Driscoll-Kraay Standard Errors Research Articles

Prospect of trade and innovation in renewable energy deployment: A comparative analysis between BRICS and MINT Countries

The current study explores the impact of technological innovation and trade openness on clean energy while accounting for economic growth, access to electricity, pollution, industrial restructuring, and urbanization using data from 1990 to 2020 for both the MINT and BRICS economies. A series of tests were performed for a robust analysis using second generation econometrics approaches before proceeding to investigate the long-run linkages between renewable energy and the duo of innovation and trade using the Prais-Winsten regression model with panel-corrected standard errors (PCSE). The Driscoll-Kraay standard errors test was applied for robustness checks. The results, firstly confirm the presence of heterogeneity, cross-sectional dependence, and cointegration among the selected variables. Secondly, technological innovation as a renewable energy determinant demonstrated negative elasticities in both BRICS countries and the full sample, but a positive elasticity in the MINT countries. Thirdly, concerning trade liberalisation, negative elasticities were obtained for the full sample and MINT countries, while the elasticities were positive for the BRICS bloc. Fourthly, the roles of economic growth and environmental pollution reveal a negative impact on renewable energy consumption for all samples while urbanisation and industrial restructuring promote renewable energy developments only in the BRICS bloc. Policy implications are discussed.

Demystifying circular economy and inclusive green growth for promoting energy transition and carbon neutrality in Europe

This paper examines the role of the circular economy and inclusive green growth in promoting energy transition and carbon neutrality for several European countries during 2009–2021, using an advanced econometric strategy. To achieve this objective, we employed a three-pronged empirical strategy. The first strategy involved standard panel specifications, such as pooled ordinary least squares, Fixed Effects, Roger panel regression, white panel regression, and Driscoll–Kraay standard errors. The second strategy explored the long- and short-term dynamics of the relationships using the dynamic specifications of the Generalised Method of Moments, comprising the augmented Arellano–Bond, Ahn–Schmidt, Arellano–Bond, and Arellano–Bover/Blundell–Bond estimators. It further controls for endoegeneity using the Two stages Lease Square (2SLS and Lewbel 2SLS). The third strategy employed the Machado and Silva quantiles via moments to re-evaluate the heterogeneity drivers of carbon neutrality. Furthermore, an alternative and complementary strategy based on the statistical procedures of Hausman–Taylor and Feasible Generalized Least Squares was employed to verify robustness. The findings suggest that prior carbon emissions positively predict future emissions. Also, our results reveal that the adoption of a circular economy, including green growth and renewable energy, can significantly contribute to reducing carbon emissions. In contrast, domestic economic drivers, and eco-innovation increase carbon emissions. We propose that policymakers mandate producers to oversee the entirety of their product life cycles as a means to mitigate carbon emissions. Furthermore, endorsing training programs and educational initiatives aimed at cultivating the requisite skills for the energy transition and the adoption of circular economy practices is imperative for ensuring the realization of a successful low-carbon economy.

The International Capital Flows and Domestic Savings–domestic Investment Nexus: A Comparative Evidence Between Heterogeneous Developing Regions

Drawing inspiration from Feldstein and Horioka’s (1980) (FH) puzzle, our study elucidates the impact of remittances and Foreign Direct Investment (FDI) on domestic savings and investment in two disparate yet globalized developing regions: Latin America and the Caribbean and South Asia. Utilizing an extensive dataset spanning from 1984 to 2021 and employing diverse methodologies, including Dynamic System generalized method of moment, Driscoll–Kraay standard error, fully modified ordinary least squares, and dynamic ordinary least squares, our findings reveal that remittances exert a positive influence on both domestic investment and savings across both regions. However, South Asia predominantly directs remittance inflows towards investment, while Latin America and the Caribbean exhibit a propensity towards saving these funds. As for FDI, the primary developing region predominantly channels these funds into investment, whereas the lower region prioritizes savings. The impact of control variables manifests varied effects across both regions. Ultimately, our study underscores the pivotal role of foreign remittances in supporting investment and savings, underscoring the profound influence of economic growth on these dynamics. This accentuates the imperative for governments to proactively allocate financial resources to optimize economic growth and fortify financial frameworks. Moreover, focused strategies are indispensable for adeptly managing foreign inflows while navigating external shocks such as international repayments, external debt, and aid. Additionally, enhancements in monetary and fiscal policies are imperative to sustain competitive interest rates and foster stable macroeconomic conditions, thereby fostering conducive environments for both public and private domestic savings. JEL Classification: F24; F3; P33; C23; O18

The Relationship Between Economic Development, Banking Sector Performance and Financial Globalization: Evidence from OECD Countries

The aim of this study is to examine the relationship between the economic development of the 11 OECD countries selected in the period 1990-2018, banking sector performance and financial globalization by integrating investments and trade openness as explanatory variables. The cointegration between variables is investigated by Pedroni, Kao and Westerlund tests and the long-term coefficients are determined by Driscoll-Kraay standard errors forecasters. Finally, the causality relationship between variables is tested in the Dumitrescu-Hurlin panel bootstrap approach. Empirical findings indicate the existence of cointegration between variables. The banking sector performance, financial globalization and investments have a statistically significant positive effect on economic development, while the trade openness has a meaninglessly positive effect. They also indicate a two-way causality between the economic development and banking sector performance and investments, and a one-way causality running from trade openness to economic development. Therefore, the findings make political recommendations for both policymakers and future studies.

Economic globalisation and Africa's quest for greener and more inclusive growth: The missing link

This study examines the contingency and threshold effects of economic freedom in the economic globalisation (EG) and inclusive green growth (IGG) relationship. To this end, we apply the fixed-effects generalized method of moments with Driscoll-Kraay standard errors estimator to macro data for the period 2008–2020 for 22 selected African countries. The following findings are established. First, we find that economic freedom reduces the negative effect of EG on IGG. Second, when we disaggregate EG into financial and trade globalisation, we show that the moderating effect of economic freedom on the former is rather striking. Third, our threshold analysis suggests that by improving Africa's unfree economic architecture to 60% (moderately free), the IGG-deteriorating marginal effects of EG are significantly mitigated (but not nullified). We conclude that unless an effort is made to improve economic freedom in Africa, the envisaged IGG gains of economic globalisation might prove elusive.

Investigating the environmental Kuznets curve hypothesis with urbanization, industrialization, and service sector for six South Asian Countries: Fresh evidence from Driscoll Kraay standard error

South Asia is the most polluted region in the world and is struggling to deal with the effects of growing CO2 emissions and the ecological impact it has left. The region needs to identify the variables that are most effective in reducing pollution in order to achieve long-term sustainable growth. The current study aims to investigate the environmental impacts of the current and projected urbanization rate, the service sector, and the availability of natural resources to test the environmental Kuznets-curve (EKC) theory in six South Asian countries (SAARC). With cross-sectional dependence present, this research examines panel data from 1972 to 2021 using the newly developed Driscoll Kraay Standard Error (DKSE) approach. To check the robustness of DKSE estimation, the study employs a novel Cross Sectional Autoregressive Distributive Lag (CS-ARDL) method. The results of DKSE show that GDP significantly minimizes CO2 emissions in both the short and long run. At the same time, GDP2, urbanization, and the service sector increase CO2 emissions in the South Asian region. The DKSE estimator also shows that industrialization and abundant natural resources have insignificant impacts on CO2 emissions. Inconsistent with the EKC hypothesis, the findings show that higher economic growth leads to increased environmental pollution and CO2 levels. Meanwhile, the CS-ARDL analysis found that GDP and industrialization reduce CO2 emissions, while urbanization, GDP2, and natural resource availability increase CO2 emissions. This research emphasizes the need for establishing appropriate industrialization and urbanization strategies and promoting cleaner energy adoption to reduce CO2 emissions.

Does energy transition reduce carbon inequality? A global analysis.

Energy transition from fossil fuels to renewables is instrumental in mitigating climate change. Low-income countries have a higher share of renewable energy in their total energy consumption than rich countries (WDI, 2023). Thus, it is imperative to examine the role of energy transition in affecting relative CO2 emissions between rich and poor sections of the societies across income groups of the countries. In this context, our study contributes by constructing the carbon inequality models with renewable and non-renewable energy consumption as prime explanatory variables separately for 114 countries over a data period 1990-2019. The models are estimated individually for high-middle-low-income countries by controlling for foreign direct investment (FDI), economic growth, and innovations. Starting with preliminary econometric operations, we employ the dynamic simulated panel autoregressive distributed lag approach and Driscoll-Kraay standard error regression for empirical investigation. We find that energy transition reduces carbon inequality globally. Innovation has a negative impact, economic growth has a positive impact on carbon inequality, and FDI has an asymmetric impact based on the income level of the countries. The crucial global policy implications are discussed.

Solar Energy Production and Economic Growth: An Analysis for EU Countries

Producing and consuming solar energy as a clean energy resource in economies has gained importance. The importance of solar energy is based on reducing costs due to technological developments. Responsive to whether the contribution of investing in solar energy to reach proclaimed new development strategies in the EU Green Deal has been one of the critical indicators for policymakers nowadays. In this context, this paper analysed the impacts of solar energy production on the economic growth of EU member countries. After the analysis, using a two-way fixed effects model and Driscoll-Kraay standard errors 2018-2021, solar energy production’s positive and statistically significant effects on economic growth were found.

The Impact of Financial Development on Renewable Energy Consumption: The Case of Vietnam and Other ASEAN Members

The purpose of this study was to evaluate the impact of financial development and renewable energy consumption in Vietnam and some selected countries in Southeast Asia. After researching over the period from 1970 to 2022, using quantitative analyses, including the ordinary least squares (OLS), fixed effects method (FEM), and random effects method (REM), and measuring the Driscoll–Kraay standard errors to assess cross-dependence between countries as well as a Dynamic Ordinary Least Squares (DOLS) estimation analysis to evaluate the robustness of the research, the research results confirm that financial development has a negative impact on renewable energy consumption, which reflects the important role of fossil energy sources in meeting energy consumption demand. Similarly, increased per capita income negatively affects renewable energy consumption. This study also confirms the positive impact of foreign direct investment on renewable energy use.

Cash holding, economic uncertainty and investment: Evidence from ASEAN countries

This research observes the effect of uncertainty on corporate cash holding. Uncertainty drives up asymmetric information problems, increasing companies' external capital costs. As a result, companies prefer to accumulate cash to protect their investment capabilities in the future. The study uses a sample of non-financial public companies in six ASEAN countries, such as Malaysia, the Philippines, Thailand, Singapore, Indonesia, and Vietnam, from 2008 to 2021. The study uses a total of 34,359 firm-year observations. The research method employs a fixed-effect panel data model with Driscoll-Kraay standard errors. The findings of this study indicate that economic uncertainty can cause companies to accumulate their cash holdings. Furthermore, cash holding can reduce the impact of economic uncertainty on decreasing corporate investment decisions. This research contributes to the literature by showing the relationship between economic uncertainty, cash holdings, and corporate investment in the context of ASEAN countries.

The effect of geopolitical risk and green technology on load capacity factors in BRICS

This study explores the interaction between geopolitics, natural resources, and load capacity factors (LCF) within BRICS countries. Using fixed effects, random effects, quantile regression, and Driscoll Kraay Standard Error approaches, we found that for every 1% increase in green technology adoption, LCF decreased by 0.14%–0.54%. This effect suggests that green technologies may reduce LCF. Geopolitical risk positively influences LCF, with a 1% increase resulting in a 0.14%–0.48% rise across quantiles, thus enhancing reliability and sustainability. Furthermore, economic growth, renewable energy, and natural resources rents enhance the ratio of biocapacity to ecological footprint.

The role of digital financial inclusion in promoting entrepreneurship in China: A provincial perspective

This study examines the impact of DFI on entrepreneurship in China and across its regions (i.e., rural and urban) using province-level panel data from 2011 to 2019. Digital financial inclusion (DFI) serves as a catalyst for entrepreneurship by giving access to financial services. Entrepreneurs, both in urban centers and rural areas, gain fair and equitable platforms by unlocking opportunities for growth and innovation through the use of technology. We employed fixed effect Driscoll-Kraay standard errors (FE-DKSE) and feasible generalized least squares (FGLS) techniques for empirical analysis. The findings showed that there is an N-shaped relationship between the DFI and entrepreneurship in China and across its regions (i.e., rural and urban). Our estimates are robust and insensitive to the inclusion of other control variables such as economic growth, urbanization and trade openness. Economic growth and trade openness have a positive and significant impact on entrepreneurship, and a negative relationship between urbanization and entrepreneurship. The policy insinuation is that the government needs to actively expedite the growth of DFI and establish a favorable external environment for entrepreneurship. To enhance the attainment of entrepreneurial targets, it is essential to adapt DFI policies according to regions.

Combining the role of urbanization and renewable energy in sustainable development: testing the EKC hypothesis for Africa.

The pressing necessity to curb greenhouse gas emissions due to climate change has sparked significant scientific interest in comprehending the factors behind CO2 emissions, particularly concerning environmental sustainability challenges. Nonetheless, there exists a notable gap in our understanding of how the process of urbanization interacts with the utilization of renewable energy to impact CO2 emissions. This research endeavor seeks to evaluate the complex interplay among urbanization, renewable energy, and CO2 emissions across 46 African nations spanning from 1990 to 2019. To accomplish this objective, a variety of econometric methodologies are employed, including Driscoll-Kraay standard errors, IV-GMM, and method of moments quantile regression (MMQR) panel estimations to address issues like cross-sectional dependencies, endogeneity, heterogeneity, and panel Granger causality examination. The empirical results suggest that urbanization leads to an increase in CO2 emissions, whereas the consumption of renewable energy plays a role in enhancing environmental quality by reducing CO2 emissions. A significant outcome of the study is the revelation that a combination of urbanization and renewable energy leads to a decrease in carbon emissions. Moreover, the Environmental Kuznets Curve (EKC) hypothesis is validated. Lastly, through the Dumitrescu-Hurlin panel causality test, it is uncovered that urbanization and renewable energy consumption exhibit a bidirectional relationship with CO2 emissions. To reduce dependence on fossil fuels and curb CO2 emissions, policymakers should promote renewable energy usage in urban areas.

Demystifying the Role of Governance Quality and Fiscal Space on Nonperforming Loans in Zimbabwe

Demystifying the Role of Governance Quality and Fiscal Space on Nonperforming Loans in Zimbabwe

IFRS adoption and the value-relevance of financial statements figures in Nigeria

Research Question: Has IFRS adoption improved the value-relevance of financial statement figures in Nigeria? Motivation: The informativeness of the reported earnings, book values, and cash flows depends on the accounting standards used in preparing the financial statements. IFRS is a global set of accounting standards that tries to improve the relevance of accounting figures by recommending more realistic measurement and recognition criteria and increasing the level of disclosure of relevant information. Idea: The value relevance of accounting figures in predicting stock prices is widely acknowledged. However, this study tests whether IFRS adoption significantly improves this value-relevance by increasing the degree of correlation between accounting figures and stock prices in Nigeria. Data: The data were collected from the Bloomberg market data terminal and Datastream financial database. A sample of 85 listed companies was selected. The sample period was from 2007 to 2016. Tools: The study applied the Ohlson model (using fixed and random-effect models) along with the Driscoll-Kraay standard errors (DKSE) and Panel-corrected standard errors (PCSE) to anticipate autocorrelation, heteroscedasticity, and cross-sectional dependence biases. The Ohlson model was estimated separately for the pre- and post-IFRS adoption periods to detect changes in value relevance. The interactions of the IFRS dummy with earnings, book values, and cash flows were also estimated separately to detect the significance of IFRS interaction with the accounting figures. Findings: The results showed an overall increase in value-relevance by comparing adjusted R2s across the pre- and post-IFRS adoption period. Also, the interactions of IFRS with earnings, book value, and cash flows were all significant. Contribution: The study contributes to the existing literature by including cash flow in the value-relevance test in Nigeria and by applying estimation techniques that control for possible estimation biases. The authors recommend that investors pay more attention to these accounting figures under the IFRS regime when making investment decisions.

The impact of digital inclusive finance on rural income growth in China: evidence from quantile regression approach

ABSTRACT Based on a panel data set from 2013 to 2021 of Chinese provinces and regions, this research aims to reveal the impact of digital inclusive finance on rural disposable income in China. The linear regression approach with Driscoll-Kraay standard errors and the quantile regression approach are applied in this research. Both approaches show that digital inclusive finance significantly impacts China’s rural income growth. The regression results of China’s east, middle and west area separately imply that the impact of digital inclusive finance in on rural disposable income is higher in the east area and middle area than that in the west area. The quantile regression results show that the impact in the higher quantile is larger than in the lower quantile, which indicates rural high-income groups get more benefits from digital inclusive finance than rural low-income groups. Moreover, this research finds that the development of e-commerce contributes significantly to rural disposable income growth. The empirical results of this research indicate that the establishment of digital inclusive finance in the west backward area still need to be improved to increase the access of digital inclusive finance for rural low-income groups.

A comparative study on the moderating impact of renewable energy and innovation on environmental quality

AbstractThis study explores the complex interactions between renewable energy production, innovation, economic growth, institutional quality, economic globalization, and CO2 emissions in OECD countries and emerging economies from 1996 to 2021. Results from Driscoll–Kraay standard error and feasible generalized least square reveal distinct trends: renewable energy production leads to increased CO2 emissions in emerging economies but significantly reduces emissions in OECD countries. Besides, residential and non‐residential innovation, along with total innovation, show similar effects. Notably, technology‐moderated renewable energy production effectively lowers CO2 emissions in both country groups. Similarly, economic growth enhances environmental quality in both sets of countries. However, institutional quality needs improvement in emerging economies, while current levels suffice in OECD nations to maintain environmental quality. Moreover, the study emphasizes the importance of considering globalization's impact on CO2 emissions, advocating for international agreements to leverage globalization for environmental benefits. Overall, these findings provide valuable insights for shaping renewable energy policies, fostering innovation, promoting economic growth, enhancing institutional quality, and harnessing globalization efforts to reduce CO2 emissions and enhance environmental quality.

Achieving ecological sustainability in European Union: The role of fiscal decentralization and green innovation

European Union member states are dedicated to bring standards and create climate change mitigation strategies at the center stage of public policy, prioritizing energy sector's transition from non-renewable to renewable sources by the means of innovation. Though there are a plethora of studies on determinants of environmental degradation, the nexus between fiscal decentralization and ecological intensity has been lacking of empirical evidence. To bridge this shortcoming, this study aspires to investigate the direct impact of fiscal decentralization, economic abundance, human capital, energy use and green innovation on environmental degradation and how green innovation moderates the impact of fiscal decentralization on environmental degradation. Using the theoretical setting of environmental Kuznets curve (EKC) phenomenon, this study analyzes the determinants of environmental degradation measured by ecological intensity and carbon intensity respectively across the nine European Union member states over the time span from 1995 to 2018. This study built upon a panel Method of Moments Quantile Regression (MMQR) with fixed effects and the ordinary least squares (OLS) regression with Driscoll-Kraay (DK) standard errors to validate the appropriateness of the EKC hypothesis in the observed sample authenticating the inverted U-shaped pattern between economic abundance and environmental degradation. Insofar as the direct impacts are considered, human capital and green innovation are efficient in abating environmental degradation of the countries under examination whereas energy use and fiscal decentralization aid in to environmental degradation. Regarding the indirect impacts, green innovation negatively moderates the association between fiscal decentralization and both indicators of environmental degradation namely, ecological intensity and carbon intensity. In the light of these findings, it is imperative for European Union member states to authorize the local governments to reduce pollution through innovation in climate change mitigation technologies to reinforce the Sustainable Development Goal (SDG) 12.

Uncovering the linkage between sustainable development goals for access to electricity and access to safely managed drinking water and sanitation services

Efforts to improve access to electricity and access to water and sanitation often go hand in hand, as they are essential components of sustainable development. By ensuring access to electricity, communities can have improved access to safe and reliable water supply and sanitation services, leading to better health outcomes, enhanced livelihoods, and overall development. This study investigates the effects of access to electricity on access to safely managed drinking water and sanitation services in 19 African countries from 2000 to 2020. Driscoll-Kraay standard errors and IV-GMM estimation techniques are used to estimate the relationship. The results show that access to electricity is positively associated with the percentage of people using safely managed clean water and sanitation services. The results also show that access to safely managed clean water and sanitation facilities in urban and rural areas turns out to be increased as far as access to electricity increases. The findings indicate that access to electricity reduces urban-rural inequalities in access to clean water and sanitation facilities. The sub-regional analyses conducted reveal that these findings are robust across SSA countries. Lastly, the findings reveal that GDP per capita, globalization, FDI and urbanization are channels through which access to electricity contributes to increasing access to safely managed water and sanitation services. African governments should implement policies that highlight the transformative potential of reliable electricity supply in ensuring sustainable and equitable access to clean water and proper sanitation facilities to safeguard public health and well-being.

Examining Volatility in Bank Stock Prices: A Comparative Exploration of Dividend Policies, Macroeconomic Influences, and Company-Specific Factors

This study aims to ascertain and compare factors influencing stock price volatility in terms of dividend policy, macroeconomic and company specific aspects for selected subset of listed banks in Bangladesh. Eleven years of secondary data (from 2011 to 2021) for fifteen commercial banks (representing 61.5% market capitalization of the banking sector) was acquired from diverse sources. The dependent variable chosen is stock price volatility, whereas the dividend policy is initially represented by dividend payout ratio (PRt & PRt-1), dividend yield (DYt & DYt-1). Several firm and country-specific macroeconomic indicators are used as control variables. A methodical approach followed by panel data analysis has been employed to identify a suitable model that can yield more accurate estimators. Consequently, some diagnostic tests are also performed to account for diagnosed problems: contemporaneous cross-sectional correlation, group-wise heteroskedasticity and autocorrelation; Driscoll-Kraay standard error regression model is finally applied. The study not only found significant negative impact of dividend payout ratio but also spotted a significant influence of inflation, EPS, and firm size on stock price volatility. Price volatility influenced by “No dividend policy” can be reinvestigated from the aspect of behavioral finance in the future. Furthermore, this study also sheds light on to what extent firm-specific and macroeconomic influence impact stock price volatility in Bangladesh's banking sector.