Fully Modified Ordinary Least Squares Research Articles

Towards sustainable initiatives: Evidence from green finance mitigating ecological footprint in East Asia and Pacific nations

Green finance serves as a bridge between development and ecological sustainability. It provides a roadmap for countries to accomplish sustainable development goals by simultaneously curbing their ecological footprint. Green financing prioritizes eco-friendly technologies, sustainable behaviors, renewable energy, and green infrastructure, promoting positive changes. This study examines the role of green finance on the ecological footprint of 11 East Asian and Pacific countries from 2000 to 2023. This study uses different diagnostic tests to prove the existence of cross-sectional dependency, non-normality, and slope heterogeneity. The coefficients are estimated using the fully modified ordinary least squares (FMOLS) approach and panel quantile regression at different quantiles. The results show the validity of an inverted U-shaped relationship between green finance and the ecological footprint. Further analysis explores that at the middle quantile, all selected countries except Mongolia and the Philippines, while the FMOLS approach shows that all countries’ green finance reduces their ecological footprint. Additionally, globalization reduces the ecological footprint, while economic growth, industrialization, and urbanization increase the ecological footprint. This study recommends that to fight against climate change, the selected countries should focus more on green finance. Financial institutions should provide funds only for environment-friendly technologies.

Tourism development and carbon emissions in sub-Saharan African countries: is there an inverted U-shaped relationship?

ABSTRACT In this study, we examine the existence of an inverted U-shaped relationship between tourism and carbon emissions in 29 sub-Saharan African (SSA) countries using data from 1995 to 2019. Departing from the previous studies, we have also grouped SSA countries into low- and middleincome countries, thereby estimating three panels. We have used a wide range of panel estimation techniques to examine this linkage, including the dynamic common-correlated effects (DCCE), the Driscoll-Kraay estimators, and the fully-modified OLS (FMOLS). Our results show that the relationship between tourism and carbon emissions depends largely on the estimation technique used and the level of income of the individual countries. Overall, we can conclude that there is primafacie evidence of an inverted U-shaped relationship between tourism and carbon emissions in middle-income countries and all SSA countries combined, but not in low-income countries. This means that the perceived adverse effects of tourism expansion on environmental pollution may only be experienced in the early stages of tourism development and that as the tourism sector develops, tourism is likely to promote energy conservation through sustainable tourism or green tourism, thereby leading to a reduction in carbon emissions. Policy implications are discussed.

Does industry 4.0 and environmental quality asymmetrically affect South Africa’s manufacturing sector? A fresh insight from nonlinear autoregressive distributed lag (NARDL) model

Owing to recent developments and implications inspired by fourth industrial revolution (4IR) technologies in the global manufacturing sector through the Industry 4.0 (I4.0) concept, this study was conducted to discover the impacts of I4.0 and environmental quality on the South African manufacturing sector, considering governance quality. To the best of our knowledge, no study has analysed the long-run and short impacts of I4.0, environmental quality and governance quality on the South African manufacturing sector integrating the bound test cointegration, Fully-Modified Ordinary Least Squares (FMOLS) & Dynamic Ordinary Least Squares (DOLS) and nonlinear autoregressive distributed lag (NARDL) estimations techniques. Therefore, this study attempts to bridge this gap using different econometric approaches. The data used spans from 2000Q1 to 2020Q4. The principal component analysis was used to create Industry 4.0 (I4.0) and governance quality components. In this study, utilising the dynamic NARDL, it is seen that the LCO2, representing environmental quality, possesses positive and significant relationship with the LMVA, but when in interaction with the governance quality variables (GOV, INS, POL & ECO), there exists a positive and insignificant relationship with the LMVA showing there exists a dearth of green innovative technologies in the South Africa manufacturing sector respective of its significance. Utilising the FMOLS and DOLS, the GOV, INS, POL & ECO which represents governance quality, mostly possesses negative but significant relationships with the LMVA, even when in interaction with the I4.0 variable proving the I4.0 technologies have not yet started to be impactful to the South African manufacturing industry at large.

Effect of Exchange Rate on Foreign Direct Investment in Nigeria

This study investigates the relationship between exchange rates and Foreign Direct Investment (FDI) in Nigeria from 1981 to 2021. Employing a Fully Modified Ordinary Least Squares (FMOLS) regression analysis, the study reveals a significant positive correlation between exchange rates and FDI. Conversely, the study finds a positive but statistically insignificant association between trade openness and FDI. Finding on interest rates (INTR coefficient: -0.104) indicates a negative relationship with FDI, lacking statistical significance. Similarly, inflation rates (INFR coefficient: 0.012) exhibit a positive yet statistically insignificant link with FDI. Notably, the study highlights a substantial and statistically significant negative relationship between human capital (HC coefficient: -77.787) and FDI, signifying the importance of human capital development in attracting foreign investment. In summary, the research findings indicate a substantial impact of exchange rates on FDI in Nigeria. It suggests that policymakers should proceed with caution to avert possible depreciation of the exchange rate, which could deter foreign investors. Furthermore, adopting a comprehensive strategy for macroeconomic stability could foster a more conducive atmosphere for foreign investment.

Building Resilience for Transformational Recovery: An Analysis of Monetary Policy and Economic Growth in West Africa before and Following the COVID-19 Periods

This study investigates the effectiveness of monetary policy in the pre and post COVID-19 periods in West Africa. The panel fully modified ordinary least squares (FMOLS) was used. Before the estimation, the correlation analysis and summary statistics were done. Unit root test was carried out to ascertain whether the data series are stationary or not and the panel cointegration test was used to determine the existence of long run relationship among the variables. The findings indicate that monetary policy has 12.3% negative and significant effects on economic growth in the periods before COVID-19, while it has insignificant effect after the pandemic. Furthermore, monetary policy has 21.01% negative and significance effects on inflation in the pre COVID-19 era, while it has 52.5% negative and significant effect on inflation after the pandemic. This indicates that the effectiveness of the central bank’s efforts to affect and control inflation has declined after COVID-19. Causes for this could include the pandemic’s effect on supply chains, demand, and the weaker economic environment. On this basis, the monetary authority should create an economic environment that will play a crucial role in determining the effectiveness of monetary policy in the post-COVID-19 periods to foster economic recovery.

Does higher education lead to lower environmental pollution? New evidence from MENA countries using econometric panel data

Recognizing the critical significance of environmental preservation, this paper investigates the intricate relationship between higher education and environmental pollution in MENA countries from 2000 to 2018. The analysis incorporates three control variables: the globalization index, population, and gross domestic product (GDP). Employing a comprehensive methodology that includes panel unit root tests, Kao cointegration test, fixed effect GLS, fully modified ordinary least squares (FMOLS), and dynamic ordinary least squares (DOLS). As main results, we first found using GLS that higher education, globalization, and GDP per capita positively impact CO2 emissions in the MENA region. Subsequently, using FMOLS and DOLS, we found that except for GDP per capita, all other variables play a key role in mitigating CO2 emissions in the long run, thus validating the KURZNETS curve hypothesis for education and challenging it for economic growth in the MENA countries. Given the existing results, this study provides significant recommendations for policymakers and governments to reduce CO2 emissions.

Credit risk and Tunisian bank stability in the Covid-19 wave

<p style="text-align:justify"><span style="font-size:16px"><span style="font-family:Times New Roman,Times,serif"><span dir="ltr" lang="EN-US"><span style="color:black">Banks are at the core of economic functioning in various countries and are the cause of their development in various fields. In a changing environment, they must deal with certain risks and maintain financial stability as the ultimate objective. The primary objective of this study is to examine the correlation between credit risk and bank stability within the Tunisian banking sector, with a specific focus on understanding the moderating impact of the COVID-19 pandemic. To achieve this, we employ several econometric techniques, including panel unit root and cointegration tests, panel Vector Error Correction Model (VECM), Fully Modified Ordinary Least Squares (FMOLS), and Dynamic Ordinary Least Squares (DOLS). Our empirical analysis relies on a panel dataset that encompasses a comprehensive sample of 8 Tunisian banks over 2000-2020. The results of our analysis unveil a significant negative relationship between credit risk and bank stability, indicating that higher levels of credit risk exert a detrimental effect on the overall stability of Tunisian banks. Furthermore, our study highlights that this adverse impact is further exacerbated during the COVID-19 pandemic, suggesting that the pandemic acts as a moderator. The findings of this study hold substantial implications for policymakers, regulators, and bank managers in Tunisia. They emphasize the critical importance of implementing robust risk management practices to mitigate credit risk and bolster bank stability. Additionally, the research underscores the need to consider the unique challenges introduced by external shocks, such as the COVID-19 pandemic, when assessing the overall stability of the banking system.</span></span></span></span></p>

The effect of institutional quality on tourism in designated European Union mediterranean states

This research delves into the correlation between institutional quality and tourism development in a panel of nine Mediterranean countries within the European Union spanning from 1996 to 2021. The study gauges tourism development by examining tourist arrivals, while considering GDP growth rate, inflation, higher education, environmental quality, and trade as control variables representing factors influencing tourism. Institutional quality is measured through indicators such as regulatory quality, rule of law, and control of corruption. Utilizing Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Squares (DOLS) models, the study aims to quantify the impact of these factors on tourism development. The findings indicate a positive relationship between institutional quality and tourism, shedding light on the pivotal role of institutions in tourism management and their influence on the sector. These results have implications for shaping national development strategies.

GCC banks liquidity and financial performance: does the type of financial system matter?

This study examines whether the type of financial structure in the GCC influences the relationship between liquidity risk and banks’ performance from 2007 to 2021. By employing fixed effects and fully modified ordinary least squares (FMOLS), we find that the impact of liquidity risk on bank profitability differs among bank-based and market-based systems. Specifically, the results show that the profitability of banks operating in bank-based countries is positively influenced by the liquidity risk compared to their counterparts. The study also demonstrates that the global financial crisis increases banks’ profitability in the bank-based financial system. Furthermore, the results show that gross domestic product growth (GDPG) determines banks’ financial profitability in the banks-based market. This study offers some important implications for policymakers to consider the type of financial system to stimulate bank stability.

Green technology innovations, natural gas and resource extraction strategies in BRICS: Modeling impacts on CO2 emission intensity

The article extends beyond conventional models and indicators by initially attempting to capture the complex effects of green technological innovations and changes in natural resource extraction and natural gas production on a novel environmental quality indicator (CO, intensity, CO2ei) for the BRICS countries from 1990 to 2020. The empirical analysis for the candidate panel was conducted using robust analytical techniques, including the fully modified OLS (FMOLS), dynamic OLS (DOLS), canonical correlation regression (CCR), and seemingly unrelated regression (SUR). The results corroborated the role of green technological innovations as an effective deterrent against increasing levels of CO2ei. Still, the outcomes suggested that changes in natural gas production and natural resource extraction had escalated CO2ei in the candidate panel. The country-wise analysis reflected significant variance among the candidate panel countries. For instance. the model revealed that natural gas production abated CO2ei in China and India only, while its environmental effects remained adverse in the remaining countries. Per estimations, the unrequited extraction of natural resources facilitated the reduction of CO2ei in Brazil and Russia, but it also raised CO2ei in the rest of the BRICS countries. In addition, the causality estimation highlighted the following causal flows: i) the feedback effect from natural gas production to CO2ei; ii) one-way causality from CO2ei to green technological innovations and from natural resources extraction to CO2ei. The study offers novel and actionable policy recommendations for policymakers and theorists to steer sustainable and environmentally conscious initiatives in the BRICS countries.

INTERMEDIATING ROLES OF INSTITUTIONAL INFRASTRUCTURE IN THE TRADE OPENNESS-INCLUSIVE GROWTH NEXUS: NEW EMPIRICAL EVIDENCE FROM NIGERIA

Introduction: Inclusive growth (IG) is a revolutionary method for generating and sustaining macroeconomic stability through economic development, social equity, and prosperity. There has been little theoretical and empirical study in Nigeria on analyzing the effects of trade openness on inclusive growth and exploring its determinants. Methods: This study examines the intermediating roles of institutional infrastructure in the trade openness-inclusive growth nexus in Nigeria spanning from 1985 to 2021. The study employed the Johansen Cointegration methodology to confirm the existence of the long-run association while fully modified ordinary least squares (FM-OLS) and dynamic ordinary least squares (DOLS) techniques are used to elucidate the uncertainty in the trade openness-inclusive growth nexus. Results: Consequently, the results of the Johansen Cointegration confirmed the long-run association among variables. The FM-OLS and D-OLS indicate that trade openness enhances growth in Nigeria, suggesting that greater trade openness would foster inclusive growth and remain a focal point for both direct and indirect relations with inclusive growth. The interaction effects of trade openness and institutional infrastructure on inclusive growth show negative and insignificant effects on inclusive growth, demonstrating that institutional infrastructure plays a mitigating influence in the relationship between trade openness and inclusive growth, albeit insignificant at a 5% level. Conclusion and suggestion: The study recommends that Nigeria should pursue policies aimed at improving institutional infrastructures with a way of reducing transactional costs and risks related to trading.

Does capital efficiency influence economic growth in Bangladesh? Application of the Harrod-Domar model

PurposeThe main purpose of this paper is to analyse the influence of capital efficiency on the economic growth of Bangladesh using the Harrod-Domar (H-D) model.Design/methodology/approachWe use annual data from 1980 to 2019 for this paper. Three steps are taken in the data analysis. First, to check the existence of a unit root, we use the augmented Dickey-Fuller (ADF) test and to determine co-integration among the variables, we use the Johansen-Juselius co-integration test. Next, for long-run estimation, we use the dynamic ordinary least square (DOLS) estimator. The sensitivity of the long-run estimations is further checked by the fully modified OLS (FMOLS) and autoregressive distributed lag (ARDL) estimators. Lastly, we use the Granger causality test to determine the long-run causality among the variables.FindingsThe long-run co-integration test validates the co-integrating relationship among the variables. DOLS estimations reveal that the economic growth of Bangladesh is negatively associated with the incremental capital output ratio (ICOR), validating the notion that capital efficiency matters for achieving higher economic growth. On average, an increase in ICOR by a unit tends to reduce economic growth in the long term by 0.75 percent. Our results also reveal no significant relationship between savings and economic growth when the model is extended. Finally, causality results indicate unidirectional causality between ICOR and economic growth.Practical implicationsBased on the results obtained, we argue that the enhancement of capital productivity could bring efficiency because ICOR is an inverse of capital productivity. Since Bangladesh’s capital productivity is considerably low compared with other neighbouring countries, it is suggested that firms should gradually move towards technological advancement and enhance economies of scale, etc. in the long run. Moreover, policies in favour of continuous skill development programmes could be highly effective in increasing capital productivity given that capital follows a vintage structure.Originality/valueThis is the first paper to analyse the economic growth pattern of Bangladesh using the traditional H-D model by incorporating variables such as savings and ICOR and also by relaxing the assumption of time-invariant (i.e. fixed) data of the variables. Moreover, this paper extends the traditional H-D empirical model by introducing key indicators and time breaks for Bangladesh’s economy through a stepwise regression process.

The Effect of Foreign Direct Investment and Economic Growth on Health: An Empirical Investigation for Türkiye

This study aims to investigate the effect of foreign direct investment (FDI) on health for the period of 1975-2018 in Türkiye by using a health production function approach. Life expectancy at birth which is the dependent variable in the study is used as a proxy for the average health status of Turkish citizens. FDI is defined as the ratio of foreign direct investment to GDP. In order to provide optimal estimates of cointegrating relationship, the Fully Modified OLS (FMOLS) developed by Phillips & Hansen (1990) is preferred as the main estimation method, as it allows for endogeneity of explanatory variables. The findings of the study point out that foreign direct investment inflows reduce life expectancy in Türkiye.

Does economic complexity help in achieving environmental sustainability? New empirical evidence from N-11 countries

In view of the SDGs argued by UNO, it is vital to address the pressing issues regarding sustainable development. The aim of current study is to investigate the impact of economic complexity (ECC) on environmental sustainability. To achieve this aim, we sampled the 25 years of data of Next-11 countries over the period 1995 to 2019. The economic complexity was measured by the economic complexity index (ECI) while environmental sustainability was measured by two proxy variables including CO2 and greenhouse gas (GHG) emissions. The empirical analysis was established by utilizing the unit root test, cointegration test, FMOLS (fully modified OLS) and DOLS (dynamic OLS) models. The estimated coefficient values disclosed that ECC has a negative and statistically significant relationship with both CO2 and GHG emissions in the long run, implying that ECC ensured environmental sustainability. In addition, the analysis reveals that financial development has a negative while economic growth and energy imports have a positive and statistically significant association with both CO2 and GHG emissions. The findings of the current study suggested an important policy regarding the focus on ECC for achieving environmental sustainability in underlying economies. This study provides robustness to the existing literature in alternative data settings (N-11 countries) and by the unique objective of focusing on environmental sustainability.

Pembangunan Ekonomi Berkelanjutan Dan Daya Dukung Lingkungan Berbasis Jejak Ekologis Di Negara Asean

Ecological footprint is one of the indicators that can be used to see the condition of environmental carrying capacity and sustainable economic development. The aim of this research is to analyze the long-term influence of GDP per capita, trade openness and energy consumption on the ecological footprint in ASEAN countries. Secondary data used in this research was obtained from official information sources, namely the Global Footprint Network (GFN), the World Bank, and Our World in Data. The analytical method used in this research is Fully Modified Ordinary Least Square (FMOLS) and uses panel data with a total of 160 data in the research period 2000-2019. The research results show that the variables GDP per capita, trade openness and energy consumptionon have a positive and significant influence in the long term on the eological footprint in ASEAN countries.

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.

Economic Growth and Female Participation in the Labour Market: Gender Disaggregated Data

The study aims to examine the impact of economic growth on female labour market participation in Kenya with data spanning between 1991 and 2022. Labour-force data disaggregated by gender are important to monitor the dynamic of gender inequalities in the labour market. The secondary data used to construct the time series was obtained from the World Bank and the International Labour Organization sources. The research was informed by the Feminisation U hypothesis, which describes the tendency of female labour force participation to first decline and then rise in the process of economic growth. The study used a fully modified ordinary least square (FMOLS) and Granger causality test to analyse the long-run effect of economic growth on women's participation in the labour market. The study results indicate that economic growth positively and significantly contributes to women’s participation in the labour market in the long run. Furthermore, the results of the control variables suggest that education has a beneficial effect on women's workforce, while women’s access to the workforce is hampered by male labour market participation, fertility rate, female self-employment and rate of urbanization. The study suggests to policymakers that the strategy to success is to facilitate education, vocational training, and social change that enable women to play the same role as men in the labour market. Finally, women must be in productive sectors and government should remove barriers to ownership of factors of production to encourage them to participate in economic activities and the labour market.

Strategic Integration: Fostering Sustainability in Low-Income Country through Poverty Alleviation, Carbon Efficiency, Energy and Economic Resilience

This study emphasizes the critical importance of strategic integration for sustainable development goals (specifically Goals 1 and 2) in low-income countries (LICs). The research uses econometric models to focus on poverty reduction, economic resilience, energy use, and carbon emissions in Indonesia from 1996 to 2022. The study reveals a long-run co-integration among the estimated parameters, with a significant speed of adjustment at a 1.04% level. ECM models highlight a positive relationship between energy use, poverty, and carbon emissions while indicating a negative association between economic growth and carbon emissions. Robustness checks support these findings, including Fully Modified Ordinary Least Squares (FMOLS) and Canonical Co-Integrating Regression (CCR). Granger causality analysis reveals a unidirectional causality from energy use to carbon emissions and economic growth, along with one-way causation from carbon emissions to economic growth and poverty. Diagnostic tests affirm the model's reliability. The study's outcomes contribute valuable insights to the discourse on strategic integration, offering policymakers and stakeholders guidance in formulating sustainable development strategies tailored to the unique challenges encountered by low-income countries.

A study on the macroeconomic and financial determinants of telecommunication infrastructure: Evidence from Turkiye

This paper investigates the economic and financial determinants of Turkiye's telecommunication infrastructure from 1970 to 2022. To analyze the impact of trade openness, gross domestic product, and foreign direct investments on telecom infrastructure, we employ the Maki cointegration test proposed by Maki (2012) [10], which accounts for multiple endogenous structural changes without requiring the number of these changes to be determined a priori. Following the finding of a long-run relationship between the variables, to assess the effect of the regressors on the telecommunication infrastructure, we estimate the long-run relationship using the fully modified ordinary least squares (FMOLS). The findings of the FMOLS model show that all the coefficients are statistically significant and positive, indicating that all the considered variables have an increasing effect on telecommunication infrastructure. Accordingly, a 1 % increase in trade openness, foreign direct investments, and gross domestic product is associated with an average change of 0.942 %, 0.301 %, and 0.911 %, respectively, in telecommunication infrastructure. Since the significance, magnitude, and sign of the coefficients may change over time, we also estimate the long-run coefficients in a time-varying form. Our findings indicate that while foreign direct investment and gross domestic product have a positive coefficient in most of the sample period, trade openness is insignificant in the majority.

Electricity Consumption and Food Production in Malaysia: Implication for the Sustainable Development Goal 2

The need to seek sustainable solutions to end hunger in all its forms by 2030 motivated the implementation of the Sustainable Development Goals. Against this backdrop, this study seeks to fill the existing gap by unraveling the underexplored dimension of escalating electricity consumption and its potential effects on the broader spectrum of Malaysia's food productivity, with a view to assessing the capacity or otherwise of Malaysia in achieving the SDG 2 (food and nutrition security) by 2030. To achieve the stated objectives, data from World Development Indicators (WDI) of the World Bank for the period 1990 to 2022 were collected for Malaysia. The collated data were analyzed within the framework of Fully Modified Ordinary Least Squares (FMOLS) method. The negative coefficient suggests that an increase in arable land is associated with a decrease in food production. Electricity consumption did not support expansion of food production in the country. Employment in agriculture, based on results, the study concludes that; electricity consumption did not support expansion of food production in Malaysia. In the same vein, arable land in Malaysia did not support sustainable food production in the country. Employment in agriculture did not drive food production changes in the country. Therefore, it could be submitted that electricity consumption only may not ensure a sustainable food production in Malaysia. Therefore, the study recommends that the policymakers and other concerned stakeholders in Malaysia should emphasize the importance of managing and utilizing arable land effectively in order for the country to experience a sustainable food production. Similarly, the policymakers in Malaysia should be given priority to food production when distributing electricity for both domestic and industrial consumptions in the country. If these policies are well implemented in Malaysia, the achievement of the Sustainable Development Goal 2- food security and sustainable agriculture will be tremendously facilitated before 2030.