Mark Wheeler

The Housing Market, Macroeconomic Activity, and Financial Innovation: An Empirical Analysis of U.S. Data

The relationship between macroeconomic activity and residential expenditure over the period 1959:I to 1991:I has been examined. The analysis is conducted using varriance decompostions (VDCs) and historical decompostions (HDs). The VDCs indicate that shocks to the money stock. Output and interest rates have significant impact on residental expenditure. The HDs indicate that shocks to macroeconomic variable are relatively unimportant in the determination of residential expenditure in the period following the extensive fiancial deregulation in the early 1980s.

Does Real Exchange Rate Volatility Affect Foreign Direct Investment? Evidence from Four Developed Economies

This study examines the impact of shocks to exchange rate uncertainty (volatility) on foreign direct investment (FDI) in Canada, Japan, the United Kingdom, and the United States. The analysis is conducted using vector autoregressive models that contain the price level, real output, the real exchange rate, the volatility of the real exchange rate, the interest rate, and FDI. The results from variance decompositions yield public policy implications. In Canada, Japan, and the United States, innovations to exchange rate uncertainty explain significant portions of the forecast error variance in FDI at longer time horizons. The impulse response functions indicate that, to the extent that shocks to exchange rate volatility have an impact on FDI, the impact is positive and takes place with a lag.

The macroeconomic impacts of government debt: An empirical analysis of the 1980s and 1990s

This study examines the macroeconomic impacts of government debt. Unlike previous studies, the current study restricts the estimation period to the 1980s and 1990s. The analysis is conducted using variance decompositions and impulse response functions derived from a vector autoregressive model. The results presented here support an extreme form of the Ricardian equivalence hypothesis. In this view, wealth falls as government debt rises. Because wealth falls as government debt rises, an increase in government debt leads to decreases in interest rates, output, and the price level.

An empirical analysis of the European Union's impact on Spanish economic performance

This paper examines the impact that the European Union (EU) has exerted on Spanish economic activity. The empirical analysis is conducted using variance decompositions and historical decompositions derived from a near vector autoregressive (VAR) model. The near VAR includes the exchange rate, the EUs inflation rate and output, and Spains inflation rate, output, money supply and interest rate. The estimation period begins in 1987, the year after Spain joined the EU, and ends in 1997. The main finding of the analysis is that the EU has significant impacts on the Spanish economy. The paper finds that shocks to EU output explain up to 63% of Spanish output. At longer time horizons, shocks to the EUs inflation rate and output combine to explain over 50% of the forecast error variance in Spanish inflation.

Expectations and the Black Market Premium

The purpose of this paper is to gain a better understanding of the black market premium--the percentage differential between the black market and the official exchange rate. Tests are used to see whether the black market premium responds to variations in expectations about the official exchange rate in Argentina, Brazil, Colombia, and Mexico. Expectations of devaluation do cause movements in the black market premium for Argentina, Brazil, and Mexico but this behavior is not observed for Colombia. Colombian economic agents seem less sensitive to expected returns. This perhaps explains the relatively flat black market premium series observed for Colombia. Copyright 1999 by Blackwell Publishing Ltd.

Oil price shocks and employment: the case of Ohio coal mining

Economic theory suggests that oil price shocks will have an impact on employment in local coal markets. However, theory is silent on both the absolute and relative magnitudes. Based on vector autoregressive models, we find that oil price shocks, and therefore OPEC policies, have significant impacts on Ohio coal mining employment. Our study indicates that oil price shocks have larger impacts on Ohio coal mining employment than do shocks to coal prices or coal wages. Our study is unusual in that we have examined the impact of oil price shocks on employment in a specific industry.

The Impact of Output and Exchange Rate Volatility on Fixed Private Investment: Evidence from Selected G7 Countries

This study examines the impact of shocks to exchange rate and output uncertainty (volatility) on real private fixed investment (FI) in Canada, Germany, the United Kingdom and the United States. The analysis is conducted using vector autoregressive models that contain the price level, real output, the volatility of real output, the real exchange rate, the volatility of the real exchange rate, an interest rate and FI. The results yield important public policy implications with regard to the impact of output volatility of FI. Our analysis indicates that volatility shocks, measured as output volatility or exchange rate volatility, do not have a significant impact on FI for any country in our study.

Exchange-rate uncertainty and dollarization: A structural vector error correction approach to estimating money demand

Open economy money demand functions for Singapore are estimated using quarterly data from 1973–1996. Variance decompositions derived from structural vector error correction models are used to test the effect of anticipated exchange rate movements and exchange rate uncertainty on money demand. Though no evidence was found for currency substitution and dollarization with respect to the US dollar, it was found that Singapores money demand is affected by variations in exchange rate uncertainty with respect to the Japanese yen.

The velocity of US M2 in the 1990s: some further evidence

This paper investigates the behaviour of M2 velocity in recent years with special emphasis on the post-1989 period. Unlike previous studies in this area, M2 velocity is analysed in the context of a small vector autoregressive (VAR) model which includes income, prices, interest rates, and money growth volatility. The hypothesis of a structural shift in M2 velocity associated with the post-1989 period is rejected by the VAR model. This suggests that the unusual behaviour of M2 velocity since 1989 may be traced to the variability in its determinants, rather than to a shift in the process generating velocity. Variance decompositions indicate that real income and the short-term opportunity cost of M2 are the most important determinants of M2 velocity. The long-term opportunity cost of M2 and the return on equities also have significant impacts on M2 velocity.

Is the world economy more integrated today than a century ago

This paper evaluates whether economies have become more internationalized: the integration hypothesis. Unlike previous studies, the current study addresses the integration hypothesis by analyzing the impact on the U.S. of economic shocks from the rest of the world. This analysis includes data beginning in the 1870s. Most previous studies have examined only the post-World War II period. Variance decompositions derived from vector autoregressive models indicate that the U.S. economy has become more vulnerable to international events over time, suggesting that the world economy is more integrated today than a century ago.