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In recent years, political rhetoric implying international trade hinder employment has gained momentum. We argue that the dynamics between the unemployment rate and the current account balance have both economic and political relevance. The presence of cointegration between the unemployment rate and the current account balance to GDP ratio and the nature of their short-run fluctuations will help us analyze the dynamics between the two objectively to evaluate the political rhetoric. We use quarterly data from 1948: Q1 to 2020: Q1 on the unemployment rate and current account balance to GDP ratio in the United States. Traditional cointegration tests fail to detect any cointegration. However, threshold cointegration tests confirm statistical evidence of threshold cointegration between the two. The estimated threshold vector error-correction model shows statistically significant evidence of falling unemployment rate coupled with deteriorating current account balance. This finding indicates that as unemployment rates go down, the current account balance deteriorates to maintain the long-run co-movement. Arguably, as the unemployment rate decline, concurrently imports rise faster than exports causing the current account balance to deteriorate. This finding thereby refutes the political rhetoric. [ABSTRACT FROM AUTHOR]

The present study unearths the causal effect of economic policy uncertainty (EPU), trade policies, and financial regulation on CO2 emissions in the United States. Based on this aim, the frequency domain causality and wavelet coherence tests are employed while answering the following questions: (i) Do EPU, trade policy, and financial regulation lead to CO2 emission in the United States, and (ii) if so, why? The findings from wavelet coherence reveal that changes in EPU, trade policies and financial regulation significantly lead to changes in CO2 emissions at different frequency levels, meaning that EPU, trade policies, and financial regulation are important predictors for the CO2 emission in the United States. The consistency of the findings from wavelet coherence is confirmed by the outcomes of frequency domain causality. To the best of our knowledge, until now, no study has explored the causal effect of economic policy uncertainty, trade policies, and financial regulation on the CO2 emission in the United States using single data set and wavelet coherence approach, which allows capturing both the long and short-run causality among the time series variables while combining time and frequency domain causality approaches. Therefore, the present study is likely to attract great interest from policy-makers and researchers in this field. At the same time, it is likely to start a new debate. [ABSTRACT FROM AUTHOR]

The disparity in unemployment rates among various racial communities of the United States labor market has long existed. Most of these works have focused on case studies or microeconomic models of steady state differences in unemployment rates. In this article, we use the Cobb-Douglas production function to develop a dynamic model to investigate the short-run and long-run temporal employment relationship between African Americans and their white counterpart. Empirically, we use annual and quarterly data to test for cointegration and develop error-correction models. Using annual employment data our central findings are that GDP, African American employment, and white employment are cointegrated. We find that white employment does not Granger-cause African American employment. On the contrary, we find that African American employment and GDP Granger cause white employment in the short run. With quarterly data, we find that employment in the white community Granger-causes employment in the African American community in the short term, but we find no feedback effect. Indeed, regardless of the frequency of data used, there appears to be a temporal dynamic relationship between African Americans and white employment in the U.S. labor market. These findings certainly have important policy implications. [ABSTRACT FROM AUTHOR]

This paper extends the buffered autoregressive model to the buffered vector error-correction model (VECM). Least squares estimation and a reduced-rank estimation are discussed, and the consistency of the estimators on the delay parameter and threshold parameters is derived. We also propose a supWald test for the presence of buffer-type threshold effect. Under the null hypothesis of no threshold, the supWald test statistic converges to a function of Gaussian process. A bootstrap method is proposed to obtain the p-value for the supWald test. We investigate the effectiveness of our methods by simulation studies. We apply our model to study the monthly Federal bond rates of United States. We find the evidences of buffering regimes and the asymmetric error-correction effect. [ABSTRACT FROM AUTHOR]

Since the beginning of 2018, Sino-US trade frictions have been escalating to the fields of science and technology, finance, and geography. Especially in the financial field, the United States has forcibly identified China as a "currency manipulator." In order to analyze the impact of Sino-US trade on the RMB exchange rate, based on the Sino-US import and export trade data under the quarterly HS classification from 2003 to 2019 and the RMB real effective exchange rate, this article carries out the traditional time series test, seasonal unit root test, and cointegration test and further constructs the seasonal error correction model to explore the long-term and short-term dynamic impact of Sino-US import and export trade structure on RMB real effective exchange rate. The results shows that the upgrading and optimization of the overall trade structure between China and the United States will increase the appreciation pressure of RMB real effective exchange rate. There are seasonal and long-term trends between RMB real effective exchange rate and different types of import and export trade structures between China and the United States. Therefore, this article not only strongly refutes the "theory of RMB appreciation" and puts forward policy suggestions to effectively deal with the negative impact of Sino-US trade friction but also provides a research framework for global trade, especially the decoupling of trade structure and exchange rate between developing and developed countries. [ABSTRACT FROM AUTHOR]

We examine the relationship between renewable and non-renewable energy consumption and economic growth in the United States. While the regime-dependent Granger causality test results for the non-renewable energy consumption and economic growth suggest bi-directional causality in both regimes, we cannot validate any causality between renewable energy consumption and economic growth. The US meets its energy demand from non-renewable sources; as such, renewable energy consumption does not seem to affect economic growth. Given the efficiency and productivity of renewable energy investments, we conclude that it is worthwhile to consider renewable energy inputs to replace fossil fuels given potential benefits in terms of global warming and climate change concerns. In this regard, increasing the R&D investments in the renewable energy sectors, increases in productivity and profitability of renewable energy investments are likely to accrue benefits in the long run. [ABSTRACT FROM AUTHOR]

This work investigates the inter-relationships among stream water quality indicators, hydroclimatic variables (e.g., precipitation, river discharge), and land characteristics (e.g., soil type, land use), which is crucial to developing effective methods for water quality protection. The potential of using statistical tools, such as Principal Component (PC) and Granger causality analyses, for this purpose is assessed across 10 watersheds in the Eastern United States. The PC analysis shows consistency across the ten locations, with most of the variation explained by the first two PCs, except for the least developed watershed that presents three PCs. Results show that stronger Granger causality relationships and correlation coefficients are identified when considering a lag of one day, compared to longer lags. This is mainly due to the watersheds' limited size and, thus, their fast hydrological response. The strongest Granger causalities are observed when water temperature and dissolved oxygen concentration are considered as the effect of the other variables, which corroborates the importance of these two water properties. This work also demonstrates how watershed size and land use can impact causalities between hydrometeorological variables and water quality, thus, highlighting how complex these relationships are even in a region characterized by overall similar climatology. [ABSTRACT FROM AUTHOR]

We explore the relationship between unemployment and inflation in the United States (1949-2019) through both Bayesian and spectral lenses. We employ Bayesian vector autoregression ("BVAR") to expose empirical interrelationships between unemployment, inflation, and interest rates. Generally, we do find short-run behavior consistent with the Phillips curve, though it tends to break down over the longer term. Emphasis is also placed on Phelps' and Friedman's NAIRU theory using both a simplistic functional form and BVAR. We find weak evidence supporting the NAIRU theory from the simplistic model, but stronger evidence using BVAR. A wavelet analysis reveals that the short-run NAIRU theory and Phillips curve relationships may be time-dependent, while the long-run relationships are essentially vertical, suggesting instead that each relationship is primarily observed over the medium-term (2-10 years), though the economically significant medium-term region has narrowed in recent decades to roughly 4-7 years. We pay homage to Phillips' original work, using his functional form to compare potential differences in labor bargaining power attributable to labor scarcity, partitioned by skill level (as defined by educational attainment). We find evidence that the wage Phillips curve is more stable for individuals with higher skill and that higher skilled labor may enjoy a lower natural rate of unemployment. [ABSTRACT FROM AUTHOR]

This paper elucidates the effect of government spending on money demand in the United States using quarterly data over the period 1973Q1-2013Q4. The related conventional literature has been developed with money demand defined as a function of income, interest rate, exchange rate, and inflation. I propose a new method of income decomposition to the public sector and private sector following Barro's (1990) spending model. I apply the autoregressive distributed lag cointegration approach (ARDL) and include government spending in the conventional money demand function to investigate its impact on the demand for money. The results confirm the long-run, significant effect of government spending on money demand, finding the elasticity of money demand with respect to government spending to be 0.62. In addition, I find that money demand tends to be unstable and shifts toward the edge of a structural break during recessions. The results do not support Friedman's (1969) idea that the demand for money is "highly stable." Instead, the findings suggest that money demand is "slightly stable" during a recession. This confirms that the current evidence is insufficient to switch to interest rate targeting instead of money targeting as an appropriate monetary policy in the United States. [ABSTRACT FROM AUTHOR]

The purpose of this study is to examine the effect of US unconventional monetary policy applied through the quantitative easing programs after 2008 global crisis on the developing country bond markets. For this purpose, the short-term and long-term relationships between US 10-year benchmark bond interest rates and emerging market 10-year benchmark bond interest rates are analysed. The 10-year benchmark bond interest rates of Mexico, Peru, Chile, Poland, Hungary, Russia, China, India, Indonesia, the Philippines and Turkey have been used as representatives of emerging market bond interest rates. This study comprises workday data belongs to the period of 04.01.2010-20.12.2017. Engel-Granger Cointegration Test and Granger Causality Test have been applied in the econometric analysis; and relations between variables have been interpreted through the Vector Error Correction Model. According to the results of the analysis, it is found that there are both short-term and long-term relationships between US 10-year benchmark bond interest rates and the 10-year benchmark bond interest rates of all emerging market economies except the Philippines. [ABSTRACT FROM AUTHOR]

The correlation between defense expenditure and economic growth has been deeply researchedwhose results fail to reach a clear consensus. This paperstudies the impact of defense expenditure on economic growth in China and US. In order to identify not only long-term but also short-term effect among variables, we respectively use the autoregressive distributive lag bounds testing (ARDL) and the vector error correction model (VECM). The research results show that as for US, an obvious positive effect of defense expenditure on economic growth has been found in both short and long term. On the contrary, when it comes to China, the impact of defense expenditure on economic growth is not remarkable. [ABSTRACT FROM AUTHOR]

This paper applies annual data from 1962 to 2011 to investigate the long run relationship between government spending and Gross Domestic Product (GDP). The common approach only considers defense government spending to estimate the multiplier to overcome the identification problem and endogeneity in isolating the effect of changes in government spending on GDP, I use the Autoregressive Distributed Lag (ARDL) approach to cointegration, which works despite having endogenous regressors to estimate the spending multiplier. The results confirm that government spending can be treated as a 'long-run forcing' variable for the explanation of real GDP and the long-run multiplier is found to be 1.94. [ABSTRACT FROM AUTHOR]

The article examines the effect of changes in the Employment Cost Index (ECI) across the Consumer Price Index (CPI) and the Producer Price Index (PPI) for finished goods, using the econometric techniques. Topics discussed include the import prices as measured by the U.S. Import Price Index (USMP), use of a vector error-correction model (VECM) to study price transmission and impact of an impulse to the CPI on the PPI and the ECI.

ABSTRACT Urea fertilizer is widely used in the United States, however, urea is not publicly traded and formula pricing is common. This article studies spatial transmission and efficiency of urea prices in the Arkansas River-New Orleans urea markets and the New Orleans-Middle East urea markets. A vector error correction model (VECM) and Baulch's (1997) parity bound model (PBM) are estimated. A threshold VECM is considered, but no threshold effects are found so threshold effects are not included in the final VECM. The estimated VECM shows that violations of spatial price equilibrium are corrected faster between Arkansas River-New Orleans prices than New Orleans-Middle East prices. The long term adjustments to deviations from spatial equilibrium in the New Orleans-Middle East price relationship are made through adjustments in the New Orleans price. The PBM shows that New Orleans-Middle East price spreads are greater than transportation costs about 23% of the time. [EconLit citations: C32, Q13, R32]. [ABSTRACT FROM AUTHOR]

This paper studies the effects of the US annual budget deficit as the ratio of annual GDP and the labor productivity-compensation gap on ROE (rate of return on equity). Cointegration methodology is implemented using annual data from 1976 through 2011. The variables in levels are nonstationary depicting I(1) behavior. Both λtrace and λmax tests confirm a cointegrating relationship among variables. The estimates of the Vector Error-Correction Model (VECM) support discernible long-run convergence and causal flows with relatively weak short-run net positive interactive feedback effects. Dynamic OLS (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) estimates also support the above findings. [ABSTRACT FROM AUTHOR]

This article studies a simple, coherent approach for identifying and estimating error-correcting vector autoregressive moving average (EC-VARMA) models. Canonical correlation analysis is implemented for both determining the cointegrating rank, using a strongly consistent method, and identifying the short-run VARMA dynamics, using the scalar component methodology. Finite-sample performance is evaluated via Monte Carlo simulations and the approach is applied to modelling and forecasting US interest rates. The results reveal that EC-VARMA models generate significantly more accurate out-of-sample forecasts than vector error correction models (VECMs), especially for short horizons. Copyright © 2015 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper first aims to reinvestigate the issue of US fiscal sustainability by using the quantile cointegration approach proposed by Xiao (2009 and 2012). Our empirical evidence indicates a quantile-dependent cointegrating relationship between government expenditures and revenues. In addition, this paper examines the long-run causality relationship between expenditures and revenues by using the vector error-correction (VEC) model with coefficients based on the different quantiles. Findings from the long-run Granger-causality analyses support the spend-and-tax hypothesis. Our investigation suggests that the government should show more discretion in increasing expenditures in the long run. Moreover, budget deficit reduction can only be achieved through reductions in government expenditures. [ABSTRACT FROM AUTHOR]

In this paper, we examine the impact of investor psychological state on their trading volume for the US stock market using a VECM model for the period from July 1987 to May 2014. We propose alternative specifications for investors' sentiment considering their optimistic and pessimistic states. We find that during pessimistic periods, investors' are extensively alerted. In optimistic and normal periods, they are less attentive. [ABSTRACT FROM AUTHOR]

In this paper we analyze the stability of the money demand system in the US. To this aim, we develop an estimation and testing framework for a threshold vector error-correction model (VECM), where short-run dynamics are regime dependent and are driven by an exogenous, stationary and ergodic threshold variable. We modify a traditional Wald-type test for linearity and derive its asymptotic distribution, which turns out to be non-standard, but similar to the one proposed by Andrews [Andrews, D. 1993. 'Tests for Parameter Instability and Structural Change with Unknown Change Point.' Econometrica 61 (4): 821-856]. Accounting for the diversity of the potential determinants of money holdings, a broad scope of money demand systems is analyzed. The linearity test confirms that money demand is not only suffering from structural breaks, but is driven by regimes governed by business cycles. Moreover, a similar pattern and a robust dating of the regimes is observed no matter the money demand system considered, offering hence a reconciling picture of previous empirical studies. From a policy perspective, our findings supports the implementation of cyclical monetary policy by the Federal Reserve. [ABSTRACT FROM AUTHOR]

We analyse nonstationary time series that do not only trend together in the long run, but restore the equilibrium immediately in the period following a deviation. While this represents a common serial correlation feature, the framework is extended to codependence, allowing for delayed adjustment. We show which restrictions are implied for the Moving Average (MA) and Vector Error Correction Model (VECM) representations and put forward a Generalized Method of Moments (GMM) test. In addition, for cases where the constraints can be uniquely imposed on a VECM a likelihood ratio test is proposed. We apply the concept to US and European interest rate data, examining the capability of the Federal Reserve Bank (Fed) and European Central Bank (ECB) to control overnight money market rates. [ABSTRACT FROM PUBLISHER]

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This paper examines the contribution to price discovery by electronic and voice-based trading systems in the U.S. Treasury market. Evidence shows that the electronic trading system has more price discovery and that trading automation increases the speed of incorporating information into prices. However, human trading generates significant price discovery, though its volume is low. The relative contribution of a trading system to price discovery depends on liquidity, volatility, volume, trade size, and order imbalance. The voice-based trading system contributes more to price discovery when trade size is large and liquidity is low. These findings provide important implications for the design of electronic markets for securities with different characteristics and trading environments. [ABSTRACT FROM AUTHOR]

This paper examines the financial crisis of 2007/9 and the downturn in the U.S. We argue that effective demand over the 2001-2006 expansion was maintained by credit. The role of credit in a Vector Error Correction Model and Granger-causality between aggregate spending, credit, disposable income, and profits are examined. We show that credit itself is determined by factors outside the circular flow of income. The results raise new hypotheses about the crucial relationships in macroeconomics that sustain aggregate spending. We then compute the generalized impulse responses in the VECM to demonstrate the severity of the downturn and show that legislative changes that dismantled the restrictions placed on the financial sector and the consequent structural changes after 1980 enabled the growth of new debt instruments and credit. The overexpansion of credit when profits and house prices were declining in 2005/06 and informational asymmetries on the quality of credit and its sudden withdrawal in 2007 paralyzed the economy and led to the Great Recession. [ABSTRACT FROM AUTHOR]

Abstract: This study examines the short- and long-run effects of various determinants on the demand for US air passenger-services using the Johansen cointegration analysis and a vector error-correction (VEC) model. Results show that, in the long-run, airfare, disposable income and NASDAQ have significant effects on US air travel demand. The combined short-run dynamic effects of disposable income, NASDAQ, population and airfare jointly explain changes in air passenger-miles. Finally, we find that the 9/11 terrorist attacks drop air passenger demand by 5% during 2001:Q3–2002:Q2, which in turn pushes down the seat capacity by 4%. However, it has little impact on airfare. [Copyright &y& Elsevier]