Bansi Sawhney

Government deficits, capital flows, and interest rates

(1988). Government deficits, capital flows, and interest rates. Applied Economics: Vol. 20, No. 6, pp. 753-765.

Dynamic interactions between Main Street and Wall Street

Abstract The paper examines the time-varying relationship between Main Street and Wall Street (proxied by the Dow–Jones industrial index and the Standard & Poor’s 500 index) using cointegration and error-correction techniques. Preliminary results reveal that each pair of series is bounded by a long-run, common stochastic trend and is characterized by significant short-run interactions. The results point to significant inverse effects of lagged GDP changes on the stock price index fluctuations but not vice versa. A suggested interpretation of this finding is that when the economy is doing well then increases in interest rates are expected which would, in turn, adversely affect the stock market.

THE IMPACT OF MILITARY SPENDING ON ECONOMIC GROWTH: THE CASE OF NORTH CYPRUS

The present study aims at investigating the causal relationship between defence expenditures and economic growth in the case of North Cyprus using the Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and Granger causality tests for the period from 1977 to 2007. The results suggest that the variables in question are in a long-run equilibrium relationship and that there exists a strong, positive unidirectional causality running from defence expenditures to economic growth.

Dynamic interactions between private investment and the stock market: evidence from cointegration and error correction models

This study examines the dynamic interdependencies between private investment and the stock market for the US economy for the 1970 to 2003 period. The main findings are as follows. First, both investment and stock prices seem to adjust to disequilibria from each other in the long run. Second, past changes in nominal investment have a positive effect on stock prices in the short-run but changes in real investment do not. Third, changes in real stock prices do not affect real investment but past changes in nominal stock prices have a positive short-run effect on investment. Finally, the interest rate appears to affect both magnitudes in the short run but in a notable and negative manner the stock returns.

Business Failures, Managerial Competence, and Macroeconomic Variables

Identifying the causes of business failures is crucial for effective policy making, and is especially important for small businesses which account for the largest component of firm failures in the U.S. As an example, if we find that managerial skills are important in reducing firm failures, resources can be directed toward management training and education programs. Policies designed to reduce failures would not only reduce the hardships on the individuals affected directly by such failures but would also aid in the smooth functioning of the economy. There are two important factors which jointly determine the failure rate of businesses in the economy. The first is internal — the effectiveness of management, and the second is external — the general economic environment. Overall the purpose of this paper is to use the traditional economic model of the firm to discuss the importance of each of these factors in determining business failures and to use time-series data to assess the relative weight of each factor in determining failures over time. Specifically the objectives of this paper are: first, to economically define managerial competency; second, to test the hypothesis that managerial efficiency has increased over time; and third, to assess the effect of selected macroeconomic variables on firm failures.

Exports, Imports and Industrial Production: Evidence from Advanced and Newly Industrializing Countries

Using a cointegration analysis and a vector autoregressive model to examine the relationship among exports, imports and industrial production for both advanced and newly industrializing countries between 1957-1991, we found that these three variables for many countries are cointegrated. The results of the Granger-causality tests suggest that there is a distinct difference in their relationship among these three variables for the two groups of countries. [F43, O11]

The Effect of the Size of the Military on Stock Market Performance in the United States and the UK

This paper uses regression analysis to investigate the relationship between military expenditure and stock market performance for the United States and the United Kingdom. Specifically, the study applies the Bierens-Guo unit root procedures to ascertain the time series properties of the variables in the study. The standard OLS technique is employed to determine the influence of military expenditure on stock markets for the period 1914 through 2001. The results from the unit root tests indicate that the military expenditure, military personnel, stock market, and energy consumption series are level stationary. The results from the OLS equations suggest that military expenditure has significantly positive effect on stock market performance for the United States and the United Kingdom. The implication of this finding is that high-income class and people in power are less likely to oppose increases in military spending even though such expenditures are not in the best interest of the society.

Growth Effects of Fiscal Decentralization: Empirical Evidence from China's Provinces

In this paper, we revisit the fiscal decentralization-economic growth nexus in the case of Chinas provinces using autoregressive distributed lag bounds tests and pooled mean group estimators with time series data from the period 1979-2009. Using principal component analysis, we build a novel composite fiscal decentralization indicator consisting of five different fiscal decentralization measures and use it in the models in addition to conventional fiscal decentralization variables. The results suggest that there is a strong, positive, and statistically significant relationship between fiscal decentralization and economic growth in most provinces in China in both the short run and the long run.

STOCK MARKET AND INVESTMENT IN TURKEY: EVIDENCE FROM COINTEGRATION AND CAUSALITY TESTS

Abstract The objective of this paper is to investigate the causal effect of business investments on stock returns in Turkey for the period following the liberalization of capital flows (1987:01-2006:03). According to results of the cointegration tests and error correction model (ECM) causality is found to run from stock returns to business investments and not vice versa.

The world distribution of military spending: is there a convergence?

This paper examines the issue of convergence in military spending among NATO countries. In particular, the paper employs the sequential panel selection method (SPSM) to ascertain whether the military spending of NATO countries has converged relative to that of the USA. The results from the SPSM for both the full- and sub-periods indicate that military spending of NATO countries, with the exception of Hungary, have converged to that of the USA. The results show that the number of NATO countries whose military spending converged relative to that of the USA did not change following the collapse of the Soviet Union. The overall finding of this study contradicts the alliance theory which stipulates that alliances tend to weaken or dissolve following the elimination of the unifying threat.