Toda-Yamamoto Causality Test Research Articles

Energy, Debt, and Growth: Time Series Evidence on Causality in OECD European Countries

In this paper, we explore the causal relationships between energy, debt, and growth for a selection of nine OECD European countries. This examination enables us to draw lessons and deduce implications regarding the interconnections between these variables, helping us determine whether they evolve independently, or are mutually related. To conduct this analysis, we utilize annual data and employ econometric techniques, including vector-autoregressive (VAR) models, as well as Granger and Toda-Yamamoto causality tests, applied to specific countries within the group. Our key findings provide significant insights, enabling us to categorize the countries by their levels of indebtedness and energy independence. The inclusion of energy supply results in a more coherent segmentation of countries, consistent with descriptions in the literature. This classification provides a clearer understanding of the economic and energy dynamics within these nations and helps inform policy decisions aimed at managing debt levels and enhancing energy security.

Effects of Social and Economic Development on CO2 Emissions in the Countries of the Visegrad Group

The aim of this study is to assess the impact of socio-economic development, consumption of renewable energy, educational spending, and foreign direct investment on carbon dioxide emissions in the Visegrad countries (Czech Republic, Hungary, Poland, and Slovakia) between 1991 and 2021. The study employed the Autoregressive-Distributed Lag Bound Testing model and Toda–Yamamoto causality tests to establish short- and long-term relationships for each of the dependent variables and countries, aiming to verify the hypotheses. For the Czech Republic and Slovakia, a bidirectional relationship was identified between carbon emissions and the Human Development Index (HDI). In Poland, bidirectional causality was indicated between renewable energy consumption and carbon dioxide emissions. Unidirectional causality was evident for the Czech Republic, Hungary, and Slovakia between the specified variables. Short-term findings indicate that an increase in renewable energy production may lead to higher carbon dioxide emissions in the Visegrad countries. In the long term, only Slovakia demonstrates a significant relationship between educational spending and reduced carbon emissions. Toda–Yamamoto tests reveal unidirectional causality between foreign direct investment and carbon dioxide emissions for the Czech Republic and Slovakia. Empirical findings suggest that policymakers should invest in socio-economic development and renewable energy to reduce CO2 emissions and achieve long-term sustainability in the Visegrad countries. Poland needs to shift its energy policy away from coal, and all countries should enhance education to effectively transmit environmental knowledge and values.

MACRO-ECONOMETRIC ANALYSIS OF INWARD CAPITAL FLOWS: A CASE OF NIGERIA IN TIMES OF SECURITY CHALLENGES

This study used quarterly data for the period of 2014Q1–2021Q2 to investigate the macro-econometric implications of capital flows to Nigeria in the face of security challenges. The ARDL bounds test technique identified the long-run relationships between macroeconomic dynamics, insecurity, and total capital inflows to Nigeria, while the error correction mechanism (ECM) identified the short-run relationships. The Toda-Yamamoto test was used to determine whether the model variables were causally related or not. The findings pointed to a short-term negative relationship between insecurity, exchange rates, lending rates, and inflows of capital, while a positive relationship was found between industrial production capacity, the consumer price index, and the total inflows of capital to Nigeria, with insecurity, exchange rates, the consumer price index, and lending rates being the most significant variables. In the long run, insecurity, lending rate, and consumer price index had no significant impact on inward capital inflows, while exchange rate and industrial production capacity exerted significant impacts on capital inflows. The lending rate had a negative impact on overall inflows of capital, whereas the exchange rate, industrial production capacity, and consumer price index had positive impacts. The exchange rate and industrial production capacity were the most important variables that affected capital inflows. Based on the ECM, it was realized that aggregate inward capital flows were stabilized by a factor of roughly 47.2% per quarter in order to reach long-run equilibrium. The Toda-Yamamoto causality tests indicated that the interactions between macroeconomic variables and insecurity strongly influenced capital flows to Nigeria. The overall findings suggested that promoting macroeconomic stability and combating insecurity could improve the investment climate, encouraging foreign capital flows into Nigeria.

Exploring Saudi Arabia’s 2060 net zero-emission paths via fractional frequency Fourier procedures. The imperatives of resource efficiency, energy efficiency, and digitalization

ABSTRACT By applying the novel fractional frequency Fourier ARDL technique, we unraveled the intricacies underpinning resource efficiency, energy efficiency, digitalization, and environmental sustainability in Saudi Arabia. Compelled by the conflicting narratives of prior investigations and the need for updated insights, the analyzed time series spanning 1990–2022 periods divulged interesting insights amenable to policy optimization. First, the fractional frequency Fourier ADL cointegration procedure reveals a long-term association among all the enlisted series. Second, resource and energy efficiencies, as well as digitalization, improved environmental quality by limiting carbon intensities and ecological footprint with some heterogeneous attributes across the timeframes. Notably, while resource efficiency is more effective toward ecological footprint mitigations, energy efficiency proves more efficient for carbon intensity reductions. Lastly, the fractional frequency Fourier Toda-Yamamoto causality test affirms the predictive attributes of the enlisted series on environmental performance. Hence, these factors are critical to KSA’s environmental sustainability paths. Based on these empirical discoveries, policymakers in KSA must pay adequate attention to the efficient utilization of resources and energy to complement other steps toward realizing Saudi Arabia’s 2060 net zero-emission. Likewise, policymakers must ensure the efficient allocation of income to environmentally sensitive ventures to curtail its negative repercussions on the environment. Other relevant steps to curtail carbon intensities and ecological footprint for optimal environmental performance in KSA have been highlighted.

Effects of FDI on the Growth of Agricultural Sector in Côte d'Ivoire: An Empirical Analysis Based on Toda-Yamamoto Causality Tests and ARDL Cointegration

This paper analyses the contribution of Foreign Direct Investment (FDI) to agricultural growth in Côte d'Ivoire over the period 1980-2021. The data come from World Development Indicators WDI (World Bank). The Toda-Yamamoto causality test and the ARDL cointegration approach are used. The results of the Toda-Yamamoto test show no causal link between FDI and agricultural growth, while those of the ARDL approach indicate that FDI has a negative impact on agricultural growth. There are several reasons for these results: insufficient resources allocated to the agricultural sector and the predominance of FDI in other sectors of activity in Côte d'Ivoire. Our results also show the role that the State must play in building infrastructure and increasing foreign trade.

The Relationship Between Sectoral Employment and Real Sector Economic Confidence: Fourier Causation Analysis

Purpose –In order to ensure economic growth in the short term and economic development in the long term, it is important to evaluate the events occurring in the political and economic order correctly and to meet the expectations. This study was created to evaluate the effectiveness of economic confidence on the relevant sectors on a sectoral basisDesign/Methodology/Approach –In this study, the relationship between the real sector economic confidence index and employment rates in industry, construction and services sectors will be analyzed. Turkey is selected as the sample and the data range subject to the analysis is determined as 2009:01-2023:08. In the study, the Fourier analysis method, which is among the new generation analysis methods, was applied, and Fractional Frequency Fourier Augmented Dickey Fuller Unit Root Test and Fourier Toda-Yamamoto Causality Test were applied.Findings –As a result of the application, a one-way causality relationship from the real sector economic confidence index to building and industry sector employment was determined. A recommendation should be made regarding the necessity of making political arrangements that will maintain the stability level of employment in the relevant sector.Discussion –In line with the data obtained in this study, the fact that real economic confidence has an effect on employment in the construction and industrial sectors, in addition to the fact that sectoral employment has no effect on the real economic confidence index, can be linked to the fact that sectoral leaders pursue a policy of contraction or expansion within the framework of expectations

The Relationship between Agricultural Production, Agricultural Exports and Economic Growth in Türkiye: Cointegration and Causality Analysis

This study aimed to assess the influence of agricultural production and agricultural product exports on economic growth within the Turkish economy. To achieve this, annual data spanning from 1980 to 2022 were utilized to construct a model, employing the ARDL Bounds Test to discern the long-term cointegration relationship among variables and the Fourier Toda-Yamamoto Causality Test to determine causality relationships. The empirical findings from the ARDL Bounds Test indicate that increases in both agricultural production and agricultural product exports positively impact economic growth. Moreover, results from the Fourier Toda-Yamamoto Causality Test unveil a two-way causal relationship between agricultural production and GDP, while a one-way causality relationship is observed between agricultural product exports and GDP. Despite the declining share of the agricultural sector in GDP over the years in Turkey, these findings underscore the enduring importance of agriculture in driving economic growth and creating value. As potential solutions to Turkey's balance of payments challenges, strategies such as boosting domestic demand, expanding the domestic market, and augmenting agricultural sector contributions to foreign exchange earnings through agricultural export subsidies are proposed. Furthermore, efforts to mitigate income disparities between the agricultural sector and other sectors could foster socio-economic development in rural areas, thus promoting a more equitable distribution of national income across society.

The Relationship between Renewable Energy Consumption and Economic Growth: Insights from Iceland and Azerbaijan

Iceland leads globally in per capita green energy production, while oil-dependent Azerbaijan endeavors to transition its energy policy towards sustainable alternatives. Investigating the impacts of renewable energy consumption on the economy represents a significant contemporary scientific inquiry. The objective of this research is to empirically examine the causal relationship between GDP per capita, a key metric of economic growth, and renewable energy consumption, a fundamental aspect of the green economy. In this research, the Toda-Yamamoto causality test framework of the vector autoregressive (VAR) model was utilized to examine the causal relationship between the variables. The outcomes of this investigation reveal a significant causality between renewable energy consumption and economic growth in Iceland and Azerbaijan.

Modeling of Brazilian Wind Power Generation Capacity: A Multivariate Analysis with Neural Networks

Over the last twenty years, Brazil has experienced significant changes in its electric energy matrix, notably with the expansion of wind and solar energy sources. In the early 2000s, hydroelectric plants with a capacity of 70 gigawatts (GW) were responsible for generating 90% of the country's electricity, while solar and wind sources contributed merely 1%. Today, the scenario has evolved, with wind and solar energy comprising approximately 25% of the national generation, indicating a departure from the previous hydro-dominated matrix. This research aims to apply specific types of neural networks to multivariate data to forecast Brazil's wind power generation capacity, providing insight into the potential for future energy strategies. This research contributes as a as a decision support tool contemplating relevant information for analysts, researchers, and participants in the renewable energy market. The monetary volume destined to import key components of the wind, considering specific time lags, was utilized to forecast the Installed capacity of the wind farms in Brazil. The Toda-Yamamoto Causality Tests revealed unidirectional Granger causality in the sense of the Import variable for the Brazilian Installed Capacity variable for wind energy production. Another result obtained was the finding that the variable that matters most in the multivariate configuration of the Neural Network is the variation in Installed Capacity in megawatts, followed by the import volume of wind energy components, which exhibited critical lags at 3 and 6 months.

The Impact of Nuclear Energy Consumption, Green Technological Innovation, and Trade Openness on the Sustainable Environment in the USA

Nuclear energy, renewable energy, and alternative energy sources are all crucial for sustainable green energy. However, the existing literature often needs to pay more attention to the role of nuclear energy in achieving sustainable development goals. This study analyzes the impact of green technological innovation, nuclear energy consumption, and trade openness on environmental quality in the US. The authors used the ARDL bounds to identify cointegration relationships, which is appropriate for this study’s dataset as it works well with smaller samples. They also used the Toda–Yamamoto causality test to examine causal links. The ARDL cointegration results indicate a significant long-term relationship between CO2 emissions, green technological innovation, nuclear energy consumption, and trade openness. Green technological innovation has a negative impact on CO2 emissions. Higher nuclear energy consumption is associated with lower CO2 emissions, while greater trade openness is associated with higher CO2 emissions, although these effects are less certain. The results suggest promoting green technological innovation and nuclear energy can be effective strategies for reducing CO2 emissions, while the impact of trade openness requires careful consideration due to its potential to increase emissions.

The Causal Relationship Among Barley Production and Some Variables in Libya Using The Toda-Yamamoto Causality Test

The Causal Relationship Among Barley Production and Some Variables in Libya Using The Toda-Yamamoto Causality Test

Why Did House Prices Go Up During COVID-19 Pandemic? Policy-Driven or Market-Driven?

During the spread of the COVID-19 virus, governments in many countries took temporary measures to mitigate and/or remove the cost of its negative effects on both society and the economy. In Türkiye, as in many countries, the deposit banks cut mortgage interest rates. Thus, Türkiye has experienced large increases in house prices, as have many countries. Türkiye has also become the country with the highest average annual rate of house price increase among the Organisation for Economic Co-operation and Development (OECD) countries during the pandemic period. However, despite an increase in the number of studies on house prices or mortgage loans during the pandemic period, there is a research gap in terms of a comparison of the relationship between house prices and mortgage loans in the pre-pandemic and the pandemic periods compared with that on other assets or in other sectors,. This study aims to rectify this gap. To achieve this, both the Fourier Granger and the Fourier Toda-Yamamoto causality tests are used. The results indicate that there are differences in both periods of time with respect to the relationship between mortgage loans and house prices in Türkiye, and that there is a causal relationship between both factors in the prepandemic period, but not during the pandemic period.

The Effect of Interest Rates on Portfolio Investments and Foreign Direct Investments in Türkiye

This study aims to analyse the relationship between foreign direct investments (FDI) and portfolio investments (PI) and interest rates. Firstly, ADF and PP unit root tests were applied to determine whether the variables were stationary or not. Since the series became stationary at different levels, the ARDL (Autoregressive Distributed Lag Bound Test) test, one of the cointegration tests, was applied. Afterward, Toda-Yamamoto tests were utilized to determine whether there is causality between the variables and if there is a causality relationship, to determine its directions. According to the ARDL bound test results, it is concluded that there is no short-term asymmetric relationship between PI and other independent variables. In other words, there is no statistically significant relationship between PI and EUR, USD and TL interest rates. On the other hand, it is concluded that the FDI dependent variable and other independent variables are long-run cointegrated in the relevant period. According to the results of the Toda-Yamamoto causality test where FDI and TL, EUR, and USD are independent variables, it is concluded that there is a Granger causality relationship between FDI and TL and EUR interest rates.

Analysis of the optimal inflation rate in the economic growth process of a developing country: The case of South Africa

The consensus is that price stability promotes sustainable economic growth while excessive inflation harms growth. This study assesses the linkage between inflation and economic growth in South Africa to determine the optimal inflation rate threshold for the sustainable growth of the economy. Quarterly data from 1995 to 2022 was analysed through the ARDL and threshold regressions. The ARDL and threshold regressions estimate established a relationship between inflation and economic growth and computed the optimal inflation rate threshold for economic growth at 6 percent. The results also established that both the repo rate (repurchase rate) and real effective exchange rate have a negative relationship with economic growth. The Toda-Yamamoto causality test result indicated a unidirectional causality runs from inflation to economic growth. These results are crucial for the South African Reserve Bank to discharge its monetary policy functions to attain and maintain price stability. Therefore, this study offers the Bank a roadmap for targeting an inflation rate that aligns with the nation’s long-term objectives for sustainable economic growth.

The Effects of Fossil Fuel Consumption-Related CO2 on Health Outcomes in South Africa

The consumption of fossil fuel significantly contributes to the growth of South Africa’s economy but produces carbon dioxide (CO2), which is detrimental to environmental sustainability with overall effects on health outcomes. This study sought to (i) examine the impacts of fossil energy consumption-related CO2 emissions on the under-five mortality and infant mortality rates in South Africa and (ii) analyse the causal relationship between fossil energy consumption, CO2 emissions, and mortality rates in South Africa. Linear and nonlinear ARDL bounds and the Toda–Yamamoto causality test were used to establish the equilibrium property in the long run and the causal effects of the models’ variables. Health outcome data include the under-five mortality rate (MTR1) and infant mortality rate (MTR2). Other explanatory variables include fossil energy consumption (FOC), inflation (Inf), carbon dioxide emissions (CO2), and government expenditure (GEH). It is evident from the results of linear ARDL that the first lag of the under-five mortality rate in the short run has a positive and significant impact on the under-five mortality rate in South Africa. Holding the other variables constant, the under-five mortality rate in South Africa would increase by 0.630% for every 1% increase in its lagged values. Fossil energy consumption has a positive and significant effect on the under-five mortality rate in South Africa. This significant relationship implies that a 1% increase in fossil energy consumption increases the under-five mortality rate per 1000 persons per year in South Africa by 0.418% in the short run, all things being equal. The results from the Toda–Yamamoto causality test revealed that there is no causality between the under-five mortality rate and both the consumption of fossil fuel and CO2 emissions in South Africa. The results from nonlinear ARDL presented four separate scenarios. In the short run, during increasing levels of CO2 in the initial period (lag of CO2), a 1% increase in CO2 would decrease the under-five mortality rate by 1.15%. During periods of decreasing levels of CO2 in the short run, a 1% increase in CO2 would increase the infant mortality rate by 0.66%. Again, during previous and current periods of decreasing levels of FEC, a 1% increase in FEC would increase the infant mortality rate by 0.45% and 0.32%, respectively. In the long run, during periods of increasing levels of CO2, a 1% increase in CO2 would decrease the infant mortality rate by 4.62% whereas during decreasing levels of CO2, a 1% increase in CO2 would increase the infant mortality rate by 2.3%. The risk posed by CO2 emissions and their effects on humans can then be minimised through a government expansionary policy within health programmes.

ECONOMIC GROWTH, RENEWABLE ENERGY, AND INFLATION: INTERCONNECTIONS OF A TRIANGLE

The primary objective of any nation's economy is to achieve economic stability and a high standard of living. This can be attained through sustainable economic growth. However, global economic competition often brings about challenges, one of which is the increasing demand for energy products driven by population growth. Historically, this demand has been predominantly met by fossil fuels, but due to resource depletion and environmental concerns, there has been a growing interest in alternative energy sources. This shift towards renewable energy has become a global trend. The energy sector serves as a key indicator of a nation's prosperity and development, with renewable energy production, transportation, and costs being vital metrics of development. For Turkey, like many developing nations, investing in renewable energy is crucial for sustainable growth. This study explores the relationship between renewable energy, economic growth, and inflation in Turkey from 1975 to 2022. It examines the process of economic growth in the first part, followed by an analysis of energy dynamics and inflation in subsequent sections. The study employs unit root tests such as ADF and PP, along with the Toda-Yamamoto causality test, using available data. The final results are then interpreted.

The Examination of the Relationship Between Bitcoin (BTC) Trading Volume in Türkiye and Google Trends Data on Bitcoin Searches in Google Search Engine

Bitcoin and cryptocurrencies have recently rekindled discussions in financial circles, both due to their technologies and price movements. The increasing inclination of investors who seek returns and embrace risk towards cryptocurrency markets is evident, driven by sudden price fluctuations. The potential of cryptocurrencies to serve as alternatives to traditional investment instruments continues to be debated within the financial framework. Researchers are persistently exploring financial instruments associated with the price fluctuations of Bitcoin and cryptocurrencies. This study investigates the interest in Bitcoin in Türkiye within the scope of Bitcoin trading volume and the "Bitcoin" search results on Google Trends. Bitcoin trade volume of BTCTurk and Paribu, two cryptocurrency exchanges operating in Türkiye, and Bitcoin search data on Google were included in the study. In this context, the long-term relationship between Bitcoin trading volume and Google Trends results is examined using the Engle-Granger cointegration test, and the existence of causality is explored through the Toda-Yamamoto causality test. According to the findings of the study, a cointegration relationship among the variables is identified. It is revealed that there is no bidirectional causality between Bitcoin trading volume and Google Trends search results. However, it is established that Google Trends is the cause of Bitcoin trading volume.

Beyond the basics: mapping the inflation response to fiscal deficit in India with smooth transition autoregressive model

PurposeIndia’s historical fiscal performance has featured elevated deficit levels. Driven by the imperative need for fiscal stimulus measures in response to the crisis, efforts toward fiscal consolidation from 2003 to 2008 were reversed in 2008–2009 due to the financial crisis. These stimulus actions are believed to have wielded a notable influence on inflation dynamics. Presumably, a high inflation rate hinders growth and inflicts severe welfare costs. Accordingly, the principal objective of this paper is to scrutinise the threshold effects of fiscal deficit on inflation within the context of the Indian economy.Design/methodology/approachWe employed the Smooth Transition Autoregressive (STAR) Model, a robust tool for capturing non-linear relationships, to discern the specific threshold level of fiscal deficit. Our analysis encompasses annual data spanning from 1971 to 2020. Additionally, we have leveraged the Toda-Yamamoto causality test to establish the existence and direction of a causal connection between fiscal deficit and inflation in the Indian economy.FindingsOur analysis pinpointed a critical threshold level of 3.40% for fiscal deficit, a value beyond which inflation dynamics in India undergo a marked transition, signifying the presence of significant non-linear effects. Moreover, the results derived from the Toda-Yamamoto causality test offer substantiating evidence of a causal relationship originating from the fiscal deficit and leading to inflation within the Indian economic framework.Research limitations/implicationsThe findings of our study carry significant implications, particularly for the formulation and execution of both fiscal and monetary policies. Understanding the threshold effects of fiscal deficit on inflation in India provides policymakers with valuable insights into achieving a harmonious balance between these two critical economic variables.Originality/valueTo the best of our knowledge, this study is the first of its kind to empirically investigate threshold effects of fiscal deficit on inflation in India from a non-linear perspective using the Smooth Transition Autoregression (STAR) model.

The Relationship Between the German Current Account and Financial Account: Evidence from the Toda-Yamamoto Causality Approach

Abstract The paper examines the causality between the German current account and financial account. It contrasts with past research which assumes the current account and financial account to be jointly determined by a saving-investment imbalance. Our analysis decomposes the current account into exports and imports (real resource flows) and the financial account into domestic capital outflows and foreign capital inflows (gross capital flows). Evidence from the Toda-Yamamoto causality test shows that for Germany from Q1.1980 to Q2.2023, the causality runs from the financial account to the current account. It is not real resource flows but gross capital flows which exert significant impacts on the German real exchange rate. The finding implies that over the long run, strong German capital outflows and weak foreign capital inflows contributed to weak wage growth and stagnant investment in Germany, sustaining the persistent German current account surpluses. A reduction of the German current account surpluses requires a policy mix of fiscal expansion and monetary tightening which would expand the absorption of German and foreign capital in the German economy.

An Analysis on Determinants of Cash and L/C Export: Findings from Türkiye’s Export

The payment methods used in international trade are of significant importance for the financial flow of the involved parties. When it comes to transferring goods and funds across borders to their new owners, the risks faced by the parties may seem daunting. The use of a letter of credit payment method by banks serves a protective role, enabling the parties to engage in trade more securely. While the expenses linked to this approach are sometimes viewed as challenging for the involved parties, it is considered a significant enabler, particularly in new trade alliances. In fact, exporters' choices are classified in countries' trade statistics based on payment methods. This study aims to uncover the determinants of exports from Türkiye between January 2013 and September 2023, utilizing both cash in advance and letter of credit payment methods. To accomplish this objective, exchange rates and specific inflation indicators, and their causal relationship with export transactions based on payment types was examined using the Toda-Yamamoto causality test. The research findings indicate that exchange rates, inflation, and cash payment variables cause letter of credit payments. Conversely, only the foreign producer price index was identified as a cause for cash-based exports. These findings illustrate that economic indicators, which may pose risks for Turkish exporters, are reasons for important decisions. In light of these findings, recommendations have been made for exporters and policymakers to proceed cautiously in the face of different economic scenarios.