Cointegration Regression Research Articles

Empowering Bangladesh: Illuminating the path to sustainable economic growth: Using a cutting‐edge non‐linear Autoregressive Distributed Lag approach

AbstractBangladesh, a developing country, is experiencing a rapid increase in its energy requirements due to its consistent economic growth in recent years. However, little is known about the economic contributions of access to electricity (AE), energy consumption (EC), and population growth (PG). In this study, the asymmetrical connection among PG, EC and electricity accessibility in Bangladesh is examined over a span of 36 years, from 1985 to 2021. The study used non‐linear ARDL cointegration methods as well as Granger Causality. For robustness, this study used Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegrating Regression (CCR). The results reveal that PG has a notable favourable impact on economic growth, and conversely, a declining population also leads to a substantial positive influence on economic growth. Both favourable and adverse fluctuations in electricity accessibility exhibit detrimental effects on long‐term economic growth. Over the course of time, enhancing power accessibility has contributed to the rise in economic growth. Unfavourable EC shocks exhibit a meaningfully positive influence on economic growth in Bangladesh. Nevertheless, the positive EC shock does not have a notable impact on long‐term economic growth. The data also demonstrate bidirectional causality between PG and economic growth and EC and economic growth (EG). There is also a unidirectional causal link between PG and AE and EC and PG. The findings have significant policy ramifications for those in charge of making decisions in Bangladesh that would help the country achieve its economic goals by bolstering its energy industry.

Effect of manufacturing service transformation management on technological innovation

The immediate need for servitization and digital technologies like the Internet of Things (IoT), cloud computing and predictive analysis must be addressed in manufacturing industries. This research aims to analyze the impact of manufacturing services transformation management from traditional methods to technological innovation. This research approached the panel data of Chinese multinational equipment manufacturing industries for the analytical purpose from 2011 to 2017. The unit-root test has checked the stationarity of panel data and cointegration regression checked the long-term relationship among selected variables. The research results have confirmed a long-run and positive relationship between service transformation management of manufacturing enterprises and technological innovation. The positive upward trend among these two variables is because of increasing market demand-driven, open innovation network construction and increase in capital (intellectual, human & financial capital). The negative sign of values is declared the validity of an inverted “U-Shaped” analysis, which confirms the relationship's longevity. The adaptation of technological innovation has also indicated the growing performance trend in service management enterprises. As per the rule of inverted “U-Shaped” law, at a specific point, the manufacturing enterprises’ servitization management will start declining, and it will continue as a cyclic process. This research suggests that enterprises should prepare for the declining phase of servitization and sort out the other performance growth area, which will help to balance the performance of manufacturing enterprises wholesomely.

Assessment of Tourism-Led Growth Risks in Resource-Rich Countries: Evidence from Azerbaijan

Abstract The COVID-19 pandemic has provided important lessons in determining future development strategies for countries whose economies are largely dependent on natural resources. The following study was conducted to analyze the potential for tourism to contribute to economic growth and sustainability of economic development in countries rich in natural resources during the post-resource period. Using data from the Republic of Azerbaijan, a co-integrated regression model was used in the analyses. Findings showed that (1) tourism has a positive effect on economic growth and can play a role in ensuring its sustainability; (2) a decrease in revenues from tourism carries more risk for the economy than revenues from oil (coefficient of variation); (3) if an oil and gas country chooses a tourism-based development path in the post-oil and gas era, it may face very serious challenges (due to the fact that tourism sector is highly vulnerable to direct and indirect events); (4) dominance of the tourism sector in the economy carries more risk than dominance of the oil and gas sector. However, combining two different approaches showed that choosing tourism as one of the priority sectors in the post-oil and gas era can reduce risks and will contribute more to the diversification of the economy.

Does Financial Inclusion Improve Income Equality? The Case of Türkiye

Abstract Income inequality has become an important economic and humanitarian problem for both advanced and emerging economies, especially with the increase in financialization trends. The equitable distribution of income has garnered attention in both developed and developing nations, given the rise in global trade and production. However, limited research has explored the impact of financial inclusion on income inequality. To address this gap, this study investigated the effect of financial inclusion on income inequality in Türkiye, contributing to the very limited literature. In this study, the financial inclusion variable is measured using a six-dimensional index encompassing financial institutions and financial markets with depth, access, and availability sub-dimensions. During the time frame spanning from 1980 to 2021, estimations of parameters are conducted employing cointegration regression techniques, including FMOLS, DOLS, and CCR. The analysis revealed that inflation, per capita income, urbanization, and financial inclusion have a negative impact on income equality, whereas education has a positive impact. A 1% rise in financial inclusion is associated with a proportional rise in income inequality of approximately 0.012%. Contrary to the findings of previous empirical studies in general, the increase in financial inclusion in Türkiye has a distorting effect on income equality. The findings of this study offer important implications for Türkiye. While the relationship between the financial inclusion indicator and income inequality is not negative, increasing the income of low-income groups across all financial sectors is likely to improve income equality.

Nexus between economy, technology, and ecological footprint in China

In contemporary times, nations across the globe, encompassing both developed and emerging economies, are actively pursuing the objective of achieving sustainable economic growth. China, as a prominent emerging nation, holds a significant position in the worldwide environment. However, it is imperative to acknowledge that China's ecological impact is substantial, as evidenced by its considerable contribution of almost one-third of the total global carbon emissions in the year 2021. The encouraging aspect lies in the emergence of China as a significant economic power, which may be attributed to the positive impact of technological advancements. The scientific literature suggests that the use of novel technologies has the potential to contribute significantly to mitigating environmental degradation. The objective of this study is to investigate the impact of China's economic growth and technological advancements on ecological footprint throughout the period spanning from 1985 to 2020. This study utilizes the ecological footprint concept as a means to assess environmental degradation in China. The ARDL cointegration methodology is utilized to estimate the long- and short-term impacts, and the outcomes are validated through the application of further cointegration regression techniques. Furthermore, the pairwise Granger causality analysis is employed to examine the causal links among the variables. The empirical evidence suggests that economic expansion exacerbates environmental degradation in China, whereas technological progress plays a mitigating role in addressing this issue. The results of the study also demonstrated a bidirectional causality between economic growth and technological innovation, suggesting that China's economic growth and technological progress mutually reinforce one another. The paper proposes green technical solutions that have the potential to mitigate environmental degradation while maintaining economic growth. Sustaining long-term economic prosperity necessitates the implementation of both carbon emission taxation and strategic investments in environmentally beneficial technologies.

Unveiling the Implications of Energy Poverty for Educational Attainments in Pakistan: A Multidimensional Analysis

The United Nations' Sustainable Development Goals (SDGs) recognize energy poverty as a significant issue affecting developing and developed countries. Goal 7 of the Sustainable Development Goals (SDG 7) focuses on energy poverty (EP) and aims to achieve universal access to affordable, reliable, sustainable, and modern energy services by 2030. This study examines the relationship between energy poverty and educational attainments in Pakistan using time series data from 1990 to 2020. A multidimensional energy development index (EDI) is constructed to measure energy poverty. By employing robust econometric techniques such as the Johansen cointegration test, fully modified ordinary least square (FMOLS), canonical cointegration regression, and the generalized method of moments (GMM) estimation, this research uncovers empirical findings that offer valuable insights into the crucial role of energy poverty as a determinant of educational attainments. The findings of this study reveal that improvements in energy development (characterized by a decline in energy poverty) and real GDP per capita, significantly enhance school enrollments in Pakistan. Moreover, it is also observed that general poverty and a high pupil-teacher ratio negatively influence educational attainments. These results emphasize that inadequate access to and affordability of energy act as formidable barriers, impeding the educational journey of children and adolescents. These findings also highlight the urgent need to address energy poverty as a paramount policy concern to enhance development outcomes. Policies aimed at improving energy infrastructure and providing reliable and affordable energy sources are crucial to unlocking educational opportunities for more children and enabling them to embark on their educational journeys.

Energy-growth nexus for ‘Renewable Energy Country Attractiveness Index’ countries: Evidence from new econometric methods

This study explores the connections between renewable energy consumption (REC), non-renewable energy consumption (NREC), gross fixed capital formation (GFCF), the labor force (LF), and economic growth (GDP) in Renewable Energy Country Attractiveness Index (RECAI) countries for 1991–2016. We quantify the nexus between REC, NREC, and GDP while utilizing a production model framework and including the measures of labor and capital, for suggesting a phase-wise strategy to attain the sustainable development goals. We use robust methodologies including Lagrange Multiplier (LM) panel unit root tests with trend shifts, Westerlund cointegration test, LM bootstrap technique for cointegration with breaks, continuously updated fully modified (CUP-FM) and continuously updated bias-corrected (CUP-BC) estimators, Augmented Mean Group (AMG) approach, fully modified ordinary least squares, dynamic ordinary least squares, Canonical Cointegrating Regression (CCR), and panel causality test proposed by Canning & Pedroni. We compute non-parametric time-varying coefficients with fixed effects for seeing the impact of GFCF, LF, REC, and NREC on GDP. Our results press upon policymakers to shift toward clean energy and REC for attaining the environmental goals (SDGs 6, 7, 13, and 15) and the economic goals (SDGs 1, 2, 8, and 10). While this shift would help developed economies, which have already attained the economic goals, to progress on the front of environmental goals, it would enable developing countries to progress on both fronts in a balanced manner.

Institutional quality and renewable energy transition: Empirical evidence from Poland

This study investigates the impact of institutional quality as measured by the corruption perception index, income, CO2 emissions, and trade openness on renewable energy consumption in Poland from 1996 to 2021. The Canonical Cointegrating Regression (CCR) technique was employed for empirical analysis. The analysis results revealed that the corruption perception index, income, and CO2 emissions have a positive and statistically significant effect on renewable energy consumption, while trade openness has an insignificant impact. The positive influence of institutional quality on renewable energy consumption highlights the significance of implementing policies that contribute to environmental sustainability and energy security.

전력 수요 시계열 분석과 장기예측

This study considers the time series characteristics in residential electricity demand function and forecasts long-run electricity demand in Korea. It is widely known that electricity demand and its determinants are unit root processes, so that estimating and forecasting the electricity demand function based on cointegration relationship are common in empirical analyses. We apply unit root tests on monthly time series data for the period 2006:01-2022:12. Korea has experienced the rapid development and social changes over this period, which provides convincing evidence of the possibility of structural changes. The unit root test of Dickey, Fuller (1979) tends to be biased in favor of non-rejection of the unit root null hypothesis if the process considered is trend-stationary with a slope change. What we found is that electricity demand and its determinants are trend-stationary processes allowing for a slope change, whereby there is no need to invoke either cointegration regression model or error-correction model under the unit root assumption. We apply a regression model with a structural change to estimate the residential electricity demand function and forecast the long-run electricity demand for the period 2023-2050.

Government Budgets and Economic Development in Nigeria: An Empirical Investigation

This study investigates the impact of government spending on Nigeria's economic growth. The study used ex-post facto and longitudinal research approaches to examine the role of several government budgetary factors on Nigeria's economic development as measured by gross national product during 21 years (2001-2021). For this research, secondary data were gathered from the Federal Ministry of Finance's Budget Office publications and the Central Bank of Nigeria's Statistical Bulletin and Bulletin. The analysis used a cointegrating regression model with a fully modified ordinary least squares model. The fully modified least square model was used to ascertain the combined impact of yearly budgeting drivers on GNP in Nigeria. The study found that CEX, INFR, and REX significantly influenced GNP, but DS and EXCHR did not significantly influence GNP. According to the study, Nigeria's economic growth and development are greatly influenced by government budgets. In order to guarantee that the budget's advantages are realised and to support economic development in Nigeria, the research advised that the government assess the performance of the yearly budgeting variables, system, and execution.

Does human capital development impact nonrenewable energy use? Evidence from a developing economy

ABSTRACT The dilemma surrounding the use of fossil fuels has led to demands for renewable energy and other clean energy sources. Renewable energy sources are not only unlimited but also have less negative impact on the environment and promote energy independence. The study uses the recent redesign of education in Ghana to assess how improved access to education can impact nonrenewable energy consumption. Using annual time-series data from 1976 to 2020, we estimate the long-term impact of human capital development on nonrenewable energy consumption in Ghana. Dynamic Ordinary Least Squares (DOLS), Fully Modified Ordinary Least Squares (FMOLS) and Canonical Cointegration Regression (CCR) were used to check the robustness. The results show that the development of human capital (returns on education) reduces the use of nonrenewable energy. In addition, other variables such as economic integration and energy prices also reduce nonrenewable energy consumption. However, rents from natural resources, urban population growth, and foreign direct investment (FDI) are having a positive impact on nonrenewable energy consumption. The study recommends that the government encourage research and development of clean and energy-saving technologies to ensure the availability and affordability of sustainable clean energy sources and reduce nonrenewable energy consumption in Ghana. In addition, the government should implement and strengthen policies that promote human capital development through education, as education has been shown to play an important role in reducing nonrenewable energy consumption.

Globalization–health outcomes nexus and institutional intermediation in Nigeria

PurposeThe role institutional quality plays in the rising pace of globalization and its associated health effects remain unclear in the literature. This study, therefore, empirically examined the moderating role of institutional quality on the globalization-health outcomes nexus in Nigeria, a country with a relatively weak health system.Design/methodology/approachThe study employed Dynamic Ordinary Least Square (DOLS) to estimate the empirical models. The Fully Modified Ordinary Least Square (FMOLS) and Canonical Cointegration Regression (CCR) techniques were thereafter used to check the consistency and robustness of our results. Annual time-series data spanning from 1984 to 2020 were sourced from the World Development Indicator, KOF Globalization Index, International Countries Risk Guide (ICRG) and Central Bank of Nigeria Statistical Bulletin databases.FindingsThe results revealed that overall globalization and its three dimensional components (economic, political and social globalization) adversely affect life expectancy in their separate models, but increased life expectancy significantly after their interaction with government effectiveness. Also, real GDP, health aids, government recurrent health expenditure are other determinants of life expectancy in Nigeria.Practical implicationsThe Nigerian government should put in place appropriate mechanisms directed toward building and sustaining government effectiveness. This will help mitigate the negative effects of globalization and utilize its net positive benefits to improve life expectancy in Nigeria.Originality/valueThe research is the first to comprehensively examine the moderating impact of institutional quality on the nexus between overall globalization as well as its three dimensional components (economic, political and social) on health outcomes in Nigeria.

A pathway to a sustainable future: Investigating the contribution of technological innovations, clean energy, and Women's empowerment in mitigating global environmental challenges

This study aims to provide insights into the pathway toward a sustainable future by investigating the factors contributing to environmental sustainability. In this pursuit, the current study empirically analyzes the role of economic growth, technological innovation, clean energy consumption, and women empowerment toward global environmental quality from 1991 to 2015. For empirical analysis, autoregressive distributive lag and fourier frequency domain causality models are employed to test the long-medium and short-run association between the selected variables. Fully modified ordinary least squares and canonical cointegration regression estimations are also applied for robustness. The empirics of this study reveal that economic growth deteriorates the environmental quality in the long and short run. However, technological innovation, clean energy consumption, and women's empowerment help improve environmental quality in the long and short run. In addition, the robust analysis also authenticates the long-run outcomes of the study. This study suggests policy recommendations aimed at a sustainable future by establishing strong regulatory policy instruments, enforcing environmental laws, promoting energy-efficient technologies in industries and households, implementing women's employment protection policies, and strong regulatory policy instruments to achieve emission reduction in the global perspective.

Russia-Ukraine war impacts on climate initiatives and sustainable development objectives in top European gas importers.

Russia holds the position of being the third largest global producer of oil and plays a significant role in the supply of oil and gas to Europe. The ongoing war conflict has the potential to impede the bilateral and multilateral relations between Russia and Europe. The ramifications of this event will have notable reverberations for environmental endeavors in Europe. The aforementioned premise forms the basis of our investigation, wherein we scrutinize the correlation among oil price, coal price, gas price, economic growth, and coal consumption, while taking into account the ramifications of the Russian-Ukrainian conflict. We adopted fully "modified ordinary least square (FMOLS), dynamic ordinary least square (DOLS), and canonical cointegration regression (CCR)" econometric techniques to gauge the nexus between factors of interest in the top 4 European Russian gas importer economies (Poland, Netherland, Hungry, and Germany). The empirical outcomes reveal substantial negative impact of economic growth and coal price elasticity on the coal consumption. On the contrary, oil and gas price elasticities depict significant positive influence on the coal consumption. Hence, this study concludes that a rise in oil and gas prices leads to an increase in coal consumption, which in turn negatively impacts environmental quality. Furthermore, the occurrence of war has the potential to impede the utilization of coal resources in Netherlands and Hungary. On the other hand, the impact of war is noteworthy and constructive in Poland and Germany. Thus, war results ecological imbalance in Poland and Germany in particular. Governments, decision-makers, stakeholders, and environmentalists must develop a long-term plan that calls for a paradigm shift away from gas, oil, and coal usage and toward more environmentally benign renewable energy sources.

The Driving Factors of Italy’s CO2 Emissions Based on the STIRPAT Model: ARDL, FMOLS, DOLS, and CCR Approaches

As the sustainability of the environment is a very much concerning issue for developed countries, the drive of the paper is to reveal the effects of nuclear, environment-friendly, and non-friendly energy, population, and GDP on CO2 emission for Italy, a developed country. Using the extended Stochastic Regression on Population, Affluence, and Technology (STIRPAT) framework, the yearly data from 1972 to 2021 are analyzed in this paper through an Autoregressive Distributed Lag (ARDL) framework. The reliability of the study is also examined by employing Fully Modified Ordinary Least Square (FMOLS), Dynamic Ordinary Least Square (DOLS), and Canonical Cointegration Regression (CCR) estimators and also the Granger causality method which is used to see the directional relationship among the indicators. The investigation confirms the findings of previous studies by showing that in the longer period, rising Italian GDP and non-green energy by 1% can lead to higher CO2 emissions by 8.08% and 1.505%, respectively, while rising alternative and nuclear energy by 1% can lead to falling in CO2 emission by 0.624%. Although population and green energy adversely influence the upsurge of CO2, they seem insignificant. Robustness tests confirm these longer-period impacts. This analysis may be helpful in planning and developing strategies for future financial funding in the energy sector in Italy, which is essential if the country is to achieve its goals of sustainable development.

The price and income elasticities of natural gas demand in Azerbaijan: Is there room to export more?

Natural gas is frequently introduced as a “transitional fuel”. Because burning natural gas emits less carbon dioxide emissions than burning either oil or coal. Additionally, the intermittent nature of low-carbon electricity generation creates imperative for using natural gas for power generation. The role of natural gas is currently under scrutiny as climate change transforms into a climate crisis. Meanwhile, share of natural gas in the primary energy consumption of Azerbaijan is 69%, while 94% of the country’s electricity is currently being generated in natural gas-fired power plants. In this manner, this paper estimates income and price elasticities of natural gas demand for the Azerbaijan case. In this study, various sets of estimation techniques are utilized. By modeling natural gas demand with different estimation methods, including Autoregressive Distributed Lagged Structural Time Series Modeling, Dynamic Ordinary Least Squares Method, Fully Modified Ordinary Least Squares, Canonical Cointegrating Regression, and General to Specific under Autometrics multi-path search machine learning algorithm, we try to find if there is room for the country to export more. All these utilized estimation methods confirmed the long-run income elasticity to be around 0.8, while the long-run price elasticity is around −0.1. Both estimations provide insights in terms of energy security and electricity security for policymakers during the implementation process of climate, energy, and environmental policy. Findings of this study classify natural as a necessity and normal good for the Azerbaijan case. The main policy implication of this study is that policymakers must enable and facilitate the availability of close renewable substitutes for residential and commercial customers. Estimated elasticities suggest that with rising national income, demand for natural gas will keep increasing, and efficient consumption will not be attainable with increasing prices. In the pursuit of export potential, findings suggest that it is more relevant to free up natural gas allocated from power generation by substituting it with renewable energy sources.

Powering environmental sustainability through renewable energy and natural resources: a Dynamic ARDL simulation approach.

The objective of this study is to examine the role of renewable energy consumption and natural resource rents along with control variables of globalization and economic growth on the environmental sustainability of Jordanian economy from 1985 to 2019. These variables have been selected based on theory and empirical literature. We apply a Dynamic Autoregressive Distributed Lag (D-ARDL) technique along with robustness checks of Fully modified OLS (FMOLS), Dynamic OLS (DOLS), and Canonical Cointegrating Regression (CCR) techniques in order to achieve the above goal. The result from the analysis confirms that the environmental Kuznets curve (EKC) is not valid for the Jordan in either long or short term. Our estimation results also confirm the highly significant and negative impact of renewable energy on CO2 emissions in both the long and short term. However, both natural resource rents and globalization are significant and positive in the long run, implying that these variables are detrimental to the environmental quality. The interaction analysis presents detrimental effect of globalization in terms of renewable energy while it shows beneficial effect of globalization in terms of natural resource for environmental quality. The frequency domain causality result shows causality at different frequencies across the variables. Based on the results, several policy directions are provided in order to achieve environmental sustainability in Jordan.

Are Cryptocurrencies Really a Threat to the Financial Stability and Economic Growth? Evidence From the Cointegration Approach

The main purpose of this paper is to investigate whether the cryptocurrency market affects financial stability and economic growth of India. The study used quarterly data on bitcoin, financial stability, inflation rate, real GDP, economic volatility uncertainty, exchange rate, and market volatility index for the period 2015Q1-2021Q4. The robustness of the findings was confirmed by the fully modified OLS (FMOLS) and canonical cointegration regression (CCR). The study results demonstrated that an increase in cryptocurrency investments will affect the financial stability of India significantly. Each 1% increase in the cryptocurrency would reduce the financial stability by 5% approximately. However, there was a marginal effect of cryptocurrency on economic growth. The results also found that exchange rate volatility and inflationary pressure would also deteriorate the financial stability of the country. Furthermore, the results also identified positive and significant cointegration between economic growth and financial stability. Due to most transactions in the economy being done through the financial system, it is paramount for economic growth. Going forward, aggressive monetary policy tightening, volatility in capital flows and exchange rates, deanchoring of inflation expectations, faltering in the economic recovery, disruptions due to global supply chains and climate change will be the major risks to the financial stability and economic growth of India.

Corruption: Governance challenge towards reducing unemployment in Nigeria

The study examines the possibility of having a very low rate of unemployment in Nigeria, if there is a reduced rate of corruption in the long‐term. While using cointegration regressions and Vector Error Correction Mechanism (VECM) over the period 1996–2020, it is affirmed that corruption could increase unemployment rate in the long run. The two corruption indicators employed (control of corruption and corruption index) are found to have a substantial effect on unemployment rate. Further evidence confirms that corruption and unemployment are cyclically interdependent. Findings indeed stress that a high level of corruption is harmful to employment growth. On the other hand, in the absence of sufficient job opportunities, rent‐seeking government officials would be more interested in collecting bribes from job seekers, which results in sustained unlawful practices among the public officials. Thus, adopting effective corruption‐control measures is critical. It is therefore suggested that to effectively tackle corruption incidents, there should be incentives for citizens or public officials to report bribery and the process of reporting corruption incidents should be further simplified. Strengthening anti‐corruption agencies and developing a sound legal framework that promotes a culture of lawfulness and impeccable practices in the public sector are central.

Natural Disasters and Economic Growth in Indonesia

Natural disasters can have a profound impact on a country's economic growth, making it crucial for policymakers to understand the relationship between natural disasters and economic growth in order to develop effective strategies that mitigate adverse effects and promote sustainable development. The study utilizes secondary data spanning from 1990 to 2021 and employs the Fully-Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), Canonical Co-Integrating Regression (CCR), and Vector Error Correction Model (VECM) methods. The study's findings provide valuable insights into the substantial effects of natural disasters on economic growth, indicating a positive long-term impact. Furthermore, the analysis highlights a unidirectional causality, illustrating the notable influence of natural disasters on the country's economic performance. Policymakers should prioritize investments in upgrading and retrofitting infrastructure, focusing on key sectors like transportation, energy, water, and telecommunications, to mitigate the adverse effects of natural disasters and promote sustainable economic growth.