A panel cointegration analysis of the demand for oil in the Middle East

This article applies recently developed panel unit root and panel cointegration techniques to estimate the long-run income and price elasticities for oil in the Middle East. The results for the panel indicate that demand for oil is highly price inelastic and slightly income elastic in the Middle East. There is considerable variation in the results for the income variable across countries, with the coefficient on the income variable statistically insignificant for several countries. The coefficient on the price variable is statistically significant in all cases with the expected sign and the price elasticity is uniformly low. While the results for the income variable differ across countries, the results for the panel as a whole suggest that the demand for oil in the Middle East is being driven largely by strong economic growth, while consumers are largely insensitive to price changes.

What explains dissent on the High Court of Australia? An empirical assessment using a cointegration and error correction approach

This article examines the factors influencing the annual dissent rate on the High Court of Australia from its first full year of operation in 1904 up to 2001 within a cointegration and error correction framework. We hypothesize that institutional factors, socioeconomic complexity, and leadership style explain variations in the dissent rate on the High Court of Australia over time. The institutional factors that we consider are the Court's caseload, whether it had discretion to select the cases it hears, and whether it was a final court of appeal. To measure socioeconomic complexity we use the divorce rate, urbanization rate, and real GDP per capita. Our main finding is that in the long run and short run, caseload and real income are the main factors influencing dissent. We find that a 1 percent increase in caseload and real income reduce the dissent rate on the High Court of Australia by 0.3 percent and 0.6 percent, respectively, holding other factors constant.

Energy consumption and real GDP in G7 countries : new evidence from panel cointegration with structural breaks

This paper examines the relationship between capital formation, energy consumption and real GDP in a panel of G7 countries using panel unit root, panel cointegration, Granger causality and long-run structural estimation. We find that capital formation, energy consumption and real GDP are cointegrated and that capital formation and energy consumption Granger cause real GDP positively in the long run. We find that a 1% increase in energy consumption increases real GDP by 0.12–0.39%, while a 1% increase in capital formation increases real GDP by 0.1–0.28%.

Panel data, cointegration, causality and Wagner's law : empirical evidence from Chinese provinces

This paper tests Wagner's law of increasing state activity using panels of Chinese provinces. The paper's main methodological contribution is in that we employ for the first time in the literature on Wagner's law a panel unit root, panel cointegration and Granger causality testing approach. Overall, we find mixed evidence in support of Wagner's law for China's central and western provinces, but no support for Wagner's law for the full panel of provinces or for the panel of China's eastern provinces.

Dead man walking : an empirical reassessment of the deterrent effect of capital punishment using the bounds testing approach to cointegration

This paper empirically estimates a murder supply equation for the United States from 1965 to 2001 within a cointegration and error correction framework. Our findings suggest that any support for the deterrence hypothesis is sensitive to the inclusion of variables for the effects of guns and other crimes. In the long run we find that real income and the conditional probability of receiving the death sentence are the main factors explaining variations in the homicide rate. In the short run the aggravated assault rate and robbery rate are the most important determinants of the homicide rate.

Determinants of female fertility in Taiwan, 1966–2001 : empirical evidence from cointegration and variance decomposition analysis

This study investigates the determinants of the fertility rate in Taiwan over the period 1966–2001. Consistent with theory, the key explanatory variables in Taiwan's fertility model are real income, infant mortality rate, female education and female labor force participation rate. The test for cointegration is based on the recently developed bounds testing procedure while the long-run and short-run elasticities are based on the autoregressive distributed lag model. Among our key results, female education and female labor force participation rate are found to be the key determinants of fertility in Taiwan in the long run. The variance decom-position analysis indicates that in the long run approximately 45percent of the variation in fertility is explained by the combined impact of female labor force participation, mortality and income, implying that socioeconomic development played an important role in the fertility transition in Taiwan. This result is consistent with the traditional structural hypothesis.

Savings behaviour in Fiji : an empirical assessment using the ARDL approach to cointegration

Purpose – This paper aims to delineate the short- and long-run relationships between savings, real interest rate, income, current account deficits (CADs) and age dependency ratio in Fiji using cointegration and error correction models over the period 1968-2000.

Design/methodology/approach – The recently developed bounds testing approach to cointegration is used, which is applicable irrespective of whether the underlying variables are integrated of order one or order zero. Given the small sample size in this study, appropriate critical values were extracted from Narayan. To estimate the short- and long-run elasticities, the autoregressive distributed-lag model is used.

Findings – In the short- and long-run: a 1 per cent increase in growth rate increases savings by over 0.07 and 0.5 per cent, respectively; a 1 per cent increase in the CAD reduces savings rate by 0.01 and 0.02 per cent, respectively; and the negative coefficient on the real interest rate implies that the income effect dominates the substitution effect, while in the short-run the total effect of the real interest rate is positive, implying that the substitution effect dominates the income effect.

Originality/value – This paper makes the first attempt at estimating the savings function for the Fiji Islands. Given that Fiji's capital market is poorly developed, the empirical findings here have direct policy relevance.

Japan's fertility transition : empirical evidence from the bounds testing approach to cointegration

This study investigates the determinants of the fertility rate in Japan over the 1950–2000 period. We use, for the first time in the fertility literature, the bounds testing approach to cointegration. Amongst our key results, we find that, in both the short-run and long-run, the use of contraceptives and abortion have significantly contributed to the fertility decline in Japan. We also find statistically significant evidence that increasing age at marriage in Japan and increasing education level of women have contributed negatively to the fertility transition.

Evidence on PPP from a cointegration test with multiple structural breaks

Despite a plethora of studies on purchasing power parity (PPP), those that take a cointegration approach have found mixed evidence on PPP. The goal of this article is to obviate existing tensions in the PPP literature by using a simple test for cointegration between nominal exchange rate and relative prices that accounts for multiple structural breaks. We find that for 14 out of 15 OECD countries, there is evidence of a cointegration relationship between nominal exchange rate and relative prices at the 5% level. Only for Japan, we find evidence for cointegration at the 2.5% level. These results suggest overwhelming evidence of support for PPP for the OECD countries.

Determinants of tourist expenditure in Fiji : a cointegration approach

Tourism is Fiji's largest industry in terms of foreign exchange earnings and employment creation. The industry earns around F$600 million per annum in foreign exchange, employs around 40,000 people, and tourist expenditure per capita is valued at around F$671. On the basis of this contribution, the industry is seen as a catalyst for economic development in Fiji; hence, it is imperative to understand the behavior of the industry. This article focuses on examining the determinants of tourist expenditure in Fiji. Using cointegration analysis and error correction models, the article finds that in the long run, real GDP in the country of origin impacts tourist spending in Fiji positively while prices and transport costs (airfares) have a negative effect. In the short run, coups d'êtat impact tourist expenditure negatively. It is envisaged that these results will help Fiji's policy makers and tourism industry stakeholders to understand the industry better.

Why do Australians, New Zealanders and Americans travel to Fiji? Evidence from cointegration, unit roots and parameter stability tests

The aim of this study was to estimate the demand for Fiji’s tourism from its three main source markets—Australia, New Zealand, and the US—using the bounds testing approach to cointegration. Our main finding was that visitor arrivals to Fiji and its key determinants are cointegrated over the 1970–2000 period. We then used the autoregressive distributed lag model to estimate short-run and long-run elasticities and found that income in origin countries, transport costs, and prices were significant determinants of Fiji’s tourism demand. We also found that coups negatively impact visitor arrivals from all markets. In testing for parameter stability, we established that the series were integrated of order one in the presence of a structural break. We then used the Hansen test for parameter stability and found that the parameters of our long-run model are stable over time.

The relationship between the real exchange rate and balance of payments: empirical evidence for China from cointegration and causality testing

This article examines the relationship between the renminbi real exchange rate and China's foreign exchange reserves using cointegration and Granger causality testing. The main findings are that in the long run foreign exchange reserves Granger cause the real exchange rate. Meanwhile, in the short run there is unidirectional Granger causality running from foreign exchange reserves to the real exchange rate.