Stilianos Fountas

• PH.D. in Economics
• Professor (Full) at University of Macedonia

This paper focuses on financial asset return spillovers and economic policy uncertainty spillovers in three continents (Europe, America, and Asia) in the last few decades. We examine three financial asset markets (stock, bond, and foreign exchange). Spillovers are measured using the Diebold–Yilmaz spillover index. In the first part, we measure the...

This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. Fir...

This paper focuses on economic policy uncertainty spillovers across Europe, before and after the outburst of the Eurozone crisis, using data for seven Eurozone countries for the period 2003–2019. At first, we analyze the spillovers of uncertainty in Europe via the estimation of the Diebold-Yilmaz spillover index. The results indicate that uncertain...

We examine the empirical relationship between output variability and output growth for Britain using data for eight centuries covering the 1270 to 2014 period. Drawing on the economic history literature, we split the full sample period in four subperiods and use GARCH models to measure output growth uncertainty and estimate its effect on average gr...

Using a balanced panel of 19 industrial economies and a long time series ranging from 1950 to 2013, we investigate the short-run and long-run relationship between health, proxied by life expectancy, and income using panel cointegrating analysis and panel Granger causality. We find that total life expectancy, male life expectancy, and female life ex...

We employ daily aggregate and sectoral S&P500 data to shed further light on the day-of-the-week anomaly using GARCH and EGARCH models. We obtain the following results: First, there is strong evidence for day-of-the-week effects in all sectors, implying that these effects are part of a wide phenomenon affecting the entire market structure. Second, u...

This article uses historical US inflation data covering over two centuries to examine the impact of the establishment of the US Federal Reserve on average US inflation and inflation uncertainty. We find that the founding of the Fed is associated with higher average US inflation and lower inflation uncertainty. Critically, these results are not driv...

This paper attempts to test for inflation convergence in a sample of 24 European Union countries. To tackle this issue, first- and second-generation panel unit root and stationarity tests are employed so as to provide evidence of inflation convergence before and after the launch of the single currency, the euro. We also test for and then allow for...

Housing is distinct from other financial assets, since it is a durable consumer good for households. Due to the irreversible nature of housing investment, uncertainty should be an important determinant of housing investment. From a theoretical point of view, though, this impact is ambiguous. This paper extends previous empirical work by employing t...

We investigate the mean reversion in real exchange rates for Central and Eastern European countries. We use point and confidence interval estimates from the Phillips et al.’s (2001) local-persistent model as our preferred measures of the persistence of real exchange rates. We find that the adjustment to purchasing power parity is more rapid after a...

The day-of-the-week effect for the securitized real estate indices is investigated by employing daily data at the global, European and country level for the period 1990 to 2010. We test for daily seasonality in 12 countries using both full sample and rolling-regression techniques. While the evidence for the former is in line with the literature, th...

This paper investigates the links between inflation, its uncertainty and economic growth in five ASEAN countries over the period 1980: Q1–2011: Q3. We rely on the Exponential GARCH (EGARCH) model to explore the causal relationship among the three variables. The major findings are: (i) inflation uncertainty increases more in response to positive inf...

We use historical data that cover more than one century on real GDP for industrial countries and employ the Pesaran panel unit root test that allows for crosssectional dependence to test for a unit root on realGDP.At first, we find strong evidence against the unit root null. Our results seem to be robust to the chosen group of countries and, in mos...

There has recently been considerable interest in the potential adverse effects associated with excessive uncertainty in energy futures markets. Theoretical models of investment under uncertainty predict that increased uncertainty will tend to induce firms to delay investment. These models are widely utilized in capital budgeting decisions, particul...

This paper examines the causal link between inflation and inflation uncertainty for the transition economies of Russia and Ukraine. The Iterated Cumulative Sums of Squares Exponential Generalized Autoregressive Conditional Heteroskedasticity (ICSS-EGARCH-M-t) models that allow for asymmetry and regime shifts in the variance of inflation are employe...

We use over two hundred years of US inflation data to examine the impact of inflation uncertainty on inflation. An analysis of the full period without allowing for various regimes shows no impact of uncertainty on inflation. However, once we distinguish between recessions and non recessions, we find that inflation uncertainty has a negative effect...

We examine the relationship between inflation uncertainty, inflation and growth using annual historical data on industrial countries covering in many cases more than one century. Proxying inflation uncertainty by the conditional variance of inflation shocks, we obtain the following results. (1) There is significant evidence for the positive effect...

The failure of decreases in oil prices to produce expansions that mirror the contractions associated with higher oil prices has been a topic of considerable interest. We investigate for the G-7 one explanation for this feature - the role of uncertainty about oil prices. In particular, we examine the link between oil price uncertainty and industrial...

This paper investigates the short-run and long-run impact of the determinants of nominal exchange rate volatility in three Latin American countries during the period 1979-2009. We estimate a multivariate GARCH model and include the covariances of those determinants, which have been ignored in the prior relevant literature. In combination with the r...

This paper investigates the short-run and long-run impact of the determinants of output volatility for the G3 during the period 1974-2009. We estimate a multivariate GARCH model and include the covariances of those determinants, which have been ignored in the prior relevant literature. Our findings indicate that nominal variability, namely variabil...

We use a very general bivariate GARCH-M model and monthly data on EU countries covering the 1962–2003 period to test for the impact of real (output growth) and nominal (inflation) macroeconomic uncertainty on inflation and output growth. Our evidence supports a number of important conclusions. First, in the majority of countries uncertainty regardi...

This paper makes an attempt to determine the factors influencing exchange rate and exchange rate uncertainty, as well as, output and output variability. In the context of a small open economy under flexible exchange rates regime it is found that the level both of exchange rate and output is affected by monetary and inflationary shocks, as well as s...

We use a very general bivariate GARCH-M model and quarterly data for five Asian countries to test for the impact of real and nominal macroeconomic uncertainty on inflation and output growth. We conclude the following. First, in the majority of countries uncertainty regarding the output growth rate is related negatively to the average growth rate. S...

This paper investigates the effect of EMU on inward FDI flows to eurozone using panel data from 22 OECD countries for the period 1973-2006. The empirical findings suggest that the EMU led to a statistically significant overall increase in inward FDI flows to countries that adopted the euro as their national currency. They also show that the EMU eff...

We use a long series of annual data that span over 100 years to examine the relationship between output growth and its uncertainty in five European countries. Using the GARCH methodology to proxy uncertainty, we obtain two important results. First, more uncertainty about output leads to a higher rate of growth in three of the five countries. Second...

We use a Markov regime-switching heteroskedasticity model in order to examine the association between inflation and inflation uncertainty in four European countries over the last forty years. This approach allows for regime shifts in both the mean and variance of inflation in order to assess the association between inflation and its uncertainty in...

We use univariate GARCH models of inflation and output growth and monthly data for the G7 covering the 1957–2000 period to test for the causal effect of real and nominal macroeconomic uncertainty on inflation and output growth, and the effect of inflation on inflation uncertainty. Our evidence supports a number of important conclusions. First, infl...

This paper proposes new methods for the econometric analysis of outlier contaminated multivariate conditionally heteroscedastic time series. Robust alternatives to the Gaussian quasi-maximum likelihood estimator are presented. Under elliptical symmetry of the innovation vector, consistency results for M-estimation of the general conditional heteros...

We use a bivariate generalized autoregressive conditionally heteroskedastic (GARCH) model of inflation and output growth to examine the causality relationship among nominal uncertainty, real uncertainty and macroeconomic performance measured by the inflation and output growth rates. The application of the constant conditional correlation GARCH(1,1)...

In this paper we attempt to examine the issue of sustainability of current account imbalances in eight East Asia countries using the latest developments in nonstationary panel data analysis. The methods of nonstationary time series panels provide a much more promising explanation than would an analysis based on pure time series or cross section dat...

We use a very general bivariate generalized autoregressive conditional heteroskedasticity-in-mean model and G7 monthly data covering the 1957-2003 period to test for the impact of real and nominal macroeconomic uncertainty on inflation and output growth. Our evidence supports a number of important conclusions. First, in most countries output growth...

This study examines the mean reverting behavior of real interest differentials in ten Asian economies using Japan as the base country. We obtain a number of interesting results: first, the conventional ADF test fails to support Real Interest Parity (RIP) for at least half of the countries, even for the post-financial liberalization period. Second,...

We investigate the behaviour of real exchange rates of six East-Asian countries in relation to their two major trading partners-the United States and Japan. These countries, except, Singapore were affected by the financial crisis of the fall 1997. Using monthly frequency data from 1976 to 2002 and the autoregressive distributed lag (ARDL) cointegra...

We examine the empirical relationship between output variability and output growth using quarterly data for the 1961-2000 period for the Japanese economy. Using three different specifications of GARCH models, namely, Bollerslev's model, Taylor/Schwert's model, and Nelson's EGARCH model, we obtain two important results. First, we find robust evi...

The relationship between inflation and inflation uncertainty is investigated in six European Union countries for the period 1960-99. Exponential generalized autoregressive conditional heteroscedasticity models are used to generate a measure of inflation uncertainty and then Granger methods are employed to test for causality between average inflatio...

- We examine,the relationship between,inflation and inflation uncertainty in the US using a GARCH model,that allows for simultaneous,feedback,between,the conditional mean and variance of inflation. We also compare,the properties of the observed,time series with the theoretical properties of GARCH models,to illustrate how theoretical results on the...

By utilizing the techniques of multivariate cointegration and error correctionmodels, we investigate the impact of the different exchange rate regimes that spannedthe twentieth century on the bilateral exports between the UK and the USA over thelast 99 years. Our results support two conclusions. First, fixed exchange rate regimesand managed float e...

This paper examines the sustainability of the current account imbalance for four ASEAN countries (Indonesia, Malaysia, the Philippines, and Thailand) over the 1961–1999 period. To this end, we utilize the intertemporal budget constraint (IBC) model to explain the behavior of the current account in these countries. The analysis is based on various u...

A key function of the banking system is to facilitate intermediation between borrowers and lenders. In this paper we single out for attention the money transmission function of banks to test whether intermediation costs have been reduced by technology and passed on to consumers. Using data for the commercial banking sector in Ireland over the perio...

Seasonal effects are tested for in stock returns, the January effect anomaly and the tax-loss selling hypothesis using monthly stock returns in eighteen emerging stock markets for the period 1987-95. Even though considerable evidence for seasonal effects applies in several countries, very little evidence is found in favour of the January effect and...

Using a bivariate GARCH model of inflation and output growth we find evidence that higher inflation and more inflation uncertainty lead to lower output growth in the Japanese economy. These results support the argument of a price stability objective for the monetary authority.

We provide some evidence consistent with a heterogeneous credit channel of monetary policy transmission in the European Union. Using the techniques of cointegration and Error Correction Models, we have shown that the external finance premium is one important leading indicator of real economic activity in Germany and Italy. No evidence is found for...

In this paper, we investigated the impact of the creation of the European Monetary System (EMS) on the exports of the four largest EU countries (France, Germany, Italy and UK) to each other. Our findings suggest that the EMS boosted bilateral trade in the cases of Germany 's exports to Italy and Italy 's exports to the UK and influenced negatively...

We examine the relationship between inflation and inflation uncertainty using a GARCH model that allows for simultaneous feedback between the conditional mean and variance of inflation. We also derive a number of theoretical econometric results and illustrate the relevance of these results with an empirical example of the US monthly inflation proce...

Using a long series of UK inflation data, I have provided strong evidence in favour of the hypothesis that inflationary periods are associated with high inflation uncertainty. This result supports the Friedman–Ball hypothesis and has important implications for the inflation–output relationship provided that more inflation uncertainty leads to lower...

The paper tests the export-led growth hypothesis in Ireland over the last 40 years using the modern econometric analysis of nonstationary time series. It is found that over the 1950-1990 period there is no long-run relationship between real GDP and export volume and no evidence for the export-led growth hypothesis either. The analysis of the more r...

We use recently developed cointegration tests that determine endogenously the regime shift to test bilateral real interest rate convergence (real interest rate parity) in the G7 against the US in the 1974-1995 period. In contrast with previous studies that employed classical regression analysis and standard cointegration tests, our innovative appro...

We argue that the interactions among the current account and budget balances and the real interest rate can provide more information about the effective degree of financial openness of an economy than simple saving-investment correlations. Cointegration tests reveal a variety of linkages between the variables across countries. A number of economies...

By utilizing the techniques of multivariate cointegration and error correction models, we investigate the impact of the different exchange-rate regimes that spanned the 20th century on the bilateral exports between the UK and the US over the last 98 years. Our results support two conclusions. First, fixed exchange-rate regimes and managed float exc...

We attempt to investigate whether the Exchange Rate Mechanism (ERM) period has coincided with an increase in intra-EU exports. We conclude that this has not been the case but it is likely that the elimination of nominal exchange rate variability arising from a single currency will boost intra-European Union trade.

This paper tests for the long-run and short-run relationship between prices and wages in the Irish economy over the 1975-92 period. Using recent econometric techniques in the analysis of time series, we conclude that there is a long-run equilibrium relationship between prices, wages and an excess demand variable in agreement with the expectations a...

We employ the econometric techniques of multivariate cointegration and error-correction models to investigate the impact of the creation of the European Monetary System (EMS) on the volume of intra-European Union (EU) exports for eight EU countries. We find that for Ireland the EMS boosted the volume of intra-EU exports, whereas for Belgium, Denmar...

We have tested for a long-run relationship between four U.S. Export measures and analogous import measures (measured in nominal and real terms, levels and deflated by GNP) in the 1967-1994 period using quarterly data. Using various econometric tests that include standard Engle-Granger cointegration tests and two tests that allow for test-determined...

The authors use cointegration tests that determine endogenously the regime shift to test for bilateral short-term and long-term real interest rate convergence in the European Monetary System in the 1979-93 period. The results of these tests provide strong evidence in favor of bilateral real interest rate convergence between Germany and several coun...

employing the techniques of multivariate cointegration and error-correction models, we investigate the impact of the creation of the European Monetary System (EMS) on the exports of the four largest EU countries to each other. Our findings suggest that the impact of the EMS on bilateral intra-EU exports has been mixed. The EMS boosted bilateral tra...

The paper tests for long-run monetary policy convergence and short-run policy interactions in seven ERM countries over the 1979-1992 period using the approach of multivariate cointegration and Granger-causality tests. The authors provide evidence for very little monetary policy convergence, even during the more stable 1987-92 period. Tests for shor...

We analyse the long-run and short-run relationship between merchandise export volume and its determinants, foreign income, relative prices and exchange rate volatility, using the techniques of cointegration and error correction. The model was estimated for Irish exports and sectoral exports SITC 0-4 and SITC 5-8 to the EU using quarterly data for t...

We use the techniques of cointegration and error correction models to estimate long-run and short-run export demand functions for Ireland using quarterly data for the 1979-93 period. We consider three determinants of exports: foreign income, relative prices, and exchange rate volatility. Our results indicate that exports depend significantly on for...

We use a new test for cointegration that allows for structural breaks in the cointegrating relationship to test for bilateral interest rate convergence in the European Monetary System. Contrary to previous studies that employed standard cointegration tests, we find strong evidence for convergence between German nominal interest rates and interest r...

We use cointegration tests that determine endogenously the regime shift ot test for bilateral short-term and long-term real interest rate convergence in the European Monetary System in the 1979-993 period.

We use recently developed cointegration tests that determine endogenously the regime shift to test for bilateral real interest rate convergence (real interest rate parity) in the G7 against the US in the 1974-1995 period. In contrast with previous studies that employed classical regression analysis and standard cointegration tests, our innovative a...

The aim of this paper is to look at ways in which the contribution of investment in technology to consumer welfare might be measured. One useful approach to this question is demonstrated by means of a simple spatial model of trade and transportation. The model is used to elaborate on a discussion found in Melvin (1990). The empirical part of the pa...

This paper applies the recently developed cointegration techniques to test for a long-run equilibrium among real wages and the average productivity of labour as implied by profit maximisation in the Greek manufacturing sector. We find evidence for a profit-maximising equilibrium and for adjustment towards this long-run equilibrium through nominal w...

The issue of credibility and capital mobility in the EMS is re-examined using an alternative methodology, as well as a longer sample period than previous studies. In particular, the dynamic relationship between interest rate differentials and the exchange rate risk premium is emphasized. The relationship between the premium and credibility is then...

The objective of this paper is to determine whether ERM-participating countries have experienced a change in the effectiveness of monetary and fiscal policies since the establishment of the ERM. Countries which have come to rely more heavily on fiscal policy instruments as the means of output, price and exchange rate stabilization since the establi...

The objective of this paper is to test for the sustainability of the current account deficits in the United States and Canada over the 1973–1994 period. Using various unit root and cointegration tests, some of which allow for structural changes, we conclude that the real current account-deficits-to-GDP ratios are not sustainable.

We use a cross-section, time-series approach to study the determinants of foreign direct investment (FDI) in the European Union (EU) with particular emphasis on the expectations of a single market following the Single European Act of 1987. Using annual data from the 1980s and early 1990s, we investigate the determinants of US and Japanese FDI in th...

We use a residual-based cointegration test suggested by Gregory and Hansen that allows for the determination of a structural break in the cointegration vector to test for the sustainability of Greek fiscal deficits over the 1958-92 period. This relatively recent test leads to a different result from that derived from standard Engle-Granger cointegr...

Models fiscal policy interactions between fiscal authorities and private investors in the foreign exchange market in a game-theoretic framework. Using a two-period game, I consider the credible and noncredible announcements of the domestic fiscal authority with respect to the stance of its future fiscal policy. Each country faces a trade-off betwee...

We use cross-section, time-series approach to study the determinants of foreign direct investment (FDI) in the European Union with particular emphasis on the expectations of a Single Market following the Single European Act of 1987. Using annual data from the 1980s, we investigate the determinants of US and Japanese FDI in the EU by pooling the dat...