Shamim Shakur

Analysis of the relationship between the share market performance and exchange rates in New Zealand: A cointegrating VAR approach

This study employs the cointegrating VAR approach to characterise the relationships between the five exchange rates comprising the TWI and the share market in New Zealand. Weekly data covering January 1999 to June 2006 are analysed. The study discovers there are two types of long‐run relationship mimicking the portfolio balance and goods market theories. That implies there is bi‐directional causality in the foreign exchange and stock markets in both the short run and long run although different exchange rates may be implicated. In the long run, the empirical results for the relationship between the NZ‐US dollar exchange rate and the overall share market index support both the portfolio balance and goods market theories. In the short run, the portfolio balance theory is further supported by all the exchange rates but the goods market theory is supported significantly only by the NZ‐Australian dollar exchange rate. Thus the evidence is predominantly in support of the portfolio balance theory and that the firms most at risk of foreign exchange rate exposure are those that export to Australia.

Nonlinear decomposition analysis of risk aversion and stock-holding behaviour of US households

Using the Survey of Consumer Finances of 2001 and 2004, this article provides a nonlinear decomposition analysis to find the relative importance of household risk preference characteristics after allowing adjustment for distribution of other household characteristics. We find significant contributions of net worth, college education, inherited wealth, managerial and low unemployment risk occupation in explaining the differences in probability of stockholding among the least and higher risk-averse households. The results show the impact of internet bubble and recession in post-9/11 environment on risk preference groups in terms of their stockholding behaviour.

Impact of trade cost on China-EU agri-food trade

ABSTRACT In this research, we investigate trade costs in relation to China-EU trade in agri-food products during 2001–2015. Major components of trade cost include transportation costs, border-related policy barriers such as tariffs, and local distribution costs. Our results indicate that trade costs between China and EU involving agri-food products, although falling, remain abnormally high. Consequently, we find that trade cost reductions contribute to over half of the overall China-EU trade growth. Our decomposition technique demonstrates that economic growth and trade cost reductions are the key drivers of China-EU trade expansion. Implementation of the Belt and Road Initiative (BRI) would reduce high trade costs to increase EU-China bilateral agricultural trade significantly. This is not fully captured in the gravity models where a static distance is usually used as a proxy to trade cost. The BRI will not reduce the distance, but it will cut transportation and other components of trade cost for China-EU trade.

Testing vertical price transmission for Vietnam's Robusta coffee

Vietnam has undergone market reforms over the last three decades; and as a consequence, the coffee sector has become increasingly market‐driven. The success of the governments liberalisation policies in terms of market efficiency is investigated by examining the transmission of both positive and negative price changes for Robusta coffee between export and farmgate prices. We used a threshold vector error correction model and high‐frequency daily data. The primary result here is that of a symmetric price transmission between export and farm‐level prices. This result holds when tested with weekly price data, derived from the daily data. Farmgate prices respond faster to decreases than increases in export prices when the long‐run deviation exceeds a certain threshold. These price changes are transmitted within several days. This research also confirms the importance of transaction costs, and other price frictions mostly ignored in prior analyses for coffee.

Remittances, Human Capital and Poverty: A System Approach

ABSTRACT:The international remittances sent back home by migrant workers have a profound impact on the developing countries of Asia, Africa, Latin America, and the Middle East. According to World Bank, official international remittances sent home by migrant workers represent the second most important source of external funding in developing countries. Estimated official international remittances are around

THE SECTORAL APPROACH TO TRADE LIBERALIZATION: Should We Try To Do Better?

440 billion in 2015 and are about twice as large as the level of official aid-related inflows to developing countries. While estimating the effects of remittances on economic growth tend to be rather difficult and controversial, measuring their welfare effects are less so. Remittances have been found to have poverty reducing impact in many studies. The usual methods used in these studies to gauge the effect of remittances on poverty have been OLS or instrumental variable (IV) regression. While these are valid approaches, one of their shortcomings is to overlook that remittances and poverty are both endogenous and jointly determined in a system. This paper estimates the effect of remittances on poverty in an unbalanced panel of 37 economies using a system of equations framework. Although there are some earlier studies that recommend the use of system approach, they tend to impose i.i.d condition on the error term. This paper relaxes the i.i.d. error assumption and adopts the multiple equation generalized method of moments (GMM) estimator because it produces consistent and efficient estimates when non-i.i.d. errors are present. The obtained results show that remittances significantly reduce poverty in the sample of a remittances dependent countries. The point estimates provide a robust estimation of remittances-poverty nexus and are consistent with those found in the literature. Furthermore, since it is likely that poverty itself can be a significant determinant of remittances flows, the estimated elasticities are measured on the basis when both remittances and poverty are jointly determined. The results also suggest that the dynamics of remittances is related to the overall level of human capital of the general population as well as to those living under poverty. Specifically, we find that the flows of remittances decline with improvement in the health factor of the general population but increase as health conditions of the poor people tend to improve. Likewise, there is also some evidence that remittances tend to rise with increases in educational attainments of the general population, but more likely to fall as the poor people become more educated. As a poverty reduction strategy, a stable macroeconomic environment is required so that the migrants are assured of the safety of the use of their money sent back home.