Nonlinear Autoregressive Distributed Lag Research Articles

Asymmetric Effect of External Debt on Foreign Direct Investment (Fdi): Empirical Study from Nigeria

The paper examines the effect of external debt on FDI inflow in Nigeria between 1983 and 2021. Stationarity tests such Augmented Dickey Fuller (ADF), Phillips Perron (PP) as well as Guris (GUR) non-linearity unit root tests were employed to check the properties of the series. Non-linear Autoregressive Distributed Lag (NARDL) model was adapted to explore the relationship between the variables after confirming the mixed order of integration across the three testes. The Bound Test reveals the existence of a long-run relationship between the variables. According to the NARDL results; in the short-run a unit positive change in external debt would lead to decrease in FDI inflow by (1.165) while a unit negative change in external would lead to increase in FDI inflow by (1.360) and both are significance at 5% level of significance in short-run. The long-run results indicates that, the positive and negative change in external debt exhibit positive effect on net FDI inflow but only negative change is statistically significance at 5% level of significance. It is recommended that government should take steps in redemption of existing external debt and refrain from taking on any unnecessary new debt as these actions will not help the country's short run net FDI inflow and consequently, its overall economic growth.

Interrogating the Asymmetric Impact of Exchange Rate on Agricultural Output in Nigeria

The agricultural sector is vital to the Nigerian economy. It serves several functions including food supply for the populace, a source of income for a sizable section of the domestic labour force, a supplier of raw materials for industrial production, and provision of foreign exchange revenues to the economy. However, due to the country’s abundance of natural resources like crude oil, the agriculture sector is vulnerable to the fluctuations in the exchange rate caused by international financial markets. This analysis looked at how changes in the value of the naira relative to dollar affects agricultural production. In order to contribute to the current body of literature for the time period between 1981 and 2021, this study employed the Dutch Disease Syndrome theoretical framework through the use of the non-linear autoregressive distributed lag (NARDL) method for Nigeria. This research shows that while the long-term effect of the exchange rate on agricultural output in Nigeria is symmetrical, the short-term effect is asymmetrical. However, in more specific terms, the symmetrical effect of the exchange rate in the long run revealed that exchange rate appreciation increased real agricultural GDP by approximately 8.8 percent compared to exchange rate depreciation which had only increased real agricultural GDP by 0.11 percent. Consequently, since exchange rate exerted positive impact on agricultural production in the long run, it is suggested that the Nigerian government explores the increased competitiveness of the agricultural sector in its economic diversification efforts. In other words, the agricultural sector could provide an avenue to expand the revenue base of the government, but for a more beneficial effect on the agricultural sector in particular and the economy in general, more focus should be placed on policies that would enhance appreciation of the Naira such as reducing imports of agricultural inputs and produce.

Dynamics of Financial Development and Foreign Direct Investment on Nepal's Economic Growth: A NARDL Analysis

This study explores the asymmetric effects of financial development and foreign direct investment (FDI) on economic growth in Nepal, employing the nonlinear autoregressive distributed lag (NARDL) model. The analysis reveals significant asymmetries in the effects of FDI and financial broadening in the economy by distinguishing between positive and negative shocks, the outcome indicates that positive shocks in financial sector growth significantly boost the economy, while negative shocks have a less pronounced and statistically insignificant effect. Similarly, positive shocks in FDI positively influence GDP per capita growth, whereas negative shocks are statistically insignificant. The robustness of these findings shows stable model parameters. The study underscores the importance of proactive policy measures to harness the positive impacts of financial development and FDI, thereby fostering sustained economic growth in Nepal. These insights contribute to the broader literature by highlighting the need for asymmetric analysis in understanding the complex dynamics of financial development, FDI, and economic growth in developing economies.

Improving the economic recovery by flexibility, natural resource performance, and resilience

Enhancing economic recovery requires a multidimensional strategy incorporating resilience, natural resource performance, and flexibility. Using a nonlinear ARDL approach, we analyze the interaction between the two concepts from 1991 to 2021. Flexible economic policies enable quick adjustments to shifting conditions, resulting in a dynamic and adaptable recovery process. Effective use of natural resources is essential as they are essential to both sustainability and economic development. While reducing environmental effects, efficient use of resources, such as sustainable agriculture and renewable energy, may increase economic output. Additionally, economic systems must be made more resilient to endure shocks and uncertainty. An economy may become more resilient by creating strong financial institutions and diverse businesses. A complete plan for long-term economic recovery is produced by the interaction of flexibility, resilience, and natural resource management, assuring stability and growth. By tackling these interrelated facets, policymakers may provide the groundwork for a future economy that is more robust and flexible.

Asymmetric effect of environmental tax on CO2 emissions embodied in domestic final demand in South Africa: A NARDL approach

AbstractMotivated by the pressing need to address environmental concerns, this study explores the relationship between environmental taxes and CO2 emissions embodied in domestic final demand in South Africa. The study uses a non‐linear autoregressive distributed lag (NARDL) model to analyse the asymmetric impact of environmental taxes. Results indicate that environmental taxes have an asymmetric impact on CO2 emissions embodied in domestic final demand in both the short and long runs. Specifically, both positive and negative shifts in environmental taxes are linked with a respective 0.06% decrease and a more pronounced 0.22% decrease in CO2 emissions embodied in domestic final demand. Moreover, positive shocks in the GDP growth rate are associated with an approximately 0.002% uptick in CO2 emissions, while negative shocks lead to a 0.012% decrease. Additionally, both positive and negative shocks in population growth exhibit a significant positive correlation with the response variable. The baseline estimates demonstrate that the joint effect of environmental taxes and the GDP growth rate is correlated with reductions in CO2 emissions embodied in domestic final demand. Similarly, the joint influence of environmental taxes and population growth rate is linked to declines in CO2 emissions. The study highlights the practical policy implications of these findings.

Asymmetric Response of Fiscal Sustainability to the Financial Development in Nigeria

This study examines the asymmetric response of fiscal sustainability to financial development in Nigeria while augmenting the model with exchange rate volatility within the non-linear autoregressive distributed lag framework. The empirical evidence reveals that positive and negative shocks in domestic credit to the private sector result in significant unsustainable fiscal balance and fiscal sustainability both in the short run and long run respectively. Increase and decrease in annual market capitalization have a positive and negative significant impact on the fiscal sustainability in the long run respectively. Exchange rate devaluation or depreciation has a devastating effect on fiscal sustainability both in the short run and long run. Wald test revealed that credit to the private sector and annual market capitalization have an asymmetric effect on fiscal sustainability both in the short run and long run, while the exchange rate has no asymmetric effect on fiscal sustainability. For a sustainable fiscal stance, we recommend a financial model that channels credits towards productive activities to boost GDP as this will go a long way in reducing the debt-to-GDP ratio and enhancing solvency.

Female empowerment and crime patterns in Malaysia: A non-linear analysis

Using data from 1982 to 2020, this study evaluated the impact of female employment on violent crime in Malaysia using the non-linear ARDL technique. The study found that, in the long run, lower unemployment rates were linked to lower rates of violent crime, and increased female employment facilitated a short-term reduction in violent crime. Fewer women working resulted in a short-term rise in violent crime and, over the long term, higher rates of violent crime contributed to higher rates of jail population growth. Surprisingly, higher employment rates for women were eventually linked to higher rates of violent crime. Long-term trends showed a correlation between lower employment rates for women and greater rates of violent crime. For short-term analysis, negative economic growth was linked to a rise in violent crime, and positive economic growth could lower violent crime. These results demonstrated the complex interplay between a number of variables and violent crime rates. Thus, to successfully prevent violent crime and build safer societies, it is crucial to address socioeconomic inequalities, advance gender equality, and put into practice comprehensive methods that include community assistance, employment, education, and rehabilitation.

Long-Term Asymmetric Impact of VAT on Domestic Investment in Nigeria

We employ a non-linear ARDL (NARDL) technique to explore long-term asymmetric influence of value added tax (VAT) on domestic investment using quarterly data for Nigeria from 1994 to 2021. A long-term relation was found between domestic investment and VAT (alongside lending and inflation rates, credit to private sector, exchange rate, openness and households’ consumption expenditure) based on the bounds test to cointegration. We uncovered a long-term asymmetric association between domestic investment and VAT. The results show that a positive shock (an increase) in VAT has a long-term decrease and significant influence on domestic investment, while a negative shock (a decrease) in VAT has an insignificant positive influence on investment during the long-term. Other significant long-term drivers of domestic investment are credit to private sector, inflation and lending rates, openness, exchange rate and households’ consumption expenditure. Some recommendations have been offered based on the empirical outcomes.

Natural resources utilization, ICT growth, and renewable energy consumption: Pathways to sustainable development in China

Economic progress drives industrial development, leading to increased natural resource extraction. The excessive use of natural resources through practices such as cultivation, deforestation, and excavation can harm ecological quality. In line with this, the present study examines the influence of natural resources on CO2 emissions in China. The study covers 31 years, from 1990 to 2021, and employs the Nonlinear Autoregressive Distributive Lag (NARDL) methodology. The empirical findings indicate that a positive shock in natural resources reduces CO2 emissions, while a negative shock in natural resources increases CO2 emissions. Additionally, the study reveals that information and communication technology (ICT) and foreign direct investment (FD) contribute to the rise in CO2 emissions. Causality analysis further confirms these associations. Based on the empirical investigations, it is deduced that the economy should devise strategies to manage natural resources effectively. Furthermore, adopting renewable energy emerges as a crucial approach to mitigate CO2 emissions in the studied economy.

The Symmetric and Asymmetric Impacts of Energy Consumption and Economic Growth on Environmental Sustainability

Climate change has emerged as a global challenge because of its threat to sustainable development goals. Fossil fuels and economic growth are responsible for pollution and, thus, for climate change. In this context, this study explored the environmental Kuznets curve hypothesis for the case of 17 MENA countries over the period of 1990–2020. It investigated the symmetric and asymmetric impact of energy consumption and economic growth on CO2 emissions by controlling for population density, trade openness, and FDI inflows using panel linear and nonlinear ARDL models. The robustness of the results was checked using the fully modified OLS and dynamic OLS methods. Moreover, the Dumitrescu–Hurlin panel causality test was employed to determine the directions of causality between the variables. Overall, the empirical results of both panel linear and nonlinear ARDL models validate the environmental Kuznets curve hypothesis for the selected sample of MENA countries. Economic growth leads to environmental degradation only in the long run, whereas a rise in energy consumption leads to an increase in pollution in both the short and long run. These results are confirmed by the fully modified OLS and dynamic OLS methods. The findings of the Dumitrescu–Hurlin panel causality test also indicate the existence of bidirectional causality between energy consumption and CO2 emissions and between economic growth and CO2 emissions. Therefore, policy makers in the MENA region should invest in clean technologies and accelerate the transition to renewable energies such solar energy, wind power, and hydropower to align with sustainable development goals.

Carbon taxes, resources efficiency, and environmental sustainability in a developed country

ABSTRACT Given the consequences for the climate and human well-being, there is unquestionable universal fear about the ecological impact of socioeconomic activity. Therefore, this research aims to investigate the effects of carbon tax and resource efficiency on environmental sustainability while controlling economic growth and total energy supply in France between 1995 and 2020. As a result, the empirical findings would shed light on ecological sustainability in France and spark new debate. This study employs a novel Fourier autoregressive distributed lag cointegration method for cointegration and a nonlinear autoregressive distributed lag approach for long-run estimation. The empirical outcomes show that resource efficiency is negatively connected to environmental pollution. Moreover, the impact of a carbon tax on environmental pollution is negative. Lastly, energy use and economic growth positively influence environmental pollution. The study concludes that carbon taxes can help to achieve sustainable development goals and resource efficiency.

The dynamics of bonds, commodities and bitcoin based on NARDL approach

Asset market dynamic interconnectedness poses significant challenges to investors, fund managers, and policymakers, particularly in periods of prolonged uncertainty and economic crisis. This study investigates the asymmetric connection between the Bitcoin, gold, and oil markets and the bond markets in the United States, Australia, China, and the European Union. The study employed nonlinear autoregressive distributed lag (NARDL) on data ranging from January 1, 2017, to January 26, 2023, that accounted for the COVID-19 pandemic period and the Russian-Ukraine war. The results indicate that a fall in the Bitcoin price leads to a rise in bond prices, most profoundly in the European Union, where a 1% rise in the Bitcoin price leads to a 0.032% fall in bond prices. Similarly, the oil price index indicated a negative asymmetric shock in bond prices, with the most profound rise in the US bond market. The gold market index exhibited a positive connection to the bond market (US bond market falls by 0.476%) as the market overreacts to a fall in prices rather than a rise, and often in the long run rather than the short run, except for Bitcoin. The Bitcoin and oil markets act as strong safe-havens, while gold plays the role of a weak hedge during the pandemic and the Russia-Ukraine war. While our results are consistent over multiplier impact and stability tests, fund managers may find these significant due to the involvement of Russia and Ukraine as the two largest producers and exporters of several important commodities and energy. We discuss practical implications of our findings.

Exploring ripple effect of oil price, fintech, and financial stress on clean energy stocks: A global perspective

This study examines the dynamic relationship between oil price volatility, fintech, financial stress, and clean energy stocks in the global market from June 2013 to December 2022. It explores the ripple effect and the impact of the fintech revolution on the performance of clean energy stocks. The analysis utilizes weekly data and employs the “Non-linear Autoregressive Distributed Lag (NARDL)” approach to capture potential non-linearities and asymmetries to understand complex dynamics and relationships comprehensively. The outcomes reveal significant associations between the examined variables. Positive fintech and negative financial stress positively positively influence clean energy stocks. These results suggest that increased fintech works as a catalyst for sustainable investments and restoring investor confidence in the financial services sector. Similarly, reducing financial stress favours the performance and attractiveness of clean energy stocks as investment options. Moreover, oil price volatility positively correlates with clean energy stocks, highlighting the interplay between energy markets and the transition towards cleaner and sustainable energy sources. The implications of these findings provide valuable insights for investors, policymakers, and stakeholders in the energy and financial sectors.

Impact of environmental fiscal reforms on carbon emissions of EURO-4 countries: CS-NARDL approach

This study investigates the effects of the Environmental Fiscal Reforms (EFR) policy on carbon emissions of the top 4 economies of Europe, using annual time series data from 1995 to 2022. The study used a cross-sectional nonlinear autoregressive distributed lag (CS-NARDL) model to examine the relationship. Estimates claim that the variables have an asymmetric long-term and short-term relationship. The negative impacts of carbon taxes on carbon emissions prove that emissions are reduced when polluting activities are taxed. Fiscal policy instrument such as taxation changes the behaviour of the private sector by disincentivizing polluting activities. On the other hand, government expenditure on environmental protection encourages the private sector to embrace and invest in green technologies, decreasing carbon emissions. The ECM term is negative and statistically significant at a 1 percent significance level for CS-NARDL model, implying a stable long-run relationship between variables. It demonstrates that short-run disequilibrium converges to long-run equilibrium at a speed of 47.2 percent. The study also propels new insight into the effectiveness of EFR policy, showing that taxes act as a counter-incentive and expenditure as a positive policy intervention for reducing carbon emissions. EURO-4 countries set an example for policymakers worldwide by rebalancing their energy mix and expanding the use of cleaner alternative energy sources.

Fin-tech indicators, mineral resources and green productivity: Role of human development and globalization in BRICS region

Fin-tech facilitates capital allocation for sustainable mineral extraction, fostering green productivity. Fin-tech platforms empower communities to invest in renewable, driving eco-friendly practices in mineral-rich areas. Despite its significant importance, the influence of fin-tech and mineral resources is relatively under-explored, particularly in the BRICS region, mainly due to the unavailability of inclusive fintech indicators. This study initially constructs fintech index based on financial development and digitalization indicators. Although it does not purely reflect fintech, however, it is a good proxy for the readiness of fintech. Later, this study explores the nonlinear dynamics of fintech and mineral resources after controlling the impact of human development and globalisation on the green productivity of the BRICS countries from 1990 to 2021. Nonlinear Autoregressive Distributed Lag (NARDL) model is employed after the preliminary examination of the data series. The bound test of the cointegration approach is used to establish the long-run equilibrium relationship between the variables. Wald test affirms the asymmetries/non-linearities in financial technology and mineral resources. The long-run outcomes of NARDL reveal positive and negative shocks in financial technology and mineral resources cause to influence green productivity differently. Positive shock in fin-tech (mineral rent) leads to a 0.251% (0.437) increase (decreased) in green productivity, while negative shows a reduction (increases) by 0.308% (114%). Human development and globalisation positively impact green productivity in the long and short run. The error correction term is negative and significant, implying that the applied model settles 46.1% of asymmetric discrepancies annually. The study emphasises enhancing the financial technology sector in the BRICS countries.

Asymmetric link between energy market and crypto market

This paper examines the nonlinear (NL) asymmetric long- and short-run interconnections between energy indices (S&P 500-ENERGY, MSCI-CHINA, and MSCI-WORLD) and the crypto (Bitcoin) market. The daily data have been used from January 1, 2013, to February 24, 2023, archived from the wind database. We use a nonlinear autoregressive distributed lag (NARDL) framework for the research to be empirical. The NARDL test reveals the presence of a nonlinear asymmetric relationship, both in the long-run and short-run, among the MSCI-China, MSCI-World, S&P500-ENERGY indices, and the price of Bitcoin. The S&P 500 energy index and Bitcoin price have an inverse asymmetric connection. The prices of Bitcoin are positively influenced by both positive and negative shifts in the MSCI-CHINA and MSCI-WORLD indices. Overall, this study underscores the growing significance of the cryptocurrency market as a hedge against risks, offering evidence that Bitcoin can be perceived as a safe haven amidst the turbulence of the energy market. This insight holds implications for Bitcoin investors, suggesting its potential as a refuge in times of energy market instability.

Exchange rate asymmetry and its impact on bilateral trade: Evidence from BCIM-EC countries using N-ARDL approach

The novelty of this study is to examine the asymmetric effect of the exchange rate on bilateral export and import between Bangladesh and its three trading partners in the Bangladesh-China-India-Myanmar Economic Corridor using nonlinear ARDL models from 1973 to 2022. After controlling income and structural breaks, the empirical findings confirm the asymmetric effects of exchange rates on the short-run and long-run export and import demand functions of Bangladesh. Furthermore, the impacts of the appreciation and depreciation of the Bangladeshi currency are heterogeneous for these three trading partners. For instance, the depreciation of the Bangladeshi currency increases exports to China and India while it decreases exports to Myanmar in the short run. However, the depreciation increases exports to India and Myanmar, and the appreciation also increases exports to China and India in the long-run. On the contrary, depreciation increases imports from China and Myanmar in the short-run, while it decreases imports from Myanmar in the long run. Only appreciation has significant negative effects on China and India. As a robustness measure, we exclude the COVID-19 period. However, it does not substantially change our main findings.

Measuring the impact of ESG investing on the stock performance of JSE-listed financial service providers during the Covid-19 pandemic

The study's objective is to examine the impact of ESG investing on the stock performance of financial service providers in South Africa (SA) during the COVID-19 pandemic. This has significant ramifications for the usefulness of ESG investing during a crisis period. To this end, the study employs the panel nonlinear autoregressive distributed lags (PNARDL). The study finds that ESG investing had a significant impact on stock performance. The error term in the PNARDL reveals that the share price of financial service providers in SA was significantly affected by ESG investing. The PNARDL shows that, on average, a 1 percent increase in ESG investing increased stock price returns by 5 percent, cetiris paribus. This crucial finding has significant implications. It implies that ESG was another significant resilience factor behind the stock performance of financial service providers. Moreover, the PNARDL found that reducing ESG investing negatively affected stock price returns, while increasing ESG investing positively affected stock price returns during COVID-19. Hence, the study recommends that financial service providers increase ESG investing during a crisis period.

Effect of Remittances on Renewable Energy Consumption in India: Evidence from a Nonlinear Analysis

The flow of remittances is decisive in shaping India's economic and societal welfare. India is also one of the fastest-growing economies, and its energy demand has a determining impact on global energy consumption. Remittances are often seen as a crucial source of external finance for India and can play a decisive role in financing renewable energy generation projects. However, minimal exploration has been conducted on the issue of interrelationship between remittances and renewable energy consumption in India. The present study attempts to empirically test the impact of remittances on the level of consumption of renewable energy in India over the period 1990–2020, which, to the best of our knowledge, none of the previous studies has dealt with yet. The results of the nonlinear autoregressive distributed lag (NARDL) model show that a lagged negative shock of remittances positively and significantly impacts renewable energy consumption in India. The long-term result confirms that a negative shock of remittances significantly reduces renewable energy use. The reduction of remittances has a more significant impact than the increase of the same, implying the existence of an asymmetric impact of remittances over renewable energy consumption. One of the critical policy implications of these findings is that the government should promote policies that enhance the inflow of remittances as it would facilitate the use of renewable energy in India.

Analyzing the role of shadow and official economies on energy demand in the United Arab Emirates: An (a) symmetric approach

The determinants of energy demand remain an open question in the literature. Hence, this study expands the energy demand function by examining the role of the shadow economy in such a nexus. Specifically, the study scrutinises the (a) symmetric impacts of shadow and official economies on the energy demand of the United Arab Emirates between 1991 and 2017. The study's objectives were analysed using the linear and nonlinear autoregressive distributed lag. The conclusion from the linear ARDL hints that the shadow economy, energy price, and financial development reduce energy demand. In contrast, the official economy positively influences energy demand in both periods. The asymmetric result reveals that positive and negative shocks in the shadow economy raise energy demand. Meanwhile, positive shocks in the official economy spur energy demand, while negative changes reduce the demand for energy in both periods. Furthermore, energy price, financial development, and urbanisation reduce energy demand in the asymmetric model. The study's outcome implies that both shadow and formal economies intensify energy demand in the UAE. The implications of the result for sustainable development are discussed.