Abbas Valadkhani

Macroeconomics, Energy Economics, Econometrics

PhD
23.27

Publications

  • Source
    Abbas Valadkhani · Russell Smyth
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    ABSTRACT: This paper examines the long-and short-run relationship between Australian house and unit prices across all capital cities over the period December 1995 to June 2015. We find that house and unit prices are cointegrated and, based on the results of Granger causality and generalised impulse responses, that house prices significantly influence unit prices across all cities. However, bi-directional causality (responses) exists only for major capital cities with the exception of Brisbane. We also, for the first time, apply self-excited threshold models to explore the complex interplay between house and unit prices in Australia. We find that when the market for units is self-excited, or bullish, the positive effects of house prices on unit prices are noticeably larger than otherwise. There is a varying degree of herd mentality in the Australian property market with Sydney and Darwin being the most and least " excitable " capital cities, respectively.
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    Abbas Valadkhani · Russell Smyth
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    ABSTRACT: This paper examines whether the relationship between unemployment and output, known as Okun's law, has been stable in the United States (US) in the period since World War II. A feature of our modeling approach is that we employ a Markov switching model in which we allow for both the presence of possible asymmetries within, and across, regimes and for the variance in the error term to switch over time. The extent of within-regime asymmetry is found to be much stronger than across-regime asymmetry. We provide evidence of a weakening of Okun's law since the 1981-1982 recession. We also show that jobless recovery, as witnessed most recently in the aftermath of the global financial crisis (GFC), is not a new phenomenon in the US, but also dates back to the early 1980s recession. We conclude through providing insights into the US jobless recovery and offering suggestions, based on our findings, for reducing the adverse effect of recessions in the future.
    Economic Modelling 07/2015; 50. DOI:10.1016/j.econmod.2015.07.001 · 0.70 Impact Factor
  • Abbas Valadkhani
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    ABSTRACT: This article examines asymmetric size- and sign-dependent effects of the output gap on the US quarterly inflation rate using data from the last half a century (1959Q2-2013Q1). Consistent with previous studies, it is found that the consumer price index is cointegrated with the unit labour cost and the price of oil. A short-run dynamic model is then estimated in which variations in the output gap are divided into three groups: large-positive; large-negative; and small-medium positive/negative. The results provide convincing evidence that only sufficiently large (positive or negative) variations of the output gap can significantly influence inflation. Put otherwise, relatively small to medium changes in the output gap exert no significant impact on inflation and if not separated, they can somewhat obscure the significant effects associated with large variations of the output gap. This study can lead to greater consensus on the inflation-output gap nexus. The findings remain robust despite the use of different measures of output gap and they are consistent with the modern doctrine but with a new caveat: inflation responds to both positive and negative changes in the output gap as long as such variations are of sizable magnitudes.
    Applied Economics 02/2015; 47(33):3525-3539. DOI:10.1080/00036846.2015.1016213 · 0.46 Impact Factor
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    Abbas Valadkhani · Israfil Roshdi · Russell Smyth
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    ABSTRACT: We employ a multicomponent Data Envelopment Analysis (DEA) framework to examine the interplay between economic and energy efficiency for all 29 OECD countries and then classify each country into one of four categories in terms of their relative economic and energy efficiency. In addition to using a broader set of inputs and improved measure of labour compared with prior studies, we make a methodological contribution in that we develop a new complete multi-component DEA measure for examining the efficiency performance of individual countries. Our proposed measure provides an efficiency index, not only at the country level, but also decomposes overall efficiency into economic and energy components. The G7 countries display the worst performance, in terms of CO 2 and energy efficiencies. For the sample as a whole, there is a positive and marginally significant relationship between economic efficiency and energy efficiency. This finding suggests that higher economic and energy efficiencies are not necessarily incompatible goals.
  • Abbas Valadkhani · Andrew Worthington
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    ABSTRACT: This paper presents an alternative framework for modeling the behavior of banks in setting lending and/or saving rates. In a short-run dynamic model, we correct for deviations from the long-run path using three feedback coefficients capturing different disequilibria. This enables us to test for both amount and adjustment asymmetries by considering the size and direction of any deviations. We use this model to examine the relationship between the official cash rate (set by the Reserve Bank of Australia as a monetary policy tool) and the standard variable mortgage rates of Australian Big-4 banks using weekly data from 2001 to 2012. The evidence indicates both types of asymmetries along with synchronized rate-setting behavior. Overall, the banks immediately pass on 120% of any rate rise, but only 85% of any rate cut. Further, when mortgage rates are substantially above the equilibrium path, we find no significant attempt to lower rates, but faster adjustment when rates are below equilibrium values. This finding has important implications for the RBA's monetary policy transmission mechanism and the effectiveness of the expansionary versus contractionary policy.
    Economic Modelling 12/2014; 43:57–66. DOI:10.1016/j.econmod.2014.07.044 · 0.70 Impact Factor
  • Abbas Valadkhani · George Chen · Bernice Kotey
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    ABSTRACT: This paper examines the dynamic asymmetric relationship between changes in the Reserve Bank of Australia's (RBA) cash rate and the interest rate for small business loans using monthly data (1990-2011). The results provide support for the rockets-and-feathers hypothesis with respect to both the amount and adjustment asymmetries. While the RBA's rate rises exert a one-to-one and instantaneous impact on the loan rate, its rate cuts are only slowly and partially passed onto small businesses with a delay of 1-2 months. The results also suggest that the recent global financial crisis increased the cost of borrowing for small businesses in Australia by 2.21 %. These findings indicate that small businesses have limited time to respond to interest rate rises and not provided with the full benefit of interest rate decreases. Addressing this problem should ease the interest rate burden for small businesses and enhance their contribution to the economy.
    Small Business Economics 12/2014; 43(4):945-957. DOI:10.1007/s11187-014-9579-z · 1.80 Impact Factor
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    Abbas Valadkhani · Alperhan Babacan · Parviz Dabir-Alai
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    ABSTRACT: This paper proposes an alternative input–output (IO) price model in which all sectors of the economy are divided into two groups: (1) endogenous non-energy sectors; (2) exogenous but interrelated energy sectors. Using the latest IO table (2009–2010) of the Australian economy, we then used the proposed model to assess the impacts of an increase in 4 different energy prices (i.e. Oil and Gas Extraction; Petroleum and Coal Products; Electricity; and Utility Gas) on production costs of 110 non-energy sectors. We found that energy price rises will increase the production costs in tradable, less-labour intensive manufacturing sectors (such as basic chemical; electricity transmission, distribution; glass and glass products) as well as transport (road; air and space; water and road) and agricultural sub-industries (i.e. forestry; fishing; sheep, grains, dairy, cattle; logging) more than the other sectors. As expected, the service industries were least affected by energy price shocks. The effects of a rise in the prices of Electricity and Utility Gas on production cost of non-energy sectors are significantly less than those of two upstream energy sources (i.e. Oil and Gas Extraction; Petroleum and Coal products).
    Economic Analysis and Policy 11/2014; 44(4). DOI:10.1016/j.eap.2014.11.005
  • Abbas Valadkhani
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    ABSTRACT: This paper examines the way in which output gap influences quarterly inflation during the period 1970q1-2013q1 in Canada, the UK and the US by adopting a Markov regime-switching model. In addition to the regime-dependent effects of the output gap, this study controls for the regime-invariant influences arising from changes in wages, oil prices and the nominal effective exchange rate. An interesting finding of this paper relates to the positive but varying impact of the output gap on inflation. Two significantly different regimes are identified whereby the probability of switching to regime 2 (represented by a relatively high output gap coefficient) peaks markedly and consistently across all three countries only when quarterly changes in inflation become noticeably large and volatile. The cross-country results provide compelling evidence that the coefficient assigned to the output gap rises significantly when the economy experiences sizable perturbations.
    International Review of Economics & Finance 09/2014; 33. DOI:10.1016/j.iref.2014.06.001 · 1.70 Impact Factor
  • Abbas Valadkhani
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    ABSTRACT: This paper examines the dynamic relationship between the price of crude oil and the CPI energy price sub-index in Canada and the U.S. using a Markov-regime switching model and the Bai-Perron sequential method. Since these two series are cointegrated during the sample period (January 1961─June 2013), a short-run dynamic model is thus estimated for each country in which all coefficients and the error-variance terms can freely switch over time between two values prevailing in Regimes 0 and 1. Previous studies indicate that the price of crude oil does not currently affect the aggregate CPI as much as it did in the 1970s. This finding is not disputed in this paper. However, the sequentially-determined-break date as well as time-varying regime-switching probabilities point to two new findings. First, the marginal effects of changes in oil price on consumer energy prices (not the aggregate CPI) have consistently increased and become more instantaneous for both countries after the Western U.S. Energy Crisis of 2000. Second, the speed of adjustment (proxied by different error-correction coefficients) has also risen, particularly for the U.S. Therefore, oil prices exert far more positive and immediate impacts on energy costs in the post- than pre-1999 periods.
    Energy Economics 09/2014; 45. DOI:10.1016/j.eneco.2014.06.015 · 2.54 Impact Factor
  • Viet Le · Abbas Valadkhani
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    ABSTRACT: This paper examines the efficiency performance of exporting versus non-exporting manufacturing small and medium enterprises (SMEs) using the Business Longitudinal Database compiled by the Australian Bureau of Statistics for the period 2005–2006. The results from an analysis of 543 manufacturing SMEs indicate that overall manufacturing SMEs improved their technical efficiency levels over time, particularly the exporting ones nearly reaching 80%. Among firms of the same size and the same narrowly defined industry, we found that the non-exporting SMEs tended to have lower efficiency levels compared to their exporting counterparts. One may attribute these efficiency differences to the inclusion of more exporting firms in the database and/or the better use of production technology by exporting SMEs. This paper calls for a focus on improving SME efficiency performance as an effective way to enhance their success in global export markets by pursuing a number of initiatives/programs already implemented in other OECD countries.
    Economic Analysis and Policy 08/2014; 44(3). DOI:10.1016/j.eap.2014.07.002
  • Amir Moradi-Motlagh · Abbas Valadkhani · Ali Salman Saleh
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    ABSTRACT: The purpose of this article is threefold. First, we measure both technical and scale efficiency of major Australian banks during the period 2006 to 2012 using data envelopment analysis (DEA). Second, the robustness and sensitivity of efficiency scores are tested based on a bootstrap approach. Third, the bootstrap results are employed to examine by how much different scenarios of improving technical efficiency scores can result in cost savings for individual banks. The results indicate a notable difference between the original and bootstrap efficiency estimates. While the conventional DEA results show that more than half of banks are fully technical efficient, the bootstrap results reveal a more accurate account of efficiency disparities from best-practicing banks.
    Applied Economics Letters 07/2014; 22(3):189-194. DOI:10.1080/13504851.2014.932044 · 0.23 Impact Factor
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    Mahmood Mehdiloozad · Israfil Roshdi · Abbas Valadkhani
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    ABSTRACT: Within the framework of the directional distance function, this study scrutinizes the super-efficiency (SE) technique in data envelopment analysis (DEA) to achieve two main objectives. Our primary goal is to propose two, Fractional and Linear, generalized directional super-efficiency (GDSE) measures that completely resolve the crucial infeasibility problem, frequently encountered in the conventional SE measures. As the second objective of our study, we examine the key role of the direction vector in the measurement of SE, and highlight its effects on the SE models’ properties. Furthermore, we demonstrate that our framework encompasses all previous approaches as special cases. Our approach has several advantages over the existing ones in operationalizing the concept of SE. First, our GDSE measures always generate feasible results. Second, they overcome the SE estimation biases caused by the input and output slacks. Third, our proposed measures satisfy several desirable properties such as monotonicity, unit independence and translation invariance. Finally, they are capable of effectively dealing with negative data. Through three numerical examples, we demonstrate that the GDSE measures outperform the existing SE measures when it comes to satisfying all desirable properties.
  • Abbas Valadkhani
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    ABSTRACT: The aim of this paper is to enhance transparency and competition in Australia's mortgage market by examining the behaviour of the mortgage interest rate spread of 39 individual lenders. Using a time-varying probability regime-switching model and monthly data (2000M9–2012M3), we identify two very distinctive regimes: a low mark-up regime (R1) and a high mark-up regime (R2). Without setting any given date a priori, the results from both the regime-switching approach and a sequential search method indicate that the spread exhibits a significant upward shift around early 2008 for all lenders. The estimated switching model controls for the rising wholesale funding costs and changes in global consumer confidence over the sample period. The results show that building societies are generally less inclined to remain in R2 than most banks (particularly foreign subsidiary banks) and some credit unions, and are consequently more likely to offer competitive mortgages to borrowers.
    Journal of International Financial Markets Institutions and Money 07/2014; 31. DOI:10.1016/j.intfin.2014.04.007 · 0.89 Impact Factor
  • Abbas Valadkhani · Alperhan Babacan
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    ABSTRACT: Gross profitability margin (difference between retail and wholesale prices) for unleaded petrol exhibits substantial variations across 108 cities, towns and regional centres in Australia. This paper examines if such variations (averaged during 2007–2012) can be explained by (a) transport costs proxied by the distance between retailers and wholesalers; (b) the size of the retail market; (c) market competition proxied by the number of cars in the vicinity of the retailers; (d) dummy variables capturing other qualitative attributes associated with the retailers’ locations. Three cross-sectional regressions are estimated but only one successfully passes all diagnostic tests. By identifying a number of locations exhibiting excessive profit margins, the results of this paper enhance the efficiency and transparency of petrol pricing in the retail market. It is found that the extent of excessive profiteering in Western Australia (WA) and South Australia (SA) were lower than other Australian states and territories. This important finding can be explained by a strong presence of independent petrol stations in SA and the successful price-monitoring performance of FuelWatch in WA.
    Energy Policy 06/2014; 69:179–188. DOI:10.1016/j.enpol.2014.02.010 · 2.70 Impact Factor
  • Source
    Abbas Valadkhani
  • Amir Arjomandi · Abbas Valadkhani · Martin O’Brien
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    ABSTRACT: In order to analyse the impact of policy reforms on the performance of the banking sector in Iran we present a decomposition of the Hicks–Moorsteen Total Factor Productivity (TFP). This entails a comparison of both the intermediate and operating performances of different types of banks in the pre- and post-reform eras. Our results show that under the intermediation approach, state-owned banks (public banks) were considerably more efficient than private banks in the post-regulation period. In contrast, under the operating approach, private banks were fully technically efficient and mix efficient in both pre and post-reform eras. This paper highlights the importance of analysing performance from multiple perspectives. The findings reflect public banks’ mission to maximise loans to target groups while private banks are motivated more by financial profit.
    Research in International Business and Finance 01/2014; 30:111–125. DOI:10.1016/j.ribaf.2013.06.003
  • Abbas Valadkhani · George Chen
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    ABSTRACT: This paper examines the dynamic and switching effects of volatility spillovers arising from US stock market returns and GDP growth on those of Australia, Canada and the UK. For this purpose, we use quarterly data (1961q1–2013q1) and a constant probability Markov regime switching model. We found that the US stock market volatility significantly affects the stock market volatility of all three countries at least in one of the two specified regimes over time. However, the stock market volatilities in none of the three countries are contemporaneously influenced by the US output volatility even after allowing for two distinct regimes. On the other hand, the US stock market volatility exerts significant influences on the output volatilities of both Australia and the UK. Compared with Australia and the UK, Canada and the US show substantial output volatility co-movements, thereby confirming the close association between the two neighbouring economies through the NAFTA (North American Free Trade Agreement). We conclude that shocks emanating from the US stock market have unequivocal flow-on effects on the output and return volatilities of the other economies.
    International Review of Applied Economics 01/2014; 28(3):323-335. DOI:10.1080/02692171.2013.872085
  • Abbas Valadkhani · Sajid Anwar · Amir Arjomandi
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    ABSTRACT: This paper measures the full extent of downward stickiness in credit card interest rates by testing for the amount and adjustment asymmetries. We found that lenders behave asymmetrically in response to changes in the Reserve Bank of Australia's (RBA) cash rate. The RBA's rate rises are passed on to borrowers much faster than rate cuts and the aggregate credit card interest rate showed a very resilient degree of downward rigidity. Overall, based on the estimated short-run dynamic model, banks immediately pass on 112% of any RBA's rate rises, but only 53.7% of any rate cut. In other words, the short-run effects of rate cuts were not only less than half of the rate rises but also were delayed on average by two months. As far as changes in the credit card interest rate are concerned, an expansionary monetary policy is thus less effective than a contractionary policy.
    Journal of the Asia Pacific Economy 01/2014; 19(1). DOI:10.1080/13547860.2013.803846 · 0.64 Impact Factor
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    Abbas Valadkhani · Sayyed M. Mehdee Araee
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    ABSTRACT: Purpose ‐ The main purpose of this paper is to provide more accurate estimates of Iran's time varying non-accelerating inflation rate of unemployment (NAIRU) than what already exists in the literature. Design/methodology/approach ‐ Using the Kalman filter approach and annual time series data spanning from 1959 to 2008, the paper presents two estimates of the NAIRU for Iran. Findings ‐ The estimated two measures appear to be robust and consistent in terms of their magnitude and pattern, having a more logical upper limit of 11.1 per cent. Irrespective of which of the two models are considered, the results clearly indicate that overall Iran's NAIRU has been on the rise since the 1960s and whenever the unemployment rate lies below the NAIRU, the rate of inflation has exhibited an explosive behaviour. Such a phenomenon was observed in both 1995-1996 and the post 2006 era. Originality/value ‐ In the context of Iran, all previous studies have consistently over-estimated the maximum value of the time varying NAIRU. In these studies, the NAIRU's upper limit ranges from 14 to 20.7 per cent. The paper concludes that such implausible high rates are as a result of the overestimation associated with misspecification errors in their model.
    Journal of Economic Studies 10/2013; 40(5). DOI:10.1108/JES-10-2011-0121
  • Abbas Valadkhani
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    ABSTRACT: This paper examines if the dynamic interplay between the Reserve Bank of Australia's (RBA) cash rate and the standard variable mortgage rates of 23 major lenders is subject to both the amount and adjustment asymmetries. Using weekly data (2000–2012), the cash rate and lending rates are pairwise cointegrated. An asymmetric short-run dynamic model is then estimated in which both the size and sign of disequilibria are taken into account. Significant evidence of the adjustment asymmetry is found among 8 lenders (including all foreign subsidiary banks). This paper also finds that the three largest domestic banks pass on the RBA's official rate rises to borrowers more than they do for rate cuts, affecting the efficacy of expansionary versus contractionary monetary policy.
    Journal of International Financial Markets Institutions and Money 10/2013; 26(1):133–151. DOI:10.1016/j.intfin.2013.05.003 · 0.89 Impact Factor

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