• KDI Journal of Economic Policy
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• v.31 no.2
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• pp.1-13
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• 2009

The monetary model suggests that nominal exchange rates between two countries will be determined by important macroeconomic variables. The existence of a cointegrating relationship among these fundamental variables is the backbone of the monetary model. In a recent paper, Rapach and Wohar (2002, Journal of International Economics) advance the literature by testing for linear cointegration in the monetary model using a century of data to increase power. They find evidence of cointegration in five or six of ten countries. We extend their work to the nonlinear framework by performing threshold cointegration tests that allow for asymmetric adjustments in two regimes. Asymmetric adjustments in exchange rates can occur, for example, if transactions costs are present or if policy makers react asymmetrically to changing fundamentals. Moreover, whereas Rapach and Wohar (2002) found it necessary to exclude the relative output variable in some cases to maintain the validity of their cointegration tests, we can include this variable as a stationary covariate to increase power. Overall, using their same long-span data, we find more support for cointegration in a nonlinear framework.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.1
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• pp.23-36
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• 2021

The study explores the nexus between foreign direct investment (FDI), financial innovation, and exchange rate volatility in selected South Asian countries for 1980 to 2017. The study applies the unit root test, Autoregressive Distributed Lagged, nonlinear ARDL, and causality test following Toda-Yamamoto. Unit root tests ascertain that variables are integrated in a mixed order; few variables are stationary at a level and few after the first difference. Empirical model estimation with ARDL, Long-run cointegration revealed with the tests of FPSS, WPSS, and tBDM by rejecting the null hypothesis of "no cointegration." This finding suggests that, in the long-run financial innovation, FDI inflows, and exchange rate volatility move together. Moreover, study findings established adverse effects running from FDI inflows and financial innovation to exchange rate volatility in the long run. These findings suggest that continual FDI inflows and innovativeness in the financial system assist in lessening the volatility in the foreign exchange market. Furthermore, nonlinear ARDL confirms the presence of asymmetric cointegration in the model. The standard Wald test established asymmetric effects running from FDI inflows and financial innovation to exchange rate volatility, both in the long and short run. Directional causality unveils feedback hypothesis holds for explaining causality between FDI, financial innovation, and exchange rate volatility.

• Journal of Korea Port Economic Association
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• v.29 no.2
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• pp.63-79
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• 2013

The fundamental endeavor of this study is to investigate the asymmetric relationship between bunker price and Baltic Dry-bulk Index (hereafter BDI). Previous investigations employ linear form based analysis between oil price and BDI but we develop nonlinear and asymmetric cointegration method, which is properly able to capture the decreasing and increasing periods differently. The empirical results show there is no relationships in linear model (e.g. Engle and Granger's methods). On the contrary, our estimate reveals there is significant long-run relationship with asymmetric framework, which implies the necessity of nonlinear and asymmetric consideration to the bunker price analysis.

• Korean Journal of Agricultural Science
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• v.47 no.3
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• pp.567-576
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• 2020

One of the main challenges receiving much attention in the Rwandan agriculture and food industry in recent decades is the increases in maize prices. Indeed, a rise in maize prices causes higher living expenses for households because maize, which is a major staple food crop, constitutes a significant share of total food consumption among households in Rwanda. The aim of this study was to assess the extent of integration and how prices are transmitted between retail and wholesale markets of domestic maize in Rwanda. This study used monthly data of retail and wholesale prices of maize from January 1995 to December 2019. This empirical investigation was based on a linear cointegration approach and an asymmetric error correction model framework. Using the augmented dickey-fuller residual-based test and the Johansen Maximum Likelihood cointegration test, the results revealed that the retail and wholesale markets of maize are integrated. Hence, prices in these markets do not drift apart in the long run. The results of the Granger causality test revealed that there is a unidirectional causal relationship flowing from wholesale prices to retail prices, i.e., wholesale prices influence retail prices. Accordingly, the results from the asymmetric error correction model confirmed the presence of a positive asymmetric price transmission between wholesale and retail prices of maize in Rwanda. Thus, we suggest that policymakers take a critical look at the causes and factors that may influence asymmetry price transmission.

• Environmental and Resource Economics Review
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• v.32 no.4
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• pp.267-292
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• 2023

In this paper, we estimate a time series model of energy demand in the industrial sector with an asymmetric response to energy prices. Including the asymmetric response to energy prices in the model strengthens robustness of the cointegration relationship and reduces the variation of the estimated coefficients across the estimating methods. We find that rising energy prices have a larger impact on energy demand than falling energy prices, with the largest impact occurring when energy prices rise to new highs. The estimation results are partially improved when using gross output rather than value added as a measure of production. Using single equation methods to estimate the asymmetric response model, the elasticity of gross output ranged from 1.05 to 1.09 and the elasticity of price-rise ranged from -0.48 to -0.56, which is similar to the results of international studies.

• The Journal of Fisheries Business Administration
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• v.41 no.3
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• pp.59-78
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• 2010

This paper tries to apply the asymmetrical price transmission(APT) behavior observed in the agricultural industry to supply chains of the domestic fishery industry by a statistical manner. The fore mentioned asymmetrical price transmission refers to when price movements in the later stage of the supply chain do not move in a normal or symmetrical manner corresponding to price movements in the earlier stage of the supply chain. Therefore, when the earlier stage price increase and the later stage price increases to a larger degree, it is called positive(+) asymmetry and the opposite behavior is called negative(-) asymmetry. The study examines the data from domestic producers of three fresh fish types, hairtail, mackerel, and cuttlefish, and tries to examine the price asymmetry between the producer or farm, wholesaler, and retail prices via an APT test utilizing unit root, cointegration, and error correction model. The study found, hairtail wholesale and retail pricing bas a negative asymmetric relationship while mackerel has a negative asymmetric pricing relationship at the producer and retail levels of the supply chain. In the case of cuttlefish, all levels of the supply chain showed negative asymmetrical behavior in the supply chain price transmission, meaning the earlier stage price changes are more rapidly and greatly inputted in the later stage of the supply chain pricing. We believe that the reason why the analysis results show negative price asymmetry is due to the uniqueness of fishery products having an important variable such as freshness. If price increases are greater and quicker than price decreases, then consumer demand, which is sensitive to price increases will decrease and subsequently result in the increase of inventory levels, reducing profits for retailers. Also, frozen hairtail, mackerel, and cuttlefish will act as substitute goods to fresh fishery products. Therefore, fresh fishery products have a high demand of price elasticity. When prices increase, demand quickly decreases. Therefore the profit of wholesalers and retailers to decrease, I think this is the main reason of APT in the supply chain of Korea' s fisheries industry.

• Journal of Korea Port Economic Association
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• v.34 no.4
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• pp.181-190
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• 2018

The goal of this study is empirically to investigate the asymmetric relationship between two variables using the dry cargo freight rates and raw material price data from January 2012 to May 2018. First, we estimate the asymmetry of macroeconomic indicators of commodity prices by using a two - step threshold cointegration test. Second, the asymmetric relation test of the trade balance of existing commodity price changes is tested by bypassing to the high frequency dry cargo freight rate index. As a result of the estimation, in contrast to the existing linear analysis, each boundary value for the lower limit and the upper limit has different asymmetry. This implies that the period of fluctuation of the sudden residual that causes irregular rate of return fluctuations does not establish a long term equilibrium relationship between the raw material price and the dry cargo freight rate. Therefore, in order to consider the sudden price change in the analysis, it is necessary to include the band of inaction that controls the irregular volatility, which is consistent with the asymmetry hypothesis.

• Environmental and Resource Economics Review
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• v.22 no.4
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• pp.671-689
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• 2013

Transmission mechanisms of volatility between two crude oil markets (WTI and Brent markets) have drawn the attention of numerous academics and practitioners because they both play crucial roles in portfolio and risk management in crude oil markets. In this context, we examined the volatility linkages between two representative crude oil markets using a VECM and an asymmetric bivariate GARCH model. First, looking at the return transmission through the VECM test, we found a long-run equilibrium and bidirectional relationship between two crude oil markets. However, the estimation results of the GARCH-BEKK model suggest that there is unidirectional volatility spillover from the WTI market to the Brent market, implying that the WTI market tends to exert influence over the Brent market and not vice versa. Regarding asymmetric volatility transmission, we also found that bad news volatility in the WTI market increases the volatility of the Brent market. Thus, WTI information is transmitted into the Brent market, indicating that the prices of the WTI market seem to lead the prices of the Brent market.

• Environmental and Resource Economics Review
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• v.17 no.4
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• pp.813-843
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• 2008

This paper investigates the presence of long-run and short-run price asymmetries in weekly gasoline prices from January 1997 to July 2008. In accordance with distribution channels, wholesale and retail stages are analyzed separately. An approach based on TAR and M-TAR cointegration tests, which entail matching asymmetric ECMs, is employed. For wholesale prices, asymmetries in the links with crude oil prices and exchange rates are found for both ECMs in the long-run and short-run. Exchange rates appear to play more significant role than crude oil prices in explaining the short-run price asymmetry. The rise in crude oil prices or exchange rates has statistically significant major impact on the increase of wholesale prices on the second week, not immediately as expected in the concept of 'rockets and feathers'. And asymmetrically, the fall does not have any statistically significant effect on the same period. The finding seems to be somewhat unusual. However, for retail prices, asymmetry m connection with wholesale prices is only revealed in the long-run. A symmetric price adjustment can be assumed in the short-run. Contrary to the long-run asymmetry found in the wholesale stage, in the retail stage, the speed of adjustment for negative deviations toward long-run equilibrium is faster than for positive ones, which is a phenomenon not favorable to consumers.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.9
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• pp.165-176
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• 2021

The paper has used the Solow-Swan growth model to analyze the long-term impact of credit market development and stock market development on economic growth in Asia from 2000 to 2019. The empirical model is performed with panel cointegration analysis by Common Correlated Effects (CCE) method with cross-sectional dependencies. The results find that there exists a cointegration relationship among stock market, credit market development, and economic growth. These results also show that financial structure improves the exact impact of financial development on economic growth, namely the opposite effect of stock market development and credit market development. Moreover, the Granger causality test reveals a bi-directional relationship between credit market development and economic growth, while only unidirectional causality from stock market development to economic growth for the whole group panel. And it is different for a specific country, according to Kónya's test. The view of the new structuralism does not apply in the Asian financial system when we estimate the Nonlinear Autoregressive Distributed Lag model (NARDL) to analyze the asymmetric relationship between financial structure and economic growth. On the whole, policymakers can draw on the findings to provide policy implications to improve their country's financial system as well as pursue the goal of sustainable economic growth.