Testing For Serial Correlation Research Articles

Institutional systems and quality of life in Sub-Saharan Africa

This study examined the impact of institutional systems drawn from economic and political institutions on the quality of life in Sub-Saharan Africa. A panel data of thirty-seven Sub-Saharan African countries over the period 2007 to 2021 sourced from the World Bank database and Heritage Foundation. A two-step system-Generalised Method of Movement (GMM) technique was employed to estimate the model. The Sargan test for over-identification restriction and the Arellano-Bond test for second-order serial correlation were conducted. The study reveals that there is a positive relationship between the institutional systems and the quality of life in Sub-Saharan Africa. The study concluded that, for the quality of life in Sub-Saharan Africa to improve, the government in Sub-Saharan Africa should implement laws and policies that will strengthen the existing institutions to improve the quality of life of the people.

A new portmanteau test for predictive regression models with possible embedded endogeneity

In the widely used predictive regression model, any possible serial correlation in innovations leads to estimation bias and statistical inference distortions. Hence, it is important to pretest the existence of such serial correlation. Nevertheless, in the presence of embedded endogeneity, which is a common problem in the predictive regression setting, traditional serial correlation tests such as Box–Pierce (BP) and Ljung–Box (LB) tests are found to perform poorly. Motivated by this, we develop a new portmanteau test in this article as a pretest for serial correlation in predictive regression under possible embedded endogeneity. This test is based on the sample splitting idea and the jackknife empirical likelihood method. The asymptotic distribution of the proposed test has been derived, and the Monte Carlo simulations confirm good finite sample performances. As an illustration, we apply our proposed test in pretesting the serial correlation in predictive regression, where financial variables are used to predict the excess return of S&P 500.

An Ad Hoc Procedure for Testing Serial Correlation in Spatial Fixed-Effects Panels

We consider testing for error persistence in spatial panels with (potentially correlated) individual heterogeneity. We propose two variants of an ad hoc testing procedure based on first transforming out the individual effects, either by time-demeaning or by taking forward orthogonal deviations, then estimating an encompassing spatio-temporal model. The procedure can also be employed under the random effects assumption, in which case, although suboptimal, it can be computationally cheaper and safer than existing tests. We report Monte Carlo simulations demonstrating satisfactory empirical properties.

Reprint of: Robust inference on correlation under general heterogeneity

Considerable evidence in past research shows size distortion in standard tests for zero autocorrelation or zero cross-correlation when time series are not independent identically distributed random variables, pointing to the need for more robust procedures. Recent tests for serial correlation and cross-correlation in Dalla, Giraitis, and Phillips (2022) provide a more robust approach, allowing for heteroskedasticity and dependence in uncorrelated data under restrictions that require a smooth, slowly-evolving deterministic heteroskedasticity process. The present work removes those restrictions and validates the robust testing methodology for a wider class of innovations and regression residuals allowing for heteroscedastic uncorrelated and non-stationary data settings. The updated analysis given here enables more extensive use of the methodology in practical applications. Monte Carlo experiments confirm excellent finite sample performance of the robust test procedures even for extremely complex white noise processes. The empirical examples show that use of robust testing methods can materially reduce spurious evidence of correlations found by standard testing procedures.

Exploring the role of spending on malaria incidence in Uganda using the auto-regressive distributed lag approach.

Malaria has remained a persistent global health problem. Despite multiple government and donor initiatives to eradicate malaria and its detrimental effects on Uganda's health outcomes, the incidence of malaria is worrying as it appears higher than the average of 219 cases per 1000 for sub-Saharan Africa for the period 2017-2018. This study investigated the effect of public and private healthcare spending on the incidence of malaria in Uganda. Employing time series data spanning over 20years from the first quarter of 2000 to the last quarter of 2019, the study builds a model based on the Grossman framework for analysing demand for health. The estimation technique used was the ARDL approach that takes into account reverse causality and incidental relationships. Prior to the adoption of the technique, a bounds test was performed to determine whether the variables contained in the model have a long-term relationship. Several diagnostic tests for serial correlation, functional normality, and heteroskedastic specification error were carried out to verify the ARDL model's goodness of fit. Additionally, the cumulative sum of recursive (CUSUM) and cumulative sum of squares of recursive residuals (CUSUMSQ) were used to test model stability. The results indicate that in the long run, an increase in public spending of one percent significantly reduces malaria incidence by 0.196 at the 10 percent level of significance. On the other hand, there is no significant evidence of private health expenditure's effect on malaria incidence. However, in the short run, public spending reduces malaria incidence by a smaller magnitude of 0.158 percent relative to the long-run. Still, private expenditure is found to exhibit no significant effect. Additional findings point to the importance of GDP per capita and urban population growth in reducing malaria incidence, whereas female unemployment, income inequality, as well as female-headed household. In the short run, however, the female-headed households and urban population growth are found to significantly reduce malaria incidence while an improvement in regulatory quality decreases malaria incidence by 0.129 percent. There is need for further government interventions to reduce malaria incidence in the country via budget allocation, as well as the strengthening of programmes to raise household income to support private health spending, in addition to the development of strategies to promote well-planned and organized urban centres.

Company Age, Company Size and Earnings Management in Listed Industrial Goods Manufacturing Companies in Nigeria: A Moderating Role of Political Connection of Board Members

1Department of Accounting, Afe Babalola University, Ado Ekiti, Ekiti State, Nigeria 2Department of Business Administration, Adekunle Ajasin University Akungba Akoko, Nigeria Emails: 1temitayoay@pg.abuad.edu.ng, 2gbengaowoseni@gmail.com ABSTRACT The study analysed the effect of company age, company size and political connections of Board members on earning management of quoted industrial goods manufacturing companies in Nigeria. The specific objectives of the study include assessing the effect of company age, company size and evaluating the moderating effect of political connections of board members on earnings management of quoted industrial goods manufacturing companies in Nigeria. The study used 130 firm-year data involving thirteen (13) quoted industrial goods manufacturing companies purposely selected over the period of 2012-2021. The data were sourced from the annual audited reports and accounts of the companies obtained from the Nigerian Exchange Group. The study used E-Views 8.0 statistical package and used panel regression techniques to analyse the data after carrying out diagnostic tests such as normality test, Panel Unit Root Test, Multicollinearity Test, Redundant Fixed Effects Tests, Hausman test, Heteroskedasticity Test, Serial Correlation Test to select the most appropriate model and fixed effect model was used for the model. The findings revealed that company age and company size do not influence earnings management. Also, the study revealed that political connection of board members insignificantly moderated the effect of company age and company size on earnings management. The study recommended that increased attention be given to internal control mechanisms to help curtail aggressive corporate earnings manipulation, reduce the effect of political connection, and enhance the financial reporting quality, particularly in Nigeria. Keywords: Firm Characteristics, Political Connections, Accruals, Real Earnings Management. Journal Reference Format: Adesuyi, T. Y. & Owoseni, G. D. (2024): Company Age, Company Size and Earnings Management in Listed Industrial Goods Manufacturing Companies in Nigeria: A Moderating Role of Political Connection of Board Members. Humanities, Management, Arts, Education & the Social Sciences Journal. Vol. 12. No. 1, Pp 49-72. www.isteams.net/humanitiesjournal. dx.doi.org/10.22624/AIMS/HUMANITIES/V12N1P4

Capital adequacy, competition and liquidity creation of banks; evidence from Kenya

PurposeThe study seeks to evaluate the effect of capital adequacy and competition on the liquidity creation of Kenyan commercial banks.Design/methodology/approachUnbalanced panel data from 36 Kenyan commercial banks with licenses from 2001 to 2020 is used in the study. The generalized method of moments (GMM), a two-step system, is employed in the investigation. To increase the robustness and prevent erroneous findings, serial correlation tests and instrumental validity analyses are used. The methodology developed by Berger and Bouwman (2009) is used to estimate the commercial banks' levels of liquidity creation.FindingsThe study supports the financial fragility-crowding out hypothesis by finding a significant negative effect of capital adequacy on the liquidity creation of commercial banks. The research also identifies a significant inverse relationship between competition and liquidity creation, depicting competition's value-destroying effect.Practical implicationsA trade-off exists between capital adequacy and liquidity creation, which must be carefully evaluated as changes in capital requirements are considered. The value-destroying effect of competition on liquidity creation presents a case for policy geared toward consolidating banks' operations through possible mergers and acquisitions.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically offer evidence concurrently on the effect of competition and capital adequacy on the liquidity creation of commercial banks in a developing economy such as Kenya. Additionally, the authors employ a novel measure of competition at the firm level.

The Influence of Macroeconomic Variables on Manufacturing Sectors: A Case of Nigeria

This study has examined the influence of macroeconomic variables on manufacturing sectors with a particular reference to Nigerian economy. The objective of the study is to investigate the effects of macroeconomic variables on manufacturing sectors (proxy businesses, productivity sectors and industries) in Nigeria. Econometrics tools were employed to analyse the variables sourced from the Central Bank of Nigeria Statistical bulletin within the period of 1985 up to 2022. Among the pre-test conducted on the variables are unit root test, descriptive statistics and co-integration bound test. Meanwhile, post-diagnosis test conducted include: stability test, heteroskedacity test, and serial correlation test. The findings show that macroeconomic variables have mixed influences on the manufacturing sector in Nigeria. It is, therefore, recommended that the government should effectively stabilise and manage interest rate, exchange rate and inflation rate with a view of creating enabling environment for manufacturing firms and potential investors in Nigeria. The government should intensify the efforts of garnering more foreign earnings by harnessing international trades.

Highly irregular serial correlation tests

Tests are developed for neglected serial correlation when the information matrix is repeatedly singular under the null hypothesis. Specifically, consideration is given to white noise against a multiplicative seasonal Ar model, and a local-level model against a nesting Ucarima one. The proposed tests, which involve higher-order derivatives, are asymptotically equivalent to the likelihood ratio test but only require estimation under the null. It is shown that the tests effectively check that certain autocorrelations of the observations are zero, so their asymptotic distribution is standard. Monte Carlo exercises examine finite sample size and power properties, with comparisons made to alternative approaches.

THE IMPACT OF TRADE, FOREIGN DIRECT INVESTMENT (FDI), AND ECONOMIC GROWTH ON CARBON DIOXIDE (CO2) EMISSIONS IN SELECTED ASIAN COUNTRIES

This study examines the impact of trade, foreign direct investment (FDI), and economic growth on carbon dioxide (CO2) emissions in Selected Asian countries for the period 1990 to 2019. The objectives of this study are (1) to investigate the relationship between trade and CO2 emission, (2) to investigate the relationship between FDI and CO2 emission, and (3) to investigate the relationship between economic growth and CO2 emission.
 This study uses ordinary least squares (OLS) method to analyze the data. Multicollinearity test, heteroskedasticity test, and serial correlation test were also used to check the stability of the model. In addition, Granger causality test was applied to this study.
 The results show that there is a significant positive correlation between economic growth and CO2 emissions. If GDP increases by 1%, the average CO2 emission will increase by 0.186%, holding other variables constant. The explanation of trade and FDI on CO2 emissions is insignificant. Multicollinearity, heteroskedasticity and serial correlation are not present in the model of this study. Finally, the results of Granger causality test show that there is no Granger causality between independent variables and dependent variable.
 The government establishes better environmental regulations and strengthens the regulation of chemical and heavy industry sectors. Promoting technological advancement and investment in new energy technologies, government focus on energy efficiency and environmental initiatives in the corporate sector can effectively curb the growth of CO2 emissions.

Financial Sector Development and Economic Growth in Nigeria (1990-2020)

In order to establish whether there is a causal relationship between the financial sector development and economic growth during the sample period of 1990–2020, the article investigates the relationship between the development of the financial sector and economic growth in Nigeria.The Autoregressive Distributive Lag (ARDL) Model is used in this work to measure and a useful tool for determining whether there is long-term relationship between economic data series. The ARDL model can be used to predict and distinguish between short-term dynamics and long-term relationships. Tests like the long-run relationship are used to determine the data's stationarity characteristics and their long-term relationship & short-run tests, bounds tests, heteroskedasticity tests, serial correlation, and co-integration tests were used. Financial intermediaries(FINIM), financial depth(FINDEPT), and market stock(MKTSTCK) all have a causal relationship with the real gross domestic product(RGDP), according to the study. Economic growth is significantly impacted by the growth of the financial industry. The public and private sectors must be informed about operations in the financial industry. The World Bank's World Development Indicators (2020) database, which covered the years 1990 to 2020, and the Central Bank of Nigeria's Statistical Bulletin were the sources for all data.

Does the Democracy and Economic Growth Affect Human Development in Indonesia?

Democracy and economic growth can be improvement of human development progress. The interaction between democracy and economic growth and human development achievements has profound implications for the development of societies and countries. This article will contribute to a better understanding of the complicated interplay between democracy, economic growth and human development. The study employs the autoregressive distributed (ARDL) to prove the relationship between democracy, economic growth and human development in Indonesia for the period 1990-2021. There is long-run cointegration relationship between democracy and economic growth on human development in Indonesia during the sample period. Where, economic growth contibutes positively to HDI and is statistically significant and democracy not significant impact to human development in Indonesia. In the short-run, democracy and economic growth have a positive and significant impact on human development in Indonesia. where democracy has greater implications for human development than economic growth. Diagnostic tests for serial correlation, functional form, normality and heteroscedasticity of the models were conducted, and the results are valid for meaningful interpretation.

Decision Making Reliability Approach for Maintainability of Economizer of Coal Based Boiler

This paper investigates the maintainability of economizers of three coal-based boilers for making decision of selection of replacement or maintenance practices. A sudden failure in the economizer can result huge production loss hence, a suitable decision model is essential which provides a strong data base for making optimal decision. A practical model for making decision is developed with respect to failure/repair data of three different economizers and trend with serial correlation tests are conducted. An investigation is carried out to determine the idealized statistical probability distribution providing best fit distribution. Further their Reliability and Maintainability are calculated. The tests of trend and serial correlation show very fast increasing failure rate of economizer # 1&2 with respect to economizer # 3. The present paper highlights that the failure data of economizer # 1 and economizer # 2 follow the NHPP model with poor reliability condition which indicates that these economizers should be replaced to restore boiler system as new as. However, failure data of economizer #3 follows the Lognormal distribution with poor reliability condition which suggests to develop the Preventive Maintenance Interval (PMI) to restore the boiler system. The present model serves a strong ground to decide replacement/preventive maintenance policy for not only to economizers but also to any pressure parts of coal based boilers.

The Interrelationship between Economic Growth and Tax Revenues in Cambodia

The relationship between economic growth and the growth rate of tax revenues on goods and services, tax revenue on income, profit, and capital gain, and tax revenue on international trade and transaction was analyzed using a VAR model. All variables in this study were found to be integrated of order one, therefore the model was run using first differences. The lag length of the model was determined to be optimal at lag-two based on the information criterion. The estimated results of the model successfully passed all diagnostic tests, including tests for residual normality, serial correlation, and heteroscedasticity. Since all the inverse roots of the AR characteristic polynomial were within the unit circle, the model was deemed stable. The empirical findings from the VAR model indicated that the growth rate of tax revenue on income, profit, and capital had the most significant impact on economic growth, ranging from 2.3505% to 2.7155%. This was followed by tax revenue on goods and services, ranging from 0.5776% to 0.5954%, and tax revenue on international trade and transaction, ranging from 0.2747% to 0.5930%. Furthermore, the response of the growth rate of all tax revenues to changes in the economic growth rate exhibited a cyclical pattern around its mean.

The Impact of Value-Added of Wholesale and Retail Trade and Hotels on Economic Activity: An Econometric Study in the Economy of Iraq between 2006-2021

This research paper aims to measure the impact of value-added tax on wholesale and retail trade and hotels on economic activity in Iraq from 2006-2021. The study applied the Autoregressive Distributed Lag (ARDL) model to clarify the effect and demonstrate the relationship between the variables. Results showed an integrative relationship between the value-added tax on wholesale and retail trade and hotels (independent variable, X), and economic growth (the dependent variable Y). The short-term parameters showed a statistically significant relationship at a significance level of less than (1%), as the value-added tax on wholesale and retail trade and hotels significantly positively affects economic growth in the short term. Furthermore, the long-term relationship results showed a statistically significant negative relationship between the variables at a probability level of less than (1%). The value-added tax on wholesale and retail trade and hotels has a major impact on national economic expansion, as an increase in the value-added tax by one dinar leads to an increase in GDP by 10.52684 dinars. This result is consistent with economic theory and verifies the study's hypothesis. The quality and validity of the model were confirmed through standard tests, including a heteroscedasticity test, serial correlation test, diagnostic tests for functional form, and stability tests for estimated model parameters.

Diagnostic tests before modeling longitudinal actuarial data

In non-life insurance, it is essential to understand the serial dynamics and dependence structure of the longitudinal insurance data before using them. Existing actuarial literature primarily focuses on modeling, which typically assumes a lack of serial dynamics and a pre-specified dependence structure of claims across multiple years. To fill in the research gap, we develop two diagnostic tests, namely the serial dynamic test and correlation test, to assess the appropriateness of these assumptions and provide justifiable modeling directions. The tests involve the following ingredients: i) computing the change of the cross-sectional estimated parameters under a logistic regression model and the empirical residual correlations of the claim occurrence indicators across time, which serve as the indications to detect serial dynamics; ii) quantifying estimation uncertainty using the randomly weighted bootstrap approach; iii) developing asymptotic theories to construct proper test statistics. The proposed tests are examined by simulated data and applied to two non-life insurance datasets, revealing that the two datasets behave differently.

Money Market and Economic Growth in Nigeria: An Autoregressive Distributed Lag Approach

This study investigated the impact of money market on the economic growth in Nigeria, 1991- 2020. The ex-post facto research design was adopted for the study. The Gross domestic product (GDP) was used as proxy for economic growth while Treasury bills, Commercial papers (CP) and Bankers’ acceptances (BA) were used as proxy for the money market variables. Tests such as descriptive analysis, unit root, bounds test for cointegration, ARDL, serial correlation, heteroskedasticity and granger causality tests were conducted. The results revealed that there is a significant but positive impact of TB, CP, BA on the GDP. The study recommended that that the Monetary authority should initiate policies that would encourage Money market operations while CBN surveillance role should be proactive in order to check practices that could undermine or sabotage market integrity and soundness

Does the Income from Tourism and Remittances Really Matter for Economic Growth? Evidence from the Nepalese Economy

This study investigates the effects of tourism and remittances on Nepal's Gross Domestic Product (GDP). It is based on secondary information acquired from Nepal's several economic surveys and publications from the Nepal Rastra Bank. It spans 34 fiscal years, from 1987/88 through 2020/21. The study employs descriptive and exploratory research designs.Descriptive statistics, unit root testing, Augmented Dickey-Fuller test, ARDL bound testing approach, heteroscedasticity test, serial correlation test, and CUSUM and CUSUM squares test of stability analysis are some econometrics instruments utilized.The GDP, remittances, and income from tourism are found to be correlated over the long term. In the long run, remittances and tourism revenue increase Nepal's GDP, but there is no discernible effect in the short run. The GDP increased by 0.794 and 0.157 percent for every one percent increase in tourist and remittance income. Therefore, the impact of tourism income is more significant than the impact of remittance income on GDP. Therefore, policymakers can employ tourism to promote Nepal's long-term economic growth.

EFFECT OF CREDIT RISK MANAGEMENT ON THE FINANCIAL PERFORMANCE OF BANKING SECTOR OF BANGLADESH: A STUDY ON GENERATION-BASED SELECTED LISTED COMMERCIAL BANKS

<p>The financial sector of the country is mostly comprised of banking institutions; those are leading the economy with great exposure with the contribution to the development process. However, the banking sector of Bangladesh is disturbed by the large-scale amount of non-performing loans while has become an essential part of the finance of the industries. As part of the measurement of credit risk and macro factors average lending rate, inflation, NPL size, capital adequacy ratio, liquidity ratio have been selected to test the influence on the financial performance found through the return on asset of the selected banks. To conduct the study 9 banks of three generations have been selected for the period of 2016 to 2022. Robust least square method of regression and error correction term have been run to oversee the real impact on financial performance while endogenity and random walk in the values are being considered to overcome through a dynamic regression model. NPL has a negative impact on the performance and average lending rate, inflation, liquidity ratio and capital adequacy ratio bring a positive impact on the financial performance of the banks. Breusch-Pagan LM test confirms that cross-sectional dependency exists and VAR serial correlation test finds autocorrelation in the data set. The policy implication of this study suggests that the high NPL ratio must be reduced and CAR and LR must be improved to get the desired results of the performance. Strong fiscal and banking regulation should implement so that governance can be ensured to create responsibility and financial strength.</p><p><strong>JEL:</strong> E4, D81, E33, E44</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/soc/0045/a.php" alt="Hit counter" /></p>

Testing serial correlation in a general d-factor model with possible infinite variance

It is well-known that the presence of serial correlation may result in an inefficient or even biased estimation in time series analysis. In this paper, we consider testing serial correlation in a general d-factor model when the model errors follow the GARCH process, which is frequently used in modeling financial data. Two empirical likelihood-based testing statistics are suggested as a way to deal with problems that might come up with infinite variance. Both statistics are shown to be chi-squared distributed asymptotically under mild conditions. Simulations confirm the excellent finite-sample performance of both tests. Finally, to emphasize the importance of using our tests, we explore the impact of the exchange rate on the stock return using both monthly and daily data from eight countries.