Dynamic Panel Research Articles

Unlocking Desire: Exploring the Impact of Seductive Forces of Political Risk, Financial Inclusion, and Competition on Bank Stability in Emerging Markets

This research inquiry overlaps financial services inclusion and a national government's risk of political instability, competition, and banking system stability. It is the analysis of 22 emerging market countries from 2016 to 2021. The research is going to be based on GMM-System dynamic data panel estimate method and the aim is to illuminate the interplay of these factors and to detect their impact on the banking industry sustainability. The point estimates derived from the GMM-System estimation reveal that several of the main conclusions have been reached. The main point to note is that, in general, the more inclusive financial system, the more stable banking sector there will be in the world. What this finding stresses is the necessity of an inclusive financial system to strengthen banks by being a part of the ever-growing body of evidence on how financial inclusion can foster economic growth and stability. Not only does the evidence support the assumption that political unrest and financial markets have a strong relationship, but also the numbers show that this relationship is highly likely. In the case of a country where political instability is reduced, the financial sector turns out to be more viable, the study reveals. Political risk is of a great significance for financial markets and banking systems, and therefore call for political stability as a fundamental for the reliable banking system. Taken together, the finding of the study will be very useful for not only government officials but also the banking sector. The output reaffirms the fact that financial inclusion, competition and political risks are the key components for the sector stability increase. Such factors have a very important influence on the policy, regulation, and strategic decision of banking. These findings show the imperativeness of political and corporate leaders to make progress in increasing financial accessibility, allowing fair competition, and safeguarding political stability so that banking sectors may be reinforced and thus, the world's banking systems may become more resilient.Keywords: Political Risk, Financial Inclusion, Bank Stability, Emerging Economies, Competition.

The Operational Risk Disclosure Threshold Effect in the Earnings Management–Sustainability Firm Performance Nexus in Saudi Arabia: A Dynamic Panel Threshold Regression Model

Although the relationship between earnings management and firm performance has been well explored in the literature, sustainable performance has not yet been examined. Furthermore, the literature has not addressed the issue of nonlinearity between earnings management and firm performance. Therefore, this paper aims to examine the potential nonlinear relationship between earnings management and sustainable firm performance in Saudi Arabia using a sample of 70 listed firms over the 2015–2022 period. Specifically, it investigates the operational risk disclosure threshold effect in the earning management–sustainable firm performance nexus. To do so, the dynamic panel threshold regression model (DPTR) is performed. The result proves that there is a threshold effect of operational risk disclosure in the relationship between earning management and sustainable firm performance. Specifically, the threshold values of operational risk disclosure for the three models are estimated at 6 between the low- and the high-operational-risk-disclosure regimes. In the lower regime, firm performance decreases when earning management increases; however, in the higher regime, firm performance increases when earning management increases. These outcomes support the predictions of agency and positive accounting theories.

Commodity price volatility, institutions and economic growth: An empirical investigation

AbstractThis article investigates the role of institutional quality in transmitting effects of commodity price volatility to economic growth. To do so, we collect data on 107 primary commodity exporting countries in both developing and developed ones over the period 1976–2015. Our empirical approach is based on Solow growth model framework (Solow, R. M. (1956). The Quarterly Journal of Economics, 70(1), 65) and consists of estimating a dynamic panel model using the two‐step system GMM estimator. Our results show evidence that commodity price booms are associated with good economic performances that are unfortunately wiped out by the negative effects of price volatility in developing commodity‐dependent countries (CDCs). The main channel through which this volatility affects economic growth turns out to be through factor productivity. Finally, we have formally established that the negative effect of price volatility in CDCs is mainly due to the poor quality of institutions in these countries. These results suggest that it is important for commodity‐exporting economies, especially developing CDCs, to work on building strong economic and political institutions to guard against the risk of commodity price volatility.

Score-driven latent-factor panel data models of economic freedom: an empirical application to the United States

ABSTRACT In this paper, we study the link between economic freedom and gross domestic product (GDP) growth of 12 industries making up the United States (US) economy for 50 US states from 2005 to 2020. To measure the industry-specific impact of economic freedom in the US, we use a novel panel data model, named the score-driven latent-factor panel data model of economic freedom, which includes US state- and industry-specific score-driven components, US state- and industry-specific unobserved effects, and federal-level latent factor. We show that the statistical performance of the novel panel data model is superior to those of classical static and dynamic panel data models. With the exception of the ‘Agriculture’ and ‘Utilities’ industries, we find a positive relationship between economic freedom and growth in 10 of the 12 US industries considered for the score-driven latent-factor panel data model.

Exploring the drivers of Indian agricultural exports: a dynamic panel data approach

Exploring the drivers of Indian agricultural exports: a dynamic panel data approach

The vulnerability to climate change in Africa: Does industrial development matter?

AbstractIn a context marked by an upsurge in the scale of climate change and its consequences in Africa, this article explores ways to increase the resilience of African economies. It aims to analyze the effect of industrialization on the continent's vulnerability to climate change (VCC). The sample used for this purpose consists of 41 African countries from 2010 to 2021. A dynamic panel model is estimated using the system generalized method of moments. Results show that industrialization reduces the VCC in African countries. It reduces their sensitivity to climate change while increasing their adaptive capacity. Furthermore, results show that industrialization is more likely to reduce the VCC in sectors such as ecosystems, habitat, health, and infrastructures whereas it increases vulnerability to climate change in the food and water sectors. The results, however, reject the environmental Kuznets curve hypothesis between industrialization and VCC. These results are robust to the change in industrialization measures. Therefore, African countries would benefit from pursuing their industrial development through greater use of renewable energy. This can help them to sustainably reduce their VCC. In addition, they need to implement specific measures to adapt to climate change in the food and water sectors.

Exploring the nexus of decent work, financial inclusion, and economic growth: A study aligned with SDG 8

We investigate the potential influence of fair employment practices and financial inclusion on economic growth, focusing on aligning our analysis with the United Nations Sustainable Development Goal 8 (SDG 8). Our study encompasses various countries, including 26 low-income, 20 middle-income, and 15 high-income nations. Utilizing a dynamic fixed-effect panel data approach and employing the Generalized Method of Moments from 2010 to 2021, our findings reveal that conducive environments for decent work and enhanced access to digital financial services positively impact economic growth. This synergistic effect of SDG 8 components is particularly pronounced in high-income countries, suggesting the potential for accelerated economic growth rates. Conversely, our analysis finds no discernible impact on the economic growth of low-income countries. For middle-income countries, nuanced coefficient outcomes provide a more intricate understanding of their economic dynamics. Through extensive impulse-response analysis using a Panel Vector Autoregression model, we illustrate the distinct effects of shocks related to decent work and financial inclusion across various income categories. Our results are robust to multiple sensitivity tests, underscoring their reliability and signaling significant policy implications for acknowledging the critical role of decent work and financial inclusion in fostering economic growth.

Mineral resource rents, fintech technological innovation, digital transformation, and environmental quality in BRI countries: An insight using panel NL-ARDL

The prime objective of the current study is to investigate the impact of mineral resource rents, fintech technological innovation, and digital transformation on the environmental quality of 50 BRI countries. The panel data from the twenty years from 2000 to 2019 of the sample countries are used in the analysis of this study. The study has employed the Panel NL-ARDL to achieve the research objectives. Meanwhile, the current study has employed conventional unit root tests based on Augmented Dickey-Fuller (ADF) unit root tests, such as the LLC and IPS tests. This study employs the method of heterogeneous dynamic panel analysis. The results obtained from the FMOLS regression analysis provide a detailed comprehension of the complex connections between Mineral Resource Rent, Fintech, Digital Transformation, and CO₂ emissions; these findings indicate that countries with advanced financial technology or heavy reliance on Mineral resources are more likely to observe the favorable impacts of digital transformation on the environment. The study results imply that policymakers should investigate all-encompassing policies that exploit these interactions, recognizing that a complete approach can produce substantial and enduring environmental advantages. The interaction variables (NRRDTT and FNTINDTT) demonstrate the negative coefficients that emphasize the combined impact of Mineral resource rent, Finetch, and digital transformation. Policymakers in resource-dependent economies should consider strategies incorporating digitalization and financial technology to optimize their potential impact on environmental sustainability.

Three-way interaction effect of entrepreneurial orientation, CEO power, and organizational slack on Indonesian firms’ performance

This study aims to explore the complex interplay between entrepreneurial orientation, CEO power, and organizational slack, and their collective impact on firm performance within Indonesia’s manufacturing sector, providing actionable insights to optimize operations in a dynamic, resource-constrained environment. The paper employs a longitudinal approach, utilizing dynamic panel data from 127 publicly-traded manufacturing companies listed on the Indonesia Stock Exchange from 2014 to 2022, focusing on this sector due to its significant role in Indonesia’s economy and the unique challenges these firms face in adapting to market changes and competitive pressures. The study initially found that entrepreneurial orientation did not significantly influence firm performance. However, when CEO power was introduced into the analysis, it significantly, albeit negatively, moderated the effect of entrepreneurial orientation, suggesting that higher CEO power may actually diminish beneficial impacts of entrepreneurial orientation on performance (β = –48.041, p < 0.05). Importantly, the analysis revealed that organizational slack can positively interact with both entrepreneurial orientation and CEO power, mitigating this negative influence and enhancing firm performance (β = 15.261, p < 0.05). These findings illuminate the complex interdependencies within strategic management, underscoring the necessity of aligning upper echelon power dynamics with organizational resources. This alignment is crucial for leveraging the full potential of entrepreneurial orientation to enhance firm performance. AcknowledgmentsThis study received sponsorship from Beasiswa Pendidikan Indonesia and Lembaga Pengelola Dana Pendidikan (Indonesia Endowment Fund for Education). The support from these organizations has been invaluable in the completion of this work, enabling comprehensive data collection and analysis crucial to complete the study.

Estimating causal effects from panel data with dynamic multivariate panel models

Panel data are ubiquitous in scientific fields such as social sciences. Various modeling approaches have been presented for observational causal inference based on such data. Existing approaches typically impose restrictive assumptions on the data-generating process such as Gaussian responses or time-invariant effects, or they can only consider short-term causal effects. To surmount these restrictions, we present the dynamic multivariate panel model (DMPM) that supports time-varying, time-invariant, and individual-specific effects, multiple responses across a wide variety of distributions, and arbitrary dependency structures of lagged responses of any order. We formally demonstrate how DMPM facilitates causal inference within the structural causal modeling framework and we take a Bayesian approach for the estimation of the posterior distributions of the model parameters and causal effects of interest. We demonstrate the use of DMPM by applying the approach to both real and synthetic data.

The effect of off-balance sheet activities on credit risk of African banks

Purpose The purpose of this study is to analyze the effect of off-balance sheet activities on the credit risk of African banks. Design/methodology/approach The theory about the relationship between off-balance sheet activities and bank risk was used to construct a conceptual model of the effect of off-balance sheet on credit risk in an African context. The accounting approach is chosen by collecting accounting data extracted from the annual reports of 24 private and conventional African banks during the period 2010–2019. Both statistical and empirical studies are conducted. The statistical study aims to give a description of sample banks in terms of off-balance sheet activities and key financial indicators. The empirical study has the goal of exploring the correlations between, on the one hand, credit risk and, on the other hand, off-balance sheet ratio and control variables (bank- and country-specific variables). This study is based on dynamic panels using the two-step generalized method of moments technique to estimate regressions between credit risk and the explanatory variables. Findings The statistical study reveals that sample banks use moderately off-balance sheet activities; most of them use essentially guarantees and letters of credit, have satisfactory financial indicators and are slightly exposed to credit risk. The empirical results from the two-step generalized method of moments technique disclose that off-balance sheet activities have an intensifying effect on the credit risk of African banks. However, the increasing effect can be minimized when African banks use moderately off-balance sheet activities. Practical implications Using judiciously off-balance sheet activities does not exacerbate the exposure of African banks to credit risk. Therefore, managers of African banks are recommended to maintain a moderate level of off-balance sheet activities, especially guarantees and letters of credit. Originality/value The findings of this study eliminate the opacity about the effect of off-balance sheet activities on credit risk. Moreover, this study fulfills the huge gap in the related literature by completing the scarcity of recent studies, considering all items of the off-balance sheet, focusing on the African context, describing off-balance sheet activities and financial indicators of sample banks due to a statistical study and estimating regressions of dynamic panels between credit risk and both bank-specific and country-specific variables due to a two-step generalized method of moments technique.

The Impact of Digital Inclusive Finance on Economic Growth in Xinjiang Uygur Autonomous Region, China

With the advancement of digital technology and the in-depth exploration of inclusive finance, digital inclusive finance has emerged as a result. The development of digital inclusive finance is propelled by the reduction of costs and barriers in financial services through digital technology. Xinjiang Uygur Autonomous Region, due to its remote geographical location, faces spatial constraints that are overcome by digital inclusive finance. Therefore, this paper focuses on the study of the effects of digital inclusive finance on economic growth in Xinjiang. To analyze the impact of digital inclusive finance on economic growth in the Xinjiang region, this paper constructs a dynamic panel GMM (Generalized Method of Moments) model based on panel data from Xinjiang Uygur Autonomous Region for the years 2011-2019. Empirical analysis reveals that digital inclusive finance has a positive effect on economic growth in the Xinjiang region.

Identification of returns to new technologies under distinctive econometric approaches

ABSTRACT This article uses distinctive econometric models to investigate returns to new technologies and whether adoption decisions can be explained by comparative advantage. I consider three models: static and dynamic panel models of homogeneous returns to fertilizer, as well as the correlated random coefficient model of heterogeneous returns. I discuss both the benefits of using each of the models and their interpretations. I then use data from cocoa farming in Ghana to identify the returns to fertilizer by means of these three models. The estimated average returns in different models are positive, high and strongly significant statistically. I also find evidence of heterogeneous returns to new technology based on comparative advantage. My overall results suggest that adoption of new agricultural technologies may not necessarily benefit all farmers, and the adoption decision may be crop-specific, context-specific or technology-specific.

ESG performance on the value of family firms: international evidence during Covid-19

The link between the financial success of family companies during COVID-19 and their environmental, social, and governance (ESG) performance is examined for the first time in this research. We have a natural setting in the COVID-19 era to see if the market rewards family-run firms that integrate social and environmental concerns into their goals during uncertain times. Since they can enhance their image and reputation, which the market values, these companies are likely to pursue broader social objectives, such as environmental improvement (socioemotional wealth perspective); alternatively, managers can act as stewards of the family’s interests by using these initiatives to increase the company’s value (stewardship perspective). However, it is also possible that in this type of companies economic interests prevail over social wellness (“amoral familism”). Therefore, family-owned firms could be reluctant to implement ESG practices unless they yield certain socioemotional benefits, including enhancing or maintaining their reputation in the public eye. In light of the above, we use an international display of the 500 biggest family firms in the world from 2015 to 2021. Taking into account an endogenous relationship between ESG performance and family business value, the study uses generalized moments to construct a dynamic panel (GMM). The primary conclusion is that there is a positive correlation between corporate valuation and ESG performance. Nonetheless, it has been noted that the performance of the companies is negatively impacted during the COVID-19 period. However, for firms with superior ESG performance, this negative impact did not exist over this period, supporting the idea that investors view better ESG performance as a prediction of future good stock performance. The results have a variety of implications. To begin with, this study adds to the body of knowledge on the environmentally friendly and sustainable expansion of family companies by providing recommendations for investors and businesses to better understand the influence of ESG on the profitability of family businesses. Furthermore, managers have to concentrate on enhancing the ESG performance of their organizations as it has the potential to increase value, draw in investments, encourage sustainability, control risks, affect earnings, and interact with the ownership structure. Additionally, managers need to consider how important it is to have a strong ESG performance in order to mitigate the negative effects of external crises like the COVID-19 epidemic. It’s crucial to remember that the precise impact might change based on the sector and other aspects unique to each company.

Does global economic and climate policy uncertainty affect private investment? Evidence from sub‐Saharan Africa

AbstractThis study investigates how uncertainty in climate and global economic policies affects private investment in sub‐Saharan Africa (SSA). Using panel data from 41 countries over the period 2000–2022, the study employs a dynamic panel model to estimate the effects of these two types of uncertainty on the private investment‐to‐gross domestic product ratio. The study finds that both global economic policy uncertainty (EPU) and climate policy uncertainty have a negative and significant influence on private investment, implying that higher levels of uncertainty discourage private investors from undertaking long‐term projects in the sub‐region. The study also finds that the effect of uncertainty on climate policy is stronger than that of EPU, suggesting that private investors are more sensitive to the lack of clarity and coherence in the global climate policy framework. The findings are robust to different estimation techniques. The study concludes that reducing policy uncertainty, especially in the area of climate change, is crucial for enhancing private investment and promoting sustainable development in SSA.

Global Energy Transition and the Efficiency of the Largest Oil and Gas Companies

The challenges posed by climate change and global warming loom large, necessitating a critical initial step towards the long-term growth and the enhancement of both environmental and operational efficiency. Within the energy sector, renewable energy sources are gaining increasing prominence. Consequently, traditional oil and gas companies (OGC) are undergoing a gradual transformation into comprehensive energy corporations, aligning themselves with energy transition policies. This paper examines two types of efficiency measures—operational and environmental—for the 20 largest OGC during the period of 2010–2019. Secondly, this research aims to explore the effect of the global energy transition on both environmental and operational efficiency. Based on three estimation methods, two estimation steps are used in this research. In the first step, the True Fixed Effect (TFE) model and the Battese and coelli (1995) SFA model are applied to evaluate, measure and compare the environmental and operational efficiency scores. In the second step, the TFE model and GMM approach for the dynamic panel data model are used to explore, evaluate and verify the effect of global energy transition on the environmental and operational efficiency of the largest 20 OGC in the world. The results reveal that the average operational efficiency of major OGC measured using the BC.95 model and TFE model is 66% and 85%, respectively, and the overall average level of environmental efficiency for OGC over a 10-year period is 31% (based to B.C.95 model) and 13% (based to TFE model). Our findings reveal that biofuels, solar and hydropower contribute to promote the operational and environmental efficiency of the largest 20 OGC. However, the analysis suggests that while the global energy transition significantly influences and bolsters environmental efficiency, its effect on operational efficiency among these major OGC remains less pronounced and insufficient.

The Influence of Natural Resources, Energy Consumption, and Renewable Energy on Economic Growth in ASEAN Region Countries

This research aims to identify and analyze the role of natural resources, CO2 emissions, and renewable energy on the economic growth of countries in the ASEAN region. In this study, we tested whether a dynamic process occurred based on a dynamic panel data model while comparing it with static panel data. The dataset used is ASEAN region countries with time series data from 2000-2021. The analysis tools used are static and dynamic panel data. The research results found that natural resources, FDI, and renewable energy significantly positively affect economic growth in the ASEAN region. Conversely, CO2 has a negative and insignificant effect. These results prove that the ASEAN region's economic development has been clean energy-oriented.

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.

Middle-aged and Older Adult Employment and the Perceived Risk of Running Out of Money during COVID-19: A Dynamic Panel Data Analysis.

The coronavirus disease of 2019 (COVID-19) adversely impacted the health of middle-aged and older adults and altered their economic outlook. Several national polls revealed older adults felt stress about money and many reported difficulties in paying expenses during 2021. While such descriptive reports have raised awareness, peer-reviewed studies utilizing panel data can offer additional insight. As such, the purpose of this study was to contribute to this growing literature by examining the demographic, economic, and health factors associated with employment and the perceived risk of running out of money for middle-aged and older adults during the pandemic. This study utilized the April-May 2020, April-May 2021, and March 2022 waves of the Understanding America Study (UAS). Next, a dynamic panel data model was formulated to account for reverse causality and unobserved heterogeneity with a sample of 2,302 adults between the ages of 50-74. Employment (-2.77, p<0.05) was negatively associated with the perceived risk of running out of money. Male, higher education levels, currently married, and health insurance status also exhibited a negative association. Meanwhile, a positive association was found for non-White (6.79, p<0.01). Financial well-being is an important consideration in later-life and what role employment played during the COVID-19 pandemic is a worthwhile examination. A better understanding of which factors may be associated with the perceived risk of running out of money during the pandemic can be useful when devising policies which address financial security for middle-aged and older adults.

Research on Green Process Innovation Enabling the Synergistic Effect of Pollution Reduction and Carbon Reduction

Achieving the objective of "peak carbon dioxide emissions and carbon neutrality" in the new stage of development will require the synergistic effect of pollution reduction and carbon reduction. In the new stage of development, achieving the goal of "peak carbon dioxide emissions and carbon neutrality" will necessitate the synergistic effect of pollution reduction and carbon reduction. This study assesses the degree to which pollution reduction and carbon reduction have a synergistic effect using the coupling coordination model, and uses the fixed effect model, the dynamic panel GMM model, the OLS model and the threshold effect model to examine how green process innovation affects pollutant reduction and carbon reduction synergistically, including direct, heterogeneous, and nonlinear effects. The results show that: firstly, green process innovation has a direct promoting effect on synergistic effect of pollution reduction and carbon reduction; Secondly, due to the differences in the economic development of different regions in China, the impact of green process innovation on the synergistic effect of pollution reduction and carbon reduction is heterogeneous in different regions, and presents a gradient distribution of "east &gt; west &gt; middle". Finally, there is a threshold effect in the impact of green process innovation on regional synergistic effect of pollution reduction and carbon reduction. This paper provides some reference value for promoting green process innovation and enhancing the collaborative impact of mitigating pollution and decreasing carbon emissions.