Does US Infectious Disease Equity Market Volatility Index Predict G7 Stock Returns? Evidence Beyond Symmetry

During the COVID-19 pandemic, Baker et al. (2020) [The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies, 10, 742–758.] proposed the infectious disease equity market volatility (ID-EMV) index, which tracks US equity market volatility caused by infectious diseases. We extended the literature by using this newly developed ID-EMV index to examine its asymmetric effect on the share market returns of the G7 countries, which include the United Kingdom, Italy, Japan, Germany, France, Canada, and the United States of America. Moreover, we used novel techniques like the quantile-on-quantile regression test, quantile cointegration test, and quantile unit root test. The quantile cointegration test indicates that the infectious disease EMV index is cointegrated with G7 stock returns. Moreover, the quantile-on-quantile regression technique reveals that the infectious disease index positively affects stock returns during bullish states of the stock markets. In contrast, it negatively affects stock returns during bearish states of the stock market returns. The negative effect of the bearish states implies that investors may discourage investments during the downturns of the economy, whereas they need to boost their investments during economic booms.

Which is leading: Renewable or brown energy assets?

This study examines the relationship between crude oil, a proxy for brown energy, and several renewable energy stock sector indices (e.g., solar energy, wind energy, bioenergy, and geothermal energy) over various investment horizons. Using daily data from October 15, 2010, to February 23, 2022, we apply a combination of methods involving co-integration, wavelet coherency, and wavelet-based Granger causality. The results show that the relationship between crude oil and renewable energy indices is non-linear and somewhat multifaceted. Firstly, there are sectorial differences in the intensity of the relationships. Notably, the relationship intensity between the wind and crude oil is lower than that involving geothermal energy or bioenergy. Secondly, the relationship evolves with time. For example, the COVID-19 outbreak seems to have increased the relationship between crude oil and renewable energy markets, notably for solar, bioenergy, and geothermal. Thirdly, the relationship varies across scales. When controlling for the VIX (volatility index), a proxy of the sentiment of market participants, and EPU (economic policy uncertainty index), the relationship seems strong in the long term but weak in the short term. This result is confirmed using a Granger causality test on the wavelet-decomposed series. These findings have important implications for long-term investors, short-term speculators, and policymakers regarding the co-movement between brown and renewable energy markets. © 2022 Elsevier B.V.

Investigating Fisher effect in SACU countries: A wavelet coherence approach

The purpose of this study is to examine the time-frequency relationship in the Fisher's effect for South African Customs Union (SACU) countries using continuous wavelet transforms. We use the Wavelet power spectrum to decompose the nominal interest rate and inflation rate across a time frequency space and then employ wavelet coherence tools to investigate the synchronization of the pair of time-series in a time-frequency space. The wavelet tools prove to be a powerful tool in harmonizing seemingly conflicting empirical evidences found in previous literature. Our findings indicate similar co-movement between interest rates and inflation for SACU countries in the post-2000 period, with stronger Fisher effects existing around the global financial crisis, and evidence of reverse lead-lag dynamics at higher frequencies during crisis period. However, subsequent to the crisis period lower frequency oscillation become increasingly dominant as higher frequency components lose their significance up until the COVID-19 pandemic when the high-frequency components re-appear. All-in-all, our findings have important academic and policy implications.

THE EFFECTS OF GLOBAL ECONOMIC CRISES ON PERFORMANCE OF PARTICIPATION BANKS: THE CASE OF THE COVID-19 OUTBREAK

Türkiye'de katılım bankaları adı altında faaliyet gösteren Islami bankacılık uygulamalarının etkinliǧi ve finans sistemi içerisindeki payı giderek artış göstermiş, söz konusu bankaların sundukları ürünler sayesinde, tasarrufların finansal sisteme kazandırılmasında, yurtiçinden olduǧu kadar yurtdışından da kaynak temininde ve kaynakların çeşitlendirilmesinde önemli ilerlemeler saǧlanmıştır. Faizsiz işlemler üzerine inşa edilen Íslami bankacılık sisteminin küresel nitelikli krizlerden etkilenme düzeylerinin tespit edilmesi, sistemin etkinliǧinin anlaşılmasına ve aksayan yönlerine yönelik gerekli iyileştirmelerin yapılmasına imkân verecektir. Bu çerçevede çalışmamızda 2008 küresel finans krizi ve Covid-19 salgını kaynaklı küresel ekonomik/finansal sorunlar karşısında Türkiye'de faaliyet gösteren katılım bankalarının performanslarında ortaya çıkan gelişmeler mevduat bankalarıyla karşılaştırmalı olarak ele alınmıştır. Sistemdeki yapısal kırılmaları dikkate alan Gregory-Hansen eş bütünleşme testi kullanılarak, işletme giderlerinin aktiflere oranı, finansman-mevduat (katılım fonu) oranı, sorunlu finansman ve sermaye yeterlilik oranı göstergelerinin aktif karlılıǧı üzerindeki etkileri analiz edilmiştir. Elde edilen bulgulara göre, 2008 küresel finans krizinden sonra katılım bankalarının performansında 2010 yılında (Krizin Avrupa'da borç krizine dönüştüǧü dönem) bir kırılma meydana gelmiş, küresel salgın sürecinde ise herhangi bir kırılma oluşmamıştır. Mevduat bankaları açısından ise, küresel finans krizinin hemen arkasından 2009 yılında bir kırılma oluşmuştur. Covid-19 sürecinin mevduat bankaları üzerinde bir kırılma oluşturmadıǧı çalışmanın diǧer bulguları arasında yer almaktadır.Alternate :The efficiency of Islamic banking practices operating under the name of Participation Banks in Turkey and their share in the financial system have gradually increased, and thanks to the products offered by these banks, significant progress has been made in bringing savings into the financial system, in obtaining resources from abroad as well as from within the country, and in the diversification of resources. Determining the impact level of global crises to the Islamic banking system, which is built on interest-free transactions, will enable the efficiency of the system to be determined and the necessary improvements to be made for the faulty aspects. In this context, in our study, the developments in the performance of participation banks operating in Turkey in the face of global economic/financial problems caused by the 2008 global financial crisis and the Covid-19 pandemic are discussed in comparison with deposit banks. By using the Gregory-Hansen cointegration test, which considers the structural breaks in the system, the effects of the ratio of operating expenses to assets, financing-deposit (participation fund) ratio, non-performing financing ratio, and capital adequacy ratio indicators on the return on assets were analyzed. According to the findings, there was a break in the performance of participation banks in 2010 (the period when the crisis turned into a debt crisis in Europe) after the 2008 global financial crisis, but no break in the pandemic process. In terms of deposit banks, a break occurred in 2009, right after the global financial crisis. Other findings of the study include that the Covid-19 process did not create a break on deposit banks.

A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS

We model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. The Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN)-based Rényi effective transfer entropy approach is used to establish dynamic flow of information between macroeconomic variables and stock returns of BRICS. The original return series suggested insignificant information flow between most macroeconomic variables and stock returns. However, we reveal both asymmetric and tail dependent analyses at diverse scales between macroeconomic variables and stock returns of BRICS economies. Moreover, we find negative significant flow of information between the variables, in that knowing the history of one variable (either stock or macroeconomic variable), in this case, indicates considerably more uncertainty than knowing the history of only the other variable (either stock or macroeconomic variable). We also observe that global economic policy uncertainty has the most significant adverse causal relationship with stock returns of BRICS, especially in the long term. These results have important implications that investors and policymakers should take into account. Regulators should consider instituting sound policy actions geared towards minimising long-term effects of external shocks and uncertainties.

Can We Increase Health Expenditure Per Capita Through Higher Economic Growth? Empirical Evidence from Turkey

Many researchers indicate that health expenditures positively contribute to economic growth and prosperity, emphasizing that when healthy individuals are more efficient, they make a huge contribution to human capital, which in turn improves productivity. There is also a relationship between economic growth and health expenditures, meaning that health expenditure is a function of income and higher income leads to an increase in spending on health. In this study, we assess whether economic growth has an impact on healthcare expenditure by focusing on an emerging market economy. Therefore, the main objective of this paper is to test the impact of economic performance on health expenditure per capita for Turkey in the period of 1999-2018. In the analysis, the unit root properties are tested by using RALS (Residual Augmented Least Squares) ADF and traditional Augmented Dickey Fuller (ADF) unit root tests. In order to examine the long-run relationship between economic growth and health expenditure per capita, we employ the RALS Engle-Granger and traditional Engle-Granger cointegration tests. The findings of our analysis support the evidence of a long-run impact of economic growth on healthcare expenditure per capita for Turkey in the relevant period.Alternate :Birçok iktisatçı, sağlıklı bireylerin verimliliği artırdığını vurgulayarak, sağlık sistemine yapılan yatırımların ekonomik büyümeye olumlu katkıda bulunduğuna işaret etmektedir. Benzer şekilde, sağlık harcamaları gelirin bir fonksiyonudur;gelir arttıkça sağlık harcamaları artmaktadır. Bu çalışmada, temel olarak, gelişmekte olan bir ülkede, ekonomik büyümenin sağlık harcamaları üzerinde etkisi olup olmadığı sorusu cevaplanmaya çalışılmaktadır. Dolayısıyla, bu çalışmanın amacı, Türkiye'de, ekonomik büyüme ile kişi başına düşen sağlık harcamaları arasındaki ilişkinin 1999-2018 dönemi için analiz edilmesidir. Analizde, serilerin durağanlığının test edilmesi amacıyla, geleneksel ADF testine ek olarak, RALS (Residual Augmented Least Squares) ADF birim kök testi uygulanmaktadır. Ekonomik büyüme ve kişi başına sağlık harcamaları arasındaki uzun dönemli ilişkinin test edilmesi amacıyla ise, Engle-Granger ve RALS Engle-Granger kointegrasyon testlerinden yararlanılmaktadır. Analiz sonuçları, ekonomik büyümenin kişi başına düşen sağlık harcamaları üzerinde uzun dönemde etkisi olduğuna işaret etmektedir.

The Relationship between the Real Effective Exchange Rate and Industrial Production in the Turkish Economy

The industrial sector is one of the key sectors for the Turkish economy in terms of production, employment and exports. The volatility in the exchange rate in the Turkish economy has important effects on industrial production, as well as many economic variables. The main purpose of this study is to empirically analyse the effects of real effective exchange rate on industrial production for the Turkish economy in the 2009M08-2022M01 period. According to the results of the study, the real effective exchange rate adversely affects the industrial production in the Turkish economy. Other things being equal, the depreciation of the domestic currency increases the foreign demand for industrial products, in line with the economic theory. Considering these relations between real effective exchange rate and industrial production while designing economic policies is important for sustainable economic growth.

DOES THE COVID19 PANDEMIC CHANGE THE RELATIONSHIP BETWEEN GOVERNMENT EXPENDITURES AND ECONOMIC GROWTH IN AZERBAIJAN?

This paper investigates the impact of the Government's capital and current expenditures on economic growth in Azerbaijan. The estimation strategy of the research consists of two directions. First, all estimation approaches were used for the period of 2005Q1-2019Q4. The estimated model for this period is called Model 1. Second, the model which is called Model 2 was estimated for whole period of 2005Q1 2021Q1. This approach allows comparing the role of the Government expenditures on non-oil economic activity in normal times and during the COVID-19 pandemic in Azerbaijan. Estimations show that coefficients characterizing the impact of Government current expenditures and capital expenditures on non-oil economic growth are almost the same for both periods. Therefore, we can state that COVID-19 pandemic did not affect the structure of the relationship between Government expenditures and non-oil economic growth. Results show that 1 percent increase in capital and current expenditures of state budget increases the real non-oil GDP by 0.10 and 0.40 percentage points, respectively. Accordingly, both capital and current expenditures of the state budget have positive impact on the real non-oil GDP growth for the both periods. This is in contrast to findings in the literature, which argue that increasing current expenditures financed by tax hikes lead to a lagged decrease in private investment, having an overall negative impact on economic growth. We attribute this opposing finding to the Azerbaijani state budget revenue system, which is financed by transfers from the State Oil Fund (Stabilization Fund). Thus, large government investment and social projects mostly rely on non-tax sources. Therefore, we argue that positive impact of capital and current expenditures of government budget on non-oil GDP seems plausible for Azerbaijan. Another result of our estimation is that expansion of economic openness accompanied by non-oil economic growth plunge in Azerbaijan. We interpret this phenomenon with very low share of non-oil export, where openness is mostly caused by increase in import volume.