Panel Dynamic Ordinary Least Squares Research Articles

Does rising resources income, consumer prices, government outlay and globalization hinder Africa’s sustainable development?

This study examines the long-term effect of contemporary challenges such as growing resource income, rising consumer prices, inefficient public spending and globalization on Africa’s quest for sustainable development (SD). A robust measure of SD that integrates resource productivity is adopted. The study period spanned from 1991 to 2021, and data was sourced from 24 African countries. The empirical output for this study is derived using long-term methodologies, including feasible generalized least squares (FGLS), Driscoll-Kraay and panel dynamic ordinary least squares (PDOLS). The estimation of the long-term model is to capture the consequential effects of contemporary issues on SD. Evidence from the model reveals that increases in resources income, consumer prices, public outlay and globalization are deterrents to SD. The individual cross-sectional regression outputs also demonstrate similar effects. Given these contemporary challenges, the study proposes relevant policy measures to aid the attainment of SD.

The impact of agriculture production and renewable energy consumption on CO2 emissions in developing countries: the role of governance.

Environmental pollution has aggravated the climate change issues posing unusual challenges to the survival and growth of humanity, including extreme weather, loss of species, and sustainability of the ecosystem in developing countries. Unlike previous studies, this paper adds new dimension to the literature by incorporating corruption into agriculture production-environment nexus. This study adds new dimension to the literature by examining corruption, agriculture, and renewable energy on CO2 emissions. The study therefore examines the effects of governance (corruption) and agriculture production on CO2 emissions in 20 countries in Africa from 1990 to 2019. The study employed recent panel econometric approach which accounts for cross-sectional dependence in the variables. The findings of the fixed effect model and panel dynamic ordinary least squares (PDOLS) show that forest and renewable energy consumption decrease CO2 emissions. However, corruption, agriculture production, export, and urbanization escalate CO2 emissions in African countries covered in the paper. Moreover, the Dumitrescu-Hurlin Granger causality indicates a bidirectional causality between agriculture production and CO2 emissions, renewable energy use, agricultural output, and forest. Also, unidirectional Granger causality runs from corruption to forest and agriculture production. On these premises, consented efforts by governments should be made to support good institutions in order to promote good governance to avert pervasive consequences of corruption on the environment.

MONETARY POLICY AND STOCK PRICE BEHAVIOUR OF BANKS IN NIGERIA: A PANEL DYNAMIC CO-INTEGRATION APPROACH

This study was conducted to examine effect of monetary policy on stock prices of listed banks in Nigeria. Specifically, the study examined effects of broad money supply, Treasury bill rate, monetary policy rate, exchange rate, cash reserve ratio, lending rate and savings deposit rate on stock prices of 15 listed banks on the Nigerian Stock Exchange as at 31st December, 2019. The study employed descriptive statistics, panel dynamic ordinary least squares and panel causality analysis to analyze quarterly data of stock price (STP) and monetary policy variables from 2006 to 2019. Results of the panel dynamic ordinary least squares (PDOLS) show that for banks, broad money supply (M2), monetary policy rate (MPR), exchange rate (EXCH) and interest on savings (SDR) significantly affect stock price negatively (p =0.0147; p =0.0000; p = 0.0110 and p = 0.0003 for M2, MPR, EXCH and SDR respectively). Treasury bill rate (TBR) significantly affects stock price positively (p = 0.0000) while cash reserve ratio (CRR) and lending rate (LDR) have insignificant effect on stock prices of banks. We recommend that Nigerian banks should be more pro-active in managing effects of monetary policy announcements to avert prolonged negative effects of such policies on their stock prices. We also advocate a re-appraisal of MP tools vis-à-vis stock market expansion goal by the Central Bank of Nigeria.

Determinants of Foreign Direct Investment Inflow to ECOWAS Member Countries

The benefits of FDI to host economies can never be overlooked by policymakers in their quest to formulate a policy driven. FDI aids the recipient economies through solving the savings deficiency problems, introduction of new technology, bridging revenue gap and addressing issues relating to management and many others. The study sought to investigate the determinants of FDI inflow into ECOWAS member countries using panel data from the time period of 1990-2017. The study specifically aimed to investigate the differential effect of external debt, political stability, trade openness and inflation on FDI flow to ECOWAS member countries in the long run and also to investigate whether the variables of concern jointly influence FDI into ECOWAS member countries in the long run. The countries of interest were Ghana, Togo, Nigeria, Niger, Cape Verde, Cote d’Ivoire, Senegal, Benin, Burkina Faso and Mali. The results based on panel Dynamic Ordinary Least Squares (PDOLS) show that trade openness and political stability have a positive and significant effect on FDI. Inflation and external debt do not have a significant effect on FDI inflows. Also, trade openness, political stability, inflation and external debt do not jointly influence FDI.

Do Technological Innovation and Financial Development Affect Inequality? Evidence from BRICS Countries

While technological innovation and financial development are broadly credited as important drivers of economic growth of developed nations, their impact on inequality (especially in emerging economies) remains understudied. Thus, the objective of this study is to investigate the impact of technological innovation and financial development on income inequality in BRICS (Brazil, Russia, India, China and South Africa) countries using panel dynamic ordinary least squares (PDOLS) and panel fully modified ordinary least squares (PFMOLS) with annual data sourced from the Standardized World Income Inequality Database, International Monetary Fund (IMF) and World Bank (1990–2017). The results suggest that technological innovation increases income inequality in the BRICS nations, while financial development has an income reducing effect on inequality. Our results are robust, using alternative estimation with various sub-indicators of financial development (such as financial markets and financial institution), including other measures proxied by access to credit provided by commercial banks. The study’s results have important implications for policy and practice in the BRICS countries. By providing a nuanced understanding of the relationship between technological innovation, financial development and inequality, the study will inform the design and implementation of policies aimed at reducing inequality and promoting inclusive growth in these emerging economies.

Skill versus inequality

This paper explores empirical evidence for a connection between income inequality and skill (advanced-level educated workers share) using panel data methods that take into account cross-section dependency and heterogeneity. To assess the income inequality associated with skill, we run a data set for 24 developed The Organisation for Economic Co-operation and Development (OECD) countries from 1995 to 2018. In order to determine the stationary characteristics of the variables, we employ the Cross-sectionally Augmented Im, Pesaran and Shin (CIPS) test approach. Following this, we employ Westerlund (2007), and Gengenbach, Urbain, and Westerlund (2016) Panel Cointegration tests, and then the Panel Dynamic Ordinary Least Squares (PDOLS) estimator. Our empirical test results conclude that there is a relationship between inequality and skill in the long run and the PDOLS estimator findings show that as the skill level in employment increases, inequality decreases. In addition, according to the findings, this negative relationship is more pronounced in the United States, whereas it is more moderate or not valid in European countries. The results obtained are primarily consistent with the framework presented by Daron Acemoglu (2002, 2003). And these findings constitute one of the main contributions of the study in terms of supporting Acemoglu's (2003) thesis that the skill premium is more pronounced in the United States.

Technological change and unemployment nexus from a gender perspective: empirical evidence from a panel cointegration approach

This study investigates the long-run relationship between technological change and unemployment, focusing on a gender perspective in developed economies. Considering the obstacles women face in accessing labor markets, this study aims to empirically combine the technological change and unemployment nexus with a gender perspective in 20 OECD economies from 1985 to 2019 by using multifactor productivity (MFP) as a proxy for technological change. The findings from Westerlund Panel Cointegration Test and Pedroni's Panel-Dynamic Ordinary Least-Squares (PDOLS) estimator indicate the presence of a long-run relationship between MFP and unemployment rate with diversified gender effects. Even though MFP affects total and male unemployment significantly and negatively in the long run, there is no significant effect on female unemployment for the whole panel. However, the findings by economies are diversified and they indicate the presence of technological unemployment for women in some economies. Thus, the empirical results clearly show that the long-run relationship between MFP and unemployment is affected by gender differences.

Evaluation of the environmental Kuznets curve hypothesis in a tourism development context: evidence for 15 Latin American countries

AbstractThe tourism sector is growing rapidly, and this has greatly stimulated economic growth around the world; however, the environmental degradation that this implies cannot be ignored. In order to achieve sustainable tourism, it is important to study the link between tourism and environmental quality. Therefore, the objective of this study was to investigate the relationship between tourism and CO2 emissions from 1995 to 2018 in a sample of 20 Latin American countries. Econometric techniques of cointegration and causality were used to evaluate the relationship between these variables. To test the consistency of cointegration vectors, the dynamic ordinary least squares (DOSL) model was applied for individual countries and the panel dynamic ordinary least squares (PDOLS) model for groups of countries. The results show that tourism revenues have a negative effect on the global panel and upper‐middle‐income countries (UMICs). This result is statistically significant. However, as tourism revenues increase, they start to have a positive and significant effect on CO2 emissions per capita, globally and in UMICs. These results, which are contrary to the theory, form a U shape, which does not support the ecological Kuznets curve.

Exploration of the Impact of China’s Outward Foreign Direct Investment (FDI) on Economic Growth in Asia and North Africa along the Belt and Road (B&R) Initiative

This empirical study has examined the impact of Chinese investments, namely infrastructure, energy, services, other investment sectors, and trade openness on the economies of the 25 Asian and North African countries along with the Belt and Road (B&R) Initiative for a period of 2007 to 2016 using the Johansen Fisher Panel Cointegration Test, Panel Dynamic Ordinary Least Squares (PDOLS) model, and the Toda and Yamamoto technique for testing causality. The findings revealed cointegration among the variables and that the impact of Chinese investments on economic growth in the host countries is positive, but it has a weaker effect, to a certain extent, in all sectors of the host countries while trade openness positively impacts the countries. Furthermore, there is evidence of a unidirectional causality between some FDI (foreign direct investment) economies while the investment in services and other sectors does not cause economic growth in the host countries. Based on the results, the paper proposes that the host countries increase the FDI in the sector of infrastructure, energy, and technology to enhance their economies.

Corporate Tax Planning and Financial Performance of Companies Listed in Colombo Stock Exchange (CSE)

This study focuses on how best performing listed companies in CSE make strategies in tax planning to reduce tax liabilities without violating rules and regulations imposed by the Tax Authority. In this study, the corporate tax planning was measured by using the Effective Tax Rate (ETR) and the financial performance was measured by using Return on Assets (ROA). The sample of the study was designed based on criteria namely, the largest and most liquid companies in the Sri Lankan equity market and the sample period was restricted for the period 10 years from 2009-2018. The sample represents seventeen (17) companies which are used to calculate the S&P SL 20 index. Data was collected through the published annual reports of CSE of the selected listed companies during the selected financial time period. Co-integration regression along with Panel Dynamic Ordinary Least Squares (DOLS) statistical technique was used to explore this study. Johansen co-integration test confirmed to run the panel DOLS. According to the result of that, corporate tax planning has a negative impact on the financial performance of Sri Lankan best-performing companies listed in CSE however, which is not statistically significant at 5% level. It provides evidence that there is no significant impact from corporate tax planning strategies to the financial performance of listed companies in CSE. This evidence implies that Sri Lankan firms do not utilize the loopholes embedded in the Sri Lankan tax law efficiently. Keywords: Corporate Tax Planning, Colombo Stock Exchange, Co-integration regression, Effective Tax Rate, Financial Performance, Panel Dynamic Ordinary Least Squares, Return on Assets.

Corporate Tax Planning and Financial Performance of Companies Listed in Colombo Stock Exchange (CSE)

This study focuses on how best-performing listed companies in CSE make strategies in tax planning to reduce tax liabilities without violating rules and regulations imposed by the Tax Authority. In this study, the corporate tax planning was measured by using the Effective Tax Rate (ETR) and the financial performance was measured by using Return on Assets (ROA). The sample of the study was designed based on criteria namely, the largest and most liquid companies in the Sri Lankan equity market and the sample period was restricted for the period 10 years from 2009-2018. The sample represents seventeen (17) companies which are used to calculate the S&P SL 20 index. Data was collected through the published annual reports of CSE of the selected listed companies during the selected financial time period. Co-integration regression along with Panel Dynamic Ordinary Least Squares (DOLS) statistical technique was used to explore this study. Johansen co-integration test was confirmed to run the panel DOLS. According to the result that, corporate tax planning has a negative impact on the financial performance of Sri Lankan best-performing companies listed in CSE however, which is not statistically significant at 5% level. It provides evidence that there is no significant impact from corporate tax planning strategies on the financial performance of listed companies in CSE. This evidence implies that Sri Lankan firms do not utilize the loopholes embedded in the Sri Lankan tax law efficiently. Keywords: Corporate Tax Planning, Colombo Stock Exchange, Co-integration regression, Effective Tax Rate, Financial Performance, Panel Dynamic Ordinary Least Squares, Return on Assets.

The relationship between foreign aid and corruption: a case of selected Asian countries

Purpose The purpose of this study is to examine the effect of foreign aid (FA) on corruption in selected Asian countries (Pakistan, India, Srilanka and Bangladesh) using the panel data from 2000 to 2014. Design/methodology/approach The author used Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests to check the stationary properties of the variables. The Pedroni’s and Kao panel cointegration approach was applied to analyze the variable’s long-run relationship. The author used panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) framework to estimate the coefficients of cointegrating vectors. Additionally, the panel granger causality test was performed to check the causal relationship between the variables. Findings The results from PDOLS and FMOLS indicate that FA has a significant negative impact on the level of corruption. This infers that the foreign assistance decrease the level of corruption perception index, hence, more corruption in the country. Originality/value Overall, the study fulfills the need to understand the aid-corruption nexus, particularly in the case of the Asian region.

Do Globalization and Institutional Reforms Matter for Financial Structure in Selected Asian Countries? A Panel Data Approach

Abstract This present study aims to examine the dynamic relationship between globalization, institutional reforms, and financial development in the context of South Asian economies over the period 1985–2015 by employing panel data methods. The Westerlund (2007) panel co-integration test result indicates that there exists a long-run equilibrium relationship between globalization, institutional reforms, and financial development. The findings of panel dynamic ordinary least squares (PDOLS) indicate that the effect of globalization is positive and statistically significant to financial development. Furthermore, the empirical evidence of a dynamic panel error-correction model reveals a unidirectional causal relationship running from globalization and institutional reform to financial development. In terms of policy recom-mendations, the study suggests that it is vital to focus on globalization and institutional reforms to promote effectiveness of the financial system and economic performance in the region. JEL Classifications: F19, G29 globalization, institutional reforms, South Asia, Panel Dynamic OLS (PDOLS), panel causality

Investigating the interlinkages between infrastructure development, poverty and rural–urban income inequality

PurposeThe purpose of this paper is to investigate the relationship between infrastructure development, rural–urban income inequality and poverty for BRICS economies.Design/methodology/approachPedroni’s panel co-integration test and panel dynamic ordinary least squares (PDOLS) have been used to carry out the analysis.FindingsThe empirical findings confirm a long-run relationship among infrastructure development, poverty and rural–urban inequality. The PDOLS results suggest that both infrastructure development and economic growth lead to poverty reduction in BRICS. However, rural–urban income inequality aggravates poverty in these nations. The paper advocates for adopting policies aimed at strengthening infrastructure and achieving economic growth to reduce the current levels of poverty prevailing in the BRICS nations.Originality/valueSignificant limitations exist in the literature in terms of not clearly defining the nature of relationship and interlinkages between infrastructure development, poverty and inequality, with regard to the BRICS nations. The available studies mainly focus on the relationship between infrastructure and growth, with the universal agreement being that these two are positively related. However, it is still not right to assume that economic growth attributable to infrastructure development will, therefore, subsequently lead to a reduction in inequality. This forms the basis for this study, that is, to critically examine the relationship between infrastructure development, inequality and poverty for BRICS nations.

An empirical relationship between financial development indicators and human capital in some selected Asian countries

PurposeThe purpose of this paper is to investigate the relationship between financial development indicators and human capital for Asian countries using the annual data from 1984-2013.Design/methodology/approachThe stationarity of the variables are checked by Levin-Lin-Chu, Im-Pesaran-Shin, Fisher-type augmented Dickey-Fuller and Philips-Perron panel unit-root tests. The Pedroni’s and Kao’s panel co-integration approaches are employed to examine the long-run relationship among the variables. To estimate the coefficients of co-integrating vectors, both panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) techniques are used. The short-term and long-run causality is examined by panel granger causality.FindingsThe Pedroni’s and Kao’s co-integration approaches support the existence of the long-run relationship among the indicators of financial development, economic growth and human capital. The PDOLS and FMOLS estimators revealed that both financial development indicators and economic growth variable act as an important driver for the increase in human capital. The results of panel granger causality indicate that causality runs from indicators of financial development, economic growth and public spending on education to human capital.Originality/valueThere is hardly any study that examine the impact of financial development indicators and economic growth on human capital in Asian economies, therefore the present study fill the research gap in the literature.

Foreign Aid and Economic Growth: Panel Cointegration Analysis for Cambodia, Lao PDR, Myanmar, and Vietnam

Given the paradoxical results of impact studies of foreign aid on economic growth in aid-growth literature, the effectiveness of aid for growth still remains a subject of intense debate. Thus, applying panel cointegration tests, and panel fully modified ordinary least squares (FMOLS) and panel dynamic ordinary least squares (DOLS) estimators, this paper estimates the magnitude of long run relationship between aid and economic growth in Cambodia, Lao PDR, Myanmar, and Vietnam using panel data from 1997 to 2014. The results of panel cointegration tests revealed that aid and economic growth cointegrate in a panel framework for the period of the study, indicating a robust long run relationship between the variables. Panel FMOLS and Panel DOLS estimation results revealed a positive impact of aid on economic growth. Thus, study concludes that foreign aid has a favorable effect on economic growth in the sample of four countries from ASEAN region.

Oil demand and price elasticity of energy consumption in the GCC countries: A panel co-integration analysis

This paper examines the cointegrating relationship between oil demand and price elasticity of energy consumption in the Gulf Co-operation Council (GCC) countries during the period 1980-2010. The paper has applied the recently developed panel cointegration techniques, Dynamic Ordinary Least Squares (DOLS) and panel DOLS in a panel of GCC countries. The region is being recognized as the major region of oil production and export in the global economy. In recent times, the region is emerging as a fastest growing oil consuming region globally. This fast increase in the level of oil consumption in the major oil exporting countries raises the energy security implications in the sphere of the growing oil demand in the world economy. This is likely to bring many pitfalls in the form of price distortions and reduced growth rates in and outside the oil export region. The empirical finding reveals a cointegrating relationship among the variables and indicates an income elastic and price inelastic demand for oil in the long-run in the GCC countries. The outcomes of income elastic and price inelastic demand for oil are also consistent in the short-run. The income and price inelastic demand for oil though exists for a full panel of countries but vary across the GCC countries. The result of the Granger Causality test also depicts a unidirectional causality running from income to oil consumption and bidirectional causality running between oil prices and income in the GCC countries. Moreover, the outcomes reveal that demand for oil varies positively with the growth of income and negatively with the price level in the economy.

Financial development, poverty and rural-urban income inequality: evidence from South Asian countries

This paper attempts to examine the relationship between financial development, rural–urban income inequality and poverty reduction in south Asian economies by using panel data from 1990 to 2013. The stationary properties of the variables are checked by LLC and IPS panel unit root tests. Pedroni’s panel co-integration test is used to examine the long run relationship and panel dynamic ordinary least squares (PDOLS) is employed to estimate the coefficients of co-integrating equation. The short term and long run causality is examined by panel Granger causality. Evidence confirms the existence of long-run equilibrium relationship among the variables. The results of PDOLS indicate that financial development and economic growth reduces poverty in south Asian countries, whereas rural–urban income inequality aggravates poverty. The empirical findings of panel Granger causality indicate the presence of short-run causality running from rural–urban income inequality and financial development to poverty reduction variable and from economic growth to inequality. The study recommends that policies geared towards increasing financial development and economic growth should be adopted in order to reduce the high level of poverty currently prevailing in south Asian economies.

The contribution of the yen appreciation since 2007 to the Japanese economic debacle

The Japanese yen in 2012 remained 25% above its value in 2007. Exports, industrial production, and stock prices crashed after 2007 and had yet to regain their pre-crash values five years later. This paper investigates the contribution of the yen appreciation to this economic disaster. Evidence from Johansen maximum likelihood and dynamic ordinary least squares (DOLS) estimation indicates that a 25% appreciation reduces long run exports by 8–18%. Panel DOLS evidence reveals that the appreciation especially depressed exports in the automobile sector. Regression evidence implies that the yen appreciation caused yen export prices to fall 29% in the automobile sector and 22% in the electrical and electronics sector. Finally, evidence from estimating exchange rate exposures indicates that the yen appreciation reduced stock prices significantly in the automobile and electronics sectors.

Estimating the impact of the financial development on energy consumption: Evidence from the GCC (Gulf Cooperation Council) countries

This study investigates the impact of the financial development on energy consumption in the GCC (Gulf Cooperation Council) countries. The panel data methodology was utilized taking the period 1980–2009. By using Pedroni cointegration test, it was found that LEC (energy consumption), the LFD (financial development), GDP (LGDP), LUR (urbanization) and LTD (total trade) are cointegrated. Furthermore, the panel dynamic OLS (ordinary least squares) revealed that LFD, LGDP, LUR and LTD have a long run positive effect on LEC. The Granger causality results show a bi-directional positive relationship between LEC and LGDP, LFD and LGDP, LTD and LGDP, LTD and LFD, LTD and LUR and between LTD and LTD. In addition, a one way positive causal relationship was found from LFD to LEC and from LUR to LEC. The study revealed that the financial development is one of the factors that increased energy consumption in the GCC in the short and the long run. From the findings of this study, a number of recommendations were formulated regarding the GCC policy makers to help reducing their energy consumption.