Rosmy Jean Louis

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.

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.

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.

Business Cycles Synchronicity and Income Levels: Has Globalisation Brought us Closer Than Ever?

Research on business cycle linkages shows a tendency to model countries of relatively the same income levels jointly. However, the issue of whether these countries move along the same business cycles has not been formally investigated in the literature. In this paper, we take this approach and investigate whether each group of countries follows its own dynamics and is therefore subjected to the same business cycle and whether these cycles are independent of each other across income groups. Results indicate that high income per capita countries (HICs) tend to be guided by stronger similarity in business cycles than countries in the middle (MICs) and low income (LICs) groups. In search for an explanation of the business cycles synchronicity observed, panel data analysis was explored. The results from the robust fixed effects estimation show neither trade openness nor shocks to consumption underlie international business cycle synchronization, but rather shocks to oil prices.

Risk Sharing in the Middle East and North Africa: The Role of Remittances and Factor Incomes

This paper 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 are 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. By 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.

Decomposing the Income Insurance Channel across OECD and Emerging Markets

This paper investigates the underlying forces driving income insurance chan- nels for the Organisation for Economic Co-operation and Development (OECD) and emerging markets. We find income insurance channels across countries to be driven by different subchannels. For the OECD, income insurance is mostly governed by payments for financial liabilities; for the emerging markets, income flows from nationals working abroad constitute the main income smoother. Despite the growth in cross-border financial asset trading over the years, we could not find evidence of income smoothing via foreign assets receipts for the OECD. For the majority of emerging markets, neither receipts of foreign assets nor foreign liability payments are strong enough to insure income as well.

Modelling the tourism receipt’s volatility

Using data from 87 countries, we show that proximity of recipient countries to the economic centres of the world, a diversified source of international tourist supplies, and larger share of GDP as tourism revenues are conducive to lower volatility in tourism receipts. We also find that the volatility of tourism revenues is quite dispersed across countries and intensifies when tourism flow originates from a specific set of countries.

North American Business Cycle: Myth or Reality

This paper investigates the business cycle linkages between Canada, Mexico, and the United States by examining the significant features of the three business cycles for the period 1963 to 2002. It analyzes the correlation between the cyclical fluctuations in these countries and answers this key question: Is there any commonality and symmetry between the individual cycles? Using Markov-switching regimes in a multivariate framework and data on industrial production index and real GDP, we discover some synchronization of the business cycles in North America. Also, Mexico and Canada individually share a common cycle with the U.S. but not with each other. Several other issues were investigated including the role of the common cycle in explaining each countrys economic fluctuations and the responses of each country to a common shock.

Monetary union in West Africa and business cycles synchronicity: New evidence

In the light of the initiative of the West African Monetary Zone (WAMZ) to introduce a common currency by 2020, this paper investigates the intricacies of the business cycles synchronicity among the six countries. Given: (i) the rising importance of trade and cooperation with China; (ii) the consideration of the Euro as a potential anchor currency and a vehicle for trade with the Eurozone; and (iii) the importance of Nigeria as the largest country of the group and the main supplier of oil, we investigate the relative importance of these three major players in having their business cycles linked with the group. In addition, we investigate the underlying determinants of the business cycles synchronicity among the WAMZ countries on a pairwise basis. Results show a clear dominance of Chinas business cycle synchronicity with the WAMZ over Europes and Nigerias. Trade integration emerges as the key underlying factor of the common cycle observed.