capita in Nigeria. Similarly, there is a unidirectional causality which flows from food production index to poverty reduction in Nigeria. In the same vein, one way causality flows from poverty reduction to agricultural value added in Nigeria. Consequently, this study makes the following recommendation for the policymakers in Nigeria, and other African countries by extension, that agricultural value added and food production are the important variables that cannot be undermined when poverty reduction occupies the central focus of the policymakers. Therefore, any time these policymakers want to reduce poverty, policies that drive agricultural value added and food production should be embarked upon. Therefore, this study will contribute to the literature by establishing the type of linkage that exists between agriculture, food security, and poverty reduction in Nigeria.

Keywords: agriculture, value added, food production, GDP per capita, Nigeria

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7339 Effects of Financial Development on Economic Growth in South Asia

Authors: Anupam Das


Although financial liberalization has been one of the most important policy prescriptions of international organizations like the World Bank and the IMF, the effect of financial liberalization on economic growth in developing countries is far from unanimous. Since the '80s, South Asian countries made a significant development in liberalization the financial sector. However, due to unavailability of a sufficient number of time series observations, the relationship between economic growth and financial development has not been investigated adequately. We aim to fill this gap by examining time series data of five developing countries from the South Asian region: Bangladesh, India, Pakistan, Sri Lanka, and Nepal. Applying the cointegration tests and Granger causality within the vector error correction model (VECM), we do not find unanimous evidence of financial development on positive economic growth. These results are helpful for developing countries which have been trying to liberalize the financial sector in recent decades.

Keywords: economic growth, financial development, Granger causality, South Asia

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7338 Epilepsy Seizure Prediction by Effective Connectivity Estimation Using Granger Causality and Directed Transfer Function Analysis of Multi-Channel Electroencephalogram

Authors: Mona Hejazi, Ali Motie Nasrabadi


Epilepsy is a persistent neurological disorder that affects more than 50 million people worldwide. Hence, there is a necessity to introduce an efficient prediction model for making a correct diagnosis of the epileptic seizure and accurate prediction of its type. In this study we consider how the Effective Connectivity (EC) patterns obtained from intracranial Electroencephalographic (EEG) recordings reveal information about the dynamics of the epileptic brain and can be used to predict imminent seizures, as this will enable the patients (and caregivers) to take appropriate precautions. We use this definition because we believe that effective connectivity near seizures begin to change, so we can predict seizures according to this feature. Results are reported on the standard Freiburg EEG dataset which contains data from 21 patients suffering from medically intractable focal epilepsy. Six channels of EEG from each patients are considered and effective connectivity using Directed Transfer Function (DTF) and Granger Causality (GC) methods is estimated. We concentrate on effective connectivity standard deviation over time and feature changes in five brain frequency sub-bands (Alpha, Beta, Theta, Delta, and Gamma) are compared. The performance obtained for the proposed scheme in predicting seizures is: average prediction time is 50 minutes before seizure onset, the maximum sensitivity is approximate ~80% and the false positive rate is 0.33 FP/h. DTF method is more acceptable to predict epileptic seizures and generally we can observe that the greater results are in gamma and beta sub-bands. The research of this paper is significantly helpful for clinical applications, especially for the exploitation of online portable devices.

Keywords: effective connectivity, Granger causality, directed transfer function, epilepsy seizure prediction, EEG

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7337 An Analysis of the Relationship between Manufacturing Growth and Economic Growth in South Africa: A Cointegration Approach

Authors: Johannes T. Tsoku, Teboho J. Mosikari, Diteboho Xaba, Thatoyaone Modise


This paper examines the relationship between manufacturing growth and economic growth in South Africa using quarterly data ranging from 2001 to 2014. The paper employed the Johansen cointegration to test the Kaldor’s hypothesis. The Johansen cointegration results revealed that there is a long run relationship between GDP, manufacturing, service and employment. The Granger causality results revealed that there is a unidirectional causality running from manufacturing growth to GDP growth. The overall findings of the study confirm that Kaldor’s first law of growth is applicable in South African economy. Therefore, investment strategies and policies should be alignment towards promoting growth in the manufacturing sector in order to boost the economic growth of South Africa.

Keywords: cointegration, economic growth, Kaldor’s law, manufacturing growth

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7336 Granger Causal Nexus between Financial Development and Energy Consumption: Evidence from Cross Country Panel Data

Authors: Rudra P. Pradhan


This paper examines the Granger causal nexus between financial development and energy consumption in the group of 35 Financial Action Task Force (FATF) Countries over the period 1988-2012. The study uses two financial development indicators such as private sector credit and stock market capitalization and seven energy consumption indicators such as coal, oil, gas, electricity, hydro-electrical, nuclear and biomass. Using panel cointegration tests, the study finds that financial development and energy consumption are cointegrated, indicating the presence of a long-run relationship between the two. Using a panel vector error correction model (VECM), the study detects both bidirectional and unidirectional causality between financial development and energy consumption. The variation of this causality is due to the use of different proxies for both financial development and energy consumption. The policy implication of this study is that economic policies should recognize the differences in the financial development-energy consumption nexus in order to maintain sustainable development in the selected 35 FATF countries.

Keywords: energy consumption, financial development, FATF countries, Panel VECM

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7335 The Internationalization of Capital Market Influencing Debt Sustainability's Impact on the Growth of the Nigerian Economy

Authors: Godwin Chigozie Okpara, Eugine Iheanacho


The paper set out to assess the sustainability of debt in the Nigerian economy. Precisely, it sought to determine the level of debt sustainability and its impact on the growth of the economy; whether internationalization of capital market has positively influenced debt sustainability’s impact on economic growth; and to ascertain the direction of causality between external debt sustainability and the growth of GDP. In the light of these objectives, ratio analysis was employed for the determination of debt sustainability. Our findings revealed that the periods 1986 – 1994 and 1999 – 2004 were periods of severe unsustainable borrowing. The unit root test showed that the variables of the growth model were integrated of order one, I(1) and the cointegration test provided evidence for long run stability. Considering the dawn of internationalization of capital market, the researcher employed the structural break approach using Chow Breakpoint test on the vector error correction model (VECM). The result of VECM showed that debt sustainability, measured by debt to GDP ratio exerts negative and significant impact on the growth of the economy while debt burden measured by debt-export ratio and debt service export ratio are negative though insignificant on the growth of GDP. The Cho test result indicated that internationalization of capital market has no significant effect on the debt overhang impact on the growth of the Economy. The granger causality test indicates a feedback effect from economic growth to debt sustainability growth indicators. On the bases of these findings, the researchers made some necessary recommendations which if followed religiously will go a long way to ameliorating debt burdens and engendering economic growth.

Keywords: debt sustainability, internalization, capital market, cointegration, chow test

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