ARDL Analysis Research Articles

Exchange rate fluctuations and industrial production in Malaysia: evidence from dynamic simulated ARDL analysis

Contemporary literature argues that the exchange rate serves as an important instrument of industrial policy to boost economic growth. However, it is difficult to design effective exchange rate policies owing to the uncertainty shrouding the outcomes of the exchange rate movement for industrial growth. Therefore, this study uses a dynamic simulated autoregressive distributive lags approach to study the impact of positive and negative changes in the real effective exchange rate on industrial production of Malaysia for the period 1970–2022. We employ an extended production function to study this relationship by incorporating capital, labour and globalisation as additional explanatory variables. The findings suggest that positive (negative) changes in real effective exchange rate are followed by positive (negative) changes in economic growth in the long run. Furthermore, positive changes in capital affect economic growth positively and significantly in both the short and long run. Finally, positive (negative) movement in labour and globalization positively (negatively) and significantly affect industrial production in the long run respectively. Policymakers should depreciate currency to expand industrial production in Malaysia. Moreover, to boost industrial production, short-term loans should be introduced for capital accumulation.

Dynamic interactions between GDP, renewable energy, innovation, and CO2 emissions in Finland: a fourier-augmented ARDL analysis

This study uses the novel Fourier-augmented ARDL (FARDL) to explore the impact of renewable energy (REN), the number of patent applications (PA) and GDP per capita on CO2 emissions in Finland during 1990–2022. The findings reveal that in the long run, GDP rises CO2 emissions, while REN and PA decrease CO2 emissions. The FARDL short-run results indicate that both REN and PA have a significant negative impact on CO2 emissions, suggesting that higher adoption of renewable energy and technological innovation contribute to emission reductions. However, GDP does not show a significant effect in the short run, which may indicate a decoupling of economic growth from environmental degradation in the short term. Furthermore, the study highlights the need for policies that promote technological innovation and increased investment in renewable energy to achieve sustainable carbon reduction in the long term.

Impact of Digitalization on Economic Growth in Developing Countries: A Panel ARDL Analysis

Impact of Digitalization on Economic Growth in Developing Countries: A Panel ARDL Analysis

Determinants of carbon emissions in Kenya and policy implications

Carbon dioxide emissions are the primary greenhouse gasses behind global climate change and its associated effects. Climate change adversely impacts the environment, biodiversity, and human health. The ability to tame carbon dioxide emissions will help in the fight against climate change. However, the recent pace of rising carbon dioxide emissions raises concerns about winning the war against climate change. World leaders are determined to take actions that will lower emissions. Thus, there is a worldwide effort to achieve net-zero emissions. Consequently, it is crucial to comprehend the specific factors that contribute to carbon emissions of specific economies so that countries can develop and enforce effective strategies for reducing carbon output, mitigating the effects of climate change, and improving recovery programs. Despite many empirical studies conducted in Africa on the determinants of carbon emissions, the results remain inconclusive and inadequate, leaving a void for further research. This study seeks to fill this knowledge gap by modeling the relationship between Kenya's carbon emissions (which have been increasing since the early 2000s), and mobile technology adoption, renewable energy mix, tourism development, development assistance, income, and global financial crises, utilizing the most current data from 1995 to 2021 from the World Bank's database. The ARDL, FMOLS, CCR, and DOLS analysis results reveal that mobile technology, tourism, development aid, and global financial crises increase Kenya's carbon emissions in the long run. At the same time, income and renewable energy reduce short- and long-term impacts. The significant insight from these results is that enhancing renewable energy development, mobile technology, and development assistance can promote a sustainable environment. From these findings, the study proposes many policy recommendations to help decision-makers, communities, companies, and the government in Kenya allocate resources and implement resilience and mitigation policies and programs in the areas most susceptible to the effects of climate change.

Analyzing the environmental impact of fuel switching: Evidence from ARDL analysis for policy considerations

The rise in global temperatures, driven by increased CO2 levels, is a pressing concern. Developing nations like Malaysia face challenges in transitioning to cleaner energy due to resource constraints, making natural gas a crucial transitional solution. This study introduces the Fuel Switch Variable to analyze the impact of shifting fuel consumption patterns on CO2. Using data from 1980 to 2020 and the ARDL model, findings show that policies promoting natural gas over oil and coal reduce CO2 emissions, while economic and population growth increase emissions. Policymakers should incentivize fuel switching, enforce energy efficiency standards, and invest in new technologies.

Technological Innovation and Agricultural Productivity in Nigeria Amidst Oil Transition: ARDL Analysis

In contemporary discourse, Nigeria’s reliance on its oil sector is proving insufficient for sustained economic growth. The volatility of oil prices, geopolitical tensions, technological advancements, and environmental sustainability concerns have exposed the vulnerabilities of an oil-dependent economy, emphasizing the need for diversification and a renewed focus on agriculture. This study investigates the relationship between technological innovation and agricultural productivity in Nigeria, contrasting it with the oil sector. Using the ARDL estimation technique, our findings reveal a significant negative influence of immediate lagged agricultural productivity (AGTFP(−1)), indicating technological constraints. Technological innovation, proxied by TFP, shows a substantial impact on agricultural productivity, with a negative long-term effect (−90.71) but a positive, though insignificant, impact on agricultural output (0.0034). The comparative analysis underscores that the agricultural sector tends to benefit more from technological innovation than the oil sector. This highlights the critical need to prioritize technological advancements in agriculture to drive sustainable growth and economic resilience in Nigeria.

Unveiling the Dynamics: Exploring the Relationship between Emerging Stock Market Prices and Macroeconomic Factors through ARDL Analysis

This study investigates the interaction between stock prices and prices in other markets using a panel ARDL model. Analyzing data from January 2004 to December 2022 for 19 emerging market countries, the study explores the impacts of gold prices, exchange rates, inflation rates, and interest rates on stock prices. The results indicate a long-term negative relationship, except for gold, between the variables. The effects are generally insignificant in the short run, except for gold's negative impact. The global financial crisis of 2008 negatively affected emerging market stock markets in both the short and long term. In the short run, the COVID-19 pandemic negatively impacted stock market returns, which turned positive in the long run. This study highlights the importance of sound monetary policies focused on price stability and fiscal policies aimed at reducing government dominance in financial markets to foster long-term growth in stock markets.

Energy Consumption, Bank Credit and Manufacturing Industry Performance: A Panel ARDL Analysis in Western Indonesia

The energy growth nexus is still being debated due to mixed empirical findings. This study seeks to establish a relationship between energy consumption, bank credit, and the performance of the manufacturing industry. This study also aims to determine the pattern of the dynamic causal relationship between energy use, bank credit, and the performance of the manufacturing industry in 17 provinces in western Indonesia. This study used secondary data from the Central Bureau of Statistics and the Financial Services Authority. Panel data are from 17 provinces in western Indonesia, spanning from Q1 2010 to Q4 2022 (2010Q1–2022Q4). We employed the panel ARDL and causality test to explore the connection between the variables of interest. The panel ARDL confirms that energy consumption and bank credit play a crucial role in boosting the performance of the manufacturing industry in the long term. This study found strong evidence to support the long-term feedback hypothesis of the energy-output growth nexus. However, in the short term, bank credit was statistically insignificant at all confidence levels. We recommended several policies to local governments and stakeholders, prioritizing the provision of more adequate energy infrastructure and greater access for industrial businesses to utilize banking services. Advancing infrastructure and developing the utilization of new renewable energy are proposed to support sustainable economic development.

Impact of Natural, Physical and Human Capital Formation on Economic Growth in Pakistan: An ARDL Analysis

Attaining sustained economic growth is one of the key objectives of any country to improve the well-being of its people and strengthen its economic position in the world. Capital formation is one of the crucial factors of economic growth as it promotes productivity, efficiency, and higher output growth. Therefore, this paper intends to analyze the impact of natural, physical, and human capital formation on economic growth in Pakistan by employing annual time series data from 1971 to 2020. Different econometric approaches such as unit root test, bound test, and ARDL model are utilized to estimate the results. The study found that labor force participation rate, physical capital, human capital, natural capital, FDI, and financial development are positively associated with economic growth in Pakistan. Instead of FDI, all the variables are found to be significantly related to economic growth in Pakistan. Considering the study’s findings, it is concluded that capital formation is essential to progress the economy of Pakistan, so policymakers must concentrate on investing in physical infrastructure, improvement in health and educational facilities, and efficient utilization of natural resources to promote economic growth.

The influence of IFRS and institutional quality on economic growth: empirical evidence in the GCC countries using panel ARDL analysis

The influence of IFRS and institutional quality on economic growth: empirical evidence in the GCC countries using panel ARDL analysis

The Nexus Among Foreign Direct Investment, Economic Growth, and Country Risk: An Aggregated and Panel ARDL Analysis

ABSTRACT The purpose of this article is to investigate and analyze the relationship among FDI, economic growth, and country risk. Using a panel study, based on data from 131 countries spanning the period of 1995 to 2018, we find that investors prioritize risk perception over economic profits. They tend to favor low risk countries with lower default risk, even if the expected return is also lower. Consequently, advanced countries with reduced default risk attract more capital inflows. Thus, advanced countries with lower default risk attract more capital, and the responses of FDI to the independent variables are rather short in nature.

Financial Development, Monetary Policy, and the Monetary Transmission Mechanism—An Asymmetric ARDL Analysis

This paper’s objective is to examine the asymmetric cointegration and asymmetric effects of financial development and monetary policy on monetary transmission mechanisms in the Nigerian context using annual data spanning the period from 1986 to 2023. This study pushes the frontiers of knowledge by providing information on the nonlinear impacts of monetary policy and financial sector innovations on monetary transmission mechanisms in Nigeria to help policymakers tailor their strategies to local conditions, enhancing the effectiveness of monetary interventions in the economy. To achieve this, this paper adopted nonlinear ARDL models to understand how changes in the direction of monetary policy and developments in the financial system induce changes in the transmission of monetary policy. The findings document the existence of asymmetries in both the short and long run, revealing that the impacts of financial development and monetary policy on the different monetary policy channels are not uniform. These asymmetries indicate that the responses of various economic variables to monetary policy actions differ depending on the level of financial development. These findings underscore the complexity of the monetary transmission mechanism and the necessity for a nuanced understanding of how financial development and monetary policy interact in different contexts. Consequently, this finding is symptomatic of some characteristics of those financial markets on their way toward advanced developments. As the financial system matures, monetary policy may have a greater impact on the cost of short-term funding for banks without having any discernible effect on the rates at which businesses and households access funding. Therefore, this paper recommends focusing on the policies that will foster the financial system across the banking sector, capital market, bond market, and overall financial sector to improve the efficiency of the monetary transmission process.

Towards the vision of going green: The role of different energy research and development investments, urbanization and income in load capacity factor

Environmental sustainability, one of the agendas of the 21st century, is an essential step in the transition to a low-carbon economy in developing countries. The motivation of this study is to investigate the impact of fossil energy research and development investments on environmental quality within the framework of the load capacity curve hypothesis, and urbanization is also added to the model to avoid omitted variable bias. To this end, the Augmented ARDL analysis examines the relationship between economic growth and ecological well-being in Turkiye from 1986 to 2022. The results from the empirical analysis support the accuracy of the load capacity curve hypothesis. Furthermore, it is observed that renewable energy research and development investments, which are the main component of the study, improve environmental quality.On the other hand, it has been found that research and development investments in fossil fuels and urbanization reduce the load capacity factor. Based on the study’s findings, the Turkish government should allocate more research and development budget to transition to a low-carbon economy. Considering Turkiye’s intense fossil resource consumption, the government should plan research and development budget arrangements supported by law regarding energy efficiency.

Dynamics of economic growth in ASEAN-5 countries: a panel ARDL approach

This research explores economic growth dynamics in five ASEAN countries (1980–2020), analyzing the short and long-term impact of financial development (FD), oil prices, investment (INV), and inflation on GDP growth. Panel ARDL analysis reveals a transient positive link between FD and long-term GDP growth, necessitating a holistic approach for short-term stability. Similarly, oil prices exhibit long-term volatility, urging diversification strategies. In contrast, consistent and significant relationships exist between INV and GDP growth in both time frames, underscoring investment's pivotal role. The study emphasizes managing inflation for sustained growth, offering vital insights for policymakers, economists, and analysts in fostering ASEAN's economic stability.

Renewable, Non-renewable Energy Consumption and Economic Growth in South Africa: Fresh Evidence from ARDL and Wavelet Coherence Analysis

Renewable, Non-renewable Energy Consumption and Economic Growth in South Africa: Fresh Evidence from ARDL and Wavelet Coherence Analysis

Will the US Dollar Hegemony as the World Reserve Currency Be Replaced? An Exploratory Study

Abstract The understanding of the behavioral economics of how the US$ has been performing as an international reserve currency since 1945 seems to face a serious threat posed by the BRICS coalition nowadays. The study aimed to assess the long-term stability of the US dollar as an international reserve currency in light of the emerging challenge from the BRICS coalition. The research used ARDL and ECM analysis to address two main questions. First, the study confirmed that the US dollar’s long-term equilibrium as a reserve currency is stable. Second, it found that the US economic and monetary infrastructure appeared more resilient than that of the BRICS countries. This suggests that a shift away from the US dollar as a world reserve currency is not likely in the near future. The study also raised the need to consider designing a better monetary system for the modern world.

Unveiling Development Gaps

The research from 1991 to 2021 compares human development progress in Indonesia and Thailand while analyzing factors influencing their Human Development Index (HDI). The study uncovers significant disparities by employing independent difference tests and Autoregressive Distributed Lag. Indonesia exhibits rapid economic growth yet faces health and educational inequalities. Thailand boasts a higher average HDI (0.70) than Indonesia's (0.63), signaling pronounced developmental gaps. ARDL analysis identifies distinct factors shaping HDI in each nation. Long-term impacts in Indonesia stem from increased life expectancy and education, while Thailand benefits from GDP and investment. Short-term effects reveal Indonesia's positive response to previous GDP changes, while Thailand experiences initial negativity but long-term positivity. Policy recommendations stress Indonesia's need to enhance investment, economic growth, health access, and education quality to narrow the HDI gap. Equitable wealth distribution and heightened investments in health and education are pivotal for achieving inclusive and sustainable human development.

From curse to blessing: a fourier-augmented ARDL analysis of agriculture, geopolitics, and trade in south and central Asia

From curse to blessing: a fourier-augmented ARDL analysis of agriculture, geopolitics, and trade in south and central Asia

ASYMMETRIC J CURVE RELATION BETWEEN TÜRKİYE AND HER EUROPEAN TRADE PARTNERS: A NARDL METHOD

This research delves into the asymmetrical impacts, both short and long term, of the real strengthening or weakening of Türkiye’s currency against that of the 28 European Union member countries, on its bilateral trade balance. The study aims to uncover potential asymmetries in the relationship between Türkiye’s currency depreciation and its trade balance with the EU 28 countries, while also considering the possibility of a J-curve effect. By utilizing the Non-Linear Autoregressive Distributed Lag Model (NARDL) introduced by Shin et al. (2013), which accounts for asymmetric relationships, the analysis examines whether Türkiye’s trade balance with her EU 28 partners reacts differently to currency appreciation and depreciation. The findings from the non-linear ARDL analysis conducted in this study lend support to the hypothesis of an asymmetrical relationship, both in the short and long term, between the real appreciation of foreign exchange rates and Türkiye’s bilateral trade balance with the EU 28 countries, potentially indicating the presence of a J-curve effect.

Symmetric and Asymmetric Association Between Foreign Direct Investments and Macroeconomic Variables: An Ardl Approach

Objectives: The main objective of the study is to investigating the dynamic relationship between FDI and different Macro Economic Variables (MEVs) using the ARDL procedure, providing a more comprehensive understanding of the association between FDI and MEVs and to evaluate their relative importance for FDI. Methods: This study utilizes annual data from 1991 to 2021 from the World Bank (2021) and the Reserve Bank of India (2021). Data on GDP, Export, Inflation and interest rate, and FDI are collected from the World Bank. Autoregressive Distributive lag Model procedure has been used for the study in order to establish relationship between Macro economic variables and FDI. Results: Our methodological approach using ARDL model and finds: (a) a positive correlation between exports and FDI, (b) a negative impact of inflation and exchange rates on FDI in the long run. Non-linear ARDL analysis reveals the asymmetric impact of inflation and interest rate on FDI, which includes the effect of positive and negative shock of interest rate and inflation on FDI. d) 1% increase in inflation reduces FDI by 0.4% and if Inflation is reduced by 1%, FDI is increased by 0.2%. At the same time, the non-linear estimation of interest rates concludes that there is an asymmetric and significant association between interest rates and FDI. e) If Interest rate has increased by 1% FDI is decreased by 0.9% and if interest rate has reduced by 1% FDI has deceased by 1.63%. f) The causality analysis reveals that exports, GDP, and exchange rates are the significant economic variables that affect FDI. Conclusion: The study's findings have practical implications for policymakers and investors looking to attract more FDI in India. The results indicate that exports play a critical role in attracting FDI and that the government should focus on improving export performance to increase FDI inflows. Additionally, the study highlights the importance of controlling inflation and exchange rates to attract more foreign investment. The finding that interest rates have an asymmetric relationship with FDI suggests that policymakers should be cautious when implementing monetary policies that may impact interest rates. Overall, the study provides valuable insights for policymakers and investors looking to attract more FDI in India and highlights the importance of considering the country's macroeconomic conditions when making investment decisions.