Pooled Mean Group Estimator Research Articles

Heterogeneous analysis of pollution abatement via renewable and non-renewable energy: lessons from investment in G20 nations.

Environmental sustainability and climate change mitigation seem central in the fight against global warming and continuous human sustenance in the twenty-first century. However, non-renewable and renewable energy are at the core of these pollution concerns, particularly among the G20 economies that are the top pollution emitters. Capital investment has been argued to ameliorate or amplify the relationship, unlike other mediators in the energy-pollution nexus. To this end, the study specifically sets out to unravel the mediating role of capital investment in energy-pollution link together with other pollution confounders, including trade openness, foreign direct investment, and energy use for G20 economies over the period 1990–2017. We report vital findings using the pooled mean group estimator and accounting for cross-sectional dependence and heterogeneity among the countries. First, results show that renewable energy negatively impacts carbon emissions in both the short and long runs, while non-renewable energy positively impacts pollution. In addition, the results show that capital investment lowers pollution in the short run but increases it in the long run. Lastly, on interacting capital investment with renewable energy, we find that pollution falls in both the short and long runs, while its interaction with non-renewable energy expands pollution in both periods. On the policy front, since capital investment provides an important channel to reduce pollution in G20 nations, it is therefore recommended that if energy consumption is to work through the capital investment channel to lower pollution in the G20, the proportion of renewable energy must increase relative to non-renewable energy in their energy mix.

Do personal remittances cause environmental pollution? Evidence from the top eight remittance-receiving countries.

This study aims to examine the asymmetric impact of personal remittances on environmental pollution with financial development (FD) as an explanatory variable. It utilizes annual panel data on the top eight remittance-receiving countries and employs panel generalized least square (GLS) method, pooled mean group (PMG) model, and the Dumitrescu-Hurlin (D-H) panel causality test to realize the objective. The GLS estimation reveals that both the positive and negative components of remittances mitigate CO2 emission in the long run, while FD increases the pollution level. The PMG estimation also provides similar results and validates the robustness of the GLS model estimation outcomes. The D-H causality test provides several unidirectional and one bidirectional causality. FD causes environmental quality. There is a feedback relationship between the positive component of remittances and environmental pollution, while there is one-way causation from the negative component of remittances to CO2 emissions. Both positive and negative shocks of remittances cause FD, and positive shock of remittances causes that of negative shocks. The outcomes suggest that the policymakers may formulate agreeable rules and incentives for the financial institutions to finance environmental-friendly economic projects and production processes and channel the personal remittances through banking channels to mitigate CO2 emissions.

The impact of population ageing on the environmental quality in late-demographic dividend countries

PurposeThe current study examined the impact of population ageing on environmental quality in 17 late-demographic dividend (LDD) countries.Design/methodology/approachThe panel autoregressive distributed lag (ARDL) model using pooled mean group (PMG) estimator based on the environmental Kuznets curve (EKC) hypothesis was used to analyse data for the period 1990–2018.FindingsThe empirical results demonstrated that in the long run, carbon dioxide (CO2) emissions decrease with population ageing. The prevailing findings also indicated no sufficient evidence of EKC hypothesis validity and electricity consumption, which is the primary driving force of CO2 emissions in LDD countries.Originality/valueUnlike prior works, this paper is among the first to discuss environmental quality due to the current demographic transition towards ageing among LDD countries. Based on the results, population ageing reduces the environmental deterioration. The identification of possible ageing impact is vital to combat the climate change in order for countries to achieve sustainability, better economy and quality environment.

Examining the Causal Relationship between Financial Intermediation and Poverty in Selected Developing Countries

Formal financial intermediation and the financial dimensions which include financial efficiency, financial access and financial stability can be tools that can be useful in providing the much needed finance for households and businesses. The objective of this article is to examine the causal relationship between financial dimension in the financial intermediation setting and poverty. This study used annual data from 2004 to 2018 for a panel of selected developing countries. The pooled mean group estimator in a panel ARDL framework was employed to examine the causal relationship between financial dimensions and poverty. Results revealed a long run causal relationship between the financial dimensions and poverty with no significant short run causal relationships. Furthermore, the study highlights the great importance of multidimensionality of poverty and that how poverty is measured is significant to the nature of the causal links with financial dimensions. The findings are expected to encourage developing countries to particularly pay attention to how poverty is measured and how different financial dimensions are important for an inclusive financial system.

Демография и подушевой доход российских регионов

Theories of economic growth and empirical studies suggest a negative effect of population growth on economic growth. This study examines the link between the two variables in 82 subjects of the Russian Federation over 2002–2019. Descriptive statistics show that Russia reaped a demographic dividend and is now paying a demographic tax. General theoretical framework for empirical analysis was drawn from the neoclassical growth theory, and panel data econometrics suggested the appropriate empirical methodology. The pooled mean group estimator was applied to an autoregressive distributed lags model based on the Solow model. We found a statistically significate negative long-term dependence (in growth terms) of per capita income on population, total fertility rate and dependence ratio. Also, three auxiliary hypotheses were tested. First: population growth variables that emphasize the relative growth of the young/dependent population (ages 0–14 years) should show a more adverse effect on economic growth than measures of growth in the total or working-age populations. Second: the partial association between population growth and economic growth will be more positive when the regression controls for investment (the resource-dilution effect). Third: the effect of population growth on economic growth is more adverse in developing countries (regions) because of greater resource-dilution and resource diversion effects, as well as poorer policy environments. These hypotheses are not rejected

THE ROLE OF TOURISM AND FDI IN THE ECONOMIC GROWTH OF EU11 COUNTRIES

Purpose - Tourism and FDI have contributed to a large extent to Central and Eastern European economies in recent decades. This paper investigates how successfully these two engines of growth have been stimulating the growth of these economies. Design/methodology/approach - Using a Pooled Mean Group estimation, this study investigates the short- and long-term effects of variations in the GDP shares of tourism and foreign investments on the economic growth rate. Findings - The results suggest that while tourism expansion is more effective in the short run, FDI has a significant positive impact on economic growth only in the long run. Originality - A new aspect of the present study is a comparison of the magnitude of the impacts of the GDP shares of international tourism and foreign investments on the economic growth rate in both the short and long run in the case of Central and Eastern Europe. Practical implications - Considering the economic structure of these countries, policy action plans for inclusive growth are suggested.

TRADE OPENNESS AND INCOME INEQUALITY: A CASE OF SOUTHERN AFRICAN DEVELOPMENT COMMUNITY COUNTRIES†

This research aims to address one of the SADC regional indicative strategic plans (RISDP) and one of the 17 Sustainable Development Goals (SDG) objectives of reducing inequality in the face of increased trade openness. The paper uses the pooled mean group (PMG) estimation technique to examine the effect of trade openness on income inequality in 16 SADC countries from 1980 to 2019. The findings of the study reveal that trade openness worsens income inequality in the long run. Again, the findings of the results indicate that it is not only trading that matters on income inequality changes. Thus, trade openness reduces income inequality when economic growth, human capital index, and financial development are high. Yet, the mediating variable of trade openness and institutional quality has a positive and significant effect on income inequality in SADC countries. As a result, this study provides SADC policymakers and governments with some recommendations, such as investing more in high-quality education and strengthening financial institutions by reducing inequalities in the financial sector. Furthermore, effective policies to stimulate local production are needed to create jobs and improve the quality of institutions to reduce income inequality in the SADC region.

The Mediating Role of Financial Development in the Remittances and Household Consumption Nexus: Evidence from a Panel of African and Asian Countries

This paper examines whether the strength of the relationship between remittances and household consumption, documented in the empirical literature, varies with the financial deepening. It uses a nonlinear panel model and the pooled mean group estimator for a sample of 19 countries over the period 1987 to 2013. The results show that households in financially developed countries gain significantly from remittances. They also indicate that per capita income is positively related to household consumption while inflation and urbanization are negatively related to it. These findings suggest that financial development should be enhanced not only to favor the inflows of remittances to developing countries but also to effectively channel remittances to productive activities and credit opportunities that can significantly improve household consumption.

The relationship of economic growth and carbon-dioxide emissions: an application on member countries of Organization of Islamic Cooperation

Motivation: Humanity has benefited from natural resources in production activities throughout history and this pressure on natural resources has increased even more with the efforts of industrialization. In this process, people benefited heavily from fossil fuels in their production and distribution activities, thereby damaging the environment and the atmosphere to a large extent. With the destruction of the environment, it has become important for the countries and the academic circles to measure environmental damage with the increase of economic activities in order to take various measures.
 Aim: At this point, in this study, the relationship between economic growth and carbon-dioxide emissions was examined within the scope of 50 countries that are members of the Organization of Islamic Cooperation (OIC). In this process, annual data of the countries concerned between 1995 and 2017 were used; Pedroni Cointegration Analysis, Granger Causality Analysis, Pooled Mean Group Estimator (PMGE) and Mean Group Estimator (MGE) methods were used to measure and estimate the relationship between these two variables. The causality analysis shows that the economic growth is the Granger cause of carbon-dioxide emissions in the country group studied. In addition, the coefficients obtained in PMGE and MGE analyzes were found as 0.43 and 0.33 and were statistically significant and positive. Then, with the help of Hausman Homogeneity Test, it was decided between the two estimators, and it concluded that PMGE Estimator is the more reliable estimator.
 Results: The results obtained with the PMGE estimator indicate that the 1% increase in economic growth increased carbon dioxide emission by 0.43%.

The Dynamic Impact of Public External Debt on Capital Formation in Sub-Saharan Africa: The Pooled Mean Group Approach

The increasing reliance on public external debt stocks in Africa and other developing countries has raised the question of debt sustainability, especially in the face of Covid-19, which has forced many counties (both developed and developing) into an unforeseen and unplanned recession. This study contributes to the literature on debt sustainability by examining the effect of public debt on capital formation in Sub-Saharan Africa (SSA) from 2000 to 2008 using the pooled mean group estimation approach. The debt variables considered are external debt stock, debt service on external debt, and interest payment on external debt. Consistent with the overhang theory, our results show that increasing external debt stock and interest payment on external debts only have a marginal impact on capital formation in the short run and exerts a serious negative effect in the long run. Our results also show that debt service burden has a positive effect on gross fixed capital formation in the long run. Therefore, we argue that despite being faced with a huge debt service burden resulting from large external debt stock, SSA countries are not neglecting investments in critical infrastructures needed to drive economic growth. However, we recommend that increasing government revenue base, minimizing economic waste associated with public expenditure, and intensifying negotiations for debt relief may be a plausible way out.

The Role of Energy and Environmental Quality in Exploring the Economic Sustainability: A New Appraisal in the Context of North African Countries

The aim of this study is to investigate the long-term relationship between real gross domestic product (GDP), energy consumption (EC), and carbon dioxide (CO2) emissions using: (i) fully modified ordinary least square (FMOLS) and dynamic ordinary least square (DOLS) estimates, to deal with the bias of endogeneity regressors and the countries’ heterogeneity, and (ii) a pooled mean group (PMG) estimator, to involve both pooling and averaging for a dynamic specification based on the auto-regressive distributed lag (ARDL) model. Regarding five North African countries (Morocco, Algeria, Tunisia, Libya and Egypt) over the period of 1971–2014, our empirical findings seem relevant in the light of economic developments, and indicate that increased energy consumption gives rise to both GDP growth and increased CO2 emissions, as a result of more pollution. This leads us to conclude that North African countries should improve the productivity of their energy by increasing: (i) the implementation of energy-saving projects, energy conservation, energy efficiency, and energy infrastructure, while outsourcing to achieve GDP growth as well as increasing their investment in full-energy-potential projects, and (ii) the use of more renewable energy in order to mitigate emissions.

COMPARING EFFECTIVENESS OF MONETARY AND FISCAL POLICIES ON REAL AND NOMINAL SIDES OF THE ECONOMY: A MACRO PANEL ANALYSIS OF SELECTED DEVELOPING COUNTRIES

This paper checks the relative effectiveness of monetary and fiscal policies on real and nominal sides of economy in 11 selected developing countries. The paper employed panel (ARDL) method of pooled mean group estimators using the annual data from 1961 to 2020. To check the robustness of PMG results, the study employed panel DOLS and panel FMOLS. The findings of this study indicated that fiscal policy has a stronger effect than monetary policy in case of developing county on real sector. While, the influence of monetary policy is stronger in changing the nominal side of economy such as price level. In addition to this, the findings also revealed that fiscal policy has no impact on nominal side such as price level. Interestingly, the obtained results are according to economic theory. Finally, the results are consistent and have very important policy implication.

Environmental protection and happiness: A long-run relationship in Europe

The possible linkage between environmental regulation and happiness represents a relatively new and little explored issue. This study wants to contribute to this recent stream of research by examining the long-run relationship between environmental protection expenditure and happiness in the case of European countries. The analysis draws both on micro data from Veenhoven's (2013) World Database of Happiness and macro data of 19 European countries observed during the period 1997–2019. A dynamic panel heterogeneity analysis through an autoregressive distributed lag model is applied, using three different estimators: the dynamic fixed effect, the mean group and the pooled mean group estimators. In order to account for cross-sectional dependence of the panel, Westerlund cointegration tests are also used. Dynamic fixed effect estimations highlight the existence of a direct link between happiness and environmental protection expenditure in the long run while the unemployment rate negatively affects happiness both in the short and in the long run. Our analysis recommends governments to include environmental expenditure among possible instruments to improve domestic well-being, highlighting the importance of the interplay between environmental quality and life satisfaction. The last aspect is crucial when implementing national and European policy measures to promote sustainable development.

Renewable energy, energy intensity and carbon reduction: Experience of large emerging economies

High level of carbon emissions is still a policy agenda because of its detrimental effect on environment. CO2 emissions are growing quickly in emerging countries with the high energy consumption, industrial activities, and rapid globalization. So, it is important to examine the roles of emission-inducing factors in these countries. To this end, this research investigates the dynamic effects of energy intensity, renewable energy, industrialization, urbanization and international trade on carbon intensity in the 25 largest emerging economies of the world. The study is based on the data period of 1990–2018, where the Pool Mean Group (PMG) estimation technique of the panel Autoregressive Distributed Lag (ARDL) approach is used, along with different diagnostic tests. The findings are, in the long-run, carbon intensity is increased by energy intensity and industrialization, and decreased by renewable energy use and urbanization. An increase of one unit in energy intensity and industrialization increased carbon intensity by 2.616 unit and 0.002 unit, respectively. Conversely, carbon intensity reduced by 0.003 unit with an increase of one unit in renewable energy and urbanization. In the short-run, carbon intensity is positively associated with energy intensity only with a coefficient value of 0.811. Therefore, an increase in renewable energy production and use, and enhancement of green technology for industrial production can be viable options for carbon reduction.

The Role of FDI on Structural Transformation among Sub-Saharan African and EAP Countries Using a Panel Data Approach

In recent decades the activities of multinational corporations have increased across the globe substantially having a massive flows of foreign direct investment. This paper empirically examines the role of FDI on structural transformation among Sub-Saharan African and EAP Countries Using a Panel Data Approach. To achieve the objective the study took 31 years panel data . The study used descriptive analysis and empirical methods of analysis. The panel Autoregressive Distributed Lag model with error correction models of Pooled Mean Group technique were employed after checking the possible assumptions of our economic series. The results of Im-Pesaran-Shin test confirms our economic series are stationary at level and first difference forms. Pedroni’s cointegration tests suggests the existence of co-integration between the variables. According to the descriptive analysis, on average structural transformation index (STI) is the highest for China (30.52%) followed by South Korea (25.86), while Ethiopia (4.85) is having the lowest. On other hand, the East Asian and Pacific (EAP) countries in the higher income category are performing better than Sub-Saharan African countries. In addition,Sub-Saharan Africa countries are by far having low level of FDI inflows as compared to EAP countries. Particularly, the FDI inflows for EAP countries in the higher income category is around USD 52 Billion, and while for low and middle income category SSA countries it accounts around USD 2.2 Billion and USD 85 million, respectively. More specifically, across countries in the panel the FDI inflow is the highest for China while on average Kenya is having the lowest FDI inflows. On the other hand, according to the ARDL model of Pooled Mean Group estimation technique in the long-run financial development indicator and FDI have positive impact on the structural transformation index of nations at 1percent level of significance for the full sample in the panel. Moreover, pooled mean group regression result among the Sub-Saharan African and EAP countries FDI has a significant but having different sign for the two group in predicting structural transformation. Particularly, for EAP countries FDI has a negative effect in the long run and a positive effect in the short-run on structural transformation index which are also statistically significant. While for Sub-Saharan African countries FDI has a positive and statistically significant effect on structural transformation both in the long run and short-run. Finally, the government of developing countries like SSAs should provide different incentive packages to attract FDI inflows, among others.

Migrant Remittances and Health Outcomes in the West Africa Monetary Zones (WAMZ)

This study investigated the impact of international migrant remittances on life expectancy rate for countries of West Africa Monetary Zones (WAMZ). Panel data set for the period (1990-2020) were used for the analysis. The study estimated pooled ordinary least square, fixed effect models, random effect models and pooled mean group estimate. The pooled mean group estimates showed that migrant remittance as a share of the gross domestic product has significant positive impact on life expectancy rate in both short and long- run. The result showed that in the, a 1% increase in migrant remittance as a share of the GDP will cause life expectancy rate to rise by 4.003% in the short-run, but 9.896% in the long-run. Other factors which include per capita income, HIV/AIDS and out-of-pocket health spending all significantly influence life expectancy rate at birth. We recommend that policies should be articulated that will incentivize remitting money home, and that the costs of remitting money home should be made less, while the channels improved on.

The nexus between research and development, renewable energy and environmental quality: Evidence from developed and developing countries

This study investigated the nexus between greenhouse gas (GHG) emission, renewable energy, forest area, total patents, and research and development (R&D) expenditures in developed and developing countries from 1995 to 2018. The Dumitrescu and Hurlin non-causality test explored two-way causality between GHG and total patents (developed countries), R&D expenditures, and total patents (developed countries). The one-way causality was found from GHG to renewable energy (developed countries), renewable energy to the number of patents (developed countries, developing countries), GHG to R&D expenditures (developed countries), R&D expenditures to renewable energy (developed countries), renewable energy to GHG (developing countries), GHG to the total number of patents (developing countries), and renewable energy to R&D expenditures (developing countries). The Pooled Mean Group estimator revealed the reduction in GHG due to utilization of renewable energy in developed and developing countries. Moreover, the GHG reduction was also found due to an increase in the forest area in developed and developing countries. Environmental quality can be improved by fixing the target of renewable energy share in the total energy mix, provision of subsidy to environment-friendly projects, efficient energy use, increase in the forest cover, implementation of environmental standards, and promotion of environment-friendly products by using media.

Does the trade‐led growth hypothesis exist for South Asia? A pooled mean group estimation

AbstractThe study investigates the validity of the trade‐led growth (TLG) hypothesis for South Asia, with gross fixed capital formation and the labor force as control variables. In the presence of cross‐sectional dependency, it applies the cross‐sectional dependency test, second‐generation panel cointegration test, pooled mean group (PMG) estimation, and Dumitrescu–Hurlin (D‐H) panel causality test. The findings demonstrate that the variables have a long‐run cointegration. The PMG estimation reveals a positive contribution of trade to economic growth and supports the TLG hypothesis for South Asia. The contribution of capital formation to economic growth is also encouraging; an increase in gross fixed capital formation brings an increase in economic growth. The labor force significantly improves long‐run economic growth. The D‐H panel causality provides a bidirectional causality between trade and economic growth, and thus validates the TLG hypothesis for South Asia. The findings have implications for the policymakers to promote trade to gain further from it and accelerate economic growth. Capital formation is also needed to increase the share of high‐technology and manufactured exports, employ and absorb the growing labor force, and boost economic growth in the region. South Asia should focus on regional integration and enhance its regional trade among member countries.

Institutional quality, insurance markets, and economic growth: evidence from pooled mean group estimation

ABSTRACT We study the role of institutional quality and insurance markets in the economic growth of middle-income countries between 2005 and 2019. Insurance market development consistently explains long- and short-run growth. Institutional quality is a better predictor of long-run growth, but is more erratic regarding sign and significance for short-run growth.

The Impact of Quality of Governance, Renewable Energy and Foreign Direct Investment on Sustainable Development in Cee Countries

Recent debates on the Environmental Kuznets Curve (EKC) in the context of the European Green Deal highlights that pollution could be controlled using channels other than economic development. The role of renewable energy consumption in reducing pollution should be correlated with quality of governance, which could support initiatives for a cleaner environment. This study considers the renewable Kuznets curve for 10 Central and Eastern European countries in the period 2006–2019, using economic indicators (index of economic freedom, foreign direct investment, domestic credit to private sector and labour productivity) as control variables and indicators reflecting the quality of governance (Worldwide Governance Indicators and Google Trend indexes associated to key-word corruption in each language). The research is based on two types of panel data models: panel dynamic OLS model (PDOLS) and panel autoregressive distributed lag models based on pooled mean group (PMG) estimator. The results indicate that government effectiveness reduces pollution in both the short-run and long-run, while control of corruption and rule of law supports environmental protection in the long-run. Google searches for corruption as a proxy for quality of governance indicate that tGHG emissions have immediate and practical implications in nowcasting pollution.