Periklis Gogas and Apostolos Serletis
This paper set out to use an autoregressive conditional heteroscedasticity (ARCH)‐type model to capture the time‐varying conditional variance of Alberta electricity prices. This…
Abstract
Purpose
This paper set out to use an autoregressive conditional heteroscedasticity (ARCH)‐type model to capture the time‐varying conditional variance of Alberta electricity prices. This is of major importance in forecasting, since ARCH‐type models allow the conditional variance to depend on elements of the information set.
Design/methodology/approach
The paper uses the model to perform static and dynamic forecasts over different horizons and to compare its forecasting performance with a random walk and a moving average model.
Findings
The paper provides a study of hourly electricity prices using recent advances in the financial econometrics literature.
Originality/value
The contribution of the paper is its use of models of changing volatility to properly identify the type of heteroscedasticity in the data‐generation processes. This is of major importance in forecasting.
Details
Keywords
Periklis Gogas, Theophilos Papadimitriou and Anna Agrapetidou
This study aims to present an empirical model designed to forecast bank credit ratings using only quantitative and publicly available information from their financial statements…
Abstract
Purpose
This study aims to present an empirical model designed to forecast bank credit ratings using only quantitative and publicly available information from their financial statements. For this reason, the authors use the long-term ratings provided by Fitch in 2012. The sample consists of 92 US banks and publicly available information in annual frequency from their financial statements from 2008 to 2011.
Design/methodology/approach
First, in the effort to select the most informative regressors from a long list of financial variables and ratios, the authors use stepwise least squares and select several alternative sets of variables. Then, these sets of variables are used in an ordered probit regression setting to forecast the long-term credit ratings.
Findings
Under this scheme, the forecasting accuracy of the best model reaches 83.70 percent when nine explanatory variables are used.
Originality/value
The results indicate that bank credit ratings largely rely on historical data making them respond sluggishly and after any financial problems are already known to the public.
Details
Keywords
Apostolos Serletis and Periklis Gogas
To test the Feldstein‐Horioka hypothesis that the investment‐to‐output ratio moves one‐for‐one with the saving‐to‐output ratio, suggesting international capital mobility.
Abstract
Purpose
To test the Feldstein‐Horioka hypothesis that the investment‐to‐output ratio moves one‐for‐one with the saving‐to‐output ratio, suggesting international capital mobility.
Design/methodology/approach
The paper uses the econometric framework developed by Fisher and Seater, interpreting the Feldstein‐Horioka hypothesis as a long‐run phenomenon, and paying particular attention to the integration properties of the data, since meaningful tests critically depend on these properties. The paper also investigates the power of the long‐horizon regression tests, using the inverse power function of Andrews.
Findings
The paper tests the Feldstein‐Horioka hypothesis for 15 European countries, as well as for the USA and Japan, using annual data for the period from 1960 to 2002. Evidence is found against the Feldstein and Horioka hypothesis of low international capital mobility.
Originality/value
Although the findings are in contrast to those of Feldstein and Horioka, they are consistent with neoclassical growth theory according to which there is no reason to expect a relation between saving and investment if there are no barriers to capital movements.
Details
Keywords
Periklis Gogas and Ioannis Pragidis
The purpose of this paper is to test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different…
Abstract
Purpose
The purpose of this paper is to test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation.
Design/methodology/approach
The authors use two alternative vector autoregressive systems in order to construct the fiscal policy shocks: one with the simple sum monetary aggregate MZM and one with the alternative CFS Divisia MZM aggregate. From each one of these systems we extracted four types of shocks: a negative and a positive government spending shock and a negative and a positive government revenue shock. These eight different types of unanticipated fiscal shocks were used next to empirically examine their effects on the growth rate and cyclical component of real private GNP in two sets of regressions: one that assumes only contemporaneous effects of the shocks on output and one that is augmented with four lags of each fiscal shock.
Findings
The authors come up with three key findings: first, all fiscal multipliers are below unity but with signs as predicted by Keynesian theory. Second, government expenditures have a larger impact as compared to the tax policy and finally, positive government spending shocks are more significant than negative spending shocks. All these results are in line with previous studies and are robust through many tests using structural identification proposed by Blanchard and Perotti (2002).
Practical implications
The empirical findings in this manuscript can be used for conducting a more efficient fiscal policy. The importance of government spending shocks is empirically verified along with the asymmetries related to price stickiness predicted by Keynesian theory. According to the results an efficient fiscal policy would: in terms of an expansionary policy, use government spending as a means to stimulate the economy instead of tax cuts and in the case of a contractionary policy use government revenue (higher taxes) so that the costs of this policy in terms of output lost are lower.
Originality/value
In this study the authors introduce three main innovations: first, to the best of our knowledge the Divisia monetary aggregates have not yet been used to previous research pertaining to fiscal policy. Second, following Cover’s (1992) procedure of identifying monetary policy shocks we extract the unanticipated fiscal policy shocks on government spending and revenue. Finally, the authors explicitly test for the asymmetric effects on the growth rate and the cyclical component of real private GNP of a contractionary and expansionary fiscal policy.