ARDL Model Research Articles

Effectiveness of Monetary Policy in Controlling Inflation from the Perspective of the Tunisian Economy

This paper aims to empirically examine, for Tunisia, the effects of monetary policy in fighting inflation using ARDL modeling. The study is based on time series data from 2000 to 2021. The results show that the key interest rate has a positive and statistically significant effect on long-term inflation. The monetarist theory is valid in the short term, while the structural theory of inflation is valid for the case of Tunisia in the short and long term. As a result, monetary policy in Tunisia, applied with the aim of curbing inflation, is not effective. The study therefore recommends that economic policies should focus directly on the factors behind inflation, mainly imported inflation.

Determinants of Female Labour Force Participation in Pakistan

Women's labour force affects the household economy as well as economic growth. Women's labour force contribution rate is also increasing gradually in Pakistan. We attempted to determine the determinants and impact of women's labour force contribution on households. Time series data were taken from World Bank and WDI from 1981 to 2020. Based on the unit root test the ARDL model was finalized. Akaike Information Criterion (AIC) was used to verify the significance of the estimated ARDL-VECM model. There was a positive and negative association among selected variables. Variables such as female population, ratio of female workers, female headed households and female literacy rate positively and significantly impacted the female labour force participation whereas fertility rate and child mortality rate negatively but significantly determined the participation of females in labour force. Based on findings, government should focus on health and education sectors with special focus on females in order to provide reasonable educational and health facilities in order to support females participation in various economic activities of the country.

Resource abundance: Blessing or curse? Comparative analyses of point and diffuse resources

The objective of this study is to assess the short and long run effects of renewable and non-renewable resource rents on economic growth in Cameroon. Taking crude oil rents and forest resource rents as proxies for non-renewable and renewable resources respectively for the period 1977–2018, we employed the autoregressive and dynamic autoregressive distributive lag (ARDL/DynARDL) modelling frameworks to achieve the stated objective. Results from the ARDL model indicate that, in the short run, both the renewable and non-renewable resources have a positive and significant effect on economic growth but the point resource is more significant than the diffused. A clear disparity in results is however noticed in the long run. While the point resources show that natural resources are a curse to long run growth, the diffuse resources reveal that natural resources are a blessing to long run growth. From the DynARDL simulation, a negative shock of the point resources leads to a fall in economic growth whereas diffuse resource indicates an increase. This shows that point resources are more prone to the resource-curse thesis and diffuse resources to resource-bless thesis. Contingent on these findings, the Cameroon government should ensure a proper allocation of natural resource revenues especially point resource rents to growth-inducing investment or social overhead capital such as open new markets, transport infrastructures, and power sectors, so as to enhance growth and development.

Exploring asymmetric influence of R&D expenditures on CO2 emissions in China: evidence from nonlinear ARDL model.

R&D spending upsurges technological advancement and innovation which results in lowering energy consumption and environmental degradation. The current study investigates the asymmetrical impact of R&D spending on CO2 emissions in China via employing annual data from 1980 to 2021 and the NARDL model for empirical analysis. The estimated results of the NARDL model confirmed that there are asymmetries in positive and negative coefficients of R&D spending in China. The results depict that the positive shock in R&D spending exerts a negative and statistically significant impact on CO2 emissions in both runs implying that an increase in R&D spending lowers CO2 emissions. However, the negative coefficient of R&D spending yields a positive and statistically significant impact on CO2 emissions revealing the fact that a negative shock in R&D spending results in the upsurge of CO2 emissions in China. According to these findings, the impact of positive and negative shocks in R&D spending on CO2 emissions is asymmetric. The findings also show that the impact of a negative shock in R&D spending is greater than the impact of a positive shock on CO2 emissions. In addition to the negative shock in R&D spending, increases in energy consumption, economic growth, and FDI inflows also contribute to an upsurge in CO2 emissions in China. The robustness of the estimated results is assessed using standard fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS) models. The FMOLS and DOLS results have been confirmed to be sound and consistent with the results of the NARDL model. The study suggests that the economic strategies should aim at investing in R&D spending to foster environment-friendly technological innovations and to lower environmental degradation in China.

IMPACT OF GLOBAL ECONOMIC FACTORS WITH FOREIGN INVESTMENTS ON INDIAN ECONOMIC DEVELOPMENT- AN EVENT STUDY

Purpose: The present stage of economic development is the basis for this empirical inquiry, which shows that foreign direct investment (FDI) significantly affects the destination countrys steady, high-quality, and healthy economic growth. To attract more international investment, every country experiencing economic globalisation is working to provide a favourable climate for businesses. Design/Methodology/Approach: I gathered five global institutional metrics global inflation, global gross domestic product, global production manager index, dollar index, and global equity index from the DPIIT websites secondary data for the years 2013-2023. These metrics form the basis of my studys primary objective. We are Using stalactitical tools like Unit root Test, ARDL Approach & OLS Model. Originality/Value: The researchers in this study used OLS (Least Squares) regression: Institutional variables effects on FDI flows were the focus of this research. To determine the effect of institutional characteristics (independent variables) on foreign direct investment (FDI) flows (dependent variable), this research used the ordinary least square approach. Findings: The study found with the help of ARDL model that the Institutional indicators had are having the positive coefficient value and stated that Global Economic Metrics which shown short run association with FDI flows, Time constraints, geographical constraints, or the inaccessibility of necessary data from appropriate sources are all obstacles that any research project must overcome. KEYWORDS: FDI, Global Metrics, Economy Growth, OLS Model.

The Impact of Resource Revenue on Non-Resource Tax Revenue in Oil-Exporting Countries: Evidence from Nonlinear Analysis

The main objective of this study was to examine the asymmetric effect of resource tax revenues on non-resource ones in oil-rich countries, as most previous research on the subject has assumed a symmetric resource-non-resource tax revenue nexus. We employed linear ARDL model to analyze the short- and long-term effects and found a negative relationship between resource and non-resource tax revenues. Based on nonlinear ARDL model estimates, empirical results provide strong evidence for the asymmetric effect of resource tax revenues. In the long-run, positive shocks have negative impacts on non-resource tax revenues. Conversely, negative shocks were found to not lead to increased non-resource tax revenues. In addition, findings show that the short-term effects are stronger when resource tax revenues increase.

The nexus between resource depletion, price fluctuations, and sustainable development in expenditure on resources

The recent Inflation Reduction Act (IRA) proposals are expected to take a number of measures. These include financial incentives to improve energy efficiency, reduce pollution and increase the climate resilience of households. Furthermore, the use of natural resources (NTR) is critical in driving energy demand in industry and households. However, NTRs also play an important role in increasing carbon emissions (CO2), which can lead to various diseases. Healthcare (HLT) has complex issues such as rising costs due to inflation (INF), stalled improvements in population-wide outcomes, stalled access due to clinical staff shortages, and COVID-19 intensify. Therefore, this study aimed to investigate the effects of NTR, CO2, and INF on HLT. In addition, this study also considers short-term and long-term volatility and does so by employing an asymmetric (non-linear) ARDL model. Application of NARDL resulted in positive shocks to NTR, INF, and CO2 that increased HLT, whereas negative shocks to NTR, INF, and CO2 decreased HLT. Based on the findings, it is recommended that there is an urgent need to identify measures that can be taken to utilize the NTR best and facilitate the sustainable efforts being promoted by the IRA.

Economic fundamentals and house prices in Namibia: comparative evidence from real and interpolated data

Purpose The primary aim of this paper is to concurrently use the data types to enhance econometric analysis in the housing market in developing countries, particularly Namibia. Design/methodology/approach Scholarly discussions on econometric analysis in the housing market in sub-Saharan Africa suggest that the inadequacy of time series data has impeded studies of such nature in the region. Hence, this paper aims to comparatively analyse the impact of economic fundamentals on house prices in Namibia using real and interpolated data from 1990 to 2021 supported by the ARDL model. Findings It was discovered that in all the three types of data house prices were affected by fundamentals except real GDP in the long term. It was also noted that there were not much significant variations between the real data and the interpolated data frequencies. However, the results of the annual data and the semi-annual interpolated data were more analogously comparable to the quarterly interpolated data Practical implications It is suggested that the adoption of interpolated data frequency type should be based on the statistical significance of the result. In addition, the need to monitor the nexus of the housing market and fundamentals is necessary for stable and sustainable housing market for enhanced policy direction and prudent property investment decision. Originality/value The study pioneer to concurrently use the data types to enhance econometric analysis in the housing market in developing countries.

SHORT AND LONG-TERM IMPACT OF EDUCATIONAL ENROLLMENT RATES ON ECONOMIC GROWTH: FOR INDONESIA'S SUSTAINABLE DEVELOPMENT OF HUMAN CAPITAL

This research explores the relationship between Indonesia's economic growth and school participation rates. Using the ARDL model and Bounds test cointegration method, the study examines this relationship and finds that investing more in education, particularly at higher levels, can contribute to long-term economic growth. The study emphasizes the role of education in shaping human resources and promoting sustainable economic development. It suggests that increased investment in education can create a stronger pool of skilled workers, leading to economic growth. The research also reveals a temporary increase in employment as a result of education-driven growth, contributing to the sustainable development of human resources. The study highlights the importance of education funding in nurturing human capital and advocates for policy interventions that prioritize education as a driver of Indonesia's long-term development goals. Overall, this study emphasizes the transformative potential of investing in human capital for Indonesia's economy. In conclusion, this study sheds light on the relationship between economic growth and education, emphasizing the transformative potential of investing in human capital for the sustainable development of Indonesia's economy.

Asymmetric effects of economic policy uncertainty on demand for money in developed countries

This paper examines the asymmetric effects of economic policy uncertainty (EPU) on the demand for money in Canada, Japan, the United Kingdom, and the United States. We use linear and nonlinear ARDL models with monthly data over the period 1985–2022 to conduct the analysis. Results from the linear ARDL model show that changes in EPU have no short-run or long-run effect on money demand in any country, except in the US, where changes in EPU have a positive short-run effect. However, with the nonlinear ARDL model, we find evidence of short-run and long-run effects across all four countries. Both increases and decreases in EPU have negative long-run effects on Canadian and UK money demand, but a positive effect on US money demand. For Japan, rising EPU has a positive effect on money demand, whereas falling EPU is insignificant. The long-run results are consistent in each country over time. The recent COVID-19 period had a short-run impact across countries and a long-run effect on the relationship between EPU and money demand in Canada and the UK. In contrast, the Brexit period had no differential long-run impact on money demand across countries, and a short run impact was only observed in the UK. Our results highlight the importance of adopting nonlinear ARDL models instead of linear models to analyze money demand and the need to examine countries separately since the long-run effects of EPU on money demand vary across countries.

THE LONG-TERM EFFECT OF FOREIGN DEBT AND FOREIGN DIRECT INVESTMENT (FDI) ON ECONOMIC GROWTH IN INDONESIA

In light of Indonesia's status as a developing nation with constrained financial resources, the imperative for strategic decision-making by the government to foster sustained economic growth becomes evident. This research delves into an analysis of the enduring repercussions of foreign debt and foreign direct investment (FDI) on Indonesia's economic landscape. The study employs a comprehensive examination of time series data spanning from 1990 to 2022, employing both the Bounds test cointegration approach and the ARDL model to scrutinize the dynamics at play. The empirical findings underscore the multifaceted influence of foreign debt and FDI on Indonesia's economic growth, illustrating that these factors exert both short- and long-term impacts. Moreover, the research identifies the export control variable as a pivotal factor, indicating an immediate effect on Indonesia's economic development albeit without a lasting impact. Consequently, this unveils a nuanced interplay of variables that contribute to the nation's economic trajectory. In light of these insights, the study posits that the Indonesian government must adopt a judicious and discerning approach in formulating and executing policies related to exports, foreign debt, and FDI. Recognizing the dual temporal impact of foreign debt and FDI, policymakers are urged to balance short-term economic imperatives with a commitment to long-term sustainable growth. The immediate influence of the export control variable further underscores the need for agile and adaptive policy management to navigate the intricacies of Indonesia's economic landscape.

The Macroeconomic and Institutional Pillars of Public Revenue Mobilization in the Democratic Republic of the Congo: an Ardl Model Application

The objective of this study is to estimate the macroeconomic and institutional determinants of public revenue mobilization in the Democratic Republic of Congo (DRC) based on the Musgrave (1969) model. To achieve our objective, we used ARDL modeling. The particularity of the present study is the consideration of tax reforms (VAT and mining reform), the quality of institutions, and the cointegration test performed. The results show that trade openness, GDP, tax pressure, development aid, and inflation are key macroeconomic factors, while the quality of institutions and tax reforms also play an essential role in the Congolese government's ability to generate revenue. The bounds cointegration test has highlighted the existence of a long-term relationship between revenue mobilization and its macroeconomic and institutional determinants.

Assessment of the Impact of GDP on Atmospheric Emissions in the Republic of Armenia

Every year scientists, especially economists, pay more and more attention to environmental issues, since their existence and the risks of further aggravation threaten the possibility of sustainable economic development and ensuring public welfare. In general, the most urgent and risky of the environmental issues is the atmospheric air pollution, which is a negative result of the economic activity of the society, which causes the involvement of economic thought in assessing the impact of economic activity on atmospheric emissions. In this work taking into account the best international experience in assessing the impact of economic activity on atmospheric emissions and in order to get an idea of the compliance of the RA economy with the green standards, with the help of econometric models, an assessment of the impact of GDP volumes on atmospheric emissions in Armenia has been carried out. In particular, within the framework of the study using the ARDL model with time series, the dependencies between two key indicators have been studied: the volumes of harmful substances released into the atmosphere and the volumes of GDP in the period from 2000 to 2022, taking into account the impact of global economic crises. As a result, it has been revealed that in the short and long term there is a direct relationship between atmospheric emissions and GDP volumes, in particular, an increase in GDP by 1% in the short term in a given year, all other things being equal, leads to an increase in emissions by an average of 0.2% in a given year, and in the long term, an increase in GDP by 1%, all other things being equal, after 12 years will be accompanied by an increase in emissions by an average of 0.6%, which is quite worrying and is an impetus for the need of greening the RA economy.

Does Monetary Policy and Fiscal Policy Affect Economic Growth during Covid-19 Pandemic: Evidence from Indonesia

Indonesia is an archipelago with more than 200 million inhabitants when the COVID-19 pandemic occurred. The Indonesian government implemented several strategies to maintain economic stability during the Covid-19 pandemic. Some strategies that are carried out to maintain economic growth are monetary policy and fiscal policy. This study aims to determine the effect of monetary and fiscal policies on Indonesia's economic growth during the Covid-19 pandemic. The model used in this study is the ARDL model. The results showed that MP had a positive and significant effect on the GDP variable in the current year. However, it negatively and significantly affected the GDP variable in the past year. FP variable has a positive and significant effect on the GDP variable in the current year. However, it has negatively and significantly affected the GDP variable in the last 2 years. The DCOV variable or dummy variable has a positive and significant effect on the GDP variable before COVID-19 and a negative and significant effect on the GDP variable after COVID-19.

Measuring the Impact of Technology Innovations and Renewable Energy Consumption for Enhancing Environmental Sustainability in India: Empirical Evidence from ARDL Approach

Rising carbon dioxide (CO2) emissions at a breakneck pace is a serious problem for sustainable development. To ensure climate-protected sustainable development, we have to promote safe and sustainable energy for the future. Here, the production and consumption of renewable energy is having a vital role. Apart from this, technological innovation is also crucial to taste the benefits of renewable energy and reduce the emission of different harmful gases. Against this backdrop, the present study intends to investigate the contribution of technological innovation along with the use of renewable energy in ensuring environmental sustainability in India using the ARDL model. Further, the Granger causality test is also performed in this study to check the direction of causality among the variables. The results of this study reveal that renewable energy consumption reduces CO2 emissions in India in both the short and long run. This means that using renewable energy would help India to bring environmental sustainability through reducing CO2 emissions. However, a positive relationship is noted between technological innovation and CO2 emissions. This may imply innovation in technology in India is unable to act as an instrument to bring environmental sustainability.

Assessing the Key Drivers of Sustainable Economic Growth in Laos: Emphasis on Infrastructure Investment

This study delves into the factors driving sustainable economic growth in Laos, with a particular emphasis on infrastructure investments. Employing advanced analytical techniques, including GMM regressions and ARDL models, we analyze data spanning from 1995 to 2020, offering valuable insights and policy recommendations. Our consistent findings underscore the pivotal role of electricity infrastructure investments in spurring economic expansion. Highlights the positive impact of telecommunication infrastructure and a skilled workforce, emphasizing the importance of technological advancements and human capital development. An investigation from various angles reveals that variables like agriculture, air transport, industry, and services emerge as significant contributors to growth, emphasizing its multifaceted nature, and we introduce exchange rates as a variable, unveiling their potential for both positive and negative impacts on economic growth. In the long run, our study identifies a positive relationship between air transport, human capital, labor force, industry, services, exchange rates, and economic growth, highlighting their central role in policy efforts. In the short term, we observe that investments in the industry positively influence growth, while exchange rate fluctuations can have adverse effects. Our research underscores the critical importance of infrastructure investments, especially in electricity and air transport, for driving economic growth in Laos. Factors such as mobile telecommunication technology, human capital, agriculture, industry, and services also make substantial contributions to sustained growth. Notably, exchange rates can have both positive and negative effects, underscoring the need for meticulous management by policymakers to support Laos in its pursuit of rapid economic development.

The Symmetric and Asymmetric Nexus Between Monetary Policy Interest Rate and Core Inflation in Jordan

Objectives: This study investigates monetary policy's symmetric and asymmetric impacts on core inflation in Jordan. It employs linear and nonlinear autoregressive distributed lag (NARDL) models. The research also seeks to assess the relationship between the overnight deposit rate, money supply growth, and real GDP growth on core inflation and to explore potential linear or nonlinear effects. Methods: The study applies ARDL and NARDL models to estimate the relationships above. It utilizes data from the first quarter of 1998 to the first quarter of 2023. Tests for Granger causality are conducted, and the Brock-Dechert-Scheinkman (BDS) test is employed to ascertain the presence of nonlinear paths within the study variable. Robustness checks are conducted to ensure parameter stability. Results: The analysis provides compelling empirical evidence supporting a long-term relationship between the overnight deposit rate and core inflation. The Brock-Dechert-Scheinkman (BDS) test confirms the existence of nonlinear dynamics. The ARDL model reveals a linear relationship: a 1% interest rate increase leads to a 0.26% reduction in core inflation in the long run. In contrast, the Nonlinear Autoregressive Distributed Lag (NARDL) analysis unveils an asymmetric effect: a 1% increase in the overnight deposit rate decreases core inflation by 0.43%, while a 1% reduction increases it by 0.37%. Conclusions: These findings have critical implications for monetary policymakers. They underscore the importance of judiciously considering interest rate adjustments to manage inflation dynamics, acknowledging the nonlinear and asymmetric effects inherent in the relationship between the overnight deposit rate and core inflation. When crafting monetary policy strategies, policymakers must consider these nuanced dynamics to address inflation concerns effectively.

Effect of Interest Rate on Savings Mobilization in Nigeria

The study examines the extent at which interest rate affects savings mobilization in Nigeria. The study is hinged on the modified variant of McKinnon and Shaw hypothesis that accounts for the link between savings mobilization and interest rate. ARDL model was used in the study to test for co-integration for the long run and the unrestricted error correction model for the short run contemporaneous dynamics. Data gotten from CBN annual report and World Economic Outlook covers the period; 1986-2022 was used for the study. Accordingly, the study finds out that savings mobilization is significant but have negative responsive to changes in nominal interest rate both in the short run and long run. Also, the study further finds out that the effect of prime lending rate on savings mobilization is significant but has positive response in long run as against its significant negative effect in the short run. Thirdly, it was observed that maximum leading rate had significant positive effect on savings mobilization in the short run while inflation rate exerted significant negative effect on savings mobilization contrary to the latter significant positive response to changes in M2-GDP ratio in the short run. The study recommended the need for government to consider a reduction from the current double digit to single digit particularly in nominal interest rate and prime lending rate in order to stimulate savings through investment in Nigeria. Finally, monetary authorities may consider a moderation rise in price level thereby encouraging people to save.

The Effect of Infrastructure Development on Poverty Alleviation in a Developing Economy: An Empirical Study from Nigeria

The study examines the effect of infrastructure development on poverty alleviation in Nigeria from 1999 to 2022, focussing on key infrastructure facilities such as transportation, energy, water, sanitation, and telecommunications. The objective of this study was to empirically ascertain the influence of these indicators in reducing poverty level in Nigeria using statistical and econometric methods such as Pearson correlation and ordinary least squares (OLS) regression. In addition, the researchers carried out a robust check on the outcomes of the study using the ARDL model, considering the principal components factor (PCA) of transport, energy, water and sanitation, and telecommunications infrastructure as a proxy for infrastructure development. The results indicate that infrastructure development has not helped in reducing poverty in Nigeria within the period of study. Specifically, the outcomes of the OLS revealed mixed results on both the direction and magnitude of the effect of infrastructure development on poverty alleviation. While the robust test validated the position that infrastructure development has not contributed to poverty reduction in Nigeria, signifying that a 0.58% increase in poverty level is associated with infrastructure development in Nigeria. The study concluded that infrastructure development in Nigeria has not effectively reduced poverty, primarily due to challenges faced by SMEs and negatively impacting living conditions across the nation. The study highlights the practical policy implications of these findings, requiring that Nigeria undertake a strategic and long-term perspective in her investment activities, similar to what has been done by successful developing countries to propel business productivity and poverty reduction.

Effect of Financial Deepening on Private Investment in Kenya

Private investment remains an important sector in the growth of the economy and sustainable development in Kenya. It is envisioned to create job opportunities, distribute income and alleviate poverty. The growth rate of private investments witnessed in the past years in Kenya is below the expected growth rate of 24%. Since 1980, the highest growth has been achieved at 15.2% in 2014. It then declined to 12.96% in 2021, 13.34% and 13.40% in 2022 and 2023 respectively, which are much below the projected growth rate. Existing studies in Kenya lack substantial inquiry on the relationship between financial deepening and private investment and have dealt with them separately without linking the two in a dynamic framework. Additionally, most of those studies tend to rely on a limited set of indicators of financial deepening, while employing different methods for analysis that may not be appropriate for unbiased results. The current study intended to determine the effect of financial deepening on private investment. A disaggregated analysis of three aspects of financial deepening was done: private sector credit, broad money and bank deposits. Data was obtained from KNBS and World Development Indicators (WDI) websites for the period between 1980-2021. STATA software was used in the analysis of the collected data. ARDL model was employed and the ECM was estimated since there was cointegration. The regression results indicated that Private sector credit, Broad money and Bank deposits were statistically significant at a 1% level in the short run. An increase in 1 percent of private sector credit, Broad money and Bank deposits cause private investment to increase by 0.32, 0.39 and 0.49 percent respectively. The findings show that financial deepening has a positive effect, while broad money and bank deposits have negative effect on private investment in the long run. The three models were good predictors of private investment as shown by R-squared values of 0.96, 0.94 and 0.94 respectively. The study concluded that financial deepening is important for growth of private investment in Kenya. Therefore, Financial intermediation theory is applicable in Kenya. The study recommends policymakers to conceptualize the policies that aim at facilitating financial access and inclusion for the marginalized groups in remote and rural areas. Further, the government needs to support financial sector through enhancing the growth of microfinance institutions. This will facilitate provision of credit and savings services to individuals earning low-income and owning small businesses.