Cointegration Procedure Research Articles

Exploring Saudi Arabia’s 2060 net zero-emission paths via fractional frequency Fourier procedures. The imperatives of resource efficiency, energy efficiency, and digitalization

ABSTRACT By applying the novel fractional frequency Fourier ARDL technique, we unraveled the intricacies underpinning resource efficiency, energy efficiency, digitalization, and environmental sustainability in Saudi Arabia. Compelled by the conflicting narratives of prior investigations and the need for updated insights, the analyzed time series spanning 1990–2022 periods divulged interesting insights amenable to policy optimization. First, the fractional frequency Fourier ADL cointegration procedure reveals a long-term association among all the enlisted series. Second, resource and energy efficiencies, as well as digitalization, improved environmental quality by limiting carbon intensities and ecological footprint with some heterogeneous attributes across the timeframes. Notably, while resource efficiency is more effective toward ecological footprint mitigations, energy efficiency proves more efficient for carbon intensity reductions. Lastly, the fractional frequency Fourier Toda-Yamamoto causality test affirms the predictive attributes of the enlisted series on environmental performance. Hence, these factors are critical to KSA’s environmental sustainability paths. Based on these empirical discoveries, policymakers in KSA must pay adequate attention to the efficient utilization of resources and energy to complement other steps toward realizing Saudi Arabia’s 2060 net zero-emission. Likewise, policymakers must ensure the efficient allocation of income to environmentally sensitive ventures to curtail its negative repercussions on the environment. Other relevant steps to curtail carbon intensities and ecological footprint for optimal environmental performance in KSA have been highlighted.

Deposit Money Bank Credit and Non-Oil Export in Nigeria

The non-oil sectors play a crucial role in driving in­dustrial transformation and generating foreign exchange for a nation. Therefore, the performance of this sector is influenced by the implementation of policies and programs, as well as the availability of credit facilities from deposit money banks (DMBs). This study examines the relationship between DMBs' credit and non-oil exports in Nigeria from 1986 to 2022. The data is analysed using the bounds test co-integration procedure of Autoregressive Distributed Lag (ARDL). The results indicate that there is a significant (Prob. < 0.05) positive relationship be­tween DMBs' credit and exchange rates. Furthermore, DMBs' lending rate and inflation rate demonstrate a significant nega­tive relationship, while gross fixed capital formation shows an inverse relationship with non-oil exports in Nigeria. The cau­sality test reveals no causality between bank credit to non-oil sectors, exchange rate, and the volume of non-oil exports in Ni­geria. However, there is a unidirectional causality between gross fixed capital formation, the lending rate of banks, the in­flation rate, and non-oil exports in Nigeria. Based on these find­ings, it is recommended that both the government and the monetary authorities make concerted efforts to stabilise the macroeconomic variables and promote growth-oriented programs meant to boost the aim of enhancing the production of locally produced goods in the non-oil sectors of Nigeria. Additionally, the Central Bank of Nigeria should consider re­ducing the bank rate, as this would directly impact other rates within the country.

Improving household well‐being through entrepreneurship and inclusive finance in the context of the Next‐11 countries

AbstractScholarship brainstorming on household welfare enablers abounds in academic literature. Nonetheless, the perspective of entrepreneurship, particularly for the Next‐11 countries, is underreported. Likewise, prior literature failed to investigate the influence of categorical (gender‐specific) entrepreneurship on household welfare. Thus, this investigation covers this lacuna by examining the predictive effects of aggregate, male and female entrepreneurship and financial inclusiveness on household welfare. With panel series spanning 2004–2021, both the Westerlund and Banerjee & Carrion‐i‐Silvestre cointegration procedures confirmed long‐term convergence among the series. The estimates of the augmented mean group (AMG) and the cross‐sectional autoregressive distributed lag (CSARDL) techniques revealed that entrepreneurship enhances household well‐being. This outcome validates the self‐determination theory since entrepreneurial engagements enhance household welfare. By extension, policies targeting entrepreneurship empowerment are critical for economic prosperity in these countries. In terms of gender variations, it is established that female entrepreneurship, much more than male, enhances household well‐being significantly. Furthermore, although automated teller machine availability promotes subjective well‐being, the number of commercial bank branches enhances only objective well‐being. Meanwhile, commercial bank loans failed to enhance both aspects of welfare at all times. Hence, we have provided relevant policy options that would ensure the maximization of households’ well‐being in these countries and other emerging economies.

The Intricate Impression of Tourism, Patent, And Renewable Energy on Environmental Sustainability

The growing global attention to indicating climate conversion and plummeting carbon dioxide (CO2) emanations has spurred researchers to examine the influence of several factors on promoting environmental sustainability. This research examines the intricate role of tourism, patent applications, rent from natural resources, and utilization of renewable power in carbon dioxide secretions in Bangladesh. For this purpose, data has been collected from 1995 to 2019 from World Development Indicators (WDI). Augmented Dickey-Fuller (ADF) and the Phillips-Perron (PP) and the ARDL bound cointegration procedures are employed to determine the existence of stationary data and cointegration among variables respectively. The Autoregressive Distributive Lag (ARDL) procedure is used to consider the effects of the chosen variables on CO2 emissions over the short and long run. VIF test, White's test, and the Breusch-Godfrey test are employed to check multicolinearity, homoscedasticity, and autocorrelation respectively. The research discloses that it is vital to expand the usage of renewable energy sources while simultaneously decreasing natural resource rent by limiting natural resource extraction for a sustainable environment. Although the statistical insignificance of the long-term coefficient of tourism has been observed, the study reveals a negative coefficient for tourism, suggesting the possible efficacy of sustainable tourism practices for mitigating CO2 emissions. The findings also demonstrate the long-term contribution of innovation activities to environmental degradation through the positive coefficient of patent applications. The research results offer significant insights for policymakers and stakeholders involved in the pursuit of a sustainable and ecologically conscious future in Bangladesh.

Relations among Bitcoin Futures, Bitcoin Spot, Investor Attention, and Sentiment

This research investigates the function of price discovery between the Bitcoin futures and the spot markets while also analyzing the impact of investor sentiment and attention on these markets. This study utilizes various statistical models to examine the short-term and long-term relations between these variables, including the bivariate Granger causality model, the ARDL and NARDL models, and the Johansen cointegration procedure with a vector error correction mechanism. The results suggest that there is no statistical evidence of price discovery between the Bitcoin spot price and futures, and the term structure of the Bitcoin futures neither enriches nor impairs this lead lag relation. However, the study finds robust evidence of a long-run cointegrating relation between the two markets and the presence of asymmetry in them. Moreover, this research indicates that investor sentiment exhibits a lead lag relation with both the Bitcoin futures and the spot markets, while investor attention only leads to the Bitcoin spot market, without showing any lead lag relation with the Bitcoin futures. These findings highlight the crucial role of investor behavior in affecting both Bitcoin futures and spot prices.

Economic Growth and Environmental Pollution in Tanzania: An Environmental Kuznets Curve Analysis

The creation of a long-term linkage between economic growth and environmental protection is a subject of an ongoing discussion among scholars and policymakers. The relationship between environmental quality and economic growth is viewed from two different angles. According to the first, it is impossible to protect the environment and increase the economy at the same time since doing so will inevitably result in the extinction of either one or both. The other contends that economic advancement and higher environmental quality can be achieved simultaneously since increasing economic growth raises income levels, which in turn increases the demand for environmental protection. However, there is a disagreement over how much environmental resources should be exploited to support rapid economic expansion. This study used the approach of the Environmental Kuznets Curve (EKC) hypothesis to investigate the relationship between economic growth and environmental pollution in Tanzania. Tanzania’s economy annual data from 1970 to 2018 was used in the ARDL bounds testing for cointegration procedures. The evidence suggests that environmental pollution and economic growth have a U-shaped relationship, which rules out the existence of a traditional EKC in Tanzania. Like in many emerging economies, environmental pollution is anticipated to rise in Tanzania if economic expansion continues beyond a threshold level. The U-shaped link between economic growth and environmental pollution is important for policy formulation because both economic growth and a clean environment are welfare-enhancing; therefore, it is possible to have two policies that are mutually supportive rather than antagonistic. This can be achieved by having a proper environmental, legal, and institutional frameworks.

Rare whiskies' market: new Eldorado for investors and collectors?

PurposeThis article aims to analyze the relationships between the different categories of rare whiskies and the opportunities for investors and collectors.Design/methodology/approachThis article uses indices representative of collectors, market performance and specific from 2008–2022 to a distillery and determine the returns. The author performs stationarity tests, cointegration procedures and the Granger non-causality test.FindingsThe results of this article indicates that average returns are positive. In addition, there is a wide range of annual returns, i.e. strongly negative and positive, leading to possible speculation over short periods. High and heterogeneous volatility accompanies these potential gains. The correlations between the different returns of rare whisky are close to zero, indicating potential gains in terms of portfolio diversification. This result is crucial for investors-speculators that benefit from an additional alternative asset. Cointegration relationships are more numerous in the short run than in the long run, confirming that rare whisky could present potential gains for investors, as collectors have in-depth knowledge of the relationships between the different markets.Originality/valueFinally, the author discusses the implications for different categories of economic actors (investors, collectors, sellers and producers).

Impact of foreign direct investment on CO2 emissions: the case of Tajikistan

Employing the cointegration procedure and time series data covering the years 1990–2020, this investigation investigates the effect of foreign direct investment inflows on carbon dioxide emissions in Tajikistan in order to test the veracity of the pollution paradise theory. Our conclusion that the variables are cointegrated is supported by the bivariate cointegration study. In addition, the outcomes of ordinary least squares (OLS) estimators demonstrate that foreign direct investment (FDI) has a favorable long-term association with carbon dioxide emissions. The Engle-Granger causality test results, on the other hand, show that both short- and long-term carbon dioxide emissions are increased by foreign direct investment inflows. So, it stands to reason that although filthy industries initially abide by environmental laws and norms, with time they too start to pollute. It is advised to keep luring these applicants while setting up systems and tools to lessen carbon dioxide emissions under the confines of strict environmental regulations.

A cointegration analysis of New Zealand’s economic development, fossil fuel usage and transport emissions

This study examines the relationship between New Zealand's (NZ) economic development, fossil fuel usage, and carbon dioxide (CO2) emissions from the transport sector from 1977 to 2013. The Autoregressive Distributed Lag (ARDL) bounds testing to cointegration procedure is conducted, followed by the Granger causality approach, to validate the hypothesis of the transport-energy environmental Kuznets curve (EKC). The empirical results of the study reveal an inverted U-shape between income and transport emissions for the sample period. The turning point is approximately US$31,070 in constant 2010 price, and NZ reached this income per capita level around 2002. Specifically, unidirectional causality between economic development and transport-related emissions was found in the short run, and it runs from economic development to transport emissions. Our findings deliver several policy implications. First, NZ’s carbon reduction policy programs should focus more on transitioning from a carbon-based energy system to renewable energy. Second, push and pull measures to address carbon emissions reduction in the transport sector will not harm economic development. Given the important role that full cells play in decarbonising the heavy transport sector, future research should also incorporate the roll-out and deployment of hydrogen vehicles on the country’s economic development, fossil fuel usage, and transport emissions.

Analysis of foreign capital inflows and stock market performance in Nigeria

Most studies concentrate on the impact of only one constituent of the foreign capital influx on the stock market and economic performance, but only few studies simultaneously considered the unique impact of the duo of foreign portfolio investment (FPI) and foreign direct investment (FDI), and many of these studies were not undertaken in Nigeria.This study, therefore, assesses how foreign capital inflows (FPI and FDI) affect the stock market development in Nigeria. The foundations for the empirical study were built upon the dividend discount model, which formed the basis for the analytical framework. Going forward, the ARDL co-integration procedure was adopted to examine the long-run relationship between foreign capital and stock market performance. The results from the ARDL Bounds test suggest no evidence of a long-run equilibrium relationship between foreign capital inflows (FDI & FPI) and the stock market performance. Also, the short-run analysis indicates an insignificant relationship between FDI and stock market performance, whereas, a reversed relationship was obtained for FPI, as it exerts a positive and significant impact on stock market performance. The study recommends strengthening the institutional framework for the enlistment of multinational companies in the Nigerian stock market.

Price Setting Behavior and Causal Relationships among Major Bivoltine Cocoon Markets in India: An Econometric Analysis

The present study empirically examines the dynamic interrelationships among the prices of major cocoons markets viz. Ramanagaram (Karnataka), Sidlaghatta (Karnataka), Hindupura (Andra Pradesh) and Dharmapuri (Tamil Nadu) in terms of market integration. The monthly average prices of bivoltine mulberry cocoons for a period between April 2009 and February 2021 were considered for the present study. The Augmented Dickey-Fuller (ADF) (tau) test indicated that all the price series were non-stationary at level, but were stationary after first difference. The Johansen's multivariate cointegration procedure revealed existence of cointegration among the prices of cocoon markets. The Vector Error Correction Models (VECM) revealed a long run price causality running from Ramanagaram market to all other markets considered under study. The Granger causality test indicated a unidirectional causality running from Ramanagaram market to all markets and not vice versa. The prices prevailed in Ramanagaram market controlled and decided the current prices of bivoltine cocoons both in long run and short run in all other markets considered for the study.

Inflation Spill-overs from BRIC to SADC Economies: The Impossible Trinity Theory Analysis

This paper examined the potential inflation spill-over effects from BRIC to five SADC countries (Angola, Botswana, South Africa, Tanzania and Zambia) by using data collected for the period 1985-2020. Thirty-six (36) observations were used to obtain more reliable results with greater precision. Studies conducted on the impossible trinity argue that, in the case of highly financially integrated economies, domestic interest rates are tightly linked to the international interest rates if it is impossible to manipulate domestic interest rates. Specifically, interest rates for open economies tend to be influenced by international interest rates if these economies opt for free capital flows with a fixed exchange rate regime. Fisher's effect theory asserts that domestic interest rates trend positively with inflation rates. The principal method of research used is that of quantitative analysis. Given the empirical nature of the research, the paradigm employed is positivist. This paper employed the generalised method of moments (GMM) model, the Johansen cointegration procedure, and the Granger causality test in a vector error correction (VEC) model. The findings indicated that the fixed-exchange-rate regimes (soft pegs and hard pegs) are associated with high responsiveness of the domestic inflation rate to the foreign countries’ inflation rates, rather than to floating exchange-rate regimes (free-floating and managed floats). The policy implications for control of inflation in SADC economies are that, because of the financial market integration increase between SADC and BRIC economies, monetary authorities in SADC countries should consider floating exchange rate regimes (managed-floats or free-floating).

Towards Sustainable Agriculture in China: Assessing the Robust Role of Green Public Investment

This paper reviews the long-term impact of public investments on irrigation and agricultural research and development along with other control variables, including physical capital, irrigated area, fertilizer consumption, level of mechanization, and CO2 emissions on China’s agricultural output from 1986 to 2017. This study applied various econometric methods such as the ARDL bound-testing approach and Johansen co-integration procedure to determine the long-term co-integrating connection amid the variables. The empirical outcomes from the ARDL bound-testing method confirm a long-term co-integrating connection among the variables. The long-run results demonstrated that public investment in agricultural research and development and irrigation have a substantial positive effect on agricultural productivity. Furthermore, results revealed that physical capital and fertilizer consumption also have a significant positive effect on agricultural output; however, CO2 emissions have a substantial negative effect on agricultural production. These findings therefore suggest that the policy makers of China should initiate more effective policies to increase irrigation and agricultural research and development investments. Increasing irrigation and agricultural research and development investments will enhance agricultural productivity by ensuring food security in the country.

Import Behavior Analysis of Air Cargo: Focusing on Machinery, Transport Equipment and Miscellaneous Manufactured Products

Purpose This paper aims to analyze the import behavioral pattern of air cargo and its determinants using exchange rate and domestic industrial production. Design/Methodology/Approach This paper utilizes a cointegration procedure, error correction equation, forward rolling regression, and impulse response function. We use monthly data for real effective exchange rates, export values, and the domestic industrial production index for the period of January 2009 to December 2020. Sectoral import statistics used in this study are taken from the Korea International Trade Association database for three digit SITC items. Findings The unitroot and the Engle-Granger cointegration tests show that all six variables are non-stationary at levels, but stationary after differencing, and that our model is stationary. The error correction terms, which range from 0.168 to 0.277, are significantly negative. These results imply that the disequilibrium of air cargo import need four or six months for long-run equilibrium at a tolerable pace. The rolling regression indicates that the paths of SITC776 and SITC764 are different from those of SITC728 and SITC874. The impulse response technique shows that both the real effective exchange rate and domestic industrial prodution affect the imports of the four products positively. Research Implications The empirical results that air cargo imports respond to the economic variables such as exchange rate and economic business in line with expectations suggest that air cargo imports are predictable. In addition, the fact that the adjustment speed toward the trend is fast means that the stable growth of the air cargo import are guaranteed. However, we notice that the negative effects of the exchange rate decay slowly.

Load Capacity Factor and Financial Globalization in Brazil: The Role of Renewable Energy and Urbanization

To mitigate environmental challenges and fulfill the Sustainable Development Goals, a broader and holistic ecological assessment is required. As a result, this research utilizes the load capacity factor, which is a distinct proxy of environmental deterioration that offers a detailed environmental evaluation measurement by comparing biocapacity and ecological footprint simultaneously. Moreover, the load capacity factor provides the combined attributes of the demand and supply-side of environmental quality. Therefore, this research scrutinized the effect of financial globalization, urbanization, economic growth, and renewable and nonrenewable energy usage on load capacity factor for the period stretching between 1970 and 2017 in Brazil. The bounds testing procedure for cointegration in combination with the critical approximation p-values of Kripfganz and Schneider (2018) disclosed a cointegrating association between load capacity and its regressors. The outcome of the ARDL method uncovered that economic growth, non-renewable and renewable energy reduce the load capacity factor, whereas urbanization has no impact on load capacity factor in Brazil. However, financial globalization has a positive effect on load capacity factor in Brazil. Finally, the study uses the spectral causality test to assess the causality interaction between the observed parameters. The policymakers should take advantage of the opportunity by developing policies that encourage the openness of the economy to foreign investors.

ARDL as an Elixir Approach to Cure for Spurious Regression in Nonstationary Time Series

In conventional Econometrics, the unit root and cointegration analysis are the only ways to circumvent the spurious regression which may arise from missing variable (lag values) rather than the nonstationarity process in time series data. We propose the Ghouse equation solution of autoregressive distributed lag mechanism which does not require additional work in unit root testing and bound testing. This advantage makes the proposed methodology more efficient compared to the existing cointegration procedures. The earlier tests weaken their position in comparison to it, as they had numerous linked testing procedures which further increase the size of the test and/or reduce the test power. The simplification of the Ghouse equation does not attain any such type of error, which makes it a more powerful test as compared to widely cited exiting testing methods in econometrics and statistics literature.

Market Integration and Price Leadership among Major Mulberry Cocoon Markets in South India

Market integration is a good proxy for measuring market efficiency and the emerging price signals from the markets can be utilized to benefit both farmers and reelers alike. The present study empirically examines the dynamic interrelationships among the prices of major cocoons markets viz. Ramanagaram (Karnataka), Sidlaghatta (Karnataka), Hindupur (Andra Pradesh) and Dharmapuri (Tamil Nadu) in terms of market integration. The monthly average prices of cross breed mulberry cocoons for a period between April 2002 and March 2021 were considered for the present study. The Augmented Dickey-Fuller (ADF) (tau) testindicated that all the price series were non-stationary at level, but were stationary after first difference. The Johansen's multivariate cointegration procedure revealed existence of cointegration among the prices of cocoon markets. The Vector Error Correction Models (VECM) revealed a long run price causality running from Ramanagaram and Sidlaghatta markets to all other markets considered under study. The Granger causality test indicated a unidirectional causality running from Ramanagaram and Sidlaghatta markets to all markets and not vice versa. The prices prevailed in Ramanagaram and Sidlaghatta markets controlled and decided the current prices of cross breed cocoons both in long run and short run in all other markets considered for the study.

An Empirical Analysis on Japanese Import Demand Function in Comparison with Korea’s Import Demand

Purpose - This study presents an empirical examination of Japan’s short-run and long-run aggregate demand for imports, compared with the study on Korea’s import, using quarterly economic data for the period 2000-2020 including aggregate imports, final consumption expenditure components, investment and relative price of imports. Design/Methodology/Approach - This paper has employed multivariate co-integration procedure and the short-run error correction model to find the existence of a cointegration and the relationship among variables in import demand function. Findings - This paper shows that the variables are all cointegrated and there exist significant differences with reference to different factors of final expenditure. Partial elasticities with respect to government expenditure, investment, exports and import prices are reported to be positive while imports seem to move negatively to changes in private consumption, in contrast to the case of Korea which shows that imports only move negatively with respect to investment. Export appears to indicate a relatively insignificant impact on Japan’s aggregate imports in the long run. However, an vector error correction model demonstrates that only exports have an influence on the imports in the short run while, in Korea, the current period changes in the demand for imports are related only to the previous period changes in relative price of imports. Research Implications - This paper provides significant implications for policy makers in a nation seeking to improve the country’s trade balances. Exchange rate policies in Japan appear to have significant long-term impact on Japan’s import demand, but no significant effect in the short term. Policies to increase the private sector consumption could be of a crucial importance in decreasing aggregate imports in the long term, resulting in further improvement in Japan’s balance of trade. In contrast to Japan, the exchange rate scheme has a short-term effect on Korea’s demand for imports but not a long-term impact on the country’s imports while investment component plays a key role in reducing imports in the long run, leading to enhancement in the Korea’s balance of trade.

Econometric Assessment of the Impact of Exchange Rate Depreciation on Inflation in Nigeria (1981-2017)

The present reality of the Nigerian economy is the fact that inflation has remained unabated in spite of all exchange rate measures that have been adopted by the monetary authority. This calls for investigation into the extent to which exchange rate impact on inflation in Nigeria. The research paper examined the impact of exchange rate depreciation on inflation in Nigeria for the period 1981–2017, using Auto Regressive Distributed Lag (ARDL) Bounds Test Cointegration Procedure. The research shows that inflation rate in Nigeria is highly susceptible to lagged inflation rate, exchange rate, lagged exchange rate, lagged broad money, and lagged gross domestic product at 5% level of significance. A long run relationship was also found to exist between inflation rate, gross domestic product and general government expenditure, indicating that the model has a self-adjusting mechanism for correcting any deviation of the variables from equilibrium. Therefore, this study concludes that exchange rate is an important tool to manage inflation in the country; thus, this paper recommends that policies that have direct influence on inflation as well as exchange rate policies that would checkmate inflation movement in the country, should be used by the Central Bank of Nigeria. Also, monetary growth and import management policies should be put in place to encourage domestic production of export commodities, which are currently short-supplied. In addition, policy makers should not rely on this instrument totally to control inflation, but should use it as a complement to other macro-economic policies.

Validity of Okun's law in Sri Lanka

The main goal of our research is to find out a relationship between the unemployment rate and the GDP growth rate in Sri Lanka according to Okun’s law and to know whether it can still be used as the best rule of thumb. This empirical analysis has employed the difference model, dynamic model, Error Correction Model (ECM) and Vector Error Correction Model (VECM) to validate the relationship between the unemployment rate and economic growth suggested by Okun's Law. The study is based on Quarterly data from 2004 Q1 to 2019 Q4. The results obtained through the application of varies econometric techniques such as Ordinary least square (OLS), Engel-Granger approach and cointegration procedure. The study finds that, Okun’s law is supported only by the cointegration analysis as expected by the Okun’s law in Sri Lanka. However, all other versions were reported negative Okun’s law coefficient signs while these results are not statistically significant. Overall this study is not able to found enough evidence to prove the inverse relationship between unemployment rate and economic growth rate in short run and able to found that Okun’s law can still be used as the best rule of thumb to describe the relationship between the unemployment and GDP growth in long term in Sri Lanka.