Short-run Coefficients Research Articles

Consumption-based carbon emissions and trade nexus: Evidence from nine oil exporting countries

Abstract The relationship between international trade and carbon emissions has been studied extensively; nonetheless, consumption-based carbon emissions, which is adjusted for international trade, have not been studied. This study is an attempt to address the gap by using consumption-based carbon emissions which is adjusted for trade in case of oil-exporting countries. The effect of international trade is analyzed by treating exports and imports separately from 1990 to 2018. The long-run impact of all variables, i.e., exports, imports, and gross domestic product (GDP) is higher than the short-run coefficients. The empirical evidence, both in the long-run and short-run, confirms the negative effect of exports on consumption-based carbon emissions. Furthermore, gross domestic product (GDP) and imports have a positive and statistically significant impact on consumption-based carbon emissions both in the short-run and long-run. Policies related to consumption-based carbon emissions and international trade shall realize the effect of government policies to absorb it fully by taking approximately two years.

The imperative of social sector development for achieving the goal of inclusive growth in India: an analytical study

Growth inclusiveness has remained the prime agenda of India’s economic development policy. India did experiment with trickle down approach to development for achieving the objective of income redistribution and social justice, but floundered on that by the end of fourth plan. Since then the focus is on human welfare and development approach. Indian planners targeted the removal of poverty and inequality as the goal and the fundamental element of our growth strategy. This inclusive growth model necessitates the social sector development, an approach which is an adjunct to the capability approach of human development and also ensures rapid and sustained growth. The present study intends to construct the composite index of inclusiveness for India by deploying principal component analysis. The study also examines the relationship between different components of social sector development and inclusiveness index of growth in India, using an autoregressive distributed lag model for the period of 1986–2016. The empirical results suggest that the estimated coefficients of the long-run relationship between social sector development and growth inclusiveness are significant for ‘education outlays’, ‘expenditure of water supply and sanitation’, ‘housing and urban development’, ‘welfare for marginalized class’, ‘spending on social security and welfare’ and ‘food storage and warehousing’. For the short-run coefficients ‘labour and employment’, ‘rural development’ and ‘food storage and warehousing’ are statistically significant for inclusive growth of India. The analysis reveals a tardy progress towards rendering growth inclusiveness in India.

Analysis of the Relationship Between Trade Openness and Economic Growth in the Caribbean: A Case Study of the 3B2GD Countries

In recent times, small island countries in the Caribbean region have been fully devoted to the consolidation and development of both regional and international investments and trade corporations. Likewise, tremendous economic growth has also been witnessed in some of these trade collaborating countries. Thus, it is essential that the effect of the recent boost of economy in the region is empirically analyzed in order to ascertain if this is a product of the recent openness to trade in the region. Therefore, in this study, we applied the Autoregressive Distributed Lag (ARDL) bounds test of cointegration and the Granger causality tests in order to empirically investigate the dynamic relationship between trade openness and economic growth in the Bahamas, Barbados, Belize, Guyana, Grenada and Dominica (3B2GD) for the period from 2000 to 2019. The empirical results show that trade openness has significant effect on economic growth as there exist a long run relationship between trade openness and economic growth. Also, the results of the bounds test of cointegration confirms that in the 3B2GB economies, there is an existence of a bi-directional causality from trade openness to economic growth. Similarly, an evidence of uni-directional causality between trade openness and output growth is observed from the investigation, mostly with regards to Guyana. To further examine the long- and short-run coefficients, we analyzed the cumulative sum of recursive residuals (CUSUM) and the cumulative sum of squared residuals (CUSUMQ) plots for the respective 3B2GD economies. The results of the residual plots show that the parameters of the estimated ARDL models are stable. Keywords - Trade openness, ARDL, economic growth, cointegration, CUSUM, Granger causality. DOI: 10.7176/JESD/11-10-02 Publication date: May 31 st 2020

The effect of exchange rate volatility on economic growth in Turkey

Purpose - Exchange rate volatility, which is defined as continuous fluctuations in exchange rates, has been frequently discussed in the literature recently due to its effects on developing economies. Exchange rate volatility is costly to the domestic economy through its direct and indirect effects on households and firms. Turkey implied different exchange rate regimes between 1980 and 2019. Also the use of exchange rate as a policy tool for fighting against inflation or current account deficit has increased exchange rate volatility in Turkey. The review of literature on the impact of exchange rate volatility on economic growth provides mixed results. The impact differs from developed to developing countries. The purpose of this study is to examine the impact of exchange rate volatility on economic growth in Turkey between 1998:Q1 and 2019:Q3. Methodology - This paper uses an Autoregressive Distributed Lag (ARDL) Model to analyze the effect of exchange rate volatility on economic growth in Turkey. Volatility of exchange rate is calculated from the real effective exchange rate by using the GARCH (1,1) model. ARDL model and the bounds testing approach has some advantages over other conventional cointegration approaches. Lagrange Multiplier (LM) test for autocorrelation and Ramsey RESET test for specification error were applied. One last diagnostic test of CUSUM and CUSUMSQ are used to check the stability of the short run and long run coefficient estimates. Findings- Estimation results of ARDL model show that real effective exchange rate volatility has a negative and highly statistically significant effect on economic growth in Turkey. From the long run coefficients export and investment have a significant positive effect on real GDP, import and exchange rate volatility have significant negative effect on real GDP. Conclusion- In order to ensure sustainable economic growth, it is necessary to strengthen the fiscal and financial structure and reduce the volatility in exchange rates. Financial deepening and fiscal discipline are very important in this respect. Changing the production structure and investing in education and high technology, increasing the domestic production of intermediate goods are also required for achieving high growth rates.

Government Infrastructure Expenditure and Investment Drive in an Emerging Market Economy: Evidence from Nigeria

Government infrastructure expenditure in an emerging market economy is critical for stimulating investment that will, in turn, foster economic growth. Given the recent growth in government infrastructure expenditure and the present deplorable state of infrastructure in Nigeria and in most emerging market economies, it becomes necessary to investigate whether the increasing government infrastructure expenditure actually drives both domestic investment and foreign direct investment (FDI). Thus, this study aimed at ascertaining whether government expenditure on roads infrastructure, transport infrastructure, defense infrastructure, and health-care infrastructure has significant positive relationship with the level of domestic investment and FDI in Nigeria. This study also employed econometric techniques in its investigation such as the unit root test, co-integration test, and error correction mechanism (ECM) in the estimation of the relevant relationships. The result of the co-integration test revealed that there exist long-run relationships between the variables in the models. The result of the short-run coefficients of the error correction estimates showed that government expenditure on road, transport, defense, and health infrastructure has positive relationship with domestic investment and FDI. However, this relationship was found to be insignificant. Thus, we conclude that government infrastructure expenditure is a good driver of investment in an economy.

Petroleum production impacts on the economic growth of the OPEC countries: panel ARDL approach

The object of this study is to examine the relation between economic growth, in terms of gross domestic production (GDP) and petroleum production (PP) for the Organization of Petroleum Exporting Countries over the period of 2000–2016. The panel co-integration tests were applied to appraise the being of the relationship while the dynamic OLS (DOLS) and fully modified OLS (FMOLS) panel co-integration methods were applied to explore the long-run effect of PP on the GDP growth. Moreover, to estimate the short-run coefficient and causality relationship, the pool mean group (PMG) method was employed. The findings indicated that the GDP and PP are non-stationary and co-integrated series. The estimated panel coefficients using FMOLS, DOLS and PMG were calculated to be 0.64, 0.76 and 0.86, respectively. In addition, there was a unilateral causality from PP to GDP.

Relationship between Economic Growth and Electricity Consumption in India: A Re-Investigation

This paper attempts to re-examine the relationship between economic growth and electricity consumption in India for the period 1971-72 – 2016-17 for the country as a whole and for the agricultural and industrial sectors separately. Using gross value added (GVA) and per capita net national product (NNP) as indicators of economic growth techniques like cointegration, error correction model and Granger causality tests are applied for the study. The results indicate that there is a long run positive relationship between economic growth and electricity consumption when GVA is the indicator of growth. However, the short run coefficients are not statistically significant. Per capita NNP does not have any long run relationship with per capita electricity consumption but there is a unidirectional Granger-cause from log per capita NNP to log per capita electricity consumption when lag length is three. There is unidirectional Granger-causality from log GVA to log electricity consumption in the agricultural sector also. For the industrial sector, however, neither variable Granger causes the other. The cross section analysis for thirty two states and union territories of India reveals that per capita net state domestic product (NSDP) positively and significantly affects per capita electricity consumption of states in each of the years from 2012-13 to 2016-17. But the responsiveness of electricity consumption with respect to NSDP declines over the years.

THE LONG-RUN MONEY DEMAND FUNCTION: EMPIRICAL EVIDENCE FROM ITALY

The stability of money demand is fundamental in ensuring a county's effective monetary policy and it is being threatened when major shocks are taking place. The current paper aims to examine the factors that influence money demand in Italy for the period 1960-2017. Auto Regressive Distributed Lags (ARDL) technique and Error correction model (ECM) were applied to test for long-run and short-run coefficients respectively, while cumulative sum of recursive residuals stability test (CUSUM) evaluated parameters' stability. The results show that there is both a long- run and short- run relationship among the variables used. Real income, long run interest rate and inflation comply with the expectations of monetary theory. Furthermore, the stability tests and unit circle confirm the long- run relationship among variables. Finally, the stability condition is satisfied when money demand for Italy is estimated using the demand for narrow money (M1) for the examined period.

Impact of FDI Inflow in Agriculture at Rural Development on Economic Growth, Rwanda

This study tests the relationship between Rwandan economic growth with FDI in agriculture, employment in agriculture, and population in rural area between 1990 and 2017. The paper used ARDL “bounds” test method to analyze the co-integration with the constant level relationship of variables. Co-integration coefficients they are estimated by ARDLs model where short run coefficients with the ECM model they are estimated after the verification of long runs (co-integration) equilibrium relationship of economic growth within variables. We find that Rwandan economic growth is depends to foreign direct investment at the present time while agriculture has become a growth engine for economic development. Causality goes from population of rural areas for economic growth, while FDI and employment in agriculture has no causal relationship with economic growth. The paper recommends that Rwanda should have the absorptive capabilities of advanced agriculture technology to fully utilize of FDI benefit. Rwandan's government should promote policies in macroeconomic in order to encourage the FDIs, as well as promoting economic growth in agriculture.

Financial Integration In Belgium: A Cointegration Test

The three main theories of exchange rate behaviour, namely, the flow-oriented theory, the stockoriented theory, and the arbitrage pricing theory posit that there is a relationship between exchange rate movements and stock returns. In light of mixed and inconclusive results in existing studies on the relation between exchange rate and stock returns, this paper reinvestigates the sensitivity of the total value of stock transactions in Belgium (as a percentage of GDP) to changes in the real effective exchange rate over the period 1980-2014. We also examine the link between stock transactions in Belgium and the United States (as percentages of GDP). Annual data on the three variables are obtained from the World Development Indicators of the World Bank Group. Due to non-stationarity in time series data, the cointegration technique is applied. The results of the Dickey Fuller-Generalized Least Squares (DF-GLS) unit root test indicate that the variables are I (1). The Johansen (1995) cointegration test provides evidence of a long-run relation between the three variables. The results of the cointegration analysis indicate a significant positive long-run relation between stock transactions in Belgium (as a percentage of GDP) and the real effective exchange rate. The results also indicate a significant positive long-run relation between stock transactions in Belgium and the United States. The long-run coefficients are significant at the 1% significance level. The short-run adjustment coefficient has the expected negative sign, which indicates adjustment toward long-run equilibrium. Diagnostic tests are performed to test for autocorrelation and normality in error distribution. The model fails to reject the null hypothesis of no autocorrelation at lag order. The model fails to reject the null hypothesis that the errors are normally distributed. The stability test is also satisfied. Dynamic forecasts indicate an increase in the total value of stock transactions in Belgium over the next ten years. Orthogonalized shocks to the real effective exchange rate and the total value of stock transactions in the United States are found to have permanent effects on the total value of stock transactions in Belgium. The important policy implications following from the empirical analysis are presented and discussed.

Does Government Expenditure Stimulate Employment Generation? A Disaggregated Empirical Evidence from the Nigerian Economy

The direction and degree of relationship between government spending and reduction in unemployment has continued to generate series of debate among scholars. To empirically establish this relationship in the context of Nigeria, motivated this study. Secondary data sourced from the CBN Statistical bulletin were used to experiment on the disaggregated impact of government expenditure on administration, economic services, social community services and transfers have on the rate of unemployment in Nigeria. The Error Correction econometric model (ECM), the Johansen cointegration and the Granger causality tests were the central analytical tools used in the study. Our stationary test showed that the variables were non-stationary at levels but all were stationary at first difference. In the short-run, a positive relationship was observed. The short-run coefficient of economic services and unemployment was observed to be negative and the direction of causality was from government expenditure on economic services. Expenditure on social community service observed negative and statistically and observed a weak causal influence on unemployment. This highlights the unique case of underdeveloped nature of Nigerian economy. Interestingly, government expenditure on Administration were found to be positive and statistically significant and the direction of causality was from government expenditure on administrative expenses. However, there was no causal relationship between government expenditure on transfers and unemployment. There is, therefore, the need for policy makers to keep an eye on the trend and effects of changes in expenditure on administration and economic services, given that the result indicates that expenditure on them explains the employment behavior in Nigeria. Keywords: Government expenditure, disaggregated impact, employment generation DOI : 10.7176/JESD/10-16-01 Publication date : August 31 st 2019

THE DYNAMIC CORRELATION BETWEEN FISCAL SPENDING ON EDUCATION, HEALTH, CONSUMPTION AND STANDARD OF LIVING IN NIGERIA

The fiscal spending of the government have always been a strong instrument towards achieving development and recovering economy from recession. This paper investigates the long run and short run impact of three component of government expenditure (education, health, and consumption expenditure) on standard of living in Nigeria with time series data from 1981 to 2017. The study employs ordinary least square method of estimation on a range of equation models: Vector Error Correction Model (VECM) and the Impulse Responses Function Model. The result shows that fiscal spending on education, health, and consumption have a long run relationship with standard of living in Nigeria and the speed of adjustment towards long –run equilibrium is 61.45%, moderately high. The short run coefficient results reveals that education expenditure in both lag 1 &2 have a positive and significant impact on standard of living while health and consumption expenditure have insignificant impact on standard of living in Nigeria. Using Impulse Response Function model, we found that none of our fiscal spending variables (education expenditure, health and consumer spending) were able to emit positive impulses/shocks on the standard of living in Nigeria. The study recommends that government should ensure that fiscal spending on education, health, and consumption should be well managed, accounted for and the method should be transparent to the populace.

Exploring the Relationship between Government R & D Expenditures and Economic Growth in a Global Perspective: A PMG Estimation Approach

This paper analyses the impact of research and development (R&D) expenditures on economic growth in a global perspective utilizing the data of 60 developed and developing countries from 1998 to 2015. This study employs the Pooled Mean Group Estimators (PMGE) proposed by Pesaran et al. (1999) to find a heterogeneous trend among different groups of countries. The findings suggest that there exist a significant & positive relationship amongst R&D spending and economic growth globally, which appears consistent with economic theory. The study also confirms both long and short run relationship of economic growth and expenditures on R& D except that the short-run coefficient appears insignificant in the case of developing countries. This study implies that economies with higher R& D spending tend to have higher economic growth. This study has retentive policy implications for management and policymakers who could make important endeavors at the national level in this regard.

Financial Development, CO2 Emissions, Fossil Fuel Consumption and Economic Growth: The Case of Turkey

Many past studies have explored the relationships between income and CO2 emissions; however, most have not covered the possible effects of financial indicators on their frameworks. This study investigates the relationships between financial development and environmental degradation in Turkey from 1960 to 2011 using a multivariate framework that focuses on economic growth and fuel consumption as additional determinants of environmental degradation. Because a unit root test indicated that data were not stationary, the Johansen co-integration test was applied, revealing that the variables under investigation are co-integrated in the long run. After establishing the long-run relationship between variables, error correction modeling identified the long-run and short-run coefficients of the variables. The findings show that in the long-run, economic growth has negative and significant effect on carbon emissions (-0.069) while fuel consumption has positive and elastic impact on carbon emissions (2.82). Therefore, the error correction term implies that CO2 moves to its long-run equilibrium level at a speed of adjustment of 16.97% by the contributions of gross domestic product (GDP), fossil fuel consumption and financial development.

CO<SUB align="right">2 emissions and militarisation in G20 countries: panel cointegratrion and causality approaches

This paper aims to test the relation among militarisation, CO2 emission, economic growth, and energy consumption in G20 countries from 1965 to 2016 via panel methods. Long and short-run coefficients and the causal relationship between the variables showed the importance of energy policy and strategy for G20 countries. Due to the importance of energy policy and strategy for G20 countries, the results were not obtained by one testing approach; instead, several tests were compared. The cointegration among CO2 emissions, militarisation, energy consumption, and economic growth was determined by using Pedroni, Kao, and PARDL methods. Further, pairwise stacked common coefficient panel causality test and Dumitrescu-Hurlin causality test were applied and unidirectional causalities from militarisation to CO2 emissions and from energy consumption to CO2 emissions were determined. Furthermore, it was determined there is the evidence of bi-directional causal relationship between per capita GDP and militarisation, between per capita GDP and energy consumption, and unidirectional causality from militarisation to energy consumption. This paper recommends that environmental and energy policies must recognise the differences in the relation among militarisation, energy consumption, and economic growth in order to maintain sustainable economic growth in the G20 countries. [Received: February 2, 2017; Accepted: September 4, 2017]

The effect of government educational expenditure on labor productivity in Turkish manufacturing sector

Labor productivity is very important phenomena to maintain the sustainable economic growth. Actually, there are many studies in the economic literature about determining the factors affecting labor productivity. At this point, this study aims to investigate the relationship between labor productivity and government educational expenditure by using the data covering the period of 1971-2015 for Turkey. To this aim, it is applied linear and non-linear autoregressive distributed lag model (ARDL). By using the bound testing approach, the long run relationship between variables has been investigated. Both models have been applied to determine whether the relationship between variables is linear or nonlinear. An asymmetric relationship between labor productivity and government educational expenditure was determined. For this reason, nonlinear model is preferred. The empirical findings indicate that positive changes in educational expenditure has negative effect on labor productivity and negative changes in educational expenditure has positive effect on labor productivity. The long run coefficient of openness is significantly positive; the short run coefficient of it is significantly negative for all lags. On the other hand, the effect of GDP growth on the labor productivity is significantly positive in both short and long run. While the effect of average annual labor worked hours is significantly negative for the first two lags, it is significantly positive the last two lags in short run, it is positive but not significant in long run.

Energy consumption and agricultural economic growth in Pakistan: is there a nexus?

PurposeThis study aims to empirically examine the relationship between energy consumption and agricultural economic growth in Pakistan over the period from 1984 to 2016.Design/methodology/approachThis study used the autoregressive distributed lag (ARDL) bounds testing approach to cointegration to investigate the long-run and short-run determinants of agricultural economic growth in Pakistan.FindingsThe results of the ARDL bounds testing approach to cointegration revealed that long-run linkage exists among the study variables. The findings of this paper showed that agricultural economic growth is positively affected by gas consumption and electricity consumption both in the long-run and short run. The long-run and short-run coefficients of gas consumption and electricity consumption were estimated to be 0.906, 0.421, 0.595 and 0.276, respectively. The estimated equation remains stable during the period from 1984 to 2016 as analyzed by the stability tests.Originality/valueThis study considers the relationship between energy consumption and agricultural economic growth in Pakistan by using an ARDL bounds testing approach to cointegration. The study has three contributions to economic literature:this study used different unit root tests to test stationarity of the variables such as ADF unit root test by Dicky and Fuller and P-P unit root test by Philip and Perron; the ARDL bounds testing approach to cointegration is applied to test the existence of long-run analysis between energy consumption and agricultural economic growth; and to check the robustness, the authors used the Johansen cointegration test to examine the long-run relationship between dependent and independent variables.

Does financial depth impact economic growth in North Cyprus?

This study purpose is to connect the proxy of financial development which is total banking sector’s deposits with the economic growth in North Cyprus. The reason for using the total deposit differently with the existing literature is because North Cyprus is bank-based financial system. Therefore, this study provides an analysis of the connection between finance-growth nexus in North Cyprus from 1978 through 2015, using the autoregressive distributed lag (ARDL) model and combined cointegration to evaluate and verify the relationship. In addition, this research added the inflation rate to the model specification to investigate the inflation-growth interaction. The results revealed that both methods of cointegration provided robust evidence for a long-run relationship between financial debt and growth. The ARDL long-run and short-run coefficients showed the positive impact of depth and the negative impact of inflation on economic growth, thereby confirming the strength of the finance-growth and inflation-growth connections. Moreover, financial depth had a larger coefficient than the inflation rate. Finally, the VECM Granger causality test provided evidence for unidirectional causality from the total deposits and inflation rate to economic growth in North Cyprus. These results are significant for the policymakers of North Cyprus because the findings show that economic growth can be improved by enhancing the deposit rates in the financial system.

Analysis of asymmetries in air pollution with water resources, and energy consumption in Iran.

Iran should pay special attention to its excessive consumption of energy and air pollution due to the limited availability of water resources. This study explores the effects of the consumption of energy and water resources on air pollution in Iran from 1971 to 2014. It utilizes the non-linear autoregressive distributed lag approach to establish a robust relationship between the variables which show that both long- and short-run coefficients are asymmetrical. The positive and negative aspects of the long-run coefficients of energy consumption and water resources were found to be 0.19, - 1.63, 0.18, and 2.36, respectively, while only the negative ones were significant for energy consumption. Based on the cumulative effects, it can be established that there are important and significant differences in the responses of air pollution to positive and negative changes in water productivity and energy consumption. In particular, CO2 gas emissions are affected by negative changes in H2O productivity both in terms of the total and the GDP per unit of energy use in Iran. In regard to short-run results, considerable asymmetric effects occur on all the variables for CO2 emissions. Based on the results obtained, some recommendations are presented, which policymakers can adopt in efforts to address the issues of pollution and consumption.

Resource Price, Macroeconomic Distortions, and Public Outlay: Evidence from Oil-Exporting Countries

ABSTRACTThis study examines the repercussions of oil price and macroeconomic distortions on government expenditure in 15 oil-exporting countries. Adapting the Pooled Mean Group analytical approach, the long-run findings are indicative of a blend of the Dutch disease and rent-seeking hypothesis of the resource curse theory in oil-exporting countries. These effects crucially impact on the poor growth of the real sector in these countries, needed for diversification of their revenue base. Furthermore, both resource curses account for one of the reasons why fiscal deficits in oil-exporting countries have been on the rise. The country short-run coefficient for the balance of payment, economic growth, and exchange rate also supports the Dutch disease and rent-seeking hypothesis mix found in the long run. Also, the significant negative impact of oil rents in most countries shows that oil-exporting countries have been making attempts at diversifying their income sources; this is because proceeds from oil cannot be relied upon to adequately finance growing government expenditure, due to the volatile nature of oil prices, thus suggesting also that the volatility hypothesis is valid for most oil-exporting countries in the short run.