Long-run Linkages Research Articles

Fostering a Sustainable Future in Somalia: Examining the Effects of Industrialization, Energy Consumption, and Urbanization on Environmental Sustainability

While existing research has extensively explored the individual impacts of energy consumption, industrialization, and urbanization on environmental sustainability, there remains a notable gap in understanding the synergistic effects of these factors within the context of rapidly developing regions, such as Somalia. Therefore, this study explores the impacts of energy consumption, industrialization, and urbanization on environmental sustainability in Somalia from 1990 to 2020. The long-run linkage among the variables of the study was confirmed using the bounds-testing approach. The findings from the ARDL model indicate that economic growth, energy consumption, and trade openness significantly exacerbate environmental pollution in Somalia in the short- and long-run. Conversely, while industrialization and urbanization reduce environmental pollution both the short- and long-run, urbanization does not demonstrate a statistically significant impact. The long-run findings of the study were validated using the DOLS and FMOLS approaches. The Granger causality analysis reveals unidirectional causalities from environmental pollution to GDP per capita, industrialization, and trade openness, as well as from energy consumption to environmental degradation. However, no causal linkage is detected between urbanization and environmental pollution within Somalia. Based on the results of the study, we propose the promotion of renewable energy sources, green industrialization strategies, urban planning and sustainable development, and enhanced monitoring and regulation to effectively address environmental degradation.

Novel Methods to Calculate and Estimate the Factors Influencing the Ecological Footprints of Pakistan

Increasing demand for natural resources has exacerbated the scarcity of natural resources. Shortage of natural resources for timely needs is raising some significant environmental issues for the fast-growing population. It is argued that there is a trade-off between economic growth and environmental quality but it is debatable. To expand this debate, this article examines the short-run and long-run relationship between ecological footprints and income growth accompanied by other macroeconomic indicators. This study investigated the validity of the Environmental Kuznets curve between income growth and environmental pressure in Pakistan. This paper is based on secondary data for the period (1970 to 2021). The Auto-Regressive Distributive lag-bound testing method is utilized to determine the short-run and long-run links between income growth and ecological footprints per capita. The study found that a larger proportion of Pakistan’s imports are contaminated with high embodied emissions. An increase in economic prosperity has dynamic implications for the environment across international borders. The products embodied emissions imported in Pakistan are greater than the emissions exported to other economies. The net effect of trade is negative on the environment in Pakistan. The study confirms that there exists a significant statistical relationship between ecological footprints and economic growth. This validates the evidence of the Environmental Kuznets Curve in the case of Pakistan.

Impact of Stock Market Integration on Industrial Corporate Investment in Nigeria: An Empirical Study (1986-2023)

Nigeria, a sub-Saharan African nation, is endowed with an abundance of natural resources, particularly those needed for industrial purposes. Despite this, the present level of output in the industrial sector in Nigeria is too low, particularly when it comes to investment undertaking by corporate investors. Therefore, the study examined the effect of stock market integration on industrial corporate investment in Nigeria from 1986-2023. Data used were sourced from the Central bank of Nigeria Statistical Bulletin. The study used Augmented Dickey-Fuller (ADF), bound test and Autoregressive Distributed Lag. The ADF estimate indicated that money supply and all share index were integrated of order one; while, corporate investment, stock market integration, real exchange rate, and lending interest rate were integrated of order zero. The F-value for the bound test estimate was much higher than upper bound of critical value at 5% conventional level; therefore, suggesting a long-run link between the use variables. The short-run estimates showed that stock market integration, real exchange rate and all share index were significant with direct effect on corporate investment; while, money supply and lending interest rate were significant also with indirect effects. Furthermore, long-run estimate showed that money supply and all share index were significant with direct effect on corporate investment; while, real exchange rate and lending interest rate were significant with indirect effects. This suggests that stock market integration currently witnessing in Nigeria is tentative. The study concluded that the current growth witnessing by industrial corporate investment in Nigeria due to stock market integration is not sustainable. Therefore, recommended that the Nigerian Exchange Group’s management should ensure that stock market price exhibit low volatility rate by making sure that its stocks management policies reflect best global stock exchange practice.

Energy security and its determinants in New Zealand

New Zealand relies on imported fossil fuels for about 38% of its primary energy. The country’s energy demand is expected to grow due to population and economic growth, which will put more pressure on the energy system. Besides, resource scarcity, energy price volatility, and environmental challenges have made energy security a major concern for New Zealand and other countries. Given the lack of significant research on the effects of energy security factors in New Zealand, this study aims to shed light on the primary determinants of energy security using the dynamic autoregressive distributed lag method based on time series data from 1978 to 2021. The study found that a long-run link exists between energy security and energy intensity (energy efficiency), renewable energy use, fossil fuel consumption, and global oil prices. Real GDP, renewable energy consumption, and energy security were found to improve energy security, while fossil fuel consumption and world oil prices had a negative impact. The study also revealed a one-way causality from real GDP, fossil fuel consumption, and renewable energy use to energy security. In contrast, the relationship between energy intensity and energy security is bidirectional. Simulation results showed that global crude oil prices have a lower impact on energy security compared to other variables and are most responsive to a 5% shock in fossil fuel consumption, followed by economic growth.

Is temperature adversely related to economic development? Evidence on the short-run and the long-run links from sub-national data

We examine the effect of rising temperatures on regional economic development, using annual sub-national data for over 1500 regions in 152 countries between 1990 and 2017. In a panel setting with region- and country-year fixed effects, we find no evidence of a homogeneous or heterogeneous effect of rising temperatures on economic development as measured by regional per capita income. Additionally, we find no non-linear relationship between temperature and economic development. We also employ a long-difference approach that is attuned to exploring the long-run relationship between rising temperatures and regional income. Results indicate that rising temperatures have a negative long-run impact on regional per capita income for a minority of regions located in countries with weak economic, legal and political institutions. Furthermore, these vulnerable regions experience a decline in long-term population and human capital development. The use of alternative regional per capita GDP data from 1950 onwards yields similar empirical results. Our findings suggest that negative economic effects of temperature increase with time, only becoming apparent in the long run for regions in already disadvantaged countries. Thus, country-specific conditions may moderate regional economic vulnerability to future temperature increases due to global climate change.

The dynamic relationships between oil products consumption and economic growth in Saudi Arabia: Using ARDL cointegration and Toda-Yamamoto Granger causality analysis

The purpose of this study is to investigate the short-run and long-run relationship between liquefied petroleum gas Consumption (LPGC), natural gas consumption (NGC), other refined products consumption (ORPC), carbon dioxide emissions (CO2), and gross domestic product (GDP) in Saudi Arabia, from 1970 to 2021. To study the link between energy consumption and economic growth and its role in this relationship, we use an autoregressive distributed lag (ARDL) bounds-testing technique of cointegration. The research findings revealed the development of a cointegrating association among all the variables. The anticipated results provide more evidence that a long-run link exists between the drivers of economic development and its regressors. The empirical estimation suggests an LPGC effect that is both beneficial and statistically significant on economic growth. A positive correlation exists between energy consumption and GDP growth. Using the Toda-Yamamoto Granger Causality approach, the causality test reveals a unidirectional causal relationship between the consumption of liquified petroleum and GDP, and between the consumption of natural gas and other refined products. In addition, there is bidirectional causality between GDP and other refined products. Consumption of natural gas and carbon dioxide emissions both have a neutral causal effect on economic growth. In the short run, NGC, ORPC, and CO2 have a positive effect on GDP. The KSA energy policy, actively engaged in slowing CO2 while preserving energy consumption, will significantly benefit from the conclusions of this research. Thus, policymakers should consider how to make LPGC, NGC, and ORPC more prudent and effective, particularly in the energy sector. The government of Saudi Arabia also needs to centralize the renewable energy sector.

Analyzing downside risk of BRICS stock indices: insights from value at risk and time series econometrics

Purpose This paper aims to analyze the downside risk for the stock indices of BRICS countries. The study also aimed to study the interrelationship, directional influence and interdependence among the stock exchanges of BRICS economies to provide insights for policymakers, fund managers, investors and other stakeholders. Design/methodology/approach The authors used Value at Risk (VaR) as an indicator of downside risk and time series econometrics for measuring the long run relationship, directional influence and interdependence. Findings The calculated VaR estimates, long-run linkages and strong interdependence among these indices especially with the returns of Brazil exerting a notable impact on the returns of other BRICS nations. These results emphasize the significance of taking into account cross-country spillover effects and domestic market dynamics in the context of portfolio management and risk assessment strategies. Further, from the extended results of variance decomposition analysis, the authors find that Brazil’s, China’s and South African stock market returns have a significantly lagged impact on their own stock market, while Russia’s and India stock market returns do not have a significantly lagged impact on their own stock markets. Originality/value To the best of the authors’ knowledge, this is the first study comprehensively analyzing the BRICS indices downside risk through the historical simulation method of VaR estimation, which is an unexplored area of risk management.

Prospect of trade and innovation in renewable energy deployment: A comparative analysis between BRICS and MINT Countries

The current study explores the impact of technological innovation and trade openness on clean energy while accounting for economic growth, access to electricity, pollution, industrial restructuring, and urbanization using data from 1990 to 2020 for both the MINT and BRICS economies. A series of tests were performed for a robust analysis using second generation econometrics approaches before proceeding to investigate the long-run linkages between renewable energy and the duo of innovation and trade using the Prais-Winsten regression model with panel-corrected standard errors (PCSE). The Driscoll-Kraay standard errors test was applied for robustness checks. The results, firstly confirm the presence of heterogeneity, cross-sectional dependence, and cointegration among the selected variables. Secondly, technological innovation as a renewable energy determinant demonstrated negative elasticities in both BRICS countries and the full sample, but a positive elasticity in the MINT countries. Thirdly, concerning trade liberalisation, negative elasticities were obtained for the full sample and MINT countries, while the elasticities were positive for the BRICS bloc. Fourthly, the roles of economic growth and environmental pollution reveal a negative impact on renewable energy consumption for all samples while urbanisation and industrial restructuring promote renewable energy developments only in the BRICS bloc. Policy implications are discussed.

The Long-Run Linkage among the Macroeconomic Factors and CO2 Emissions in terms of Sea Transport Induced EKC Hypothesis in USA

The main aim of this article is to comprehend the long-run relationship among sea transportation, energy use, GDP, and CO2 for USA from 1980 to 2023. In this sense, FMOLS, DOLS, CCR, and ARDL analyses are employed in order to investigate the entity of long-run linkage between the relevant variables. According to results of this manuscript, except energy use there is no both long-run relationship among variables and effects of independent variables (GDP, sea transportation) on dependent variable (CO2 emissions) from 1980 to 2023 in USA. Therefore, the sea transport-induced EKC hypothesis has not been confirmed empirically. Although the hypothesis has not been confirmed, there are some issues to consider in terms of energy consumption. Transportation energy consumption and greenhouse gas emissions are seen as an alarming threat to leaving a livable and sustainable green environment and economy to future generations. Fossil fuels used in transportation have an important place in carbon dioxide emissions. This is seen as a crucial environmental factor that all stakeholders should consider when planning energy and environmental policy decisions. In order to prevent environmental quality from being negatively affected by greenhouse gas and exhaust emissions, policy makers need to encourage more energy efficient and healthier transportation ways. Thus, the harmful effects of transportation energy consumption can be reduced as well.

Asymmetric Effects of Local and Global Business Cycle Variations on the Sectoral Industrial Production in Singapore

Abstract This paper investigates the sensitivities of Singapore’s sectoral industrial production to local and global business cycle variations using the auto-regressive distributed lag (ARDL) model in the nonlinear and asymmetric cointegration framework. By employing monthly time series data from Jan 1983 to Dec 2022 the study corroborates the commonly held view that durable industries are pro-cyclic to thelocal business cycle. However, the nature of cyclic sensitivity is different if viewed from a global perspective. Industries including pharmaceutical, computer, and motor vehicles industries flourish in both the local and global business cycle booms. Almost all industries having long-run linkages with global industrial production are also affected by global production growth in the short run. However, consistent with earlier studies for Southeast Asian countries, very few industries exhibit short-run asymmetries in their relationship with local and global business cycles. We found that incorporating long-run information also improves the forecasting ability of sectoral industrial production growth in Singapore.

Clarifying the nexus between Trade Policy Uncertainty, Economic Policy Uncertainty, FDI and Renewable Energy Demand

: As the world becomes increasingly aware of the need to shift towards sustainable energy sources, China and the United States are two global superpowers leading this transition. With growing populations and increasing demand for energy, these countries have recognized the importance of renewable energy in meeting their needs while reducing carbon emissions. The motivation of the study is to evaluate the impact of trade policy uncertainty on renewal energy demean in the USA and China for the period 2000-2021 by employing linear and nonlinear assessment. The test statistics derived through the cointegration test by following Bayer-Hancked and Makki's cointegration established a long-run tie in the empirical equation. Moreover, the long-run linkage was revealed with symmetry and asymmetry investigation. Referring to the coefficients of linear assessment, the study established that uncertainties have a detrimental role in clean energy demand in the long- and short-run assessment. The asymmetric association between uncertainties and REC has been documented through the execution of a standard weld test with the null of symmetry. The directional causality test established a unidirectional linkage between trade policy uncertainty and REC [TPU<- ->REC], and a bidirectional linkage between economic policy uncertainty and REC [EPU<- ->REC].

Long-Run Linkages Between us Stock Prices and Cryptocurrencies: A Fractional Cointegration Analysis

AbstractThis paper applies fractional integration and cointegration methods to examine respectively the univariate properties of the four main cryptocurrencies in terms of market capitalization (BTC, ETH, USDT, BNB) and of four US stock market indices (S&P500, NASDAQ, Dow Jones and MSCI for emerging markets) as well as the possible existence of long-run linkages between them. Daily data from 9 November 2017 to 28 June 2022 are used for the analysis. The results provide evidence of market efficiency in the case of the cryptocurrencies but not of the stock market indices considered. The results also indicate that in most cases there are no long-run equilibrium relationships linking the assets in question, which implies that cryptocurrencies can be a useful tool for investors to diversify and hedge when required in the case of the US markets.

Stock market indices and interest rates in the US and Europe: persistence and long-run linkages

PurposeThis paper aims to analyse the persistence of the S&P500 and DAX 30 stock indices as well as of the Fed’s Effective Federal Funds rate and of the European Central Bank’s Marginal Lending Facility rate, and the long-run linkages between stock prices and interest rates in the USA and Europe, respectively.Design/methodology/approachThe methodology is based on the concepts of fractional integration and cointegration.FindingsUsing monthly data from January 1999 to December 2022, the results can be summarised as follows. All series examined are non-stationary: stock prices are found to be I(1) while interest rates display orders of integration substantially above 1, which implies a rejection of the hypothesis of mean reversion in all cases examined.Originality/valueThis paper uses an appropriate econometric framework to obtain new, reliable empirical evidence. All four series are highly persistent, and mean reversion does not occur in any single case. Moreover, the fractional cointegration analysis suggests that stock prices and interest rates are not linked in the long run.

Evaluating Sustainable Relationship between Stock Market Development and Nigeria’s Economic Growth

Our paper investigates the sustainable relationship between the stock market development and Nigeria’s economic growth with Zivot Andrew structural unit root test and Autoregressive Distributed Lag model (ARDL) technique from1980–2020, we discovered an evidence of a long-run link between Nigeria’s economic progress and stock market size at a speed of adjustment of 60% per annum. Further evidence shows that in the long run, market liquidity (TVR) showed a positive (coef =1.4) but insignificant (prob = 0.7) effect on economic performance. As much as the Nigerian stock market is growth inducing, evidence shows that the market indicators failed to produce significant effect on the growth of the economy in the long-run. To achieve a long-lasting impact, the market needs to be deepened (liquidity) through enhancing its trading infrastructures and policies. Furthermore, Security and Exchange Commission needs to encourage and lure unquoted firms which have attained some certain level of capitalization to get listed on the exchange.

Economic growth, energy consumption, and trade openness nexus: Evidence from net energy importing middle-income countries

The study explores both the long- and short-run liaisons between three conceptual dimensions: economic growth, energy consumption, and trade openness in 29 net energy importing middle-income economies using annual data from 1990 to 2019. We hereby assess ARDL models which examine the long-run links by integrations in between these three conceptual variables, and additionally Dumitrescu-Hurlin and Granger causality tests for panel and individual country models, respectively. For panel country samples, we reveal bidirectional causality connection between trade openness and economic growth along with unidirectional causalities from economic growth to energy consumption and from energy consumption to trade openness in the short-run. Bidirectional positive feedback relationships stand between economic growth - energy consumption and trade openness - energy consumption in the full sample and the upper middle-middle economies subsample in the long-run. Findings for individual country estimations reveal significant long-run relationships between energy consumption and economic growth in 12, energy consumption and trade openness in 6, and economic growth and trade openness in 9 of the middle-income economies examined.

Analysis of the Long-run Linkage Effect between Pension Insurance and Economic Growth Based on VAR Modeling

This paper conducts an empirical analysis based on the VAR model to explore the mechanism of the long-term spillover effects of our country's pension insurance on economic growth. The study reveals that the implementation of the pension insurance system can stimulate consumption and savings among the elderly, thus promoting economic growth. Additionally, it encourages increased labor supply and fosters the accumulation of human capital, exerting a positive impact on economic growth. The equity and sustainability of pension insurance can improve income distribution and reduce wealth disparity, leading to a favorable impact on economic growth. Furthermore, the empirical analysis demonstrates the long-term spillover effects of pension insurance on economic growth, providing significant support for the sustainable development of the pension insurance system and economic growth. This holds considerable theoretical and practical value for formulating pension insurance policies and promoting sustainable economic development.

Credit Financing and Agricultural Development in Nigeria

This study investigates the short-run dynamics and long-run link between credit financing offered by Deposit Money Banks (DMBs) and agricultural development in Nigeria for a period of 1981 to 2020. A quantitative ex-post facto research design was employed to analyze bank credit impact on agricultural advancement at both aggregate and sub-sectoral agricultural production. The research strategy utilized allows the use of economic series obtained from Central Bank of Nigeria Statistical Bulletin (2021) and World Bank Development Indicators (2021) to be analyzed by Autoregressive Distributed Lag (ARDL) estimation technique. From ARDL estimations, it is indicated that DMBs loans and advances have significantly negative short-run impacts on agricultural development in Nigeria at both aggregate and sub-sector levels. However, Bounds Testing analysis shows that the impacts of DMBs financing on Nigeria agriculture sector and labour employment in the sector become positively significant over a long period at aggregate level and for crop production only as a sub-sector. But the observed positive long-run impact of DMBs lending to agriculture was not significant for advancement of other sub-sectors (livestock, fishing and forestry). Hence, the study affirms that in the short run DMBs lending significantly slow down agricultural development in Nigeria but increases it significantly in the long run. The study recommends that there is need for agricultural policy makers and governments in Nigeria to develop appropriate specific agricultural financing mechanism that can aid performance of agricultural sector in the short-run and maintain long-run positive gains in the sector.

Does resource efficiency matter for environmental quality in Canada?

In order to combat climate change, the OECD emphasized the need to minimize the environmental impact of material use, as well as promote resource efficiency and accelerate the creation of a circular economy. The present study objects to promote a new debate about Canadian environmental quality and resource efficiency. In other words, this paper aims to capture the effect of resource efficiency on environmental quality in Canada while controlling financial development, economic growth, and energy. Nonlinear ARDL bounds test results indicate the significant long-run linkage between environmental quality, resource efficiency, financial development, economic growth, and energy in Canada. Moreover, the asymmetric results underline that 1) resource efficiency mitigates environmental degradation; 2) economic growth and energy uses in Canada significantly increase consumption-based CO2 emissions; 3) financial development positively contributes to environmental stability. Therefore, policymakers in Canada make sure that circular economies and resource efficiency can help reach net zero and combat climate change.

Contributions of Investment and Employment to the Agricultural GDP Growth in Egypt: An ARDL Approach

This paper explores the impact of investment and employment on Egypt’s agricultural growth during the period 1991 to 2021 using annual time series data. We use the ARDL approach to examine the long-run and short-run relationships among agricultural investment, agricultural employment and agricultural GDP. The results reveal that the variables of interest are bound together in the long run. The long-run relationship and the error correction model are estimated. The accompanying equilibrium correction proves that long-run linkages exist in a meaningful way. Results show that agricultural investment and agricultural employment are major short- and long-run determinants of the agricultural GDP. In the long run, every 1% increase in agricultural employment (AEMP) results in an increase in the agricultural GDP (AGDP) of 3.73%, while every 1% increase in agricultural investment (AINV) improves the AGDP by 0.43%. In the short run, 26% of all disequilibrium-causing motions are adjusted for in a single session. Therefore, it takes 3.85 years for the Egyptian agricultural GDP to achieve the transition from a short-term disequilibrium situation to a long-term equilibrium. Thus, decision makers should increase the rates of investment in the agricultural sector, in parallel to the development of the agricultural labor force in Egypt. Moreover, the increased allocation of public investments and the injection of private investments are highly recommended. In addition, the Egyptian agricultural sector needs improvements regarding human capital development and agricultural training. Finally, the government must initiate comprehensive farmer support services, bolstered farm/non-farm links and the promotion of rural SMEs to serve as the foundation for agricultural and rural development.

Did biofuel production strengthen the comovements between food and fuel prices? Evidence from ethanol-related markets in the United States

U.S. ethanol production from corn rapidly grew since the enactment of the Energy Policy Act of 2005 and the Energy Independence Act of 2007. Although many economists analyzed the relationships between food and fuel prices, the mechanisms between the price comovements and ethanol production have not yet been investigated with numerical models. We test the hypothesis that ethanol production strengthens the linkages between food and energy prices using the dynamic conditional correlations (DCC) -mixed-data sampling (MIDAS) model and wavelet coherence approach over the sample period 2005–2020. To the best of our knowledge, this research is the first to apply the combination of the DCC-MIDAS and wavelet methodologies to address the relevant issues. Our primary findings are as follows (1) the DCCs for the three pairs (i.e., ethanol-corn, crude oil-corn, and ethanol-crude oil): exhibited positive linkages in most of the sample period. (2) The ethanol-corn DCC positively and negatively affects ethanol production in the short and long run. (3) Ethanol production negatively and positively influenced the crude oil-corn DCC in the short and long term. The results suggest that U.S. biofuel policies foster the food-energy long-run linkages and enhance the probability of concurrent food and energy crises.