Second-generation Panel Unit Root Tests Research Articles

Nexus among energy consumption structure, energy intensity, population density, urbanization, and carbon intensity: a heterogeneous panel evidence considering differences in electrification rates.

The main purpose of this article is to link the environment, economy, electricity, and society and put forward a new point of view. The current research mainly explores the relationship between the environment, economy, and society and lacks a discussion on electricity. Using a new research framework, this article examines the relationship between energy intensity, energy consumption structure, population density, urbanization rate, and carbon intensity based on relevant data from 2000 to 2017 in China. In the empirical research, according to the cluster analysis, China's 30 provinces are divided into three regions according to the electrification rate standard. The cross-sectional dependence test method is used to verify the cross-sectional dependence of the data, and the second-generation panel unit root test method is used. Exploring the relationship between the variables, this article finally uses the convergence analysis method to explore the degree of influence of each variable on the carbon intensity. The empirical results show that there are both short-term effects and long-term relationships in various regions, and the influencing factors of each region are different. It further shows that the carbon intensity of the four panels shows convergence, β absolute convergence, and β conditional convergence, but the main influencing factors in different regions are different. Finally, based on the results of empirical research, policy recommendations for reducing carbon intensity in different regions are put forward.

PANEL DATA ANALYSIS OF RELATIONSHIP BETWEEN ECONOMIC GROWTH, FOREIGN DIRECT INVESTMENT, EXCHANGE RATE AND TRADE OPENNESS IN NEWLY INDUSTRIALIZED COUNTRIES

This study examines the effects of foreign direct investment, gross fixed capital formation, real exchange rate, and trade openness on economic growth in newly industrialized countries for 1982 and 2019 by using the panel ARDL method. Before estimating panel ARDL, we tested the existence of cross-sectional dependence among the countries, determining the degree of the integrations of variables by using second-generation panel unit root tests and examining the cointegration among the variables. Finally, we carry out the Dumitreuscu Hurlin causality test to determine the direction of the causal relationship between variables. The study results indicate a positive long-run relationship between economic growth and FDI, gross capital formation and real exchange rate, and a negative long-run relationship with trade openness. The study's findings have significant implications for the industrial policies that these countries should adopt to reach developed countries.

The dynamic effect of eco-innovation and environmental taxes on carbon neutrality target in emerging seven (E7) economies

After the Paris Climate Conference (Conference of the Paris COP21), emerging countries also start succeeding in carbon neutrality targets. In doing so, environmental sustainability has become a vital concern over the past few decades. To control the pollution from combustion gases and to mitigate the destructive effects of carbon emission on environmental quality, governments and policymakers need to consider the important factors that decrease the net carbon emission level, such as eco-innovation and environmental taxes. The literature on the environmental taxes and eco-innovation to control carbon emission is scant. Therefore, this study fills the knowledge gap by evaluating the dynamic effect of eco-innovation and environmental taxes on the carbon neutrality target in emerging seven (E7) economies from 1995 to 2018 and other control variables. The study uses advanced panel data econometric tools to handle various issues such as cross-section dependence structural break and slope heterogeneity for empirical analysis. The study uses the second-generation panel unit root test, Westerlund's cointegration tests, CS-ARDL long-run and CS-ARDL short-run analysis, AMG, and CCEMG for robustness check. The study's outcomes confirm that eco-innovation and environmental taxes play a major role in carbon abatement and Environmental Kuznet Curve (EKC) presence found in E7 countries.

Institutional Quality and Tourism: Panel Causality Analysis in the Case of Mediterranean Countries

Using panel data methods this study examines the relationship between institutional quality and tourism in the case of 12 Mediterranean countries. Six indexes of the Worldwide Governance Indicators database and a general index calculated as their average were taken into consideration as institutional quality indicators. International tourism receipts per tourist and international tourism receipts as a percentage of export were used as tourism performance indicators. In analysis, the cross-sectional dependence was examined by Pesaran (2004) CD test and in accordance with the findings of this test, first and second-generation panel unit root tests were applied. Taking into consideration of the stationarity of the variables and non-homogeneity of the parameters, the relationship between institutional quality and international tourism revenues was examined by Dumitrescu and Hurlin (2012) heterogeneous panel causality test. Findings of the causality analysis strongly supported the causality toward international tourism receipts per tourist from institutional quality variables. Causality to the international tourism receipts as a percentage of export was supported for some of the institutional quality variables.

International Environmental Agreements and CO2 Emissions: Fresh Evidence from 11 Polluting Countries

This study attempts to evaluate the energy and carbon footprint within the framework of international environmental treaties and the efforts made by 11 large polluting countries to mitigate climate change. The econometric methodology accounts for the presence of cross-sectional dependence while it employs second-generation panel unit root tests and cointegrated relationships. To secure the robustness of our findings, we conduct an ARDL approach employing dynamic panel data techniques. Dynamic OLS is also applied to verify the validity of the empirical results. The empirical analysis supports that the reduction in CO2 emissions can be achieved without a slowdown in economic activity for the sample countries. The findings suggest insightful policy implications for policymakers and government officials.

The dynamic links between nuclear energy and sustainable economic growth. Do institutions matter?

This study investigates the relationship between nuclear energy consumption and economic growth and the role of institutional quality in explaining this relationship using panel data of 18 top nuclear power-consuming countries for the period 1995–2017. It is the first research effort that incorporates the impact of institutional arrangements into the nexus between nuclear energy and economic growth. For this reason, we employ an institutional quality index which constitutes a composite measure of core institutional dimensions such as the rule of law and regulatory efficiency. The results of first and second-generation panel unit root and cointegration tests reveal a long-run relationship between economic growth, nuclear energy consumption, institutional quality, real gross fixed capital formation, and labor force. The pooled mean group estimation shows that nuclear energy consumption and institutional quality exercise significant positive effects on economic growth in the long run. In contrast, higher institutional quality has a negative long-run impact on the use of nuclear power. Furthermore, it is only observed a unidirectional causal effect from economic growth to nuclear energy consumption in the short run. Given the global controversies over the role of nuclear power in promoting sustainable economic growth, our findings imply that the institutional framework of the countries that consider nuclear energy as a long-term clean energy option has to be reassessed.

A panel causality analysis of the relationship between financial development and economic growth in OECD countries

This study examines the relationship between financial development and economic growth. Thus, this study aims to find empirical shreds of evidence for the direction of the causality between financial development proxied by domestic credit to the private sector and per capita GDP growth by using the panel granger causality test of the Dumitrescu-Hurlin Test. For this purpose, we used a panel of 16 OECD countries from 2008 to 2019 to provide evidence of whether the supply leading hypothesis or demand following hypothesis or both holds. All econometric exercises are carried out for whole countries and high-income countries, and upper-middle-income country groups in the sample. Due to cross-sectional dependence among the sample countries, we determine the degree of integration of each variable by employing the second-generation panel unit root tests of CIPS. We continue our analysis with the panel causality test developed by Dumitrescu and Hurlin (2012) to determine the direction of the causality between variables. For this purpose, we performed three sets of causality analyses. In the first one, we include all countries in the panel. We then divided the countries into two sub-groups based on the income classification and the level of financial development in these countries proxied by domestic credit to the private sector. The causality test results, including all countries in the sample, indicate that the hypothesis holds the supply leading hypothesis during the sample period. This means that even though this panel contains countries with a development level, financial development still seems to be a pre-condition for economic growth for these nations. We also obtain the same results when we include high-income countries in the sample. The study results provide compelling evidence for the relationship between economic growth and financial development since the sample includes countries with different levels of financial development with different degrees of per capita GDP growth.

Saving Tendency of Developed and Developing European Countries

In the previous literature studies, the saving condition is mainly examined focusing in Developing countries and Asian countries. The examination on the saving condition is crucial due to the linkages between saving accumulation and economic growth. The studies that focused in Developed countries are limited. This study extends the analysis by comparing the saving determination in Developed and Developing European countries and contributes to the literature of saving in two ways. First, the study compares the two panel groups, Developed and Developing European countries, which might reveal how economic development could affect the saving behavior. Second, the study considers the cross-section dependency effect in the panel data analysis by applying the testing (second-generation panel unit-root and cointegration tests) and the estimation approaches (Augmented Mean Group, AMG estimator). The study demonstrates that ignoring the cross-section dependency effect might lead to misleading results. Four determinants of savings are examined (GDP per capita, age dependency ratio on working group, inflation and government expenditure). Our results reveal the existence of cointegration and cross-section dependency in the saving relationship in both panel groups. Comparing the results across panel groups, it is observed that government expenditure is contributes to lower saving in both groups of countries with larger impact in the Developed European countries. On the other hand, GDP contributes to higher saving in both groups of countries. Inflation also leads to higher saving in the Developed group but not in the Developing group. Age dependency ratio is not influential in the Developed group but might trigger lower saving in the Developing group.

Does energy trilemma a driver of economic growth? The roles of energy use, population growth, and financial development

Economic growth can increase the economy's energy intensity, impeding security through unmanaged demand and affecting sustainability. This study employed energy use, population growth, and financial development from 1990 to 2016 as moderator variables to examine the impact of energy trilemma on the economic growth of the top ten countries in the World Energy Trilemma Index (WETI) 2020. We applied advanced econometric methodologies for empirical analysis, such as second-generation panel unit root tests, and cross-section dependence. Besides, we used the random-effect and fixed effect panel generalized method of moments (GMM) for short-run estimates and the random effect and fixed effect generalized least squares (GLS) regressions and robust fully modified least squares (FMOLS) regression for the long-run estimates. The results indicate that the impact of energy trilemma and population growth on economic growth are significant only in the long-run, while energy use and financial development influence economic growth in both the short-run and the long-run. Our findings suggest that policymakers implement lesser potential for Pareto perfections in the energy system by levying energy security, affordability, and sustainability taxes on energy products, and that they highlight energy efficiency and support robust policies to enhance financial development. Study limitations and directions for future research in the area are discussed.

Firm-level TFP convergence: an application to the German electricity and gas industry

ABSTRACT This paper investigates the degree of total factor productivity (TFP) convergence for the German electricity and gas industry. We use different approaches to compute the productivity level and several classic and new second-generation panel unit root tests to check the existence of a convergence process. For robustness purposes, we compare the convergence between small- and medium-sized enterprises and large companies. Our findings show the existence of the TFP convergence process, a result confirmed by all categories of tests we use. Therefore, we show that an innovation transfer is recorded between German electricity and gas firms and it is slightly higher for small- and medium-sized enterprises.

Climate change and agricultural development in West Africa: Role of renewable energy and trade openness

The design, implementation, and evaluation of energy policies in combating climate change are becoming increasingly evident to strengthen economic growth driven by the agricultural sector in most developing countries. The study analyzes the direct and indirect effects of renewable energy consumption (REC) on agriculture value-added (AgVA), CO2 emissions, and trade openness in the short- and long-run in the West African countries. The second-generation panel unit root tests, the panel cointegration methods, and Panel Vector Error Correction Model are used with World Bank data from 1990 to 2015. A panel Granger causality test was also used to determine the direction of causality between variables. Findings show a unidirectional relationship between AgVA, CO2 emissions, and REC; between REC, gross fixe capital formation (GFCF) and trade openness. Moreover, the bidirectional hypothesis is verified between agricultural development and trade openness. However, the null hypothesis is found between AgVA and GFCF, on the one hand, and GFCF and CO2 emissions, on the other hand. These results suggest that fostering renewable energy policy and revisiting trade policy toward reducing environmental pollution will enable agricultural development and boost the regional economy. AcknowledgmentThe author wants to thank Dr. Moukpè GNINIGUE for his technical supports and Prof. Jean Marcelin Bosson BROU from the University of Houphouet Boigny (Cote d’Ivoire), Dr. Odzadifo K. WONYRA and Dr. Hodabalo BATAKA from the University of Kara, Dr. Koffi Massesso ADJI from the West African Sciences Services Centre on Climate Change and Land Use (University of Cheikh Anta Diop, Dakar) and Essotanam MAMBA from the University of Lomé for their constructive comments on the earlier version of this manuscripts. Finally, the author is grateful to the anonymous reviewers and Editor-in-Chief of Environmental Economics, whose comments have improved this paper. However, the opinions expressed in this paper are solely those of the author.

What determines environmental deficit in Asia? Embossing the role of renewable and non-renewable energy utilization

Considering the sustainable development goals (SDGs) 7 and 13 of certain access to the reliable, renewable and clean energy technologies and climate action, this study explored the dynamic nexus between financial development, economic growth, non-renewable and renewable energy utilization, trade openness and ecological footprint by utilizing the second-generation panel data approach covering the period from 1990 to 2014 for 20 Asian economies. The inspection of cross-sectional dependency (CSD) tests confirmed the CSD exists across cross-sections. For this intention, the study employed the second-generation panel unit root tests, panel cointegration techniques, augmented mean group (AMG) approach for the estimation of long-run magnitude of the parameters. The empirical findings illustrate that economic growth and non-renewable energy utilization significantly accelerate the environmental deficit, while renewable energy utilization reduces the total environmental damages in the long-run. Furthermore, country-specific outcomes explore the influence of renewable and non-renewable energy utilization on ecological footprint varies in terms of their nature of association, influence in their magnitude and their significance level. Moreover, Dumitrescu and Hurlin (D-H) causality test discovered the feedback hypothesis between ecological footprint and financial development, economic growth, non-renewable and renewable energy utilization and trade openness. Finally, current study expresses the some vital policy implications for Asian countries.

Towards sustainable production and consumption: Assessing the impact of energy productivity and eco-innovation on consumption-based carbon dioxide emissions (CCO2) in G-7 nations

Abstract Environmental degradation has gained significant momentum over the past few decades. Globally, researchers have focused on environmental pollution due to its impact on billions of human lives. With the growing demand for fossil fuels across developing markets, there has been little global consensus on reducing the energy use and carbon emissions. Then again, many countries are making efforts to comply with the Paris Climate Agreement of 2015. Past literature suggests that international trade leads to favorable socioeconomic outcomes, yet some experts believe that international trade causes natural resource scarcity and environmental degradation. The environmental economics literature offers but no empirical studies on the nexus between energy productivity and consumption-based carbon dioxide. This paper has attempted to fill this knowledge gap by analyzing the impact of international trade (imports and exports), eco-innovation, energy productivity, and renewable energy consumption on CO2 emissions for G7 countries from 1990 to 2018. Data were analyzed using different tests: slope homogeneity and cross-section dependence test; second-generation panel unit root test; Westerlund panel co-integration test; cross-sectional autoregressive distributed lag; augmented mean group; panel causality test. The results suggested that exports, imports, eco-innovation, GDP, renewable energy consumption, and energy productivity are primary factors of consumption-based CO2 emissions in the G7 countries.

Are shocks to tourist arrivals permanent or transitory? A comprehensive analysis on the top 20 most-visited countries

ABSTRACT Tourism sector is highly vulnerable to shocks due to its characteristics. The purpose of this paper is to investigate whether the effects of the shocks on the tourism sector would be permanent or transitory. To this end, I analysed the number of tourist arrivals in the top 20 most-visited countries for the 1995–2018 period. I employed a battery of cross-sectional dependency tests, second-generation panel unit root tests without and with structural breaks. The findings significantly change from non-stationary to stationary when structural breaks are incorporated. The results suggest that tourist arrivals to top 20 most-visited countries are stationary under sharp structural breaks. This finding is important in that shocks hitting tourism sector are transitory and the effects of shocks will eventually die out, but the new equilibrium will not converge to its pre-shock level.

An empirical nexus between economic growth, energy utilization, trade policy, and ecological footprint: a continent-wise comparison in upper-middle-income countries.

This study investigates the causal connection between economic growth, foreign direct investment, primary and renewable energy utilization, trade openness, and ecological footprint for 33 upper-middle-income countries (UMICs) from Africa, Asia, Europe, and America during the period from 1994 to 2017. Initially, first- as well as second-generation panel unit root tests are applied to check the integration order after confirming the cross-sectional dependency and heterogeneity. Four different tests (FMOLS, DOLS, FGLS, and AMG) are applied to estimate the long-run elasticity, whereas Dumitrescu and Hurlin (D-H) non-causality test is used to test growth, conservation, and feedback hypothesis. Results show negative relationship of economic growth on ecological footprint in Africa and Europe; renewable energy utilization in Asia, Europe, and America; and trade openness in Asia. Moreover, the results revealed an adverse impact of trade openness on ecological footprint in case of Africa and America. Furthermore, the results of D-H panel non-causality test confirm the growth hypothesis for economic growth to ecological footprint in Africa, Asia, and Europe; foreign direct investment to ecological footprint in Africa and Asia; primary energy utilization to ecological footprint in Asia; renewable energy utilization to ecological footprint in America; and trade openness to ecological footprint in Africa, Asia, and America. Furthermore, the feedback hypothesis was confirmed between economic growth and ecological footprint in Asia and Europe; foreign direct investment and ecological footprint in Africa and Asia; renewable energy utilization and ecological footprint for America; and trade openness and ecological footprint for Asia and America. Finally, in context to efficient policy implications, it is suggested to associate the economic growth with clean energy and environment-friendly technologies by expanding the share of renewable energy in America and economic growth in Africa and Europe. Furthermore, Asian policy makers need to focus on foreign direct investment and trade openness by using green energy to overcome the environmental degradation. Impulsion with these findings, the central authorities of UMICs need to focus on more investments in environmental quality not only through foreign direct investment but also exchanging their clean energy technologies through trade policies such as tax exemption, feed-in tariffs, and subsidies. Government of these countries ought to upgrade the conventional capital which will ultimately improve the human lives by providing clean environment.

Energy Consumption, Environmental Degradation and Growth: A Panel Data Analysis

Energy is essential as an input to develop economic, although it could bring negative effect on environmental quality. The relationship between energy consumption, environmental degradation and economic growth have been widely studied, but there is no consistency in the relationship. The objectives of this study are to determine the short-run relationship (one-way or bidirectional) and to reveal the long-run relationship for each pair of variables. The second-generation panel unit root and cointegration test were used in the analysis. Breusch-Pagan LM test suggests that there is a cross-sectional dependency for all the models and integrated of order one, I (1). Cointegration test indicates that economic growth has long-relationship with carbon dioxide and energy consumption in high-income countries. In low-income countries, carbon dioxide has a long-run relationship with energy consumption and economic growth. In the short run, we have evidence of a bidirectional relationship between energy consumption and economic growth in high-income countries but a one-way relationship in low-income countries. Overall, it can be concluded that the three variables are related. This study develops a deeper awareness and understanding of the relationship between the variables in distinct levels of economies. Keywords: energy consumption; CO2, economic growth

Modelling the employment, income and price elasticities of outbound tourism demand in OECD countries

This study examines how employment affects demand for tourism in the short and long run, controlling for the effects of income and relative prices within a panel of 32 Organisation for Economic Co-operation and Development (OECD) countries throughout the 1995–2016 period. To this end, we employ second-generation panel unit root tests, panel cointegration tests and panel data estimation techniques. Panel cointegration tests uncovered a long-run relationship between international tourism expenditure per adult, gross domestic product per adult, effective exchange rates adjusted relative prices and employment to adult population ratio. A particular implication of the result would be that the quality of employment by way of remuneration which is sufficient enough to sustain outbound tourism expenditure does not move in synchrony with workforce expansion. The failure of employment to be a significant determinant of long-run outbound tourism demand may have to do with economic and demographic factors in OECD countries as well as employment business cycles. Diminishing returns to employment, a general decline in the labour income share, a rising inequality of wage distribution among the working population due to relative adjustments in factor intensities as well as an aging population may have played contributory roles to this phenomenon. Therefore, tourism stakeholders should take note of median wage changes of possible departure countries in relation to destination costs when developing marketing frameworks for tourist locations. Moreover, reduction in unemployment rates is only indicative of short-run changes, implying that a significant impact on average tourism demand should not be expected unless average income also rises.

Impact of financial development on CO2 emissions: A comparative analysis of developing countries (D8) and developed countries (G8).

Financial development is one of the key drivers of rapid economic growth as well as CO2 emission in the environment. This study aims to investigate the casual links between financial development and CO2 emission in G8 and D8 countries for the time period from 1999 to 2013. We used PCA to develop financial development index from its five sub-components. Second-generation panel unit root tests are applied to check the stationary level and to tackle the presence of cross-sectional dependence in panels. The empirical results of PMG-panel ARDL technique show that financial development has significant and positive impact on carbon emission at a 1% statistical level in both panels in the long-run. The impact of financial development and energy consumption is more evident in D8 and G8 countries respectively. The energy use and trade openness affect positively while GDP significantly causes to decline the carbon emissions at 1% statistical level. The results of D-H causality test show that majority of the variables have one-way causality towards CO2emission in both panels except the financial development and energy use having two-way causality in G8 panel only. The empirical findings of the present study suggest that through improved financial system, more funds should be invested in clean energy projects to adopt the renewable energy, strict monetary policies should be implemented to reduce the consumption of big ticket items, and adoption of measure to reduce trade embodied emission is suggested.

Does ICT lessen CO2 emissions for fast-emerging economies? An application of the heterogeneous panel estimations.

This study examines the effects of electricity consumption, financial development, economic growth, trade and ICT on CO2 emissions in the fast-emerging countries, excluding Russia due to the unavailability of data. Cross-sectional dependency was identified using the Pesaran (2004) and Breusch and Pagan CD tests from Breusch and Pagan (1980) using annual data from 1993 to 2014 based on data availability. The second-generation panel unit root test was applied to investigate the integration order of the series. The long-run relationship among the variables was confirmed using second-generation panel cointegration techniques, which take cross-sectional dependency into account. Additionally, this study utilized the FMOLS, DOLS and robust least square estimators to determine the long-run coefficients. The results suggested that electricity usage and financial development have a positive and significant impact, while economic growth and trade have a negative and significant impact on CO2 emissions. Additionally, an inverted U-shaped relationship between ICT and CO2 emission was confirmed. This implies that pollution declines after attaining a threshold point as the ICT usage increases. Furthermore, the Dumitrescu and Hurlin (2012) heterogeneous panel causality test suggested that there is a unidirectional causal relationship between electricity consumption and CO2 emissions, CO2 emissions and ICT, gross domestic product and CO2 emissions. Another unidirectional causality exists between financial development and CO2 emissions. The study suggests that renewable energy sources can be adopted to decrease carbon emissions and to promote clean energy. Financial development needs to be further strengthened to promote the use of eco-friendly ICT products.

The impact of tourism demand on regional inflation in Turkey

The main purpose of this study is to examine the effects of total tourism demand as well as the effects of both foreign and domestic tourism demand (measured by overnight stays) on regional inflation in Turkey based on the Nomenclature of Territorial Units for Statistics regions classified by Turkish Statistical Institute. To obtain the region-specific effects of tourism demand on inflation, we used the Random Coefficient Regression developed by Swamy by using the annual panel data over the period between 2004 and 2013. Before estimating Swamy Random Coefficients Regressions, we first tested the existence of cross-sectional dependence among the regions of Turkey. And then, based on the results of these tests, we examined the stationarity properties of variables by using second-generation panel unit root tests. The results of the study indicate that there are significant differences in regional effects of different forms of overnight stays on regional inflation. Also, the results show that the contribution of domestic overnight stays to overall and regional inflation is greater than that of foreign overnight stays. Thus, the findings of the study have significant importance in Turkey for designing tourism, industrialization, and monetary policies, particularly aiming to reduce the inflation by adopting inflation targeting regime.