Econometric Approach Research Articles

Spatial patterns of European innovation: a spatial econometric approach with technological proximity weights

The paper deals with a spatial econometric analysis of 220 European regions. The analysis follows the Mixed Geographically Weighted Regression – Spatial Autoregressive approach. Patent applications were a proxy for innovation output. Instead of traditionally applied geographical proximity, the technological similarity was considered. The results supported the assumption of spatial differentiation of model parameters and indicated that regional innovation activities do not have only a local character in almost half of the regions. The region's technological similarity appears to be a significant factor stimulating innovation for regions that are not among the top innovators.

Debt Puzzle: A Comparative Analysis of Public Debt’s Impact on Production Efficiency across OECD Countries

Debt is a fundamental component of modern economic systems. It serves as a source of financing for government, business, and individual projects. Many earlier studies concentrated on the direct relationship between debt and economic performance using different econometric methodologies. This work investigates the effect of debt on production efficiency, extracted from the estimated production function. Unlike previous econometric approaches, we employ a production stochastic frontier analysis (SFA) on data for 18 OECD countries spanning from Quarter 1, 2015, to Quarter 3, 2021, to capture the short-run effect of debt on the production efficiency and, thus, output growth. The results show that, in the short run, as debt increases by $1 billion, efficiency increases by 0.04%. Additionally, we found that the most indebted countries are the most efficient countries. In our sample, those were the UK and France. Furthermore, the average efficiency for the 18 OECD countries was 70.07.

Digitalization's contribution towards sustainable development and climate change mitigation: An empirical evidence from EU economies

The current study aims to test the usage of econometric and machine learning approaches to study the relationship between methane (CH4), a hydrocarbon component of natural gas, as a proxy of carbon emission, GDP as economic growth, financial development (FIN), and medium and high technologies as a proxy of information technology (ICT) and human development (HDI). This study observes two extended moderating effect models of human development index and financial development via medium and high technologies on carbon emissions over the 15-year periods from 2007 to 2021 for the 27 EU economies. Results indicate that when considered solely, ICT, economic growth, and HDI improve environmental quality and contribute to climate change mitigation, reducing methane emissions, whereas financial development seems to damage environmental quality. However, the crossed effects of ICT with HDI, and that of ICT with FIN, were considered in estimations, with results pointing out that those favorably affect climate change mitigation. Jointly considering ICT, HDI, and financial development proves to have a synergistic effect in promoting environmental health than each element on its own. Green and yellow countries were also identified revealing the countries for which a reduction and increase, respectively, in the value of methane emissions is predicted after three years. In the case of the entire panel, the STR (linear regression tree) algorithm predicts an average growth in methane emissions of around 3.64 %. Important policy directions are drawn considering the results obtained.

Towards low-carbon development through innovation: Empirical evidence from China

Innovation is crucial for countries to achieve their carbon peak and carbon neutrality goals. To explore how and to what extent innovation contributes to low-carbon development, this study utilizes data from 272 Chinese cities, applying both staggered difference-in-differences and spatial econometric approaches to comprehensively assess the direct and spatial spillover effects of China's innovative city pilot policy on urban low-carbon development. The findings are as follows: First, the innovative city pilot policy has reduced urban carbon intensity by 4.62 % and increased carbon total factor productivity by 3.03 %, with the effect being more significant in larger cities. Second, mechanism analysis indicates that the innovative city pilot policy primarily promotes urban low-carbon development through innovation financing and talent attraction, rather than optimizing industrial structures Third, spatial analysis reveals that the innovative city pilot policy has a low-carbon spillover effect, indicating it can promote low-carbon development in neighboring cities. Finally, this paper proposes policy recommendations for combining innovative city pilot policies with climate policies, focusing on the underlying mechanisms, and exploring cross-regional linkages.

Does the sequencing of accounting principles courses affect academic performance?

ABSTRACT Research has documented the difficulty business and accounting students have in introductory accounting courses, and significant effort has focused on changes internal to the courses to try to improve student outcomes. Internationally and across the United States, most accounting programs separate introductory financial (FA) and managerial (MA) accounting into two independent courses because the course content and purpose of each are distinct. One underexplored way institutions might affect student outcomes is by determining the sequence in which students take principles courses at the same cognitive level. We use student data from a diverse non-selective institution, with 100 nations represented, combined with several econometric approaches to identify the effect, if any, of course ordering on course outcomes and long-term student outcomes for business and accounting students. Our results recommend that the practical and optimal sequencing method for accounting majors is FA before MA. For other students, we find evidence of an ‘accounting burnout effect’: students perform noticeably worse in their second accounting course regardless of sequencing, or do noticeably worse in both if taken simultaneously, another type of burnout. Given the similarities of accounting programs internationally and the diverse nature of our data, our findings can be generalized to international audiences.

A Panel Analysis on the Nexus between Financial Development, Oil Production, and Trade-Openness and Its Impact on Sustainable Economic Growth: Evidence from Selected Arab Economies

In accordance with the United Nations Sustainable Development Goals agenda for decent and sustainable economic growth highlighted in the UNSDGs-8, several economies over the years have been on the quest for drivers for decent and sustainable economic growth, of which the Arab bloc is no exception. To this end, the present study draws strength from the classical growth model while exploring the dynamic nexus between oil production and economic growth while accounting for other key growth drivers like gross capital formulation accumulation, labour, trade openness, and financial development for a balanced panel of selected Arab economies. To operationalise the study objectives, the present study leverages second-generational panel econometric approaches. The econometrics techniques applied circumvent the cross-sectional dependency and slope heterogeneity in the sampled bloc. For co-integration analysis, the Westerlund’s panel co-integration test affirms a long-run equilibrium relationship between the study’s outlined variables. Furthermore, for long-run estimates, the present study leverages the common correlated effects mean group (CCEMG) methodology and the augmented mean group (AMG) method for robustness and soundness of the results and coefficients. The present study corroborates the trade-induced growth hypothesis in the entire panel at a p < 0.001 statistical level, which resonates with the mercantilism school of thought. Additionally, the present study also affirms the Solow–Swan hypothesis, where gross capital formation accumulation and labour drive economic growth. Interestingly, the panel bloc shows that oil production is a key driver to the nation’s economic growth, at a p < 0.05 statistical level. However, from a policy standpoint, there are policy suggestions for diversification of the Arab economies to move from a mono-economy dependent on oil production to other sectors like service, industry, and manufacturing, which require labour, capital accumulation, and more. Further policy caveats are outlined in the concluding section.

Sustainable Employment Creation through the Polish Investment Zone in Lagging Regions

The article aims to identify the firm-level effects of public support within the Polish Investment Zone (PIZ) on firms’ employment located in lagging regions of Poland, signalling insights into sustainable employment creation. Utilising a difference-in-differences framework and accounting for controls, including the firms’ size, age, leverage, other public aid programmes, subsidies, and firm-level fixed effects, our objective is to ascertain the average treatment effects (ATEs) of the programme, particularly concerning the creation of additional workplaces. To ensure the reliability of our findings, we conducted robustness checks utilising alternative econometric approaches and scrutinise changes in the duration of both the pre- and post-treatment periods. No significant ATEs were observed in the year of the treatment or in one to three years following treatment. This outcome remains robust to variations in the econometric approach, the set of variables considered, and alterations in the length of both pre- and post-treatment periods. This article contributes to an ongoing discussion marked by a lack of consensus regarding the effectiveness of special economic zones in fostering sustainable employment and reducing unemployment rates by presenting the effects of the PIZ and directing policy attention towards more qualitative aspects of created workplaces, fostering sustainable employment.

The effects of monetary policy on macroeconomic risk

Monetary policy expansions significantly reduce macroeconomic downside risk, measured as the difference between the median and the 5th percentile of the industrial production growth forecast distribution. However, the effects are smaller in magnitude than those of credit spread shocks, which we find to be a major driver of fluctuations in downside risk. As a consequence, large policy interventions are required to stabilize risk originating from the financial sector, with undesirable consequences in terms of both price and output stability. These findings are obtained using US data and a novel econometric approach which combines quantile regressions and Structural VAR analysis.

The long-run effects of recessions on fertility

AbstractUsing large repeated cross-sections and a cohort-based econometric approach, this paper produces evidence that women who finish their formal education during periods of high unemployment have significantly, and persistently, lower fertility compared to women who graduate during more favorable economic conditions. In terms of magnitude, a woman who graduates into a market with a 3 percentage point higher unemployment rate experiences an approximate 14% reduction in birth probabilities about a half-decade later. The long-recognized negative effects of unemployment on marriage explain, at most, 30% of that reduction in fertility. Rather, graduating into high unemployment appears to exert its own influence on fertility, separate from its effect on marriage.

On the information content of explainable artificial intelligence for quantitative approaches in finance

AbstractWe simulate economic data to apply state-of-the-art machine learning algorithms and analyze the economic precision of competing concepts for model agnostic explainable artificial intelligence (XAI) techniques. Also, we assess empirical data and provide a discussion of the competing approaches in comparison with econometric benchmarks, when the data-generating process is unknown. The simulation assessment provides evidence that the applied XAI techniques provide similar economic information on relevant determinants when the data generating process is linear. We find that the adequate choice of XAI technique is crucial when the data generating process is unknown. In comparison to econometric benchmark models, the application of boosted regression trees in combination with Shapley values combines both a superior fit to the data and innovative interpretable insights into non-linear impact factors. Therefore it describes a promising alternative to the econometric benchmark approach.

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.

The Euro Area Government Spending Multiplier in Demand‐ and Supply‐Driven Recessions

AbstractWe estimate government spending multipliers in demand‐ and supply‐driven recessions for the Euro Area. Multipliers in a moderately demand‐driven recession are two to three times larger than in a moderately supply‐driven recession, with the difference between multipliers being non‐zero with very high probability. More generally, multipliers are inversely correlated with the deviation of inflation from its trend, implying that the more demand‐driven a recession, the higher the multiplier. Multipliers range from 0.5 in supply‐driven recessions to about 2 in demand‐driven recessions. The econometric approach leverages a factor‐augmented interacted vector‐autoregression model purified of expectations (FAIPVAR‐X). The model captures the time‐varying state of the business‐cycle including strongly and moderately demand‐ and supply‐driven recessions, by taking the whole distribution of inflation deviations from trend into account.

Enhancing Beef Supply through Beef Self-Sufficiency Policy in Indonesia: An Econometric Approach

Abstract Enhancing beef production is important to meet the increasing beef demand. However, beef demand has outpaced domestic beef production, resulting in a gap between beef demand and domestic beef production. The beef self-sufficiency policy is one of the flagship policies aimed at enhancing beef supply in Indonesia. This study aims to assess the impact of the beef self-sufficiency policy on beef supply in Indonesia. The study used time series data from 1990 to 2019, sourced from BPS, Ministry of Agriculture, Ministry of Trade, BI, and FAO. The analysis method employed an econometric approach through a simultaneous equation system model and estimated using the Two Stage Least Square (2SLS) method. The research findings showed that the beef self-sufficiency policy has a positive and significant effect on domestic beef production (p-value < 0.15) and beef demand (p-value < 0.05). Conversely, the beef self-sufficiency policy has a negative and significant effect on the import of fattening cattle (p-value < 0.05). The results showed that the beef self-sufficiency policy through the artificial insemination program had an impact on increased calf population by 3.819%, cattle population by 1.202%, and domestic beef production by 2.528%. These programs also showed an impact on the decreased import of fattening cattle by 13.727% and the import of beef by 24.972%. It can be concluded that the beef self-sufficiency policy has significant impacts on the beef supply in Indonesia.

Investigating the role of energy mix and sectoral decomposition on environmental sustainability in selected European countries

This study investigates the interactions between per capita CO2 emissions, economic growth, energy consumption (renewable and nonrenewable), agricultural, industrial, and services value-added, and trade openness across a panel of 23 European countries from 1995 to 2022. The empirical analysis is based on panel data econometric approaches (fixed effects, fully modified ordinary least squares, dynamic ordinary least squares, quantile regression models). Empirical findings reveal that economic growth and renewable energy consumption negatively impact CO2 emissions across all models, highlighting its role as a crucial mitigating factor in reducing air pollution. Conversely, fossil fuel energy consumption and trade openness positively influence CO2 emissions, underscoring the urgent need to transition towards more sustainable sources and trade strategies. Agriculture, industry, and services value-added are also significantly associated with air pollution, indicating areas requiring targeted interventions to curb emissions effectively. These empirical insights contribute to the literature and provide actionable plans for policymakers.

Public debt, investment and economic growth dynamics: Do geographical proximity and spatial spillover effects matter?

This study employed an innovative spatial econometrics approach to analyze the spillover effects of foreign public debt and foreign direct investment (FDI) on regional economic growth dynamics of Eastern Africa. Specifically, we utilize Spatial Durbin Fixed Effect (SDM-FE) Model, drawing on balanced panel data from the World Development Indicators (WDI) for the period 1992–2019. This study contributes by utilizing a spatial weight matrix and investigating its interactions with economic growth and various other macro-regional factors, thereby unveiling the presence of spatial spillover effects and the impact of geographical proximity of countries within the region. Our results indicate that foreign public debt, FDI, gross fixed capital formation, human capital development, inflation, and government expenditure, significantly have spatial spillover effects on regional economic growth. Additionally, the results underscore the presence of regional growth divergence and provide further evidence of substantial regional spatial dependence in economic growth. Based on these outcomes, it is evident that foreign public debt has a negative impact on economic growth, which is consistent with the debt overhang theory and the crowding-out hypothesis. Moreover, the foreign public debt and regional growth policies should be devised considering the geographical interconnectedness between countries in the region, as the research output has revealed the impacts of growth and debt spillovers among the countries studied. Policies that prioritize these objectives would promote long-term regional economic growth and prevent the effects of excessive foreign public debt by creating a favorable macroeconomic climate.

Financial performance and capital structure – an econometric approach for Romanian e-commerce companies during the COVID-19 pandemic

The study investigates the inverse relationship between financial performance and capital structure for the Romanian B2C e-commerce companies, based on a representative sample of 437 companies active in the period 2005–2020. Statistical analyzes show the evolution of financial performance and the impact of the COVID-19 pandemic on it, depending on the company category. All company categories had better financial performance in 2020 compared to 2019, based on sample results. The study reveals valid reference values for the financial ratios of Romanian electronic commerce, being a model to be applied in any industry. The analysis of the causality of the financial variables and their correlations, on the sub-periods 2005–2008 and 2009–2020, both at the company category level and at the sample level, are the basis of the GMM approach. The econometric models Difference GMM and System GMM explain the relationship between financial performance and capital structure leading to interesting conclusions. As e-commerce has a sustainable development, the findings and conclusions of the study provide guidance for economic policies at the sectoral level. Financial performance in relation to strategic debt management depends on the company category. Stimulating the development of those categories of companies that ensure the efficient performance framework can be the key to a sustainable development of the national economy. The study is useful for managers, investors, financial analysts, decision makers, in financial education as well as for the banking system.

European Financial Markets Integration and the Politics of Credit Rating Agencies: An Econometric Approach to Study Microeconomic Dynamics and Sustainability

Abstract On sovereign credit default swaps markets, contagion serves as a sobering reminder of the interconnectedness of global financial systems. Like ripples in a pond, the impact of sovereign default or downgrades can cascade across borders, highlighting the intricate web of dependencies among nations. Utilizing sovereign CDS spreads between 2006-2020 on local European markets, the study employs an event study methodology to assess the effects of rating changes on CDS spreads, focusing on negative events such as sovereign rating downgrades. The findings reveal that negative events have a greater impact on the CDS market than positive events, abnormal returns are higher during economic crises, and states with public debt exceeding the Maastricht criteria experience higher abnormal returns. These results suggest that investors are sensitive to adverse news and risk factors, see opportunities for profit during economic turmoil, and closely monitor fiscal sustainability metrics. Understanding and managing contagion risk in these markets requires not only vigilance but also cooperation and coordination among policymakers and market participants.

Do money supply, interest rates, external debt and exchange rates explain inflation in Nigeria? An econometric approach

The recent jump up in the prices of goods and services in Nigeria despite government policy interventions has triggered new research towards finding solutions to curbing this economic menace. This study examines whether the interest rate, exchange rates, external debt and money supply can curb inflation in Nigeria. The proxy measures of the variables under study, such as; 3-month deposit rate (ITR3), naira\1 Us dollar exchange (EXR), government external debt (ETD), money supply (MS) and consumer price index (CPI) data used cover the period from January 1981 to December 2022. Statistical tools such as; order of integration, the Johansen co-integration test, vector error correction (VEC) model, and residual diagnostic test were adopted. The result shows that the variables except ITR3 are integrated order one and ITR3 is stationary in its normal level. The Johansen co-integration test indicates the existence of one co-integrating equation significant at 0.05 level. The estimates of the VEC model specify that of all the explanatory variables considered only 3-month deposit rate has a strong impact on inflation both in the short-run and long-run, while exchange rate has a weak effect on inflation. However, this result can form a basis to re-assess the monetary policy rate in order to control inflation in Nigeria.

Financial instability in Europe: Does geopolitical risk from proximate countries and trading partners matter?

Using a spatial econometric approach, we measure 28 European countries' foreign geopolitical risks (GPR) from their proximate countries, export destinations, and import origins from January 1985 to January 2024 at a monthly frequency. Based on difference GMM estimation on dynamic panel data model, we find that the foreign GPRs increase Europe's financial instability through potential channels of surging energy inflation and capital flight to the U.S. Compared with high-income countries with a bank-based financial system, low-income countries with a market-based financial system are more fragile to the foreign GPRs. These findings can help European financial authorities improve prudential regulation policies.

Empowering Asia's sustainable future: Unraveling renewable energy dynamics with trade, carbon emission, governance, and innovative interactions

This study is important as it addresses critical challenges in Asia's sustainable development by examining the intricate relationships between renewable energy dynamics, trade, carbon emissions, governance, and their interactive effects from 1990 to 2020. This study introduces a novel interactive term (CO2*QGov) to assess the effectiveness of government policies in reducing carbon emissions and promoting renewable energy. This research employs many econometric approaches, such as cross-sectional ARDL, Westerlund co-integration techniques, and FMOLS and DOLS, to ensure the robustness of the findings. The results of the present study confirm that trade openness and FDI positively influence renewable energy consumption. Conversely, corruption, urbanization, and the interactive term (CO2*QGov) were associated with reduced renewable energy consumption, indicating the need for comprehensive policy interventions. Governments should consider offering financial support to households, industries, and businesses to stimulate renewable energy production and consumption, such as subsidies for renewable energy installations like solar panels.