In this paper we develop a dynamic discrete-time bivariate probit model, in which the conditions for Granger non-causality can be represented and tested. The conditions for simultaneous independence are also worked out. The model is extended in order to allow for covariates, representing individual as well as time heterogeneity. The proposed model can be estimated by Maximum Likelihood. Granger...

Housing market cycles are featured by correlation of prices and trading volume, which is conventionally attributed to a causal relation between prices and volume. This paper relies on a large panel dataset of housing markets in 127 metropolitan statistic areas from 1990:1 to 2002:2, treats both the price and volume as endogenous variables in housing markets, and studies how exogenous shocks cau...

A key feature of the Swedish economy over last decade and a half has been the rapid internationalisation of its economy, both through FDI and trade. In this paper we consider the relationship between these two trends: whether the effect of increased inward FDI on exports by domestic firms may be positive or negative. The first case may occur as a result of demonstration effects. The second may ...

This paper compares emission taxes with other taxes from the viewpoint of emission reduction in an open economy. Using a simple monopoly model, we show that emission taxes may not be very effective to protect environment because of the spillover effects between markets stemming from non-constant marginal costs and transboundary externalities. Other taxes such as production taxes and tariffs are...

Previous analyses of free trade areas suggest that member countries reduce external tariffs to the level that improves welfare of non-member countries. Using an oligopoly model with product differentiation, this paper shows that when a free trade area entails endogenous change from segmented to integrated markets for internally produced goods, external tariffs become strategic complements and t...

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, exp...

To examine the effects of unilateral trade liberalization on growth and welfare of the liberalizing and partner countries through intraindustry reallocations, we formulate an asymmetric two-country Melitz model of trade and endogenous growth based on capital accumulation. We obtain two main results. First, each country’s mass of exported varieties, revenue share of exported varieties, and growt...

To analyze the effects on prices of simultaneous tariff reductions by multiple importing countries, we construct a simple three-country model where a good is produced by a monopolist with non-constant marginal cost and imported by two countries. We specifically compare two representative tariff-reduction formulas: the "fixed-amount" and the "uniform percentage" reductions. The uniform percentag...

This paper uses all value-added tax (VAT) changes across EU Member States from 1988 to 2016 estimate the effect of VATs on trade flows. We find small elasticities flows with respect VATs, even when VAT are large. These substantially smaller than tariffs estimated in literature. finding holds different time periods, countries, and types reforms. Our results imply that unlikely distort (JEL F13, ...

a r t i c l e i n f o JEL classification: O43 O16 E44 E31 Keywords: Banking sector Stock market Economic growth Granger causality ASEAN countries This paper examines the relationship between banking sector development, stock market development, economic growth, and four other macroeconomic variables in ASEAN countries for the period 1961–2012. Using principal component analysis for the construc...