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Triggering economic growth to ensure financial stability: case study of Northern Cyprus
Financial Innovation volume 9, Article number: 77 (2023)
Abstract
This study questions the importance of public debt in stable growth between 1980 and 2018, specifically, the Ricardian equivalence hypothesis and Keynesian view are questioned. This study used data obtained from the Northern Cyprus State Planning Office. A restricted vector autoregressive model is used to test the causal relationships between this model and public debt, government expenditure, total capital, consumption, investment, employment, net exports, exchange rate, and gross domestic product growth rate. To ensure financial stability, the variables that trigger economic growth through increased interactions were evaluated. Accordingly, unlike other studies, the Wald test results reveal that public debt does not have a direct effect on the gross national product but indirectly affects total capital, consumption, investment, and public expenditure, all of which influence real gross domestic product (RGDP). It has been observed that employment affects RGDP, consumption, government spending, and investment. There is also bidirectional causality between consumption, government spending, and RGDP. The estimates of the Ricardian equivalent hypothesis are important. However, today's changing economic policies, declining real incomes, and consumer behavior in the face of ever-increasing inflation require that the theory be redesigned. Therefore, contrary to theoretical predictions, consumers are concerned about maintaining their standard of living rather than directing tax deductions to savings. Contrary to the claims of Keynesian researchers, no causal relationship is observed between public debt and growth in this study. However, public debt directly affects total capital, consumption, government spending, and investment, which are important for sustainable economic policy.
Introduction
The Ricardian Equivalent Hypothesis (REH), based on the theory that public debt has a neutral effect on the real gross domestic product (RGDP; Ricardo 1951; Barro 1979, 1990; Afzal 2012), has been researched several times. However, the Keynesian economic model plays an important role in the RGDP growth rate. In the Keynesian economic model, savings are part of disposable income, and public debt has an effect on RGDP. Therefore, in this study, not only the REH but also Keynesian and modern monetary views are considered to analyze the impact of public debt and other considered variables' causal relationships to ensure financial stability.
I develop a model based on the Keynesian expenditure output approach to estimate its effects on RGDP. While questioning the causal relationship between the parameters considered, the views of four schools of thought (classical, Keynesian, Ricardian, and Modern Monetary) that have contributed to the literature with different arguments as well as my theoretical knowledge, were used as the foundation for creating my model. While using the explanatory variables specified in the equation, I include Consumption (C), Investment (I), Government Expenditure (G), and Net Export (NX) models from the Keynesian spending approach. However, as the REH is also questioned in this study, I specifically decided to include public debt (TD) and total capital (TC). Again, when the current economic conditions and production model were questioned, when considering the dependency on imported inputs, energy, and the effects of the globalizing world, it was deemed appropriate to include both the exchange rate (REER) and employment (E) in the model.
In the model created to determine the direct effects, the second cointegration equation for the relationship between the independent variables and components of RGDP was used. Ordinary least squares (OLS) and short-term Wald tests were used to determine the long-term effects of the variables on RGDP. In addition, variance decomposition, impulse response, and Granger causality tests were conducted. However, to determine the indirect effects of the variables, the cointegration equations used in the Keynesian output expenditure model and the variables that make up the components of the RGDP were used. However, this time, each independent variable was questioned as a dependent variable, and its long- and short-term effects were estimated using OLS, Wald, and other tests.
The effects on private consumption and public deficit, government expenditure, and the growth of government debt have been examined by researchers who support both REH and Keynesian views. While some researchers have reached conclusions supporting the view of the REH, others have also supported the Keynesian view.
Several studies have questioned growth from different perspectives using the REH and Keynesian theories. However, for this inquiry, the interaction between macro variables, such as public debt, public expenditure, budget deficit, and private consumption, has been evaluated in terms of the effects of growth. It is argued that the REH model is no longer a validated model for economies under today's conditions. Therefore, this study questions the REH model while specifically examining the economy of Northern Cyprus in terms of current economic conditions. Through this research, it is predicted that the REH model can be understood more clearly.
External borrowing is the easiest way to alleviate the tax burden on states (Ogunmuyiwa 2010). Borrowing power is difficult for states not recognized by the international community, such as Northern Cyprus. The government often uses high taxes and constantly increases fees and penalties to finance spending. In addition, short- and long-term loans are mainly provided by Turkey. However, instead of constantly looking for resources to finance government expenditures in Northern Cyprus, reducing electricity and energy consumption to reduce the amount of expenditures can also be a solution. On an island like Cyprus, where sunlight is abundant, energy needs can also be met by using solar energy panels. Kou et al. (2022) stated in their study that solar energy could not only be used to reduce government expenditures but more energy could also be produced with flexible panels that change position according to the sun's angle. Considering that energy is an important expense today, the widespread and effective use of solar energy on islands with plenty of sunshine should be considered a financially profitable and important economic investment.
Moreover, economic activities financed by borrowing are not sustainable (Ogunmuyiwa 2010). As seen in many countries in 2010, domestic or foreign borrowing caused crises and recessions (Donayre and Taivan 2017). Gómez-Puig and Sosvilla-Rivero (2018) also question the problems of public debt and growth. Several studies (Cochrane 2011; Castro et al. 2015; Soydan and Bedir 2015) have reported that public debt halts economic growth and prevents the absorption of international demand shocks.
Reviewing the literature shows that sudden tightening in financing conditions affects small and medium-sized enterprises (SMEs) the most (European Central Bank 2021a, b). Such financial problems affecting SMEs represent the engine of the Northern Cyprus economy; therefore, growth cannot be realized at the desired level. A previous study highlighted that promoting access to finance will contribute to the development of the financial system (Rashidin et al. 2020; Hasan et al. 2020a, b).
It is predicted that, while affecting economic growth, the increase in financing would lead to both an improvement in environmental factors and an improvement in carbon emissions in the country (Chienwattanasook et al. 2021). Other researchers (Borensztein et al. 1998) have stated that international financial integration supports investments, and financial instability negatively affects economic welfare.
Financial resources are needed for business continuity (Vickers 1970). Reid (1996) states that financial resources are obtained through either subprime bank borrowing or high-cost equity capital to repay capital providers. It has been stated that knowledge of financial services is vital in guiding and developing inclusive finance (Hasan et al. 2021). Unfortunately, state policies in Northern Cyprus are not prepared by competent and experienced people, and programs designed with Turkey’s support are not always effective in financing the economy. Checherita-Westphal et al. (2014) also state in their study that fiscal deficits and debt are affected by unconscious policies.
In addition, the state heavily uses taxes, fees, and penalties for capital increases, which negatively affects low-income consumers. When necessary, taxes are not collected from high-income groups, entrepreneurs, and producers, and incentives are given to SMEs that report losses. This is because, as stated by Kou et al. (2021a), SMEs’ annual financial information is not available in banks, and there is no internal control system; therefore, they are unreliable and insufficient to inspect SMEs. Therefore, SMEs turn this into an opportunity and declare bankruptcy, thus avoiding taxes and obtaining financial support from the state.
If tax laws are not improved in developing economies, it will not be easy to achieve long-term financial stability in the long run (Wopke et al. 2013). Tax evasion is also a problem in Northern Cyprus. A similar problem was described by González-Fernández et al. (2018), who examined the effects of the interaction between tax evasion and innovation on the economy. Khuong et al. (2021) also question the similar relationship between the informal economy and economic growth.
Economic and social outlook of Northern Cyprus
Northern Cyprus imports are very high compared with exports, and savings, investment, and capital inefficiency increase the current account deficit (see Table 1). The state budget deficit, which the Turkish government continuously finances for the survival of the public sector, is not a sustainable model.
In Northern Cyprus, tourism, education, trade, and the public sector contribute to the gross national product (GNP), as well as to SMEs. However, the import rate, which is ten times higher than the export rate, causes high public debt, current account deficit, and resource insufficiency. The economy, which developed steadily between 1983 and 2010, had a per capita income of 1305 TL in 1983 and 43,050 TL in 2019 (see Table 1).
Literature reviews and theoretical considerations
This study was developed using the views of four schools of thought–Classical, Ricardian, Keynesian, and Modern Monetary—which have contributed to the literature through different arguments.
Classical view
According to the classical view, economic growth sustained by public debt is negatively affected over time and stagnates (Saungweme and Odhiambo 2019; Domar 1944). Increasing public and private borrowing demand has increased interest rates. According to the monetarists, this domestic borrowing demand and increasing interest rates are seen as exclusions. While this situation causes a decrease in private investments, it also creates a liquidity problem in the market (Mankiw 2000; Modigliani 1961). The classical school also argues that borrowing and inadequate resources hinder the private sector's access to finance (Modigliani 1961; Krugman 1988; Broner et al. 2014). The question of public debt included in this study’s model is also supported by this approach.
Ricardian equivalent hypothesis
The second approach, REH, is a theory that predicts that government expenditures financed by public debt and tax increases do not matter and have the same effect on aggregate demand and, consequently, the RGDP in an economy. This was also stated by Demissew and Kotosz (2020) in relation to the REH, who claimed that when the government tries to stimulate the economy by increasing debt-financed government spending, there is neither an increase in wealth in the private sector nor an increase in aggregate demand.
The Ricardian hypothesis assumes that government spending and income cause parallel changes in savings (Kourtellos et al. 2013). According to the assumptions of Ricardo (1951), Barro (1979), and Afzal (2012) for REH, the neutral effect of public debt or taxes on consumption is related to the assumption that taxpayers and households are similar. However, not everyone with household rights is a taxpayer. Thus, the prediction that a government deficit will lead to higher taxes and that households will manage to save is not a correct approach. Therefore, tax cuts and government debt-financed public expenditure do not affect the demand of all consumers.
However, REH's assumptions of the REH are not realistic. According to these assumptions, it is not plausible that individuals and households can save money whenever they want, as it is impossible for those working for minimum wages, especially in developing countries. In such countries, tax cuts can only help consumers maintain their standard of living in the face of ever-increasing inflation and declining real income. Therefore, it is obvious that tax cuts do not have a serious effect on macro indicators, savings, demand, and nominal interest rates. Lindsey (2016) made a similar prediction.
In addition, there is no perfect capital market where people can borrow money whenever they want. Likewise, in today's conditions, the assumption that individuals will save more due to tax increase expectations is incorrect. According to critics of the REH, Ricardo's theory is contrary to Keynesian economic theory.
Keynesian approach
Keynesian economics considers the mono-causal theory of growth, and in this model, savings are part of disposable income, and public debt has a positive outlook on RGDP. Keynesians assume an amount above borrowing and debt-financed government spending (Elmendorf and Mankiw 1999).
The Keynesian approach is based on government intervention, such as tax cuts or income increases, to increase government activities and stimulate demand and consumption. Furthermore, increased government spending supports economic growth and private investment (Wagner 1911; Saungweme and Odhiambo 2019). However, Keynesian economic theorists state that government spending financed by debt has a crowding effect, as well as a multiplier effect on national income, which leads to an increase in the source of funds used by the private sector (Saungweme and Odhiambo 2019). For this reason, the causal relationship between public debt and growth in my model was questioned, and it was observed that there was no causal relationship contrary to the Keynesian approach. Some researchers predict a positive relationship between growth and public debt, whereas others suggest a negative causal relationship. However, the causal relationship between the growth rate and government debt is primarily bidirectional and has been proposed as the “feedback hypothesis’ (Ferreira 2009; Erickson and Owusu-Nantwi 2016).
Contrary to the REH view, empirical results show no direct relationship between public debt and RGDP, and results close to the Keynesian view have been obtained. In studies on which both views are valid, some authors, such as Marinheiro (2001), Giorgioni and Holden (2003b), Beyene and Kotosz (2020), and Elmendorf and Mankiw (1999), reached conclusions in favor of the Keynesian model. Conversely, authors such as Wheeler (1999), Lucke (1998), Giorgioni and Holden (2003a), Barro (1979), Wheeler (1999), and Lucke (1998) have reported findings in favor of the REH model (see Table 2).
Modern monetary theory
Finally, this research was based on Modern Monetary Theory, a macroeconomic theory that focuses on the control of the currency because, as Mosler (2010) mentioned, government debt is money that is not taxed in economic activities. Therefore, considering that insufficient tax collection and other problems affect government debt, Wray (1998) predicted that comparing the government's budgets with that of average households would be wrong. He argued that it would not be right to expect sovereign governments to lend in their own currencies to default (Wray 2015). Another study supporting this prediction assumed that governments would support deficit financing with a near-zero interest rate by the central bank at low growth rates (Driessen and Gravelle 2019). Yet another stated that they could print money instead of taxes or borrow to finance government expenditures (Mosler 2010; Wray 1998, 2015). It has been predicted that, by printing money, the public deficit may be small enough to limit inflation, which may encourage short-term growth (Driessen and Gravelle 2019).
Theoretical and empirical results
According to classical economics schools, the saving rate plays an important role in development. However, in Keynesian economics, savings capital is the non-consumable portion of disposable income. Therefore, savings are encouraged as income increases. In neoclassical economics, Solow (1956) argues that saving stimulates growth only in the short run. Friedman hypothesizes that the expectation of future income growth would reduce the current desire to save. According to Lewis (1954a; b) weak economic growth may result from low savings accounts. Romer (1986) and Lucas (1988) state that high savings and capital accounts encourage economic growth. A report by the World Bank (2020) supports the positive relationship between savings and growth. Therefore, a country's savings capacity and bank reserves are important for its economic growth.
The savings rate in Northern Cyprus is insufficient and is significantly lower than the total investment (see Table 1). From this point of view, this study questions the Keynesian model, which assumes that savings and capital are part of disposable income, and REH, which assumes that public expenditures contribute to economic growth in parallel with the changes in savings. Previous studies have shown that sustainable public debt and capital savings increase difficulty and competitiveness. Adom (2016) stated that public debt should be increased to a sustainable level to increase economic growth. The fact that savings capital and public debt cause a skeptical attitude toward the country in the face of international shocks creates problems in terms of development (Cochrane 2011; Soydan and Bedir 2015; Castro et al. 2015). Similarly, political problems and embargoes in Northern Cyprus created problems for international trade and capital inflows, which increased public debt and reduced financial stability. Bělín and Hanousek (2020) stated that if the benefit outweighs the cost for similar embargoed countries, it may be more costly for the companies in countries imposing sanctions.
Cutting the supply chain toward international markets is sufficient to reduce economic growth. In one study, the supply chain problem was analyzed using the vector autoregressive (VAR) method. The results of this study indicate that world trade (as a cumulative value) would be 2.7% higher, and global industrial production would be 1.4% higher in the absence of supply chain shocks (European Central Bank 2021a, b). Embargoes that have been implemented in Cyprus for years have a negative impact on both producer and consumer welfare.
As a result of the isolation of Northern Cyprus, a foreign trade deficit and negative net exports occurred between 1983 and 2018. During this period, net exports rose to − 104.6 million dollars in 1983 and to − 1521.0 million dollars in 2019 (see Table 1).
A fiscal deficit is triggered by high inflation. According to Wray (2015), governments that lend their own currency to the domestic market cannot go bankrupt. Driessen and Gravelle (2019) allude to the fact that central banks setting a near-zero nominal interest rate can contribute to the fiscal deficit when economic growth is weak. Therefore, central bank regulations are important. Central bank regulations in Northern Cyprus are predicted through the Central Bank of Turkey, and despite high inflation, nominal interest rates remain very low, resulting in negative real interest rates. This is not a fair banking arrangement, and many people, savers, manufacturers, entrepreneurs, property owners, and others choose to use and lease foreign currency.
One of the biggest problems experienced in Northern Cyprus regarding accessing finance is the inability to obtain sufficient financial data security and reliable customer information. Therefore, distrust and fraud are encountered by both the customers and the banking sector. Li Tie et al. (2022) state that insufficient data causes problems in evaluating credit, the reliability of individuals, fraud detection, rejection, and similar financial applications. Therefore, both customers and institutions in the finance sector suffer losses and must go bankrupt. The demand for loans is difficult because of these inadequacies. These negativities contribute to public debt and the burden on the government.
Research data and methodology
This study examines the effects of total government debt (TD), total capital (TC), consumption (C), government expenditure (G), employment (E), investment (I), net exports (NX), and the real effective exchange rate (REER) on RGDP. The restricted vector error correction model (VECM), a stochastic process, is used to estimate the effects of the parameters.
Model estimation and results
After performing unit root tests for the estimation integration order for the considered data series, the probability value decreases, which implies that the null hypothesis is rejected. This means that there is cointegration between the variables, and the variables are in equilibrium in the long run. The OLS method was used to determine the significance of the variables. After these estimations, the VECM, which is a restricted VAR, is employed.
The methodology consisted of three steps. In the first step, unit root tests are inverted with I (1) values less than 0.05 to estimate the order of integration for the above-mentioned data. Second, a restricted VAR comprising the principal variables is used, and the optimal delay length is determined using three information criteria: Akaike information criterion (AIC), final prediction error (FPE), and Schwarz information criterion (SIC). The third step involved determining the significance of the variables. The OLS method consistency test was performed, and it was determined that it was not cointegrated according to the results, and restricted VAR was applied (see also “Appendix 4”). The VECM model was implemented based on Engle and Granger’s representation theorem (1987). Annual time-series data for 1980–2018 were obtained from the State Planning Office in Northern Cyprus.
Some studies consider the consumption function and interest rate approach to test the REH. In this study, the model developed to estimate the effects of public debt, consumption, government expenditures, and other parameters that affect RGDP was based on the Keynesian expenditure-output model.
Unit root test results
Unit root tests, including the Augmented Dickey–Fuller (ADF) and Phillips Perron (PP) tests, were performed to estimate the investigated data series, with all variables becoming stationary at the first difference. Then, in cases where the probability values are less than 0.05, and the values of the trace and maximum eigenvalues are greater than the test critical values, the restricted VAR model, which is supported by the results of the Johansen cointegration test, is used (See Table 3). These results and interpretations are also compatible with the literature on data stationarity (Dickey and Fuller 1979, 1981; Owusu-Nantwi and Erickson 2016).
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Ho: variables have a unit root.
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H1: variables have no unit root.
Variables are not stationary at level but are stationary at the first difference considered for the employed model.
Correlation analysis
The correlations between variables are presented in “Appendix 4”. There is a negative and very weak (less than 0.20) relationship between INVEST and REER, and NX. However, between EMP, CONS, CAP, and INVEST, there was a weak positive correlation. For the second variable, NX, there is a very weak negative correlation between GEXPD and RGDP EMP. DEBT, and CAP. However, a moderate correlation was observed between REER, CONS, and NX. For the third variable, REER, there is again a weak correlation among all variables. There was a very weak negative correlation between GEXPD and EMP, but a moderate relationship existed between GEXP and RGDP, DEBT, and CONS. There was a strong correlation between CONS, CAP, and RGDP. However, a weak negative correlation was observed between the EMP DEBT and RGDP. The sixth variable, employment, has a weak correlation with the other variables. There was a weak correlation between the DEBT and CONS, but a moderate correlation was observed between the CONS, CAP, and DEBT.
Lag length selection
In this study, we continued by estimating the lag length in the restricted VAR model (Hacker and Hatemi 2008) because all series became stationary at the first difference I (1) order, as indicated at the bottom of Table 4. Three of the four lag length selection criteria, namely, SIC, AIC, and Hannan–Quinn (HQ) information criteria, have the lowest lag length values. Too many lags lead to the loss of degrees of freedom and can cause multicollinearity. Therefore, another VAR model was developed to analyze Lag 2. Table 4 presents the results of the lag-order selection test.
Cointegration results for employing restricted VAR
This study uses the Johansen test for the cointegration of non-stationary variables at the level to estimate the possible long-run relationships. If cointegration is found between the variables, it is assumed that there is a linear relationship, and the disequilibrium errors will be approximately zero. The cointegration tests of Engle and Granger, Johansen and Juselius (1990), and Pesaran et al. (2001) have been used to estimate the long-term relationship between two variables. Additionally, existing cointegration equations between the variables handled using the Johansen technique were used. Finally, the results were evaluated using trace and maximum eigenvalue statistics.
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Null Hypo: a cointegrated equation is considered for the model.
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Alt Hypo: there is no cointegrated equation.
According to Table 5, the results of the cointegration test provide eight cointegration equations for the trace statistic and eight cointegration equations for the maximum eigenvalue, which are higher than the test critical values. Furthermore, the probability values for trace statistics and max eigenvalues are significantly less than 0.05, which means that our variables are not cointegrated for these equations. However, the trace statistics values for seven and eight and the maximum eigenvalues for five, six, and eight are less than the test critical values. Probability values were higher than 0.05.
The results of the restricted cointegration rank test for trace show that the null hypothesis can be accepted for at most 7 and 8 and for maximum eigenvalues 5, 6, and 8, which means that there is at least one cointegration equation. This implies cointegration between the variables, which will be in equilibrium in the long run.
The following nine equations from “Appendix 3” were estimated in the given model to determine the probability value: If the probability value is less than 0.05, it is significant and affects the endogeneity, whereas if it is greater than 0.05, it is not significant. Therefore, it is necessary to estimate the probability values for the 171 coefficients giv
en below: In “Appendix 7”, nine equations are illustrated to show how each variable becomes endogenous and how it is affected by other exogenous variables, which are estimated using the OLS method.
In “Appendix 3”, the probability values in bold, estimated to be less than 0.05, become significant and affect the endogenous variable. In “Appendix 3”, the following results are estimated.
In Eq. (2), C1 is the long-run coefficient, which is expected to become a negative value to bring the entire system back to equilibrium. However, its value here is positive (0.990352), and its probability value is higher than 0.05 and is significant. This implies no long-run causality between the exogenous variables and the RGDP growth rate. However, when the coefficients of other parameters are considered, such as employment, investment, and government expenditure, there is less than a 0.05 probability that they affect the RGDP growth rate as the endogenous variable. Additionally, the R-squared value is 0.96, indicating that the endogenous variable RGDP is sufficiently influenced by the exogenous variables under consideration.
When total capital becomes the endogenous variable in Eq. (3), government expenditure, employment, and investment affect the total capital. In Eq. (4), RGDP, public debt, employment, and investment all affect consumption.
In Eq. (5), no effect is observed on public debt. In Eq. (6), when employment becomes an endogenous variable, there is no influence from other variables. In Eq. (7), RGDP, consumption, and exchange rates influence government expenditures. In Eq. (8), only total capital influences investment. In Eq. (9), RGDP, total capital, consumption, employment, government expenditure, investment, and exchange rate affect net exports. In the last equation, RGDP, total capital, consumption, public debt, government expenditure, employment, and investment influence the exchange rate.
Vector error correction model
If one or more cointegration vectors were found among the variables, a VECM was used.
In the VECM model estimation, the parameter gives the coefficient of the error correction term to measure the adaptation rate of growth to the equilibrium level. The short- and long-term relationships were determined using the equations formed in this model. The short-term effects are captured through the individual coefficients of the differentiated terms (Dalina and Liviu 2015).
Wald test estimation
The results of the Wald test for the nine predicted equations are shown in Tables 6, 7, 8, 9, 10, 11, 12 and 13. This is done to understand whether the lags jointly affect the endogenous variables.
Table 6 presents the Wald test results for Eq. (2) for the RGDP. The probability values of the estimated coefficients for total capital, public debt, and net exports are greater than 0.05, indicating that these exogenous variables do not affect the RGDP. However, the probability values for consumption, employment, investment, and government expenditure were found to be less than 0.05, indicating that they do have some effect on RGDP.
Table 7 shows the results of the Wald test for Eq. (3) for total capital. The probability values of the coefficients estimated for RGDP, consumption, employment, investment, and government expenditure are zero, whereas, for net exports, they are greater than 0.05, so the exogenous variables have no effect on total capital.
However, the probability values for public debt and REER were 0.0010 and 0.0103, respectively. Thus, the variables affect total capital.
Table 8 presents the Wald test results for Eq. (4) with consumption as the endogenous variable. The probability values for total capital, government spending, and REER is greater than 0.05, whereas, for investment, the probability value is zero, meaning that these exogenous variables have no effect on consumption. However, the probability values for employment, public debt, and RGDP are less than 0.05 and, therefore, have some influence on consumption.
Table 9 presents the results of the Wald test for Eq. (5) for public debt. The probability values for total capital, RGDP, consumption, employment, government expenditure, investment, and net exports are greater than 0.05. This implies that the exogenous variables considered in Table 9 have no effect on public debt.
Table 10 shows the results of the Wald test for Eq. (6) for employment. The probability values for the estimated coefficients of RGDP, total capital, government debt, government spending, investment, and consumption were higher than 0.05. This finding implies that the exogenous variables considered in Table 10 have no effect on employment.
Table 11 presents the results of the Wald test for Eq. (7). The probability value for total capital is zero, whereas the values for RGDP, consumption, investment, employment, public debt, net exports, and REER are greater than 0.05. This means that the exogenous variables have no effect on investment.
Table 12 shows the results of the Wald test for Eq. (8) for government expenditure. The probability values for RGDP, consumption, public debt, employment, and investment are zero, and for net exports, they are higher than 0.05. This means that these variables have no influence on government expenditures. However, the probability value for REER is less than 0.05 and therefore has some effect on government expenditure.
Table 13 shows the results of the Wald test for Eq. (9) for net exports. The probability value for employment is zero, whereas for public debt, governmental expenditure, and REER, the values are greater than 0.05 and, therefore, have no effect on net exports. However, RGDP, total capital, public debt, consumption, and investment values are less than zero and have some influence on net exports.
Table 14 presents the results of the Wald test for Eq. (10) for the REER. The probability values for RGDP, total capital, public debt, employment, investment, and government expenditure are less than 0.05. This means that these variables have some influence on REER. However, the probability values for consumption and net exports are higher than 0.05 and have no effects on REER.
Granger causality
“Appendix 5” provides the Granger causality test results. There are bidirectional causalities between consumption and capital, public debt and total capital, governmental expenditure and capital, and REER and net exports. However, there is unidirectional causality from RGDP to CAP, investment in REER, investment in consumption, consumption to governmental expenditure, and investment in total capital. The results show that public debt has no direct effect on RGDP but indirectly influences certain parameters, including total capital, investment, consumption, government expenditures, net exports, and REER.
Variance decomposition
The variance decomposition results for RGDP estimate the source of the fluctuations in public debt and consumption. RGDP, consumption, and employment affect total capital more than the other variables. The variance decomposition results for government expenditure indicate that changes in RGDP consumption and public debt have a greater influence on such fluctuations. RGDP, capital consumption, public debt, employment, and investment have more effects than other variables on fluctuating consumption. RGDP, public debt, employment, total capital, and consumption influence the fluctuations in public debt. RGDP has greater value than capital, public debt, and consumption in causing employment fluctuations. RGDP, consumption, public debt, employment, and total capital contribute to investment fluctuations. RGDP, consumption, total capital, and employment cause more fluctuations in net exports than other variables. Finally, RGDP, consumption, public debt, employment, and investment cause more fluctuations in the exchange rate than the other variables (see “Appendix 1”).
Impulse response results
The results show that both consumption and the real effective exchange rate have positive effects on RGDP, but all other variables react negatively to influence RGDP. Exchange rates and government spending have some value in influencing consumption, total capital, employment, and debt. The exchange rate also has a positive effect on investments and government spending. Investment has a positive effect on net export. Consumption had a positive effect on total capital and employment. Finally, GDP consumption and net exports have a positive effect on the exchange rate (see “Appendix 2”).
Results and discussion
In Eq. (2), the long-term coefficient C1 is positive (0.990352), whereas a negative value is desired for the system to approach equilibrium. However, the probability value is greater than 0.05 and is significant. This means that there is no long-run causality running from exogenous variables to the RGDP growth rate. However, when the coefficients of other parameters, such as employment, investment, and public expenditure, are considered, the probability of affecting real gross national product (RGNP) as an endogenous variable is less than 0.05. In addition, the R-squared value was 0.96, which means that the endogenous variable RGDP was sufficiently affected by the exogenous variables considered.
In Eq. (3), when total capital becomes the endogenous variable, government spending, employment, and investment affect the total capital. In Eq. (4), it can be seen that GDP, public expenditure, employment, and investment affect consumption, but again, the coefficients of both equations were determined to be 0.713628 and 1.285059, respectively, and the desired negative value was not obtained to bring it into balance.
Again, in the long run, the effect expected from the independent variables for public debt in Eq. (5) and employment in Eq. (6) was not observed, but the coefficient of public debt (− 2.79) and the coefficient of employment were determined to be negative (− 1.16) to balance the whole system. The coefficients of Eqs. (7) and (8) were positive. However, while GDP, consumption, and exchange rate affect government spending, Eq. (8) shows that only total capital affects investment. In Eqs. (9) and (10), the coefficient of net exports was determined as (− 1.06), and the coefficient of the exchange rate was determined as (− 1.59). Furthermore, the results indicated that it had a balancing effect on the entire system. In addition, net exports are affected by GNP, total capital, consumption, employment, government expenditure, investment, and exchange rate. Similarly, the exchange rate is affected by GDP, total capital, consumption, public debt, government expenditure, employment, and investment.
The short-term results are estimated as follows. According to the Wald test results for Eq. (2), in which RGDP is considered, unlike other studies, public debt does not directly affect GNP but indirectly affects total capital, consumption, investment, and public expenditure, which in turn affects GDP (See Tables 6, 7, 8, 11, 12).
Conversely, points out that unidirectional causality runs from public debt to RGDP in the long run. Saungweme and Odhiambo (2019) also support the REH and find that government debt affects economic growth. Enrique (2015) also states that there is a positive relationship between public debt and economic growth up to a certain level and that these effects become negative and harm economic growth.
Analysis of the Wald test results also shows that government spending, consumption, and investment have positive values, indicating that they jointly influence RGDP in Eq. (2) (see Table 6). As exogenous variables, public debt and investment affect consumption, REER, and government expenditures (see Tables 8, 12, 14). Additionally, as endogenous variables, REER and net exports are affected by RGDP, employment, consumption, public debt, investment, capital, and government expenditures (see Tables ). Consumption and government expenditure are affected by RGDP, investment, employment, and public debt (Tables 8, 12).
The Wald test results show bidirectional causality between RGDP and consumption and governmental expenditures, as well as between REER and capital. Hilton (2021) observes a similar positive bidirectional interaction between government spending and RGDP in the long run. This study observes bidirectional causality between government expenditure and capital, capital, public debt, consumption, and REER, and between net exports and REER.
Again in my study, contrary to previous studies by Saungweme and Odhiambo (2019) and Elmendorf and Mankiw (1999), employment as an exogenous variable has a significant influence on consumption, government expenditure, REER, and net exports as endogenous variables. GDP growth rate, investment, and public debt, as exogenous variables, also have values that affect consumption as endogenous variables (see Tables 7, 8, 9, 10, 11, 12, 13, 14).
However, the exogenous variables considered in Eqs. (5) and (6) as endogenous variables have no direct effect on public debt and employment (see Tables 9, 10). These variables do not affect the accumulated capital or income. This is because either the unregistered amount of collected income is high, or the transferred income is not used properly, meaning that the government cannot meet its debts. This means that it is not possible to overcome the negative effects of public debt and current account deficit. The relative prices of goods that cannot be traded in local markets due to public debt are lower than those of foreign goods, and production and development can be seen in these sectors. Since the increase in public debt similarly increases the risk premium, it becomes a loss, and therefore, the interest to be paid increases; as a result, the income and savings of households also decrease the resources, and the growth is also indirectly affected.
According to the findings shown in “Appendix 3”, when RGDP is the endogenous variable in the second least squares equation, the coefficients of total investment, government expenditure, and employment affect RGDP. Similar findings were observed in a study by Jermsittiparsert et al. (2019), indicating that government spending affects economic growth.
In addition, this study emphasizes the importance of macroeconomic variables and fiscal policy. According to the results obtained in Eq. (3), RGDP affects total capital formation when consumption, public debt, employment, government expenditure, investment, net exports, and exchange rate become the exogenous variables. In Eq. (4), public debt, employment, investment, and RGDP have some influence on consumption. In Eq. (7), investment, public debt, consumption, employment, RGDP, and exchange rate affect government expenditure. In Eq. (8), investment is affected only by total capital. In Eq. (9), where net exports are the endogenous variable, RGDP, total capital, consumption, government expenditure, investment, exchange rate, and employment affect it. Finally, in Eq. (10), RGDP, total capital, consumption, public debt, employment, government spending, and investment affect the REER (see “Appendix 3”).
Recommendations
The insufficient financing of Northern Cyprus requires a sustainable fiscal policy. Currently, due to changing conditions and preferences, financing opportunities and access to banks have become more difficult. In a study that may also contribute to the improvement of the financial system in Northern Cyprus, Kou (2021b) drew attention to technology investments to increase the financial performance of financial technologies (Fintech). It was stated that in this way, costs would be reduced, productivity would increase, and serious contributions would be made to the financial system. While emphasizing the importance of cost management in their study, they observed that payments are the strongest investment alternative based on fintech, but savings are the weakest alternative for European banking services. Additionally, the importance of non-financial factors is also highlighted in this study.
The weak regulations and practices of the Central Bank of Northern Cyprus to create a viable banking sector that encourages savings accounts and raises capital for creditors and investors should also be addressed. However, low incomes and wages reduce households’ ability to contribute to savings accounts for investment transfers, in turn reducing capital formation in Northern Cyprus.
Influenced by the Central Bank of Turkey, the Turkish Central Bank of Northern Cyprus is responsible for the current financial system in Northern Cyprus. The economy in Northern Cyprus has constantly been experiencing the closure and economic contraction experienced in many countries during the pandemic. However, although liberal economic policies have been implemented, the existing political isolation and embargoes have increased trade in favor of imported products. A stable monetary policy is required to improve Northern Cyprus' terms of trade. However, the country has been experiencing serious economic and welfare reductions due to the export products produced with high-cost imported inputs and expensive imports due to the depreciating value of the Turkish lira. Banchorndhevakul et al. (2015) also pointed out that there is a long-run relationship between the increase in GDP per capita income and terms of trade.
Political and financial difficulties in trade and lack of know-how in Northern Cyprus negatively affect public debt, government expenditure, investment, and economic growth. In a study by Ayu (2017), the results showed that economic growth is affected by trade, and there is also a positive correlation between dynamic trade and expertise. Inadequate government control, incentives for inefficient production, rising government debt, and budget deficits are not sustainable. Apart from these, negative real interest rates, an increase in the exchange rate, current account deficits, financial inadequacies, resource management problems, recession, and speculation all affect Northern Cyprus.
Conclusion
This study questions the importance of public debt for stable growth. Specifically, the REH and Keynesian views were questioned, and a redesign of the REH estimates and model was proposed. The most important reason for this is that, contrary to popular belief, it is challenging to direct tax deductions to savings. Particularly in developing countries, it is predicted that when tax reductions are applied, those who work with low wages will prefer to increase their consumption instead of saving, and they will prefer to increase their welfare to some extent. Therefore, the REH model is unsuitable for today's economic conditions; thus, the assumption that public debt has a neutral effect on RGDP should be questioned.
Barro's version of the REH, which is generally interpreted as being contrary to Keynesian fiscal policy, is difficult to evaluate in today's economic conditions. According to the REH, investors and consumers agree that the effect would be the same if the government borrowed more or imposed more taxes to increase spending. It is expected that this will not change aggregate demand. The explanation for this is that debt is eventually paid with taxes. Thus, it is correct to expect an increase in demand resulting from increased public expenditure to be balanced. In this regard, it is similar to Keynes’ fiscal policy. However, the REH's prediction that savings will increase because of the expectation that taxes will increase is an open question in today's economic policies. It is a correct approach to overcome this stagnation by increasing public expenditure and lowering tax rates, thus increasing disposable income, which is present in Keynes's fiscal policies and in periods when demand decreases. However, the opposite is true. In other words, a budget surplus can be achieved by reducing public expenditures and increasing tax rates (Kurz 2017). No one objects to the necessity of state intervention for a sustainable economic structure rather than realizing economic growth in times of reduced demand. However, some differences emerge when this situation is evaluated in the context of current conditions. Today, imported inputs and energy are used in many countries, and owing to the increase in their prices, the reflection of the economic contraction on production and costs is inevitable. The fact that production is dependent on foreign exchange-indexed inputs increases the prices of goods and services, particularly in developing countries such as Northern Cyprus. This caused a decrease in demand. It is observed that wages and income decline because of continuous high inflation. Therefore, consumers are more concerned about maintaining living standards rather than saving because real wages and purchasing power decrease even though nominal wages are constantly increasing. Unfortunately, the only way to stimulate domestic demand is through consolidated budgets; raising nominal wages and salaries is one of the most frequently applied government policies. When this is done, taxes, fees, and penalties are increased again in the next stage. Thus, consumers whose welfare increases in the short run suffer more losses in the long run, which weakens both the value of money and the strength of the economy.
This study also shows no direct relationship between public debt and the RGDP. However, investments, consumption, employment, and government spending have direct effects on RGDP. However, when public debt is the endogenous variable, government expenditures and total capital are indirectly affected by net exports, exchange rates, and consumption.
Likewise, RGDP showed that consumption, public debt, employment investment, and exchange rates also affect government expenditures. Therefore, it should not be forgotten that the revival of debt-financed public expenditure affects many other variables. Beyene and Kotosz (2020) also predicted that debt-financed public expenditure would not increase either wealth or aggregate demand in the private sector.
From the 1970s to the end of the 1990s, public debt and capital savings were major problems for long-term loans and investments in Northern Cyprus, as most of the loans made by investment banks for long-term projects accumulated in these debts. Public debt negatively affects economic growth (IADB 2013). Inadequate public policies and weak international relations create economic problems. Financial problems and public debt increase as small firms have difficulty repaying their loans, most bank loans cannot be repaid, and borrowers are secured with their personal assets. These inadequacies also negatively affect financial development, ultimately increasing public debt and negatively affecting the RGDP. Dampitakse et al. (2021) obtained similar results in their research and stated that economic growth will be positively affected in parallel with financial development.
In their study, Gibson et al. (2014) stated that debt resources are secured by overdraft accounts from financial institutions, but these cannot be a permanent solution either. Financial stability refers to the prevention of financial crises, the sustainability of the financial system, and the prevention of these negativities that affect the economy (Das et al. 2010).
The continued support of Turkey to the public sector in Northern Cyprus reduces its ability of Northern Cyprus to create a sustainable financial system. Similar problems are observed in many developing countries, and short-term loans are generally used to support and finance long-term projects that do not pay debt obligations on time (Marquez 2000). Stambuli’s (1998) study supports this observation. In Northern Cyprus, the government’s weak financial ability to finance long-term economic activities is not a realistic model for sustainable economic growth. As a result, taxes, fees, and penalties, which are the government's primary means of capital accumulation, have become the main instruments of fiscal policy used by the public sector for government expenditure and revenue payments.
Availability of data and materials
Not applicable.
Abbreviations
- ADF:
-
Augmented Dickey Fuller
- AIC:
-
Akaike information criterion
- ARCH:
-
Autoregressive Conditional Heteroscedastic
- ARDL:
-
Autoregressive distributed lag
- C or CONS:
-
Consumption
- EGARCH:
-
Exponential Generalized Autoregressive Conditional Heteroscedastic
- E or EMP:
-
Employment
- Fintech:
-
Financial Technology
- FPE:
-
Final prediction error
- GARCH:
-
Generalized Autoregressive Conditional Heteroscedastic
- GJR-GARCH:
-
Glosten,Jagananthan & Runkle-Generalized Autoregression. Conditional Heteroscedastic
- GNP:
-
Gross National Product
- G or GEXPD:
-
Government expenditure
- HQ:
-
Hannan–Quinn information criterion
- I or INVST:
-
Investment
- MMT:
-
Modern Monetary Theory
- NX:
-
Net exports
- OBS:
-
Observations
- OLS:
-
Ordinary least squares method
- OECD:
-
Organisation for Economic Co-operation and Development
- PP:
-
Phillips Perron
- PRD:
-
Period
- REER:
-
Real effective exchange rate
- RGDP:
-
Real Gross Domestic Product
- REH:
-
Ricardian Equivalence Hypothesis
- SC:
-
Schwarz information Criterion
- SE:
-
Standard Error, forecast error of the variable for each forecast horizon
- SMEs:
-
Small and Medium Sized Enterprises
- TD:
-
Total government debt
- TC or CAP:
-
Total capital
- VAR:
-
Vector autoregression model
- VD:
-
Variance Decomposition
- VECM:
-
Vector Error Correction Model
- Y:
-
Output
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Appendices
Appendix 1: variance decomposition (VD) result for North Cyprus
Period | S.E | DGDPTL | DCAP | DCONS | DDEBT | DEMP | DINVST | DGEXPD | DNX | DREER |
---|---|---|---|---|---|---|---|---|---|---|
VD of DGDP/TL real gross domestic production | ||||||||||
1 | 1.06E+08 | 100.0000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 1.29E+08 | 68.87165 | 0.573492 | 16.21451 | 1.164364 | 1.079946 | 0.013381 | 10.03228 | 2.049118 | 0.001253 |
3 | 1.68E+08 | 47.33496 | 4.573719 | 15.10353 | 8.330281 | 14.54968 | 1.705089 | 6.552983 | 1.809491 | 0.040265 |
4 | 2.77E+08 | 18.41108 | 1.823171 | 42.79973 | 21.85675 | 6.791880 | 4.864271 | 2.456846 | 0.888964 | 0.107309 |
5 | 4.04E+08 | 10.06858 | 1.643935 | 43.80433 | 28.61573 | 5.336861 | 7.656030 | 1.746487 | 0.796455 | 0.331592 |
6 | 4.72E+08 | 7.718534 | 4.628383 | 40.25610 | 29.92347 | 4.120912 | 9.842792 | 2.405053 | 0.612363 | 0.492392 |
7 | 5.05E+08 | 7.409775 | 5.212909 | 37.20531 | 27.35684 | 7.234514 | 12.03651 | 2.130078 | 0.542523 | 0.871546 |
8 | 5.40E+08 | 6.625323 | 4.646132 | 32.49702 | 23.98496 | 17.01172 | 11.19163 | 2.189225 | 0.643803 | 1.210183 |
9 | 5.63E+08 | 7.334654 | 4.368222 | 30.02574 | 22.60080 | 19.65596 | 10.31259 | 3.626284 | 0.672595 | 1.403156 |
10 | 5.74E+08 | 7.427009 | 4.387233 | 29.01624 | 21.78093 | 19.77532 | 9.947872 | 4.866601 | 1.268036 | 1.530756 |
VD of DCAP (total capital) | ||||||||||
1 | 28,199,817 | 1.969945 | 98.03005 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 55,848,136 | 6.957497 | 27.36241 | 15.27831 | 2.837808 | 43.28727 | 0.495271 | 3.377151 | 0.341236 | 0.063040 |
3 | 79,143,540 | 8.907543 | 13.73985 | 8.620451 | 1.920329 | 62.75329 | 0.501916 | 2.447593 | 0.867422 | 0.241609 |
4 | 95,180,642 | 6.396734 | 11.97969 | 23.25284 | 4.503779 | 43.47405 | 2.686150 | 5.191883 | 1.525200 | 0.989663 |
5 | 1.21E+08 | 9.145021 | 8.835758 | 27.13070 | 15.25382 | 29.92547 | 3.160907 | 3.233055 | 2.296712 | 1.018551 |
6 | 1.36E+08 | 8.990874 | 7.645856 | 27.97860 | 18.10870 | 26.75418 | 4.651240 | 2.591239 | 2.306187 | 0.973125 |
7 | 1.41E+08 | 8.403055 | 7.743852 | 26.91504 | 19.71382 | 25.48835 | 5.855622 | 2.427980 | 2.376540 | 1.075731 |
8 | 1.51E+08 | 13.94617 | 9.813590 | 24.81234 | 17.33882 | 22.55866 | 5.200466 | 2.973284 | 2.366391 | 0.990279 |
9 | 1.66E+08 | 12.43690 | 8.758309 | 24.13544 | 15.98552 | 28.89580 | 4.296177 | 2.469719 | 2.205454 | 0.816687 |
10 | 1.73E+08 | 12.12050 | 8.513643 | 24.81938 | 15.99698 | 29.32580 | 3.973487 | 2.325863 | 2.126937 | 0.797410 |
VD of DCONS (consumption) | ||||||||||
1 | 97,384,080 | 90.73474 | 0.951809 | 8.313454 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 1.53E+08 | 67.28652 | 3.145412 | 13.32141 | 7.358517 | 2.460125 | 1.694390 | 1.679577 | 3.053493 | 0.000559 |
3 | 1.68E+08 | 55.83926 | 7.297191 | 12.42577 | 7.026157 | 10.92896 | 1.677124 | 1.984132 | 2.767518 | 0.053883 |
4 | 2.56E+08 | 26.56807 | 7.082952 | 29.80654 | 20.15118 | 5.148297 | 6.485608 | 2.114756 | 2.276682 | 0.365916 |
5 | 3.34E+08 | 18.48277 | 4.687257 | 32.47718 | 21.30474 | 8.549307 | 10.84846 | 1.289024 | 1.512158 | 0.849102 |
6 | 3.64E+08 | 15.97245 | 6.084649 | 31.59072 | 22.90683 | 7.766309 | 11.60922 | 1.608722 | 1.331828 | 1.129267 |
7 | 3.97E+08 | 16.17012 | 6.544442 | 29.76945 | 19.73972 | 10.37303 | 12.97026 | 1.575077 | 1.116036 | 1.741859 |
8 | 4.21E+08 | 15.12179 | 6.059368 | 26.48008 | 17.55477 | 16.42470 | 12.23962 | 2.383654 | 1.635404 | 2.100615 |
9 | 4.44E+08 | 16.10917 | 5.835360 | 23.89126 | 16.56743 | 18.54372 | 11.04963 | 4.418453 | 1.475478 | 2.109497 |
10 | 4.59E+08 | 15.06564 | 5.467587 | 23.88017 | 16.00444 | 19.00843 | 10.39002 | 5.802512 | 2.234058 | 2.147132 |
VD of DDEBT (public debt) | ||||||||||
1 | 45.18106 | 50.51819 | 0.207424 | 12.55250 | 36.72188 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 59.40321 | 29.30179 | 10.95578 | 10.86686 | 21.24836 | 24.12707 | 0.384051 | 2.741720 | 0.008853 | 0.365510 |
3 | 67.61410 | 36.88990 | 12.12662 | 8.833357 | 16.73585 | 18.67712 | 2.555827 | 2.607074 | 1.284905 | 0.289339 |
4 | 72.08439 | 33.80399 | 14.76042 | 10.95970 | 16.50650 | 16.71005 | 2.550531 | 2.538556 | 1.892882 | 0.277371 |
5 | 86.62290 | 29.74969 | 10.84099 | 14.27069 | 12.27993 | 27.16445 | 1.881368 | 1.765225 | 1.789500 | 0.258148 |
6 | 93.44255 | 26.85359 | 10.93763 | 12.41064 | 11.22217 | 32.40062 | 1.631384 | 2.579834 | 1.588222 | 0.375919 |
7 | 100.1966 | 25.24243 | 9.951478 | 13.21552 | 11.02036 | 33.00566 | 1.549221 | 2.393723 | 3.124353 | 0.497256 |
8 | 100.7807 | 25.24901 | 9.853802 | 13.08227 | 10.97764 | 32.63487 | 1.538450 | 2.800512 | 3.359984 | 0.503457 |
9 | 105.0386 | 23.40487 | 9.182202 | 12.11725 | 11.14592 | 36.54238 | 1.420721 | 2.628630 | 3.094189 | 0.463827 |
10 | 105.8142 | 23.48271 | 9.517554 | 12.11917 | 11.01290 | 36.02240 | 1.450027 | 2.882736 | 3.053601 | 0.458899 |
VD of DEMP (employment) | ||||||||||
1 | 1.982774 | 15.64428 | 0.001951 | 2.532761 | 0.209835 | 81.61117 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 2.089139 | 15.19801 | 0.137063 | 2.402749 | 2.023290 | 79.21758 | 0.291286 | 0.584976 | 0.136969 | 0.008074 |
3 | 2.174359 | 14.77085 | 1.282349 | 2.318374 | 2.054986 | 76.67627 | 1.261665 | 0.554217 | 0.827098 | 0.254190 |
4 | 2.343438 | 16.25330 | 2.299314 | 3.306809 | 3.636343 | 71.18064 | 1.690651 | 0.483840 | 0.751699 | 0.397399 |
5 | 2.414951 | 15.96755 | 3.841279 | 3.160359 | 3.424344 | 68.89435 | 2.448101 | 0.538856 | 1.083269 | 0.641893 |
6 | 2.478469 | 16.17393 | 3.767576 | 3.090080 | 3.688315 | 67.27977 | 2.427582 | 1.675366 | 1.031333 | 0.866044 |
7 | 2.505481 | 16.34672 | 3.760521 | 3.354199 | 3.669419 | 65.97110 | 2.389309 | 2.277163 | 1.197110 | 1.034455 |
8 | 2.542382 | 15.87594 | 3.680416 | 3.641432 | 3.741541 | 65.17693 | 2.323114 | 3.295178 | 1.235182 | 1.030272 |
9 | 2.678737 | 14.82386 | 4.822141 | 3.362160 | 3.689962 | 65.50343 | 2.237245 | 3.484603 | 1.117366 | 0.959235 |
10 | 2.949037 | 13.39254 | 4.864663 | 5.172012 | 5.239922 | 64.78422 | 1.873703 | 2.885210 | 0.939264 | 0.848462 |
VD of DINVST (investment) | ||||||||||
1 | 1.03E+08 | 23.83571 | 4.361505 | 16.10582 | 8.462367 | 33.12380 | 14.11080 | 0.000000 | 0.000000 | 0.000000 |
2 | 1.22E+08 | 17.25532 | 24.24235 | 13.93169 | 9.756481 | 24.07403 | 10.10710 | 0.116077 | 0.456847 | 0.060093 |
3 | 2.10E+08 | 6.854382 | 20.93054 | 5.887007 | 6.747283 | 47.13261 | 4.468525 | 7.612406 | 0.264271 | 0.102978 |
4 | 2.33E+08 | 6.239530 | 18.31515 | 11.00087 | 8.522084 | 43.23874 | 5.179654 | 6.702714 | 0.716147 | 0.085110 |
5 | 3.00E+08 | 4.224475 | 15.19530 | 20.85737 | 12.42579 | 37.09758 | 5.461632 | 4.137694 | 0.431506 | 0.168657 |
6 | 3.35E+08 | 15.06149 | 15.03203 | 17.52422 | 11.59310 | 30.97119 | 5.629949 | 3.610081 | 0.433190 | 0.144743 |
7 | 3.72E+08 | 22.35130 | 13.44565 | 14.83810 | 10.82634 | 29.20985 | 4.572045 | 2.967623 | 1.661780 | 0.127309 |
8 | 3.83E+08 | 21.06685 | 12.69043 | 16.27231 | 10.49802 | 28.76328 | 4.499530 | 2.853355 | 3.031268 | 0.324957 |
9 | 3.91E+08 | 20.28680 | 12.86450 | 15.65051 | 10.24928 | 29.64832 | 4.450704 | 3.574751 | 2.962276 | 0.312863 |
10 | 4.08E+08 | 19.11199 | 11.81292 | 14.35054 | 9.476315 | 34.55228 | 4.311428 | 3.319280 | 2.731159 | 0.334088 |
VD of DGEXPD (governmental expenditure) | ||||||||||
1 | 36,330,698 | 20.24350 | 19.49317 | 18.09718 | 0.133456 | 0.080344 | 8.551476 | 33.40087 | 0.000000 | 0.000000 |
2 | 71,384,388 | 23.04594 | 22.30204 | 8.754345 | 2.084982 | 25.48876 | 4.625296 | 10.89823 | 1.927081 | 0.873337 |
3 | 87,561,274 | 17.34508 | 16.37492 | 5.927705 | 1.385816 | 38.30666 | 7.366419 | 9.590932 | 3.116902 | 0.585562 |
4 | 1.15E+08 | 20.81686 | 11.43522 | 15.99197 | 12.60757 | 22.62019 | 5.440208 | 5.762161 | 4.858697 | 0.467135 |
5 | 1.50E+08 | 15.01858 | 6.757191 | 33.56317 | 16.60555 | 16.06115 | 4.892802 | 3.644270 | 3.048932 | 0.408356 |
6 | 1.85E+08 | 11.26807 | 8.414554 | 28.46056 | 20.53940 | 19.10117 | 6.114335 | 3.559929 | 2.178973 | 0.363009 |
7 | 1.99E+08 | 10.37540 | 7.611974 | 24.84676 | 17.76300 | 27.38181 | 6.046687 | 3.120847 | 2.490281 | 0.363230 |
8 | 2.02E+08 | 12.00722 | 7.497537 | 24.01140 | 17.52507 | 27.06664 | 5.901870 | 3.108919 | 2.433032 | 0.448304 |
9 | 2.12E+08 | 10.92326 | 6.855279 | 21.83922 | 16.91539 | 31.40338 | 5.370893 | 3.621732 | 2.544960 | 0.525886 |
10 | 2.13E+08 | 10.78767 | 6.954690 | 21.57940 | 16.73979 | 31.09632 | 5.453507 | 4.342937 | 2.523849 | 0.521844 |
VD of DNX (net export) | ||||||||||
1 | 72.37871 | 27.00853 | 5.970357 | 2.490250 | 16.11089 | 5.203267 | 12.70961 | 1.015302 | 29.49180 | 0.000000 |
2 | 141.6871 | 53.45443 | 10.15629 | 5.143016 | 7.242183 | 9.416050 | 4.937527 | 0.541752 | 8.656439 | 0.452310 |
3 | 151.7838 | 46.63844 | 9.134725 | 5.026736 | 7.313215 | 18.67905 | 4.657778 | 0.476658 | 7.562555 | 0.510839 |
4 | 176.4227 | 37.49279 | 10.19005 | 8.150248 | 9.711148 | 18.39737 | 7.096480 | 0.675273 | 6.941681 | 1.344954 |
5 | 200.5015 | 30.87155 | 8.773468 | 8.521062 | 8.165634 | 27.04980 | 7.953200 | 1.321445 | 5.476000 | 1.867836 |
6 | 202.8312 | 31.07364 | 8.648308 | 8.342852 | 8.000332 | 26.46658 | 7.895411 | 1.878551 | 5.453875 | 2.240456 |
7 | 208.6302 | 31.87264 | 8.449638 | 7.886285 | 7.794941 | 25.62750 | 7.506951 | 3.144961 | 5.202607 | 2.514482 |
8 | 213.6372 | 30.39713 | 8.998211 | 7.585632 | 7.456927 | 24.63797 | 7.256683 | 6.066247 | 5.138182 | 2.463024 |
9 | 224.8974 | 28.41764 | 10.42314 | 6.866313 | 6.732616 | 26.62981 | 7.352999 | 6.681606 | 4.646877 | 2.249002 |
10 | 276.6945 | 20.29196 | 8.936442 | 9.208312 | 7.657528 | 39.79650 | 4.887746 | 4.603364 | 3.069999 | 1.548147 |
VD of DREER (real effective exchange rate) | ||||||||||
1 | 0.108522 | 18.15369 | 0.255121 | 11.38788 | 15.16301 | 21.14835 | 28.64414 | 0.002541 | 0.066925 | 5.178341 |
2 | 0.153618 | 13.81468 | 0.574773 | 37.03853 | 12.71172 | 10.85529 | 16.51603 | 1.264761 | 1.489909 | 5.734299 |
3 | 0.164530 | 12.13760 | 0.577140 | 37.14215 | 13.92987 | 9.464090 | 16.90401 | 2.570626 | 1.446180 | 5.828343 |
4 | 0.187787 | 17.90733 | 2.863843 | 28.51549 | 11.34009 | 14.60584 | 13.63115 | 5.400351 | 1.251222 | 4.484693 |
5 | 0.211332 | 20.15789 | 3.185356 | 22.51541 | 8.992464 | 24.15135 | 11.84384 | 4.582038 | 0.988080 | 3.583574 |
6 | 0.221812 | 18.37279 | 3.978725 | 21.70377 | 9.542410 | 26.60647 | 10.83610 | 4.624168 | 0.897137 | 3.438435 |
7 | 0.255591 | 13.94235 | 8.042298 | 18.68620 | 9.837266 | 34.01311 | 8.284435 | 3.484220 | 0.713991 | 2.996126 |
8 | 0.320684 | 9.606922 | 5.484295 | 20.83100 | 13.27548 | 39.03293 | 5.361408 | 3.792282 | 0.534699 | 2.080977 |
9 | 0.369763 | 7.261184 | 4.197495 | 23.14392 | 17.49538 | 35.82690 | 5.158427 | 4.779673 | 0.510016 | 1.627005 |
10 | 0.381696 | 6.835286 | 4.237080 | 22.47713 | 17.97838 | 33.62192 | 5.487672 | 6.998770 | 0.780054 | 1.583709 |
Cholesky Ordering: DGDPTL DCAP DCONS DDEBT DEMP DINVST DGEXPD DNX DREER |
Appendix 2: impulse response result for North Cyprus
Prd | DGDPTL | DCAP | DCONS | DDEBT | DEMP | DINVST | DGEXPD | DNX | REER |
---|---|---|---|---|---|---|---|---|---|
Impulse response of DGDPTL (real gros domestic production) | |||||||||
1 | 1.06E+08 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 12,376,629 | − 9,769,700 | 51,948,091 | − 1,392,073 | − 13,406,601 | 1,492,293 | 40,861,806 | − 18,467,206 | − 456,713.5 |
3 | − 4,422,018 | − 34,656,090 | 39,783,482 | − 4,655,707 | 62,806,020 | − 21,934,154 | 13,706,118 | − 13,110,708 | − 3,347,417 |
4 | − 2,583,408 | − 9,915,076 | 1.69E+08 | − 1.20E+08 | − 32,737,343 | − 56,903,714 | − 4,695,035 | − 12,929,264 | 8,407,269 |
5 | − 4,852,159 | 35,907,541 | 1.97E+08 | − 1.73E+08 | − 59,310,589 | − 93,696,808 | − 31,177,002 | − 24,906,336 | 21,431,635 |
6 | − 2,814,900 | 87,458,005 | 1.35E+08 | − 1.42E+08 | 22,052,000 | − 97,334,357 | − 50,177,544 | 8,167,309 | 23,619,348 |
7 | 40,346,246 | 54,176,803 | 69,452,046 | − 5,314,822 | 95,987,368 | − 93,067,419 | − 7,225,610 | 3,705,929 | 33,451,780 |
8 | 21,923,947 | 17,165,432 | 12,931,921 | 19,646,633 | 1.77E+08 | − 45,102,781 | 31,130,755 | − 22,327,348 | 36,254,918 |
9 | 62,775,774 | − 17,392,978 | 21,016,577 | 41,497,248 | 1.13E+08 | − 7,960,460 | 71,551,523 | − 15,985,634 | 30,349,454 |
10 | − 3,447,986 | 24,278,649 | 17,178,950 | 4,944,112 | 52,572,242 | − 6,485,723 | 67,259,672 | − 45,198,928 | 24,282,360 |
Impulse response of DCAP (total capital) | |||||||||
1 | − 3,957,978 | 27,920,675 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | − 1,418,942 | 8,594,972 | − 21,829,630 | 9,408,063 | 36,744,199 | − 3,930,339 | 10,263,227 | − 3,262,390 | 1,402,219 |
3 | − 1,846,446 | 2,680,539 | − 7,964,072 | 5,636,667 | 50,799,029 | − 3,998,865 | 6,926,477 | − 6,609,806 | 3,628,700 |
4 | 4,643,381 | − 14,988,656 | 39,580,278 | − 1,696,259 | 2,791,265 | − 14,557,108 | 17,805,650 | − 9,156,450 | 8,632,696 |
5 | − 2,761,338 | 14,537,390 | 43,298,771 | − 4,278,357 | − 21,283,703 | − 14,849,404 | − 2,022,156 | − 14,101,830 | 7,733,819 |
6 | 17,838,059 | 10,733,918 | 34,423,987 | − 3,324,740 | − 23,426,343 | − 19,875,007 | 2,010,372 | 9,423,957 | 5,497,459 |
7 | − 3,562,673 | 11,393,868 | 13,853,819 | − 2,410,009 | − 11,575,608 | − 17,517,874 | − 2,209,857 | − 6,875,956 | 5,870,846 |
8 | 38,579,233 | − 26,131,204 | 16,311,251 | − 2,371,475 | 6,263,533 | − 3,615,400 | 13,805,939 | 7,954,682 | 3,211,466 |
9 | 16,104,336 | − 13,577,766 | 31,839,896 | − 2,159,442 | − 53,234,408 | 1,669,759 | 2,300,563 | − 8,377,220 | 383,156.7 |
10 | 13,759,665 | − 11,261,479 | 27,458,975 | − 1,918,039 | − 28,051,747 | − 1,358,346 | 3,669,419 | 5,186,496 | − 3,588,771 |
Impulse response of DCONS (consumption) | |||||||||
1 | 92,762,995 | − 9,500,857 | 28,078,811 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | − 8,459,833 | 25,427,266 | 48,292,007 | − 4,151,783 | 24,005,912 | − 19,922,609 | 19,835,336 | − 26,744,717 | − 361,748.0 |
3 | 7,181,023 | − 36,465,299 | 19,959,519 | − 1,631,085 | 50,187,115 | − 8,834,220 | 12,979,076 | 8,274,558 | − 3,889,551 |
4 | − 3,994,942 | 50,741,958 | 1.27E+08 | − 1.06E+08 | − 16,688,821 | − 61,440,204 | − 28,702,754 | − 26,610,211 | 14,983,854 |
5 | − 5,672,062 | 24,282,932 | 1.29E+08 | − 1.03E+08 | 78,532,820 | − 88,639,371 | 7,265,963 | − 13,989,401 | 26,604,788 |
6 | − 2,198,155 | 53,016,656 | 74,210,852 | − 8,061,407 | 26,894,203 | − 56,889,377 | − 26,222,291 | − 8,522,876 | 23,342,928 |
7 | 66,345,057 | 47,785,012 | 72,218,509 | − 2,947,296 | 78,110,128 | − 71,553,313 | 18,943,029 | − 752,937.7 | 35,434,930 |
8 | − 3,658,165 | 20,824,838 | 7,071,921 | − 5,138,049 | 1.13E+08 | − 35,624,926 | 41,801,186 | − 33,808,275 | 31,331,401 |
9 | 69,681,543 | − 26,945,328 | 2,108,688 | 37,914,607 | 85,636,776 | 3,881,457 | 66,811,909 | 440,335.3 | 20,543,182 |
10 | − 244,418.0 | − 4,643,023 | 56,865,905 | − 3,276,924 | − 59,211,500 | − 10,874,660 | 59,288,084 | − 42,397,668 | 19,151,710 |
Impulse response of DDEBT(public debt) | |||||||||
1 | 32.11296 | − 2.057720 | − 16.00742 | 27.37908 | 0.000000 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 1.656017 | − 19.55421 | 11.27944 | − 0.430952 | 29.17845 | − 3.681327 | 9.836067 | 0.558912 | 3.591363 |
3 | − 25.54406 | 12.95328 | 4.513106 | − 3.912471 | − 1.572881 | 10.16325 | − 4.736931 | − 7.643899 | − 0.574219 |
4 | 8.368124 | 14.58035 | − 12.87058 | 9.622708 | − 3.798046 | − 3.960527 | 3.566607 | 6.294091 | − 1.088594 |
5 | − 21.81209 | 6.817756 | − 22.39021 | 7.982748 | 34.20542 | − 2.939275 | 0.739404 | − 5.993202 | 2.226559 |
6 | 10.60414 | − 11.89805 | 3.582021 | 7.644407 | 28.12066 | 1.129391 | 9.633500 | 2.097644 | 3.667859 |
7 | − 13.76415 | 6.636495 | 15.59218 | − 11.24755 | − 22.01114 | − 3.617627 | 3.880171 | − 13.22834 | 4.134959 |
8 | 5.504906 | − 1.327622 | 1.407836 | − 2.932372 | − 1.043665 | − 0.851359 | 6.642805 | 5.253619 | 1.101634 |
9 | 4.219416 | 3.500782 | 2.859211 | − 10.71307 | − 26.77901 | − 0.702152 | − 2.361864 | − 0.346200 | 0.199001 |
10 | 6.855006 | − 7.250130 | 4.475494 | − 1.825863 | 1.240916 | − 2.367420 | 5.722766 | 0.718005 | 0.454763 |
Impulse response of DEMP (employment) | |||||||||
1 | − 0.784244 | 0.008757 | − 0.315551 | 0.090826 | 1.791216 | 0.000000 | 0.000000 | 0.000000 | 0.000000 |
2 | 0.219727 | − 0.076847 | 0.072769 | 0.282944 | − 0.498998 | 0.112753 | 0.159785 | − 0.077318 | − 0.018772 |
3 | − 0.187148 | 0.233763 | 0.068854 | − 0.094074 | 0.409484 | − 0.216648 | − 0.025908 | − 0.182005 | 0.108006 |
4 | − 0.440727 | 0.256211 | 0.268312 | − 0.320220 | 0.532820 | − 0.182198 | 0.019198 | 0.046660 | 0.099027 |
5 | − 0.196579 | 0.312652 | − 0.052074 | 0.003211 | 0.329975 | − 0.223445 | 0.069677 | − 0.147970 | 0.124945 |
6 | 0.249615 | − 0.086092 | − 0.074202 | 0.163886 | 0.339049 | − 0.079679 | 0.267373 | − 0.013290 | 0.125556 |
7 | 0.180615 | − 0.068040 | 0.144014 | − 0.061477 | − 0.091808 | 0.029423 | 0.200082 | − 0.108605 | 0.108341 |
8 | 0.004337 | − 0.042743 | 0.157524 | − 0.107223 | − 0.267489 | 0.013110 | 0.264657 | − 0.068489 | 0.040700 |
9 | 0.193729 | − 0.328828 | 0.076712 | − 0.151446 | − 0.698169 | 0.101868 | 0.192488 | 0.018426 | − 0.047301 |
10 | 0.317836 | − 0.277582 | 0.456666 | − 0.436953 | − 0.966375 | 0.049154 | − 0.029651 | 0.038834 | − 0.070414 |
Impulse response of DINVST (investment) | |||||||||
1 | 50,272,142 | − 21,504,610 | − 4,132,423 | 29,954,308 | 59,262,974 | 38,680,238 | 0.000000 | 0.000000 | 0.000000 |
2 | − 5,209,624 | 55,913,515 | − 1,883,390 | 23,389,339 | − 7,193,857 | 255,546.5 | − 4,145,331 | − 8,223,765 | − 2,982,626 |
3 | − 2,173,182 | − 75,190,179 | − 2,317,599 | 39,180,185 | 1.31E+08 | − 21,839,136 | 57,829,394 | − 7,004,597 | 6,047,831 |
4 | − 1,875,497 | − 25,972,496 | 5,793,949 | − 4,043,452 | − 50,986,150 | 28,833,948 | − 16,365,284 | − 16,464,194 | 781,759.3 |
5 | 20,443,620 | 61,144,018 | 1.13E+08 | − 8,094,611 | − 99,630,899 | − 45,865,144 | − 9,442,388 | − 123,045.4 | 10,270,495 |
6 | − 1.15E+08 | 56,768,306 | − 3,053,830 | − 4,301,432 | 37,900,788 | − 37,592,392 | − 18,303,974 | − 9,930,283 | 3,309,459 |
7 | 1.18E+08 | − 41,459,764 | − 2,909,616 | 44,241,800 | 75,007,570 | 1,532,609 | 7,152,591 | 42,568,326 | 3,683,091 |
8 | 2,839,040 | 5,519,956 | 57,984,080 | − 2,086,166 | − 42,648,991 | − 16,759,119 | 9,147,006 | − 46,378,467 | 17,346,485 |
9 | − 6,179,247 | − 31,714,245 | − 255,625.5 | 15,252,907 | 55,029,673 | 13,707,907 | 35,600,289 | 8,455,572 | 703,542.7 |
10 | 29,381,610 | 6,074,483 | − 3,239,848 | − 1,172,006 | − 1.11E+08 | 19,663,458 | − 8,451,535 | 5,182,595 | − 8,878,294 |
Impulse response of DGEXPND (governmental expenditure) | |||||||||
1 | 16,346,191 | − 16,040,390 | 15,455,363 | 1,327,219 | − 1,029,797 | 10,624,152 | 20,996,778 | 0.000000 | 0.000000 |
2 | − 3,011,911 | 29,650,594 | − 14,395,471 | − 1,022,172 | − 36,024,685 | 11,082,419 | − 10,699,513 | − 9,909,533 | − 6,671,050 |
3 | 12,469,341 | − 10,909,138 | 2,894,462 | 71,536.92 | 40,473,750 | − 18,140,810 | 13,416,045 | 11,864,792 | − 626,102.0 |
4 | − 3,778,423 | − 16,102,719 | 40,790,807 | − 3,954,495 | − 7,707,517 | − 12,484,070 | − 5,286,434 | − 20,115,468 | 4,121,140 |
5 | 24,687,411 | − 333,933.2 | 73,525,780 | − 4,530,656 | − 24,582,954 | − 19,397,577 | − 7,329,036 | 6,318,610 | 5,446,940 |
6 | − 2,184,318 | 36,820,396 | 46,742,580 | − 5,730,834 | − 53,996,689 | − 31,448,310 | − 19,936,608 | − 7,734,606 | 5,682,604 |
7 | 16,065,219 | 11,788,714 | − 10,701,342 | 4,008,385 | 65,648,743 | − 17,458,926 | − 4,409,262 | 15,531,975 | 4,446,619 |
8 | 28,470,872 | − 7,618,302 | − 701,936.1 | 12,138,647 | 15,755,968 | − 4,903,637 | 6,173,459 | − 3,298,775 | 6,309,659 |
9 | 1,048,410 | − 4,030,712 | 405,030.7 | 20,953,474 | 55,250,118 | 1,165,824 | 18,900,561 | − 12,222,173 | 7,290,245 |
10 | − 671,743.3 | − 9,183,431 | 2,456,441 | 4,044,409 | − 6,244,926 | 8,260,037 | 18,686,212 | − 2,208,912 | 1,074,243 |
Impulse response of DNX (net export) | |||||||||
1 | 37.61502 | − 17.68524 | − 11.42174 | − 29.05163 | − 16.51007 | − 25.80340 | − 7.293036 | 39.30623 | 0.000000 |
2 | 96.52054 | − 41.54674 | 30.03359 | 24.69591 | − 40.22079 | 18.03897 | 7.454498 | − 13.88599 | 9.529025 |
3 | − 3.689439 | − 8.098679 | 11.20728 | − 15.19727 | − 49.12277 | 9.047315 | − 1.027633 | 2.117859 | − 5.185208 |
4 | 30.41224 | − 32.66745 | − 37.13067 | 36.57526 | − 37.72050 | 33.70020 | 10.01821 | 20.45264 | − 17.34728 |
5 | 27.22148 | − 18.85100 | − 29.81238 | 16.12648 | − 71.75011 | 31.44007 | − 17.91798 | 6.387728 | − 18.22827 |
6 | − 19.31897 | − 5.563095 | 2.598303 | − 2.953227 | 3.772273 | 7.138435 | − 15.54390 | 6.507875 | − 13.07090 |
7 | − 33.00309 | − 10.94884 | − 0.579220 | − 10.07426 | − 16.31802 | 4.393632 | − 24.41408 | 4.556660 | − 13.14277 |
8 | − 0.672783 | 20.71292 | 5.433234 | − 3.246121 | 9.498226 | − 6.670541 | − 37.41382 | 8.977482 | − 5.447743 |
9 | − 22.35641 | 34.13273 | − 3.279543 | 1.369302 | 47.16008 | − 20.17549 | − 24.71423 | 2.286275 | 3.657101 |
10 | − 34.09074 | 39.62100 | − 59.80776 | 49.57128 | 130.3806 | − 4.794640 | − 12.03532 | − 0.221934 | 6.909405 |
Impulse response of DREER (real effective exchange rate) | |||||||||
1 | 0.046238 | 0.005481 | 0.036622 | − 0.042258 | 0.049906 | − 0.058081 | − 0.000547 | − 0.002807 | 0.024695 |
2 | 0.033498 | − 0.010276 | 0.086020 | − 0.034843 | 0.008429 | − 0.022893 | 0.017267 | − 0.018539 | 0.027264 |
3 | 0.005063 | 0.004538 | 0.036249 | − 0.027768 | 0.000527 | − 0.026047 | 0.019935 | − 0.006316 | 0.014985 |
4 | 0.055038 | − 0.029218 | − 0.001085 | 0.015103 | − 0.050879 | 0.015196 | 0.034763 | 0.007053 | 0.001930 |
5 | 0.051846 | − 0.020316 | − 0.000118 | − 0.004147 | − 0.075071 | 0.021971 | 0.011917 | − 0.000245 | − 0.004358 |
6 | − 0.006064 | − 0.023129 | 0.024955 | − 0.026053 | − 0.048003 | 0.006467 | 0.015124 | 0.000329 | − 0.009553 |
7 | 0.008278 | − 0.057413 | 0.039098 | − 0.041610 | − 0.095546 | 0.008973 | − 0.001001 | 0.005003 | − 0.016295 |
8 | 0.027776 | − 0.019652 | 0.095996 | − 0.085005 | − 0.133870 | − 0.010081 | − 0.040296 | 0.009135 | − 0.013519 |
9 | − 0.006945 | 0.009953 | 0.101100 | − 0.101332 | − 0.094039 | − 0.039233 | − 0.051333 | 0.012143 | − 0.009191 |
10 | − 0.005537 | 0.020835 | 0.033227 | − 0.047672 | 0.000599 | − 0.030696 | − 0.060512 | 0.020956 | − 0.009101 |
Appendix 3: estimation method: least squares method for Eq. (2) and others
Coefficient | SE | t-statistic | Probability | |
---|---|---|---|---|
Equation 2 | ||||
C(1) | 0.990352 | 0.474777 | 2.085931 | 0.0524 |
C(2) | − 0.548050 | 0.530189 | − 1.033687 | 0.3158 |
C(3) | − 0.416671 | 0.482365 | − 0.863808 | 0.3997 |
C(4) | − 1.548809 | 0.830724 | − 1.864409 | 0.0796 |
C(5) | − 0.462043 | 0.486587 | − 0.949558 | 0.3556 |
C(6) | 0.913688 | 0.474139 | 1.927047 | 0.0709 |
C(7) | − 308,684.3 | 468,714.0 | − 0.658577 | 0.5190 |
C(8) | 908,173.4 | 836,565.2 | 1.085598 | 0.2928 |
C(9) | 15,947,031 | 19,275,861 | 0.827306 | 0.4195 |
C(10) | 91,831,406 | 28,883,551 | 3.179367 | 0.0055 |
C(11) | 1.781968 | 0.687104 | 2.593447 | 0.0189 |
C(12) | 0.325079 | 0.958833 | 0.339036 | 0.7387 |
C(13) | − 0.792938 | 0.275077 | − 2.882599 | 0.0103 |
C(14) | − 0.552628 | 0.237091 | − 2.330872 | 0.0323 |
C(15) | − 471,149.9 | 543,915.5 | − 0.866219 | 0.3984 |
C(16) | − 34,391.69 | 542,255.7 | − 0.063423 | 0.9502 |
C(17) | − 18,494,041 | 2.70E+08 | − 0.068409 | 0.9463 |
C(18) | 5.44E+08 | 2.78E+08 | 1.955357 | 0.0672 |
C(19) | 13,924,194 | 32,736,938 | 0.425336 | 0.6759 |
R-squared | 0.967538 | |||
Equation 3 | ||||
C(20) | 0.713628 | 0.125898 | 5.668293 | 0.0000 |
C(21) | 0.428563 | 0.140592 | 3.048276 | 0.0073 |
C(22) | 0.085840 | 0.127910 | 0.671094 | 0.5112 |
C(23) | 0.208738 | 0.220286 | 0.947578 | 0.3566 |
C(24) | − 0.886109 | 0.129030 | − 6.867468 | 0.0000 |
C(25) | − 0.457637 | 0.125729 | − 3.639869 | 0.0020 |
C(26) | 456,851.2 | 124,290.5 | 3.675674 | 0.0019 |
C(27) | − 294,177.5 | 221,834.8 | − 1.326111 | 0.2023 |
C(28) | 24,959,517 | 5,111,444 | 4.883065 | 0.0001 |
C(29) | 57,384,706 | 7,659,148 | 7.492310 | 0.0000 |
C(30) | 0.462859 | 0.182202 | 2.540367 | 0.0211 |
C(31) | − 0.589128 | 0.254257 | − 2.317058 | 0.0332 |
C(32) | − 0.196145 | 0.072943 | − 2.689009 | 0.0155 |
C(33) | − 0.460801 | 0.062870 | − 7.329401 | 0.0000 |
C(34) | − 78,943.72 | 144,231.9 | − 0.547339 | 0.5913 |
C(35) | − 299,823.5 | 143,791.8 | − 2.085123 | 0.0524 |
C(36) | 56,781,124 | 71,688,571 | 0.792053 | 0.4392 |
C(37) | 1.64E+08 | 73,840,821 | 2.220123 | 0.0403 |
C(38) | 6,900,154 | 8,680,963 | 0.794860 | 0.4377 |
Equation 4 | ||||
C(39) | 1.285059 | 0.434772 | 2.955710 | 0.0089 |
C(40) | − 0.744403 | 0.485515 | − 1.533225 | 0.1436 |
C(41) | − 0.397769 | 0.441720 | − 0.900499 | 0.3804 |
C(42) | − 0.036184 | 0.760726 | − 0.047565 | 0.9626 |
C(43) | − 0.801679 | 0.445587 | − 1.799154 | 0.0898 |
C(44) | 0.967750 | 0.434187 | 2.228877 | 0.0396 |
C(45) | − 1,155,345 | 429,219.5 | − 2.691735 | 0.0154 |
C(46) | 934,122.0 | 766,075.1 | 1.219361 | 0.2394 |
C(47) | 47,175,328 | 17,651,650 | 2.672573 | 0.0161 |
C(48) | 75,707,965 | 26,449,783 | 2.862328 | 0.0108 |
C(49) | 0.707602 | 0.629207 | 1.124593 | 0.2764 |
C(50) | − 0.337961 | 0.878040 | − 0.384903 | 0.7051 |
C(51) | − 1.186012 | 0.251899 | − 4.708283 | 0.0002 |
C(52) | − 0.121187 | 0.217113 | − 0.558173 | 0.5840 |
C(53) | − 681,465.5 | 498,084.4 | − 1.368173 | 0.1891 |
C(54) | 56,746.06 | 496,564.5 | 0.114277 | 0.9104 |
C(55) | − 14,648,535 | 2.48E+08 | − 0.059170 | 0.9535 |
C(56) | 4.08E+08 | 2.55E+08 | 1.600078 | 0.1280 |
C(57) | 22,154,646 | 29,978,478 | 0.739018 | 0.4700 |
Equation 5 | ||||
C(58) | − 2.79E−07 | 2.02E−07 | − 1.384394 | 0.1841 |
C(59) | − 6.35E−08 | 2.25E−07 | − 0.281903 | 0.7814 |
C(60) | − 3.55E−07 | 2.05E−07 | − 1.731408 | 0.1015 |
C(61) | 2.41E−07 | 3.53E−07 | 0.683101 | 0.5037 |
C(62) | 2.01E−07 | 2.07E−07 | 0.973001 | 0.3442 |
C(63) | 3.64E−09 | 2.01E−07 | 0.018058 | 0.9858 |
C(64) | 0.161820 | 0.199135 | 0.812612 | 0.4277 |
C(65) | 0.103769 | 0.355418 | 0.291964 | 0.7738 |
C(66) | 12.49117 | 8.189431 | 1.525279 | 0.1456 |
C(67) | 10.46196 | 12.27130 | 0.852555 | 0.4058 |
C(68) | 4.81E−07 | 2.92E−07 | 1.647003 | 0.1179 |
C(69) | 2.47E−07 | 4.07E−07 | 0.606326 | 0.5523 |
C(70) | 7.55E−09 | 1.17E−07 | 0.064640 | 0.9492 |
C(71) | 1.01E−07 | 1.01E−07 | 1.001979 | 0.3304 |
C(72) | 0.024607 | 0.231085 | 0.106483 | 0.9164 |
C(73) | − 9.20E−05 | 0.230380 | − 0.000400 | 0.9997 |
C(74) | 145.4278 | 114.8577 | 1.266156 | 0.2225 |
C(75) | − 58.62206 | 118.3060 | − 0.495512 | 0.6266 |
C(76) | 3.487487 | 13.90843 | 0.250746 | 0.8050 |
Equation 6 | ||||
C(77) | − 1.16E−09 | 8.85E−09 | − 0.131490 | 0.8969 |
C(78) | − 1.21E−09 | 9.89E−09 | − 0.122217 | 0.9042 |
C(79) | − 5.09E−10 | 8.99E−09 | − 0.056609 | 0.9555 |
C(80) | 3.26E−09 | 1.55E−08 | 0.210307 | 0.8359 |
C(81) | − 5.54E−10 | 9.07E−09 | − 0.061108 | 0.9520 |
C(82) | − 8.36E−11 | 8.84E−09 | − 0.009457 | 0.9926 |
C(83) | 0.009029 | 0.008739 | 1.033135 | 0.3160 |
C(84) | 0.007247 | 0.015598 | 0.464612 | 0.6481 |
C(85) | − 0.223542 | 0.359394 | − 0.621999 | 0.5422 |
C(86) | − 0.077664 | 0.538527 | − 0.144216 | 0.8870 |
C(87) | 6.89E−09 | 1.28E−08 | 0.537674 | 0.5978 |
C(88) | 2.14E−09 | 1.79E−08 | 0.119504 | 0.9063 |
C(89) | − 1.47E−09 | 5.13E−09 | − 0.285997 | 0.7783 |
C(90) | − 7.21E−10 | 4.42E−09 | − 0.163085 | 0.8724 |
C(91) | − 0.002021 | 0.010141 | − 0.199322 | 0.8444 |
C(92) | − 0.005366 | 0.010110 | − 0.530704 | 0.6025 |
C(93) | − 0.760168 | 5.040536 | − 0.150811 | 0.8819 |
C(94) | 6.192676 | 5.191865 | 1.192765 | 0.2493 |
C(95) | − 0.267096 | 0.610372 | − 0.437596 | 0.6672 |
Equation 7 | ||||
C(96) | 0.925956 | 0.162199 | 5.708784 | 0.0000 |
C(97) | − 0.131696 | 0.181129 | − 0.727081 | 0.4771 |
C(98) | 0.175217 | 0.164791 | 1.063267 | 0.3025 |
C(99) | − 0.143342 | 0.283801 | − 0.505080 | 0.6200 |
C(100) | − 0.747954 | 0.166233 | − 4.499423 | 0.0003 |
C(101) | 0.187047 | 0.161981 | 1.154751 | 0.2642 |
C(102) | − 867,138.1 | 160,127.2 | − 5.415307 | 0.0000 |
C(103) | − 196,265.3 | 285,796.6 | − 0.686731 | 0.5015 |
C(104) | − 11,058,494 | 6,585,232 | − 1.679287 | 0.1114 |
C(105) | 31,900,809 | 9,867,517 | 3.232911 | 0.0049 |
C(106) | − 0.610887 | 0.234736 | − 2.602441 | 0.0186 |
C(107) | − 0.114574 | 0.327567 | − 0.349773 | 0.7308 |
C(108) | − 0.132377 | 0.093975 | − 1.408645 | 0.1770 |
C(109) | − 0.382000 | 0.080998 | − 4.716189 | 0.0002 |
C(110) | − 271,405.3 | 185,818.4 | − 1.460594 | 0.1624 |
C(111) | − 149,730.1 | 185,251.4 | − 0.808253 | 0.4301 |
C(112) | − 2.70E+08 | 92,358,607 | − 2.924858 | 0.0095 |
C(113) | 3.11E+08 | 95,131,417 | 3.264139 | 0.0046 |
C(114) | 5,945,966 | 11,183,954 | 0.531652 | 0.6018 |
Equation 8 | ||||
C(115) | 0.427007 | 0.459713 | 0.928857 | 0.3660 |
C(116) | 0.447690 | 0.513367 | 0.872066 | 0.3953 |
C(117) | 1.471974 | 0.467060 | 3.151572 | 0.0058 |
C(118) | − 2.082301 | 0.804366 | − 2.588748 | 0.0191 |
C(119) | − 0.351103 | 0.471148 | − 0.745207 | 0.4663 |
C(120) | − 0.635582 | 0.459095 | − 1.384425 | 0.1841 |
C(121) | 699,813.8 | 453,842.2 | 1.541976 | 0.1415 |
C(122) | 1,189,997 | 810,021.9 | 1.469092 | 0.1601 |
C(123) | 5,261,586 | 18,664,257 | 0.281907 | 0.7814 |
C(124) | 45,599,149 | 27,967,105 | 1.630457 | 0.1214 |
C(125) | − 0.276241 | 0.665303 | − 0.415212 | 0.6832 |
C(126) | 1.043263 | 0.928410 | 1.123709 | 0.2768 |
C(127) | − 0.244202 | 0.266349 | − 0.916846 | 0.3720 |
C(128) | − 0.691074 | 0.229568 | − 3.010319 | 0.0079 |
C(129) | − 217,849.4 | 526,657.6 | − 0.413645 | 0.6843 |
C(130) | − 335,748.3 | 525,050.5 | − 0.639459 | 0.5310 |
C(131) | − 1.21E+08 | 2.62E+08 | − 0.461392 | 0.6504 |
C(132) | 1.80E+08 | 2.70E+08 | 0.666059 | 0.5143 |
C(133) | − 7,924,084 | 31,698,228 | − 0.249985 | 0.8056 |
Equation 9 | ||||
C(134) | − 1.06E−06 | 3.23E−07 | − 3.277891 | 0.0044 |
C(135) | 9.75E−08 | 3.61E−07 | 0.270225 | 0.7902 |
C(136) | − 6.38E−07 | 3.28E−07 | − 1.942072 | 0.0689 |
C(137) | − 1.68E−06 | 5.65E−07 | − 2.971708 | 0.0086 |
C(138) | 1.02E−06 | 3.31E−07 | 3.070699 | 0.0069 |
C(139) | − 6.69E−09 | 3.23E−07 | − 0.020731 | 0.9837 |
C(140) | 0.512005 | 0.319009 | 1.604990 | 0.1269 |
C(141) | 0.941778 | 0.569369 | 1.654071 | 0.1165 |
C(142) | − 61.18373 | 13.11922 | − 4.663670 | 0.0002 |
C(143) | − 57.10722 | 19.65825 | − 2.905000 | 0.0099 |
C(144) | 2.52E−07 | 4.68E−07 | 0.538759 | 0.5970 |
C(145) | 1.77E−06 | 6.53E−07 | 2.708138 | 0.0149 |
C(146) | 7.59E−07 | 1.87E−07 | 4.055578 | 0.0008 |
C(147) | 3.35E−07 | 1.61E−07 | 2.075859 | 0.0534 |
C(148) | − 0.325717 | 0.370191 | − 0.879861 | 0.3912 |
C(149) | 0.325511 | 0.369061 | 0.881998 | 0.3901 |
C(150) | 385.8660 | 183.9986 | 2.097114 | 0.0512 |
C(151) | − 439.9923 | 189.5226 | − 2.321582 | 0.0329 |
C(152) | − 38.56337 | 22.28088 | − 1.730783 | 0.1016 |
Equation 10 | ||||
C(153) | − 1.59E−09 | 4.84E−10 | − 3.272774 | 0.0045 |
C(154) | 8.59E−11 | 5.41E−10 | 0.158851 | 0.8757 |
C(155) | 4.01E−10 | 4.92E−10 | 0.814055 | 0.4269 |
C(156) | − 1.89E−09 | 8.48E−10 | − 2.228782 | 0.0396 |
C(157) | 1.11E−09 | 4.97E−10 | 2.241014 | 0.0387 |
C(158) | 1.02E−10 | 4.84E−10 | 0.210010 | 0.8362 |
C(159) | − 0.000521 | 0.000478 | − 1.089254 | 0.2912 |
C(160) | 0.002017 | 0.000854 | 2.362583 | 0.0303 |
C(161) | − 0.049367 | 0.019670 | − 2.509688 | 0.0225 |
C(162) | − 0.020599 | 0.029475 | − 0.698875 | 0.4941 |
C(163) | 7.15E−10 | 7.01E−10 | 1.019308 | 0.3223 |
C(164) | 3.28E−09 | 9.78E−10 | 3.354318 | 0.0038 |
C(165) | 6.08E−10 | 2.81E−10 | 2.164458 | 0.0450 |
C(166) | − 1.51E−10 | 2.42E−10 | − 0.625967 | 0.5397 |
C(167) | − 0.000393 | 0.000555 | − 0.707707 | 0.4887 |
C(168) | 0.000471 | 0.000553 | 0.850508 | 0.4069 |
C(169) | 1.104041 | 0.275880 | 4.001887 | 0.0009 |
C(170) | − 0.191628 | 0.284163 | − 0.674360 | 0.5091 |
C(171) | 0.009593 | 0.033407 | 0.287144 | 0.7775 |
Appendix 4: vector autoregression estimates
Sample (adjusted): 1983 2018 | ||||||||
---|---|---|---|---|---|---|---|---|
Included observations: 36 after adjustments | ||||||||
Standard errors in & t-statistics in | ||||||||
DGDPTL | DCAP | DCONS | DDEBT | DEMP | DGEXPD | DINVST | DNX | |
DGDPTL (− 1) | 1.414709 | 0.836309 | 1.603117 | − 3.37E−07 | 3.71E−09 | 1.189134 | 0.576323 | − 1.43E−06 |
(0.44564) | (0.12968) | (0.39312) | (1.8E−07) | (7.7E−09) | (0.17951) | (0.38704) | (3.2E−07) | |
[3.17453] | [6.44895] | [4.07793] | [− 1.92054] | [0.48175] | [6.62442] | [1.48904] | [− 4.51910] | |
DGDPTL (− 2) | − 0.401626 | 0.463344 | − 0.634562 | − 1.01E−07 | 5.39E−10 | − 0.009451 | 0.513098 | − 7.62E−08 |
(0.55690) | (0.16206) | (0.49127) | (2.2E−07) | (9.6E−09) | (0.22432) | (0.48367) | (4.0E−07) | |
[− 0.72117] | [2.85912] | [− 1.29168] | [− 0.45959] | [0.05607] | [− 0.04213] | [1.06083] | [− 0.19229] | |
DCAP (− 1) | − 0.216888 | 0.217153 | − 0.248962 | − 2.13E−07 | 1.14E−09 | − 0.007130 | 1.406980 | − 3.76E−07 |
(0.42366) | (0.12329) | (0.37373) | (1.7E−07) | (7.3E−09) | (0.17065) | (0.36795) | (3.0E−07) | |
[− 0.51194] | [1.76139] | [− 0.66615] | [− 1.27598] | [0.15522] | [− 0.04178] | [3.82380] | [− 1.24673] | |
DCAP (− 2) | − 0.849929 | 0.483788 | 0.486706 | 3.15E−07 | 1.06E−08 | − 0.013867 | − 1.970669 | − 1.86E−06 |
(0.80869) | (0.23533) | (0.71338) | (3.2E−07) | (1.4E−08) | (0.32575) | (0.70236) | (5.8E−07) | |
[− 1.05099] | [2.05580] | [0.68225] | [0.98887] | [0.76165] | [− 0.04257] | [− 2.80580] | [− 3.23457] | |
DCONS (− 1) | − 0.797582 | − 0.976507 | − 1.053251 | 2.62E−07 | − 4.46E−09 | − 0.983552 | − 0.481317 | 1.35E−06 |
(0.47632) | (0.13861) | (0.42018) | (1.9E−07) | (8.2E−09) | (0.19187) | (0.41369) | (3.4E−07) | |
[− 1.67446] | [− 7.04506] | [− 2.50665] | [1.39697] | [− 0.54277] | [− 5.12627] | [− 1.16348] | [3.98874] | |
DCONS (− 2) | 0.865823 | − 0.443507 | 0.931521 | 7.45E−08 | − 8.80E−10 | 0.040920 | − 0.703865 | 2.02E−07 |
(0.48616) | (0.14147) | (0.42887) | (1.9E−07) | (8.4E−09) | (0.19583) | (0.42224) | (3.5E−07) | |
[1.78093] | [− 3.13492] | [2.17205] | [0.38935] | [− 0.10479] | [0.20896] | [− 1.66699] | [0.58356] | |
DDEBT (− 1) | − 167,089.3 | 505,325.6 | − 1,049,314 | 0.160017 | 0.010588 | − 810,714.2 | 735,768.5 | 0.432346 |
(496,201.) | (144,394.) | (437,720.) | (0.19517) | (0.00857) | (199,873.) | (430,953.) | (0.35292) | |
[− 0.33674] | [3.49964] | [− 2.39723] | [0.81990] | [1.23566] | [− 4.05615] | [1.70730] | [1.22507] | |
DDEBT (− 2) | 267,274.2 | − 587,804.7 | 455,137.5 | − 0.058814 | 0.000845 | − 142,649.6 | 1,163,765 | 0.860804 |
(778,700.) | (226,600.) | (686,924.) | (0.30628) | (0.01345) | (313,665.) | (676,305.) | (0.55384) | |
[0.34323] | [− 2.59401] | [0.66257] | [− 0.19203] | [0.06287] | [− 0.45478] | [1.72077] | [1.55425] | |
DEMP (− 1) | 23,601,189 | 29,036,333 | 52,888,542 | 15.74435 | − 0.152119 | − 14,072,295 | 4,526,347 | − 56.82526 |
(1.9E+07) | (5,607,141) | (1.7E+07) | (7.57874) | (0.33273) | (7,761,522) | (1.7E+07) | (13.7045) | |
[1.22485] | [5.17846] | [3.11152] | [2.07744] | [− 0.45719] | [− 1.81308] | [0.27047] | [− 4.14646] | |
DEMP (− 2) | 1.00E+08 | 61,322,205 | 81,990,168 | 12.79191 | 0.005553 | 30,840,607 | 45,785,605 | − 55.53509 |
(3.0E+07) | (8,812,003) | (2.7E+07) | (11.9105) | (0.52290) | (1.2E+07) | (2.6E+07) | (21.5376) | |
[3.31018] | [6.95894] | [3.06930] | [1.07400] | [0.01062] | [2.52838] | [1.74089] | [− 2.57852] | |
DGEXPD (− 1) | 1.520693 | 0.383298 | 0.511827 | 5.07E−07 | 3.92E−09 | − 0.756157 | − 0.360767 | 4.58E−07 |
(0.72093) | (0.20979) | (0.63596) | (2.8E−07) | (1.2E−08) | (0.29039) | (0.62613) | (5.1E−07) | |
[2.10936] | [1.82707] | [0.80481] | [1.78751] | [0.31525] | [− 2.60390] | [− 0.57619] | [0.89273] | |
DGEXPD (− 2) | − 0.634859 | − 0.941485 | − 1.056491 | 2.05E−07 | − 8.22E−09 | − 0.398308 | 0.843151 | 2.17E−06 |
(0.90774) | (0.26415) | (0.80075) | (3.6E−07) | (1.6E−08) | (0.36564) | (0.78838) | (6.5E−07) | |
[− 0.69939] | [− 3.56420] | [− 1.31937] | [0.57314] | [− 0.52458] | [− 1.08934] | [1.06948] | [3.35522] | |
DINVST (− 1) | − 1.017709 | − 0.271065 | − 1.354353 | 1.51E−08 | − 3.96E−09 | − 0.230393 | − 0.305009 | 8.98E−07 |
(0.27173) | (0.07907) | (0.23970) | (1.1E−07) | (4.7E−09) | (0.10945) | (0.23599) | (1.9E−07) | |
[− 3.74536] | [− 3.42810] | [− 5.65020] | [0.14113] | [− 0.84382] | [− 2.10496] | [− 1.29244] | [4.64556] | |
DINVST (− 2) | − 0.623639 | − 0.499137 | − 0.174184 | 6.96E−08 | − 1.38E−09 | − 0.351899 | − 0.683307 | 2.91E−07 |
(0.24367) | (0.07091) | (0.21495) | (9.6E−08) | (4.2E−09) | (0.09815) | (0.21163) | (1.7E−07) | |
[− 2.55933] | [− 7.03917] | [− 0.81033] | [0.72583] | [− 0.32774] | [− 3.58521] | [− 3.22876] | [1.68183] | |
DNX (− 1) | − 422,528.0 | 27,583.79 | − 646,194.8 | 0.230764 | − 0.002279 | − 626,250.4 | − 370,821.4 | 0.181645 |
(413,979.) | (120,467.) | (365,189.) | (0.16283) | (0.00715) | (166,753.) | (359,543.) | (0.29444) | |
[− 1.02065] | [0.22897] | [− 1.76948] | [1.41724] | [− 0.31876] | [− 3.75555] | [− 1.03137] | [0.61693] | |
DNX (− 2) | 344,619.5 | − 148,637.5 | 340,289.6 | 0.044391 | − 0.001382 | − 87,936.38 | − 278,929.7 | 0.239796 |
(543,211.) | (158,074.) | (479,190.) | (0.21366) | (0.00938) | (218,809.) | (471,782.) | (0.38635) | |
[0.63441] | [− 0.94031] | [0.71014] | [0.20777] | [− 0.14732] | [− 0.40189] | [− 0.59123] | [0.62067] | |
C | 34,824,267 | 17,459,026 | 37,762,129 | 11.05206 | − 0.067016 | 102,635.9 | − 8,877,631 | − 30.07167 |
(3.0E+07) | (8,774,661) | (2.7E+07) | (11.8600) | (0.52069) | (1.2E+07) | (2.6E+07) | (21.4463) | |
[1.15489] | [1.98971] | [1.41964] | [0.93188] | [− 0.12871] | [0.00845] | [− 0.33899] | [− 1.40218] | |
R-squared | 0.958528 | 0.954753 | 0.944923 | 0.780313 | 0.251855 | 0.949392 | 0.929330 | 0.809528 |
Adj. R-squared | 0.923604 | 0.916650 | 0.898542 | 0.595313 | − 0.378161 | 0.906775 | 0.869818 | 0.649131 |
Sum sq. resids | 2.46E+17 | 2.08E+16 | 1.91E+17 | 37,996.90 | 73.23676 | 3.99E+16 | 1.85E+17 | 124,246.0 |
S.E. equation | 1.14E+08 | 33,085,821 | 1.00E+08 | 44.71954 | 1.963305 | 45,798,086 | 98,747,019 | 80.86572 |
F-statistic | 27.44621 | 25.05732 | 20.37325 | 4.217914 | 0.399760 | 22.27735 | 15.61585 | 5.047016 |
Log likelihood | − 707.3443 | − 662.9045 | − 702.8298 | − 176.3931 | − 63.86500 | − 674.6095 | − 702.2689 | − 197.7188 |
Akaike AIC | 40.24135 | 37.77247 | 39.99054 | 10.74406 | 4.492500 | 38.42275 | 39.95939 | 11.92882 |
Schwarz SIC | 40.98912 | 38.52025 | 40.73832 | 11.49184 | 5.240273 | 39.17052 | 40.70716 | 12.67659 |
Mean dependent | 3.25E+08 | 61,503,414 | 2.49E+08 | 1.433333 | 0.171111 | 69,458,130 | 50,036,956 | − 39.07889 |
S.D. dependent | 4.11E+08 | 1.15E+08 | 3.15E+08 | 70.29715 | 1.672391 | 1.50E+08 | 2.74E+08 | 136.5186 |
Determinant resid covariance (dof adj.) | 9.67E+82 | |||||||
Determinant resid covariance | 5.82E+80 | |||||||
Log likelihood | − 3756.080 | |||||||
Akaike information criterion | 216.2267 | |||||||
Schwarz criterion | 222.2089 | |||||||
Number of coefficients | 136 |
Appendix 5: Granger causality results
Null hypothesis | Obs | F-statistic | Probability | Direction |
---|---|---|---|---|
DCAP does not Granger Cause DGDPTL | 36 | 14.6429 | 3.E-05 | |
DGDPTL does not Granger Cause DCAP | 5.95176 | 0.0065 | GDP → CAP | |
DCONS does not Granger Cause DGDPTL | 36 | 2.78430 | 0.0773 | |
DGDPTL does not Granger Cause DCONS | 1.75862 | 0.1890 | ||
DDEBT does not Granger Cause DGDPTL | 36 | 0.05527 | 0.9463 | |
DGDPTL does not Granger Cause DDEBT | 3.09461 | 0.0595 | ||
DEMP does not Granger Cause DGDPTL | 36 | 2.21638 | 0.1260 | |
DGDPTL does not Granger Cause DEMP | 0.31780 | 0.7301 | ||
DINVST does not Granger Cause DGDPTL | 36 | 1.47385 | 0.2447 | |
DGDPTL does not Granger Cause DINVST | 6.15127 | 0.0056 | GDP → INVST | |
DGEXPD does not Granger Cause DGDPTL | 36 | 1.68656 | 0.2017 | |
DGDPTL does not Granger Cause DGEXPD | 20.3646 | 2.E-06 | ||
DNX does not Granger Cause DGDPTL | 36 | 0.46667 | 0.6314 | |
DGDPTL does not Granger Cause DNX | 0.09480 | 0.9098 | ||
DREER does not Granger Cause DGDPTL | 36 | 0.29908 | 0.7436 | |
DGDPTL does not Granger Cause DREER | 3.57012 | 0.0402 | GDP → REER | |
DCONS does not Granger Cause DCAP | 36 | 5.13101 | 0.0119 | CONS ↔ CAP |
DCAP does not Granger Cause DCONS | 5.90460 | 0.0067 | ||
DDEBT does not Granger Cause DCAP | 36 | 3.81159 | 0.0331 | DEBT ↔ CAP |
DCAP does not Granger Cause DDEBT | 9.08042 | 0.0008 | ||
DEMP does not Granger Cause DCAP | 36 | 2.87485 | 0.0716 | |
DCAP does not Granger Cause DEMP | 1.03194 | 0.3682 | ||
DINVST does not Granger Cause DCAP | 36 | 6.19535 | 0.0055 | INVST → CAP |
DCAP does not Granger Cause DINVST | 25.2236 | 3.E-07 | ||
DGEXPD does not Granger Cause DCAP | 36 | 4.09692 | 0.0264 | GEXPND → CAP |
DCAP does not Granger Cause DGEXPD | 4.63291 | 0.0174 | ||
DNX does not Granger Cause DCAP | 36 | 1.44594 | 0.2510 | |
DCAP does not Granger Cause DNX | 0.70915 | 0.4999 | ||
DREER does not Granger Cause DCAP | 36 | 2.48975 | 0.0994 | |
DCAP does not Granger Cause DREER | 1.76968 | 0.1872 | ||
DDEBT does not Granger Cause DCONS | 36 | 0.15150 | 0.8601 | |
DCONS does not Granger Cause DDEBT | 0.21933 | 0.8043 | ||
DDEBT does not Granger Cause DCONS | 36 | 0.15150 | 0.8601 | |
DCONS does not Granger Cause DDEBT | 0.21933 | 0.8043 | ||
DEMP does not Granger Cause DCONS | 36 | 1.19393 | 0.3166 | |
DCONS does not Granger Cause DEMP | 0.19161 | 0.8266 | ||
DINVST does not Granger Cause DCONS | 36 | 3.76975 | 0.0342 | INVST → CONS |
DCONS does not Granger Cause DINVST | 2.21365 | 0.1263 | ||
DGEXPD does not Granger Cause DCONS | 36 | 0.04503 | 0.9560 | |
DCONS does not Granger Cause DGEXPD | 4.80290 | 0.0152 | CONS → GEXPD | |
DNX does not Granger Cause DCONS | 36 | 0.08033 | 0.9230 | |
DCONS does not Granger Cause DNX | 1.12284 | 0.3382 | ||
DREER does not Granger Cause DCONS | 36 | 2.09535 | 0.1401 | |
DCONS does not Granger Cause DREER | 1.28420 | 0.2912 | ||
DEMP does not Granger Cause DDEBT | 36 | 1.67636 | 0.2036 | |
DDEBT does not Granger Cause DEMP | 0.41099 | 0.6666 | ||
DINVST does not Granger Cause DDEBT | 36 | 0.11665 | 0.8903 | |
DDEBT does not Granger Cause DINVST | 3.00332 | 0.0642 | ||
DGEXPD does not Granger Cause DDEBT | 36 | 0.49421 | 0.6148 | |
DDEBT does not Granger Cause DGEXPD | 0.95678 | 0.3952 | ||
DNX does not Granger Cause DDEBT | 36 | 1.77162 | 0.1868 | |
DDEBT does not Granger Cause DNX | 0.39063 | 0.6799 | ||
DREER does not Granger Cause DDEBT | 36 | 1.00415 | 0.3780 | |
DDEBT does not Granger Cause DREER | 0.74346 | 0.4838 | ||
DINVST does not Granger Cause DEMP | 36 | 0.09421 | 0.9104 | |
DEMP does not Granger Cause DINVST | 2.46121 | 0.1018 | ||
DGEXPD does not Granger Cause DEMP | 36 | 0.13030 | 0.8783 | |
DEMP does not Granger Cause DGEXPD | 0.65251 | 0.5277 | ||
DNX does not Granger Cause DEMP | 36 | 1.07835 | 0.3526 | |
DEMP does not Granger Cause DNX | 3.99674 | 0.0286 | ||
DREER does not Granger Cause DEMP | 36 | 0.79185 | 0.4620 | |
DEMP does not Granger Cause DREER | 0.25906 | 0.7734 | ||
DGEXPD does not Granger Cause DINVST | 36 | 2.48868 | 0.0995 | |
DINVST does not Granger Cause DGEXPD | 3.12658 | 0.0580 | ||
DNX does not Granger Cause DINVST | 36 | 0.13422 | 0.8749 | |
DINVST does not Granger Cause DNX | 2.06739 | 0.1436 | ||
DREER does not Granger Cause DINVST | 36 | 0.45146 | 0.6408 | |
DINVST does not Granger Cause DREER | 0.79901 | 0.4588 | ||
DNX does not Granger Cause DGEXPD | 36 | 0.46468 | 0.6326 | |
DGEXPD does not Granger Cause DNX | 0.73339 | 0.4884 | ||
DREER does not Granger Cause DGEXPD | 36 | 0.34609 | 0.7101 | |
DGEXPD does not Granger Cause DREER | 1.09058 | 0.3486 | ||
DREER does not Granger Cause DNX | 36 | 6.23033 | 0.0053 | REER ↔ NX |
DNX does not Granger Cause DREER | 6.82859 | 0.0035 |
Appendix 6: correlation analysis between variables
Covariance analysis: ordinary | |||||||||
---|---|---|---|---|---|---|---|---|---|
Correlation t-statistic probability | DINVST | DNX | DREER | DGEXPD | DGDPTL | DEMP | DDEBT | DCONS | DCAP |
DINVST | 1.000000 | ||||||||
– | |||||||||
– | |||||||||
DNX | − 0.152885 | 1.000000 | |||||||
− 0.928221 | – | ||||||||
0.3595 | – | ||||||||
DREER | − 0.018431 | − 0.471958 | 1.000000 | ||||||
− 0.110605 | − 3.211979 | – | |||||||
0.9125 | 0.0028 | – | |||||||
DGEXPD | 0.562604 | − 0.296125 | 0.167447 | 1.000000 | |||||
4.083116 | − 1.860182 | 1.019068 | – | ||||||
0.0002 | 0.0710 | 0.3150 | – | ||||||
DGDPTL | 0.421406 | − 0.072537 | − 0.021114 | 0.687313 | 1.000000 | ||||
2.788085 | − 0.436373 | − 0.126715 | 5.677439 | – | |||||
0.0084 | 0.6652 | 0.8999 | 0.0000 | – | |||||
DEMP | 0.019779 | − 0.160435 | − 0.008456 | − 0.137229 | − 0.041764 | 1.000000 | |||
0.118696 | − 0.975244 | − 0.050738 | − 0.831241 | − 0.250805 | – | ||||
0.9062 | 0.3359 | 0.9598 | 0.4113 | 0.8034 | – | ||||
DDEBT | − 0.436235 | 0.134678 | 0.001862 | − 0.623099 | − 0.178600 | 0.054578 | 1.000000 | ||
− 2.908774 | 0.815497 | 0.011171 | − 4.779933 | − 1.089108 | 0.327959 | – | |||
0.0062 | 0.4202 | 0.9911 | 0.0000 | 0.2833 | 0.7448 | – | |||
DCONS | 0.378254 | − 0.423392 | 0.074390 | 0.637721 | 0.856186 | − 0.053166 | − 0.137910 | 1.000000 | |
2.451676 | − 2.804084 | 0.447582 | 4.967526 | 9.942780 | − 0.319446 | − 0.835444 | – | ||
0.0192 | 0.0081 | 0.6571 | 0.0000 | 0.0000 | 0.7512 | 0.4090 | – | ||
DCAP | 0.266866 | − 0.187453 | 0.063151 | 0.478367 | 0.635826 | 0.024643 | − 0.090457 | 0.416800 | 1.000000 |
1.661449 | − 1.145014 | 0.379664 | 3.268431 | 4.942730 | 0.147904 | − 0.544976 | 2.751162 | – | |
0.1053 | 0.2598 | 0.7064 | 0.0024 | 0.0000 | 0.8832 | 0.5891 | 0.0092 | – |
Appendix 7
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Cite this article
Akalpler, E. Triggering economic growth to ensure financial stability: case study of Northern Cyprus. Financ Innov 9, 77 (2023). https://doi.org/10.1186/s40854-023-00481-7
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DOI: https://doi.org/10.1186/s40854-023-00481-7
Keywords
- RGDP
- REH
- Public debt
- Government expenditure
- Northern Cyprus
- Restricted VAR
JEL Classification
- O1
- O11
- C13