Cointegration Regression Research Articles

The Impact of Urbanization on Energy Demand: An Empirical Evidence from Somalia

Somalia is recovering from a long-period of civil unrest and political instability. The urbanized population are growing at unprecedented growth rate which ultimately results in an increase in energy demand. To this end, this study assesses the effect of urbanization on energy demand in Somalia while controlling the effects of economic growth and population growth. To achieve the aim, the study employs fully modified ordinary least square (FMOLS), canonical cointegration regression (CCR) and impulse response function (IRF) with time series data spanning from 1990 to 2018. Before the long-run model estimation, the study utilizes Augmented Dickey-Fuller (ADF) and Philips’s Perron (PP) tests to check the unit root problem, and they demonstrate that all the variables are stationary at first difference I (1). Furthermore, the empirical results indicate that urbanization impedes energy consumption, whereas economic growth and population growth increase energy demand in the long-run. Besides, the result of IRF demonstrate that one standard deviation shock in urbanization (lnUB) results in energy consumption to decrease (lnEC) in the whole 10 periods. This calls for the Somali policy makers to consider urbanization as an effective determinant while targeting energy conservation policy in order to mitigate the fossil fuel energy use.

Renewable and non-renewable energyconsumption driven sustainable development in ASEAN countries: do financial development and institutional quality matter?

Energy consumption for sustainable development has become a crucial issue in recent years. The anthropogenic effects of traditional energy sources (non-renewables) underscore the need for renewable energy and efforts to promote its adoption have comprised policy makers' strategies to achieve sustainable development. At the same time, institutional stability is a necessary element needed to meet the goal of sustainable development via improved management of resources and technology diffusion. The literature shows some contradictory findings on this matter and this study aims to clarify. Thus, this research scrutinizes the contribution of renewable and non-renewable energies in sustainable developmentwhile also taking into account financial development and institutional quality in ASEAN countries from 1980 to 2018. To assess for co-integration, a pooled mean group (PMG) regression technique is employed and the findings from this technique are verified by using fully modified ordinary least square (FMOLS), dynamic ordinary least square (DOLS), and canonical cointegration regression (CCR) techniques in conjunction with other panel-based econometric procedures to evaluate the robustness of the model. The findings reveal a significantly positive influence for renewable energy and a significantly adverse impact for non-renewable energy with respect to sustainable development in ASEAN countries. In addition, the results indicate that institutional quality and financial development have adverse effects on sustainable development. Therefore, this research recommends sustainable management of non-renewables and greater promotion of renewables by strengthening institutional quality in ASEAN countries.

On Exports and Economic Growth: Revisiting Export-Led Growth Hypothesis Including North-South Divide

Objective: The purpose of the present study is to revisit the export-led growth hypothesis in the wake of globalization. This will help in trade policy decisions and make it possible to standpoint whether the export promotion is a good idea to accelerate economic growth. Design: The ELG hypothesis is examined for 107 countries through panel data analysis using cointegration and panel regression tests from 1990 to 2018. The study finds strong support for the long-run relationship between exports and gross domestic product and the export-led growth hypothesis in a two-variable regression framework. Findings: It is evident from the long-run coefficient of dynamic ordinary least squared that a 1.0 percent increase in real exports increases the real gross domestic product by 0.53 percent. The long-run coefficient of real exports for the Global South (0.55) is found higher than that of the Global North (0.51), which indicates that in the wave of globalization, the evidence of export-led growth hypothesis is stronger for comparatively poor Global South than the richer Global North. Practical Implications: The results indicate implications for export promotion policy in the Global South countries to accelerate economic growth and increase real gross domestic product. Originality: The study is the first to explore the ELG hypothesis using a big pool of 107 countries, including the global north-south divide.

Tracking the effect of climatic and non-climatic elements on rice production in Pakistan using the ARDL approach.

The present study aims to investigate the effect of climatic and non-climatic factors on rice production by employing an annual time series data from the period of 1970 to 2018. The study employed an ARDL (Autoregressive Distributed Lag) approach, and the long-term equilibrium linkages between the variables have been discovered. Additionally, the study also used a regression model to determine the robustness for the authentication of results. The Fully Modified Ordinary Least Squares (FMOLS), Canonical Cointegration Regression (CCR) methods, and the VECM (Vector Error Correction Model) technique confirmed the long-run causal relationships amid the variables. The empirical results further revealed that climatic factors including annual temperature negatively affect the rice crop production, while carbon dioxide emission positively influenced via long-run. Similarly, non-climatic factors like area under rice crop, fertilizer consumption, labor force, and water availability affect the rice production positively in the long-run analysis. Finally, the pairwise Granger causality test revealed that both climatic and non-climatic variables had a substantial impact on rice yield in Pakistan. Based on the study's findings, the government and policy makers should formulate alleviation polices to tackle with harsh effects of climate change and consistent adoption of measures to secure overall agricultural production including rice crop because it is a country stable food.

Alternate energy sources and environmental quality: The impact of inflation dynamics

In the past few years, the investigation into the case of ecological footprint and its determining factors has remained the core subject of debate among policy analysts. But some of the crucial determinants of ecological footprint have not been sufficiently covered in the literature. This study employed government expenditures, inflation dynamics, and economic growth from 1971 to 2016 as moderator variables to examine the impact of alternative energy sources on Germany’s environmental quality. We applied advanced econometric methodologies for empirical analysis. The results of fully modified least squares, dynamic least squares, and robust canonical cointegrating regressions indicate that alternative energy sources, government expenditures, and inflation are negatively associated while economic growth is positively associated with the environmental quality in Germany. Policymakers are encouraged to eliminate subsidies for domestic coal productions, promote cost-efficient ecological policy designs, price environmental resources, intensify green budget, decouple economic growth from the harmful emissions, and generate a trade-off between stabilizing inflation and stabilizing fluctuations through a sustainable monetary policy.

Impact of innovation in renewable energy generation, transmission, or distribution-related technologies on carbon dioxide emission in the USA.

Innovation in renewable energy generation, transmission, or distribution-related technologies (IREGT) is an effective way to deal with environmental pollution. Even though previous studies have focused on renewable energy generation in the USA, the impact of IREGT on carbon dioxide emissions (CO2e) remains widely unexplored. Recognizing this gap, this study inspected the IREGT-CO2e nexus in the USA, with international collaboration in green technology development (ICGTD), trade openness (TO), renewable energy consumption (REC), and gross domestic product per capita (GDPPC) as control variables from 1990Q1 to 2018Q4. The study applied the canonical cointegration regression (CCR), fully modified ordinary least squares (FMOLS) method, and dynamic ordinary least squares (DOLS) approach to assess the long-run association among variables. First, the findings validated the cointegration relationship among IREGT, ICGTD, TO, REC, GDPPC, and CO2e. Second, the results indicated that the IREGT, REC, and ICGTD had benefited the USA in mitigating CO2e. Third, GDPPC and TO were positively connected to CO2e. Fourth, the Granger causality depicted that GDPPC, TO, and ICGTD Granger caused CO2e in the USA, while IREGT and CO2e had a bidirectional relationship. The study's findings encourage the government should devise policies to induce higher research institutions and private enterprises to engage in IREGT.

YATIRIMCI RİSK TOLERANSI VE PİYASA LİKİDİTESİ İLİŞKİSİ: SEÇİLİ PİYASALARDAN BULGULAR

This study investigated in what ways the stock market liquidity and the investor risk tolerance has a relation over the developed and developing countries. Seven developed and six developing countries were selected from the International Monetary Fund’s counrty list for the sample. Dataset was consisted of the stock markets’ weekly data. Some interesting outputs were gotten.The investors’ risk tolerance and the market liquidity had a long-run relation in the all markets. The variables moved together. However, the cointegration regression coefficients were different in the markets. The coefficients could be estimated just for the USA, UK and Indonesia within the confidence intervals. Neverthlessly, the variables did not have any relation in short-run in spite of the long-run relation. Those results implied other variable(s) may cause a long-run relation between the tolerance and liquidity. Also, the variable(s) may affect the markets not in same strength. It caused a positive and different degree relation in the USA and UK, while it was negative in Indonesia.

Cointegration with structural changes and classical model of inflation in Spain, 1830–1998

In this article, we test a classical model of inflation with rational expectations for the case of Spain during the period 1830–1998. The principal testable implication is that money growth and inflation are cointegrated ruling out speculative bubbles. First, to detect episodes of potential explosive behaviour in the Spanish inflation rate, we use the recursive unit root tests for explosiveness recently proposed by Phillips et al. (2011), and Phillips et al. (2015a, 2015b). Second, we consider the possibility that a linear cointegrated regression model with multiple structural changes would provide a good empirical description of the classical model of inflation for Spain over this long period. Our methodology is based on the instability tests recently proposed in Kejriwal and Perron (2008, 2010) as well as the cointegration tests developed in Arai and Kurozumi (2007) and Kejriwal (2008).

China economic performance and natural resources commodity prices volatility: Evidence from China in COVID-19

Since the beginning of the 21st century, the world has faced many challenges, including the 2003 oil price hike, the 2007-08 global financial crisis, among others. While the recent Covid-19 outbreak slowdown economic performance and create uncertainty in natural resources commodity prices, which brought the attention of academic research. Current study examined economic performance and natural resource commodity price volatility in China over the period 1990–2020. Also, this study considers the role of renewable energy investment, renewable electricity output, and green finance in the pre and post Covid-19 pandemic periods. For empirical investigation, this study employed dynamic ordinary least square (DOLS), fully modified ordinary least square (FMOLS), and Canonical Cointegrating Regression (CCR). The outcomes reveal that the first-differenced stationary variables are all cointegrated in the long run. While these estimators confirmed that natural resources commodity price volatility negatively affects economic performance. Besides, the results validate the positive impact of renewable energy investment, renewable electricity output, and green finance on economic performance. The results are found robust and consistent, justified by Robust regression. These findings could have essential economic, natural resources, and energy implications for policymakers, governors, and researchers.

HOW DID COVID-19 PANDEMIC AFFECT THE TOURISM INDEX IN BORSA ISTANBUL?

This study aims to determine how and to what extent the Covid-19 pandemic impacted the Turkish tourism sector index in Borsa İstanbul. Daily data for the period from March 27th 2020 to December 31st 2020 were used to find the relationship between the dependent variable (BIST tourism stock index) and the independent variables (Covid-19 cases and deaths in Turkey). The cointegration relationship between the Covid-19 pandemic and the BIST tourism index was investigated with the ARDL bound test. In addition, the effect of the Covid-19 pandemic on the BIST tourism index was tested with the Cointegrating Regression Models. As a result of the ARDL bound test, it was determined that there is a long-term cointegration relationship between the Covid-19 pandemic and the BIST tourism index. In addition, it has been determined that the impact of the short-term shocks caused by Covid-19 on the BIST tourism index will disappear in the long term and will balance again in about a week. According to the Cointegrating Regression Models (FMOLS, DOLS and CCR) results, it is seen that the deaths from Covid-19 significantly affect the tourism index. According to the models, a 1% increase in the number of deaths causes the BIST tourism index to decrease by 0.08%, 0.06% and 0.08%, respectively. The coefficient of the number of Covid-19 cases is not significant, showing that the number of cases does not have a sufficient effect on the tourism index. The findings of the paper have some implications for stock investors, policy makers, academicians and the company owners in the tourism index of Borsa Istanbul.

Investigating the validity of the agricultural-induced environmental Kuznets curve (EKC) hypothesis for Ghana: evidence from an autoregressive distributed lag (ARDL) approach with a structural break

PurposeThe purpose of this research is to examine the validity of the agriculture-induced environmental Kuznets curve (EKC) hypothesis with evidence from an autoregressive distributed lag (ARDL) approach with a structural break including real income and energy consumption in the model for Ghana over the period 1980–2014.Design/methodology/approachThe ARDL approach with a structural break was used to analyze the agriculture-induced EKC model which has not been studied in Ghana. The dynamic ordinary least squares (DOLS), canonical cointegration regression (CCR) and fully modified ordinary least squares (FMOLS) econometric methods were further used to validate the robustness of the estimates, and the direction of the relationship between the study variables was also clarified using the Toda–Yamamoto Granger causality test.FindingsThe ARDL results revealed that GDP, energy consumption and agricultural value added have significant positive effects on CO2 emissions, while GDP2 reduces CO2 emissions. The Toda-Yamamoto causality test results show a bidirectional causality running from GDP and energy consumption to CO2 emissions whereas a unidirectional long-term causality runs from GDP2 and agriculture value-added to CO2 emissions.Practical implicationsThis finding validated the presence of the agriculture-induced EKC hypothesis in Ghana in both the short run and long run, and the important role of agriculture and energy consumption in economic growth was confirmed by the respective bidirectional and unidirectional causal relationships between the two variables and GDP. Thus, a reduction in unsustainable agricultural practices is recommended through specific policies to strengthen institutional quality in Ghana for a paradigm shift from rudimentary technology to modern sustainable agrarian technologies.Originality/valueThis study is novel in the EKC literature in Ghana, as no study has yet been done on agriculture-induced EKC in Ghana, and the other EKC studies also failed to account for structural breaks which have been done by this study. This study further includes a causality analysis to examine the direction of the relationship which the few EKC studies in Ghana failed to address. Finally, dynamic ordinary least squares (DOLS), canonical cointegration regression (CCR) and fully modified ordinary least squares (FMOLS) methods are used for robustness check, unlike other studies with single methodologies.

Climate change and rice production in India: role of ecological and carbon footprint

PurposeThe paper investigates the effects of climate change along with ecological and carbon footprint on rice crop production in India during 1982–2016.Design/methodology/approachThe autoregressive distributed lag (ARDL), canonical cointegration regression (CCR) and fully modified ordinary least square (FMOLS) models are used in the paper.FindingsA long-run relationship is found between climate change and rice production in India. Results report that ecological footprint and carbon footprint spur long-term rice production. While rainfall boosts rice crop productivity in the short term, it has a negative long-term impact. Further, the findings of ARDL models are validated by other cointegration models, i.e., the FMOLS and CCR models.Research limitations/implicationsThis study provides insights into the role of ecological footprint and carbon footprint along with climate variables in relation to rice production.Originality/valueIn the literature, the effects of ecological and carbon footprint on rice production are missing. Therefore, this is the first study to empirically examine the impact of climate change along with ecological footprint and carbon footprint on rice production in India.

An Economic Analysis of The Impact of Some Agricultural Economic Variables on Iraq’s Agricultural Gross Domestics Production Using ccr Model (2008-2019)

The research aimed to determine the impact of some agricultural economic variables on agricultural domestic products. This relationship was estimated between agricultural loans and agricultural investment and the rate of agricultural capital accumulation as independent variables, and agricultural GDP as a dependent variable during the period 2008 - 2019 with quarterly data, so that the number of surveyed observations became 48 observations and using the legal canonical Cointegrating Regression (CCR), the results showed that there is a positive and very high impact for each of the variables of agricultural loans and capital accumulation while the agricultural investment variable was not significant despite its positive sign. The research recommended that agricultural lending should in-kind take the largest share of the loan while being the dominant one and that has tightened control over the destination of the agricultural loan and the guarantees of its repayment on time.

Money supply, inflation and output: an empirically comparative analysis for Vietnam and China

Purpose This study focuses on analyzing the relation between money supply, inflation and output in Vietnam and China. Design/methodology/approach Using the error correction model and the vector autoregression model (ECM and VAR) and the canonical cointegration regression (CCR), the study shows similar patterns of these variable relations between the two economies. Findings The study points out the difference in the estimated coefficients between the two countries with different economic scales. While inflation in Vietnam is strongly influenced by expected inflation and output growth, inflation in China is strongly influenced by money supply growth and output growth. Originality/value To the best of the authors’ knowledge, this is the first empirical and comparative research on the relation between money supply, inflation and output for Vietnam and China. The study demonstrates that the relationship between money supply, inflation and output is still true in case of transition economies.

English

Pakistan is the primary producer of cotton, which is an indispensable crop worldwide. The agriculture sector depends on the climate and may be susceptible to future climate changes, such as increasing temperature, heavy rainfall, droughts, and floods directly impacting cotton productivity. This study empirically investigates the relationship between climate change variables and non-climate change variables on cotton productivity in Pakistan. An econometric technique, the “autoregressive distributed lag model” (ARDL), was employed on time series data from 1970 to 2018 to explore the existence and nature of the relationship among variables. The findings indicated the presence of co-integration among variables which confirms the long-run relationship among the variables. At the same time, the empirical results revealed that increases in temperature and rainfall positively affected cotton productivity. However, CO2 harms cotton productivity. Moreover, infrastructural changes positively affect cotton productivity in both the long and short run, while labor is negatively related to productivity. The area, fertilizer, and seed consumption showed a significant positive effect on cotton productivity. We employed the dynamic ordinary least squares (OLS), co-integration regression estimation, and the series test to validate the robustness of the finding. The finding of this study urges policymakers to devise a comprehensive policy to mitigate the adverse effect of climate change and upsurge water conservation. Furthermore, it is imperative to adopt environmentally friendly production inputs and modern techniques, which helps to gain sustainable cotton productivity. To conclude, the cotton crop is significantly affected by climate change subject to the region. Although this study analyzed the Pakistan case, the model can be generalized to all the developing countries

Analyzing the Role of Money Balances as a factor of Output in Context of Globalization: A Case Study of Bahrain

The nexus between money and output is regaining attention from researchers after recent global financial crisis. Likewise, globalization-output nexus also grabs the attention of researchers. Henceforth, the study is design to analyze the effect of real money balances and globalization on output by incorporating real money balances and globalization in Cobb-Douglas production function. Time series data has been analyzed and all variables of the study are tested for order of integration through unit root test. So, it is found that that all variables are integrated of first order so one cannot apply ordinary least squares. This is the reason that Johansen cointegration technique and the cointegration regression, fully modified least squares, are applied for long run relationship and long run estimates respectively. The cointegration technique confirmed long run relationship among variables thus; it is concluded that real money balances and globalization are important determinants of output in the Kingdom of Bahrain. Furthermore, results of the study show that real money balances and globalization are found to have positive and significant effect on output along with labor and capital. Thus, this study concludes that real money balances and globalization are important factors of output in the Kingdom of Bahrain and monetary authorities should consider real money balances and globalization in policy making for sustainable economic growth.

Impact of unemployment by sex and marriage rate on fertility decline: Estimates for Turkey and Greece using CCR model

The article analyses the effect of unemployment by sex and marriage rate on fertility changes in Greece and Turkey. The empirical part of the study is based on annual time series data retrieved from the World Bank and National Statistical Offices of Turkey and Greece for 1991–2019. Canonical Cointegrating Regression model is applied for the two countries separately, allowing to quantify the effects of the determinants (crude marriage rate and unemployment rate by sex) on the variation of fertility rate. CCR models show these determinants to be the most significant factors of fertility dynamics in both countries. The results from Engle-Granger and the Phillips-Ouliaris tau (t-statistics) tests confirm the cointegration, i.e., long-term relationship between the variables only for Turkey’s CCR model. However, it was found that in Greece, female unemployment impacts fertility rate negatively and male unemployment has a positive effect on fertility rate; for Turkey modelling shows the opposite relationship. The results of the study suggest that economic uncertainties might be one of the factors contributing to fertility decline in these countries, long-term or in the coming years.

Electricity Power, Democratic Governance and Economic Growth: Evidence from Nigeria

The study examines the impact of democratic governance and corruption on electricity power supply in Nigeria. To achieve this goal, an integrated regression analysis such as Dynamic Ordinary Least Squares (DOLS), Fully Modified OLS, Canonical Cointegrating Regression and OLS were utilized to estimate data spanning the period of 1986 – 2020. The result revealed a negative and significant impact of democracy and corruption on electricity power generation in Nigeria. On the other hand, economic growth has shown a positive and important impact on electricity generation, suggesting that higher GDP growth will increase the supply of electricity in Nigeria. The implication of this findings are as follows: (i) one of the dividends of democracy which is providing public good to the citizens have not been achieved, as such, policymakers need to give more attention to the provision electricity supply; (ii) the institutions in charge of fighting corruption such as the Economic and Financial Crime Commissions (EFCC) need to be further strengthened in Nigeria.

Does crude oil output aid economy boom or curse in Nigeria? An inference from “Dutch disease”

PurposeA reflection on some supposed oil exporting states constantly reminds of the (in) validity of the resource curse hypothesis and environmental consequences of oil exploration. In Africa, especially the case of Nigeria, the argument has remained whether the country's voluminous deposit of crude oil has positively affected the livelihood of the people. The study aims to examine the impact of oil production on the income level in Nigeria.Design/methodology/approachIn this context, the study first examined validity of Dutch disease in Nigeria, thus providing a foundation to further establish the resource curse hypothesis. As such, the impact of crude oil production (CRUDE), square of crude oil production (CRUDESQ), crude oil reserves (RESERVES) and population (POP) on economic growth over the period of 1980–2018 is examined through the combination of autoregressive distributed lag (ARDL), fully-modified ordinary least square (FMOLS) and canonical cointegration regression (CCR) methods.FindingsWhile the study revealed the existence of Dutch disease in Nigeria, the resource curse hypothesis is also valid. However, the study found that the resource curse hypothesis in Nigeria can be over-turned when the CRUDE attains a certain maximum threshold, i.e. when crude oil output is doubled over time. In addition, either of crude RESERVES or oil rent (RENT) is seen as a limiting factor to economic growth while POP poses a positive and desirable impact on the country's economic development.Originality/valueThus, the implication of a U-shaped relationship between oil production and income level is that Nigeria's natural resources exploration could be employed to over-turn the potential of resource curse hypothesis by increasing exploration while the sources of leakages and misappropriation of the oil revenues are deliberately mitigated. Other useful socio-economic policies were proposed for the Government.

Does Stock Market Respond to Disease Pandemic? A Case of COVID-19 in Nigeria

Abstract This paper investigates whether stock markets respond to disease pandemic referencing the case of COVID-19 in Nigeria. The paper employs three cointegrating regression models: Fully Modified Ordinary Least Squares, Dynamic Ordinary Least Squares, and Canonical Cointegrating Regression to analyse the effect of growth in total COVID-19 confirmed cases and related deaths in Nigeria and across the globe from 27 February 2020 to 4 September 2020 on the stock market performance. Key findings support the presence of long-run association between stock market returns and COVID-19 in Nigeria. The stock market is found to respond negatively to both domestic and global growths in total confirmed cases and deaths of COVID-19. Consequently, affected businesses in Nigeria should be assisted and bailed out by the government through practices such as tax filing, subsidies, targeted spending, and credit.