Bounds Testing Approach Research Articles

Analysis of Turkey's classic and financial kuznets curves in regards to the level of development and increased distribution

In this research, we probe the authenticity of both the Financial Kuznets Curve hypothesis and the classical Kuznets curve within the Turkish economy, exploring the interrelation between financial development and income distribution. By employing the ARDL bounds test approach in the econometric analysis, we ascertain that the Financial Kuznets Curve is applicable to Turkey. This means the correlation between income distribution and the extent of financial development adopts an inverted U-shaped pattern. Moreover, the interrelation between GDP and income distribution doesn’t form an inverted U pattern, demonstrating that the classical Kuznets curve is not pertinent in the context of Turkey. From the derived outcomes, it is inferred that prioritizing policies that accentuate financial development would constitute a more judicious economic strategy in Turkey, particularly for redressing disparities in income distribution, instead of merely focusing on economic growth.

What Affects Crop Production in Pakistan: The Role of Agriculture Employment, Machinery and Fertilizer Consumption

Labor abundant or under developing economies normally rely on their agriculture sector. The performance of agriculture sector depends on the production of cropping, livestock, fishery, and forestry sectors. The contribution of both cropping and livestock sectors in the agriculture production is almost 96.42 percent while the cropping sector contributes almost 33.85 percent during the fiscal year 20-2021 [Pakistan Economic Survey, 2020-2021]. The focus of this study is to investigate the factors which may influence the performance of crop production in Pakistan. For this purpose, bounds testing approach for the sample period from 1976 to 2022 is considered. The empirical results reveal that employment in agriculture sector, agriculture machinery, fertilizer consumption and urban population significantly boost the pace of crop production while the role of raw material imports is witnessed to be insignificant. The above reported results proposes that utilization of latest agriculture machinery, advanced fertilizers and high employability in agriculture sector may be encouraged to uplift the share of cropping sector in agriculture production in Pakistan.

Does Trade Openness and Human Capital abate Unemployment? Empirical Evidence from India

This study comprehensively investigates the impact of trade openness and human capital on India’s unemployment rate using time-series data from 1990 to 2019. The ARDL bound testing approach was used to determine the long and short-run relationship among the variables. The empirical findings indicate that trade openness and human capital have a negative impact on the unemployment rate in both the long and short run, suggesting that trade openness and human capital have reduced the unemployment rate in India. These results have significant implications for policymakers in crafting policies that promote continuous trade openness and help reduce unemployment in India. To succeed, trade liberalisation must be integrated into a reasonable set of structural and macroeconomic policies, supplemented by complementary policies such as maintaining an adequate inflation rate and macroeconomic stability and nurturing human capital. The study recommends that India should prioritise improving and enhancing efficient schooling and training programs, with a particular focus on career skills for young people. Policymakers can use the study’s findings to guide policy decisions to reduce unemployment and promote trade openness. JEL Codes: E24, F14, F63, C32

Impact of Foreign Direct Investment on Economic Growth: Evidence from Arab Region

Abstract Theoretical literature indicates that foreign direct investment can bring about major changes in host economies, especially in developing countries, because of its advantages in financing, transferring modern technology, contributing to the development of human capital, contributing to inventions through research and development activities, contributing to the openness of the host economy on the global markets, and other accompanying advantages, but these advantages cannot be benefited from unless certain conditions are met in the host economy. In this context, this paper sought to investigate the impact of inflow foreign direct investment on economic growth in the Arab countries region between 1990 and 2000, using ARDL bounds testing approach. The results showed that there was a very weak effect of foreign direct investment on economic growth in the long run, but in the short run there was no effect. The reasons for this are mainly due to the lack of appropriate and necessary conditions that attract and incubate foreign direct investments in most Arab countries.

Gelişmekte olan bir ülkede sektörel katma değerin ekonomik büyümeye etkisi: Zambiya örneği

With the help of the ARDL bounds test approach, the analysis of the effect of sectoral value added on economic growth in Zambia was made for the period 1994 – 2021. It has been observed that agriculture, industry and service sectors have a positive effect on economic growth in the long run. The effect of imports on economic growth was negative as expected, while the manufacturing sector and exports were found to be insignificant. The same relationship between imports and growth is also found in the short run. All other independent variables were found to have no effect on economic growth in the short run. For this reason, promotion of agriculture, industry and service sectors should be given priority for long-term impact.

Türkiye'de Yapısal Değişim, Ticari Açıklık, Yenilenebilir Enerji ve Ekonomik Büyüme Bağlantısı, 1970-2020

Purpose: This paper aims to investigate the effects of structural change, trade openness, and renewable energy on economic growth in Türkiye. 
 Design/Methodology: Structural change is defined as the shift of resources from the agricultural sector to the industrial sector and then to the services sector. In the structural change process, it is accepted that the manufacturing industry is the engine of growth. However, since the mid-1970s, especially in the post-1980 period, the manufacturing industry has lost its importance. In addition, trade liberalisation and energy policies came to the fore in this process. In this context, this paper analyses the determinants of economic growth within the framework of the structuralist approach. For this, we apply the ARDL bounds test approach and apply FMOLS, DOLS, and CCR for robustness check.
 Findings: According to the ARDL bounds test results, the manufacturing industry, renewable energy, and trade openness affect economic growth positively; however, the coefficient of renewable energy is statistically insignificant. The results of the robustness check (FMOLS, DOLS, and CCR) also confirm these findings. The effect of the manufacturing industry on economic growth is greater than that of other variables.
 Limitations: To analyse the impact of structural change on economic growth in the Türkiye, the study is limited to the period 1970-2020.
 Originality/Value: The originality of our paper is that it analyses the impact of structural transformation (such as the manufacturing industry, trade openness, and renewable energy) on long-run economic growth in Türkiye.

Foreign Exchange Rate Management and Macroeconomic Performance in Nigeria: Autoregressive Distributed Lag (ARDL) Bound Testing Approach

This paper examined the impact of real exchange rate on economic performance in Nigeria for the period (1981-2021) using a modified and extended aggregate production model and Autoregressive Distributed Lag (ARDL) Bound Testing Approach for analysis. The results indicated that the real exchange rate had a positive and significant effect on economic performance in the long run and a negative but insignificant impact in the short run. As for the control variables, in the long-run capital stock, labour force and foreign direct investment had a positive and significant impact on economic performance, real interest rate and broad money supply exerted a positive but insignificant effect on economic performance, whereas inflation rate and trade openness displayed a negative but insignificant effect on economic performance. In the short-run, capital stock, inflation rate, foreign direct investment and broad money supply impacted positively on economic performance, while labour force, real interest rate, trade openness and government expenditure had a negative effect. It was recommended, among others, that government policies should be directed toward increasing productivity in Nigeria; and that Nigeria should refine a good chunk of crude oil locally, increase agricultural production and revive the manufacturing sector for increased manufacturing output to meet the country’s need for petroleum, agricultural and manufactured products.

Nexus Between Foreign Direct Investment and Employment in Manufacturing and Services Sectors in Tunisia: An ARDL Approach

This study investigated both the cointegration and the causal nexus between foreign direct investment (FDI) and employment in the manufacturing and services sectors in Tunisia by employing the augmented autoregressive distributed lag (ARDL) bounds testing approach. Our findings confirm a long-run relationship among the examined variables. Causality results indicated both short-run and long-run bidirectional causality between FDI and employment in the services sectors as well as between employment in the manufacturing and the services sectors. However, there is a unidirectional causality between FDI and employment in manufacturing running from FDI to employment in Manufacturing. These results are of particular interest and offer new perspectives and insight for new policies toward promoting and diversifying foreign investment as a critical contributor to the manufacturing sector's productive capacity and by extension to its employment level.

Investigating the Impact of Economic Development, Energy Consumption, International Trade and Population on CO2 Emission of a Country: Evidence from an Emerging Economy

This paper investigates the consequences of economic development, along with energy consumption, international trade, and population growth, on the CO2 emissions of Bangladesh as a participant in an emerging economy, covering periods from 1972 to 2021. The unit root properties of the variables have been tested using the Augmented Dickey-Fuller (ADF) approach to examine the presence of stationary of data series. To check for co-integration in the data series of variables included in the models, we used the ARDL (Autoregressive Distributive Lag) bounds testing approach. In addition, the VECM (Vector Error Correction Model) Granger Causality approach has been used to examine the casual relationship between the selected variables representing the proxy for determinants of CO2 emission in Bangladesh. Our investigation confirms the co-integration between the data series, followed by the significant impact of these variables on CO2 emissions of Bangladesh. More precisely, GDP being the proxy of economic development, energy consumption, merchandise trade as a proxy for international trade, and population growths have had a significant positive impact on the CO2 emissions of Bangladesh since its inception.

The Impact of Public Investment on Private Investment in Botswana: A Disaggregated Approach

The study examined the crowding in or out effect of public investment on private investment in Botswana from 1980 to 2018 using the autoregressive distributed lag bounds testing approach. The findings of the study indicate that infrastructure public investment negatively affects private investment while non-infrastructure public investment has a positive impact on private investment in the short run. The study concluded that infrastructure public investment crowd out private investment while non-infrastructure public investment crowds in private investment only in the short run. The recommendation emanating from the study is that the government should spend more on non-infrastructure public investment in order to crowd in private investment, especially in the short run, and introduce more initiatives to promote the role of the private sector in growing the economy.

Examining the impact of the free senior high school policy and women empowerment on secondary school enrolment in Ghana: The bounds test approach

Examining the impact of the free senior high school policy and women empowerment on secondary school enrolment in Ghana: The bounds test approach

The role of the Foreign Direct Investment inflows on export in Azerbaijan: An ARDL approach

Purpose ― This study aims to investigate the impact of FDI inflows on Trade in Azerbaijan from 1993 to 2021. Method ― This study uses the datasets from the World Bank Database. It employs the Augmented Dickey and Fuller (ADF), Phillips and Perron (PP), Zivot and Andrews (ZA), ARDL bounds testing approach, and the Granger Causality tests for the empirical part of the study.Findings ― The bound test shows the presence of cointegration between FDI and Export. The estimated long-run equation suggests a positive and significant relationship, whereas the estimated short-run equation indicates a positive but insignificant relationship between FDI and export. Additionally, the results of Granger causality test show a unidirectional causality running from FDI to export. Implications ― Since the FDI inflows show a positive effect on the export of Azerbaijan, most foreign investments come into the oil and gas sector. Accordingly, oil and gas products and services account for a significant share of exports in Azerbaijan. Policymakers might need new regulations to attract more attention from foreign investors to non-oil sectors.Originality/value ― There were vast studies about FDI and trade relationships in different countries with different techniques. This study is unique because it employs a new methodology and the latest dataset in which Azerbaijan was a focused area for the first time.

The Impact of Takaful Insurance on the Manufacturing Industry in Malaysia: Empirical Evidence through ARDL Bounds Testing Approach

In post-financial crisis, the interconnection between the financial sector and real activity is gaining more interest in the literature. Given that the insurance sector represents a large part of the financial globe, it will be essential to explore its impact on the real economy. Further, the expansion of participative finance, in the last decade, requires contextualising the question in this sense. However, this paper experiments with the effect of Takaful insurance on real activity in Malaysia. Hence, an ARDL model is estimated on quarterly data between 2010Q1 and 2017Q4. The results show a positive and significant impact of the increase in Takaful contributions to manufacturing activity. On the same side, a long-term relationship between the two sides is established in the image of a significative cointegration.

Modeling the climate change impacts on major fruits production: Recent evidence from Pakistan

The literature on the effect of climate change on agricultural products has grown over the years. However, evidence on how climate change affects fruit industry remains limited. This research fills the gap by estimating the effects of climatic parameters on major fruits production in Pakistan. In this study, the ARDL model is employed to estimate the long three decades of data. The ARDL Bounds testing approach confirmed the long-term co-integration of the variables under consideration. The findings show that climatological elements such as temperature and CO2 emissions have a detrimental impact on apples output whereas precipitation has a favorable impact on both in the long and short run. Furthermore, the findings reveal that precipitation and CO2 emissions have a negative impact on bananas output in Pakistan, both in the long and short run. Temperature, on the other hand, has a favorable and considerable effect on bananas output. In addition, the outcomes reveal that temperature, CO2 emissions, and precipitation all have a favorable impact on mangoes, guavas, and mangosteens production in both the long and short run. The findings of this study guide the formulation of appropriate policies to mitigate the negative impacts of global warming on the fruits industry and ensure sustainable food production in the country to meet domestic demand and international trade goals.

Determinants of Indonesian stock market development: Implementation of an ARDL bound testing approach

The Indonesian stock market is a growing financial industry that plays a strategic role in the growth of the country’s economy. Its development is affected by various factors. This study examined the impact of the exchange rate, gross domestic product (GDP), interest rates, inflation, foreign portfolio investment (FPI), and domestic political stability on stock market capitalization. Quarterly data between 2000:Q1 and 2020:Q4 are used. The autoregressive distributed lag (ARDL) method is applied to identify long-run relationships between variables. To understand how fast the system reaches equilibrium after a shock, the model also examines short-run relationships using an error correction model (ECM). The findings show that the impact of exchange rate, interest rate, and inflation on stock market capitalization is negative in the long run. While the GDP, FPI, and political stability are positive. Increment in the US Dollar against the Indonesian Rupiah, interest rate, and inflation by 1% respectively, caused stock market capitalization to fall by 1.31%, 0.06%, and 0.04%. A rise in GDP, FPI, and political stability by 1% respectively, increases the stock market’s value by 1.17%, 1.08%, and 1.28%. In the short run, the coefficient of ECM indicates the speed of adjustment of the system: the occurrence of the shock to reach long-run equilibrium is quick enough, at 63.8% each quarter. The study recommends governments evaluate the impact of these factors when formulating monetary policies, promote economic growth, and continuously implement good governance, thus supporting stock market development.

The role of governance in girl‐child education: Insights on the odds against Nigerian women in leadership

AbstractIt is widely recognized that prioritizing female education is the global best investment. This is because the promotion of girls' access to education is essential for increasing women's formal economic opportunities and their participation in public decision‐making in the long term. Thus, understanding the nexus between governance and women empowerment becomes central for developing new thinking and addressing prevailing challenges. The study, therefore, examines the impact of governance effectiveness on school enrolment, primary, female (% gross) in Nigeria between 1996 and 2020, using autoregressive distributed lag (ARDL) bounds testing approach to cointegration and vector error correction mechanism (VECM) for the assessment of long‐run causality. Results show that governance effectiveness has a significant and positive effect on female primary school enrolment in the long run and in the short run. In addition, findings indicate that there exists bidirectional causality between the effectiveness of governance and female primary school enrolment, suggesting that these indicators are interconnected as they could influence each other. While it is recognized that government policies seem to have failed to redress the norms, societal values, and behaviors that contribute to the perpetuation of inequalities in education enrolment, good governance could further stimulate capacity development, thereby enhancing girl‐child education.

Impact of Banks’ Credits and Capital Market Dynamics on the Performance of the Manufacturing Sector in Nigeria: An ARDL Bounds Testing Approach

In this study, we examined the impact which bank credits and some capital market variables had on the performance of the Nigerian manufacturing sector. Secondary time series data from 1986 to 2017 was used which was analysed using an ARDL bounds testing to cointegration. The results showed that while MCR negatively and significantly impacted on manufacturing output, TVTR and ASI positively and significantly increased the growth of the manufacturing output. BCRM, on the other hand, impact on manufacturing output was positive but insignificant. We made some recommendations.

The Examination of the Relationship Between Foreign Direct Investment and Trade in Turkey: ARDL Approach

Abstract This paper is aimed to examine the effect of Foreign Direct Investment inflow on Trade (Export, Import) in Turkey. The study copes the time span from 2006 Q2 to 2019 Q4. The time series datasets, those are retrieved from CBT and FRED database are used in applied econometrical methods such as ADF, PP, Zivot Andrews Unit Root Tests, ARDL bounds testing approach, and the Granger Causality tests, to accomplish the statistical part of the research. Based on the findings, it was supported that there was a positive relationship between FDI and Trade. Additionally, the outputs of Granger causality test indicated that there is a unidirectional causality running from FDI to Trade (Export and Import).

Fiscal Sustainability and Its Implications for Economic Growth in Egypt: An Empirical Analysis

This study examines the association between fiscal sustainability indicators and Egypt’s economic growth from 1980 to 2018. Fiscal sustainability refers to a government’s ability to generate sufficient revenue to cover its costs and debt obligations in the long run without excessive borrowing or money creation. Egypt’s economic growth has slowed, raising questions about fiscal sustainability. This study aimed to analyze the dynamic relationship between fiscal sustainability indicators (government revenue, expenditure, external debt) and economic growth in Egypt. The autoregressive distributed lag (ARDL) bounds testing approach and unrestricted error correction model were applied to annual data from 1980 to 2018. A dynamic link was found between fiscal sustainability indicators and economic growth. Government expenditure and external debt significantly impacted economic expansion in the long term, while government revenue did not. Fiscal sustainability, measured by growth in total government expenses, external debt obligations, and revenue, significantly influences Egypt’s economic growth. Prudent fiscal management is crucial for sustained economic development. Policymakers should focus on controlling government spending, limiting external debt, and improving revenue generation to promote long-term economic growth in Egypt. Fiscal sustainability must balance critical investments in public services. Carefully managing fiscal deficits is key to unleashing Egypt’s economic potential. This study provides valuable insights into the connection between fiscal policy and economic growth in Egypt, informing policymakers’ decisions.

Economic diversification in Saudi Arabia: Comparing the impact of oil prices, geopolitical risk, and government expenditures

Our paper examines and compares the influence of oil prices, the international geopolitical risks, and government expenditures on Saudi Arabia's economic diversification during 1970–2020. We employ the bounds testing approach to cointegration to estimate the parameters of the Autoregressive Distributed Lag model to attain the paper's goal. Our results show that oil prices and international geopolitical risk harm the KSA diversification process in the short run. The destructive effect of oil prices continues in the long run, while the impact of the international geopolitical risk does not persist. On the other hand, government expenditures encourage the diversification attitude in the short and long run. This outcome highlights the capability of the KSA government to stimulate the diversification process. It is a positive sign of the state capitalism doctrine's impact on the KSA economic diversification mechanism. From a policy implication perspective, our paper suggests prioritizing economic diversification clearly on the KSA government's agenda. Simultaneously, strengthening the KSA institutional framework and developing new forms of the social contract are critical to motivating the diversification process.