Long-run Nexus Research Articles

Exploring the effect of ODA on poverty: insights from least developed countries

PurposeThe purpose of this study is to examine the long run impact of official development assistance (ODA) on Poverty levels in a sample of 33 least developed countries (LDCs) from 1991 to 2018.Design/methodology/approachThis study employed second-generation panel econometric techniques like Westerlund (2007), Pedroni (2004) cointegration tests and the augmented mean group (Eberhardt and Bond, 2009); (Eberhardt and Teal, 2010) and fully modified ordinary least squares (Phillips and Hansen, 1990) estimations to ascertain the long-run nexus between the variables of interest.FindingsOur findings revealed that ODA has a significant and positive impact on poverty expansion in LDCs. This indicates that ODA perpetuates poverty in LDCs in the long run. While gross domestic product (GDP) per capita and trade openness significantly contributed to reducing poverty levels. Our findings have several policy implications.Originality/valueThis paper sheds light on a panel of LDCs on which research on the ODA–poverty nexus is sparse in prevailing literature. Although studies have documented the impact of single country episodes on LDCs, research on the panel of LDCs remains largely unexplored. This is surprising given the heightened economic and social issues faced by these cross-sections. Additionally, a sustained downturn in ODA flows to LDCs and the commitment to meet SDG Goal 1 underscore the need for comprehensive analysis on LDCs. Hence, our study aims to address the critical gap in the prevailing literature and contribute to the field.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2024-0390

Examining the Influential Role of Family CEO and Investment on Tunneling: A BoundTest Approach

Tunneling is one of the ferocious corporate frauds mostly practiced in concentrated firms. This creates principal-principal agency conflict which influences the entire company operation and discourages investors. This study examined whether growth opportunities and family chief executive officer (CEO) smooth the way for tunneling practices in concentrated firms. The study analyzed panel quantitative data through a fixed effect model and autoregressive distributed lagged (ARDL) to forecast the short and long-run nexus. The finding shows that an increase in investment for expansion purposes creates a way for outward tunneling, which means that controlling shareholders secure their private benefits while availing growth opportunities. In addition, the study forecasts that these positive nexuses will be sustained significantly in the short and long run. Further, the current study also found that family CEOs tackle and minimize expropriation due to sustaining business, getting growth, and having a good reputation in the market. The study helped the regulatory body design policy, providing thorough information to investors strengthening governance mechanisms, and protecting shareholder's rights. The findings contribute to understanding governance dynamics in concentrated firms and highlight the need for regulatory measures to curb tunneling.

Unraveling the Link Between Environment and Economic Growth in Türkiye

This study examines the short and long-run and causative interconnections between carbon dioxide (CO2) emissions, economic growth, energy use, and industrialization in Türkiye using yearly data from 1971 to 2021. The paper employs the cointegration autoregressive distributed lag (ARDL) model, which indicates the presence of a long-run nexus between the variables and the estimated long-run coefficient of economic growth, energy use, and industrialization exhibit a sensitivity of -0.726, 0.563, and 0.548 changes in CO2 emissions respectively. The error-correction term is -0.563 and significant at a 1% significance level under the cointegration-ARDL model, suggesting that the deviations from the long-run equilibrium between the variables will be addressed through correction by almost 56.3% yearly. In other words, the speed of adjustment coefficients indicates that when disequilibrium occurs, adjustments returning to equilibrium take almost two years. The Toda and Yamamoto (1995) causality test indicates a unidirectional causal link from industrialization to CO2 emissions. This finding implies that industrialization harms environmental quality in Türkiye; therefore, Türkiye must prioritize sustainable industrial development and embrace green technologies.

Energy efficiency investment in a developing economy: financial development and debt status implication

PurposeThis study aims to assess financial development and debt status impact on energy efficiency in Nigeria as a developing economy.Design/methodology/approachThis study combined the autoregressive distributed lag (ARDL), fully modified ordinary least squares and canonical cointegration regression analytical methods to estimate the parameters for energy efficiency policy recommendations. Secondary data between 1990 and 2020 were used for the analysis.FindingsThe result confirms the long-run nexus between energy efficiency, financial development and total debt stock. Furthermore, the ARDL estimates for this study’s key variables show that financial development promotes energy efficiency in the short run but hinders long-run energy efficiency. Total debt stock limits energy efficiency in Nigeria in short- and long-run periods.Research limitations/implicationsThe limitation of this study is that the scope is limited to Nigeria as a developing economy. The need to support energy efficiency projects is a global call requiring cross-country analysis. Despite this study’s focus on Nigeria, it provides useful insights that can guide energy efficiency policy through the financial sector and debt management.Practical implicationsThe financial sector must ensure the availability of long-term credit facilities to clean energy investors. The government must maintain a sustainable debt profile to pave the way for capital expenditure on clean energy projects that promote energy efficiency.Originality/valueThe environmental consequences of energy intensity are being felt globally, with the developing countries most vulnerable. The cheapest way to curb these consequences is to promote energy efficiency to reduce the disastrous effect. Driving energy efficiency requires investment in energy-efficient technology but the challenge for developing economies, i.e. Nigeria’s funding, remains challenging amid a blotted debt profile. This becomes crucial to investigate how financial sector development and debt management can accelerate energy-efficient investments in Nigeria.

The Energy Consumption-Economic Growth Nexus in Nigeria: What Evidence Exists?

The study investigated the energy consumption-economic growth nexus in Nigeria. Specifically, the study aimed to establish a comprehensive understanding of the nexus and causality between the variables in Nigeria. The study’s significance is highlighted in the context of various energy policies implemented in Nigeria, including the elimination of fuel subsidies. In order to accomplish the goals of this research, data spanning the period 1980 to 2022 were utilised in the study. Additionally, various econometric techniques, including the autoregressive distributed lag (ARDL) technique and the causality test, were adopted in order to estimate the relationship and causality between the variables. This approach has several advantages especially given variables that were integrated of order, I(0), I(1) or the combination of both. The method used in this study is also extremely resilient in establishing a strong and uninterrupted correlation between variables. The results of the research uncovered various important discoveries, one of which highlights the presence of a lasting connection between energy consumption and economic growth in Nigeria. Specifically, the study showed the presence of co-integration between energy consumption and economic growth. The study also demonstrated that in the event of an economic shock or destabilisation, the economy will take a relatively longer time period to re-establish equilibrium. Additionally, the outcomes of the study implied that energy consumption had a short- and long-term beneficial influence on growth. The study therefore suggested the implementation of an effective energy strategy that promotes sustainable consumption, so facilitating a prompt return to equilibrium in the event of an economic shock. The study showed novelty in that, unlike previous studies in Nigeria which has placed more emphasis on the impact or the effect of energy consumption on economic growth, it examined both the short- and long-run nexus, as well as the causality among the variables. This importance of the study cannot be overemphasised given the structural imbalances in Nigerian energy sector.

Do the asymmetric effects of eco-digitalization amidst energy transition make or mar the strides toward environmental sustainability in the USA?

The present era faces adverse effects of the strides recorded in economic advancements of the prior generations thus leading the present generation to growth dilemma. Consequently, there is a conscientious consideration for the ecological effects of economic growth. To resolve the preceding issue, due consideration must be given to harmless growth of which eco-digitalization, green financing, green technology, energy transition, and regularity quality are key determinants. Despite the aforesaid importance, empirical studies advancing this nexus are scarce. Hence, this study contributes to environment empirics by providing empirical evidence for the impacts of the highlighted indicators on sustainable environment in the USA. The study explores quarterly data from 1996Q1 to 2019Q4 based on the novel non-linear autoregressive distributed lag (ARDL) model. The pretests' outcomes show that long-run nexus exists among the variables, whereas the Zivot-Andrew uncovers breakpoint years in the observations. The main findings show that eco-digitalization, green financing, green technology, and renewable energy promote sustainable environment. On the flip side, non-renewable energy and regulatory quality hinder the pathways to sustaining the environment in the USA. Robustness analyses conducted based on FMOL, DOLS, and CCR provide substantial support and validity for the main results. Furthermore, the causality nexus lends empirical support for the existence of bidirectional and unidirectional causalities in the empirical model. Policy insights that drive the paths to sustainability in the US are suggested based on the findings.

Analysis of Fishery and Forestry Ventures and Poverty Reduction in Nigeria

Fishery and forestry ventures are sub-sectors of agriculture with the potential for poverty reduction through employment creation, value addition, and improvement in export earnings. Nevertheless, they have received relatively less attention from all levels of government in Nigeria. This paper examined the effect of fishery and forestry ventures on poverty reduction in Nigeria between 1976 and 2022. Ex-post facto research design was adopted. Data were sourced from CBN annual statistical bulletin, the National Bureau of Statistics, publications of the World Bank, as the Federal Ministry of Agriculture and Rural Development. NARDL was adopted for data analysis. Phillip-Peron Unit root tests revealed a uniform order of integration, while Co-integration Bounds test revealed no existence of long-run relationship between the fishery and forestry ventures and poverty reduction. Findings revealed that agricultural production in fishery and forestry has no significant long-run nexus with poverty reduction in Nigeria. The paper recommended that the Federal Department of Fisheries should engage reputable research institutes and colleges in the fishery industry in Nigeria to train and retrain participants in the sub-sectors to provide skilled workforce in the development of sustainable fishery production towards poverty reduction in Nigeria. The paper also recommended that regulatory agencies in the forestry sub-sector in Nigeria appoint more supervisors and enforcement officers to ensure adequate regulation of the industry towards adding maximum economic value to the exploration and exploitation of the forestry resources in Nigeria by reducing leakages and ensuring that adequate taxes and levies are paid including collection of relevant penalties from defaulters in order to attain sustainable income generation and poverty reduction among the accredited participants.

The Impact of Macroeconomic Variables on the Contingent Built-in Inflation: Evidence from Indonesia

This paper examines the relationship between Exchange rates, GDP, and Government expenditure as macroeconomic variables on the Inflation of Indonesia which is quite struggling with increased prices of goods and services as it has been a persistent problem in Indonesia for many years. In 2023, it is so far 5.47% which is above the target set by the central bank of Indonesia of 2-4%. With the data taken from World Bank and IMF, the methodology consists of stationarity check, Cointegration analysis, and Error Correction Model to identify the long-run nexus among variables. The estimation result found that GDP is positively correlated with Inflation, Exchange rate is positively correlated with mild effects on inflation and government expenditure is negatively correlated with Inflation.

Does population aging coexist with income inequality in the long run? Evidence from selected Asia-Pacific countries

Advanced countries have experienced a general rise in income inequality, whereas the outlook for income inequality in developing countries is mixed. As such, reduction in income inequality continues to be an important socio-economic development goal in many countries in the twenty-first century. Furthermore, it remains unclear whether the slow progress in reducing income inequality is a manifestation of the prevailing aging population. Using a sample of countries that are currently considered aging, aged, and super-aged countries in the Asia-Pacific region, the paper empirically examines whether a long-run nexus exists between population aging and income inequality. The methodology adopted includes the augmented autoregressive distributed lag (A-ARDL) bounds test. The key results show that aging and income inequality have a long-run relationship among aged and super-aged countries. In contrast, recently graying countries show no evidence of cointegration due to their relatively early transition to aging. Some other control variables also reveal a significant impact on income inequality. Increases in the real gross domestic product per capita worsen the income distribution, but higher government expenditure can help moderate income inequality. In light of rapid population aging, the findings are useful for policy makers in designing and targeting appropriate socioeconomic policies to help mitigate income inequality in the long run based on the intensity of the share of the elderly population in the countries studied.

Linking governance with environmental quality: a global perspective

Sustainable environmental quality is a global concern, and a concrete remedy to overcome this challenge is a policy priority. Therefore, this study delves into the subject and examines the effects of governance on environmental quality in 180 countries from 1999 to 2021. To maintain comparability and precision, we first classify countries into full and income-level panels and then, innovatively, construct a composite governance index (CGI) to capture the extensive effects of governance on CO2 emissions. Complementing the stationarity properties of the variables, we employ the cross-sectionally augmented autoregressive distributed lags model to analyze the data. Our survey yields four key findings. First, a long-run nexus between CGI, CO2 emissions, and other control variables is confirmed. Second, the findings indicate that CGI is crucial to improving environmental quality by reducing CO2 emissions across all panels. Third, we find that while CGI maintains a similar magnitude, the size of its effects substantially varies according to the income level of the underlying countries. Fourth, the findings reveal that energy consumption, population growth rate, trade openness, and urbanization contribute to environmental degradation, while financial development and the human development index are significant in reducing CO2 emissions. Our findings suggest specific policy implications, summing up that one common policy is not a good fit for all environmental quality measures.

DÜNYA TİCARET BELİRSİZLİĞİNİN ULUSLARARASI TİCARETE ETKİSİ: TÜRKİYE EKONOMİSİ ÖRNEĞİ

International trade can be affected by various economic events, including domestic and global developments, such as economic crises, exchange rate volatilities, natural resource explorations, and globalization. In addition, trade uncertainty is an important factor that affects the trade volume of an economy. Recently, trade uncertainty has increased episodically in the world with trade wars between the US and China, and this uncertainty has spilled over to other countries, thereby affecting trade volumes. This study attempts to understand and explain the role of World Trade Uncertainty (WTU) on both export and import in the Turkish economy for the period from 1998:Q1 to 2021:Q4. Therefore, this study utilizes the Autoregressive Distributed Lag (ARDL) bounds test. The research findings presented here reveal that there is a long-run nexus between the variables in both models. The results also show that an increase in WTU negatively affects export, while it has no statistically significant effect on Turkish import for the period examined.

Public expenditure on infrastructural development and economic growth: Evidence from Nigeria

This research investigated the nexus between public spending on infrastructural development and economic growth: evidence from Nigeria. As a matter of urgency, there is a need for the Nigerian government to invest in infrastructure for sustainable economic growth since infrastructural development touches all human fields of endeavors in one way or another. Notably, despite the country’s pole position in the economic ranking in Africa, Nigeria’s infrastructural state still falls short, which has led to negative economic growth in recent years. Therefore, it is pertinent in this study to unravel the causes and the missing gaps between increasing fiscal spending on infrastructure and slow economic growth in Nigeria. Interestingly, Autoregressive Distributed Lags and cointegration techniques were adopted to investigate whether there are long interactions between economic advancement and public funding of social amenities in the case of Nigeria. Furthermore, post-estimation tests were carried out to ascertain the validity of the models adopted in the study. The investigations from the study showed that short and long-run nexus subsists between government investment in infrastructure and economic growth in Nigeria. Hence, to address the problems underpinning this research, the study recommended that a proactive policy framework be used to promote economic growth via a redesigned fiscal framework in Nigeria. Also, protective laws and acts to safeguard the existing infrastructures should be well-pronounced and adopted by policymakers to expand the productive life span of social goods.

Energy efficiency, carbon neutrality and technological innovation: a strategic move towards green economy

Through a production process based on low carbon emissions, achieving sustainable development is the desired goal of the various social and political actors around the world. However, achieving this requires energy policies focused on the factors that determine green economic growth (GEG). Consequently, the current study investigates the long-run nexus between GEG and some factors that determine its behaviour using annual data from 1990 to 2020 for the Organization for Economic Co-operation and Development. The empirical evidence relies on second-generation estimators comprising cross-sectional dependence tests, Westerlund tests, and method of moment quantile regression. Feedbacks from the empirical analyses uncover the pertinence of energy efficiency, renewable energy, and technology as positive predictors of GEG. Complementarily, the findings reveal that the Integrity of the Government plays an essential role in implementing more efficient and environmentally friendly production processes. From the results found, several policy suggestions are derived from being considered to develop an energy policy aimed at mitigating environmental degradation.

Investigating the asymmetric effects of renewable energy-carbon neutrality nexus: Can technological innovation, trade openness, and transport services deliver the target for Germany?

The present millennium records the most devastating effects of global warming than what was evident in the pre-industrial era. The pervasive effects of global warming have raised concerns about the sustainability of the present and future generations. Hence, researchers are working assiduously towards proffering the most effective method of halting the surging emissions from global, regional, and national angles. This study contributes to the extant literature by providing the first empirical verification of how renewable energy, technological innovations, trade openness, and transport services impact carbon emissions in Germany. The empirical evidence is anchored on annual time series data from 1990 to 2020 estimated using the novel nonlinear ARDL to explore the positive and negative shocks associated with the short and long-run nexus. The wavelet coherence estimator is equally for ascertaining the multiple time scales in the time series and extends the knowledge frontier to the literature. The following findings are eminent from the overall analyses. First, long-run cointegration is supported among the variables of interest Second, only the adverse effects of renewable energy and technology are substantial enough to mitigate carbon emissions. The trade-induced emissions are established with the positive impacts of trade openness on carbon emissions. Transport services contribute significantly to carbon emissions in the long-run and short-run periods. However, mitigating effects of small magnitude are apparent in the long-run due to the perceived transition to green transportation. Policy implications supporting the transition to 100% renewable energy and green transportation are significant steps towards achieving Germany's carbon neutrality target.

Nexus between energy consumption and carbon dioxide emission: evidence from 10 highest fossil fuel and 10 highest renewable energy-using economies.

The world, addressing to achieve rapid and drastic economic growth by relying on fossil fuel energy consumption, could increase already increasing level of carbon dioxide (CO2). Therefore, there is a growing consensus that environmental sustainability by using renewable energy is the only option to avoid environmental calamity. Therefore, according to the authors' best knowledge, this is the first work to look into the short and long-run nexus between economic growth, trade openness, renewable and fossil fuel energy consumption, along with gross capital formation, population growth, and life expectancy as additional variables in top 10 highest renewable energy-using (TRU) economies and top 10 highest fossil fuel-using (TFU) economies from 1991 to 2020, by employing advanced panel data econometric approach. After demonstrating cross-sectional dependency in panel data, the Westerlund cointegration test verifies the long-term link between the variables. A cross-sectional autoregressive distributed lag (CS-ARDL) econometric technique is used to show short- and long-run coefficient values. CS-ARDL estimates confirm that the economic growth, fossil fuel energy, trade openness, and gross capital formation increase carbon dioxide (CO2) emissions levels in the short run for TRU and FEU economies, except for gross capital formation for FEU economies. However, economic growth adds to CO2 emissions for only TRU economies, while fossil fuel energy consumption enhances CO2 emissions for both groups of economies in the long run. On the contrary, renewable energy reduces CO2 emissions in the short and long run, while human capital in only the short run. The inferences of this study present new intuitions and urge governments and policymakers to develop a reliable mechanism for investing capital to diversify the energy portfolio through the energy transition process to attain sustainable economic growth and promote awareness campaigns to draw the attention of human capital to environmentally friendly, clean, and green energy sources. Overall, the results recommended energy efficiency usage and ecological friendly innovative technologies to enhance and protect environmental quality.

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.

Assessing the influence of urbanization and energy on carbon emissions of Turkey: evidence using the new RALS analysis.

This research aimed at examining the nexus among urbanization, energy use, foreign direct investment (FDI), economic growth, and environmental sustainability in Turkey. Time-series data from 1970 to 2017 were used in the analysis, and ecological footprint was used as an indicator for environmental sustainability. The aim was to investigate the long-run nexus among the indicators and contribute to the literature in several ways. One of these contributions is to empirically investigate this relationship with the residual augmented least squares (RALS) augmented Dickey-Fuller ADF for stationarity test and RALS-EG (residual augmented least squares-Engle and Granger) for the long-run steady-state relationship of investigated variables. Together with, fully modified OLS (ordinary least squares) model has been employed to observe the long-run effect and the significance of the investigated variables on environmental sustainability. The results revealed that the long-run relationship exists and the long-run coefficients show statistically significant effects on environmental sustainability. In the long run, urbanization and energy usage degrade the environment and reduce environmental quality, although FDI inflow and gross domestic product (GDP) growth contribute 0.22% and 8.03% to environmental sustainability in Turkey, respectively. The environmental Kuznets curve (EKC) hypothesis is not valid in this model and U-shaped relationship was found between increasing economic performance and the ecological footprint. The causality results reflect that urbanization has feedback causality with energy use. The study suggests that to achieve sustainable urbanization, policymakers in Turkey should execute well-planned urbanization programs, create an energy conservation policy, and encourage green industries to ensure a sustainable increase in environmental quality for Turkey.

The Dynamic Link of Energy Consumption, Economic Growth and Poverty in Eastern Indonesia: Panel VECM and FMOLS Approach

This study aims to investigate the pattern of dynamic relationships between energy consumption, economic growth, and poverty in panel data set of 12 provinces of Eastern Indonesia during the period 2009-2019. PVECM and FM-OLS were applied to analyze the dynamic link of the variables both in the short and long term. All secondary data used were collected from BPS and the Ministry of Energy and Mineral Resources. The results of this empirical study in the short term corroborate the neutrality hypothesis, which reveals that there is no short-term relationship in the case of energy-growth nexus, energy-poverty nexus, and poverty-growth nexus. In the long term, empirical evidence corroborates the feedback hypothesis in the case of the energy-growth nexus and poverty-growth nexus. Concerning the long-run energy-growth nexus, the increase in energy consumption has a positive effect on the acceleration of economic growth, and also the increase in economic growth requires the fulfillment of adequate energy consumption. Furthermore, a feedback relationship is found in the poverty-growth nexus case which explains that the progress of poverty reduction is significantly determined by sustainable economic growth that supports several previous studies and the trickle-down economics argument or pro-growth-poverty. On the other hand, widespread poverty has a negative impact on the achievement of economic growth.

The Relationship Between Volatility and Sovereign Credit Risk in the Emerging Markets: A Nonlinear ARDL Approach

This study investigates the short- and long-run nexus between the volatility index of VIX and sovereign credit risk represented by CDS spread in emerging markets, namely Turkey, China, Russia, Brazil, and Mexico. The emerging markets are at the center of investors’ interest due to high return opportunities. The relationship between volatility and sovereign credit risk has been studied many times via linear models. However, financial series exhibit asymmetric dynamics, as volatility clustering, excess kurtosis, and others. Thus, we use nonlinear autoregressive distributed lags (NARDL) analysis to capture nonlinear relations between the volatility and the sovereign credit risks of these countries by using daily data from 04.01.2010 to 29.11.2019. The bounds test of the NARDL model confirms the cointegration between VIX and CDS spreads of the countries under study. The analysis of estimated NARDL parameters shows that negative shocks of the volatility index have a long-lasting impact on CDS spreads. Chinese CDS spread are more sensitive to VIX index changes in the short run. The effect of a decrease in volatility on Russian CDS spread is higher than the effect of an increase. Turkish and Brazilian CDS spreads are more reactive to increase in the VIX, whereas Mexican CDS is less sensitive. These findings show that investors, arbitrageurs and speculators should consider global indicators when taking a position on sovereign bonds of emerging markets.

On the Sustainable Nexus between Oil Prices and Aviation Stocks

Aviation stock sensitivity to crude oil prices has raised a suspicion of nexus between aviation stocks and crude oil prices. In this paper, the sustainable nexus between oil Prices and aviation stocks in India are analysed. In particular, it is tested whether there is any sustainable long-term co-movement between the stocks of three aviation companies listed on the Indian stock market and crude oil. The oil prices and aviation stocks are decomposed into different time horizons using the methodology of wavelets. The nexus is studied at shorter, medium, and longer time horizons. Broadly, results show that there is some nexus in the short-run, however, sustainable long-run nexus is missing. The results are found to be robust and approximately similar when data from three Indian aviation stocks are used. It is inferred that sustainable long-run movements in aviation stocks should be attributed to the reasons not related to crude oil price changes.