Faruk Balli

Risk Sharing Through Capital Gains

We estimate channels of international risk sharing between European Monetary Union (EMU), European Union, and other OECD countries, 1992–2007. We focus on risk sharing through savings, factor income flows, and capital gains. Risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then. Risk sharing from capital gains, at about 6%, is higher than risk sharing from factor income flows for European Union countries and OECD countries. Risk sharing from factor income flows is higher for euro zone countries, at 14%, reflecting increased international asset and liability holdings in the euro area. On examine les canaux de partage international du risque entre l’Union monetaire europeenne, l’Union europeenne, et les autres pays de l’OCDE (1992–2007). On se concentre sur le partage du risque via les epargnes, les flux de revenus des facteurs, et les gains de capitaux. Le partage du risque via les revenus des facteurs et les gains de capitaux a ete presque nul avant 1999, mais s’est accru depuis. Le partage du risque via les gains de capitaux (a peu pres 6%) est plus grand que le partage du risque via les flux de revenus des facteurs pour les pays de l’Union europeenne et les pays de l’OCDE. Le partage du risque vis les flux de revenus des facteurs est plus eleve pour l’Euro zone (a quelques 14%), refletant le fait que les actifs et passifs internationaux detenus dans la zone Euro se sont accrus.

Time‐Varying Spillover Effects on Sectoral Equity Returns

In this paper, we investigate the integration of the Euro- and US-wide sector equity indices by focusing on the return, volatility, and trend spillover effects of local and global shocks. We explore that unlike volatility spillovers, return spillovers are not significant enough to explain sector equity returns. Moreover, we are able to show that when the trend is incorporated into the volatility spillover analysis, a number of sector equity indices tend to react similarly to local and global shocks. Following this path, we arrive at four major sector groups: production and industry; consumer goods and services; financial; and technology, media, and telecommunication across Euro- and US-wide sector equity indices.

Risk sharing in the Middle East and North Africa

This study investigates welfare gains and channels of risk sharing among 14 Middle Eastern and North African (MENA) countries, including the oil‐rich Gulf region and the resource‐scarce economies such as Egypt, Morocco and Tunisia. The results show that for the 1992–2009 period, the overall welfare gains across MENA countries were higher than those documented for the Organization for Economic Cooperation and Development (OECD) nations. In the Gulf region, the amount of factor income smoothing does not differ considerably when output shocks are longer lasting rather than transitory, whereas the amount smoothed by savings increases remarkably when shocks are longer lasting. In contrast, both factor income flows and international transfers respond more to permanent shocks than to transitory shocks in the non‐oil MENA countries. The results also show that a significant portion of shocks is smoothed via remittance transfers in the economically less‐developed MENA countries, but not in the oil‐rich Gulf and OECD countries. Finally, for the overall MENA region, a large part of the shock remains unsmoothed, suggesting that more market integration is needed to remedy the weak link of incomplete risk sharing.

International income risk-sharing and the global financial crisis of 2008–2009☆

We examine the impact of the global financial crisis on the degree of international income and consumption risk-sharing among industrial economies using returns on cross-border portfolio holdings (e.g., debt, equity, FDI). We split the returns from the net foreign holdings as receipts (inflows) and payments (outflows) to investigate which of the two sides exhibited the greater resilience for income risk-sharing during the recent crisis. First, we find that debt delivered better risk-sharing than equity, mainly reflecting the deficit deterioration in EMU countries during the post-crisis period. FDI, by contrast, did not correspond to noticeable risk diversification. Second, separating output shocks into positive and negative components reveals that debt holding receipts (equity liability payments) performed better under negative (positive) realizations of the shock variable. Third, the unwinding of capital flows resulted in a sharp fall in income dis-smoothing via the debt liability channel in the new EU countries.

Risk Sharing Through Capital Gains - Partage Du Risque Via Les Gains De Capitaux

We estimate channels of international risk sharing between European Monetary Union (EMU), European Union, and other OECD countries, 1992–2007. We focus on risk sharing through savings, factor income flows, and capital gains. Risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then. Risk sharing from capital gains, at about 6%, is higher than risk sharing from factor income flows for European Union countries and OECD countries. Risk sharing from factor income flows is higher for euro zone countries, at 14%, reflecting increased international asset and liability holdings in the euro area. On examine les canaux de partage international du risque entre l’Union monetaire europeenne, l’Union europeenne, et les autres pays de l’OCDE (1992–2007). On se concentre sur le partage du risque via les epargnes, les flux de revenus des facteurs, et les gains de capitaux. Le partage du risque via les revenus des facteurs et les gains de capitaux a ete presque nul avant 1999, mais s’est accru depuis. Le partage du risque via les gains de capitaux (a peu pres 6%) est plus grand que le partage du risque via les flux de revenus des facteurs pour les pays de l’Union europeenne et les pays de l’OCDE. Le partage du risque vis les flux de revenus des facteurs est plus eleve pour l’Euro zone (a quelques 14%), refletant le fait que les actifs et passifs internationaux detenus dans la zone Euro se sont accrus.

Is the US Dollar a Suitable Anchor for the Newly Proposed GCC Currency

Responses of inflation and non-oil output growth from the Gulf Cooperation Council (GCC) countries to monetary policy shocks from the United States (US) were estimated to determine whether there is evidence to support the US Dollar as the anchor for the proposed unified currency. A structural vector autoregression identified with short-run restrictions was employed for each country with Fed funds rate as the US monetary policy instrument, non-oil output growth, and inflation. The main results suggest that for inflation, the GCC countries show synchronised responses to monetary policy shocks from the US which are similar to inflation in the US, and for non-oil output growth, there is no clear indication that US monetary policy can be as effective for the GCC countries as it is domestically. Consequently, importing US monetary policy via a Dollar peg may guarantee only stable inflation for the GCC countries - not necessarily stable non-oil output growth. If the non-oil output response is made conscientiously - and there are concerns over the Dollars ability to perform its role as a store of value - a basket peg with both the US Dollar and the Euro may be a sound alternative as confirmed by the variance decomposition analysis of our augmented SVAR with a proxy for the European short-term interest rate.

Inter-regional spillover effects in New Zealand international tourism demand

In this paper, we have investigated the linkages between the international tourism demands across tourism regions in New Zealand. The big portion of the international tourists is visiting the big hubs of the New Zealand (namely, Auckland, Wellington and Christchurch). However, big bulks of the tourists are also visiting the other parts of New Zealand as well. However, it is not certain whether the tourists visiting other regions are spilled over from these big hubs or they visit these regions as the main destination. To investigate this question, we examined the impact of the spillovers from these hubs to other regions of New Zealand. We employed a multivariate AR-GARCH model to estimate the spillover effects for both New Zealands North Island and South Island regions. In particular, we quantified and compared the magnitudes of the main hubs on the volatility of the international tourism demand of the other regions. We found that the spillovers from the main centres are by and large important for a number of Regional Tourism Organisations (RTOs), thereby suggesting that both expected guest night and volatility spillovers are important in explaining New Zealands international hotel guest nights. We also quantified that, on average, 52% of the volatility in a South region tourism demand is explained by the volatility in tourism demand of Christchurch, whereas this rate is much lower in North Island which is around 25%. However, this is quite an evidence for the integration of the international tourism demand spillovers among New Zealand regions.

Oil Price and Stock Market Synchronization in Gulf Cooperation Council Countries

Knowing that the Gulf Cooperation Council (GCC) economies are dichotomous in nature, and growth in the non-oil sector is tributary to the oil sector, we document the extent of synchronization between crude oil prices and stock markets for each of the GCC markets and for the GCC as an economic bloc. We use both the bivariate and multivariate nonparametric synchronicity measures proposed by Mink et al. (2007) to assess that linkage. We find a low to mild (mild to strong) degree of synchronization between oil price and stock market returns (volatilities). In a very few instances, we find very strong (above 80 percent) associations between these variables. These results hold irrespective of whether we assume that stock market participants form adaptive or rational expectations about the price of oil. Dynamic factor results confirm that shocks to volatility are more important than shocks to oil price returns for the GCC stock markets.

International arrivals forecasting for Australian airports and the impact of tourism marketing expenditure

An airport’s international passenger arrivals are susceptible to exogenous and endogenous factors (such as economic conditions, flight services, fluctuations and shocks). Accurate and reliable airport passenger demand forecasts are imperative for policymaking and planning by airport and airline management as well as by tourism authorities and operators. This article employs the Box–Jenkins SARIMA, SARIMAX and SARIMAX/EGARCH volatility models to forecast international passenger arrivals for the eight key Australian airports (Adelaide, Brisbane, Cairns, Darwin, Gold Coast, Melbourne, Perth and Sydney). Monthly international tourist arrivals between January 2006 and September 2012 are used for the empirical analysis. All the forecasting models are highly accurate with the lower values of mean absolute percentage error, mean absolute error and root mean squared error. The findings suggest that the international passenger arrivals of Australian airports are affected by positive and negative shocks and tourism marketing expenditure is also a significant factor influencing the majority of Australian airports’ international passenger arrivals.

Tourism Demand Spillovers between Australia and New Zealand Evidence from the Partner Countries

International tourism is susceptible to fluctuations and shocks. The spillovers of international inbound tourism between Australia and New Zealand have been one of the key issues for both governments and tourism authorities to address. This paper used a bivariate GARCH model to investigate the spillovers of international tourist arrivals between Australia and New Zealand from seven countries (Canada, China, Germany, Japan, Korea, United Kingdom, and United States). The monthly international tourist arrivals between 2000 and 2012 were used for the empirical analysis. The findings suggested a significant spillover of Chinese and Japanese tourists from New Zealand to Australia, whereas New Zealand’s tourism demand from China and Japan was not significantly affected by that of Australia. However, New Zealand’s inbound tourism from Canada, Germany, and United States was significantly affected by tourism demand from those countries to Australia. Furthermore, symmetric spillovers between Australia and New Zealand (in both directions) existed for UK tourists.