110 research outputs found
Oil, agriculture, and the public sector: linking intersector dynamics in Ecuador
No full textIn a recent paper, Fiess and Verner (2000) analyse sectoral growth in Ecuador and find significant long-run and short-run relationships between the agricultural, industrial and service sectors. They take this as evidence against the dual economy model which rules out a long-run relationship between agricultural and industrial output and show further that a more detailed picture of the growth process can be discovered, once the agricultural, industrial and service sectors are disaggregated further into intrasector components. This paper extends their initial results and provides insight from a multivariate cointegration analysis of intrasector components. The authors are able to identify three cointegrating relationships, each of which has its own meaningful economic interpretation: Two cointegration relationships capture the direct and indirect effects of the"petrolization"of the Ecuadorian economy. A third relationship clearly indicates a link between agriculture and industrial activity. Since this third cointegrating relationship seems to coincide in time with the trade liberalisation at the end of the 1980s, promoting agriculture appears to be an important way to promote sustainable economic growth in Ecuador.Economic Theory&Research,Environmental Economics&Policies,Scientific Research&Science Parks,Statistical&Mathematical Sciences,Agricultural Knowledge&Information Systems,Statistical&Mathematical Sciences,Economic Theory&Research,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Achieving Shared Growth
The Global Side of the Investment-Saving Puzzle
No full textIn this paper, we reexamine the long-standing and puzzling correlation between national saving and investment in industrial countries. We apply an econometric methodology that allows us to separate idiosyncratic correlation at the country level from correlation at the global level. In a major break with the existing literature, we find no evidence of a long-run relationship in the idiosyncratic components of saving and investment. We also find that the global components in saving and investments commove, indicating that they react to shocks of a global nature. Copyright (c) 2009 The Ohio State University.
Interest rate co-movements, global factors and the long end of the term spread
No full textThe decoupling of US short and long interest rates has been a distinctive feature of the 2000s. We employ recent advances in panel econometrics to document this disconnect for industrial countries and link it to a global latent factor in long term rates. We investigate whether international forces, such as global inflation, global output, or the global savings glut may be behind this global latent factor. The savings glut is the most likely contender, suggesting that reserve accumulation and a search for yield from emerging markets has lowered long rates internationally, driving a wedge between domestic short and long rates
Primary Commodity Prices: Co-movements, Common Factors and Fundamentals
No full textThe behavior of commodities is critical for developing and developed countries alike.
This paper contributes to the empirical evidence on the co-movement and
determinants of commodity prices. Using nonstationary panel methods, we document
a statistically significant degree of co-movement due to a common factor. Within a
Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by
a simple asset pricing model, are both found to be negatively related to this common
factor. This evidence is robust to the inclusion of demand and supply shocks, which
both positively impact on the co-movement of commodity prices
Oil, Agriculture, and the Public Sector: Linking Intersector Dynamics in Ecuador
No full textIn a recent paper, Fiess and Verner
(2000) analyse sectoral growth in Ecuador and find
significant long-run and short-run relationships between the
agricultural, industrial and service sectors. They take this
as evidence against the dual economy model which rules out a
long-run relationship between agricultural and industrial
output and show further that a more detailed picture of the
growth process can be discovered, once the agricultural,
industrial and service sectors are disaggregated further
into intrasector components. This paper extends their
initial results and provides insight from a multivariate
cointegration analysis of intrasector components. The
authors are able to identify three cointegrating
relationships, each of which has its own meaningful economic
interpretation: Two cointegration relationships capture the
direct and indirect effects of the "petrolization"
of the Ecuadorian economy. A third relationship clearly
indicates a link between agriculture and industrial
activity. Since this third cointegrating relationship seems
to coincide in time with the trade liberalisation at the end
of the 1980s, promoting agriculture appears to be an
important way to promote sustainable economic growth in Ecuador
Primary commodity prices: co-movements, common factors and fundamentals
No full textThe behavior of commodities is critical for developing and developed countries alike. This paper contributes to the empirical evidence on the co-movement and determinants of commodity prices. Using nonstationary panel methods, we document a statistically significant degree of co-movement due to a common factor. Within a Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by a simple asset pricing model, are both found to be negatively related to this common factor. This evidence is robust to the inclusion of demand and supply shocks, which both positively impact on the co-movement of commodity prices
Capital Flows, Country Risk, and Contagion
No full textIt has been widely recognized that both
country-specific and global factors matter in explaining
capital flows. The author presents an empirical framework
that disentangles the relative weight of country-specific
and global factors in determining capital flows. In essence,
his approach first separates the common component of
emerging country spreads from their country-specific
component. The pure country risk and global risk components
are then used as explanatory variables to account for the
observed pattern of capital flows using multivariate
cointegration analyses. The author is able to identify the
relative weight of global and country-specific factors in
explaining capital flows to Argentina, Brazil, Mexico, and
Venezuela in the 1990s. When further decomposing country
risk into its determinants, the author finds that within a
small system it is possible to jointly identify the
determinants of capital flows and sovereign bond spreads. We
find that capital flows are driven by country risk and
global factors ("contagion" and U.S. long-term
interest rates), while country risk is determined by the
primary balance-to-GDP ratio (-) and the ratio of public
debt to GDP (+)
Domestic vs. international correlations of interest rates maturities
No full textThe association between long and short interest rates is traditionally envisaged from a purely domestic perspective where it is believed an empirical regularity. Hence, the weakening of this relationship in the first half of the 2000s has represented a conundrum, calling for a reassessment of the term structure and the conduct of monetary policy. Some commentators have called for investigations into the international dimension of this puzzle. Hence, in this paper we employ recent advances in panel data econometrics to investigate the co-movement of interest rate maturities both at the domestic and international levels for a sample of industrial countries. Specifically, we use the Ng (2006) spacings correlations approach to examine interest rates correlations between and within countries. Compared to alternatives, this method does not just estimate bivariate correlations, but also assesses the degree of panel correlation without being restricted by the assumption of either zero or complete panel correlation. We find very small correlations between the different maturities of domestic rates and much higher correlations of international rates. Moreover, international correlations between long rates are significantly higher than those between short rates. These findings suggest a scenario for national monetary policy, where financial globalization may have changed the transmission mechanism, advocating searches for the "missing" yield curve in its international dimension.</p
Interest rate co-movements, global factors and the long end of the term spread
No full textThe disconnect between rising short and low long interest rates has been a distinctive
feature of the 2000s. Both research and policy circles have argued that international
forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles
(e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be
responsible. In this paper, we employ recent advances in panel data econometrics to
document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor
International capital flows to emerging and developing countries: national and global determinants
No full textThis paper examines international capital flows to emerging and developing countries. We assess whether commonalities exist, the permanence of shocks to commonalities and their determinants. Also, we consider individual country coherence with global capital flows and we measure the extent of co-movements in the volatility of capital flows. Our results suggest there are commonalities in capital inflows, although aggregate or disaggregate capital flows respond differently to shocks. We find that the US long run real interest rate is an important determinant of global capital flows, and real commodity prices are relevant but to a lesser extent. We also find a role for human capital in explaining why some countries can successfully ride the wave of financial globalisation.Capital Flows; Emerging Markets; Developing Countries; Global Factors
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