Nonlinear Autoregressive Distributed Lag Research Articles

Unlocking the dynamic linkages between sustainable equity investment and economic policy uncertainty: An empirical analysis for G‐20 countries

AbstractThe study examines the dynamic relationships between sustainable equity investment and economic policy uncertainty of G‐20 countries using monthly environmental, social, and governance (ESG) equity and economic policy uncertainty (EPU) indices. Using the autoregressive distributed lag model and nonlinear autoregressive distributed lag model models, the study finds a negative long‐run relationship between sustainable equity investments and economic policy uncertainties in Australia, Canada, the USA, Brazil, Mexico, Germany, Italy, and Japan. Investors in these G20 countries may perceive that companies with higher ESG performance are more likely to face regulatory scrutiny, legal action, or reputational damage if they are associated with high levels of economic policy uncertainties. As a result, ESG market indices may underperform when EPU is high and vice versa. It supports prospect theory and suggests that individuals are more sensitive to potential losses than gains. On the contrary, the relationship is positive in the case of the USA, Brazil, China, and to some extent India. This might be because firms with high ESG performance could manage risks better and seize opportunities associated with EPU, which helps ESG market indices to outperform when EPU is high. It is supported by the legitimacy theory that says to maintain the legitimacy and credibility of the company, the investment must be invested in ESG initiatives, which can lead to improved long‐term financial performance and market value.

Asymmetric Effects of Uncertainty and Commodity Markets on Sustainable Stock in Seven Emerging Markets

The increase in global economic policy uncertainty (EPU), volatility or stock market uncertainty (VIX), and geopolitical risk (GPR) has affected gold prices (GD), crude oil prices (WTI), and stock markets, which present challenges for investors. Sustainable stock investments in emerging markets may minimize and diversify investor risk. We applied the non-linear autoregressive distributed lag (NARDL) model to examine the effects of EPU, VIX, GPR, GD, and WTI on sustainable stocks in seven emerging markets (Thailand, Malaysia, Indonesia, Brazil, South Africa, Taiwan, and South Korea) from January 2012 to June 2023. EPU, VIX, GPR, GD, and WTI showed non-linear cointegration with sustainable stocks in seven emerging markets and possessed different asymmetric effects in the short and long run. Change in EPU increases the return of Thailand’s sustainable stock in the long run. The long-run GPR only affects the return of Indonesian sustainable stock. All sustainable stocks are negatively affected by the VIX and positively affected by GD in the short and long run. Additionally, long-run WTI negatively affects the return of Indonesia’s sustainable stocks. Our findings contribute to rational investment decisions on sustainable stocks, including gold and crude oil prices, to hedge the asymmetric effect of uncertainty.

Modeling the influence of mineral rents and low‐carbon energy on environmental quality: New insights from a sustainability perspective

AbstractIn recent decades, the detrimental impacts of climate change have been increasingly felt worldwide. This is due to the extreme consumption of natural resources to fuel economic activity. Confronting a widening ecological deficit, humanity must urgently accelerate its journey toward sustainable development goals (SDGs). This demands active efforts to curb environmental pollution and protect natural resources, safeguarding the planet for future generations. Since Brazil has high biocapacity and ecological areas, the impact of energy resources on ecological sustainability policies cannot be excluded. Moreover, Brazil holds a vital position in the world for global foreign direct investment flows. In this regard, this paper considers the asymmetric impact of mineral rents and foreign direct investments when investigating Brazil's environmental sustainability. In addition, it evaluates elements like economic growth and low‐carbon energy consumption from 1970 to 2021. To this end, the research applies the Fourier nonlinear autoregressive distributed lag model and draws three significant conclusions. First, resource extraction undermines environmental sustainability. Second, the inflow of foreign direct investment reduces the load capacity factor, implying that the pollution haven hypothesis holds for Brazil. Third, low‐carbon energy consumption contributes to environmental sustainability. Our findings highlight the critical role of regulating mineral resource rents in achieving SDGs in Brazil. Moreover, increasing investment in clean energy sources and transitioning toward low‐carbon energy can promote sustainable development in Brazil. The Brazilian government should abandon mineral extraction, focus on low‐carbon energy consumption, and prevent companies from destroying nature by introducing strict environmental regulations for foreign investment flows.

Tourism and Economic Misery: Theory and Empirical Evidence from Mexico

The misery index (MI) was devised to summarize the most evident costs for a society, attempting to objectively measure the loss in general welfare. It has been remarked in the literature that economic growth exerts a negative impact on the MI; however, analyses of this relationship in the tourism field have been neglected. This study assessed the effectiveness of the tourism sector at improving welfare conditions by measuring the impact of tourism GDP on the misery index and providing a theoretical framework for the relationship between tourism and the MI. A quantitative analysis was conducted using quarterly time series data for the period 2005Q1–2021Q2. Firstly, the existence of a long-term relationship was tested by using the Toda–Yamamoto procedure, and secondly, by applying linear and nonlinear ARDL models. The main results show that tourism can help to reduce the loss of welfare mirrored by the MI. These findings have policy implications, as they provide evidence that expanding the tourism sector counters the MI, and, consequently, the economic malaises derived from it.

Factors influencing the material footprint in the USA.

Using novel approaches, namely Fourier autoregressive distributive lag (F-ADL) cointegration and nonlinear autoregressive distributed lag (N-ARDL), this article analyzes how infrastructure investment and environmental R&D affected the material footprint from 1995Q1 to 2019Q4 in the USA while controlling financial development and economic growth. The outcomes reveal that (i) a reduction in the material footprint can be achieved through increasing environmentally related R&D; (ii) by increasing the environmental R&D, material consumption can be used more effectively; (iii) an increase in financial development leads to an increase in the material footprint; and (iv) the slowdown of the economy contributes to efficient material consumption. Integr Environ Assess Manag 2024;00:1-8. © 2024 SETAC.

Asymmetric effects of international trade and foreign direct investment on economic growth: Empirical evidence from Vietnam

The research focuses on analyzing the non-linear effects of international commerce and foreign direct investment (FDI) on the economic growth of Vietnam. This study utilizes the Nonlinear Autoregressive Distributed Lag (NARDL) model to examine the asymmetric impacts of international trade and foreign investment on the Vietnamese economic growth from the first quarter of 2008 to the fourth quarter of 2021. The findings suggest that a rise in foreign investment during the first phase has favorable outcomes for economic growth, with a reported impact of 53%. Nevertheless, it is important to note that FDI does not only contribute to the enhancement of economic development. According to reports, foreign investment has a negative impact of 13% on the rate of economic growth when it exceeds a certain threshold. However, the results of the research also indicate that Vietnam continues to face certain negative implications as a result of international commerce. The study highlights the importance for developing nations, such as Vietnam, to practice prudence in their trade endeavors and the influx of foreign investments to mitigate any negative repercussions on their economies. These insights underscore the significance of strategic economic planning and policy formulation in navigating the complexities of global economic interactions.

On the Nonlinear Effects of Globalization on Poverty: Insights from African Countries

The study examines both the linear and nonlinear effects of globalization in 38 African countries between 1996 and 2018. In doing this, the study employs both linear and nonlinear autoregressive distributed lag estimation techniques. The findings from the two approaches show that globalization reduces poverty in Africa. Specifically, the findings from the symmetric models imply that the selected countries have benefited, in terms of poverty reduction, from an increase in trade and information flows occasioned by the current wave of globalization. On the other hand, the results from the asymmetric effect of globalization on poverty suggest that positive and negative shocks in overall and social globalization ameliorate poverty in the selected African countries. Thus, the study recommends that African governments should embark on those activities that will help in increasing the level of globalization for poverty to reduce in the region.

Exploring the Complementary and Nonlinear Effects of Financial Development and ICT on Inclusive Growth in South Asia

The current research aims to examine the dynamics among financial development, renewable energy consumption, information and communication technology (ICT) and inclusive growth by focusing on the interaction of finance and ICT in South Asia from 1995 to 2019. The objectives of the study are obtained by using new and broad measures for inclusive growth and financial development. The panel co-integration tests confirm the long-run association between the selected variables. The existence of cross-sectional dependence and mixed order of integration of analyzed variables require the application of panel linear and nonlinear autoregressive distributed lag (ARDL). The findings of both techniques disclose that financial development and ICT individually are significant and vital contributors to inclusive growth in the long run. While their collaboration does not supplement inclusive growth during the same period which is an interesting and unique finding. The short-run outcomes also endorse this outcome. However, the individual impact of financial development remains insignificant while ICT enhances inclusive growth significantly in the short run. The panel nonlinear autoregressive distributed lag (NARDL) results have more explanatory powers than panel ARDL and endorse the assumptions of significant complementarity and nonlinearity between financial development-ICT and inclusive growth. Therefore, it is suggested to increase the access and efficiency of financial intermediaries to accelerate the participation of the masses in the economic growth process and its benefits. In addition, more investment in ICT infrastructure and education is needed so that the ICT sector can complement the financial sector efficiently to boost inclusive growth in South Asia.

Unraveling the complexity! Exploring asymmetries in climate change, political globalization, and food security in the case of Pakistan

Climate change and global politics pose potential threats to food security by impacting crop productivity and food availability. Short-term variability resulting from climate change and global politics may disrupt the stability of entire food systems. The regional implications of these factors remain uncertain, prompting this study to investigate the relationship between climate change, global politics, global inflation, and food security. Using time series data spanning from 1981 to 2021, the Non-linear Auto Regressive Distributive Lag (NARDL) approach was used to examine the asymmetric effects of political globalization (proxied by political globalization) and environmental change (proxied by CO2 and Mean Temperature) on food security. Our findings indicate that mean temperature (MT), CO2 emissions, and political globalization (POLG) had an asymmetrical effect on food security as CO2_POS, CO2_NEG, and MT_POS, MT_NEG had a positive relationship with food security while POLG_POS, POLG_NEG had a negative relationship with food security. The current research proposes that Pakistan needs a holistic approach to address climate and food security, including sustainable farming, water management, climate-resilient infrastructure, social safety nets, and local food production. Government subsidies and incentives can encourage heat-tolerant crop cultivation, while international collaboration and alliances are needed to strengthen domestic agriculture, invest in research, implement social safety nets, and manage exchange rate fluctuations.

Information Warfare: Analyzing COVID-19 News and its Economic Fallout in the US

By separating the ‘good news’ from the ‘bad news,’ we analyze the asymmetric effects of the infodemic and market emotions on the US weekly economic activity index (WEI) during COVID-19. The ‘hot stove effect’ and complicated, asymmetric, and time-varying coherence structures are present when we use the nonlinear autoregressive distributed lag and wavelet coherence methods. Our findings contrast existing literature based on the pandemic’s symmetric impacts, which claim that the economy was negatively affected by non-pharmaceutical actions and that the severity of COVID-19 was the cause of the negative economic and financial shocks. We also discovered that while ‘good news’ has strong and favorable effects on WEI, ‘bad news’ has little to no impact. Furthermore, policymakers react to ‘bad news’ more slowly than they do to ‘good news.’ Therefore, to affect the representative agent’s behavior and ensure an effective response to pandemic occurrences, policymakers should distinguish between deterioration (bad news) and improvements (good news) in shocks.

Retraction Note: Asymmetric effect of FDI and public expenditure on population health: new evidence from Pakistan based on non-linear ARDL.

Retraction Note: Asymmetric effect of FDI and public expenditure on population health: new evidence from Pakistan based on non-linear ARDL.

Asymmetry in the exchange rate pass-through to consumer prices in Eastern European countries

Using quarterly data from Q1 2002 to Q4 2021, a Nonlinear Autoregressive Distributed Lag (NARDL) model is utilised to investigate the potential asymmetry in the exchange rate pass-through (ERPT) to consumer prices in 11 Eastern European countries. The findings show that both the appreciations and depreciations of the nominal effective exchange rate (NEER) have significant long-term effects on consumer prices, with the appreciations being stronger in countries with a fixed exchange rate regime, especially the Baltic States. Incomplete long-term ERPT is observed in the majority of countries, except Estonia. Short-term ERPT is much weaker and often of an opposite direction for appreciations and depreciations. Additionally, a strong uniform long-term effect of both the money supply and crude oil prices was observed, while the short-term effects are mixed. As regards economic liberalisation, both long- and short-term effects are country-specific and of a different direction.

Natural resource development, economic policy uncertainty and urban residents’ consumption in China: a nonlinear ARDL and time-varying parameter vector autoregressive with stochastic volatility approach

AbstractIncreased risks of economic policy uncertainty and overexploitation of natural resources exist in China. At the same time, the growth rate of urban residents’ consumption has generally declined. The paper analyses the role of economic policy uncertainty (EPU) and natural resource exploitation on the urban residents’ consumption in China. Based on the data from the first quarter of 2002 to the third quarter of 2021, the paper uses a nonlinear autoregressive distributed lag model to verify the asymmetric effects. Then the paper constructs a time-varying parameter vector autoregressive model with stochastic volatility term to analyze the nonlinear responses. Impulse response analysis was used to further explain the relationship between the three. The negative impact of rising EPU on urban residents’ consumption is larger than its reduction. Negative shocks to natural resource development increase the urban residents’ consumption. Positive shocks reduce the urban residents’ consumption. There is a time-varying non-linear effect of EPU and natural resource development on urban residents’ consumption in China. The negative impact of EPU on urban consumption has been further exacerbated by major crises such as the financial crisis, COVID-19 and the post-crisis period. The negative impact of natural resource development diminished after the government introduced industrial upgrading policies and environmental regulations. This study provides constructive suggestions for the optimization of economic policies and the improvement of urban consumption. This study also enriches consumer theory and provides new evidence for the resource curse hypothesis.

Importance of natural energy, and blue resources to address environmental challenges in view of the Saudi Vision 2030

AbstractThe purpose of this study is to scrutinize the impact of natural resources, energy, and blue economic indicators on the ecological footprint of Saudi Arabia over the period from 1993 to 2022 by employing a nonlinear autoregressive distributed lag model. We have simulated the missing data using the Markov Chain Monte Carlo algorithm. The study encompasses the effects of post‐Vision 2030 and post‐COVID‐19 policies and their assistance in minimizing the environmental footprint. The observed results determine that non‐renewable energy consumption increases the ecological footprint, whereas natural resources and biocapacity drop the ecological footprints in the case of pre‐ and post‐Vision 2030. For variable fisheries production, the post‐ and pre‐Vision 2030 results demonstrate a boosted ecological footprint in Saudi Arabia, with the highest coefficient among all results. This research offers valuable insights into how Saudi Arabia's energy consumption and natural resource management impact its ecological footprint, highlighting the effectiveness of Vision 2030 and post‐COVID policies in promoting environmental sustainability. The study's findings provide crucial guidance for policy making to reduce environmental impact while considering the role of fisheries and biocapacity in ecological balance. Based on empirical findings, this study commends some policy understandings that assist in being effectively implemented towards a sustainable environment.

Unveiling the nexus of globalization, economic growth, and environmental sustainability

AbstractMalaysia's rapid economic development, although remarkable, has resulted in a significant contribution to carbon dioxide (CO2) emissions in Southeast Asia. Despite this environmental challenge, Malaysia is actively working to reduce its carbon footprint. However, a limited understanding persists regarding how economic globalization (EGB), gross domestic products (GDP), financial development (FD), population density (PD), and energy consumption (ENC) intricately influence the country's ecological footprint (EP). To address this gap, this study examines both symmetrical and asymmetrical short‐ and long‐term impacts of EGB, GDP, FD, PD, ENC, and EP in Malaysia using Autoregressive Distributed Lag (ARDL) and nonlinear ARDL cointegration methods, analyzing data from 1984 to 2021. The findings reveal both symmetrical and asymmetrical long‐term relationships between these variables and the ecological footprint, particularly concerning financial development. The results indicate that, as financial development increases, there is a reduction in Malaysia's ecological footprint. This implies that a more developed financial sector may contribute to environmentally sustainable practices or investments. The study's revelation that economic globalization is associated with an increase in Malaysia's ecological footprint raises important considerations. This finding may prompt a closer examination of the environmental consequences of global economic integration, emphasizing the need for sustainable development practices. The acknowledgment that both positive and negative changes in economic globalization led to decreased ecological footprints adds complexity to the relationship. This suggests that not all aspects of economic globalization have uniformly negative ecological consequences. Understanding these nuances is crucial for formulating balanced and informed environmental policies. These findings carry significant policy implications. Policymakers may need to consider the dual impact of economic globalization and the beneficial role of financial development in crafting effective environmental policies. Incorporating environmental considerations into economic planning can help strike a balance between economic development and ecological conservation.

Unveiling the asymmetric effects: global value chain participation and income inequality

ABSTRACT This study employs a panel nonlinear ARDL model to analyse the asymmetric effects of global value chain participation and its components (forward and backward participation) on income inequality across 29 economies spanning from 2004 to 2018. The findings reveal that global value chain participation is negatively associated with income inequality in the long run, as it stimulates employment opportunities, economic growth, and access to markets. Concomitantly, our study sheds light on whether the effects of global value chain participation vary across its components within the selected economies. Both positive and negative changes in backward participation have positive and significant effects on income inequality in the long run. Simultaneously, adverse changes in forward participation contribute to an upward trajectory in income inequality over the same period. The comprehensive analysis highlights the multi-faceted dynamics between a country’s involvement in global value chains and income disparities within that nation. Given the findings, policymakers need to make it a top priority to boost their economies’ participation in global value chains. This can be accomplished through a multi-pronged strategy that includes trade liberalization policies, measures to attract foreign direct investment, and robust infrastructure development initiatives.

Stock-oil comovements through fear, uncertainty, and expectations: Evidence from conditional comoments

This paper investigates the role of sentiment as a potential driver of the novel stock-oil (represented by the S&P 500 and West Texas Intermediate futures) dynamics in the aftermath of the 2008 global financial crisis (GFC). We study the impact of both sentiment shocks and fluctuations, on the stock-oil time-varying conditional comoments, using the time-varying parameter vector autoregression (TVP-VAR), and the nonlinear autoregressive distributed lag (NARDL), respectively. The findings show that the increasing (asymmetric) effect of sentiments, accounts for the novel post-GFC stock-oil dynamics. As a result, a proactive regulatory framework is needed to shield oil futures against the ever-increasing speculation and financialization.

Private and Public Investment: Are they Substitute or Complementary in Driving Economic Growth in Nigeria?

The paper investigates the relationship between government and private investment with a view to ascertaining their complementarity or substitutability in driving economic growth in Nigeria for the period of 1981-2021. To achieve the objective, nonlinear autoregressive distributed lags (ARDL) models and nonlinear Granger causality tests were employed to analyze annual secondary data which were sourced from the Central Bank of Nigeria Statistical Bulletin. Findings show that government investment expenditure displayed a positive and long-term influence on private investment, suggesting a “crowding-in” effect where increased public investment stimulates private investment thereby fostering overall economic growth. Economic adversities or reduced public investment exerted a substantial negative impact on private investment, underscoring the complementarity of government investment expenditure in driving economic growth in Nigeria. Also, the nonlinear Granger causality tests reveal unidirectional relationship as government investment expenditure causes private investment across various embedding dimensions, emphasizing the positive influence of government investment on private investment. The findings generally suggest the need for balanced fiscal policies, prioritizing productive government investments, encouraging private investment, controlling inflation, and making time-sensitive policy decisions to promote economic growth in Nigeria.

Dynamics of cereal product price transmission between markets in Burkina Faso

PurposeEffective agricultural product price regulation policies depend on market integration and the degree of symmetry in the transmission of agricultural product price signals. This study analyzes the transmission and asymmetry of the price series between the Ouagadougou consumer market and assembly markets considering three primary cereal products in Burkina Faso.Design/methodology/approachThis study applies the nonlinear autoregressive distributed lag (NARDL) econometric model, which is an asymmetric extension of the ARDL cointegration model. The price series examined covers the period extending from January 2005 to December 2020.FindingsOur analysis provides novel insights regarding short- and long-term asymmetric effects in the transmission of price signals between assembly markets and the consumer market. We also determine that the effects of negative shocks are more persistent than those of positive shocks in several markets.Research limitations/implicationsFor markets that exhibit symmetrical responses of assembly market prices to consumer market prices, the results could reflect the continuous efforts of market players, particularly the government, to eliminate market failures and ensure the long-term efficiency of cereal markets. To this end, an agricultural market information system can have a crucial role in easing information access for all market players.Originality/valueThis study provides new evidence regarding the nature of the transmission and asymmetry of price information on primary cereal products in the largest markets in Burkina Faso. Applying the NARDL model makes it possible to simultaneously estimate short- and long-term asymmetry.

Asymmetric effect of environment tax and spending on CO2 emissions of European Union.

This study investigates the effects of environmental tax and environmental spending on CO2 emissions of 27 countries of the European Union EU27 countries using annual time series data from 1995 to 2022. The study used linear and non-linear autoregressive distributive lag (ARDL and NARDL) to examine the relationship. Estimates claim that the variables have a symmetric and asymmetric long-term and short-term relationship. The negative impacts of environmental taxes on CO2 emissions prove that emissions are reduced when polluting activities are taxed. Fiscal policy instrument such as taxation changes the behaviour of the private sector in the EU27 nations by disincentivizing polluting activities. On the other hand, government investment in environmental protection has encouraged the private sector in the EU27 nations to embrace and invest in green technologies, decreasing CO2 emissions. The ECM term is negative and statistically significant at a 1 percent significance level for ARDL and NARDL models, implying a stable long-run relationship between variables. It demonstrates that short-run disequilibrium converges to long-run equilibrium at a speed of 9.2% (in the ARDL model) and 22.7% (in the NARDL model). The study also sheds fresh light on the effectiveness of environmental taxes vs. expenditure, where taxes serve as a counter-incentive policy for CO2 emissions, and spending is a positive policy intervention.