Frequency Domain Causality Test Research Articles

Investigating the Connectedness between Oil and Stock Markets in GCC countries: Evidence from Rolling-Window Frequency Domain Causality

Abstract This study aims to investigate the causal relationship between oil prices and stock markets in GCC countries. We use weekly stock index and crude oil price data from November 21, 2003, to August 6, 2021, to analyze the spillover effect on the returns and variances of these countries. First, the link between the variables is examined using the frequency domain causality test. Since our sample includes important financial episodes such as the global financial crisis and the global COVID-19 pandemic, we employ rolling-window frequency domain causality test to determine whether such causal relationships exist in these financial crises. To the best of our knowledge, the paper is among the first to employ rolling-window frequency domain causality test to investigate the relationship between the variables. The analysis reveals that the Omani, Kuwaiti, and Bahraini stock markets have limited portfolio diversification benefits due to their high dependence on the price of oil. In addition, Saudi Arabia has the most pronounced divergence in the oil price interaction among GCC stock markets. Investors can benefit from the empirical results practical implications, particularly regarding portfolio diversification. The shifting link between oil and stock markets across different countries and time periods underscores the importance of dynamic diversification strategies that adapt to business cycles.

Disentangling the effects of nonrenewable energy consumption on CO2 emissions in Canada: The moderating role of construction and manufacturing

The role of industrial sectors, including construction (CONS) and manufacturing (MFG), in mitigating carbon dioxide (CO2) emissions is often overlooked. The response of these indicators in environmental sustainability is gaining critical attention among scholars and policymakers. Therefore, this research aims to address this issue by investigating the impact of nonrenewable energy consumption (NREC) under the moderating effects of CONS and MFG on Canada's CO2 emissions from 1980 to 2021, utilizing both traditional autoregressive distributed lags (ARDLs) and dynamic ARDL simulation methods. The findings reveal that NREC, CONS, and economic growth (GDP) are significant drivers of emissions in both the short and long run. Meanwhile, MFG reduces emissions in the long run with no significant short-run impact. Further analysis using Generalized Kernel-based regularized least squares (gKRLS) and frequency domain causality (FDC) tests confirmed these results. Moreover, examining the moderating role of CONS and MFG exhibits significant long-run positive moderating effects on the NREC-CO2 relationship, with MFG having a more substantial impact than CONS. However, both sectors show insignificant adverse moderating effects in the short run. Robustness analysis using quantile regression (QREG) and simultaneous quantile regression (SQREG) demonstrates that GDP and MFG consistently mitigate CO2 emissions across all quantiles, with stronger effects at higher emissions levels. These results underscore the importance of targeted renewable energy policies that balance economic growth with environmental sustainability.

Historical geopolitical risk acts and world crude oil production: evidence from the international level

Purpose The purpose of this study is to empirically investigates the influence of geopolitical risk acts (GPR) on world crude oil production. GPRs are a proxy for waging wars and military actions, thus it is expected to have a clear impact on world crude oil production (WCOP). Design/methodology/approach The current study formulates a theoretical model, and its parameters are estimated using three methodologies – traditional autoregressive distributed lag (ARDL) model, Dynamic ARDL model, and Frequency domain causality test – across the period 1973–2023 to ensure robust findings. Findings The results illustrate that GPRs constrain the global crude oil supply. The final impact relies on the positive interaction term between GPRs and international economic activity from one side and the negative interaction term with crude oil prices from the other. Likewise, the findings show that geopolitical threats reduce producing crude oil. Furthermore, this research deliberates on policy implications stemming from these findings. Originality/value Examining existing literature reveals a gap in understanding the relationship between geopolitical risk and crude oil production. Most of the studies in this research strand focus on investigating the impact on oil price volatility.

Economic Determinants of E-Commerce: A Frequency-Domain Causality Analysis of CPI and Personal Loans in Türkiye

This study explores the relationship between e-commerce volume, the Consumer Price Index (CPI), and personal loan rates in Turkey, focusing on the period from 2015 to 2024. By employing time series analysis and frequency-domain causality tests, the research aims to identify the factors influencing the growth of e-commerce in Turkey, particularly in response to economic fluctuations. Traditional unit root tests, including the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests, were used alongside the Zivot-Andrews test to account for structural breaks in the data. The findings suggest a significant positive impact of personal loans on e-commerce volume, while CPI fluctuations show a nuanced effect, with short-term inflation dampening consumer activity and long-term inflation promoting price-sensitive shopping behaviors. Frequency-domain tests further reveal that personal loans have a stronger long-term causal impact on e-commerce than CPI. These results underline the crucial role of digital finance mechanisms and consumer credit in supporting the expansion of Turkey’s digital economy. The study contributes to the literature by highlighting the interplay between economic indicators and e-commerce dynamics in emerging markets.

Dynamic relationships between inflation, industrial production, and freight rates in the EU: A wavelet coherence and causality analysis

Dynamic relationships between inflation, industrial production, and freight rates in the EU: A wavelet coherence and causality analysis

A CYCLICAL ANALYSIS OF THE RELATIONSHIP BETWEEN INCOME TAX AND UNEMPLOYMENT: EMPIRICAL EVIDENCE FOR TURKEY

Increasing tax revenues is very important for states. Among the crucial topics that require investigation in this context is the impact of certain macroeconomic variables on revenue from taxes. This study investigated the impact of Turkey's income tax revisions on the country's unemployment rate. From 2005 until 2023, information from the Ministry of Treasury and Finance's and the IMF's online databases was used for the study. The Breitung-Candelon Frequency Domain causality test was used to determine the periodic causality relationship between variables, the ADF unit root test was used to analyze unit roots, the ARDL bounds test was used to determine the long-term cointegration relationship, and the long-term coefficient was used to determine the direction and strength of the independent variable's effect on the dependent variable estimators. As a result of the research, it was determined that income tax has an effect on unemployment in the short, medium and long term. Additionally, unemployment affects income tax in the medium and long term. Finally, according to the results of OLS, FMOLS and CCR, which are long-term parameter coefficient estimation tests, the coefficients of the income tax variable were statistically significant in all estimators and it was seen that the income tax level and the unemployment level had a positive interaction. Thus, raising income taxes eventually results in higher unemployment in long term.

Exploring the association between the female gender, education expenditure, renewable energy consumption and CO2 emissions: Empirical evidence from Nigeria

AbstractThe significance of women's contribution to attaining the Sustainable Development Goal of net zero emissions cannot be underestimated. Therefore, employing the ecofeminism theory, this research explores the effect of female gender, education expenditure and renewable energy consumption on carbon dioxide emissions in Nigeria between 1990 and 2019. The utilised methodologies include autoregressive distributed lag (ARDL), fully modified ordinary least square (FMOLS), dynamic ordinary least square (DOLS) and canonical cointegrating regression (CCR). The cointegration tests showed evidence of long‐run association. The ARDL result revealed that female gender, education expenditure, and renewable energy consumption have a negative relationship with carbon dioxide emissions in the long run. This indicates that a rise in these variables is beneficial to the environment. In the short run, female gender and renewable energy consumption have a negative link with carbon dioxide emissions. For robustness check, the results obtained from the FMOLS, DOLS and CCR methods validate the ARDL findings. Furthermore, the frequency domain causality test established that the female gender has a one‐way causal influence on carbon dioxide emissions in the long, medium, and short term. Based on these outcomes, policy recommendations are further discussed.

Does green finance reduce environmental degradation? The role of green innovation, environmental tax, and geopolitical risk in China

Does green finance reduce environmental degradation? The role of green innovation, environmental tax, and geopolitical risk in China

Is there a relationship between economic growth and natural resource commodity price volatility? Evidence from China

Is there a relationship between economic growth and natural resource commodity price volatility? Evidence from China

Caring for environment sustainability: how human capital, natural resources and economic growth interact with ecological footprint in Morocco?

PurposeThis study attempts to come in help for Morocco by investigating rigorously the linkage between environmental degradation, measured by ecological footprint (EF), and the gross domestic product growth (EG), the human capital (HC) index and the natural resources (NR) depletion over the period of 1980:Q1 to 2021:Q1. The paper examines the validity of environmental Kuznets curve (EKC) hypothesis in the Moroccan context.Design/methodology/approachUnlike previous studies, which are based only on the autoregressif dynamic linear (ARDL) model, this paper investigates two recent models: the novel DYNARDL simulation approach and the Kernel-based regularized least squares (KRLS) technics and uses in addition the frequency domain causality (FDC) test.FindingsModels output say a significant and negative association between HC and the EF and a significant and positive interplay between economic growth and environmental quality in the long term. In the short term, findings reveal a significant and negative association between NR and the EF. Based on the FDC test, results conclude about a unidirectional causality from NR to the EF in short-, medium-, and long-term. Moreover, results validate the EKC hypothesis for the Moroccan environment sustainability.Originality/valueIn this study, the researchers use the “ecological footprint” as dependent variable to obtain more accurate and comprehensive assessment of environmental deterioration. Based on time series data investigations, this study is the first paper, which validates the EKC hypothesis and develops important policy implications for Morocco context to achieve sustainable development targets.

The asymmetric and long-run effect of demand-based CO2 emissions productivity on production-based CO2 emissions in the UK

Trade effects on atmospheric air contamination of countries have received increasing global policy focus over the past few decades. The United Kingdom is committed to changing the complexities in international trade, current pathways to economic output pursuit, and carbon dioxide emission toward realizing the goals of the Paris Agreement and Kyoto Protocol. This research is motivated to explore the asymmetric long-run impact of demand-based CO2 emissions productivity on production-based CO2 emissions for the UK economy. Data for this assessment was drawn from 1990 to 2019 and analyzed using Gregory-Hansen cointegration, nonlinear autoregressive distributed lag (NARDL), and frequency domain causality techniques. Gregory-Hansen estimates for cointegration provide integration evidence for all variables. Estimates for NARDL long-run cointegration indicate (i) demand-based CO2 emissions productivity is a credible variable that contributes to reducing production-based CO2 emissions in the UK; (ii) both economic output and globalization contribute in rising production-based CO2 emissions in the UK; and (iii) the frequency domain causality test indicates one direction causality from demand-based CO2 emissions productivity, output, globalization, and consumption of green energy to production-based CO2 emissions in the UK.

Maliye Politikalarının İşsizlik Üzerine Etkisi: Türkiye İçin Ampirik Bir Kanıt

The economic policies implemented in a country can directly or indirectly affect many macroeconomic indicators. One of these macroeconomic indicators is the unemployment rate. The government's aim to reduce unemployment with the economic policies they implement. Especially in times of crisis, fiscal policies come to the fore, find a wider application area and support employment. The effects of fiscal policies may differ between expansionary and contractionary policies. The aim of this study is to investigate the effect of fiscal policies implemented in Türkiye on unemployment. For this purpose, monthly data for the period 2014:1-2022:12 were used in the study. In the study, public expenditures, direct and indirect tax revenues are used to represent fiscal policy. The ARDL bounds test was used in the analysis. In addition, the frequency domain causality test developed by Breitung and Candelon (2006) was used to the robustness check of the findings. The findings show that increases in government expenditures increase unemployment in the long run. On the other hand, while increases in indirect taxes reduce unemployment, increases in direct taxes have no effect on unemployment. The findings obtained from the causality test also support this situation.

The dynamic relationships between nuclear energy consumption, nuclear reactors and load capacity factor: time and frequency domain panel data analysis.

Nuclear energy is an environmental issue that needs to be carefully considered regarding its consequences. The environmental effects of nuclear energy encompass a complex interplay of factors, ranging from managing radioactive waste to the potential for accidents, emissions, and resource depletion, necessitating a thorough examination of its impact on our planet. This study examines the relationships between nuclear energy, nuclear fission, nuclear fusion, and load capacity factor for the eight countries (Canada, China, France, Germany, Japan, Russia, Spain, USA) that consumed the most nuclear energy from 1993 to 2018 using the time (Emirmahmutoglu & Kose, 2011) and frequency domain (Croux & Reusens, 2013) panel causality tests. The results differ according to time and frequency domain causality tests. While the time-domain causality test results showed no causal relationship between the nuclear energy consumption, nuclear reactors, and the load capacity factor variables, the frequency-domain causality test revealed that there are causal relationships between these variables in the short, intermediate and long run. According to the frequency-domain causality test results, there is a bidirectional causality relationship between nuclear reactors, energy consumption and load capacity factor. In line with the main findings of this study, it is recommended that these countries implement effective policies to increase environmental quality and make investments and incentives in nuclear energy and technologies.

Enerji Tüketiminin Ekonomik Büyüme Üzerindeki Etkileri: Frekans Alanda Nedensellik Analizi

One of the most important indicators of the production channels of developed and developing countries is undoubtedly the energy problem. In addition, the nexus between economic growth and energy use differs from country to country. The main purpose of this article is to examine the nexus between economic growth and energy consumption in Turkey in the period of 2016 and 2022. Daily electricity consumption is used as an indicator of energy consumption, and industrial production index data is used as an indicator of economic growth. Toda-Yamamoto (1995) and Breitung-Candelon (2006) frequency domain tests were used to determine for the causality. According to the outcomes of the Toda-Yamamoto causality test, a unidirectional causality relationship was found from economic growth to energy consumption in the long run. Breitung- Candelon frequency domain causality test results revealed a short (temporary) and long (permanent) relationship from economic growth to energy consumption. In Türkiye, increases in economic growth (expansion of the production channel), increase the energy need more and thus this situation increases import dependency.

Impacts of Environmental Variables on Rice Production in Malaysia

Climate change has brought significant changes to the earth and agriculture is the main economic sector that has suffered. The current study aims to assess the impact of climatic factors—measured by precipitation, temperature, and CO2 emissions—on rice production using time series from 1961 to 2019 in Malaysia. This research follows the ARDL bounds test and dynamic ARDL simulations methods to estimate long- and short-term connections of the variables under consideration. Empirical evidence indicates that long-run cointegration exist between variables. The results suggest that the sensitivity of rice production to changes in harvested area and temperature is high, while it is low for other inputs. Due to high humidity, the effect of precipitation on rice production is not significant, while temperature can reduce rice yield in the long and short term. However, the impact of carbon emissions on rice production is insignificant. Among the other determinants of rice production, the impact of agricultural labor is negative, but more area cultivation increases rice production over the long and short term. Results also show that the magnitude of the impact of the 2% increase (decrease) in temperature on rice production is greater than the changes in rainfall and carbon emissions. The results for the frequency domain causality test show that a one-way causality exists between temperature and rice production and between carbon emissions and rice production in the short and long run. Hence, the findings of this study can help policy makers to formulate appropriate adaptation methods and mitigation policies to reduce the negative effects of climate change on Malaysian rice production.

Role of energy mix and eco-innovation in achieving environmental sustainability in the USA using the dynamic ARDL approach: Accounting the supply side of the ecosystem

The United Nations Framework Convention on Climate Change (UNFCCC) partners agreed with a landmark decision on environmental concerns at the COP26 in Glasgow, outlining future attempts and measures to ensure a secure environment. In this regard, several prior studies have looked at environmental issues using carbon dioxide emissions, or ecological footprint. However, considering these variables may cause the supply side of environmental quality to be overlooked. To make up for this shortcoming, this study examines the effect of energy mix (fossil fuels, nuclear, and renewables), economic growth, and eco-innovation on the load capacity factor, which emphasizes both the demand and supply side of the ecosystem since it takes biocapacity and ecological footprint into account. Hence, this study differs from previous research in that it takes a broader view of environmental sustainability. In this milieu, the current research employs a recently developed dynamic autoregressive distributed lag (DARDL) simulation model for the United States (USA), harnessing data from 1990 to 2018. The findings unveil that nuclear and renewable energy consumption and eco-innovation all positively impress the load capacity factor, meaning that these variables help the USA maintain its environmental sustainability. On the other side, fossil fuel usage and economic expansion curbs environmental sustainability. Furthermore, since the short-run income elasticity is larger than the long-run elasticity, the environmental Kuznets curve hypothesis is legitimate for the USA. These findings also validated by the frequency domain causality test. Based on the findings, specific policy proposals are given to assist the USA in improving its environmental quality and achieving the UN Sustainable Development Goals (SDGs) 7 (clean energy) and 13 (climate change mitigation).

Which liquidity indicator is more informative to market volatility? Spectrum analysis of China’s base metal futures market

By applying the frequency domain causality test and cross-spectral coherence analysis, this study investigates the informational effects of liquidity indicators on the volatility of China’s base metal futures market from January 2016 to June 2022. We find that trading volume is more informative in economically explaining the price variations of most base metal futures for all frequency horizons, while open interest is more informative to Granger-cause economic innovations in the market volatility of the lead and nickel futures markets both in the short and long run. The coherence levels between the underlying frequency components for open interest are found to be greater than those for trading volume, suggesting that price volatility in China’s base metal futures market would be more responsive to shocks in open interest.

Symmetric and asymmetric frequency-domain causality between tourism demand and exchange rates in Türkiye: a regional comparison

PurposeThis study investigates if the causal relationships between the exchange rates and selected inbound markets’ tourism demand are temporary or permanent, and compares market reactions in Türkiye.Design/methodology/approachTourism demand is examined with a regional approach, focusing on the geographical markets, namely Europe, Commonwealth of Independent States (CIS) members and Asian countries, as the top inbound tourism markets, in addition to the total number of inbound tourists to Türkiye. Granger, frequency-domain causality, asymmetric Toda–Yamamoto, and asymmetric frequency-domain causality tests were employed to investigate and compare markets on exchange rate–tourism demand relationship for 2008M01-2020M02.FindingsThe results indicate that exchange rates affect European tourism demand both in the short and long run. The meaning of this Frequency Domain Causality (FDC) analysis finding shows that the exchange rate has both permanent and temporary effects on European tourists. The relationships are statistically insignificant for CIS members and Asian countries. The exchange rates also permanently affect total inbound tourism demand, but the independent variable has no short-run (temporary) effects on total demand. Asymmetric causality tests confirmed a permanent causality relationship from the positive and negative components of exchange rates to the positive and negative components of European and total tourism demand.Originality/valueThe Granger causality test provides information on the presence of a causal relation, while the FDC test, an extended version of Granger causality, enlightens the short- (temporary) and long-run (permanent) relationships and allows for analyzing the duration of the impact. In addition, asymmetric causality relationships are also investigated in the study. Besides, this study is the first in the literature to examine the relationship between tourism demand and the exchange rate regionally (continentally) for Türkiye.

The impact of green technology innovation, environmental taxes, and renewable energy consumption on ecological footprint in Italy: Fresh evidence from novel dynamic ARDL simulations

The impact of green technology innovation, environmental taxes, and renewable energy consumption on ecological footprint in Italy: Fresh evidence from novel dynamic ARDL simulations

Frequency-domain and time-varying asymmetric Granger causality between real effective exchange rates and remittances in Mexico

The sheer size of remittances has fostered an interest in investigating the consequences of these flows, particularly in remittance-dependent economies. This study relies on monthly data from 1995M01 to 2021M05 and uses both frequency-domain and time-varying causality approaches to investigate the asymmetric causality relationships between real effective exchange rates and remittances in Mexico. Two key results are obtained. First, according to the frequency domain causality test results, positive shocks to remittances lead to appreciation in the Mexican peso in the medium- and long-run cycles, but negative shocks to remittances do not lead to depreciation in the Mexican peso, thus suggesting non-asymmetry. Second, the results of time-varying causality based on heterogeneous errors support asymmetric behavior between real effective exchange rates and remittances, underscoring the importance of allowing asymmetries when investigating the causal relationship.