Girardin

Publications

Short- and long-run causality between energy consumption and economic growth: Evidence across regions in ChinaJournal articleMaria J. Herrerias, Roselyne Joyeux and Eric Girardin, Applied Energy, Volume 112, Issue C, pp. 1483-1492, 2013

The relationship between energy consumption and economic growth has created a large body of research in the energy-economics literature. In this paper, we investigate such a relation in the case of Chinese regions from 1995 to 2009. The majority of previous studies have ignored the regional dimension and the cross-sectional dependence of provinces. Besides, different energy policies adopted by the government have influenced energy intensity over time, showing improvement in the 1990s and deterioration from 2000 onwards. Thus, it is necessary to examine these two periods separately. Moreover, a detailed disaggregation of total energy consumption into electricity, coal, coke, and crude oil consumption and its linkage with economic growth may provide new insights for the design of energy policy across Chinese regions. We use panel techniques to test the direction of the causality in the long- and short-run between these different types of energy consumption and economic growth. Our results are mixed from 1995 to 2009 due the aforementioned break around 1999. However, in all cases our estimations provide empirical evidence that from 1999 to 2009 there is unidirectional causation from economic growth to energy consumption in the long-run. Therefore, energy-saving policies can be adopted without interrupting the path of growth.

Macro fundamentals as a source of stock market volatility in China: A GARCH-MIDAS approachJournal articleEric Girardin and Roselyne Joyeux, Economic Modelling, Volume 34, Issue C, pp. 59-68, 2013

In order to shed new light on the influence of volume and economic fundamentals on the long-run volatility of the Chinese stock market we follow the methodology introduced by Engle et al. (2009) and Engle and Rangel (2008) to account for the effects of macro fundamentals, and augment it with speculative factors. We show that the Chinese A-share market presented speculative characteristics before WTO entry in late 2001. However, after that date macroeconomic fundamentals and their volatility played an increasing role in the A-share market, especially CPI inflation, at the expense of speculative factors, proxied by volume. The B-share market has shown speculative characteristics since it was opened to domestic investors in 2001. However the disconnect of long-run stock market volatility from real economic activity in China is particularly noteworthy.

Seasonal Patterns of Energy in ChinaJournal articleMaria J. Herrerias and Eric Girardin, The Energy Journal, Volume 34, Issue 2, pp. 169, 2013

This paper provides evidence on the relevance of modeling adequately the seasonal character of coal and electricity production across Chinese regions. Unlike other work, this paper relaxes the assumption of deterministic seasonality, allowing for time and regional variation in this economy. More specifically, we analyze and distinguish the type of seasonality around the year that prevails in the case of coal and electricity production of each individual Chinese province. Our results indicate that for the majority of the provinces seasonality is stochastic in both types of energy considered. Our findings provide new evidence of a Lunar New-Year effect in February and Summer as well as Winter effects in coal and electricity production. However, in terms of seasonal patterns and their evolution over time, there are significant differences between the Northern Southern regions. Besides for each type of energy, regional clusters matter for the appropriate design of energy-development policy.<br><small>(This abstract was borrowed from another version of this item.)</small>

How helpful are spatial effects in forecasting the growth of Chinese provinces?Journal articleEric Girardin and Konstantin A. Kholodilin, Journal of Forecasting, Volume 30, Issue 7, pp. 622-643, 2011

In this paper, we make multi-step forecasts of the annual growth rates of the real gross regional product (GRP) for each of the 31 Chinese provinces simultaneously. Beside the usual panel data models, we use panel models that explicitly account for spatial dependence between the GRP growth rates. In addition, the possibility of spatial effects being different for different groups of provinces (Interior and Coast) is allowed for. We find that both pooling and accounting for spatial effects help substantially to improve the forecast performance compared to the benchmark models estimated for each of the provinces separately. It is also shown that the effect of accounting for spatial dependence is even more pronounced at longer forecasting horizons (the forecast accuracy gain as measured by the root mean squared forecast error is about 8% at the 1-year horizon and exceeds 25% at the 13- and 14-year horizons). Copyright © 2010 John Wiley & Sons, Ltd.

The stabilization of foreign bank lending: A neglected benefit of hard pegsJournal articleCaroline Duburcq and Eric Girardin, Economics Bulletin, Volume 31, Issue 2, pp. 1673-1685, 2011

The turmoil in credit markets has brought to the fore again the negative implications of the volatility of foreign bank-intermediated flows to emerging countries. This paper examines whether the adoption of a hard-peg regime can reduce shocks in foreign capital inflows. Using unobserved-components univariate and multivariate models, we separate out the persistent and temporary components of US banking claims to ten Latin American countries during a period ranging from January 1990 to July 2010. Four countries have fixed exchange rates while the other six have flexible rates. Our results vindicate our maintained hypothesis that the adoption of a fixed-exchange-rate regime dampens shocks in foreign capital inflows as far as stocks and flows of US banking claims are concerned. However we cannot attribute this higher stability of US bank lending to hard-peg countries to a higher dependence on US rather than country-specific factors.

Quantitative easing works: Lessons from the unique experience in Japan 2001-2006Journal articleEric Girardin and Zakaria Moussa, Journal of International Financial Markets, Institutions and Money, Volume 21, Issue 4, pp. 461-495, 2011

The current financial crisis has now led most major central banks to rely on quantitative easing. The unique Japanese experience of quantitative easing is the only experience which enables us to judge this therapy's effectiveness and the timing of the exit strategy. In this paper, we provide a new empirical framework to examine the effectiveness of Japanese monetary policy during the "lost” decade and quantify the effect of quantitative easing on Japan's activity and prices. We combine advantages of Markov-switching VAR methodology with those of factor analysis to establish two major findings. First, we show that the decisive change in regime occurred in two steps: it crept out from late 1995 and established itself durably in February 1999. Second, we show for the first time that quantitative easing was able not only to prevent further recession and deflation but also to provide considerable stimulation to both output and prices. This positive effect is reached through the interest rate factor. These results remain valid even when fiscal policy is simultaneously taken into account in the analysis. If Japanese experience is any guide the quantitative easing policy must be seen as a symptomatic treatment; it must be accompanied with a dramatic restructuring in the financial framework. The exit from quantitative easing must be postponed and decided within a clear program and according to clear numerical objectives.

Domestic and external factors in interest rate determination: the minor role of the exchange rate regimeJournal articleCaroline Duburcq and Eric Girardin, Economics Bulletin, Volume 30, Issue 1, pp. 624-635, 2010

We compare the behavior of short term interest rates in hard-peg and floating-exchange-rate countries. We use a framework which allows both domestic and foreign factors to play a role in the determination of interest rates and assess them empirically for eight Latin American countries between January 1998 and April 2009. Two countries have hard peg while the remaining six follow alternative exchange rate regimes. We find empirical evidence that economies with rigidly-fixed exchange rates do not bear a loss of monetary autonomy above and beyond that of floating-exchange-rate economies, with the exception of the region's largest country, Brazil, the only floating-rate-economy of our sample that proves to benefit from monetary freedom.

Regionale Unterschiede in China: Konvergenz noch zu schwachJournal articleKonstantin A. Kholodilin and Eric Girardin, DIW Wochenbericht, Volume 77, Issue 25, pp. 11-14, 2010

Im Verlauf der rasanten wirtschaftlichen Entwicklung Chinas haben sich enorme regionale Unterschiede herausgebildet. In der leistungsstärksten Provinz (Shanghai) war das Pro-Kopf-Einkommen 2007 fast zehnmal so hoch wie in der wirtschaftlich schwächsten Provinz (Guizhou). Eine Verringerung der Disparitäten zwischen den Provinzen ist bisher nicht erkennbar. Etwas anders ist die Situation auf der Ebene kleinerer Regionen - der Ebene der Verwaltungskreise. Hier zeigt sich eine gewisse Tendenz zur Annäherung der Pro-Kopf- Einkommen, allerdings handelt es sich dabei um einen sehr langsamen Prozess. Eine spürbare Beschleunigung wird wohl nur eintreten, wenn die eingeleiteten regionalpolitischen Maßnahmen längerfristig durchgehalten und noch verstärkt werden.

The financial integration of China: New evidence on temporally aggregated data for the A-share marketJournal articleEric Girardin and Zhenya Liu, China Economic Review, Volume 18, Issue 3, pp. 354-371, 2007

In the presence of de jure capital account inconvertibility, but in spite of high trade openness of China, existing empirical work, using daily data, has not found any evidence of international financial integration of its A-share market. In this paper we shed new light on this issue, examining a long sample of active trading, over 1992–2005, within the framework of a regime-switching error correction model, with a major focus on the role of temporal aggregation. With end-of-week closing prices we do not find any long run relationship between the Shanghai market and either the New York or the Hong Kong market, thus replicating previous findings. However, with weekly-averaged indices, up to late 1996, the Shanghai index was cointegrated with the S&amp;P 500. Subsequently, this relationship broke down and a long run relationship with the Hang Seng index gradually arose. Information flows, as well as the prospects of de jure financial opening, and the growing awareness of valuation concepts among Chinese domestic investors, in the presence of identical fundamentals (multiple listing of Mainland firms), help explain the evidence of long run financial integration in spite of capital controls.

Monetary Frameworks and Institutional Constraints: UK Monetary Policy Reaction Functions, 1985-2003Journal articleChristopher Adam, David Cobham and Eric Girardin, Oxford Bulletin of Economics and Statistics, Volume 67, Issue 4, pp. 497-516, 2005

Monetary policy reaction functions are estimated for the UK over three periods - 1985-90, 1992-97 and 1997-2003 - in order to disentangle two effects: the switch from an emphasis on exchange rate stabilization to inflation targeting, and the introduction of instrument-independence in 1997. The external factors considered include US as well as German interest rates, and this leads to the identification of 'domestic' and 'international' models of the reaction function. The results suggest that it is the changes in the institutional arrangements rather than those in the targeting regime which have been decisive in the development of policy in this period. Copyright 2005 Blackwell Publishing Ltd.