ARDL Bounds Testing Approach Research Articles

The causal connection between CO 2 emissions and agricultural productivity in Somalia: evidence from an ARDL Bounds Testing Approach

The causal connection between CO ₂ emissions and agricultural productivity in Somalia: evidence from an ARDL Bounds Testing Approach

Are water indices cointegrated with the world water markets? Evidence based on an ARDL Bounds Testing Approach

Are water indices cointegrated with the world water markets? Evidence based on an ARDL Bounds Testing Approach

How population ageing affects FDI flows: a tale of South Korea

The neoclassical theory predicts that population ageing would reduce net FDI inflows, which would nullify government efforts to attract FDI. There is a complete paucity of literature on the dynamic relation between population ageing and FDI flows for South Korea. This is a distinctive attempt to test the hypothesis that population ageing reduces net FDI flows (% of GDP) in South Korea. The results of the ARDL bounds testing approach to cointegration analysis under structural breaks provide clear evidence of non-linearity between population ageing and net FDI flows (% of GDP). Support for the neoclassical hypothesis is established only in the short-run.

Assessing the Impact of Market Supporting Institutions on Environmental Outcomes Empirical Evidence from Pakistan

There is a considerable debate on the impact of institutional quality including economic and political institutions on economic outcomes. Most of the existing discourse has focused only on their economic implications. This study, on the other hand, seeks to explore the role of market supporting institutions, measured by economic freedom, on environmental outcomes in Pakistan. While utilizing data for the period 2000–2020 and using ARDL bounds testing approach, we arrive at few important conclusions. The empirical results indicate that market supporting institutions such as economic freedom have strong negative impact on environmental degradation (measured by CO2 emissions per capita and CO2 emissions from electricity and heat production) in Pakistan. Importantly, the effect holds both in short-run as well as in the long-run, suggesting that the strength of market supporting institutions not only lowers environmental pollution in the country but it also mitigates the environmental degradation from electricity and heat production. The estimated results are robust through alternative estimation strategies. Ultimately, the study implies that the strength of market supporting institutions can be an eventual boon to the environmental outcomes of Pakistan’s economy.

Cash Incentive on Remittance Inflow and its Impact on Economic Growth in Bangladesh

Remittances are crucial for driving economic growth in developing countries like Bangladesh, as they effectively influencenearly all macroeconomic indicators within the financial ecosystem. This study examines the impact of remittance inflow on economic growth in Bangladesh considering the cash incentive policy of the government. The ARDL Bound testing approach is employed for the analysis using a monthly dataset covering the period from January 2015 to April 2023. The evidence from the results provides a substantial and favorable influence of remittances on the economic growth of Bangladesh, both in the short term and the long term. According to the expected error correction term, it is projected that the economy will undergo a correction of its imbalances at an annual rate of 58%. Consequently, a strategic blend of short-term policy adjustments and long-term initiatives has the potential to enhance the influence of remittances in fostering sustainable economic growth and elevating the the quality of life for both expatriates and the nation as a whole.

Impact of External Debt and Energy Consumption on Environmental Quality in Somalia

This study investigates the interconnections between external debt, energy consumption, industrialization, and environmental quality in Somalia over the period 1990 to 2019, utilizing the ARDL bounds testing approach. Notably, a positive correlation is found between energy consumption and CO2 emissions, emphasizing the imperative for sustainable practices. In the long run, external debt is observed to have an insignificant impact on environmental quality, suggesting a strategic opportunity for policymakers to channel external funds towards environmentally sustainable projects. Short-term strategies underscore the positive link between decreased industrialization and improved environmental quality, while a cautious approach to external debt is crucial due to its short-term negative impact. The significance of the error correction term underscores the need for adaptive policies. Overall, the study advocates for comprehensive policies integrating sustainable practices and directing external financing towards eco-friendly projects, alongside a capacity building and technology transfer partnerships for environmentally conscious development in Somalia.

The Relationship Between Current Account Deficit and CBRT Policy Rates After the 2008 Crisis: ARDL and NARDL Bounds Test Approach

The current account deficit has continued as a constant problem due to the structural problems of the Turkish economy and the impact of the tightening monetary policy decisions taken after the 2008 global crisis. For this reason, measures regarding the current account deficit are among the priority agenda items of the CBRT. The aim of this study is to examine the relationship between the current account deficit and the policy interest rate in the inflation targeting and floating exchange rate system using the ARDL bounds test method in the period 2011:Q1-2023:Q1. Cointegration results confirm the existence of a long-term relationship between the variables. Long and short term coefficients show that the policy rate does not have a significant effect on the current account deficit.The findings indicate that the expected impact of policy rate adjustments on the current account deficit is limited. It is thought that this situation arises from the fact that the reaction of the exchange rate to the policy interest is more decisive in inflation targeting than the reaction of the current account deficit. Therefore, keeping the current account deficit at a sustainable level will depend on exchange rate stability.

The Linkage Between Government Expenditure and National Income: the Case of Bangladesh

Objective: This study examines the applicability of Keynesian and Wagner's law in terms of gross national expenditure (GNE) and gross national income (GNI) in Bangladesh. Theoretical Framework: According to Wagner's Law, a country's government spending rises in tandem with its national income. The opposite is true, according to the Keynesian Law, which claims that government spending increases GDP. Methodology: This study is a quantitative and secondary data based analysis. It makes use of time series data spanning the years 1981 to 2020. All variables' data were gathered from the World Bank's compilation of global development indicators. In order to exclude years with outlier data, the current study did not include variables' data from 1971 to 1980 (The abnormality occurred in 1971 for the war of liberty; in 1974 for the Famine and in 1975 for the political violence). Once the sequence of integration with ADF had been determined; the ARDL bounds testing technique and Granger causality test were used. Results and Discussion: According to the findings of the ARDL bounds test, there is a long-term correlation between government spending and gross domestic product. Government spending likely contributes significantly to the causes of national income, according to the slope coefficients from long-run equations. Granger causality findings show that government spending and national income have a one-way causal link but not the other way around. Research Implications: One possible explanation for this result is that recent government spending on development projects boost up the national income. Originality/Value: We contribute to the literature in two important ways. The first contribution is that we focus on more robust estimation methodologies. Unlike previous studies of Bangladesh context, we apply ARDL bounds test approach to co-integration. In addition to having advantageous small sample characteristics, the ARDL limits testing approach does not necessitate the same order of integration in the variables. With these considerations, this technique suits better in case of Bangladesh given that data would be of a small span. And second, we examined both of the Wagner’s Law and Keynesian Law for Bangladesh with two separate equations, unlike the previous studies on Bangladesh who investigated the Wagner’s equation only.

Estimating the causal relationship between external debt and inflation in Jordan: evidence from an ARDL and Toda–Yamamoto approaches

Purpose This study aims to investigate the causal relationship between external debt and inflation in Jordan over the period 1970 to 2020. Design/methodology/approach The external debt–inflation nexus is examined within a multivariate framework by including other determinants of inflation, including money supply and the nominal effective exchange rate. This study uses an ARDL bounds testing approach to cointegration to test the existence of a long-run relationship between the inflation rate and its drivers. An error correction model is estimated to reveal the short-run dynamics of the series. The direction of causality among the variables is examined using a modified version of the Granger non-causality test due to Toda and Yamamoto (1995). The analyses control for the presence of structural breaks in the underlying time series. Findings The empirical results show that external debt and money supply have a statistically significant positive effect on inflation in the long run. The authors also find that a nominal depreciation of the Jordanian Dinar raises inflation rates in the long run. The Toda–Yamamoto Granger non-causality test findings reveal a statistically significant bi-directional positive causality between inflation and external debt, between the nominal effective exchange rate and inflation and between money supply and inflation. Practical implications Proper management of the exchange rate policy, money supply and external debt levels is crucial to control inflation rates in Jordan. Originality/value To date, the authors are unaware of any empirical study that examines the impact of external debt on inflation in Jordan, and the current study aims to fill this gap in the literature.

The use of the joint simultaneous integration methodology to measure the impact of certain macroeconomic variables on the GDP: ARDL model

Purpose. The objective of this study is to analyse the evolution of public expenditure, exports, imports, and gross domestic product (GDP) in Algeria over the past four decades (1980–2022). It aims to measure the impact of each of these macroeconomic variables (public expenditure, imports, and exports) on GDP during the study period, in the long and short term. Additionally, the study intends to identify the most significant economic variables influencing GDP in Algeria by constructing an econometric model (autoregressive model) based on economic theory and previous studies. These variables are considered the driving force and effective activator for improving GDP. Results. The findings obtained using the ARDL bounds testing approach for cointegrated time series revealed the existence of a long-run equilibrium relationship between the independent variables (public expenditure, imports, exports) and the dependent variable (GDP). In the short run, most of the model variables were statistically significant, indicating their influence in explaining GDP. This allows us to conclude that there is a dynamic relationship between the model variables in Algeria during the study period. Additionally, the error correction coefficient was statistically significant at the 5 % level, while the speed of adjustment to equilibrium was 0.8828. Scientific novelty. Research in this field continues to provide new insights into the dynamic relationship between these important economic factors. While this topic has been explored in previous studies, our research distinguishes itself by examining the collective impact of public expenditure, imports, and exports on GDP. This study establishes a direct link between these variables and GDP. Modern studies emphasise the significance of the composition of public expenditure in determining its impact on GDP. Additionally, several studies have demonstrated the influence of exports and imports on GDP. Imports play a crucial role in enhancing production efficiency and reducing costs within the economy. The current study addresses the gap in previous research by simultaneously examining public expenditure, imports, and exports as independent variables, considering both the pre- and post-Algerian economic reforms period. Practical value. This study contributes to understanding economic growth trajectories and how various economic components impact GDP. By analysing the influence of public expenditure, exports, and imports on economic growth, the study offers significant added value. It empowers policymakers at the macroeconomic level to leverage these findings in formulating and implementing effective economic policies that can enhance GDP, thereby promoting economic growth and improving living standards through the management of the study variables such as public expenditure, export values, and imports.

Impact of Globalisation and Energy Consumption on CO2 Emissions: Empirical Evidence from Lithuania Using Linear and Non-linear ARDL Bound Testing Approach

Impact of Globalisation and Energy Consumption on CO2 Emissions: Empirical Evidence from Lithuania Using Linear and Non-linear ARDL Bound Testing Approach

The Impact of Export and FDI on the Economic Growth Rate in India: An ARDL Bound Testing Approach

The Impact of Export and FDI on the Economic Growth Rate in India: An ARDL Bound Testing Approach

The Impact of Financial Development, Net Foreign Assets and Domestic Businesses on Export Performance: A case of Singapore Economy

The effects of financial sector liberalization; foreign assets, domestic businesses in the form of listed companies and domestic manufacturing, and real interest rate on export performance of Singapore economy are tested by using ARDL bounds testing approach by covering period from 1978-2023. The empirical results suggest that liberalizing financial sector and foreign assets significantly accelerate export performance. This study considers two proxies for domestic businesses – listed companies and manufacturing. The results uncover the significantly expansionary effects of both indicators of domestic businesses on export performance. Lastly, real interest rate is adversely affecting export performance in Singapore. This study suggests that by expanding domestic businesses; increasing investments in foreign assets, liberalizing financial sector and reducing real interest rate can give boost to exports in Singapore.

The Dynamic Effect of Trade Openness, Debt, and Foreign Investment in Ghana’s Economy: An ARDL Bound Testing Approach

The Dynamic Effect of Trade Openness, Debt, and Foreign Investment in Ghana’s Economy: An ARDL Bound Testing Approach

Financial health and economic growth responsiveness as solution to environmental degradation in Pakistan.

This study analyses the impact of GDP per capita, domestic credit, savings, and population on the environment in Pakistan from 1995 to 2019. The country has consistently been ranked eighth, fifth, and eight as an environmentally vulnerable nation from 1998 to 2017, 1999 to 2018, and 2000 to 2019, respectively. Therefore, the study explores the role of environmental awareness as a potential strategy for making peace with nature. Findings of the ARDL bounds testing approach confirm the long-run cointegration among variables of concern. In further assessment, the study determines that increased per capita income is detrimental to environmental quality in the long run. However, in the short run, it shows a favourable impact. On the other hand, domestic credit worsens the environment in the long and short runs. However, savings are positively insignificant in this regard. Furthermore, the total population significantly harms the environment in the long and short run. Fortunately, environmental awareness has emerged as a key solution to environmental degradation in Pakistan. Findings show that an increase in the dissemination of environmental awareness through the Internet, mobile, and landline phones, as well as by increasing education expenditures, mitigates the populations' detrimental impact on the environment and improves environmental quality in the long run.

Remittances and economic growth: Evidence from South Africa using ARDL in the presence of structural breaks

The aim of this study is to investigate the relationship between remittances and economic growth in South Africa, using data running from 1970 to 2019. We utilize the ARDL bounds testing approach to explore the relationship between remittances and economic growth, incorporating control variables and addressing structural breaks. Our findings suggest that the structural change in economic growth occurred in 2008 during the global financial crisis, while the break point for remittances emerged in 1997. After taking into consideration the presence of structural breaks, our study found the estimated coefficient for remittances to be statistically significant at the 1% level of significance. The coefficient is negative, indicating that remittances have a negative impact on economic growth. This result is robust to alternative estimators, including the fully modified least squares technique and the impulse response function. Despite employing different estimation methods, the consistent finding of a negative relationship between remittance inflows and economic growth underscores the reliability of our conclusion. Being a recipient of remittances, it is appropriate for a study of this nature to guide policy makers in formulating appropriate policies to benefit from the full impact of remittances, diversify the economy, and reduce reliance on remittance inflows.

Does Uncertainty in Climate Policy Affect Economic growth? Empirical Evidence from the U.S.

This study aims to empirically investigate the short- and long-term effects of climate policy uncertainty on economic growth in the U.S. for the years 1990-2020. In the study, total workforce, foreign direct investments, and financial development variables were also selected as control variables, and the effects of these variables on economic growth were examined. The study used the ARDL bounds test approach to investigate the cointegration between the variables. The findings confirm the existence of a positive and statistically significant relationship between climate policy uncertainty and economic growth in the sample period in the U.S. In addition, the effects of total labor force, foreign direct investments, and financial development on economic growth were found to be positive and statistically significant in the study.

Moderating Role of Remittance Inflows in Testing the Validity of Ecological Footprint-Induced Environmental Kuznets Curve (EKC) Hypothesis in Nigeria: An ARDL bound testing approach

The paper tests the validity of ecological footprint induced-environmental Kuznets curve (EKC) hypothesis by considering the moderating role of remittance inflows in environmental quality -economic growth nexus in the context of Nigeria from 1980 to 2022. The study employed an ARDL bound testing approach, the results of both the short and long-run revealed that the coefficients of economic growth (GDP) and economic growth squared (GDP2) is significantly positive and negative respectively. This indicates an inverted U-shaped relationship between environmental degradations and economic growth thereby authenticating the validity of the EKC hypothesis in Nigeria. Furthermore, remittance inflows exert a negative and significant impact on environmental quality in the short-run but the coefficient is insignificant in the long-run. The interactive term of GDP and remittance inflows exert a positive and significant impact on environmental degradations in the short-run thereby revealing a complementary role by both the two variables in deteriorating the environment in the short-run, although the coefficient is insignificant in the long-run. The interactive between squared GDP and remittance inflows revealed a negative significant impact on environmental pollution thereby indicating a substitutability role by the two variables in improving the quality of the environment. Based on the findings, it is recommended that government should invests in research and development (R&D) on green energies and environmentally friendly technologies. personal remittances received should be channeled toward financing environmentally friendly businesses for environmental sustainability in Nigeria. Keywords: Ecological Footprint-Induced, Environmental Kuznets Curve, and Nigeria

Financial Development and Income Inequality in Nigeria: Testing the Financial Kuznets Curve Hypothesis

This study aims to investigate the link between financial development and income inequality in Nigeria, considering the potential existence of a financial Kuznets curve in Nigeria from 1986 to 2022. The study uses datasets from the World Bank and International Monetary Fund Database. It employs the Augmented Dickey-Fuller (ADF), Phillips-Perron (PP), Zivot-Andrews (ZA), ARDL bounds testing approach, and the Toda-Yamamoto causality test to determine the direction of causality between the two variables. The study finds evidence of an inverted U-shaped relationship between financial development and income inequality, potentially supporting the Financial Kuznets curve hypothesis in Nigeria. Additionally, the results of the Toda-Yamamoto causality test show a unidirectional causality running from financial development to income inequality. The findings have significant implications for economic development and social stability in Nigeria, emphasizing the need for targeted policies to mitigate the potential adverse effects of financial development on income inequality. This study fills a gap in existing research by examining the financial Kuznets curve in Nigeria and accounting for structural breaks, thus contributing valuable insights to the ongoing debate on finance and inequality.

THE NEXUS BETWEEN MACROECONOMIC INDICATORS AND ELECTRIC CONSUMPTION EFFECT ON ECONOMIC GROWTH IN TURKEY

Currently, energy consumption is an important factor regarding its contribution to economic growth rather than the inputs used for its realization. It is known that economic decision units are linked to energy consumption. Innovation of technologies and the use of technology in production increases the energy demand. Energy is complementary to labor and capital in countries' economic and technological development. 
 The study aims to determine the impact of electricity consumption on economic growth by utilizing selected economic indicators for the period between 1996 and 2022 in Turkey. The study uses the ARDL bounds test approach to analyze the cointegration relationship using economic growth, electricity consumption, foreign direct investment, and general price level data. Short and long term effects have been revealed. It is observed that energy consumption and economic growth have a positive relationship with the same direction in the short and long term. Inflation has a negative impact on energy consumption in the short and long term. In addition, the increase in foreign direct investments in the short term leads to a significant increase in energy consumption in the relevant period in Turkey.