Dynamic Panel Threshold Regression Research Articles

Threshold Effects of Institutional Quality in the Infrastructure-Growth Nexux

This study estimates the threshold level of institutional quality that will ensure the efficient use of infrastructure in stimulating growth in Sub-Saharan Africa based on panel data from 41 countries in the region between 1996 and 2015. It employs a dynamic panel threshold regression model which is derived from the New Institutional Economics theory and this is estimated using the first-differenced Generalized Method of Moments estimator. Results reveal that the relationship between infrastructure and growth is non-linear which provides support for the use of a threshold regression model, with institutional quality serving as the threshold variable. In terms of the threshold level, the findings show that the index of institutional quality that will ensure the efficient use of infrastructure in stimulating growth is 0.410. The study also finds that, on average, countries in the region operate below this threshold level, hence their poor growth. The conclusion that is drawn from the analysis is that poor or low institutional quality is one of the factors hampering the growth of countries in the SSA region. A major limitation of the study is that the estimator employed for the threshold analysis is developed for models with single threshold value only and so does not allow for multiple threshold values. Thus, it is recommended that governments in the region need to formulate and implement policies targeted at improving the level of institutional quality in their countries.

Political institutions and finance-growth nexus in emerging markets and developing countries: A tale of one threshold

The empirical evidence predicts that political institutions are the core component of institutional matrix. They set stages for other institutions to be devised and influence the economic growth. Applying Kremer et al.’s (2013) dynamic panel threshold regression to a selected panel of 77 emerging market and developing countries over the period 1976–2010, we provide compelling evidence in favor of a split base on political institutions in the finance-growth nexus. The asymmetric impact of institutions on growth sets in around the optimum threshold level. Minimizing political risks through improvement in the quality of political institutions can improve the growth dividend due to financial development. Our empirical results appear to be robust across a wide range of alternative empirical strategies, several new disaggregate measures of political institutions, and also when addressing the endogeneity issues of the regressors.

Threshold Effects of Inflation on Economic Growth: Evidence from Dynamic Panel Threshold Regression Analysis for 18 Developed Economies

Threshold Effects of Inflation on Economic Growth: Evidence from Dynamic Panel Threshold Regression Analysis for 18 Developed Economies

Reducing CO2 emissions in the EU member states: Do environmental taxes work?

The purpose of this paper is to investigate the impact of environmentally related taxes on carbon dioxide (CO2) emissions in the EU member states. The paper uses a dynamic panel threshold regression model to determine the nonlinear relationship between environmental taxes and CO2 emissions in 15 EU member countries between 1995 and 2013. The results confirm asymmetrical relationships, in which the thresholds of the environmental taxes for total environmental taxes, energy taxes (including CO2 taxes), transport taxes, and taxes on pollution and resources are 3.02%, 2.20%, 0.88%, and 0.23%, respectively. The findings reveal that, after exceeding the threshold level, the effect of environmentally related taxes (excluding transport taxes) on CO2 emissions changes from insignificantly positive to significantly negative. However, the analysis shows a significant effect of transport taxes on CO2 emissions neither below nor above the threshold.

Does the level of energy intensity matter in the effect of energy consumption on the growth of transition economies? Evidence from dynamic panel threshold analysis

This study investigates whether the effect of energy consumption on economic growth differs by the level of energy intensity. We employ an advanced dynamic panel threshold regression model to test for the “threshold” level of energy intensity that has an asymmetrical energy consumption effect on economic growth; we consider 12 Commonwealth of Independent States countries over the period 1991–2013. The estimated panel threshold regression model suggests 0.44% as the threshold level of energy intensity. Energy consumption above this level significantly retards economic growth, whereas energy consumption below the level is found to have a statistically significant positive effect on economic growth. Thus, when the threshold level of energy intensity (one of the important indicators of energy efficiency) is exceeded, energy consumption significantly hinders growth. If policy makers pay more attention to energy intensity while formulating new energy policies, substantial gains can be achieved in low energy intensity environments.

Threshold Effects of Inflation on Economic Growth: Is Africa Different?

ABSTRACTThis study examines nonlinearities in the inflation-growth nexus in Africa. The study employs a novel dynamic panel threshold regression method developed by Kremer et al. [(2013). Inflation and growth: New evidence from a dynamic panel threshold analysis. Empirical Economics, 44, 861–878. doi:10.1007/s00181-012-0553-9] that extends Hansen’s [(1999). Threshold effects in non-dynamic panels: Estimation, testing, and inference. Journal of Econometrics, 93, 345–368. doi:10.1016/S0304-4076(99)00025-1] non-dynamic panel threshold model as well as Caner and Hansen [(2004). Instrumental variable estimation of a threshold model. Econometric Theory, 20, 813–843. doi:10.1017/S0266466604205011] cross-sectional threshold model to deal with potential endogeneity problems. The findings of this study confirm a non-linear relationship between inflation and economic growth in Africa. More specifically, the results show that the inflation threshold values are 6.7% for the whole sample, 9% for the sub-sample of low-income countries and 6.5% for middle-income countries. The regression results suggest that relatively lower level of inflation appears to be in favor of higher economic growth only in African middle-income countries. However, inflation rate beyond a certain threshold is more likely to be detrimental to economic growth for all the cases. These results are robust by considering additional control variables and using three-year averages of the data. The findings of this study may be useful to African monetary policymakers as they decide on inflation targets to adopt to avoid the detrimental effects of high inflation while reaping the growth benefits of low inflation.

Threshold effects of financial stress on monetary policy rules: A panel data analysis

This study tests for the state-dependent response of monetary policy to increases in overall financial stress and financial sector-specific stress across a panel of advanced and emerging economy countries. We use a factor-augmented dynamic panel threshold regression model with (estimated) common error components to deal with cross-sectional dependence. We find strong evidence of advanced economy countries' aggressive monetary policy loosening in response to stock market and banking stress but only in times of high financial market volatility. By comparison, evidence of threshold effects of financial stress is generally weak for emerging market countries’ interest rate decisions.

Financial stress, sovereign debt and economic activity in industrialized countries: Evidence from dynamic threshold regressions

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non-linear manner due to amplifications from the financial sector. Employing dynamic country-specific and dynamic panel threshold regression methods, we study the non-linear relation between the growth rate and the debt-to-GDP ratio using quarterly data for sixteen industrialized countries for the period 1981Q1-2013Q2. We find that the debt-to-GDP ratio has impaired economic growth primarily during times of high financial stress and only for countries of the European Monetary Union and not for the stand-alone countries in our sample. A high debt-to-GDP ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm.

The Impact of Government Debt on Economic Growth: Dynamic Panel Threshold Regression Approach

본 연구는 비선형적 시각에 입각하여 정부부채가 경제성장에 미치는 영향에 대하여 실증적으로 검증하고 이를 재조명하고자 하는 목적을 가지고 있다. 이를 위하여 1981년부터 2010년에 걸친 OECD 34개국의 불균형 패널자료를 Kremer et al.(2011)이 제안한 동태적 패널문턱모형을 이용하여 분석하였다. 분석결과 동태적 패널 선형모형에서 정부부채는 경제성장에 부정적인 영향을 미치는 것을 확인하였으며, 동태적 패널문턱 모형을 통한 분석에서는 약 43%의 정부부채 수준을 기준으로 하여 하위 정부부채 레짐에서는 통계적으로 유의미한 관계를 보이지 않다가 43% 이상의 정부부채 레짐에서는 통계적으로 유의미한 부(-)의 영향을 미치는 것으로 나타났다. 이를 통해 정부부채의 모든 수준에서 정부부채가 일률적으로 경제성장에 부정적인 영향을 미치기보다는 일정 문턱수준에 이르게 됨으로써 비로소 그러한 효과가 나타나게 된다는 사실을 유추할 수 있다. 이를 바탕으로 경제활성화를 위한 정부부채를 통한 재정확장정책이 좋은 정책적 의도에도 불구하고 과도한 수준의 정부부채로 인해 종국적으로 경제성장에 악영향을 미칠 수 있다는 점에서 적정수준의 부채관리가 중요하다는 점을 정책적 시사점으로 제시하였다.