1. |
- Byusa, Vincent
(author)
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Money demand, real effective exchange rates, and uncertainty
- 2024
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Doctoral thesis (other academic/artistic)abstract
- This PhD thesis consists of three distinct but interrelated research papers that collectively explore critical aspects of money demand, real effective exchange rates behavior, and uncertainty in different contexts. The first paper examines the nature of money demand in Rwanda and the rationale for the country’s monetary policy shift to inflation targeting in 2019, providing evidence of long-run money demand stability despite uncertainties affecting the global economy, and challenging the view that monetary aggregates should have no role in Rwanda’s monetary policy. The second paper investigates the complex effects of grant revenues on real effective exchange rates in Sub-Saharan African countries, revealing the outcomes of short-run depreciation and long-run appreciation. The last paper assesses how exchange rate regime choice affects the degree and persistence of real effective exchange rate misalignments, showing that, relative to a floating exchange rate regime, fixed and intermediate regimes effectively limit misalignment size, although with higher persistence. Together, these papers offer nuanced insights into the interaction between the money market, uncertainty, external grants, and exchange rate regime, underscoring the need for careful policy consideration to ensure economic stability and competitive currency values.
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2. |
- Habibi, Arash
(author)
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International trade, global value chains and sustainable development
- 2024
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Doctoral thesis (other academic/artistic)abstract
- This thesis consists of three articles that explore the challenges of international trade, focusing on environmental (article 1), social (article 2), and macroeconomic considerations (article 3). Articles 1 and 3 delve deeper into the complexities of international trade due to globalization. Articles 1 and 2 address how international trade interacts with crucial aspects of sustainable development, namely carbon pricing and gender equality. Overall the thesis dives into sectoral heterogenities and highlights the need for policies that consider sectoral aspects due to the distinct characteristics of each sector.The first article examines the impact of carbon pricing on carbon leakage which is a counteractive mechanism for the effectiveness of carbon pricing. The study confirms that fuel excise taxes, rather than carbon taxes or emission trading schemes, are the primary drivers of carbon leakage. Structural gravity estimates show that carbon pricing based on carbon taxes and emission trading schemes (ETS) does not cause carbon leakage, but fuel excise taxes and ETS exemptions have a significant impact. This finding is supported when looking at carbon prices in different sectors. Thus, policymakers should consider adjusting fuel excise taxes accordingly.The second article delves into the effectiveness of anti-discrimination references in trade agreements on promoting gender equality in developing countries. The research demonstrates that the location and language of these references significantly influence their impact. The results indicate that such references are more likely to improve gender-related labor conditions when they appear in legally binding sections and are associated with hard modal verbs like “shall” or “should”, in contrast to those that appear in aspirational sections and are associated with softer modal verbs like “may” or “might”. Furthermore, the results highlight a significant effect of these references in the agriculture sector, which hosts most of the female labor force in developing countries.Finally, the third article investigates the non-linear relationship between exchange rates and industrial production in various sectors of the U.S. economy. Employing a non-linear autoregressive distributed lags model, the research reveals short-run and long-run non-linear effects of exchange rate fluctuations on the production of non-energy materials, durable manufacturing, consumer goods, and business equipment. These findings underscore the role of import contents of exports on sectoral production.
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3. |
- Hacker,, R Scott, 1964-, et al.
(author)
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A Bootstrap Test for Causality with Endogenous Lag Length Choice : theory and application in finance
- 2010
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Reports (other academic/artistic)abstract
- Granger causality tests have become among the most popular empirical applications with time series data. Several new tests have been developed in the literature that can deal with different data generating processes. In all existing theoretical papers it is assumed that the lag length is known a priori. However, in applied research the lag length has to be selected before testing for causality. This paper suggests that in investigating the effectiveness of various Granger causality testing methodologies, including those using bootstrapping, the lag length choice should be endogenized, by which we mean the data-driven preselection of lag length should be taken into account. We provide and accordingly evaluate a Granger-causality bootstrap test which may be used with data that may or may not be integrated, and compare the performance of this test to that for the analogous asymptotic test. The suggested bootstrap test performs well and appears to be also robust to ARCH effects that usually characterize the financial data. This test is applied to testing the causal impact of the US financial market on the market of the United Arab Emirates.
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4. |
- Hacker, R Scott, 1964-, et al.
(author)
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An Investigation of the Causal Relations between Exchange Rates and Interest Rates Differentials using Wavelets
- 2010
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Reports (other academic/artistic)abstract
- Monthly and quarterly data for the spot exchange rate of the Swedish Krona against major currencies have been used in this paper to investigate the causality in a Granger sense at different time scales between the spot exchange rate and the nominal interest rate differential by using wavelet analysis. Impulse response functions are also utilized to examine the signs of how one of these variables affects the other over time. One key empirical finding from the causality tests is that there is only substantial evidence of a causal relationship in the long run between the two variables. When using monthly data, this is true in both directions. When considering impulse responses on how the interest rate differential affects the exchange rate, there appears to be some evidence of more negative relationships at the shorter time scales and more positive relationships at the longer time scales.
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5. |
- Hacker, R. Scott, 1964-, et al.
(author)
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Commonalities in the levels and movements of the inflation rates among countries in the East African Community
- 2022
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In: Emerging markets finance & trade. - : Taylor & Francis. - 1540-496X .- 1558-0938. ; 58:9, s. 2493-2504
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Journal article (peer-reviewed)abstract
- In this study, we investigate the degree to which inflation rates and their movements for countries in the East African Community (EAC) have become more similar, which is an important issue for the EAC’s goal of creating a common currency. We find that the five EAC countries (excluding South Sudan) have had a tendency to converge in their inflation-rate levels, and we show through an inflation-movement similarity index that inflation-rate changes between consecutive months trended toward becoming more similar between 1995 and 2018 for most country pairs from these EAC countries. We also find that the inflation correlations between these EAC countries seem favorable for monetary union when comparing these correlations to analogous ones for the 2001 European Monetary Union countries prior to the creation of the euro and to analogous ones for the West African Economic Monetary Union countries.
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6. |
- Hacker, R. Scott, 1964-, et al.
(author)
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Model selection in time series analysis : using information criteria as an alternative to hypothesis testing
- 2022
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In: Journal of economic studies. - : Emerald Group Publishing Limited. - 0144-3585 .- 1758-7387. ; 49:6, s. 1055-1075
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Journal article (peer-reviewed)abstract
- Purpose: The issue of model selection in applied research is of vital importance. Since the true model in such research is not known, which model should be used from among various potential ones is an empirical question. There might exist several competitive models. A typical approach to dealing with this is classic hypothesis testing using an arbitrarily chosen significance level based on the underlying assumption that a true null hypothesis exists. In this paper, the authors investigate how successful the traditional hypothesis testing approach is in determining the correct model for different data generating processes using time series data. An alternative approach based on more formal model selection techniques using an information criterion or cross-validation is also investigated.Design/methodology/approach: Monte Carlo simulation experiments on various generating processes are used to look at the response surfaces resulting from hypothesis testing and response surfaces resulting from model selection based on minimizing an information criterion or the leave-one-out cross-validation prediction error.Findings: The authors find that the minimization of an information criterion can work well for model selection in a time series environment, often performing better than hypothesis-testing strategies. In such an environment, the use of an information criterion can help reduce the number of models for consideration, but the authors recommend the use of other methods also, including hypothesis testing, to determine the appropriateness of a model.Originality/value: This paper provides an alternative approach for selecting the best potential model among many for time series data. It demonstrates how minimizing an information criterion can be useful for model selection in a time-series environment in comparison to some standard hypothesis testing strategies.
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7. |
- Hacker, R Scott, 1964-, et al.
(author)
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Optimal lag-length choice in stable and unstable VAR models under situations of homoscedasticity and ARCH
- 2008
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In: Journal of Applied Statistics. - : Routledge. - 0266-4763 .- 1360-0532. ; 35:6, s. 601-615
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Journal article (peer-reviewed)abstract
- The performance of different information criteria - namely Akaike, corrected Akaike (AICC), Schwarz-Bayesian (SBC), and Hannan-Quinn - is investigated so as to choose the optimal lag length in stable and unstable vector autoregressive (VAR) models both when autoregressive conditional heteroscedasticity (ARCH) is present and when it is not. The investigation covers both large and small sample sizes. The Monte Carlo simulation results show that SBC has relatively better performance in lag-choice accuracy in many situations. It is also generally the least sensitive to ARCH regardless of stability or instability of the VAR model, especially in large sample sizes. These appealing properties of SBC make it the optimal criterion for choosing lag length in many situations, especially in the case of financial data, which are usually characterized by occasional periods of high volatility. SBC also has the best forecasting abilities in the majority of situations in which we vary sample size, stability, variance structure (ARCH or not), and forecast horizon (one period or five). frequently, AICC also has good lag-choosing and forecasting properties. However, when ARCH is present, the five-period forecast performance of all criteria in all situations worsens.
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8. |
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9. |
- Hacker, R Scott, 1964-, et al.
(author)
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The Properties of Procedures Dealing with Uncertainty about Intercept and Deterministic Trend in Unit Root Testing
- 2010
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Reports (other academic/artistic)abstract
- The classic Dickey-Fuller unit-root test can be applied using three different equations, depending upon the inclusion of a constant and/or a time trend in the regression equation. This paper investigates the size and power properties of a unit-root testing strategy outlined in Enders (2004), which allows for repeated testing of the unit root with the three equations depending on the significance of various parameters in the equations. This strategy is similar to strategies suggested by others for unit root testing. Our Monte Carlo simulation experiments show that serious mass significance problems prevail when using the strategy suggested by Enders. Excluding the possibility of unrealistic outcomes and using a priori information on whether there is a trend in the underlying time series, as suggested by Elder and Kennedy (2001), reduces the mass significance problem for the unit root test and improves power for that test. Subsequent testing for whether a trend exists is seriously affected by testing for the unit root first, however.
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10. |
- Hacker, R Scott, 1964-, et al.
(author)
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The Relationship between Exchange Rates and Interest Rate Differentials : a Wavelet Approach
- 2010
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Reports (other academic/artistic)abstract
- This paper uses wavelet analysis to investigate the relationship between the spot exchange rate and the interest rate differential for seven pairs of countries, with a small country, Sweden, included in each of the cases. The key empirical results show that there tends to be a negative relationship between the spot exchange rate (domestic-currency price of foreign currency) and the nominal interest rate differential (approximately the domestic interest rate minus the foreign interest rate) at the shortest time scales, while a positive relationship is shown at the longest time scales. This indicates that among models of exchange rate determination using the asset approach, the sticky-price models are supported in the short-run while in the long-run the flexible-price models appear to better explain the sign of the relationship.
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11. |
- Hatemi-J, Abdulnasser, et al.
(author)
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Can the LR Test Be Helpful in Choosing the Otpimal Lag Order in the VAR Model When Information Criteria Suggest Different Lag Orders?
- 2009
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In: Applied Economics. - : Informa UK Limited. - 0003-6846 .- 1466-4283. ; 41:9, s. 1121-1125
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Journal article (peer-reviewed)abstract
- The objective of this simulation study is to investigate whether the likelihood ratio (LR) test can pick the optimal lag order in the vector autoregressive model when the most applied information criteria (i.e. vector Schwarz--Bayesian, SBC and vector Hannan-Quinn, HQC) suggest two different lag orders. This lag-choosing procedure has been suggested by Hatemi-J (1999). The results based on the Monte Carlo simulations show that combining the LR test with SBC and HQC causes a substantial increase in the success rate of choosing the optimal lag order compared to cases when only SBC or HQC are used. This appears to be the case irrespective of homoscedasticity or conditional heteroscedasticity properties of the error-term in small sample sizes. This improvement in choosing the right lag order also tends to improve the forecasting capability of the underlying model.
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12. |
- Karlsson, Hyunjoo Kim, et al.
(author)
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Revisiting the nexus of the financial development and economic development : new international evidence using a wavelet approach
- 2021
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In: Empirical Economics. - : Springer. - 0377-7332 .- 1435-8921. ; 60:5, s. 2323-2350
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Journal article (peer-reviewed)abstract
- This study investigates Granger causality and instantaneous causality between financial development and economic development for 76 economies of four different income levels. The main novelty of the study is that it fills a gap in existing studies on the relationship between financial development and economic development by employing wavelet analysis, which enables us to study the varying time-scale relationships of the variables. Among the findings is that at the scale of 4-8 years it is more common for financial development and economic development to support each other once a country achieves at least lower-middle-income status.
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13. |
- Ruranga, Charles, et al.
(author)
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The determinants of households having savings accounts in Rwanda
- 2020
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In: Rwanda Journal of Social Sciences, Humanities and Business. - : University of Rwanda. - 2708-759X .- 2708-7603. ; 1:1, s. 6-19
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Journal article (peer-reviewed)abstract
- This paper analyses the determinants of Rwandan households having savings accounts using Integrated Household Living Conditions Survey (IHLCS) data of 2010/11. After a background discussion and literature review an empirical analysis is presented with different variables adopted and analysed as determinants of household’s head having savings accounts. Poverty level, age, gender, residential area and level education of household head (literate or not) were considered as independent variables of the study. Findings from the estimations of logit models indicate the likelihood of a household having a savings account is positively and significantly related to each of the following: non-poor status of the household,the household residing in an urban area, the household head being male, and the household head being literate. Having the household head be literate tends to be more important for younger household heads and for non-poor households. The proportion of households having money in a savings account more than doubled over the decade between the IHLCS 2000/2001 survey and the IHLCS 2010/2011 survey. Government policies on savings and poverty reduction may explain the trend of increased cash balances in saving accounts.
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14. |
- Umulisa, Yvonne
(author)
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The prospects for the East African Monetary Union : An empirical analysis
- 2020
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Doctoral thesis (other academic/artistic)abstract
- This thesis operationalizes the theory of optimum currency areas, which describes the preconditions (criteria) that countries must fulfill prior to forming a monetary union. In light of the different dimensions of the theory that are examined, the empirical findings from the four papers in this thesis seem to favor forming a monetary union among East African Community (EAC) partner states. Hence, the findings are important for EAC policymakers, as they decided to participate in a monetary union by 2024.The first paper uses a gravity model to determine to what extent membership in the EAC has affected intraregional trade. One common argument is that if there is not much trade between EAC member countries, there is no interest in forming a monetary union. The paper implements the fixed effect filter estimator, which uses a two-step approach and has better performance than the standard fixed effect estimator. The empirical findings in this paper show that EAC membership has a positive and significant effect on intra-trade among member countries. The second paper investigates business cycle synchronization and core-periphery patterns. Greater synchronization is needed for an easy transition towards monetary union. Unlike previous studies, this paper uses wavelet decomposition, a powerful tool for analyzing the comovement of business cycles. It is found that business cycle synchronization is more significant for Kenya, Tanzania, and Uganda, the countries that also form the core of the East African Monetary Union.The link between business cycle synchronization and trade intensity among EAC countries is established in the third paper. This analysis is relevant, as it is associated with the hypothesis of the endogeneity of the optimum currency area criteria, whereby a monetary union among member countries is predicted to increase trade among them, which, in turn, may lead to more synchronized business cycles. The empirical findings show that trade intensity among the considered countries has indeed led to more synchronized business cycles, suggesting that monetary union among EAC countries may be beneficial.Moreover, the fourth and last paper uses a similarity index and a rank correlation measure, Kendall’s tau, to investigate the movement of inflation rates among EAC countries. The results show that changes in inflation have become more similar over time and that there are high correlations between EAC countries. This paper also investigates the convergence in inflation rate levels among the EAC countries. It is found that these levels have tendency to converge. These findings favor the formation of a monetary union among these countries.
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