Panel Vector Error Correction Research Articles

The Contribution of Green, Blue, and Energy Sources to Economic Development in Central Asia

Central Asia (CA) is a young integrated region formed after the collapse of the Soviet Union, with most of its infrastructure based on fossil fuels. The traditional energy and water infrastructure is facing huge inefficiency and technical losses. This study investigates the transition of the green, blue, and energy economies in Central Asia using a small-dimensional panel dataset on five countries, Uzbekistan, Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan, over the period 1995–2018. The authors analyze the impact of ecological footprint, water withdrawal, and energy consumption on gross domestic product. In applying the Panel Vector Error Correction Model, evidence was found supporting the long-running association between variables. Furthermore, the adjustment coefficients suggest that only GDP growth will adjust toward equilibrium. Overall, the findings suggest a more effective role of green transition compared to blue and energy transitions.

Does Political Stability Matter to the Profitability of Banks?

This study examines the impact of net interest margin, non-interest income, non-performing loans, and Political Stability Index on the banks’ profitability regarding return on assets in developing Asian countries, focusing on how political stability affects the bank’s profitability. The secondary data from 14 developing countries used in this study are collected from the World Bank and World Financial Studies Report. The dataset includes 154 data points spanning from 2012 to 2022, focusing on 14 underdeveloped countries of Asia. Exploratory and analytical research designs are utilized. Data are analyzed by using EViews 12. Econometric tools such as descriptive statistics, correlation analysis, panel unit root testing, Fisher-Johnsen combined co-integration test, panel vector error correction model, and Wald test investigate the relationship between response and predictor variables. The net interest margin, non-interest income, non-performing loan, and Political Stability Index are jointly integrated to determine the bank’s profit of developing countries of the Asia continent. Interest margin, non-interest revenue, non-performing loans, and the Political Stability Index all show a 38.6 percent variance in bank profit. It has been discovered that for every unit that rises in net interest margin and Political Stability Index, the bank profitability of developing Asian countries increases by 0.4867 and 0.2221 percent, respectively. Non-interest income has little bearing on the profitability of banks. Meanwhile, non-interest income exhibits minimal influence, suggesting a need for a strategic focus on interest margin enhancement and fostering political stability to optimize banking sector profitability in the region.

Credit risk and Tunisian bank stability in the Covid-19 wave

<p style="text-align:justify"><span style="font-size:16px"><span style="font-family:Times New Roman,Times,serif"><span dir="ltr" lang="EN-US"><span style="color:black">Banks are at the core of economic functioning in various countries and are the cause of their development in various fields. In a changing environment, they must deal with certain risks and maintain financial stability as the ultimate objective. The primary objective of this study is to examine the correlation between credit risk and bank stability within the Tunisian banking sector, with a specific focus on understanding the moderating impact of the COVID-19 pandemic. To achieve this, we employ several econometric techniques, including panel unit root and cointegration tests, panel Vector Error Correction Model (VECM), Fully Modified Ordinary Least Squares (FMOLS), and Dynamic Ordinary Least Squares (DOLS). Our empirical analysis relies on a panel dataset that encompasses a comprehensive sample of 8 Tunisian banks over 2000-2020. The results of our analysis unveil a significant negative relationship between credit risk and bank stability, indicating that higher levels of credit risk exert a detrimental effect on the overall stability of Tunisian banks. Furthermore, our study highlights that this adverse impact is further exacerbated during the COVID-19 pandemic, suggesting that the pandemic acts as a moderator. The findings of this study hold substantial implications for policymakers, regulators, and bank managers in Tunisia. They emphasize the critical importance of implementing robust risk management practices to mitigate credit risk and bolster bank stability. Additionally, the research underscores the need to consider the unique challenges introduced by external shocks, such as the COVID-19 pandemic, when assessing the overall stability of the banking system.</span></span></span></span></p>

The Effect of Macroeconomic Variables on Stock Returns of The Jakarta Islamic Index: A Panel Vector Error Correction Model Approach

Introduction: This study was conducted because there were differences in stock return trends in JII during 2016-2018, where stock return movements simultaneously decreased, but different conditions occurred in 2019-2022, where trend returns experienced different conditions between companies. This was caused by the domino effect of the Covid-19 Pandemic, which resulted in changes in Indonesia's BI Rate and Inflation. Thus, this study aims to analyze the long and short-term effects of BI Rate and Inflation on changes in the return of company shares in JII. Research Methods: This study uses the Panel Vector Error Correction Model (VECM) method, secondary data in the form of a Panel of Stock Return of 4 companies, BI Rate and Inflation during 2016-2022. Results: The long and short-term results in the previous two and three-quarters of the BI Rate were significantly positive for stock returns. While in the long and short term, inflation was significantly negative for stock returns. Conclusion: The research found that the BI Rate does not always negatively affect return. When the BI Rate increases, it gives investors confidence that the value of their investment is protected from depreciation. This can create a positive environment for the stock market so that it has an impact on rising stock prices.

Moderating the Role of Trade Openness on Foreign Portfolio Investment and Economic Growth among East Africa Community Countries

Purpose: This study investigates the impact of foreign portfolio investment (FPI) on economic growth in East Africa using panel data for Kenya, Uganda, Tanzania, Rwanda, and Burundi from 1974-2022. Methodology: The analysis employs a panel vector error correction model to estimate the short and long-run effects of FPI on growth. The study relied on secondary data sources for the period 1974-2022 with an annual frequency, implying 49 years of data. Data on foreign investment variables and macroeconomic control variables were sourced from the World Bank database, National Statistical Bureaus, Central Banks, and Stock Exchanges of the respective countries. Findings: The results indicate that FPI significantly positively impacts economic growth in East Africa. A 1% increase in FPI inflows as a share of Gross Domestic Product (GDP) boosts annual real GDP growth by approximately 10.7% in the long run. The findings are robust to the inclusion of moderating variables like trade openness. Unique Contribution to Theory, Practice and Policy: The empirical analysis aimed to validate the Modern Portfolio Theory by examining if greater foreign portfolio investment flows contributed positively to economic growth in the East African region. The results lend support to policy efforts in East Africa to attract greater FPI through capital market reforms, regional integration, and macroeconomic stability. However, further developing financial markets and enhancing absorptive capacity is essential to leverage FPI more effectively for sustainable growth financing.

Exploring the nexus between FDI inflows and economic growth: A sectoral level analysis.

This study investigates the relationship between Foreign Direct Investment (FDI) inflows and economic growth at sectoral levels in Bangladesh, employing a panel study framework. Utilizing sectoral-level panel data spanning six sectors from 2007-08 to 2018-19, the analysis is conducted using Panel Vector Error Correction Model (Panel VECM). Results from panel unit root tests confirm that all variables are integrated of order one I (1), indicating stationarity. The Pedroni panel co-integration test further supports the presence of co-integration among the variables. Notably, the Panel VECM reveals evidence of a unidirectional causal relationship from Real Gross Domestic Product (RGDP) to Real Foreign Direct Investment (RFDI) across all six sectors of Bangladesh. The findings underscore the significance of formulating pragmatic policies and implementing them effectively to attract FDI across sectors, thereby contributing to the overall economic growth of Bangladesh.

Effect of Corporate Environmental Performance on Banks’ Loan Pricing

Effect of Corporate Environmental Performance on Banks’ Loan Pricing

The Relationship Between Education Inequality, Poverty, and Economic Growth

This study aims to establish the relationship between education inequality, poverty, and economic growth in the 10 Provinces of Sumatra Island 2004-2022. The data used is secondary data sourced from the Badan Pusat Statistik (BPS). The analytical approach employed encompasses the Panel Vector Error Correction Model (PVECM) along with Granger Causality. The findings indicate the presence of both short-term and long-term associations between education inequality and economic growth concerning poverty levels in the 10 Provinces of Sumatra Island. Furthermore, a bidirectional connection is observed between education inequality and economic growth within the 10 Provinces of Sumatera Island. Conversely, a unidirectional linkage is identified between economic growth and poverty in the 10 Province of Sumatera Island. It is anticipated that governmental policies will aim to enhance educational aspects and promote public consciousness regarding education to bolster developmental investments across various regional autonomies at both the Regency/City and Province tiers in Indonesia.

European Tourism Sector Development in the Context of Energy Uncertainty

The research is a novel to study the impact of energy uncertainty on international tourism receipt in 11 European countries namely Belgium, Croatia, Denmark, France, Germany, Greece, Ireland, Italy, Netherlands, Spain and Sweden due to availability of energy uncertainty index data recently developed by Dang et al. (2023). As econometric tool, we employ a Fully Modified Ordinary Least Squares (FMOLS) framework and include obtained long-run relations in a panel Vector Error Correction model (VECM). The findings suggest that 1% increase in energy uncertainty leads to 0.08% decrease in international tourism receipt in Europe. Moreover, international tourism receipt reaches the equilibrium with the adjustment speed of 23% annually. Regarding the effect of control variables, economic development has a negative relation whereas CO2 emissions and institutional quality have a positive association with international tourism receipt. As a policy implication, enhancing renewable energy is suggested to cope with energy uncertainty consequences that might affect tourism development.

ANALYSIS OF DETERMINANTS OF FOOD INFLATION IN ASEAN COUNTRIES: A PVAR MODEL APPROACH

Purpose: This research aims to analyze the impact of macroeconomic factors, namely the money supply, exchange rate, economic growth, food supply, interest rates, imports, exports, and wheat prices on food inflation. Theoretical reference: The data used in this study are secondary data obtained from the World Bank's website, covering the years 2002-2021. Method: The methods employed for data analysis include Panel Vector Autoregression (PVAR) and Panel Vector Error Correction Model (PVECM). Results and Conclusion: The results and conclusions The research indicate that economic factors such as the money supply, exchange rate, interest rates, imports, and wheat prices can influence the level of food inflation, but their effects may vary in the long run and short run. Implications of research: Implications of research availability of food supply and economic growth and can play a role in controlling food inflation. value: The novelty of this study is that economic factors can affect the inflation rate and affect the long-term and short-term and can control food inflation.

Intersecting paths: Corporate and green innovation in Chinese firms-A penal cointegration analysis.

In today's dynamic and competitive business landscape, innovation is paramount for companies striving to maintain a competitive edge. Among various innovation strategies, corporate green innovation has gained prominence as an efficient means of achieving sustainable growth. In response to the pressing need for sustainable development, this study investigates the bidirectional cointegration link between green innovation and overall corporate innovation in a panel dataset of Chinese-listed enterprises.As China emphasizes principles like "greening" and "innovation" for twenty-first-century development, this research aligns with the nation's goal of fostering sustainable industry growth through "green innovation". It employs panel cointegration tests, including the Westerlund test, dynamic panel ordinary least square (DOLS), and the panel vector error correction model (VECM), using data from Chinese A-listed firms spanning from 2008 to 2020. The study reveals a robust long-term, bidirectional relationship between corporate innovation and green innovation. Notably, it demonstrates that green innovation causally impacts corporate innovation in both the short and long term. This research also conducts subsample analysis, ensuring the robustness of the main findings across both non-polluted and polluted industries. These findings provide valuable insights into how corporate innovation factors influence corporate green innovation. Consequently, they offer valuable insights for policymakers and organizations, aiding in the formulation of policies that promote environmentally friendly innovation while elevating corporate innovation standards.

Is There a Trade-off Between Economic Growth, Foreign Direct Investment, International Trade and Environmental Degradation? A Comparison Between Asian Developed and Developing Countries

Against the backdrop of impressive economic growth, the attractive foreign direct investment (FDI) and international trade of Asian countries, this study attempts to examine whether trade-offs between three aspects of economic growth, FDI, international trade and environmental degradation. Panel Autoregressive Distributed Lag (P-ARDL) model with pooled mean group estimates has been applied on panel data from 1996 to 2019. Panel Vector Error Correction model (VECM) Granger causality test is also used to identify multidimensional causal relationships between variables. The research results confirm the existence of a long-term equilibrium relationship between environmental degradation (CO2 emission) and the combination of economic growth, FDI and trade openness. In the short run, income positively affects CO2 emission while negative impacts and lower income elasticity have been found in the long run, implying that CO2 emission decreases and reverses its direction when income rises. Contrasting results collected from two groups of developed versus developing countries, the author reveals a linear relationship with a positive direction between economic growth and environmental degradation in developing countries while opposite results have been shown in developed nations, which supports the environmental Kuznets curve hypothesis in Asian countries. This study also provides sound proof for the ‘pollution haven hypothesis’ and the scale effects on FDI attraction and international trade. By applying relatively new estimators in the field of econometrics to compare the differences between Asian developed and developing countries, the research highlights the appropriate policies contributing to sustainable economic growth, attractive FDI and growing green trade with minimum adverse effects on the environment. JEL Codes: C33, F18, F21, F43, O44, Q40, Q51, Q53

Trade agreements and CO2 emissions in Asian countries: accounting for institutional heterogeneity.

This paper aims to measure the impact of environmental provisions in free-trade agreements on pollution levels in 40 Asian economies for the period 1990-2019. Following the failure of WTO negotiations, there has been a rapid proliferation of preferential trade agreements incorporating various types of environmental clauses. We exploit such changes to assess their influence on pollution emissions. We use a DOLS approach that considers the potential endogeneity of environmental clauses. Further, panel vector error correction models (VECM) are employed for examining the presence of a cointegration relationship among the variables studied. Overall, our findings indicate that these environmental clauses have heterogenous effects on CO2 emissions. We do not find significant effects of environmental clauses on pollution. However, this result is driven by environmental provisions that are not legally enforceable. We do find a positive effect of environmental clauses with a higher level of legalism on the environmental quality. These results show that the inclusion of environmental provisions in trade agreements is not sufficient by itself. Such provisions should incorporate a legally enforceable framework to effectively address environmental concerns. These findings have significant policy implications for Asian countries.

The Relationship between Corporate Environmental Performance and Suppliers’ Credit Lending

Green supply chain management has gained traction in contemporary times against many environmental catastrophes and scandals involving prominent companies. Despite the strides made by lawmakers to address such challenges, an increasing number of corporations overlook environmental issues such as global warming, ecological concerns, reverse logistics, and global energy. Notwithstanding the contributions in prior studies, to the best of researchers’ knowledge, no study has sought to link corporate environmental performance with suppliers’ credit lending practices. Yet policymakers seek to develop regulations that incorporate the understanding of the collaboration among the supply chain members. Thus, we seek to establish the short-run and long-run dynamics between corporate environmental performance and suppliers’ credit lending. Targeting companies listed in the FTSE/JSE RII, we draw a sample of 21 companies using a judgemental sampling technique. Furthermore, archival data were collected to compute a short panel data set. The panel data set for statistical analysis comprised 21 cross-sections over six years, totalling 126 observations. The study adopted the first differenced econometric models in data analyses, namely Panel Vector Error Correction Model (VECM) and, subsequently, Panel Least Squares (PLS), Wald Test, and Impulse Response Functions (IRF). Findings indicated a statistically significant positive relationship exists in the long run between corporate environmental performance and suppliers’ credit lending. Conversely, the same endogenous variables produced a statistically significant negative relationship in the short run. The study contributes new insights to supply chain management literature and renders novel policy implications for lawmakers.

Impacts of Remittance and FDI on Economic Growth in South Asian Countries: A Panel Data Analysis

The current study looks at the short- and long-term effects of foreign direct investment (FDI) and remittances on gross domestic product (GDP) in South Asian nations, particularly Bangladesh, India, Sri Lanka, and Pakistan. Utilizing annual panel data from several secondary sources spanning the period from 1981 to 2023, the research applies multiple econometric techniques, including LLC and IPS tests, Johansen Fisher type cointegration test, and panel Vector Error Correction Model (VECM), along with several diagnostic tests to ensure model reliability. The findings reveal a substantial long-term relation between the variables. Remittances and total reserves have a notable optimistic impact on GDP in both the long and short term, while FDI negatively impacts GDP. To enhance remittance flow and promote sustainable economic growth, the study suggests exporting a skilled labor force abroad. Consequently, the study recommends that South Asian countries develop policies, programs, and institutional reforms to encourage the productive use of remittances.

Do tourism and CO2 emission predict technological innovation in developing countries: Examining Porter and innovative Claudia curve hypothesis

The accelerating concentration of CO2 emissions is attributed to human activities worldwide, leading to increased greenhouse gas emissions. There is an outcry for innovations to combat the environmental threat to even the existence of the human race. From this perspective, the current study aims to analyze the significance of technological innovation, tourism development, economic growth, and human development from the environmental perspective under the idea of carbon neutrality from 1996 to 2019. The study utilized dynamic ordinary least squares (DOLS) to estimate the relationship between the study variables and the panel vector error correction model to showcase the variables’ short and long-run connections. Results reveal that CO2 emissions positively affect technological innovations, which is evidence of the Porter hypothesis. The study showed that the gross domestic product, tourism, and human development index are good innovation indicators and supported the growth-led innovation hypothesis. This study supports the innovative Claudia curve theory between technology and CO2 emissions. Moreover, the study also investigated the Environmental Kuznets Curve (EKC) hypothesis during the study period. The causality analysis also supports the long-run results of DOLS. Based on the results, the study has implications for future researchers, policymakers, and regulatory bodies in developing countries to achieve carbon neutrality and Agenda 2030.

Sovereign spread divergence owing to inflation and redenomination risk countered by unconventional monetary policy in the Eurozone

Using a panel vector error correction (VECM) model, we assess sovereign spread divergence in the Eurozone. Recent literature defines redenomination risk as a member state's unilateral exit from the Eurozone, estimated by the quanto Credit default swaps (CDS) spread (qCDS). We show that sovereign spread divergence is driven not only by the qCDS but also by inflation and US dollar liquidity shocks. We also find evidence that the balance sheet structure better describes the European Central Bank's (ECB) unconventional monetary policy (UMP) shocks than the shadow rate. Such policy shocks had a greater impact in the early 2020s than between the global financial crisis and the COVID-19 pandemic (2008Q1–2019Q4). Thus, this paper makes a new contribution to the debate on the ECB's instruments to maintain price stability objectives and avoid divergence of sovereign bond yields while emphasizing cross-central bank swap lines.

Impact of Covid-19 Cases on Inflation in ASEAN

This study is aimed to examine the impact of the total cases of COVID-19, interest rates, and money supply on inflation in ASEAN-5. Using the Panel Vector Error Correction Model (PVECM), the study reveals that the number of COVID-19 cases has a negative impact on inflation in ASEAN-5 both in the short and long run. The higher the total cases, the lower the inflation in the region. This was caused by a shock from the demand aspect due to the large number of people who were not working, so that household income decreased. A decrease in income will certainly impact on a decrease in demand which will affect equilibrium inflation. In addition, some control variables such as interest rates have a negative effect on inflation in the long run. Meanwhile, the money supply has no significant effect on inflation during the pandemic.

Pengaruh Zakat Terhadap Sustainable Development Goals di Indonesia (Studi pada Seluruh Provinsi di Pulau Jawa)

In its development, zakat has become one of the Islamic philanthropic institutions that work for the welfare of society and as an effort to assist in realizing the Sustainable Development Goals (SDGs) program. In fact, the contribution of zakat can not be said to be maximal to the SDGs in Indonesia. This is because the collection and distribution of zakat has not been optimal. This study aims to describe the effect of zakat on the SDGs in Indonesia (a study of all provinces on the island of Java). Of the 17 SDGs programs, only 5 programs were tested, namely (1) economic growth (GRDP), (2) poverty-free (JPM), (3) healthy and prosperous life, quality education, and decent work as measured by the Human Development Index ( HDI), (4) reduced inequality (GI), and (5) gender welfare (GPI). The method used is the Panel Vector Error Correction Model (PVECM). The results of this study prove that (1) Zakat in the short and long term has a negative and significant effect on GRDP, (2) Zakat in the short and long term has no effect on JPM, (3) Zakat in the short and long term has no effect on HDI, (4) Zakat in the short term has no effect on GI, but zakat in the long term has a positive and significant effect on GI, (5) Zakat in the short and long term has no effect on GPI.

New insights on the environmental Kuznets curve (EKC) for Central Asia

We estimate the environmental Kuznets curve (EKC) for Central Asia by allowing for the possibility of linear, U-shaped and N-shaped forms, and considering the impact of ecological footprint, climate change adaptation and energy consumption. We employ a fully modified ordinary least squares framework for cointegrating polynomial regressions, and include obtained long-run relations in a panel Vector Error Correction model. The findings suggest that the linear EKC form is more coherent for Central Asia compared to the N-shaped EKC form. We link this to the fact that the Central Asian countries are in the first stage of the EKC. We observe that Gross domestic product, ecological footprint, energy consumption and climate change adaptation positively impact carbon dioxide emissions in the long-run. Moreover, there is bidirectional causality from GDP\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$GDP$$\\end{document} and climate change adaptation to CO2\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$${CO}_{2}$$\\end{document} emissions, while causality is unidirectional between emissions and energy consumption.