Generalized Method Of Moments Model Research Articles

The Impact of Digital Inclusive Finance on Economic Growth in Xinjiang Uygur Autonomous Region, China

With the advancement of digital technology and the in-depth exploration of inclusive finance, digital inclusive finance has emerged as a result. The development of digital inclusive finance is propelled by the reduction of costs and barriers in financial services through digital technology. Xinjiang Uygur Autonomous Region, due to its remote geographical location, faces spatial constraints that are overcome by digital inclusive finance. Therefore, this paper focuses on the study of the effects of digital inclusive finance on economic growth in Xinjiang. To analyze the impact of digital inclusive finance on economic growth in the Xinjiang region, this paper constructs a dynamic panel GMM (Generalized Method of Moments) model based on panel data from Xinjiang Uygur Autonomous Region for the years 2011-2019. Empirical analysis reveals that digital inclusive finance has a positive effect on economic growth in the Xinjiang region.

Structural Change in the 21st Century: The Role of the Modern Services Sector in the Economic Development Strategy

ABSTRACT Traditional literature on Economic Growth highlights the role of the manufacturing sector in fostering economic growth. This sector, characterized by increasing returns, plays a fundamental role in both static and dynamic scale gains within the economy. Recently, an increasing number of studies have suggested that the increased share of the modern services sector also significantly contributes to innovation, productivity, and increased output. The aim of this paper is to reevaluate growth theories in light of the emerging prominence of the services sector and to outline key components of a research agenda that encompasses this sector as a crucial area of investigation. To substantiate this argument, we apply a GMM (Generalized Method of Moments) model to a dataset spanning from 1990 to 2018, encompassing fifty-one (51) countries, in order to evaluate the impact of modern services on manufacturing performance. An interaction variable is employed to test whether a symbiotic relationship between industry and services is the driving force behind economic growth. The results demonstrate the relevance of the services sector. Finally, we suggest possible research lines to be developed.

The Asymmetric Effects of Consumer Confidence on Credit Card Spending in Turkey

This paper analyzes the asymmetric effects of consumer confidence on personal credit card expenditures in Turkey. To this end, the impact of the consumer confidence index on real credit card spending is investigated from January 2013 to June 2023 using the threshold generalized method of moments (GMM). The linear GMM model findings indicate that consumer confidence increases real credit card expenditures. Furthermore, when the threshold GMM model is estimated using the annual percentage change of the consumer confidence index as a threshold variable, the coefficients differ across low- and high-confidence regimes. More specifically, the consumer confidence index has a statistically significant positive impact on credit card expenditure in the low-confidence regime but not in the high-confidence regime. This indicates that the optimistic expectations of economic units in a low-confidence environment may stimulate credit card spending.

Micro-pathways to Technology Spillover in Industrial Agglomerations: Evidence from Manufacturing Enterprises in Guangdong Province

Abstract: Under the "new normal" economy, the driving force of industrial agglomeration has gradually shifted from factor- and investment-driven to innovation-driven economic growth. This article uses the local and global industrial clustering indices based on the density accumulation function to measure overall industrial agglomeration. The authors then adopt the system GMM (generalised method of moments) model to analyse the technology spillover effect of industrial agglomeration. Findings have identified three pathways of technology spillover: spatial agglomeration, specialisation spillover and technological networks. Enterprises at the centre of industrial agglomerations have stronger technological innovation capabilities. Specialisation agglomeration has a significantly positive impact on technological innovation. Technology cooperation networks have a significantly positive impact on improving technological innovation and thus form an important pathway for technology spillover in industrial agglomerations.

Nexus between financial inclusion, workers’ remittances, and unemployment rate in Asian economies

Unemployment is one of the biggest macroeconomic issues, and economists and policymakers have provided various options to tackle this menace. Financial inclusion and remittances are an important part of any economy and help increase the level of employment. However, despite extensive research, several gaps and issues in understanding the intricate relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies persist. This paper seeks to bridge these gaps and address the issues by examining the relationship between financial inclusion, workers’ remittances, and the unemployment rate in Asian economies using rigorous econometric methodologies, such as two-stage least squares (2SLS) and generalized method of moments (GMM) methods. The findings of 2SLS and GMM demonstrate that ATM, remittances, internet users, GDP, and financial globalization adversely influence the unemployment levels in Asia, Central Asia, East Asia, Southeast Asia, West & Middle East Asia, and South Asia in 2SLS and GMM models. However, the influence of inflation on the unemployment level is favourable in some regions. Therefore, it is important to give priority to policies that encourage financial inclusion, such as increasing underprivileged populations’ access to banking services, credit, and insurance. Moreover, reducing transaction costs, streamlining money transfers, and promoting formal remittance channels can boost remittances.

Impact of macroeconomic factors on firm performance: Empirical evidence from India

Understanding the macroeconomic factors is essential for all firms operating in the economy. Investment decisions, financing decisions, and risk management of firms are influenced by the existing macroeconomic factors, thereby impacting their performance. This paper examines the effect of macroeconomic factors on the performance of Indian manufacturing firms. Two-step generalized method of moments model is applied in this investigation to analyze the effect of firm performance from the financial year 2004-05 to 2021-22. Firm performance is proxied by two accounting-based measures and a market-based measure, namely, return on assets, return on equity, and Tobin’s Q, respectively, while the macro-economic factor is proxied by annual gross domestic product growth rate. The empirical findings show that firm performance has a positive relationship with macroeconomic factors. In addition, the findings reveal that firm size, firm age, leverage, sales growth, and operating profit impact firm performance. The study further extends to examine the moderating effect of financing constraints (measured by firm size and age) on macroeconomic factors and firm performance. The results show that the effect is more pronounced on small and young firms as compared to large and mature firms. The study also evaluates the impact of macroeconomic factors on firm performance excluding the crisis periods (the financial crisis of 2008 and the COVID-19 pandemic) and finds the impact on the market performance to be insignificant during non-crisis periods. This study recommends that lenders, managers, and other stakeholders should take proactive policy measures for any anticipated adverse changes in macroeconomic factors on the performance of Indian firms. AcknowledgmentsThe financial and infrastructural support provided by FORE School of Management, New Delhi, India in completing this paper is gratefully acknowledged.

The Effect of R&D on Economic Growth: Evidence from Cross-Country Panel Data

ABSTRACT: Research and Development (R&D) in particular and innovation in general are the best drivers of long-run sustainable economic growth and spending in R&D has been recognized as one of the means to the economic accomplishment of both developed and developing countries. However, the sustainability of the association between R&D & economic growth exclusively depends upon the performance of other macroeconomic determinants. Hence, we examine the effect of R&D on economic growth in the existence of five important macroeconomic determinants. The study focusses on 151 selected countries, including both developed and developing, over the period 1996-2020 and focused on the macro-level analysis. Our research is based on the deployment of system Generalized Method of Moments (GMM) technique. The GMM technique encompasses longitudinal data; and is gathered by pooling time-series across a pool of cross-sectional units, specifically country-wise. The biggest advantage of using the GMM technique is that it allows for addressing the endogeneity problem using lagged explanatory variables as instrumental variables. We have three samples in our analysis, namely pool of developed countries, pool of developing countries, and the pool of both developed and developing countries. Our study deploys four proxies of R&D to work the nexus between R&D and economic growth in presence of five important macroeconomic determinants. In each of these three samples, we run four GMM models, depending upon the deployment of four R&D activities that we used in this study. We observe an evidence that R&D plays a significant role in economic growth when the selected macroeconomic determinants are used as control variables. Our findings are mostly robust to R&D specifications, country specifications, model specifications, and estimation strategies. Most importantly, the effect of lagged economic growth is highly positive, signifying that economies with higher economic growth in the previous years tend to grow faster in presence of R&D intensity. The behaviour of other macroeconomic variables is having diverse nature. Some of these variables behave positively, while others behave negatively. This study suggests that policymakers should focus on improving R&D activities and strengthening the chosen macroeconomic determinants to facilitate economic development. Hence, it contributes to the ongoing policy debate, that is with reference to R&D effect on economic growth, on the finest strategies for attaining sustainable economic growth in all these selected countries. Hence, we can use these findings to develop a targeted policy that promotes R&D intensity in the phases of economic development.

How economic development promotes the sustainability targets? Role of natural resources utilization

Economic growth is essential to accomplishing sustainability goals. It is still being determined how natural resource consumption affects this connection. This study examines how natural resource exploitation links economic growth to sustainability goals. This research examines economic growth, natural resource use, and sustainability goals. We use the Generalized Method of Moments (GMM) model to explore China from 2009 to 2021. The GMM model examines how natural resource exploitation affects sustainability metrics, including greenhouse gas emissions, renewable energy uptake, and environmental quality. Technological advances, clean technology investment, and legislative frameworks also affect economic growth. This research illuminates the intricate link between economic growth, natural resource usage, and sustainability objectives. The findings emphasize the need for natural resource management for sustainable economic development and environmental protection. Understanding how natural resource consumption promotes sustainability may inform policy choices and assist in building solutions that boost economic growth while protecting the environment. This research adds empirical information on the relationship between China's economic development, natural resources, and sustainability objectives. This study helps policymakers, academics, and practitioners promote sustainable development and meet sustainability goals by explaining how natural resource consumption influences sustainability.

Digital Media and Green Development Path in Asia: Does Digital Financial Inclusion Matter?

We are entering a new epoch characterized by pervasive digitization, where a significant proportion of our daily activities rely on advanced digital and informational technology. Consequently, this study intends to scrutinize the repercussions of digital media and digital financial inclusion on environmentally sustainable growth across 38 selected economies. The research incorporates four distinct empirical analysis techniques: two-stage least squares (2SLS) and the generalized method of moments (GMM). The assessment reveals a meaningful and positive association between digital financial inclusion and green growth per the 2SLS and GMM methodologies. This affirms the notion that digital financial aid fosters ecological sustainability. Conversely, the metrics linked with information and communication technology (ICT) have shown positive significance across all four utilized estimation models. This suggests that an increase in ICT utilization can play a vital role in advancing green growth. In the same vein, the estimated coefficients of research and development initiatives and renewable energy consumption have demonstrated positive significance across all four models. Furthermore, the metrics associated with trade openness have exhibited a positive significance in both the 2SLS and GMM models. Meanwhile, the metric linked with education has displayed a positive significance solely with the GMM technique. Upon evaluation, it can be concluded that digital media, the consumption of renewable energy, and research and development endeavors are principal contributors to green growth.

Impact of regional energy allocation distortion on carbon emission efficiency: Evidence from China

The free flow of energy cannot be fully achieved in China's energy market because of incomplete market-oriented reform, resulting in energy allocation distortion, which has hampered carbon emissions reduction. However, the extent of energy allocation distortion and its role in carbon emission efficiency remain unexplored. Therefore, this study aims to measure energy allocation distortion and investigate its impact on carbon emission efficiency. For this purpose, first, we derive energy allocation distortion based on a production function and carbon emission efficiency using a meta-frontier non-radial Malmquist index. To effectively address the endogeneity issue, we use a generalized method of moments model to estimate the impact of energy allocation distortion on carbon emission efficiency. Second, we further explore the distortionary mechanism of carbon emission efficiency associated with energy allocation and analyze the asymmetric effect of energy allocation distortion on carbon emission efficiency. The results show a certain degree of energy allocation distortion throughout the country, and disparity exists among different regions. The average value of carbon emission efficiency in the eastern region is 1.0286, well ahead of the national average, demonstrating better performance than other regions. Energy allocation distortion negatively affects carbon emission efficiency, with a 1% increase in energy allocation distortion leading to a 0.251% decrease in carbon emission efficiency. Technological progress, the structure of energy consumption, and industrial structure are important transmission channels through which energy allocation affects carbon emission efficiency. The study contributes to uncovering regional energy allocation distortion and its impacts on carbon emission efficiency and providing strategic policy recommendations for improving energy allocation efficiency.

Examination of the Effects of COVID-19 on Happiness in Different Geographical Regions with Piecewise Linear Panel Data Models

The COVID-19 pandemic has recently caused the loss of millions of lives, and billions of others have been deeply affected. This crisis has changed the way people live, think about life, and perceive happiness. The aim of this study is to reveal differences between geographical regions by investigating the effect of the happiness variable on different countries during the international COVID-19 pandemic. The primary purpose is to demonstrate how such a pandemic may affect different countries in terms of happiness at the individual level and to identify possible strategies for the future. With this aim, both static and dynamic panel data models were used while applying fixed effects, random effects, and the generalized method of moments (GMM). A basic assumption in panel data models is that the coefficients do not change over time. This assumption is unlikely to hold, however, especially during major devastating events like COVID-19. Therefore, the piecewise linear panel data model was applied in this study. As a result of empirical analysis, pre- and post-COVID differences were seen between different geographical regions. Based on analysis conducted for three distinct geographical regions with piecewise linear models, it was determined that the piecewise random effects model was appropriate for European and Central Asian countries, the piecewise FGLS model for Latin American and Caribbean countries, and the piecewise linear GMM model for South Asian countries. According to the results, there are many variables that affect happiness, which vary according to different geographical conditions and societies with different cultural values.

The impact of corporate social responsibility on financial constraints: the role of insider and institutional ownership

Purpose This study aims to examine the impact of corporate social responsibility (CSR) on financial constraints (FC). Furthermore, the authors investigate the moderating impact of two key ownership variables, insider and institutional ownership, separately and their interacting effect on the CSR-FC relationship. Design/methodology/approach The study sample consists of 137 nonfinancial Pakistan Stock Exchange listed firms from 2010 to 2019. Firms’ participation in socially responsible activities is measured using a multidimensional financial approach, whereas FC are determined using the WW index. The findings were observed using the dynamic generalized method of moments model. Findings According to the findings, CSR has a negative impact on FC. In terms of moderating impact, the interactive variable of CSR and insider ownership does not affect FC, implying that when an insider owns a majority of shares, the negative relationship between CSR and FC is weaker. The findings demonstrate the entrenchment effect of insider ownership. In terms of the moderating effect of institutional ownership, CSR and institutional ownership have a significant but positive relationship with FC, implying that when powerful institutional investors are present, the negative relationship between CSR and FC disappears, demonstrating that higher institutional ownership leads to shareholder conflicts. Finally, the interactive variable of insider and institutional ownership has no statistically significant effect on the CSR-FC relationship. This insignificant relationship does not support the substitution or complementarity effect of corporate governance. Research limitations/implications The authors measure CSR activities using a multidimensional financial approach; however, in the future, CSR should be measured using qualitative aspects such as content analysis to strengthen the findings. Because the research is limited to a single emerging economy, Pakistan, the generalizability of the findings is limited. In the future, this research could be replicated in other emerging economies in Asia, Africa and Latin America. Practical implications The findings of the study will assist regulatory authorities, investors, financial analysts and other stakeholders in better understanding CSR practices in Pakistani firms, as well as the role of CSR and two other important aspects of internal governance mechanisms, namely, insider ownership and institutional ownership, in the CSR-FC relationship. Originality/value Few studies in the literature investigate the impact of CSR on FC. To the best of the authors’ knowledge, this is the first study of its kind in an emerging market to empirically test this relationship and further investigate the role of insider and institutional ownership in this unexplored relationship.

Digital Technology Development and Income Inequality in Indonesia: Using System GMM Model

This study aimed to analyze the importance of information and communication technology (ICT) for economic development. ICT development has been widely studied and well understood, but its impact on income inequality is less well documented. Therefore, this study used a panel data set in 34 provinces in Indonesia during 2013-2020 to examine the impact of ICT development on income inequality. The econometric Generalized Method of Moments (GMM) with the estimation model of the System GMM showed that higher ICT development (Information and Communication Technology Development Index) reduces income inequality (Gini Ratio). This implies that ICT development does not contribute to exacerbating income inequality. However, it could play a role in mitigating and reducing income inequality in Indonesia. Socio-economic and political factors are also important in reducing income inequality. Therefore, redistribution policies and government spending are crucial to reducing income inequality due to ICT development. These policies must be adapted to the needs of each region for ICT development. Keywords: ICT Development, Income Inequality, Socio-Economic and Political Factors, GMM Model.

Herding Trend in Working Capital Management Practices: Evidence from the Non-Financial Sector of Pakistan

Working capital management requires careful attention from corporate managers because it plays an important role in corporate stability. The social belongingness of managers induced them to learn from their society, colleagues, and overall industrial movement. They also learn from their peers that have more strategic efficiency. In line with these arguments, the objective of the current study is to explore the peer influence on corporate working capital management practices. For regression analysis, we utilized ten years of data (2009–2018) of non-financial publicly listed firms at PSX (Pakistan Stock Exchange). We used the cash conversion cycle (CCC) as a proxy variable to measure working capital management (WCM). We employed panel fixed effect and system GMM (generalized method of moments) models to estimate regression between the variables of the study. The empirical findings suggest the significant impact of peer WCM on corporate WCM. They also suggest the significant impact of other variables that determine the WCM. This study recommends social learning policy for corporate managers. They can learn from their peers to manage the working capital. Most previous studies discuss peer influence on investment decisions, corporate cash holding, financing policy, etc., but no study explores such a relationship specifically in the case of Pakistan.

The Twin Impacts of Income Inequality and Unemployment on Murder Crime in African Emerging Economies: A Mixed Models Approach

This study analyses the dynamic impact of income inequality and unemployment on crime in a panel of 15 African countries during the period 1994–2019 using four models: the panel vector autoregression model, the generalized method of moments model, the fixed-effect model, and machine learning. These models were chosen due to their ability to address the dynamics of several entities. The variables employed for empirical investigation include income inequality, unemployment, and crime. Machine learning was adopted to find which socioeconomic issues contribute to crime between the two issues at hand. The results show that income inequality accounts for 64% of crime, making it the biggest contributor to crime. The findings further show that an unexpected shock in inequality and unemployment has a significant positive impact on crime in these countries. Even when pre-tax income held by the top 10% and male unemployment is adopted, the study yields similar results. Educational entertainment through secondary enrolment was found to increase crime, while it was found to decrease crime through tertiary enrolment at the tertiary level. Finally, economic development was found to decrease crime. From a policy perspective, the current study suggests to the government that some policies are more appropriate for addressing concerns about income inequality and unemployment (income policy or fiscal policy). Therefore, more policies targeting the distribution of income are crucial, as that might decrease income inequality while at the same time decreasing crime. In addition, policymakers should focus on addressing structural challenges through the implementation of sound structural reform policies that aim to attract investment consistent with job creation, human development, and growth in African economies.

FAMILY VALUES, CAPITAL STRUCTURE, AND FINANCIAL PERFORMANCE: EVIDENCE FROM A DEVELOPING COUNTRY

The corporate finance literature holds a significant and ongoing dispute about how capital structure affects firm performance. This is true because different companies’ capital structures differ significantly from each other because of several factors, such as ownership structures and company-specific characteristics. Given the uniqueness of Jordanian businesses and the shortcomings of earlier research, the current study investigates the financial performance of family-owned companies in Jordan from the perspective of capital structure. We perform a quantitative analysis of companies in the insurance sector using a panel data method. To solve endogeneity issues, the generalized method of moments model is used. The data cover the period from 2015 to 2021. Financial performance and firm liquidity were positively correlated. Results for the leverage variables and company size, however, are inconsistent. Financial performance was negatively impacted by family-owned businesses’ long-term debt to total assets and debt-to-equity ratios. At the 1% level, there was a positive and significant correlation for DTA. The results of the GMM study also show that all capital structure proxies have a negative effect on the performance of the listed Jordanian non-family insurance companies. Overall, our findings are consistent with those of earlier research. Though, the difference in results between companies and countries produces a unique and novel consequence. Besides the empirical results, policy implications and recommendations for future research are presented in this study.

Does GRI compliance moderate the impact of sustainability disclosure on firm value?

PurposeThis paper aims to examine the moderating role of global reporting initiative (GRI) compliance in the association between sustainability reporting and firm value.Design/methodology/approachThis study investigates a sample of 223 manufacturing firms, encompassing 11 industries from 2010 to 2019. Using GRI compliance as a moderator, the authors employed a generalized method of moments model to study how sustainability disclosure impacts firm value.FindingsThe results indicate a positive and significant association between sustainability disclosure and firm value. This study reveals that GRI compliance moderates the relationship between sustainability disclosure and firm value, such that firm value increases when the firm adopts GRI in sustainability reporting.Originality/valueNo prior studies have examined GRI compliance's direct and moderating effects on the association between sustainability disclosures and firm value in the Indian manufacturing sector. This study is also valuable for the managers and industry to understand the significance of implementing voluntary sustainability disclosure practices and being GRI compliant.

The Impact of Digitalization and Trade Openness on Economic Growth: New Evidence from Richest Asian Countries

The aim of this investigation is to check the impact of digitalization and trade openness on economic growth for top ten richest Asian countries. Static Gravity Model and Generalized Method of Moments Model were estimated. We found that digitalization and trade openness have a significant positive effect on economic growth. These results prove that trade openness and digitalization is a source of economic growth for richest Asian countries. Due to the magnitude of the positive externalities attached to the trade openness and digitalization, in terms of technology transfer bias, financial capacities, economic policies, human expertise, plenty of natural resources, large markets size, and spillover effect added to the domestic capacities and the national investment, the pace of the phenomenal economic performance of the Asian economies is very well marked.

The effect of foreign direct investment on renewable energy consumption subject to the moderating effect of environmental regulation: Evidence from the BRICS countries

The environmental impact of foreign direct investment (FDI) is inconclusive, and FDI's different effects are generally explained through various factors. Meanwhile, this paper explores the effect of FDI on renewable energy consumption. Environmental regulation is considered as a moderating variable and a threshold variable simultaneously to capture the nonlinear association between FDI and renewable energy consumption. The panel threshold method was employed for empirical estimations using the dataset of the BRICS countries from 1990 to 2015. In addition, the generalized method of moments (GMM) models—both system GMM and difference GMM models—were applied to verify the robustness of this work. When formal environmental regulation was used as a moderating variable, the empirical results indicate that FDI reduces renewable energy consumption when the degree of regulatory stringency is lower than a threshold level. In addition, it turns to foster renewable energy consumption once the stringency is higher than the threshold. A similar finding was obtained when an informal environmental regulation was considered. Furthermore, the findings suggest that stricter environmental regulation can substantially promote renewable energy consumption emanating from FDI.

New insights into the impact of financial inclusion on economic growth: A global perspective.

Financial inclusion is critical to inclusive growth, proffering policy solutions to eradicate the barriers that exclude individuals from financial markets. This study explores the effects of financial inclusion on economic growth in a global perspective with a large number of panels classified by income and regional levels from 2002-2020. The analysis begins with the development of a comprehensive composite financial inclusion index comprised of penetration, availability, and usage of financial services and the estimation of heterogeneous panel data models augmented with well-known variables. The results obtained from the panel cointegration test support a long-run relationship between economic growth, financial inclusion, and the control variables in the full panel, income-level, and regional-level economies. Furthermore, the study employs a GMM (generalized method of moment) approach using System-GMM estimators to examine the effects of financial inclusion and the control predictors on economic growth. The results of the GMM model clearly indicate that financial inclusion has a significantly positive impact on economic growth across all panels, implying that financial inclusion is an effective tool in fostering rapid economic growth in the world. Finally, the study delves into the causality relationship between the predictors and provides statistical evidence of bidirectional causality between economic growth and financial inclusion, whereas it only supports unidirectional causality relationships from credit to the private sector, foreign direct investment, inflation rate, the rule of law, school enrollment ratio, and trade openness with no feedback causality. Moreover, the study fails to provide causality evidence from the age dependency ratio and population to economic growth.