Mean Group Estimator Research Articles

Financial development and renewable energy deployment in sub-Saharan African countries

PurposeThe underdevelopment of the financial sector could be one of the barriers to the deployment of renewable energies in developing countries. The purpose of this paper is therefore to analyse the effect of financial development in the deployment of renewable energies in sub-Saharan African countries.Design/methodology/approachThe empirical analysis is based on a production approach and a cross-sectionally augmented autoregressive distributive lag error correction model estimate for 25 sub-Saharan African countries over the period 1990–2018. The augmented mean group (AMG) and common correlated effects mean group (CCEMG) estimators were used for the robustness analysis.FindingsTwo results emerge: financial development contributes positively to renewable energy deployment in sub-Saharan African countries in the short and long run; and fossil fuel dependence impedes significantly renewable energy deployment in the short and long run. The robustness analyses using the AMG and CCEMG methods confirm these results.Practical implicationsThese results suggest the need for policies to support and strengthen the development of the financial sector to improve its ability to effectively finance investments in renewable energy technologies.OriginalityThe originality of this paper lies in the fact that the analysis is based on a renewable energy production approach. Indeed, the level of renewable energy deployment is measured by the production and not the consumption of renewable energy, unlike other previous work. In addition, this research uses recent econometric estimation techniques that overcome the problems of cross-sectional dependence and slope heterogeneity.

Exploring the impact of public funds and eco-friendly innovations on reducing carbon pollution in North Africa.

The main objective of this study is to examine the impacts of green energy and public investment on the CO2 emissions in North Africa. Moreover, the study also tests the existence of the N-shaped Environmental Kuznets Curve (EKC) hypothesis for North African countries between 1995 and 2018. These factors were analyzed using the Dynamic Ordinary Least Squares (DOLS), Fully Modified Ordinary Least Squares (FMOLS), and Pooled Mean Group (PMG) estimators to obtain estimations of heterogeneous parameters. The outcome of these tests and examinations showed that the N-shaped curve was confirmed. Secondly, The results of the study also demonstrate the effectiveness of renewable energy as an eco-friendly innovation in reducing carbon emissions. This finding highlights the positive impact that renewable energy sources can have in terms of emitting fewer carbon emissions compared to traditional energy sources. Moreover, public investment, which interprets government expenditure, and urbanization contribute to environmental degradation by increasing CO2 emissions in the case of North African countries. Furthermore, the findings also indicated a trade-off effect resulting from the correlation between CO2 emissions and economic development. Based on these findings, the study recommends that economic policymakers in North African countries prioritize transforming the structure of government expenditures to improve environmental quality, optimize the utilization of revenues from non-environmentally friendly energy resources to accelerate the energy transition, increase the exploitation of renewable energy, and promote environmental awareness in society. By implementing these recommendations, North African countries can balance economic growth and environmental quality while reducing their carbon footprint.

Driving industrial and economic growth in Central and Eastern Europe: The role of electricity infrastructure and renewable energy

Balancing environmental objectives with energy security poses a significant challenge for Central and Eastern European (CEE) economies undergoing substantial energy sector reforms, particularly in the electricity sector. Apart from implementing market principles, improving electricity infrastructure and increasing the use of renewable energy sources (RES) are crucial for fostering industrial and overall economic growth. This study analyzes a panel of 15 Central and Eastern European economies (CEE) from 1995 to 2021. It employs various analytical techniques such as cross-sectional dependency testing, unit root testing, cointegration analysis, and the Augmented Mean Group (AMG) estimator. The results indicate that inefficient electricity infrastructure negatively impacts GDP and industry value-added (IVA) growth rates, regardless of control variables. Conversely, electricity generated from RES positively affects GDP and IVA growth rates in fully developed models. However, increased RES-generated electricity in models without control variables adversely affects IVA growth rates. These findings, coupled with the specific characteristics of CEE economies, lead to policy recommendations for sustainable economic and energy development.

The relationship between renewable energy production and CO2 emissions in 27 OECD countries: A panel cointegration and Granger non-causality approach

Human-caused CO2 emissions are the primary cause of global warming. In this regard, determining the most effective approach for lowering CO2 emissions and the collateral risk of catastrophic natural disasters is crucial. This study examines the long-run relationship between disaggregated renewable energy production and carbon dioxide (CO2) emissions per capita for a panel of 27 OECD countries from 1965 to 2020. The panel-autoregressive distributed lag (ARDL) models of the pooled mean group (PMG), mean group (MG), and dynamic fixed effect (DFE) were used to evaluate the relationship between CO2 emissions and energy production from biofuel, aggregated geothermal and biomass (GEOB), hydropower, nuclear, solar, and wind. As robustness checks, fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and common correlated effects mean group (CCEMG) estimators were used. Then, using a generalized method of moment (GMM) framework for panel vector autoregression (PVAR), the Granger non-causality between CO2 emissions and renewable energy production was investigated. GEOB, hydropower, nuclear, solar, and wind were found to be negatively and significantly correlated with CO2 emissions. GEOB, hydropower, and solar were the most effective renewable resources in reducing CO2 emissions. Granger non-causality approach showed unidirectional causation from hydropower, solar, and wind to CO2 emissions, bidirectional causation between CO2, and biofuel and GEOB, and unidirectional causation from CO2 emissions to nuclear. The findings were consistent across different model specifications and suggested a faster transition to GEOB, hydropower, and solar energy in OECD countries to reduce CO2 emissions and enhance environmental sustainability.

Inquiring the impact of rural-urban migration, construction sector, and agriculture irrigated land on environmental degradation: insights from urbanized Asian countries.

The present study investigates the influence of rural-urban migration, construction sector share, and agriculture-irrigated land on environmental quality in urbanized Asian nations. For analysis, panel data from seven highly urbanized economies from 1996 to 2020 is utilized. The study employed an augmented mean group (AMG) estimator to find short and long-run results. The empirical discoveries depict that rural-urban migration increases energy demand in urbanized areas and significantly contributes to deteriorating environmental quality. The findings also reveal that the expansion of construction sectors is a significant source of high cement production, which also increases carbon emissions and environmental pollution by increasing the concentration of particulate matter in the atmosphere. The findings also exposed the role of agriculture-irrigated land, contributing to carbon emissions in urbanized Asian economies. The study also investigated the impact of the square term of irrigated agricultural land on environmental deterioration, revealing that adding agricultural land will further intensify environmental degradation by increasing carbon emissions in the atmosphere. A policy framework to reduce environmental damage in Asian economies caused by rural-to-urban migration, the building industry, and irrigated agricultural land was recommended based on the study's findings.

Breaking the ties that bind: Metropolitan dependence and export growth in the poor periphery, 1950-90

Decolonisation was one of the most important institutional transformations of the twentieth century. Recent work on the effect of decolonisation on bilateral trade has suggested that trade with the ex-metropolis declined significantly after independence. Due to problems related to data quality and coverage, however, there is still no consensus on whether the reduction of colonial dependence encouraged or impeded export growth. In this paper, we argue that metropolitan trade shares proxy for colonial monopsony. Using a new database of exports at constant prices for 131 countries and mean group estimators that control for a range of confounding factors, we find that trade shares with the metropole are negatively associated with export growth, with important differences across metropolitan nationalities and locations. We argue that the significance of the erosion of colonial trade ties for export growth following independence was contingent on the interaction of policy and location during the colonial period.

Realizing sustainable development goals in sub‐Saharan Africa: The role of industrialization on consumption‐based carbon emission

AbstractThe study analyzed the linkage among industrialization, trade openness, and consumption‐based carbon emissions in Sub‐Sahara Africa (SSA) to establish how Sustainable Development Goals (SDG) 8 and 9 can be achieved without negatively affecting the climate—SDG 13. Based on insights drawn from the environmental governance and economic integration theories, we developed a model that connects industrialization, trade openness and consumption‐based carbon emission in SSA, as the region strives to balance development with climate protection. We used purposive sampling to select 30 out of 46 countries in SSA with readily available data on the International Energy Agency and the World Development Indicators databases from 2000 to 2021. The study utilized the dynamic common correlated effect and the pooled mean group estimators for the empirical analysis. The results revealed that industry growth has an affirmative link with consumption‐based carbon emissions. Similarly, urban growth recorded a positive association with carbon emission. Moreover, trade openness positively moderates the link between industry growth and carbon emissions. The findings affirm the need for strengthening policies and regulations to promote industry growth (SDG 9), while ensuring climate protection in SSA to achieve SDG 13.

Pooled Bewley Estimator of Long Run Relationships in Dynamic Heterogenous Panels

Using a transformation of the autoregressive distributed lag model due to Bewley, a novel pooled Bewley (PB) estimator of long-run coefficients for dynamic panels with heterogeneous short-run dynamics is proposed. The PB estimator is directly comparable to the widely used Pooled Mean Group (PMG) estimator, and is shown to be consistent and asymptotically normal. Monte Carlo simulations show good small sample performance of PB compared to the existing estimators in the literature, namely PMG, panel dynamic OLS (PDOLS), and panel fully-modified OLS (FMOLS). Application of two bias-correction methods and a bootstrapping of critical values to conduct inference robust to cross-sectional dependence of errors are also considered. The utility of the PB estimator is illustrated in an empirical application to the aggregate consumption function.

Monetary Policy and Investment in ASEAN-5 Countries

Central bank policy interest rate has a role in economic activity such as investment in 5 ASEAN countries. The occurrence of the Asian Financial Crisis (AFC) in 1997-1998 changed the number of investments in the ASEAN-5 countries that were previously the destination of investors from developed countries. The declining level of economic and industrial stability in ASEAN-5 countries has reduced investor interest in investment. However, after AFC, from 2000 to 2019, 5 Southeast Asian countries (Singapore, Indonesia, Malaysia, the Philippines, and Thailand) experienced an increase in investment. This study aims to analyze the effect of Central bank policy interest and macroeconomic variables such as GDP, Exchange Rate, Inflation, and Labor rate on investment in 5 ASEAN countries. The analytical method used in this study is Panel Autoregressive Distributed Lag (ARDL) with Pooled Mean Group (PMG) estimation. The results showed that the Central bank policy interest rate, Inflation, and Labor have a positive and significant effect on investment in the long term. Meanwhile, in the short-term, GDP has a positive and insignificant effect on investment.

Healthcare Expenditure and Human Development Index as Determinants of Environmental Quality: A Panel Study on Selected Asian Countries

This study explores how healthcare expenditure and human development index impact environmental quality in 26 Asian countries during the period 2000–2018. Both aggregate and disaggregate (public and private) variables of healthcare expenditure are used. The dynamic ordinary least squares and augmented mean group estimation techniques are employed to assess the impact of selected variables on environmental quality captured using carbon dioxide (CO2) emissions as a proxy. The causality among the variables is tested using the Dumitrescu–Hurlin panel causality test. The outcome of the study showed that scaling aggregate healthcare expenditure, disaggregate healthcare expenditure (public and private) and human development index deteriorates environmental quality. The causality tests confirm a bidirectional association between aggregate healthcare expenditure and CO2 emissions, disaggregate healthcare expenditure and CO2 emission and a one-way connection from human development index to CO2 emission. The study finds that the significant positive impact of healthcare expenditure and human development index on CO2 emission is a concern, as rising emissions have adverse effects on the environment, public health and global economy. The study highlights the need for policies to promote sustainable development in a way that balances the needs of healthcare, human development and the environment.

YÜKSELEN PİYASA EKONOMİLERİNDE DOĞRUDAN YABANCI YATIRIMLAR, TİCARİ AÇIKLIK VE CO2 İLİŞKİSİ

In this study, it was aimed to investigate the effect of foreign direct investment (FDI) and trade openness (TO) on environmental pollution. The study was conducted on Emerging Market Economies (EMEs), which are subject to flexible practices and conditions to attract trade and investment. The 1990-2020 data of 15 countries included in the IMF's EMEs category were tested with the following methods: The cross-sectional autoregressive distributed lag estimator (CS ARDL), Main Group (MG), Common Correlated Effects Mean Group Estimators (CCE), Augmented Mean Group (AMG), Emirmahmutoğlu and Köse (2011) Causality Test. The variables used were FDI, TO, GDP per capita and carbon dioxide (CO2) emissions. According to the results of the coefficient estimators, it was found that only GDP had a significant and positive effect on CO2 in both the short and long term, and there was no significant relationship between FDI-CO2 and TO-CO2. According to the causality test results, it was determined that there is a unidirectional relationship from CO2 to FDI and from TO to CO2, and a bidirectional relationship between GDP and CO2.

Can environmental taxes decrease final energy consumption in the old and new EU countries?

Despite the harmonisation process within the EU area, there are many economic and political differences among European countries in promoting energy policies. Moreover, the status of implementation of environmental tax reforms in the new EU countries is very different from that in the old EU countries, and the economic and environmental impacts of such taxation are diverse. The objective of this paper was therefore to investigate whether the role of environmental taxes in reducing final energy consumption is the same in old and new EU countries. The analysis was conducted for 16 old and 11 new EU member states over the period 1995–2020 using Pooled Mean Group (PMG) and Mean Group (MG) estimators. The results indicate that environmental taxes have a negative long-term impact on final energy consumption in both groups of countries. However, this impact is much smaller in the new EU countries. Moreover, economic growth and greenhouse gas emissions increase final energy consumption. These results also suggest that in order to achieve climate neutrality by 2050, the new EU countries need to apply some stringent regulations and introduce further institutional and environmental reforms that support increasing the share of clean energy sources in the energy mix.

Government health expenditure and child health: empirical evidence from West African countries

PurposeThe purpose of this paper is to study the effect of government health expenditure on the health of children (under-five mortality rate and prevalence rate of stunting) among West African countries.Design/methodology/approachThe study utilizes heterogeneous panel from the period 1990 to 2018 among 16 West African countries for the analysis. The effect of government health expenditure on under-five mortality rate is measured in per 1,000 live births while that of stunting is measured in percentage. The study employs Pooled Mean Group (PMG) estimation technique and Impulse Response Functions (IRFs) for the analysis.FindingsThe results indicate that government health expenditure has negative effect on under-five mortality rate and prevalence rate of stunting in the long-run but not significant in the short-run. In addition, the IRFs result indicates that under-five mortality rate and prevalence rate of stunting both respond negatively to shocks in government health expenditure.Practical implicationsGovernments should ensure that inefficiencies in the public health sector are reduced by licensing the health workers of this sector and allowing independent bodies to appoint the heads of health institutions. This will improve the delivering of health services for the health of children.Originality/valuePrevious studies carried out have not examined the short-run and long-run effects of the relationship under study among West African countries.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-03-2022-0212

Declining population and GDP growth

Businesspeople and politicians seem to be afraid that population reduction will be accompanied by economic recession. In this paper we examine the experience of some countries of various sizes in which population has been declining and observe how GDP, GDP per capita, unemployment rate, and labour force participation rate are evolving during the period that population is declining. Using the pooled mean group (PMG) estimation method, we find that population decline can go hand in hand with growing GDP and increasing per capita GDP, and at the same time the labour participation rate may increase and unemployment may fall.

Short- and long-run relationship between financial development and economic competitiveness in WAEMU: does institutional quality matter?

PurposeThis paper aims to assess the short- and long-run effects of the interaction between institutional quality and financial development (FD) on the competitiveness of the WAEMU economy over the period 2007–2018.Design/methodology/approachThe methodology consisted of cross-referencing a synthetic indicator of FD with indicators of institutional quality and then estimating an auto regressive distributed lag model.FindingsThe results of the pooled mean group and dynamic fixed effect estimation show a positive and significant impact of this interaction on the competitiveness of the economy in the long run. In the short run, the results are quite similar to those in the long run for the direct effects but different for the crosses. Also, the analysis of country specificity shows that the results are similar to those in the short run since the interaction between FD and institutional quality (political stability and government effectiveness) negatively affects the competitiveness of Burkina Faso, Ivory Coast and Mali, and positively affects the competitiveness of Benin and Senegal.Social implicationsThese results suggest the need for effective policies to improve the quality of institutions to enhance the mobilization of financial resources through FD to ensure the competitiveness of economies. Improving the quality of the political and institutional environment is a prerequisite for economic competitiveness.Originality/valueThe paper is in line with the New Institutional Economics that developed in the 1970s. This referential framework is a heterogeneous body of work that encompasses works whose common point is the determination of the role of institutions in economic coordination. Unlike previous studies, which have focused on the contribution of the interaction between institutional quality variables and FD on economic growth, this paper analyzes the effects of this interaction on economic competitiveness. It, therefore, constitutes a contribution to this literature and aims primarily to fill this gap.

Economic integration and consumption risk sharing: A comparison of Eurozone and OECD countries

Economic theory predicts that economic integration can facilitate improvements in international consumption risk sharing. We test this proposition by comparing risk sharing among Eurozone members and members of the Organisation for Economic Co-operation and Development (OECD) using a dynamic common correlated effects mean group estimator (DCCEMG). The results reveal that the OECD members outperform the Eurozone members in terms of short run and long run risk sharing, despite the barriers to risk sharing being considerably lower among the latter. We attribute this outcome to lower business cycle synchronization and stock return correlations among OECD members, which creates better opportunities to share risk within the group. The results highlight the trade-off between the benefits of business cycle synchronization and international risk sharing. More tightly integrated economies, facilitate trade in assets that promotes better portfolio diversification, while at the same time are characterized by higher business cycle synchronization that depletes agents of risk sharing opportunities. Consequently, our results give strong support to the hypothesis of “diminishing international diversification potential”. However, the benefits associated with the improved risk sharing are increasing with the number of countries in the monetary union.

Exploring the Causal Links of Public Spending on Bank-Based Financial Development in African Economies

This work examined the causal impact of types of government spending on bank-based financial development. It tests the influences of both government productive and non-productive spending on bank-based financial development. Selected 37 African economies between 1980-2018 were sampled. Both the short –run and long –run effects were assessed using either Feasible Generalized Least Squares (FGLS), Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Common Correlated Effects Mean Group (DCCEMG) estimators. Evidences support the hypotheses that both types of spending contribute positively to bank-based financial development. Bank-based financial development is more responsive to non-productive spending than it is to productive spending. Also, confirm the supportive roles of trade openness and GDP per capita, and the detriment of inflation to bank-based financial development. This study comprehensively unearths the impact of government spending on bank-based financial development in Africa by isolating spending into productive and non-productive types. Governments need to promote dual policies that address spending and financial development. They should avoid detrimental spending and promote enhancing spending within each type above. Spending that attract private agents, investments, saving, and liquidity in the financial sector, trade openness, and economic output should be promoted since these enhances bank-based financial development.

Digitalization and the environment: The role of information and communication technology and environmental taxes in European countries

AbstractThis study examines the impacts of digitalization through information and communication technology (ICT) and environmental taxes on greenhouse gas (GHG) emissions in 23 European Union (EU) countries between 2000 and 2017. Using the Pooled Mean Group estimator, the empirical results provide evidence that ICT development and environmental taxes improve environmental sustainability while research and development investments and income per capita deteriorate environmental sustainability. Furthermore, the results based on the Dynamic Panel Threshold Regression model show that the relationship between ICT and GHG emissions is dependent on the level of environmental taxes. During the period of low environmental taxes, the effect of ICT on GHG emissions is positive and insignificant but once environmental taxes cross the threshold value, the effect of ICT becomes negatively related to greenhouse gas emissions. This suggests that the period of low environmental taxes does not support the environmental friendliness of ICT development in the European region. The policy implication of these findings is that ICT, environmental taxes, and renewable energy can be possibly stirred up to achieve long‐term environmental sustainability in the EU region.

Nexus Among Digital Economy, Green Innovation, and Green Development: Evidence from China

ABSTRACT Green development is an essential requirement for the high-quality development. In the context of the new round of technological revolution, the digital economy has injected new momentum into China’s high-quality economic development. This article aims to clarify the relationships among digital economy, green innovation, and green development using Westerlund and Edgerton (2007) cointegration test as well as pooled mean group (PMG) estimation and utilizing yearly data from 274 cities in China from 2011 to 2019. Overall, the results confirm the existence of cointegration relationships between green development and green innovation, between green development and digital economy, as well as between digital economy and green innovation, and support that digital economy and green innovation can affect the green development in the long-term positively. Additionally, while digital economy positively affects the green development in the short-run, green innovation cannot affect the green development. Furthermore, while the long-run positive impact of digital economy and green innovation on green development is generally established among eastern, central, and western regions, the short-run impact of such two factors on green innovation varies among different regions, seeing as both two variables exert no significant impact on green development in western region. Empirical findings offer important policy implications for the policymakers to attach more importance on the emerging economy model such as digital economy or green innovation, which can bring about long-term green development.

Is participation in global value chains a blessing or a curse for green total factor productivity in Belt and Road initiative countries?

With the continuous expansion of the "Belt and Road" (BRI), green total factor productivity (GTFP) has developed into consensus. Participation in Global value chains (GVCs) brings significant industrial and ecological benefits to BRI economies. By combining the multi-region input-output analyses with the panel regression model, the current paper examines the GVCs' influence on GTFP in 93 BRI countries during 2002–2018. Furthermore, the mediating effect model recognizes the impact mechanism of GVCs. The results showed that the GVCs position caused the GTFP to increase by 33%, as evidenced by the common correlated effects mean group (CEMG) estimator. Considering the GVCs’ participation modes heterogeneity, the increase in forward GVCs participation raises the GTFP by 20%, while the backward GVCs participation causes the GTFP to decrease by 17%. Considering the national heterogeneity, the GVC position increases GTFP in high-income, upper-middle-income, and lower-middle-income countries. Forward and backward participation have mixed results. Regarding the meditating effect model, the GVCs position and forward participation increase GTFP by increasing technology development and technical efficiency, while for backward participation, the effect is negative. BRI economies need to seek breakthroughs in GVC positions to attain the environmental governance function, enhance climate governance cooperation, and encourage synergy to promote green production.