Fully Modified Ordinary Least Squares Research Articles

Natural resources, remittances and carbon emissions: A Dutch Disease perspective with remittances for South Asia

Several academic studies and policy discussions have been prompted by the intricate relationship between natural resources, remittances, and carbon emissions. It has been shown that the exploitation of natural resources (including mineral, forest, natural gas and coal rents) and the influx of remittances significantly contribute to the expansion of economic output. Yet, these variables affect production growth in various ways, and their interactions with carbon emissions have significant environmental effects. This study fills the knowledge gap by studying the connections between natural resources, remittances, and CBCE for the panel of India, Bangladesh, Pakistan, and Sri Lanka from 1988 to 2021. This study examines the links between natural resource rents, remittances, GDP, trade openness, and CBCE in a few South Asian countries using the Augmented Mean Group (AMG) technique. The findings indicate that while forest resources, remittances, GDP, and imports increase CE, overall natural resources and exports decrease. To put it another way, while preserving all natural resources is crucial, the quality of the ecosystem is significantly impacted by the use of remittances. The study also shows that imports harm the environment while exports have a positive one. The fully modified ordinary least squares (FMOLS), which verify the significant influence of identified factors on CBCE in the chosen panel, provide evidence of the robustness of the findings. Furthermore, the Granger panel causality test developed by Dumitrescu and Hurlin (2012) shows that GDP and CBCE, exports and CBCE, forest resources and CBCE, and remittances and CBCE are all causally linked in both directions. These conclusions have significant policy ramifications for South Asian countries and address that the combination of education and awareness, sustainable product choices, sustainable transportation strategies, promoting sustainable economic growth, addressing the impact of imports, focusing on forest conservation, encouraging sustainable personal remittances, fostering low-carbon exports, and managing overall resource rents can lead to significant progress in achieving a sustainable and low-carbon future and mitigating the detrimental effects of consumption on the environment.

The impact of globalization on the decoupling of water consumption and economic growth in BRICS and N11 countries—Linear and nonlinear approaches

AbstractIn the context of globalization, the 2030 sustainable development goals pose a huge challenge to the coordinated development of economy and environment in emerging economies. The purpose of this article is to investigate whether globalization contributes to balance water consumption and economic growth in emerging economies. China is the largest developing country and the largest trader of goods in the world. From holistic and representative perspectives, this article analyzes the mechanisms affecting economic growth and water consumption in BRICS countries, Next Eleven (N11) countries and China. Combining decoupling model and econometric models, fully modified ordinary least squares (FMOLS) linear model and threshold panel nonlinear model are constructed. Both linear and nonlinear effects of trade and foreign investment on economic growth and water consumption are considered. The results show that, from a holistic perspective, globalization helps balance economic growth and water consumption in emerging economies. The impact of trade on water consumption in BRICS countries is negative. And with the increase of trade, its positive coefficient on water consumption in N11 countries gradually decreases. Foreign direct investment (FDI) plays a positive role in the coordinated development of economic growth and water environment in BRICS and N11 countries. Taking China as a representative country, there is a decoupling phenomenon between economic growth and water use during the study period. With the trade crossing the threshold successively, the promoting effect on economy increases first and then decreases, and the inhibiting effect on water consumption weakens. With the increase of foreign investment, its positive effect on GDP increases, and its positive coefficient on water consumption decreases. The conclusions from representative country and holistic perspective are consistent. Finally, some policy recommendations are put forward.

Green logistics of fossil fuels and E-commerce: Implications for sustainable economic development

This research task to analyze the impacts of e-commerce and green logistics on the sustainable development of 21 emerging and developing countries in Asia from 2000 to 2021. The estimated coefficients from the Fully Modified OLS (FMOLS) analysis confirm that e-commerce, green logistics, green electricity generation, good governance, and ICT diffusion have a favorable effect on advancing the sustainable development goals. Conversely, the consumption of fossil fuels presents a serious obstacle to achieving sustainable development. Furthermore, the inflow of foreign direct investment has shown no significant effect on the sustainable development index. Countries should prepare the platform for the adoption of electronic commerce by spreading ICT and culturalizing the digital economy in society, thereby increasing digital literacy. Simultaneously, governments can attract green foreign direct investment to promote environmentally friendly projects and foster sustainable practices.

Exploring the roles of natural resources on sustainability blueprint in G7 countries amidst green energy, technological innovation, and carbon‐tax intervention

AbstractToday's global economy faces the most devastating challenges of global warming occasioned by overdependence on natural resources. Besides, the dilemma of choosing between economic benefits and environmental costs emanating from natural resources heightens the empirical relevance of green energy in recent times. To solve this developmental puzzle, the current study presents extends the knowledge frontier by evaluating the impacts of natural resource dependence, green energy (captured by biofuels and renewable energy), carbon tax, and technological innovation on environmental sustainability in G7 economies. The empirical model endogenizes environmental policy stringency and financial development from 1996 to 2019. The empirical verification anchors on second‐generation estimators entailing Cross‐Sectional Autoregressive Distributed Lag (CS‐ARDL), Common Correlated Effects Mean Group (CCEMG), augmented mean group (AMG), and novel Method of Moment Quantile Regression (MMQR). The fallouts from the analyses uncover that natural resource dependence militates against the attainment of the sustainability blueprint by escalating the surge in CO2 emissions in G7 countries. Similarly, the feedbacks from financial development support the surge in emissions. On the flip side, green energy, technological innovation, carbon tax, and environmental policy appear as effective tools for mitigating the surge. The Fully Modified Ordinary Least Square (FMOLS) estimator for the country‐specific analysis corroborates the panel findings. Additionally, two channels of causalities, including unidirectional and bidirectional nexuses, are apparent from the estimated model. Policy measures are suggested based on empirical findings.

Does High Minimum Wage Attract Immigrants?

Immigration is associated with an effort to get a better living. Therefore, this research analyzes whether the high minimum wage attracts immigrants. This study utilizes secondary data from Indonesian Statistics that cover the condition of immigrants in Java, an island with the highest population density. In this research, the proportion of immigrants is the dependent variable. At the same time, the minimum wage is the independent variable and the percentage of formal jobs and prosperity as covariates. The secondary data is analyzed by regression based on Fully Modified Ordinary Least Squares (FMOLS). This regression analysis is complemented by primary data through questionnaires sent to some economic experts. The primary data is analyzed by Delphi Method. The regression result shows no association between the proportion of immigrants and minimum wage. A high minimum wage does not attract people to enter an area. At the same time, a percentage of formal jobs and prosperity attract people to immigrate. In addition, the Delphi analysis exhibits similar results. The expert’s opinion about the impact of minimum wage is not convergence. Not all experts agree that migrant considers the high minimum wage. However, all experts agree that formal jobs, infrastructure, prosperity, amenities, and living costs have an impact on immigrants.

An Econometric Analysis of the Determinants of Foreign Direct Investment: A Panel Data Analysis of Brazil and India

Foreign direct investment (FDI) has become a big source of non-debt funding in the world economy over the past 20 years. The goal of this study is to look at what makes Brazil and India attract FDI. The goal of this study is to figure out the most important reasons why FDI into India and Brazil keeps going up. The most important factors that affect FDI imports in Brazil and India are found using panel data regression analysis. The panel unit-root test, the Fisher Johansen test of cointegration, the panel vector error correction model, and the panel fully modified ordinary least squares (FMOLS) model has all been used to look at the data. In this study, FDI flows are considered as a function of India and Brazil’s relative consumer price index, gross domestic product, trade openness, human capital and population. The study shows that the size of the market and the number of people in a country have the biggest positive effects on drawing FDI. Inflation and trade openness, on the other hand, have little to do with attracting FDI to these two countries. Real GDP is used to measure the size of the market, and it is a major positive predictor of FDI. This means that most investment in these countries is driven by a desire to get into the market.

Powering environmental sustainability through renewable energy and natural resources: a Dynamic ARDL simulation approach.

The objective of this study is to examine the role of renewable energy consumption and natural resource rents along with control variables of globalization and economic growth on the environmental sustainability of Jordanian economy from 1985 to 2019. These variables have been selected based on theory and empirical literature. We apply a Dynamic Autoregressive Distributed Lag (D-ARDL) technique along with robustness checks of Fully modified OLS (FMOLS), Dynamic OLS (DOLS), and Canonical Cointegrating Regression (CCR) techniques in order to achieve the above goal. The result from the analysis confirms that the environmental Kuznets curve (EKC) is not valid for the Jordan in either long or short term. Our estimation results also confirm the highly significant and negative impact of renewable energy on CO2 emissions in both the long and short term. However, both natural resource rents and globalization are significant and positive in the long run, implying that these variables are detrimental to the environmental quality. The interaction analysis presents detrimental effect of globalization in terms of renewable energy while it shows beneficial effect of globalization in terms of natural resource for environmental quality. The frequency domain causality result shows causality at different frequencies across the variables. Based on the results, several policy directions are provided in order to achieve environmental sustainability in Jordan.

Are Cryptocurrencies Really a Threat to the Financial Stability and Economic Growth? Evidence From the Cointegration Approach

The main purpose of this paper is to investigate whether the cryptocurrency market affects financial stability and economic growth of India. The study used quarterly data on bitcoin, financial stability, inflation rate, real GDP, economic volatility uncertainty, exchange rate, and market volatility index for the period 2015Q1-2021Q4. The robustness of the findings was confirmed by the fully modified OLS (FMOLS) and canonical cointegration regression (CCR). The study results demonstrated that an increase in cryptocurrency investments will affect the financial stability of India significantly. Each 1% increase in the cryptocurrency would reduce the financial stability by 5% approximately. However, there was a marginal effect of cryptocurrency on economic growth. The results also found that exchange rate volatility and inflationary pressure would also deteriorate the financial stability of the country. Furthermore, the results also identified positive and significant cointegration between economic growth and financial stability. Due to most transactions in the economy being done through the financial system, it is paramount for economic growth. Going forward, aggressive monetary policy tightening, volatility in capital flows and exchange rates, deanchoring of inflation expectations, faltering in the economic recovery, disruptions due to global supply chains and climate change will be the major risks to the financial stability and economic growth of India.

The impact of renewable energy on economic growth in the Southern African Power Pool (SAPP)

ABSTRACT The past decade has seen an increase in renewable energy sources in the energy mix due to global environmental and supply security concerns. This paper aimed to investigate renewable energy effects on Gross Domestic Product (GDP) in the Southern African Power Pool (SAPP). The investigation is from 1988 to 2018, using the autoregressive distributed lag (ARDL), Nonlinear ARDL (NARDL), and fully modified OLS (FMOL) techniques. Based on empirical analyses of ARDL and FMOLS, it was found that both renewable and nonrenewable energies have a positive impact on economic growth in the Southern African power pool. However, the NARDL estimation indicates that neither renewable nor nonrenewable energy has a significant effect on economic growth in Southern African power pool. Therefore, based on the findings from both ARDL and FMOLS, the growth hypothesis is supported regarding the connection between renewable energy and economic growth in the Southern Africa power pool. Centered on the results, some policy implications were drawn for SAPP for sustainable economic growth, which includes measures to increase renewable energy in the energy mix, and also to encourage the optimization of cross-border connections where energy production from countries within SAPP that are not restricted by natural resources can be relied on to export sustainable energy. Additionally, building a more sustainable integrated power system in the region will assist SAPP with sustainable energy access and reduce the dependence on nonrenewable energy within the interconnected countries soon.

Does transport infrastructure make South Asian economies growth more inclusive? An application of a new transportation infrastructure index

Inadequate transport infrastructure in South Asian economies is one of the critical factors as this phenomenon hinders market competition due to the lack of goods transportation from urban to rural areas or vice versa. Given this, we solve the plausible research question of whether transport infrastructure development is adequate for inclusive growth in South Asian countries. This study contributes to constructing inclusive growth and transport infrastructure indices. However, this study measures transport infrastructure's impact on inclusive growth by applying the cross-sectional auto-regressive distributed lag model (CS-ARDL) approach from 1990 to 2020. Our empirical findings confirm that transport infrastructure significantly elevates inclusive growth by declining income inequalities in South Asian Economies in both the short and long runs. Finally, the two-way fixed effect with Driscoll and Ķraay standard error (DKSE), the dynamic ordinary least square (DOLS) and the fully modified ordinary least square (FMOLS) techniques are applied for the findings' robustness test. The results from the CS-ARDL method are consistent with the outcomes found from these three alternative parameters, i.e., DKSE, DOLS and FMOLS. Therefore, our findings suggest reinforcing the transport infrastructure to promote spectacular inclusive growth in South Asian countries.

Natural Disasters and Economic Growth in Indonesia

Natural disasters can have a profound impact on a country's economic growth, making it crucial for policymakers to understand the relationship between natural disasters and economic growth in order to develop effective strategies that mitigate adverse effects and promote sustainable development. The study utilizes secondary data spanning from 1990 to 2021 and employs the Fully-Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), Canonical Co-Integrating Regression (CCR), and Vector Error Correction Model (VECM) methods. The study's findings provide valuable insights into the substantial effects of natural disasters on economic growth, indicating a positive long-term impact. Furthermore, the analysis highlights a unidirectional causality, illustrating the notable influence of natural disasters on the country's economic performance. Policymakers should prioritize investments in upgrading and retrofitting infrastructure, focusing on key sectors like transportation, energy, water, and telecommunications, to mitigate the adverse effects of natural disasters and promote sustainable economic growth.

EFFECT OF THE FINANCIAL DEVELOPMENT ON CARBON EMISSION: AN EMPIRICAL INVESTIGATION FROM A GLOBAL PERSPECTIVE

This study analyses the effect of financial development on Carbon (CO2) emissions globally. The World Bank classification of income levels and geographical regions, including 144 countries for the 1980-2019 period, were considered. Newly introduced broad-based financial development indexes of the International Monetary Fund (IMF), i.e., financial development index, financial market index, and financial institutions index and metric tons per capita of CO2 emission extracted from World Development Indicators (WDI) used to measure the financial development and CO2 emission respectively. Panel cointegration tests were employed flowed by the panel unit root tests to reveal the long-run relationship of the variables, and Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) estimators were employed to investigate the long-run impact. The significant positive long-run relationship of the financial development on CO2 emission is confirmed globally. In addition, financial institutions showed higher significant long-run coefficients relative to the financial market index. The financial institutions index showed a significant impact on emissions, and it is a key cause for the positively significant impact of the aggregate financial development index. Hence, transferring to green products, services, and technologies while lowering carbon footprints is crucial in financial institutions. In addition, the adoption of digital platforms to facilitate the customers would be much worthier as it widely caused the improvement of Ecological Footprints (EFP) by lowering the actual interactions by providing a virtual interface. The information necessities of the environmentalists, economists, and regulatory agencies were facilitated through the findings to enable robust strategic decision-making processes and financial, economic, and environmental policy coherence.

Unveiling the Carbon Footprint: Biomass vs. Geothermal Energy in Indonesia

Global climate change, caused by greenhouse gases (GHGs) emissions, particularly carbon dioxide (CO2), has an enormous and unprecedented impact on our planet's ecosystem, development, and long-term sustainability. This study investigates the dynamic impact of biomass and geothermal energy on CO2 emissions in Indonesia from 2000 to 2020. Employing the Green Solow model with the approach of Fully-Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), Autoregressive Distributed Lag (ARDL) and Pairwise Granger causality test. The cointegration tests suggest the existence of a long-term equilibrium relationship between CO2 emissions, biomass, and geothermal energy. Empirical evidence reveals that although biomass and geothermal energy positively influence CO2 emissions, their overall impact is relatively low. This highlights the potential for these renewable energy sources to contribute to CO2 reduction and promote environmental sustainability. The Granger causality test confirms a causal relationship between CO2 emissions, biomass, and geothermal energy. Important policy recommendations for promoting sustainable energy practices in Indonesia involve investing in high-quality biomass and geothermal facilities to reduce emissions, implementing energy efficiency programs and fossil fuel conservation measures, and encouraging the use of electricity-based biomass and geothermal energy sources to reduce dependence on non-renewable fuels. These recommendations play a crucial role in achieving environmental and economic sustainability.

The resource curse paradox: The role of financial inclusion in mitigating the adverse effect of natural resource rent on economic growth in Ghana

Over the last decades, “the resource curse paradox” has received ample attention in the literature. Many studies in the literature have demonstrated that developing countries rich in abundant natural resources have experienced a slower rate of economic growth. However, none of the existing studies, to the best of our knowledge, explore whether financial inclusion can help to resolve this paradox. In this study, we attempt to do this using Ghana as a case study. We applied the fully modified ordinary least square (FM-OLS) to historical data for Ghana covering the period of 1970–2020. Our results show that financial inclusion does help in averting the “resource curse paradox” in Ghana. Our results highlight that increased financial knowledge, availability, and usage of financial services can help to thwart “the resource curse paradox” in resource-rich developing countries. Therefore, policymakers should pay attention to these factors when devising policies to avert the “resource curse paradox” in developing countries rich in abundant resources.

LONG-TERM IMPACT OF MACROECONOMIC VARIABLES ON FOREIGN EXCHANGE RESERVES IN THE ORGANIZATION OF ISLAMIC CORPORATION

One of the factors that influence the country's economy is foreign exchange reserves. This study examines the long-term effect of inflation variables, Gross Domestic Product (GDP), exports, imports, and receipts of remittances in 7 countries of the Organization of Islamic Cooperation. This study uses secondary data panels in 7 countries of the Organization of Islamic Cooperation from 1990 to 2021. The method used in this analysis is the Fully Modified Ordinary Least Square (FMOLS) panel. The results of this study are the variables used are cointegrated in the long run. There are partially negative and significant effects on foreign exchange reserves in 7 countries of the Organization of Islamic Cooperation. GDP and exports have a significant positive effect on foreign exchange reserves. Imports have a negative and insignificant effect on foreign exchange reserves and receipts of remittances have a positive and insignificant effect on foreign exchange reserves in the 7 OIC countries from 1990-2021. This research is expected to contribute to the Cooperation Organization countries related to increasing foreign exchange reserves through macroeconomic control of inflation control, increasing export diversification, increasing export diversification, decreasing imports, and increasing remittances while still paying attention to people in work abroad. It is hoped that the increase in foreign exchange reserves that can improve the organization's economic level can optimize cooperation in Islamic Cooperation, namely to support international peace and security and protect the holy places of Muslims.

Natural Resources, Institutional Quality and Economic Growth: Evidence from South Asian Countries

The present research examines the correlation between natural resources, institutional quality, and economic growth in five nations in South Asia. To estimate the model, the study utilized the Fully Modified Ordinary Least Squares (FMOLS) estimation technique, analyzing data spanning from 2001 to 2020. The study reveals that natural resources exert a significant negative impact on growth while institutional quality wields a significant positive effect on economic growth. Additionally, labor and capital demonstrated a significant positive influence on economic growth. These outcomes have important implications for policymakers and decision-makers, urging them to consider the complex interplay of natural resources, institutional quality, labor, and capital in shaping economic growth strategies.

Are cryptocurrencies a threat to financial stability and economic growth of India? Evidence from the cointegration approach

The purpose of this paper is to investigate whether the cryptocurrency market affects the financial stability and economic growth of India. The study used time series quarterly data on bitcoin, financial stability, inflation rate, real GDP, economic volatility uncertainty, exchange rate, and market volatility index for the period 2015Q1–2022Q4. The robustness of the findings was confirmed by the fully modified OLS (FMOLS) and canonical cointegration regression (CCR). The study results demonstrated that an increase in cryptocurrency investments will affect the financial stability of India significantly. Each 1% increase in the cryptocurrency would reduce the financial stability by 5% approximately. However, there was a marginal effect of cryptocurrency on economic growth. The results also found that exchange rate volatility and inflationary pressure would also deteriorate the financial stability of the country. Furthermore, the results also identified positive and significant cointegration between economic growth and financial stability. Due to most transactions in the economy being done through the financial system, it is paramount for economic growth. Going forward, aggressive monetary policy tightening, volatility in capital flows and exchange rates, de-anchoring of inflation expectations, faltering in the economic recovery, disruptions due to global supply chains and climate change will be the major risks to the financial stability and economic growth of India.

Influence of Infrastructure Development with its Sub-sectors on Economic Growth in Selected Asian Countries: An Empirical Analysis using DOLS and FMOLS Approaches

This paper exploits a dynamic ordinary least square (DOLS) and fully modified ordinary least square (FMOLS) panel data method to research the bond through infrastructure development and economic growth for four selected Asian countries viz., China, Pakistan, India and Bangladesh since 1990-2016. In this regard, the data is collected mainly from secondary resources including gross domestic product (GDP), domestic credit (DC), electric power consumption (EN), rail lines (RL), mobile subscriptions (M), health expenditures (HT), Education expenditures (ED). To attain the desired objectives, panel causality test is also used in the study to check the causal relationship among the variables. Results showed that all the variables have significant positive impact on economic growth except the variable domestic credit. Further, the findings showed that investment in all types of categories in public infrastructure have significant contribution in the development of the countries. The study concludes that an economy can robust its economic growth if regressive taxes are levied. Moreover, study recommends that the countries should have to focus on all the sectors but there is need to focus more on energy sector and telecommunication sector to accelerate economic growth.

Economy-energy-environment nexus: The role of information and communication technology towards green development in Malaysia

Global warming and climate change are caused by anthropogenic greenhouse gas (GHG) emissions from rising energy consumption due to population and economic growth. Over the past decade, information and communication technology (ICT) usage has increased which may increase energy utilization and GHG emissions. Conversely, ICT's clean technologies can minimize pollution. Therefore, this study investigated the dynamic influences of ICT, economic growth, population, and energy use on GHG emissions in Malaysia by employing the autoregressive distributed lag (ARDL) approach using data from 1990 to 2021. The results of the ARDL bounds test indicated the existence of a long-run link between the variables. The results revealed that a 1% increase in the number of Internet users could increase GHG emissions by 0.013% in the short run but cut GHG emissions by 0.077% in the long run. Additionally, economic growth, population, and energy usage have a positive association with GHG emissions. The robustness of the ARDL outcomes has been checked by using the Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Canonical Cointegration Regression (CCR) methods. This article offers additional policy proposals for emission reduction and sustainable development by promoting renewable energy use and financing green ICT.

Unveiling the spillover effects of democracy and renewable energy consumption on the environmental quality of BRICS countries: A new insight from different quantile regression approaches

This research explores the nexus of economic expansion, population, use of renewable energy, democracy, and the combined effect of democracy and GDP on carbon dioxide (CO2) emissions in the BRICS countries. We apply an extended STIRPAT model, including the variables of democracy and democracy with GDP, to examine the case of the BRICS countries between 1990 and 2019. Quantile regression methods (Simultaneous, Powell, and MM-QR) are applied together with the Dynamic OLS (DOLS), Fully modified OLS (FMOLS), and CCR. The results indicate that economic size (GDP) and population are linked to increasing levels of CO2. Whereas increased use of renewable sources of energy can help reduce environmental degradation. Similarly, an interaction between good democracy and economic growth is helpful for a sustainable environment. The Dumitrescu and Hurlin panel causality test highlights a bidirectional causal link between GDP, Democracy, and Population with CO2, but only a unidirectional causal relationship between renewable energy and CO2. Policymakers in the BRICS countries need to consider:1) pro-growth economic policies along with better democratic practices, 2) higher promotion of renewable energy resources, and 3) improving living standards for the population to achieve higher environmental quality.