Evidence Of Granger Causality Research Articles

Marginal propensity to import and terms of trade: Panel granger causality evidence from the East African Community (EAC)

Abstract Subject and purpose of work The nexus between the terms of trade and marginal propensity to import and the consequent policy options arising from it among economic blocs is an area that has not been given due attention in the literature. The focus of the current paper is to examine the link between the marginal propensity to import and the terms of trade in the East African Community (EAC). Material and methods The authors discuss and test a panel Granger causality model which is complemented with the test of impulse response function and variance decomposition using data from five EAC countries (Uganda, Tanzania, Rwanda, Kenya and Burundi). Results The long-run result of the study indicated that causality runs from all the variables to the terms of trade. In the short-run, results reveal that both the marginal propensity to import and the export of manufactures Grangercaused terms of trade without a feedback. The results of the impulse response function revealed that the terms of trade responded positively to shocks in the marginal propensity to import only in the first period, but afterwards the response turned negative in all the other periods. The terms of trade were equally found to respond positively to shocks in inflation rate in all the periods. The variance decomposition results indicated that apart from shocks to itself which was 100% in the first period, marginal propensity to import contributed about 0.0458% of shocks to the terms of trade, and this rose continuously in all the periods. Conclusions The analysis shows that both in the long-run and the short-run, marginal propensity to import determines the terms of trade among the EAC countries.

Money-Output Revisited: Time-Varying Granger Causality Evidence from Forty-Three Countries

Money-Output Revisited: Time-Varying Granger Causality Evidence from Forty-Three Countries

Comparative benefits of environmental protection expenditures and environmental taxes in driving environmental quality of the European countries

AbstractEnvironmental protection and tax policies are part of the crucial pillars and the evolving aspects of environmental sustainability drive. These policies are increasingly employed to counter the 21st century's global climate problem alongside providing economic relief for the implementing economies. Being on the frontier (i.e., the European Union [EU]) of these policies, the current study examines and compares the impacts of environmental protection expenditures and environmental tax on energy consumption on the ploy to mitigate greenhouse gas (GHG) emissions in the panel of EU member countries. With the use of system generalized method of moments and panel causality analyses, the study established the effectiveness of both environmental protection expenditure and environmental tax at improving environmental quality by respectively mitigating GHG emissions by elasticities of ~2.08 and ~0.18. Importantly, environmental protection expenditure is found to be about two times more effective at mitigating GHG emissions than environmental tax policy, thus providing a novel perspective in the literature. Moreover, energy intensity and Gross Domestic Product help to improve environmental quality by mitigating GHG emissions while population causes more pollutant effects. Additionally, the investigation reveals evidence of Granger causality from environmental protection expenditure to GHG emissions in seven of the EU countries and Granger causality from environmental tax to GHG emissions in 10 European countries. Notably, measurable dimensions of policy guidelines that are relevant for globally and/or nationally defined sustainable development goals are induced from the result of this investigation.

Effects of dehumanization and disgust-eliciting language on attitudes toward immigration: a sentiment analysis of Twitter data

Attitudes towards immigration may be influenced by dehumanization and disgust: The more people dehumanize immigrants and the more disgusted they feel, the more negative their attitudes toward immigrants tend to be. Despite the fact that the majority of U.S. adults are on social media, however, little is known about how exposure to social media that links dehumanization, disgust and immigration influences users’ attitudes on this issue over time. We used Twitter data, machine learning and sentiment analysis to explore this question. Results showed that dehumanizing and/or disgust-eliciting language appeared in 66% of sampled immigration-relevant tweets. Surprisingly, exposure to both types of language in such tweets related to increases in positive sentiment about immigration over time. There was evidence of Granger-causality only for dehumanizing language, however, and only when controlling for communicators’ political affiliation. These findings suggest social media exposure may influence public attitudes toward immigration in unexpected ways.

Explaining the environmental efficiency capability of energy mix innovation among the Nordic countries

Improving the environmental efficiency performance of energy mix is important to the global carbon neutrality goal. Given this motivation, this study delves into providing more explanation about the role of innovation approaches to coal, oil, and natural gas energy resources in the Nordic economies i.e., Denmark, Finland, Norway, and Sweden during the period 2000–2019. To achieve this objective and reach an evidence-based insight for policy formulation, the present study leveraged robust panel econometrics estimators that circumvent cross-sectional dependence and heterogeneity issues in the investigated blocs. The empirical evidence shows that economic growth (GDP), coal energy, oil and natural gas contribute to the Nordic economies' environmental degradation in the short- and long-run. Contrarily, innovation via environmental-related patents mitigates environmental degradation, especially in the long run. Furthermore, the interaction models, i.e., applying innovative approaches in the energy mix's consumption, can mitigate carbon emissions across the countries, thus significantly improving environmental sustainability. Specifically, innovative approaches in coal, oil, and natural gas consumption improve environmental sustainability by mitigating carbon emissions, thus delivering respective environmental efficiency improvements of ∼94%, ∼108%, and ∼123%. Additionally, Granger causality evidence further suggests that the examined factors are significant drivers of the environmental indicator. Regarding policy insight, this study affirms that further improvement in energy savings is vital to continuously deploying the conventional energy mix.

Effects of regional accessibility on productivity: An analysis based on composite indicators

The relationship between transport infrastructure and accessibility has long stood as a central research area in regional and transport economics. Often invoked by governments to justify large public spending on infrastructure, the study of this relationship has led to conflicting arguments on the role that transport plays in productivity. This paper expands the existing body of knowledge by adopting a spatial analysis (with spillover effects) that considers the physical effects of investment in terms of accessibility (using distinct metrics). The authors have used the Portuguese experience at regional level over the last 30 years as a case study. The main conclusions are as follows: i) the choice of transport variables matters when explaining productivity, and more complex accessibility indicators are more correlated with; ii) it is important to account for spill-over effects; and iii) the evidence of granger causality is not widespread but depends on the regions.

Drivers of sustainable natural capital, forest capital, and green growth in Sweden: Rise and fall scenario of material productivity

Given Sweden’s impressive performance on green growth among the European Union countries, this study is focuses on examining the responses of green growth, sustainable natural capital, sustainable forest capital, and carbon footprint to environmental-related innovation and material productivity while employing population to control for unobserved forces. By employing the dataset that spans over 1970–2019 alongside using suitable econometric approaches, the short- and long-run relationships alongside the Granger causality evidence are provided. The revelation from the result shows that environmental-related innovation promotes sustainable natural capital (by elasticity of ∼ 0.04), promotes sustainable forest capital (by elasticity of ∼ 0.13), improves green growth (by elasticity of ∼ 0.01), but spur carbon footpint (by elasticity of ∼ 0.01) especially in the long-run. Importantly, the investigation further reveals that material productivity exhibits an inverted U-shaped relationship with sustainable natural capital, sustainable forest capital, and carbon emission, thus affirming the validity of material productivity Kuznets curve (MPKC) i.e., rise and fall scenario of material productivity. Meanwhile, while population produces desirable carbon emission and green growth outcomes, it hampers both sustainable natural capital and sustainable forest capital especially in the long run. Given these results, relevant and implementable policy guidelines are highlighted for policy makers and other stakeholders in Sweden.

Examining the roles of labour standards, economic complexity, and globalization in the biocapacity deficiency of the ASEAN countries

ABSTRACT With Singapore currently the world’s most natural capital (biocapacity) deficit alongside four other Association of Southeast Asian Nations (ASEAN) countries having varying degree of ecological deficit, i.e. Indonesia, Malaysia, the Philippines, and Thailand, it then offers a clear justification for a more scrutiny of the ASEAN states’ ecological footprint dynamics. To provide more insight on the drivers of ecological footprint in the overall panel and for each of the above-mentioned countries, the roles of economic complexity, average working hours, labour productivity, labour income share, and globalization were examined by employing the Dynamic Ordinary Least Squares Mean Group (DOLSMG) alongside the recently developed (non)time-variant Granger causality approaches. For the overall panel, the DOLSMG approach established that labour productivity, labour income share, and globalization reduce the biocapacity deficit by improving ecological quality while economic complexity worsen the region’s environmental quality. Additionally, in the overall panel, there is Granger causality evidence from the average working hour, labour income share, labour productivity, globalization, and economic complexity to ecological footprint. Moreover, the results of the two Granger causality approaches are unanimous in evidence. For instance, average working hours per year is a significant causal of ecological footprint in all the sampled countries at varying periods. Specifically, there are Granger causalities: from labour productivity to ecological footprint in Malaysia, the Philippines, Singapore and Thailand; from globalization to ecological footprint in Malaysia, the Philippines, Singapore, and Thailand; from economic complexity to ecological footprint in Indonesia, Malaysia, the Philippines, Singapore, and Thailand, all at varying times.

Interdependence between foreigner housing acquisitions and housing price increase in Turkey during the COVID-19 pandemic era

PurposeThis study aims to establish the relationship between house acquisitions by foreigners (HAF) and house price index (HPI) in Turkey.Design/methodology/approachDue to the nature of this study, the data spans from January 2020 to March 2022. The house price index and the number of foreign house acquisitions across three provinces: Ankara, Izmir and Bursa, and national-level data were obtained from the TurkStat database. Consumer price index (CPI) and Turkish interest rates are control variables. In addition, monthly Turkish interest rates and CPI were obtained from the investing.com and TurkStat database, respectively. Furthermore, this study used autoregressive-distributed lag and Toda Yamamoto Granger causality models to avoid analysis bias. HPI and HAF are the variables used to accomplish the objectives of this study.FindingsThis study established a short-run equilibrium between foreign house acquisitions at the provincial and national levels. The short-run deviations were adjusted faster, ranging from 57.53% to 89.24% for some provinces, while Izmir is struggling to adjust at 6.48%. Both unidirectional and bidirectional Granger causality evidence suggests that the Turkish house price index increases at the national and provincial levels. This finding suggests the need for continuous policy intervention in the Turkish housing market because house prices play a pivotal role in Turkish economic development and daily lives.Research limitations/implicationsThis study’s scope and single-country study are its limitations. However, those limitations make the findings appropriate for the country of the study rather than generalising the results.Practical implicationsThe study provides empirical evidence that foreign housing acquisition contributes negatively to housing affordability in Turkey and calls for authority intervention. This is because housing is considered shelter, a fundamental need to which citizens are expected to be entitled. Most citizens are low- and medium-income earners who may be unable to afford a house out of their income if it becomes costly. Once the expenditure to secure housing exceeds 30% of their income, it is considered unaffordable.Originality/valueTo the authors' best knowledge, this is the first empirical study that established the influence of foreign house acquisitions on Turkish house price increases and adversely reduced house affordability by Turkish citizens. The study is the first on foreign Turkish housing acquisition that used both theory of ownership and justice motivation theory to explain HAF.

Market efficiency assessment for multiple exchanges of cryptocurrencies

PurposeThis study aims to analyze the efficient market hypothesis (EMH) of cryptocurrencies on multiple platforms by observing whether there is a discrepancy in the levels of efficiency between different exchanges. Additionally, EMH is tested in a multivariate way: whether the prices of the same cryptocurrencies traded on different exchanges are temporally related to each other. ADF and KPSS tests, whereas the vector autoregression model of order p – VAR(p) – for multivariate system.FindingsBoth Bitcoin and Ethereum show efficiency in the weak form on the main platforms in each market alone. However, when estimating a VAR(p) between prices among exchanges, there was evidence of Granger causality between cryptocurrencies in all exchanges, suggesting that EMH is not adequate due to cross information.Practical implicationsIt is essential to assess the cryptocurrency market in a multivariate way, not only to favor its maturation process, but also to promote a broad understanding of its inherent risks. Thus, it will be possible to develop financial products that are actively managed in a more sophisticated cryptocurrency market.Social implicationsThere is a possibility of performing arbitrage on different exchanges and market assets through cross-exchanges. Thus, emphasizing the need for regulation of exchanges in the digital asset market, as an eventual price manipulation on a single platform can impact others, which generates various distortions.Originality/valueThis study is the first to find evidence of cross-information for the same (and other) cryptocurrencies among different exchanges.

The moderating role of environmental-related innovation and technologies in growth-energy utilization nexus in highest-performing eco-innovation economies

In pursuance of SDG 7, 8 and 12, unearthing the substantive role of environmental-related innovations and technologies in mitigating the undesirable effects of fossil fuel dependence and natural resources consumption on the environment in selected highest performing eco-innovation economies unveils cutting edge policy options to aspiring eco-innovation economies. Considering the selected panel of leading eco-innovation economies (Austria, Denmark, Finland, France, Germany, Netherland, Spain, and Sweden), this study examines the contribution of oil utilization, environmental-related technologies-innovations, and the moderating role of environmental-related technologies-innovations in energy-economic output nexus over the period 1990–2020. By employing the recently developed method of moments quantile regression approach alongside long-run estimator and Granger causality approaches as robustness, we found that oil utilization and environmental technologies spur economic growth in the countries while environmental innovations hinder output. Yet, environmental technologies further moderate the positive effect of oil utilization on economic prosperity but the disservice effect of environmental-related technological innovation is further exemplified when such innovation is applied to the oil consumption network. Moreover, while a one-way Granger causality evidence is established from environmental technologies to economic output, there is statistical evidence of a bi-directional causal relationship from oil utilization and environmental-related technological innovation to economic output. The policy relevance of this study further unearths the importance of the valuation of cost-effectiveness and energy efficiency of economic inputs such as technology-related inputs, especially during the design and manufacturing process.

Trilemma of pandemic-related health emergency, economic policy uncertainty and partisan conflict in the United States: A time-varying analysis evidence

The events in the year 2020, especially the ravaging coronavirus (COVID-19) pandemic has further exposed the vulnerability and connectedness associated with human health and the global economy. In the United States, amid the COVID-19 pandemic, the recent political polarization, especially the sharp divide between the Republican and Democrat party has further demonstrated the heightened partisan conflict in the country. From this basis, the current study examines the time-varying Granger causality between pandemic-related health emergency, partisan conflict, and economic policy uncertainty (EPU) in the United States over period January 1996 to June 2020. While there is an evidence of common time-varying Granger causality between August 2005 and September 2006 from pandemic-related health emergency to partisan, the evidence of Granger causality from partisan conflict to pandemic is common in the period of January to May 2009. In addition, the Granger causality between partisan conflict and EPU is obviously common between February and May 2020. As a policy concern, we are of the opinion that mechanism toward diffusing the heightened political divide in the United States is essential and be pursued for the country’s economic and health sector challenges.

Movement for Balanced Development: A Case Study of a Local Government in South Korea

South Korea has a metropolitan area where, like major cities worldwide, the population is dense as a result of employment opportunities. To prevent economic centralization, the government has implemented policies to relocate public institutions to provincial areas, completing its basic plan for innovation cities in 2003. This case study uses the Granger causality analysis, the impulse response function, and the variance decomposition method to investigate the relations among economic growth, employment, population inflow, and tax revenue for the period 1989-2018 in Chungbuk Innovation City, South Korea. Besides evidence of Granger causality among the variables, we also find that the impulse response function and variance decomposition results produce meaningful outcomes. This indicates that Chungbuk Innovation City must increase its competitiveness through population expansion measures and by promoting the development of related industries. In a sluggish economy due to the COVID-19 pandemic, the government needs to actively promote relocation policies.

The energy mix-environmental aspects of income and economic freedom in Hong Kong: cointegration and frequency domain causality evidence

ABSTRACT Since the inception of the quantification or qualification of global economic freedom, there has been increasing drive and competition towards for better financial freedom among the global economies. However, balancing the drive towards environmental sustainability and economic freedom, especially from the context of the Global Goals, has remained relatively ignored. Thus, this study tries to reveal the nature of the relationship, that is, a U- or inverted U-shaped hypothesis between economic freedom and environmental degradation in the case of Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR). As the result of the investigation implied, economic freedom and environmental degradation exhibit a U-shaped relationship against the validity of the environmental Kuznets curve in the relationship between environmental degradation and income. The implication is that economic freedom poses more danger to the environment than income growth, especially when both experiences exponential increase. In any case, Hong Kong’s two principal energy sources (coal and oil) constitute a significant source of environmental damage. Moreover, there is Granger-causality evidence with frequency inference in favour of causality between carbon emission and all the explanatory variables except for the fossil oil consumption.

Forecasting fuel prices with the Chilean exchange rate: Going beyond the commodity currency hypothesis

In this paper we show that the Chilean exchange rate has the ability to predict the returns of oil and of three additional oil-related products: gasoline, propane and heating oil. We show this using both in- and out-of sample exercises at multiple horizons. Natural explanations for our findings rely on the well know “dollar effect” and on the present-value theory for exchange rate determination in combination with the strong co-movement displayed by fuel and metal prices. Given that the Chilean economy is heavily influenced by copper, which represents nearly 50% of total national exports, the floating Chilean Peso is importantly affected by price fluctuations in this metal. As oil-related products display an important co-movement with base metal prices, it is reasonable to expect evidence of Granger causality from the Chilean peso to these oil-related products. Interestingly, we provide sound evidence indicating that the predictive ability of the Chilean Peso goes beyond these natural explanations. In particular, we show another plausible predictive channel: volatility in combination with a negative contemporaneous leverage effect in fuel returns. Finally, we compare the Chilean peso with other commodity-currencies in their ability to predict fuel returns. The Chilean peso fares extremely well in this competition, especially at short horizons of one, three and six months.

Trade Openness and Economic Growth in Tanzania 1970-2021, A Search for Causal Relationship.

The purpose of this paper is to analyse the relationship which exist between trade openness and economic growth in Tanzania as well as uncovering the direction of causality between trade openness and economic growth. The study applies the Vector Autoregressive (VAR) Model which is time series model applicable in capturing dynamic interrelationship among variables. Data analyzed were yearly time series data covering the period of 1970 to 2021. The contribution of this paper is on the evidence of whether trade openness affect growth and the direction of causality between trade openness and economic growth. The empirical results shows that trade openness lagged to one period positively and significantly affect economic growth in Tanzania. The growth rate of GDP lagged to two period have a significant positive influence on growth rate of GDP, the gross national savings measured as a percentage of GDP lagged to two period is statistically significant and negatively related to the growth rates of GDP and in addition, the paper found a negative and statistically significant relationship between inflation lagged to two period and growth rate of GDP in Tanzania. As regards to the causality test, the findings reject the null hypothesis of no evidence of Granger causality between trade openness and economic growth however the test could not account for the magnitude of causality. Based of on the findings, the paper recommends measures to foster trade liberalization by pursuing policies that promote trade such as reducing tariffs, streamlining custom procedures, eliminating non-tariff barriers to trade, encouraging Foreign Direct Investment (FDI) and investing in infrastructure development, optimal savings and controlling higher inflation so as to promote economic growth by implementing policies which target inflation reduction and promote economic stabilization.

The impact of interest rate corridor on monetary policy efficiency: VEC Granger causality evidence from the central bank of the Republic of Turkey

This paper aimed to analyze the impacts of interest rate corridor policy on monetary efficiency in Turkey, applying the Error Correction Model and VEC Granger causality. The data set consisted of 108 observations for each time series from May 2010 to December 2019. The Granger causality test results indicated a significant impact of the borrowing rate on the inflation rate. Response function revealed that a change in the borrowing interest rate affected the opposite way in the inflation rate with a 3-month lag. An increase in the lending rate caused an increase in the BIST 100 index value. It is concluded that the interest rate corridor implementation successfully increased the flexibility and effectiveness of the monetary policy in Turkey.

Testing the asymmetric causal nexus of housing-oil prices and pandemic uncertainty in four major economies.

The spread of COVID-19 worldwide has shown how quick global economy can become affected when ones’ health and future are at risk. This paper examines the evidence of Granger causality among the housing price, the unemployment rate, crude oil price, and world pandemic uncertainty in France, Germany, the UK, and the USA over the period 1996Q1–2019Q2. In this case, the linear and asymmetric Granger causality approaches of Toda-Yamamoto and Hatemi-J are respectively applied to provide useful insight. Although only significant evidence of linear Granger causality is found among the unemployment rate and the house prices in all the four economies, the investigations revealed asymmetric evidence involving the world pandemic uncertainty. Specifically, there is a significant uni-directional asymmetric Granger causality from the world pandemic uncertainty to the house price in France, Germany, and the USA but not in the UK. The variation in the results among the examined countries is explained by potential differences in economic structures or business cycle and other social and economic factors. Thus, relevant policy guidance is implied from the results especially for the policymakers in the examined countries.

The importance of extreme shock: Examining the effect of investor sentiment on the crude oil futures market

This paper is the first to comprehensively investigate the causality between the crude oil futures market and investor sentiment under extreme shocks. By dividing the data into various pairs of extreme positive, extreme negative and normal shocks, we introduce an extended Granger causality approach in the time and frequency domains. Although weak evidence of Granger causality is discovered, we find evidence of strong causality running from extreme sentiment to crude oil futures, which has not been documented in previous literatures. Moreover, the crude oil futures market and investor sentiment show dynamic causality at different frequencies, while the extreme shock-related causal linkages from the frequency perspective illustrate that short-term causality is more significant than medium- and long-term causality. Finally, we find evidence that crude oil futures are more strongly affected by negative extreme shocks than by positive extreme shocks. Our findings call for investors to make better risk management decisions and for policymakers to design better macroeconomic and energy policies.

An inquiry into the nexus between energy poverty and income inequality in the light of global evidence

The study investigates the nexus between energy poverty and income inequality from multiple perspectives by drawing on a rich set of global data and applying a novel set of comprehensive empirical approaches. In so doing, analysis of energy poverty is carried out from five different dimensions, and its nexus with two aspects of income inequality is explored. The empirical analysis strategy entailed panel Granger causality, two-stage least squares, three-stage least squares, and two-step system GMM approaches for the robustness of inferences. Based on data availability, the dataset constituted a global sample of 51 economies from 2002 to 2014. Our key findings suggest that there is significant evidence of Granger causality between energy poverty and income inequality. Notably, an increase in income inequality causes higher energy poverty. In return, a decrease in energy poverty appears to reduce income inequality. The analysis of low- and lower-middle-income economies, as well as upper-middle-income economies, yields consistent auxiliary findings that provide robustness to our analysis and inferences. The findings have important implications for policymakers and stakeholders interested in the reduction of energy poverty and income inequality.