Econometric Methodology Research Articles

The Tunisian Central Bank’s Efficiency Benchmarks: A Dynamic Approach

The topic of banking performance and efficiency has received considerable attention, yet there is a noticeable gap in examining the performance and efficiency of central banks. Moreover, there is a scarcity of studies on central bank efficiency. This paper aims to investigate the factors that influenced the efficiency of the Central Bank of Tunisia from 2000 to 2020, using an Autoregressive Distributed Lag Model. The appropriate econometric methodology was first established to achieve this goal, after which the model's results were presented and interpreted. The study's findings indicate that the Tunisian Central Bank’s efficiency is influenced by several macroeconomic (inflation, public deficit, growth rate), international (exchange rate, foreign debt), and political variables (political and government instability, conflict of interest), each with a varying degree of impact. Interestingly, the transition of the Central Bank of Tunisia from a dependent to an independent institution in 2016 did not yield a notable change in efficiency.Copyright© 2024 The Author(s). This article is distributed under the terms of the license CC-BY 4.0., which permits any further distribution in any medium, provided the original work is properly cited.

The Role of Renewable Energy, Technological Innovation, and Human Capital on Environmental Quality in Türkiye: Testing the LCC Hypothesis with Smooth Structural Shifts

Newly industrializing economies are ardently striving for rapid development, aspiring to emulate the affluence of Western nations. However, amidst this relentless economic dynamism, the world grapples with an escalating climate change crisis. Therefore, it becomes imperative to identify the factors contributing to improving developing nations' environmental quality while concurrently advancing their sustainable development objectives. In this regard, the present study aims to dissect the environmental implications of renewable energy consumption, technological innovation, and human capital and examine the "Load Capacity Curve" (LCC) hypothesis in Türkiye through an extension of the STIRPAT model. To achieve this objective, the research operates a novel econometric methodology, namely the "augmented autoregressive distributed lag" (A-ARDL) approach with Fourier terms, to analyze yearly data from 1980 to 2019. The empirical findings substantiate the validation of the LCC hypothesis in Türkiye, both in the short and long term. Furthermore, the results unveil that renewable energy consumption and human capital significantly bolster ecological welfare over the long term, whereas technological innovation exhibits no discernible impact on the environment. Additionally, the outcomes display that population growth positively impacts the environment in the short term; nevertheless, over the long term, it becomes detrimental to environmental quality.

Influence of vaccination on COVID-19 reproduction rate: Time trends and persistence analysis

This paper aims to study how the increase in vaccination rate in Israel affect to the behavior of COVID-19 reproduction rate, from 19 December 2020, to 25 April 2021. Multiple advanced econometrics methodologies are used to analyze the degree of persistence, to understand the relationship between these two times series and the long-term behavior. The results of our study indicate that the vaccinations cause long-run effects to COVID-19 reproduction rate and the vaccination provides useful information to predict the COVID-19 reproduction rate. Also, we determine whatever exogenous shocks related with the virus reproduction will have a very short impact over time. The first change in trend occurs on 13 January 2021, with 24.37% of the population vaccinated and when it can be seen that the increased rate of vaccinations causes the infection rate to decrease.

A framework for cost-effectiveness analysis of greenhouse gas mitigation measures in dairy industry with an application to dairy farms in China

The dairy industry is a significant contributor to global greenhouse gas emissions (GHG). Although much effort has been directed to explore the cost-effective measures for many sectors such as electricity, building infrastructure, transportation, research on mitigation measures within dairy industry remains limited. A notable obstacle is the absence of a cost-effectiveness analysis (CEA) framework to guide decision-makers and practitioners in this sector. In response, we propose a comprehensive CEA framework tailored to mitigate GHG emissions in the dairy industry. Our conceptual framework consists of six steps: defining the system boundary to determine the activities generating GHG emissions; identifying GHG emission sources within the system boundary; identifying potential mitigation measures; determining methods to quantify GHG emissions; collecting data to estimate both GHG emissions and mitigation costs; and applying general econometric methodologies to analyze the cost-effectiveness of mitigation measures. We further conducted a case study focusing on dairy farms in China, analyzing three categories of mitigation measures: feed, energy, and manure management. The results indicate that implementing effective feed and energy measures is a cost-saving strategy, reducing the cost per unit of milk production. Conversely, adopting effective manure management measures may lead to increased costs for dairy farms. The findings offer strategic recommendations for reducing GHG emissions from dairy production in China and provide analytical insights and strategic references applicable to other developing countries.

Digitalization and economic development: lessons from globalized developing countries

Purpose This paper aims to empirically investigate the dynamic interlinkages among globalization, digitalization and economic development in the top 75 most globalized countries from 2000 to 2019. The selection of the 75 most globalized developing countries is based on the overall scores of the KOF Globalization Index (2021). Design/methodology/approach The research design is based on secondary data collected from the World Bank (2021), the International Telecommunication Union (2021) and the KOF Globalization Index (2021). The study uses panel unit root tests followed by the panel cointegration techniques. Further, the estimation uses panel fully modified ordinary least squares and panel dynamic ordinary least squares methods. Findings The empirical results reveal that the effect of globalization on economic development is sensitive to different estimation procedures; in some cases, but not in every case, the effect is positive and significant. However, the positive and significant effect of digitalization on economic development is robust across all estimated models. Long-run equilibrium relationships and bidirectional causalities strongly affirm the nexus among globalization, digitalization and economic development, substantiating the interconnectedness among 75 developing economies. Originality/value The study reinstates that the forces of globalization and digitalization will be instrumental in shaping the selected most globalized economies in the long run. Adopting various econometric methodologies takes care of the time-specific and cross-sectional dynamics, as evident in the panel framework considered in this study. The empirical findings truly ascertain the theoretical synergy among the forces of globalization leading to more digitalization and economic development. This makes the empirical interplay highly conducive to framing long-term policies to expand the information communication network in terms of its access and reach.

The causal impact of a business cycle shock on road crashes and its determinants – A synthetic control group analysis

Introduction: Research suggests that recessions correlate with reductions in crash counts. However, knowledge is still scarce regarding the causality of this association, and the mechanisms through which economic shocks affect crash numbers are not well understood. We address these research gaps by applying an econometric methodology that has so far not been used for these research questions. Method: We use a quasi-natural experimental approach as our identification strategy. By exploiting the spatial heterogeneity of a shock, we define affected and less affected regions as treatment and control units. A synthetic control approach is applied to identify the causal impact of a shock on crash counts and explore the mechanisms contributing to this effect. As a case study, we use the 2008/09 financial crisis in Germany and exploit its high spatial variation. Results: We find that the crisis caused a significant crash rate reduction of 8% in the treated region. Only 1/4 of this reduction can be attributed to the decline in exposure. The remaining 3/4 are associated with the crisis-induced decrease in crash risk. Decomposing this effect shows that the crash rates in rural areas, of newly registered vehicles, of young adults, related to alcohol and speeding decline more than the overall crash rate. In contrast, crash rates of severe crashes, of heavy-goods vehicles, at night and on weekends are not the driving factors of the decrease in crash rates. Several robustness tests validate the results. Conclusions: Crash counts declined significantly due to the economic crisis. However, the magnitude of the influence is highly dependent on the crash characteristics. Practical applications: Understanding the trajectory of crash counts is crucial for implementing traffic safety measures and working towards vision zero. Our study shows that macroeconomic parameters are important potential confounding factors that should be considered in accident analysis.

Green horizons: Synergized green technological innovation and green energy consumption on ecological degradation

The ecological environment is at great risk due to economic activities owing to investments, rapid industrialization, and energy resources depletion, which pose significant environmental challenges globally. Recent research has emphasized on the crucial role of green energy consumption (GEN) and green technology innovation in attaining environmental sustainability. However, there are still areas that need to be addressed. This research study investigates the role of GEN, green technology innovation, and foreign direct investment while controlling the effect of economic growth (EGR) and trade openness level on the ecological footprint (EFP) using data from 1999 to 2022 for Pakistan. We used diverse econometric methodologies to ensure the data consistency. We examine the long-term relationships among the study variables using fully modified ordinary least-squares and canonical co-integrating regression. The results revealed that green technology innovation, and GEN emerge as pivotal in reducing environmental degradation. Conversely, foreign direct investment and EGR increased the EFP, validating the pollution haven hypothesis in Pakistan. These findings highlighted the significance of green technology innovation that increased GEN to address ecological degradation. These findings contribute to more extensive discussions on environmental sustainability and development of the green horizon, particularly in the context of developing countries like Pakistan.

Impact of climate change on agriculture in Australia: an interactive fixed effects model approach

ABSTRACT Developing policies and programmes aimed at mitigating the impacts of climate change on crop yield requires methods that correctly quantify the dependence of crop yield on weather. This article utilizes recent advances in econometric methodology and proposes an interactive fixed effects model for modelling crop yield. An attractive feature of the proposed model is that it allows for the varying degrees to which different farmers adapt to global events, such as, an increase in the global fertilizer price and an introduction of a new technology. Thus, the proposed method is an improvement over the standard method based on the fixed effects model, which is widely used in the literature for modelling crop yield. We apply the proposed approach to model wheat yields across 24 statistical areas that cover the wheat belt of the state of Victoria, Australia. Our forecasts point to a potential 14% loss in yields in the state of Victoria and a 27% loss in North-West Victoria, under the Hotter & Drier climate scenario, which the IPCC predicts to be more likely for Victoria in the medium term. Should this eventuate, it would have significant negative impacts on the wheat industry, food security and the economy.

Are natural resources a curse, a blessing, or a double-edged sword? Implications for environmental sustainability

Natural resources have a significant impact on economic and political landscapes of developing countries which determines environmental sustainability. This study explores the convoluted connection between governance and natural resources, examining how resource abundance might influence governance quality. The main components of this dynamic that the theoretical framework considers are the Rentier effects, the repression effects, and the obstruction of modernization. This study creates a governance index applying principal component analysis (PCA) on several governance characteristics, such as political stability, rule of law, government efficacy, regulation and control of corruption, to measure governance comprehensively. Natural resource exports, rents, and the differentiation between renewable and non-renewable natural resources are the three proxies used to quantify natural resources, providing a more nuanced view. To calculate the effect of renewable and non-renewable natural resources on governance in developing nations, the econometric methodology uses a dynamic panel model and system GMM. This analysis reveals that the ability of renewable resources to promote inclusive development has a favourable impact on governance. On the other hand, non-renewable resources show a negative correlation, mainly because of their vulnerability to swings in the world price and their propensity to consolidate power and promote corruption. The significance of differentiating between natural resource types is highlighted in this study, along with the possible advantages of renewable resources for governance and the disadvantages of an over-reliance on non-renewable resources. Policymakers, researchers, and practitioners interested in the development and governance difficulties encountered by resource-rich developing nations can benefit greatly from this research's larger and more complex understanding of the link between natural resources and governance.

Health-led growth hypothesis and health financing systems: an econometric synthesis for OECD countries.

This study investigates the Health-Led Growth Hypothesis (HLGH) within OECD countries, examining how health expenditures influence economic growth and the role of different health financing systems in this relationship. Utilizing a comprehensive analysis spanning 2000 to 2019 across 38 OECD countries, advanced econometric methodologies were employed. Both second-generation panel data estimators (Dynamic CCEMG, CS-ARDL, AMG) and first-generation models (Panel ARDL with PMG, FMOLS, DOLS) were utilized to test the hypothesis. The findings confirm the positive impact of health expenditures on economic growth, supporting the HLGH. Significant disparities were observed in the ability of health expenditures to stimulate economic growth across different health financing systems, including the Bismarck, Beveridge, Private Health Insurance, and System in Transition models. This study enriches the ongoing academic dialog by providing an exhaustive analysis of the relationship between health expenditures and economic growth. It offers valuable insights for policymakers on how to optimize health investments to enhance economic development, considering the varying effects of different health financing frameworks.

Capital structure in Latin America: institutional and macroeconomic effects

PropósitoEste estudio analiza la influencia de los factores institucionales y macroeconómicos, además de los factores a nivel de empresa, en la estructura de capital de las empresas industriales cotizadas latinoamericanas (LATAM). El objetivo es proporcionar evidencia empírica sobre las empresas latinoamericanas desde (1) la perspectiva de las teorías tradicionales trade-off y pecking order, y (2) desde los enfoques que introducen el impacto de los factores institucionales y macroeconómicos en el análisis.Diseño/metodología/enfoqueEl análisis empírico adopta una metodología econométrica, utilizando datos de panel de empresas de Argentina, Brasil, Chile, Colombia, México y Perú, de 2008 a 2018.HallazgosLos resultados indican que, además de las características a nivel de empresa, las características institucionales y macroeconómicas de los países influyen en la estructura de capital de las empresas latinoamericanas.Limitaciones/implicaciones de la investigaciónEl estudio presenta algunas limitaciones, principalmente se centra en empresas cotizadas provenientes de solo seis países de LATAM, debido a la falta de datos. Sería recomendable realizar estudios similares con factores de gobierno corporativo, con empresas familiares y PYMES.Implicaciones prácticasLos resultados pueden servir de referencia para los agentes económicos y profesionales, animándolos a considerar la evolución de las variables institucionales y macroeconómicas a la hora de tomar decisiones. Académicamente, nuestros hallazgos verifican la validez de las teorías convencionales y la relevancia de incorporar variables institucionales externas en el marco de la estructura de capital.Originalidad/valorLa importancia de esta investigación radica en analizar la estructura de capital de empresas en un área geográfica poco explorada, LATAM, incluyendo factores institucionales y macroeconómicos y utilizando la nueva base de datos Orbis.

Cross-sectional analysis of socioeconomic drivers of PM2.5 pollution in emerging SAARC economies

Within the intricate interplay of socio-economic, natural and anthropogenic factors, haze pollution stands as a stark emblem of environmental degradation, particularly in the South Asian Association for Regional Cooperation (SAARC) region. Despite significant efforts to mitigate greenhouse gas emissions, several SAARC nations consistently rank among the world’s most polluted. Addressing this critical research gap, this study employs robust econometric methodologies to elucidate the dynamics of haze pollution across SAARC countries from 1998 to 2020. These methodologies include the Pooled Mean Group (PMG) and Augmented Mean Group (AMG) estimator, Panel two-stage least squares (TSLS), Feasible Generalized Least Squares (FGLS) and Dumitrescu–Hurlin (D–H) causality test. The analysis reveals a statistically significant cointegrating relationship between PM2.5 and economic indicators, with economic development and consumption expenditure exhibiting positive associations and rainfall demonstrating a mitigating effect. Furthermore, a bidirectional causality is established between temperature and economic growth, both influencing PM2.5 concentrations. These findings emphasize the crucial role of evidence-based policy strategies in curbing air pollution. Based on these insights, recommendations focus on prioritizing green economic paradigms, intensifying forest conservation efforts, fostering the adoption of eco-friendly energy technologies in manufacturing and proactively implementing climate-sensitive policies. By embracing these recommendations, SAARC nations can formulate comprehensive and sustainable approaches to combat air pollution, paving the way for a healthier atmospheric environment for their citizens.

The role of natural resources, and economic development in evaluating the environmental effects of biofuel and waste energy generation in the group of BRICS

The green energy sources such as biomass conversions and waste energy have shown great potential in environmental management. This article aims to examine the changes brought about by the production of biofuel and the management of solid fossil waste over the past forty years, and to analyze the significant roles that natural resources and economic factors have played in the BRICS countries (Brazil, Russia, India, China, and South Africa) from 1990 to 2021. To achieve accurate and feasible results, second-generation econometric methodologies were applied. The Driscoll-Kraay standard errors (DKSE) approach revealed a significant negative relationship between biofuel production and environmental damage through waste management. Thus, an increase in biofuel production is associated with a reduction in environmental degradation in the region. Furthermore, the results indicate that environmental degradation (ED), the dependent variable, is still positively correlated with natural resources, urbanization, trade, and economic growth. As the financial sector struggles to address environmental threats, stringent monitoring of financial control measures and provisions for environmental issues is necessary. To achieve sustainable development, BRICS member countries need to address the issues of natural resource exhaustion and over-exploitation. The findings of this research suggest policy support for sustainable redevelopment, which should be goal-oriented and backed by the central authorities of the respective countries.

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.

An Application of the Kaldor-Dixon-Thirlwall Model for Regional Economic Growth in Mexico

This paper analyzes the links between exports and regional economic growth in Mexico. The Kaldor-Dixon-Thirlwall theoretical model and the econometric methodology of Durbin spatial panel models are used, which were estimated for the periods 2008-2019 and 2008-2023. The econometric results show, among other findings, that the relationship between regional growth and state export growth is null and non-significant, while trade openness and its absolute growth are positive and significant. The weak relationship between exports and regional growth implies that industrial policy proposals other than traditional ones should be promoted. A limitation of this study is the absence of data on regional imports, which could have enabled a more comprehensive examination of theoretical frameworks. Nonetheless, the study's significance lies in highlighting the limited role of the export sector in driving regional growth in Mexico, attributed to the weakening of national productive links.

THE DETERMINANTS AND IMPACT OF FOREIGN DIRECT INVESTMENT ON THE ECONOMIC GROWTH OF SIERRA LEONE

<p>This article aims to examine the factors that influence foreign direct investment (FDI) and its effects on Sierra Leone's economic expansion. Understanding the elements that draw foreign direct investment (FDI) and its overall effects on the recipient country's economy is crucial as FDI has long been acknowledged as a driver for economic development in developing nations. This study used a mixed-methods approach to examine the factors influencing foreign direct investment (FDI) in Sierra Leone by analyzing both qualitative and quantitative data. Interviews with important stakeholders, including government officials, foreign investors, and industry experts, are used to analyze factors such as political stability, institutional quality, market size, natural resources, and infrastructure. Secondary data are statistically analyzed to determine the importance of these determinants. In addition, the study evaluates how FDI affects Sierra Leone's economic expansion. Analyzing macroeconomic data like GDP growth, employment rates, trade patterns, and technology transfer are necessary for this research. The research offers a thorough understanding of the direct and indirect effects of FDI on the nation's economy by utilizing both descriptive and econometric methodologies. The results of this study have added to the body of information already available on foreign direct investment (FDI) and its effects on economic growth in developing nations, with a particular emphasis on Sierra Leone. Policymakers, government organizations, and investors will be able to create focused strategies to draw in and maximize the advantages of FDI for sustainable economic development with the help of the results, which offers insightful information.</p><p> </p><p><strong>JEL</strong>: F21, F23, O55, O11, C83, C18, P48</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0771/a.php" alt="Hit counter" /></p>

The Effect of Military Expenditure on Economic Prosperity in Croatia

The objective of this study was to empirically evaluate the impact of military spending on the economic well-being of the Croatian economy. The objective of the study was as well to find out if military expenditure could bolster the economic growth. Croatia has been among the European nations with significant military expenditures over the past three decades. However, these expenses have substantially decreased due to successful peace initiatives and the country's accession to the European Union. Reflecting on Croatia's history, notably during the Croatian War of Independence, the government significantly augmented its military expenditures. The sample period of the study was for 40 years from 1981 to 2020. An applied econometrics methodology called the 2-Stage Least Squares with Instrumental Variables was utilised in the study. In the first stage, instrumental variables were used to instrument for the endogenous regressors. In the second stage, the predicted values obtained from the first stage were used as explanatory variables in the main regression equation. The study found that the effect of military expenditure on the economic prosperity of Croatia was positive and highly statistically significant. The study addressed an empirical gap in the literature by integrating distinctive characteristics into the model concerning the long-term relationship between Croatia's military expenditure and economic growth. These factors enhanced empirical accuracy and instilled confidence in the broader and diverse literature concerning military expenditure and economic growth. The implication of this study is that investing in the military provides an enabling environment for economic growth to increase.

Determinants of Road Traffic Crash Fatalities: A Case of Road Accidents in India, 2004–2018

The purpose of this study is to determine the factors that influence deaths in road accidents in India. The study uses panel econometric methodologies such as the fixed effects model, random effects model, and Hausman–Taylor instrumental variable technique to achieve this goal. Unobserved heterogeneity between states/union territories (UTs) and time is accounted for by time-fixed and state-fixed effects. Based on the panel data set from Indian states/UTs for the period 2004–2018, the study confirms previous results that motorisation, population, urbanisation and income level are all potential contributors to road accidents and fatalities. It also shows that spending on health care and law enforcement appears to help the Indian states minimise mortality in road traffic accidents. On the one hand, spending on health care facilities can provide health-related assistance to persons who have been involved in traffic accidents; on the other hand, spending on police increases the enforcement of rules, resulting in a reduction in traffic accidents. Thus, to lessen the economic and financial cost of road accidents in the country, the government should focus on boosting both per capita health expenditure and per capita police expenditure. JEL Codes: C23, C26, H51, I18, L92, O18, R41, R42

Oil Price Volatility and Economic Growth: Evidence from the Middle East

This paper seeks to study the effect of oil price volatility on economic growth in Middle East countries (Jordan, United Arab Emirates, Saudi Arabia, Kuwait, Qatar, and Turkey). The study's goals were achieved by utilising a range of econometric methodologies. For instance, the IPS and LLC procedures are used to study unit root qualities, while Westerlund and Edgerton's (2008) test is used to study cointegration. The findings demonstrate a long-term correlation between Oil price volatility, inflation, investment, and economic growth. The study concludes with more detailed findings regarding how oil prices affect gross domestic product growth. As such, policymakers can use it to support their decision-making.

Method myopia

AbstractMethod myopia is defined as theoretical rhetoric absent empirical discernment regarding flavor‐of‐the‐day econometric methodologies. This Fellows Address discusses why method myopia is pervasive, what factors contribute to the pervasiveness, why is likely it to increase, and finally, a possible remedy. To that end, incentive structures facing researchers, reviewers, and editors are considered within the life‐cycle of a typical econometric methodology. Considering our discipline is empirically driven, there are potentially large costs by using flavor‐of‐the‐day methodologies when an alternative ‐‐ possibly leading to different economic results and policy responses ‐‐ is the appropriate method. Furthermore, method myopia can notably restrict the set of research problems examined thereby creating additional, potentially large, opportunity costs. Finally, over‐selling the superiority/completeness/correctness of results from such flavor‐of‐the‐day methodologies to policy makers can not only be costly in the particular case, but can undermine the long‐term credibility of our disciplinary advice to policy makers.