Cointegration Relationship Research Articles

Analyzing GDP Growth Drivers in Saudi Arabia: Investment or Consumption: An Evidence-Based ARDL-Bound Test Approach

This study delves into the intricate interplay of economic growth components, specifically focusing on consumption and investment in Saudi Arabia from 2000 to 2022. Employing vector error correction models and co-integration techniques, we analyze the short- and long-term dynamics within the relationship of consumption, investment, and economic growth. Granger causality analysis is also used to discern these pivotal variables’ causal connections. Our empirical analysis reveals a persistent long-term cointegration relationship among the variables, underscoring the enduring nature of their interdependency. Furthermore, our findings highlight consumption and investment’s statistically significant positive impact on economic growth. Notably, the short-term analysis unveils a stable model characterized by an annual adjustment to equilibrium of 100%. Moreover, the Granger causality study demonstrates unidirectional causal linkages among consumption, investment, and economic growth. These findings hold substantial implications for policy formulation in Saudi Arabia. Policymakers must grasp the ramifications of burgeoning prosperity and evolving private consumption patterns on future environmental outcomes. Achieving sustainable long-term results necessitates equal emphasis on bolstering private consumption and fostering other facets of economic growth.

ESTIMATING OF OKUN'S RELATIONSHIP IN IRAQI AGRICULTURAL SECTOR FOR THE PERIOD 1998-2019 USING BOOTSTRAP ARDL METHODOLOGY

This study was aimed to test the relationship between the unemployment rate and agricultural growth rates in the agricultural sector of Iraq according to Okun's Law for the period 1998-2019. The differences and gap versions of Okun's Law for the relationship was conducted, Alongside with Hodrick-Prescott (HP) filter to find the potential production and the Baxter-King (BK) filter to find the trend of unemployment for the agricultural sector, and then to find production and unemployment gaps. Bootstrapping method was used to generate data because the lack of data and Augmented ARDL to identify the cointegration. The result of independent-F test at the level was insignificant with a value of 1.49 for the differences model, that is less than the critical value which is 9.26 of the 0.05 level of significance. While the result of independent-F test at the level of the gap model was 1.89, which is less than the critical value which is 12.8 at 0.05 the level of significance. Thus, confirming the absence of a co-integration relationship between the two variables. This result confirms the complete absence of Okun's relationship with the two versions in the Iraqi agricultural sector.

The Effect of Liquidity M3 and Exchange Rate on Sukuk Market Size in Malaysia in Short-Term and Long-Term

The increase in the size of the sukuk market has become large with time and takes its place among the important topics that need to be studied and developed. This study focuses on the impact of some financial factors on the size of the sukuk market in Malaysia, as it is a leader in the Islamic financial industry, especially the sukuk sector. This study attempts to reveal the relationship between the factors of exchange rate and liquidity M3 as independent variables, and the size of the sukuk market as a dependent variable. This study uses the model of Autoregressive Distributed Lag (ARDL) as well as the test of cointegration to know the relationship between the variables of the study in both short-term and long-term. By examining monthly time series data starting from 04/2011 till 12/2020. The findings appear that the variables of the study have a cointegration relationship in the long run. In the short run, the exchange rate affects the size of the sukuk market significantly negatively, while liquidity M3 influences the sukuk market size positively insignificant. In the long run, the exchange rate has a positive significant effect on the sukuk market size, while the impact of liquidity M3 on the market size of Sukuk is non-significant.

THE ASYMMETRİC EFFECT OF PRODUCER PRİCES ON CONSUMER PRİCES İN TURKİSH ECONOMY

The aim of the study is to evaluate the asymmetric impacts of producer price on consumer prices and cointegration relationship between two price indexes for Turkish economy from 2003.M1 to 2022.M12. Another aim is to analyze the causality between Producer Price Index (PPI) and Consumer Prıce Index (CPI). The Autoregressive Distributed Lag Model (ARDL) and Non-Linear Autoregressive Distributed Lag Model (NARDL) is estimated to determine relation between PPI and CPI and asymmetric effects of PPI on CPI. The causality relation is examined using Toda-Yamamoto Granger Causality method. According to the results, there is a cointegration relation between CPI and PPI. The ARDL model implies that PPI has a positive impact on CPI both in the short time period and in the long time period. The NARDL model indicates that although positive shocks to the PPI have positive effects on CPI, negative shocks do not have statistically significant effect on CPI. In addition to these results, Toda-Yamamoto Granger Causality method indicates that a bidirectional causality is found between two price indexes.

Green innovation, industrial structure and urban eco-efficiency in Chinese cities

In the context of significant environmental changes, the urgency of adopting green innovation has become increasingly apparent as a central mechanism for adjusting industrial structures in China. This transition serves not only as a crucial way to address pressing environmental challenges, but also as a fundamental strategy to improve the ecological efficiency of urban areas. Existing research mainly keeps a close eye on the unidirectional relationship between variables such as technological innovation and environmental protection. There is less relevant literature that has researched the cointegration relationship among green innovation, industrial structure, and eco-efficiency of cities. The essential role of green innovation and industrial structure in reaching a higher eco-efficiency of city are discussed in this research and the relationship among these three variables are analyzed by the evidence from cities in China from 2011 to 2019. The fact that the variables are cointegrated in the long run is evidenced by the results for the full sample. The sub-sample results report that in the eastern region, green innovation, industrial structure upgrading, and industrial structure rationalization could improve urban eco-efficiency. However, in Midwest regions where economic development is relatively backward, green innovation's effect on urban eco-efficiency is not in a significant positive way. The results obtained in this paper have implications for different cities in China to formulate corresponding policies on green innovation, industrial structure, and urban eco-efficiency.

El crecimiento económico y su influencia sobre los accidentes de trabajo mortales en el Perú

This study aims to determine how economic growth influenced fatal occupational accidents in Peru from 2011 to 2019. Data from the 24 departments, grouped into 4 macro-regions, were used and an econometric analysis using panel data was applied. This analysis consisted of assessing the stationarity of the data, and through first generation unit root tests, it was determined that they are integrated of order one. Likewise, it was found that there is a cointegration relationship between the variables (long-run equilibrium) by Pedroni panel cointegration means testing. Finally, the regression coefficients were estimated using the DOLS (Dynamic Ordinary Least Squares) estimator. It was determined that economic growth has a direct proportional relationship with fatal occupational accidents; that is to say, economic boom would cause fatal occupational accidents to increase.

Oil and Food Price Before and During COVID-19 Pandemic in Nigeria: A Non-Linear ARDL Approach

Abstract This paper analyzes the relationship between food and oil prices in Nigeria before and during the COVID-19 pandemic, using monthly data from January 2018 to December 2021. The ARDL and NARDL models are applied to estimate the symmetry and asymmetric relationship that exists in food price behavior. The NARDL confirms the presence of asymmetries, and the bound test affirms the co-integration and long-run relationship among the variables. In the long run, there is a significant positive relation between oil price increases and food prices, but the long-run impact of oil price reductions on food prices is not significant. In the short run, only increases in oil prices exert a significant influence on food prices, while decreases in oil prices do not. Furthermore, the COVID-19 period exerts a positive and significant impact on food prices, while COVID-19 cases do not influence food prices in Nigeria.

Assessing energy consumption and economic growth interrelations in Asia-Pacific: A multivariate approach with panel FMOLS and bootstrap Granger causality tests

This study investigates the cointegration and causal relationship between energy consumption and economic growth using data from 16 Asian and Pacific countries from 1970 to 2010. The expanded production function is used in this investigation; this function considers not only labor but also financial resources. This study investigates whether or not a rise in energy demand is associated with a healthy economy. Human capital, in addition to material and labor resources, is taken into account by this operation. One of the first studies to adopt a multivariate method and add human capital was undertaken on the energy-growth nexus. Using the panel unit root and cointegration tests, this study confirms the existence of a long-run cointegrating connection between these variables. These studies recognize the presence of cross-sectional interdependence, according to specific reports. The significance of considering the interconnection of various countries is confirmed by comparing estimates from panel heterogeneous fully modified ordinary least squares (FMOLS) models with those from unceasingly efficient and fully modified models. Nonetheless, the bootstrap panel Granger causality test findings demonstrate that economic growth is a causal factor in rising energy consumption in the region, indicating that the relationship is not constant across countries.

Cointegration Modeling for COVID-19 Infected Cases and Deaths in the US

Abstract This paper aims to study the short-run and long-run cointegration relationships between the total population, the cumulative number of new COVID-19-infected cases, and the cumulative number of deaths due to COVID-19 in different states in the US. The short-run relationship is assessed using the ARDL model, and the long-run relationship is assessed using the ARDL bounds test. To assess the consistency of the model parameters, the cumulative sum of recursive residuals test and the cumulative sum of recursive residuals squares tests are used. JEL classification numbers: E18, HO, I1, J64, J88. Keywords: Autoregressive distributed lag model, Error correction model, Unit root tests, Residual diagnostics, Bounds cointegration test, Stability tests.

ANALYSIS OF THE INFLUENCE OF UNEMPLOYMENT VARIABLES ON ECONOMIC GROWTH IN CENTRAL KALIMANTAN USING THE ERROR CORRECTION MODEL (ECM) APPROACH

The objective of this study is to examine the impact of unemployment variables on Gross Regional Domestic Product (GRDP) by employing the Error Correction Model methodology. This research is conducted in Central Kalimantan from 2012 to 2023. According to the cointegration testing findings using the ECM approach, the probability of the unemployment variable is 0.3788, which is greater than the significance level of 0.05. There is a lack of cointegration or long-term balance relationship between the variables, which means that testing cannot be conducted over an extended period of time. The ECM test findings indicate that there is no significant short-term impact of the unemployment variable on GRDP in Central Kalimantan. This is supported by the probability value of the unemployment variable, which is 0.2660, above the threshold of 0.05. According to the classical assumption test, there are no signs of autocorrelation in the research model. Additionally, the Jarque Berra probability value of 0.764092 is greater than 0.05, indicating that there are no signs of heteroscedasticity. Therefore, the research model can be considered normally distributed.

Cointegration analysis of GDP indicators per capita between the Republic of Azerbaijan and Turkey on purchasing power parity

The article analyses the interrelationships between the main components of socio-economic development levels in Turkey and the Republic of Azerbaijan. The purpose of this work is to construct a cross-country regression model of per capita economic growth in Turkey and the Republic of Azerbaijan and to conduct a cross-country comparative analysis of the main components of inclusive growth under the strong influence of both countries. The aim of this research is to enable empirical study of the joint movement of both indicators, determine cause-effect relationships and co-integration dependence, establish long-term integration relationships, and take necessary steps and measures for a positive outcome. The level of economic development was measured using GDP per capita with purchasing power parity (PPP). The study analyses the dynamic interaction of indicators using data from January 1992 to December 2022. Econometric methodology was employed, including the extended Dickey-Fuller test to detect a single root, and the Granger test. The Johansen test, Error correction model, and ARDL model standard diagnostic tests were used to examine the cointegration relationship. Stationarity, causality, and cointegration tests were conducted on the entire sample at a significance level of 10%.

Analysis of the impact of agricultural credits on agricultural mechanization in Türkiye

Agricultural mechanization is one of the high-cost important inputs used in agricultural production. Thanks to agricultural mechanization, time and manpower are saved greatly in the agricultural production process. Agricultural loans, one of the most important agricultural financing instruments, are considered necessary for agricultural enterprises to invest in agricultural mechanization. This study, which adopts a quantitative research method approach, aimed to analyze the impact of agricultural loans on agricultural mechanization in Türkiye using time series analysis. Within the scope of the purpose, annual data covering the period 1981-2022 were gathered from data sources related to loans and agricultural mechanization. A log-log model was constructed with loans as the independent variable and agricultural mechanization as the dependent variable, and ARDL bounds testing method was applied in the estimation of the model. According to the findings obtained from the estimation of the model, there was a long-term, positive, and statistically significant co-integration relationship between loans and agricultural mechanization variables. A 1% increase in the loan balance was found to increase agricultural mechanization by approximately 0.035%. On the other hand, the short-term relationship between the variables was found to be negative and statistically significant. Short-term deviations from the long-term equilibrium caused by shocks were shown to vanish by approximately 86% after 1 period. In this context, it is clear that the adaptation process between the variables is very rapid.

An Analysis of the Relationship between Business Confidence and Macroeconomic Factors: Türkiye Case

Investor sentiment plays an important role in the all level of economic activities. Confidence as an indicator of investor sentiment has become an important and interesting concept in recent years. Confidence indicators are a way in assessing economic developments in the short term. The aim of this study is to analyze the long and short term relationship between the Real Sector Confidence Index and macroeconomic/financial variables for the period of January 2007 – December 2021. The Johansen Cointegration Test results prove a long-term cointegration relationship. Vector Error Correction Models for both macroeconomic and financial variables are statistically significant at the 5% level. In the short run, Manufacturing Capacity Utilization Ratio, Official Reserves, Domestic Debt Stocks, Real Exchance Rate, US Dollar/TRL Buying Rate, Non-Residents’ Stock Portfolio and Volatility Index have a statistically significant effect on the changes in Real Sector Confidence Index. Thus, this study informs investors to predict the effects of changes in the confidence index on financial instruments bilaterally and contribute to their investment decision.

Product differentiation in the fruit industry: Lessons from trademarked apples

AbstractWe derive price premiums for patented or trademarked apple varieties, also known as “club apples,” compared to open‐variety apples. We use an expansive retail scanner dataset, along with unique data on apple taste characteristics, to estimate monthly club apple premiums for 2008–2018. We find that club apple premiums are around 29% and have consistently decreased from 35% in 2008 to 22% in 2018. Positive club apple premiums relate to consumers' preferences for juicier, more acidic, and sweeter apples. We do not find evidence that consumers place value on the exclusivity of purchasing more expensive and limited varieties. Hence club premiums exist in the market by meeting the demand of consumer segments for apples with distinct taste attributes rather than replacing the demand of traditional consumers who prefer open varieties. We use a vector error correction framework to find short‐run and long‐run determinants of club apple premiums. In the short run, the sales of club varieties may positively associate with the sales of open varieties, given the premium and cost factors. However, in the long run, there is a negative cointegrated relationship between club apple sales, open apple sales, and club apple premiums; and an increase in club apple sales is adversely related to the open apple sales and club premiums. The high initial premiums of protected club varieties have provided incentives for the development of uniquely differentiated apple varieties, while in the long term as production expands, premiums decrease making club varieties less expensive for consumers [EconLit Citations: L66, Q11].

STUDYING THE RELATIONSHIP BETWEEN THE PRICE OF GOLD AND THE INFLATION RATE PERSISTENCE IN ALGERIA USING THE FRACTIONAL INTEGRATION MODEL

This study aims to analyse the relationship between gold price and inflation rates in Algeria to determine the extent of inflation persistence in face to gold price shocks from January1992 to March 2023 using the recently developed Fractional Cointegration Model, which allows residuals to be fractionally integrated rather than stationary, with the classical cointegration approach based on I(0) stationarity or I(1) cointegrating relationships. This topic was chosen due to its significance for monetary policymakers, investors, financial analysts and academics in understanding the dynamics of inflation persistence in Algeria and studying the impact of some prices shocks on it, such as gold price shocks, These shocks were affected by several factors, the most important of which is the Ukrainian war, which contributed to the rise of gold price to record levels. Our results also showed that Algeria has a co-integration relationship between gold price and the inflation rate, with an estimated persistence of 0.593, which is greater than 0.5 and less than 1. This indicates that the impact of gold price shocks is still present for a long time on the inflation rate persistence in Algeria, in other words the inflation rate in Algeria will persistence for a longer period due to the shock of gold price before eventually fading away, and with the adoption of a monetary policy targeting inflation in Algeria, it will contribute to reducing the inflation rates persistence.

Influence of China’s Lighting Industry on Urban Nighttime Tourism Economic Development: Based on Co-Integration Test and Granger Causality Test

With the upgrading of residents’ consumption and the diversification of the consumption structure, China’s urban night-time tour economy has developed rapidly and become a new bright spot of urban development. As an important constituent part of urban night landscapes, the lighting industry is closely related to the development of nighttime tour economy. To further explore the influence of the lighting industry on urban night-time tour economy, the short-term and long-term cointegration relationship between the lighting industry and urban night-time tour economy was analysed by the cointegration test, and the causal relationship between the two was explored through the Granger causality test. The ADF unit root test revealed that the lighting industry and urban night-time tour belonged to second-order single integration; the Johansen cointegration test exhibited a co-integration relationship between the lighting industrial and urban night-time tour; the regression coefficient of the lighting industry (independent variable) was 0.788, showing a significance level of 0.01 (t=22.470, P=0.000<0.01); the error correction coefficient was –0.489, showing a significance level of 0.01 (t= –3.912, P=0.001<0.01). When the short-term fluctuation of the night-time tour economy deviated from the long-term equilibrium, the lighting industry would pull the night-time tour economy from an unbalanced state back to an equilibrium state with the adjustment power of –0.489. The lighting industry was only the one-way Granger result of urban night-time tour. The research results have important reference value for figuring out how China’s lighting industry can promote the development of urban night-time tour economy, guiding it to achieve high-quality development, and enhancing the strong support from the lighting industry for development of night-time tour economy.

THE NEXUS BETWEEN MACROECONOMIC INDICATORS AND ELECTRIC CONSUMPTION EFFECT ON ECONOMIC GROWTH IN TURKEY

Currently, energy consumption is an important factor regarding its contribution to economic growth rather than the inputs used for its realization. It is known that economic decision units are linked to energy consumption. Innovation of technologies and the use of technology in production increases the energy demand. Energy is complementary to labor and capital in countries' economic and technological development. 
 The study aims to determine the impact of electricity consumption on economic growth by utilizing selected economic indicators for the period between 1996 and 2022 in Turkey. The study uses the ARDL bounds test approach to analyze the cointegration relationship using economic growth, electricity consumption, foreign direct investment, and general price level data. Short and long term effects have been revealed. It is observed that energy consumption and economic growth have a positive relationship with the same direction in the short and long term. Inflation has a negative impact on energy consumption in the short and long term. In addition, the increase in foreign direct investments in the short term leads to a significant increase in energy consumption in the relevant period in Turkey.

An analysis of the market efficiency of the Chinese copper futures based on intertemporal and intermarket arbitrages

This paper studies the market efficiency and relevant issues of the copper futures traded on the Shanghai Futures Exchange (SHFE) in China. Since its listing, the market, grown unceasingly in scale and internationalization level, has become the largest copper futures trading market in the world (the London Metal Exchange (LME) copper futures market is the second largest). Using the data from 2006 to 2022 as a sample, a period covering the outbreak of the COVID-19 pandemic and the internationalization of the Chinese copper futures, this paper analyzes the market efficiency of China’s copper futures based on both intertemporal and intermarket strategies (SHFE Copper Futures and LME Copper Futures, with considering time difference factor). To better reflect the actual situation, this paper, when establishing trading strategy models, not only took into account various actual trading factors such as transaction costs, market impact costs, liquidity costs, margin, and capital costs but also combined daily and high-frequency data to present highly practical arbitrage strategies. According to empirical results, overall, it was not found significant arbitrage opportunities to violate the market efficiency rule. Although some arbitrage opportunities indeed emerged, they were infrequent, especially when transaction costs were considered. Specifically, in terms of the intertemporal strategy, despite that infrequent arbitrage opportunities did appear in the SHFE copper futures market, they failed to bring substantial gains, some of which even caused losses in extreme cases. In terms of the intermarket strategy, there is a cointegration relationship between the logarithmic price of LME copper futures and the logarithmic price of SHFE copper futures. The average annualized rates of return in the results of the in-sample empirical analysis were high, but in the out-of-sample empirical analysis of high frequency and daily data were not found significant arbitrage opportunities. The influence between the LME copper futures market and the SHFE copper futures market was bidirectional.

The nexus between firm-specific agriculture research and development and agriculture total factor productivity: new evidence from China

ABSTRACT This study investigates the relationship between firm-specific agriculture research and development (ARD) and agriculture total factor productivity (ATFP) in China using autoregressive distributed lag (ARDL) techniques. The results show cointegration and bidirectional causal relationship between ATFP and ARD. ARD plays a significant role in promoting ATFP, and ATFP also impacts the level of ARD in China. These findings are positive for China’s agriculture improvement efforts. Additionally, the inclusion of control variables strengthens the ATFP-ARD relationship.

Does the Linkage between GDP, Renewable Energy, and Methane Validate the EKC hypothesis? Evidence from Indonesia

Is it feasible for Indonesia to sustain economic growth while simultaneously reducing methane emissions? This paper aims to unravel the Environmental Kuznets Curve (EKC) hypothesis for methane by integrating the role of renewable energy by employing annual data for the period 1990-2020. Autoregressive distributed lag (ARDL)-bounds testing is applied to estimate the dynamic and cointegration relationships. Also, this paper performs both traditional and breakpoint unit root tests. The EKC hypothesis is confirmed since there is an inverse U-curve nexus between GDP and methane per capita. The income turning point is 14,516 USD per capita. Indonesia’s income level is still below its estimated EKC threshold, implying that economic growth forces methane emissions to scale up. A 1% increase in GDP per capita leads to a 4.59% increase in methane per capita. However, renewable energy has a beneficial role in tackling methane emissions. A 1% increase in the share of renewable energy use leads to a 0.36% decrease in methane per capita. It is therefore recommended that to mitigate the damaging impact of economic growth, governments should enhance the share of energy use from renewable sources.