Oil price shocks and stock market returns of the GCC countries: empirical evidence from quantile regression analysis

This paper examines the effects of oil price shocks on the stock market returns of the Gulf Cooperation Council countries. The empirical method used is quantile regression analysis. In addition, we allow for structural breaks and asymmetry by differentiating between positive and negative oil price changes. Unlike OLS analysis, quantile regression allows the coefficient estimates to vary throughout the distribution of the dependent variable, which provides a complete picture of the relationship between the explanatory variables and the dependent variable. Our results suggest that the coefficient estimates have not been constant throughout the distribution of stock returns; that oil price shocks have asymmetrical effects on stock returns; and that the effects of oil price shocks on stock market returns are affected by stock market conditions. Overall, the results suggest that rising oil prices increase stock returns only when stock markets are bullish (high quantiles) and normal (medium quantiles), and that falling oil prices lower stock returns only when stock markets are bearish (low quantiles) and normal (medium quantiles). This suggests that oil and stock markets are more likely to boom together or crash together.     

Oil price changes and stock market returns: cointegration evidence from emerging market

The aim of this paper is to examine whether changes in nominal oil prices (Brent and West Texas Intermediate (WTI)) affect the stock market returns in the context of an emerging market framework. The Autoregressive Distributed Lag bounds testing approach of cointegration is used to test for the long run relation between the two variables, where the daily stock market index return is calculated using the first difference in the natural logarithms of stock market index. Further, we test for the stability of the cointegration relationship by examining the sensitivity analysis where diagnostic tests for serial correlation (namely the Breusch–Godfrey serial correlations LM test) and cumulative sum of recursive residuals (CUSUM) are employed. Using daily data from January 3, 2000 to December 9, 2015, the findings suggest that there is long run integration between oil prices and stock returns series in which the daily oil price shocks have a negative impact on stock returns. The highly significant error correction coefficient indicates high rate of convergence to equilibrium. In addition, the Toda and Yamamoto (J Econom 66(2):225–250, 1995) Granger non‐causality test indicates significant bidirectional causality between stock market returns and Brent nominal oil price, meanwhile there is unidirectional causality running from WTI oil price to stock market returns. These findings are, up to some extent, meaningful for investors, portfolio managers and policy makers.     

An empirical testing of informational efficiency in Bangladesh capital market

We investigate how efficiently the stock market participants incorporate the information contained in money supply changes into stock prices in an emerging economy like Bangladesh. Of particular interest is to test how the changes in monetary aggregates directly affect the stock prices through asset changes and indirectly through their effects on real economic activity. We have considered the monthly series of the real stock returns (P) and examine the relationship between stock returns and monetary aggregates from 1980 to 2008. We also include the exchange rate of US dollar against Bangladeshi Taka and industrial production index. The presence of cointegration between stock prices and monetary aggregates indicate long-run predictability of the Bangladesh stock market. The short-run dynamics between monetary aggregates and real stock return, relied on theoretically motivated long-run restrictions, are analyzed using an empirical structural VAR model. The dynamic response of the real stock returns to changes in macroeconomic variables (such as broad money supply, exchange rates), particularly its lagged responses to real economic activity generates inefficiency in the Dhaka Stock Exchange. The findings of this article indicate that informational inefficiency exists in the stock market of Bangladesh due to the presence of unidirectional causality. To be efficient, the infrastructure of the SEC should be modernized, revaluation of the net asset value of the companies should be audited by the affiliated firms of the SEC, demutualization should be done as early as possible, private placement, issue of preference share and book building methods must be under rule based. Insider trading should be strictly prohibited.     

Price-wage nexus and the role of a tax system

The presented study was aimed to test empirically major economic hypotheses dealing with long-term relationships between wages, producer prices, prices of consumer goods and services, the consumer price index, productivity of labour, unemployment and payroll expenses other than wages themselves. It is particularly important for this approach to distinguish between net wages shaping employees’ decisions and gross wages driving employers’ decisions. Because the variables are generated by non-stationary stochastic processes integrated of order 1 and 2, the analytical tool applied was a vector equilibrium correction model, VEqCM. The findings demonstrate that prices and payroll expenses are the major sources of shocks in the system in question. Wages and prices (particularly producer prices) are the most sensitive to this type of stochastic trends. In the Polish economy prices are integrated of order two, so they can be effectively influenced by anti-inflationary policy.     

CAUSALITY,ECONOMIC CONDITIONS,AND BURGLARY*

This study examines the extent to which the symmetry-asymmetry distinction and offense aggregation bias obfuscate the relationship between economic conditions and crime. Specifically, we use ARIMA techniques to assess the impact of incremental and abrupt changes in oil prices on counts of total, commercial, and residential burglaries in Oklahoma City, Oklahoma. Taken together, the bivariate and interrupted time series analyses indicate that the causal impact of oil prices on burglary is asymmetrical and varies across the two subcategories of breaking and entering.     

Not Thanks to But Despite

Although the Russian economy declined in 2015, the decline was not as serious as expected by Russian leaders. None of the disasters anticipated at the end of 2014 happened. The decline was moderated by continued demand from the main consumers of Russian raw materials, continued government financial support for the defense industry, and balancing changes in internal prices. The ruble has remained stable because it is largely dependent on the price of oil on world markets. The impact of Western sanctions on the Russian economy steadily declined throughout 2015. Although Russia avoided economic collapse, the prospect for the near future is continued stagnation, rather than renewed growth.     

A Theoretical Analysis of Alcohol Regulation and Drinking-Related Economic Crime

Alcohol consumption is widely believed to influence criminal activity, and numerous sociological, criminological, and psychological studies demonstrate an apparent positive correlation between drinking and crime. Using a multiattribute model of offender and victim behavior, this study examines the theoretical effects of changes in the price of alcohol on the incidence of crimes committed for economic gain. It is shown that in the general case price effects do not result in an unambiguous decrease in the rates of crime or victimization even when the models are constructed to impose a bias towards the finding of a causal negative price effect. Using a modified model of the drinking offender that imposes even further structure on the model, it is shown that the realization and magnitude of a negative equilibrium alcohol price effect will likely depend upon the implementation of complementary alcohol control policies. The implications of the theoretical analysis to policy implementation and empirical research are also considered.     

我国资产价格"货币现象"的实证分析

借鉴弗里德曼的经典观点,可将货币数量影响资产价格波动的现象称为货币现象。在此基础上综合运用Granger因果检验、Johansen协整和脉冲响应函数等方法,对M/GDP影响房屋销售价格指数和上证综指进行了实证分析。结果显示,超额货币是房地产价格的Granger原因,且二者存在协整关系,超额货币对于推动房地产价格的上涨发挥了重要作用,表明我国房市存在货币现象。从股市来看,长期的货币现象并不存在,但自2006年第4季度以来超额货币存量与股指的相关性显著增强。     

Impacts of realized volatility of oil price over foreign trade related activities in Turkey

Since 1973 oil crises, especially, small open economies have considered sudden and highly volatile movements in currencies and current account deficits. Oil prices have been breaking new historical price records since second quarter of 2014, especially from last quarter of 2015 to first quarter of 2016, which have gradually put pressure on political, geographical, and currencies risks in the Middle East and Eastern European countries. Similarly, because Turkish economy has been experienced serious current account deficit problems especially since 2002, the effect of decline in oil prices and increased volatility has been worth of investigating. For 2003M1–2015M7 period, export–import ratio, real exchange rate index, realized volatility in oil prices calculated based on monthly OPEC basket price, industrial production index, and consumer price index were collected to analyze these effects and causality relationship among these variables. Test results of unit root test with and without structural break, ARDL bound test and co-integration test were sorted out among variables. Initial result is that price volatility increases and total import decreases more sharply than total export after the decline in oil prices; thus, export–import ratio increases. Another is that there is a negative relationship between real exchange rate index and export–import ratio for real economy because of low oil substituents. As expected, inflation has an adverse effect on foreign trade ratio. Consequently, because of lower pressure of energy-induced inflation, economy policy makers will have some ability to change their priorities from inflation issue to other structural problems.     

SUBSTITUTING COMPLEMENTS

The presence of multiple sellers in the provision of (nonsubstitutable)complementary goods leads to outcomes that are worse than thosegenerated by a monopoly (with a vertically integrated productionof complements), a problem known in the economic literatureas complementary oligopoly and recently popularized in the legalliterature as the tragedy of the anticommons. We ask the followingquestion: how many substitutes for each complement are necessaryto render the presence of multiple sellers preferable to a monopoly?Highlighting the asymmetries between Cournot (quantity) andBertrand (price) competition and their dual models, we showthat the results crucially depend on whether firms compete bycontrolling price or quantity. Two substitutes per componentare sufficient when firms choose price. However, when firmschoose quantity, the availability of substitutes, regardlessof their number, is ineffective. Considering more complex casesof multi-complementarity, we ask the related question of howmany complements need to be substitutable and offer commentson equilibrium prices and quantities under different scenarios.     

Criminals and the Price System: Evidence from Czech Metal Thieves

Objectives

This paper tests the economic theory of criminal behavior. Specifically, it looks at “the carrot” side of the theory, studying how thieves react to changes in monetary gains from crime.

Methods

Using a unique crime-level dataset on metal theft in the Czech Republic, we study thieves’ behavior in a simple regression framework. We argue that variation in metal prices represents a quasi-experimental variation in gains from crime. It is because (1) people steal copper and other nonferrous metals only to sell them to scrapyard and (2) prices at scrapyards are set by the world market. This facilitates causal interpretation of our regression estimates.

Results

We find that a 1% increase (decrease) in the re-sale price causes metal thefts to increase (decrease) by 1–1.5%. We show that the relationship between prices and thefts is very robust. Moreover, we find that thieves’ responses to price shocks are rapid and consistent.

Conclusion

Our results are in line with the economic model of crime, wherein criminal behavior is modeled as a rational agent’s decision driven by the costs and benefits of undertaking criminal activities. Our estimates are also consistent with recent results from the United Kingdom, suggesting these patterns are more general.

     

POTENTIAL EFFECTS OF PROPOSED PRICE GOUGING LEGISLATION ON THE COST AND SEVERITY OF GASOLINE SUPPLY INTERRUPTIONS

The rise in gasoline prices that followed the devastation causedby Hurricanes Rita and Katrina has led to proposals for federal"price gouging" legislation. This paper analyzes the potentialeconomic costs of such proposals in light of the experiencegained from prior episodes of gasoline supply interruptionsand efforts to impose price controls. Studies of previous spikesin the price of gasoline, including those after Katrina andRita, have consistently found that price increases were dueto the normal operation of supply and demand and not price manipulation.Studies of gasoline price controls find that neither consumersnor the economy benefit, because the apparent monetary savingsto consumers are transformed into costs of waiting or otherforms nonmarket rationing that exceed the monetary savings.Price controls also make shortages worse by reducing the incentiveto provide additional supplies. We apply these lessons to estimatethe additional economic cost that would have been incurred hadprice controls like current legislation been in effect afterthe hurricanes, and conclude that economic damages would havebeen increased by $1.5–2.9 billion during the two-monthperiod of price increases.     

The Auction Price of Apartments in Moscow: Hedonic Estimation in Disequilibrium1

The purpose of this paper is to see how economic factors determine prices in the previously communist countries undergoing privatization. This does not concern the auctions of big state enterprises where the prices are found to be rigged. In this paper we estimate hedonic price functions based on a unique data set on auction prices of apartments in Moscow. We collected the data ourselves by attending the auctions and gathered data on the characteristics. We estimated the hedonic equations using a disequilibrium approach because no equilibrium prices were observed for large number of apartments that were withdrawn from the auction. We found that, as the privatization of residential housing was carried out, the hedonic price equations fit the data remarkably well.     

The Dutch Disease: evidences from Russia

The present study examines whether the Russian economy exhibits the symptoms of the Dutch Disease over the transition period begun in the early 1990s. Five warning signs have been detected, namely, a real exchange rate appreciation (1); a flourishing economic situation pushed by higher oil prices (2); a relative de-industrialisation (3); an export reduction in the non-booming-sector (4) and a real wage growth (5). The first three symptoms are estimated simultaneously in a VECM dimension. The results suggest the existence of three long-run cointegrating vectors, thus confirming the presence of the first three symptoms. Specifically, a 10% oil price shock leads to a real appreciation by 4%, a rise in GDP by 3% and a decline in domestic manufacturing production vis-à-vis service production by another 3%. Finally, a number of manufacturing exports have been crowded out and real wages have recorded important increases. To a certain extent, this corroborates the presence of symptom 4 and 5. The paper concludes that the risk of the Dutch Disease exists, and two preventive thrusts of action could be undertaken to reduce its threat: namely to diversify the economy and to hold back the appreciation of the exchange rate through targeted fiscal and monetary policies. These instruments would render Russia less vulnerable to exogenous shocks.     

The erratic behaviour of the EU ETS on the path towards consolidation and price stability

The Kyoto Protocol envisages the use of various instruments to achieve emission reduction targets, one of which is the European Union Emission Trading Scheme (EU ETS), the most important market worldwide for CO₂ emission allowances. The volume of European Union Allowances traded represents over 45% of all the carbon dioxide generated by human activity within the continent. In its first two phases (2005–2012), the behaviour of the EU ETS was erratic, as a result of discretionary policies, an oversupply of allowances and reduced economic activity due to the global crisis. These factors caused excessively low prices that distorted the initial goals of achieving low-carbon solutions. From 2013, changes were made to the market regulation mechanisms in order to correct these structural deficiencies. Empirical analysis of daily prices in the two central phases of the market, following the pattern of ARCH and GARCH models, shows that the measures taken within the EU generated greater confidence and stability in the market and thus reduced volatility. Subsequent price behaviour, following a bullish path, has confirmed the success of the measures taken and their contribution to fulfilling emission reduction targets.     

基于价格影响的期货市场操纵规制理论:反思与重构

在基于价格影响的期货市场操纵规制理论中,操纵被定义为故意制造人为价格的行为。人为价格的判断依赖于替代的价格标准,即执法实践中经常采用的参照系比较方法。这种判断方法不仅证明困难,且在行政处罚听证会或法庭辩论中容易受到质疑,导致期货市场操纵问题上的监管无力。要改变此种状况,首先,在判断操纵行为是否造成人为价格时,所关注的重点应当是影响市场价格的力量和因素,而非操纵行为造成的价格是否偏离了正常供求力量下应有的价格水平。其次,应当将意图作为操纵的核心要件,运用价格影响测试的分析框架,以行为人的不正当行为和其他直接或间接证据为支撑,并辅以经济或经验分析等方法进行综合判断。最后,当行为人的操纵行为未造成或未能证明造成人为价格时,引入试图操纵进行规制。     

Dynamic Structure of Disequilibrium Models

This paper investigates the dynamic structure of a standard disequilibrium model. By assuming that the model variables are non-stationary time series with respect to ample empirical evidence, we find the following: 1) It is the exogenous variables rather than the price adjustment process that form the real adjustment force of the model; 2) Quantity disequilibrium and price disequilibrium are isomeric in the model, and follow a weakly stationary process when all the variables areI (1) nonstationary; 3) The disequilibrium process has a none-zero mean when the weakly exogenous variables of the demand equation do not cointegrate with those of the supply equation, corresponding to certain 'chronic disequilibrium' phenomena; 4) The isomerism between quantity disequilibrium and price changes makes it unnecessary to lean on the 'min condition' to characterise disequilibrium.     

Are bar associations anticompetitive? An empirical analysis of recommended prices for legal services in Spain

The European Commission Report on Competition in Professional Services found that recommended prices by professional bodies have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. Professional associations argue, first, that a fee schedule may help their members to properly calculate the cost of services avoiding excessive charges and reducing consumers’ searching costs and, second, that recommended prices are very useful for cost appraisal if a litigant is condemned to pay the legal expenses of the opposing party. Thus, recommended fee schedules could be justified to some extent if they represented the cost of providing the services. We test this hypothesis using cross-section data on a subset of recommended prices by 83 Spanish bar associations and cost data on their territorial jurisdictions. Our empirical results indicate that prices recommended by bar associations are unrelated to the cost of legal services. Therefore, we conclude that fee schedules are not playing the role of providing useful cost information to practitioners and therefore this efficiency justification is weak.     

An Econometric Analysis of Polish Inflation Dynamics with Learning about Rational Expectations

Rational expectations modelling has been criticized for assuming that economic agents can learn quickly about and compute rational price expectations. In response, various authors have studied theoretical models in which economic agents use adaptive statistical rules to develop price expectations. A goal of this literature has been to compare resulting learning equilibria with rational expectations equilibria. The lack of empirical analysis in this literature suggests that adaptive learning makes otherwise linear dynamic models nonlinearly intractable for current econometric technology. In response to the lack of empirical work in this literature, this paper applies to post-1989 monthly data for Poland a new method for modelling learning about price expectations. The key idea of the method is to modify Cagan’s backward-looking adaptive-expectations hypothesis about the way expectations are actually updated to a forward-looking characterization which instead specifies the result of learning. It says that, whatever the details of how learning actually takes places, price expectations are expected to converge geometrically to rationality. The method is tractable because it involves linear dynamics. The paper contributes substantively by analyzing the recent Polish inflation, theoretically by characterizing learning, and econometrically by using learning as a restriction for identifying (i.e., estimating wth finite variance) unobserved price expectations with the Kalman filter.     

Dual ‘prices’ in plan and market

(JEL classification: 020) The solution to the dual programming problem is traditionally conceived as a vector of unit values for the constraints of the primal problem, which in much economic-theoretic exposition employs dollar-denominated output (revenue; gross output) as the maximand, and in some applied literature, contribution to profit. This interpretation of the dual is unreasonable and we argue that the dual values either are the unit Premiums over market prices, for those inputs whose acquisition costs are deducted from selling price (and only for those units which are incremental to the amounts represented by the current constraints) or, for ‘common’ or ‘overhead’ capacity constraints whose costs are not deducted to calculate the maximand, the potential profit contribution per unit activity/per unit time. The latter application requires estimation of facility life and consumption rates in the first place, which is abjured in the standard microeconomic cost model. The paper reviews other uses of duality, including that of the planned/semiplanned economy and the evolution of Kantorovich's treatment.