Unit Root Tests Research Articles

Assessing the non-linear impact of fiscal balance on current account balance in major SAARC economies: evidence from method of moments quantile regression

PurposeIn the backdrop of persistent internal and external imbalances, the nexus between fiscal imbalance and current account imbalance remains a subject of debate among economists, policymakers, research scholars and governmental organisations. Nevertheless, there is no definitive consensus, either theoretical or empirical, especially within the SAARC region. This evident lack of unequivocal solid agreement underscores the pressing necessity for further empirical inquiry into the twin deficits hypothesis. In this regard, the present study makes a novel attempt to re-examine the twin deficits hypothesis for major SAARC economies in a non-linear fashion using a balanced data set from 1985 to 2021.Design/methodology/approachIn our empirical analysis, we addressed several methodological challenges in examining the relationship between fiscal balance and current account balance. Initially, we tackled cross-section dependency, heterogeneous slope coefficients and non-stationarity issues. We employed the panel Fourier unit root test by Nazlioglu and Karul to detect smooth breaks and non-linearity. Long-run cointegration was assessed using novel third-generation cointegration tests introduced by Westerlund and Edgerton (2008) and Banerjee and Carrion-i-Silvestre (2017). The non-linear dynamics were examined using the method of moments quantile regression (MMQR). Finally, to investigate the causal relationship between fiscal deficit and current account deficit within a panel framework, we employed the novel JKS test.FindingsThe MMQR analysis reveals that the fiscal balance has a positive and significant impact on the current account balance across all quantiles except the lower quantiles (first to third). The magnitude of the coefficient for fiscal balance increases from lower to higher quantiles, suggesting that countries with lower fiscal deficits manage their current account balances more efficiently. Likewise, a positive and significant impact of the saving-investment balance on the current account balance is observed across all quantiles, with the coefficient decreasing as quantiles increase. This indicates that a wider saving-investment gap leads to a more pronounced deterioration in the current account balance. The exchange rate also significantly influences the relationship, highlighting a strong exchange rate channel in transmitting fiscal policy shocks to the current account balance. These findings are corroborated by robustness checks using fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimators. The JKS causality test confirms the bi-directional causality between fiscal and current account balances, further validating the results.Practical implicationsOur study has profound policy implications, suggesting that the “size” of fiscal deficit significantly impacts external balances and broader macroeconomic goals in SAARC economies. Policymakers are urged to implement prudent fiscal policies, enhance revenue generation, and promote fiscal discipline to achieve economic stability and sustainability. Minimising unproductive consumer spending and improving tax collections are also recommended to manage external imbalances effectively. Our research offers valuable insights for policymakers and researchers striving to foster sustainable economic development in the SAARC region.Originality/valueMost macroeconomic variables do not always behave symmetrically and linearly. As a result, it is likely that these variables exhibit asymmetric and non-linear behaviour in response to cyclical and structural changes. Therefore, employing asymmetric and non-linear econometric approaches, rather than the usual symmetrical analysis, to understand the behaviour of the current account and fiscal balance in SAARC economies is rational. Existing empirical studies predominantly focus on the twin deficits hypothesis, neglecting the influence of the saving-investment balance on both fiscal and current account balances. Our research aims to fill this gap by integrating the saving-investment balance into the twin deficits model, thus providing a pioneering analysis that expands our understanding of the relationship between internal and external imbalances. The methodological novelty of our study lies in the fact that this is the first study, at least in the SAARC region, to investigate the non-linear dynamics and causality direction in the twin deficits hypothesis using the MMQR and the JKS causality test.

Econometric analysis of factors influencing export performance of soybean (Glycine max) production in NIGERIA: An auto-regressive distributive lag (ARDL) approach

This study presents an econometric analysis of factors influencing the export performance of soybean (Glycine max) production in Nigeria using an auto-regressive distributive lag (ARDL) approach. The study used a secondary data covering the period from 2011 to 2022. The used data were collected from CBN (Central Bank of Nigeria), NBS (National Bureau of Statistics), FAO (Food and Agriculture Organization), and the General Household Survey-Panel (GHS-P) in conjunction with the Federal Ministry of Agriculture and Rural Development, and the World Bank publication. The data analysis included descriptive statistics, Augmented Dickey-Fuller (ADF) unit root test, Bound test, ARDL, and principal component model. The result of the ADF unit root test showed that the trade openness, consumer price index, exchange rate, population growth, world trade in oil seeds, agricultural labor, and soybean production were stationary at first difference I (1), while agricultural machinery was stationary at level I (0). The results of ARDL method showed that the consumer price index, population growth rate, world trade in oil seeds, agricultural labor, and agricultural machinery were significant factors influencing export performance of soybean in Nigeria. The trade openness and exchange rate were not different significantly from zero. The trade openness could not expand market access due to non-competitiveness of the Nigerian’s soybean. The exchange rate has lost its role with respect to soybean seed partners in international trade. The policies that would encourage exportation of this crop should be pursued by provision of storage facilities, granting of tax holidays, long term export credit at concessionary interest rate to exporters, and research activities towards improving the quality of produced agricultural products. Keywords: Export Performance, Augmented Dickey-Fuller, Auto-Regressive Distributive Lag, Soybean Production, Nigeria

Unveiling the causal nexus between Saudi’s seaborne trade and economy: evidence from an ARDL model

An economy’s primary objective is to foster high economic growth, ultimately enhancing the well-being of its citizens. Recent economic strategies have increasingly emphasized trade-oriented policies to achieve this goal. This study delves into the nexus between Saudi seaborne trade (measured in tons) and gross domestic product (GDP), aiming to determine any causal relationship between these economic variables. Using datasets from the Saudi Central Bank and the General Authority of Statistics, this research employs rigorous unit root, cointegration, and causality tests to find the intricate interplay between trade and economic growth in Saudi Arabia. The empirical analysis highlights a robust long-term relationship between Saudi GDP and seaborne trade, suggesting cointegration. Specifically, the findings reveal a significant impact of economic growth on seaborne trade, as indicated by a trade elasticity of 1.08, which implies that changes in GDP yield a substantial shift in trade. For instance, a 1% increase in GDP corresponds to an approximate 1.08% increase in trade volume. The error correction mechanism also illustrates the dynamic adjustment process: deviations of Saudi seaborne trade and economic growth from equilibrium are corrected by 61% and 43%, in the subsequent year. Furthermore, Granger causality tests unveil bidirectional causality between GDP and trade, elucidating that economic growth changes precede trade volume alterations and vice versa. Thus, fostering international trade not only stimulates income but also bolsters the domestic economy of Saudi Arabia.

Factors Influencing Inflation: Insights from the Nepalese Economy

Inflation is a persistent issue in developing nations such as Nepal, resulting in serious economic and social consequences. This article examines the macroeconomic determinants of inflation in Nepal, considering the variables as government expenditure, exchange rate remittances, real GDP, and the consumer price index of India. Using the time series data from 1975 to 2023. It employs the Engel-Granger two-step cointegration test to examine the short- and long-term causal connections between Nepal's consumer price index (inflation) and all of these variables. The augmented Dickey-Fuller unit root test confirms that the variables are stationary at first difference, suggesting they possess an integrated order of I. The Engel-Granger test established that there is co-integration among the variables. Additionally, the error correction term (ECT) was found to be statistically significant, with a negative coefficient. The causal association between the selected dependent and explanatory variables in Nepal is both significant and persistent. The empirical findings suggest that India's inflation highly affects inflation in Nepal. Furthermore, the enduring effects of broad money supply and government expenditure are also substantial factors. The results indicate an inverse relationship between inflation and real GDP in Nepal, whereas remittances have no significant impact on consumer prices in the nation. So, it is vital to control inflation to be able to deal with poverty and economic growth. Policies are needed to keep the inflation target range around the optimum inflation rate to accelerate the pace of economic growth and ensure that the adverse effect inflation has on economic growth is minimized.

Detecting bubbles via FDR and FNR based on calibrated p-values

Detecting bubbles in asset prices is still an open question that has attracted considerable attention in recent years. This paper improves the bubble detection and dating approaches developed in recent years by Phillips and co-authors, proposing to assess the plausibility of its outcomes via the false discovery rate (FDR) and the false non-discovery rate (FNR) based on calibrated p-values. Calibrating p-values of unit root tests, applied sequentially to detect bubbles, allows recovery of their super-uniformity property, which is crucial for a valid implementation of the inferential procedure. The paper also develops original self-calibrated versions of both FDR and FNR for the specific problem of bubble testing. Calibrated p-values are implemented in an online false discovery-based approach which monitors bubbles in real time. The effectiveness of the proposed methods is investigated via a simulation study and an empirical application.

Relationship between Agriculture Growth and the Unemployment Rate in Iraq (1991–2022)

Purpose: The objective of this study is to analyze the relationship between agriculture development and unemployment rate for the period of 1991-2-2022 in Iraq. Theoretical framework: In the context of agricultural employment, agriculture is recognised as a crucial component of economic advancement and emphasises the significance of efficiently utilising all available resources, including human resources (Alsudani & Al-Hiyali, 2021). Moreover, the growth of agricultural and the unemployment rate have been used as two indicators to evaluate the significance of the agriculture sector(Jongerden et al., 2019). Design/methodology/approach: In order to examine whether there exists a real correlation between unemployment rate and agriculture growth in Iraq, we utilize yearly secondary data and apply extensive methodology that includes unit root tests, correlation analysis, co-integration tests, and the autoregressive distributed lag (ARDL) approach. Findings: the results of emperical examinations highlight a negative relationship between agricultural growth and the unemployment rate; that is, as agriculture growth increases, so does the unemployment rate decrease. Research, Practical & Social implications: The findings can provide insights for well-informed policy decisions and strategies to promote sustainable growth and employment generation in Iraq. In addition, for future research we suggest to include more macroeconomic variables in oreder to have intensive understanding real impacts of agriculture sector on economic growth and laboure force of countries. Originality/value: The results document that the connection between both agriculture development and unemployment rate is not positive, it means that unemployment rate will decrease if growth in agriculture increase.

The nonlinear impact of renewable energy, fossil energy and CO2 emissions on human development index for the eight developing countries

This study analyzes the impact of renewable energy, fossil energy, CO2 emissions, urbanization, international trade and industrialization on human development for the eight developing countries over the period 1990–2021 using Karavias and Tzavalis (2014) panel unit root test regarding structural breaks and cross-section dependence and feasible generalized least squares (FGLS) estimator technique. The countries of interest are Brazil, Russia, India, China, South Africa (BRICS countries) plus Egypt, Iran and Turkey while human development index is used as a measure of human development. The findings reveal that there exists a U-shaped relationship between renewable energy consumption and HDI an inverted U-shaped relationship between fossil energy/CO2 emissions and HDI is relevant. Moreover, the positive impact of urbanization, international trade and industrialization on HDI is determined. As for policy implications, the policies oriented to renewable energy and to reduce fossil energy dependence and CO2 emissions should be adopted to improve human development in the developing countries. Additionally, policies promoting urbanization, international trade, and industrialization are necessary to achieve high levels of human development, provided that the negative effects of these policies are mitigated.

THE REALITY OF DATE PRODUCTION IN ALGERIA AND ITS RELATIONSHIP WITH NATIONAL INCOME: AN ECONOMETRIC STUDY USING THE AUTOREGRESSIVE DISTRIBUTED LAG (ARDL) MODEL DURING THE PERIOD 2000-2019

Objective: The objective of this study is to investigate the evolution of date production in Algeria and its impact on the country's national income (GDP) from 2000 to 2019. This research aims to analyze the short-term and long-term relationships between date production and national income, assessing the significance of agricultural policies in enhancing the productivity and economic contribution of the date sector. Ultimately, the study seeks to highlight the role of date production in diversifying Algeria's exports and contributing to sustainable economic growth. Theoretical Framework: This study explores the relationship between date production and national income in Algeria, using agricultural productivity theory, endogenous growth theory, export diversification theory, and the ARDL model. It aims to understand the impact of agricultural policies, human capital investment, and export diversification on Algeria's date production, highlighting the potential for economic diversification. Method: This study analyzes the relationship between date production and Algeria's GDP from 2000 to 2019, using the Autoregressive Distributed Lag (ARDL) model. Data sources include Algeria's GDP and date production data. The study uses unit root tests, bounds testing, and error correction models to estimate the relationship. Statistical software like EViews or R is used for analysis. Results and Discussion: The study reveals a positive relationship between date production and national income in Algeria from 2000 to 2019. The data suggests that agricultural policies have led to an upward trajectory in date production, while GDP has grown significantly. The study also highlights the importance of date production in Algeria's economy, particularly in diversifying exports. The long-term relationship suggests sustained investment in date production will yield continued benefits for national income. Research Implications: The study highlights the importance of supporting agricultural policies that enhance productivity in Algeria's date sector. It suggests broader export diversification strategies, infrastructure development, and economic development. Strengthening date production can create job opportunities, stimulate rural development, and contribute to food security. Future research should explore other agricultural products, climate change, and technological innovations to improve yields and sustainability in the sector. Originality/Value: The study explores Algeria's date production and national income relationship, providing insights for policymakers to diversify the economy beyond hydrocarbons and foster sustainable growth.

The Causality between Economic Growth, Public Debt and Government Spending of Lao PDR

This paper aims to test the causality between economic growth, public debt and government spending. This study used the time series data from 1995-2021 and implied with a VAR model and Granger causality test. In addition, the unit root, cointegration, Lagrange multiplier and Jarque-Bera test statistics was used. The empirical analysis by using VAR model found that public debt and economic growth have no effect on public spending. But government spending affects public debt in the same direction with a statistical significance level of 0.1 meaning that only government spending affects public debt, while public debt does not affect government spending. While government spending and public debt affect economic growth in the same direction with a statistical significance level of 0.01. For the Granger Causality Test, there is a unidirectional relationship means that only government spending and public debt affect economic growth, economic growth does not affect government spending and public debt.

The Effects of Industrial Value Addition and Energy Consumption on Environmental Deterioration: New Evidence from Islamic Countries

The current research is aimed at finding out the effects of energy consumption and industrial value addition on environmental deterioration. Panel data for the years 2000-2017 was employed to explore the long- and short-term association of variables for the selected Islamic countries. Panel Unit Root Test was used to check the stationarity of the data. Moreover, Fisher panel Co-integration tests, PMG, Fully Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square method (DOLS) were also applied to find out relationship between the variables. The study suggested that economic growth, industrial value addition and energy consumption positively affect the CO2 emission. Moreover, high-energy consumption to meet the demands of energy in transportation and production sectors leads to increased environmental pollution. The coefficient of industrial value addition shows significant effect on environmental deterioration in long term. Our study suggests the use of cleaner technology in production system and replacing renewable energy by non-renewable energy sources.

HDI, Oil Prices, Government Expenditures in GCC: Evidence from a Cross Sectional ARDL Approach

This study explores the relationship between oil prices and the Human Development Index (HDI) in the Gulf Cooperation Council (GCC) countries. It investigates whether oil prices remain the primary driver of economic growth and development in the region. The analysis employs a Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) approach and Cointegrated Autoregressive Distributed Lag (CCEMG) methods, following unit root and stationarity tests. The findings reveal an insignificant correlation between oil prices and HDI in the overall GCC countries. However, significant relationships are observed at the individual country level. These results suggest that policymakers in the region should prioritize economic diversification and focus on sectors such as tourism in Dubai and the specific policies implemented in Saudi Arabia to foster sustainable development.

The relationship between transport infrastructure and output growth in rural nodal municipalities within South Africa

Transport infrastructure is an integral part of economic and social development in many countries, including South Africa. Economic growth theories state that a sound transport system enhances accessibility and output. Despite this, rural areas in South Africa face widespread poverty, poor infrastructure and limited access to essential services. This paper aims to examine the impact of transportation infrastructure investment on the output growth of rural nodal district municipalities in South Africa. This study focuses on two main objectives 1) investigating the relationship between transport infrastructure investment and output growth in rural nodal district municipalities and 2) understanding the causal relationship between transportation infrastructure investment and output growth in rural nodal district municipalities—this analysis uses panel data from 2012 to 2019. We used Fisher type (ADF and PP) panel unit root tests (Maddala & Wu,1999) to determine if the variables were stationary. Additionally, we employed Pedroni tests (1999) to ascertain the presence of cointegration among the variables. Once cointegration was confirmed, our study utilised the Panel VECM. A Panel Granger was then conducted to analyse the direction of causality between transportation infrastructure investment and output growth. This study recommends that the government should improve investments in transportation to improve the output of rural nodal district municipalities.

Stock Returns and Volatility: Comparative Investigation from SAARC Countries

This research article analyses the stock return and volatility of three selected SAARC countries (Pakistan, India, and Bangladesh), focusing on the role of natural resources in influencing market performance. This study aims to determine the robustness of the performance, considering the economic significance of these countries' natural resources. The daily data from the PSX 100 index (Pakistan Stock Exchange), BSE index (Bombay Stock Exchange), and DSE index (Dhaka Stock Exchange) for the years 2019 to 2021 has been obtained from their websites. The data is treated in MS Excel to compute the daily Geometric Returns for BSE, PSX, and DSE indices. Furthermore, the data were analyzed using the specialized package EViews for Time Series Graph, Descriptive Statistics, Unit Root Test, and GARCH Model. The findings of this research show that the BSE index has the highest return value of 6.78 percent compared with 4.56 percent and 3.75 percent for DSE and PSX, respectively. The Half-life model has been applied to calculate the volatility observed by the indices. The result shows that BSE is the most volatile and takes the highest time of 45 days to revert to its mean position, followed by PSX and DSE, which take 19 and 10 days, respectively. Therefore, investing in the BSE index is better for risk-lover investors. At the same time, DSE has the fastest mean reversion compared to the other two indices. Therefore, it is feasible for risk-averse investors.

Economic Openness and the Behaviour of Great Ratios in G20 Countries

Most of the macroeconomic models suggest that great ratios of economics should be stable in the long term. Keeping the theoretical consequences in mind, the present study investigates the order of integration of two great ratios, viz. consumption–output and investment–output ratios. The study employs both mean shift and trend shift unit root tests with a structural break to examine the stationarity property of great ratios. This article attempts to analyse the relationship between economic openness and the behaviour of great ratios. Results of the study indicate a balanced growth path for 10 out of 18 G20 countries considered in our analysis. Findings show that countries that have a deficit trade balance with surplus foreign direct investment are more likely to demonstrate a balanced growth path. The multivariate analysis shows evidence in support of the balanced growth hypothesis in 13 of the 18 G20 countries. Of the 18 countries analysed, 8 internationally open and 6 financially open countries provide support for the balanced growth path. JEL: C20, E20, O50

Corporate Social Responsibility, Earnings Management, and Cash Holding: A Study of Non-Financial Firms in Pakistan

This study investigates the interplay between CSR practices, earning management, and cash holdings in Pakistani publicly listed companies (PLCs). Spanning the period from 2013 to 2022, the research aims to provide empirical insights into how CSR initiatives influence financial practices within the Pakistani context. Methodologically, the study employs panel unit root tests and compares Ordinary Least Squares (OLS), fixed effects, and random effects models to analyze a sample of 202 non-financial firms listed on the Pakistan Stock Exchange. The implications of these findings underscore the importance of strategic CSR integration to enhance financial transparency, mitigate agency conflicts, and foster sustainable corporate growth. Managerial implications suggest that executives should focus on enhancing board effectiveness, strengthening audit oversight, aligning managerial incentives with long-term shareholder interests, and integrating CSR initiatives into core business strategies. However, the study acknowledges several limitations. These include the sector-specific focus on non-financial firms, which may limit generalizability to other sectors within the Pakistani economy. The study's reliance on panel unit root tests and econometric models, while robust, may benefit from alternative methodological approaches and sensitivity analyses. In conclusion, while this study contributes valuable insights into the CSR practices and financial management of Pakistani PLCs, future research should explore longitudinal trends, sector-specific variations, the role of emerging technologies in integration of CSR into corporate strategies. Addressing these areas would further enhance our understanding and inform policy interventions aimed at promoting transparency, accountability, and sustainable in emerging market economies like Pakistan.

Determinants of environmental sustainability in the United States: analyzing the role of financial development and stock market capitalization using LCC framework

This research investigates how the USA's load capacity factor (LCF) has been impacted by trade openness, financial development, stock market capitalization, and industrialization over the period 1990–2022. This study also tests the “Load Capacity Curve (LCC)” hypothesis. Various unit root tests were conducted to determine the stationarity of the dataset, revealing that the variables are free from unit root problems and exhibit mixed orders of integration. The “Autoregressive Distributed Lag (ARDL)” bounds test confirmed co-integration among the variables. The results from the ARDL model validated the existence of the LCC hypothesis in the USA. The findings also demonstrated that industrialization is positively correlated with LCF, whereas financial development, stock market capitalization, and trade openness are negatively correlated with LCF. To ensure the robustness of the ARDL estimations, the study also employed several regressions, all of which confirmed the validity of the ARDL results. Additionally, pairwise Granger causality tests revealed unidirectional causal relationships between GDP and LCF, stock market capitalization and LCF, and industrialization and LCF, while no causal relationships were found between financial development and LCF and trade openness and LCF. The findings advocate that the USA should advance eco-friendly industrial practices to ensure environmental sustainability, alongside regulated financial markets and institutions that mandate the utilization of green investments.

Impact of Average Atmospheric Temperature on Rainbow Trout Production in South Africa: A Time Series Analysis Approach

Climate change has various effects on the global food supply and the environment as a whole. Similarly, the production of fish like Rainbow Trout is affected by variation in the atmospheric temperature higher than 21oC, leading to fluctuations in yield. Therefore, this study sought to investigate the impact of average atmospheric temperature on Rainbow Trout production in South Africa using time series data spanning from 2000 to 2022. The unit root test, Johannsen cointegration test, and the Vector Error Correction model were employed to analyse the data. The results show that the change in average atmospheric temperature affects the production of Rainbow Trout. The correlation between average temperature and Rainbow Trout production is positive in the short-run and long-run. I Prolonged exposure to high temperature may lead to fish stress, migration and increased susceptibility to diseases which ultimately affects the economic viability of the sector in both the short-run and the long-run. In addition, the overall change in the atmospheric temperature has a negative effect on the production of the fish highlighting the need for climate change intervention to sustain fish production. The study recommends implementing strategies that reduce the impact of temperature changes on fish production to support both economic growth and food security.

Non-linear effects of three core mineral resources, energy uncertainty, and inclusive digitalization on economic growth: A comparative analysis of US and China

This study examines the asymmetric effects of mineral resources (oil, coal, and gas), digitalization, and energy uncertainty on economic growth in China and the USA. Using quarterly data from 2000 to 2022, we employ the nonlinear autoregressive distributed lag (NARDL) model to analyze these relationships. The study begins by conducting unit root tests, cointegration analysis, and asymmetry tests to establish robust connections between the variables. The long- and short-run results confirm the presence of asymmetry, as positive and negative shocks in oil rents, digitalization, and energy uncertainty affect economic growth differently. Notably, positive shocks in oil rents and digitalization favour economic growth, indicating that increases in oil rents and digital inclusion contribute to economic development. Conversely, positive shocks in energy uncertainty tend to reduce economic growth. Interestingly, the findings for China and the USA show similar asymmetric patterns; coal and natural gas rents positively influence economic growth, while the control variables suggest that capital and labour increase contribute to both countries' development. The error correction terms, 0.731 (73.1%) for China and 0.625 (62.5%) for the USA, indicate the annual rate at which asymmetric discrepancies are corrected. All diagnostic tests confirm the suitability of the NARDL model for this study. Finally, the study reveals significant bi-directional causality among all pairs of variables.

Investigating the role of biomass energy consumption and forest products trade on the forest footprint in Finland: an environmental Kuznets curve analysis

AbstractForests are essential in mitigating climate change by absorbing carbon dioxide and maintaining ecosystems, mainly through preserving biodiversity. For this reason, the sustainability of forests is essential for human life. This paper examines the role of biomass energy consumption, forest product trade, and economic growth on Finland’s forest footprint from 1970 to 2018. By employing Fourier-based unit root and cointegration tests, we confirm the Environmental Kuznets Curve (EKC) hypothesis, demonstrating a long-term relationship in which economic growth first raises, then reduces the forest footprint. Biomass energy consumption and forest products trade show an insignificant long-term effect on the forest footprint. We found unidirectional causality from the forest footprint to biomass energy consumption and economic growth. This research fills a gap by focusing on the under-researched forest footprint within the EKC framework, particularly in Finland’s context of stringent forestry policies. Our findings emphasize the need for interdisciplinary collaboration to enhance environmental policy and sustainability practices. We further contribute to the broader literature on sustainable forest management and offer actionable policy recommendations for enhancing Finland’s environmental strategies.

HUMAN CAPITAL AND PROFITABILITY: CASE of TURKISH BANKING SECTOR

This study aims to examine the effect of human capital on profitability of Turkish banking sector by a panel data covering 2009.q1-2022.q4. Throughout this aim, a research model based on a dependent variable as return on equity is set up. The independent variable to be focused is the Human Capital Efficiency Coefficient -mostly considered as the most significant sub-coefficient of the Value-Added Intellectual Coefficient Methodology developed by Ante Pulic (2004)- to measure intellectual capital efficiency. Besides, three control variables are included in the model to proxy balance sheet structure, assets quality and liquidity. Levin-Lin-Chu (LLC), Im-Pesaran-Shin (IPS) and Augmented Dickey Fuller (ADF) Fisher panel unit root tests, and Pedroni (1999) panel co-integration test are conducted in the econometric analyses to test the stationarity and co-integration among the series. Long term co-integration coefficients are estimated by Fully Modified Ordinary Least Squares (FMOLS) methodology proposed by Pedroni (2000). The empirical findings indicate the existence of a statistically significant and positive relationship between human capital and profitability; and statistically significant and negative relationships among human capital and assets quality, and human capital and liquidity. Another finding is that there exists no statistically significant relationship between human capital and balance sheet structure.Levin-Lin-Chu (LLC), Im-Pesaran-Shin (IPS) and Augmented Dickey Fuller (ADF) Fisher panel unit root tests, and Pedroni (1999) panel co-integration test are conducted in the econometric analyses to test the stationarity and co-integration among the series. Long term co-integration coefficients are estimated by Fully Modified Ordinary Least Squares (FMOLS) methodology proposed by Pedroni (2000). The empirical findings indicate the existence of a statistically significant and positive relationship between human capital and profitability; and statistically significant and negative relationships among human capital and assets quality, and human capital and liquidity. Another finding is that there exists no statistically significant relationship between human capital and balance sheet structure.