Tag Archives: Co-integration

The impact of crude oil price fluctuations on Economic Growth and Non-oil exports in the Kingdom of Saudi Arabia: An ARDL approach (Published)

Using annual data covering the period from 2000 to 2020 the effect of volatility was estimated on economic growth and crude oil prices on Saudi non-oil exports, each of the two sectors was chosen, Exports from manufacturing industries, agricultural exports, and high-tech exports to represent Non-oil export, also we Measuring the impact of oil price fluctuations on economic growth in the Kingdom of Saudi Arabia.  The study followed the application of the ARDL model to study the equilibrium relationship between all of the volatility in oil prices, the three export sectors. The results indicated that the sector Exports of manufacturing industries is the sector most affected by the fluctuation in the price of oil, while the results did not indicate the existence of a long-term equilibrium relationship through which the sectors of agricultural exports and high-tech products are affected by the change in oil prices.The study recommends the need to increase investments for these twoSectors to secure a stable export proceeds that guarantee the stability of the Kingdom’s economic growth rates.To reach the above, we have relied on measuring the impact of the relationship between oil prices and economic growth of the Kingdom of Saudi Arabia during the period 2000-2020, based on a model the Autoregressive Distributed Lag (ARDL).

Citation: Mahmoud Amin El-batanony, Hala Samir El ghawy, Zeinab Abdel Rashid, Engy Taser El Sheikh , . Safaa Salah El Dien, Wafaa Fangary Said  and  Mahmoud Farouk Mohamed Ghorab  (2022) The impact of crude oil price fluctuations on Economic Growth and Non-oil exports in the Kingdom of Saudi Arabia: An ARDL approach, International Journal of Development and Economic Sustainability, Vol.10, No.2, pp.49-61

Keywords: Co-integration, Non-Oil Exports, Oil prices, ardl model

Savings-Investment and Economic Growth Nexus in Nigeria (Published)

Nigeria as a developing nation needs adequate savings to encourage investment and promote economic growth. Empirically, this work has made an attempt to analyze the impact of savings and investment on the growth of the Nigerian economy. From the result of the study conducted within the period 1970 to 2015, using a battery of contemporary econometric approach involving unit root test, co-integration test and error correction model it was found that factors such as Gross Domestic Savings (GDS), Gross Fixed Capital Formation (GFCF), Labour Force (LAF) and Savings Facility (SF) are the main drivers of economic growth in Nigeria. Furthermore, evidence from the investment model shows that Real Gross Domestic Product and Gross Domestic Savings (GDS) are the two drivers of Investment in Nigeria. This means that if there is proper capital accumulation in the form of savings, investment would be great and sustainable. The multiplier effect is on the well-being of the people through increased capital and output. The study recommended among others that; the government through the Central Bank of Nigeria (CBN) should ensure the reduction of reserve requirements of commercial banks in order to make available adequate funds in form of loans and advances for investment which will boost economic growth. Government should always maintain a good political atmosphere that is devoid of political upheavals because insecurity in the country has contributed immensely to the discouragement of the people from the cultivation of banking habit. More so, foreign direct investment will be discouraged in an environment ravaged with rancor. Banks should be encouraged to establish branches in the rural areas to discourage the rural dwellers from saving in their local saving boxes. This will bridge the gap between savings and investment. The government of Nigeria has a role to play by making policies that would encourage the spread of banks. This would be done by upgrading the standard of the Nigerian banking sector.   Labour force has been revealed to be a positive growth stimulant in the study. Thus, government and the private sector should ensure that there is realistic and practical curriculum development in schools that will evolve a more productive labour force. Finally, the Governor of the apex bank (CBN) and monetary policy committee should liaise with the necessary operators to ensure that there are realistic interest and inflation rates that will stimulate economic activities and bring about the requisite economic growth in Nigeria.

Keywords: Co-integration, Investment, Nigeria, Savings, economic growth

The Effects of the Maastricht on Portfolio Diversification (Published)

Whether economic interdependence among countries is a contributing factor to co-integration and common stochastic trends in international stock markets is indiscernible due to conflicting results from prior empirical works. The purpose of this study is in two folds: Firstly to investigate whether the implementation of the Maastricht treaty has played any role in determining the long-run relationship between U.K stock market and other E.U and non-E.U stock markets and also to investigate the extent to which world stock markets have been correlated in the short-run over the study period and how such relationships would benefit investors in their portfolio diversification decisions. Data for this study was obtained from M.S.C.I indices and covered the period from 1985-2003. The methodologies used for this study are the correlation coefficient, the Vector Error Correction model and Vector Autoregressive model for the short-run relationship as well as the Johansen Co-integration approach for testing the long-run stochastic trend among the variables under consideration. The results for the short-run relationship among the variables indicates that in general, stock markets from the developed economies have become integrated in the short-run after the implementation of the Maastricht treaty compared to the pre-Maastricht treaty era. The results also show that the U.K stock market shows high correlation with the U.S stock market both before and after the implementation of the treaty and that correlation with other European Union economies, increased after the treaty. The co-integration results for the pre-Maastricht treaty period showed 2 co-integrations among the variables but there was no evidence of co-integration after the implementation of the treaty. However, when test was carried out for the whole study period, the results showed 1 co-integration among the sample country indices.  The implication from the above results shows that diversification benefits for international investors wishing to invest into these developed markets especially in the short-run should expect reduced gains. However, long-term diversification benefits are possible as long as the correlations between these markets are low.

Keywords: Co-integration, European Union., Maastricht Treaty, Portfolio Diversification, Stock Market

Effect of Climate Change on Food Crop Production in Southeast, Nigeria: A Co-Integration Model Approach (Published)

This paper studied the effect of climate change on selected food crop production in Southeast, Nigeria. The data were sourced from National Root Crops Research Institute, Umudike, National Bureau of Statistics and the Central Bank of Nigeria (CBN) bulletin. Data on crop yield and climate variables from 1984 to 2014 were collected. Descriptive Statistics, Co-integration analysis and Error Correction Model were adopted. The finding reveals unsteady climatic pattern with peak points across the period under review. The Augmented Dickey-Fuller test for unit root reveals that yam; maize and cassava outputs were non stationary but became stationary after the differencing. All climate variables showed stationary at first level. Result shows the existence of one co-integrating vector in the three models. The results shows that the coefficients of ECM(-1) which indicates speed of adjustment of the crop outputs to the equilibrium when a disturbance has occurred are -0.365 (p<0.01), -0.211 (p<0.05) and  -0.599 (p<0.001) for yam, maize and cassava output models respectively. The coefficients of multiple determination (R2) for yam, maize and cassava were 0.611, 0.440 and 0.2669 respectively. In yam model, the coefficients show that all variables except lagged yam output and temperature have positive relationship with the yam output; the coefficients of lagged maize output, rain days and temperature are negative while rainfall volume, humidity and sunshine are positive in maize model and in cassava model, coefficients of rainfall volume, rain days, sunshine and lagged cassava output are positive while temperature and humidity are negative. Results show that climate change impacted yam and maize output. It is recommended that adequate mitigation and adaptive measures be put in place to reduce the effect of climate change in order to achieve an appreciable agricultural productivity.

Keywords: Climate Variables, Co-integration, Error Correction, Food Crops, Southeast Nigeria

Empirical Analysis of Effects of Inflation on Aggregate Stock Prices in Nigeria: 1980-2012 (Published)

This paper investigates empirically the effects of inflation on aggregate stock prices in Nigeria during the period of 1980-2012. Annual time series data on Stock Prices (ASP) and inflationary pressure measure were sourced from the Central Bank of Nigeria Statistical bulletin and Nigeria Stock Exchange Fact book. Employing the Engle-Granger and Johansen-Joselius method of co-integration in a Vector Error Correction Model (VECM) setting, in addition to Granger causality Test, Argumented Dickey Fuller Test (ADF) was employed. The empirical results shows that there exist a long run equilibrium negative and significantly relationship between inflation rate and aggregate stock prices, Broad money supply (M2) has a negative and significantly effects on aggregates stock prices, Narrow Money Supply (M1) shows a positive and significantly effects on aggregates stock prices while Average inflation rate show a positive and significantly relationship between aggregate stock prices. The results also show a strong relationship with an R2 of 0.886 representing 89.6% variations in the explanatory variables. However, the direction of causality between the money supply measures and aggregate stock prices is mixed. We recommend for the strengthening of monetary policy objective of price stability for the purpose of achieving efficiency in performance of the stock prices quoted in the Nigerian Stock Exchange (NSE).

Keywords: Aggregate Stock Prices, Co-integration, Inflation Rate, Unit Root Causality Tests


The study appraised the role of infrastructure on economic development in Nigeria measured by the gross domestic product while the infrastructure is measure with the capital expenditure on Transportation & communication (TRC), Education (EDU) and Health (HLT) respectively for a period of 32 years (1981-2013). Using least square (OLS), we find out that, the measure of coefficient of determination shows that about 95.11% of variation in GDP can be explained by infrastructure. The regression model explain that a unit increase in Transport &Communication(TRC) and Education(EDU) will increase GDP by 237% and 174% respectively, while the Health(HLT) will reduces the GDP by 31%. The residual of the regression model is stationary, when subjected to the unit root test and the Johansen co integration test show that two of the equation is co integrated. From this, it can be affirmed that the regression model are not spurious. The co integrating equation also suggesting that the GDP adjust to change in capital expenditure on infrastructures in the same time period and shows that short-run change in TRC and EDU have negative impact on short-run change in GDP but only HLT has positive impact on GDP in the short run.

Keywords: Co-integration, Economic Development, Infrastructure, Regression Model

Analysis of Macroeconomic Aggregates on Stock Prices in Nigeria: An Application of Co-Integration and Causality Tests 1985 – 2011 (Published)

This study examined the analysis of macroeconomic aggregates on stock prices using evidence from Nigeria Economy. The study investigated the nature of relationship between macroeconomic aggregates proxies by inflation rates, interest rates and money supply while All Share Index (ASI) standing as a proxy for Aggregates Stock Prices.. In course of this study, secondary data were sourced from the Central Bank of Nigeria statistical bulletin and the Nigerian stock exchange fact book. The Granger Causality Test and Johansen Co-integration Test in a Vector Error Correction Model (VECM) setting were employed. The descriptive analysis was also used to mirror their relationship. The empirical results demonstrate that changes in inflation rates, interest rates and money exert a significant impact on aggregate stock within the period understudy. The results also shows that where is a negative long-run relationship between inflation rates, interest rates and All Share Index while a positive significant relationship exist between money supply and aggregates stock prices. However, on the causality test, the study shows a unidirectional causality running from inflation to aggregates stock price and a bi-directional causality between money supply and aggregates stock prices. Therefore, we recommended that macroeconomic policy should be channeled towards improving aggregates stock prices which in turn enhance overall returns on stock market and the Nigerian economy at large.

Keywords: Co-integration, Macroeconomic Aggregates, Stock Prices

Impact of Fiscal Policy on the Manufacturing Sector Output in Nigeria: An Error Correction Analysis (Published)

There has been a growing concern on the role of fiscal policy on the output and input of manufacturing industry in Nigeria, despite the fact that the government had embarked on several policies aimed at improving the growth of Nigerian economy through the contribution of manufacturing industry to the economy and capacity utilization of the sector. The aim of this study is to examine the impact of fiscal policy on the manufacturing sector output in Nigeria. Empirical evidence from the developed and developing economies has shown that fiscal and monetary policies have the capacity to influence the entire economy if it is well managed. An ex-post facto design (quantitative research design) was used to carry out this study. The results of the study indicate that government expenditure significantly affect manufacturing sector output based on the magnitude and the level of significance of the coefficient and p-value and there is a long-run relationship between fiscal policy and manufacturing sector output. The implication of this finding is that if government did not increase public expenditure and its implementation, Nigerian manufacturing sector output will not generate a corresponding increase in the growth of Nigerian economy. It is the recommendation of researcher that the expansionary fiscal policies should be encouraged as they play vital role for the growth of the manufacturing sector output in Nigeria; that fiscal policy should be given more priority attention towards the manufacturing sector by increasing the level of budget implementation, which will enhance aggregate spending in the economy; and consistent government implementation will contribute to the increase performance of manufacturing sector.

Keywords: Capacity Utilization, Co-integration, Error Correction Model, Government Expenditure, Government Tax Revenue, Manufacturing sector, Output

Effect of Bank Lending Rate on the Performance of Nigerian Deposit Money Banks (Published)

This study examined the impact of bank lending rate on the performance of Nigerian Deposit Money Banks between 2000 and 2010. It specifically determined the effects of lending rate and monetary policy rate on the performance of Nigerian Deposit Money Banks and analyzed how bank lending rate policy affects the performance of Nigerian deposit money banks. The study utilized secondary data econometrics in a regression, where time-series and quantitative design were combined and estimated. The result confirmed that the lending rate and monetary policy rate has significant and positive effects on the performance of Nigerian deposit money banks. The implication of these is that lending rate and monetary policy rate are true parameter of measuring bank performance. We therefore recommend that government should adopt policies that will help Nigerian deposit money banks to improve on their performance and there is need to strengthen bank lending rate policy through effective and efficient regulation and supervisory framework.

Keywords: Bank, Bank Performance, Co-integration, Financial System, Lending Rate