World Journal of Applied Economics

Investigating the Validity of Climate Migration: Empirical Evidence from the Most Polluted Countries

Onur Çelik, Emrah Eray Akça — Thu, 13 Jun 2024 12:17:52 +0000

The literature generally finds that lower air quality has been an important determinant of migration. This study builds a migration model employing annual data from 2010 to 2019 for the most polluted ten countries to test the validity of migration caused by air pollution through PM2.5 concentration. The Poisson Pseudo Maximum Likelihood method results show that air pollution is one of the most significant determinants of migration from the most polluted countries. Moreover, the low income level also pushes people to migrate more from their origin regions than richer ones. The study provides some policy recommendations for policy-makers in the countries where people breathe the most polluted air: (i) governments should follow growth-promoting economic policies; (ii) environment-friendly production techniques should be implemented to prevent worsening environmental quality; (iii) climate-induced mass migration should be considered while making security policy arrangements.

JEL Codes: F22, Q53, Q56

Keywords: Climate migration, Air pollution, Gravity model, PPML

Using Advanced Machine Learning Techniques to Predict the Sales Volume of Non-Fungible Tokens

Özge Çamalan, Şahika Gökmen, Sibel Atan — Thu, 13 Jun 2024 12:17:22 +0000

Non-fungible tokens (NFTs) are a type of digital asset based on blockchain that contain unique codes verifying the authenticity and ownership of different assets such as art pieces, music, gaming items, collections, and so on. This phenomenon and its markets have grown significantly since the beginning of 2021. This study, using daily data between November 2017 and November 2022, predicts the volume of NFT sales by utilising Random Forest (RF), GBM, XGBoost, and LightGBM methods from the community machine learning methods. In the predictions, several financial variables, including Gold, Bitcoin/USD, Ethereum/USD, S&P 500 index, Nasdaq 100, Oil/USD, Euro/USD, and CDS data, are treated as independent variables. According to the results, XGBoost is found to be the best prediction method for NFT market volume estimation concerning several statistical criteria, e.g., MAE, MAPE, and RMSE, and the most significant influential feature in determining prices is the Ethereum/USD exchange rate.

JEL codes: G12, C53

Keywords: Financial assets, Non-fungible tokens, Machine learning

Issue Information (Vol. 10 Issue 1)

Thu, 13 Jun 2024 12:16:02 +0000

Global Consumption Disparities: Unveiling a Persistent Divide

Fatih Elçin — Thu, 13 Jun 2024 00:00:00 +0000

This paper delves into global consumption inequality through empirical and theoretical analyses. First, countries are categorized into five groups according to their consumption levels to uncover worldwide consumption patterns using the Penn World Tables 10.01 dataset between 1970 and 2019. The results imply that the inequality in per capita consumption is significant and persistent across time. Moreover, there is a ``Caste System'' in world consumption: countries belonging to the lowest class struggle to climb up to the upper consumption groups, whereas the countries in the top class keep their seats over time. Second, the saving rate differences between ``climbing'' and ``falling'' countries are empirically tested based on the Solow-Swan framework, which shows that the level of the saving rate determines the level and the growth rate of per capita consumption. Since the analyses show that the climbing countries have significantly higher saving rates than falling countries, a higher saving rate is conducive to increasing a country's per capita consumption level and growth rate in the long run.

JEL Codes: E21, O47, C21

Keywords: Consumption-saving decision, Solow Growth Model, Cross-sectional models

NEET Status and Mental Health Disorders: Evidence from a Developing Country

Deniz Karaoğlan, Pınar Tat, Nazire Beğen — Thu, 23 Nov 2023 14:46:59 +0000

The extant literature defines the young individuals engaged in neither employment nor education or training program as “NEET”. This study investigates the relationship between being NEET and the probability of having mental health disorders among youth in Turkey. We conducted a bivariate probit model with selection by utilizing data from the Turkish Health Surveys (THS) of 2014, 2016, and 2019. The results indicate that the probability of being NEET increases with age, being women and married. In addition, the parents' education and wealth statutes are found to be important determinants of a young individual’s NEET status. The value of the correlation coefficient (1.69) in the probit model indicates that there is a positive association between being NEET and experiencing mental health disorders and that some unobserved factors (i.e., access to mental health services, psychosocial support, cultural factors) are positively related to experiencing mental health disorders. We conclude that the circumstances causing young people to be unemployed also tend to make them have mental health disorders, but unemployed NEET with higher levels of education are less likely to experience mental health disorders.

JEL Codes: I12, I19, J21
Keywords: Mental health disorders, NEET, Turkey, Developing country, Bivariate probit models with selection

Do Social Isolation and Loneliness Affect Healthcare Spending and Utilization in Japan?

Ü. Furkan Yüksel — Thu, 23 Nov 2023 14:46:35 +0000

Social isolation and loneliness are associated with worse health outcomes, and there is a growing literature that studies the economic cost of these conditions in terms of increased healthcare spending and utilization. However, a handful of existing studies mostly focus on Western countries. This article analyses the issue in the case of Japan using the Japanese Study of Aging and Retirement (JSTAR) dataset with the help of generalized linear and probit models. The results show that social isolation is associated with reduced healthcare spending, while loneliness does not have any statistically significant effect. Neither social isolation (living alone) nor loneliness has a statistically significant effect on healthcare utilization; that is, these measures are not associated with increased or decreased inpatient or outpatient visits. Therefore, care should be taken when launching social programs to tackle social isolation and loneliness to reduce healthcare spending and utilization because these two conditions might not be associated with increased healthcare spending universally.

JEL Codes: D00, I10, H51
Keywords: Social isolation, Loneliness, Healthcare spending, Healthcare utilization

Underutilisation of Labour: Underemployment and Skills-Mismatch in Turkey

Zeynep Başak, Caner Özdemir — Thu, 23 Nov 2023 14:46:15 +0000

This paper aims to reveal the extent and characteristics of under and inadequate forms of employment in Turkey. Our descriptive analysis using the Household Labour Force Surveys of 2014-2021 shows that despite not being unemployed, many people do not work in their full capacity or cannot enter the workforce, although they are willing to do so. In addition, the size of these groups varies due to age, sex and education level. To better understand the demographic and socioeconomic determinants of skill-related underemployment, the incidence and evolution of education-occupation mismatch are investigated using the Income and Living Conditions Survey (SILC) of 2016-2021. The results of the multinomial logit models using SILC-2021 indicate that age and education effects are similar for both sexes, but marital status, number of kids and household size have diverging effects for men and women. Moreover, the effects of household income, excluding the respondents’ income, social transfers and social security registration in the household confirm the reservation income hypothesis.

JEL Codes: A14, J01, J10, J24, C31
Keywords: Underemployment, Youth unemployment, Skills-mismatch, Education-occupation mismatch

Unemployment in the WAEMU Countries: A Cross-Sectional Data Approach

Mohamed Niaré, Ousmane Mariko — Thu, 23 Nov 2023 14:45:46 +0000

The aim of this article is to conduct an empirical evaluation of the microeconomic determinants of unemployment in the West African Economic and Monetary Union (WAEMU), controlling for inactivity. A multinomial logistic analysis has been conducted by using the Harmonized Survey of Household Living Conditions (2019) survey. Our results show that being female, single, young, disabled, and living in urban increases the risk of unemployment and inactivity. Furthermore, despite a higher incidence of unemployment among educated individuals, they are less likely to be inactive compared to those with no education. We also note that women with a university education are less affected by inactivity than men with the same level of education but remain more exposed to unemployment. In addition, age has a very limited influence on unemployment among men, unlike women, where it has a very significant amplifying effect. In addition, the negative effect of university education on unemployment is more pronounced in rural areas than in big cities. Finally, disability does not determine rural unemployment, unlike in urban areas, where it exacerbates it.

JEL codes: D63, J16, J64
Keywords: Unemployment, WAEMU, Cross-sectional data, Employment survey, Inactivity

Issue Information (Vol.9 Issue 2)

Thu, 23 Nov 2023 14:45:01 +0000

Issue Information (Vol.9 Issue 1)

Sat, 13 May 2023 07:25:46 +0000

Financial Globalization and Growth: The Impacts of Financial Development and Governance

Fatma Taşdemir — Sat, 13 May 2023 07:25:07 +0000

The conventional theory suggests that financial globalization encourages growth. The empirical literature, however, does not give convincing support for the theoretical benefits of financial globalization. This paper investigates the relationship between financial globalization and growth in a sample of 33 emerging market economies during the 1995-2019 period by considering both de facto and de jure measures of financial globalization. We first study the direct effect of financial globalization on growth. Then, we focus on whether the growth impact of financial globalization is conditional on the level of financial development and governance. Our two-step system GMM estimation results suggest that both financial globalization measures tend to lower growth, albeit this negative relationship mitigates after the global financial crisis. Our empirical findings also indicate that the negative growth impact of financial globalization diminishes with the high levels of financial development and governance. The results indicate that investing and upgrading the collateral environment cause higher growth and mitigate the negative growth impact of financial globalization.

JEL classification: F02, F41, F43, F63.

Keywords: Financial globalization, Growth, Governance, Financial Development, Generalized Method of Moments

The Influence of Bank Performance, Market Condition and Economic Growth on Non-Performing Loans

Candida Ferreira — Sat, 13 May 2023 07:24:22 +0000

The paper contributes to the literature on the determinants of non-performing loans by applying panel fixed effects and dynamic Generalised Method of Moments (GMM) estimations to a relatively large panel of 80 countries over the period 1999-2017. The paper considers three categories of explanatory variables; bank-level, industry-level, and macroeconomic-level. The bank-level variables highlight the relevance of bank profitability and efficiency to avoid non-performing loans. The industry-level variables, for the entire period and particularly after the onset of the Global Financial Crisis (years 2009-2017), show that bank market concentration promoted non-performing loans, while bank market competition and bank stability did not contribute to increasing non-performing loans. The macroeconomic-level variable, real per capita gross domestic product, provides very convincing evidence that promoting economic growth looks like the best way to avoid non-performing loans. Analyses with different sub-samples show that the determinants of non-performing loans are not particularly dependent on the level of income of the country.

JEL classification: G21, G15, G32, F39, C3

Keywords: Non-performing loans, Bank performance, Bank market conditions, Panel estimates

Interrelationships between Tourist Arrivals, Exchange Rate, Inflation, and Economic Growth: Empirical Evidence for Türkiye

Gülsüm Akarsu — Sat, 13 May 2023 07:23:35 +0000

Touristic activities have become essential for sustainable development associated with countries' prosperity and mobility opportunities. These activities may be affected by the exchange rate, economic growth, and general price movements, and these variables may also be affected by tourism activities. This study analyzes the relationships between tourist arrivals, economic growth, inflation, and exchange rate for Türkiye taking the country's geopolitical risk as exogenous, using monthly data over 2008-2020 and a Vector Error Correction modelling approach. The results indicate favorable short-run and long-run impacts of tourist arrivals on economic growth and confirm the validity of the tourism-led growth hypothesis for Türkiye. Toda Yamamoto causality tests show unidirectional causality from economic growth to inflation and exchange rate fluctuations and from the exchange rate to inflation. Therefore, results do not show evidence of tourism’s Dutch disease effect. Improving the quality of tourism-related services and marketing is vital for revenue increase and, thus, economic growth.

JEL classification: Z32, C32, F31

Keywords: Tourist arrivals, Tourism-led growth, Inflation, Exchange rate, Geopolitical risk

Analysis of Dynamic Connectedness among Sovereign CDS Premia

Özcan Ceylan — Sat, 13 May 2023 07:22:48 +0000

This paper studies the dynamics of spillovers between sovereign Credit Default Swap (CDS) premia of nine countries, including Turkey, Russia, Brazil, South Africa, China, Germany, France, Italy and Spain. Weekly CDS data spans from July 2012 through June 2022. Adopting the methodology developed by Diebold & Yılmaz (2014), several connectedness measures are computed based on generalized forecast error variance decompositions generated through a time-varying parameter vector autoregressive model (TVP-VAR). The results show that the network’s connectedness level increased significantly during the COVID-19 outbreak and the Ukrainian war. Higher connectedness levels among European markets and developing countries are observed. Especially the connectedness levels between South Africa and other developing countries are remarkably high. The results reveal both fundamental-based and pure contagion channels and provide insight into the dynamic network of risk spillovers. A thorough understanding of international risk transmission channels is crucial for policy-makers and global investors regarding risk mitigation.

JEL classification: F36, G15, H63

Keywords: Connectedness, Sovereign CDS premia, Spillovers, TVP-VAR analysis

Combined Forecasts of Intermittent Demand for Stock-keeping Units (SKUs)

Aysun Kapucugil İkiz, Gizem Halil Utma — Sat, 13 May 2023 07:21:50 +0000

Effective inventory management requires accurate forecasts for stock-keeping units (SKUs), especially for the strategic ones for companies’ operations and after-sales services like providing spare parts. Forecasting is a challenging task for such SKUs as they usually have intermittent demand (ID) patterns, consisting of many periods with zero demand and infrequent demand arrivals. Given the highly uncertain nature of ID for SKUs, this study developed a methodological framework for combining statistical and judgmental forecasts and assessed the performance of the proposed framework by using accuracy and bias measures. The forecasting process has several steps, including data preparation, data categorization based on demand patterns, generating statistical and judgmental forecasts, combining statistical and judgmental forecasts, and evaluating the forecast performance. These steps were illustrated on a real-world dataset that contains monthly customer demand data for after-sales spare parts. Results showed that combination is the best method for the majority of SKUs. This paper contributes to the limited literature by addressing the gap between the combined and ID forecasts. The proposed framework gives practitioners and researchers a comprehensive overview to help them make more accurate forecasts while encouraging the use of simple but structured approaches.

JEL classification: C44, C53, M11

Keywords: Statistical forecasting, Judgmental forecasting, Combining forecasts, Intermittent demand, Stock-keeping Units

Issue Information (Vol.8 Issue 2)

Thu, 15 Dec 2022 16:00:24 +0000

Determinants of Bilateral Trade between Europeans and the Ottoman Empire: 1878-1913

Meryem Türel, Kazım Baycar — Thu, 15 Dec 2022 15:53:51 +0000

During the 19^th century, the Ottoman Empire experienced an increased integration into the world economy, primarily through the development of bilateral trade with European markets. This study examines the determinants of bilateral trade of the Ottoman Empire with its trading partners between 1878 and 1913 using a panel regression framework. The results indicate that the GDP of trading partners, distance, common borders, and the adoption of the metric system significantly affected bilateral trade. In contrast, the GDP of the Ottoman Empire, trade agreements, railways, and commercial ports had no statistically significant effects on the mentioned trade relations.

JEL classification: B10, N7, F14

Keywords: Ottoman Empire, Nineteenth century, Foreign trade, Gravity model of trade

Internalizing Environmental Externalities and the Coase Theorem

Nicolas Schneider — Thu, 15 Dec 2022 15:53:26 +0000

This article offers a brief review of the Coase Theorem in the context of policy planning. This concept first revolutionized the regulatory approach to the environmental problem because it advocated how bargaining mechanisms correct externalities without any pre-condition on entitlement assignment. However, given a set of non-negligible constraints imposed by the empirics i.e., non-null transaction costs and asymmetric income effects, questions remain on how decentralized decision-making processes, i.e., private market mechanisms, can ensure Pareto-efficiency in practice without undermining the local validation of the theorem. Starting from major theoretical underpinnings, this brief highlights that active regulation of externalities by governments is relevant under reasonable conditions. Far from being empirically inadequate, Coase’s transaction-cost-free model must be seen as a demonstration of how transaction costs cause substantial distortions and inefficiencies when excluded from environmental policy frameworks. Thus, Coasian bargaining and Pigouvian taxation may be complements rather than substitutes. Active public environmental intervention could act as a backup system capable of correcting inefficiencies when market mechanisms and private negotiations fail to do so.

JEL classification: C78, H23, Q50

Keywords: Coase Theorem, Environmental externalities, Property rights

Tourism Location Choice of Local and Foreign Tourist: A Perspective through Spatial Analysis

Dilek Çetin, Emre Aksoy, Yalçın Arslantürk — Thu, 15 Dec 2022 00:00:00 +0000

The economic outreach of tourism businesses has undoubtedly had a significant contribution to the economic growth of countries and regions. Attracting tourists to the tourist provinces is an important regional growth and development issue. The main aim of this study is to present the factors influencing the tourism location choice of both foreign and domestic tourists. Cross-sectional spatial analysis is applied to Turkish province-level data for 2002-2019, and the time and spatial effects of regional tourism demands are considered. Lisa and Geary’s cluster maps provide the regional clusters. Accordingly, Bitlis, Siirt and Tunceli are the common low-tourist number provinces surrounded by low-ranking provinces (low-low cluster), whereas Burdur is the common low province surrounded by high-ranking provinces (low-high cluster). Both domestic and foreign tourist location choices were strictly influenced by their choice in 2002, i.e., time consistency in location choice is valid. The location choices do not depend on whether the province is on the seaside or inland, which is contrary to our expectations. Foreign tourists’ location choices are influenced by domestic tourists’ location choices three times more than that domestic tourists. Most importantly, according to the spatial autocorrelation results, location choice made by foreign tourists is spatially dependent, but this is not true for domestic tourists.

JEL classification: C01, C21, L83

Keywords: Tourism, Location choice, Spatial analysis, Moran’s I, Turkey

International Trade, Foreign Direct Investment, Financial Development and Renewable Energy Supply: Panel Data Evidence from Newly Industrialized Countries

Gülçin Elif Yücel, Ayfer Ustabaş, Tuğçe Acar — Thu, 15 Dec 2022 00:00:00 +0000

In many newly industrializing countries (NICs), increased international trade activities are often triggered by several advancements, including attracting foreign direct investment (FDI), financial development, and technological changes. Recently, abundant and diversified renewable energy sources used in production have also started to take their place among these advancements. Although the relationship between FDI, financial developments, and international trade for NICs has been analyzed in many studies, incorporating renewable energy supply’s impact in this linkage has been relatively narrow. This paper aims to fill the gap in the literature by investigating the effects of renewable energy supply on FDI, financial development, and international trade for newly industrialized countries using panel causality and panel cointegration analyses between 1990 and 2019. Our findings indicate (i) uni-directional causality running from international trade to financial development, (ii) uni-directional causality running from renewable energy supply to financial development, and (iii) bi-directional causality between financial development and FDI. The result of the cointegration analysis showed that there is no long-term relationship between the variables.

JEL classification: F14, Q27, C33

Keywords: International trade, Foreign direct investment, Financial development, Renewable energy supply, Panel data analysis

Issue Information (Vol. 8 Issue 1)

Mon, 13 Jun 2022 18:58:28 +0000

Financial Development and Female Labor Income Share: Evidence from Global Data

Adem Yavuz Elveren, Hale Kırmızıoğlu — Mon, 13 Jun 2022 18:58:07 +0000

While there has been sizable literature on the effect of financial development on growth, inequality, and poverty, there are fewer studies on its impact on female labor force participation or women’s wellbeing. Using a novel dataset, this paper investigates the association between the dimensions of financial development and female labor income share for 156 countries for the period of 1991-2019 to contribute to the literature on the role of financial development in improving women’s wellbeing. The findings show that financial development is positively associated with women’s income in high-income countries but not in low-income countries. The main implication of the study is that financial development in poor countries is not sufficiently inclusive enough to create economic opportunities for women.

JEL classification: E44, J16, 016

Keywords: Financial development, Financial inclusion, Economics of gender, Gender inequality, Female labor force participation

Employability and Labor Income of Immigrants in the US: A Special Focus on the Roles of Language and Home Country Income Level

Selda Dudu — Mon, 13 Jun 2022 18:57:50 +0000

Speaking the most-demanded languages is an asset in the labor market. However, coming from a high-income country may give immigrants an advantage in the labor market as those may have more transferable skills. This article investigates the determinants of the employability and labor income of immigrants and newcomer immigrants in the United States (US) labor market, specifically focusing on the role of language and income level of the home country. It applies the Heckman two-step selection procedure to the American Community Survey between 2000 and 2019. The findings show that immigrating from both high-income countries and countries where internationally most widely used languages (English, French, Portuguese, Spanish, and Chinese) are spoken gives immigrants an advantage in the US labor market compared to those from the countries where only national languages are spoken. This article emphasizes the key role of the income level of the home country on immigrants' labor income in the US. It contributes to the literature by employing the interaction terms of being from the same-income-level countries and the same-languages-speaking countries.

JEL classification: F22, J15, J61

Keywords: Employability, Foreign language knowledge, Income level of home country, Immigrants, Labor income

Asymmetric Effectiveness of Monetary and Fiscal Policies: Evidence from Turkey

Cemal Öztürk, Günsenin Altınkaynak — Mon, 13 Jun 2022 18:57:07 +0000

This study assesses the asymmetric effectiveness of Turkey's monetary policy and fiscal policy under the inflation targeting regime in the period of 2006-2020. We employed the non-linear autoregressive distributed lag (NARDL) method and Hatemi-J asymmetric causality test with the assistance of the St. Louis equation, which relates the growth in nominal income with the growth in money supply and public expenditures. The NARDL model revealed that an increase in money supply and gross domestic product (GDP) has a positive relationship. On the other hand, a decrease in money supply and government expenditures have no significant relationship with GDP. In addition, Hatemi-J asymmetric causality results showed an asymmetric causality between money supply and GDP. It demonstrates that the money supply in Turkey during the period 2006-2020 is endogenous.

JEL classification: C22, E63, E52

Keywords: St. Louis equation, NARDL, Asymmetric causality

Economic and Monetary Integration in ECOWAS Countries: A Panel VAR Approach to Identify Macroeconomic Shocks

Asta Ndongo, Ibrahima Thione Diop — Fri, 10 Dec 2021 10:20:36 +0000

This paper studies the impact of output, exchange rate, price, and economic policies (fiscal and monetary) shocks to Economic Community of West African States (ECOWAS) economies over the period 1977-2019. The results of the impulse response functions obtained from the panel VAR show that monetary policy shocks stimulate economic activity, whereas fiscal shocks lead to a contraction. Moreover, these economic policy shocks lead to an increase in the price level. Finally, they have opposite effects on the real exchange rate: a monetary policy shock leads to an appreciation of national currencies against the US dollar, while a fiscal innovation leads to a depreciation of these currencies. As for exchange rate and price shocks, they create inflation and consequently a decline in economic activity. Furthermore, the forecast error variance decomposition reveals that real exchange rate shocks contribute the most to future fluctuations in macroeconomic variables in ECOWAS countries. Moreover, a comparison of the impact on the two currency areas, West African Economic and Monetary Union (WAEMU) and West African Monetary Zone (WAMZ), shows the degree of asymmetry between the two areas. The analysis shows, on the one hand, that shocks are more persistent and significant in the WAMZ and, on the other hand, that except for real exchange rate shocks, the two zones respond asymmetrically to shocks emanating from the other variables.

JEL classification: C12, C53, F15, E32, F45

Keywords: Monetary integration; Macroeconomic shocks; Impulse response function; Forecast error variance decomposition

Time-Varying Network Connectedness of G-7 Economic Policy Uncertainties: A Locally Stationary TVP-VAR Approach

Onur Polat — Fri, 10 Dec 2021 10:20:20 +0000

This work analyzes the frequency-dependent network structure of Economic Policy Uncertainties (EPU) across G-7 countries between January 1998 and April 2021. We implement an approach that builds dynamic networks relying on a locally stationary Time-Varying Parameter-Vector Autoregressive model using Quasi-Bayesian Local Likelihood methods. We compute short-, medium-, and long-term network connectedness of G-7 EPUs over a period covering several economic/financial turmoils. Furthermore, we structure short-term network topologies for the Global Financial Crisis (GFC) and the COVID-19 pandemic periods. Findings of the study indicate amplified interdependencies between G-7 EPUs around well-known economic/geopolitical incidents, frequency-dependent connectedness networks among them, and stronger interdependencies than the medium-, and long-term linkages. Finally, we find that short-term spillovers are not persistent in the long-term for both turmoil periods.

JEL classification: C10, C40, C58

Keywords: Dynamic networks, TVP-VAR, Pairwise spillovers, Financial connectedness

Issue Information (Vol. 7 Issue 2)

Fri, 10 Dec 2021 10:18:44 +0000

Comparison of News Impacts on Sectoral Stock Returns during the COVID-19 Pandemic in Turkey

Metin Tetik — Fri, 10 Dec 2021 00:00:00 +0000

This study examines how the volatility of the sectoral stock returns within Borsa İstanbul are affected during the COVID-19 pandemic. The analysis uses daily stock return data for four main sector indices: services, finance, industry, and technology. The sample period of the study covers 03.03.2015–11.03.2021, and 12.03.2020-03.04.2021 is separately analyzed for the COVID-19 period. When E-GARCH models and news impact curves are analyzed, it is found that the services sector stock returns volatility differs from other sectoral stock returns.

JEL classification: C58, G14, E44

Keywords: COVID-19, Stock returns, Investment decisions, E-GARCH model

Government Size and Openness: Insights Based on Country Classifications

Erkam Sarı, Hakan Hotunluoğlu — Mon, 21 Jun 2021 14:48:34 +0000

This study investigates the nexus between government size and openness by paying special attention to country classification. The main results of our empirical investigations show that (i) there are two government size trends meaning two different country groups exist; (ii) there is a positive relationship between trade openness and government size for the first country group, which validates the compensation hypothesis; (iii) a negative relationship between financial openness and government size is found for the second country group, which confirms the efficiency hypothesis; (iv) the effect of financial openness is nearly ten times higher than trade openness; (v) an endogenous country classification process yields better results to understand the linkages between openness and government size. In this regard our study incorporates both hypotheses and provides a uniform explanation.

JEL classification: C33, F62, H50

Keywords: Government size, Trade openness, Financial openness, Club convergence

Issue Information (Vol. 7 Issue 1)

Mon, 21 Jun 2021 00:00:00 +0000

The Impacts of Oil Prices, Exchange Rate and COVID-19 Pandemic on BIST Petrochemical Market

Seval Mutlu Çamoğlu — Mon, 21 Jun 2021 00:00:00 +0000

Stock markets are developing with the economic growth of the countries in a liberal market economy. Petrochemicals is an indicator of the performance of the country's industry with high inter-industry linkage by providing input to several sectors, producing various outputs with a certain number of raw materials. The COVID-19 pandemic period has affected all markets worldwide and caused fluctuations in the index values of large firms in the petrochemical industry in Borsa Istanbul (BIST). This study analyzes the impact of the pandemic period and change in the oil prices and exchange rate on the petrochemical market in Turkey. The monthly data of petrochemical stock market index, exchange rate, oil prices are used in this time series analysis. A pandemic information index representing the COVID-19 pandemic was derived and included in the model. According to the results, it is observed that the most important determinant of the fluctuations on the BIST petrochemical index is the oil prices. While a shock in oil prices negatively affects the BIST petrochemical index, the petrochemical index responds positively to the shock in the pandemic index.

JEL classification: N50, G10, E4

Keywords: Petrochemical stock market, Pandemic information index, Oil prices, Time series analysis

Can US Wage Increases be Regarded as a Leading Indicator for Bond Rates?

Ekin Ayşe Özşuca Erenoğlu, Elif Öznur Acar — Mon, 23 Nov 2020 10:30:48 +0000

After the subprime meltdown, the Federal Reserve focused its attention on US non-farm payroll data in order to pave the way for its fund rate hikes. As time went by, the Federal Reserve deemed particularly one sub-component of this data, namely the increments on average weekly wage growth as a proxy for inflation and thus a plausible explanation for raising the interest rates. In that aspect, we decide to elaborate on this issue further and examine whether this implemented strategy indeed had a reflection in the real market. For doing so, we intend to determine whether there is any causality relation in either direction between US average weekly wage increases and 10-year Treasury Bond rates. We utilize the Toda-Yamamoto causality approach and come up with a statistically significant result between wages and bond rates. For robustness, we also consider the unemployment rate and consumption expenditures as independent variables.

The Main Determinants of Capital Inflows in Emerging Market Economies: Does the Exchange Rate Regime Matter?

Fatma Taşdemir — Mon, 23 Nov 2020 10:30:30 +0000

There is a bulk of literature in analyzing the impacts of exchange rate regimes (ERRs) on capital flows into emerging market economies. However, these studies mainly do not take into account integration and cointegration properties of variables. This paper aims to tackle this important issue by investigating whether ERRs matter for the impacts of the main push (global financial conditions, GFC) and pull (real GDP) factors on capital inflows into emerging market economies. We find that worsening GFC decreases all types of capital inflow except foreign direct investments in case of floating ERR. This impact is statistically significant only for portfolio inflows in case of managed ERR. The pull factor is often positive and statistically significant in determining capital inflows in the long-run only under floating ERRs. These results suggest that the long-run impacts of the main pull and push factors on capital inflows are often magnified under more flexible ERRs.

Impact of Public Debt, Deficit and Debt Financing on Private Investment in a Large Country: Evidence from the United States

Amir Kia — Mon, 23 Nov 2020 10:30:07 +0000

This paper analyses the direct impact of fiscal variables on private investment. The current literature ignores one or more fiscal variables and, in many cases, the foreign financing of debt. In this paper, an aggregate investment function for an economy in which firms incur adjustment costs in their investment process is developed. The developed model incorporates the direct impact of government expenditure, public debt and investment, deficits and foreign-financed debt on private investment. The model is tested on US data. It is found that public investment does not have any impact on private investment, but government expenditure, deficit, debt and foreign-financed debt crowd out private investment over the long run. However, deficit crowds in the private investment over the short run.

Factors Influencing the Economic Behavior of the Food, Beverages and Tobacco Industry: A Case Study for Portuguese Enterprises

Kelly Patricia Murillo, Eugénio Rocha — Mon, 23 Nov 2020 10:27:42 +0000

In today's world, it is increasingly important to conduct economic and financial analyzes of enterprises in all sectors to determine strengths, identify weaknesses and adopt strategies that allow them to be at the highest competitive level. In particular, the food sector plays an essential role in the economy of any country, representing a significant contribution to gross domestic product, total employment, and disposable income of households. In this work, we adopt a methodology for measuring efficiency based on the multidirectional efficiency analysis and other mathematical techniques (the calculation of the normal distribution intersection coefficient (NC value), analysis of clusters and principal components, and model fitting) in order to examine the factors that influence the performance of Portuguese enterprises in the food, beverages and tobacco industry for the period of 2006-2013. The results show a characterization of the financial structure of the sector and diagnosis through indexes that identify the strategic positioning of the enterprises in terms of efficiency scores. In addition, we also show that an analysis of the variables that must be approached differently to obtain better results regarding economic performance. Although there is an increase in credit with the acquisition of long-term debts, there is no evidence that this implies the ability of enterprises to grow faster, which affects profitability.

Issue Information (Vol. 6 Issue 2)

Mon, 23 Nov 2020 10:26:01 +0000

Is Tourism a Key Factor for Economic Growth? Fresh Evidence from South Europe Using Panel Cointegration and PVAR Analyses

Ioannis Kostakis — Mon, 23 Nov 2020 00:00:00 +0000

This paper brings fresh empirical evidence on the relationship between tourism and economic growth for five South European countries over the period 2000Q1-2018Q4 within a multivariate framework. PVAR and panel cointegration analyses are employed to infer the causal relationship between tourism and economic growth. Heterogeneous panel cointegration test reveals a long-run relationship between real GDP, labour force, gross fixed capital formation and tourism. Granger causality validates the bidirectional and unidirectional causal relationship between tourism, labour and economic growth and physical capital and economic growth, respectively. Simultaneously, impulse-response functions of PVAR model highlight the fact that short-run innovations might have a smaller impact on economic growth against a permanent long-run augmentation of these variables. Our findings might leave ample room for government policies to stimulate strategies for higher economic growth.

Issue Information (Vol. 6 Issue 1)

Mon, 25 May 2020 00:00:00 +0000

Credit Rationing and Mature French SMEs: A Disequilibrium Model

Philippe Adair, Mohamed Adaskou — Mon, 25 May 2020 00:00:00 +0000

A conventional assumption that deserves testing is that small and medium-sized enterprises (SMEs) are most affected by credit crunch. In this respect, a disequilibrium model is designed to analyse the determinants of credit rationing upon a balanced panel of 2,370 mature French SMEs over the period 2002-2010. According to the estimates of simultaneous equations, the desired demand for bank credit is determined by exogenous factors from the supply-side. The credit supply-side validates best trade-off theory, whereas the credit demand-side validates best pecking order theory. The average share of rationed SMEs is seven per cent of the sample, suggesting that access to bank loans is not a major issue for mature French SMEs.

Monopsony and Discrimination in Labor Market in the Solow-Stiglitz Two-Group Neoclassical Growth Model

Wei-Bin Zhang — Mon, 25 May 2020 00:00:00 +0000

The purpose of this study is to deal with economic growth with labor market monopsony. The economy is composed of one sector (like in the Solow model) and two groups of households (like in the Stiglitz model). The sector uses capital and labor as inputs. Capital and output markets are perfectly competitive. The population is classified into two - discriminatory and discriminated - groups. Labor market for the discriminatory group is perfectly competitive, whereas it is characterized by monopsony for the latter group. We model the behavior of the household with the concept of disposable income and utility function developed by Zhang (2013, 2017). The model endogenously determines the prot of the rm which is equally distributed among the discriminatory population. We build the model and provide a computational procedure to quantify the response of the model economy in a comparative dynamic setting. We also compare the model outcomes with a labor market under perfect competition and under monopsony. We show that monopsony harms not only national economic growth but also the discriminatory household in the long term.

Inequalities and Unfair Income Distribution in Japan

Sayaka Sakoda — Mon, 25 May 2020 00:00:00 +0000

There has been a debate about what measurement is most appropriate for measuring inequality because the classical index does not distinguish between what is fair and unfair distribution of income. In this empirical study, the "Responsibility-Sensitive Egalitarian Theory" is applied for the case of Japan. Our paper firstly tracks the historical evolution of inequalities and concludes that the Japanese accept pre-tax income inequality because they believe their socio-economic class is determined by luck. Secondly, illustrating the Unfairness Lorenz Curve by gender shows that females face more unfairness than males: the pre-tax income of middle-income males increases slightly compared to the fair-income group from 2010 to 2013. However,the opposite is true for females in the bottom and middle classes. Considering there already exists a gender wage gap in Japan, it is necessary to take action to reduce inequality.

Are Macroprudential Policies Effective Tools to Reduce Credit Growth in Emerging Markets?

Fatma Pınar Erdem Küçükbıçakcı, Etkin Özen, İbrahim Ünalmış — Mon, 25 May 2020 00:00:00 +0000

Macroprudential policies (MPPs) were relatively less used around the world before the 2008 global financial crisis (GFC). In the aftermath of the GFC, they have become popular both in advanced and emerging market countries. Through time, the accumulation of new data across countries has led to a growing body of literature investigating the effectiveness of such policies. In this paper, using a data set of 30 developing and emerging market countries and panel VAR approach with GMM estimation, we contribute to this literature, first, by testing whether MPPs are effective in controlling domestic credit growth after a global liquidity shock. Second, we test whether MPPs are more effective when a combination of MPPs are used to control credit growth. Results indicate that MPPs are effective tools to limit domestic credit growth, especially during the expansion phase of the credit cycle. Second, the number of MPP tools does matter to manage the magnitude and duration of the domestic credit growth effectively. We argue that the insufficient number of MPP implementations are unable to prevent leakages in the system and reduce the effectiveness of MPPs under a global liquidity shock.

Determining the Interaction of the International Portfolio Flows with Exchange Rate Volatility in Developing Countries

Utku Altunöz — Mon, 25 May 2020 00:00:00 +0000

The aim of this study is to examine the effect of the bond portfolio and equity inflows on the exchange rate dynamics for a set of developing countries, including Turkey, Hungary, New Zealand, India, Russia, Poland, Brazil and Argentina over the period 1997:01-2017:12 by using a Markov-switching model. According to the analysis results, the net bond inflows lead to an increase in the likelihood of a high volatility regime in Turkey and Russia and increases the probability of transition from the high volatility regime to the low volatility regime in Hungary. Additionally, the net bond inflows from New Zealand and Poland to the United States (US) rise the possibility of remaining in the low volatility regime. The net equity inflows from Turkey and Poland to the US lead to a rise in the possibility of remaining in the high volatility regime. Besides, the net equity inflows from Brazil and Argentina to the US lead to a decline in the possibility of remaining in the low volatility state. In the light of the empirical results supporting the "return chasing" hypothesis, this paper argues that credit controls on short-term financial inflows could be an effective means in stabilizing the foreign exchange market.

The Determinants of Migration: Italian Regional Factors and the Relationship with Filipino Migrant Labor Supply

Maire Carroline Magante — Mon, 25 May 2020 00:00:00 +0000

Throughout the years, the segmentation of the Italian labor market across regions, classes, genders, skill-levels and sectors has beneted from the supply of migrant labor. Among these migrant laborers, Filipinos met the demand for labor across various sectors where native supply is insufficient for local demand. Nevertheless, despite demand, the migration inflow fluctuates in response to variations in economic and geographic conditions. This study investigates the region-specific drivers of the annual inflow of Filipino migrants to the various regions in Italy. Using the annual arrivals of labor migrants from the Philippines to Italy for the period of 2007-2017, this paper uses static and dynamic estimation techniques by utilizing regional economic and demographic indices. The results show adherence to and diversion from migration theories and expected movements. Regardless of the substantial regional differences, the Filipino migrant stock is the most stable and significant variable in influencing regional migration inflow.

Issue Information (Vol. 5 Issue 2)

Wed, 27 Nov 2019 00:00:00 +0000

The Unequal Burden of Poverty on Time Use in South Africa

Burça Kızılırmak, Emel Memiş — Fri, 22 Nov 2019 00:00:00 +0000

This study aims to contribute to the research on poverty by analysing the association of income poverty with gender inequalities in time use patterns. Based on South Africa's first time-use data compiled in 2000, we explore whether household income poverty has any influence on the typical patterns of time use of women and men. Controlling for a variety of household and individual characteristics, we assess the extent to which living in income poverty produce long hours of work –-in particular unpaid work hours-- using bivariate and multivariate Tobit estimations. Our results show asymmetric impacts of income poverty on women's and men's time allocations controlling for the widely accepted determining factors. While women in poor households spend more time on unpaid work activities, we do not see any significant change in men's unpaid work time with poverty status. Women's total paid and unpaid work time is higher under poverty as the increase in their unpaid work time extends away from the decline in paid work time. Other findings obtained provide supporting evidence presented in previous research: being married/cohabiting with a partner has an increasing impact on women's unpaid work, whereas an opposite impact is observed for their male counterparts. Women's unpaid work time increases with the number of preschool children, whereas it is the paid work time which rises in case of men's work time.

Political Announcements and Exchange Rate Expectations

Brigitta Tóth-Bozó, László Szalai — Fri, 22 Nov 2019 00:00:00 +0000

Exchange rate fluctuations in a small open economy are closely related to political trust. Various political announcements exert significant influence on the exchange rate by affecting the expectations of economic actors. Due to information technology and social networks, these statements spread quicker and gain more publicity than ever before. In this paper, we present a dynamic model with adaptive expectations to describe the short and long-run effects of political announcements on the exchange rate. We found that relevant announcements cause significant fluctuations in the short-run but do not affect the long-term equilibrium exchange rate. Our results are also supported by case-studies from Hungary.

Wavelet Leader and Multifractal Detrended Fluctuation Analysis of Market Efficiency: Evidence from the WAEMU Market Index

Oumou Kalsoum Diallo, Pierre Mendy — Tue, 28 May 2019 00:00:00 +0000

Efficient markets hypothesis (EMH) has been a hot topic since its introduction in the 1960s. This problematic is a current topic and has been the subject of many studies with different methods. This paper examines the weak-form efficiency of the WAEMU stock exchange from 11/04/2008 to 23/08/2016. We combined the wavelets approaches and multifractal detrended uctuation analysis (MF-DFA) to analyse the efficient market hypothesis of the BRVM10 index of the WAEMU regional stock change. Our ndings show that the log return of BRVM10 index exhibits a persistent and multifractal process.

Issue Information (Vol. 5 Issue 1)

Tue, 28 May 2019 00:00:00 +0000

Cover for Volume 3 Issue 2

Who Pays for Renewables? Increasing Renewable Subsidisation due to Increased Datacentre Demand in Ireland

Muireann Lynch, Mel T. Devine — Tue, 28 May 2019 00:00:00 +0000

Demand from datacentres makes up a rapidly growing portion of electricity demand in Ireland. Increased demand in turn gives rise to increased renewable generation, mandated by government targets, and a corresponding increase in subsidisation levels. The current method of apportioning renewable subsidy costs may lead to consumers other than datacentres bearing this excess cost of subsidisation. This letter calculates the expected impact on these consumers.

Issue Information (Vol. 4 Issue 2)

Fri, 30 Nov 2018 14:40:10 +0000

Credit, Capital Flows and Monetary Policy

Nazim Kadri Ekinci — Fri, 30 Nov 2018 14:11:58 +0000

The credit channel literature implicitly relies on the fact that capital spending requires and depends on financing and that credit is the main form of financing. The mainstream model tries to avoid this implication by recourse to artificial concepts and variables such as the “external finance” premium. We, by contrast, explicitly model capital expenditures as a function of the credit volume along with other relevant variables. This formulation has roots in the Post-Keynesian logico-temporal ordering of production and the realization of income. The inclusion of credit in expenditure functions result in a simple income determination model making the roles of credit and monetary policy transparent. A financial block is added to the model to determine the interest rates and credit aggregates. Principles of consistent macro modelling on Post-Keynesian principles are carefully delineated. In particular, the principle of Keynesian dichotomy and necessity of an appropriate lead-lag structure in simultaneous equation models compatible with the logico-temporal ordering of production is stressed. A comparative static/dynamic example based on the model demonstrates the ability of the model in generating a reasonable account of possible outcomes in response to changes to underlying conditions.

The Effect of Military Expenditure on Profit Rates

Adem Yavuz Elveren, Sara Hsu — Fri, 30 Nov 2018 14:10:31 +0000

This article provides evidence of the effect of military expenditures on the rate of profits by focusing on 32 major countries for the period of 1963-2008 by using data from the Extended Penn World Tables, the University of Texas Inequality Project Estimated Household Income Inequality, the World Development Indicator, and the Stockholm International Peace Research Institute. The article employs a Generalized Method of Moment model within a Marxist framework. Findings show that military expenditures have positive effect on the rate of profits. It is also showed that increasing income inequality increases the rate of profits. Finally, the findings suggest that while military expenditures have a positive effect on the profit rates in the case of both armsexporting countries and net-arms exporters, the relationship is not that significant in the case of arms-importing countries.

Wage Gap and Employment Status in Indian Labour Market

Panchanan Das — Fri, 30 Nov 2018 14:08:00 +0000

This study examines the extent of wage gap between workers in permanent and temporary jobs but in roughly similar occupation types by evaluating the impact of workers’ characteristics and education. The differential effects of the covariates on wage gap at different locations of the wage distribution are estimated by applying quantile regression model. After estimating the differential effects the relevance of glass ceiling or sticky floor hypothesis has been tested with Indian data. The wage gap between temporary and permanent employment is decomposed into endowment effect based on the difference in labour market characteristics and coefficient effect based on the difference in returns for the same characteristics. The study observes that the wage gap between temporary and permanent workers is wider at the upper tail of the distribution not rejecting the glass ceiling hypothesis. The decomposition analysis suggests that the wage gap presents in the Indian labour market primarily because of discrimination measured by the coefficients effects.

The Potential Effects of TPP, TTIP and Trump's Tariffs on China's Competitiveness in the US Market

Seda Ekmen Ozcelik — Fri, 30 Nov 2018 00:00:00 +0000

This paper analyzes the potential effects of the Trans-Pacific Partnership (TPP), the Trans-Atlantic Trade, Investment Partnership (TTIP) and also tariff-related measures implemented by Trump administration against China’s export. It examines the sectors in which China will be affected most in terms of its competitiveness in the US market against the countries included in these agreements. It also investigates whether China has significant price advantages in certain sectors and whether these agreements and tariff measures have the potential to erode those advantages. The ‘quantity’ and ‘value’ of US imports from the countries included in these agreements are used for calculating ‘quantity similarity indexes’ and ‘price similarity indexes’ in order to compare China to its competitors. Taking into account ‘product heterogeneity’, this paper reveals how Chinese exports will be affected by the elimination of tariff barriers within the context of these agreements and also by the increases in tariffs on Chinese products. The paper also presents policy implications for China to create its own trade and competition measures against these possible trade actions, along with the potential effects of Chinese competition on other countries in the US market. The results indicate that China is likely to be seriously and negatively affected from these prospective agreements and tariff measures. It is also likely that China will lose its price competitiveness against its main competitors in the US market, especially in such sectors as plastics, medical appliances and optical instruments. Last but not the least, the products whose tariffs are increased by the Trump administration are selected in a rational way from the viewpoint of the US, as those products are generally the ones in which TPP and TTIP are relatively ineffective.

The Portuguese Manufacturing Sector during 2013-2016 after the Troika Austerity Measures

Kelly Patricia Murillo, Eugénio M. Rocha — Fri, 01 Jun 2018 00:00:00 +0000

This work studies some of the effects of the Troika austery measures on the manufacturing Portuguese firms in terms of efficiency scores. We adopted a non-parametric approach, which combines multidirectional efficiency analysis with other techniques, to examine two empirical hypotheses after the financial crisis and corresponding intervention of the Troika measures: (a) the performance of firms in the manufacturing sector has improved; (b) the manufacturing sector significantly acquired long-term debt but use it in an efficient way. Our results show that validation of the first hypothesis heavily depend on the firm size, and the second hypothesis is correct only with respect to long-term debt acquiring. In fact, some sectors have managed to maintain an acceptable level of efficiency, according to the circumstances, however, most showed some inefficient level in the management of resources and less than 10% were able to overcome the difficulties presented after the intervention of the Troika. In approx. 77% of firms there was an acquisition of long-term debts, but it was the variable that was used less efficient.

Post-Crisis Growth and Development Slowdown of Central Eastern European Countries from the Middle-Income Trap Perspective

Krisztina Soreg — Fri, 01 Jun 2018 00:00:00 +0000

There seems to be no compelling reason to argue that the financial crisis of 2007-08 has significantly contributed to the deepening of centre-periphery based development issues in the European Union. It has become evident that globally, the economic and political role of the EU is in a significant decline. The world’s most opened economic integration was facing a severe market crisis including a so-called double-dip recession period between 2008-2009 and also 2011-2013 with slight regional differences. The development and economic growth of transition economies within the European Union are definitely representing a special case. During the recent crisis, the above-mentioned countries have been dealing with several socio-economic difficulties raising significant financing needs towards the IMF. It can be assumed that the long-standing structural problems of the post-Soviet countries combined with the latest protracted recession have created a middle-income trap related situation in the examined region. In this paper, the discussion centres on the case study of Hungary, a country which has come a long way to be integrated into the EU, however, from the mid-2000s no converging tendency can be observed towards the old Member States.

Issue Information (Vol. 4 Issue 1)

Fri, 18 May 2018 00:53:11 +0000

Cover for Volume 4 Issue 1

Institutions and Resource-driven Development

László Szalai — Fri, 18 May 2018 00:39:40 +0000

According to the resource curse hypothesis abundant resources are likely to impede economic growth and social development. However, empirical evidences are controversial as numerous studies found that the direct effects of abundance are either insignificant, non-monotonic, or positive, while the negative indirect effects arise when natural wealth crowds-out other fundamental sources of growth. Further research on the different development outcomes concluded that the growth effects are also conditional on the quality of both public and private institutions. Political economy explanations argue that abundance leads to patronage and myopic rent-seeking behavior under weak institutions, whereas it fosters economic growth if the institutional environment of the extraction promotes sound revenue management, transparency, and accountability. This paper aims to synthetize the findings on the interaction between institutions and natural resources and gives an overview of the policy proposals on mitigating the negative indirect effects.

The Impact of Institutional Quality on Economic Performance: An Empirical Study of European Union 28 and Prospective Member Countries

Puruweti Siyakiya — Sun, 31 Dec 2017 00:00:00 +0000

Using a panel set of 28 European Union member states and Turkey over a period of 1995-2014, this paper examines to what extent institutional quality (economic freedom index) and its sub-indicators (rule of law, regulatory efficiency and market openness) can influence overall economic performance measured by gross value added per capita. The paper expands on existing literature by disaggregate the growth impact of institutions for all countries in the sample, high income and low income countries. The independent variables included in the model are gross fixed capital formation as a percentage of GDP, trade openness, government size, quality of institution, inflation and human capital while gross value added per capita is the dependent variable. Generally, the results show a positive and significant relationship between economic performance and the quality of institution. Precisely, a 1 per cent improvement in institutional quality is predicted to have an effect of increasing gross value added per capita by 1.092 per cent holding other things constant. However, decomposing countries according to their level of economic development the results reveal that the impact of institutional quality on economic performance is more pronounced in middle income countries than high income countries. Moreover, there is significant evidence that improvement of regulatory efficiency promotes economic performance for all countries and countries at different levels of development. Given these differences in the impact of institutional quality on economic performance across countries and also by institutional category this implies that different countries require different institutional settings to foster their growth.

Comparing the performance of Turkish deposit banks by using DEMATEL, Grey Relational Analysis (GRA) and MOORA approaches

Serhat Yüksel, Hasan Dinçer, Şenol Emir — Sun, 31 Dec 2017 00:00:00 +0000

The purpose of the study is to measure the financial performance in Turkish banking sector and to combine the data mining with the multi-criteria decision-making methods. For this purpose, a text-mining process is applied to measure the pairwise comparison of the criteria and the results are used in the integrated models. DEMATEL-GRA and DEMATEL-MOORA are defined as two integrated models. The results show that integrated models give the coherent outcomes and the text-mining process could be adapted properly in the multi-criteria decision-making methods. It is also concluded that foreign banks have better performance in comparison with state and private banks.

Issue Information (Vol. 3 Issue 2)

Sun, 31 Dec 2017 00:00:00 +0000

Cover for Volume 3 Issue 2

Structural Change in Turkey’s Foreign Trade: 1990-2014 Period

Aziz Murat Hatipağaoğlu — Sun, 31 Dec 2017 00:00:00 +0000

The macroeconomic policy change which Turkey imposed after 1980 has caused significant structural changes in foreign trade. After this fundamental change in the policy, “Import-Substitute Economic Policy” came to an end and Turkey switched to the new policy called "Export-Oriented Industrialization". This Strategy foresaw a structural transformation in many areas of the Turkish economy, especially in foreign trade. The period from 1980 to 1990 has been a period of adapting to these policy changes. During this period, macroeconomic policies of Turkey have been tried to be harmonized with global economic policies. After this period, foreign trade oriented policies have been developed. The aim of this study is to determine whether a structural transformation has taken place in Turkey's foreign trade between the years 1990 and 2014 over a period of 25 years. This is the first study that evaluates the structural transformation of Turkey's foreign trade using the new formula for the Constant Market Share (CMS) analysis method. For the analysis, we used Turkey’s foreign trade data with 23 countries which have the largest part among Turkey’s trade partners. World Integrated Trade Solution (WITS) data has been used for the analysis and the data compiled by the United Nations (UN) Classification of Broad Economic Groups. According to the results, there are some significant positive developments in Turkey's foreign trade in 1990-2004 area. However, these developments are not unique, purely country-based and independent of trends in the world. To sum up, there is no structural transformation in Turkey's export performance in the context of product, technological composition and geographical market diversity.

Product Life Cycle and Innovativeness: The Case of MENA

Ugur Aytun, Yılmaz Kılıçaslan — Sun, 31 Dec 2017 00:00:00 +0000

One discussion in the literature of economics is the interaction between product life cycle and technological advancement. Firms may enjoy high profits and pay higher wages to the workers due to higher prices by introduction of new products in early stages and product developments in later stages. The aim of this study, by assuming that life cycle stage of a product represents its level of technology intensity, is to measure the innovative capabilities of selected benchmark and MENA countries by developing a maturity index and then to see how MENA countries adapt themselves to relative maturity changes of products at the global level. Empirical findings using COMTRADE bilateral trade data for the period 1996-2013 showed that most of MENA countries’ –especially in Algeria and Turkey- adaptation performance fall in high- and low-tech industries. Moreover, adaptation pattern of MENA countries except for Egypt shows a decreasing trend in the highest growing products World trade. The performance of benchmark countries such as USA, South Korea, and Germany in terms of maturity adaptation was found to be increasing. We found that adaptation performance of MENA countries showed improvements in medium high- and medium low-tech industries mostly due to chemical and plastic industries in the last quarter. All these findings imply to call for policies that give incentive to create young products in high-tech and most demanded industries and to rejuvenate those already exist.

Issue Information (Vol. 3 Issue 1)

Fri, 30 Jun 2017 00:00:00 +0000

Cover for Volume 3 Issue 1

Eliminating the Effects of the Companies Insolvency Risk:A Model Approach

Malgorzata Porada Rochon, Justyna Franc Dabrowska, Radoslaw Suwala — Mon, 26 Jun 2017 00:00:00 +0000

Managers around the world identify risk of liquidity problems as the primary barrier of their decisions. In the global economy, in the turbulent environment, the effects of companies' insolvency risk lead to many operational and strategic problems also causes of contagion effect. Therefore, it is important to study the phenomenon of insolvency, determinants that shape it as well as seek opportunities to reduce the risk of this problem. The aim of the study is to identify the determinants that affect the risk of insolvency of companies in Poland as well as propose a model of the effects of companies' insolvency based on the profiles of risk factors and the actions as well as instruments to successfully manage the risks of default. We used Logit Model and Panel Data. Our findings suggest that appropriate debt management, as well as the need for synchronization of receipts and expenditure, which should secure the current payments in a short run is crucial in identifying and reducing the risk of insolvency, in a short term (in relation to all groups of companies). However, in the longer term, consideration should be given to the different factors that can allow the identification of the risk of insolvency, which may further allow the entrepreneurs to make quick response, or spread out over time the operations (e.g. restructuring) and thus allow avoiding the insolvency. Hence, in private companies a sustainable performance should be instituted by the board of directors.

The Importance of Estimation Method Choice for the Analysis of the Determinants of Capital Structure– An Example of Poland

Natalia Szomko — Mon, 26 Jun 2017 00:00:00 +0000

When assessing the influence of selected factors on capital structure, the researcher has to choose the set of determinants taken into account, their operationalization and the estimation method for regression model. However, the results vary significantly when the model is estimated with ordinary least squares, fixed effects or generalized method of moments. This study compares the results of parameter and standard errors estimates for the capital structure determinants models. Lagged debt ratio and size have positive impact on debt ratio, while profitability, business risk and industry median debt ratio have negative impact on debt ratio for companies listed in Poland.

Impact of Consumer Loans on Inflation and Current Account Deficit: A Toda Yamamoto Causality Test for Turkey

Serhat Yüksel, Mustafa Özsarı — Sat, 31 Dec 2016 00:00:00 +0000

This study aims to investigate the causality relationship between consumer loans and inflation, and consumer loans and current account deficit in Turkey. In this scope, Toda Yamamoto causality test is used for the periods between 1994:1 and 2015:3. According to test results, we found that there is no causal relationship between consumer loans and inflation rate, and consumer loans and current account deficit. In other words, changes in consumer loans do not lead neither high current account deficit rates nor high inflation rates in Turkey. Therefore, limiting consumer loans is not the solution for inflation and current account deficit problems of Turkey and policy makers should apply some other effective policies to solve high CA deficit and high inflation problems.

Conflict or Distance: What Determines the International Trade?

Ilhom Temurov, Yilmaz Kilicaslan — Sat, 31 Dec 2016 00:00:00 +0000

This paper aims to examine the impact of distance and conflict on the dynamics of Turkish international trade by using a gravity type model. Since the gravity model of international trade would work only if there is no conflict, we incorporate conflicts into the model. Three questions have motivated this study: (1) What are the determinants of trade performance? (2) How does conflict impacts international trade? (3) How does conflict between trading partners affect the impact of distance on trade? In order to explain the impact of different types of conflict on trade relations, we defined and measured two different types of conflict: Diplomatic and security. In our analysis, we also control for the impact of Arab-Spring on trade relations of Turkey. We use dynamic panel data models to explore the impact of conflict and proximity by using UN COMTRADE bilateral trade data of Turkey for the period 1990-2013. The estimation results show that while diplomatic conflicts have no significant impact on trade, security conflicts affect trade relations negatively. We also found that Arab Spring had a negative impact on the trade relations. Moreover, we found in this study that geographical distance reduces the negative impact of conflict on trade.

Issue Information (Vol. 1 Issue 1)

Fri, 30 Dec 2016 00:00:00 +0000

Cover page for Volume 1, Issue 1

Issue Information (Vol. 2 Issue 1)

Fri, 30 Dec 2016 00:00:00 +0000

Cover for Vol. 2 Issue 1

Issue Information (Vol. 2 Issue 2)

Fri, 30 Dec 2016 00:00:00 +0000

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The Relationship between Credit Volume and Current Account Deficit: A Dynamic Analysis for Turkey

Pinar Karahan, Nilgun Caglarirmak Uslu — Mon, 06 Jun 2016 12:08:42 +0000

One of Turkey’s most important macroeconomic problems is persistent current account deficit. Credit volume has been shown as one of the basic determinants of current account rate, especially after the global financial crisis in Turkish economy. The Central Bank of Turkey has begun to implement the policy to ensure financial stability by slowing down credit volume in response to current account deficit affected by rapid credit expansion after the global financial crisis of 2008. In this study, we investigated the relationship between credit volume and current account deficit covering the period of 2005:Q1- 2015:Q3 employing Bound test approach, ARDL model and Kalman filter method. Bound test results suggest the existence of co-integration relationship between current account deficit and credit volume. ARDL model results indicate that the credit volume is statistical significant and positively affects current account deficit in the short and long run. The results show that a 1 % increase in credit volume leads to nearly a 0.62 % increase in current account deficit. Kalman Filter method results indicate that the effect of credit volume on current account deficit increased after global financial crisis and started to decrease after 2013.

Evolving Patterns of Payment Methods in Turkish Foreign Trade

Kemal Turkcan — Mon, 06 Jun 2016 12:08:42 +0000

Serving the global marketplace brings many risks to the firms that they may not have on the domestic side. Apart from financing, trade finance mechanisms assist exporters and importers to mitigate or reduce their risks associated with doing business internationally. The present paper sheds lights on the structure and evaluation of payment methods in international trade as well as their changing composition due to 2008-2009 global financial crisis using a unique bilateral trade finance data from Turkey with 206 countries over the period 2002-2012 at the 2-digit level of ISIC Revision 3. Three key results emerge. First, Turkey’s exports are mainly financed via open account method while the majority of its imports were executed via cash-in advance method. Second, the shares of inter-firm trade finance (open account and cash-in advance) in Turkey’s foreign trade dramatically increased over the period 2002-2012, while the shares of the intermediate trade finance (cash against documents and letter of credit) decreased substantially. Finally, the evidence show that both exporters and importers started to use cash-in advance method, the safest method of payment, more intensively than other methods shortly after the global recession in 2008. Overall, the patterns presented in this paper highlight the fact that Turkish traders are not able to set payment terms that are highly favorable to themselves and bear all risks associated with international trade transactions.

Issue Information (Vol. 1 Issue 2)

Tue, 01 Dec 2015 23:47:44 +0000

Cover for Vol 1. Issue 2

Revisiting Sovereign Ratings, Capital Flows And Financial Contagion in Emerging Markets

Noha Emara, Ayah El Said — Tue, 01 Dec 2015 20:51:16 +0000

This study revisits sovereign credit ratings, contagion and capital flows to Emerging Markets (EMs), and clarify the relationship between them. Specifically, this study analyzes how the changes in sovereign rating influence different types of capital flows to EMs and whether the changes in the different kinds of capital flows in one country be explained by a sovereign ratings’ change in another country. Using Arellano-Bover/Blundell-Bond Dynamic Panel System GMM for 23 EMs over the period 1990-2012 the results of the study suggest that sovereign ratings is a crucial factor for EMs’ access to international capital markets and that capital flows is a major source of financing for Ems. In addition, the results show that financial contagion may continue to be a threat to capital flowing into EMs and that financial crisis increases the impact of sovereign rating on foreign direct investment but is not the case with portfolio investment.

CO2 Emissions and Economic Growth of SAARC Countries: Evidence from a Panel VAR Analysis

Sweety Pandey, Mrutyunjaya Mishra — Tue, 01 Dec 2015 12:57:22 +0000

The paper examined the causality in both static and dynamic framework between CO2 emissions and economic growth of SAARC countries over the period 1972-2010 using panel approach. The paper presents the facts obtained on the basis of panel unit root test, panel-co-integration test , panel VECM and Impulse Response functions (IRFs) and Variance decomposition (VDs). IRFs and VDs analysis indicate that CO2 emissions, GDP have positive impact on each other. The result from the application of VECM analysis suggests unidirectional causality running from economic growth to CO2 emissions. The result found contradicts the Environmental Kuznets Curve hypothesis.

Circular Causality of R&D and Export in EU countries

Dilek Cetin, Michele Cincera — Mon, 01 Jun 2015 18:27:13 +0000

The main objective of the study is to explore the relationship between Research and Development (R&D) investments and export behaviour in EU countries in the aspect of competitiveness. To this end, the micro-aggregated Community Innovation Survey 3 (CIS3) is used. Both the volume and the decision of R&D investment and export are found to be mutually dependent. Particularly, in manufacturing industry, the effect of export on R&D is underestimated and the one of R&D on export is overestimated. In the knowledge intensive sectors, circular causality link is broken between the R&D and export.

The Impact of the Informal Employment on the Social Security Deficits in Turkey

Adem Yavuz Elveren — Mon, 01 Jun 2015 11:42:46 +0000

This study examines the impact of the formalization of the labor market on social security deficits in Turkey. After a brief discussion on the causes and consequences of the informality of the economy, the paper reveals the effect of possible developments in the labor market, --such as the reduction in informal employment, the decrease in contribution evasion, and the increase in youth employment and womens employment-- on the deficits, which has increased since the early 1990s. To assess the effect, we utilize a simple actuarial model to project the deficit through 2050 under different scenarios. The results point to the importance of increasing female labor force participation, preventing evasion of social security contributions, and show the effect of an ageing population.

Standards, Inequality in Education and Efficiency

Sevket Alper Koc, Hakki Cenk Erkin — Mon, 01 Jun 2015 00:00:00 +0000

We develop a model of educational standards that includes inequality in educational opportunities. Our model shows that policymakers setting an output maximizing standard need to consider structural factors such as inequality of income and opportunity, skill mismatch in the economy, profit and wage shares and labor market imperfections. High standards are not optimal under severe educational inequality; they lead to lower output when many cannot access quality education. Optimal standard rises along with increasing opportunities for poor students. Targeted subsidies enhance both distributional and efficiency-related objectives. Other effective policies to extend skilled labor and to improve poor workers income are remedying information problems between employers and workers and distributing more of output gains toward labor.

Drivers of Farm Efficiency in Turkey: A Stochastic Frontier Analysis

Hasan Dudu, Erol Cakmak, Nadir Öcal — Mon, 01 Jun 2015 00:00:00 +0000

This paper analyzes the efficiency structure of Turkish agriculture in farm household level by using various models of stochastic frontier analysis. A household level survey conducted in 2002 and 2004 is used in the analysis. Firstly, an efficient production frontier is estimated by a panel data model. By using these estimates, relative importance of inputs and their interaction with various farm characteristics are inspected. The parameters of production frontier show that agricultural production is crucially dependent on land and there is an excessive employment of labor. Secondly, the efficiency scores are estimated at farm household level. The results are reported according to NUTS-I regional classification and many other farm specific characteristics. The western parts of the country are found to be relatively more efficient and there is a high deviation in the mean efficiencies of different regions. There is an increase in mean efficiencies of all regions from 2002 to 2004. Besides, crop patterns, farm size, education level of household chief and irrigation are found to be effective on efficiency.

Forecasting Agricultural Production: A Chaotic Dynamic Approach

Mon, 01 Jun 2015 00:00:00 +0000

The aim of this study is to examine the existence of chaotic structure in agricultural production in Turkey by using Chaotic Dynamic Analysis (CDA) and to provide accurate forecasts of agricultural production. The data of wheat, barley and rice production in Turkey obtained from Turkish Statistical Institute (TURKSTAT) covers the period of 1991 to 2009. Our analysis shows that the supply of the selected agricultural products has a chaotic structure. Our dynamic system constructed predicted the supply of year 2010 with % 0.5 error for wheat, %5 error for barley, and %2.5 error ratio for rice. This study is the first attempt using CDA to forecast future agricultural product supply in Turkey. The findings of this study will help to produce effective policies to prevent supply disequilibrium, and excess price fluctuations.