Capital flight from BRICS nations: Does every cloud have a silver lining?

This study investigates the potential determinants of capital flight from BRICS countries. We use the residual method to estimate capital flight and employ GMM testing approach. We find a surge in the volume of capital flight from BRICS especially in the aftermath of global financial crisis. The empirical results suggest that, past values of the capital flight, real GDP growth rates, exchange rate depreciation, unemployment rate, business confidence index and financial stability indicator as significant factors causing resident capital outflows from BRICS nations. These findings call for an effective policy framework by the fiscal and monetary authorities.

A study of Fisher Effect in India

In this paper, the relationship between nominal interest rate and inflation is analyzed based on Fisher Effect (FE) theory. As per FE theory, the difference between nominal interest rate and expected inflation is equal to real interest rate. The theory proposes that a rise in expected inflation can lead to positive impact on nominal interest rate when the real interest rate is constant. For analyzing FE, the inflation rate measures based on Core index, Wholesale Price Index (WPI) and Consumer Price Index (CPI) are considered. As per rational expectation hypothesis, the one-period-ahead inflation rate is considered as expected inflation (eInf). The interest rates (IR) associated with call money, treasury bills of 91- and 364-day maturities are considered. The study uses ARDL bounds testing approach and Granger causality test for analyzing the long-run relationship between eInf and IR. The study finds evidence for presence of cointegrating relationship between eInf and IR in India. Contrary to FE theory, the long-run relation between eInf and IR is found to be negative. The extent and significance of long-run relationship varies depending on measures of eInf and IR considered. Along with cointegration, the expected WPI inflation and interest rate measures also exhibit Granger causality in at least one direction. Although, the cointegration is not observed between expected CPI and IR, there exists Granger causality between these variables. This increasing disconnect between eInf and IR could be attributed to adoption of flexible inflation targeting framework, pursual of additional objectives by monetary authority, different sources and types of inflation, etc.

A mathematical model to investigate the interactive effects of important economic factors on the behaviors of retailers

Cost management is a key step to the success of any logistics system and supply chain management. Inventory costs are an important part of logistics costs which are highly affected by economic factors such as demand growth rate (DGR), interest rate ( i r ), and inflation rate ( e ). Analyzing the interactive effects of these economic factors plays a key role in preventing failures of logistics systems This study aims to develop a novel mathematical model and investigate the interactive effects of these factors on the behavior of retailers in Iran. To the best of our knowledge, this is the first time that the sale price is defined as a function of time and inflation rate where the demand rate is built up with a linear function of time. Different scenarios and sub-scenarios are then taken into consideration based on different combinations of factors and assumptions. As the main findings of the study, it is revealed that if e ≤ 18 % ori r ≥ 40.52 % , holding costs are much higher than buying costs, and retailers are reluctant to invest in inventories. Given that DGR is independent of the inflation rate, and also if e ≥ 20.45 % ori r ≤ 31.9 % , then DGR fluctuations have no impact on the total cost. Hence, in this case, buying costs are much higher than holding costs, and retailers are eager to invest in inventories instead of bank deposits. Furthermore, it is concluded that decision-makers can use the interest rate as leverage to set the probability of shortages and hoardings. Finally, some useful future research directions are discussed based on the main limitations of the study.

The impact of the US interest rate and oil prices on renewable energy in Turkey: a bootstrap ARDL approach

This research investigates the spillover effect of the US interest rate and oil prices on renewable energy utilization in Turkey. By employing a novel bootstrap autoregressive distributed lag approach on annual data from 1985 to 2016, the empirical findings and discussions represent the first contribution to the energy economics literature. The findings of this research confirm that the US interest rate has a significant spillover effect on the use of renewable energy in Turkey through the channels of income and local interest rate. Due to limited foreign exchange reserves, high foreign debt, low international reserves, and devaluation of the local currency, the Turkish economy is highly intertwined with the US economy through international investment and trade. All these factors reinforce the spillover influence of the US interest rate on energy consumption in Turkey. Moreover, this study affirms that the price of oil has a negative impact on renewable energy use through the real income channel. In order for Turkey to realize its investments in renewable energy resources more reliably and sustainably, the study suggests that policymakers should revise the current economic growth model by making it more resilient to external shocks such as the US interest rate, exchange rate, and oil prices.

Innovation, militarization, and renewable energy and green growth in OECD countries

Within a framework that includes economic activity, real interest rate, grants, and subsidies, we aim to explore the role of renewable energy, technological innovation, and particularly the environmentally damaging militarization in driving green growth, which fosters sustainable economic growth by ensuring the values of natural assets, considering OECD countries. Our examination affirms a positive proposition between the development of renewable energy, technological innovation, and green growth in the long run by implementing the cross-sectional dependency panel autoregressive-distributed lags (CS-ARDL) framework in a dynamic heterogeneous panel setting. The findings also suggest that militarization is antagonistic to green growth. Our decomposed analysis is compatible with our premier analysis, indicating a conducive impact of both biomass and non-biomass types of renewable energy on green growth. We also document a negative association between the real interest rate (RIR) and green growth, while income muddles the results. The robustness tests confirm the sensitivity of our main findings to the magnitude of the subsidies and grants provided to renewable energy. The paper concludes with several policy recommendations.

An augmented capital asset pricing model using new macroeconomic determinants

Using the interview results of 26 experienced scholars, managers, and professional stock traders in conjunction with findings of recent studies in economics, we proposed an augmented asset pricing model using the macroeconomic determinants representing the macroeconomic state variables to explain the nexus between these risks and the U.S. stock returns. This non-traded factor model (MAPM) is inspired by and based on the macroeconomic theory and models and consists of the market return, U.S. prime rate, U.S. government long-term bond rate, and exchange rate of USD/EUR as in Eq. (1). Using the Bayesian approach (via two Bayes and t.Bayes estimators) and monthly returns of the S&P 500 stocks from 2007- 2019, our results showed the MAPM consistently yielded a statistically significant greater forecasting, explanatory power, and model adequacy compared to the most used capital asset pricing model (CAPM) in practice. Interestingly, our study found and confirmed (t-statistic > 3) that the last two macroeconomic determinants have a statistically significant positive effect on the stock returns, which also supports the MAPM. These findings suggest the MAPM is a more efficient and advantageous model compared to the CAPM. So, practitioners would be better off employing the MAPM over CAPM in practice and research.