Dynamic Causality Test Research Articles

The relationship between cryptocurrencies and convention financial market: Dynamic causality test and time-varying influence

This paper examines the dynamic causal effect of financial markets on cryptocurrencies from a return perspective by applying the dynamic asymmetric causality tests. Applying daily data from February 1, 2018, to August 31, 2023, this paper also investigates whether the major events, such as COVID-19 or the categories of cryptocurrency, will alter or intensify the existing relationship. The empirical result shows that the causal relationship for both symmetric and asymmetric, between traditional financial markets and cryptocurrency is cyclical and only significant in the short term; such a result is robust with the examination of the VAR-based Granger causality test in the presence of instabilities. The pandemic does not influence the causal relationship, and the gold price had the most significant causal impact on cryptocurrency portfolio returns, while the fluctuations in the stock market had a negligible influence and the two indices did not have different causal impacts on the different types of cryptocurrencies. Adding cryptocurrencies to portfolios with only traditional financial assets can significantly reduce risk.

The Causal Relationship between, Electricity Consumption and Economic Growth in Kingdom of Saudi Arabia: A Dynamic Causality Test

The Causal Relationship between, Electricity Consumption and Economic Growth in Kingdom of Saudi Arabia: A Dynamic Causality Test

Corruption and economic growth in Nigeria: dynamic causality and asymmetric relationships

PurposeThis study aims to intend to investigate the dynamic causality and asymmetric relationships between corruption and economic growth of Nigeria.Design/methodology/approachToda–Yamamoto (TY) Dynamic Causality Test and Non-linear Autoregressive Distributed Lag Model (NARDL) were used for the estimations, for the period 1984–2018.FindingsThe result reveals the existence of bidirectional causality between control of corruption and economic growth, Similarly, in both the short run and long run, corruption can affect economic growth and economic growth can as well affects corruption.Research limitations/implicationsFindings of the research are limited to Nigeria whose data were used, based on TY causality test and NARDL as the econometrics techniques applied, for a period 1984–2018.Practical implicationsFor a meaningful progress to be recorded in Nigeria in terms of economic growth, the country must device some means for strengthen the control of corruption.Originality/valueThe study was able to prove empirically, the existence of not only causality between corruption and economic growth but also asymmetric effect of corruption on economic growth and that of economic growth on corruption in both the long run and short run, as against the previous studies that are lopsided on the effect of corruption on economic growth only.

Evidence of Inflation-Poverty Causality in Nigeria based on the Toda-Yamamoto Dynamic Causality Test.

Purpose: One of the known global consequences of inflation is increasing and causing poverty. Most studies follow suit and empirically investigated the effect of inflation on poverty without taking into cognizance that poverty might as well cause inflation. The main aim of this study is to investigate the nature of causality between inflation and poverty in Nigeria.
 Methodology This research work employs the famous Toda-Yamamoto causality test to investigate the nature of causality between inflation and poverty in Nigeria for the period 1980-2016, with money supply and exchange rate as control variables.
 Findings: The results reveal that there is bidirectional causality between inflation and poverty, none of the variables cause money supply and none of them cause exchanges rate.
 Implication: Even though the money supply does not cause poverty directly, it does cause inflation, and inflation in turns causes poverty. Also, the exchange rate does not cause inflation directly, but it does cause poverty, and at the same time, poverty causes inflation. Therefore, the study calls the attention of the policymakers to be cautious in making policies concerning money supply and local currency devaluations (exchange rate) as they cause both inflation and poverty directly and indirectly, consequently, they affect the societal welfare in general.

The role of tourism development on CO2 emission reduction in an extended version of the environmental Kuznets curve: evidence from top 50 tourist destination countries

This study empirically investigates the role of tourism development in an extended version of the environmental Kuznets curve (EKC) for the top 50 tourist destination countries. Panel data on annual basis that range from 1996 to 2016 have been used by employing CADF, CIPS and PANKPSS unit root tests, DSUR cointegrating test as well as DH panel dynamic causality test. The results explain that tourism development exerts significant long-term effects on the extended version of EKC, whereas carbon emission levels significantly move over years through tourism development. Our findings also indicate that tourism development has positive effects on the level of CO2 emissions in the case of Turkey, Thailand, Russia, Greece, Saudi Arabia, Macao, Indonesia, Brazil, Dominica, Philippines, Bulgaria, Tunisia, Egypt, Iran, Georgia, Hong Kong, India and Malaysia. This result suggests that these countries should not use traditional fuel oil consumption methods, and such methods need to be abandoned for reduction in carbon dioxide in terms of environmental quality and sustainability.

Financial Development, Savings and Investment in South Africa: A Dynamic Causality Test

This study investigates the causal relationship between financial development and investment in South Africa during the period from 1976 to 2014. The study incorporates both bank-based and market-based segments of financial sector development. In addition, composite indices for bank-based and market-based financial development indicators are used as explanatory variables. The study incorporates savings as an intermittent variable – thereby creating a simple trivariate Granger-causality model. Using the ARDL bounds testing approach to cointegration and the ECM-based Granger-causality test, the study finds a unidirectional causal flow from investment to financial development, but only in the short run. In the long run, the study fails to find any causal relationship between financial development and investment. These results apply irrespective of whether bank-based or market-based financial development is used as a proxy for financial sector development. The findings of this study have important policy implications.

Time-varying causality between crude oil and stock markets: What can we learn from a multiscale perspective?

This paper investigates the presence of time-varying causal linkages in mean and variance between oil price changes and stock returns for six major oil-importing countries (France, Germany, Italy, Spain, the UK and the US) in a multiscale framework that combines wavelet analysis and a modified version of the dynamic causality test of Lu, Hong, Wang, Lai, and Liu (2014). The results show significant bidirectional causal relations between oil and stock markets at the different time horizons for all countries. The causal links tend to be stronger at coarser scales and in periods of financial turmoil, mainly during the recent global financial and European sovereign debt crises. This evidence provides useful insights to participants in oil and stock markets and to policymakers.

Foreign Direct Investment and Economic Growth in Botswana: A Dynamic Causality Test

Foreign Direct Investment and Economic Growth in Botswana: A Dynamic Causality Test

A panel cointegration analysis and dynamic causality test of agricultural supply response to prices: The case of rice in West Africa

The paper provides a regional estimate of rice yield and acreage supply response to prices in West Africa. Using balanced panel data of seven countries covering 1991–2006, the study employs panel cointegration estimators, namely FMOLS and DOLS to estimate the long-run rice yield supply function and using one-step Blundell-Bond system GMM to estimate the short-run acreage supply function in the region. While the empirical findings from both estimators provide similar results, the estimates show that price of maize is a key determinant of rice yield and acreage and there is rice-maize substitutability in both the long-run and short-run in the study. The short-run Granger causality runs only from maize price to rice acreage, while long run causality of joint effect of the prices on the acreage supply is also evident in the study. Our results also show that the rice yield and acreage supply functions are unresponsive to own price in the short -run and long -run, respectively.

Foreign direct investment and economic growth in Zimbabwe: a dynamic causality test

In this study we examine the dynamic causal relationship between foreign direct investment (FDI) and economic growth in Zimbabwe – using the modern time-series techniques. Specifically, we employ the ARDL-bounds testing approach to examine the FDI-growth linkage. We also employ the error-correction-based causality test, which captures both the short run and long run dynamics. Contrary to some of the previous studies, this study shows that there is a distinct causal flow from economic growth to FDI in Zimbabwe. The results apply irrespective of whether the causality test is conducted in the short run or in the long run. The study, therefore, recommends that Zimbabwe should pursue pro-growth strategies, in order to promote foreign direct investment.

A dynamic causality test of imports and economic growth in Zimbabwe

A dynamic causality test of imports and economic growth in Zimbabwe

A dynamic causality test of exports and economic growth in Zimbabwe

In this paper, we examine the causal relationship between export growth and economic growth. The causal relationship between exports and economic growth has been a subject of extensive debate in recent years. There are currently three dominant views regarding the relationship between exports and economic growth. The first view maintains that it is the growth of exports that drives economic growth. The second view argues that it is economic growth that spurs exports expansion; while the third view maintains that both exports and economic growth promote one another. Using the autoregressive distributed lag (ARDL)-bounds testing approach, we find that there is a distinct causal flow from export growth to economic growth in Zimbabwe – both in the short run and in the long run. We therefore recommend that policies, which are geared towards export promotion should be intensified, in order to promote long-term economic growth in Zimbabwe.

Information transmission between the NASDAQ and Asian second board markets

In the 1980s and early 1990s, the NASDAQ's success helped to prompt Singapore (SESDAQ), Japan (JASDAQ), Taiwan (TAISDAQ), and South Korea (KOSDAQ) to set up or formalize their own second board markets. In 1999, Malaysia (MESDAQ) and Hong Kong (GEM) followed suit. Given the growing importance of these second board markets, we examine whether there is any evidence of spillovers from NASDAQ returns and volatilities to Asian second board market returns and volatilities after controlling for spillovers from the NYSE, and whether these cross-country spillovers are strong relative to domestic spillovers from the corresponding main board markets. We employ EGARCH models, dynamic causality tests, and VAR-based forecast error decompositions using daily data of a recent sample period that includes the Asian financial crisis of 1997 and continues until April 20, 2001. There is strong evidence of lagged returns and volatility spillovers from the NASDAQ market to the Asian second board markets when we exclude contemporaneous main board market returns. There is also strong evidence of contemporaneous and lagged returns and volatility spillovers from the local main board markets to the corresponding second board markets. However, even in the presence of contemporaneous main board market returns, there are substantial spillovers from the lagged NASDAQ returns and volatilities to Asian second board market returns and volatilities. These findings are not sensitive to whether we use US dollar-based data or local currency-based data. Given the difference in the trading hours between the NASDAQ and Asian stock markets, we use available intra-day return data and Canadian return data. The findings seem quite robust: there is substantial information spillover from the NASDAQ to the Asian and Canadian second board markets. These findings indicate the existence of a substantial cross-country industry effect (or meteor shower effect), as well as a domestic market effect (or heat wave effect), and imply that both country diversification and industry diversification are important.

Information transmission between the NASDAQ and Asian second board markets

In the 1980s and early 1990s, the NASDAQ's success helped to prompt Singapore (SESDAQ), Japan (JASDAQ), Taiwan (TAISDAQ), and South Korea (KOSDAQ) to set up or formalize their own second board markets. In 1999, Malaysia (MESDAQ) and Hong Kong (GEM) followed suit. Given the growing importance of these second board markets, we examine whether there is any evidence of spillovers from NASDAQ returns and volatilities to Asian second board market returns and volatilities after controlling for spillovers from the NYSE, and whether these cross-country spillovers are strong relative to domestic spillovers from the corresponding main board markets. We employ EGARCH models, dynamic causality tests, and VAR-based forecast error decompositions using daily data of a recent sample period that includes the Asian financial crisis of 1997 and continues until April 20, 2001. There is strong evidence of lagged returns and volatility spillovers from the NASDAQ market to the Asian second board markets when we exclude contemporaneous main board market returns. There is also strong evidence of contemporaneous and lagged returns and volatility spillovers from the local main board markets to the corresponding second board markets. However, even in the presence of contemporaneous main board market returns, there are substantial spillovers from the lagged NASDAQ returns and volatilities to Asian second board market returns and volatilities. These findings are not sensitive to whether we use US dollar-based data or local currency-based data. Given the difference in the trading hours between the NASDAQ and Asian stock markets, we use available intra-day return data and Canadian return data. The findings seem quite robust: there is substantial information spillover from the NASDAQ to the Asian and Canadian second board markets. These findings indicate the existence of a substantial cross-country industry effect (or meteor shower effect), as well as a domestic market effect (or heat wave effect), and imply that both country diversification and industry diversification are important.

Information Transmission between NASDAQ and Asian Second Board Markets

In Asia, NASDAQ's success has helped prompt Singapore (SESDAQ), Japan (JASDAQ), Taiwan (TAISDAQ) and South Korea (KOSDAQ) to set up or formalize their own second board markets in the 1980s and early 1990s. In 1999, Malaysia (MESDAQ) and Hong Kong (GEM) also set up their second board markets. Given the growing importance of these second board markets, we examine whether there is any evidence of spillovers from NASDAQ returns and volatilities to Asian second board market returns and volatilities and whether the cross-country spillovers are strong relative to domestic spillovers from the corresponding main board markets. For this purpose, we employ EGARCH models, dynamic causality tests, and VAR-based forecast error decompositions using daily data of a recent sample period that includes the Asian financial crisis of 1997 and up to April 20, 2001. We find that, first, there is strong evidence of lagged returns and volatility spillovers from the NASDAQ market to the Asian second board markets when we exclude contemporaneous main board market returns. Second, there is strong evidence of contemporaneous and lagged returns and volatility spillovers from the local main board markets to the corresponding second board markets. However, even in the presence of contemporaneous main board market returns, there remain substantial spillovers from the lagged NASDAQ returns and volatilities to Asian second board market returns and volatilities. These findings are not sensitive to whether we use U.S. dollar-based data or local currency-based data. Given the difference in the trading hours between the NASDAQ and Asian stock markets, we attempt to alleviate this concern by using some available intra-day return data and Canadian return data. The findings seem quite robust: There is substantial information spillover from the NASDAQ to Asian and Canadian second board markets. These findings indicate the existence of substantial cross-country industry effect (or meteor shower effect) as well as domestic market effect (or heat wave effect) and imply that both country diversification and industry diversification are important.