Common nonstationary components of asset prices
ABSTRACT This paper presents a stock-flow consistent macroeconomic model in which financial fragility in firm and household sectors evolves endogenously through the interaction between real and financial sectors. Changes in firms' and households' financial practices produce long waves. The Hopf bifurcation theorem is applied to clarify the conditions for the existence of limit cycles, and simulations illustrate stable limit cycles. The long waves are characterized by periodic economic crises following long expansions. Short cycles, generated by the interaction between effective demand and labor market dynamics, fluctuate around the long waves.
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ABSTRACT: In this study, we incorporate new variables and assess the impact of transportation sector's energy consumption and foreign direct investment on CO2 emissions for ASEAN-5 economies using the cointegration and Granger causality methods. This study also attempts to validate the Environmental Kuznets Curve (EKC) hypothesis. Our results reveal that the CO2 emissions and their determinants are co-integrated only in Indonesia, Malaysia and Thailand. The long-run elasticity estimation suggests that income and transport energy consumption significantly influence CO2 emissions whereas FDI is not significant. Economic growth plays a greater role in contributing to CO2 emission in ASEAN-5. Nonetheless, we find that the inverted U-shape EKC hypothesis is not applicable to the ASEAN-5 economies, especially in Indonesia, Malaysia and Thailand. In the long run, the bi-directional causality between economic growth and CO2 emissions is detected in Indonesia and Thailand, while we find unidirectional causality running from GDP to CO2 emissions in Malaysia. We also observe bi-directional causality between transport energy consumption, FDI and CO2 emissions in Thailand and Malaysia. As an immediate policy option, controlling energy consumption in transportation sector may result in a significant reduction in CO2 emissions. However, this may slow the process of economic growth in Malaysia and Indonesia. Alternatively, we suggest policymakers to place more emphasis on energy efficient transportation system and policies to minimise fossil fuel consumption. Thus, the quality of environment can be improved with less deleterious impact on economic growth.Renewable and Sustainable Energy Reviews 08/2013; 24:445-453. DOI:10.1016/j.rser.2013.03.054 · 5.51 Impact Factor
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ABSTRACT: A major problem that frequently occurs in the VAR approach to modelling multiple time series is the large number of parameters that need to be estimated from relatively small samples. Litterman (1980) proposed a Bayesian version which has random walks as priors. Recently, that approach has been adapted to Vector Error Correction (VEC) models. In this paper, a new method of reducing the parameter space is proposed that combines VEC modelling, Box and Tiao's (1977) canonical approach, and Bayesian priors. The procedure is illustrated with an application to a six-equation forecasting model of the US economy.