Fully Modified Ordinary Least Squares Research Articles

Nexus of Human Development and Environmental Quality in Low-Income and Developing Countries: Do Renewable Energy and Good Governance Matter?

The relationship between human development and environmental quality has been explored in this study by examining the human-development status and carbon (CO2)-emissions levels of 60 countries from the low, lower-middle, and upper-middle income categories. The roles of renewable energy and some economic and institutional factors such as GDP, the rule of law, regulatory quality, and corruption control have also been investigated to ascertain their impacts on the relationship. The empirical investigations apply the generalized method of moments (GMM), fixed effects (FE), and random effects (RE) methods, and the long-run associations among the variables are investigated by applying the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) techniques. The robust findings support the trade-off relationship between human development and environmental quality in the selected low-income and developing countries. With evidence of an environmental Kuznets’s relationship between economic growth and environmental quality, these findings reveal that the measures pursued to improve human-development status have a contributory impact on CO2 emissions in the selected countries. However, an increased demand for renewable energy, effective enforcement of the rule of law, and improved control over corruption have a mitigating effect on CO2 emissions. The result has also highlighted the policy issues instrumental to increased emissions levels in these countries. Consequently, it is recommended to formulate policies for resolving disparities within the various dimensions of human development while also making deliberate investments in the socio-economic aspects of human development to ensure both sustainable human development and environmental quality.

Moving towards food security in South Asian region: Assessing the role of agricultural trade openness, production and employment

Despite several accomplishments in addressing malnutrition, the issue of food scarcity remains a persistent concern all over the globe, particularly in the South Asian region. One recommended solution to address this situation involves advocating for further liberalization of global food trading and opening employment opportunities. In this context, using panel data spanning 2000–2019, this study makes a novel attempt to quantify the impact of agricultural trade openness and agricultural employment on food security in countries belonging to the South Asian region while controlling the tariff and agricultural production. Using “Fully Modified Ordinary Least Square (FMOLS)” and “Dynamic Ordinary Least Square (DOLS)” modeling, this article concludes that increased agricultural trade openness hinders food security in this region. Because, the member countries of South Asia are heavily reliant on food imports to meet their domestic needs, implying that the expenses of food imports exceed the potential benefits of increasing exports. Moreover, tariffs have a detrimental impact on food security in this region. However, production and employment in the agricultural industry augment earnings, strengthen the capacity to buy food, and ensure adequate nutrition intake over the long term. The study's findings suggest that these nations should prioritize food self-sufficiency to expand agricultural exports and lessen their reliance on imported food. More than that, economies should provide rewards to broaden their agricultural production locally, which aids in reducing hunger and uplifting food security.

Climate policy uncertainty and energy impacts on trade openness and foreign direct investment in the United States: Evidence from the RALS co‐integration test

AbstractClimate change is becoming an increasingly pressing global issue, and understanding how climate policy uncertainty affects trade openness and foreign direct investment is crucial. This study provides contemporary insights into this complex relationship, particularly in the context of the United States, which is a major player in global trade and investment. The study employed a monthly dataset spanning from January 1990M01 to December 2020M12. Co‐integration exists between all the variables specified by employing Residual Augmented Least Squares (RALS‐EG), climate policy uncertainty, and fossil fuel consumption adverse influence upon trade openness and foreign direct investment, economic growth, and renewable energy consumption positive impact upon trade openness and foreign direct investment via the use of fully modified ordinary least square (FMOLS), and Dynamic Ordinary Least Squares (DOLS). The Fourier Toda‐Yamamoto causality reveals that climate policy uncertainty, economic growth, renewable energy, and trade openness exhibit bidirectional causality, while fossil fuels exhibit unidirectional causality. Based on the findings, policymakers should prioritize reducing climate policy uncertainty to create a more stable environment for trade and foreign direct investment (FDI). Clear and consistent climate policies can mitigate the negative impact of uncertainty on trade openness and FDI.

The financial development and renewable energy consumption nexus in Africa: Does the quality of governance matter?

AbstractThe impact of financial development (FD) on renewable energy consumption has been extensively examined in recent years. Nevertheless, studies on the moderation of quality of governance in the financial development and renewable energy consumption nexus are sparse. By filling the gap in the literature relating to energy economicsc, this study investigates the moderating effect of the quality of governance on the relationship between financial development and consumption of renewable energy for a panel of 33 African countries over the period between 2000 and 2020. The fully modified ordinary least squares (FMOLS) estimation technique is used to account for cointegration and cross‐sectional dependence. The results unveil that the impact of governance quality and financial development on renewable energy consumption is negative and statistically significant. Moreover, the results reveal that the FD‐governance quality interactions are significant and negative. Governance quality thresholds at which the negative incidence of financial development on renewable energy consumption is completely nullified are provided.

Business Confidence in Indonesia: Which Macroeconomic Factors Have Long-Term Impact?

Business confidence refers to the level of optimism or pessimism that business owners have about the prospects of their companies and the overall economy. Thus, the focus of this study is to examine the long-term impact of various macroeconomic factors—economic growth, government expenditure, interest rates, inflation, exchange rates, and the composite stock price index—on the business confidence index in Indonesia by utilizing monthly data from January 2009 to December 2022. We employ Dynamic Ordinary Least Squares (DOLS) and Fully-Modified Ordinary Least Squares (FMOLS) as the main methods, with Canonical Cointegrating Regressions (CCR) as a robustness check method. The study also utilizes pairwise Granger causality tests for a comprehensive analysis. The findings indicate that all macroeconomic factors significantly impact the business confidence index in the long term across all methodologies. Specifically, economic growth, inflation, and the composite stock price index exert a positive impact, while government expenditure, interest rates, and exchange rates indicate a negative impact on the business confidence index. This evidence emphasizes the importance for businesses to diligently monitor macroeconomic trends and understand the patterns in these indicators so that companies can better anticipate changes in business sentiment. Taking a long-term perspective when making strategic decisions and investments is also advisable, recognizing that the influence of macroeconomic factors on business confidence may be more pronounced over time.

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>

Achieving zero emission targets: The influence of green bonds on clean energy investment and environmental quality

The effectiveness of green finance in driving clean energy and environmental sustainability in the current era is receiving attention. Therefore, this study proposes an empirical framework highlighting the effects of green bonds (GB) on clean energy investment (CEI), clean energy investment efficiency (CEE) and environmental sustainability of 29 green bond issuing countries between 2014 and 2022. Using system and difference GMM approaches, this study finds that (i) green bond issuance drives clean energy investment. (ii) Green bonds sufficiently enhance the selected countries' environmental quality. These results supplement the promotion of green bonds in increasing the transfer of funds towards renewable energy projects by reducing reliance on fossil fuels. (iii) Using Driscoll & Kraay, Fully Modified-OLS, and changing the dependent variable, this study further supported the idea that green bonds effectively promote the CEE and environmental sustainability of the chosen countries. (iv) Similarly, this study conducted income heterogeneity, showing that green bonds improve high- and middle-income countries' CEI and environmental quality. (v) Finally, the results indicate that resource consumption escalates CO2 emissions by declining the CEI. Technological innovations increase CEI, whereas they do not mitigate CO2 emissions directly, hinting at the requirement for a comprehensive approach. Therefore, inclusive policies on green bond frameworks, robust incentives, and rigorous environmental criteria should be implemented to attract investment in clean energy development and ensure the environmental sustainability of the selected countries.

Electricity consumption and economic growth: Evidence from the East African community

This study investigates the dynamic causal relationship between electricity consumption and economic growth in the East African Community (1990–2021). It seeks to interrogate the nature of relationship between electricity consumption and economic growth. The hypothesis used in this study is four folded including growth, conservation, feedback and neutral hypothesis.It uses panel data estimation techniques, particularly the panel dynamic ordinary least squares (DOLS), fully modified ordinary least squares (FMOLS), and non-linear autoregressive distributed lag (NARDL). The panel augmented Dickey Fuller (ADF)-fisher and Levin, Lin & Chu (LLC), 2003, was used to test the unit root process. Dumitreschu-Hurlin (2012) and pairwise Granger tests were used to test for the direction of causality.The findings indicate growth hypothesis with a unidirectional relationship running from electricity consumption to economic growth. Regional governments must increase their investments in electricity market trading to boost economic growth. Greater benefits from regional cooperation can be realized with increased investment in electricity consumption.This is a novel study of the dynamic causal relationship between electricity consumption and economic growth in the East African Community. It is a ground-breaking inquiry into the possibility of integrating electricity markets and their role in promoting economic growth.

The dynamics of natural resources, renewable energy, and financial development on achieving ecological sustainability

Environmental sustainability has emerged as a paramount concern on the global agenda. Following the Paris Agreement and COP26, a strong global commitment exists to reducing its environmental footprint. This study examines the impact of non-renewable energy consumption and economic growth on ecological integrity from 1980 to 2021 b y employing the Autoregressive Distributed Lag (ARDL), Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) methodologies. Causality tests were also performed to understand the interrelationships among the variables, complemented by various pre-estimation tests to address potential data structure limitations. The findings highlight a dual impact on ecological integrity. While economic growth and the consumption of fossil fuels significantly worsen ecological degradation, the presence of natural resources benefits environmental quality. Intriguingly, it was revealed that both financial development and renewable energy consumption do not notably influence carbon dioxide emissions. This result is further validated by Granger causality tests, which align with the conclusions derived from the ARDL outcomes. Based on these detailed results, the study proposes targeted policy recommendations for Indonesia to encourage sustainable development practices that mitigate adverse environmental impacts while leveraging the positive contributions of natural resources .This study also serves as a valuable reference for other developing countries, such as China, in balancing the relationship between environmental sustainability and economic development.

DETERMINANTS OF EXPORT ENTREPRENEURSHIP DEVELOPMENT: A COMPREHENSIVE ANALYSIS OF THEIR HETEROGENEOUS IMPACT

The article aims to analyse current trends in the export entrepreneurship sphere. The main objective of the study is to identify a possible relationship between the attained level of export performance achieved in different countries and various institutional and other determinants. The article provides a concise theoretical overview and bibliometric analysis of publications, highlighting promising directions for the promotion of export entrepreneurship and identifying key factors influencing its effectiveness. To achieve the study՚s objective, data are used on the time to export a single cargo, the number of procedures to register a new business, the creditworthiness of countries, GDP per capita, the share of natural resource rents in GDP, the efficiency of government institutions, the share of urban population in the total population, and the average years of education. The specified parameters have been collected for the period from 2006 to 2020. To analyse the nature of the influence of the selected determinants, a sample of 135 countries with different levels of population income was compiled. Statistical data processing was carried out using the software tools EViews 13 and Stata/MP 14.2. Initially, a series of econometric tests were used to check the panel data for multicollinearity, variable stationarity, and their cointegration. Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) methods were then used to estimate the statistically significant long-term relationship between the variables. As a result, a pool of significant factors of institutional and other factors has been identified that determine the effectiveness of export entrepreneurship in the country. The results obtained allow for a more comprehensive justification of measures to support the development of export business activities.

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.