Posts Tagged ‘Stability’

IS STABILITY FOR REGIONAL DISPARITIES OF UNEMPLOYMENT RATES TRULY MYSTERIOUS? AN ANALYSIS FROM STATISTICAL APPROACH

Tsunetada HIROBE

Professor, Department of Economics, Meikai University, 1 Akemi, Urayasu, Chiba 279-8550, Japan

tsune@meikai.ac.jp

Abstract

The paper analyzes the peculiar phenomenon of regional disparities brought by the changes in the geographical distribution of US unemployment rates. Specifically, we investigate the characteristics concerning the gap of that regional distribution especially focusing upon the statistical analysis by mainly an exploratory way. Reduction in disparities or Expansion in disparities usually involves reducing or increasing the overall level of distribution, and the so-called relative disparity between all states of the U.S. shows an extremely stable transition of distribution within a certain range. This is a mysterious phenomenon that is also shown in any other country in the world. One of the reasons that the regional distribution of unemployment rates becomes stable is derived from the robustness of that geographical distribution; this is one of the reasons that the unemployment rate does not fluctuate significantly. Even if that robustness deteriorates for some reason, then the unemployment rate updates the values of minimum and maximum, or only just the range of variation expands; the relative disparities between regions tend to be offset by increases or decreases in the same direction as a result. Since that range is usually very limited, the gap frequently fluctuates up and down within a confined extent and it does not necessarily converge or diverge to a specific point; it would constantly change within the allowable fluctuation range depending on the socio-economic situation.

Keywords: unemployment rate, regional disparity, convergence, equilibrium, stability

JEL classification: C13, C15, J69, R12, R19

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USING ARDL APPROACH TO COINTEHRATION FOR INVESTIGATING THE RELATIONSHIP BETWEEN PAYMENT TECHNOLOGIES AND MONEY DEMAND ON A WORLD SCALE

Payam MOHAMMAD ALIHA

Ph.D candidate, National University of Malaysia (UKM), Malaysia

payammaliha@gmail.com

Tamat SARMIDI

Associate Professor Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

tamat@ukm.edu.my

Abu Hassan SHAAR

Professor Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

ahassan@ukm.edu.my

Fathin FAIZAH SAID

Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

fatin@ukm.edu.my

Abstract

This paper estimates the relationship between financial innovation and money demand in world countries with a focus on the number of automated teller machines (ATMs) using the ARDL approach to cointegration. In this study, we estimated a conventional money demand model with currency in circulation (M2) as dependent variable and gross domestic product (GDP, constant 2005 US$), interest rate (IRATE), the number of automated teller machines per 100,000 adults (ATM) to take into account for the effects of financial innovation as dependent variables. It covers 215 countries and territories over the period 2004-2013. This paper adopts the bounds testing procedure developed by Pesaran et al. (2001) to test the stability of the long-run money demand and determine the short-run dynamics for all of the countries as a whole. The empirical evidence points to the existence of long-run and cointegrating relationships between variables meaning all of these variables move together in the long run. The speed of adjustment toward long run equilibrium is – 0.4345 which means that the whole system gets back to long run equilibrium at the speed of 43.45 percent. The results confirm that in the short-run, ATM does not impact money demand.

Keywords: Money demand, Financial innovations, Stability, ARDL, Cointegration.

JEL classification: R21, R32

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INVESTIGATING THE EFFECTS OF FINANCIAL INNOVATIONS ON THE DEMAND FOR MONEY IN MALAYSIA USING THE ARDL APPOACH TO COINTERGRATION

Payam MOHAMMAD ALIHA

Ph.D candidate, National University of Malaysia (UKM), Malaysia

payammaliha@gmail.com

Tamat SARMIDI

Associate Professor Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

tamat@ukm.edu.my

Abu Hassan SHAAR

Professor Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

ahassan@ukm.edu.my

Fathin FAIZAH SAID

Dr. at Faculty of Economics and Management, Universiti Kebangsaan Malaysia (UKM), Malaysia

fatin@ukm.edu.my

Abstract

Money demand function plays a vital role in monetary policy formulation. Over the years, several countries have experienced growth in financial innovation which has implications for monetary policy. This paper estimates the relationship between financial innovation and money demand in Malaysia with a focus on payment instruments (PI), payment systems (PS) and payment channels (PC) using the ARDL approach to cointegration between 2008 Q1 to 2015 Q4. This paper adopts the bounds testing procedure developed by Pesaran et al. (2001) to test the stability of the long-run money demand and determine the short-run dynamics for Malaysia. The empirical evidence points to the fact that while innovation in the Malaysian financial system have not ruled out the existence of stable long run money demand relationships as attested to by QUSUM Test, they (except for PS) fail to pass the Bound Test meaning that there is no evidence for a long-run association between variables. Therefore, for PI and PC, we cannot proceed to the next step. For PS, the estimated coefficient for the error correction term is not significant which means that there is no adjustment towards long-run equilibrium. In other words, disequilibrium between money demand and independent variables is not corrected over time and it actually diverges rather than converge.

Keywords: Money demand, Financial innovations, Stability, ARDL, Cointegration

JEL classification: C13, C40, C51, E40, E44

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