Cross-sectionally Augmented Distributed Lag Research Articles

Sustainable Energy Usage for Africa: The Role of Foreign Direct Investment in Green Growth Practices to Mitigate CO2 Emissions

In line with Africa’s commitment to keeping up with the United Nations Framework Convention on Climate Change, achieving a sustainable future requires balancing economic growth with environmental sustainability. This study investigates the long-term impacts of foreign direct investment, economic growth, agricultural production, and energy consumption on CO2 emissions across 43 African nations from 1990 to 2021. Despite significant research on the individual effects of these factors, the combined influence on CO2 emissions remains underexplored. Addressing this gap, this study employs cross-sectional augmented distributed lag estimators (CS-DL and AMG) and updated estimation packages to effectively examine the relationships between variables. Our findings are as follows: firstly, economic growth and energy use was shown to have a significant positive influence on CO2 in the long term. Also, foreign direct investment significantly promotes CO2 emissions. Secondly, the causality test shows a unidirectional causal relationship between CO2 emissions and foreign direct investment. The test also revealed a bidirectional relationship between GDP and CO2 emissions, as well as between energy consumption and CO2 emissions. Again, a bidirectional causation was observed between agricultural production and CO2 emissions. Thirdly, the impulse response analysis shows that GDP will contribute more to emissions over the 10-year forecast period. This study also proposes policy implications to lessen CO2 across the continent and advocates for the judicious adoption of existing policy frameworks like the 2030 Agenda for environmental Sustainability.

The linkages between energy efficiency, renewable electricity, human capital and inclusive growth: The role of technological development

This study highlights the important role of strategic policy interventions in promoting sustainable economic prosperity and social equity in OECD economies. It specifically focuses on the positive effects of technological development, energy efficiency, renewable electricity, and human capital on inclusive growth across 35 OECD economies from 1990 to 2019. We employed cross-sectional augmented distributed lag, fully modified ordinary least squares, and dynamic ordinary least squares to analyze the data. The long-run and short-run estimates show that technological development, energy efficiency, renewable electricity, human capital, and renewable energy consumption have positive effects on inclusive growth. Based on these findings, we propose that the government should provide funds for innovation and technological development, and it improves access to information and services, it increases productivity and efficiency, creates new job opportunities, and promotes inclusive growth. Moreover, the government should promote energy efficiency, which will help in cost savings, job creation, improved access to energy, inclusive growth, and environmental benefits.

Does industrialization promote the emission mitigation agenda of East Africa? a pathway toward environmental sustainability

Africa’s economy continues to be characterized by increasing environmental pollution caused by anthropogenic activities. Despite the implications of environmental pollution in the continent, little attention has been paid to it, although almost all its countries are signatories to the Paris Agreement. One macroeconomic variable that has proven to be a major driver of environmental pollution in the region is industrialization. However, despite the numerous explorations on the connection between industrialization and environmental degradation, limited studies have examined the linkage amidst the series in East Africa. This study was, therefore, conducted to help fill that gap. In accomplishing this goal, econometric techniques that control cross-sectional correlations, heterogeneity, and endogeneity, among others, were employed for the analysis. From the results, the panel under consideration was heterogeneous and cross sectionally correlated. In addition, the studied series were first differenced stationary and co-integrated in the long run. The elasticities of the regressors were explored via the cross sectionally augmented autoregressive distributed lag (CS-ARDL) estimator, the cross sectionally augmented distributed lag (CS-DL) estimator, and the augmented mean group (AMG) estimator. According to the results, industrialization led to a reduction in the environmental quality in the region through high CO2 emissions. In addition, financial development, foreign direct investments, urbanization, and energy consumption were not environmentally friendly in the bloc. On the causal linkages amid the series, bidirectional causalities between industrialization and CO2 emissions, energy consumption and CO2 emissions, and foreign direct investments and CO2 emissions were detected. Finally, one-way causal movements from financial development and urbanization to CO2 emissions were unraveled. These findings are useful in helping stimulate the emission mitigation agenda of the region. Based on the findings, the study recommended, among others, that national policies that can promote energy conservation at the industrial level and can convert the industrial structure of the region to a low carbon-intensive one should be formulated.

Assessing the roles of green innovations and renewables in environmental sustainability of resource‐rich Sub‐Saharan African states: A financial development perspective

AbstractEnvironmental literature keeps expanding on the natural resources‐environmental sustainability conundrum. However, most studies examine this conundrum in different geographical locations other than resource‐rich Sub‐Saharan African (SSA) countries while also neglecting the criticality of issues like green innovations, financial development, and renewable energy. Besides, the likelihood of a nonlinear relationship has often been jettisoned in the framework. Thus, the resources‐sustainability nexus was examined in the SSA using robust econometric techniques, while underscoring the roles of green innovations, renewable energy, and financial development. Using the cross‐sectional augmented auto‐regressive distributed lag (CS‐ARDL), cross‐sectional augmented distributed lag (CS‐DL), and the common correlated effect mean group (CCEMG) approaches that conciliate with residual cross‐sectional dependence and heterogeneity amongst others, we discovered that (i) the natural resources‐sustainability nexus is nonlinear in SSA. (ii) unlike the environmental gains from green innovations and renewables in the SSA, natural resource harms their environmental sustainability (iii) the interaction between financial development and natural resources worsened the ecosystem of the countries (iv) the interaction between natural resources and the duo of green innovations and renewable energy enhances SSA's ecological quality (v) urbanization damage environmental sustainability by spurring ecological footprints. Furthermore, one‐way causality paths were observed from the trio of natural resources, financial development, and green innovations to ecological footprints. But renewable energy and urbanization had a feedback causal relationship with ecological footprints. The findings are robust to CO2 emissions as an alternative environmental quality measure. Policy implications to foster SDGs‐related pollution mitigation agenda were thereafter extensively discussed for the SSA.

Impact of regional trade integration and energy transition on natural resources footprints in Asian Countries

With the right policies and investments, regional trade integration and energy transition can offer a unique opportunity for economic development and environmental sustainability in Asian countries. Therefore, exploring the determinants of resource sustainability from unique perspectives is crucial. Hence, this study explores the role of regional trade integration, energy transition, and financial development on trade-adjusted resource footprints in selected Asian countries from 1990 to 2021 using Cross-Sectional Augmented Distributed Lag (CS-ARDL) estimation strategy. The preliminary findings expose that cross-sections are heterogenous and the variables are cointegrated. The long-run estimates reveal that improvement in regional trade integration (across borders), and renewable energy transition reduce resource footprints. At the same time, economic growth, financial development, and industrialization contribute to higher resource consumption in the region. These findings are consistent across alternative estimators and recommend relevant policies.

Green growth: Intellectual property conflicts and prospects in the extraction of natural resources for sustainable development

Considering the global issues of resource depletion and climate change, the need for sustainable development is more significant than ever. This study focuses on China and examines the complex dynamics of green growth and natural resource exploitation through the prism of intellectual property conflicts and prospects to strike a balance between sustainable development and economic growth from 2000 to 2020. Advanced econometric techniques are essential to this research, such as the Cross-sectional Augmented Dickey-Fuller (CADF) test, the Cross-sectional Im, Pesaran, and Shin (CIPS) test, and the Cross-sectionally Augmented Distributed Lag (CS-ARDL) model. The study clarifies how important it is for intellectual property rights to spur innovation in environmentally friendly resource extraction techniques. It also evaluates the impact of taxes on the energy sector on China's energy transition rate, weighing the need for economic growth against environmental protection. This study thoroughly explains the opportunities and challenges related to intellectual property in green growth. It also offers important insights and strategies for academics, industry stakeholders, and policymakers who navigate the intricate landscape of sustainable resource exploitation.

Influence of fiscal decentralization, fintech, and mineral resources on green productivity of G5 countries

The study explores how regional financial autonomy, financial technologies, and resource management strategies intersect to influence sustainable practices and environmental efficiency in G5 economies. The yearly data from 1990 to 2021 has been taken for Canada, Japan, Germany, the United Kingdom, and the United States of America. Empirical analysis of the Cross-sectional Augmented Distributed Lag (CS-ARDL) modeling framework has been performed after a preliminary investigation regarding the variables' cross-sectional dependence, slope heterogeneity, and unit root properties. The outcomes of long-run estimation reveal the positive impact of fintech and revenue decentralization, while mineral resources and expenditure decentralization negatively influence green productivity. Similar results are observed in the short-run; however, their marginal effects are relatively lower. Moreover, the error correction term is negative and significant, indicating an 81.4% speed of adjustment annually to restore the obtained model's equilibrium system. These estimates are validated by the Augmented Mean Group (AMG) and Common Correlated Effect Mean Group (CCEMG) estimators. A bi-directional causality of fintech and revenue decentralization is observed, which offers valuable policy implications.

Dynamic Common Correlated Effects of Geopolitical Risk on International Tourism Arrivals

Abstract Research background Geopolitical risk is currently recognized as a worldwide concern that significantly affects various economic sectors. As a consequence, rising geopolitical risks can cause a decline in the number of tourist arrivals. Purpose The aim of this paper is to examine the applicability of a commonly used dynamic model, the autoregressive distributed lag model (ARDL), in a panel data context and the effect of geopolitical risk on explaining tourist demand in chosen countries across long and short time periods. Research methodology On 18 developing economies, the Cross-sectionally Augmented Distributed Lag (CS-ARDL) technique is used. Results The results of the test show interesting insights. Although the consequences of geopolitical threats in the short term are significant and have a negative impact on tourist arrivals, in the long term, results show there is no effect. Specifically, a rise in geopolitical risk decreases foreign visitor visits in the short term but has no lasting impact. Novelty Using an econometric model, this study contributes to the limited research on the link between geopolitical risk and tourist arrivals.

Governance and modern renewable energy consumption in the East African Community (EAC): a dynamic panel CS-ARDL approach

PurposeThis study aims to examine the effect of governance on the consumption of modern renewable energy in the East African Community (EAC), controlling for economic growth, trade openness and foreign direct investment (FDI).Design/methodology/approachThe study relied on secondary data sourced from the World Development Indicators, World Governance Indicators and the International Energy Agency (IEA) for the EAC from 1996 to 2019. A panel Cross-Sectional Augmented Distributed Lag (CS-ARDL) model and second-generation panel data models were employed in the analysis.FindingsThe findings indicate that poor governance and inadequate FDI are significantly responsible for the low level of modern renewable energy consumption (MREC) in the EAC. On the other hand, trade openness significantly enhances MREC, while GDP per capita has no significant effect on MREC.Originality/valueThe consumption of modern renewable energy sources (excluding the traditional use of biomass) and its determinants, as most studies focus on renewable energy consumption as a whole. The study also employed the panel CS-ARDL model and second-generation panel data models.

Environmental regulation, renewable electricity, industrialization, economic complexity, technological innovation, and sustainable environment: testing the N-shaped EKC hypothesis for the G-10 economies.

This study examines the validity of the environmental Kuznets curve (EKC) hypothesis and the role of environmental regulation, renewable electricity, industrialization, economic complexity, and technological innovation in sustainable environment for the G-10 economies, namely, Belgium, Canada, Germany, Italy, Japan, Netherlands, Sweden, Switzerland, the United Kingdom, and the USA, from 1994 to 2020. We employed CS-ARDL (cross-sectional augmented distributed lag (CS-ARDL), FMOLS (fully modified ordinary least squares), and DOLS (dynamic ordinary least squares) for the analysis of the data. The estimates confirm the N-shaped EKC hypothesis between the GDP and CO2 emission. Moreover, the long-run estimates exhibit that environmental tax, renewable electricity, economic complexity, and technological innovation have negative effect on CO2 emission, while GDP, industrialization and arable land have positive effect on CO2 emission. Based on these findings, we propose that governments must implement large-scale government plans and initiatives to encourage the development of environmentally friendly technologies and ideas based on renewable energy. Moreover, further growing renewable energy, environmental policies like a carbon tax, investments in green technologies, subsidies, and rewards for renewable energy infrastructure investment should be taken into account.

Role of economic complexity and technological innovation for ecological footprint in newly industrialized countries: Does geothermal energy consumption matter?

This research evaluates how energy (geothermal and coal), economic complexity, and technological innovation impact the ecological footprint in newly industrialized countries (NICs), considering the period 1990–2018. The authors employed economic complexity, technological innovation, and ecological footprint as significant considerations instead of standard environmental and economic parameters. The study used cross-sectional augmented distributed lag (CS-ARDL) and the pairwise Dumitrescu-Hurlin (DH) panel causality to consider the dynamic character of the correlation between the Environment and economic activities. The outcomes of the CS-ARDL showed that economic growth and coal energy intensify ecological footprint in both the long and short run. However, CS-ARDL results revealed that geothermal energy consumption, economic complexity, and technological innovation lessen the ecological footprint in NICs in the long and short run. Finally, the DH causality results revealed a unidirectional causality from geothermal, technological innovation, economic complexity, and coal energy use to ecological footprint. This demonstrates that all the exogenous variables have a predicted power on the ecological footprints in NICs. Based on these findings, policy measures to diversify products have the potential to tackle ecological problems.

Wind energy, industrial-economic development and CO2 emissions nexus: Do droughts matter?

This study empirically explored the nexus of wind energy (with regards to the effect of the drought), industrial-economic development, and emitted CO2 in 41 World's top countries in wind energy consumption from 1997 to 2018. Cross-sectional augmented distributed lag estimators (CS-DL, CS-ARDL, CCE-P) and newly updated estimation packages to effectively assess the relationships between variables. Our results are the following: First, severe droughts were not a significant matter in wind energy, and consuming wind energy reasonably contributes to reducing emitted CO2, while industrial and economic development positively promotes CO2 emissions in sampled countries. Second, industrial development significantly promotes economic growth, while wind energy use has an insignificant positive effect on economic growth. Moreover, wind energy negatively affects industrial development. Third, two-way directional causal relationships were noted between CO2 and other covariates, this hypothesis was also noted between industrial development and economic growth and wind energy use. We, therefore, suggested policy implications to reduce CO2 across the globe and country-specific and consider the positive effect of wind energy on growth.

Environmental quality and energy transition prospects for G-7 economies: The prominence of environment-related ICT innovations, financial and human development

Energy transition and reducing greenhouse gas emissions are fundamental to achieving sustainable development and ensuring a bright and healthy future. To contribute to the empirical literature on these objectives, this study explores the long-term influence of environment-related ICT innovations (EICT) on energy transition and greenhouse gas emissions (GHGE) in G-7 economies for the first time, while considering financial development (FD) and human development (HD). Additionally, the study investigates the moderating role of FD with EICT and HD in energy transition and GHGE. Using a Cross-Sectional Augmented Distributed Lag (CS-ARDL) technique to tackle the issues of cross-sectional dependency and slope heterogeneity, the study evaluated data from 1990 to 2020. The results indicate that EICT, FD, and HD have a significant positive effect on long-term energy transition, and mitigate GHGE in G-7 economies. Furthermore, the influence of EICT and HD on energy transition and GHGE is amplified in the presence of financial development, as evidenced by the moderating effect of FD. Based on these facts, the study suggests various policy measures, such as investing in clean technologies and education, to promote the energy transition and environmental quality in G-7 economies to achieve sustainable development goals.

Role of renewable energy investment and geopolitical risk in green finance development: Empirical evidence from BRICS countries

Global efforts are being made to achieve ecological sustainability while reducing the consequences of environmental degradation. We used panel data from Brazil, Russia, India, China, and South Africa (BRICS countries), spanning 2000 to 2020, to examine the interactions between economic growth, green financing, green credit, renewable energy investment, geopolitical risk (GPR), and environmental sustainability. To explore the short- and long-term connections between the series, we used the cross-sectional augmented distributed lag (CS-ARDL) econometric method. We found that increasing green financing, renewable energy investment, and energy innovation by 0.05% reduced environmental pollution. Moreover, GPR shocks have long-term beneficial effects on green finance development. We also found that the adoption of renewable energy in BRICS countries is significantly and favourably impacted by GPR. This study is groundbreaking because it is the first to examine the interplay between green financing, geopolitical risk, and environmental tax nexus in renewable energy investments, all of which play critical roles in achieving ecological sustainability and yield valuable insights for policymakers working towards the realization of sustainable development goals.

Revisiting the energy-growth-environment nexus in the OECD countries: An application of the CS-ARDL approach

Abstract Background This study revisits the energy-growth-environment nexus in the member countries of the Organization for Economic Cooperation and Development (OECD) by examining the role of trade openness, financial development, and urbanization. The cross-sectional augmented distributed lag (CS-ARDL) approach is employed to address the presence of slope homoskedasticity and cross-sectional dependence in the data set. Results Our empirical findings fail to confirm the validity of the environmental Kuznets curve (EKC) hypothesis for emissions of carbon dioxide (CO2) during the period researched. CO2 emissions have bidirectional causality with income, the share of renewable energy, and the share of nonrenewable energy. Trade openness, financial development, and urbanization play different roles in the energy-growth-environment nexus. Whereas trade openness increases CO2 emissions, financial development reduces consumption of renewable energy. Urbanization plays a limited role in this nexus. Conclusions These findings lead to some policy implications. The close relationship between economic growth, CO2 emissions, and energy consumption is highlighted, which suggests that a policy targeting one component needs to consider the impacts on the other components.

Economic, social, and political determinants of environmental sustainability: Panel data evidence from NEXT eleven economies

This paper aims to investigate the impact of social, economic, and political variables on per capita ecological footprint consumption in the NEXT Eleven economies over the period 1984- 2018. The study utilized the dynamic heterogeneous panel estimators of Cross-Sectionally Augmented Auto-regressive Distributive Lag (CS-ARDL) along with the estimator with a multifactor error structure. The study also estimated the cross-Sectionally augmented distributed lag (CS-DL) model while for robustness check the augmented mean group (AMG) and cross-Sectionally augmented error correction method (CS-ECM) is also considered. The study finding maintains that the impact of GDP per capita, multifaceted phenomena of financial development, and military expenditure is positive and significant suggesting that a unit increase in these variables deteriorates the environment in the NEXT Eleven economies. In contrast, higher life expectancy and government stability improve the environment in the long run. The findings of the study suggest that eco-friendly technologies to be used in the production process, as well as projects using outdated technologies, should be discouraged along with the assurance of government stability and reduction of military expenditure in the NEXT Eleven economies.

The Impact of Climate Change on Economic Growth in Africa: An Econometric Analysis

African economics are characterized by strong economic dependency on sectors highly vulnerable to climate change that may make it more susceptible to climate change. This study aims to investigate the effect of climate change on both short and long-run economic growth in Africa using a panel of 34 selected African countries for the period of 1971–2019. The study relies on a dynamic panel model with a multifactor error structure; we estimate the model through the cross-sectionally augmented autoregressive distributed lag (CS-ARDL) and the cross-sectionally augmented distributed lag (CS-DL) approaches. We find clear evidence that climate change is negatively associated with economic growth in both the short and long-run. We establish that a rise in the mean temperature change with one degree would significantly reduce the real GDP per capita in Africa by 1.68% (2.45%) in the short-run (long-run), respectively

The investment volatility-dampening role of foreign aid in poor sub-Saharan African countries

Sustained investment is required for economic growth. Investment however often experiences severe volatility in poor countries, making spending plans difficult to formulate, and diminishing growth potentials. Foreign aid serves as an important source of complementary financing for sustained investment. This paper thus studies the effect of aid inflows on total investment volatility in 19 heavily indebted poor sub-Saharan African countries over the period 1980–2018. Employing the cross-sectionally augmented distributed lag (CS-DL) estimation technique for long-run coefficients in dynamic heterogeneous panels with cross-sectional dependence along with bootstrap panel causality testing, we show that aid has an inverse relationship with investment volatility. We thus conclude that aid can be viewed as a dampening factor for investment volatility in poor countries. We also show that the ability of sudden reductions in aid inflows to trigger investment volatility is bigger than the ability of sudden increases in aid inflows to lower investment volatility.

Financial development and environmental sustainability in West Africa: evidence from heterogeneous and cross-sectionally correlated models.

Although West African nations are flourishing economically of late, they still have environmental issues due to the high rate of emissions in the bloc. Despite the worsening environmental condition, there have been limited studies on the causal agents of this situation in the region. Therefore, drawing strength from the United Nations' Sustainable Development Goals (SDGs) and their targeted impacts of 2030, this study explored the nexus between financial development and environmental sustainability in West Africa (WA) for the period 1990 to 2016. The cross-sectional autoregressive distributed lag (CS-ARDL) estimator alongside the cross-sectionally augmented distributed lag (CS-DL) and the cross-sectional augmented error correction (CAEC) estimators were engaged to examine the elastic effects of the explanatory variables on the explained variable and from the results, financial development was harmful to environmental sustainability in WA through high carbon emissions. Also, control variables foreign direct investments, energy consumption, industrialization, and population growth were detrimental to the sustainability of the environment. On the causal connections amid the series, a unidirectional causality from financial development and population growth to carbon emissions was uncovered. Also, feedback causalities between foreign direct investments and carbon emissions, between energy consumption and the effluents of carbon, and between industrialization and environmental pollution were unraveled. Based on the findings, the study recommended among others that the countries should integrate environmental welfare objectives into their financial development policies. Also, the nations should ensure that their citizens have access to energy that is affordable, reliable, sustainable, and modern (SDG 7). Finally, improvement in energy efficiency, sustainable infrastructure, and good use of resources (SDG 12) should be promoted by the nations. The above recommendations if seriously taken into consideration will help the region to combat climate change and its impacts, which is the focus of SDG 13. The main flaw of this exploration was the lack of data for some specific time periods. Therefore, in future when such data become available, similar investigations could be carried out to confirm the robustness of the study's results.

The dynamic role of institutional quality, renewable and non-renewable energy on the ecological footprint of OECD countries: do institutions and renewables function as leverage points for environmental sustainability?

This article examines for the first time the impact of disaggregated energy sources and institutional quality on the ecological footprint (EF) of 29 OECD countries, by explaining how the diversification in countries' energy mix and their institutional performance are associated with sustainable environmental performance. We use panel data from 1984 to 2016 and we apply second-generation techniques to arrange the critical issues of cross-sectional dependence and heterogeneity. The applied cointegration tests expose a long-run equilibrium relationship that associates renewable/non-renewable energy consumption, economic growth, institutional quality, and the EF of OECD countries. The robust cross-sectional augmented distributed lag (CS-DL) estimator shows that economic growth and the adoption of non-renewable energies are detrimental to the environment, while the operational quality of institutions adds to ecological sustainability. Concurrently, the negative effect of renewables on EF does not seem to cause a significant beneficial impact on the environment. Moreover, there is evidence that non-renewable energy and institutional quality have a bidirectional causal association with EF. Also, a weak unidirectional causal effect is running from the EF to renewables consumption. The study further demonstrates the inefficient integration of renewable energy forms in OECD countries and the concomitant essential role of institutions on environmental sustainability by providing relevant policy orientations.