Multivariate Granger causality between macro variables and KSE 100 index: evidence from Johansen cointegration and Toda &amp; Yamamoto causality

Ahmed, Rizwan Raheem; Vveinhardt, Jolita; Štreimikienė, Dalia; Fayyaz, Majid

doi:10.1080/1331677x.2017.1340176

Cited by 10 publications

(8 citation statements)

References 78 publications

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“…The core concept behind cointegration is to see if there is long-run relationship between the movements of variables over a period of time. In presence of long-run interrelation between the variables implies that two variable's movement is mutually influenced by movement of each other's variable (Dwyer, 2015;Ahmed et al, 2017). In following example, the cointegration is used to determine if the money demand function's movements have mutual interrelation with the other macroeconomic indicators.…”

Section: Co-integrationmentioning

confidence: 99%

“…Granger Causality is a statistical method to approach to determine causality between the variables of the time series even when there is unit root in the data. The core concept behind the Granger causality is to identify the patterns of relationship between the variables in the data, and then determine causality of the variables (Ahmed et al, 2017). The Granger Causality is somehow based on the cause-and-effect idea; but is not entirely related to this.…”

Section: Granger-causalitymentioning

confidence: 99%

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Demand for Money Function in Case of Philippines: An Empirical Analysis

Kerdpitak¹

2020

RWE

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An effective formulation of monetary policy provides an empirical and coherent model of money related with demand. In order for the monetary authorities to understand the demand for the purpose of money function, the steadiness of money demand is important as it leads towards an application of efficient monetary policy. In order to examine the stability of money demand function of Philippines, following study was conducted with broad money, real asset price index, GDP deflator, real GDP, long-term interest rate and short-term interest rate. For empirical investigation, unit root test, cointegration, and Granger-Causality tests were used. However, the findings of the cointegration suggests that cointegration reveals there is presence of linear combinations, and results shows that there are four cointegrating equations present. Therefore, it is evident that there are at least 4 cointegrating relations between the variables. Hence, some of macroeconomic indicators can be used to predict the broad money due to presence of vector. However, the Granger-Causality shows that no macroeconomic variable granger cause broad money (M1). Therefore, the selected macroeconomic indictors RS, LS, CPI, GDP deflator, RGDP and AP/P cannot be used to predict the variation in the broad money (M1) in case of Philippines. This means the money demand function in Philippines is not stable, and for this purpose further investigation is suggested by increasing sample size and time window in quarterly or semi-annually.

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Section: Co-integrationmentioning

confidence: 99%

Section: Granger-causalitymentioning

confidence: 99%

Demand for Money Function in Case of Philippines: An Empirical Analysis

Kerdpitak¹

2020

RWE

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“…This analysis allows us to investigate causation and direction of causality with an improved Wald approach (Toda & Yamamoto, 1995). This approach could be used regardless of the cointegration (Ahmed, Veinhardt, Streimikiene, & Fayyaz, 2017). We add in m additional lags of each of the variables into each of the equations [following Giles (2011)] and Granger non-causality test results (52 V.A.R.…”

Section: Toda and Yamamoto Wald Causality Technique -Finalise Var mentioning

confidence: 99%

Self-employment and unemployment relationship in Romania – Insights by age, education and gender

Grigorescu

Pîrciog

Lincaru

2019

Economic Research-Ekonomska Istraživanja

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We check on the short term if self-employment in Romania influences unemployment and vice versa. Age, education and gender characteristics treat both variables, and self-employment considers both cases with and without employees. The objective is to look at the job creation and unemployment reduction in quarterly variation during the 1999Q1-2017Q3 period. On autoregressive models, we apply the Toda and Yamamoto (1995) procedure, detailed by Giles (2011), to assess for Granger Causality. We found for unemployment rates a push effect in the self-employment rate for adults and youth with low education level to self-employment without employees' rate for adults and self-employment with employees' rate for old adults. We establish a 'Schumpeter' effect for the adult with a low level of education self-employment to unemployment, for adults' males with tertiary education and selfemployed, and older adults self-employed without employees to unemployment. We conclude that unemployment work as an inclusion mechanism for some vulnerable groups but inefficient for others. Self-employment with employees is less diversified, indicating a high-risk aversion and low start-up effect. In general, the labour market presents a unidirectional flexibility effect.

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“…Since PSX stages a vital role for the expansion of the country, researchers in the past have employed various methods to examine the impact of macroeconomic variables on Pakistan stock market (see e.g. Nishat & Shaheen, 2004;Sohail & Zakir, 2010;Shahbaz, 2013;Ahmed, Vveinhardt, Streimikiene, & Fayyaz, 2017). However, many studies have adopted network science theories to analyse a complex system such as stock market.…”

Section: Introductionmentioning

confidence: 99%

Network Analysis of Pakistan Stock Market During the Turbulence of Economic Crisis

Memon

Yao

Aslam

et al. 2019

Business, Management and Education

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Purpose -the purpose of this study is to analyse the impact of the recent economic crisis on the network topology structure of Pakistan stock market. Since stock market is considered a core financial market for the development of an economy, it is often used as benchmark to measure a country`s progress. Policymakers often forecast tendency of share prices, that is dependent on several foreign and local macroeconomic factors. Therefore, the aim of this study is to investigate how rising inflation, higher interest rates, and trade and budgetary deficits affect the network structure of blue-chip 96 companies listed on the Karachi stock exchange (KSE-100) index of Pakistan stock market.Research methodology -this study follows the methodology proposed by Mantegna and Stanley and uses cross-correlation in the daily closing price of KSE 100 Index companies to compute Minimum spanning tree (MST) structures. Additionally, we also apply time-varying topological property of average tree length to extract dynamic features of the MST networks.Findings -we construct eight monthly MSTs that show the instability of the network structure and significant differences in the topological characteristics due to economic crisis of Pakistan. Furthermore, the time-varying topological property of average tree length reveals contraction of the networks due to tight correlation among stocks.Research limitations -this study focuses on correlation-based network construction of MST. The scope of the study can be widened by constructing partial correlation-based MSTs and comparison of different networks structures accordingly.Practical implications -the network properties and findings of this paper will help policymakers and regulators in setting right policies, regulatory framework, and risk management for the stock market.Originality/Value -no previous studies have performed MST based network analysis examining macroeconomic events. Therefore, we fill the research gap and thoroughly analyse structural change and dynamics of Pakistan stock market during the turbulence of current economic crisis of Pakistan.

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Multivariate Granger causality between macro variables and KSE 100 index: evidence from Johansen cointegration and Toda & Yamamoto causality

Cited by 10 publications

References 78 publications

Demand for Money Function in Case of Philippines: An Empirical Analysis

Demand for Money Function in Case of Philippines: An Empirical Analysis

Self-employment and unemployment relationship in Romania – Insights by age, education and gender

Network Analysis of Pakistan Stock Market During the Turbulence of Economic Crisis

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