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The role of permanent and transitory shocks in explaining international health expenditures

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Author Info
Paresh Kumar Narayan (School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Burwood, Australia)
Seema Narayan (School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology, Melbourne, Australia)

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Abstract

While there is a growing literature that examines the issue of cointegration (co-movement over the long run) among health expenditures, there are no studies that examine the issue of common cycles (co-movement over the short run) among health expenditures. We undertake a multivariate variance decomposition analysis of per capita health expenditures of the USA, the UK, Japan, Canada, and Switzerland based on a common-trend-common-cycle restriction framework, to examine the relative importance of permanent and transitory innovations in explaining variations in per capita health expenditures in each of the five countries. Our main finding is that transitory shocks are more important in explaining per capita health expenditures in the UK, Japan, and Switzerland, while permanent shocks dominate variations in per capita health expenditures in the USA and Canada over short horizons. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1316
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 10 ()
Pages: 1171-1186
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:hlthec:v:17:y:2008:i:10:p:1171-1186

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Issler, Joao Victor & Vahid, Farshid, 2001. "Common cycles and the importance of transitory shocks to macroeconomic aggregates," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 449-475, June. [Downloadable!] (restricted)
  2. Narayan, Paresh Kumar, 2006. "Examining structural breaks and growth rates in international health expenditures," Journal of Health Economics, Elsevier, vol. 25(5), pages 877-890, September. [Downloadable!] (restricted)
  3. Alain Hecq & Franz Palm & Jean-Pierre Urbain, 2002. "Separation, Weak Exogeneity, And P-T Decomposition In Cointegrated Var Systems With Common Features," Econometric Reviews, Taylor and Francis Journals, vol. 21(3), pages 273-307. [Downloadable!] (restricted)
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  4. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec.. [Downloadable!] (restricted)
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  5. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May. [Downloadable!] (restricted)
  6. John Strauss & Duncan Thomas, 1998. "Health, Nutrition, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 766-817, June. [Downloadable!] (restricted)
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  7. Hitiris, Theo & Posnett, John, 1992. "The determinants and effects of health expenditure in developed countries," Journal of Health Economics, Elsevier, vol. 11(2), pages 173-181, August. [Downloadable!] (restricted)
  8. McCoskey, Suzanne K. & Selden, Thomas M., 1998. "Health care expenditures and GDP: panel data unit root test results," Journal of Health Economics, Elsevier, vol. 17(3), pages 369-376, June. [Downloadable!] (restricted)
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  14. Clemente, Jesus & Marcuello, Carmen & Montanes, Antonio & Pueyo, Fernando, 2004. "On the international stability of health care expenditure functions: are government and private functions similar?," Journal of Health Economics, Elsevier, vol. 23(3), pages 589-613, May. [Downloadable!] (restricted)
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  16. Eric Zivot & Donald W.K. Andrews, 1990. "Further Evidence on the Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Cowles Foundation Discussion Papers 944, Cowles Foundation, Yale University. [Downloadable!]
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  17. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March. [Downloadable!] (restricted)
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  18. Hitiris, Theo, 1997. "Health Care Expenditure and Integration in the Countries of the European Union," Applied Economics, Taylor and Francis Journals, vol. 29(1), pages 1-6, January. [Downloadable!] (restricted)
  19. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  20. Hecq, Alain & Palm, Franz C & Urbain, Jean-Pierre, 2000. " Permanent-Transitory Decomposition in VAR Models with Cointegration and Common Cycles," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(4), pages 511-32, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paresh Kumar Narayan & Stephan Popp, 2009. "A Nonlinear Approach to Testing the Unit Root Null Hypothesis: An Application to International Health Expenditures," Economics Series 2009_10, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  2. Andrea M. Leiter & Engelbert Theurl, 2009. "The Convergence of Health Care Financing Structures: Empirical Evidence from OECD-Countries," Working Papers 2009-20, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
  3. Anurag Sharma & Preety Ramful, 2008. "Does disaggregation affect the relationship between health care expenditure and GDP? An analysis using regime shifts," Centre for Health Economics Research Papers 27/08, Monash University, Centre for Health Economics. [Downloadable!]
  4. Andrea Leiter & Engelbert Theurl, 2009. "The Convergence of Health Care Financing Structures: Empirical Evidence from OECD-Countries," NRN working papers 2009-12, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria. [Downloadable!]
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