Autoregressive Distributed Lag Research Articles

The Role of Information and Communication Technology (ICT) and FDI on South African Economic Growth

Information, communication, technology (ICT) and foreign direct investment plays a substantial role in various spheres of social and economic development. Therefore, changes in these variables can significantly impact a country's economy. The current study aims to assess the implication of information and communication technology (ICT) and FDI on South African economic growth. To achieve this objective, the autoregressive distributed lag (ARDL) model and Error Correction Model (ECM) were applied to time series data over the period 1991 to 2021. Findings obtained from econometric modelling and analysis indicate that besides the positive effect of FDI on South African economic growth, all the analysed components of ICT namely mobile phone subscriptions, fixed phones, and internet subscriptions are drivers of economic growth in South Africa. Based on the findings, from the policy perspective, it was suggested that South African economic authorities increase and improve investment in the ICT infrastructure while also attracting more foreign investors. Additionally, to benefit from FDI and ICT's drivers of economics, policymakers should endorse policies and strategies that enhance economic openness and the ICT's resource allocation.

Asymmetric relationship between crude oil price and remittance inflows in a small island economy: Evidence from non-linear ARDL approach

Sri Lanka's economy heavily depends on remittance inflows to finance its import of essential and intermediate goods. A decline in remittances could severely limit the country's import capacity, affecting overall economic growth and development. This study investigates the impact of crude oil prices on Sri Lankan remittance inflows from 1980 to 2020, while accounting for per capita GDP, financial development, and exchange rates as additional explanatory variables. Employing a nonlinear autoregressive distributed lag (NARDL) model, the analysis reveals significant asymmetric effects of oil price shocks on remittance inflows. In the short run, positive oil price shocks lead to increased remittance inflows, whereas negative shocks reduce them. However, in the long run, both positive and negative oil price shocks have an adverse impact on remittance inflows. Furthermore, changes in per capita GDP, financial development, and exchange rates also play a crucial role in influencing remittance inflows. The findings highlight Sri Lanka's vulnerability to global oil market fluctuations and suggest policy measures to mitigate these risks. Key recommendations include diversifying labor export markets, enhancing financial infrastructure, and reducing dependence on remittance inflows to sustain import capacity and promote long-term economic resilience.

Assessing the influence of foreign direct investment on renewable energy consumption in Somalia: an ARDL model analysis

ABSTRACT This study examines the impact of Foreign Direct Investment (FDI) on renewable energy consumption in Somalia from 1990 to 2019 using the Autoregressive Distributed Lag (ARDL) model. The findings reveal a positive, statistically significant relationship between FDI, Gross Domestic Product (GDP), trade openness, and renewable energy consumption in the long run. Specifically, a 1% increase in FDI leads to a 0.0000115% increase in renewable energy consumption. Similarly, a 1% increase in GDP leads to a 0.026041% increase in renewable energy consumption. Meanwhile, a 1% rise in trade openness enhances renewable energy consumption by 0.0000280%. Increased foreign investments and economic growth promote the adoption of renewable energy, aligning with sustainable development principles. Conversely, environmental degradation negatively impacts renewable energy consumption. Specifically, a 1% increase in environmental degradation leads to a 0.570376% decrease in renewable energy consumption. Policymakers should incentivize FDI in the renewable energy industry through tax incentives, streamlined regulations, and public-private partnerships. Strategies promoting economic growth and integrating renewable energy objectives are essential, with trade openness facilitating the importation of renewable energy technologies. A limitation of this study is the reliance on yearly data, which may not capture recent developments or short-term fluctuations. Future research should use more granular, up-to-date data to understand the dynamics in Somalia better.

Does Current Account Balance Affect Economic Growth? Evidence from Sub-Saharan Africa

This study aimed to provide an econometric analysis of the impact of current account balances on economic growth in various subregions of Africa. It utilized the cross-sectional autoregressive distributive lags (CS-ARDL) technique and analyzed data from 1994 to 2022. The result showed that inflation has had an adverse effect on the Gross Domestic Product (GDP) in three specific regions. While the short-run influence of inflation on GDP may not be statistically significant, its long-term impact is notably negative. Foreign Direct Investment (FDI) has a negative effect on GDP in the short run; however, this effect is not statistically significant across the different economies. Over time, Foreign Direct Investment (FDI) has a negligible effect on the GDP in North Africa, but it has a negative and statistically significant influence in Central Africa. These findings emphasize the different regional dynamics in Africa and illustrate the intricate interplay between current account balances and economic growth. In conclusion this study affirmed the necessity for targeted economic strategies to combat inflation and utilize FDI for long-term growth.

Tourism’s Influence on Economic Growth and Environment in Saudi: Present and Future

Reports from the World Tourism Organization indicate that tourism activity has been increasingly booming; this sector is essential for economic growth and may affect the environment. Tourism is one of the key strategic sectors for planned growth in Saudi Arabia’s Vision 2030. This study is designed to evaluate the long-termning association between tourist arrivals, growth domestic product (GDP), and CO2 emissions in the Kingdom of Saudi Arabia (KSA). The data related to these variables were assessed for the period 2010 to 2020. The autoregressive distributed lag (ARDL) bounds results revealed that there are long-established relations between tourist arrivals and growth domestic product and tourist arrivals and CO2 emissions. The dynamic ordinary least squares (DOLS) and fully modified ordinary least squares (FMOLS) model outcomes were compatible with the outcomes of the ARDL model. In reference to the Granger causality test, tourist arrivals cause (affect) the GDP. Such a result confirms the conception that tourism encourages economic growth. No causality runs from tourist arrivals towards CO2 accumulation. This result may reflect the governmental effort to reduce CO2 accumulation and/or to perform tourism activities in a sustainable way. The results predicted that the growth rate of tourist arrivals, GDP, and CO2 accumulation equal 0.0023, 0.048, and 0.0169, respectively, during the forecast period (2021–2030), which appeared to be increasing for tourist arrivals and GDP and decreasing for CO2 accumulation. The study recommended that, to increase economic growth, tourist arrivals should be increased alongside performing tourism activities in a sustainable way. These findings point to the benefits of governance in ensuring effective policies to decarbonize the environment, and policy proposals are put forward accordingly.

Achieving Carbon Neutrality in Emerging Markets: The Dual Impact of Energy Transition Investments on Economic Growth and Carbon Emissions.

This study investigates the effectiveness of energy transition investments (ETIs) in achieving net-zero emissions. Specifically, it revaluates the environmental Kuznets curve (EKC) by analysing whether ETIs can simultaneously stimulate economic activity and reduce carbon emissions (CE) using the Autoregressive Distributed Lag (ARDL) model. The analysis focuses on a sample of emerging countries. In contrast to previous research, the study expands the EKC model by incorporating the ETIs variable, which encompasses a broader and more comprehensive range of investments that contribute to climate change mitigation, beyond just renewable energy. Additionally, the study employs total factor productivity (TFP) as a measure of economic activity, instead of GDP, considering the efficiency of technology, energy, and other resources. Key findings indicate that the TFP coefficient is higher in the short term compared to the long-term supporting the validity of the EKC hypothesis. This suggest that emerging countries have reached a TFP level of that helps reduce their CE, aiding climate change adaptation and mitigation. The study also reveals a negative effect of ETIs on CE and shows that an increase in TFP significantly enhances ETIs, suggesting that higher TFP levels attract more investment in energy transitions. These findings provide insights for policymakers on the impact of ETIs on CE and aid in formulating effective policies to achieve net-zero emissions.

Are natural resource volatility curses or blessings for economic performance? Stories of resource-rich regions

This paper analyses the time-varying and non-linear effects of natural resource volatility on economic growth in 10 countries using the smooth transition regression (STR) model and further examines the long-run and short-run relationships using the autoregressive distributed lag (ARDL) cointegration approach. The conclusions exhibit that natural resource rents are linearly and non-linearly associated with economic growth in countries with different levels of economic development, and display long-term cointegration and short-term equilibrium state. This study provides guides for policymakers in considering differences in national development to implement management strategies that combine the long and short term.

The Dynamics of Tourism, Economic Growth, and CO2 Emissions in Uzbekistan: An ARDL Approach

In this study, we examined the impact of key macroeconomic variables on the sustainability of tourism in Uzbekistan using open data from the World Bank from 2000 to 2023. The selected variables for the study include the number of international tourists, GDP, CO2 emissions, and exchange rates. Considering the importance of climate issues in ensuring sustainable tourism, the study combines these factors using the autoregressive distributed lag (ARDL) model to assess their long-term relationships. We chose this model due to its flexibility in dealing with variables of different integration orders. The results of the bounds testing procedure confirm the existence of a long-term cointegration relationship between the dependent variable (international tourist arrivals) and the selected macroeconomic indicators. Specifically, the study results indicate that GDP growth, exchange rate fluctuations, and CO2 emissions positively affect tourist arrivals to Uzbekistan. The findings of this study underscore the importance of infrastructure development and macroeconomic stability in attracting international tourists while emphasizing the need for sustainable international practices to mitigate environmental impacts. This study contributes to understanding the complex interrelationship between tourism development and macroeconomic variables in the context of developing countries and aids decision-making in this area.

Sectoral value addition and its impact on economic growth in Saudi Arabia: An ARDL approach

Saudi Arabia is working to reduce its reliance on oil by diversifying its economy, making it important to understand how different sectors contribute to GDP growth. This research explores the connection between sectoral value addition and economic growth in Saudi Arabia, using data from 1980 to 2022. The aim is to identify which sectors can support long-term economic growth in line with the goals of Vision 2030. The study uses the autoregressive distributed lags (ARDL) model to analyze the yearly growth rates of value addition in different sectors and their impact on GDP growth. The results show that the construction, mining, services, and financial sectors have a positive and significant effect on economic growth. These findings highlight key sectors that influence GDP growth, suggesting that targeted investments and policy measures in these areas could strengthen economic stability and sustainability. The study emphasizes the need to promote growth in a variety of sectors to meet the broader economic aims of Vision 2030.

Economic growth and environmental sustainability: The role of foreign direct investment and technological innovation on carbon emissions in Ghana

Debates on foreign direct investment, technological innovation and carbon emission seem unsettling in the literature. We contribute to the literature by investigating the relationships between foreign direct investment, technological innovation, and carbon emissions in Ghana. Using the Autoregressive Distributive Lag (ARDL) method, the analysis reveals that foreign direct investment contributes to reduced emissions in the short run but significantly increases carbon emissions in the long run, aligning with the pollution haven hypothesis. This indicates that Ghana may have a robust environmental regulation that ensures eco-friendly foreign direct investments in the short run, with weak enforcement of regulations resulting in high emissions in the long term. Technological innovation in the Ghanaian context contributes to increased CO2 emissions. However, the interaction effect of foreign direct investments and technological innovation reduces carbon emissions, emphasizing the importance of aligning foreign investments with sustainable technological advancements in Ghana. The study also identifies the Environmental Kuznets Curve (EKC) effect, where emissions rise with economic growth but decelerate at higher GDP levels. The findings underscore the need for stronger environmental regulations and a shift towards sustainable, cleaner energy and technological development to mitigate the environmental impacts of economic growth in Ghana and similar developing countries.

The relationship between government expenditure on agriculture and agriculture production

PurposeThe impact of government expenditure on economic performance has been a topic of discussion at both the sectoral and aggregate national levels. Despite its theoretical importance, evidence from literature indicates that this relationship has not been universally accepted across different countries and sectors. Given the significance of agriculture in African economies, particularly in Ghana, and the role of government in this sector, this study examines the impact of government expenditure on agricultural productivity in Ghana from 2000Q1 to 2022Q4.Design/methodology/approachSpecification of the model was done based on the Autoregressive Distributed Lag (ARDL) cointegration bound test approach.FindingsThe results revealed that the studied variables cointegrated in the long run. Government expenditure was found to induce agriculture production both for the long run and short run within the period of the study, implying that government expenditure matters in inducing agriculture productivity in Ghana.Originality/valueThe study employed the ARDL methodology to investigate government expenditure and agriculture production contagion in Ghana, which has been specifically overlooked by previous studies. It is suggested that the Government of Ghana as well as others in similar environment should increase investment into the agriculture to boost the productivity of the sector.

Toward Environmental Sustainability: The Nexus between Agriculture, Renewable Energy, and Economic Growth in Mitigating CO2 Emissions in Somalia

This research investigates the intricate relationships between agriculture, renewable energy, economic growth, and carbon dioxide (CO2) emissions in Somalia from 1991 to 2022. This study uses the Autoregressive Distributed Lag (ARDL) model and Granger causality tests to understand their impact on environmental sustainability. ARDL results reveal a negative role of agriculture and renewable energy on CO2 in the short and long term. The country's reliance on fossil fuels and biomass further intensifies CO2 emissions. While economic growth is essential for improving living standards, it positively correlates with CO2 emissions in the short and long term, emphasizing the challenge of decoupling economic development from environmental degradation. Domestic investment has a short-run relation only to CO2 emissions. In Granger causality tests, the results indicated that Agriculture and domestic investment have bidirectional causality to carbon dioxide emissions. On the other hand, renewable energy, economic growth, and domestic investment have unidirectional causality to Agriculture in Somalia, while domestic investment has bidirectional causality to renewable energy and economic growth. The study recommends implementing comprehensive and integrated approaches to prioritize sustainable development strategies, clean energy alternatives, and efficient agricultural practices. Promoting economic growth while also focusing on capacity-building and awareness campaigns is essential. Collaborating with the international community on climate change mitigation and sustainable development initiatives can further support Somalia's journey toward environmental sustainability.

The economic implications of Nigeria’s foreign debt servicing and sustainability

Despite extensive literature examining the role foreign debt plays in the growth of the Nigerian economy, seldom do they simultaneously consider the effect of external debt servicing and sustainability. Accordingly, this study examined the impact of external debt servicing and sustainability on the economic growth of Nigeria for the period between 1980 and 2022. The auto-regressive distributed lag (ARDL) model was adopted to measure the effect of the explanatory variables on the dependent variable. Empirically, the study demonstrated that the impact of debt sustainability was insufficient on the economy; notwithstanding being positive in the long run. Thus, suggesting the presence of a sovereign Ponzi finance in Nigeria’s debt management. However, the effects of external debt servicing and foreign debt interest payment were significant and negative on the economy in the short and long run periods. Thus, showing that resources being used to service the debt of the nation, crowd-out funds that could have been used to spur growth of the economy. Generally, the study affirmed the applicability of the debt-overhang hypothesis for the country. Conversely, exchange rate significantly and positively impacted the economy, indicating that an improvement in the value of the Naira, will be indicative of an improvement in the economy. Hence, the study recommends amongst others that effective external debt management strategies such as the debt for equity swap programme should be adopted by fiscal authorities in the country.

Renewable Energy Consumption in Somalia: Assessing Its Impact on Currency Exchange Rates

This study utilizes an Autoregressive Distributed Lag (ARDL) model to examine the effects of renewable energy, economic growth, and inflation rate on exchange rate fluctuations in Somalia from 1990 to 2019. The analysis shows that economic growth and RE positively influence the exchange rate in both the short and long run. In contrast, inflation negatively impacts the exchange rate in the short run, suggesting short-term currency appreciation, but leads to depreciation in the long term. Moreover, the study finds that a 1% increase in RE results in an 80% increase in the exchange rate, indicating significant currency depreciation. To mitigate currency depreciation, the research advocates for policies promoting local renewable energy use to reduce import dependency and stabilize the currency. This approach includes investments in renewable infrastructure, community education, and economic diversification. This study highlights the need for further research into renewable energy’s impact on exchange rates in Somalia, particularly in different economic contexts, to gain a more holistic understanding of these dynamics.

Impact of green trade on green growth in Malaysia: A dynamic ARDL simulation

Green economic growth emphasizes developing an economy that safeguards natural resources, enhances resource capabilities, and promotes sustainable resource utilization. This approach is vital for balancing economic development with environmental preservation, highlighting the efficient and sustainable use of renewable and non-renewable resources to maintain a clean environment and societal well-being. It also stresses the long-term preservation of natural resources for green growth and prosperity. Environmental sustainability is key for economic growth, as poor sustainability can lead to economic decline due to inefficient resource use. The Eleventh Malaysia Plan highlights the importance of green economic growth, focusing on areas such as creating a supportive environment for green growth, adopting sustainable consumption and production practices, conserving natural resources, and strengthening resilience against climate change and natural disasters. This study examines the impact of natural resource use on the green economic growth in Malaysia from 1990 to 2021, with a focus on green trade as a key component. To achieve this objective, this study utlizies the Autoregressive Distributed Lag (ARDL) method and also its extension, the Dynamic ARDL (DYNARDL). Estimation results for both model indicate that green trade has a significant long run positive impact on green economic growth. While for short run, only DYNARDL method found evidence for positive impact of green trade. These findings suggest that policymakers should further promote green trade as a means to enhance sustainable and equitable resource use, thereby supporting the growth of the green economy in Malaysia.

Decoding the mystery of Bangladesh's jute decline: A climate crisis or plastic predicament

Bangladesh is one of the areas in Asia most vulnerable to climate change, with a mostly agricultural economy. Although jute was formerly an important cash crop, its production has steadily declined. However, the use of plastic products instead of jute-made goods is increasing rapidly. This study investigates whether plastic and climate change seriously threaten jute crops in Bangladesh. The dataset includes observations from 1988 to 2021, and various methods are used, including the Augmented Dickey-Fuller (ADF) test, Johansen cointegrating regression estimators, and fully modified Autoregressive Distributed Lag (ARDL). The findings show that floods and rainfall significantly harm jute production in Bangladesh. However, plastic usage which is measured by the use of plastic has no statistically significant effects on jute production. Therefore, to safeguard jute production in Bangladesh, the government should prioritize climate-resilient agricultural practices, such as improved flood management and the introduction of flood-resistant jute varieties. Additionally, promoting jute-made products over plastic alternatives can help revive the jute industry and reduce plastic pollution.

The role of government integrity in the impact of environmental taxes on comparative advantage in environmental goods and climate change in emerging markets

The goal of this study is to examine how environmental taxes influence the comparative advantage in environmental products and carbon emissions within emerging economies. To gain a better understanding, we examine whether this impact changes depending on the level of government integrity. This study utilizes panel autoregressive distributed lag (ARDL) techniques and a two-step generalized method of moments (GMM) dynamic panel model to ensure accuracy. The results indicate that increased environmental taxes mitigate the comparative advantage in environmental goods for emerging markets. However, for countries with high levels of government integrity, higher environmental taxes enhance their competitive edge in environmental goods. Additionally, our findings show that although a rise in environmental taxes is associated with higher carbon emissions, raising such taxes results in a reduction in carbon emissions for emerging economies with solid government integrity. These findings suggest that robust political institutions are crucial in promoting the comparative advantage of emerging markets in environmental goods and mitigating climate change. In the absence of substantial confidence in political or governmental institutions, the efficient implementation of climate taxes poses considerable challenges. Furthermore, we observe that an increase in the comparative advantage of environmental goods results in a decrease in carbon emissions.

Public Energy R&D Spending and Green Energy for Sustainable Development: COP28 Perspective of G7 Economies

Achieving sustainable development goals (SDGs) is one of the top priorities for countries worldwide, and the recent COP28 has focused mainly on achieving sustainable development via clean energy investment financing. However, countries and regions still struggle to find various policy-level indicators to achieve sustainability engagement. In this context, finding the right combination of policy indicators becomes crucial. Therefore, the current study seeks to identify the key drivers of sustainability for the G7 economies by utilizing data from 1990–2019. This study employed the cross-sectional autoregressive distributed lag (CS-ARDL) panel time series method of estimating primary results and a novel sustainable development index as the dependent variable. The study revealed that public energy R&D budgets, increasing income levels, improving the political risk index, and promoting clean energy are important for achieving sustainable development in the G7 countries and that the depletion of natural resources has an adverse influence on sustainability. These empirical results are supported by various economic and environmental theories, i.e., the environmental Kuznets curve, the innovation theory of sustainability, the Dutch disease hypothesis, and the political economy of development and energy transition theory. Based on these findings, energy investment is recommended, especially for clean energy projects, and increasing income levels via sustainable economic activities to achieve sustainability in the G7 economies.

Towards Environmental Sustainability: The Impact of External Debt and Government Expenditure on Carbon Emissions in Somalia

This study aims to assess the effect of external debt and government expenditure on carbon emissions in Somalia. To do so, the study employed a rigorous econometric approaches such as autoregressive distributed lag model (ARDL), Fully modified least square (FMOLS), and Dynamic least square (DOLS). Findings demonstrated that external debt (LNED) positively and significantly affects carbon emissions. Results revealed that a 1%, or a point increase of external debt, rises 0.29% into the emitted emissions. Moreover, the study found that the long-run coefficient of government expenditure (LNGE) positively correlates with emissions. However, a 1% increase in total government expenditure significantly increases CO2 emissions by 0.05% in the long run. So, regarding the positive correlation between external debt, government expenditure, and carbon emissions, the study suggests that the government should strategically use its expenditures and external debt to fund environmentally sustainable projects. This approach aims to reduce carbon emissions while promoting sustainable development and balancing economic growth with ecological conservation.

Do governance indicators have a role in remittances-growth nexus in Egypt?

Purpose ― Drawing on annual data from 1996 to 2022, this study aims to examine the effect of Egypt’s real GDP growth. Methods ― Autoregressive Distributed Lag (ARDL) and Cointegration technique are applied by first examining the stationarity of the series by utilizing the Augmented-Dicky-Fuller (ADF) unit root test. The bound cointegration test is then implemented to evaluate the existence of cointegration among the variables. Findings ― The results indicate that the GDP growth rate has a long-run positive relationship with remittance inflows in Egypt. This paper also finds that the average governance indicators in Egypt, which include government effectiveness, political stability, control of corruption and regulatory quality, voice and accountability, and the rule of law, could help facilitate the long-run effect of remittances on GDP growth. Implication ― The findings imply that maintaining high levels of governance indicators is essential for helping Egypt benefit from remittances and enhancing its economic growth.Originality/value ― The study is a pioneer in including the average governance indicators in the remittance-growth nexus study for Egypt. Its purpose is to assess whether governance quality affects the nexus and whether there exists a threshold for the average governance indicators below which the flow of remittances does not encourage economic growth.