Heterogeneous Panel Causality Test Research Articles

Unlocking the potential of natural resources, fintech and fiscal policy for carbon neutrality; evidence from N-11 nations

By controlling the quantity of greenhouse gases in the natural environment, carbon neutrality is designed to reduce the adverse impacts of climate change. The specific goal can be attained by enforcing carbon dioxide elimination approaches, fostering the growth of fintech, fiscal policy tools, and funding in human development, along with the lowering of emissions. The current research analyzes the influence of the human development index (HDI), natural resources (NR), fintech (FT), and fiscal policy (FP) on carbon neutrality within the parameters of a policy structure. This task is performed with the objective of fulfilling the goals stated above. The ongoing research applies the innovative " General Method of Moment Quantile-based Regression (GMMQR)" and “Panel Quantile ARDL" techniques on a sample of N-11 nations to accomplish the goal. The outcomes support the idea that NR and FP function as pivotal factors in diminishing carbon neutrality. On the other hand, FT and HDI improve carbon neutrality. Moreover, in accordance with the heterogeneous panel causality test developed by Dumitrescu and hurlin (2012), NR, FP, HDI, and FT have been determined to have a unidirectional link with carbon neutrality. In regard to these findings, the research outlines a strategy designed to attain SDG 13 for the chosen nations. Decision-makers in these nations need to focus on policies that encourage the efficient use of natural resources. In addition, the chosen nations need to enhance their level of fintech to combat environmental degradation and achieve the targets of carbon neutrality.

Primary energy consumption-growth nexus: The role of natural resources, quality of government, and fixed capital formation

This present study is the first attempt to analyze the synergy between primary energy consumption, economic growth, natural resources, quality of government, financial development, and gross capital formation in the panel data of 30 developing countries from 1990 to 2017. For this purpose, the study employed pooled regression, fixed effects, random effects, and the heterogeneous panel Dumitrescu-Hurlin causation procedure. Our findings confirm that primary energy consumption, gross capital formation, financial development, and quality of government positively impact economic growth. The heterogeneous panel causality test confirms the feedback effect hypothesis in the connection between primary energy consumption and other factors including economic growth. These results offer new insights into policy implications for the developing countries being studied.

A DCCE Approach to the Governance-growth Nexus: Global Perspective

This study, being one of its kind by method and scope, delves into the effects of governance indicators on economic growth, using large panel datasets spanning from 2002 to 2020 for the world’s economies, income level economies, Organisation for Economic Co-operation and Development (OECD) members, and regional level economies that include 218 countries. In the presence of cross-sectional dependence and mixed integrating orders of the predictors, the results confirm a long-run nexus between governance and economic growth in the world and other panels. Using the dynamic common correlated effects model, the results indicate that governance predictors postulate significantly positive effects on economic growth, while the critical findings highlight that the scale of governance effects on growth varies in relation to the income level of the underlying economies in the panels, implying that the larger the economy, the higher the governance effects will be. Moreover, the results of the heterogeneous panel causality test reveal significantly strong unidirectional causality that runs from governance predictors to economic growth, while little evidence is found for feedback response and interdependencies between governance predictors in most of the panels. Based on the findings, appropriate policy recommendations are discussed.

Economic growth, energy consumption and environmental degradation nexus in heterogeneous countries: does education matter?

BackgroundEnvironmental concerns are growing globally. The world has suffered severe environmental deterioration over the years. Undeniably, the impact of environmental degradation on the earth’s geographical space is alarming, making environmental stakeholders to be worried. Existing literature has examined several factors affecting the environment, but the focus has now shifted to education and the need to maximize its potentials. Although studies have examined the direct impacts of education on the environment, those investigating its moderating role are relatively new and scarce, particularly across income groups. Understanding the channel through which education might affect the environment requires the knowledge of its moderating role. Therefore, this study employs FMOLS, DOLS, ARDL-PMG, CCEMG and heterogeneous panel causality test methodologies to investigate the direct and moderating effects of education in the growth-energy-environment linkages in heterogeneous income groups of 92 countries from 1985 to 2018.ResultsThe findings of this study indicate that economic growth is a long-term solution to environmental deterioration in high and upper-middle-income countries, while the opposite holds for lower-middle-income and low-income countries. In addition, energy consumption is linked with environmental degradation across all income groups. Also, the study finds that education’s direct effects aggravate environmental degradation across all income groups. Moreover, its moderating role ameliorates the adverse effects of energy consumption on environmental degradation in high and upper-middle-income groups but worsens it in the lower-middle-income and low-income groups.ConclusionThis study examines the role of education in economic growth, energy consumption and environmental degradation nexus. The study concludes that education is important for environmental sustainability as it encourages pro-environmental behaviors and attitudes and supports energy-efficient products and investments in green technologies. However, education may also aid energy-intensive activities and dirty technology by supporting lifestyles that are not eco-friendly. It is important, therefore, to provide education that promotes better environmental quality.

The shadow economy-environmental quality nexus in OECD countries: empirical evidence from panel quantile regression.

This study examines the heterogenous impact of shadow economy on the ecological footprint. We apply the panel quantile regression to a panel dataset of 32 OECD countries from 1990 to 2015. The estimation results indicate that the shadow economy-ecological footprint nexus follows an inverted U-shaped pattern. Initially, the higher size of the informal economy leads to more ecosystem degradation. When the shadow economy increases to certain thresholds, its environmental impact reverts to benefit. Such threshold changes with the evolution of the ecological footprint. Specifically, it first rises then decreases along with the degradation of the ecosystem. Moreover, the heterogeneous panel causality test reports the one-way directional running from the shadow economy to the ecological footprint in OECD countries. Likewise, environmental effects of other control variables, including trade openness, energy intensity, renewable energy, and income, are also not homogeneous across various levels of the ecological footprint. The significant and heterogeneous relationships between ecological footprint and its determining factors provide insightful implications for governments in tailoring environmental regulations upon different ecological conditions.

The nexus between health status and health expenditure, energy consumption and environmental pollution: empirical evidence from SAARC-BIMSTEC regions

BackgroundThe COVID-19 pandemic has highlighted the need for the betterment of health status, while also considering health expenditure, energy, and environmental issues. This paper examines the nexus between health status and health expenditure (both public and private), energy consumption and environmental pollution in the SAARC-BIMSTEC region.MethodsWe utilized the panel autoregressive distributed lag (ARDL) model, the heterogeneous panel causality test, the cross sectional dependence test, the cointegration test and the Pesaran cross sectional dependent (CADF) unit root test for obtaining estimated results from data over 16 years (2002–2017).ResultsOur results authorize the cointegration among the variables used, where the coefficients of energy consumption, public and private health expenditures, and economic growth are 0.027, 0.014, 0.030, and 0.029, respectively, and indicating positive and statistically significant effects. The coefficient of environmental pollution is − 0.085, implying significant negative effect on the health status of these regions in the long-run. However, no panel wise significant impact is found in the short-run. Bidirectional and unidirectional causal links between the studied variables and the health status are also identified..ConclusionsThe improved health status in the SAARC-BIMSTEC region needs to be protected by articulating the effective policies. The attained results are theoretically and empirically consistent, and have important policy implications in the health sector.

Institutional Quality and Tourism: Panel Causality Analysis in the Case of Mediterranean Countries

Using panel data methods this study examines the relationship between institutional quality and tourism in the case of 12 Mediterranean countries. Six indexes of the Worldwide Governance Indicators database and a general index calculated as their average were taken into consideration as institutional quality indicators. International tourism receipts per tourist and international tourism receipts as a percentage of export were used as tourism performance indicators. In analysis, the cross-sectional dependence was examined by Pesaran (2004) CD test and in accordance with the findings of this test, first and second-generation panel unit root tests were applied. Taking into consideration of the stationarity of the variables and non-homogeneity of the parameters, the relationship between institutional quality and international tourism revenues was examined by Dumitrescu and Hurlin (2012) heterogeneous panel causality test. Findings of the causality analysis strongly supported the causality toward international tourism receipts per tourist from institutional quality variables. Causality to the international tourism receipts as a percentage of export was supported for some of the institutional quality variables.

Asymmetric impact of fiscal decentralization and environmental innovation on carbon emissions: Evidence from highly decentralized countries

This study examines the asymmetric link between fiscal decentralization, environmental innovation, and carbon emissions in highly decentralized countries. Our preliminary findings strictly reject the preposition of data normality and highlight that the observed relationship is quantile-dependent, which may disclose misleading results in previous studies using linear methodologies. Therefore, a novel empirical estimation technique popularized as Method of Moments Quantile Regression is employed that simultaneously deal with non-normality and structural changes. The results exhibit that fiscal decentralization significantly mitigates carbon emissions only at lower to medium emissions quantiles. On the other hand, environmental innovation reduces carbon emissions only at medium to higher emissions quantiles. Interestingly, the emissions-reducing effect of fiscal decentralization is highest for lower emissions quantiles and lowest for higher emissions quantiles. In contrast, the impact of environmental innovation is lowest for lower emissions quantiles and highest for higher emission quantiles. Economic growth and population increase carbon emissions, and their emissions-increasing effect are lowest for lower emissions quantiles and highest for higher emissions quantiles. Moreover, the heterogeneous panel causality test confirms a one-way causal association, implying that any policy intervention regarding fiscal decentralization and environmental innovation significantly affects carbon emissions.

Exploring the driving factors of economic growth in the world's largest economies

This study explores the main factors of economic growth in a panel of the world's 20 biggest economies considering the data period of 39 years (1980–2018). In particular, the roles of international trade, energy use, human capital, and foreign direct investment (FDI) are examined in addition to the roles of capital and labour. To estimate the results the panel autoregressive distributed lag (ARDL) method of Pool Mean Group (PMG) estimator and heterogeneous panel causality test are used with due consideration of cross sectional dependence test, cointegration test and other necessary diagnostic tests. The obtained results ratify the cointegration among the variables used. Energy use, trade, capital, labour, human capital development and foreign direct investment have positive and significant impacts on the economic growth of these countries in the long run. In the short run energy use, trade and capital also have positive and significant effects, but human capital has negative effect on economic growth. A bidirectional causal relationship between economic growth and trade, capital, labour and human capital, and a unidirectional causal link from economic growth to energy use and foreign direct investment are also found. The obtained results are theoretically consistent, and therefore have important policy implications.

The dynamic nexus of energy consumption, international trade and economic growth in BRICS and ASEAN countries: A panel causality test

This study explores the dynamic relationship of energy consumption, international trade and foreign direct investment (FDI) with economic growth for a panel of BRICS and ASEAN countries over the period of 1990–2017 within a multivariate framework. The panel co-integration test, panel quantile regression method, impulse response function and heterogeneous panel causality test are used for empirical investigation. The results reveal the existence of a long-run equilibrium relationship among the variables. In the long run, the effects of energy consumption, international trade, capital and FDI are found to be positive and significant on the economic growth of these countries. The heterogeneous panel causality test results indicate bidirectional causality between energy consumption and economic growth, labour force and economic growth, international trade and energy consumption, and labour force and international trade. A unidirectional causality from economic growth to international trade and FDI, and from international trade and energy consumption to FDI is also identified. The implications of these results are also discussed.

Association between health expenditures, economic growth and environmental pollution: Long-run and causality analysis from Asian economies.

This study examines the association between health expenditures, economic growth (EG) and environmental pollution in Asia both at panel and country level. The separate impact of EG and environmental pollution on public and private health expenditures (PRHEs) are also examined. In doing so the panel cointegration tests with the level break, common correlated effects mean group and heterogeneous panel causality test are employed. The study covers 20 Asian economies and time-period from 1995 to 2017. The results provide evidence in support of a long run association between selected variables. The results explain that EG and environmental pollution are positively associated with total health expenditures as well as with public and PRHEs in all countries. However, the magnitude of environmental pollution coefficient is greater from EG coefficient, thus indicate that environmental pollution is the key determinant in increasing national health expenditures. Causality results demonstrate the existence of two-way causality between health expenditures and EG and unidirectional causality flowing from environmental pollution to health expenditures in Asian economies. Findings of this study have provided some important suggestions to policy makers which can be used to minimize the risk of environmental pollution on health in Asian economies.

Does Renewable Energy Matter for Economic Growth in Central and Eastern European Countries? Empirical Evidence from Heterogeneous Panel Cointegration Analysis

Abstract The aim of the paper is to provide empirical evidence in support of the relationship between renewable energy consumption and economic growth in eleven Central and Eastern European (CEE) countries over the period 1995-2015 within a multivariate panel data analysis. Based on World Bank data, the panel cointegration analysis reveals that renewable energy consumption and economic growth are positively associated in the long run in CEE countries. The heterogeneous panel causality test indicates a bi-directional causality relationship in support of the feedback hypothesis between economic growth and renewable energy consumption in Central and Eastern European countries.

Electricity consumption and economic growth at the state and sectoral level in India: Evidence using heterogeneous panel data methods

The demand for energy has been increasing over the years in India, which may be the result of its rapid economic growth trajectory. In this context, this study examines the direction of the Granger-causal relationship between electricity consumption and economic growth at the state and sectoral levels in India. In doing so, the panel cointegration tests with the structural break, the heterogeneous panel causality test, and the panel VAR based impulse-response model are employed. The study covers overall economic growth and growth in agricultural and industrial sectors for eighteen major Indian states for the period 1960–61 to 2014–15. The results provide evidence in support of a long-term relationship between economic growth and electricity consumption only in the agriculture sector. Further, the results provide evidence for the presence of unidirectional Granger-causality flowing in the direction of overall economic growth to electricity consumption at the aggregate state level. However, at the sectoral level, there is a unidirectional causal relationship running from electricity consumption to economic growth for the agriculture sector, and economic growth to electricity consumption for the industrial sector. • A long-run link exists between agricultural growth and electricity consumption. • Overall, causality flows from economic growth to electricity consumption. • Causality runs from electricity consumption to agricultural growth. • Existence of causality from industrial growth to electricity consumption

Heterogeneous effects of energy efficiency and renewable energy on economic growth of BRICS countries: A fixed effect panel quantile regression analysis

Despite the importance of energy efficiency (EE) in promoting economic growth (EG), the empirical evidence about the growth effect of EE is quite thin. This research intends to examine the heterogeneous impacts of EE, renewable energy consumption (REC), and other factors on EG of BRICS countries for 1990–2014. The empirical results unveil that EE in BRICS countries is an important source for EG. The findings of fixed-effect panel quantile regression analysis clearly explain that the effects of all the selected components of EG are heterogeneous along the quantiles. The effect of EE is significantly positive across all the quantiles, but the positive effect is more robust at 50th and 60th quantiles of EG. REC significantly decreases the EG in BRICS economies, but the negative influence is more robust at the upper quantiles of EG (0.60–0.90). Moreover, the results obtained from Dumitrescu-Hurlin (D-H) heterogeneous panel causality test approve the feedback hypothesis between EE and EG in BRICS countries. The findings also provide the bidirectional causal relationship between REC and EG. Furthermore, a causal association is observed from EE to REC. It suggests that EE is also beneficial to enhance REC in BRICS countries. The study suggests that more prolific use of energy can stimulate EG in BRICS countries by improvement in EE and renewable energy (RE).

Technology policy and environmental quality at crossroads: Designing SDG policies for select Asia Pacific countries

Since the inception of Sustainable Development Goals (SDGs), the Asia Pacific countries are facing difficulties in attaining the SDG objectives, as maintaining the environmental quality has been a challenge for them. In this study, we have revisited the technology policies of these countries, and in doing so, we have tried to address the problem of environmental degradation, while addressing the issues of sustainable economic growth, clean and affordable energy, and quality education. In this pursuit, we have designed two indices for environmental degradation and technological advancement, and then analyzed the association between them following the Environmental Kuznets Curve (EKC) hypothesis. Following IPAT framework, and by using quantile approach, over a period of 1990–2017, we have found that the turnaround points of EKCs rise with the rise in quantiles, i.e. quantiles with low pollutions are having turnaround points within sample range, whereas quantiles with high pollutions are having turnaround points outside sample range. Using Rolling Window Heterogeneous Panel Causality test, unidirectional causality has been found running from technological advancement to environmental degradation. Following the results obtained from the analysis, we have tried to address the objectives of SDG 13, SDG 4, SDG 8, SDG 9, SDG 7, and SDG 10.

Consumption of liquefied petroleum gas and the EKC hypothesis in South Asia: evidence from cross-sectionally dependent heterogeneous panel data with structural breaks

Economic growth without accounting for the simultaneous environmental deterioration that accompanies the achievements is doubtful to be sustained over time. Thus, global economies in the contemporary era have reached a consensus in aligning their respective growth policies with the environmental welfare aspects. Thus, economic and environmental welfares are envisioned to take place in tandem. However, as per the environmental Kuznets curve (EKC) hypothesis, economic growth in the initial stages can trigger a trade-off between economic and environmental well-beings which, beyond a certain growth threshold, can be expected to be diminished. Hence, it is pertinent to identify the key factors that can attribute to lower environmental hardships alongside economic growth in the long run. Against this milieu, this paper investigates the authenticity of the EKC hypothesis for aggregate and disaggregated greenhouse emissions in the context of six South Asian economies namely Bangladesh, India, Pakistan, Sri Lanka, Nepal and Bhutan. Annual data from 1980 to 2016 is employed to conduct panel data estimation exercises that are robust to handling cross-sectional dependency and structural break issues. Besides, the impacts of liquefied petroleum gas (LPG) use on the economic growth–greenhouse emissions nexus are also explored. The findings from the econometric analyses validate the existence of the EKC hypothesis for both aggregate and disaggregated greenhouse emission figures. Moreover, the country-specific EKC analysis reveals heterogeneity of the EKC findings across the concerned South Asian countries. However, LPG consumption is found to homogenously reduce the greenhouse emissions within all the economies. Finally, the heterogeneous panel causality test results reveal unidirectional causation stemming from economic growth to aggregate greenhouse emissions. Furthermore, statistical evidence regarding bidirectional causality between LPG consumption and aggregate greenhouse emissions and unidirectional causalities running from LPG consumption to carbon dioxide, methane and nitrous oxide emissions are also ascertained. These findings collectively imply that LPG can potentially act as a transitional fuel for the South Asian countries prior to undergoing renewable energy transition. Thus, it is recommended to promote the use of LPG for bridging the existent energy crises and simultaneously mitigating environmental pollution in South Asia.

Evaluating the relationship among agriculture, energy demand, finance and environmental degradation in one belt and one road economies

The agriculture sector has a 21 percent share in global CO2 emission. It is contributing the 40 percent share in the gross domestic product of OBORI (One Belt and One Road Initiative) economies. Therefore, the present work intends to evaluate the role of agriculture and forest on environmental degradation from 1980 to 2017 for OBORI economies. The cross-sectional dependence, and order of integration are checked by cross-sectional dependence and second-generation panel unit roots tests respectively. Afterwards, the Wester-Lund co-integration test infers the existence of co-integration between under-considered variables for OBORI region. The empirical results from Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) suggest that agriculture and energy demand cause to upsurge the environmental degradation. While, the forest is improving the environment quality. The authorities may consider the efficient energy utilizing, and eco-friendly techniques to overcome the deteriorating effects of energy usage and agriculture on environment respectively. The heterogeneous panel causality test infers a bidirectional causality between environmental degradation, finance, agriculture, and energy demand respectively.

Does ICT lessen CO2 emissions for fast-emerging economies? An application of the heterogeneous panel estimations.

This study examines the effects of electricity consumption, financial development, economic growth, trade and ICT on CO2 emissions in the fast-emerging countries, excluding Russia due to the unavailability of data. Cross-sectional dependency was identified using the Pesaran (2004) and Breusch and Pagan CD tests from Breusch and Pagan (1980) using annual data from 1993 to 2014 based on data availability. The second-generation panel unit root test was applied to investigate the integration order of the series. The long-run relationship among the variables was confirmed using second-generation panel cointegration techniques, which take cross-sectional dependency into account. Additionally, this study utilized the FMOLS, DOLS and robust least square estimators to determine the long-run coefficients. The results suggested that electricity usage and financial development have a positive and significant impact, while economic growth and trade have a negative and significant impact on CO2 emissions. Additionally, an inverted U-shaped relationship between ICT and CO2 emission was confirmed. This implies that pollution declines after attaining a threshold point as the ICT usage increases. Furthermore, the Dumitrescu and Hurlin (2012) heterogeneous panel causality test suggested that there is a unidirectional causal relationship between electricity consumption and CO2 emissions, CO2 emissions and ICT, gross domestic product and CO2 emissions. Another unidirectional causality exists between financial development and CO2 emissions. The study suggests that renewable energy sources can be adopted to decrease carbon emissions and to promote clean energy. Financial development needs to be further strengthened to promote the use of eco-friendly ICT products.

Bioenergy industry and the growth of the energy sector in the EU-28 region: Evidence from panel cointegration analysis

This study attempts to find whether the bioenergy industry contributed to the growth of the energy sector in the EU-28 region from 1990 to 2013. This study adopts the framework of the conventional production function to identify the influence of the bioenergy industry on the growth of the energy totality industries in the EU-28 region. To this goal, the authors apply the unit root test, panel cointegration test, cointegration estimate analysis, and heterogeneous panel causality test. The key finding of this study is that the bioenergy industry's determinant consumption and labour and capital inputs have an important and positive effect on the outgrowth of the energy section. This study showed that there is a significant long-run balanced correlation between the bioenergy industry and the outgrowth of the energy sector in the EU-28 region. Heterogeneous panel causality results show that bioenergy consumption and capital input of the bioenergy industry have an important and positive correlation with the growth of the energy sector in EU28. Also, the results show that bioenergy consumption, capital input of bioenergy, and labour input of the bioenergy industry have important and positive relationships with the growth of the energy sector in EU28 developed states. Moreover, heterogeneous panel causality results show that bioenergy consumption and labour input of the bioenergy industry have important and positive correlations with the growth of the energy sector in EU28 developing states. With reference to the studied panel dataset implicating all 3 models, the findings boost the growth hypothesis. The implications of such analysis for the EU energy policy makers are related to competitiveness, sustainable development, and the security of energy supply. The results showed that the bioenergy industry have an important effect on the growth of the energy sector in the EU-28 region.

A Comparison of Domestic Demand and Export-led Growth Strategies for European Transition Economies

The relationship between growth and trade has been argued many times in the literature. The topic is still current, dealing with different methodologies and countries by researchers. In this frame to understand the relationship theoretically and empirically better, the topic is examined again with a different approach which is explaining export-led growth (ELG) and domestic-demand-led growth (DLG) strategies comparatively for European transition economies. The annual data for the period between 1990 and 2015 were taken from Data Stream for 16 European (Central and Eastern Europe, Southeastern Europe and Balkans) transition economies and because data include both cross section and time dimension, it is necessary to apply dynamic panel data techniques. Second-generation unit root test (multifactor), Westerlund ECM panel co-integration test and heterogeneous panel causality test are applied, and long-term coefficients are estimated with common correlated effects (CCE) model. According to test results, not only ELG but also DLG strategy is accepted for European transition economies, and the direction of the relationship between growth and trade is bilateral. But the contribution of domestic demand on growth is seven times bigger than net export. The leading countries for ELG strategy are Romania, Bosnia and Herzegovina but for Poland and Czech Republic DLG strategy contributes more on economic growth. It is a better macroeconomic policy to have the balance between export-led and domestic-demand-led growth strategies for a sustainable economic growth. The key approach of high growth rate is to produce high technology with competitive price according to domestic demand and export it to the foreigner markets. JEL Codes: F14, C01, C33