Nonlinear Autoregressive Distributed Lag Research Articles

Tourism Development and Environmental Sustainability in the European Union: Moderating Role of Institutional Governance

This study examines the dynamic effects of tourism and institutional governance along with other variables on CO2 emissions (COE) in the 15 selected European Union (EU) economies over the period 1995-2018. The novel empirical evidence of this study is twofold. First, countries’ bloc effect is controlled based on the entry and exit information of EU countries, and second, in order to capture and better apprehend the aspects of institutional quality meaningful for carbon-neutral tourism in sample countries, interaction effects of tourism receipts and index of institutional quality are examined. For the robust results, non-linear autoregressive distributed lag (ARDL), fixed effects and generalized method of moments (GMM) based models are estimated, wherein the results of the non-linear ARDL approach reveal that there are no asymmetric effects of tourism and institutional quality, that intrinsically affect pollution. Specifically, the findings reveal that tourism development and trade openness can reduce COE. Also, there is evidence of the existence of an environmental Kuznets curve (EKC) in the region. Though institutional quality alone has been found to have an unfavorable impact on the environment yet the interaction term of tourism and institutional quality into the framework reveals a significant and negative impact on COE in the selected region. Therefore, it is suggested that the EU economies should develop effective strategies to improve their present institutional governance framework in such a manner that will help to promote tourism, green purchase intentions of tourists, economic development, trade liberalization and environmental quality.

Effect of Exchange Rates and Information and Communication Technology on Indonesia’s Economic Growth

Foreign exchange rates as well as information and communication technology (ICT) are crucial in the global economy. Exchange rates affect trade balance, which influences gross domestic product (GDP) and economic growth. ICT also affects economic growth by reducing business transaction costs and increasing the income of investors and companies, stimulating national income and economic growth. This research examines the effect of exchange rate asymmetry and ICT on Indonesian economic growth, using annual time-series data on exchange rates, ICT usage (proxied by Internet, telephone, and mobile phone users), and economic growth (GDP from 1994 to 2018). The data were analyzed using a non-linear auto-regressive distributed lag model. The results show that the exchange rate exerts an asymmetric effect on long-term economic growth. ICT has short- and long-term positive effects on economic growth. According to the findings, the Indonesian government should stabilize the IDR/USD exchange rate through monetary policies to encourage economic growth. Monetary policy needs also to support IDR/USD exchange rate appreciation to enhance the trade balance, GDP, and economic growth. The economic growth of Indonesia, which is driven by ICT development, still needs to be sustained by the government initiating ICT development in cities and rural areas.

Symmetric and Asymmetric Effects of Exchange Rate Changes on Stock Prices in Fragile Five Economies: Analysis of the Global Crisis and Pandemic Period

This study examined the symmetric and asymmetric effects of exchange rate changes on stock prices in the economies of India, Indonesia, Brazil, South Africa, and Turkey, collectively known as the "Fragile Five" due to their similar economic dynamics in light of the global financial crisis and pandemic period. The study uses monthly data from July 2000 to July 2022, and panel autoregressive distributive lag and panel nonlinear autoregressive distributive lag models to investigate the effects of exchange rate changes on stock prices in the Fragile Five economies. Prior to the global financial crisis, exchange rate changes have both long- and short-term asymmetric effects on stock prices in the Fragile Five economies. However, after the global financial crisis, exchange rate changes have both short- and long-term asymmetric and symmetric effects. Similarly, exchange rate changes also have asymmetric effects on stock prices during the COVID-19 period.

Effects of real effective exchange rate volatility on export earnings in Ethiopia: Symmetric and asymmetric effect analysis

The exchange rate is one of the key monetary policy instruments used to dictate the economy. However, the effect of exchange rate volatility on macroeconomic outcomes has been a subject of debate in previous research. Thus, this study examined the effects of real effective exchange rate (REER) volatility on Ethiopia's export earnings using quarterly data covering 2007 to 2021. The GARCH model is employed to estimate the volatility of the real effective exchange rate, and its effect is examined at the aggregate and disaggregate levels. Disaggregation is made at commodity and partner country levels. Besides these, the study also examined the symmetric and asymmetric effects of exchange rate volatility on the three categories of export earnings. To estimate the effects, both the linear autoregressive distributed lag (ARDL) and nonlinear ARDL (NARDL) models are employed. The short-run ARDL result shows that the real effective exchange rate and its volatility affect export earnings only in a few cases. Real effective exchange rate appreciation is significant and reduces total export earnings and export earnings from vegetables, meat, and oilseed-related products. Similarly, exchange rate volatility reduces total export earnings and earnings from coffee, vegetables, and meat-related products. At the aggregate level, the NARDL result shows that exchange rate volatility has an asymmetric effect on total export earnings. Positive volatility reduces total export earnings, while negative volatility is not significant. At the commodity level, volatility also has an asymmetric effect on earnings from coffee and meat exports in the short run. However, in the long run, there is no asymmetric effect of exchange rate volatility on total and commodity-level export earnings. In terms of the country of destination, there is no strong evidence of the effect of real effective exchange rate appreciation and its volatility on export earnings. Thus, policies that stabilize the volatility of the exchange rate are needed in Ethiopia in order to enhance export earnings.

Moving toward environmental mitigation in Algeria: Asymmetric impact of fossil fuel energy, renewable energy and technological innovation on CO2 emissions

Algeria's recent economic shifts have caused its macroeconomic data to exhibit an abnormal distribution, requiring a nonlinear approach to examine the asymmetric impact of technological innovation (TI), fossil fuel energy (FFE), and renewable energy (RE) on CO2 emissions. This study employs the nonlinear autoregressive distributed lag (NARDL) model to analyze the asymmetric impact of these factors on CO2 emissions. Furthermore, Quantile Autoregressive Distributed Lag (QARDL) and Quantile Granger Causality (QGC) approaches are employed for robustness checks. The NARDL results indicate that positive shocks in TI decrease CO2 emissions, whereas negative shocks increase CO2 emissions. Positive shocks in RE also decrease CO2 emissions, while negative shocks have no effect. In contrast, positive shocks in FFE increase CO2 emissions, but negative shocks have an even stronger effect, resulting in almost double CO2 emissions over time. These findings confirm the presence of asymmetry, as positive and negative shocks in regressors clearly influence CO2 emissions in Algeria. Moreover, the results from the asymmetric causality analysis indicate that TI, RE, and FFE have a causal effect on CO2 emissions in Algeria. These results are consistent with the findings from the QARDL and QGC approaches. Therefore, it is crucial for Algeria to prioritize investment in sustainable technology and implement carbon-neutral energy policies to reduce its reliance on fossil fuel and encourage the use of cleaner energy sources. The shift towards a green energy sector requires policymakers to ensure that innovation aligns with development objectives.

ASYMMETRIC IMPACT OF DIFFERENT TYPES OF ROAD TRANSPORT ON ECONOMIC GROWTH IN THE SEHRADEGROUP COUNTRIES: AN EMPIRICAL ANALYSIS OF THE NARDL FRAMEWORK

The contemporary economy depends on an effective transportation system, and road haulage assumes a crucial function in fostering dynamic economic growth and commerce. This article aims to investigate the influence of various road transportation modes on economic growth in the Visegrad countries. In this study, the nonlinear autoregressive distributed lag (NARDL) model was employed to scrutinize the asymmetrical impact of various transport modes on GDP. We used quarterly data from 2004–2021 for the Visegrad countries. In addition, a Toda-Yamamoto test was performed to establish causality between variables. The study found evidence of differing impacts of transport modes on economic growth in the examined countries. Specifically, international, and cross-trade transport had a balanced effect on GDP growth, whereas cabotage and domestic transport had an imbalanced impact. The Toda-Yamamoto method's causality analysis results demonstrate bidirectional causality between freight work and GDP in both international and domestic transportation for the Czech Republic, Poland, and Poland's cross-trade. On the other hand, unidirectional causality was established for cross-trade in Hungary, Slovakia, and the Czech Republic. Based on the conducted estimation, it was deduced that the impact of specific transport modes on economic growth is uneven and reliant on both the transport mode and the country. The significant results obtained hold critical implications for economic policy, enabling the adaptation of strategies and regulations to foster growth based on variances in the influence of road transportation on the economy.

A Nonlinear Approach to the Analysis of the Financial Innovation-Money Demand Nexus in Nigeria

This study examines the asymmetric roles of financial innovation in the money demand function in Nigeria using annual data over the period 1981-2020. This is with a view to providing insight into how changes in financial innovation have contributed to the level and stability of the money demand function. The study questions the fundamental assumption of the existing literature that growing trends in financial innovation have symmetric or linear effects on the country’s money demand. Hence, it adopts the nonlinear autoregressive distributed lag (NARDL) with bounds testing procedure together with the cumulative sum of recursive as well as the cumulative sum of squares of recursive residuals tests. Results show that the link between financial innovation and money demand is asymmetric and that of the two partial sum variables, only positive changes in financial innovation have significant effects with the sign being positive in both the short run and long run. This shows that assumptions of linearity and no asymmetric structure reported in extant studies for financial innovation are somewhat misleading. Findings also confirm the stability of demand for money in Nigeria on account of the introduction of asymmetric effects of financial innovation. The study concludes that the financial innovation-money demand nexus is asymmetric and that there is stability in the country’s money demand function once asymmetry or nonlinearity is captured in the nexus. Therefore, it recommends the need for monetary authorities to pay attention to positive changes in financial innovation when policies on money demand are formulated for the purpose of enhancing the effectiveness and reliability of monetary policy as a tool for stabilising the economy.

Role of technology management for carbon neutrality in Gulf economies: the role of social globalization and financial development.

This study is founded on the United Nations' Sustainable Development Goals (SDGs) for 2030, particularly SDGs 8, 11, 12, and 13, among others. Investigating the impact of nonrenewable energy, social globalization, financial development, and ICT on CO2 emissions in the Gulf nations, data from 1992 to 2019 was employed using advanced panel methodologies. Both linear and nonlinear autoregressive distributed lag techniques, along with a panel causality approach, were utilized for a comprehensive analysis. These extensive investigations offer robust insights into the ecological sustainability dynamics within the Gulf nations. The empirical findings highlight that positive (negative) shifts in social globalization, economic growth, ICT, and nonrenewable energy correlate with an increase (decrease) in CO2 emissions, while positive (negative) shifts in financial development contribute to a decrease (increase) in CO2 emissions. These results emphasize the need for a policy framework aligned with the SDGs, advocating an inclusive policy framework tailored for the Gulf nations, aiming to drive progress towards achieving SDGs 7, 8, 9, 13, and 16.

Analysis of Symmetric and Asymmetric Effects of Exchange Rate Pass-Through in Inflation-Targeting Countries

The main purpose of this study is to analyze the effects of symmetry and asymmetry of the exchange rate pass-through in Middle-Income and High-Income countries that implement inflation-targeting policies. This study uses a sample of Middle-Income Countries (South Africa, Brazil, India, Indonesia, and Mexico) and High-Income Countries (Australia, Japan, Canada, Norway, and Sweden) in the form of time-series 2000:Q1- 2021:Q4 with the method of Autoregressive Distribution Lag (ARDL) and Nonlinear Autoregressive Distributed Lag (NARDL). The results showed that five countries have a significant positive effect on the real exchange rate on inflation in the short-run in the ARDL method. In addition, in the NARDL method, five countries significantly positively affect the depreciation of the real exchange rate on inflation in the short-run. Then, only one country has a significant negative effect between the appreciation of the real exchange rate on inflation in the short-run and eight countries in the long-run. Based on the estimation results, it can be concluded that the average quantity of real exchange rate effect on inflation (exchange rate pass-through) in Middle-Income Countries is greater than in High-Income Countries. Therefore, inflation-targeting policies are more flexible to be applied in high-income countries. In addition to the exchange rate, other variables such as oil prices, money supply, and real GDP also greatly affect inflation and have different effects in each country.

Dynamics of oil price shocks in Latin American stock markets during global turbulence: A nonlinear autoregressive distributed lag analysis

This paper investigates the impacts of oil price shocks on the stock markets of six Latin American countries – Argentina, Brazil, Chile, Colombia, Mexico, and Peru – by employing a Nonlinear Autoregressive Distributed Lag (NARDL) approach. This is during periods of global turbulence triggered by the COVID-19 pandemic and Russia’s war in Ukraine. The study used data gathered from January 2020 to July 2023, daily stock prices of the six countries, and West Texas Intermediate (WTI) as a proxy of the oil price index. The analysis revealed that the complex relationship between oil price shocks and stock markets in Latin America has changed significantly since the start of the pandemic and the Russian-Ukrainian War. The findings indicate that the relationship between oil price changes and stock markets is not a straightforward linear correlation, but rather is more complex, with non-linear and counteracting effects, likely due to the uncertainty created by the pandemic and the Russian-Ukrainian War, which has caused investors to be more cautious when responding to oil price shocks.

Remittances and environment quality: Asymmetric evidence from South Asia

Remittances are the largest sources of foreign funds and are critical for economic development in South Asia. However, they have been found to damage the environment by promoting the production and consumption of energy-intensive products and pose challenges for achieving Sustainable Development Goals (SDGs). Against this backdrop, this study examines the role of remittances in environmental degradation using a sample of five South Asian countries from 1990 to 2021. A non-linear multivariate panel ARDL (NARDL) model is applied to investigate the asymmetric long and short-run relationship between the two. Cointegration results suggest that there is a stable long-run relationship among the variables. Empirical findings indicate that positive remittance shocks impact environmental degradation, and adverse shocks have a favourable effect. The causality results show one-way causality from positive and negative shocks to environmental quality, supporting the asymmetric relationship. The control variables, such as trade, financial development, and energy consumption, exacerbate environmental degradation while FDI improves the environmental quality. For robustness, the study uses Ecological Footprints (EPF) as an alternative proxy for environmental quality and confirms the asymmetric long and short-run link between remittances and environmental quality. Based on the results, an integrated approach combining the development and environmental goals is recommended.

Asymmetric Effects of Exchange Rate Volatility on Taiwan-China Trade: A Non-Linear ARDL Analysis of 20 Industries

Abstract This study investigates the long-run and short-run effects of exchange rate volatility on Taiwan's exports to and imports from China across 20 industries, employing a non-linear autoregressive distributed lag (NARDL) approach. The analysis covers the period from January 2004 to December 2022 and highlights industry-specific sensitivities and asymmetric impacts of exchange rate fluctuations. Our findings reveal the critical role of exchange rate volatility in shaping export and import performance across industries, with both positive and negative shocks exerting significant short-run and long-run effects. Asymmetric impacts of exchange rate fluctuations affect 87.96% of Taiwan's total exports to China in the long run and 72.11% in the short run. In contrast, the asymmetric impacts on imports influence 77.12% of Taiwan's total imports from China in the long run and 13.21% in the short run, demonstrating varying sensitivity across industries. These findings accentuate the necessity for industry-tailored trade policies and strategic considerations to better manage the risks and opportunities presented by exchange rate volatility in cross-strait trade. JEL classification numbers: F14, F31, C22. Keywords: Exchange rate volatility, Taiwan-China trade, Non-linear ARDL, Asymmetric effects.

Market integration and asymmetric price transmission in selected domestic markets for major staple foods in Uganda

In this study, we examined the price transmission dynamics and market integration among domestic markets for Uganda’s major staple foods (matoke, maize, and beans) utilizing the Granger causality analysis, bounds test, Wald test for long- and short-run asymmetry, and the nonlinear ARDL model. Among the key findings, the causal order between wholesale and retail commodity prices flows unidirectionally forward from the wholesale to the retail level across all markets. Wholesale and retail prices for Uganda’s staple foods are interlinked in all markets, and spatially separated markets are also well integrated. The Wald test revealed asymmetric price transmission (APT) in speed alone for the pairs wholesale and retail prices of matoke in Kampala, and wholesale prices of matoke in Mbarara with Kampala retail prices, both APT in magnitude and APT in speed for the pairs wholesale and retail prices of beans in Kampala, wholesale and retail prices of maize in Masindi, and wholesale prices of beans in Masindi with wholesale and retail prices in Kampala. We also found that in the long run, retail prices respond more strongly to wholesale price increases than decreases, an implication of positive APT in the marketing supply chain of Uganda’s major staples. This may be linked to information asymmetry between traders and consumers, traders’ adjustment costs, production levels, inventory management, and the market power of retailers. We thus concluded that final consumers are more likely to experience an increase rather than a decrease in the prices of staples at the retail level, while retailers are more likely to benefit from price decreases at the wholesale level.

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.

The Dynamic Effect of Financial Sector Development in Stimulating the Gross National Savings of Djibouti

Abstract Savings are important determinants of wealth. At the macroeconomic level, governments attach importance to saving money in order to make new investments, produce new capital goods, and sustain economic growth. However, due to the high level of internal and external debt in Djibouti, it is nearly impossible for the country to achieve domestic savings. Hereby, the major aim of this study is to examine the dynamic effect of financial sector development in stimulating the gross national saving of Djibouti from the period 1987 to 2021. The paper considered numerous indicators as measurements of the financial sector development including FDI inflows, domestic loans to the private sector, central bank assets to GDP, and money supply. To proceed with the analysis, Non-Linear Autoregressive Distributed Lag (NARDL) was performed and according to the model, the findings highlighted that the Djiboutian financial industry is still in its early development and has not yet made a substantial contribution to boosting the country’s national savings. Nevertheless, the gross national saving of Djibouti was still positively prompted by significant components of the financial sector development, such as the positive shocks of FDI inflows and both the negative shocks of central bank assets and money supply. While both the positive and negative shocks of the credit offered to the private sector were uncovered to diminish the national savings in the long run. In conclusion, the current research will help governments and policymakers understand the best ways to use the financial sector to raise gross national savings. It will also present evidence of how to implement long-term initiatives that can lower public debt and encourage savings. Not to mention, the article provides information on the value of long-term investments.

Evaluating the Symmetrical and Asymmetrical Linkage Between Gold Price and Indian Stock Market in the Presence of Structural Change

This article investigates the symmetrical and asymmetrical linkage between gold prices and the Indian stock market in the presence of structural breaks. The study covers a time frame from April 1993 to December 2019. The study employs both linear autoregressive distributed lag (ARDL) and non-linear ARDL (NLARDL) models. The major findings of the study are as follows: first, both the ARDL and NLARDL models indicate the co-movement of gold prices and the Indian stock market. Second, based on the long-run parameters of both the models, the long-run relationship between the variables could not be established. Third, short-run parameters show that positive shocks in gold prices depress the Indian stock market; however, negative shocks in gold prices have a positive but insignificant relationship with the Indian stock market. The asymmetric reaction of the Indian stock market will yield new insights for investors, fund managers, and policymakers.

Modelling of nonlinear asymmetric effects of changes in tourism on economic growth in an autonomous small-island economy

Abstract While a substantial body of empirical evidence exists supporting the tourism-led growth hypothesis, more limited evidence exists regarding the dynamics of the relationship between tourism and economic growth in the island context, with important questions remaining to be answered regarding the linearity and symmetry of the relationship. Policymakers would benefit greatly from such knowledge as they attempt to harness inbound tourism as an engine of economic growth. This study contributes to bridging this important gap in knowledge by investigating the dynamics of the relationship between tourism and GDP in Madeira, a small-island autonomous region of Portugal. The analysis employs an asymmetric nonlinear autoregressive distributed lag model, using data from 1976 to 2019. The results confirm unidirectional causality between tourism and GDP, thus corroborating the tourism-led growth hypothesis. The relationship is also found to be asymmetrical, where the retarding effect of falling tourism receipts is significantly stronger than the stimulus effect associated with increasing tourism receipts. Significant non-linear effects are also found in each adjustment pathway. In terms of policymaking, while this study confirms that investing in tourism can be an effective way of promoting economic growth, efforts should also be made to diversify both the tourism sector and the wider economy to reduce exposure to downside risks.

Nexus between resource policy, renewable energy policy and export diversification: Asymmetric study of environment quality towards sustainable development

This study examines the environmental performance of the United Arab Emirates (UAE) towards its sustainable development amidst its heavy endowment with natural resources and export diversification. The UAE is among the economies that depend on both export diversification and natural resources for their sustainable economic development. The two mentioned indices (export diversification and natural resources) have been proven to be among the drivers of carbon emissions. Notwithstanding, the UAE has a desert environment with nearly continuous sunlight capable of generating and boosting its renewable energy development. With this potential, it is crucial to create a green energy strategy since renewable energy sources are gaining popularity as alternatives to conventional energy sources. Natural resources and export diversification have garnered mixed reactions in their role towards environmental development. While some researchers report that they induce degradation, others suggest that they mitigate environmental damage. Also, empirically, studies have found renewables such as hydroelectricity, wind and geothermal energy capable of moderating and mitigating the negative impact of carbon emissions on the environment. In this study, data from 1990 to 2019 is analyzed using the nonlinear autoregressive distributed lag (NARDL) and dynamic ordinary least squares (DOLS) scientific methods. The variables of interest are natural resources, export diversification and renewable energy. Findings from NARDL show that export diversification, natural resources and economic growth negatively impact the environment in the UAE by inducing carbon emissions. Specifically, positive and negative shocks of export diversification, natural resources and economic growth to carbon emissions increase and decrease carbon emissions, while positive and negative shocks of renewable energy to carbon emissions decrease and increase carbon emissions. This indicates that the UAE has the potential to achieve its carbon neutrality target with a renewable energy policy.

Asymmetric role of the informal sector on economic growth: Empirical investigation on a developing country

The role of the informal sector in economic growth still remains an issue of debate. This study contributes to resolving this by taking into account the asymmetric effect of the informal sector on economic growth. The study applies the Non-linear Autoregressive Distributed Lag (N-ARDL) model to capture the asymmetric relationship between the informal sector activity and economic growth for the period 1982–2018 in Bangladesh. The estimation of the N-ARDL model reveals that the informal sector asymmetrically affects the domestic output and economic growth in Bangladesh for both the short-run and the long run. The study has observed an asymmetrically larger effect on output and economic growth from the falling contribution of the informal sector. Urbanization and capital growth also contribute to an increase in economic growth. Therefore, proper incentives and careful policy measures are suggested to effectively diminish the prevalence of informality and promote its transition towards a more formalized framework.

Asymmetric impact of microfinance on economic growth: Evidence from Bosnia and Herzegovina

This study explores the correlation between microfinance loans (MFL) and economic growth in Bosnia and Herzegovina (Bosnia). It utilizes the non-linear Autoregressive Distributed Lag (NARDL) method to examine cointegration and short-run dynamics by analyzing quarterly data spanning from 2010 to 2022. The findings underscore the link between MFL shocks and long-term economic growth. The study unveils the unique effects of both positive and negative MFL shocks on growth, suggesting a non-linear relationship between microfinance loans and economic growth in Bosnia. However, the study concludes that the impact of MFL on Bosnia's GDP is adverse. Short-term fluctuations in MFL show no substantial influence on Bosnian economic growth. The coefficient of the error correction model is both negative and significant indicating the stability of the long-term relationship. This implies a rapid correction, with 46.4 % of the previous quarter's imbalance rectified within the current quarter. While our results are based on a single country, they align with recent criticisms of microfinance practices. Furthermore, our study offers a novel approach as it represents the first examination of the asymmetric relationship between MFL and GDP in Bosnia, providing valuable policy recommendations.