The impact of uncertainty on money demand in the UK, US and Euro area

We estimate money demand functions for the UK, the Euro area and the US using Divisia monetary aggregates and investigate the extent to which the uncertainty caused by Brexit and Covid have affected these relationships. Our cointegrated VAR analysis shows that for all three economies Brexit and/or Covid have had some impact on the stability of money demand functions. We find that including a measure of stock market volatility in the money demand specifications helps re-establish stability of the models, particularly for the UK and the Euro area. We also explore the uncertainty and money demand relationship in the context of a Markov-switching model. We find that the effect of uncertainty on the demand for money is more pronounced during periods of heightened uncertainty. The findings of this study lend support to studies calling for Divisia aggregates to be given a more prominent role in policymaking, especially when interest rates are in the zero lower bound environment and are less informative about the stance of monetary policy.

The relationship between crude oil futures and exchange rates in the context of the Covid-19 shock: a tale of two markets

We examine the high-frequency intraday return and volatility transmission between crude oil futures prices and exchange rates during the 2020 Covid-19 pandemic in the context of two markets: the newly established renminbi-denominated Shanghai International Energy Exchange in China and the US-dollar-denominated Brent market in the United Kingdom. By controlling for the influence of the stock markets, our findings reveal significant disparities in return linkages, yet fairly comparable volatility transmission patterns. The International Energy Exchange shows no return linkages with exchange rates except before the shock, while Brent consistently shows return spillovers from crude oil futures prices to exchange rates. In both markets, the volatility spillovers from exchange rates to crude oil futures prices are unidirectional prior to the shock but become bidirectional as a result of the shock. Nevertheless, both the return and volatility spillover patterns in China resemble those in the United Kingdom when utilizing offshore instead of onshore exchange rates. Such similarities in return and volatility spillovers can also be observed during the 2022 Covid-19 shock that emerged in Shanghai. These findings have significant practical implications. © Infopro Digital Limited 2023.

Reactions of Long-run Private Consumption in Malaysia to Crises, Economic Leadership and Telecommunication Technology

We estimate the long-run reactions of private consumption in Malaysia to crises, economic leadership, information and communications technology (ICT), and other key determinants using time series econometrics. This study covers the quarterly sample from 1990:Q1 to 2020:Q4. We find that Malaysia's private consumption and its key determinants are cointegrated, demonstrating that a reliable long-run private consumption function can be estimated. We find that both economic and health crises, namely the Asian financial crisis in 1997/98, SARS and COVID-19 pandemic are likely to reduce private consumption in Malaysia. However, the long-run estimation results show that ICT and economic leadership are positively related to consumption. Therefore, policymakers should set the goal of encouraging the development of ICT infrastructure and good economic leadership in order to promote private consumption, which eventually sustains long-term economic growth and development. © 2023 Malaysian Economic Association. All rights reserved.

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.

Influence of the global environment on capital flows in the London Office market

PurposeThe London office market is a major destination of international real estate capital and arguably the epicentre of international real estate investment over the past decade. However, the increase in global uncertainties in recent years due to socio-economic and political trends highlights the need for more insights into the behaviour of international real estate capital flows. The purpose of this study is to evaluate the influence of the global and domestic environment on international real estate investment activities within the London office market over the period 2007–2017.Design/methodology/approachThis study adopts an auto-regressive distributed lag approach using the real capital analytics (RCA) international real estate investment data. The RCA data analyses quarterly cross-border investment transactions within the central London office market for the period 2007–2017.FindingsThe study provides insights on the critical differences in the influence of the domestic and global environment on cross-border investment activities in this office market, specifically highlighting the significance of the influence of the global environment in the long run. In the short run, the influence of factors reflective of both the domestic and international environment are important indicating that international capital flows into the London office market is contextualised by the interaction of different factors.Originality/valueThe authors provide a holistic study of the influence of both the domestic and international environment on cross-border investment activities in the London office market, providing more insights on the behaviour of global real estate capital flows.

Mortality and Health Spending during the First Year of the COVID-19 Pandemic. Comparing Central, Eastern and Western Europe

The article shows the relationships between the COVID and non-COVID deaths during the first year of the pandemic, compared with the stringency of restrictions imposed and the compul- sory spending on healthcare. We compare these relationships among European countries, analysing weekly data and applying cointegration models. Regarding the pandemic's inten- sity, we split the period into two: March - August 2020 and September 2020 - February 2021. We find that, most often, if there was a relationship between the stringency index and COVID or non-COVID mortality, it was usually positive and mortality driven. That sug- gests that although the governments tailored the restrictions to the growing mortality rate, they were unable to control the pandemic. No relationships, or negative ones, were most of- ten found in these countries where the spending on healthcare was the highest (i.e., Northern and Western European countries). The biggest weekly changes in non-COVID deaths during the second sub-period were observed in the Central and Eastern European countries, where government healthcare expenditures per capita are the lowest.

Cointegration between high base metals prices and backwardation: Getting ready for the metals super-cycle

This paper is devoted to test agents' behavior in the markets of hard commodities by trying to distinguish between managing future price structures to hedge their positions and speculating in on prices. We do a triple analysis: cointegration on the time series, structural breaks over the full time series and panel data. The analysis of the full series and the identification of structural breaks allows us to discover the connection between high prices and the negative futures price structure (backwardation) in rising prices scenarios of tin, copper, aluminium, and zinc. Moreover, we obtain that the base metals full matrix (price and futures price structure) is cointegrated in our analysis that uses panel data methods. We believe that these results are important for agents in the markets, as commodity traders or brokers, to maximize profits in their hedging positions.

Intra-BRICS Trade: A Panel Data Analysis with Structural Breaks

This article attempts to examine the recent developments that have amplified the consequences of uncertainty regarding trade between Brazil, Russia, India, China, and South Africa (BRICS) countries under global economic turmoil such as occurred in the 2008 financial crisis and trade wars sparked by the USA and the COVID-19 pandemic. These events severely affected intraBRICS trade and investment. For this purpose, we employed the Westerlund and Edgerton cointegration approach to check for cointegration under structural breaks and the procedure for the asymmetric Granger non-causality test to assess the causal relationship between the custom tariff and export variables of BRICS countries with regard to the panel data methodology for the 2000-2020 period using annual data. The empirical results for cointegration indicate the presence of a long-term relationship;in other words, they are seen to move together under investigation. The estimated breakpoints correspond with 2008 and the ongoing financial turmoil and with the 2018-2020 period and the rising trade disputes between USA and China. In addition, the Granger non-causality test provides enough evidence to show opposite directions (signs) for the causal links between the variables that run from tariffs to exports for BRICS countries.

Sukuk and bond dynamics in relation to exchange rate

PurposeThis study aims to contribute by expanding the existing literature on Sukuk return and volatility and exploring the implications of the Sukuk-exchange rate interactions.Design/methodology/approachThis study examines the dynamic interactions of Sukuk with exchange rate in 15 countries, employing the Wavelet approach that considers both time and investment horizons.FindingsThe results reveal significant evolving coherence of Sukuk return and volatility with the underlying exchange rate. The relationship is more potent than what this study witnesses in their counterpart bond market. For Sukuk returns, the coherence is negative, whereas it is positive for volatility. Notably, the coherence is strong in the medium to long term and intensifies during extreme economic episodes, especially during the COVID-19 pandemic. These findings are further validated by comparing firm-level matched data for Sukuk and conventional bond.Originality/valueTo the best of the authors' knowledge, this is the first study that reports the dynamic relationship of Sukuk return and volatility with the underlying exchange rate in 15 countries. Collectively, this study unites valuable insights for faith-based active Islamic investors and cross-border portfolio managers.

Study of COVID19 Impact on Moroccan Financial Market Based on ARDL

The aim of this work is to study the impact of the COVID-19 pandemic new cases on the Moroccan financial market using the Autoregressive Distributed Lag (ARDL) approach. The analysis focuses on the relationship between the natural logarithm of the Moroccan All Shares Index (MASI) price and the natural logarithm of new daily cases of COVID-19 in the short term as well as in the long term. A cointegration test is performed on the daily time series for the period from March 3, 2020 to February 11, 2022. A causality test of Toda-Yamamoto is also applied on the variables. The implementation of the forecast with the ARDL method improves the forecast accuracy by 8% to achieve 26.7%. The implementation of the forecast with the ARDL method shows that the addition of the lag of COVID19, the trend and the seasonality makes it possible to achieve a MAPE of 26.7% by improving it by 8% compared to the forecast with the lag of the price only. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.

Gold, crude oil, bitcoin and Indian stock market: recent confirmation from nonlinear ARDL analysis

PurposeThis paper investigates the causality among gold prices, crude oil prices, bitcoin and stock prices by using daily data from January 2014 to December 2021. The study also examines the data during the COVID-19 outbreak from January 2020 to December 2021.Design/methodology/approachTo estimate the long- and short-run causality, this study considers the nonlinear autoregressive distributed lag (NARDL) cointegration test.FindingsThe analysis found the existence of an asymmetric long-run cointegration among selected assets. Findings indicate that positive changes in bitcoin do not affect stock market in the long term. Changes in crude oil prices have a significant impact on stock prices. Moreover, it is observed that variations in the stock prices trigger a negative impact on gold prices. During the COVID-19 period, the study notices the presence of an asymmetric long-term cointegration between selected assets except bitcoin. Besides, findings revealed that negative price adjustments in gold lead to significant positive shocks in stock market.Originality/valueThese results provide critical information for policy performers and researchers to develop new strategies. Policy regulators can also consider the potential effects of the COVID-19 outbreak while developing strategies for investment decisions.

Labour market uncertainty after the irruption of COVID-19.

This paper examines the evolution of labour market uncertainty after the irruption of the COVID-19 pandemic in European countries. Since uncertainty is not directly observable, we use two alternative methods to directly approximate it. Both approaches are based on qualitative expectations elicited form the consumer survey conducted by the European Commission. On the one hand, following (Dibiasi and Iselin in Empir Econ 61:2113-2141, 2021), we use the share of consumers unable to formalise expectations about unemployment (Knightian-type uncertainty). On the other, we use the geometric discrepancy indicator proposed by (Claveria in Empirica 48:483-505, 2021) to quantify the proportion of disagreement in business and consumer expectations. We find that both uncertainty measures covary across the 22 European countries analysed. Although we observe differences in the evolution across countries, in most cases the perception of labour market uncertainty peaked before the outbreak of the crisis, plummeted during the first months of the lockdown, and started rising again. When testing for cointegration with the unemployment rate, we find that both indicators exhibit a long-term relationship with unemployment in most countries. The impact of both indicators on unemployment is characterised by considerable asymmetries, showing a more intense reaction to decreases in the level of labour market uncertainty. While this finding may seem counterintuitive at first sight, it somehow reflects the fact that during recessive periods, the level of disagreement in consumer unemployment expectations drops considerably.

Investigation of cointegration and causal linkages on Bitcoin volatility during COVID-19 pandemic

In this study, we focus on a prominent feature in Bitcoin: its volatility. This paper aims to examine the volatility action of Bitcoin's price during the COVID-19 pandemic through various angles: COVID-19 fear sentiments, investor fear sentiments, macro-financial factors, and crypto market factors. The study utilises daily data from 11 March 2020 to 31 May 2021. We implemented an ARDL bound testing approach to find cointegration, and the Toda-Yamamoto approach to further examine any existing causal relationships between the variables. The empirical results show that COVID-19 fear increased Bitcoin volatility and a unidirectional causal relation was found between them. Investor fear sentiments revealed that US dollar volatility moved in the same direction as Bitcoin volatility, while VIX was found to be insignificant. Gold, crude oil, and the stock market did not influence the volatility of Bitcoin. Overall, only crypto market factors were cointegrated with Bitcoin volatility in the long run. Copyright © 2023 Inderscience Enterprises Ltd.

Dynamics of Industrial Electricity Demand in the State of Bahia (Brazil): Evolution of Price and Income and COVID-19 Implications

The growth in demand for electricity is a determining factor for the regional development. This research aimed to estimate the price and income elasticity parameters of the industrial demand for electricity in the State of Bahia, Brazil, from January 2003 to June 2022, in addition to making forecasts for the period from July to December 2022. After verifying that some of the analyzed data were non-stationary, we chose to use the cointegration method, estimating the econometric model through the Error Correction Mechanism (ECM). The ECM considers the model's variables and their lags, relating the series' short and long-run trends. The estimated parameters were inelastic and presented the following values: 0.501 and 0.762 (price and income, long-run) and 0.482 and 0.702 (price and income, short-run). The adjustment coefficient between the short and long-run was also statistically significant and indicated that approximately 8% of the difference between the effective value and the long-run value (balance value) is corrected in each period, demonstrating the rigidity of the consumption structure of electricity in the industrial sector in Bahia. The model also demonstrated an 8.1% reduction in consumption during COVID-19 incidence period. Regarding the forecasts, they proved to be robust and with an average difference of 5.4% in relation to what actually happened in the months of July and August 2022. Thus, the calculated parameters are configured as another source of information for public policymakers and private investors interested in the electricity sector in the State of Bahia.

World pandemic uncertainty and German stock market: evidence from Markov regime-switching and Fourier based approaches.

This study aims to examine the impact of the world pandemic uncertainty index on the German stock market index (DAX index) for the 1996Q1 to 2020Q3 period while controlling real effective exchange rate, industrial production index, and consumer price index. The present study performs the Fourier Augmented Dickey-Fulle Unit Root, Fourier Engle-Granger Cointegration, Bayer-Hanck Cointegration, and Markov switching regression tests. The outcomes disclose that there is a long-run cointegration association between the stock market index and world pandemic uncertainty index, real effective exchange rate, industrial production index, and consumer price index in Germany, indicating that the combination of these factors significantly affects the German stock market index in the long-run. Moreover, in both high and low volatile regimes, the world pandemic uncertainty index and real effective exchange rate negatively affect the German stock market index while industrial production and consumer price indices impact positively.

A global monetary policy factor in sovereign bond yields

We document the existence of a global monetary policy factor in sovereign bond yields, related to the size of the aggregate balance sheet of nine major central banks of developed economies that have implemented programs of large-scale asset purchases. Balance sheet policies of these central banks reduced the net supply of safe assets in the global economy, triggering a decline in global yields as investors rebalanced their portfolios towards more risky assets. We find that central banks' large-scale asset purchases have contributed to significant and persistent declines in long-term yields globally, ranging from around 330 bps for AAA-rated sovereigns to 800 bps for non-investment grade sovereigns. The stronger decline in yields of high-risk sovereigns can be partly attributed to the decline in the foreign exchange risk premium as their currencies appreciated. Global central bank asset purchases during the Covid-19 crisis have more than counterbalanced the effects of expanding fiscal deficits on global bond yields, driving them to even lower levels. Our findings have important policy implications: normalizing monetary policy by scaling down central bank balance sheets to pre-crisis levels may lead to sharp increases in sovereign bond yields globally, widening spreads and currency depreciations of vulnerable sovereigns with severe consequences for financial stability and the global economy. © 2023 Elsevier B.V.

The impact of COVID-19 on agricultural market integration in Eastern Canada

Since the outbreak of the coronavirus pandemic in early 2020 and the resulting economic fallout, reports and official statistics have pointed to an unequivocal effect of the disease on almost all global economic activities, including the agricultural and agri-food sectors. The aim of this article is to use a price transmission approach in order to study the price relationships of agricultural commodities, including potatoes, corn, hogs, eggs, and chicken between regional Canadian markets and to verify their economic integration. The method of panel cointegration is applied to investigate the potential impact of the pandemic on the spatial integration of the provincial agricultural markets in Eastern Canada. It is found that these markets were fully integrated and efficient prior to COVID-19 restrictions. However, the statistical results show that travel restrictions and labor shortages represented trade barriers between the provinces, and they are likely the factors that impacted the price transmission mechanism, and consequently the markets became much less integrated. It is suggested that government policies should include actions that would manage future shocks to the agricultural commodity prices by accelerating the necessary transformations in the agri-food sector to make it more resilient and less vulnerable to future pandemics and other potential natural challenges.

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.

The Impact of COVID-19 Pandemic on Tariffs: Case of Jordan

This study examines the impact of macroeconomic variables in addition to the COVID-19 pandemic on tariffs in Jordan for the period 2003–2020, by using Autoregressive Distributed Lag (ARDL) model, in order to reveal the long-run relationship between macroeconomic variables and tariffs. However, it became clear that all these macroeconomic variables contributed to tariffs in Jordan, and it was proven that there is a long-term relationship between them and tariffs. On one hand, GDP negatively affected tariffs in Jordan, on the other hand, imports and COVID-19 pandemic positively affected tariffs. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.

The Impact of the Corona Pandemic on Bank Credit: Case of Jordan

This study examines the impact of macroeconomic variables in addition to the Corona pandemic on bank lending in Jordan during 2008:01–2021:02, and thus using the Autoregressive Distributed Lag (ARDL) model, in order to reveal the long-term relationship between macroeconomic variables and bank lending. However, it became clear that all these macroeconomic variables contributed to bank credit in Jordan, and it was proven that there is a long-term relationship between them and bank credit. On one hand, the GDP, inflation, interest rate and coronavirus pandemic negatively affected the lending activities of commercial banks in Jordan, on the other hand, inflation had positively affected these activities. © 2023, The Author(s), under exclusive license to Springer Nature Switzerland AG.