Abdullah Alqahtani, Amine Lahiani and Ali Salem
This paper aims to investigate the transmission of international oil prices to the stock market indices of the Gulf Cooperation Council (GCC) countries over the weekly period from…
Abstract
Purpose
This paper aims to investigate the transmission of international oil prices to the stock market indices of the Gulf Cooperation Council (GCC) countries over the weekly period from April 07, 2004, to August 15, 2018.
Design/methodology/approach
The authors use the augmented Dickey–Fuller (ADF) unit root test to check the order of integration of data series. Afterward, the authors use the ordinary least square method to determine the spillover of international oil prices to the stock markets of GCC countries while accounting for the time-varying volatility of oil and stock market returns through the generalized autoregressive conditional heteroskedasticity. Then, the Johansen (1991) cointegration test is used to determine the long-run equilibrium relationship. Finally, the Granger (1969) causality test is used to determine the short-run causal effects between oil and the stock markets returns of GCC countries.
Findings
The findings indicate that the stock markets of GCC countries are efficient and respond significantly to international oil prices and evidence of high volatility associated with oil returns.
Originality/value
Investors and portfolio managers should consider the association between international oil prices and GCC stock returns when allocating their funds for diversification strategy. Moreover, policymakers should better understand the behavior of local stock markets.
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The purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.
Abstract
Purpose
The purpose of this paper is to explore the effect of oil price shocks on the US Consumer Price Index over the monthly period from 1876:01 to 2014:04.
Design/methodology/approach
The author uses the Bai and Perron (2003) structural break test to split the data sample into sub-periods delimited by the computed break dates. Afterwards, the author uses the quantile treatment effects over the full sample and then, by including sub-periods dummies to accommodate the selected structural breaks that drive the relationship between inflation and oil price growth.
Findings
The findings include a decreased transmission effect of oil price changes on inflation in recent years; a varied elasticity of inflation to the growth rate of oil prices across the distribution; and, finally, evidence of asymmetry in the relationship between the growth rate of oil prices and inflation, with a higher transmission mechanism for decreasing rather than increasing oil prices.
Practical implications
Policymakers should remain alert to monitoring potential inflation increases and should take precautionary measures to anchor inflation expectations, because inflation reacts differently to positive and negative oil price shocks. Moreover, authorities should consider the asymmetric reaction of inflation to oil price shocks to adopt an appropriate monetary policy strategy to achieve the price stability target.
Originality/value
The paper used a quantile regression model with structural breaks, which has not yet been used in the literature.
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Ameni Mtibaa, Amine Lahiani and Foued badr Gabsi
Departing from the expansionary austerity literature, this study aims at examining how fiscal consolidation affects the economic growth in Tunisia using annual data over the…
Abstract
Purpose
Departing from the expansionary austerity literature, this study aims at examining how fiscal consolidation affects the economic growth in Tunisia using annual data over the period 1970–2018.
Design/methodology/approach
To revisit the fiscal consolidation-economic growth nexus, the ambiguous empirical findings in previous literature make useful the adoption of alternative econometric techniques. The authors use an extended nonlinear autoregressive distributed lag (ARDL) cointegration approach developed by Shin et al. (2014) and the Diks and Panchenko's (2006) nonlinear Granger causality test. Furthermore, a traditional approach based on changes in cyclically-adjusted primary balance was applied to define the fiscal consolidation episodes in Tunisia.
Findings
The empirical evidence reveal that fiscal adjustment in Tunisia may hurt the economy, both in the short- and long-run, through its contractionary effect on economic growth. Another important finding concerns the unidirectional nonlinear Granger causality running from fiscal consolidation to economic growth.
Practical implications
Fiscal adjustment in Tunisia is found to play a prominent role in reducing public debt; but at the same time, it may be costly and not beneficial to the economy. This view corroborates with the fact that fiscal consolidation is more likely to end successfully only under specific conditions. This calls for a deeper reflection upon new insights regarding the design of fiscal adjustment in Tunisia. To reach this end, it is suggested to combine the defensive consolidation strategy with offensive components such as investment, infrastructure, education and health.
Originality/value
The existing economic analysis on fiscal policy-growth nexus in Tunisia has often identified fiscal consolidation through the use of the actual fiscal balance. With the goal of more accurate estimation, this study bridges the gap by using the cyclically-adjusted primary balance (CAPB) as a much suitable indicator to investigate the non-Keynesian effect of fiscal consolidation in Tunisia. This indicator eliminates the influence of cyclical fluctuations and many other fixed expenditures such as the interest paid on the public debt.
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Ahmed Ghorbel, Mohamed Fakhfekh, Ahmed Jeribi and Amine Lahiani
The paper analyzes downside and upside risk spillovers between stock markets of G7 countries and China before and during the COVID-19 pandemic.
Abstract
Purpose
The paper analyzes downside and upside risk spillovers between stock markets of G7 countries and China before and during the COVID-19 pandemic.
Design/methodology/approach
By using VAR-ADCC models and conditional value at risk (CoVaR) techniques, downside and upside risk spillovers between stock markets of G7 countries and China are analyzed before and during the COVID-19 pandemic.
Findings
The results suggested existence of a significant and asymmetrical two-way risk transmission between majority of pair markets, but the degree of asymmetry differs according to the use of the entire cumulative distributions or distribution tails. Downside and upside risk spillovers are significantly larger before the COVID-19 pandemic in all cases except between CAC 40/DAX and S&P/SSE pairs.
Originality/value
The paper used CoVaR and delta-CoVaR to investigate the downside and upside spillovers between stock markets of G7 countries and China before and during the COVID-19 pandemic.
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Mohamed El Hédi Arouri, Amine Lahiani and Duc Khuong Nguyen
This paper aims to investigate the return links and volatility transmission between five major equity markets of the Latin American region and the USA over the period 1993-2012…
Abstract
Purpose
This paper aims to investigate the return links and volatility transmission between five major equity markets of the Latin American region and the USA over the period 1993-2012.
Design/methodology/approach
The authors employ a multivariate vector autoregressive moving average – generalized autoregressive conditional heteroskedasticity (VAR-GARCH) methodology which allows for cross-market transmissions in both return and volatility. Moreover, we show how the obtained results can be used to design internationally diversified portfolios involving the Latin American assets and to analyze the effectiveness of hedging strategies.
Findings
The results point to the existence of substantial cross-market return and volatility spillovers and are thus crucial for international portfolio management in the Latin American region. However, the intensity of shock and volatility cross effects varies across the studied markets.
Research limitations/implications
The optimal weights and hedging ratios that we compute from the observed return and volatility spillovers, suggest that adding the Latin American assets helps improve the risk-adjusted return of the internationally diversified portfolios as well as reduce their risk exposure. For policymakers and market authorities, an increase in the level of shock interactions and volatility transmission between the US and Latin American equity markets as well as among these Latin American markets implies that the stability of the financial system in one country can be deeply affected by the disturbances in another country.
Originality/value
The authors extend the previous works on Latin American emerging markets by examining the extent of shock and volatility transmission as well as portfolio design and management from the point of view of both the US (global) and Latin American investors.
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Amine Ben Amar, Amir Hasnaoui, Nabil Boubrahimi, Ilham Dkhissi and Makram Bellalah
This study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the…
Abstract
Purpose
This study aims to elucidate the volatility spillovers among commodities, equities and socially responsible investments, underpinning their dynamic correlations during the economic instability wrought by the COVID-19 pandemic and associated financial crises.
Design/methodology/approach
This research quantitatively analyzes volatility transmission across various financial assets from January 2005 to October 2020 by employing the Diebold and Yilmaz (2012) spillover index. The methodology incorporates a temporal examination to capture the evolution of volatility dependencies pre and post the emergence of COVID-19.
Findings
The findings indicate substantial volatility spillovers among the assets in question, aligning with the current financialisation of commodity markets and a rise in financial market integration. These spillovers also show variation over time. Notably, the interconnectedness among the assets intensifies during periods of stress. For instance, the total spillover index significantly surpassed 80% toward the end of January 2020, following the onset of the COVID-19 crisis. Furthermore, the results imply that financial markets appear to be segmented.
Practical implications
The findings afford investors a more comprehensive insight into both the character and scale of the interdependencies across a broad array of financial markets. Indeed, grasping the extent to which financial markets are segmented or integrated during times of stress and stability is crucial for investors. Such understanding is key to more accurately evaluating risks, diversifying investment portfolios and devising more efficient hedging strategies.
Originality/value
This study contributes to financial literature by offering a comprehensive investigation into the spillover effects across a diverse set of asset classes during an unprecedented global health crisis, filling a gap in existing research on market behavior against the backdrop of a pandemic-induced financial crisis.
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Haining Guan, Chunmei Feng, Xiaojun Xu, Weiting Sun, Jianchun Han, Dengyong Liu and Xiaoqin Diao
This study aims to investigate the influence of soy protein isolate hydrolysates (SPIH) obtained using 4 h hydrolysis under 200 MPa on proximate composition, cooking loss…
Abstract
Purpose
This study aims to investigate the influence of soy protein isolate hydrolysates (SPIH) obtained using 4 h hydrolysis under 200 MPa on proximate composition, cooking loss, textural properties, color, water distribution, microstructure, thiobarbituric acid reactive substance (TBARS) value and carbonyl and sulfhydryl contents of emulsion sausages.
Design/methodology/approach
Sausages with SPIHs at four concentrations (0, 1.0, 2.0 and 3.0%) were prepared, and the sausage with 0.01% butylated hydroxyanisole (BHA) was used as a positive control. Some sausages were selected for the analyses of quality characteristics and microcosmic properties. Other sausages were stored under 4 °C for 0, 7, 14, 21 and 28 days to investigate the oxidative stability.
Findings
The addition of SPIHs at various levels (0–3.0%) or 0.01% BHA did not affect the proximate composition (protein, fat and ash) of emulsion sausages. The addition of 2.0% SPIH decreased cooking loss and increased moisture content, hardness, springiness, chewiness, resilience and L* value, compared to the sausages without SPIH and with 0.01% BHA (p < 0.05). Furthermore, low-field nuclear magnetic resonance results suggested that sausages with 2.0% SPIH had the shortest T2 relaxation time. In addition, 2.0% SPIH and 0.01% BHA could inhibit the oxidation of emulsion sausages when compared with the sample without SPIH (p < 0.05). Moreover, there were no differences between sausages with 2.0% SPIH and 0.01% BHA (p > 0.05).
Originality/value
These findings confirmed that the 2.0% SPIH obtained under 200 MPa can be used as a natural additive to improve quality properties and antioxidant potential of emulsion sausages during storage.