Causality Going Research Articles

Évolution des prix intérieurs et activité économique en RDC de 1960 à 2018 : analyse descriptive, corrélation et politiques subséquentes

This research paper aims to analyze the different relationships that exist between the inflation rate and economic growth, in the Congolese context, and to determine their implications in terms of economic policies. The approach is based on a combination of descriptive and econometric analyses, covering the period 1960-2018. This shows, on the one hand, the existence of a negative but insignificant link in the first three phases of the country's economic development and, on the other hand, a statically significant negative relationship with regard to the fourth phase. In addition, the study highlights a unilateral causality going from the rate of economic growth to the rate of inflation in the first and third phases. By way of recommendations, it is suggested to put in place mechanisms aimed at strengthening and consolidating the macroeconomic framework, based on the application of restrictive short-term policies and ambitious structural reforms and incentives favorable to public and private investment. It is only in this way that the increase in the DRC's gross domestic product can accelerate and be sustained, subject to a moderate or controlled variation in the general level of domestic prices.

Sustainable developments, renewable energy, and economic growth in Canada

AbstractThe object of this paper is to investigate the dynamic causal relationship between economic growth and renewable energy in Canada. The causal relationship is examined under the neoclassical production function framework. We employed a panel autoregressive distributed lag model controlling for different states of the economy by incorporating a dummy variable, which indicates the economic peak and trough. The data set consists of annual real GDP, capital formation, labor, and electricity generation by renewables for nine Canadian provinces covering from 1981 to 2015. The empirical results find that there is a unidirectional causality from renewable energy to economic growth in the long run. In the short run, a unidirectional causality going from renewable energy to economic growth only during the expansion period is observed. Our study suggests that renewable energy policies should be designed and implemented in a way that takes into account the nonlinear relationship between renewable energy and economic growth. This could involve promoting the development and deployment of renewable energy sources as part of their economic stimulus packages during economic upturns.

Understanding Claims Regarding the Ease of Improving Public Morale

Abstract In this article, I present discussions of conditions for reviving public morale and, in the process, public morality, which would ultimately be a political goal, using examples from the Victorian era in Britain and what Americans refer to as the Progressive Era at the beginning of the twentieth century in the United States. I begin with an older book by Gertrude Himmelfarb that emphasises the revitalisation of public morality in Victorian Britain. A book by Robert D. Putnam and Shaylyn Romney Garrett makes similar claims for the effects of the Progressive Era in the US, and for how a similar approach could be useful in the present era. Both books emphasise cultural critique and discount the effects of causality going in the opposite direction, starting with economic revival, and I discuss this dilemma in this article.

GDP growth rate, tourism expansion and labor market dynamics: Applied research focused on the Italian economy

<abstract> <p>This paper focuses on the Italian economy and investigates the causal nexus between economic growth, tourism development and labor market dynamics. We performed a two-step analysis. In the first step, we evaluate whether tourism stimulates Italian economic growth or if it is the economic growth that promotes tourism expansion. To get the goal, we use panel data from 1997 to 2019 concerning the GDP and overnight stays in each Italian region. We performed the Granger causality test on the whole panel and analyzed a panelvar model. In the second step, after having established the relationship between the two variables of interest, we extended our analysis to investigate—throughout the estimate of the employment intensity of growth and the impact of GDP growth on employment, at both aggregate and disaggregate level. The main findings of our analysis are as follows: a) the existence of a unidirectional causality going from economic growth to tourism development (i.e., validation of economic-driven tourism growth hypothesis), and b) a significant estimated magnitude of the (average) employment intensity of growth.</p> </abstract>

The relationship between selected macroeconomic indicators and economic freedom in V4 countries

The paper aims to determine the practical applicability of the indicator of economic freedom in economic policy. The problem areas that arose in connection with the given aim, had a significant influence on the determination of the goal of the work. We were interested in, whether a small degree of economic freedom is the cause of slow economic growth and development, or if the causal link going in the opposite direction? Is the relationship between these elements and economic freedom the same always and everywhere? To answer these questions, we perform a series of analyzes on the data panel of the V4 countries for the period 2000-2019. Based on the obtained results, we identify those factors whose development is strongly related to the development of economic freedom. The results suggest that economic freedom is strongly correlated with public debt, exports, and the level of unemployment, is reflected in the values of these elements and at the same time is significantly affected by these elements. The strength and nature of their relationship with economic freedom vary across the group. Therefore, they cannot be considered as indicators of the state of economic freedom. Contrary to some published findings, little evidence has been obtained that economic freedom significantly affects economic growth.

Effect of Speculators’ Position Changes on the LME Futures Market

This paper employs Granger causality tests to analyze the role of speculators using weekly COTR (commitment of traders reports) data covering the period of August 2014 to July 2017. The paper presents statistically significant evidence that the position changes of speculators, such as hedge funds and CTAs (commodity trading advisors), unidirectionally Granger-cause the prices of base metals, such as aluminum, copper, and zinc. This finding is a result of causality going from the levels of net futures positions of money managers to futures price changes on the London Metal Exchange (LME). However, producers’ and swap dealers’ speculative roles in price-formation are rejected in Granger causality tests. This paper presents clear results with important market implications.

What happens to the relationship between EU allowances prices and stock market indices in Europe?

The stock market may reflect the economic conditions of an economy and a positive economic situation is expected to improve the companies' profits, which makes company shares more attractive since the expected dividends to shareholders will be larger. Theoretically, higher economic activity leads to higher energy demand and, consequently, higher carbon emissions, which give rise to higher EU allowances (EUA) prices. Therefore, the stock market and EUA prices seem to be connected, with causality going from the stock markets to EUA prices. This paper formally tests for it, showing that the causality effectively runs from the stock market to the European Climate Exchange market. Furthermore, the paper studies the effects of the evolution of European stock markets on the EUA spot prices.

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The effect of financial reporting quality on corporate dividend policy

This study examines how financial reporting quality affects corporate dividend policy. We find that higher quality reporting is associated with higher dividends. This positive association is more pronounced among firms with more severe free cash flow problems and among firms with higher ownership by monitoring-type institutional investors. Further analysis of the relation between reporting quality and under−/over-payment of dividends suggests that reporting quality largely mitigates underpayment of dividends. Additionally, both a granger causality test and a difference-in-difference analysis of dividend changes around a quasi-exogenous reporting event yield evidence consistent with the direction of causality going from financial reporting to dividends. Overall, these findings are consistent with financial reporting quality acting as a governance mechanism that induces managers to pay dividends by disciplining free cash flow problems. Our findings support the view that dividends are the result of enhanced monitoring (Jensen 1986; La Porta, Lopez-de-Silanes, Shleifer, and Vishny 2000).

How energy consumption affects economic development in select African countries

The purpose of this study is to examine the causality between economic development (GDP), oil and gas consumption and in the case of eight countries over the period of 1980–2011. This study used the fully modified OLS. The findings support the conservative hypothesis; there is a relationship of causality going of the energy to the economic growth for the group countries except South Africa. The effect of oil and gas varies from a country to another one. The results provide evidence of feedback causality in Tunisia and Egypt.

Internationalisation and Innovation Intensities of Polish Manufacturing Firms: A Close Nexus?

Objective : The paper aims at the empirical identification of the nexus between innovation and internationalisation intensities in a sample of Polish manufacturing companies. Research Design & Methods : Using a unique dataset combining micro-level financial data from InfoCredit and results from an extensive survey we follow the approach of Altomonte, Aquilante, Ottaviano & Bekes (2013). We define innovation and internationalisation intensities and analyse the two dimensions disjointly and then simultaneously use formal econometric tools. Findings: Both dimensions are closely and robustly correlated. There is some evidence for the causality going from innovation to internationalisation. Polish manufacturing companies have in general low innovation and internationalisation intensity. Rising innovation intensity allows companies to become more internationalised and in particular, it raises their probability of exporting. Mean characteristics of firms, such as employment, sales or productivity, change along the two examined dimensions. Implications & Recommendations: Our results firmly support the postulates of the heterogeneous firms’ trade theory. The results strongly support the introduction of a new type of economic policy in which internationalisation promotion and innovation promotion are simultaneously targeted at the level of a firm. Contribution & Value Added: We extensively analyse innovation and internationalisation intensities for manufacturing firms from Poland. Using a logit model we show their impact on the likelihood of exporting. We furthermore apply the classification of exporting firms along temporal and geographical dimensions identifying main features and links to the key dimensions.

Balanced Budget Rules and Fiscal Outcomes: Evidence from Historical Constitutions

This paper studies the long-run fiscal consequences of balanced budget rules (BBR) that are enshrined in a country's constitution. Using historical data dating back to the 19th century and applying a difference-in-difference approach we find that the introduction of a constitutional-BBR reduces government debt-to-GDP and expenditure-to-GDP ratios, on average, by around 11 and 3 percentage points, respectively. We do not find evidence that BBRs affect tax revenues. Our analysis indicates that such rules reduce the probability of experiencing a debt crisis and that the effective enforcement of BBRs can be conditional on the quality of democratic institutions. In addition, we implement an instrumental variable approach by instrumenting the probability of having budget rules on de jure constraints on changing the constitution. This and other tests suggest that the relations we find are largely causal going from BBRs to fiscal outcomes.

Balanced Budget Rules and Fiscal Outcomes: Evidence from Historical Constitutions

This paper studies the long-run fiscal consequences of balanced budget rules (BBR) that are enshrined in a country's constitution. Using historical data dating back to the 19th century and applying a difference-in-difference approach we find that the introduction of a constitutional-BBR reduces government debt-to-GDP and expenditure-to-GDP ratios, on average, by around 11 and 3 percentage points, respectively. We do not find evidence that BBRs affect tax revenues. Our analysis indicates that such rules reduce the probability of experiencing a debt crisis and that the effective enforcement of BBRs can be conditional on the quality of democratic institutions. In addition, we implement an instrumental variable approach by instrumenting the probability of having budget rules on de jure constraints on changing the constitution. This and other tests suggest that the relations we find are largely causal going from BBRs to fiscal outcomes.

Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis

The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. We make use of a Johansen-based panel cointegration methodology allowing for cross-country dependence to test the number of cointegrating vectors among these three variables for 5 developing countries. In addition, we test the direction of potential causality between financial and economic development. Our results conclude to the existence of a single cointegrating vector between financial development and growth and of causality going from financial development to economic growth. We find little evidence of reverse causation as well as bi-directional causality. We interpret this as evidence supporting the significance of financial development for economic development although banks and stock markets may have different effects depending on the level of economic development.

Why a positive link between increasing age and income-related health inequality?

This study analyze why the SES-health gradient increases with ageing. We use Statistics Sweden’s Survey of Living Conditions (the ULF). By comparing various SES and health outcome relationships we explore the age increase in health inequality and distinguish between three types of explanations, namely: i) age increase in the causal SES effect; ii) reversed health effect on SES, and iii) lifecycle variation in the measurement errors in SES. Thus, the study indicates that the age increase in health inequality is primarily caused by a reversed causality going from health to annual income, and the probable mechanism is health affecting the labour supply of the individual. The evidence in our study is not conclusive in that we can prove anything, but all the documented evidence supports this conclusion.

Federal Transfers and Fiscal Discipline in India: An Empirical Evaluation

This paper examines the relationship between federal transfers and fiscal deficits in India. The system of federal transfers has been criticized on the grounds that it distorts the incentives for states to promote fiscal discipline. We analyze the relationship between transfers, state domestic product, and fiscal deficit for a panel of states during the period 1990–2010. The paper finds a positive long-run relationship and bi-directional causality between primary/gross fiscal deficits and non-plan transfers. Further, a negative long-run relationship and one-way causality between state domestic product and transfers is observed, with causality going from state product to transfers. These results are confirmed by multi-variate cointegration analysis, which finds a long-run relationship between fiscal transfers, state product per capita and the primary deficit of the states. The evidence in the paper is consistent with the system of fiscal transfers being “gap- filling.”

Twin deficits in Morocco: An empirical investigation

This paper investigates the hypothesis of twin deficits in Morocco. According to this theoretical concept, the budget deficit is the main cause of the current account deficit. The Empirical results obtained from the impulse responses analysis of the VAR model and the Granger-causality test indicate the existence of an unidirectional causality going from the current account deficit to the fiscal deficit. This implies the existence of reverse causality i.e. the current account deterioration is the main cause of the fiscal deficit in Morocco

Stock Markets, Banks and Long Run Economic Growth: A Panel Cointegration-Based Analysis

The aim of this paper is to investigate the long run relationship between the development of banks and stock markets and economic growth. We make use of the Groen and Kleibergen (2003) panel cointegration methodology to test the number of cointegrating vectors among these three variables for 5 developing countries. In addition, we test the direction of potential causality between financial and economic development. Our results conclude to the existence of a single cointegrating vector between financial development and growth and of causality going from financial development to economic growth. We find little evidence of reverse causation as well as bi-directional causality.

Trust, Regulation and Market Failures

Abstract Government regulation of firms is associated with more negative externalities and unofficial activity across countries. I argue that this correlation mainly reflects causality going from concerns about market failures to demand for government intervention. Using trust in others as a proxy for such concerns, I show that differences in trust explain a great deal of variation in entry regulations. Then, controlling for trust in the regression of market failures on regulation, the latter is no longer associated with worse economic outcomes. The same result is confirmed when I exploit country population as an alternative source of variation in regulation.

English

This study investigates the link between energy consumption, financial development and growth in Tunisia. The causal relationship between energy consumption growth (ENC), per capita GDP growth (GDP) and credit to the private sector as a proxy of financial development (CSPV) during the 1972 to 2010 period was examined using the cointegration and vector error correction models for Granger causality tests. The main empirical results show that in the long term there is bidirectional causality between ENC and GDP, as well as a unidirectional causality going of ENC to CSPV. On the short term, only the variable ENC causes CSPV which demonstrates the interest to include this variable in the relation energy-growth. The research results strongly support the neoclassical perspective that energy consumption is not a limiting factor to economic growth in Tunisia. Accordingly, an important policy implication resulting from this analysis is that government can pursue the conservation energy policies that aim at curtailing energy use for environmental friendly development purposes without creating severe effects on economic growth. In future, the energy should be efficiently allocated into more productive sectors of the economy. Key words: Energy, financial development, growth, cointegration.