Unit Root Analysis Research Articles

Is military spending converging across middle eastern countries and Turkiye? A comprehensive unit root test analysis

AbstractThe Middle East is a region of chronic insecurity due to internal and external tensions. These tensions and insecurity have made the Middle East one of the world's leading regions in military armaments. This study investigates the stochastic convergence of military burden in 10 selected Middle Eastern countries using comprehensive unit root analysis. Stochastic convergence for each country from 1977 to 2020 is examined using conventional, structural break, nonlinear, and Fourier‐based unit root tests. Empirical results provide strong evidence of convergence with regional averages in Bahrain, Saudi Arabia, and Oman. There is also some evidence of convergence in the case of Israel, Egypt, Kuwait, Lebanon, and Turkiye. However, evidence for the existence of convergence in Iran and Jordan is weak.

ANALYSIS OF EXPORT-LED GROWTH MODEL FOR TÜRKİYE ECONOMY WITH MARKOV REGIME SWITCHING MODEL

Research on the export-led growth model is significant due to the contribution of exports to the development of domestic sectors and its positive impact on national values, especially employment and growth. Therefore, countries prefer the export-led growth model by increasing their export volumes with an outward-oriented policy. When Turkiye's growth figures are analyzed, it is feasible to say that there is a strong connection between exports and economic growth. In this study, within the framework of export-led growth hypotheses, the additive of exports to Turkiye's growth dynamics between 1980 and 2022 is investigated. The aim of the study is to econometrically test the intercourse between exports and GDP in the Turkiye economy. In the analysis, first linear unit root analyses were implemented. Then, the dynamic correlation relationship between exports and GDP was analyzed with DCC-GARCH, and the dynamic regression relationship was performed with the Markov regime switching model. As a consequence of the examines, it was seen that the dynamic correlation indicators and Markov model results were consistent with each other. While it was found that the correlation decreased during the high volatility period, a decrease in the number of regressions was observed according to the Markov model results.

A step towards sustainable environment in OECD countries: Do natural resource depletion, resource tax, institutional quality, and green innovation matter?

AbstractProtecting and improving environmental quality is essential for sustainable development. This study considers natural resource depletion, resource tax, institutional quality, and green innovation, which are likely to impact environmental quality. These issues are addressed by Sustainable Development Goals (SDGs) 7, 12, and 18. The study aims to uncover the influence of the variables we have considered on environmental quality in a sample of 18 Organisation for Economic Co‐operation and Development (OECD) countries from 1994 to 2020. Before panel data analysis, we conducted preliminary tests to determine the most suitable techniques. The econometric procedure comprises four stages: unit root analysis, cointegration analysis, estimation of long‐run coefficients using two different methods, and panel causality analysis. The empirical findings suggest that resource tax and green energy innovation positively impact environmental quality for the panel in the long run. Results based on the country show that institutional quality has a negative impact on environmental quality in Portugal but a positive impact in Luxembourg. Although resource taxes positively impact environmental quality in Portugal, they harm Luxembourg. Lastly, natural resource depletion negatively impacts environmental quality in Luxembourg. There are no statistically significant results for other countries. The study concludes with policy recommendations.

Foreign Direct Investment and Income Inequality Nexus in Middle-Income Countries: Exploring the Role of Research and Development Expenditure

The study explored the role of Research and Development Expenditure in determining the linkages between foreign direct investment (FDI) and income inequality within middle-income countries. World development indicators were used as a source for panel secondary data from 1990-2023. Panel unit root analysis was employed for data stationarity. The Panel co-integration analysis using the Fully Modified Ordinary Least Square (FMOLS) technique was applied to obtain correlations among three core variables. The findings explain that co-integration exists between variables; all variables are stationary at the first difference level. The FMOLS model incorporates the impact of FDI on the income inequality index with control variables. The analysis suggests that FDI in middle-income countries may decrease income inequality. Increasing research and development expenditures can reduce income inequality by promoting innovation and reducing reliance on external funding.

TESTING MEAN REVERSION OF STOCK PRICES IN OECD COUNTRIES: EVIDENCE FROM FOURIER THRESHOLD UNIT ROOT TEST

Researchers focus on whether stock prices have a unit root, that is, whether they contain a random walk process. If stock prices have a stationary process, that is, if they return to the mean, the effects of shocks are temporary, and it is interpreted that they will return to the trend path over time. If stock prices have transitory shocks, it allows for the prediction of future movements based on past behavior in terms of investment. This study investigates whether stock prices revert to the mean and thus have a random walk process. For this purpose, the Fourier Threshold Unit Root (FTUR) test based on the test methodology of Caner and Hansen (2001) for the period January 1990–January 2021 for 26 OECD countries is applied. The FTUR test takes into account both structural breaks and nonlinearities. The purpose of using Fourier functions to account for structural changes is that they are not affected by the number, location, or shape of breaks. Thus, the power of the test increases. According to the results of this test, stock prices in Austria, Canada, Germany, Italy, New Zealand, Spain, and the UK are linear. Therefore, Fourier Augmented Dickey-Fuller (FADF) unit root analysis was performed for these countries. The FTUR test was performed in other countries. According to the results of FTUR and FADF unit root tests, stock prices are found to contain unit roots in some countries except Italy. In some countries, stock prices have a partial unit root structure. In other words, the effects of shocks are permanent, and it is concluded that future returns cannot be predicted in these countries with the random walk process.

Exploring the consequence of ecological and agronomic determinants on wheat production instabilities in Khyber Pakhtunkhwa, Pakistan: Perspectives from dynamic autoregressive distributed lag analysis

One of the major obstacles to agriculture is global climate change, which damages crop productivity through increasing temperatures and irregular precipitation patterns. Wheat, one of the most vital staple crops in the world, is particularly susceptible to these weather Therefore, understanding the fundamental relationship between wheat yield and climate is critical in developing effective adaptation and mitigation plans. The study aims to determine how unirrigated wheat yield evolves depending on the temperature, humidity, rainfall, rainfed areas, and fertilizer in Khyber Pakhtunkhwa, Pakistan. The Kripfganz method was used for p-value calculation, and the DYNARDL simulation model and the autoregressive distributed lag bound testing were used to analyze data from the Development Statistics of Khyber Pakhtunkhwa and the Pakistan Meteorological Department. Unit root analysis was used to check the stationarity of the time series. Then, DYARDL-bound Testing was used for long-run cointegration analysis among variables. The short-run influence of precipitation is substantial, but the long-run impact is not. Meanwhile, the use of chemical fertilizers does not influence yields in either the short or long run. In addition, neither short-run nor long-run yields are statistically significantly connected with the highest temperature. The DYNARDL simulation model reveals precipitation, rainfed-area, and fertilization shocks in the long and short run. The 10 % positive and negative shocks in DYNARDL simulations are supplemented with graphical interpretations of the impact on yield. The study results may have significant implications for policymakers and management professionals in the agriculture sector in Khyber Pakhtunkhwa.These findings can inform the development of strategies to mitigate the impacts of climate change on wheat yields, ultimately enhancing food security and agricultural sustainability in the region.

Exploring the Phillips Curve: Inflation and Unemployment Dynamics in Pakistan

Using a strict analytical framework, this study investigates the dynamic link between inflation and several macroeconomic variables (unemployment, crude oil prices, and nominal exchange rate) in Pakistan from 1991 to 2019. Utilizing a diverse array of statistical methodologies, including unit root analysis, cointegration analysis, and dynamic ordinary least squares (DOLS), we assess the applicability of the Phillips Curve theory in predicting fluctuations in inflation. According to our findings, Pakistan exhibited a steady Phillips Curve over the study period, with all models demonstrating good tracking performance of changes in inflation. Furthermore, the CUSUM and CUSUMsq tests validate the stability of our estimates. This analysis contributes to our understanding of Pakistani inflation dynamics and has implications for economic policy in the nation.

The Influence of Nigeria's Level of Public Debt on the Country's Ability to Sustain Fiscal Stability

This research investigates the impact of public debt exposure on Nigeria's fiscal sustainability through an ex post facto research design. The study utilizes quarterly data from 1986 to 2021, comprising 36 data points sourced from the Central Bank of Nigeria (CBN) and World Bank databases. Employing descriptive statistics, unit root analysis, Johansen cointegration, and Vector Error Correction techniques, the analysis maintains a significance level of 5%. The model exhibits a satisfactory fit with an R-squared value of 0.67 and an Adjusted R-squared value of 0.65. Key factors, including the domestic debt to GDP ratio, external debt to GDP ratio, debt servicing to GDP ratio, economic growth, exchange rate, and interest rate, undergo evaluation for their impact on Nigeria's current account balance and budget deficit/surplus. The findings highlight the external debt to GDP ratio, debt servicing to GDP ratio, economic growth, exchange rate, and interest rate as primary determinants of Nigeria's fiscal responsibility. The study recommends several measures based on these findings. These include managing external debt effectively, prioritizing debt servicing, promoting economic growth, monitoring exchange rates and interest rates, strengthening debt management practices, diversifying revenue sources, enhancing budget discipline, and improving governance.

Chinese stock market integration with developed world: A portfolio diversification analysis

This study investigates integration dynamics between the Chinese stock market and major developed counterparts—Australia, Germany, Japan, the UK, and the US—focusing on portfolio diversification. Using a comprehensive analytical approach from 2012 to 2022, encompassing events like the Belt and Road Initiative, the Shanghai market crash, US-China trade tensions, and the COVID-19 pandemic, the research employs descriptive statistics, unit root tests, cointegration analysis, and VECM-based Granger Causality Tests. Findings indicate modest integration, endorsing diversified portfolios for developed country investors due to higher returns in China with acceptable risk. Unit root analysis confirms cointegration with developed indices, indicating relatively low integration. Granger Causality Tests reveal bidirectional causality, emphasizing mutual influence. Notably, no causal link exists between the US and China, possibly due to regulatory disparities and the trade war. The study enhances understanding of Chinese stock market dynamics, supporting global economic intertwining and urging further openness of China's domestic shares for economic growth.

Public debt dynamics and fiscal sustainability in selected North African countries: new evidence from recurrent explosive behavior tests and quantile unit root analysis

Public debt dynamics and fiscal sustainability in selected North African countries: new evidence from recurrent explosive behavior tests and quantile unit root analysis

ESTIMATING THE EFFECT OF TAXATION ON THE ECONOMIC GROWTH OF SIERRA LEONE USING A TIME SERIES ANALYSIS

<p>This study delves into the impact of taxation on the economic growth of Sierra Leone, aiming to establish a comprehensive understanding of the intricate relationship between taxation and the country's economic trajectory. Employing time series data spanning from 1995 to 2022, the study utilizes the Auto Regressive Distributed Lag (ARDL) framework for analysis. Unit root analysis reveals that certain variables remain stable at levels, while others achieve stability at their first difference. The bound test cointegration results affirm the presence of cointegration, indicating a long-term relationship between taxation and economic growth in Sierra Leone. The study highlights the overall significance of explanatory variables in explaining Gross Domestic Product (GDP). The coefficient of determination indicates that 77.37 percent of GDP variation is explained by indirect taxes, other taxes, interest rates, and foreign direct investment. Notably, the coefficient of indirect taxes demonstrates a negative and statistically significant influence on short-term economic growth in Sierra Leone. In contrast, interest rates exhibit positive and individually significant effects on short-term economic growth. The findings suggest that indirect taxes in Sierra Leone stimulate consumption but reduce savings. Consequently, policymakers are urged to prioritize enhancing international relations to attract Foreign Direct Investment (FDI) and promote export activities, thereby bolstering export revenue and fostering economic growth.</p><p> </p><p><strong>JEL: </strong>O11, O23, H20, H22, C22, F21, E62</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu/0758/a.php" alt="Hit counter" /></p>

The effects of the monetary transmission mechanisms on inflation in Türkiye

The goal of this paper is to examine the impacts of the monetary transmission mechanisms on inflation in Türkiye using monthly data over the period 2006:M01-2021:M11. To this end, the paper considers the interest rate channel, the exchange rate channel, and the credit channel as the main monetary transmission channels. For unit root and cointegration analyses, the paper relaxes the assumption of linearity and employs time series methods based on nonlinear models. Besides, the paper performs a causality test based on the bootstrapping procedure. The findings indicate that the inflation rate is positively related to the interest rate, the exchange rate, and the credit growth rate and that all these variables have predictive power in forecasting future inflation rates in Türkiye. These results imply the existence of efficient monetary transmission channels in Türkiye. Theoretical and practical implications are discussed.

Trade Balance and Pakistan Economy using ARDL model: A Perspective of Trade Deficit Developing Economies

The influence of trade balance on the economy provides opportunities and challenges against an ongoing global uncertain environment. Existing studies take a broad picture to analyze such influence, often failing under specific implications, indicating a need for a close perspective. Taking this background, this paper aims to study the main features of the complex association between trade balance and economic growth through a close perspective of Pakistan. Accordingly, the study follows econometric techniques and applies the autoregressive distributed lag (ARDL) model on time series days of Pakistan from 1970-2021. In methodology, various statistical techniques are applied to refine the findings, mainly unit-root analysis and cointegration modeling in both long and short-run evaluations. In addition, dependence on trade balance was measured against independence of currency rate, joblessness, investment, and overall domestic production. Findings revealed that the local currency rate, in the long run, has a negative and significant association with the trade deficit, suggesting a growth in exports by lowering that rate. It also boosts local manufacturing to compete against imports, which feel costly. These results can facilitate customizing the local policy guidelines at the national level or in developing countries with similar financial issues like trade deficits. This study’s implications suggest that a close viewpoint between trade balance and the economy could guide in pursuing area-specific goals on a sustainable basis.

Remittances and Financial Deepening in Nepal

In the case of remarkable remittance inflows, the impact of remittances on financial development in Nepal has not been adequately studied. Therefore, this paper investigates the effects of remittances on financial development, using Nepal as a case study for the period from 1975 to 2021. The study examines the impact of remittances on the broad money supply. Alongside remittances as the key explanatory variable, other control explanatory variables such as gross capital formation, total trade, real gross domestic product, the national consumer price index, and foreign aid were considered. Unit root analysis revealed that all variables were integrated at order one. Consequently, a cointegration test was conducted, indicating the presence of at least one cointegration equation. Subsequently, an ordinary least squares regression was performed using the first difference data. The results were subjected to various econometric diagnostic tests, including assessment for autocorrelation, heteroscedasticity, multicollinearity, normality, as well as the Durbin–Watson test, t-tests for coefficients, and the F-test. Both the coefficient of determination and the adjusted coefficient of determination confirmed that the models were well-fitted. The outcomes of the model suggest that remittances have a positive impact on the enhancement of the broad money supply. Based on these findings, the study recommends implementing policies aimed at boosting remittance inflows into the country to further financial development in Nepal, specifically promoting financialdeepening.

Quantile-based assessment of energy-CO2 emission nexus in Pakistan.

Nonrenewable energy sources maintain a substantial majority of Pakistan's energy composition, exceeding 70%, posing challenges to achieving sustainability goals for a low-carbon economy. Recognizing this, the study determines the critical thresholds where renewable and nonrenewable energies affect more significantly on CO2 emission over the period from 1972Q1 to 2020Q4. The analysis begins by confirming the stationarity of the data through quantile unit root analysis, followed by an examination of long-term associations using quantile cointegration. For quantile-based impact assessments, we apply quantile regression. To uncover the direction of causality within quantiles, we use a novel approach, quantile causality analysis. Nonrenewable energy sources exhibit a long-term association at disaggregated levels, whereas the same is not true for renewable energy across the quantile distribution. Quantile regression results reveal that renewable energy sources positively impact CO2 emissions, with coal having the highest coefficient, followed by oil and gas, particularly in the upper quantiles, τ = {0.70-0.75}. However, renewable energy sources prove insignificant in decreasing CO2 emissions. Similarly, total energy consumption has a positive influence on CO2 emissions at extremely low quantiles, τ = {0.05-0.30} and high quantiles, τ = {0.65-0.90}, indicating sensitivity to extreme variations. The quantile causality analysis highlights a bidirectional causality relationship among CO2 emissions, total energy consumption, and both renewable and nonrenewable energy consumption across lower and upper quantiles. Policymakers should reallocate funds, provide subsidies, and introduce infrastructure development projects to reduce the burden on nonrenewable energy sources based on this quantile analysis.

Modeling Finance–Growth Nexus in MENA Region Economies: A Panel Data Analysis

The primary objective of this paper is to examine the relationship between finance and economic growth in a cohort of 16 economies within the MENA region spanning a four-decade period from 1980 to 2021. This study employs panel unit root and panel co-integration analyses to investigate this long-term nexus. The fully modified and dynamic Ordinary Least Squares (OLS) approaches are utilized to estimate the long-run coefficients. The findings underscore the existence of cross-sectional interdependence among these nations. Furthermore, Pedroni’s panel co-integration research robustly supports the idea of a long-term co-integrating relationship between financial development and economic growth. Our long-run panel estimations reveal a positive and statistically significant impact of financial development on GDP per capita income growth. In addition to this broad analysis, this paper conducts a detailed time-series examination focused on a specific country to validate the robustness of the results. These findings further substantiate the favorable influence of financial development on income growth in the majority of MENA nations. Notably, private sector participation in these economies is found to be alarmingly low. As a result, a significant policy implication of this study underscores the urgent need for policymakers to prioritize measures conducive to private sector expansion. Moreover, enhancing financial inclusion, addressing the crowd-out effect, and tackling non-performing loans are critical areas requiring attention within the MENA region. Furthermore, our research highlights the potential benefits of developing stock markets as part of an optimal strategy to enhance both economic and income growth rates. In conclusion, this study contributes valuable insights into the finance–growth nexus in the MENA region, emphasizing the importance of financial development as a driver of economic prosperity and the need for targeted policy initiatives to support private sector growth and financial stability.

Prevalence and treatment of HIV/AIDS in Pakistani population: A retrospective study

HIV/AIDS epidemic poses an emerging threat around the world. An estimated 0.1% of people aged 15 to 49 years have been infected with HIV/AIDS in Pakistan during the last few years. This research study aims to analyse the prevalence and treatment/management of HIV/AIDS among the Pakistani population aged 15 to 45 years from 1990 to 2020 and this research data was collected during the year 2021. The analysis was done by using E-views software. Descriptive statistical analysis, correlation coefficient, unit root analysis, and linear regression analysis were used. Results indicated that there is low awareness regarding AIDS in the population and there is a significant link between prevalence and population increase, i.e. with the increase in population the prevalence of AIDS also increases. Findings are discussed in terms of implications for prevention and education of HIV/AIDS in Pakistan’s population. Keywords: Prevalence (P), Therapy (T), Human Immunodeficiency Virus (HIV).

Unit Root Tests of Airline’s Stock Returns Considering Alliances

The purpose of this study is to make a unit root analysis of the stock return time series of 18 air carrier companies due to alliance membership in this paper because of the importance of the unit roots in the detection of time-related matters. Five important unit root tests, which can be classified as Fourier or classical utilized. According to the findings, there is no unit root in the stock return series regardless of airline alliances but there are differences on a regional basis depending on the test and test power, specific Asian airlines stocks’ return series show linearity. These results will shed more light on the efficient market hypothesis on aviation management in the next research.

Does Financial Development in Relation to Remittances influence Economic Growth in Sub-Saharan Africa?

Abstract This study investigates the influence of financial development on the relationship between remittances and economic growth within the Sub-Saharan Africa region. The study utilised panel data encompassing 42 countries, spanning the time frame 1980 to 2021. The research employed a cross-sectional augmented panel unit root test, as well as the Im-Pesaran-Shin unit-root test, to conduct the unit root analysis. The regression estimations employed the Pooled Mean Group and Mean Group/ARDL methodologies. The research findings demonstrate a significant association between the development of financial systems and sustained economic growth over an extended period. The findings from the empirical analysis indicate that there exists a substitutive relationship between financial development and the association between remittances and economic growth. The study proposes that it would be advantageous for financial policies in the Sub-Saharan Africa (SSA) region to give priority to the implementation of efficient financial reforms with the goal of improving the overall depth of the financial sector. Keywords: Remittances, Financial development, ARDL, Economic growth, Sub-Saharan Africa.

THE IMPACT OF THE 2023 KAHRAMANMARAŞ EARTHQUAKE ON BIST100 AND BIST BANK INDEX: EVIDENCE FROM TODA-YAMAMOTO CAUSALITY TEST

Purpose- The effects of the Kahramanmaraş-centred earthquakes that occurred on 6-7 February 2023 on the Borsa Istanbul 100 index and the Banking index are examined. Methodology- Between 06/02/2023 – 07/02/2023, econometric analysis was applied by using BIST 100, BIST BANK index and earthquake data consisting of 312 observations. To determine the degrees of stationarity of the variables, the PP and ADF tests were applied in the study. In the series in which Unit Root analysis was carried out, the VAR model was used to apply Toda-Yamamoto causality analysis. Additionally, techniques for impulse-response functions and variance decomposition were also used. Findings- It has been discovered that the series' level difference is stationary. The Toda-Yamamoto Causality test findings demonstrate a causative link between earthquake magnitude, the BIST 100 index, and the BIST Banking index. In every time, the variations in BISTBANKA and BIST100 are largely self-explanatory. Conclusion- These findings led to the conclusion that the Kahramanmaraş Earthquake had an impact on the decline of the Borsa Istanbul 100 index and banking index on the 6-7 February 2023. Keywords: Earthquake, Borsa Istanbul, BIST100, BIST-BANKA, Toda-Yamamoto Causality Test JEL Codes: G21, P45, Q54