Panel GMM Research Articles

Indirect impact of public expenditures and inflation on energy poverty: empirical evidence from 32 developing countries

ABSTRACT Energy poverty (EP) is an important barrier to environmental sustainability, and many studies have addressed its causes and linkages with various macroeconomic variables. However, there has been insufficient analysis of the indirect effects of public expenditures and inflation on EP, particularly through income. This study analyses the effects of public expenditures and inflation on EP for 32 developing countries using Panel GMM and 3SLS methods. The findings indicate that public expenditures are an important public policy instrument in combating EP. Conversely, the study reveals that inflation negatively affects energy poverty. Moreover, the study concludes that there is a U-shaped relationship between inflation and income inequality and that a decline in inflation over time will positively affect EP through income inequality.

Energy consumption, technological innovation, and economic growth in BRICS: A GMM panel VAR framework analysis

The growing interdependence between environmental resources, financial development, technological advancements, and energy consumption poses significant challenges for sustainable growth in emerging economies. This study investigates these dynamics in the BRICS nations (Brazil, Russia, India, China, and South Africa) from 1990 to 2023 using the GMM panel VAR framework, with the aim of understanding how these factors interact and shape economic outcomes. The analysis shows that environmental rents positively impact financial growth, countering the traditional "resource curse" belief. Technological innovation is negatively linked to both economic growth and environmental sustainability, while energy consumption is positively correlated with economic growth and exhibits a weak correlation with the environment. Furthermore, primary energy consumption is strongly connected to resource utilization and financial growth, although technological advancements negatively affect this relationship. Causality tests reveal mutual influences between energy consumption and technological innovation, alongside unidirectional effects of natural resources on financial and technological growth. Policy implications underscore the need for BRICS nations to balance resource management and technological progress to foster sustainable economic and environmental development.

Governance, institutional quality and economic complexity in selected African countries

AbstractNew economic thinking speculates that the diversification and sophistication of economic capabilities/structures is key in explaining why African countries lag in development behind the rest of the world. We question the extent to which non-traditional growth factors such as governance and institutional quality are related to economic complexity for 35 African countries. We estimate panel GMM regressions using 8 different measures of governance/institutional quality for both linear and kinked regressions using annual data collected between 1996 and 2021. The baseline estimates reveal a positive linear relationship between most measures of governance and institutional quality and economic complexity. Our sensitivity analysis further show that institutions/governance have stronger relationship with economic complexity in the post-global financial crisis era. Moreover, nonlinear or kinked relationships emerge once the data is segregated into different income and resource abundant groups. Altogether, our findings of a nonlinear relationship between institutions/governance and economic complexity are novel to the literature and offer unique insights on how African policymakers can use governance/institutions for improving the complexity of production processes.

Economic growth, income inequality and lethal violence in developed countries

PurposeThe paper aims to investigate the effect of GDP growth on crime and to test the hypothesis of nonlinearity. Additionally, we estimate the interaction between GDP and income inequality and examine its impact on the relationship between GDP and homicide rates.Design/methodology/approachThe study utilizes panel data from the Organization for Economic Cooperation and Development (OECD), spanning the period from 2000 to 2018 and estimates dynamic panel GMM models.FindingsWe found a nonlinear relationship between GDP and homicide rates, indicating a dual effect of GDP on the occurrence of lethal crimes. Moreover, income inequality conditions the effect of GDP on homicide rates, exerting a significant influence. We conclude that in contexts characterized by high levels of income inequality, GDP growth is more effective in reducing crime, as there is greater potential for improvement.Originality/valueThis paper contributes to the existing literature by providing insights into the complex nonlinearity between economic conditions, income inequality and homicide rates.

China’s foreign direct investment: driving green growth or seeking pollution havens? Based on the perspective of green total factor productivity

China has significantly increased its foreign direct investment (FDI). Although these investments help to boost global development, their impacts on the environment are still controversial and deserve careful investigation. This paper uses the super-efficiency SBM model to measure the green total factor productivity (GTFP) of 123 host countries of China’s FDI. On this basis, we adopt the two-step system GMM and dynamic panel threshold effect model to analyze the impact of China’s FDI on the GTFP of host countries. The research results show that: 1) The impact of China’s FDI on the GTFP of host countries is mainly through green technology efficiency. Its impact is inhibitory, followed by a promotional one, with the latter being significantly larger than the former. 2) There is no evidence of the “pollution haven effect” associated with China’s FDI. In fact, for countries with lower environmental regulations, China’s FDI promotes the growth of GTFP more effectively. 3) The innovation level of host countries moderates the relationship between China’s FDI and GTFP growth. For host countries with stronger innovation level, their GTFP growth can be enhanced to a greater extent by China’s FDI.

An Investigation on the Effectiveness and Trade Direction of ASEAN Trade Agreements

This study aims to evaluate the effectiveness of the ASEAN regional trade agreement by comparing the growth rates of intra-ASEAN trade with those of the rest of the world as well as with major trading countries, China, the USA, the EU, and India. The objective of this research is threefold: To identify existing trade trends, to determine the underlying explanations for these trends, and finally, to compare intra-ASEAN trade trends with the inter-ASEAN countries’ trade trends. This paper takes a descriptive approach and dynamic panel GMM methods spanning the years 1990 to 2019. Between 2005 and 2019, growth rates among members of intra-ASEAN, Indonesia-Malaysia, Indonesia-Thailand, Singapore-Thailand, Malaysia-Philippines, and Philippines-Thailand, all decreased. Additionally, although the market share of imports and exports within ASEAN has decreased over time, the market share of imports and exports of inter-ASEAN has increased, especially with China and India. The results of descriptive analysis of inter-ASEAN trade openness are supported by first-differenced GMM and system GMM. This is the first study to examine historical intra-ASEAN trade trends and growth and compare them to inter-ASEAN trade trends and growth to determine whether AFTA has a greater impact on intra-ASEAN trade growth than on inter-ASEAN trade growth using updated aggregated data. This study sheds light on the fact that over the periods intra-ASEAN trade could not outperform inter-ASEAN trade by a significant margin due to trade diversity challenges and incomplete implementation of WTO regulations.

Input costs’ pass-through to output prices: a cross-country empirical analysis

ABSTRACT This article decodes the pass-through behaviour from input prices to output prices, which is a key component in assessing second-order effects of cost-push pressures. Using panel GMM model, this paper has tried to empirically test the degree of pass-through of Purchasing Managers Index (PMI) input prices to output prices in a cross-country framework for 28 countries for the period 2011–2023. Empirical results support modest pass through with the sensitivity of output prices to input prices being lower for advanced nations and inflation targeting countries and higher for manufacturing sector with signs of non-linearity.

Role of investor attention and executive green awareness on environmental information disclosure of Chinese high-tech listed companies

Against the backdrop of growing public concern about environmental disclosure, and despite this concern, the level of environmental disclosure by high-tech firms remains low, necessitating a heightened emphasis on corporate environmental disclosure. This study delves into the impact of investor attention on the environmental information disclosure of Chinese high-tech firms, analyzing data from 463 firms between 2011 and 2022. Utilizing dynamic panel GMM, our findings highlight a significant negative correlation between investor attention and environmental information disclosure. We also introduced executive green awareness, exploring their moderating role. The results show that improved executive green awareness mitigates the adverse impact of investor attention on environmental information disclosure. However, heterogeneity analysis revealed that this moderating effect does not exist in IT service and non-polluting high-tech enterprises. This research offers policy implications for enhancing transparency and environmental governance through targeted investor engagement and executive training programs. The findings underscore the importance of a comprehensive regulatory framework tailored to sector-specific challenges in high-tech industry.

Unveiling the Catalytic Role of Digital Trade in China’s Carbon Emission Reduction under the Dual Carbon Policy

Digital trade (DT), a key component of today’s digital economy, is pivotal in attaining “carbon neutrality and carbon peaking”, essential for low-carbon and high-quality growth. This study delves into the intermediary role of carbon emissions (CE) reduction in DT, analyzing both production and consumption angles, and examines the moderating influences of CE in DT through industrial agglomeration and low-carbon pilot policy. The research employs spatial panel and system GMM models for an empirical investigation. On the production side, the scale and technological effects on CE outweigh the structural impact on emissions. In terms of consumption, the mediating role of urban residents’ consumption upgrading is to enhance the effect of DT on reducing CE by promoting consumption upgrading, whereas the mediating role of rural residents’ consumption upgrading is to promote consumption upgrading but weaken the effect of DT on reducing CE. Regarding regulatory influences, the factor of industrial agglomeration tends to diminish the impact of DT on reducing CE; thus, industrial agglomeration does not amplify the reduction effect of DT on CE. Low-carbon pilot policy(pol)s can enhance the CE reduction effect of DT, showing stronger CE reduction effects in provinces participating in low-carbon pilot programs.

Financial Development, Financial Openness, and Policy Effectiveness

This study explores how financial development and openness influence the effectiveness of fiscal and monetary policies. An analysis of data from about 100 countries between 1980 and 2018 reveals that both financial openness and development weaken the impact of monetary and fiscal policies. Our results further show that financial development in a country diminishes policy effectiveness depending on the country’s level of financial development; specifically, the more developed a country, the less effective the policies would be. Additionally, through a detailed examination employing a dynamic panel GMM approach, the study investigates the global repercussions of economic downturns in the US and how financial maturity shapes policy effectiveness during these times. We also discuss some policy implications that show that the positive impacts of monetary policy on output growth are lessened during crisis periods, and policymakers should act accordingly.

Research on Green Process Innovation Enabling the Synergistic Effect of Pollution Reduction and Carbon Reduction

Achieving the objective of "peak carbon dioxide emissions and carbon neutrality" in the new stage of development will require the synergistic effect of pollution reduction and carbon reduction. In the new stage of development, achieving the goal of "peak carbon dioxide emissions and carbon neutrality" will necessitate the synergistic effect of pollution reduction and carbon reduction. This study assesses the degree to which pollution reduction and carbon reduction have a synergistic effect using the coupling coordination model, and uses the fixed effect model, the dynamic panel GMM model, the OLS model and the threshold effect model to examine how green process innovation affects pollutant reduction and carbon reduction synergistically, including direct, heterogeneous, and nonlinear effects. The results show that: firstly, green process innovation has a direct promoting effect on synergistic effect of pollution reduction and carbon reduction; Secondly, due to the differences in the economic development of different regions in China, the impact of green process innovation on the synergistic effect of pollution reduction and carbon reduction is heterogeneous in different regions, and presents a gradient distribution of "east > west > middle". Finally, there is a threshold effect in the impact of green process innovation on regional synergistic effect of pollution reduction and carbon reduction. This paper provides some reference value for promoting green process innovation and enhancing the collaborative impact of mitigating pollution and decreasing carbon emissions.

Corporate Internationalization and Uncertainty of Cash Holdings: Evidence from an Emerging Market

Abstract Purpose – The purpose of this study is to investigate the empirical relationship between corporate internationalization and uncertainty of cash holding in non-financial listed companies of Pakistan. Secondly, the effect of cash flow, size of firm and capital expenditure on uncertainty of cash is also explored. Design/Methodology/Approach - A panel data of 100 companies over the period starting from 2011 to 2018 is collected from the published annual reports. Data is analyzed using pooled and panel OLS regression. For robustness of results dynamic GMM is used. Findings - The estimated results show a significant negative relationship between corporate internationalization and uncertainty of cash holdings. Moreover, large size firms tend to represents a relatively more stable cash balance as compared to small size firms. Practical Implications - The study concludes that firms engage in international operations are in better position to access external capital market and are able to stabilize their liquidity. Originality/Value – This study uses 3 years standard deviation of cash instead of conventionally used absolute change in cash balance to measure uncertainty of cash. This study is among the first studies to examine such sort of relationships in an emerging economy. Further, for robustness of results dynamic panel GMM is applied.

Analyzing Macroeconomic Indicators that May Affect Economic Growth in Sub-Saharan African Countries: A Panel Data Analysis in the Context of Income Level Classification (1990-2019)

The purpose of the study was to ascertain whether the export-import coverage ratio (EXIM), the income of natural resources (NATR), labour force participation rate (LFPR), and foreign direct investment (FDI) had a positive or negative impact on economic growth for 34 Sub-Saharan African countries using data from 1990 to 2019. The change in Gross Domestic Product Per Capita (%) is used in the study as a proxy for the economic growth variable, and Sub-Saharan African nations were categorized based on the United Nations' income classification system to create more homogeneous groups and consequently more accurate analysis results. To do this, 34 Sub-Saharan African nations were divided into three income categories: lower-middle-income, upper-middle-income, and low-income. The income categories established by the UN were considered while drawing this distinction. This divide led to the analysis of 18 low-income nations, 12 lower-middle-income countries, and 4 upper-middle-income countries. One of the dynamic panel data analysis techniques, the two-step system GMM panel data analysis, was used as the econometric analysis approach. According to the estimations, FDI in lower-middle-income sub-Saharan African countries was statistically significant and inversely related to economic growth; it was observed that the coverage ratio of exports to imports has a statistically significant and linear relationship. None of these independent variables were found to influence economic growth in low-income sub-Saharan African countries. There is a statistically significant correlation between the LFPR and NATR and economic development in the upper-middle income category of nations analyzed. As a result, the influence of factors varied and fluctuated on economic growth based on the income levels of different groups.

Fiscal policy and inequality in middle- and high-income countries: redistributive effects of tax and spending shocks

Abstract Motivated by the sharp increases in public spending following the global financial crisis, we employ the GMM Panel VAR approach at annual frequency between 2004 and 2014 to investigate the dynamic response of alternative income distribution variables to shocks imposed on tax revenues and three key components of social expenditures: social protection, health, and education. We confirm the potential of fiscal policy to reduce income inequality in the medium to longer run, but point to the differential approaches to pursue such a goal in middle- versus high-income countries. We find that the particular expenditure component under consideration matters in terms of the dynamic effect on inequality and on different parts of the income distribution, as well as in terms of the implied time profile. In middle-income countries, positive education spending shocks are the most effective in achieving better distributional outcomes over a medium run of several years. By contrast, in high-income countries, positive health spending and tax shocks have a more pronounced favorable dynamic distributional effect.

Does the board of directors influence Shariah governance in Islamic banks?

This paper examines whether and how the board of directors influences Shariah board governance in Islamic banks. We use data from 54 Islamic banks from 10 countries where Islamic banks are systemically important from 2003 to 2019. The results show that the board of directors positively impacted Shariah governance. Our findings remain robust after using the dynamic panel GMM estimator and propensity score matching techniques as alternative estimation methods. We further document that the impact of the board of directors on Shariah board governance is more pronounced in large banks, publicly traded banks, and countries with better national governance.

Moderating effect of capital structure on the relationship between corporate governance mechanisms and firm value: Evidence from India

While corporate misconducts highlight the need for effective corporate governance mechanisms, the degree to which such mechanisms impact firm value is unsettled in literature. We argue that board-centered mechanisms may appear impeded in isolation, as firm capital structure moderates the relationship between corporate governance mechanisms and firm value. We employ fixed effect panel models and GMM estimations on a sample of 306 non-financial Indian firms for 2013–2022 to uncover the standalone effects of capital structure and corporate governance mechanisms, along with their interaction effects, on firm value. Findings identify direct as well as moderating impacts of leverage on firm value for high-levered firms and large board size firms. However, for low-levered firms we find a direct but not moderating impact of leverage. There is no impact of leverage for small board size firms.

How Does Renewable Energy Respond to Financial Globalization and Information and Communications Technology Trade?

Policymakers are looking at renewable energy as a substitute for traditional fossil fuels due to the growing concern about climate change and sustainable development. However, in the case of Asian countries, nothing is known about how ICT trade and financial globalization affect renewable energy consumption. To fill this gap, we have gathered data across 24 Asian economies, and a dynamic panel data approach known as GMM panel VAR is applied. The key outcomes of the GMM panel VAR underscore that ICT trade, financial globalization, and GDP favorably impact the current renewable energy consumption. Furthermore, the panel causality results indicate bidirectional causality between ICT trade, financial globalization, and renewable energy consumption. These findings have policy-relevant implications, highlighting the significance of financial liberalization and ICT-enabled trade in promoting renewable energy usage in Asian nations.

Does deforestation endanger energy security? A panel GMM evidence from 47 sub-Saharan African countries

Does deforestation endanger energy security? A panel GMM evidence from 47 sub-Saharan African countries

International emigration and economic complexity: Evidence from the dynamic GMM panel VAR approach

For over a decade, developing nations have used foreign direct investment and trade to access advanced economies’ technology and knowledge. However, the role of emigrants in promoting the productive capacity of their home countries through the diffusion of knowledge and novel technologies has been relatively overlooked. The present study investigated the relationship between emigration stock and productive knowledge embedded in their origin economy, as measured by the Economic Complexity Index (ECI). The study applied a GMM Panel Vector Autoregressive (PVAR) technique to 86 non-high-income countries between 1995 and 2020. In principle, the PVAR model findings indicated that international emigrants promoted the level of technology and knowledge in their home countries. Further causality analyses revealed that within all countries, there was unidirectional causality from emigration to the ECI. However, a bidirectional relationship existed between the two variables in countries with low education levels. Developing countries should consider the opportunities emigrants offer when planning their development strategies.

Credit risk and bank specific factors: an empirical study using panel GMM

Credit risk and bank specific factors: an empirical study using panel GMM