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Substitution elasticities in an energy-augmented CES production function: An empirical analysis for Turkey
Get PDFAbstract. This study estimates a production function for Turkey taking capital, labor and energy as input factors. The production function estimated is of the CES form with Hicks-neutral technology and constant returns to scale. A nonlinear least squares regression is employed on a dataset for the entire Turkish economy covering a time period of 27 years. The production function parameters provide insights into the elasticity of substitution of capital, labor and energy in Turkey. In particular, it is found that the elasticity of substitution between the capital-labor bundle and energy is, slightly higher than values found in other studies for various countries. This finding shows the relative ease of substitutability of capital-labor with energy for one another in Turkey and provides new insight on a critical parameter for future energy-economy modeling studies related to Turkey and other similar countries with no elasticity estimate. It is thought that the high substitutability for the case of Turkey may be related to the flexibility of its rapidly growing economy with investment needs that can easily be adapted to market conditions.Keywords. Substitution elasticities, CES, Energy economics.JEL. D22, E23, Q40
An empirical test for the effectiveness of central bank interventions in foreign exchange markets: An application to the Canadian and Swiss Central Banks
Get PDFAbstract. This paper investigates the effectiveness of foreign exchange intervention of central banks of Canada and Switzerland. We examine the effectiveness of Canada and Switzerland interventions policies on Canadian dollar against US dollar and Swiss franc against US dollar exchange rates volatility over the 1980-2014 period. A behavioral exchange rate equation is estimated with instrumental variables methodology. The main results indicate that interventions generally reduce exchange rates volatility. However, the Swiss National Bank seems to be more efficient by stabilizing the Swiss franc than the Bank of Canada, whose interventions, despite its effectiveness, remains weak.Keywords. Volatility, Exchange rate, Official international reserves.JEL. E51, E52, E58
Modelling dynamics of inflation in Nigeria
Get PDFAbstract. The study was motivated by the pervasively increasing inflation rate which has for the past 3 decades embattled and inhibited the potential growth of the Nigeria economy coupled with the fact that empirical studies on modeling the trend and behavior of inflation dynamics have remained largely neglected or scarcely researched. Hence, the pertinent concern of this paper is to model the dynamics of inflationary expectation in Nigeria by applying autoregressive distributed lag (ARDL) cointegration framework, Error Correction model, Ordinary Least Square methods and a host of diagnostic tests on time series (secondary) data, covering 1980 to 2015. While the empirical results expedite a cointegrated and stable long-run relationship between the variable of interests when price level is the dependent variable, money supply, interest rates, fiscal deficit to GDP and international oil price shock are found to be statistically significant in explaining the dynamics of inflation in Nigeria both in the long run and short run. Consequently, the study recommends the need for implementation of strategic diversification policy to reduce the vulnerability of the economy to oil price shock both locally and internationally and also, that the government and policymakers need to swing into urgent action in initiating fiscal policy that will further enhance stabilization of the country’s exchange rate and raise the value of the Naira.Keywords. Exchange rate, Industrialization, Export, Inflation.JEL. L00, L16, F31
The impact of financial distress risk on equity returns: A case study of non-financial firms of Pakistan Stock Exchange
Get PDFAbstract. This study aims to investigate the relationship of financial distress risk and the equity returns of financially distressed firms listed on Pakistan Stock Exchange (PSX). Several studies have suggested that firm distress risk factor could be behind the book-to-market and size effects. Fama and French three factor Model (1993) is used for examining the relationship among equity returns, financial distress risk, size and book-to-market equity ratio. Non-financial firms listed on PSX are taken from the time-period of 2010-2016. Ohlson’s O-Score (1980) “bankruptcy prediction model” is used for the prediction of financial distress risk and forecasted the distress risk firms listed on PSX. The panel (unbalanced) data is used to get the empirical findings and showed that the financial distress risk and book-to-market equity effect are statistically insignificant to explain the stock returns of distress firms due to the inefficiency of market. However, size effect is significant in explaining the stock returns of distress firms. The study also reveals that it is important to predict financial distress risk with a better predictor in order to avoid the uncertainties in PSX.Keywords. Financial distress risk, Equity returns, Book-to-market effect, Size, Pakistan Stock Exchange.JEL. G30, G32
The crisis and its consequences for society and economic theory
Get PDFAbstract. The Financial Crisis (2007-09; FC) has shown that the assumptions of the neoliberal paradigm are not sufficient. The FC has also led to a Moral Crisis (MC). Ethical standards in business are deteriorating. Institutions and authorities have significantly lost its reputation due to the FC and right-wing populism has gained political influence worldwide. This political agenda will disappear due to its own contradictions. This paper will also show, that the crisis is a crisis of theory. Economic as science is stagnating since several decades, because of its institutionalization in economic journals and in the academic environment which is conserving old methods and thinking styles. Economic theories of today are not appropriate for the solution of the actual problems. Progress in economic theory is urgently needed, because the prevailing paradigm does not solve the problems of income inequality, high unemployment levels and the destruction of the ecological sphere. The doctrine of permanent economic growth as well as austerity measures have to be scrutinized. The constantly rising pressure of unsolved problems in economics resp. economic theory must lead to a change of the current paradigm.Keywords. Financial crisis, Neoliberal theory, GDP-growth, Austerity, Moral crisis.JEL. A10, G01, H12, K42, Z10
Globalization under hysteresis: A study of Eastern Bloc Countries, China and India
Get PDFAbstract. This study is concerned with a great socio-economic experiment in history that replaced the naturally evolved market economy with the humanly designed command economy to achieve a socialist triumph over capitalism, experienced a setback and ultimately returned to the market economy for managing the material aspects of the society. Efforts to open the subject economies in the aftermath of the said experiment are on the contemporary agenda worldwide. Yet, the past pulls the present causing hysteresis that thwarts the momentum of globalization. Using KOF and AEMC indices of globalization (based on KOF data 1991-2014), the paper concludes that most of the countries to the south of Russian Federation (Armenia, Azerbaijan, Tajikistan, Kyrgyzstan, Kazakhstan) have performed rather poorly in globalization efforts. On the other hand, the countries in the north-western side of the Russian Federation (except Moldova) have on the whole performed better. In comparison, China has performed fairly while India lags behind. In spite of all proclamations, unless the political will to globalization is there, globalization cannot progress much further. However, such a political will has not been strong in India. India has remained protectionist of vested interests of politicians, industrialists, business houses and perhaps the intelligentsia, a coalition of the dominant proprietary classes that benefit from the status quo or stagnancy of the Indian economy and society. Globalization in India is under a strong spell of hysteresis on account of the pre-1991 pseudo-socialistic nostalgia as well as age-old internal contradictions.Keywords. Globalization, KOF index, Equi-marginal, Shapley value, Global optimization, China, India, Eastern Bloc.JEL. C43, C61, C71, F60, P52
Econometrics analysis and application of event study methodology on international mergers and acquisition activities of MNCs from Eastern Europe
Get PDFAbstract. The objective of this paper is to examine the impact of financial crisis on the International Expansion activities of MNCs from Eastern Europe. This study has two interrelated foci. The fist one provides an empirical analysis of international expansion activities that span around the period of 2006 – 2016. The second focus examines market reaction to the announcements of international mergers and acquisations actualized by these firms to see whether there is any value creation for firms in these activities. The paper utilizes Securities Database (SDC) Platinum Worldwide Mergers and Acquisitions database in examining 621 international mergers and acquisitions activities of various MNCs from the Czech Republic, Slovakia, Poland and Hungary. In order to assess value creation, the paper utilizes Event Study Methodology. Overall, the results suggest that Eastern European firms’ global mergers and acquisition activities increase during the beginning of financial crisis, but later the activities have slowed down. Hence, the study indicates that the effects of crisis on these firms’ activities were not immediate but began recently as their activities decreased since the beginning of 2009. Event Study results does not indicate value creation. Keywords. Firms from the Eastern Europe; International investments, Foreign direct investment; Cross-border mergers and acquisitions; Emerging market multinationals; Internationalization; Event study.JEL. F21, F23, F37, G30, G34
The great deceleration in human activities and impacts
Get PDFAbstract. Economic growth is inadvertently connected with human impacts on the environment. The currently accepted interpretation is that the intensity of human activities and impacts accelerated dramatically in the 1950s or more broadly in the second half of the 21st century. These claims are not based or a rigorous analysis of data but on impressions. The important question for human future is whether these claims are true. Distributions describing time dependence of human activities and impacts have now been mathematically analysed. Conclusions can be summarised as follows. (1) The intensity of human activities and impacts decelerated in the 1950s or more broadly in the second half of the 21st century. (2) Distributions describing time dependence of human activities and impacts cannot be used to determine the beginning of the Anthropocene because there are no intensification landmarks. (3) Mathematical analysis suggests a new interpretation of the concept of the Anthropocene. Human activities and impacts did not emerge with high intensity at any specific time. They evolved gradually over a long time. Keywords. The Anthropocene, Human activities and impacts, Deceleration, Sustainable future.JEL. A12, C02, C12, F01, Y80
Outsourcing embryos: An examination of the maternal surrogacy market
Get PDFAbstract. The word “market” brings to mind a grocery shop or perhaps the financial markets. However, with the advancements in reproductive technologies in the last thirty years, there is now an established market for sperm, eggs, fertilization techniques and even wombs. Surrogacy is a topic that most Americans are unfamiliar with; only a small percentage of American couples are infertile. However, surrogacy has made its popular culture debut with Kim Kardashian announcing her use of a maternal surrogate for her third child. I seek to provide an analysis for commercial surrogacy contracts and the gestational surrogacy market. Despite the lack of official statistics on the gestational surrogacy market, it is estimated to grow to a $4 billion global market by 2020, which makes it an interesting market to examine.Keywords. Embryos, In vitro fertilization, Maternal surrogacy, Commercial surrogacy.JEL. I11, I18