News-based uncertainty measures and returns on prices of precious metals: evidence from regime switching and time-varying causality approach

PurposeThe study aims to examine the relationship among economic policy uncertainty (EPU), geopolitical-risks (GPR), the interaction (EPGR) of EPU and GPR and the returns of gold, silver, platinum, palladium and rhodium using monthly data from January (1997) to May (2021).Design/methodology/approachThe paper employs the Markov-switching and the novel Shi et al. (2020) bootstrap time-varying Granger-causality approach.FindingsThough the Markov-switching shows variation in the responses of precious metals to EPU, GPR and EPGR across low and high states, the paper observes the safe-haven potential of the precious metals in the high regime while the hedging potency is also evident in the results. To further substantiate the safe-haven and hedging properties, the time-varying Granger-causality shows the causal effect of EPU on all the selected precious metal returns coinciding with global events. While the authors show that GPR Granger causes platinum, palladium and rhodium consistently under the rolling/recursive-evolving tests, the authors cannot find the causal effect of GPR on gold and silver returns across the algorithms. The paper also observes persistence in the causal effect of EPGR on palladium and platinum across all the algorithms, while gold and rhodium only show consistency in the responses under the rolling- and recursive-evolving algorithms given the conditions of homoscedasticity and heteroscedasticity.Practical implicationsThe authors' results are essential to investors and policymakers since both typically leverage the hedging and safe-haven characteristics of precious metals to obviate downside risks during highly uncertain periods.Originality/valueThe authors' techniques allow examining the hedging and safe-haven properties of precious metals across regimes and date-stamp critical periods of causation inherent in the relationship.

Pro-poor and inclusive growth in West Africa

PurposeThis paper focuses on three key metrics of poverty, income distribution and employment to ascertain the pro-poor and inclusive-growth position of the western African region. The roles of governance structures and their interactive effects are also accommodated to capture the peculiarity of the region.Design/methodology/approachThe paper employs fixed and dynamic models.FindingsEvidence suggests that growth is pro-poor, although virtually all governance indicators are sterile in stimulating poverty reduction. The authors observe that health and education spending coupled with trade-openness stimulate pro-poor growth potentials, whereas conflicts culminate the pervasiveness of poverty in the region. By empirically answering the question of how inclusive is economic growth through the lens of income-distribution and employment, the authors show that growth has been exclusive as per-capita-GDP growth rather dampens income shared by the poorest 20%. Also, it is observed that growth has not been inclusive as the jobless-growth argument remains valid while high inequality further exacerbates unemployment in the region. It is further shown that governance has been generally weak in propelling inclusive growth except where the institutional-component of governance stimulates inclusive growth through improvement in equality and labor employability.Originality/valueThe study jointly examines the metrics of poverty, income distribution and employment to ascertain growth pro-poorness and inclusivity which are key for the achievement of African-union (AU) agenda 2063. The study captures cross-sectional dependence among selected countries which previous studies ignored.

Oil Price and Economic Performance: Additional Evidence from Advanced Economies (preprint)

This paper reexamines the effects of oil price returns on economic performance in seven selected industrialized economies: Canada, Australia, USA, UK, Germany, Japan and China. We employed the wavelet decomposition strategies, wavelet-based regime-switching and granger-causality approaches to examine the effect of oil prices on economic performances of sample countries across time scales. Further, through the bootstrap time-varying causality, we detect and date-stamp periods where causality may or may not exist as the technique allows us identify periods of uncertainties such as the ongoing Covid-19 crisis and study the influence of global events on the causal link between oil prices and economic performance. The wavelet-analysis shows diverse underlying cycles in oil price whereas its macroeconomic impact on growth-performance vary across economies and different orthogonal frequency scales aligning the heterogeneous market hypothesis. This corroborates the wavelet-based-regime-switching approach as different signs/magnitudes/significance across regimes and countries reflect asymmetries and heterogeneous behaviors. The wavelet-based Granger-causality approach also reveals strong causal-linkages between oil-prices and growth in the shortest wavelet-scales but not in medium/long term. Further evidences from the bootstrapped time-varying Granger-causality approach shows that causality runs from oil prices to growth for at least 1-month across all samples. We further detect and date-stamp longest periods of causation from growth to oil-prices across countries extending through pre and post Covid-19 pandemic. This affirms the weight and significance of growth performances of these economies in shaping the cyclical variation of oil commodity prices. Policy implications are informed from the study.