Hassan Mohammadi

Wagner's hypothesis: New evidence from Turkey using the bounds testing approach

Purpose - The aim of this paper is to prove the validity of Wagners hypothesis. Design/methodology/approach - The paper examines the validity of Wagners hypothesis with annual data for Turkey over 1950-2005 period. Findings - The empirical results using the ARDL bounds tests of cointegration provide strong support for the hypothesis. Also, the results are robust across six alternative specifications of the Wagners hypothesis as well as four alternative lag length selection criterions. Originality/value - The paper provides useful information on the validity of Wagners hypothesis.

Turkish budget deficit sustainability and the revenue-expenditure nexus

The sustainability of the Turkish budget deficits as well as the dynamics of government revenues and expenditures in controlling the size of the deficit is examined using annual data from 1968 to 2004. The findings support the existence of a long-run relation between government revenues and expenditures once allowance is made for an unknown structural break. However, the size of the slope parameter is significantly less than one, suggesting that the government might face difficulties in financing its future debt. With respect to the revenue-expenditure nexus, the empirical evidence is favourable to the tax-spend hypothesis through the error correction term in the expenditures equation. Finally, there is no evidence of asymmetries in the adjustment process in either the threshhold autoregressive or momentum threshold autoregressive specifications of the budgetary adjustment process.

Oil Prices and Real Exchange Rates in Oil-Exporting Countries: A Bounds Testing Approach

We test the validity of the Dutch disease hypothesis by examining the relationship between real oil prices and real exchange rates in a sample of fourteen oil exporting countries. Autoregressive distributed lag (ARDL) bounds tests of cointegration support the existence of a stable relationship between real exchange rates and real oil prices in all countries, suggesting a strong support for the Dutch disease hypothesis. As for short-run, there are evidence of causality from oil prices to exchange rates in four countries; from exchange rates to oil prices in two countries; and bidirectional relations in another four countries. There is no evidence of causality in the remaining four countries.

Budget deficits and the current account balance: New evidence from panel data

This study examines two distinguishing predictions of the finite-horizon open-economy macroeconomic models regarding the effect of fiscal policy on the current account balance: (1) Given the path of government expenditures, a fall in public savings has an adverse effect on the current account balance, and (2) a bond-financed increase in government expenditures exerts a larger adverse effect on the current account balance than a tax-financed alternative. These predictions are vastly different from those of the Ricardian theory. According to this view, (1) lower public savings are met by equal increases in desired private savings, and thus the current account balance does not change, and (2) the response of current account balance to a change in government spending is independent of its financing methods. Empirical analysis of 63 countries is consistent with the conventional theory.

Long-run relations and short-run dynamics among coal, natural gas and oil prices

We examine the long-run relations and short-run dynamics among the three primary energy prices–coal, natural gas and crude oil–using the annual and monthly US data for the post-1970 period. The results are consistent with the view that oil prices are determined globally; natural gas prices are determined regionally and coal prices are set by long-term contracts.

The transmission of shocks across real estate investment trust (REIT) markets

This paper examines the transmission of shocks across equity, mortgage, and hybrid real estate investment trusts (REITs). Though the augmented Dickey–Fuller, Phillips–Perron, and Kwiatkowski–Phillips–Schmidt–Shin unit root tests reveal that the respective REITs are integrated of order one, Johansen–Juselius cointegration tests suggest that the three REIT markets are not cointegrated. The absence of cointegration supports the proposition of financial market efficiency proposed by Granger and by Richards. Granger-causality tests and Wald tests of long-run relations are presented to examine the short-run dynamics of the respective REIT markets; moreover, the generalized impulse response analysis reveals that shocks across the REIT markets are disseminated quickly.

Long-run estimates of money demand in Romania

This paper estimates the long-run demand for money in Romania using monthly data from January 1994 to August 2003. The Johansen–Juselius cointegration procedure provides evidence of one cointegrating vector for both narrowly and broadly defined money demand functions. Real money balances are not only sensitive to real income, but also the domestic interest rate and the depreciation of the domestic currency.

Oil prices and competitiveness: time series evidence from six oil‐producing countries

Purpose - The purpose of this paper is to study the potential loss of competitiveness due to higher oil prices through the monetary channel in a group of six oil producing countries. Design/methodology/approach - A dynamic time series methodology, Dynamic Simultaneous Equations, is applied to Vector Autoregressive Moving Average model with exogenous variables. Findings - Mixed evidence was found of loss of competitiveness due to high oil prices in the sample. Practical implications - Findings are useful both for academic researchers in international finance or development economics. Policy makers will find the results useful for implementing stabilization or neutralization policies. Originality/value - The empirical work extends earlier research in several directions including extension to six oil-producing countries, use of data over the flexible exchange rate period, and a more suitable technique, which estimates the model in a dynamic setting.

Capital mobility and savings-investment correlations: panel data evidence from transition economies

This study examines the relationship between savings and investment for 26 transition economies using a panel data set covering the 1991 to 2002 period. Estimates of the saving coefficient based on cross-sectional, fixed-effect, random-effect and mean-group estimators range from 0.263 to 0.315, which are significantly less than one.

Risk and Return in the Tehran Stock Exchange

This paper analyzes market index returns in the Tehran stock exchange (TSE) within the context of three variants of the Capital Asset Pricing Model: the static international; the constant-parameter intertemporal; and a Markov-switching intertemporal CAPM, which allows for time-varying degree of integration with regional and international equity markets. We find that TSE returns are CAPM-efficient at monthly frequency with respect to several international market indices. Moreover, we find evidence in support of international integration of the TSE with respect to international markets. In addition, we conduct an extensive investigation for the direction of causality between TSE returns, international market index returns, and those in neighboring countries.This paper analyzes market index returns in the Tehran stock exchange (TSE) within the context of three variants of the Capital Asset Pricing Model: the static international; the constant-parameter intertemporal; and a Markov-switching intertemporal CAPM, which allows for the degree of integration with regional and international equity markets to be time-varying. We find that TSE returns are CAPM-efficient at monthly frequency. Moreover, we find evidence in support of international integration of the TSE. We conduct event studies for TSE returns to examine the impact of non-market events. We find that TSE returns have become less sensitive to non-market factors over time.