This document summarizes a research paper that empirically examines the long-run relationship between exchange rates and trade balance in Thailand. Specifically, it:
1) Uses an asymmetric cointegration method to test for a relationship between exchange rate, imports/exports, and trade balance in Thailand.
2) Finds evidence of an asymmetric cointegration between these variables, indicating exchange rate changes have differently impacted trade balance depending on the direction of change.
3) Suggests Thailand's trade balance deficit during the late 1990s-2010 period was likely due to large imports of crude oil over this time frame.
Purpose: Considering the mixed results of previous empirical studies with regard to how the real
exchange rates affect bilateral trade balance, this study intends to test the presence of not only the nonlinear
relationship but also the J-curve effect and Korea data from January 1985 through December 2013 is adopted.
The findings are helpful for emerging countries to evaluate their exchange policy. Methodology: Unit root test,
cointegration analysis and Vector Autoregressive Error Correction Model are adopted in this study. Findings: The
results indicate that there is a co-integration relationship between real exchange rates and bilateral trade balance
in both linear and nonlinear models and Korea-U.S. bilateral trade balance exhibited no J-curve effect when the
Korean won depreciated against U.S. dollar. A performance evaluation proves nonlinear model is better than
linear model. Recommendation: The findings help us to realize that depreciation has a limited effect on
promoting trade balance. Sharp currency depreciation will hurt country’s trade balance.
Purpose: Considering the mixed results of previous empirical studies with regard to how the real
exchange rates affect bilateral trade balance, this study intends to test the presence of not only the nonlinear
relationship but also the J-curve effect and Korea data from January 1985 through December 2013 is adopted.
The findings are helpful for emerging countries to evaluate their exchange policy. Methodology: Unit root test,
cointegration analysis and Vector Autoregressive Error Correction Model are adopted in this study. Findings: The
results indicate that there is a co-integration relationship between real exchange rates and bilateral trade balance
in both linear and nonlinear models and Korea-U.S. bilateral trade balance exhibited no J-curve effect when the
Korean won depreciated against U.S. dollar. A performance evaluation proves nonlinear model is better than
linear model. Recommendation: The findings help us to realize that depreciation has a limited effect on
promoting trade balance. Sharp currency depreciation will hurt country’s trade balance.
American Journal of Multidisciplinary Research and Development is indexed, refereed and peer-reviewed journal, which is designed to publish research articles.
This study examines whether shifts in exchange rate has symmetric or asymmetric impact on stock prices in Germany. Linear and nonlinear autoregressive distribution lag models are applied by using monthly data from the period January 1993 till April 2017. Findings suggest that only currency devaluation affects stock prices which implies asymmetric impact of changes in exchange rate on stock prices. The empirical results from this study would be useful for policymaking as well as for forecasting the impact of exchange rate changes on stock prices.
Shahid, M., & Kamran, F. (2015). Causal Relationship between Macroeconomic Factors and Stock Prices in Pakistan. International Journal Of Management And Commerce Innovations, 3(2), 172-178. Retrieved from http://researchpublish.com/journal/IJMCI/Issue-2-October-2015-March-2016/0
The (Nonlinear) relationship between Exchange rate uncertainty and trade. An ...IOSR Journals
In this paper Bilateral models formulizing monthly growth of US imports and exports are hired to explore the prospective of nonlinear relationships between exchange rate uncertainties and trade growth. Parametric linear and nonlinear along with semi parametric time series models are in terms of fitting and ex stake estimating. The whole impact on exchange rate differences in trade growth is found to be weak. In periods of large exchange rate differences, trade growth gain from conditioning on instability. Experiential effects maintenance the view that the relationship of interest might be nonlinear and beside, lacks similarity across countries and imports vs. exports. JEL no. C14, C22, F31, F41
This paper empirically examines the role of uncertainty occurred by ‘news’ in Japanese financial markets. A GARCH-MIDAS model is used for estimation. It finds that news-based implied volatility performs well in predicting long-term aggregate market volatilities. A subsample analysis provides that the predictive power of news-based volatility is continuing, as most of the coefficients are positive and significant. So, in general, the news based implied volatility model is associated with high market volatility. Moreover, stock market prices go on rising, different effects that appeared in each subsample period. On the recent period, when Abenomics was conducted, the effect decreased. Also, the effect of exchange rates decrease in short time. When stock prices decrease, volatilities of the stock prices in the past period increase. There is some possibility that markets were too unstable about the movements because of the low prices. Also, the volatility of long-term interest rates increases when the interest rate declines in the recent period under Abenomics. Although interest rates have been quite low in both sample periods, the Bank of Japan (BOJ) started to manage long-term interest rates in the recent period, so market participants seem to begin noticing the movements.
The paper aims to see the effect of Nominal, Real (External) and Effective Exchange rates (EER) of the U.S dollar on its Terms of Trade with two of its APEC trading partners Australia and New Zealand for the period 1991 to 2010. For analysis, the whole values, percentage changes and relationships between Nominal, Real, EER and Terms of Trade of U.S with the two countries has been taken into consideration. In order to fully access the relationship between the EER and TOT of the U.S with the two trading partners, the Classical Regression analysis is used. It was found that the Real Exchange rate was overvalued as compared to the Nominal Exchange Rate. It was also found that when compared to Nominal exchange rate, Real exchange rate is more effective in explaining the TOT. The Real AUD/USD had both short run and long run impacts on the TOT of U.S.A with Australia but the Real NZD/USD had no impact on the TOT of U.S.A with New Zealand. The EER has been found to be the most effective in determining the TOT balance. The regression analysis showed a regression function of “Terms of Trade= -122.026 + 2.1 Effective Exchange Rate”. The relationship is found by coefficient correlation (r) and there is found to be a positive and strong relationship between the two variables. The 𝑟2 value shows that although some values of the TOT are caused by the EER, there are also other variables that might be influencing the EER as well. The t-values show that the values of β0 and β1 are significant. Also the F-test confirms the overall significance of the model and terms the results as authentic.
This paper examined the causal relationship between real exchange rate returns and real stock price returns in Nigeria from January 1985- June 2017. For the investigation the VAR/pair-wise granger causality test and Sims-causality test were applied. From the evidences shown, there exist a unidirectional causal relationship between real exchange rate returns and real stock price returns. Causality running from Real exchange rate returns to real stock price returns. Thus, the past values of REXR can influence/predict the present value of RSPR. This confirms the findings of Olugbenga (2012) and the proposition of the flow oriented model. Also, evidences from the sims-Causality test show that there is uni-directional causality running from Real exchange rate returns to real stock price returns. Thus, the present value of REXR can influence/predict the future values of RSPR. Therefore, it is important for the monetary authority of Nigeria to put into due consideration the exchange rate policy in its conduct of monetary policy internally. Investors could also use these findings as an effective tool in stock trading. As movement in the foreign exchange market (real exchange rate returns) could have a great impact on the present and future movement of stock exchange market (real stock price returns) in Nigeria.
The Effects of Macroeconomic Variables on Stock Returns in the Jordanian Stoc...Premier Publishers
This study investigated the effects of six macroeconomic variables on the stock returns in the Jordanian financial market between 1976 and 2016 using annual data. The study used the stock return data for 218 companies listed on the market and the quarterly data of the six macroeconomic variables (Industrial production, interest rates, money supply, inflation, GDP, import prices). Autoregressive Distributed Lag (ARDL) model was employed for the estimations. The reason to test these models in the Jordanian stock market was motivated by the fact that the returns of shares in the Arab markets in general do not follow the normal distribution. The results of the estimated ARDL model revealed that the industrial production has a statistically significant effect on the returns of shares at a significant level of 1 percent, and in line with the hypothesis of the study because the relationship was positive. The effect of the money supply on the stock returns is statistically significant, (positive impact of money supply on stock returns), while the impact of import prices was negative and statistically significant on the stock returns. This work has found that it is imperative to search for new markets for the disposal of Jordanian products, and not rely on traditional markets only such as Gulf markets, the Iraqi market, this requires policies to strengthen and support the role of local industries, to develop global quality requirements, and to develop preferential features for products to be compared with those in other foreign markets.
Abstract The main purpose of this paper is to investigate whether stock prices and exchange rates are related to each
other or not. Both the short term and the long term association between these variables are discovered. The study applies
monthly and quarterly data on two gulf countries, including Kingdom Saudi Arabia (KSA) and United Arab Emirate (UAE)
for the period January 2008 to December 2009. The results of this study in the short term found that the exchange rate
influence positively on the stock market price index for United Arab Emirate and there is no association between them for
Kingdom Saudi Arabia. Moreover the study in the long term found that the exchange rate influence negatively on stock
market price index for the United Arab Emirate. While no association between these variables in Kingdom Saudi Arabia.
Purpose: Considering the mixed results of previous empirical studies with regard to how the real exchange rates affect bilateral trade balance, this study intends to test the presence of not only the nonlinear relationship but also the J-curve effect and Korea data from January 1985 through December 2013 is adopted. The findings are helpful for emerging countries to evaluate their exchange policy. Methodology: Unit root test, cointegration analysis and Vector Autoregressive Error Correction Model are adopted in this study. Findings: The results indicate that there is a co-integration relationship between real exchange rates and bilateral trade balance in both linear and nonlinear models and Korea-U.S. bilateral trade balance exhibited no J-curve effect when the Korean won depreciated against U.S. dollar. A performance evaluation proves nonlinear model is better than linear model. Recommendation: The findings help us to realize that depreciation has a limited effect on promoting trade balance. Sharp currency depreciation will hurt country’s trade balance.
American Journal of Multidisciplinary Research and Development is indexed, refereed and peer-reviewed journal, which is designed to publish research articles.
This study examines whether shifts in exchange rate has symmetric or asymmetric impact on stock prices in Germany. Linear and nonlinear autoregressive distribution lag models are applied by using monthly data from the period January 1993 till April 2017. Findings suggest that only currency devaluation affects stock prices which implies asymmetric impact of changes in exchange rate on stock prices. The empirical results from this study would be useful for policymaking as well as for forecasting the impact of exchange rate changes on stock prices.
Shahid, M., & Kamran, F. (2015). Causal Relationship between Macroeconomic Factors and Stock Prices in Pakistan. International Journal Of Management And Commerce Innovations, 3(2), 172-178. Retrieved from http://researchpublish.com/journal/IJMCI/Issue-2-October-2015-March-2016/0
The (Nonlinear) relationship between Exchange rate uncertainty and trade. An ...IOSR Journals
In this paper Bilateral models formulizing monthly growth of US imports and exports are hired to explore the prospective of nonlinear relationships between exchange rate uncertainties and trade growth. Parametric linear and nonlinear along with semi parametric time series models are in terms of fitting and ex stake estimating. The whole impact on exchange rate differences in trade growth is found to be weak. In periods of large exchange rate differences, trade growth gain from conditioning on instability. Experiential effects maintenance the view that the relationship of interest might be nonlinear and beside, lacks similarity across countries and imports vs. exports. JEL no. C14, C22, F31, F41
This paper empirically examines the role of uncertainty occurred by ‘news’ in Japanese financial markets. A GARCH-MIDAS model is used for estimation. It finds that news-based implied volatility performs well in predicting long-term aggregate market volatilities. A subsample analysis provides that the predictive power of news-based volatility is continuing, as most of the coefficients are positive and significant. So, in general, the news based implied volatility model is associated with high market volatility. Moreover, stock market prices go on rising, different effects that appeared in each subsample period. On the recent period, when Abenomics was conducted, the effect decreased. Also, the effect of exchange rates decrease in short time. When stock prices decrease, volatilities of the stock prices in the past period increase. There is some possibility that markets were too unstable about the movements because of the low prices. Also, the volatility of long-term interest rates increases when the interest rate declines in the recent period under Abenomics. Although interest rates have been quite low in both sample periods, the Bank of Japan (BOJ) started to manage long-term interest rates in the recent period, so market participants seem to begin noticing the movements.
The paper aims to see the effect of Nominal, Real (External) and Effective Exchange rates (EER) of the U.S dollar on its Terms of Trade with two of its APEC trading partners Australia and New Zealand for the period 1991 to 2010. For analysis, the whole values, percentage changes and relationships between Nominal, Real, EER and Terms of Trade of U.S with the two countries has been taken into consideration. In order to fully access the relationship between the EER and TOT of the U.S with the two trading partners, the Classical Regression analysis is used. It was found that the Real Exchange rate was overvalued as compared to the Nominal Exchange Rate. It was also found that when compared to Nominal exchange rate, Real exchange rate is more effective in explaining the TOT. The Real AUD/USD had both short run and long run impacts on the TOT of U.S.A with Australia but the Real NZD/USD had no impact on the TOT of U.S.A with New Zealand. The EER has been found to be the most effective in determining the TOT balance. The regression analysis showed a regression function of “Terms of Trade= -122.026 + 2.1 Effective Exchange Rate”. The relationship is found by coefficient correlation (r) and there is found to be a positive and strong relationship between the two variables. The 𝑟2 value shows that although some values of the TOT are caused by the EER, there are also other variables that might be influencing the EER as well. The t-values show that the values of β0 and β1 are significant. Also the F-test confirms the overall significance of the model and terms the results as authentic.
This paper examined the causal relationship between real exchange rate returns and real stock price returns in Nigeria from January 1985- June 2017. For the investigation the VAR/pair-wise granger causality test and Sims-causality test were applied. From the evidences shown, there exist a unidirectional causal relationship between real exchange rate returns and real stock price returns. Causality running from Real exchange rate returns to real stock price returns. Thus, the past values of REXR can influence/predict the present value of RSPR. This confirms the findings of Olugbenga (2012) and the proposition of the flow oriented model. Also, evidences from the sims-Causality test show that there is uni-directional causality running from Real exchange rate returns to real stock price returns. Thus, the present value of REXR can influence/predict the future values of RSPR. Therefore, it is important for the monetary authority of Nigeria to put into due consideration the exchange rate policy in its conduct of monetary policy internally. Investors could also use these findings as an effective tool in stock trading. As movement in the foreign exchange market (real exchange rate returns) could have a great impact on the present and future movement of stock exchange market (real stock price returns) in Nigeria.
The Effects of Macroeconomic Variables on Stock Returns in the Jordanian Stoc...Premier Publishers
This study investigated the effects of six macroeconomic variables on the stock returns in the Jordanian financial market between 1976 and 2016 using annual data. The study used the stock return data for 218 companies listed on the market and the quarterly data of the six macroeconomic variables (Industrial production, interest rates, money supply, inflation, GDP, import prices). Autoregressive Distributed Lag (ARDL) model was employed for the estimations. The reason to test these models in the Jordanian stock market was motivated by the fact that the returns of shares in the Arab markets in general do not follow the normal distribution. The results of the estimated ARDL model revealed that the industrial production has a statistically significant effect on the returns of shares at a significant level of 1 percent, and in line with the hypothesis of the study because the relationship was positive. The effect of the money supply on the stock returns is statistically significant, (positive impact of money supply on stock returns), while the impact of import prices was negative and statistically significant on the stock returns. This work has found that it is imperative to search for new markets for the disposal of Jordanian products, and not rely on traditional markets only such as Gulf markets, the Iraqi market, this requires policies to strengthen and support the role of local industries, to develop global quality requirements, and to develop preferential features for products to be compared with those in other foreign markets.
Abstract The main purpose of this paper is to investigate whether stock prices and exchange rates are related to each
other or not. Both the short term and the long term association between these variables are discovered. The study applies
monthly and quarterly data on two gulf countries, including Kingdom Saudi Arabia (KSA) and United Arab Emirate (UAE)
for the period January 2008 to December 2009. The results of this study in the short term found that the exchange rate
influence positively on the stock market price index for United Arab Emirate and there is no association between them for
Kingdom Saudi Arabia. Moreover the study in the long term found that the exchange rate influence negatively on stock
market price index for the United Arab Emirate. While no association between these variables in Kingdom Saudi Arabia.
Purpose: Considering the mixed results of previous empirical studies with regard to how the real exchange rates affect bilateral trade balance, this study intends to test the presence of not only the nonlinear relationship but also the J-curve effect and Korea data from January 1985 through December 2013 is adopted. The findings are helpful for emerging countries to evaluate their exchange policy. Methodology: Unit root test, cointegration analysis and Vector Autoregressive Error Correction Model are adopted in this study. Findings: The results indicate that there is a co-integration relationship between real exchange rates and bilateral trade balance in both linear and nonlinear models and Korea-U.S. bilateral trade balance exhibited no J-curve effect when the Korean won depreciated against U.S. dollar. A performance evaluation proves nonlinear model is better than linear model. Recommendation: The findings help us to realize that depreciation has a limited effect on promoting trade balance. Sharp currency depreciation will hurt country’s trade balance.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
Abstract: The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
The theoretical relationship of the long-run equilibrium between real exchange rates and interest rate differentials is essentially derived from the Purchasing Power Parity (PPP) and the uncovered interest parity. However, empirical evidence on this long-run relationship has rather been inconclusive. While several authors are able to establish the long-run relationship between real exchange rates and interest rate differentials other could not found this relationship. The reason for lack of relationship in some of the studies is as a result of omitted variables (Meese and Rogoff, 1988). Therefore, attempt is made in this study to evaluate this relationship between real exchange rate and interest rate differential for the case of Nigeria by controlling for foreign exchange reserves. The paper uses monthly data for the period 1993:1-2012:12 and applies Autoregressive Distributed Lags (ARDL) model. The estimates suggest the existence of long-run relationship between real exchange rate, interest rate differential and foreign exchange reserves. In the long run, the exchange rate coefficient has a positive effect on the foreign reserves. However, the effect of interest rate differential is negative and statistically significant. On the short run dynamics, the finding indicates a non-monotonic relationship between real exchange rate, interest rate differential and foreign exchange reserves. The out-of-sample forecast indicates a better forecast using ARMA model as all Theil coefficients are close zero for all the horizons used in the model.
After the fall of Bretton Woods System, exchange rates become the focus of researchers and politicians. When a floating exchange rate system was started researchers investigated the impact of exchange rate volatility on international trade but the development of derivative instruments changed the researchers focus from currency volatility towards the impact of currency appreciation or depreciation on international trade. The main objective of this research was to investigate the short run and long run relationship between Turkey’s merchandise trade deficit and real effective exchange rate. The monthly data was collected from Central Bank of Republic of Turkey from March 2005 to September 2017. Autoregressive distributed lag (ARDL) approach and Error correction model (ECM) was used for the analysis. The finding shows that the variables have long run relationship but it is not significant at 5% significance level. The short run model also shows the insignificant results. These findings have the following policy implication: Turkey cannot improve the merchandise trade deficit by devaluating its currency.
IOSR Journal of Humanities and Social Science is an International Journal edited by International Organization of Scientific Research (IOSR).The Journal provides a common forum where all aspects of humanities and social sciences are presented. IOSR-JHSS publishes original papers, review papers, conceptual framework, analytical and simulation models, case studies, empirical research, technical notes etc.
This paper investigates the extent of macroeconomic volatility caused by the transfer pricing behavior of multinational corporations. The study examined two possible transmission channels through which transfer pricing causes macroeconomic volatility, namely, terms of trade and budget policy channels. Using the EGARCH model with annual data on selected variables from 1980 to 2017, the paper found evidence of macroeconomic volatility caused by transfer pricing. The size of the shock from transfer pricing is high and statistically significant in the terms of trade and budget policy channels. Negative shock from multinational corporations shifting taxable income between high and low tax regimes had a larger effect than a positive shock on the country’s budget policy. The volatility caused by transfer pricing was short-lived in the terms of trade channel. However, in the budget policy channel, past volatility of transfer pricing persisted for a longer period to explain current volatility.
Developing economies are different than developed economies in many aspects, i.e., in terms of institutional framework and political situation etc. Thus, the monetary policy needed in developing countries is also different than developed countries. The goal of this study is to investigate exchange rate channel of monetary transmission mechanism in a developing country’s setup. The variables included in our analysis are interest rate, exchange rate, exports, consumer price index and gross domestic product. Johansen cointegration technique is applied to analyze the long run relationship among variables while multivariate VECM granger causality test is used to explore the direction of causality among the set of our variables. We use annual data ranging from 1980 to 2015 while taking account of the limitations of time series data. Our findings suggest that output has a negative long run relationship with exchange rate and interest rate, positive relationship with exports and no statistically significant relationship with inflation. Interest rate granger causes all four of our variables thus showing the power of this policy tool. Exchange rate causes exports, consumer price index and output which means exchange rate is the second most powerful variable in our analysis. Output is granger caused by interest rate, exports and exchange rate which confirms the sensitivity of output to these variables. Consumer price index is granger caused by all four of our variables and came out to be the most sensitive variable in our analysis.
This study examined the nature of the relationship between the macroeconomic variables and share prices using the Nairobi Securities Exchange All Share Index (NASI). The study used four macroeconomic variables namely; interest rate, inflation, exchange rate and gross domestic product (GDP) for the period January 2008 to December 2014. The study found a positive relationship between GDP and NSE share prices. Exchange rate was found to have an insignificant positive relationship with share prices while interest rates had negative relationship with share prices. Inflation rate was found to have significant negative relationship with share prices due to its effect on purchasing power. The study concluded that the four macroeconomic variables combined had strong positive and significant relationship with share prices. The macroeconomic variables accounted for 86.97% of changes in share prices. The study recommended that capital markets regulators and other government regulatory bodies should promote a stable macroeconomic environment in the country for optimal performance of shares and stock market at large.
The objective of this study is to identify the determinants of inflation in West Africa, mainly in the WAEMU zone, in order to contribute to improving the conduct of monetary policy. The equation of the exchange of the Quantitative Theory of the Currency and the generalized method of moments (MMG) in dynamic panel is used. Annual data concerning six countries in West Africa and range from 1991 to 2015. The results of the estimation show that in addition to the economic growth rate and the money supply, the devaluation has a significant effect on inflation. As we can see, inflation is not systematically a monetary phenomenon in West Africa. The authorities must therefore seek to determine the optimal threshold for the rate of increase of the money supply.
The study gauged the influence of exchange rate fluctuations on the Performance of the Nigerian Economy over the time from of 1986 to 2016, utilizing secondary data tracked from the statistical report of the Apex Nigerian bank, and utilizing techniques such as Unit root test, Generalized autoregressive conditional heteroscedasticity (GARCH), Impulse-Response Output and Variance-Decomposition Test to evaluate variables such as Interest rate, inflation rate, exchange rate against a sole indicator of Economic Performance I.e. Gross Domestic Product Growth rate (GDPGR), it was discovered that despite the short run influx of the spill over volatility of Interest rate and inflation rate, there exist no long run volatility influence of interest rate on Economic Performance in Nigeria. It was therefore recommended that the apex financial institution and relevant policy makers should ensure an interest rate system and status that could stimulate growth or production and the nation should endeavour to utilize her interest rate in controlling its output level as it motivates Economic Performance (GDPGR).
This study is about the impact of selected macroeconomic variables on economic growth of Bangladesh. Economic growth of Bangladesh is measured in terms of annual nominal GDP growth rate. Least squared regression model has been employed considering exchange rate, export, import and inflation rate as independent variables and gross domestic product as the dependent variable in this study. The results reveal that export and import have significant positive impact on GDP growth rate. The other variables (exchange rate and inflation) are not significant, indicating that there exists no significant relationship among the variables. The findings will help the policy makers to make policies concerning the country’s economic growth to remain robust in the near future.
Evaluation of Agro-morphological Performances of Hybrid Varieties of Chili Pe...Premier Publishers
In Benin, chilli pepper is a widely consumed as vegetable whose production requires the use of performant varieties. This work assessed, at Parakou and Malanville, the performance of six F1 hybrids of chilli including five imported (Laali, Laser, Nandi, Kranti, Nandita) and one local (De cayenne), in completely randomized block design at four replications and 15 plants per elementary plot. Agro-morphological data were collected and submitted to analysis of variance and factor analysis of mixed data. The results showed the effects of variety, location and their interactions were highly significant for most of the growth, earliness and yield traits. Imported hybrid varieties showed the best performances compared to the local one. Multivariate analysis revealed that 'De cayenne' was earlier, short in size, thin-stemmed, red fruits and less yielding (≈ 1 t.ha-1). The imported hybrids LaaliF1 and KrantiF1 were of strong vegetative vigor, more yielding (> 6 t.ha-1) by developing larger, long and hard fruits. Other hybrids showed intermediate performances. This study highlighted the importance of imported hybrids in improving yield and preservation of chili fruits. However, stability and adaptation analyses to local conditions are necessary for their adoption.
An Empirical Approach for the Variation in Capital Market Price Changes Premier Publishers
The chances of an investor in the stock market depends mainly on some certain decisions in respect to equilibrium prices, which is the condition of a system competing favorably and effectively. This paper considered a stochastic model which was latter transformed to non-linear ordinary differential equation where stock volatility was used as a key parameter. The analytical solution was obtained which determined the equilibrium prices. A theorem was developed and proved to show that the proposed mathematical model follows a normal distribution since it has a symmetric property. Finally, graphical results were presented and the effects of the relevant parameters were discussed.
Influence of Nitrogen and Spacing on Growth and Yield of Chia (Salvia hispani...Premier Publishers
Chia is an emerging cash crop in Kenya and its production is inhibited by lack of agronomic management information. A field experiment was conducted in February-June and May-August 2021, to determine the influence of nitrogen and spacing on growth and yield of Chia. A randomized complete block design with a split plot arrangement was used with four nitrogen rates as the main plots (0, 40, 80, 120 kg N ha-1) and three spacing (30 cm x 15 cm (s1), 30 cm x 30 cm (s2), 50 cm x 50 cm (s3)). Application of 120 kg N ha-1 significantly increased (p≤0.05) vegetative growth and seed yield of Chia. Stem height, branches, stem diameter and leaves increased by 23-28%, 11-13%, 43-55% and 59-88% respectively. Spacing s3 significantly increased (p≤0.05) vegetative growth. An increase of 27-74%, 36-45% and 73-107% was recorded in number of leaves, stem diameter and dry weight, respectively. Chia yield per plant was significantly higher (p≤0.05) in s3. However, when expressed per unit area, s1 significantly produced higher yields. The study recommends 120 kg N ha-1 or higher nitrogen rates and a closer spacing of 15 cm x 30 cm as the best option for Chia production in Kenya.
Enhancing Social Capital During the Pandemic: A Case of the Rural Women in Bu...Premier Publishers
Social capital plays an essential role in empowering people for social and economic change even during the pandemic. A livelihood project of the government was implemented among the members of a women’s association of a disadvantaged upland community in Bukidnon province, Southern Philippines for inclusive development. This study was conducted to determine the influence of some socio-economic attributes and the change in the knowledge level on the social capital of the rural women amidst the pandemic. The activities of the project were implemented considering the health protocols imposed by the government during the health crisis. The findings revealed that the trainings conducted resulted to a positive change in the knowledge level among the rural women. This facilitated the production of vegetables for their households and generated additional income very necessary during the pandemic especially that other economic activities were hindered. Similarly, there was a significant increase in the social capital of the rural women during the last two years. The main occupation, sources of income and their ethnicity significantly influenced the social capital of the rural women. The rural development workers and policymakers must consider the social capital of the group in the implementation of poverty alleviation programs.
Impact of Provision of Litigation Supports through Forensic Investigations on...Premier Publishers
This paper presents an argument through the fraud triangle theory that the provision of litigation supports through forensic audits and investigations in relation to corporate fraud cases is adequate for effective prosecution of perpetrators as well as corporate fraud prevention. To support this argument, this study operationalized provision of litigation supports through forensic audit and investigations, data mining for trends and patterns, and fraud data collection and preparation. A sample of 500 respondents was drawn from the population of professional accountants and legal practitioners in Nigeria. Questionnaire was used as the instrument for data collection and this was mailed to the respective respondents. Resulting responses were analyzed using the OLS multiple regression techniques via the SPSS statistical software. The results reveal that the provision of litigation supports through forensic audits and investigations, fraud data mining for trends and patterns and fraud data collection and preparation for court proceedings have a positive and significant impact on corporate fraud prevention in Nigeria. This study therefore recommends that regulators should promote the provision of litigation supports through forensic audits and investigations in relation to corporate fraud cases in publicly listed firms in Nigeria, as this will help provide reports that are acceptable in court proceedings.
Improving the Efficiency of Ratio Estimators by Calibration WeightingsPremier Publishers
It is observed that the performances of most improved ratio estimators depend on some optimality conditions that need to be satisfied to guarantee better estimator. This paper develops a new approach to ratio estimation that produces a more efficient class of ratio estimators that do not depend on any optimality conditions for optimum performance using calibration weightings. The relative performances of the proposed calibration ratio estimators are compared with a corresponding global [Generalized Regression (GREG)] estimator. Results of analysis showed that the proposed calibration ratio estimators are substantially superior to the traditional GREG-estimator with relatively small bias, mean square error, average length of confidence interval and coverage probability. In general, the proposed calibration ratio estimators are more efficient than all existing estimators considered in the study.
Urban Liveability in the Context of Sustainable Development: A Perspective fr...Premier Publishers
Urbanization and quality of urban life are mutually related and however it varies geographically and regionally. With unprecedented growth of urban centres, challenge against urban development is more in terms of how to enhance quality of urban life and liveability. Making sense of and measuring urban liveability of urban places has become a crucial step in the context of sustainable development paradigm. Geographical regions depict variations in nature of urban development and consequently level of urban liveability. The coastal regain of West Bengal faces unusual challenges caused by increasing urbanization, uncontrolled growth, and expansion of economic activities like tourism and changing environmental quality. The present study offers a perspective on urban liveability of urban places located in coastal region comprising of Purba Medinipur and South 24 Parganas districts. The study uses the liveability standards covering four major pillars- institutional, social, economic and physical and their indicators. This leads to develop a City Liveability Index to rank urban places of the region, higher the index values better the urban liveability. The data for the purpose is collected from various secondary sources. Study finds that the eastern coastal region of the country covering state of West Bengal depicts variations in index of liveability determined by physical, economic, social and institutional indicators.
Transcript Level of Genes Involved in “Rebaudioside A” Biosynthesis Pathway u...Premier Publishers
Stevia rebaudiana Bertoni is a plant which has recently been used widely as a sweetener. This medicinal plant has some components such as diterpenoid glycosides called steviol glycosides [SGs]. Rebaudioside A is a diterpenoid steviol glycoside which is 300 times sweeter than table sugar. This study was done to investigate the effect of GA3 (50 mg/L) on the expression of 14 genes involved in Rebaudioside A biosynthesis pathway in Stevia rebaudiana under in vitro conditions. The expression of DXS remarkably decreased by day 3. Also, probably because of the negative feedback of GA3 on MEP-drived isoprenes, GGDS transcript level reached its lowest amount after GA3 treatment. The abundance of DXR, CMS, CMK, MCS, and CDPS transcripts showed a significant increase at various days after this treatment. A significant drop in the expression levels of KS and UGT85C2 is detected during the first day. However, expression changes of HDR and KD were not remarkable. Results revealed that the level of transcript of UGT74G1 and UGT76G1 up regulated significantly 4 and 2 times higher than control, respectively. However, more research needs to shed more light on the mechanism of GA3 on gene expression of MEP pathway.
Multivariate Analysis of Tea (Camellia sinensis (L.) O. Kuntze) Clones on Mor...Premier Publishers
Information on genetic variability for biochemical characters is a prerequisite for improvement of tea quality. Thirteen introduced tea clones characterized with objective; assessing tea clones based on morphological characters at Melko and Gera research stations. The study was conducted during 2017/18 cropping season on experimental plots in RCBD with three replications. Data recorded on morphological traits like days from pruning to harvest, height to first branch, stem diameter, leaf serration density, leaf length, leaf width, leaf size, petiole length, leaf ratio, internode length, shoot length, number of shoot, canopy diameter, hundred shoot weight, fresh leaf yield per tree. Cluster analysis of morphological trait grouped into four clusters indicated, the existence of divergence among the tested clones. The maximum inter-cluster distance was between clusters I and IV (35.27) while the minimum inter cluster distance was observed between clusters I and II (7.8).Principal components analysis showed that the first five principal components with eigenvalues greater than one accounted 86.45% for 15 morphological traits. Generally, the study indicated presence of variability for several morphological traits. However, high morphological variation between clones is not a guarantee for a high genetic variation; therefore, molecular studies need to be considered as complementary to biochemical studies.
Causes, Consequences and Remedies of Juvenile Delinquency in the Context of S...Premier Publishers
This research work was designed to examine nature of juvenile offences committed by juveniles, causes of juvenile delinquency, consequences of juvenile delinquency and remedies for juvenile delinquency in the context of Sub-Saharan Africa with specific reference to Eritrea. Left unchecked, juvenile delinquents on the streets engage in petty theft, take alcohol or drugs, rape women, rob people at night involve themselves in criminal gangs and threaten the public at night. To shed light on the problem of juvenile delinquency in the Sub-Saharan region data was collected through primary and secondary sources. A sample size of 70 juvenile delinquents was selected from among 112 juvenile delinquents in remand at the Asmara Juvenile Rehabilitation Center in the Eritrean capital. The study was carried out through coded self-administered questionnaires administered to a sample of 70 juvenile delinquents. The survey evidence indicates that the majority of the juvenile respondents come either from families constructed by unmarried couples or separated or divorced parents where largely the father is missing in the home or dead. The findings also indicate that children born out of wedlock, families led by single mothers, lack of fatherly role models, poor parental-child relationships and negative peer group influence as dominant causes of juvenile infractions. The implication is that broken and stressed families are highly likely to be the breeding grounds for juvenile delinquency. The survey evidence indicates that stealing, truancy or absenteeism from school, rowdy or unruly behavior at school, free-riding in public transportation, damaging the book of fellow students and beating other young persons are the most common forms of juvenile offenses. It is therefore, recommended that parents and guardians should exercise proper parental supervision and give adequate care to transmit positive societal values to children. In addition, the government, the police, prosecution and courts, non-government organizations, parents, teachers, religious leaders, education administrators and other stakeholders should develop a child justice system that strives to prevent children from entering deeper into the criminal justice process.
The Knowledge of and Attitude to and Beliefs about Causes and Treatments of M...Premier Publishers
Stigma and discrimination associated with mental illness are a common occurrence in the Sub-Saharan region including Eritrea. Numerous studies from Sub-Saharan Africa suggest that stigma and discrimination are major problems in the community, with negative attitudes and behavior towards people with mental illness being widespread. In order to assess the whether such negative attitudes persist in the context of Eritrea this study explored the knowledge and perceptions of 90 Eritrean university students at the College of Business and Economics, the University of Asmara regarding the causes and remedies of mental illness A qualitative method involving coded self-administered questionnaires administered to a sample of 90 university students to collecting data at the end of 2019. The survey evidence points that almost 50% of the respondents had contact with a mentally ill person suggesting that the significant number of the respondents experienced a first-hand encounter and knowledge of mental illness in their family and community. The findings show an overall greater science-based understanding of the causes of mental illness to be followed by recommended psychiatric treatments. The survey evidence indicates that the top three leading causes of mental illness in the context of Eritrea according to the respondents are brain disease (76%), bad events in the life of the mentally ill person (66%) and substance abuse or alcohol taking, smoking, taking drugs like hashish. (54%). The majority of the respondents have a very sympathetic and positive outlook towards mentally ill persons suggesting that mentally illness does not simply affect a chosen individual rather it can happen to anybody regardless of economic class, social status, ethnicity race and religion. Medical interventions cited by the majority of the respondents as being effective treatments for mental illness centered on the idea that hospitals and clinics for treatment and even cures for psychiatric disease. Changing perceptions of mental illnesses in Eritrea that paralleled the very caring and sympathetic attitudes of the sample university students would require raising public awareness regarding mental illness through education, using the mass media to raise public awareness, integrating mental health into the primary health care system, decentralizing mental health care services to increase access to treatment and providing affordable service to maintain positive treatment outcomes.
Effect of Phosphorus and Zinc on the Growth, Nodulation and Yield of Soybean ...Premier Publishers
An investigation was carried out at Kogi State University Student Research and Demonstration farm Anyigba during the 2019 wet season to observe the effect of phosphorus and zinc on the growth, nodulation and yield of soybean. The treatments comprised three levels: phosphorus and zinc (0, 30 and 60 kg P2O5/ha; 0, 5 and 10kg Zn/ha) and two varieties TGX 536 – 02D and Samsoy 2. The investigation revealed that application of phosphorus affected growth, nodulation, yield and some yield components of soybean while zinc application, apart from the plant height, which is reduced significantly, had no significant effect on other growth characters, nodulation, yield and yield components. However, it was generally found to decrease most of the characters. Application of 60 kg P2O5/ha gave the highest growth and yield, while 30 kg P2O5/ha gave the highest nodulation. Application of 60 kg P2O5/ha significantly increased yield to 1.9t/ha, which was significantly higher over the control plots, which gave 1.7t/ha. Crude protein and oil contents of the seeds were not significantly affected by phosphorus application but were significantly affected by zinc application, which significantly decreased protein content as its amount an increase from 0 to 10 kg/ha, and significantly increased oil content from 0 to 5kg/ha and decreased it below 5kg/ha. It was also revealed that the two varieties responded similarly to phosphorus and zinc in terms of growth, grain yield and crude protein content of the seeds.
Influence of Harvest Stage on Yield and Yield Components of Orange Fleshed Sw...Premier Publishers
A field experiment was conducted at Adami Tullu Agricultural Research Center in 2018 under rainfed condition with supplementary irrigation to determine the influence of harvest stage on vine yield and tuberous root yield of orange fleshed sweet potato varieties. The experiment consisted of four harvest stages (105, 120, 135 and 150 days after planting) and Kulfo, Tulla and Guntute varieties. A 4 X 3 factorial experiment arranged in randomized complete block design with three replications was used. Interaction of harvest stage and variety significantly influenced above ground fresh biomass, vine length, marketable tuberous root weight per hectare, commercial harvest index and harvest index. The highest mean values of above ground fresh biomass (66.12 t/ha) and marketable tuberous root weight (56.39 t/ha) were produced by Guntute variety harvested at 135 days after planting. Based on the results, it can be recommended that, farmers of the study area can grow Guntute variety by harvesting at 135 days after planting to obtain optimum vine and tuberous root yields.
Performance evaluation of upland rice (Oryza sativa L.) and variability study...Premier Publishers
This study aimed at assessing genetic variability and to evaluate the performance of 13 improved upland rice varieties for yield and its components based on morphological traits. The field experiment was conducted using a randomized block design at Guraferda and Gimbo districts in the 2019 main cropping season. The analysis of variance (ANOVA) over the two locations revealed significant differences (p≤ 0.05) among varieties for days to 50% heading, days to 85% maturity, panicle length, thousand-grain weight, and grain yield. Similarly, the ANOVA for variety by location interactions depicted significant differences among the tested varieties for days to 50% heading, days to 85% maturity, and thousand-grain weight. High heritability was obtained from days to heading (88.5%), panicle length (85.0%), and grain yield (85.2%), which indicates these traits can be easily improved through selection. High to medium broad sense heritability and genetic advance as percentage of the mean for days to heading, thousand-grain weight, and grain yield indicates a good opportunity for improvement through selection using their phenotypic performance. This is mainly due to the high role of additive gene action in the expression of such traits. This study confirmed the presence of variability among varieties for most of the studied traits, which will create an opportunity for breeders to improve rice yield and other attributes.
Response of Hot Pepper (Capsicum Annuum L.) to Deficit Irrigation in Bennatse...Premier Publishers
This study was conducted at Enchete kebele in Benna-Tsemay Woreda, South Omo Zone to evaluate the response of hot pepper to deficit irrigation on yield and water productivity under furrow irrigation system. The experiment comprised four treatments (100 % of ETc, 85% of ETc, 70 % of ETc and 50% of ETc), respectively. The experiment was laid out in RCBD and replicated four times. The two years combined yield results indicated that, the maximum total yield (20.38 t/ha) was obtained from 100% ETc while minimum yield (12.92 t/ha) was obtained from 50% of ETc deficit irrigation level. The highest WUE 5.22 kg/ha mm-1 was obtained from 50% of ETc. Treatment of 100% ETc irrigation application had highest benefit cost ratio (4.5) than all others treatments. Applying 50% of ETc reduce the yield by 37% when compared to 100 % ETc. Accordingly, to achieve maximum hot pepper yield in areas where water is not scarce, applying 100% ETc irrigation water application level throughout whole growing season under furrow irrigation system is recommended. But, in the study area water scarcity is the major limiting factor for crop production. So, it is possible to get better yield and water productivity of hot pepper when we apply 85% ETc irrigation water throughout growing season under furrow irrigation system.
Harnessing the Power of Agricultural Waste: A Study of Sabo Market, Ikorodu, ...Premier Publishers
Nigeria is still burdened with huge responsibilities of waste disposal because the potential for benefits of proper waste management is yet to be harnessed. The paper evaluates the capacity of the Sabo Cattle market in producing the required quantities of waste from animal dung alongside decomposed fruits with a view to generating renewable energy possibilities for lighting, security and other business activities of the market. It is estimated that about 998 million tons of agricultural waste is produced yearly in the country with organic wastes amounting to 80 percent of the total solid wastes. This can be categorized into biodegradable and non-biodegradable wastes. The paper evaluates the capacity of the Sabo Cattle market in producing the required quantities of waste from animal dung alongside decomposed fruits with a view to generating renewable energy possibilities for lighting, security and other business activities of the market. The Sabo market was treated as a study case with the adoption of in-depth examinations of the facility, animals and products for sale and waste generated. A combination of experimental, interviews (qualitative) and design simulation (for final phase) was adopted to extract, verify and analyse the data generated from the study. Animal waste samples were subjected to compositional and fibre analysis with results showing that the sample has high potency for biogas production. Biodegradable Wastes are human and animal excreta, agricultural and all degradable wastes. Availability of high quantity of waste generated being organic in Sabo market allows the use of anaerobic digestion to be proposed as a waste to energy technology due to its feasibility for conversion of moist biodegradable wastes into biogas. The study found that at peak supply period during the Islamic festivities, a conservative 300tonnes of animal waste is generated during the week which translates to over 800kilowatts of electricity.
Influence of Conferences and Job Rotation on Job Productivity of Library Staf...Premier Publishers
The general purpose of this study is to investigate the influence of conferences and job rotation on job productivity of library staff in tertiary institutions in Imo State, Nigeria. The survey research design was used for this study using questionnaire as an instrument for data collection. This study covered the entire population of 661. Out of these, 501 copies of the questionnaire representing 75.8% were duly completed and returned for analysis. Student’s t-test was used to analyze the research questions. The finding showed that conferences had no significant influence on the job productivity of library staff in tertiary institutions in Imo State, Nigeria (F cal= 7.86; t-vale =6.177; p >0.005). Finding also showed that job rotation significantly influences job productivity of library staff in tertiary institutions in Imo State, Nigeria (F-cal value= 18.65; t-value = 16.225; P<0.05). This study recommended that, government should ensure that library staff participate in conferences with themes and topics that are relevant to the job they perform and also ensure that there should be proper evaluation and feedback mechanism which aimed to ensuring control and minimize abuse of their development opportunities. Again, there should be written statement of objectives in order to sustain job rotation programmes. Also, that training and development needs of library staff must be identified and analyzed before embarking on job rotation processes as this would help to build skills, competences, specialization and high job productivity.
Scanning Electron Microscopic Structure and Composition of Urinary Calculi of...Premier Publishers
Microscopic examination of urine samples collected from geriatric dogs revealed increased numbers of erythrocytes, leucocytes, epithelial cells and pus cells along with casts, bacteria, spermatozoa and crystals of various shapes. Among the different crystals, triple phosphate or struvite were predominant, followed by calcium oxalate dihydrate, calcium oxalate monohydrate and ammonium urate or biurate. The struvite crystals were, coffin-lid shape and while calcium oxalate dihydrate were octahedron or envelope and monohydrate crystals demonstrated “picket fence” and “dumbbell” and “hemp seed” appearance. Brown or yellow-brown spherical bodies with irregular borders with thorn-apple appearance were shown by ammonium urate or biurate crystals. SEM aspects of magnesium ammonium phosphate crystals revealed perpendicular columnar strata, few with scattered hexa or octa-hedral coffin-lid shaped crystals and calcium phosphate crystals were like cracked eggshells. Presence of wavy phases with sundry areas (uric acid), picket fence (calcium oxalate monohydrate) and typical envelope (calcium oxalate dehydrate) were electron microscopic appearance of various crystals.
Gentrification and its Effects on Minority Communities – A Comparative Case S...Premier Publishers
This paper does a comparative analysis of four global cities and their minority districts which have been experiencing the same structural pressure of gentrification. The main contribution of this paper is providing a detailed comparison of four micro geographies worldwide and the impacts of gentrification on them: Barrio Logan in San Diego, Bo-Kaap in Cape Town, the Mission District in San Francisco, and the Rudolfsheim-Fünfhaus District in Vienna. All four cities have been experiencing the displacement of minority communities due to increases in property values. These cities were chosen because their governments enacted different policies to temper the gentrification process. It was found that cities which implemented social housing and cultural inclusionary policies were more successful in maintaining the cultural and demographic make-up of the districts.
Oil and Fatty Acid Composition Analysis of Ethiopian Mustard (Brasicacarinata...Premier Publishers
The experiments was conducted at Holetta Agricultural Research Center, to analyze forty nine Ethiopian Mustard land races for oil and fatty acid composition traits The experiment was carried out in a simple lattice design. The analysis of variance showed that there were highly significant differences among genotypes for all oil and fatty acid traits compared. The significant difference indicates the existence of genetic variability among the land races which is important for improvement
June 3, 2024 Anti-Semitism Letter Sent to MIT President Kornbluth and MIT Cor...Levi Shapiro
Letter from the Congress of the United States regarding Anti-Semitism sent June 3rd to MIT President Sally Kornbluth, MIT Corp Chair, Mark Gorenberg
Dear Dr. Kornbluth and Mr. Gorenberg,
The US House of Representatives is deeply concerned by ongoing and pervasive acts of antisemitic
harassment and intimidation at the Massachusetts Institute of Technology (MIT). Failing to act decisively to ensure a safe learning environment for all students would be a grave dereliction of your responsibilities as President of MIT and Chair of the MIT Corporation.
This Congress will not stand idly by and allow an environment hostile to Jewish students to persist. The House believes that your institution is in violation of Title VI of the Civil Rights Act, and the inability or
unwillingness to rectify this violation through action requires accountability.
Postsecondary education is a unique opportunity for students to learn and have their ideas and beliefs challenged. However, universities receiving hundreds of millions of federal funds annually have denied
students that opportunity and have been hijacked to become venues for the promotion of terrorism, antisemitic harassment and intimidation, unlawful encampments, and in some cases, assaults and riots.
The House of Representatives will not countenance the use of federal funds to indoctrinate students into hateful, antisemitic, anti-American supporters of terrorism. Investigations into campus antisemitism by the Committee on Education and the Workforce and the Committee on Ways and Means have been expanded into a Congress-wide probe across all relevant jurisdictions to address this national crisis. The undersigned Committees will conduct oversight into the use of federal funds at MIT and its learning environment under authorities granted to each Committee.
• The Committee on Education and the Workforce has been investigating your institution since December 7, 2023. The Committee has broad jurisdiction over postsecondary education, including its compliance with Title VI of the Civil Rights Act, campus safety concerns over disruptions to the learning environment, and the awarding of federal student aid under the Higher Education Act.
• The Committee on Oversight and Accountability is investigating the sources of funding and other support flowing to groups espousing pro-Hamas propaganda and engaged in antisemitic harassment and intimidation of students. The Committee on Oversight and Accountability is the principal oversight committee of the US House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X.
• The Committee on Ways and Means has been investigating several universities since November 15, 2023, when the Committee held a hearing entitled From Ivory Towers to Dark Corners: Investigating the Nexus Between Antisemitism, Tax-Exempt Universities, and Terror Financing. The Committee followed the hearing with letters to those institutions on January 10, 202
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2. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
Buba et al. 076
This can be explained by the fact that when trade costs
decreased, firms that were unable to export before the
decrease will now do so. But the new firms’ productivity will
be lower or will have higher marginal cost than the firms
already exporting before the decrease. In addition, the new
firms with lower productivity also have a pricing behavior
that will determine how aggregate pass-through to a
country’s import prices changes resulting from a decrease
in trade costs.
In recent years, Thailand has recorded a fall in its trade
balance from USD 36.6 billion in 2009 to USD 6.8 billion in
2013, making a short of USD 29.8 billion (Focus
Economics, 2015). A question may be asked; is it the
depreciation of Baht to US dollar that contributed to this
trade balance deficit faced by Thailand? This study will
examine the exchange rate pass-through into to trade
balance in Thailand. To the best of our knowledge, there
is no study on Thailand that examined exchange rate pass-
through into trade balance using asymmetric cointegration
with threshold autoregressive (TAR) and momentum
threshold autoregressive (M-TAR). It is imperative,
therefore, to study this pass-through of exchange rates
into trade balance in Thailand using asymmetric
cointegration approach proposed by Enders and Siklos
(2001).
Previous studies have used cointegration analysis to
examine the relationship between exchange rates and
trade balance such as the Engle-Granger (1987), two-step
cointegration analysis and Johansen Juselius (1999), to
examine the long run relationship between exchange rate
and trade balance, see (Hsing 2009), Wong and Tang
(2007), Bagchi et.al (2004), Khan (2005). The Engle-
Granger (1987) and Johansen Juselius (1999), assumed
symmetric cointegration; they show the changing
coefficient values related either negatively or positively in
the symmetry error. Studies dealing with symmetry
relationship do not consider the account of asymmetric
adjustment that occurs in the endogenous variables,
(Duasa, 2009). Precisely, Cook (2006) argued that Engel
and Granger (1987) and Johansen (1988) were unable to
identify the cointegration between stock prices and
industrial production for a long span of U.S data. However,
Narayan (2007) has employed asymmetric approach using
TAR and M-TAR for nominal exchange rates and price
levels for Canada, the UK, Japan, Germany, Italy and
France (G6) vis-à-vis the US dollar. Shen et.al (2007) has
employed the asymmetric cointegration test proposed by
Enders and Siklos (2001) to examine the long run
asymmetric equilibrium relationships between the Chinese
Shanghai and Shenzhen stock markets. The asymmetric
relationship entails differentiating positive and negative
effects of the error obtained from the cointegration
regression, (Enders and Siklos, 2001). Asymmetry has
been a significant matter in macroeconomics analysis with
findings giving proof of the existence of asymmetric
changes of most of the macroeconomic indicators.
This study is theoretically, based on the standard theory of
international trade by Hecksher-Ohlin (1990’s), which
states that changes in real exchange rate yield impacts on
both the value and volume of trade; the higher the real
exchange rate for the home country, the more the trade
surplus the country obtains and vise-versa. The major
different between this study and Duasa (2009) besides the
choice of country of study is the ability of the current study
to incorporate political stability in the short-run model and
the idea employed by the study to conduct robust checks
using fully modified ordinary least squares (FMOLS) and
the dynamic ordinary least squares (DOLS).
RELATED LITERATURE
There is various literature concerning trade balance,
Kayhan et al. (2013) have examined the causality between
the trade deficit and government expenditure in the
Turkish economy; they employed Toda-Yamamoto
causality (bootstrap process based) and frequency domain
analysis method, their findings revealed a bi-directional
causality between the trade deficit and government
expenditure. This is evident that each method applied in
their study is robust; government expenditure affects trade
deficit in the shorter period, whereas trade deficit affects
government expenditure even in the long run. They
conclude based on theoretical and empirical interpretation
that reduction in government expenditure will help reduce
the trade deficit. A more recent study was conducted by
Prakash and Maiti (2016) who investigated the devaluation
effectiveness in improving trade balance in Fiji. They used
econometric models to empirically examine devaluation
impact; they found that real exchange rate has a strong
relationship with trade balance in the long run.
Appreciation of foreign currency is responsible for the
rising trade deficit. This is due to Fiji’s over-dependent on
imports and its failure to cure import bills by raising
domestic export. Another recent study by Chiu and Sun
(2016) examines the relationship between trade balance,
savings and exchange rates in a panel of 76 countries. The
study uses panel smooth transition regression model with
instrumental variables to address the potential non-linear
effects of the savings rate. They found that countries with
savings rate above 14.8 percent threshold can induce their
trade balance by increasing the savings rate.
Aliyu and Tijjani (2015) examined the long-run exchange
rates pass-through into trade balance in Nigeria by means
of threshold cointegration and asymmetric error correction
modelling. Niemenien (2015) found that the introduction of
a common currency in the EU area did not increase the
elasticity of net capital flows to per capita income; hence
the understanding of imbalance in the Euro area
increased. Interestingly, countries with the most
sophisticated financial markets have had positive intra
balances and negative extra balances. Whalley and Wang
(2011) found that the effect of Renminbi revaluation on
3. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
World J. Econ. Fin. 077
surplus is proportionally larger than on trade flows;
changes in trade flows can be substantial. China’s
processing trade was incorporated into their model, they
found that the impact of revaluation on the surpluses are
elasticity dependent; huge substitution elasticities between
domestic and foreign production in demand in China yield
larger effects on trade, its flow and surpluses. Devaluation
of US dollar deteriorates her bilateral trade balance with
13 trading partners, but improves it with 37 trading
partners, especially for China, and the U.S. trade
imbalance can be eliminated by way of dollar devaluation
in the long run, (Chiu et al. 2010). Contrary to many
empirical studies but consistent with the theoretical
expectation regarding the effect of the contractionary
policy, Ivrendi and Guloglu (2010) found that monetary
policy affects the level of price, domestic demand and real
exchange rate in the short run. This is consistent with both
Keynesian and Monetarist approaches. Other studies on
this matter also include Chang (2008), Ghoshray (2008),
Ewing et.al (2006), Yau and Nieh (2008), and Heimonen
(2006), Duasa (2009) among others.
The inability to compel into consideration, the currently
acknowledged evidence of the existence of asymmetric
changes of macroeconomic variables, may lead to
inappropriate interpretations (Duasa 2009). This is
because according to Balke and Fomby, (1997), the
movement towards the long-run steady state will not be
essentially constant, Hence the need for this study. The
rest of the work of this paper is structured as follows: the
theoretical framework is presented in the next section, that
is section 3, empirical methods are presented in section 4;
the highlights of the empirical findings and analysis are
presented in section 5. Section 6, the final section
concludes and draws policy recommendation from the
major findings.
Theoretical Framework
In this section, we provide an overview of the theoretical
relationship between exchange rate and trade volumes
(import & export volumes). Rose and Yellen (1989) and
Rose (1990) presented a model which specified in a
reduced form, the performance of trade balance in a given
economy as equation (1) and (2) below. The model is
presented based on the real exchange rate and real
incomes generated within and outside the economy.
𝑋𝑡 = ( 𝑃
𝑃∗𝐸)
𝑡 .
𝜂
. (𝑌𝑡
∗) 𝜀
(1)
𝑀𝑡 = (
𝑃∗ 𝐸
𝑃
)
𝑡
𝛾
. (𝑌𝑡) 𝑧
(2)
According to the models, X denotes exports, M is imports,
E is the minimum exchange rate (as in for example Duasa
(2009)) and P, 𝑃∗
and Y, 𝑌∗
indicate the domestic and
foreign levels of prices and incomes; 𝜂 and 𝛾 denote the
elasticities of the rate of real exchange for exports and
imports, respectively, while
𝜀 stands for export′
s elasticity of income, z is the income
elasticity for imports. We rewrite equations (1) and (2) by
taking their natural log:
𝑙𝑛𝑋𝑡 = 𝜂[ 𝑙𝑛𝑃𝑡 − 𝑙𝑛𝑃𝑡
∗
− 𝑙𝑛𝐸𝑡] + 𝜀𝑙𝑛𝑌𝑡
∗
(3)
𝑙𝑛𝑀𝑡 = 𝛾[𝑙𝑛𝑃𝑡
∗
− 𝑙𝑛𝐸𝑡 − 𝑙𝑛𝑃𝑡] + 𝑧𝑙𝑛𝑌𝑡 (4)
Where 𝑙𝑛𝑒𝑡 = [𝑙𝑛𝑃𝑡
∗
+ 𝑙𝑛𝐸𝑡 − 𝑙𝑛𝑃𝑡] designates natural log
of real exchange rate. Under normal condition, balance of
trade (TB) is the ratio of exports to imports or otherwise
and its equation could be written as in Duasa (2009).
𝑙𝑛𝑇𝐵𝑡 = 𝑧𝑙𝑛𝑌𝑡 + 𝜀𝑙𝑛𝑌𝑡
∗
+ 𝜃𝑙𝑛𝑒𝑡 (5)
Where 𝜃 = - (𝜂 + 𝛾). The amount of 𝑙𝑛𝑒𝑡 shows the
condition of Marshal-Lerner (M-L), whether achieved or
not. The M-L condition occur when exchange rate
devaluation will improve balance of trade as the sum of
long-term export and import demand elasticities less than
one, (Davidson, 2009). In order to achieve the M-L
condition, 𝜂 and 𝛾 are expected to be non-positive then
𝜀 and 𝑧 are expected to be non-negative hence, M-L holds
at any time 𝜃 is non-negative showing that rate of
exchange is higher.
Empirical Approach
Enders and Siklos (2001), have expanded Engle-Granger
two-step cointegration tests, to integrate an asymmetric
error correction term, assumed two series{𝑦𝑡, 𝑥𝑡}, The
ordinary least squares (OLS) is employed in the first step
to examine the symmetric correlation among the 𝑦𝑡 and 𝑥𝑡
in the long-run; thus:
𝑦𝑡 = ģ0+ ģ1 𝑥𝑡 + 𝜀𝑡 (6)
Where ģ0 and ģ1 designate the parameters to be estimated
and 𝜀𝑡 is an error term. The conceivable cointegration
among 𝑦𝑡 and 𝑥𝑡 is then estimated through the order of
incorporation of the residuals 𝜀𝑡 in equation (6) by means
of a Dickey-Fuller test as follows:
∆𝜀̂𝑡 = 𝜌𝜀̂𝑡−1 + 𝑣𝑡 (7)
By way of suitable degree of augmentation put in place
through the insertion of lagged values of the endogenous
variable, (𝐻0 : 𝜌 = 0) as null hypothesis of no cointegration
can be properly examined through the assessment of the
t-ratio of the changing parameter 𝜌 and precisely produced
unusual critical values. Though, according to Enders and
Siklos (2001), the misspecification of Engle-Granger
method occurs when the estimated time series have a
fundamental asymmetric correlation. Hence, stationary
testing of the error term is done by integrating the
asymmetric changes. A model was proposed by Enders
and Siklos (2001) in the second step as follows:
∆ε 𝑡 = 𝐼𝑡 𝜌1 𝜀̂𝑡−1 + (1 − 𝐼𝑡)𝜌2 𝜀̂𝑡−1 + ∑ 𝜌́𝑘
𝑖=1
́ ∆𝜀̂𝑡−𝑖 + 𝜑 𝑡 (8)
4. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
Buba et al. 078
Where 𝜌1 𝜌2 and 𝜌́ 𝑖 are coefficients; 𝜑 𝑡 is a white-noise
disturbance; k is the number of lags; and 𝐼𝑡 is an indicator
function such that:
𝐼𝑡 = {
1𝑖𝑓𝜀𝑡−1 ≥ 0
0𝑖𝑓𝜀𝑡−1 < 0
(9)
Tong (1983, 1990) revealed that the OLS estimates of 𝜌1
and 𝜌2 contained an asymptotic multivariate normal
distribution. Equations 6, 8 and 9 are cointegration model
and are called the Enders and Siklos (2001)’s threshold
autoregressive (TAR) model. It remains imperative to
know that the indicator function 𝐼𝑡 is influenced by the rate
of 𝜀𝑡−1 in equation (9).
An alternative threshold has been suggested by Enders
and Siklos (2001) and Enders and Granger (1998). This
suggested threshold depends on the adjustment in 𝜀𝑡−1 in
the preceding period and consequently, the new indicator
𝑀𝑡 is emerged as:
𝑀𝑡 = {
1𝑖𝑓∆𝜀𝑡−1 ≥ 0
0𝑖𝑓∆𝜀𝑡−1 < 0
(10)
The model that contains equations 6, 8 and 10, is devoted
to the momentum threshold autoregressive (M-TAR)
model. The threshold (τ) value is set to 0 in equations 9
and 10. When the threshold (τ) is not known; the use of
grid process is suggested by Enders and Siklos (2001), in
order to come up with a consistent and dependable
estimate of the threshold. To be precise, we bear in mind
that TAR model, the residual series {𝜀̂𝑡} is orderly and
arranged as {𝜀̂1
0
< 𝜀̂2
0
<. … . < 𝜀̂ 𝑇
0
}. After thrown away 15
percent of the largest and smallest {𝜀̂𝑡}, the dominant
observations which is 70 percent of the array are formally
reflected as thresholds in equations (8) and (9) as every
single of the observation could be the conceivable
threshold. The estimated threshold considered yielding the
lowermost residual sum of squares stood to be believed as
the right estimate of the threshold. A related method can
be applied for M-TAR model. With 70 percent of
observations of the sequence {𝜀̂1
0
< 𝜀̂2
0
<. … . < 𝜀̂ 𝑇
0
}
measured as values of the threshold for equation (10),
possibly, the value may offer least sum of residual squares
emanating from the estimation of equations (8) and (10),
is then described as the consistent threshold.
To check for asymmetric cointegration; firstly, we
determine whether or not 𝑦𝑡 and 𝑥𝑡 are cointegrated in the
TAR and M-TAR models. We carry out this test by means
of F test meant to investigate the null hypothesis of no
cointegration, H0: 𝜌1 = 𝜌2 = 0. Enders and Siklos (2001)
denoted Ф as the F statistics and it has a non-standard
distribution. Secondly, the null hypothesis H0: 𝜌1 = 𝜌2 can
be tested using the standard F-statistics, however this can
be done in the existence of asymmetric cointegration. The
evidence supporting the asymmetric adjustment of the
error correction term is specified when both H0: 𝜌1 = 𝜌2 =
0 and H0: 𝜌1 = 𝜌2 are rejected. Possible adjustment is 𝜌1
if 𝑦𝑡−1 is above its long run equilibrium value(= 𝛾0 +
𝛾1 𝑥𝑡−1), but 𝜌2 if 𝑦𝑡−1 is below the equilibrium.
The error-correction model of the asymmetric
correspondingly exists for 𝑦𝑡 and 𝑥𝑡 once they are made in
an asymmetric cointegration relationship. Thus:
∆𝑦𝑡 = 𝛼0 + 𝜃11 𝑀𝑡 𝜀𝑡−1 + 𝜃12(1 − 𝑀𝑡)𝜀𝑡−1 +
∑ 𝛼1𝑖∆𝑦𝑡−𝑖
𝑘
𝑖=1 + ∑ 𝛼2𝑖∆𝑥𝑡−𝑖
𝑘
𝑖=1 + 𝜗1𝑡 (11)
And
∆𝑥𝑡 = 𝛽0 + 𝜃21 𝑀𝑡 𝜀𝑡−1 + 𝜃22(1 − 𝑀𝑡)𝜀𝑡−1 +
∑ 𝛽1𝑖∆𝑦𝑡−𝑖
𝑘
𝑖=1 + ∑ 𝛽2𝑖∆𝑥𝑡−𝑖
𝑘
𝑖=1 + 𝜗2𝑡 (12)
Where 𝜃11 and 𝜃12 signify the adjustment coefficients’
speed of ∆𝑦𝑡 if 𝑦𝑡−1 is above and below its long run steady
state, respectively. Likewise, 𝜃21 and 𝜃22 denote the
adjustment coefficients’ speed of ∆𝑥𝑡 of the two systems,
respectively, 𝛼0 and 𝛽0 are the constant terms, 𝛼1𝑖, 𝛼2𝑖, 𝛽1𝑖
and 𝛽2𝑖 are coefficients of lagged change terms, and 𝜗1𝑡
and 𝜗2𝑡 are white-noise disturbances.
In addition, we apply the Granger causality test in order to
observe the lead-lag correlation among 𝑦𝑡 and 𝑥𝑡. The null
hypothesis; 𝑥𝑡 does not lead 𝑦𝑡 is H0: 𝛼2𝑖 = 0, i = 1,……..,k
and the null hypothesis that 𝑦𝑡 does not lead 𝑥𝑡 is H0: 𝛽1𝑖 =
0, i = 1,…….,k.
EMPIRICAL RESULTS AND ANALYSIS
Data description and unit root test
The observed series of trade variables in this study are all
together, collected from the Bank of Thailand (BOT)’s data
and statistics database. A monthly data of fifteen years,
from M1: 2000 to M12: 2014; see Chen, et al. (2005) and
Ibrahim (2011) on the use of the data sample size. The
measure of the exchange rate is the exchange rate of
commercial banks in Bangkok, with the base year of 2000.
The imports and exports volumes are both in indices with
2000 as the base year, and finally, the balance of trade is
basically the difference between export volume and import
volume, (Luo, Lv & Zhang 2010). Imports and exports
values are in log form, except for the trade balance.
Political stability data were taken from World Bank’s world
governance indicator (WGI); an annual data resampled to
monthly using Eviews.
The first test conducted in the unit root test; breakpoint unit
root, in particular, using a modified Dickey-Fuller test with
Eviews 9 software. It carries out a test which allows for a
structural break in the process. The latest Eviews 9
supports the computation of modified Dickey-Fuller tests
which allow for levels and trends that differ across single
break date. The framework follows the work of Perron
(1989), Perron and Vogelsang (1992), Vogelsang and
Perron (1998), Banerjee, et al. (1992).The results of the
unit root tests are displayed in Tables 1 and 2 below.
5. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
World J. Econ. Fin. 079
Table 1: Breakpoint Unit Root Tests
Variable
Minimize Dickey-Fuller test statistics
Level First Difference
Tb -3.9798 -6.6659***
X -3.6053 -5.2154**
M -3.1415 -5.9743***
rer -3.9745 -10.128***
Note: *, **, and *** indicate level of significance at 10%, 5%
and 1% level, respectively.
Table 1 above showed that all the variables are stationary
at first difference and at 1 percent significant level. This
means that the data are not spurious and no presence of
unit root.
Table 2 Breakpoint Unit Root Test
Variable
Minimize Intercept break test statistics
Level First Difference
Tb -4.6409* -16.600***
X -2.9157 -4.7754**
m -4.0771 -22.1629***
rer -4.1997 -9.5069***
Note: *, **, and *** indicate level of significance at 10%, 5%
and 1% level, respectively
Our test results for two structural breaks (minimize Dickey-
Fuller t-statistics and minimize intercept break t-statistics)
showed statistics coefficient with p-values less than 0.01
all at first difference except for trade balance under
minimize intercept break t-statistics. This has led us to
reject the null of a unit root. The break dates and the effect
sign of break dummy variable on each of our variables and
their significance levels were also provided.
For real exchange rate, the break date is 2001, the fifth
month is shown by both Dickey-Fuller t-statistics and
autoregressive coefficient graphs; the effect of break
dummy variable on the exchange rate is negative but not
significant. The import volume has its break date in 2012,
third month; the effect of its break dummy on it was positive
(0.331) and significant at one percent. The break date for
export volume is 2008, seventh month; the effect of its
break dummy variable is positive (0.1748) and significant
at five percent. The trade balance has a break date in
2009, second month and the effect of the break dummy
variable on it is also positive but insignificant. Lastly,
political stability has a break date in 2007, sixth month; the
effect of its break dummy variable is positive (1.466) and
significant at ten percent. See Appendix 1 and 2 for break
dates and break dummy variables effects.
The long run relations
We present the following functions which are considered
suitable for long run correlation between exchange rate
and trade balance, export volume & import volume, as in
the work of Duasa (2009):
Model 1: 𝑡𝑏𝑡 = 𝛼0 + 𝛼1 𝑟𝑒𝑟𝑡 + 𝜀𝑡 (13)
Model 2: 𝑥𝑡 = 𝛽0 + 𝛽1 𝑟𝑒𝑟𝑡 + 𝜀𝑡 (14)
Model 3: 𝑚 𝑡 = 𝜔0 + 𝜔1 𝑟𝑒𝑟𝑡 + 𝜀𝑡 (15)
Model 1 forms the relationship between trade balance and
real exchange rate; Model 2 institutes the link between real
exchange rate and volume of exports while Model 3
establishes the link between real exchange rate and the
volume of imports. The results of these long-run
relationships are presented in Table 3.
Table 3: Long-run model
Equation/Model Dependent Variables
Variable Ln tb Ln x Ln m
Constant -0.79*** 21.21*** 22.00***
(-4.25) (64.63) (56.65)
Ln rer 0.22*** -2.31*** -2.54***
(4.32) (-25.36) (-23.50)
Observation
Adjusted R-square
F-statistic
180 180 180
0.08 0.78 0.75
18.69*** 6.43*** 5.52***
Before testing for the existence of asymmetric
cointegration, we conduct the Engle-Granger (1987)’s two-
step cointegration test; based on equation (7), the results
of these tests are presented in Table 4.
Table 4: Engle-Granger ADF Cointegration tests
Model t-statistic Critical values
1% 5% 10%
(tb) 1 -17.069 -2.578 -1.942 -1.615
(x) 2 -4.218 -2.578 -1.942 -1.615
(m) 3 -19.759 -2.578 -1.942 -1.615
The Engle-Granger cointegration test results (Table 4)
above reveal the existence of long-run relationships
between real exchange rate and trade balance, exports
volume & imports volume in models 1, 2 and 3
respectively. With this, therefore, the null hypothesis of no
cointegration is hereby rejected at 1% significance levels.
Thus there might be a chance to discover an asymmetric
cointegration in the model without further prove from
Johansen Jusellius (1990) cointegration test. We now
explore further analysis called threshold cointegration
using TAR and M-TAR for the three models. The results
are presented in Table 5.
Table 5: Enders-Siklos asymmetric cointegration tests
H0: 𝜌1 = 𝜌2 = 0 H0: 𝜌1 = 𝜌2
TAR: Ф k M-TAR:
Ф*
k TAR:
F test
M-TAR:
F test
Model
1(tb)
7.48** 1 9.52** 1 0.218 3.98
Model 2(x) 14.43*** 1 11.38*** 1 6.54** 1.12
Model
3(m)
12.03*** 1 11.01*** 1 5.02 3.18
6. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
Buba et al. 080
Note: k Notation is the default lag periods of lagged
difference term, ** indicates significance at 5% level, the
critical values of Ф and Ф* statistics are given in Enders and
Siklos (2001). F indicates F statistic for the null hypothesis
of symmetric adjustment, 𝜌1 = 𝜌2.
In Table 5 above, we have found, using model 1,
asymmetric cointegration occurs between trade balance
and real exchange rate in both TAR and M-TAR under the
joint null hypothesis. Exhausting model 2 and 3, we also
found asymmetric cointegration between exports demand,
imports demand and real exchange rate respectively,
using TAR model as Ф and M-TAR model as Ф* statistic,
both significance at 1% and TAR F-statistic of Wald
coefficients tests is significant at 5% level. All results are
significant at 5% and 1 % levels.
Threshold error-correction models
Having confirmed the existence of asymmetric
cointegrations between real exchange rate and all the
trade variables used in this study, we now go further to
estimate TAR and M-TAR error correction models so as to
evaluate the short run dynamically. We set the maximum
lag order of first differenced variables to 12. The lag order
is to be trimmed down if and only if the last lag is not found
significant at least 10% level. Table 5, Table 6 and Table
7 present the results; M-TAR for trade balance model and
TAR for export and import models respectively. All the
three models are diagnosed with robust evidence.
Table 6: Momentum Threshold Autoregressive (M-
TAR) Error Correction Model for trade balance
Independent Variable
Equation
Dependent Variable: (M-
TAR) ∆𝒕𝒃
Constant -0.003
𝑀𝑡 𝜀𝑡−1 -0.442***
(1 − 𝑀𝑡)𝜀𝑡−1 -0.269***
∆𝑡𝑏𝑡−1 -0.308***
∆𝑡𝑏𝑡−2 -0.281***
∆𝑡𝑏𝑡−9 0.244***
∆𝑟𝑒𝑟𝑡−1 0.023*
∆𝑟𝑒𝑟𝑡−10 -0.026**
Adjusted R-square 0.420
F-statistics 18.128***
Diagnostic tests:
Serial correlation 0.867
Heteroskedasticity 0.379
Wald test:
F-statistics 8.690***
Chi-square 43.45***
Note: ***, ** and * denote 1%, 5% and 10% significance
levels respectively
After the estimate of M-TAR error-correction model of
trade balance, we found that long-run relationship exists
between real exchange rate and trade balance and with a
causal adjustment manner being asymmetric. Indeed, the
rate of the adjustment parameters show that as trade
balance and real exchange rate set off from their original
steady-state temporarily, the movement or adjustment
back to the steady state, is faster when there is relative
increase in trade balance (above long-run value),
compared to relative decrease in trade balance (below
long-run value). We explain this scenario in the following
models.
∆𝑡𝑏𝑡 = 𝐾 − 0.442[𝑡𝑏𝑡−1 + 0.79 − 0.22𝑟𝑒𝑟],
for 𝜀̂𝑡−1 > 0 (16)
∆𝑡𝑏𝑡 = 𝐾 − 0.269[𝑡𝑏𝑡−1 + 0.79 − 0.22𝑟𝑒𝑟],
for 𝜀̂𝑡−1 < 0 (17)
In the above models, K represents constant and lagged
changes in equations 11 and 12. The specification of M-
TAR disclosed a return to an underlying equilibrium
relationship is faster, 44% adjustment speed, as a short-
term movement from equilibrium relationship, are
instigated by relative increases in the trade balance, or
equally, decreases in the real exchange rate. However, the
return to the original equilibrium is only 27% as the
temporary moves from equilibrium point are triggered by
comparative decreases in the trade balance, or equally,
increases in the real exchange rate.
From the investigations made, an inference is drawn that
there is an evidence of deficit trade balance in Thailand.
This can be explained by the fact that the adjustment of
trade balance back to the long run value is slower when it
faces deficit than when it faces surplus. The apprehension
is that a trade deficit that lasts long can lead to more
foreign debt as the country pays more than its earnings,
and eventually devaluation of the currency. Thailand
historically has been having a negative trade balance with
the rest of the world for most of the times. If a trade balance
surplus is present, it remains relatively small especially the
period between 2001 and 2010. Though if not for crude oil
imports, the trade balance would have been positive all the
time. There was also a noticeable striking trade deficit in
the 1995 – 2000 periods, as a result of Asian economic
crisis. Prior to the said crisis, Thailand was importing a lot
of capital goods; which was a good thing to reckon,
however, it is obvious that too much of a good thing turned
out to be bad at the time. These trade deficits occurred
despite various trade and investment policies adopted by
the government of Thailand, such as export promotion
policies that have to do with refinancing facilities,
investment promotion for exports and tax refunds. These
policies date back from the 1960s through to 1990s.
7. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
World J. Econ. Fin. 081
Table 7: Threshold Autoregressive (TAR) Error
Correction Model for export demand
Independent Variable
Equation
Dependent Variable
(TAR) ∆𝒙
Constant 0.003
𝐼𝑡 𝜀𝑡−1 -0.389***
(1 − 𝐼𝑡)𝜀𝑡−1 -0.095**
∆𝑥𝑡−1 -0.215***
∆𝑥𝑡−12 0.425***
∆𝑟𝑒𝑟𝑡−1 1.117***
Adjusted R-square 0.475
F-statistics 31.024***
Diagnostic tests:
Serial correlation 0.4870
Heteroskedasticity 0.4077
Wald test:
F-statistics 30.056***
Chi-square 90.167***
Note: *** and ** denote 1% and 5% significance levels
respectively.
From Table 7, we noticed the existence of long-run
cointegration between real exchange rate and export
volume. We also observed a causal adjustment manner
being asymmetric. When export volume and real
exchange rate depart temporarily from the state of
equilibrium relationship, adjusting back to steady
equilibrium state is faster resulting from a comparative
increase in export volume (above long-run value) as
compared to a relative decrease in export demand which
has very low percentage point of 9%. This means that the
error-correction export demand model provides a
somewhat meaningless evidence for the adjustment of
export demand when it is below long-run value. We have
the following as an illustration for this non-meaningfulness.
∆𝑥𝑡 = 𝐾 − 0.389[𝑥𝑡−1 − 21.21 + 2.31𝑟𝑒𝑟𝑡−1],
for 𝜀̂𝑡−1 > 0 (18)
∆𝑥𝑡 = 𝐾 − 0.095[𝑥𝑡−1 − 21.21 + 2.31𝑟𝑒𝑟𝑡−1],
for 𝜀̂𝑡−1 < 0 (19)
Where K, signifies other terms, which is constant and
lagged changes in export and real exchange rates. Error-
correction coefficients estimate suggest that return to the
underlying equilibrium correlation is faster, with 39%
adjustment speed as temporary departures from the
original equilibrium is caused by a relative increase in
export demand. On the other hand, the return to the
underlying equilibrium is just as low as 9% speed of
adjustment as temporary departures from it are triggered
by relative decreases in export volume or consistently,
increases in the real exchange rate. This result confirmed
persistent evidence of trade balance deficit observed in
Table 5.
Table 8: Threshold Autoregressive (TAR) Error
Correction Model for import demand
Independent Variable
Equation
Dependent Variable:
(TAR) ∆𝒎
Constant 0.013**
𝐼𝑡 𝜀𝑡−1 -0.095**
(1 − 𝐼𝑡)𝜀𝑡−1 -0.385***
∆𝑚 𝑡−1 -0.420***
∆𝑚 𝑡−7 -0.118*
∆𝑚 𝑡−9 0.119*
∆𝑚 𝑡−11 -0.154**
∆𝑟𝑒𝑟𝑡−3 -0.724*
Adjusted R-square 0.332
F-statistics 12.873***
Diagnostic tests:
Serial correlation 0.992
Heteroskedasticity 0.167
Wald test:
F-statistics 9.548***
Chi-square 47.74***
Note: ***, ** and * denote 1%, 5% and 10% significance
levels respectively.
In Table 8, we have import demand model for TAR error-
correction, the model also advocates speedy adjustment
of import demand, and however, the adjustment is faster
when below long-run value. On the other hand, the model
provides very little evidence concerning adjustment in
import demand when it is above long-run value. This can
be demonstrated as follows:
∆𝑚 𝑡 = 𝐾 − 0.095[𝑚 𝑡−1 − 22.00 + 2.54𝑟𝑒𝑟𝑡−1],
for 𝜀̂𝑡−1 > 0 (20)
∆𝑚 𝑡 = 𝐾 − 0.385[𝑚 𝑡−1 − 22.00 + 2.54𝑟𝑒𝑟𝑡−1],
for 𝜀̂𝑡−1 < 0 (21)
Where K, expresses other terms, which is lagged changes
and constant in imports and real exchange rates. The
assessed coefficient of error correction recommends that
38% deviation of imports in last-period from its long-run
value will be corrected by imports change. Specifically, the
values of the conformity parameter showed that when real
exchange rate and imports coincidentally move from their
underlying equilibrium relationship, alteration back to
balance is faster after a relative reduction in imports or
similarly, an increment in the real exchange rate. On the
other hand, imports adjustment is found to be less
meaningful when it is above its long-run value. This result
is in opposite with the one in Table 6, and it shows that a
shock of exchange rate on import volume is possible to be
temporary in nature. To be precise, the increment in
exchange rate has the same impact on both exports and
imports demand in Thailand.
8. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
Buba et al. 082
We have also included a control variable of political
stability in our short-run model, using autoregressive
distributed lag (ARDL), in order to capture its effects on the
trade balance in Thailand. We found that, although, the
variable has a negative effect the effect is not significant.
Table 9: Short-Run Model
Regressors Coefficient Standard Error T-Ratio
DLEXR -0.0259** 0.01109 -2.3417
DLXVOL 0.3770*** 0.07061 5.3353
DLMVOL -0.3973*** 0.07124 -5.5779
DPSTAB -0.4410 0.64620 -0.6823
Dependent Variable DTB, R-Squared 0.99578, DW-
statistic 1.9979
Robustness Checks
It is imperative to have an additional support to our
findings. In doing this, we conduct two types of estimation;
the dynamic ordinary least square (OLS) and the fully
modified ordinary least squares (FMOLS), to serve as
robust checks to our findings. We presented the results of
the robustness checks in Table 10 with trade balance as
the dependent variable. The coefficients of exchange rate
using DOLS is negative and significant at 10 percent which
is in line with our main findings. The coefficient is also
negative and significant at 5 percent using FMOLS. This
confirms our findings that exchange rate causes negative
trade balance in Thailand, as a result of excess import over
export. The other two independent variables; import and
export volumes showed a negative and a positive
relationship with trade balance respectively and are
significant at 1 percent level. Political stability showed a
non-significant negative effect on trade balance using both
FMOLS and DOLS.
Table 10: Results for DOLS and FMOLS Estimates
DOLS FMOLS
Dep. Var. : Trade
Balance
Lag=1,
lead=1
Exchange Rate -0.12*
(0.06)
-0.022*
(0.01)
Import Volume -1.00***
(0.01)
-1.00***
(0.01)
Export Volume 0.99***
(0.01)
0.99***
(0.01)
Political Stability -0.001
(0.00)
-0.004
(0.00)
Note: values in parenthesis are standard errors
CONCLUSION
In examining the impacts of exchange rate shock on trade
variables, most studies currently employed asymmetric
threshold cointegration framework. However, prior to this,
several studies commonly used symmetric cointegration
analysis to examine the interdependence among
variables. One of such methods is implemented from
Engle-Granger (1987), which assumes symmetric
adjustment of the error correction term. For symmetric
cointegration, adjustment coefficients are alike,
irrespective of their positivity or negativity in the equilibrium
error. This study tries to investigate the long run
equilibrium relationship between real exchange rate and
trade balance, export demand as well as import demand
using asymmetric cointegration framework advanced by
Enders and Siklos (2001). The study also incorporates
political stability in its short run model as a control variable,
to see whether the variable has any effect on Thailand’s
trade balance. This method is used because; it has been,
nowadays, an important process in macroeconomic
analysis, with quite a number of studies providing clear
evidence of asymmetric adjustment of macroeconomic
variables.
In this study, we found that there exists a long run
asymmetric cointegration between trade balance and real
exchange rate when we conducted the M-TAR model.
Using TAR model, we also found the existence of
asymmetric cointegration between real exchange rate and
exports and imports volumes with the value of threshold
not equal to zero (𝜏 ≠ 0). Therefore, based on the
expectations and objective of this study, we report that
changes in the real exchange rate have contributed to the
recent trade balance deficit came across by Thailand.
From the M-TAR model of the error correction for trade
balance, an inference can be drawn that long-run
relationship exists between trade balance and real
exchange rate with the underlying adjustment manner
being asymmetric. Basically, the value of the adjustment
parameters specifies that when trade balance and real
exchange rate depart from their core equilibrium
relationship, then adjustment back to equilibrium is more
speedy resulting from an increase in trade balance (above
long-run value) as related to decreasing in trade balance
(below long-run value). The export model for TAR error
correction suggests that when export volume and real
exchange rate momentarily depart from their equilibrium
correlation, adjustment back to original equilibrium is more
rapid resulting from a relative increase in export volume
(above long-run value) compared to a relative decrease in
export volume (below long-run value).
As per import demand model for TAR error correction, the
model recommends rapid adjustment of import volume
when it is below long-run value. The model also asserts
that returns or adjustment back to equilibrium point is quite
slow when it is above long-run value and faster when it is
below long-run value. The results indicate the evidence
that there is the presence of fluctuations of trade balance
deficit and surplus in Thailand, with much effect on trade
balance deficit. This is because adjustment of trade
balance back to its long-run value is quite slow when it
9. Asymmetric Co-integration between Exchange Rate and Trade Balance in Thailand
World J. Econ. Fin. 083
faces deficit than when it faces surplus. The study also
uses political stability in its short run model as part of the
explanatory variables to capture its effects on trade
balance; however, its effect on trade balance was not a
meaningful one. For the trade balance deficit, it is most
likely due to a policy of massive crude oil imports between
late 1990,s through to 2010 which in turn led to the
devaluation of Thailand’s currency. The shock of the
exchange rate, import demand might be more or less a
temporary one. Therefore, to avoid a negative effect on
Thailand’s currency, it is suggested that policy adjustment
is implemented to boost export and in addition reduce
over-reliance on crude oil imports.
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