nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2019‒09‒23
eleven papers chosen by
Paul Makdissi
Université d’Ottawa

  1. Is There Asymmetry between GDP and Labor Market Variables in Turkey under Okun’s Law? By Evren Erdogan Cosar; Ayse Arzu Yavuz
  2. Estimates of Exchange Rate Pass-through with Product-level Data By Yusuf Emre Akgunduz; Emine Meltem Bastan; Ufuk Demiroglu; Semih Tumen
  3. Long-Term Economic Forecasting with Structured Analogies and Interaction Groups By Konstantinos Nikolopoulos; Waleed S. Alghassab; Konstantia Litsiou; Stelios Sapountzis
  4. Governance and foreign direct investment: comparative study between Arab Maghreb countries and ASEAN By Aloui, Zouhaier
  5. Foreign Currency Debt and the Exchange Rate Pass-Through By Salih Fendoglu; Mehmet Selman Colak; Yavuz Selim Hacihasanoglu
  6. Two and a Half Million Syrian Refugees, Tasks and Capital Intensity By Yusuf Emre Akgunduz; Huzeyfe Torun
  7. Saudi Arabia; 2019 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  8. A Bayesian VAR Approach to Short-Term Inflation Forecasting By Fethi Ogunc
  9. Saudi Arabia; Selected Issues By International Monetary Fund
  10. Intraday Volume-Volatility Nexus in the FX Markets: Evidence from an Emerging Market By Suleyman Serdengecti; Ahmet Sensoy
  11. Composing High-Frequency Financial Conditions Index and Implications for Economic Activity By Abdullah Kazdal; Halil Ibrahim Korkmaz; Muhammed Hasan Yilmaz

  1. By: Evren Erdogan Cosar; Ayse Arzu Yavuz
    Abstract: This study examines the long-term relationship in Turkey between Gross Domestic Product (GDP) and two labor market variables, employment and unemployment rate. Markov switching (MS) models are estimated to capture non-linear effects under Okun’s law, using quarterly data for 1989 to 2018. The aim is to determine whether these labor market variables exhibit asymmetric behavior in response to GDP changes. Asymmetric effects determine the course of the recovery in GDP and employment after a crisis, so it is important to determine elasticities among these variables to implement active labor market policies. This study is novel in that we investigate the existence of these asymmetric relationships in the Turkish economy while taking into consideration the expansion and recession phases of both variables. In a MS model with two states being expansion and recession, we find asymmetric relationships between labor market variables and GDP both within and between phases. In addition, labor market variables in Turkey respond more strongly to GDP changes during recessions.
    Keywords: Okun’s law, Markov-switching models, Asymmetry, Turkey
    JEL: C22 E24 E32
    Date: 2019
  2. By: Yusuf Emre Akgunduz; Emine Meltem Bastan; Ufuk Demiroglu; Semih Tumen
    Abstract: We estimate the export and import pass-through rates using product-level data from Turkey. We find that the Turkish lira (TRY) exchange rate changes are mostly passed on to TRY prices of exports and imports–and therefore modestly to their prices in trading partners’ currencies. The rate of average pass-through to TRY-prices is 89% for imported goods and 82% for exported goods, with no apparent lags in the impact. Pass-through estimates by sector show variation and are relatively low for food and agricultural products. We argue that the highly-detailed productlevel data enable us to estimate the pass-through rates with better reliability and precision than we could by using only aggregated time-series data. We also introduce a pooled equation to estimate the difference between the export and import pass-through rates–a potentially useful statistic–in a way that allows statistical inference.
    Keywords: Exchange rate pass-through, Product-level estimates, Turkish export prices, Turkish import prices
    JEL: F14 F31 F41
    Date: 2019
  3. By: Konstantinos Nikolopoulos (Bangor University); Waleed S. Alghassab (University of Hail, Saudi Arabia); Konstantia Litsiou (Manchester Metropolitan University); Stelios Sapountzis (Salford Business School & Manchester Metropolitan University)
    Abstract: This paper explores the potential of long-term economic forecasting with judgmental methods: semi-Structured Analogies(SA) and Interaction Groups (IG). The case study is Saudi Arabia and its aim to adopt a diversification strategy to reduce its dependency on the oil sector, where oil revenue consists 90% of its budget currently. The study has four phases: Unaided Judgment, Structured Analogies, and Interaction Groups with Structured Analogies - all three using disguised data – before finally working on the undisguised case study under review over a significant amount of time. Adopting judgmental methods are attributed to three main reasons: in an attempt to derive long-term economic forecasts about Saudi Arabia’s ability to diversify its investments, to discover the impact of different factors on financial and economic outlooks, and to explore the main reasons for deviating the accuracy of financial and economic forecasts
    Keywords: Foresight, Economic Forecasting, Structured Analogies, Interaction Groups, Gross Domestic Product (GDP)
    Date: 2019–08
  4. By: Aloui, Zouhaier
    Abstract: The interest of this paper is to show the impact of governance on foreign direct investment and its different effects among Maghreb Arab countries and Asian countries. The results of the effect of political stability, the rule of law, the quality of regulation and the way responsibility and Showed That governance Positively and Significantly contributed to Improving the attractiveness of foreign direct investment (FDI) in Asia purpose in the Arab Maghreb countries, and the way responsibility: has a significant negative impact on FDI. The objective of this work is to study the impact of governance on direct foreign investment (FDI) for a panel of Maghreb Arab countries in Asia countries during 1996 to 2014. Empirical verification generally shows significant results in Asia and is not significant in countries of Arab Maghreb. Indeed, thesis results in Asian countries claim that governance plays a key role in attracting foreign direct investment (FDI).
    Keywords: governance, foreign direct investment, Arab Maghreb, Asia, panel data.
    JEL: F2 F21 F23 K12
    Date: 2019–09–02
  5. By: Salih Fendoglu; Mehmet Selman Colak; Yavuz Selim Hacihasanoglu
    Abstract: We show that higher foreign currency indebtedness raises the degree of exchange rate pass-through to domestic producer prices. For identification, we use micro-level data from Turkey, an emerging market economy that has experienced large exchange rate movements over the last decade. Matching the Credit Register of Turkey with disaggregated manufacturing sector data on domestic prices and foreign currency revenues from international trade, we show that sectors with higher ex-ante net foreign-currency liabilities raise their prices significantly more following domestic currency depreciation. The results are stronger if foreign currency liabilities are short term.
    Keywords: Exchange rate pass-through, Producer prices, Foreign currency indebtedness, Emerging market economies
    JEL: E31 F31
    Date: 2019
  6. By: Yusuf Emre Akgunduz; Huzeyfe Torun
    Abstract: We investigate how the rapid increase in the low-skilled labor supply induced by the inflow of 2.5 million Syrian refugees changed the tasks performed by native workers and the capital intensity of firms in Turkey. We use both survey and administrative data to estimate the effects. The results based on the Labor Force Survey suggest that the inflow of refugees increased natives’ task complexity, reducing the intensity of manual tasks, and raising the intensity of abstract tasks. This effect is driven by highly educated and young natives. Exploiting the administrative firm data that contains the entirety of firms in the country, we find that manufacturing firms reduced their capital intensity and investments. Reduction in capital intensity and investment is largely driven by smaller sized firms. We conclude that tasks provided by Syrian refugees are substitutes for manual tasks and capital inputs in production, and complements to more complex tasks.
    Keywords: Migration, Refugees, Labor-capital substitution, Skills, Tasks
    JEL: F22 J24 J21 D24
    Date: 2019
  7. By: International Monetary Fund
    Abstract: Reforms are starting to yield positive results. Oil prices and production have been volatile, and uncertainties in the global oil market continue. Promoting non-oil growth and creating jobs for Saudi nationals remain key challenges. Non-oil growth is expected to strengthen further this year and over the medium term. Risks to the growth outlook are broadly balanced.
    Date: 2019–09–09
  8. By: Fethi Ogunc
    Abstract: In this paper, we discuss the forecasting performance of Bayesian vector autoregression (BVAR) models for inflation under alternative specifications. In particular, we consider modelling in levels or in differences; choice of tightness; estimating BVARs of different model sizes and the accuracy of conditional and unconditional forecasts. Our empirical results point out that BVAR forecasts using variables in log-difference form outperform the ones using log-levels of the data. When we evaluate forecast performance in terms of model size, the lowest forecast errors belong to the models having relatively small number of variables, though we find only small difference in forecast accuracy among models of various sizes up to two quarter ahead. Finally, the conditioning seems to help to forecast inflation. Overall, pseudo evaluation findings suggest that small to medium size BVAR models having wisely selected variables in difference form and conditioning on the future paths of some variables appear to be a good choice to forecast inflation in Turkey.
    Keywords: Inflation, Forecasting, Bayesian vector autoregression, Turkey
    JEL: C51 C52 E37
    Date: 2019
  9. By: International Monetary Fund
    Abstract: Selected Issues
    Date: 2019–09–09
  10. By: Suleyman Serdengecti; Ahmet Sensoy
    Abstract: Using a dataset on local banks' daily FX transaction volume segregated into counterparty and transaction types, this article investigates the relationship between trading volume and intraday realized volatility for the US dollar/Turkish lira parity (USDTRY), one of the most traded emerging market currencies against US dollar. We question whether type of counterparty and transaction affects intraday volume-volatility relationship across various trading sessions around the world. We reveal that only the spot transactions of domestic customers have positive contemporaneous relation with realized volatility and this significance is valid only in global trading sessions that mostly overlap with the local trading hours. Furthermore, we utilize a metric for the belief dispersion on the level of future exchange rate via currency options and find that the dispersion significantly strengthens the volume-volatility nexus, confirming the Dispersion of Beliefs Hypothesis.
    Keywords: FX microstructure, Volume-volatility nexus, Mixture of distribution hypothesis (MDH), Sequential information arrival hypothesis (SIAH), Dispersion of beliefs hypothesis (DBH)
    JEL: G12 G15 D49
    Date: 2019
  11. By: Abdullah Kazdal; Halil Ibrahim Korkmaz; Muhammed Hasan Yilmaz
    Abstract: In this study, the main aim is to construct an index using high-frequency data related to financial markets and intermediation services for Turkey, termed as High-Frequency Financial Conditions Index by employing alternative statistical techniques. In a complementary manner, the informative nature of the constructed indices with respect to the course of economic activity is examined. The paper also includes detailed empirical analysis about the relationship between financial conditions and growth tendencies. The findings of the time series analysis and forecast exercises show that the constructed series are quite informative regarding the economic activity. More importantly, probit model estimations indicate that index can be qualified as an early indicator to predict “loss of momentum” episodes in economic growth by also considering the lead-lag relationship. When similar methodology is applied on emerging market economies, indices can be produced with a high level of co-movements with growth indicators. Panel Vector Autoregression estimation shows that, after controlling for country-specific characteristics, a shock coming to financial conditions is creating a significant overall response in emerging market countries. In terms of policy-making, we believe that constructed indices will contribute to a better understanding of the current financial environment and relation with economic activity.
    Keywords: Financial conditions, Growth dynamics, Factor models, Forecasting, Probit models, Panel VAR
    JEL: G10 E17 E44 E66
    Date: 2019

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