Autoregressive Distributed Lag Framework Research Articles

Investigating the Finance-Energy-Growth Trilogy in Sub-Saharan Africa: Evidence From the NARDL Framework

This paper analyzes the nexus between energy consumption, financial development, and economic growth in twenty-one (21) sub-Saharan African (SSA) nations by using the nonlinear autoregressive distributed lag (NARDL) framework from 1990Q1 to 2014Q4. First, the study reveals that energy consumption and financial development have asymmetrical impacts on economic growth in most countries in the short and long term. Second, positive shocks to financial development favor economic growth in only a few nations compared to the negative shocks in the short term, whereas they have mixed effects in the long term. Third, we found that adverse shocks to energy consumption boost economic growth in several nations in the short term, unlike the positive shocks, but the scenario has reversed in the long term. We also found that gross fixed capital formation and labor force remain key factors promoting economic growth in many SSA countries, in contrast to the mixed effects of trade openness over time. Accordingly, our study recommends implementing energy-saving policies in specific SSA countries to stimulate sustainable development. Policymakers must embrace an effective credit allocation to the private sector supporting productive investments. Governments should also optimize domestic investments in physical capital, upgrade the labor force, and implement efficient strategies in international trade. These policy recommendations need to be implemented according to the unique socio-economic characteristics of each SSA country.

Asymmetric reactions of stock prices and industrial output to exchange rate shocks: Multiple threshold nonlinear autoregressive distributed lag framework

Motivated by swings in the exchange rate of many developing economies which exert influence on firms? input costs, output, stock prices, and profits, the study investigated the asymmetric reactions of stock prices and industrial output to various shocks in the exchange rate in Nigeria using a multiple threshold nonlinear autoregressive distributed lag model and high frequency series from January 1999 to December 2021. Empirical results suggest that stock prices and industrial output react asymmetrically in the opposite direction to exchange rate depreciation. It further indicates that the reactions of both stock prices and industrial output to exchange rate changes are sensitive to the size of shocks. Exchange rate shocks above the 25th percentile significantly and inversely affect both stock prices and industrial output, and the effects of exchange rate shocks on stock prices and industrial output become pernicious if above the 75th percentile. The main economic implication of the empirical finding is that in the upper quantile, both exchange rate depreciation and appreciation hurt industrial output, and hence, stock values. Thus, the multiple threshold nonlinear autoregressive distributed lag results suggest that the reactions of both stock prices and industrial output to exchange rate changes are highly sensitive to the extent of the shocks.

Estimating the link between trade uncertainty, pandemic uncertainty and food price stability in Togo: New evidence for an asymmetric analysis

AbstractGlobally, the outbreak of COVID‐19 and the associated containment measures adopted by governments are causing disruptions that sow uncertainty in several sectors of the economy. In this study, we explore the asymmetric impact of pandemic uncertainty and global trade policy on food prices in Togo. The study uses a nonlinear autoregressive distributive lag (NARDL) framework and causality tests for the period 2000 M1–2021 M5. The results show that the different types of uncertainty affect food price stability in the short and long run, but the shock is more pronounced in the case of pandemic uncertainty, as they are sudden and disrupt food price stability. The main findings remain significant when we use various alternative methods and estimation techniques. However, our results suggest that the Togolese food market is facing pandemic uncertainty and trade policy, which should lead policymakers and stakeholders to take corrective measures to control losses.

The asymmetric effects of exchange rate on trade balance and output growth

The study analyses the impact of exchange rate asymmetries on trade and output growth in 8 of the largest African countries between 1970 and 2019 using the non-linear autoregressive distributed lag (NARDL) framework. The empirical result confirms a long-run relationship between exchange rate, trade and output growth. Also, currency appreciation and depreciation enhance short-run trade and output in South Africa while reducing both in Angola. Regarding Egypt and Morocco, currency appreciation improves short-run trade and growth, but in the long run, depreciation lowers both. This is similar in Kenya and Nigeria, except for the weak negative effect of currency depreciation on trade. In general, for most African nations, both appreciation and depreciation primarily exert negative impacts on the long-run trade balance, while depreciation has mainly short-run positive effects. Similarly, depreciation positively impacts short-run growth, while currency appreciation remains largely negative. We then recommend policy prescriptions for the continent.

Dynamic Role of Green Energy Efficiency and Climate Technologies in Realizing Environmental Sustainability: Fresh Insights From China

Amid rising industrialization and economic progress, China has shown exponential growth in energy and fossil fuel consumption; therefore, it faces great global concern and widespread criticism for energy and fuel conservation to reduce fuel-related emissions. In addition, the recent spread of COVID-19 instigates the impact of environmental pollution, exaggerates the virus intensity, and lowers people’s immunity due to poor air quality. Therefore, this study explored the role of green energy efficiency and climate technologies in achieving carbon neutrality in China using an advanced quantile autoregressive distributed lag (QARDL) framework. The results indicated that green energy efficiency and climate technologies significantly reduce environmental pollution across all quantiles in the long run. In contrast, urbanization enhances environmental degradation at lower and higher emissions quantiles, while trade only promotes environmental pollution at lower quantiles. These findings suggested using alternative energy sources and carbon-reducing technologies to ensure a sustainable environment.

Budget Consolidation and Social Sector Spending: Does Fiscal Contraction Endanger Growth of Human Capital in India?

This study analysed the short- and long-term impacts of fiscal consolidation on social sector spending in Indian economy and thereby on human capital. Using autoregressive distributed lag framework, the study found that fiscal adjustments have significant potential to undermine the short- and long-run spending in human capital. A fiscal adjustment aimed at strengthening fiscal position of the Indian economy can have adverse impacts on the growth rate of income. Lower-income growth will imply increased constraint on part of the government to spend in public utilities like education and health. Similarly, a fiscal adjustment based on slashing government spending can adversely impact both short- and long-term welfare spending as these spendings are mainly financed by deficits. The policymakers while framing the design of a consolidation programme need to take extra precaution as far as the composition of these adjustments are concerned. Moreover, there is need of legislate aimed at changing the nature of welfare spending from discretionary to compulsory.

Energy Consumption and Economic Growth Linkage: Global Evidence from Symmetric and Asymmetric Simulations

Abstract The literature reveals that linear models do not accurately represent the asymmetric relationship between economic growth and energy consumption (EC). To fill this gap, we examined the asymmetric relationship between EC and economic growth in a non-linear panel autoregressive distributed lag (ARDL) framework of 85 countries as a whole sample and of Brazil, Russia, India, China, and South Africa (BRICS), the Next Eleven, Big Four in Western Europe, Asia-Pacific region, Group of Seven, South Asian Association for Regional Cooperation (SAARC), Economic Cooperation Organization (ECO) and the Arab League as a sub-sample analysis from 1977 to 2014. A second generational unit root test has been applied to check the problem of cross-sectional dependency. Asymmetric co-integration was employed to analyse the co-integration between the variables of interest. Long-run and short-run estimates have been calculated using the non-linear panel ARDL method. Results indicate that positive shocks to energy use tend to have a growth-enhancing effect in ECO and the Next Eleven while in the rest of the regions, the effect is growth contraction. Moreover, economic recovery from a positive shock to energy use is the case in the Arab League, Asia-Pacific region, Group of Seven and in the whole sample. However, a negative shock to EC is observed in the Group of Seven, Asia Pacific region, Big Four in Western Europe and ECO, and the whole sample worsens the economic contraction. We can deduct from this study’s results that information on the asymmetric relationship between the subject variables is needed to design sound economic policy decisions across different economic regions.

The asymmetric influence of renewable energy and green innovation on carbon neutrality in China: Analysis from non-linear ARDL model

Adopting green technology and renewable energy is imperative to address climate challenges and realize sustainable development goals. Therefore, this study examines the impact of green innovation and energy consumption on carbon emissions in China from Q1-1990 to Q4-2018. Due to several technological and economic shifts in recent eras, Chinese macro-economic data shows an abnormal distribution, and traditional linear estimators failed to integrate non-linearity. In response, this study employs a non-linear autoregressive distributed lag (NARDL) framework to address non-linearity arising from abnormal data distribution. The overall results reveal that positive shocks in green technology significantly mitigate carbon emissions by 0.262%, while negative shocks increase emissions by 0.104%. Similarly, positive shocks in renewable energy consumption caused a 0.360% reduction in carbon emissions, while negative shocks increased emissions by 0.424%. In contrast, a positive change in non-renewable energy consumption leads to 0.139% higher emissions. However, in a negative shock, this effect turns stronger and spurs carbon emissions by 0.246% in the long run. These findings confirm the asymmetricity because positive and negative shocks in regressors distinctly affect carbon emissions in China. Finally, population and economic growth contribute to higher emissions by 0.872% and 0.685% in the long run, respectively. Moreover, the error correction term confirms the long-run steady-state equilibrium convergence by 11.5% in the case of any shock in the short run. These results indicate that the Chinese government should promote green innovation and renewable energy policies based on their asymmetric emissions-reduction effects.

The sugar-ethanol-oil nexus in Brazil: Exploring the pass-through of international commodity prices to national fuel prices

Understanding the pass-through mechanisms from international energy and agricultural markets to domestic energy markets is crucial for policy making, fuel hedging and risk management strategies. We provide a first insight into the asymmetric effects of international energy and agricultural commodity prices on fuel prices in Brazil, a country that supplies much of the ethanol that the world demands. Closing prices data for the years between 2015 and 2020 are considered under a multivariate nonlinear autoregressive distributed lag (NARDL) framework. Our findings suggest that prices for the reformulated blendstock for oxygenate blending (RBOB) have had both short- and long-run asymmetric effects on domestic gasoline prices in Brazil, while surges in heating oil (HO) prices have led to declines in Brazilian ethanol prices. We also consider nonparametric causality tests, which support the findings towards a considerable influence of HO on Brazilian ethanol price returns. Policy and stakeholder implications are further discussed, along with avenues for future studies.

Impact of Human Capital and Social Capabilities on Economic Growth of Pakistan: A Time Series Analysis

Theoretically, human capital has a significant relationship with economic growth. In this regard, the present study was conducted to determine the conditions that have a significant and positive relationship with economic growth. The main objective of the study was to explore the impact of human capital and social capabilities or skills on the economic growth of Pakistan. The study estimates the impact of human capital and social capabilities on economic growth of Pakistan by using time series data from the period of 1980-2018 taken from World Bank. Autoregressive distributed lag framework is used for the valuation of variables relationship and direction of connection of variables. Human capital influenced by education expenditure, social capabilities, gross fixed capital formation (GFCF) and children mortality. This study indicates the role of human capital in growth and development of Pakistan. Results showed that health and education are the two main sectors which need significant attention of government. In addition, more investment on human capital can increase the social capabilities. Final consumption expenditure depends on current economic conditions of a nation. Results showed progressive human capital influence economic growth due to social capabilities. These objectives can be attained through sharing the suitable amount of GDP to these sectors.

Evidence from the nonlinear autoregressive distributed lag model on the asymmetric influence of the first wave of the COVID-19 pandemic on energy markets

The COVID-19 pandemic remained a global risk factor and integrated into various means in the functioning of companies, economies and financial markets. Therefore, this paper investigates how COVID-19 influences the energy market in the main financial markets (China, France, Germany, Italy, Spain and the United States), using time series from February 28, 2020, to November 3, 2020. The goal of this research is to investigate the asymmetric impact of COVID-19 from leading financial markets on energy commodities. In this regard, the non-linear auto-regressive distributed lag (NARDL) framework is employed to capture the long-run asymmetric reactions. The econometric design allows to explore the long-term asymmetric reactions of dependent variables through positive and negative partial sum decompositions of changes in the explanatory variables. The quantitative results show a significant long-run asymmetric interdependence between the number of new SARS-CoV-2 incidence and mortality and the daily percent change in close price of future contracts pertaining to Brent oil, crude oil WTI, carbon emissions, gasoline RBOB, heating oil, Chukyo kerosene, and natural gas. Furthermore, no asymmetry is found in the case of ethanol and fuel oil futures. The novelty of this article is the study of the impact of COVID-19 on the energy sector during the first two waves of COVID-19 by applying the NARDL model that allows to capture long-term asymmetric reactions. Certainly, further research on this topic is necessary due to the permanent shifts in the pandemic, as well as the availability of longer data periods on COVID-19.

Ways to achieve universal access to sustainable electricity in Southeast Asia

This paper proposes a multidimensional dependent variable, namely the Green Power Index, as an appropriate proxy for a sustainable power market and assesses its determinants. For this purpose, we apply the product lifecycle management estimator with the panel Autoregressive Distributive Lag framework for the annual data of 2000–2019 of nine Southeast Asian countries. The findings revealed that Southeast Asian nations consider the following as appropriate accelerators to a sustainable power market in the short and long run: economic growth, improved foreign direct investment inflow, increased share of research and development, governance, and privatisation. Conversely, an increase in the price of electricity may slow it down. Empirical findings show that major policy implications include implementing electricity tariff classifications, accelerating economic recovery in the post-COVID-19, boosting bilateral trade and investments and partnerships among Southeast Asian countries and other economic powers in Asia and others.

Deficits, Debt and Interest Rates in Sri Lanka: Does the Spillover of Foreign Interest Rates Matter?

Fiscal policy’s impact on the interest rate has a controversial background. To reconcile theoretical uncertainties, researchers and policymakers often relied on empirical exploration. This article appraises the impact of external debt, domestic debt, the budget deficit, and foreign interest rates on interest rate variations in Sri Lanka, for the period when interest rates were deregulated. It applies the bounds testing procedure to the cointegration and error correction models within an autoregressive distributive lag framework. A set of relevant variables like the exchange rate, trade openness and money supply is controlled to corroborate whether such impacts are robust. It is found that the budget deficit elevates interest rates both in the long and short runs; external debt raises interest rates only in the long run; and domestic debt lowers interest rates both in the long and short runs. The spillover of foreign interest rates has a positive impact on Sri Lanka’s interest rate. As interest rates respond to domestic fiscal policy, they can induce fiscal discipline by affecting the cost of borrowing. On the other hand, the significant impact of foreign interest rates on Sri Lanka’s interest rate is a critical issue, as domestic macroeconomic policy has to face challenges to achieve its goal. JEL Classification: E62, E43, E52, H60

Effects of Digital Banking on The Performance of Commercial Banks in Nigeria 2010 -2019

In this study, the effect of digital banking on the performance of Commercial Banks was examined from 2010 to 2019. The study applied the Autoregressive Distributive Lag (ARDL) framework to examine the relationship between point of sales machine (POSG), Banking Transactions made through unstructured supplementary service data (USSDG), Web banking (WEBG) and Return on Assets (ROA) of commercial banks in Nigeria. The data were obtained from the statistical bulletins of the Central Bank of Nigeria (CBN) and annual reports of Nigeria Deposit Insurance Corporation (NDIC). The result of the analysis revealed that digital banking has positive and insignificant effect on the performance of commercial banks in Nigeria. . In the light of this findings, the study recommends the need for relatively stable network: In other to reduce number of failed transactions, banks are hereby encouraged to liaise with network providers and their engineers to develop a standardized network platform exclusively for each of the digital banking channels. Also there is need for digital banking education to bank customers on the benefits of digital banking. Equally there is need for all banks to have 24 hours working cyber security department in order to ensure that the channels are not hijacked by cyber criminals.

Asymmetric Gasoline Price Effects on Public Transit Ridership: Evidence from U.S. Cities

Using a nonlinear autoregressive distributive lag framework, the paper examines the dynamic effects of gasoline price, gasoline price volatility, income, and transit service coverage and frequency on public transit ridership in six U.S. cities (New York City, Chicago, Los Angeles, Boston, San Francisco, and Cleveland). The results indicate that, in the long run, rising gasoline prices increase transit ridership in all cities. More importantly, transit riders react differently, depending on the direction of gasoline price movements. The variable corresponding to price increases is found to have a larger elasticity than that for price decreases in five out of six cases, supporting gasoline price asymmetry. In Chicago, Los Angeles, Boston, and Cleveland, a small but statistically significant long-run effect of gasoline price volatility on transit ridership was found, suggesting that gasoline price uncertainty is an important factor affecting transit ridership in these cities. In the short run, transit service coverage is found to be the key determinant of transit ridership, implying that expanding transit service coverage can boost public transit ridership in the short term.

Foreign Direct Investment and Financial Development in Guinea: Causality Analysis

This essay provides a better comprehension of the other disregarded impacts of FDI by examining first, the causality direction then the long- and short-term interaction among inward FDI and financial development in Guinea using 1990-2017 data set.
 
 The empirical assertions are grounded on the Granger causality wald test, Bounds test for co-integration, Error correction model (ECM) and the Auto regressive distributed lag (ARDL) framework. FDI per GDP net inflows and Credit to private sector are respectively adopted as FDI measure and financial advancement indicator. The following outcomes are established: first, FDI in the long term negatively influence financial advancement in Guinea at 5% magnitude. This inference indicates that 1 percent surge in FDI per GDP induces 0.389 decrease in credit to private sector. Second, FDI per GDP [L1] negatively and significantly interact with financial advancement in the short term. Suggesting that 1 percent increase in FDI in the short term engenders 0.215 decrease in credit to private sector. Third, the causality direction remains unidirectional irrespective to the number of lags. Finally, the long- and short-term coefficients tell us the same story regardless of the time effects. Overall, contrary to the common perceptions, we found strong evidence that foreign investment does not enhance financial development in Guinea. In terms of practical implications, it seems ineffective to use FDI as financial advancement instrument within the Guinean context.

Socio-economic and environmental drivers of green innovation: evidence from nonlinear ARDL

The adoption of green technology is imperative to realise sustainable development. Considering the same, this study explores the drivers of Green Innovation (GI) based on the theoretical foundation of the Triple Bottom Line (environmental, social, and economic factors) with the integration of information and communication technologies (ICT) and institutional governance (INST) in Pakistan. This study employs a nonlinear autoregressive distributed lag (NARDL) framework on quarterly data from Q1-1996 to Q4-2019. The results reveal that positive shocks in human capital (HCI) instigate GI by 1.05%, while negative shock undermines GI by 0.93%. Similarly, positive shocks in carbon dioxide (CO2) emissions increase GI by 0.63%, while any negative shock undermines GI by 0.01%. On the other hand, positive shock in ICT leads to 0.55% advanced GI; however, this effect turned stronger in negative shocks, which leads to reduced GI by 0.78% in the long-run. These results confirm the asymmetricity because positive and negative shocks in HCI, CO2 emissions, and ICT instigated GI differently. Finally, INST and GDP contribute to enhancing GI by 0.12% and 1.69%, respectively. The results indicate that the Pakistan government should improve institutional governance, adapt, and focus on sustainable practices with ICT integration to promote green technologies.

Analysing the presence of volatility clustering and impact of macro-economic variables on sustainability indices in India: using GARCH (1, 1) model and ARDL framework

Increasing environmental consciousness among various stakeholders of financial markets has led to the introduction of GREENEX and CARBONEX indices by Bombay Stock Exchange (BSE). This study is an attempt to analyse the impact of macro-economic variables, namely growth rate (GDP), inflation (WPI) and exchange rate (FOREX) on both the sustainability indices. The paper also attempts to find the presence of volatility clustering in the sustainability indices of India. The cointegration amongst the macro-economic variables and sustainability indices is tested through auto-regressive distributive lag (ARDL) Approach and significant results are achieved for both the indices. The volatility clustering for GREENEX and CARBONEX is tested through GARCH (1, 1) model and significant volatility clustering is established for both the indices. These significant relationships highlight that the macro-economic variables have a significant and crucial impact on sustainability of the Indian economy. Any measure taken to improve the growth rate, exchange rate, or inflation shall significantly facilitate sustainability in the Indian economy, further reducing the volatility in stock market and economy.

The dynamic linkages among outbound tourism, economic growth, and international trade: empirical evidence from China.

The aim of this research was to examine the long- and short-run relationships among real expenditures on outbound tourism from China, economic growth and international trade for the period of 1995 to 2018, applying a newly developed cointegration test—the Bootstrap Autoregressive Distributed Lag framework. Evidence of cointegration was found when expenditures on outbound tourism served as the dependent variable, and economic growth and international trade were important factors affecting outbound tourism from China. For the short-run, a two-way Granger causality relationship was detected between economic growth and outbound tourism expenditures, and the feedback was confirmed between outbound tourism expenditures and international trade. The findings have important policy implications for the growth of the outbound tourism market. Large volumes of outbound tourists result in economic losses for China and outbound tourism reduces the growth of tourism-driven international trade.

(2021) Volume 2, Issue 4 Cultural Implications of China Pakistan Economic Corridor (CPEC Authors: Dr. Unsa Jamshed Amar Jahangir Anbrin Khawaja Abstract: This study is an attempt to highlight the cultural implication of CPEC on Pak-China relations, how it will align two nations culturally, and what steps were taken by the governments of two states to bring the people closer.

(2021) Volume 2, Issue 4 Cultural Implications of China Pakistan Economic Corridor (CPEC Authors: Dr. Unsa Jamshed Amar Jahangir Anbrin Khawaja Abstract: This study is an attempt to highlight the cultural implication of CPEC on Pak-China relations, how it will align two nations culturally, and what steps were taken by the governments of two states to bring the people closer.