Presence Of Cross-sectional Dependence Research Articles

Nexus Between Green Finance, Energy Efficiency, and Carbon Emission: Covid-19 Implications From BRICS Countries

The threats of climatic change on life, health, and the environment have been regarded by the joint consensus of scholars in the recent decades. With the advancement of global green development, green finance has paved the way for the government to respond to the challenges of climate change by providing mature financial services, appropriate financing, investment, and project funds related to environmental protection. In this context, green finance was proposed, and the relationship between green finance, renewable energy, and carbon emissions in the BRICS countries from 2000 to 2018 was further studied based on the quantile regression model. The presence of cross-sectional dependence in panel results is tested through CD and LM methods. The findings show the negative effect of green finance and non-fossil energy consumption on CO2 emissions. Furthermore, economic growth, trade openness, energy consumption, and foreign direct investment increase the CO2 emissions. Finally, the research results confirm that green finance is the best financial strategy to reduce carbon dioxide emissions.

Nexus of Renewable Energy Consumption, Economic Growth, Population Growth, FDI, and Environmental Degradation in South Asian Countries: New Evidence from Driscoll-Kraay Standard Error Approach

Environmental degradation is the most prominent area nowadays, especially in developing counties where high renewable energy consumption and population growth deteriorate the atmosphere of the country. Thus, the current study investigates the nexus among renewable energy consumption, economic growth (EG), population growth, foreign direct investment (FDI), and environmental degradation in South Asian countries. The covariance matrix estimators that are developed by “Driscoll and Kraay” are used in this study. The primary property of this estimator is that it does not account for the cross-sectional dependence; thus, it provides substantial, robust outcomes among the cross-sectional units while in the presence of cross-sectional dependence. The data was collected from the World Development Indicators (WDI) from 2001 to 2019. The findings exposed that positive nexus among the population growth, FDI, and environmental degradation while renewable energy consumption and EG has negative nexus with environmental degradation and also not supported the EKC hypothesis in South Asian countries. These findings suggested that the regulators should develop policies that reduce environmental degradation in the presence of high EG, energy consumption, FDI, and population growth.

Drivers of the shadow economy in European Union welfare states: A panel data analysis

This paper carries out an extensive analysis of the drivers of the shadow economy (SE) in the welfare states of the European Union for the period 1995-2017. The empirical analysis is applied to the 28 EU11As we consider the period before the Brexit, when the United Kingdom is still EU member. member states, which are divided into the following clusters, according to their welfare model: Nordic, Liberal, Continental, Mediterranean, and Eastern models. The relationship between the SE and its determinants is analyzed based on the panel corrected standard errors (PCSEs) model in the presence of cross-section dependence and fully modified ordinary least square (FMOLS) for investigating the long-run impact. The main empirical findings derived from a causality analysis reveal the important role played by economic development and welfare in the SE’s decline in the past two decades. Increasing social protection expenditure and government efficiency are also considered as drivers of the SE’s decline and for this reason, need to be included in the European Union’s policy for combating the SE. Based on the results from this empirical study it is argued that EU countries need to implement an integrated set of rules and regulations in order to reduce the level of the SE in the long run.

Estimating long-run effects and the exponent of cross-sectional dependence: An update to xtdcce2

In this article, I describe several updates to xtdcce2 (Ditzen, 2018, Stata Journal 18: 585–617). First, I explain how to estimate long-run effects in models with cross-sectional dependence. I review three methods to estimate the long-run effects and discuss their implementation into Stata using xtdcce2. Two of the estimation methods build on Chudik et al. (2016, Advances in Econometrics: Vol. 36—Essays in Honor of Aman Ullah, 85–135): the cross-sectionally augmented distributed lag and the cross-sectionally augmented autoregressive distributed lag estimator. As a third alternative, I review an error-correction model in the presence of cross-sectional dependence. Second, I explain how to estimate the exponent of cross-sectional dependence using xtcse2 following Bailey, Kapetanios, and Pesaran (2016, Journal of Applied Econometrics 31: 929–960; 2019, Sankhyā 81: 46–102).

Decomposing scale and technique effects of financial development and foreign direct investment on renewable energy consumption

This paper contributes to literature by divulging the nature of scale and technique effects on renewable energy consumption, considering foreign direct investment (FDI) and financial development as considerable factors of renewable energy demand. The data for 39 countries over the period of 2000–2019 is used for empirical analysis. In doing so, second generation methodological approaches are applied to decompose scale and technique effects. The empirical results show the presence of cointegration between the model parameters, in the presence of cross-sectional dependence and structural breaks. Further, financial development is positively linked with renewable energy consumption. Foreign direct investment and renewable energy demand are positively linked. Composition effect has negative effect on renewable energy consumption. Economic growth and fossil fuel consumption have positive impact on renewable energy consumption. Long run estimation results indicate that renewable energy-FDI and renewable energy-financial development associations are U-shaped. It indicates that the scale effects exerted by FDI and financial development are overridden by technique and composition effects, and hence, the demand for renewable energy and consequential renewable energy consumption rises with the progression of economic growth. Based on this, policy suggestions are provided for these nations to ascertain sustainable development through bringing forth transformations in the energy policies.

Financial Development, Clean Energy, and Human Capital: Roadmap towards Sustainable Growth in América Latina

The consumption of renewable energy has become a substitute for fossil fuels to mitigate environmental degradation. However, this substitution of energy raises many questions regarding its possible impact on economic growth. In this context, this research aims to examine the long-term relationship between economic growth and financial development, non-renewable energy, renewable energy, and human capital in 16 Latin American countries. Panel data techniques during the period 1988–2018 and statistical information compiled by the World Bank and Penn Word Table databases were used. Second-generation econometric techniques (cross-sectionally augmented Dickey–Fuller (CADF) and cross-sectionally augmented IPS (CIPS) were used in the work methodology, which allow the presence of cross-sectional dependence between sections to be controlled. The main results indicate that there is a long-term equilibrium relationship between financial development, non-renewable energy consumption, renewable energy consumption, human capital, and economic growth. The results show that the consumption of renewable energy does not compromise economic growth; the 1% increase in renewable energy consumption is related to the 1% increase in economic growth. The policy implications suggest some measures to ensure economic growth considering the role of green energy and human capital.

Nonrenewable and renewable energy consumption, trade openness, and environmental quality in G-7 countries: the conditional role of technological progress.

The present study empirically investigates the tripartite impacts of renewable energy (RE), nonrenewable energy (NRE), and trade openness (TO) with the conditioning role of technology on environmental quality (CO2 emission) for the G-7 countries (Canada, France, Germany, Japan, Italy, USA, and United Kingdom) for the period straddling 1990-2019. The empirical analyses are anchored on a set of estimation procedures including; cross-sectional dependence test, second generation panel unit root test, Westerlund cointegration test, Hausman test, and pooled mean group (PMG). The following results emanate from the findings. First, the presence of cross-sectional dependence and long-run relationships are confirmed for the countries. Second, RE significantly lessens the prevalence of carbon emissions across the estimated models. This further underscores the mitigating effects of RE on CO2 emissions for the G-7 countries. Third, the impacts of NRE and TO are found to contribute to surge in CO2 emissions. Fourth, the effects of technological progress captured by research and development (RD) and eco-innovation significantly reduce the stock of CO2 emissions using both unconditional (single effect) and conditional (interactive effect) methods. Fifth, the existence of Environmental Kuznets Curve (EKC) receives empirical support for the G-7 countries. Other covariates such as foreign direct investment (FDI), Gross Fixed Capital Formation (GCFC), and service value-added (SVA) exert diverging impacts on CO2 emissions. Sixth, the country-level analyses show the heterogeneous nature of the G-7 countries as evident from each country's findings.

DOES THE INSURANCE SECTOR REALLY MATTER FOR ECONOMIC GROWTH? EVIDENCE FROM CENTRAL AND EASTERN EUROPEAN COUNTRIES

This paper analyses the impact of insurance sector development on economic growth based on a sample that includes 14 Central and Eastern European (CEE) post-transition countries for a period of 19 years, from 1998 to 2016. Considering the presence of cross-section dependence and multiple structural breaks, recently developed panel econometric techniques were employed and led to the following conclusions: (1) life insurance has no significant effect on economic growth in both panel and individual countries, (2) non-life insurance positively affects economic growth in both panel and individual countries, (3) Dumitrescu and Hurlin causality test indicates a unidirectional causality running from economic growth to both life and non-life insurance and infers the absence of causal connection between life and non-life insurance and economic growth.

Environmental Kuznets curve in France and Germany: Role of renewable and nonrenewable energy

This paper aims to quantify the relation between real GDP, CO2 emissions, renewable and nonrenewable energy consumption, tourism development and labor force for France and Germany as these two countries are pioneer countries pushing Paris agreement within and outside the European Union. The time spans have been used for the period of 1995–2015 according to data availability. In the presence of cross-sectional dependency, several first and second-generation unit root tests confirm the unit root problem while Pedroni and Westernlund confirm the cointegration. Results reveal an inverted U-shape relation between CO2 emissions and real GDP in long run confirming the validity of environmental Kuznets curve for the group of France and Germany. Results declare that renewable energy significantly reduces carbon emissions while nonrenewable energy consumption adds to carbon emissions. Tourism sector was found helpful in carbon reduction that appeals to attract more tourists for the development of sustainable tourism industry by taking energy conservation and emissions reduction in relevant industries in the full consideration.

Environmental quality and output volatility: the case of South Asian economies.

This study explores the impact of environmental degradation on output volatility for eight South Asian economies over the time span 1971-2017. Environmental degradation is measured by CO2 emissions, nitrous oxide (N2O), methane emissions (CH4), greenhouse gas emissions (GHG), and environmental pollutants index (EPI), whereas output volatility is constructed using a rolling window of five-year moving standard deviation. The results of cross-sectional dependence (CSD) tests indicate the presence of CSD among South Asian economies. For empirical analysis, second-generation panel time series approaches are employed. Also, the findings of panel unit root tests (URTs) signify that the variables are stationary at the first difference and have a long-run relationship. Westerlund cointegration test is used to assess the long-run relationship among the variables. Moreover, this study has used a fully modified ordinary least square (FMOLS) and dynamic modified ordinary least square (DOLS) methods to examine the relationship between environmental degradation and output volatility. In the long run, all indicators of environmental degradation are positive and significant signaling the harmful effects of environmental degradation on output volatility. However, the impact of nitrous oxide is larger relative to other indicators used in the study. The outcome, therefore, suggests that promoting clean investment in nitric acid plants might help improve the environmental quality in the region which in turn fosters the process of economic stability.

Testing for panel cointegration in high dimensional data in the presence of cross-sectional dependency

Testing for Panel Cointegration in High-Dimensional Data in the Presence of Cross-Sectional Dependency

Testing for panel cointegration in high dimensional data in the presence of cross-sectional dependency

Testing for panel cointegration in high dimensional data in the presence of cross-sectional dependency

Renewable Energy Consumption, Water Crises, and Environmental Degradation with Moderating Role of Governance: Dynamic Panel Analysis under Cross-Sectional Dependence

This study aims to investigate the relationship between renewable energy consumption, water availability, and environmental degradation with the moderating effect of governance in the South Asian region. This study collected data for renewable energy, water availability, governance, and environmental degradation for the period of 1988 to 2018 from the World Development Indicator. In panel data estimation, if cross-sectional dependence exists, it produces biased estimates. Therefore, this study applied a newly developed technique, dynamic common correlated effect, which produces efficient estimates in the presence of cross-sectional dependence. This study found that foreign direct investment positively and significantly increases environment degradation (β = 0.69 *, * indicates the significance level at less than 1%) while renewable energy and water availability cause to reduce environment degradation (β = −0.08 **, β = −0.09 **, **indicates the significance level at less than 5%). Moreover, the study also found that governance significantly strengthens the relationship of renewable energy and water availability with environment degradation (β = 0.37 **, β = 0.24 **) while governance significantly weakens the relationship of foreign direct investment and environmental degradation (β = −0.34 *). The study suggests that South Asian countries should improve political institutions, and promote renewable energy, water availability, and clean production to improve the environment quality.

Determinants of information and communication technology (ICT) adoption in developing countries

Background/Objective: The adoption of Information and communication technology (ICT) in developing countries is increasing during last two decades. This study explores the determinants of ICT adoption in 67 selected developing countries. Methods/Statistical analysis: Panel data was collected from World Bank and International telecommunication websites for the period of 2000 to 2018. This study explores the impact of access to electricity, ICT good imports, financial development index, GDP per capita, urban population, control of corruption and government effectiveness on ICT adoption. Selected developing countries are divided into four panels such as low income, lower middle, upper middle and high income countries. Pesaran CSD, Friedman CSD and Frees CSD tests are used to check the presence of cross-sectional dependency in the panel data. The results confirmed the presence of crosssectional dependency in the variables and hence CIPS second generation unit root test is used for stationarity. Kao test is used to check the long run cointegration among the variables. FMOLS is used for regression analysis. Findings: The regression results show the mixed findings in different panels. The results indicate that access to electricity is an important determinant of ICT adoption in low and lower middle income developing countries. ICT imports and Government effectiveness are among the significant determinants of ICT adoption in low, upper middle and high income developing countries. GDP per capita is an important variable for each panel. Urban population is found to enhance ICT adoption in lower middle and high income developing countries. It is recommended that Government should focus on these important determinants to increase the ICT adoption in selected developing countries. Novelty/Application: ICT development index is used as a dependent variable instead of components of ICT such as internet, mobile phone and computer penetration. New econometrics techniques and variables are used in analysis.

Financial sector development and Investment in selected countries of the Economic Community of West African States: empirical evidence using heterogeneous panel data method

This study investigated the impact of financial sector development on domestic investment in selected countries of the Economic Community of West African States (ECOWAS) for the years 1985–2017. The study employed the augmented mean group procedure, which accounts for country-specific heterogeneity and cross-sectional dependence, and the Granger non-causality test to test for causality in the presence of cross-sectional dependence. The results show that (1) The impact of financial sector development on domestic investment depends on the measure of financial sector development utilised; (2) Domestic credit to the private sector has a positive but insignificant impact on domestic investment in ECOWAS, whereas banking intermediation efficiency (i.e., ability of the banks to transform deposits into credit) and broad money supply negatively and significant influence domestic investment; (3) Cross-country differences exist in the impact of financial sector development on domestic investment in the selected ECOWAS countries; and (4) Domestic credit to the private sector Granger causes domestic investment in ECOWAS. The study recommends careful consideration in the measure of financial development that is utilised as a policy instrument to foster domestic investment. We also highlight the importance of employing country-specific domestic investment policies to avoid blanket policy measures. Domestic credit to the private sector should be given priority when forecasting domestic investment into the future.

Life expectancy and trade openness: causality in Latin America

PurposeThe aim of this research is to investigate the causal relationship between trade openness (TO) and life expectancy (LE) at birth in Latin American countries over the period of 1980–2014.Design/methodology/approachThe bootstrap panel Granger causality test proposed by Emirmahmutoglu and Kose (2011) was used to determine the direction of causality in the presence of cross-sectional dependency and heterogeneity among Latin American countries. Also, four different tests were employed in order to determine the cross-sectional dependency and slope homogeneity. The stationarity properties of variables were inspected by employing a unit root test.FindingsThe findings indicated that Granger causality existed between TO and LE, at birth which was running from the former to the latter for panel. On a country basis, TO Granger caused LE at birth for countries with low level of economic development and higher taxes on income and profits.Practical implicationsThis study provides new insights for policymaking regarding the role of TO in achieving comprehensive economic reforms to increase LE at birth during a period of intense trade rivalry across nations.Originality/valueAlthough research in the literature has mainly focused on the impact of TO on LE at birth with panel data, most studies ignored the regional effects. It is the authors’ concern that the direction of causality can be country-specific and have regional characteristics. In this regard, instead of dividing countries for a specific region into two parts such as developing and developed, the authors investigated the pattern of trade–health link for a specific region, Latin America.

The relationship between MSW and education: WKC evidence from 25 OECD countries

Nowadays municipal solid waste (MSW) has become a vital part of the economy, both as an output of human activities and as an input in the economy through material or energy recovery. Education has been shown to be closely related to the amount of MSW generated. The present research uses panel data obtained for 25 world counties for the years 1995–2016 and the examined variables include MSW, Gross Domestic Product (GDP) and education level. Through econometric methods, the present paper accounts for the presence of cross section dependence and uses appropriate panel unit root tests to discover feasible cointegrated relationships. Also it strongly accounts for the interdependence between MSW, economic growth and education level. Based on these, the validity of the Waste Kuznets Curve (WKC) hypothesis is redefined. Specifically, an inverted U-shape relationship is observed both in the static and dynamic analyses for MSW. The calculated turning points although quite high they are in all cases within the sample. In all specifications the sign of education level is negative as expected. Therefore it is shown that education can act as an effective tool to enhance pro-environmental behaviour leading in turn to lower MSW arisings.

THE IMPACT OF INNOVATION IN THE PROCESS OF HIGH TECHNOLOGY EXPORTS: AN ANALYSIS ON BRICS COUNTRIES

The purpose of this study is to investigate the effects of innovation on high-tech exports in BRICS countries. For this purpose, in this study, the relations between the R&D expenditures of the relevant countries and the number of patents they have and the export of high-technology are examined for the period of 1999-2018. In the study using panel data techniques, firstly, the existence of cross-section dependence in the se-ries was investigated. Following the determination of the cross-section dependency, the stationarity of the series was investigated by Pesaran (2007) unit root test, which can also be applied in the presence of cross-section dependence. Afterwards, the series, which were found to be non-stationary at level, were made stationary by taking the difference of the series and the relations between the variables were analyzed by panel fixed effects and panel random effects methods. In the outputs of the study, a significant positive re-lationship was found between the number of patents and high-tech exports in the countries subject to the study. Accordingly, innovation is a highly important factor in the export of high-tech products for BRICS coun-tries, and it is understood that innovation activities should be given importance to create high added value in these countries

The impacts of foreign direct investment and globalisation on economic growth in West Africa: examining the role of political governance

PurposeThis paper measures the impacts of foreign direct investment (FDI), globalisation and political governance on economic growth in West Africa. The empirical analysis also includes the interaction effect of political governance and FDI on the growth of the sub-region, over the period of 1996–2016.Design/methodology/approachThe study employs the autoregressive distributed lag technique on data obtained from the World Bank and the KOF institute.FindingsThe study findings suggest a positive relationship between globalisation and political governance on economic growth. Even though there have been inconclusive results on the FDI–growth nexus, the authors found that FDI stimulates the growth of the sub-region, while political governance enhances the positive impact of FDI on economic growth. The other factors of growth included are labour, capital and government size, whose effects on growth are, respectively, negative, negative and positive.Practical implicationsThe governments of the West African countries promote policies that attract FDI into the sub-region, so that economic performances may be enhanced. In addition, the governments of the West African sub-region should work to reap the benefits of globalisation, by promoting the competitiveness of their local economies in order to keep pace with the global markets. Finally, the political-governance infrastructures should be overhauled; the culture of accountability and transparency should be promoted, while all efforts should be made to improve stability in the political environment in order to increase investors' confidence in the West African economy.Originality/valueThis study is the first to single out the impacts of political governance, as categorised by the World Bank, through both direct and interactive measures. This is necessary in view of the assertion that political governance largely accounts for improved economic performance in an economy. The use of the Pesaran (2007) technique of unit root is also a deviation from existing studies. This is in view of the fact that it tests variable unit root in the presence of cross-sectional dependence; thus, controlling for contemporaneous correlation which was not considered in the first-generation tests.

Does financial inclusion promote tourism development in advanced and emerging economies?

ABSTRACT This research article is the first of its kind to consider the financial inclusion, which is constructed using the depth, access and efficiency of the financial institutions and markets, and various aspects of tourism development such as business tourism spending, direct tourism contribution, domestic tourism spending, total internal tourism expenses, leisure tourism spending and total tourism contribution. Given the growing importance of financial inclusion in the recent time, this article is designed to investigate the role of financial inclusion on various dimensions of tourism development across the panels of 24 advanced and 21 emerging economies around the world, using yearly data from 1995 to 2016. Given the presence of cross-sectional dependence in the data series, we employ Augmented Mean Group (AMG) estimator as it is a robust technique to handle this issue in the estimation. The evidences show that financial inclusion has a significant positive impact on various aspects of tourism development across the panels. The results also suggest that the impact is more in emerging economies than that of advanced economies. Hence, this article offers numerous policy and practical suggestions for sustainable tourism management.