Feasible Generalized Least Squares Research Articles

Is economic complexity an enabler of environmental innovation? Novel insightful lessons from European region

PurposeThis paper empirically examines the influences of economic complexity performance on environmental innovation implementation.Design/methodology/approachThe research is based on four measures designed to assess the effectiveness of environmental innovations in 24 European countries, including the percentage of enterprises implementing environmental innovation investment (% of surveyed firms), the percentage of enterprises implementing environmental innovation activities (e.g. implementation of resource efficiency actions, sustainable products or ISO 14001 certificates) measured, a number of enterprises having new ISO 14001 registration and a number of environmental innovation related patents. After conducting various tests for longitudinal correlations and asymmetry of the studied series, we examine the relationship between product proximity, economic complexity and environmental innovation (EI) implementation using the panel-corrected standard error model (PCSE) model in the following section. The feasible generalized least squares (FGLS) model is employed to further verify our findings by taking into account heteroscedasticity. An application of the two-step generalized mixed model (GMM) is considered to resolve an endogeneity issue. In addition, the dynamic fixed-effects estimate (DFE) estimator is applied to the autoregressive distributed lag (ARDL) method in order to calculate both the short-run and long-run effects. As indicated by Ha (2022a, b) and Ha and Thanh (2022), the DFE-ARDL method can be used to identify both time-fixed effects and country-fixed effects.FindingsThe authors provide empirical evidence to propose the mechanism through which economic complexity encourages the implementation of environmental innovation through favorable impacts of economic complexity on environmental innovation investments of firms and governments and the public's awareness regarding the importance of environmental innovations.Practical implicationsThis research provides important implications for policymakers in promoting environmental innovations.Originality/valueThe study is the first to empirically examine economic complexity performance's influences on environmental innovation implementation. It is also the first to investigate the importance of institutional quality in enhancing the influence of economic complexity on environmental performance.

Tax avoidance and cost of debt: does integrated report assurance matter?

PurposeThis study examines the association between corporate tax avoidance and the cost of debt (COD). It also investigates the moderating effect of integrated report (IR) assurance on tax avoidance/COD relationship.Design/methodology/approachBased on a sample of 76 South African companies listed on the Johannesburg Stock Exchange (JSE) from 2010 to 2020, the authors built and estimated regression models using the feasible generalized least squares (FGLS) method. The authors significantly mitigated the endogeneity concerns using propensity score matching (PSM), difference-in-differences (DID) analysis and fixed effects regression.FindingsThe authors found that tax-avoiding firms pay higher costs of debt due to information asymmetries and agency problems. Bankers systematically reflect the increase in tax avoidance by adjusting the COD upward. However, results show that the assured IR disclosure mitigates these problems, which decreases the COD for tax avoidance strategies adopters. Using a quasi-natural experiment, well-grounded evidence was provided showing that the decrease in the COD for debtors who engage in tax avoidance practices is attributed to the availability of an assured IR.Practical implicationsThis study provides plausible evidence in favor of the role that an assured IR can play in capital allocation decisions. Consequently, it is likely to push policymakers in South Africa and other countries to set standards for IR assurance.Originality/valueThis is the first study that investigates and validates the role of IR assurance in solving the controversy about the “tax saving effect” vs. “risk exposure effect” that bankers face while identifying debtors with successful (non-risky/cash-saving) tax avoidance practices and those with non-successful (risky) ones.

Greenhouse gas (GHG) emissions in Australian states and territories: Determinants and policy implications

In order to implement effective climate mitigation policies, it is imperative to understand the determinants of GHG emissions. Our research indicates, no state and territory level analysis of Australia, for the determinants of GHG emissions has yet been carried out. This paper identifies the main determinants that affect GHG emissions growth in Australia and assesses their impact in the main Australian states and territories. It performs a rigorous statistical analysis and contrasts the significance of determinants using Feasible Generalised Least Squares (FGLS) Regression and the Linear Panel Data Model with Random effects for the period 1990–2018 for seven states and territories of Australia. We find a mix of GHG determinants in being significant for different states and territories while some show none of the determinants as being significant. Environmental policy analysis is later carried out and then compared with the empirical findings of this study. It is found that it is only in the latter half of the period under observation that some states and territories have instituted encouraging climate change policies while the rest lag behind. Heterogeneous climate mitigation policies, at state and territory level, will have to be implemented to decouple the significance of GHG emissions from its determinants. Also, the ready and comprehensive availability of data for unique variables, such as Savanna burning, will give clearer direction to heterogeneous and customized climate change policy solutions. Lastly, climate mitigation success in TAS (Tasmania), could serve as a leading case study to institute similar renewable energy measures in other states and territories.

Do high-speed rail (HSR) station and airport affect local government debt risk? Evidence from China

This study examines the differential impact of HSR station and airport on local debt risk during the construction and operation stage. Based on the data of China's prefecture-level cities from 2010 to 2019, Feasible Generalized Least Square (FGLS) model results show that HSR station under construction reduces local debt risk by attracting extra-municipal capital inflows. However, the more HSR stations and airports are opened, the more local governments invest in other infrastructure, leading to increased local debt risk. By dynamic test, it is found that the longer the opening time, the greater the difference between the positive impact of HSR stations and airports on debt risk. Further synergies suggest that both local governments and investors have high expectations for urban development driven by HSR stations rather than airports, and the presence of HSR station amplifies the positive external effects of the airport construction. These findings not only deepen the understanding of the risk impact of HSR station and airport, but also provide enlightenment for countries to develop HSR station and airport through debt.

Provincial and regional analysis of carbon neutrality policy and the environmental Kuznets curve: examining their effect on CO2 emissions in China.

China is making a challenging effort to achieve its ambitious goal of becoming carbon-neutral by 2060. Therefore, the Chinese government should develop effective policy tools to improve its carbon neutrality plan. Due to this importance, an empirical study is required to examine the comprehensive effect of the carbon neutrality policy on CO2 emissions in China. Also, the role of economic development on the environment, the environmental Kuznets curve (EKC) hypothesis in the carbon neutrality-CO2 emissions nexus, has yet to be examined. Considering this gap, the present study investigates the impacts of carbon neutrality policy and the economy on CO2 emissions at China's provincial and regional levels from 2006 to 2017. We use a comprehensive approach to measure the carbon neutrality policy through the source control and sink increase perspectives. This study performs the panel-corrected standard errors (PCSE) and the feasible generalised least squares (FGLS) regression techniques to control the heteroscedasticity and cross-sectional correlation issues. The results show that an improvement in energy efficiency and renewable energy power generation decreases the per capita CO2 emissions at the provincial level from the source control perspective. From the sink increase perspective, only green space development affects CO2 emissions reduction; the development of carbon capture, utilisation, and storage (CCUS) does not. Also, this study shows that the EKC hypothesis holds true in China nationally and in the central region. Due to differing regional development patterns, the impact of carbon neutrality policy on CO2 emissions varies across regions. This study suggests specific policy implications such as increasing R&D investment per unit of GDP to support CCUS technologies at provincial and regional levels.

The Impact of the Financial Industry and Globalization on Environmental Quality

The objectives of this study were to evaluate the impact of financial development, globalization, and pollution in six MENA countries from 1971 to 2015. Many prior studies empirically explored numerous factors determining environmental quality/pollution across the world. As far as the region of North Africa and the Middle East is concerned, the majority of previous studies ignored the combined role of globalization and financial development in predicting environmental quality using carbon emissions (CO2). Furthermore, we aimed to assess the legitimacy of the environmental Kuznets curve (EKC) theory for MENA nations. For this purpose, a feasible generalized least squares (FGLS) estimator was applied. It was found that the development of the financial sector and globalization significantly affected ecological quality. Regressors such as energy use and foreign direct investment (FDI) had an altogether positive effect on natural quality. These empirical discoveries also demonstrate the acceptability of the EKC hypothesis for MENA nations. This study shows that governments in the Middle East and East Africa need to develop and implement appropriate policies to promote renewable energy sources, such as wind, solar, biofuel, and heat production, which help to reduce carbon dioxide emissions and promote sustainable economic development.

An examination of the mitigation effect of vegetation restoration on regional water poverty: Based on panel data analysis of 9 provinces in the Yellow River basin of China from 1999 to 2019

Vegetation plays an important role in improving the water resource environment. Faced with the serious water poverty problem in various regions of China, whether vegetation restoration can further alleviate water poverty needs to be studied urgently. Taking 9 provinces in the Yellow River basin in China as an example, this paper first uses the framework of the existing water poverty index (WPI) to calculate the WPI of each province over the years from 1999 to 2019 and evaluate the water poverty status of each province. Later, the normalized difference vegetation index (NDVI) was used to analyze the vegetation restoration status of each area. Finally, using provincial panel data for the study area from 1999 to 2019, a comprehensive feasible generalized least squares (FGLS) model was used to analyze the impact of vegetation cover on water poverty. It was found that there was no pure linear relationship between vegetation cover and water poverty; instead, there was a significant U-shaped relationship. Moreover, the influence of vegetation cover on each component of the WPI has certain differences. This research advances knowledge on the relationship between vegetation cover and water poverty and provides ideas for effectively alleviating regional water poverty.

Controlling corruption in African countries: innovation, financial inclusion and access to education as alternative measures

PurposeThis study aims to examine the impact of financial inclusion and financial innovation on corruption, considering the moderating role of education, as well as identify the specific modality of digital inclusion and payments that contribute to corruption reduction.Design/methodology/approachThe study uses a representative sample consisting of 46 African countries in three different years 2011, 2014 and 2017. On the data, feasible generalized least squares (FGLS), instrumental variables – two stages least squares (IV-2SLS) and two-stage generalized method of moments (IV-2GMM) model estimation methods were employed.FindingsThe results suggest that financial inclusion and education significantly reduce corruption. As well, the interaction between financial inclusion and education reduces corruption. Additionally, the authors find that the expansion of bank credit and the use of credit and debit cards are the specific modes of financial inclusion and digital payments that can contribute to corruption reduction.Research limitations/implicationsThis study awakens policymakers in African countries about the need to consider education as an alternative measure to support financial inclusion and reduce the use of physical cash in transactions for an effective fight against corruption.Practical implicationsRegarding practical implications, the study shows that financial inclusion besides reducing poverty for households can contribute to macroeconomic stability in Africa.Originality/valueThe study uses a representative sample composed of 46 African countries and considers the role of education in moderating the relationship between financial inclusion and financial innovation on corruption. Furthermore, the study identifies the specific modality of financial inclusion and digital payments that contribute to corruption reduction.

Fintech and financial sector performance in Saudi Arabia: An empirical study

Globally, the Fintech industry has grown in importance as a means of staying ahead of changes in the financial sector. This study aims to assess the influence of Fintech on Saudi Arabia’s finan-cial corporate performance. The sample of the study is the financial service industry comprising banks and insurance companies. Data are gathered from the annual reports and DataStream for the years from 2014 to 2021. Banks and insurance companies make up the bulk of the financial ser-vices industry, which serves as a good representative sample. The associations between the in-dependent and dependent variables in five models are examined using ordinary least squares (OLS) and feasible generalized least squares (FGLS) regressions. The results reveal that Fintech has a positive impact on corporate performance. The results of additional tests are consistent with the main findings. We contributed to the literature and associated theories by shedding light on the impact of fintech on the financial sector. The findings have ramifications for a wide range of parties. Researchers can utilize the study and findings to learn more about Fintech in the context of Saudi Arabia, which stands for the Gulf region and the Arab World.

Leadership Changes and Civil War Peace Agreements: Does Who Comes to Power Influence the Implementation?

ABSTRACT Why is the implementation of civil war peace agreements comparatively higher in some countries than in other countries? In this study, I address this puzzle by investigating the effects of insider-outsider leader turnover on the execution of peace agreements. The idea is that leaders should be the fundamental units of analysis to explain the implementation of peace agreements due to more frequent leadership changes than state-level variables, such as the level of democracy, political system, military capability, and GDP per capita. Besides, leader turnover poses a commitment problem in peace processes if outsider leaders differ in their resolve and revise inherited agreements. I test this hypothesis quantitatively using feasible generalized least squares (FGLS) regressions to analyze the panel dataset of this research that covers 34 comprehensive peace agreements of 31 countries from 1989 to 2015. The findings of this study demonstrate the positive impacts of insider leader turnover and the adverse effects of outsider leader turnover on the execution of peace agreements. Hence, whether the implementation of peace agreements will continue depends on who comes to power.

Prices and the activities of financial investors in global commodities markets in the 21st century

It is generally considered that rising inflation is a negative development. However, in the case of investments in stock markets (regulated and unregulated), this situation is not so obvious and clear-cut. Rising prices in global commodity markets are generally accompanied by an increase in investor activity in over-the-counter markets. It can therefore be anticipated that the rise in global inflation is a phenomenon that drives the pro-investment activities of OTC investors. However, is this correlation so obvious and invariable over time? The study is focused on the research of the relations between financial investors activities and the changes in prices on the global commodity markets in the 21st century. The study conducted a correlation (correlation and regression) analysis for global inflation and OTC investment from 2005 to 2022, showing that the period analyzed was not uniform. The main tool used during the research is econometric model estimation with use feasible generalized least squares (FGLS) method.

Analysis of the relationship between social factors and water services delivery in the public sector: A case of an emerging economy

This article evaluates the linkage between social factors and water services delivery in the biggest municipalities in South Africa for improved service delivery. The study is conducted against the failure of several studies to focus on social practices’ impacts on service delivery. Social practices have huge impacts on service delivery and tend to have financial implications on municipalities (Morudu, 2017). Therefore, this article sought to introduce another dimension of addressing water service delivery challenges (WSDCs) by examining the relationship between social practices and service delivery. A multivariate regression analysis using the panel data (2013–2021) collected from the 20 largest municipalities in South Africa. While ordinary least squares (OLS) and feasible generalized least squares (FGLS) results show that job opportunities created have had a positive impact on service delivery performance (SDP), service delivery protests adversely influenced SDP. On the same note, expenditure on housing, population, and educational level produced a neutral effect on SDP. The results provide deep insights to policymakers and city managers to consider aligning social practices with a regulatory framework that governs the provisioning of water services. Although the paper provides vital information, further studies focus on reviewing and reconfiguring laws and regulations that govern social practices to further reduce the negative impacts of social practices on water provision efforts.

Globalization, Governance, and Inclusive Human Development: An Asian Perspective

An enhanced focus on inclusive economic growth has recently led to a paradigm shift in framing development policies. Inclusive human development cannot be achieved if principles of participation and equity are disregarded. The current study investigates the implications of globalization and governance from the perspective of inclusiveness by using IHDI (Inequality-Adjusted Human Development Index) for a set of Asian countries from 2010 to 2018. The Feasible Generalized Least Square (FGLS) technique is used to assess this relation, and the results show that governance and globalization aid in making human development more inclusive. Population growth has a negative relation with inclusive human development, and higher population growth in Asia puts pressure on the already fragile institutions. The study also entails reducing corrupt practices, ensuring accountability, and transparency in political and regulatory processes is vital for broad-based human development. Higher liberalization, higher levels of social globalization, and effective governance can also be helpful in realizing the goal of more inclusive human development in Asia. Keywords: corruption, governance, human development, inequality, liberalization. DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.60.62

Do board characteristics affect the choices on capital structure of Vietnamese firms?

Businesses play an important role in the economy of most countries. Businesses have a role in generating the output of the economy, in jobs and investments, and in contributing to the national budget. The purpose of the study is to evaluate the impact of corporate governance on the capital structure choice of real estate and construction companies listed on the Ho Chi Minh City and Hanoi Stock Exchanges in the period 2007 - 2020. Using panel data regression methods such as Pooled OLS, FEM and REM, and at the same time evaluating the defects in the estimated model, if this occurs, the feasible generalized least squares (FGLS) is selected. In addition, the study evaluates the invariance of enterprises over time. The research results show that factors that do not affect the choice of capital structure are the size of the board of directors and the independence of the board of directors. At the same time, firm size and macro-economic factors such as economic growth (GDP) and consumer price index (CPI) have no influence on the choice of capital structure. The study also confirms that firms with high financial performance often prioritize the choice of equity structure, and an increase in female members in the Board of Directors affects the choice of equity structure in the enterprise while an increase in male members in the Board of Directors has a positive influence on debt choice in enterprises. Further, increasing the operational capacity of the Board of Directors helps the business receive more criticism and thus makes the enterprise more inclined to choose equity. The study also confirms that firms with high liquidity often seek equity financing, while firms with low liquidity often seek debt financing.

Regional Consumption Inequalities in Pakistan under Relative Income Hypothesis

In this paper panel analysis is being carried on original Relative Income Hypothesis (RIH) and its other modifications over the time span of 1998 to 2015. To furnish reliable and appropriate estimation, Households Integrated Economic Surveys (HIES) based consumption and income variables have been gone through various stages of data filtering. The findings of Feasible Generalized Least Squares (FGLS) significantly validate the relevance of three types of ratchet effects (income, consumption and habit) in provinces. Average Propensity to Consume is highest for Baluchi’s households followed respectively by Pashtuns, Punjabi, and Sindhi. The selection of constant slop model implies that province-wise there is no difference in magnitudes of ratchet effect obtained from various versions of RIH. All provinces make adjustments in long run to their consumption in response to income fluctuations. Estimated marginal consumption propensities are according to economic theory that shows smooth consumption path in short run as well in the long run. Polices should be formulated to switch consumer mind set from consumption oriented to saving oriented with the help of appropriate tool of fiscal and monetary policies.

Quality of Indonesia’s domestic institutions and export performance in the era of global value chains

The focus of this research is on analysing the effects of institutional quality and trade agreements on Indonesia bilateral trade in four commodity groups in the era of global value chain (GVC). Employing a panel data gravity model of Indonesian export of four commodities to Indonesia’s trading partners from 2000 to 2018 and estimating the Feasible Generalized Least Squares (FGLS) and the Poisson Pseudo Maximum Likelihood Method (PPML), the results of this study find that institutional quality plays a different role in explaining Indonesia’s export performance of those four commodities, despite the fact that institutions contribute positively. On two commodities that are prospective to increase Indonesia participation in the global value chain, exported intermediates and consumer goods, we find that although both domestic institutions and trading partner institutions are significant to Indonesian export, but we argue that domestic institutions contribute more. This study also reveals that through tariff reductions, Indonesian trade agreements are significant regarding export of all the four commodities group. However, even though tariffs are significant, we find that the quality of institutions, especially domestic institutions, has a greater effect on Indonesia's exports.

Modeling the impact of green energy consumption and natural resources rents on economic growth in Africa: An analysis of dynamic panel ARDL and the feasible generalized least squares estimators

The United Nations Sustainable Development Goals (SDGs) 7, 11, and 12 are all aimed at advancing green energy consumption in the fight against the three planetary crises facing the world today: climate change, biodiversity loss, and pollution. Besides, Africa has an abundance of natural resources, yet, the continent continues to witness slow growth and development compared to its counterparts. Therefore, this study, the first of its kind, simultaneously assesses the impact of green energy consumption and natural resources rents on economic growth by applying the dynamic panel ARDL and the Feasible Generalized Least Square (FGLS) estimators on data from 1990 to 2020 for 24 selected African countries. The results show that green energy consumption has a short-run growth-limiting and a long-run growth-enhancing effect in Africa. Also, CO2 emissions have both short- and long-run significant positive impacts on economic growth, while fossil fuel combustion negatively impacts growth both in the short and long run, albeit the effect is not significant in the long run. Similarly, regarding Africa’s natural resource rents’ impact on growth, the results show that total natural resource rents are growth-enhancing in the short run and growth-limiting in the long run. Additionally, both forest and mineral rents have a significant short-run negative impact on growth in Africa. However, in the long run, only the effect of mineral rent is growth-enhancing although generally not statistically significant. These findings provide relevant implications for policy shifts to enhance environmental sustainability, achieve sustainable economic growth, and ensure proper natural resources management in Africa.

PENGARUH IMPOR PANGAN TERHADAP KESEJAHTERAAN PETANI PANGAN

This study uses Feasible Generalized Least Square (FLGS) model to assess the impact of food import on the farmers welfare by monthly time series data for the period 2011 to 2017. The number of food imports were used as dependent variables and independent variables is Nilai Tukar Petani (NTP) as indicator of farmers welfare degree. The estimation showed a negative relationship between the number of food import and farmers welfare. But, the relationship not statistically significant.

Does globalization and energy usage influence carbon emissions in South Asia? An empirical revisit of the debate

The 2030 United Nations Sustainable Development Goal (SDG) 13 agenda hinges on attaining a sustainable environment with the need to “take urgent action to combat climate change and its impacts”. Hence, this study empirically revisits the debate on the effect of nonrenewable energy and globalization on carbon emissions within the framework of the Kuznets hypothesis using an unbalanced panel data from seven South Asian countries (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka) covering 1980–2019. The variables of interest are carbon emissions measured in metric tons per capita, energy use measured as kg of oil equivalent per capita, and globalization index. To address five main objectives, we deploy four techniques: panel-corrected standard errors (PCSE), feasible generalized least squares (FGLS), quantile regression (QR), and fully modified ordinary least squares (FMOLS). For the most part, the findings reveal that the (1) inverted U-shaped energy-Kuznets curve holds; (2) U-shaped globalization-Kuznets curve is evident; (3) inverted U-shaped turning points for nonrenewable energy are 496.03 and 640.84, while for globalization are 38.83 and 39.04, respectively; (4) globalization-emission relationship indicates a U-shaped relationship at the median and 75th quantile; and (5) inverted U-shaped energy-Kuznets holds in Pakistan but a U-shaped nexus prevails in Nepal and Sri Lanka; inverted U-shaped globalization-Kuznets holds in Bangladesh and Sri Lanka, but U-shaped nexus is evident in Bhutan, Maldives, and Nepal. Deductively, our results show that South Asia countries (at early stage of development) are faced with the hazardous substance that deteriorates human health. Moreover, the non-linear square term of the nonrenewable energy-emissions relationship is negative, which validates the inverted U-shaped EKC theory. Overall, the effect of energy and globalization on carbon emissions is opposite while the consistency at the 75th quantile result indicates that countries with intense globalization are prone to environmental degradation.

The relationship between economic globalization and ecological footprint: empirical evidence for developed and developing countries

Purpose. The aim of this study is to examine the relationship between economic globalization and the ecological footprint in countries with different levels of development using a Feasible Generalized Least Squares (FGLS) analysis.
 Methodology / approach. The study covers the years 1970 to 2017 for 65 developed and developing countries. The ecological footprint is the dependent variable in the study’s model, and the GDP and KOF Globalization Index (KOF) index are the independent variables. The CADF panel unit root test, which takes into account cross-sectional dependence, was used to choose the appropriate test method for the analysis. Feasible Generalised Least Square and Westerlund ECM panel cointegration analyses were performed for model estimation.
 Results. Economic globalization and ecological footprint have a considerable relationship, according to the results of FGLS and Westerlund cointegration analysis. Economic globalization has a long-run negative impact on the ecological footprint. Environmental problems are being addressed as a result of more economic globalization, faster technology development, and consequently decreased usage of natural resources. Furthermore, as globalization and communication technologies develop, societies will have more information on the importance of the environment. As a result, they can show more eco-friendly behavior.
 Originality / scientific novelty. Several studies in the literature include the cointegration relationship between economic globalization and ecological footprint. Although there are few studies on this topic in the literature, one aspect that distinguishes this study is the use of an estimation method that takes into account the cross-sectional dependent, second-generation unit root tests, FGLS cointegration analysis, and Westerlund ECM analysis.
 Practical value / implications. The importance of the findings is that increased economic globalization has a negative effect on the ecological footprint. As economic globalization increases, so does communication technology, as well as international trade. Individuals become more environmentally conscious as a result of communication, which generally reduces ecological footprint.