Portuguese Economic Journal, 2025, Volume 24, Nº 1, 2025
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- Application of empirical wavelet transform, particle swarm optimization, gravitational search algorithm and long short term memory neural network to copper price forecastingPublication . Kim, Yong HyongCopper is one of the main non-ferrous metals which are closely associated with important industries, such as equipment manufacturing, electrical wiring, and construction; and thus, copper price is becoming an important impact factor on the performance of related economies. This paper aims to develop a hybrid method for forecasting the copper price by combining empirical wavelet transform (EWT), particle swarm optimization (PSO), gravitational search algorithm (GSA) and long short term memory neural network (LSTM), which is denoted as EWT-PSO-GSA-LSTM in this study. The forecasting performance of the proposed hybrid method was verified by time series data of the copper closing price in the London Metal Exchange (LME). The results of this study have shown that the proposed EWT-PSO-GSA-LSTM method outperformed other forecasting methods in terms of several performance criteria, such as the root mean square error (RMSE), the mean absolute error (MAE), the mean absolute percentage error (MAPE), and the Diebold–Mariano (DM) test. For the daily copper price time series, the EWT-PSO-GSA-LSTM method had the smallest RMSE, MAE and MAPE values (0.007, 0.013 and 1.358, respectively) compared to LSTM, EWT-LSTM, PSO-LSTM and EWT-PSO-LSTM methods. Furthermore, all the DM values of our proposed method were below -2.61 and the p values were smaller than 1%, indicating that the proposed method performed the best in forecasting the copper price at the 99% confidence level. Given the present results, it can be concluded that it is possible to improve the copper price forecasting method by combining the EWT, PSO, GSA and LSTM models.
- External debt, state ownership and technical efficiency: A stochastic frontier analysis of emerging economiesPublication . Yap, Woon Kan; Kamarudin, Fakarudin; Gryzelius, JennyArguing that the litmus test of external debt sustainability should be based on total factor productivity growth instead of mere GDP growth, this study examines the effect of external debt on total factor productivity through technical efficiency change using the Stochastic Frontier Analysis method. To deepen the analysis, the dynamics of technical efficiency, public sector external debt and state ownership are also investigated in this study. The results show that external debt of the private sector increases total factor productivity by improving technical efficiency, whereas the contrary is true with regard to external debt of the public sector. Hence, between the public and private sectors, the latter shows greater efficiency in allocating and using external debt. Nonetheless, the negative impact of public sector external debt on technical efficiency can be mitigated by transferring state-owned assets to the private sector through privatization.
- A robust method to date recessions and compute output gaps: the Portuguese casePublication . Assunção, João B.; Fernandes, Pedro AfonsoThe application of the Hodrick-Prescott (HP) and other linear filters to remove trend and extract business cycles in macroeconomic time series is a common practice despite its limitations, namely, in signaling recessions. Median filters and other nonlinear techniques can perform better by accommodating sharp but fundamental changes in the growth trend and passing only the relevant information to the cycle component, a possible measure of the output gap of an economy. An application to the Portuguese relevant macroeconomic series confirmed the robustness of nonlinear filters in signaling the recessions and recoveries. In particular, the Mosheiov-Raveh (MR) filter estimates piecewise trend growth paths that naturally date the specific periods of the Portuguese economy since 1977.
- Nonlinearity and nonlinear convergence of inflation rates in the West African Monetary Zone: a way to Monetary IntegrationPublication . Ilyas, Muhammad; Song, Liying; Galadima, Mukhtar Danladi; Hussain, Muhammad Noshab; Satta, AbdulThe inflation rate is one key indicator for a group of countries to achieve the harmonization required to establish stable and sustainable monetary integration. However, for the West African Monetary Zone (WAMZ), despite its ambition to embark on monetary integration for about two decades now, achieving this requirement is still a question of investigation. This study examines the nonlinearity and nonlinear convergence of inflation rates among the WAMZ countries as a way to monetary integration. We use inflation rates from 2000 to 2022 and employ a variety of linear and nonlinear tests (such as the Brock–Dechert–Scheinkman–LeBaron nonlinearity test, the Harvey nonlinearity test, the Dickey–Fuller Generalized Least Squares linear unit root test, the Ng–Perron linear unit root test, the Cuestas–Ordonez nonlinear unit root test, the Park–Shintani nonlinear unit root test, and the Hu–Chen nonlinear unit root test). The findings revealed that the data generating process of inflation in the WAMZ countries is nonlinear and that there is inflation convergence in those countries. This means that the countries share similar long-run inflation and, therefore, meet one key criterion for a group of countries to share a common currency.
- Financial development, economic growth and extreme poverty in Sub Saharan AfricaPublication . Djomo, Jules Médard Nana; Epo, Boniface Ngah; Etame, David Arsène Temching SonkengThis paper analyses the financial development threshold above (below) which economic growth affects extreme poverty in sub-Saharan Africa (SSA) using a panel of 37 countries over the period 1990–2017. To compute our results, we mobilize a panel smooth transition regression (PSTR) model and the two-step generalized method of moments (GMM) applied to the dynamic panel model. Our findings suggest that growth reduces extreme poverty when the financial development is above the threshold of: (i) 34% for SSA; (ii) 37% for non-fragile countries and (iii) 9% for fragile and post-conflict countries. The GMM results corroborate those of the PSTR by showing that the squared interaction between financial development and growth has a significant and positive effect on poverty reduction in SSA. Furthermore, the thresholds obtained by the GMM method are similar to those of the PSTR. Overall, these results indicate that financial development is a channel through which inclusive growth is achieved, particularly in fragile and post-conflict countries.
- Optimal policies in a small open economy with an environmental externality and shallow foreign exchange marketPublication . Moro, AlessandroThis paper develops a small open economy model with a brown and green industry. Brown firms generate an environmental externality that reduces the utility of domestic households. Firms in both sectors rely on domestic and foreign capital to finance their production. Foreign exchange markets are assumed to be shallow and firms pay a higher return to borrow capital with respect to the exogenous foreign interest rate. This inefficiency contributes to a further decline in welfare. In this framework, the first-best allocation is attained through a tax on the output produced by the polluting sector combined with differentiated capital controls, with a higher tax rate applied to foreign capital inflows in the brown sector and a lower tax rate applied to foreign inflows in green firms. Looking at single policy tools, such differentiated capital controls are preferable to a tax on brown production for moderate values of the environmental externality.
- Response of consumers to wage shocks in the framework of the Portuguese assistance programPublication . Alves, Nuno; Cardoso, Fátima; Pereira, Manuel CoutinhoThis paper studies the impact on consumption of the exogenous changes in public wages in Portugal during and after the economic and financial assistance program (2011-2014), by exploiting the variability in the size of such changes across municipalities. The initial wage cuts triggered a marked reduction of private consumption, while the reinstatements in the later years gave rise to an increase, albeit of a smaller magnitude. The consumption response was larger for employees with relatively lower wages. Households smoothed the impact on consumption of negative income shocks partly by drawing down their deposits. Consumer credit did not play such a role, as households deleveraged as a response to those negative shocks.