Andy C. C. Kwan

Boom, crisis, and adjustment : the macroeconomic experience of developing countries

Boon, Crisis, and Adjustment reviews the macroeconomic experiences of eighteen developing countries from 1974 to 1989. The authors address why the experiences and policy reactions have differed among the countries, and how their individual growth rates were affected by these policy reactions.

The causal relationships between equity indices on world exchanges

The Engle and Granger cointegration analysis and Granger causality tests are applied to monthly time series of nine major stock market indices over the period January 1982 to February 1991 to examine for causal linkages. The empirical results indicate that there is adequate evidence to refute the notion of informationally efficient stock markets.

Cointegration and Wagner's hypothesis: time series evidence for Canada

It is argued that Wagners hypothesis is essentially a proposition about the secular comovement of income growth and public spending. Using the Engle and Granger cointegration tests and time series data from Canada, the long-run validity of Wagners hypothesis is maintained.

Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys

This paper represents a first formal attempt to examine the ability of consumer confidence to forecast household spending within a multicountry framework. To this end, we use two confidence indices, namely the Consumer Confidence Indicator and the Economic Sentiment Indicator, both of which are derived from the European Commission Business and Consumer Survey. As in previous single-country investigations, we find that there is much variability in the in-sample incremental forecasting performance of the confidence indices for the countries canvassed. Further, the results of our out-of-sample tests indicate that the confidence indices considered provide limited information about the future path of household spending.

Multivariate cointegration and causality tests of Wagner's hypothesis: evidence from the UK

The purpose of this paper is to examine the issue of omitted variables in testing the long run validity of Wagners hypothesis. Using UK data for the period 1948 to 1997, this paper first investigates the secular relationship between public spending and economic development in a bivariate system. In all cases considered, our bivariate cointegration tests indicate the absence of a long run equilibrium condition. However, the introduction of a third variable (money supply) re-establishes a cointegrating relationship between public expenditure and economic development variables. In addition, the results of the Grangers multivariate causality test indicate a unidirectional causality from income and money supply to public spending in the long run, thus providing support for Wagners hypothesis.

Public Expenditure and National Income Causality: Further Evidence on the Role of Omitted Variables*

Whether changes in public expenditure growth help predict changes in national income growth (and/or vice versa) remains an important issue of sustained interest in the empirical public finance literature. In recent years, attention has mainly been confined to two specific areas, namely, estimation of the impact of the public sector on output growth (by means of regression analysis) and causality testing. Unfortunately, the outcome of both types of analysis has been inconclusive. Focussing on the impact studies, we note that a number of empirical investigations have attempted to measure the effect of the size of the public sector on overall economic growth. For instance, Ram [19], utilizing a two-sector model, found that growth of government size has a positive effect on economic growth. Landau [14; 15], however, presented opposite evidence, indicating that the government sector expansion led to a decline in output growth for many DCs and LDCs since 1960. In a recent study, Barth, Keleher and Russek [4] estimated variants of Rams models with data for 30 countries. Their empirical results largely support a negative relationship between the scale of government and aggregate economic activity. Furthermore, using the Hausman procedure, they rejected the hypothesis that the independent variables (namely, real government spending or other measures of the scale of the government, depending on the specification) in the regression equations are exogenous. This strongly suggests that the conclusions reached by

Exports, economic growth and exogeneity: Taiwan 1953-88

The econometric techniques developed by Engle and Hendry (1993) are used to examine empirically the exogeneity status of the real export growth variable in a commonly used output growth equation. Data from Taiwan shows that, while the weak exogeneity assumption appears to be valid, the super exogeneity assumption is rejected. Thus, the results cast doubt on policy recommendations based on the export-led growth hypothesis.

Fixed Investment and Economic Growth in China

This paper attempts to investigate empirically the investment-growth relationship in China. Using the exogeneity framework pioneered by Engle et al. (1983) and Engle and Hendry (1993), we find that fixed investment is a key determinant of Chinas economic growth, which, surprisingly, has not been rigorously examined in the literature. The super exogeneity test results suggest that there exists a robust (or structurally invariant) relationship between capital formation and income growth, thereby giving credence to policy evaluation.

Exports, economic growth and structural invariance: evidence from some Asian NICs

In this paper we use the exogeneity techniques developed by Engle and Hendry (Journal of Econometrics, 1993, 56, pp. 119-39) and data from three Asian NICs to test the invariance assumption of the export-led growth hypothesis.

An exogeneity analysis of financial deepening and economic growth: evidence from Hong Kong, South Korea and Taiwan

This paper presents exogeneity tests for the existence (or absence) of a behavioural relationship between financial deepening and economic growth for three high performing economies: Hong Kong, South Korea and Taiwan. The findings suggest that weak, strong and super exogeneity assumptions are valid, and the variable of financial deepening has a positive influence on output growth. Since the successful stories of these high performing economies have been examples for other developing countries, we argue that a sound financial system is essential in the course of economic development.