Granger Causality Results Research Articles

The Impact of Changes in the RMB Exchange Rate on the Export Competitiveness of China's Textiles and Clothing Industry

In recent years, the export volume of China's textiles and clothing industry and its international market share have increased year by year. Under such circumstances, studying the export status of China's textiles and clothing is conducive to further promoting the development of its textiles and clothing industry. This paper establishes a model based on the annual Revealed Comparative Advantage Index of China's textiles and clothing industry from 2000 to 2021, the nominal exchange rate of RMB against the US dollar, and the annual data of GDP. This paper then tests its stability, and continues to carry out the co-integration test and Granger-Causality under the condition that the data is stable in the same order to judge the relationship between the change of RMB exchange rate and the Revealed Comparative Advantage Index of China's textiles and clothing. Research shows that for every 1% appreciation of the nominal exchange rate of the RMB against the US dollar, the Revealed Comparative Advantage Index of China's textiles and clothing industry will increase by 0.0009647%. The rise of the RMB exchange rate has a certain effect on the RCA of China's textiles and clothing industry, and the results of Granger-Causality also show that the RMB exchange rate is the reason for RCA in China's textiles and clothing industry.

Reassessing the role of technology for economic growth: A comparative study of Asian developing economies

The role of technology in stimulating economic growth needs to be reexamined considering current heightened economic conditions of Asian developing Economies. This study conducts a comparative analysis of technology proxied by R&D expenditures alongside macroeconomic variables crucial for economic growth. Monthly time-series data from 1990 to 2019 were analyzed using a vector error correction model (VECM), revealing a significant impact of technology on the economic growth of India, Pakistan, and the Philippines. However, in the cases of Indonesia, Malaysia, Thailand, and Bangladesh, macroeconomic indicators were found more crucial to their economic growth. Results of Granger causality underlined the relationship of R&D expenditures and macroeconomic variables with GDP growth rates. Sensitivity analyses endorsed robustness of the results which highlighted the significance and originality of this study in economic growth aligned with sustainable development goals (SDGs) for developing countries.

Capital Flow Management Within Macroeconomics Stability Framework in Indonesia (2008 – 2022)

Indonesia is an EMDEs (Emerging Market and Developing Economies) country, and adopting an open economy causes foreign capital flow, especially FDI (Foreign Direct Investment) and PI (Portfolio Investment) can be free flows, and its movements are unpredictable. The movement of capital flows will affect the money supply transmitted to monetary and macroeconomic variables. This study aims to determine the response and contribution of macroeconomic variables to FDI and PI, as well as examining the causality between macroeconomic variables, FDI and PI. This research used the Vector Error Correction Model Granger Causality. The results show that exchange rate and inflation shocks significantly impact FDI and PI. While the results of Granger causality, changes in macroeconomic variables cause changes in FDI and PI. This research recommends that stakeholders continue implementing policy mix and monetary policy to improve exchange rates and inflation stability. In addition, the management of capital flows is still considered because the potential risks posed to the economy are quite large

Quantile Effect of Economic Factors and Energy Consumption on Environmental Degradation in Vietnam

This study aims to highlight the asymmetric impact of economic growth (GDP), trade openness (TO), energy consumption (EC), foreign direct investment (FDI), and financial development (FD) on carbon dioxide (CO2) emissions in Vietnam over the period 1990–2022, using quantile-on-quantile regression and Granger causality in quantiles techniques. Our mainstream findings indicate that the selected macroeconomic indicators have a strong positive effect on CO2 emissions in this country, and this effect is more pronounced in the lowest and highest quantiles of the respective variables. In addition, the results of Granger causality suggest a bidirectional causal relationship between the examined indicators. These findings suggest that fostering economic growth, promoting trade openness, managing energy consumption, encouraging foreign direct investment, and enhancing financial development can contribute to a sustainable environment in Vietnam.

Empowering Pakistan’s Economy: The Role of Health and Education in Shaping Labor Force Participation and Economic Growth

The labor force is a crucial factor in conducting economic activities, especially in labor-surplus countries like Pakistan. In this study, we explore the impact of labor force participation (LF) on economic growth (EG), with an emphasis on how this impact depends on the levels of health and education expenditures. We analyze time series data from Pakistan spanning from 1980 to 2022, using ARDL (Autoregressive Distributed Lag), ECM (Error Correction Model) and Granger causality techniques for empirical analysis. The ARDL results indicate that LF significantly boosts EG, both in the short and long run. Furthermore, the estimations reveal that better facilities for health and education strengthen the positive effects of LF on EG. This suggests a complementary relationship between health, education, and LF in driving EG. Moreover, our findings highlight the temporal significance of health and education: Health plays a more crucial role in the short run, while education’s impact is more substantial in the long run. Furthermore, the Granger causality results indicate that LF, health, and education significantly contribute to EG. It is advisable for the government to prioritize investments in the health and education sectors. This approach can empower individuals to actively and effectively participate in economic activities, eventually contributing to the overall economic output of the nation.

An Estimation of Causal Interaction Between Monetary and Fiscal Stabilization Policies on Economic Growth in Nigeria

This study was structured to examine the causal relationship between monetary and fiscal stabilization policies on economic growth in Nigeria. Data employed for econometric analysis were obtained from the Central Bank of Nigeria statistical bulletin published in 2022. The analytical methodology adopted was the Granger Causal technique. Augmented Dickey-Fuller test was employed to examine the stationary properties of the time series at a 5 per cent level. None of the series was stationary at a level, which validated the hypothesis of non-stationarity. Stationarity was attained after the first and second differencing respectively at a 0.05 level of significance. A cointegration test was also performed to confirm the existence or otherwise of a long-run equilibrium relationship at 0.05 level. The results indicate long-run equilibrium relationships among the variables. The results of Granger Causality signify that both monetary and fiscal policies are potent stabilization instruments in gauging the health of the Nigerian economy to guarantee that the economy is prodded onto a steady long-run growth path. Therefore, it is recommended that growth in the money supply should be consciously backed up with gold and other foreign hard currencies to guarantee price stability, and that, the Federal Government should establish a coordinating agency to synchronize conflicting monetary and fiscal policies and implementation that are inimical to the attainment of the macroeconomic goal of economic stabilization and growth.

Role of the government towards stock markets and carbon emissions: evidence from wavelet approach.

The government of any country can play a great role in promoting economic and environmental policy reforms in both normal and crisis periods, but during the crisis period, the role of the government should take the economy into a recovery position. The stock market is the backbone of the financial system that needs the government's attention, especially in the period of financial stress and environmental protection is the responsibility of every economy to live in a healthy environment. Combining this motive, this study analyzed the role of the government towards the stock market and carbon emission by using different approaches, including the wavelet approach, OLS regression, and the Granger causality test. The wavelet approach is useful for analyzing the role of the government at different time intervals by using the time horizon from 1993 to 2021. World governance's six indicators in terms of voice and accountability, control of corruption, rules of law, regulatory quality, political stability, and government effectiveness are used as the proxy for the role of the government. Our findings show that all WGI indicators have a positive relationship with the stock market of Malaysia except voice and accountability while concerning voice and accountability, the role of the government of Malaysia is negative on the stock market. Similarly, our findings also show that the effective government governance mechanism through WGI indicators has a significant positive impact on CO2 emission due to industrialization. Furthermore, findings of the Granger causality test reveal that all the WGI indicators cause to stock market of Malaysia, and political stability has bi-directional causality indicating stock market index is also a factor that caused the political stability within Malaysia. In the Granger causality results of the CO2 and WGI indicators, there is unidirectional causality found between rules of law and regulatory quality with CO2 emission. This study advocated strong implementations for the investors for investment decisions in effective governance countries and implications for the government to remove their weakness by making effective governance related to the economy and as well as the environments within the country.

Multivariate time series analysis of COVID-19 Pandemic and gold price by using Error Corrections Model

Coronavirus (COVID-19) severe acute respiratory syndrome is an infectious disease that has a direct influence on the world’s population, as is obvious from the prevalence of COVID-19. However, as the COVID-19 virus continues to proliferate, its impact is becoming more and more significant and extensive. Accordingly, the study’s goal is to use the Error Corrections Model (ECM) to examine the relationships between the COVID-19 pandemic and gold prices. An Error Corrections Model was used by the researchers in this investigation. Error Correction Models and long-term equilibrium can be found for non-stationary time series that have been cointegrated together. Two-step estimation can be used to estimate the ECM since a proportion of the imbalance from one period is adjusted in the succeeding period, the system returns to equilibrium. The calculated cointegrating relations are used to create the error correction terms, and the estimation of VAR is done by a first differencing process, and then appears in the model as an explanatory variable, with the term of error correction. The COVID-19 pandemic and gold price data were made available to the general public in a sample data. For the year 2020, it includes data on daily observations for the relevant variables. R-language results show that the COVID-19 pandemic and gold prices have been demonstrated to have a long-term causal relationship. During the most recent period of variance decomposition, 99.76 percent of the variance in covid-19 explains only 0.24 percent of the variance in gold price. This explains that there is no short-term causal relationship between covid-19 and gold price, as indicated by the Wald test results, the granger causality results have shown that the gold price is influenced not only by itself but also by the Covid-19 pandemic. Finally, there is a positive relationship between the Covid-19 pandemic and the price of gold, and this has a negative impact on human life during 2020.

Foreign Direct Investment, Non-Renewable Energy and Economic Growth: An Empirical Analysis from South Africa

Purpose This study aims to examine the connection between foreign direct investment, non-renewable energy, and economic growth in South Africa. Methodology The data was collected from the World Bank’s website from 1990 to 2020. The VECM and Granger causality approaches were employed to evaluate the connection between Economic growth, FDI, and Non-renewable energy. Findings The findings show that a long-term equilibrium relationship exists among the variables. Further, the result of the Vector Error Correction Model (VECM), shows a coefficient value of 0.0038 indicating the short-term adjustment speed of the system towards its long-run equilibrium. The result of Granger causality shows no bidirectional Granger causality among any of the variables. There is a Unidirectional Causality between GDPC and NRENW. Conclusion The study concluded that non-renewable energy can enhance economic growth in these countries, but it can aggravate the degradation of the environment. Essentially, foreign direct investment (FDI) significantly and negatively affects growth, suggesting that FDI entry into African nations negatively affects the environment.

Nexus Between Pension Funds and Stock Market Sustainability Development in Nigeria

Objective: It has long been recognized that pension systems across the emerging markets including Nigeria have undergone dramatic reforms over the last twenty-eight years. This process has mainly been fueled by the demographic problem faced by modern financial systems. Hence, this study examines the short-run and long-run dynamic of pension funds on capital market development in Nigeria using ex-post facto research design. Method: Data were collected from the Central Bank of Nigeria (CBN) statistical bulletin and annual report of the pension fund commission from 1995 to 2022. Data collected were analyzed using descriptive statistics, unit root test and auto regressive lag model (ARDL) and Toda Yamamoto multivariate granger causality approach. The unit root test reveal that all the variables used in the study are non-stationary at first difference except inflation which is stationary at level. Results: The findings from the ARDL analysis reveal a short-run dynamic impact between pension funds and capital market development due to the coefficient of error correction mechanism (speed of adjustment) which is negative and significant at 5% level of significant. The result suggests that over 22% of the short run disequilibrium is corrected in the long run equilibrium. However, the results from the long-run dynamic impact reveal a positively significant impact between the proxies of pension funds (pension contributory fund, pension investment) and control variable - inflation to be positively significant with capital market development proxied by market capitalization as a ratio to GDP at 5% level of significant. The results of the Toda Yamamoto granger causality results suggest a bidirectional relationship between pension funds (pension contributory fund, pension investment) and market capitalization as a ratio of Gross Domestic Product (GDP) in Nigeria at aggregate level. This suggest that the relationship between pension funds (pension contributory fund, pension investment) and market capitalization as a ratio of Gross Domestic Product (GDP) in Nigeria was two-ways. Conclusion: The study concludes that pension fund administrators in Nigeria should understand that the rate of inflation is dynamic in Nigeria and the value of money is being lost as money is not worth it values in the next five years.

Investigation into the dynamic relationships between global economic uncertainty and price volatilities of commodities, raw materials, and energy

Purpose This paper aims to deepen the understanding of the relationship between global economic uncertainty and price volatility, specifically focusing on commodity, industrial materials and energy price indices as proxies for global inflation, analyzing data from 1997 to 2020. Design/methodology/approach The dynamic conditional correlation generalized autoregressive conditional heteroscedasticity model is used to study the dynamic relationship between variables over a while. Findings The results demonstrated a positive relationship between commodity prices and the global economic policy uncertainty (GEPU). Except for 1999–2000 and 2006–2008, the results of the energy price index model were very similar to those of the commodity price index. A predominant positive relationship is observed focusing on the connection between GEPU and the industrial material price index. The results of the pairwise Granger causality reveal a unidirectional relationship between the GEPU – the Global Commodity Price Index – and the GEPU – the Global Industrial Material Price Index. However, there is bidirectional causality between the GEPU – the Global Energy Price Index. In sum, changes in price indices can be driven by GEPU as a political factor indicating unfavorable economic conditions. Originality/value This paper provides a deeper understanding of the role of global uncertainty in the global inflation process. It fills the gap in the literature by empirically investigating the dynamic movements of global uncertainty and the three most important groups of prices.

Government social spending and poverty reduction in Nigeria

The study examined the impact of government social spending on poverty reduction in Nigeria for the period 1981-2020 with time series data obtained from the Central Bank of Nigeria Statistical Bulletin. Poverty (household consumption expenditure) was specified as a function of social capital Spending, social recurrent Spending, Inflation rate, and Unemployment. The Augmented Dickey-Fuller unit root test shows that all the time series data were stationary at first difference (I(1)). The result of the Johansen cointegration proves evidence of long run relationship among the variables. The result of the Fully Modified OLS indicates that: government capital spending on social goods and services has significant impact on poverty reduction in Nigeria; government recurrent spending on social goods and services has significant impact on poverty reduction in Nigeria. The Granger causality result shows that there is a uni-directional causality relationship running from government capital spending on social goods to poverty reduction. There is a uni-directional causality relationship running from government recurrent spending on social goods to poverty reduction. This implies that social government spendings has the potency of reducing poverty if resources are effectively monitored and productively spent for the purpose they are meant for. Based on these findings, the study recommends that government should establish an agency that should ensure adequate monitoring and implementation of government social expenditure in Nigeria.

The Nexus between Foreign Direct Investment and Electricity Consumption in South Africa

The study investigates the nexus between foreign direct investment inflows and electricity consumption in South Africa. The study utilized borrowed time series data sourced from the World Bank and South African Reserve Bank spanning from 1970 to 2020. The study employs a Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) models to investigate the nexus between foreign direct investment inflows and electricity consumption in South Africa. The results of the Johansen cointegration test revealed the presence of cointegration relationships between the variables in the study. The results of the FMOLS and DOLS revealed negative statistically significant and insignificant relationship between electricity consumption and foreign direct investment inflows in South Africa, respectively. Other results revealed that economic growth has a positive statistically significant relationship with foreign direct investment inflows. The Granger causality results revealed unidirectional causality running from economic growth to foreign direct investment inflows. The study recommends that the government and policymakers must revise policies on electricity consumption and economic growth to attract foreign direct investment inflows in South Africa.

The Causal Links between Urbanization, Energy Use and Carbon Emissions: A Case of SADC Region

The study aimed at examining the causal links between urbanization, energy consumption and carbon emissions in the case of selected SADC countries. The study employed annual time series data spanning from 1988 to 2020 extracted from the World Bank Development indicator Databank. A Pedroni cointegration test was employed to test whether the variables of interest move together in the long run. Granger causality backed with Full Modified Ordinary Least Squares (FMOLS) was used to detect the direction and the nature of causality among the variables of interest. The results from Pedroni cointegration test revealed that the variables move together in the long run. Granger causality results indicate bidirectional causality among the three variables in the short-run and one way Granger causality running from both energy consumption and urbanization to carbon emission in the long-run. Furthermore, the FMOLS shows the positive contribution of both energy consumption and urbanization to carbon dioxide emissions. The results from the empirical work make some significant contribution to the existing body of knowledge and to the policy makers and urban planners of SADC region. Policies in this region should focus on finding coherent ways of discouraging movements of people from rural areas to urban areas. This can be done by making rural environment conducive enough to motivate people to engage in agricultural activities.
 Keywords: Urbanization; Energy Consumption; Carbon Emissions, SADC region

Analyzing the Impact of Urbanization on Carbon Dioxide Emissions: Fresh Evidence from Pakistan

Over several decades, unplanned urbanization is increasing CO2 emissions due to higher energy demand from industrial activities, transportation, and waste management. The present study assesses the link between urbanization and CO2 emissions in Pakistan from 1985 to 2020 by controlling FDI, access to electricity, and institution quality. The empirical results are estimated by using the ARDL approach while causality is extracted through the Granger Causality test. The empirical findings depict that urbanization leads to CO2 emissions. Furthermore, institutional quality declines CO2 emissions, while FDI and access to electricity significantly increase CO2 emissions. The Granger Causality results indicate a bidirectional causality between electricity access and CO2 emissions. At the same time, CO2 emissions and urbanization show unidirectional causality. The study suggests that Pakistan needs to promote an environment-friendly energy consumption pattern

Impact of Worker’s Remittance on Financial Development of Nepal

This study analyzes the impact of remittance inflows on financial development of Nepal. Money supply and total bank deposits are selected as the dependent variables while remittance inflow as an increment of GDP, foreign direct investment as an increment of GDP, inflation, per capita income and exchange rate are selected as independent variables. The key sources of data include Quarterly Economic Bulletin published by Nepal Rashtrabank, Economic Survey published by Ministry of Finance and World Development Indicators of World Bank. The study is grounded on the secondary data which are collected for the period of 31 years from 1990 to 2021. The co-integration analysis has been performed to analyze the long run co-integrating relationship between remittance and financial development. It is found that there is long run co-integrating relationship between financial development and remittance inflow in Nepal.
 In addition, remittance inflow has long run positive relationship with total deposits. This indicates that higher the remittance inflow, higher would be the total deposits. The findings also show that per capita income, inflation and exchange rate has positive relationship with total deposit and money supply. This indicates that increase per capita income leads to increase in total deposits and money supply in long run. Likewise, the study indicates that higher the inflation in long run, higher would be the total deposits and money supply. The result of Granger Causality shows that there is unidirectional causality from remittance to total deposits and money supply. This indicates that remittance leads to increase in total deposits and the money supply in Nepal.

Food import demand in Peru, 1980-2021

ABSTRACT This study analyses and explains food imports from Peru: 1980–2021. The econometric method uses Autoregressive Distributed Lagged (ARDL) models. The result of the stationarity property of I(0) and I(1) of the variables suggests the use of the ARDL model. The Granger causality result shows that variables explain food imports. The bound test cointegration showed a long-run cointegration to exist between foot imports and income, the real exchange rate, relative prices, price of fertilizers, and institution. The short-run analysis shows positive effects of relative prices and the real exchange rate towards food imports. And in the long-run analysis, we have found a positive relationship between food imports and economic growth. Also, there is a negative relationship between food imports and the growth of the real exchange rate, the price of fertilizers, and the opening of the Free Trade Agreement. Policies for self-sufficiency are recommended through investment policies in human capital for research in fertilizers and alternative organic manures; in financial capital for access to credit for small producers; in social capital, with support for sectors with lower productivity in rural areas to reduce dependence on the international market and the growing demand for food imports that puts food security at risk.

Empirická verifikace vztahu mezi saldem hospodaření sektoru vládních institucí a běžného účtu platební bilance: Případ zemí Evropské unie

The article focuses on the relationship between the general government balance and the current account of the balance of payments. The aim is to summarize the existing knowledge about the relationship based on the twin deficit theory and to carry out an empirical verification. As part of the analysis, the Granger causality method is first applied to each EU country separately, and then the threshold panel regression method is used. For the subsequent estimation of the threshold panel model, the direction of the relationship from the general government balance to the current account is considered based on the results of Granger causality. Within the panel, the dependence of the balances on the level of the general government debt to GDP is tested. First, the relationship and its strength are verified in all EU countries. Due to the diversity of EU countries, the economies are subsequently aggregated into sub-panels. Threshold values for general government debt affecting the strength of the relationship between balances are different for individual panels and depend, among other things, on the perception of these countries by the financial markets and often also on the (high) indebtedness of the private sector, which usually requires a more drastic fiscal policy response.

Foreign Debt, Exchange Rate, Inflation and Economic Growth: A Co-integration and Causality Analysis

Pakistan is grappling with a significant debt crisis and seeking assistance from the IMF and allied nations to alleviate the situation. This has aroused the interest of the academic community to understand the intricacies of the debt trap and explore potential solutions. This study examines how foreign debt affects the economic growth of Pakistan by analyzing selected macroeconomic variables for the period 1990-2020. The results of dynamic autoregressive distributed lag models show that Pakistan's economic growth performance is significantly and adversely impacted by debt servicing and exchange rate fluctuations. From the Granger causality results, it is evident that there is a neither unidirectional nor bidirectional causal relationship between GDP and foreign debt. This rejects the notion of a direct relationship between the two, as proposed by previous studies. The study also finds that foreign debt negatively affects the economic performance of Pakistan’s economy via its effects on inflation, exchange rate and debt servicing. The paper offers useful policy recommendations.

Credit Risk Management and Its Impact On the Performance of Commercial Banks in Pakistan: An Application of Penal Var Approach

Credit risk is nothing else but the default by the borrower. Credit risk management practices are adopted by the banks to mitigate this risk. It is crucial for every bank or financial institution to follow the effective risk management system to avoid or mitigate the credit risk. This paper is an attempt to investigate the effect of default or credit risk management on the financial performance of banks and how factors of CRM affect each other. VAR approach has been used to analyze the penal data. Sixteen private commercial banks have been taken into the consideration. Data has been collected from the year 2012 to 2021. Granger causality and impulse response have also been identified and analyzed. E view has been used for the purpose of analysis. Results of Granger causality reveal that almost all the variables are affecting or explaining each other. There is a bidirectional association ship between LTDR and ROE. In variance decomposition analysis, all the variables are mostly being affected by themselves or by their own shocks and shocked of other variables. Finally, short term relationship has been found or identified through VECM. This study is helpful for all the stakeholders of commercial banks. This study is also helpful for the students using penal var approach for understanding and analysis purpose. This study is also helpful for the decision makers to frame policy of credit risk management and see how effective risk management affects the financial health of commercial banks.