Jamel Jouini

Revisiting the Decline in the Exchange Rate Pass-Through: Further Evidence from Developing Countries

The main purpose of the paper is to contribute to the empirical works relating to exchange rate pass-through. Indeed, we revisit the Taylor (2000) proposition for some developing countries in order to examine the decline in their pass-through coefficients, and to find possible explanations for this. To that effect, we adopt an empirical methodology based on some structural breaks and cointegration tests proposed respectively by Bai and Perron (1998), and Gregory and Hansen (1996). Our work is motivated by the fact that during the 1990s, some developing countries shifted their monetary policy in order to reduce the inflation.

Structural breaks in the US inflation process

The empirical evidence of the instability based on some selection procedures is explored. The focus is on the problem of choosing the number of structural breaks and their locations for the US inflation series. The obtained results give reason for thinking that they are very significant since they coincide with important facts and economic events. They show in particular that the evolution curve of inflation in the USA was flattened during the last 20 years since it is noted that this reduction in extent of inflation is stable and durable.

The Asian Crisis Contagion: A Dynamic Correlation Approach Analysis

In this paper we are testing for contagion caused by the Thai baht collapse of July 1997. In line with earlier work, shift-contagion is defined as a structural change within the international propagation mechanisms of financial shocks. We adopt Bai and Perrons (1998) structural break approach in order to detect the endogenous break points of the pair-wise time-varying correlations between Thailand and seven Asian stock market returns. Our approach enables us to solve the misspecification problem of the crisis window. Our results illustrate the existence of shift-contagion in the Asian crisis caused by the crisis in Thailand.

Bai and Perron's and spectral density methods for structural change detection in the US inflation process

This paper addresses the issue of estimating the number of breaks and their locations in the monthly US inflation series using two different approaches to testing for structural changes. The first approach considers Bai and Perrons selection procedure based on a sequence of tests. This approach focuses on the instability problem in time. The second method uses a test similar to the one based on Kolmogorov–Smirnov statistics applied to the evolutionary spectrum. The results obtained are similar and economically significant.

Long-memory and shifts in the unconditional variance in the exchange rate euro/US dollar returns

In this paper two characteristics a priori contradictory and yet coexistent in the daily returns of exchange rate euro/US dollar are drawn. The non-stationarity of the covariance structure of the series is shown and, after the extraction of the unstable variance using the algorithm based on the cumulative sums of squares of Inclan and Tiao (Journal of the American Statistical Association, 1994, 89(427), 913–23), the existence of long-memory in the filtered series. Does the non-stationarity of the unconditional variance explain the phenomenon of long-memory? Thus a classic debate is found of which the exit does not again elucidate.

Structural breaks in the U.S. inflation process: a further investigation

The selection procedure of Bai and Perron (Econometrica, 1998, 66, 47–78), based on a sequence of tests for multiple structural changes, is used to explore the empirical evidence of the instability by selecting the number of breaks and their locations for the post-war monthly U.S. inflation rate. The obtained results indicate that the U.S. inflation process is unstable after June 1982 as there is a break at the beginning of the 1990s. This conclusion contradicts that of Ben Aïssa and Jouini (Applied Economics Letters, 2003, 10, 633–6), who show that using some information criteria, the evolution curve of U.S. inflation was flattened during the last 20 years, making the process stable. Hence this points to the fact that the procedure used is more powerful than the information criteria in detecting changes.

Linkage between international trade and economic growth in GCC countries: Empirical evidence from PMG estimation approach

This paper explores the empirical evidence of the links between economic growth and openness to international trade by controlling for auxiliary variables in the model for the six Gulf Cooperation Council (GCC) countries over the annual sample period 1980–2010. After testing for cointegration based on a recent bootstrap panel test, we employ the Pooled Mean Group (PMG) estimation technique of M.H. Pesaran, Y. Shin, and R. Smith (1999. “Pooled Mean Group Estimation of Dynamic Heterogeneous Panels”. Journal of the American Statistical Association 94: 621–634) that is appropriate for drawing sharper conclusions in dynamic heterogeneous panels by considering long-run equilibrium relations. The results show evidence of cointegration relationship between the variables of interest, and reveal that economic growth responds positively to trade openness over both the short run and long run. The evidence is robust to using various trade openness measures and to alternative model specifications, suggesting thus the non-fragility of the linkage between economic growth and openness to international trade for the GCC region. Our findings are then promising and support the view that economic growth is directly and robustly linked to trade openness for the GCC countries.

Detecting Multiple Breaks in Time Series Covariance Structure: a Nonparametric Approach Based on the Evolutionary Spectral Density

This article estimates the number of breaks and their locations in the covariance structure of a series based on the evolutionary spectral density and uses some standard information criteria. The adopted approach is non-parametric and does not privilege a priori any modelling of the series. One carries out a Monte Carlo analysis and an empirical illustration using the daily return series of exchange rate euro/US dollar to support the relevance of the theory and to produce additional insights. The simulation results are globally adequate and show that the criteria having heavy penalty are more accurate in the selection of the number of breaks. The empirical results indicate that the covariance structure of the return series considerably varies between 30 March 2000 and 6 April 2001. The unconditional volatility appears non-constant over this interval.

Equity Market Comovements Among Selected Emerging Countries from Long- and Short-Run Perspectives

This chapter deals with long- and short-run comovements among selected emerging equity markets by employing the ARDL bounds approach to cointegration of Pesaran et al. (2001) and the DCC-GARCH model of Engle (2002) . It is shown in the literature that these techniques enable us to obtain reliable results and to draw sharp conclusions in several application areas. The empirical results show evidence of financial integration between the emerging stock markets we consider. We also find that the comovement degree is generally greater between countries of the same geographical region. The equity markets had heavily fallen at the beginning of the global financial crisis, which was reflected in the comovements among the emerging countries that became more volatile during the crisis period. Our findings have important implications for international portfolio diversification and the effectiveness of domestic policies.

Economic growth and savings in Saudi Arabia: empirical evidence from cointegration and causality analysis

Abstract The similar evolution of GDP and savings, the high level of natural resources, and the high financial surplus of Saudi Arabia motivate us to examine the linkages between economic growth and savings from 1980 to 2012 in the ARDL framework. By incorporating relevant determinants, we find cointegration among the variables and positive two-way Granger-causality between economic growth and savings over the long- and short-run. Authorities should thus pursue policies that promote economic growth and savings, to achieve higher levels of both. The results are robust to using alternative specifications and econometric procedures, and show stable economic growth and savings functions.