GMM Approach Research Articles

Pollution haven or pollution halo in the context of emerging economies: a two-step system GMM approach

Pollution haven or pollution halo in the context of emerging economies: a two-step system GMM approach

Nordic environmental resilience: balancing air quality and energy efficiency by applying artificial neural network

Maintaining public health and environmental safety in the Nordic nations calls for a strict plan to define exact benchmarks on air quality and energy efficiency. This study investigates the complicated interaction of decentralized energy production (DEP) with energy efficiency, and air quality index in the Nordic nations from 1990 to 2022 using System GMM and Artificial Neural Network (ANN) approach. Our research explored positive role of decentralized energy production and technological advancement to propel notable increases in energy efficiency, hence lowering pollution expressed as PM2.5 level. Our research indicates, however, that although international trade, GDP and urbanization assist to enhance energy efficiency, they also contribute to pollution by raising PM2.5 Level by higher energy usage. Furthermore damaging to environmental quality is the persistent link shown by economic disparity and the energy price index with increased degrees of pollution and less energy efficiency. Policy frameworks must devised sustainable development policy (decentralized energy production) to significantly improve energy efficiency and lower the amount of pollution. This calls for proper urban planning and a close observation of the possible drawbacks of growing GDP, trade, economic disparity, and energy expenses.

Towards a greener future: The impact of financial technology (FinTech) and climate finance on ecological sustainability

Ecological sustainability has become a top priority for worldwide policymakers due to severe consequences. Innovative approaches, like climate finance and financial technology (FinTech), are crucial in combating climate change and its environmental hazards. This study aims to investigate the role of climate finance on ecological sustainability with FinTech and institutional quality as moderators from 2010 to 2022 in 58 advanced countries. Besides that, the COVID-19 spillover shock effect (pre-post), socio-economic conditions, and trade openness are also considered as other variables in this study. The study employed the two-step Sys GMM approach, and the robustness was checked by the D-K regression and bootstrap panel quantile regression for empirical analysis. The results reveal that climate finance improves the trajectory of long-term ecological sustainability by significantly lowering the ecological footprint (EF). FinTech has a strong positive effect on ecological performance by decreasing the EF. Furthermore, the combined influence of CF∗FinTech has significantly boosted ecological sustainability by diminishing the EF. Institutional quality substantially enhances ecological sustainability by reducing the EF. Similarly, the interaction term CF∗IQ improves ecological performance by lowering the EF. The outcomes have significant implications for sustainable development policy, influencing the transition to low-carbon economies and meeting net-zero emissions within this decade, contributing to improved ecological sustainability.

Exploring the Non-Linear Impact of Government Debt and institutional quality on Economic Growth across the MENA Region: Evidence from GMM approach.

Exploring the Non-Linear Impact of Government Debt and institutional quality on Economic Growth across the MENA Region: Evidence from GMM approach.

The Relationship between Technological Innovation and Economic Growth in EU Countries: A System GMM Approach

Purpose: This study aims to investigate the effects of technological innovation and scientific research on economic growth in European Union (EU) countries. It emphasizes the importance of prioritizing these factors for sustainable development and global competitiveness. Methodology: The research, conducted using panel data analysis and the System GMM method, examines the relationship between R&D expenditures and per capita Gross Domestic Product (GDP). Findings: Existing research indicates that innovation and research positively affect economic performance. Technological innovation supports economic expansion by enabling the creation of new products and improving production methods, while scientific research also makes a significant contribution to economic growth. The study confirms a positive relationship between R&D expenditures and GDP per capita, indicating economic growth. Originality: In contrast to existing literature, the results are analyzed comparatively on EU countries using methods such as Prais-Winsten and System GMM. Additionally, the discussion conducted on the group of EU member states addresses the concepts of sustainable development and global competitiveness.

Retraction Note: Understanding the role of green finance and innovation in achieving the sustainability paradigm: application of system GMM approach.

Retraction Note: Understanding the role of green finance and innovation in achieving the sustainability paradigm: application of system GMM approach.

Navigating poverty in developing nations: unraveling the impact of political dynamics on sustainable well-being

Political instability, dismal governance, and corruption are among the factors that currently distress poverty. The primary objective of this research was to determine how political factors distress poverty in developing nations, which has perhaps not been investigated yet. The main objective was also to observe if the effect of political factors on poverty is a dilemma or a reality. Poverty (dependent variable) has been divided into two segments: income poverty index and Human Health Poverty Index; however, political factors (independent variables) studied were corruption, democracy, governance, and political globalization. Twenty-six years of data were taken from 1997 to 2022 of twenty-four developing nations. The poverty and institutional quality indices were constructed through Principal Component Analysis (PCA). The Fixed Effect, System GMM, and 2SLS approaches were used to determine the dynamic impact on poverty. Furthermore, this study incorporated fixed effects with Driscoll-Kraay standard errors to address cross-sectional dependence. The findings indicated that, although there was a significant connection between governance and income and human poverty. Democracy also showed a negative and significant relationship in the income poverty model but insignificant in the human poverty model. Political globalization showed negative and significant associations with poverty models (income and human poverty). Conversely, corruption showed a significant positive relationship in poverty models, i.e., income and human poverty.

Female economic participation and sustainable development in African countries: The moderating role of governance

AbstractThis study examines the impact of female economic participation on sustainable development and the moderating role of governance in African countries using data between 2002 and 2022. Despite the significant contributions of women to the economy, they remain underrepresented in economic governance. The study employs the two‐step dynamic system GMM approaches with fixed effects and Driscoll–Kraay standard errors, and to address potential endogeneity. The findings reveal that while female economic participation positively affects sustainable development, poor governance weakens this relationship, suggesting a substitutive rather than complementary role of governance. The study establishes a governance threshold of 2.667, on a scale of 0–5, above which female economic participation significantly enhances sustainable development. Subregional analyses indicate varying impacts, with governance complementing female economic involvement in Central and Southern Africa but acting as a substitute in East, North, and West Africa. These insights underscore the need for enhanced governance and targeted policies to empower women and promote sustainable development across the African continent and the need for incorporating context.

Corporate governance and firm performance in Vietnam: The moderating role of digital transformation

This study examines the interplay between corporate governance mechanisms and firm performance in the Vietnamese context, with a particular focus on the moderating role of digital transformation. Utilizing a sample of 150 Vietnamese firms in 2023, the study employs a GMM approach to analyze the relationship between board characteristics (size, independence, duality, gender diversity, meeting frequency, and nationality diversity), digital transformation, and firm performance, proxied by ROA, ROE, and EPS. The findings reveal that board size and CEO duality positively influence firm performance. Notably, the positive impact of gender diversity on performance is amplified by digital transformation. While digital transformation exhibits a standalone positive effect on performance, its moderating role on other governance mechanisms is mixed. These results underscore the importance of effective corporate governance practices, particularly in the context of digital transformation, for enhancing firm performance in the Vietnamese market.

Providing an accelerator for neutralising inequalities through tourism development across developed and developing countries

ABSTRACT This study uses a novel dynamic GMM approach to compare the effects of tourism development across developed and developing countries. It is the first study to examine the tourism accelerator on the alleviation of income inequality, considering the total, direct and indirect contributions. The direct contribution of tourism emerges as the most influential factor in diminishing income inequality for both developed and developing countries. We find a decrease of 0.363 and 0.077 in the Gini index, in response to a unit increase in the value of the direct variable for the respective country groups. In developed countries, a marginal increase in the indirect contribution of tourism is associated with a Gini reduction of 0.105 units, highlighting a substantial mitigating effect on income inequality. In contrast, the coefficient in developing countries is 0.041, indicating a comparatively weaker impact in addressing income inequality. Moreover, a decline of 0.171 units in the Gini coefficient is observed in response to an escalation in the total contribution of tourism in developing countries, whereas a similar scenario results in a 0.027 unit decrease in the developing country group. These findings spawn some enlightening policy recommendations that are pertinent to the economic structure of the developing economies.

Is enterprise risk-taking less sensitive to financial flexibility post COVID-19? Evidence from non-linear patterns

We explore the non-linear relationship between financial flexibility and enterprise risk-taking, investigating the non-linear nature of this association across distinct periods: pre-pandemic, post-pandemic, and the overall sample period. We analyze a sample of 2503 Chinese listed firms, segmented into different time phase. Our design allows for an examination of how financial flexibility relates to risk-taking under various economic circumstances. Utilizing a two-step system GMM approach, as expected, we evidence a positive relationship between financial flexibility and risk-taking. However, squared financial flexibility has a negative and significant impact on risk-taking before the pandemic and across the overall period, while insignificant post-pandemic. These results are consistent with a shift towards enterprise risk-taking being less sensitive to levels of financial flexibility during times of excess financial resources. Moreover, we evidence diminishing returns in risk-taking opportunities beyond a specific threshold of financial flexibility, consistent with this association having non-linear dynamics. These findings highlight the crucial role of maintaining a balanced financial approach for fostering healthy firm-level risk-taking behavior.

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.

How economic policy uncertainty affects common prosperity in China? The mediating role of green finance and the moderating role of low-carbon technology

During a period marked by economic instability and urgent environmental concerns, the Chinese government has prioritized the objective of achieving comprehensive common prosperity, alongside the targets of "carbon peaking" by 2030 and "carbon neutrality" by 2060, in its forthcoming economic development agenda. This objective has garnered significant attention and has emerged as a focal point in the government's strategic planning. Existing literature predominantly delves into the economic ramifications of policy uncertainty, with limited attention given to the intersection of economic and environmental impacts. This study aims to fill this gap by investigating the correlation between economic policy uncertainty and the pursuit of common prosperity in China, with particular emphasis on the pivotal roles played by green finance and low-carbon technologies. The study introduces a Common Prosperity Evaluation Index, assessing prosperity levels across Chinese provinces and cities from 2010 to 2021. The analysis employs the System GMM approach, revealing that prosperity disparities persist, with eastern regions outpacing central and western areas. Economic policy uncertainty emerges as a determinant negatively affecting prosperity, especially in regions where prosperity levels are high. Moreover, it impedes green finance development, thereby hindering prosperity gains. Contrastingly, advancements in low-carbon technology bolster green finance and support the advancement towards common prosperity, aligning with the Sustainable Development Goals, particularly SDG8 (Decent Work and Economic Growth) and SDG11 (Sustainable Cities and Communities).

Financial performance and capital structure – an econometric approach for Romanian e-commerce companies during the COVID-19 pandemic

The study investigates the inverse relationship between financial performance and capital structure for the Romanian B2C e-commerce companies, based on a representative sample of 437 companies active in the period 2005–2020. Statistical analyzes show the evolution of financial performance and the impact of the COVID-19 pandemic on it, depending on the company category. All company categories had better financial performance in 2020 compared to 2019, based on sample results. The study reveals valid reference values for the financial ratios of Romanian electronic commerce, being a model to be applied in any industry. The analysis of the causality of the financial variables and their correlations, on the sub-periods 2005–2008 and 2009–2020, both at the company category level and at the sample level, are the basis of the GMM approach. The econometric models Difference GMM and System GMM explain the relationship between financial performance and capital structure leading to interesting conclusions. As e-commerce has a sustainable development, the findings and conclusions of the study provide guidance for economic policies at the sectoral level. Financial performance in relation to strategic debt management depends on the company category. Stimulating the development of those categories of companies that ensure the efficient performance framework can be the key to a sustainable development of the national economy. The study is useful for managers, investors, financial analysts, decision makers, in financial education as well as for the banking system.

Financial Development, Financial Openness, and Policy Effectiveness

This study explores how financial development and openness influence the effectiveness of fiscal and monetary policies. An analysis of data from about 100 countries between 1980 and 2018 reveals that both financial openness and development weaken the impact of monetary and fiscal policies. Our results further show that financial development in a country diminishes policy effectiveness depending on the country’s level of financial development; specifically, the more developed a country, the less effective the policies would be. Additionally, through a detailed examination employing a dynamic panel GMM approach, the study investigates the global repercussions of economic downturns in the US and how financial maturity shapes policy effectiveness during these times. We also discuss some policy implications that show that the positive impacts of monetary policy on output growth are lessened during crisis periods, and policymakers should act accordingly.

The Causal Linkages between Market Power and Cost Efficiency: Testing Quiet Life Hypothesis for the Banking Industry

This study aims to test the quiet life hypothesis considering the impact of market power on cost efficiency in Pakistani banks where managers of the banking industry slacken their efforts to enjoy a ‘quiet life’ due to market power and are not focused on the cost efficiency of their banks. Thus, banks with high market power are relatively less focused on the efficient allocation of resources, resulting in a loss of consumer surplus and efficiency. We take panel data for a sample of 25 commercial banks throughout 2006-2019. Our findings suggest Uni-directional causality running from cost efficiency towards market power in the case of Pakistan. In addition, to control for endogeneity, we adopt a dynamic two-step system GMM approach to model the relationship between market power and cost efficiency. Our findings suggest significantly negative effects of cost efficiency over market power, disproving the presence of quiet life in the case of Pakistan. This study provides substantial theoretical contributions in the form of the Quiet life hypothesis and welfare performance of banks. However, to the best of our knowledge, the causal linkages and the effects of market power on cost efficiency or vice versa are not documented for the banking industry of Pakistan.

Sustaining and Stabilizing During Covid-19: Effective Management of Bank Financial Behavior through Digital Financial Inclusion

Digital financial inclusion is critical for achieving higher economic growth, sustainable development, and a more financially inclusive nation. Additionally, digital financial inclusion is vital for stabilizing the Islamic banking industry during the COVID-19 epidemic, leveraging its resistance to financial shocks, and fostering financial inclusiveness. Islamic banks are usually considered because of their significant ability to counter financial crises and their prominent contribution to financial landscape. This study investigated the digital financial inclusion and Islamic banking stability nexus using unbalanced panel data from 65 Islamic banks from six countries from 2010 to 2021. This study uses a GMM approach and a Z score. The finding implies that the default risk of the banks in the analyzed area is reduced due to the increased stability of Islamic banking brought about by the broader application of digital financial inclusion. Digital financial inclusion is more strongly correlated with banks' financial soundness. Access to banking services, made possible by digital financial inclusion, also dramatically improves banking stability and makes banks more resilient. Moreover, incorporating digital financial inclusion into Islamic banking promotes inclusive economic development, which may help the industry weather crises like the present COVID-19 epidemic. This study lays out the policy implications that increasing bank stability, bolstering financial literacy, and combining digital financial inclusion with other strategies to keep banks viable.

Nexus of green energy, financial inclusion, militarization, and environmental sustainability: A global perspective.

This article investigates the dynamic impact of green energy consumption (GE), financial inclusion (FI), and military spending (MS) on environmental sustainability (ES) by utilizing a sample of 121 countries from 2003 to 2022. The dataset is divided into high-income, upper-middle income and low and lower-middle-income countries. We employed a two-step system GMM approach, which was further robust through panel Quantile and Driscoll-Kraay (D-K) regressions. The findings divulged that green energy resources benefit ES at global and all income levels because of having a significant negative impact of 5.9% on ecological footprints. At the same time, FI and MS significantly enhance ecological footprints by 7% and 6.9%, respectively, proving these factors detrimental to ES. Moreover, conflicts (CON), terrorism (TM), institutional quality (IQ), and socioeconomic conditions (SEC) also have a significantly positive association with global ecological footprints and most of the income level groups. Dissimilarly, financial inclusion and armed conflicts have a non-significant influence on ecological footprints in low-income and high-income countries, respectively. Furthermore, institutional quality enhances ES in upper-middle and low and lower-middle-income countries by negatively affecting ecological footprints. At the same time, terrorism significantly reduces ecological footprints in high-income countries. This research also provides the imperative policy inferences to accomplish various SDGs.

Influence of Financial Development on Environmental Quality: Research Results from Developing Countries

This study provides evidence supporting the hypothesis that financial development reduces environmental pollution in developing countries. using an annual dataset of carbon emissions, financial development, and other factors from 1990 to 2020, with the GMM approach, We find that the more developed the financial system, the more advantageous it is for the environment. This conclusion is strengthened when particular facets of financial development are taken into account. Moreover, the impact is also influenced by the countries' wealth levels, in which countries with high average incomes have financial development that has an impact on reducing environmental pollution and the opposite result when viewed. considered in low-middle-income countries. Finally, we offer some policy recommendations regarding financial development to enhance its efficacy in maintaining environmental quality.

Nexus between boardroom independence and firm financial performance: evidence from South Asian emerging market

This study empirically investigates the linkage between boardroom independence and the financial performance of non-financial firms in an emerging market featured by family-controlled businesses and concentrated ownership. The relationship is tested in a sample of 152 non-financial firms listed on the Pakistan Stock Exchange over a period from 2003 to 2018. Firms’ financial performance is measured through return on assets (ROA), return on equity (ROE), market-to-book ratio (MBR), and Tobin’s Q (TQ), while boardroom independence is measured through the proportion of non-executive directors on the corporate board. Using the dynamic GMM approach to address the possibility of endogeneity, it was found that boardroom independence is significantly negatively related to the financial performance of the sample firms. This negative impact is due to the reason of close ties of outside independent directors (non-executive directors) with dominant shareholders and management in personal, financial, and social terms. A significant negative influence of the board size and CEO duality on firms’ financial performance was also observed. The present study will add to the existing literature on corporate governance and firm financial performance using firm-level manually collected data. Further, our findings will also help the policymakers by providing empirical insights for strengthening corporate governance mechanisms in emerging market economies, specifically in the context of Pakistan.