Granger-cause Economic Growth Research Articles

Oil price, energy consumption and CO2 emissions as growth determinants: a PVAR system GMM approach

Purpose This study aims to revisit the empirical debate about the asymmetric relationship between oil prices, energy consumption, CO2 emissions and economic growth in a panel of 184 countries from 1981 to 2020. Design/methodology/approach A relatively new research method, the PVAR system GMM, is applied. Findings The outcome of the PVAR system GMM model at the group level in the study suggests that oil prices exert a positive but statistically insignificant effect on economic growth. Energy consumption is inversely related to economic growth but statistically significant, and the correlation between CO2 emissions and economic growth is negative but statistically insignificant. The Granger causality test indicates that oil prices, CO2 emissions, oil rents, energy consumption and savings jointly Granger-cause economic growth. A unidirectional causality runs from energy consumption, savings and economic growth to oil prices. At countries’ income grouping levels, oil prices, oil rent, CO2 emissions, energy consumption and savings jointly Granger-cause economic growth for the high-income and upper-middle-income countries groups only, while those variables did not jointly Granger-cause economic growth for the low-income and lower-middle-income countries groups. The modulus emanating from the eigenvalue stability condition with the roots of the companion matrix indicates that the model is stable. The results support the asymmetric impacts of oil prices on economic growth and aid policy formulation, particularly the cross-country disparities regarding the nexus between oil prices and growth. Originality/value From a methodological perspective, to the best of the author’s knowledge, the study is the first attempt to use the PVAR system GMM and such a large sample group of 184 economies in the post-COVID-19 era to examine the impacts of oil prices on countries’ growth while controlling for other crucial variables, which is noteworthy. Two, using the World Bank categorisation of countries according to income groups, the study adds another layer of contribution to the literature by decomposing the 184 sample economies into four income groups: high-income, low-income, upper-middle-income and lower-middle-income groups to investigate the potential for asymmetric effects of oil prices on growth, the first of its kind in the post-COVID-19 period.

Determinants of Economic Growth: A Granger Causality Analysis

ABSTRACT: Countries devote a lot of time and effort to develop economically, but they nevertheless struggle to attain that growth consistently. Research into economic growth should have provided some guidance as to which actions these countries should adopt, but multiple studies using different methods and datasets generally have led to an array of outcomes that contradict one another. However, Granger causality analysis can provide better insight into the relationship between some key variables and economic growth to give these countries more direction. Granger causality results establish a stronger connection between variables, even though they do not depict true causation. We therefore use a Vector Auto Regression method with Generalized Method of Moments estimation and then Granger-causality to discover how commonly used variables in the literature individually impact economic growth and in what way for a selection of OECD and non-OECD countries. We choose government expenditure, foreign direct investment (FDI), education (as a proxy for human capital), population growth, urbanization, and trade openness as our variables of interest. We also utilize updated datasets from the World Development Indicators (WDI) ranging from the years 2000-2016, based on the availability of the data. We find that FDI and population growth do Granger-cause economic development for OECD countries but that government expenditures, education, urbanization, and trade openness do not show such Granger causality. However economic growth Granger-causes government expenditures, FDI, and education for these OECD countries. For the non-OECD countries, we find that FDI, population growth, and trade openness Granger-cause growth but Granger causality does not occur from government expenditure, education, and urbanization to economic development. Yet similar to the OECD countries, economic growth does Granger-cause FDI and trade openness for the non-OECD countries as well. The overall results indicate that all countries should encourage the expansion of foreign direct investment to grow their economy, which then in turn can lead to additional investment as well as more resources available for the country as a whole. We also suggest further studies should focus on the economic development of individual countries rather than regions, particularly in terms of how technology can drive growth and impact these other variables.

Do Innovation and Institutional Quality Elevate Economic Growth? Empirical Evidence from Developing Countries

Research Highlights • An assessment of institutional quality, innovation, and economic growth in developing countries. • Long-run causality from innovation and institutional quality to economic growth is present. • Short-run directions of causality are varied among variables of interest. • Innovation and institutional quality generally positively impact economic growth. Continuous innovation is the lifeblood of a competitive economy. Furthermore, and arguably, the existence of institutions of governance of quality can be a catalyst for emerging economies to transition up the universal innovation value chain. In this context, we investigate temporal causal interactions among institutional quality, innovation, and economic growth for developing countries (DCs) spanning the period of 2005–2020. Employing a vector error-correction model (VECM), we find that for each case and specification (49 instances), there is evidence of the long-run causality from institutional quality and innovation to economic growth. Stated another way, in the long run, institutional quality and innovation Granger-cause economic growth. However, the short-run causality results differ depending on the specific measures of innovation and institutional quality. The strongest short-run conclusion is support for the feedback hypothesis for economic growth and innovation where there is a strong endogenous relationship between innovation, institutional governance, and economic growth. The empirical analysis shows over 70% of our observations support that economic growth and innovation jointly determine each other in the short run. The results suggest that DCs should develop and pursue long-term growth strategies that simultaneously develop innovation and improve institutional governance.

Government Size and Economic Growth in Nigeria: An Assessment

As the size of the federal government expands in tandem with debt, economic growth rather looks gloomy despite the country’s emergence from two recessions in four years. Although the situation provokes studies with robust outcomes, however, there is no convergence in findings. As such, in the attempt to contribute to the empirics, this paper assesses the relationship between government size and economic growth using the Johansen co-integration technique on time series data covering the period 1981-2020. A long-run relationship is affirmed as expenditure on transfers Granger-causes economic growth while economic growth Granger-causes social and community services, and a no-causality is established between economic growth and every other component of expenditure. Nonetheless, expenditure on social and community services impact economic growth negatively even as economic services and transfers promote growth. Thus, with disaggregated recurrent expenditure, government size exhibits both positive and negative relationships with economic growth in Nigeria. In effect, more budgetary allocation is suggested for economic services.

Causal nexus between health expenditure, health outcome and economic growth: Empirical evidence from Sub-Saharan Africa countries.

The relationships among health expenditure, health outcome, and economic growth have been given significant consideration in the current literature. Nevertheless, there are potential gaps in the nature of health-growth nexus that current empirical studies have not thoroughly considered. This study explores Granger causality and cointegration relationships in a trivariate framework among, health expenditure, health outcome, and economic growth. We used three health outcome measures and a panel vector autoregressive model to study 45 countries in Sub-Saharan Africa between 1990 and 2018. Our innovative panel data evaluation technique allows to ascertain significant causal relationships among the studied variables in the short and long run. Findings from the study include (1) health expenditure and health outcome Granger-cause economic growth in the long run; (2) economic growth Granger-cause health expenditure in the short run; (3) no causal relationship was found running from health expenditure and health outcome to economic growth in the short-run. The former result (1) may not be surprising, given that the countries considered in this study are relatively less developed countries from Sub-Saharan Africa. Hence, further health improvement may play a statistically significant role in spurring further economic growth. Based on the results, the study presents interesting and possible effective policy perspectives for health improvement in the studied countries. Policies that stimulate health spending are needed to create a better and more industrious society that can support SSA's economic progress. This is because a healthy person may be more productive than someone who is sick, allowing them to produce greater output.

Causal Examination of Carbon Emissions and Economic Growth for Sustainable Environment: Evidence from Ghana

This study aligns with the 2030 Sustainable Development Goals (SDGs) 8, and 13 to evaluate the causal relationship between carbon emissions and economic growth in Ghana from 1960 to 2018. Using a battery of econometric techniques, findings indicate, among others, that economic growth is a positive predictor of carbon emissions. Inferences from these estimations point to a growth-led emissions nexus in Ghana. The causal analysis further provides evidence, though weak, that economic growth Granger-cause carbon emissions. Hence, policymakers should encourage coal gasification in Ghana, offering better environmental benefits at a lower cost to address the atmospheric build-up of carbon dioxide.

RENEWABLE ENERGY CONSUMPTION, POVERTY ALLEVIATION AND ECONOMIC GROWTH NEXUS IN SOUTH AFRICA: ARDL BOUNDS TEST APPROACH

This study examines the relationship between renewable energy consumption, poverty alleviation and economic growth in South Africa. The paper applies the Autoregressive distributed lag (ARDL) model to examine the long run relationship and the Vector Error Correction Model (VECM) to determine the direction of causality between the variables. Quarterly data is used for the period 1990 – 2018. The findings of the paper established a presence of a long run relationship between renewable energy consumption, poverty, economic growth, financial development and government expenditure. Specifically, renewable energy consumption and economic growth have a negative and significant impact on poverty in both long run and short run. The VECM suggest that renewable energy consumption Granger-causes both economic growth and poverty in the long. Moreover, there is a bidirectional causality flowing between poverty and economic growth. The results have important implication for renewable energy policy makers as it can be realised that policies that promote adoption of clean technology will alleviate poverty in South Africa.Keywords: Renewable energy consumption, poverty alleviation, economic growth, South AfricaJEL Classifications: C32, D04, Q47, Q42, Q01DOI: https://doi.org/10.32479/ijeep.7215

The stability of interaction channels between tourism and financial development in 10 top tourism destinations: Evidence from a Fourier Toda-Yamamoto estimator

Our article investigates the dynamic interlinkages between financial development, tourism development and economic growth in the top 10 tourism destination countries. The knowledge of which series has a causal power to predict tourism can inform policy making about which country needs marketing support and additional investment for its tourism growth. Moreover, results will throw light on which countries are assisted by their ex ante economic and financial development and can thus evolve into a tourism hub through the aid of the general economic development characterizing a country and/or a flourishing financial environment. Our study has employed a battery of cointegration and Granger-causality methods, which prove the robustness of our results. Specifically, we rely on the augmented mean group estimator and the novel Fourier Toda-Yamamoto (FTY)-based Granger-causality test, whose advantage lies in taking into account sharp and smooth structural breaks and resilient to cross-sectional dependence. The FTY reveals that the tourism-led growth hypothesis is confirmed for the United States, Italy, the United Kingdom, and Russia, while economic growth Granger-causes tourism development in the United States only. The financial development growth hypothesis in confirmed only for Spain and the United Kingdom, while economic growth Granger causes financial development in the United States, Italy, the United Kingdom, and Russia.

Foreign Direct Investment, Import And Export Trade And Economic Growth-Based On Vector Autoregression Model

Fostering the new development pattern will promote the level of China's opening-up. Which means that the scale of China's foreign trade, foreign capital use will continue to expand. By establishing a vector autoregression model, this paper conducts an empirical study on the relationship between foreign direct investment, import and export trade and economic growth in China from 1987 to 2018. The results show that there is a long-term equilibrium relationship among foreign direct investment, import and export trade and economic growth in China. China's economic growth has a strong self-promoting effect. China's import and export trade are the Granger cause of economic growth, and in the long term, the contribution of export to the economy is obviously greater than that of import. China's import is a strong Granger reason for export. The contribution of foreign direct investment to import, export and economic growth is relatively low.

Türkiye Cumhuriyet Merkez Bankası Bilançosu Parasal Büyüklüklerinin Ekonomik Büyüme ve Enflasyon Üzerinde Etkisi Var mı?

Bu çalışmanın amacı, Türkiye Cumhuriyet Merkez Bankası [TCMB] Bilançosu parasal büyüklük kalemleri ile ekonomik büyüme ve enflasyon arasındaki ilişkiyi araştırmaktır. Araştırmada parasal büyüklük kalemleri olarak merkez bankası parası, parasal taban ve rezerv para kullanılmıştır. 2003Q1-2019Q4 dönemi için değişkenler arasındaki uzun dönem ilişkiler Engle ve Granger Eşbütünleşme Analizi ile kısa dönem ilişkiler hata düzeltme modeli ve VAR/Granger Nedensellik Analizi ile değerlendirilmiştir. Çalışmadan elde sonuçlar, TCMB Bilanço parasal büyüklükleri ile ekonomik büyüme arasında uzun dönemde istatistiksel olarak anlamlı bir ilişkinin bulunmadığı yönündedir. Kısa dönemde ise sadece merkez bankası parası ekonomik büyümenin Granger nedenidir. Diğer taraftan TCMB Bilanço parasal büyüklükleri ile enflasyon arasında hem uzun dönemde hem de kısa dönemde istatistiksel olarak anlamlı pozitif yönlü ilişki mevcuttur. Bu sonuçlar ışığında, politika yapıcıların, özellikle fiyat istikrarı amacına uygun olarak, parasal büyüklüklerin belirlenmesi ve takip edilmesi konusunda hassas olmaları büyük önem arz etmektedir.

How to achieve a win-win situation between economic growth and carbon emission reduction: empirical evidence from the perspective of industrial structure upgrading.

Over the past 40years since China's reform and opening up, the industrial structure has undergone tremendous changes. The rapid development of the economy has been accompanied by a surge in carbon emissions. How to achieve a win-win situation for economic growth and carbon emissions reduction has aroused widespread concern from all sectors of society. Here, this paper discusses the dynamic relationship of industrial structure upgrading, economic growth, and carbon emission reduction. Results show that there is a long-term equilibrium relationship among industrial structure upgrading, economic growth, and carbon emissions. In the short term, when the three variables deviate from the long-term equilibrium state, the non-equilibrium state will be pulled back to equilibrium with the adjustment strength of - 0.0633, - 0.0097, and 0.0013. Carbon emission reduction promotes industrial structure upgrading. Industrial structure upgrading has a greater positive impact on economic growth. Industrial structure upgrading and economic growth have a negative impact on carbon emissions, thereby promoting emission reduction. And at the 10% significance level, there is a one-way Granger causality from carbon emissions to industrial structure upgrading, economic growth can cause one-way changes in carbon emissions, and industrial structure upgrading is a one-way Granger cause of economic growth. Finally, several carbon emission reduction policies are proposed promote industrial restructuring and sustainable economic development.

Does Remittance Inflow Granger-Cause Economic Growth in South Africa? A Dynamic Multivariate Causality Test

In this study, we examine the dynamic causal relationship between remittances and economic growth in South Africa during the period from 1970 to 2017. Although South Africa is well-known for being a source of cross-border remittances to various countries, especially in the African continent, remittance inflows to South Africa have grown in the recent past. The growth in remittances, on one hand, and the need to fight against poverty and inequality in South Africa and ultimately improve economic growth, on the other hand, prompted the need for this study. The study uses the autoregressive distributed lag (ARDL) approach within a multivariate Granger-causality setting to examine the remittance-growth causal link—in an effort to address the variable-omission bias. The empirical findings of the study show that remittances and economic growth are not causally related in South Africa, irrespective of whether the estimations are done in the long run or in the short run. This finding, though contrary to the expectation, is not surprising, given the level of financial sector development in South Africa.

The Indian inflation–growth relationship revisited: robust evidence from time–frequency analysis

ABSTRACTThis article re-visits the inflation–growth nexus in India using the tools of wavelet, i.e. wavelet correlation, wavelet cross-correlation and scale by scale Granger causality test. Wavelet cross-correlation analysis shows that at the shortest scales inflation and economic growth were independent; at medium scales, there exists feedback effect; and at higher scales, only economic growth is leading to inflation. Furthermore, we find: (a) high and increasing dependence between inflation and economic growth, particularly after mid-2002; (b) high-frequency components of economic growth Granger-cause low-frequency component of CPI-based inflation and vice-versa, and at all scales economic growth Granger-cause inflation at scales of 4–6 and no evidence of causality was detected from WPI-based inflation to economic growth; (c) results indicate that there is no long-run causal link between inflation and economic growth. This study presents new insights for policymakers to sustain economic development by using inflation as an economic tool in India.

INCLUSIVE FINANCE, GROWTH AND SOCIO-ECONOMIC DEVELOPMENT IN SAUDI ARABIA: A THRESHOLD COINTEGRATION APPROACH

Empirical literature argues that financial inclusion has positive impact on growth, reduce inequality and poverty. This paper has twofold. First, it aims to provide a measurement of financial inclusion in the Kingdom of Saudi Arabia (KSA) as an oil-rich economy during the period 1980-2016 by the construction of a comprehensive index. Second, we study the incidence of financial inclusion on growth and human development through a set of socioeconomic leading variables. Using GMM methodology, our results suggest that financial inclusion is highly and positively correlated to human development index, and to employed share of adult population. Conversely, financial inclusion is insignificantly negatively correlated to per capita real GDP and highly negatively correlated to the share of rural population and to the share of women in adult population. In this study we take in consideration the non-linearity between inclusive finance, economic growth and human development by performing threshold cointegration and Granger-causality tests. Our findings show that there is non-linear causal relationship between financial inclusion, human development and economic growth in the long-run while in the short-run neither financial inclusion nor economic growth Granger-causes each other. This result is in concordance with previous empirical studies in the case of oil-based economies. Our findings could help policy-makers and regulators in KSA to design an inclusive financial sector taking into account the specificities of the Saudi economy.

Local Government Debt and Economic Growth in China—An Empirical Study Based on Granger Causality Test

In both the theoretical and empirical levels, both at home and abroad, the research of the relativity between government debt and economic growth is still inconclusive. Combined with the practical situation of China, this article takes 31 provinces of our country from 1995 to 2014 and 18 (2005, 2013, rejecting) local government debt and economic growth data as samples. First, we conduct unit root test on two variables DEBT and GDP to ensure that data is stationary, and then, on this basis of unit root test, we conduct cointegration test to determine whether there is a long-term cointegration relationship between DEBT and GDP. Finally, on the basis of the first two steps, we conduct Granger causality test on DEBT and GDP. The results show that the local government debt and economic growth in China is the second order sequences that are of single integer. And there may not exist long-term cointegration relationship between DEBT and GDP. In the short term, the economic growth of local government is the Granger cause of local government debt, but the local government debt is not a Granger cause of economic growth of local government. In the medium term, the economic growth of local government is still the Granger cause of local government debt and its performance is more significant. However, local government debt is not the Granger cause of local government economic growth, but it is weaker than the short-term. In the long term, economic growth and government debt of local government exit Reciprocal causation relationship. According to 18 years real data of 31 provinces in China, we design empirical scheme and conduct Granger causality test in using econometric software Eviews 8. This is the possible innovation of this article.

Validating the dynamic relationship between technological innovation and economic growth in Malaysia

Technological innovation is a dynamic growth factor to achieve sustainable development. This study aims to explore the long- and short-run relationship between technological innovation and Malaysia's sustainable growth from 1980 to 2015. Augmented Cobb-Douglas production function is used to scale the technological innovation and economic growth link. The F-bounds test and VECM Granger causality are employed. The dynamic relationships among the gross domestic product, capital, employment, electricity consumption, technological innovation, technological innovation squared and governance institution quality variables; and the nonlinear relationship between technological innovation and economic growth are studied. The study confirms the existence of long-run relationship among the variables and the link between technological innovation and economic growth has an inverted U-shape. Also, technological innovation, technological innovation squared, and governance institution quality Granger-cause economic growth in the long and short run, together with capital, employment and electricity consumption. Therefore, continuous plans and policies are very much needed to drive technological innovation evolution in Malaysia, so the tide is slowly turning.

Validating the dynamic relationship between technological innovation and economic growth in Malaysia

Technological innovation is a dynamic growth factor to achieve sustainable development. This study aims to explore the long- and short-run relationship between technological innovation and Malaysia's sustainable growth from 1980 to 2015. Augmented Cobb-Douglas production function is used to scale the technological innovation and economic growth link. The F-bounds test and VECM Granger causality are employed. The dynamic relationships among the gross domestic product, capital, employment, electricity consumption, technological innovation, technological innovation squared and governance institution quality variables; and the nonlinear relationship between technological innovation and economic growth are studied. The study confirms the existence of long-run relationship among the variables and the link between technological innovation and economic growth has an inverted U-shape. Also, technological innovation, technological innovation squared, and governance institution quality Granger-cause economic growth in the long and short run, together with capital, employment and electricity consumption. Therefore, continuous plans and policies are very much needed to drive technological innovation evolution in Malaysia, so the tide is slowly turning.

Finance-Growth Nexus Revisited: Empirical Evidence from Six Countries

Abstract This paper investigates the dynamic causal relationship between bank-based financial development and economic growth, and between market-based financial development and economic growth in six countries during the period from 1980 to 2012. The causal relationship was found to vary largely across countries and over time. In general, bank-based financial development seems to Granger-cause economic growth in the UK and only in the long run in Australia. However, there is a feedback loop in Brazil and Australia, but only in the short run for the latter. In Kenya, South Africa and USA, the results support the neutrality hypothesis. The study results further indicate short-run unidirectional causality from market-based financial development to economic growth in the USA. Evidence of the feedback loop was found in Kenya, while the demand-following hypothesis found support only in South Africa and Brazil. However, the neutrality view was supported in Australia and the UK.

Economic Growth and Government Debt of Six Large National Economies before and after the 2008 Financial Crisis

This paper investigates the causal relationship between economic growth and government debt of six large national economies ten years before and ten years after the 2008 financial crisis. There have been numerous studies on whether government debt has any negative effect on economic growth. The results of most empirical studies are mixed depending on the levels of government debt, the countries included in the sample, the sample periods chosen, and the methodologies employed. This paper focuses on six large national economies, namely, the United States, Japan, Germany, the United Kingdom, France, and Canada during the periods ten years before and ten years after the most recent financial crisis of 2008. It is found that there are significant increases in the level of government debt and decreases in economic growth during the ten years after the financial crisis for all six countries. Our results show that the hypothesis that government debt does not Granger-cause economic growth is rejected for all six countries combined for the pre- financial crisis sub-period and the whole sample period, but not for the post financial crisis sub-period. The hypothesis that economic growth does not Granger-cause government debt is also rejected for both the pre- and post- financial crisis sub-periods as well as for the whole period. In short, our investigation documented a bidirectional Granger causality between government debt and economic growth during periods ten years before, ten years after, and the combined periods before and after the 2008 financial crisis. The evidence also suggests that economic growth reduced government debt for most countries during all three sample periods.

The Finance – Growth Nexus in Botswana: A Multivariate Causal Linkage

This paper evaluates the dynamic causal relationship between financial development, savings, investment and economic growth in Botswana from 1976-2014 by employing a multivariate causality model. Results reveal that it is chiefly investment that drives the bank-related and stock exchange-based financial sectors in the short run. Stock exchange-based financial development drives bank-related financial development and savings in both the short run and the long run. While, savings are found to Granger-cause investment. Economic growth Granger-causes investment and savings, both, in the short run and long run. Further, only bank-related financial development is found to Granger-cause economic growth in Botswana.