Smooth Transition Regression Approach Research Articles

Does the material recycling rate matter in the effect of the generated waste on environmental pollution? Panel smooth transition regression approach

This study examined the effect of material recycling on the relationship between the waste amount and environmental pollution in EU-15 countries for the 1995-2019 period through panel smooth regression analysis by using the material recycling rate as the threshold variable. Based on the analysis results, the material recycling rate threshold level was estimated as 11.79. In these countries, if the material recycling rate is below the threshold level, the rise in the waste amount will increase environmental pollution. If the material recycling rate is above the threshold value, the rise in the waste amount will still increase environmental pollution, but the pollution increase rate will decrease. With the increase in the waste amount in the long term, environmental pollution can only be reduced by raising the material recycling rate. For the reduction of environmental pollution, which is one of the most prioritized issues in Europe in recent years, policy makers should take measures to increase the material recycling rate by taking the results of this study into consideration and pay attention to the implementation of these measures.

The Causal Relationship between Government Expenditure and Inflation in Nigeria: Smooth Transition Regression Approach

This paper revisits the nexus between government spending and inflation in Nigeria using a Smooth Transition Regression model (STR) to investigate both the linear and nonlinear effects of the former on the latter from 2000: 1 to 2023:6. The monthly data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (2023) are used. The study reveals that linear approximation fails to adequately explain the non-linear effects of government spending on inflation, particularly in high-growth regimes financed by the central bank. It is suggested that in a low-growth regime where government spending is not financed by the central bank, avenue should be given to fiscal policy to stimulate and control inflation.

Corruption in Arab countries: a grease or sand in the wheel of economic growth? a panel smooth transition regression approach

The relationship between corruption and economic growth has long been dealt with in the literature. Yet, no consensus has been drawn about the way how corruption might affect economic growth. This paper aims at revisiting the relationship between corruption and growth in the context of Arab countries using a panel threshold model with smooth transition (PSTR). The study covers 14 Arab countries over a period from 2007 to 2017. Our results show that the institutional quality variable divide the sample into two regimes. In the first regime (low institutional quality), reducing corruption risk hinders economic growth. The second regime (high institutional quality) stipulates that a lower risk of corruption will have a positive effect on economic growth. The results on a country basis reveal two heterogenous groups and one homogenous group in terms of hydrocarbons endowment: (1) Algeria, Egypt, Jordan, Lebanon Sudan ,Syria and UEA are in favor of “grease in the wheels” hypothesis, (2) Bahrain, Kuwait, Morocco and Tunisia demonstrate “the sand in the wheel” hypothesis and (3) Oman, Saudi Arabia and Qatar showed a strong support toward “the sand in the wheel” hypothesis.

Threshold effects of technology import on industrial employment: a panel smooth transition regression approach

The relationship between imported technology and employment is a controversial issue. This study aims to test the hypothesis that the relationship between imported technology and employment is non-linear and evolves with the level of technology imports. The study covers two groups of developed and developing countries over the period 2000–2019. The Panel Smooth Transition Regression (PSTR) model is used to estimate the technology import threshold and its impact on industrial employment. The study finds a positive relationship between imported technology and industrial employment for technology import rates above the 13.667% threshold, above which imported technology begins to improve industrial employment in developed countries. In contrast, for developing countries, the results showed a negative relationship between imported technology and industrial employment for technology import rates above the 3.44% threshold above which imported technology begins to reduce industrial employment. These results suggest that the threshold level of technology imports can be considered as an indicator for promoting innovation policies in both developed and developing countries to minimize the negative effect of process innovation resulting from imported technology.

Revisited the nexus between renewable energy consumption and economic growth: a smooth transition regression approach

Revisited the nexus between renewable energy consumption and economic growth: a smooth transition regression approach

Revisited the nexus between renewable energy consumption and economic growth: A smooth transition regression approach

Revisited the nexus between renewable energy consumption and economic growth: A smooth transition regression approach

Identifying heterogeneous flexibility of dairy farms using a panel smooth transition regression approach

Abstract Our objective is to identify the individual flexibility of dairy farms, which may be the result of heterogeneous input adjustment costs, based on their observed short-run responses to price variations. For this purpose, we propose an analytical framework based on the panel smooth transition regression model with farm-specific threshold parameters. Our model is estimated using data from a sample of French dairy farms over the period 2007–2018. Our empirical results reveal heterogeneous levels of flexibility for these farms, with the most flexible farms appearing to be more autonomous both financially and in terms of animal feed.

Fiscal outcomes, current account imbalances, and institutions in Europe: Exploring nonlinearities

We analyze the fiscal outcomes associated to the current account imbalances within Europe. We hypothesize that the effects of current account imbalances on fiscal variables within the European Union are nonlinear and that the nonlinearity is modulated by the quality of governance. We use data on 28 European Union countries from 2000 to 2019, apply a Panel Smooth Transition Regression (PSTR) approach and proxy governance by measures of corruption. We find evidence of a nonlinear relationship: the fiscal effects related to current account imbalances are differentiated among European countries. On the one hand, we find a positive elasticity of fiscal balance to current account balance when the quality of institutions is low. This suggests that in countries with high corruption, a deterioration of the current account results in a degradation of fiscal balance and an increase of debt. On the other hand, we find a negative elasticity of fiscal balance to current account balance when the quality of institutions is high. This implies that in countries with low corruption, larger current account imbalances can be related to an improved fiscal balance and a lower debt. Robustness checks comfort our findings.

Inflation Threshold in the Context of Structural Breaks: Evidence from Egypt Using the Logistic Smooth Transition Regression Approach

The disparities in structure and nature of developing economies, in terms of their level of development, yield mixed results on the linear/nonlinear relationship between inflation and real GDP (i.e., the inflation threshold), which should be revisited. No study examined the effects of inflation on real GDP in Egypt, particularly after the 2011 revolution and the November 2016 exchange rate floating. This study empirically investigates the inflation threshold in Egypt over the period 1976-2019. In other words, it seeks to determine the optimal level of an inflation rate such that beyond it, inflation becomes a destructive element to economic growth. To this end, the logistic smooth transition regression (LSTR) has been performed. Considering structural breaks, this study checked the stationarity of the variables with the Kapetanios unit root test. Results of the LSTR technique highlight a statistically significant positive relationship between inflation and GDP growth in the lower regime at 9.32%. Beyond this threshold, inflation harms GDP growth, indicating an asymmetric relationship between the two variables. Such a specified estimated inflation threshold could assist monetary authorities in setting their inflation target to be below that threshold. This study recommends that policymakers restrict inflation and keep it below the estimated threshold, considering that inflation in the Egyptian economy is derived from the aggregate supply, demand factors and the production apparatus's inelasticity.

Correction: Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Correction: Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Tourism development and housing price: An interplay

This study underscores the significance of the nexus between tourism and housing price. Using panel data from 35 major cities in China, it employed the panel smooth transition regression approach to explore the interplay between tourism development and housing prices. Our findings showed a nonlinear tourism–housing price nexus. Specifically, tourism development can raise housing prices in a nonlinear way, indicating that this positive impact varies at different levels of tourism specialisation. Housing prices had an inverted U-shaped effect on tourism development. Several explanations for these empirical results are provided in the Discussion section, along with policy suggestions.

Corruption, imported innovation, and growth: Evidence using the panel smooth transition regression approach for developing countries

AbstractThis article investigates the nonlinear relationship between corruption, imported innovation (imports of high technology), and economic growth in developing countries from 2009 to 2018. We used a sample of 38 countries divided into two subsamples. The first covers 21 African countries, and the second covers 17 non‐African countries. The empirical results from the panel smooth transition regression model indicate that there is a threshold effect in the two relationships: corruption–imported innovation and corruption–growth. Specifically, we found that corruption exerts a significant effect only for non‐African countries. However, no significant effect was found for the whole sample and African countries. Furthermore, we found that below certain thresholds, corruption significantly decreases the level of growth for both the whole sample and the two subsamples. Above these thresholds, the effect of corruption becomes positive and significant.

Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Non-linear Threshold Effect of Governance Quality on Economic Growth in African Countries: Evidence from Panel Smooth Transition Regression Approach

Nonlinear Impact of Inflation on Economic Growth in Nepal: A Smooth Transition Regression Approach

Macroeconomic stability is one of the most important macroeconomic goals for all countries. In recent years, the Nepalese economy has been experiencing inflation twice the economic growth rate, posing a threat to macroeconomic stability. Thus, careful investigation of the relationship between inflation and economic growth is required. This study assesses the existence of a nonlinear relationship between inflation and economic growth in the Nepalese context. The assessment is performed by considering the possibility of smoothly changing slope parameters to maximise economic growth or minimise growth losses and to determine the optimal inflation level along with the speed of inflation response to economic growth. The study applies a Logistic Smooth Transition Regression model that Terasvirta (1998, 2004) developed to estimate an optimal inflation rate using annual time-series data from 1976 to 2019. The study finds a nonlinear relationship between inflation and economic growth and estimates an optimal inflation threshold of 6.38±1.36 per cent for the Nepalese economy. It also shows that inflation positively correlates with economic growth up to the threshold level and that the association becomes negative beyond that level. This study suggests that inflation beyond the threshold level harms economic growth, while inflation below has a favourable effect. The findings assist policymakers in making an informed decision, providing leverage in inflation control and creating an atmosphere encouraging economic growth.

Assessing the Threshold Level of Ownership Structure and its Relationship with Tax Avoidance in Security Market: A Nonlinear Smooth Transition Regression Approach

Assessing the Threshold Level of Ownership Structure and its Relationship with Tax Avoidance in Security Market: A Nonlinear Smooth Transition Regression Approach

Exploring Okun's law asymmetry: An endogenous threshold logistic smooth transition regression approach*

AbstractUsing a novel methodology, we offer new evidence that a threshold relationship exists for Okun's law (the well‐known output–unemployment co‐movement). We use a logistic smooth transition regression (LSTR) model where threshold endogeneity is addressed using copula transformations of the threshold variable. We also suggest a test of the linearity hypothesis against the LSTR model. In line with Okun's insight (and that of the subsequent literature) that the trade‐off can be affected by different margins, we consider several potential threshold variables. We find mainly a combination of structural and policy‐related variables accounts for changes in the Okun's law trade‐off for the United States in recent decades. This conclusion is bolstered by combing these threshold candidates into a single factor. Accordingly, we find that the unemployment gap is increasingly associated with a smaller output gap. Notably, while the Great Recession accelerated that rise, the bulk of the change occurred beforehand.

Exploring the Effects of Tourism Development on Air Pollution: Evidence from the Panel Smooth Transition Regression Model.

Based on the theoretical framework of the Environmental Kuznets Curve (EKC), this study investigates whether tourism development can decrease air pollution. This study applies the panel smooth transition regression approach and panel data for 2005–2019 from 283 prefecture-level cities in China to examine the nonlinear effect of tourism development on PM2.5, emissions. Our results reveal that the effects of tourism on PM2.5, emissions vary according to the modes of tourist arrivals. At the national level, the effect of tourism on PM2.5 emissions exhibits an inverted-U shape. At the regional level, tourism exerts a U-shaped impact on PM2.5 emissions in eastern China, and tourism is nonlinearly negatively associated with PM2.5 emissions in central and western China. An important theoretical contribution of our study is the proposal and validation of the U-shaped tourism-induced EKC hypothesis.

Investigating the Effects of Financial Risks with Central Bank Policy Intervention and Foreign Exchange Market Pressure on the Stability of Banking sector Based on Gerton and Ruper Model: Nonlinear Smooth Transition Regression Approach

Investigating the Effects of Financial Risks with Central Bank Policy Intervention and Foreign Exchange Market Pressure on the Stability of Banking sector Based on Gerton and Ruper Model: Nonlinear Smooth Transition Regression Approach

The capital ratio and the interest rate spread: A panel threshold regression approach

Using annual observations of insured US commercial banks, this paper investigates the possible asymmetric impacts of capital ratios on the interest rate spread where the asymmetry depends on the magnitude and also the channel the bank used to increase the capital ratio. To this end, we employ a panel threshold regression approach with one and two threshold variables, where the change in the capital ratio itself and the main components of change in the capital ratio, namely, change in the capital or change in risk-weighted assets have been used as the threshold variables. The results show a significant threshold effect. In the single threshold models, banks that correspond to regimes with a higher increase in the capital ratio, a higher contribution of capital to the increase in the capital ratio, and a higher contribution of risk-weighted assets to the increase in the capital ratio also show a higher impact of capital ratios on the interest rate spread compared to their counterparts. In the panel threshold regression model with two threshold variables and four regimes, we find similar results. Our baseline results also hold stable using the panel smooth transition regression approach as an alternative modeling approach, using alternative proxies as threshold variables and performing the main tests in different bank size categories.

Correction to: Financial System Development and Democracy: a Panel Smooth Transition Regression Approach for Developing Countries

Correction to: Financial System Development and Democracy: a Panel Smooth Transition Regression Approach for Developing Countries