Panel Smooth Transition Regression Research Articles

Exploring The Role of High Government Debt on Economic Growth: A Nonlinearity and Threshold Analysis for Africa’s Developing Countries

Purpose: This paper empirically investigated the impact of high government debt on economic growth, using a panel data of 12 developing countries in Africa for the period between 1991 and 2020. Furthermore, it sought to find the existence of nonlinearity between government debt and economic growth. The study used a cross-country panel data approach estimated through the panel smooth transition regression to find the threshold effect. The results reveal a threshold of 60.5% of government debt on economic growth, suggesting an inverted U-shaped relationship between government debt and economic growth for the whole sample. After this threshold, additional government debt starts impeding economic growth. The estimated slope parameter of 18.11 supports the smoothness of government debt from a low regime to a high regime of debt. In the lower debt regime, government debt boosts economic growth; however as the level of debt growth surpasses the peak point, economic growth decreases. By implication, policymakers should have strict debt management policies in place to keep the level of government debt low, and be able to respond robustly to an economic shock. While resorting to borrowing to finance public spending, especially during economic crises, may be an imperative, it should be done in a circumspect manner so that the borrowings are kept at tolerable levels and reduced and/or repaid when there is a recovery in the economy.

Monetary policy uncertainty, monetary policy surprises and stock returns

We study the effects of monetary policy surprises on stock returns under low and high monetary policy uncertainty in the U.S. using the Panel Smooth Transition Regression (PSTR) model to identify the uncertainty regimes. Monetary policy surprises are unexpected changes in the Federal Funds Rate (FFR) on Federal Open Market Committee (FOMC) announcement days, where the mimicking portfolio method is used to obtain a regular time series with surprises since the announcements occur on an irregular basis. Using data for the period 1994–2008, we find a negative relationship between monetary policy surprises and stock returns under both uncertainty regimes but a less pronounced relationship between surprises and returns when uncertainty is low. Hence, it is more important to hedge against unexpected stock market volatility when the uncertainty in monetary policy is high compared to when uncertainty is low.

Environmental protection tax superseded pollution fees, does China effectively abate ecological footprints?

This paper constructs the ecological footprint accounts for 30 provinces in China, and explores the effects of environmental policies from the perspective of various ecological footprints. We innovatively focus on the impact which pollution fees superseded environmental protection tax on ecological footprints. The effects of these two environmental policies in China is compared with the panel smooth transition regression model (PSTR). In comparison with pollution fees, environmental protection tax has a stronger inhibition on ecological footprints. Pollution fees can lessen the cropland's ecological footprint, but this negative effect presents marginal diminishing. As for the ecological footprints of fishing grounds and fossil energy land, when pollution fees exceed 2.002 and 2.011 (‱ of GDP) respectively, there will be a restraining effect. Pollution fees has no effect on reducing the ecological footprints of grazing land, forest land, infrastructure, and the total. The environmental protection tax has a negative impact of linearity on the ecological footprints of fishing grounds and forest land. When environmental protection tax exceeds the corresponding thresholds (1.226, 3.482, 1.867 and 3.083), it will decrease the ecological footprints of grazing land, infrastructure, fossil energy land, and the total. The negative effect of environmental protection tax on cropland's ecological footprint is not obvious. Further, the change charts of influence coefficient on ecological footprints are drawn to directly reflect the optimal tax range for environmental protection tax to diminish ecological footprints. The heterogeneity analysis reveal that the current environmental protection tax only inhibits the total ecological footprint of eight provinces, mostly in northern China. These conclusions have reference significance for the government to adjust the appropriate environmental protection tax rate.

The nexus between green finance and CO2 emissions in China: New evidence from a panel smooth transition regression

The nexus between green finance and CO2 emissions in China: New evidence from a panel smooth transition regression

Nonlinear Relationship between Financial Development and CO2 Emissions—Based on a PSTR Model

The contradiction between financial development and environmental pollution has become increasingly prominent with economic development. The discovery of the link between financial development and carbon dioxide emissions will aid in the development of solutions to this problem. This paper uses a panel smooth transition regression (PSTR) model to examine the impact of financial development on carbon dioxide emissions using panel data from 28 Chinese provinces from 2005 to 2021. The PSTR model can solve the problem of minimizing potential outliers ignored in the previous literature, while taking into account the endogeneity and heterogeneity of the model and obtaining more reliable results. According to the findings, financial development has a nonlinear effect on carbon dioxide emissions. Furthermore, the positive effect of financial development on carbon dioxide emissions occurs via the scale and structural effects, while the negative effect occurs via the technological effect, which takes up more space. Moreover, financial added value and the financial scale demonstrate a smooth transition, while financial efficiency and foreign direct investment demonstrate a positive influence.

Corruption, imported innovation, and growth: Evidence using the panel smooth transition regression approach for developing countries

AbstractThis article investigates the nonlinear relationship between corruption, imported innovation (imports of high technology), and economic growth in developing countries from 2009 to 2018. We used a sample of 38 countries divided into two subsamples. The first covers 21 African countries, and the second covers 17 non‐African countries. The empirical results from the panel smooth transition regression model indicate that there is a threshold effect in the two relationships: corruption–imported innovation and corruption–growth. Specifically, we found that corruption exerts a significant effect only for non‐African countries. However, no significant effect was found for the whole sample and African countries. Furthermore, we found that below certain thresholds, corruption significantly decreases the level of growth for both the whole sample and the two subsamples. Above these thresholds, the effect of corruption becomes positive and significant.

Investigating the Role of Green Innovation in Economic Growth and Carbon Emissions Nexus for China: New Evidence Based on the PSTR Model

In the context of climate change and high-quality economic growth, the penetration of green innovation is crucial for attaining sustainable economic development. However, the economic growth and carbon emissions nexus has not been fully investigated from the green innovation perspective. Using green innovation as the transition variable, this research employs the panel smooth transition regression model to examine the influence of economic growth on carbon emissions in 30 Chinese provinces over the period 2000–2019. The empirical results indicate that economic growth and carbon emissions have a substantially nonlinear nexus. The promoting influence of economic growth on carbon emissions is offset and even transformed into an inhibiting effect as green innovation degree rises; that is, green innovation alters the economic growth and carbon emissions nexus and plays a considerable part in carbon reduction for China. Additionally, the temporal variations analysis indicates that the positive nexus economic growth effect exerted on carbon emissions decreases gradually as time goes on. In terms of spatial variations, economic growth in the eastern area with higher levels of green innovation exerts the least positive impacts on carbon emissions. The research findings indicate that it is crucial for the Chinese government to lay down effective environmental protection policies to stimulate the enthusiasm of green innovation for social entities.

The non-linear and interactive effects of meteorological factors on the transmission of COVID-19: A panel smooth transition regression model for cities across the globe

The ongoing pandemic created by COVID-19 has co-existed with humans for some time now, thus resulting in unprecedented disease burden. Previous studies have demonstrated the non-linear and single effects of meteorological factors on viral transmission and have a question of how to exclude the influence of unrelated confounding factors on the relationship. However, the interactions involved in such relationships remain unclear under complex weather conditions. Here, we used a panel smooth transition regression (PSTR) model to investigate the non-linear interactive impact of meteorological factors on daily new cases of COVID-19 based on a panel dataset of 58 global cities observed between Jul 1, 2020 and Jan 13, 2022. This new approach offers a possibility of assessing interactive effects of meteorological factors on daily new cases and uses fixed effects to control other unrelated confounding factors in a panel of cities. Our findings revealed that an optimal temperature range (0°C–20 °C) for the spread of COVID-19. The effect of RH (relative humidity) and DTR (diurnal temperature range) on infection became less positive (coefficient: 0.0427 to −0.0142; p < 0.05) and negative (coefficient: −0.0496 to −0.0248; p < 0.05) with increasing average temperature(T). The highest risk of infection occurred when the temperature was −10 °C and RH was >80% or when the temperature was 10 °C and DTR was 1 °C. Our findings highlight useful implications for policymakers and the general public.

The relationship between decentralization and economic growth across regimes

Panel smooth transition regression (PSTR) is applied to obtain thresholds in certain variables to classify the regions into regimes (high or low). Data for the regions of Spain over the period 1986–2010 are used. In general, the results point to a positive (negative) relationship between fiscal (administrative) decentralization and economic growth in regions with low public infrastructure stock per efficient worker and high human capital per worker. In addition, in regions with low (high) total factor productivity, expenditure (revenue) decentralization is positively (negatively) correlated with economic growth. The results are fairly robust to different specifications and estimation methods.

Household indebtedness, financial frictions and the transmission of monetary policy to consumption: Evidence from China

This paper studies the impact of household indebtedness on the transmission of monetary policy to consumption using the Chinese household-level survey data. We employ a panel smooth transition regression model to investigate the non-linear role of indebtedness. We find that housing-related indebtedness weakens the monetary policy transmission, and this effect is non-linear as there is a much larger counteraction of consumption in response to monetary policy shocks when household indebtedness increases from a low level rather than from a high level. Moreover, the weakened monetary policy transmission from indebtedness is stronger in urban households than in rural households. This can be explained by the investment good characteristic of real estate in China.

Does globalization change the renewable energy consumption and CO2 emissions nexus for OECD countries? New evidence based on the nonlinear PSTR model

Renewable energy is preferred by most countries due to its clean and sustainable characteristic especially under the background of rapid rise in carbon emissions. However, the carbon reduction effect of renewable energy has not been thoroughly investigated in the context of rapid globalization. The panel smooth transition regression (PSTR) model is utilized in this study because it allows for smooth changes of the nexus when studying the dynamic linkage of the variables. Using globalization as the transition variable, this paper employs the PSTR model to investigate the effects of renewable energy consumption (REC) on CO2 emissions in 33 OECD countries for the period between 2000 and 2018. The empirical results demonstrate the existence of a strongly nonlinear relationship between REC and CO2 emissions. Although the renewable energy is always beneficial to carbon reduction, the carbon reduction effect of renewable energy becomes stronger as globalization level increases, that is globalization changes the REC and CO2 emissions nexus for OECD countries. Also, the individual country analysis indicates that the carbon reduction effects are more significant for the countries possessing less fossil energy and more advanced technologies. Our study emphasizes the effectiveness of globalization in encouraging the development of renewable energy and improving environmental quality. Based on this study, the significance of the global cooperation in renewables market and reducing CO2 emissions should be attached for policymakers.

Threshold Effect of Environmental Regulation on Eco-Friendly Productivity: Empirical Evidence From China

This paper identifies the existence of a significant nonlinear relationship between environmental regulation (ER) and eco-friendly efficiency (EFE) adopting the panel smooth transition regression model. It is interesting to find that ER has temporarily inhibited EFE growth in China. An initial downward trend is reversed and shows upward improvement from a distinct point, creating a V-shaped trend.

Revisiting the Environmental Kuznets Curve hypothesis in OECD during 1970–2016: Panel smooth transition regression

The examination of the Environmental Kuznets Curve (EKC) hypothesis is revisited in the OECD countries during 1970–2016. This paper focuses on some OECD countries with a high economic level and a high concentration of air pollution monitoring. In this examination, we propose a Panel smooth transition kink regression (PSTKR) model to examine the inverted U-shaped nexus between economic development and air quality and define the turning point of this relationship. This model allows the slope of the independent variable to be changed after the kink point, leading us to capture the nonlinear relationship between the dependent and independent variables. This study uses the GDP per capita and Sulfur dioxide emissions as economic and development indicators, respectively. Our finding reveals the existence of the EKC hypothesis in the OECD countries. Furthermore, we find the heterogeneous impacts of economic growth on air quality. There is evidence of the positive effects of economic growth on air pollution when the GDP per capita is less than 26,338.84 USD, while it turns out to be harmful when the GDP per capita is more than 26,338.84 USD. In sum, our model confirms the presence of EKC in the OECD countries.

Nonlinear relationship between financial inclusion and inclusive economic development in developed economies: evidence from panel smooth transition regression model

PurposeThe purpose of this study is to investigate the nonlinear association between financial inclusion and inclusive economic growth (IEG) in developed economies. A Block of G7 countries (Germany, Japan, Canada, France, Italy, the UK and the US) are considered in this study.Design/methodology/approachFor analysis, the authors have employed the “Panel Smooth Transition Regression model.” Annual data consists of the period from 1995 to 2019.FindingsThis research makes a unique contribution to literature with reference to G7 countries, being a pioneering attempt to apply the panel threshold regression model to analyze the relationship between financial inclusion and IEG by applying more rigorous and advanced econometric techniques.Originality/valueThe results indicate that total labor force available in a country, gross fixed capital formation and financial inclusion are positive and significant in lower regimes, but as it moves toward the higher regime, the labor force available in a country becomes less impactful. However, an increase has been observed in financial inclusion in the higher regime. The complete sample generally exhibits a positive yet significant relationship between financial inclusion and inclusive economic development.

Nonlinear Effect of Urbanization on the Gap between Urban and Rural Elementary Education in China

The urban-rural gap of elementary education seriously affects social fairness, so the study on the urban-rural gap of elementary education can help promote social fairness in China. China’s urbanization is an important variable affecting the social process, and its impact on the urban-rural gap of elementary education is worthy of further study. Based on China’s provincial panel data from 2006 to 2017, this paper uses the Theil index to measure the urban-rural gap in different aspects of elementary education and uses principal component analysis (PCA) to construct a comprehensive index to objectively measure the urban-rural gap of overall elementary education in China. Our results show that the gap between urban and rural areas in China’s elementary education showed an upward trend from 2006 to 2010, and the gap decreased year by year from 2010 to 2017. Then we used the panel smooth transition regression (PSTR) model to study the impact of urbanization on the urban-rural gap of elementary education in China and find evidence that urbanization has a nonlinear effect on the urban-rural gap of elementary education. That is, in economically underdeveloped areas, urbanization exacerbates the gap between urban and rural areas in elementary education, while in economically developed areas, urbanization narrows the gap between urban and rural areas in elementary education. Therefore, developing economy and continuing to promote urbanization are effective measures to narrow the gap between urban and rural areas in elementary education.

Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Artificial intelligence and unemployment:An international evidence

This paper examines the possible effect of artificial intelligence (AI) on unemployment using a broad database of AI-related patents in 40 developed and developing markets from 2000 to 2019. The study employs a panel smooth transition regression (PSTR) model to analyse the relationship between artificial intelligence and unemployment under various inflation levels. The study contributes to the existing literature with several findings. First, results from our analysis confirm the non-linear relationship between artificial intelligence and unemployment depending on the threshold of inflation. In general, artificial intelligence increases unemployment until a certain inflation threshold is attained, and then the effect reduces afterwards. Second, the smooth mechanism employed in this analysis can capture individual estimates varying amongst countries over time.

External debt and economic growth in Sub-Saharan Africa: does heterogeneity in the quality of public sector management make a difference?

This study empirically examines the effect of external debt on economic growth, taking into account heterogeneity in public sector management (PSM) across 31 selected sub-Sahara African (SSA) countries spanning 2005 to 2017. In this study, we contributed to existing studies by examining how differences in PSM quality complement external debt to influence economic growth. We employ the system-generalized method of moment (system-GMM) and the panel smooth transition regression (PSTR) methods for the analysis. The results without differences in PSM quality show that external debt has a significant negative effect on economic growth in SSA. However, the effect of external debt on economic growth tends to be positive for SSA countries with strong PSM quality when external debt interacts with PSM quality. Furthermore, the results show that countries with strong PSM quality experienced higher economic growth than those with weak PSM quality. The PSTR also showed strong evidence of a nonlinear relationship between external debt and economic growth and estimated the indebtedness threshold value at 45% for the selected SSA countries. The implication of the findings calls for governments in SSA to strengthen the quality of public sector management via structural reforms aimed at public sector reform, tax reforms and strengthening debt management capacity to ensure positive growth effects of external debt.

Regional differences and threshold effect of clean technology innovation on industrial green total factor productivity

Guiding technological progress towards clean innovations is crucial to industrial green transformation. This paper explains how clean technology innovation affects industrial green total factor productivity, using Tobit and panel smooth transition regression (PSTR) models to empirically test the relationship between clean technology innovation and industrial green total factor productivity. This research shows that clean technology innovation has a significantly positive effect on industrial green total factor productivity. The magnitude of this effect is different in various regions. When the intensity of environmental regulation reaches a particular threshold value in the central and western regions, clean technology innovation can significantly promote industrial green total factor productivity. In the eastern region, however, strict environmental regulation inhibits the promotion effect of clean technology innovation on industrial green total factor productivity. The corresponding research conclusion provide theoretical support and empirical evidence for exploring the way of industrial green transformation.

Green Total Factor Productivity Growth: Policy-Guided or Market-Driven?

The green growth mode of modern economy is affected by both policy and market, but previous studies have lacked a comparison between the two effects on green economy development. Which is the leading factor of green growth: policy or market? Using the Panel Smooth Transition Regression (PSTR) model and the twelve-year data of more than 200 prefecture-level cities in China, we compared and analyzed the linear and non-linear effects of environmental regulation and marketization degree on green total factor productivity (GTFP). The results show that: (1) both environmental regulation and marketization degree have a non-linear promoting effect on GTFP. (2) GTFP is mainly market-driven rather than policy-guided. (3) Environmental regulation and marketization promote the improvement of GTFP through the industrial upgrading effect and the innovation development effect, respectively. This paper makes up for the comparative analysis gap of factors in the field of green growth and extends from the single determination of influencing factors to the importance of the comparison of influencing factors with the transition perspective. The conclusions provide a reference for the green development of countries and regions, emphasizing the importance of green development policies adapting to local conditions and time and providing evidence for market-oriented green economy development.