Dynamic Panel Threshold Regression Research Articles

Green innovation and SO2 emissions: Dynamic threshold effect of human capital

AbstractGreen innovation is an effective path to decrease environmental pollutions. It is of immense interest to evaluate the roles of green innovation on SO2 emissions reduction. We also investigate the static and dynamic threshold effect of human capital in the impacting paths of different innovations on SO2 emissions. The empirical results show that the design patent increases SO2 emissions while the development of utility patent can decrease SO2 emissions based on the static analysis and dynamic analysis. Both the “pollution halo” and the “pollution heaven” hypotheses of foreign direct investment (FDI) are validated in China. Moreover, green innovation positively affects SO2 emission reduction based on the System Generalized Method of Moment (SYS‐GMM) estimation. Both static and dynamic panel threshold regression results reveal that the positive effects of different innovations will become larger when human capital exceeds the corresponding threshold values. Hence, it is important to enhance green human capital.

Digitalization and electricity consumption: Does internet development contribute to the reduction in electricity intensity in China?

The coming of the internet era has converted traditional energy utilization methods, and with the emergence of new internet-based technologies, the internet is likely to exert a greater influence on reducing electricity intensity. The impact mechanism of the internet development level on electricity intensity are analyzed and a sample of 30 Chinese provinces from 2006 to 2018 are used. The dynamic panel threshold regression model, intermediary effect model and spatial measurement model are used to examine the direct and indirect influence mechanisms of the effect on the internet development level on electricity intensity as well as the possible spatial spillover and threshold effects stemming from this process. The following conclusions are drawn. i) the level of internet development plays a significant negative role on electricity intensity, ii) internet development has a negative spatial spillover effect on electricity intensity, and iii) the effect of internet development on electricity intensity has a significant threshold effect. In different stages of financial development, education level, industrial structure and technological development, internet development can have different effects on electricity intensity; that is, the impact of internet development on electricity intensity is nonlinear. It is worth noting that internet development affects energy intensity through financial development, education level, industrial structure and technological development.

Relationship between Urban Innovation Capability and Energy Utilization Efficiency: An Empirical Study of 281 Prefecture‐Level Cities in China

Following a dynamic nonlinear perspective, this study explores the relationship between urban innovation capability and energy utilization efficiency by employing the Panel Vector Autoregression (PVAR) and Dynamic Panel Threshold Regression (DPTR) methods. Using the 2003–2020 panel data of 281 prefecture‐level cities in China, this study confirms that energy utilization efficiency improves owing to the improvement of urban innovation capability. Depending on the characteristics of the city, such as population density, industrial structure, and environmental pollution, high energy utilization efficiency in the early stages of city development may help or hinder the improvement of energy utilization efficiency in the later stages. The enhancement in urban innovation capability has failed to improve energy utilization efficiency and has adversely affected cities with a low population density or weak secondary industrial foundation. However, in cities with a high population density or proportion of secondary industry, the improvement in innovation capability significantly increases the efficiency of energy utilization. In addition, the positive effect that urban innovation capability has on energy utilization efficiency is higher in low‐pollution cities than in high‐pollution cities.

Does development of renewable energy reduce energy intensity? Evidence from 82 countries

• A dynamic panel threshold regression model is proposed. • Renewable energy development can reduce energy intensity. • Renewable energy development has a threshold effect on energy intensity. • Effects are different between the high and the low regimes. In recent years, renewable energy (RE) has seen rapid development worldwide. However, energy intensity has not declined at the same rate. This study applies a dynamic panel threshold regression model to explore the effects of RE development on energy intensity in 82 major countries. The results show that RE development has a significantly negative impact on energy intensity. Specifically, for every 10.0% increase in RE development, energy intensity reduces by 0.3%. The threshold point of the effect is determined and estimated at 2.3588 (the equivalent RE consumption is 10.58 billion MJ) between the low and the high development regimes of RE. Every 10.0% increase in the development of RE leads to a 2.2% decrease in energy intensity in the high development regime, but only 0.2% decrease in the low development regime. Economic development has a significantly negative impact on energy intensity, while energy consumption structure based on non-renewable energy creates has a significantly positive impact. All countries should increase the consumption of renewable energy to more than 10.58 billion MJ to cut energy intensity and improve the technical content of international trade products, especially in low renewable energy development level regimes.

Official development assistance and carbon emissions of recipient countries: A dynamic panel threshold analysis for low- and lower-middle-income countries

Better use of official development assistance (ODA) to mitigate carbon emissions in developing countries requires a better understanding of the effects of ODA on carbon emissions. The dynamic panel threshold regression model is employed to explore the effects of ODA and carbon emissions in 59 low-income and lower-middle-income countries. Urbanization is employed as a threshold variable. The proposed model can better reflect endogenous explanatory variables, which indicate the inertial characteristics and dynamic changes of carbon emissions. The first-order lag coefficients of carbon emissions in the proposed model have a significant positive effect, indicating that the growth of carbon emissions in these countries has a strong path dependence. Moreover, when the urbanization of recipient countries is below the threshold value, a 1% increase in ODA leads to a 0.2259% increase in carbon emissions. When urbanization exceeds the threshold value, a 1% increase in ODA leads to a 0.2281% increase in carbon emission. In addition, the conditional convergence level of carbon emission growth in low-urbanization areas is much greater than that in high-urbanization areas. With the development in urbanization, if no effective measures are developed and implemented, there is a risk that carbon emissions of recipient countries might develop from “low-emission balanced growth” to “high-emission balanced growth.”

The asymmetric effect of internet access on economic growth in sub-Saharan Africa

This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008–2018. The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen’s threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.

Can technological innovation spur economic development? The case of Indonesia

PurposeInnovation in digital technologies has been the main force in promoting growth and inclusion. However, the impact of such innovations remains ambiguous. Within this context, this study aims to analyze the distribution of digitally empowered peer-to-peer (P2P) lending in Indonesia.Design/methodology/approachThis study uses a quantitative approach to estimate the impact of technological innovation in promoting economic development. In particular, this study employs empirical panel data from 135 financial technology (FinTech) companies from 2015 to 2019 and use the dynamic panel threshold regression approach. This study collects secondary data to build the estimated model.FindingsContrary to conventional wisdom, this study’s evidence suggests that there is a delayed effect between the contribution of P2P lending by FinTech firms on economic growth in the country. While the immense growth of FinTech seems promising, the findings indicate that FinTech is far from its optimal point. This study calculates the optimal combination between productive and consumptive lending and between Java and non-Java. In view of this finding, this study proposes strategies to effectively distribute lending and bring about the expected benefit to the economy.Practical implicationsSince the contribution of P2P lending on economic development has not reached its optimum, the findings expose the limitation of current technological innovation in the financial sectors. In this sense, P2P penetration on the financing market needs encouragement. The calculations for optimal allocation between productive and consumptive and between Java and non-Java provide guidance to policymakers. This study helps practitioners to shape strategy and to begin experimenting with different approaches to distribute loans effectively.Originality/valueTo the best of the authors’ knowledge, there are no empirical studies that examine the impact of emerging FinTech companies in promoting economic growth and financial development. The findings close this research gap, especially in regard to innovation management literature, and provide insights for practitioners, policymakers and regulators.

Does Financial Inclusiveness Affect Economic Growth? New Evidence Using a Dynamic Panel Threshold Regression

• This study examines the impact of financial inclusiveness on economic growth using a dynamic panel threshold estimation for the sample of 60 countries from 2010 to 2017. • A new Index of Financial Inclusion (IFI) has been constructed for each country to determine their level of financial inclusiveness across time. • The main findings revealed that there is a threshold effect in the financial inclusiveness-growth nexus. • The level of financial inclusiveness is beneficial and positively affects economic growth at lower or upper threshold levels in a different regime. • The threshold impact of financial inclusion is positive and has a more significant growth-enhancing effect among less developed and emerging market countries relative to developed ones. • Policymakers in less developed and emerging market countries need to prioritize their efforts to raise the level of financial inclusiveness in place of its greater growth-enhancing effect in these countries. This study examines the impact of financial inclusiveness on economic growth using a sample of 60 countries from 2010 to 2017. A new Index of Financial Inclusion (IFI) has been constructed for each country to determine their level of financial inclusiveness across time. The main findings using a dynamic panel threshold estimation technique revealed a threshold effect in the financial inclusiveness-growth nexus. We find that the level of financial inclusiveness is beneficial and positively affects economic growth at lower or upper threshold levels in a different regime. Furthermore, the threshold impact of financial inclusion is positive and has a more significant growth-enhancing effect among less developed and emerging market countries relative to developed ones. Thus, policymakers in less developed and emerging market countries need to prioritize their efforts to raise the level of financial inclusiveness in place of its greater growth-enhancing effect in these countries.

Asymmetric Impact of Inflation to Financial Development

Abstract Because of financial frictions and asymmetric information, inflation impacts financial development uncertainly. These findings are empirically tested within a factor-augmented dynamic panel threshold regression model. This study provides a comparative study on the threshold effects of inflation on financial development between advanced countries and underdeveloped countries. The findings of the study indicate evidence of the existence of a robust threshold of inflation in both sample countries, suggesting that low inflation is development enhancing for the sample of developing countries but impedes financial development for the advanced countries to a certain degree. However, inflation above the minimum level is a hinderance to financial development for all countries considered. The study therefore argues inflation suppressing policies should be the focus in monetary policy to develop the financial sector.

Finansal Gelişmişliğin Ticari Açıklık Üzerindeki Etkisi: Panel Eşik Değer Regresyon Modellerinden Kanıtlar

This paper attempts to re-examine the finance-trade nexus and tests whether higher levels of financial development can reduce trade openness. Using static and dynamic panel threshold regression techniques based on 64 countries over the period of 1970-2014, this study shows that financial development fosters trade openness until a certain level of threshold is achieved and beyond that threshold level, further increases in financial development lead to decline in trade openness. The results of this study suggest that there is a need for developing alternative and new trade financing channels to increase trade openness as well as it provides a strong empirical support for trade-limiting effects of financial development. Hence, this study is possibly encouraging for policy makers to redesign trade enhancing policies.

Do government expenditure reduce income inequality: evidence from developing and developed countries

PurposeThis paper aims to re-examine the impact of government expenditure on income inequality. Existing studies provide mixed results on whether government expenditure reduces or increases income inequality. In this paper, government expenditure is viewed as a tool for redistribution, hence, its impact on inequality is examined.Design/methodology/approachA sample of 122 countries with 91 and 31 countries categorized as developing and developed countries is used. The dynamic panel threshold regression is used to examine the impact of government expenditure on income inequality and to estimate the turning point of the negative or positive effects.FindingsThe major findings suggest that, in general, government expenditure does reduce income inequality. Results from developed countries support the inversed U-shaped Kuznet curve where higher government expenditure initially led to more inequality but would eventually bring about a positive effect after a certain threshold level. For developing countries, education and development expenditure were the driving forces towards lower income inequality.Practical implicationsSeveral policy implications can be derived from this paper. First, government expenditure is a useful tool to alleviate the problem of income inequality. More integration with the global economy via trading activities is also an important channel to help reduce income inequality. Finally, better institutional quality provides an effective ecosystem in promoting better redistribution of income via government expenditure.Originality/valueThis paper presents a maiden attempt to estimate a threshold value or when government expenditure starts to reduce or increase income inequality. The sample is segregated into developed and developing countries to further control the effect of government size and the level of development of a country.

What Drives the Relationship Between Export Upgrading and Growth? The Role of Human Capital, Institutional Quality, and Economic Development

The main goal of this paper is to empirically examine whether human capital, institutional quality, and economic development affect the relationship between export upgrading and economic growth. Different from most previous studies, which include an interaction term between export upgrading and a conditioning variable, this article applies an innovative dynamic panel threshold regression model to allow for non-linearity and an endogenous determination of the threshold location. The model is implemented using a panel data set of 56 developed and developing countries over the period of 1995–2015. Our main findings are twofold. First, the relation between export upgrading and economic growth appears to be non-linear. Second, we find evidence that export upgrading can only enhance economic growth in countries satisfying certain threshold prerequisites, regarding initial income level, human capital, and institutional quality.

The Asymmetric Effect of Internet Access on Economic Growth in Sub-Saharan Africa: Insight from a Dynamic Panel Threshold Regression

This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008-2018. The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen's threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of: internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.

The asymmetric effect of internet access on economic growth in sub-Saharan Africa

This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008-2018.The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen's threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.

Growth threshold-effect on renewable energy consumption in major oil-producing countries in sub-Saharan Africa: a dynamic panel threshold regression estimation

Purpose This study aims to explore the relationship between the growth threshold effect on renewable energy consumption (REC) in the major oil-producing countries in sub-Saharan Africa (SSA) over the period 1990–2018. Design/methodology/approach This article used a dynamic panel threshold regression model introduced by Hansen (1996, 1999 and 2000) threshold (TR) models. The procedure is achieved using 5,000 bootstrapping replications and the grid search to obtain the asymptotic distribution and p-values. For the long-run relationship among our variables, the author followed the process in Pesaran et al. (1999) pooled mean group (PMG) for heterogeneous panels. Furthermore, for the robustness of our empirical results due to the sensitivity of the results to outliers, the author used the approach by Cook (1979) distance measure. The author applied quantile (QR) regression to explore the distribution of dependent variables following Bassett and Koenker (1982) and Koenker and Bassett (1978) approaches. Findings The results from the threshold effect test and threshold regression revealed a significant single threshold effect of growth level on REC. Furthermore, the result from the PMG estimation showed the growth of the variable, energy intensity, consumer prices and CO2 emissions play a significant role in REC in major oil-producing countries in SSA. The growth threshold estimation results indicated one significant threshold value of 1.013% at one period lagged of real growth. The outlier’s sensitivity detention greatly influenced our empirical results. Originality/value The article filled the literature gap by applying a combined measure that is robustness to detect outliers in the data, which none of the studies in the literature addresses hitherto. Further, the article extends the quantile regression to growth – REC literature.

Examining the linkages between electricity consumption and economic growth in African economies

As global energy consumption continues to increase, an increasing attention is also being drawn to the need to embrace cleaner energy despite ensuring energy security and efficiency in production. This study examines the relationship between economic growth and electricity consumption in sub-Sahara African economies between 1971 and 2017. It employs the System Generalized Methods-of-Moments (System GMM) techniques so as to address the issues of endogeneity in the data generating process. We also examine whether the impact of electricity consumption differs by the level of energy intensity, by employing an advanced dynamic panel threshold regression model to ascertain the degree of threshold level of energy intensity and the potential of threshold asymmetric of energy consumption on economic growth. Our results show significant positive relationship between electricity consumption and growth, including a threshold level of energy intensity which stood at 0.48%. This suggests that energy consumption beyond 0.48% will reduce growth, while consumption below this level will stimulate growth.

Human capital threshold, foreign direct investment and economic growth: evidence from sub-Saharan Africa

Purpose The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017. Design/methodology/approach This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data. Findings This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%. Practical implications It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI. Originality/value The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

Housing prices and carbon emissions: a dynamic panel threshold model of 60 Chinese cities

ABSTRACT In the past two decades, both housing prices and carbon emissions have risen dramatically in China. However, it is unclear whether there is a nexus between them. This study employs a dynamic panel threshold regression model using residents' income levels as the threshold variable to investigate the relationship between housing prices and per capita carbon emissions. By considering 60 Chinese housing price-monitored cities, a threshold effect of income on carbon emissions was identified with a threshold value of 2.448, which divided the full sample into two regimes to further analyse the impacts of housing prices on per capita carbon emissions at each income level. The empirical results show that housing prices have a slight but positive effect on per capita carbon emissions both at two income levels. Specifically, a 10% change in housing prices can lead to a change in the same direction in per capita carbon emissions by 0.7% and 0.2% at lower and higher average income levels, respectively. However, in small cities, limited population may contribute to the negative impact of housing prices on carbon emissions. Furthermore, the results also confirm that the urbanization rate is an important factor of per capita carbon emissions.

The impact of exchange rate volatility on inflation targeting monetary policy in emerging and advanced economies

AbstractExchange rate volatility is a stated concern for policymakers in many emerging market economies. This paper investigates whether exchange rate volatility impacts the commitment to inflation targeting monetary policy by analyzing thirteen emerging market economies and nine advanced economies from 2000 to 2016. Using a dynamic panel threshold regression model, the response of the domestic target interest rate to the inflation gap, output gap, and exchange rate condition is tested in scenarios of above‐threshold and below‐threshold exchange rate volatility. Both emerging and advanced economies adhere to their inflation targeting commitments when exchange rate volatility is below 1%, but are unable or unwilling to respond to deviations in the inflation gap when volatility is beyond this threshold value.

Financial development threshold, private capital inflows and economic growth

PurposeThis study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between the periods 1995 and 2017.Design/methodology/approachThe study used a secondary source of data obtained from the world development indicator (WDI) and used the system generalized method of moments (SGMM) and dynamic panel threshold regression to analyze the data.FindingsThe study found that foreign direct investment has a negative and significant impact on the economic growth of SSA. The study also found that portfolio investment has a positive impact on economic growth but it is statistically insignificant. However, when portfolio investment interacted with financial development, it became positive and statistically significant presupposing that financial development is a necessary condition for portfolio investment to exert impact on economic growth. Further, the study showed that the interaction of foreign direct investment with financial development has a negative and significant effect on economic growth. Finally, the study found the minimum threshold of financial development at 42.66 per cent.Practical implicationsPolicymakers in SSA should be cautious and critical in the kind of foreign direct investment they attract as the open door policy to attract all kinds of foreign direct investment would not bring about the desired result. Also, policymakers in the region should develop and implement policies that would deepen and strengthen the financial system to foster the development of the country’s financial sector and accelerate economic growth.Originality/valueThe contribution of the study lies in establishing a minimum threshold of financial development; thus, providing a clear-cut direction for policymakers in SSA countries in their pursuit of financial development and economic growth.