Toda-Yamamoto Granger Causality Test Research Articles

Phase-wise evaluation and optimization of non-pharmaceutical interventions to contain the COVID-19 pandemic in the U.S.

Given that the effectiveness of COVID-19 vaccines and other therapies is greatly limited by the continuously emerging variants, non-pharmaceutical interventions have been adopted as primary control strategies in the global fight against the COVID-19 pandemic. However, implementing strict interventions over extended periods of time is inevitably hurting the economy. Many countries are faced with the dilemma of how to take appropriate policy actions for socio-economic recovery while curbing the further spread of COVID-19. With an aim to solve this multi-objective decision-making problem, we investigate the underlying temporal dynamics and associations between policies, mobility patterns, and virus transmission through vector autoregressive models and the Toda-Yamamoto Granger causality test. Our findings reveal the presence of temporal lagged effects and Granger causality relationships among various transmission and human mobility variables. We further assess the effectiveness of existing COVID-19 control measures and explore potential optimal strategies that strike a balance between public health and socio-economic recovery for individual states in the U.S. by employing the Pareto optimality and genetic algorithms. The results highlight the joint power of the state of emergency declaration, wearing face masks, and the closure of bars, and emphasize the necessity of pursuing tailor-made strategies for different states and phases of epidemiological transmission. Our framework enables policymakers to create more refined designs of COVID-19 strategies and can be extended to other countries regarding best practices in pandemic response.

Price transmission in shrimp production in Vietnam

Under the trade international integration, vertical price transmission in agri-food export supply chains is an essential issue that needs attention. This study analyses the price transmission from export prices to farm-gate prices of the black-tiger shrimp and white-leg shrimp production in Vietnam. Monthly price series of black-tiger shrimp and white-leg shrimp were collected from January 2015 to October 2020, from the Department of Aquaculture of Ca Mau, Soc Trang, Kien Giang, Ben Tre provinces; Vietnam Association of Seafood Exporters and Producers, and Vietnam market analysis and forecast joint stock company. The Johansen cointegration test, the Toda-Yamamoto Granger causality test, the Engle-Granger’s two-stage estimation, and the asymmetric error correction model using the Houck and Ward approach were applied. The results showed a long-term relationship between the farm-gate prices and export prices for both black-tiger shrimp and white-leg shrimp. The export prices were the price leader. In the long run, the price transmission from export prices to farm-gate prices in both black-tiger shrimp and white-leg shrimp was incomplete; however, the white-leg shrimp’s price transmission was noticeably better than black-tiger shrimp’s. In the short run, there was no statistically significant effect of export prices on farm-gate prices of black-tiger shrimp; while the price transmission of white-leg shrimp was significant but relatively slow rate. The price transmission for black-tiger shrimp and white-leg shrimp was symmetric in the short run and the long run. The findings of this study are useful for farmers in developing production and business strategy. Symmetric price transmission in both the short run and the long run is a positive signal for farmers to invest in sustainable production approaches and to meet stringent standard requirements of the export market.

The energy-growth nexus in 3 Latin American countries on the basis of the EKC framework: in the case of Argentina, Brazil, and Chile

In this paper, the effects of economic growth and four different types of energy consumption (oil, natural gas, hydroelectricity, and renewable energy) on environmental quality in terms of carbon dioxide (CO2) emissions were examined within the framework of the Environmental Kuznets Curve (EKC) for three Latin American countries, namely, Argentina, Brazil, and Chile, from 1975 to 2018. The autoregressive distributed lag (ARDL) in the form of Error Correction Mechanism (ECM) was used to verify the validity of the EKC hypothesis and the impacts of the variables in the short and the long run alike. Furthermore, the Toda-Yamamoto Granger causality test was carried out to identify the direction of causality between the variables. From ARDL-ECM estimation, the EKC was confirmed (inverted U-shaped curve between income growth and CO2 emissions) only in Argentina in the long run but not in Brazil and Chile. Based on the findings, renewable energy can have a great potential in reducing CO2 emissions in the future, but this advantage has not been fully exploited yet since a significant negative impact on CO2 emissions was only found in Chile. Also, the use of other less carbon-intensive energy sources such as natural gas and hydropower if they could be combined with renewable energy would be of great benefit and contribute to enhancing environmental quality and energy security in the short and the medium term and to successful low-carbon energy transition in the long run in Argentina, Brazil, and Chile.

Impact of Formal Financial Services on Per Capita Income in India: Evidence from Regression and Causality Approach

The main purpose of this paper was to examine the impact of formal financial services on per capita income in India from 2004 to 2018. The study used a regression approach to find the impact of formal financial services on per capita income. The Toda-Yamamoto Granger causality test was used to find the direction of causality between formal financial services and per capita income. The empirical findings of this study confirmed that formal financial services had a positive and statistically significant impact on per capita income. These results suggested that India can increase per capita income by improving the coverage of formal financial services. Further, the causality test confirmed that a unidirectional causal relationship was found running from formal financial services (such as the number of ATMs per 1000 km2, deposit accounts with commercial banks, and outstanding deposits with commercial banks) to per capita GDP. Formal financial services are one of the main drivers of per capita income. Policymakers must emphasize financial sector reforms and create awareness about financial services and financial literacy to increase per capita income in the long run, especially in developing countries.

Renewable and Non-renewable Energy Consumption and Economic Growth in Pakistan: A Disaggregated Analysis

This study addresses the research question of how renewable and non-renewable energy consumption (EC) affects economic growth (GDP) in Pakistan over a period of 1972-2015. The study extends the basic production function having labor and capital as the mainstream variables by adding major energy sources of Pakistan. The results of Toda-Yamamoto Granger causality test confirm that no causality exists between GDP and labor force and bidirectional causality exists between GDP and gross capital formation. Moreover, the results confirm a unidirectional relationship (growth hypothesis) between hydroelectricity consumption (HEC) and nuclear energy consumption (NEC) and a bidirectional relationship (feedback hypothesis) between fossil fuel consumption (FFC) and GDP, respectively. The findings suggest for an efficient utilization of existing energy resources along with diversification and expansion of the renewable energy resources. The study recommends for the government policy to avoid energy conservation as it can hamper GDP growth in Pakistan.

Toward achieving sustainable development agenda: Nexus between agriculture, trade openness, and oil rents in Nigeria

Abstract Over the years, agriculture has been considered as a panacea for long-term economic growth as believed by the physiocracy school of thought. Aligning this with the United Nations’ Sustainable Development Goals (specifically UN-SDG-2 which highlights zero hunger), the present study empirically complements existing studies by exploring the interactions between agriculture, trade openness, and oil rents using annual time frequency series data from 1981–2017. A series of analyses is conducted. First, a battery of non-stationarity and stationarity unit root tests are performed; these range from the traditional Augmented Dickey-Fuller (ADF) and Phillips–Perron (PP) techniques to the relatively recent Zivot Andrews (ZA) unit root test which accounts for a single structural break to ascertain stationarity properties in the variables under review. Subsequently, the recent Bayer–Hanck cointegration test in conjunction with the Johansen cointegration test was used for the cointegration analysis. Furthermore, to detect the direction of causality, the Toda-Yamamoto Granger Causality test alongside the impulse response function technique shows insightful outcomes. From the empirical results, cointegration is apparent and a long-run equilibrium relationship is traced between the outlined variables over the investigated period. The causality results and impulse response analysis highlight the existence of one-way causality links running from agriculture to trade and from trade to oil rents. The causality test results are informative, and the plausible explanation might be due to the dwindling oil market prices. More insights are elucidated in the conclusion section accordingly.

Population and economic growth in developed countries

ABSTRACT The relationship between population growth and economic growth is examined. Evidence is provided on the direction of causality between population and GDP in five industrialized countries (US, UK, Germany, France, and Italy) for the periods 1820–1938 and 1950–2016. Using Toda-Yamamoto Granger causality tests and Sims causality test it was found that the direction of causality during the former period was from Population to GDP or bidirectional while for the latter period, it was from GDP to population. It is also shown that during the second period per capita GDP was almost double relative to the first period. We argue that the difference may be partly explained by the direction of causality between the two variables. In the 1820–1938 period, the direction of causality is probably due to the large family model that prevailed in that period that led to rapid population growth. For the 1950–2016 period it is probably the rapid economic growth that followed the Second World War and motivated large migration flows to the developed countries we examined.

Determinants of Foreign Direct Investment in Jiangsu Province, China

China has turned to be one of the world’s most significant foreign direct investment (FDI) recipients, with FDI stock second only to the United States. Even though total FDI in China is substantially large, the spatial distribution of FDI is extremely uneven. The eastern coastal regions have always been important areas of China to receive FDI. Among the eastern coastal areas, Jiangsu province is consistently ranked second behind Guangdong province in terms of total FDI in China. However, FDI inflows of Jiangsu province surpassed Guangdong province for the first time in 2003. Although Jiangsu province has become a remarkable destination of FDI, the current FDI growth rate has started reducing. Therefore, it is crucial to investigate the determinants of FDI in Jiangsu province. Consequently, this study examines the determinants of FDI in Jiangsu province by employing an autoregressive distributed lag (ARDL) model with annual data during 1985-2019. In addition, we apply the Toda-Yamamoto Granger causality test to increase the robustness of our empirical results. The findings show that FDI in Jiangsu province is determined by average wage, education, and per capita GDP. Consequently, Jiangsu authorities should implement a policy to ensure a low wage rate and promote education in order to attract more FDI. In addition, the policy on economic development is needed to promote inward FDI in Jiangsu.

Impact of socioeconomic development on inflation in South Asia: evidence from panel cointegration analysis

Purpose This study aims to examine the influence of socioeconomic development on inflation in South Asia using the foreign exchange rate and money supply as control variables. Design/methodology/approach The study uses annual panel data for five South Asian economies, namely, Bangladesh, India, Nepal, Pakistan and Sri Lanka over the period 1990–2018, applies cointegrating regression techniques, namely, the panel dynamic ordinary least square (OLS) and fully modified OLS estimators to examine the long-run relations and conducts the Toda-Yamamoto Granger causality test to detect the direction of causality among variables. Findings The cointegrating regression estimations have documented that the socioeconomic development proxied by the human development index (HDI) has no significant impact on inflation. Although economic development represented by gross domestic product (GDP) growth causes inflation, socioeconomic development represented by HDI has no impact on inflation and has demonstrated as a better macroeconomic indicator, and thus creates no inflationary pressure in the economy. The foreign exchange rate has a positive impact on inflation. The broad money supply has the usual positive effect on domestic inflation that endorses the monetarist view about prices. The Toda-Yamamoto Granger causality test has confirmed several unidirectional causalities: inflation causes HDI, money supply causes both inflation and HDI and the foreign exchange rate causes HDI. Practical implications The study has practical implications for policymakers in South Asia, to improve HDI, particularly GDP per capita, education and health-care facilities to realize continuous socioeconomic development, which will take care of inflation. Moreover, these counties may follow a conservative monetary policy to control inflationary pressure in their economies. Originality/value The study is original and claims to be the first to examine the impact of socioeconomic development on inflation. The findings have socioeconomic values regarding controlling inflation in South Asia.

Getting into the details: structural effects of economic growth on environmental pollution in Ethiopia

Reduced-form approaches are like a ‘black-box’ which do not explicitly display the possible channels (exact forces) through which growth may influence the environment. Accordingly, this study aims to provide some empirical evidence regarding the underlying structural effects of growth on emissions of carbon dioxide (CO2), Methane (CH4), and Nitrous oxide (N2O) in Ethiopia over 1975–2017. Autoregressive Distributed Lag (ARDL) model is employed and the results confirm that the scale effect of growth increases all types of emissions in both the short run and long run. And, the composition effect has a long-run monotonically increasing relationship with CO2 emissions and a non-increasing pattern with CH4 and N2O emissions. On the other hand, a generally decreasing (for CO2 emissions) and an Inverted-U shaped (for CH4 and N2O emissions) technique effects of growth are obtained. This indicates that while growth through its technique effect reduces CO2 even at a lower level of income, the country needs to achieve a higher income level for the technique effect to be effective in reducing CH4 and N2O emissions. Fossil fuel energy appears to be the main driver of environmental pollution. Furthermore, the Toda-Yamamoto Granger causality test indicates a unidirectional causality from the three structural components of growth to all emissions. The findings, generally, suggest that a self-correcting mechanism in the growth process may not automatically reduce environmental pollution. Quite simply, to achieve environmentally sustainable economic growth, the technique effect should be sufficiently strong to offset the scale effect.

Influence of Socioeconomic Determinants on Undernourishment in South Asia: A Panel Cointegration Analysis

Background: Undernourishment is a major public health challenge worldwide, with severe economic consequences. If occurs in the first years of life, it may cause long-lasting effect, particularly regarding personal development and economic growth of the country. Objectives: The current study aimed to investigate the influence of socioeconomic factors, particularly education and national income, on undernourishment in selected countries of South Asia. Methods: The annual panel data for 2001 to 2018 were analyzed using the vector error correction model (VECM) technique and the Toda-Yamamoto Granger causality test (TYGCT). Results: According to the results of the VECM, adult literacy has mixed effects on undernourishment in the short run, while in the long term, it is associated with significant improvements in undernourishment. There is a negative association between economic growth and undernourishment in the short term; while, it disappears in the long term. The TYGCT is designed to validate the findings of the VECM as well as to investigate their robustness. According to the findings of the TYGCT, adult literacy alone can both improve undernourishment and enhance economic growth. Conclusions: This study demonstrated a negative association between undernourishment and adult literacy rate in the long term; that is, higher literacy is associated with lower rates of undernourishment, which in turn results in improved community health. Adult literacy causes declined undernourishment and enhanced economic growth. Therefore, South Asian countries should incorporate appropriate interventions based on health and nutritional evidence in the curricula of schools to, firstly, gear up the nutritional awareness and, secondly, to strive redistribution of income among the relatively poor, which may reduce the undernourishment to a significant extent.

Clean energy, population density, urbanization and environmental pollution nexus: Evidence from Bangladesh

Environmental problem is a much discussed issue worldwide. It is a more serious issue for Bangladesh, which is vulnerable to frequent natural disasters. Therefore, this work aims to identify the short-run and long-run causal relationships between clean energy, population density, urbanization, economic development, trade openness and environmental pollution in Bangladesh using the data of 1973–2014. Different time series related econometric techniques such as Augmented Dickey-Fuller test, Phillips-Perron test, Autoregressive Distributive Lag (ARDL) bounds test and the Toda-Yamamoto Granger causality test are applied to find out outcomes. Our findings are: the use of clean energy improved the environmental quality, but population density, urbanization and economic growth are found to be detrimental to the environment; a unidirectional causality of CO2 emissions with clean energy, economic growth and urbanization is also revealed. Therefore, the use of more clean energy for reducing the environmental pollution is to be ensured.

Is the Trade-led Growth Hypothesis Valid for the Kingdom of Saudi Arabia? Evidence from an ARDL Approach

This study examines the trade-led growth (TLG) hypothesis for the Kingdom of Saudi Arabia. Using time-series annual data for the period 1985–2019, the ARDL approach and Toda-Yamamoto Granger causality test are applied to accomplish the study. The ARDL estimation reveals that trade openness positively causes economic growth in both the long and short run, and the TLG hypothesis is found valid for the Kingdom. The Toda-Yamamoto Granger causality test results have evidenced several unidirectional causalities. Of them, trade openness causes economic growth and supports the ARDL finding and hence the TLG hypothesis for the Kingdom. Moreover, trade openness causes gross fixed capital formation, and the labor force stimulates both economic growth and trade volume. The findings recommend that the Kingdom may increase its trade to reap further benefits and enhance its income growth.

DO INTERNATIONAL GOLD PRICES AND NSE NIFTY 50 MOVE TOGETHER?

With gold’s persistence performance over erratic periods since the catastrophic event of global financial crisis in 2008, attention is focussed on gold to substitute stock market investments in the times of crisis. Exploring such causal nexus between NSE NIFTY 50 index and Gold prices in Indiapost 2008 crisis is the main focus of the present research. The daily data of International Bloom berg Gold prices and NSE NIFTY 50 Index series has been used over the time period of November 13, 2008 to January 24, 2020. By applying unit root and Toda-Yamamoto granger causality test, study primarily shows stationarity of the variables at different order. The study evidenced the significant bidirectional short-run causal relationship in between NSE NIFTY 50 prices and International Gold prices. Hence, International Gold prices hold significant information which can be used to predict NSE NIFTY 50 returns and vice-versa. The results of present study can be used by Indian stock market policymakers to implement new structural restructuring to augment efficiency of Indian equity sector. Present study is limited in scope to account for gold’s nexus with only stock market index which in future can be furthered by establishing association with other commodity markets, mutual funds, exchange rate, derivative, etc.

Relationship between uncertainty in the oil and stock markets before and after the shale gas revolution: Evidence from the OVX, VIX, and VKOSPI volatility indices.

We investigate the relationship between crude oil prices and stock markets. Unlike prior studies, we use implied volatility indices and evaluate the change in the relationship between the volatility indices through a sub-period analysis. Specifically, we examine the causal relationships among the crude oil, S&P 500 index, and KOSPI 200 index volatilities by using the autoregressive distributed lag (ARDL) bounds and the Toda-Yamamoto Granger causality tests. In addition, a BEKK-GARCH model is employed to enhance the robustness of the causality test results. These experiments indicate that the OVX and VIX show bi-directional causality in the period that includes the shale gas revolution and no causality in the period that does not. Further, the OVX Granger causes the VKOSPI in the former period, but there is no causality between them in the latter period. Finally, we find strong unidirectional causality from the VIX to the VKOSPI in both sub-periods. These results have important implications for the analysis of portfolio risk management and for assisting energy policymakers and traders in making effective decisions and investments, respectively.

Does electricity consumption and globalization increase pollutant emissions? Implications for environmental sustainability target for China.

Giving that People's Republic of China is one of the two new frontiers of globalization, the country has continued to contend with the bottleneck of sustaining its economic growth amidst environmental hiccups arising from the drawbacks of globalization and energy consumption. By investigating the challenges of the country's drive toward environmental sustainability, the present study offers a new perspective on the role of electricity consumption and economic growth in a carbon-income function setting. This study also incorporates globalization into CO2 emissions equation for the experimental period of 1970-2014. Stationarity properties were ascertained by the Zivot and Andrew unit root test under a single structural break. Subsequently, the recent and novel combined cointegration test of Bayer and Hanck (2013) in conjunction with the Pesaran bounds testing approach is used to establish a cointegration relationship among the selected variables. Finally, the modified Wald test of the Toda-Yamamoto Granger causality test is employed to detect the direction of causality flows among the variables. Empirical piece of evidence finds a statistically positive correlation between electricity consumption and economic growth as seen in the long-run regression. This result is also affirmed by the Granger causality test. The test corroborates with the electricity-induced growth hypothesis in the case of China. However, there is an environmental trade-off, as more electricity consumptions spur increased carbon dioxide emissions (CO2). Our study finds empirical support that globalization reduced pollutant emissions in both the short and long run over our sampled period. Based on these results and outcomes, several policy prescriptions on the energy-income and environment nexus are renders for policymakers. Among such policy recommendations are (a) the need for the diversification of the Chinese energy mix to cleaner energy sources and renewables and (b) the need for decarbonization and adoption of carbon capturing and storage technologies.

Modeling the dynamic Nexus among coal consumption, pollutant emissions and real income: empirical evidence from South Africa.

This study explores the interaction among coal consumption, pollutant emissions, and real income for South Africa in a multivariate setting. To achieve this objective, annual frequency data spanning from 1965 to 2017 is used for analysis. A series of econometrics tests were conducted ranging from stationarity and non-stationarity tests for unit root properties of the variables under consideration. Empirical evidence finds support for the inverted U-shaped pattern between energy consumption and environmental degradation in South Africa. The Toda-Yamamoto Granger causality test shows a feedback causality between economic growth and carbon dioxide emissions, as well as between GDP and coal consumption. All these highlighted findings have inherent environmental implications. Based on these outcomes, policy directions such as diversification of the South Africa energy mix to renewables and cleaner energy sources and also the adoption of carbon capturing and storage techniques were suggested to engender a cleaner and friendlier environment.

Does the Export-led Growth Hypothesis Hold for Myanmar?

This article examines the causality between export expansion and economic growth in Myanmar using annual time series data for the period from 1981 to 2015. We use the Johansen cointegration test and the Toda-Yamamoto Granger causality test to examine the export-led growth hypothesis in Myanmar. The results show that there is a uni-directional causality running from export expansion to economic growth in Myanmar. Our results support the export-led growth hypothesis in Myanmar. This finding is very important because it indicates that exports are an important factor to promote economic growth. Economic growth can be generated not only by increasing the amounts of labour and capital within the country but also by expanding exports. Exports can perform as an ‘engine of growth’ in Myanmar as in the case of East Asian economies. Therefore, the Myanmar government should actively promote an export expansion strategy to stimulate economic growth by improving trade liberalization and trade facilitation while reducing tariffs and eliminating non-tariff barriers.

Dynamic Relationship Between Global Oil Price and the Eswatini’s Exchange Rate: A Toda-Yamamoto Approach

Globalization and liberalization puts the emphasis on exports as a technique in which developing countries like the Kingdom of Eswatini should adopt to expand their markets beyond their domestic market. For the developing countries to be international competitive in the global markets they need to minimize their production cost particularly on the products that are being exported. The production of most of the exported commodities needs lot energy from oil; hence there has been tremendous increase of oil and its by-product worldwide. The current oil demand for most countries in the world is not met because of insufficient reserves for crude oil in most countries. The Kingdom of Eswatini does not have an oil reserves or oil-refining facilities hence they depends on imports from the neighbouring states in order to meet the consumption requirement. The oil price shocks in the global market normally have adversely effects on various macroeconomic variables such as exchange rate since the oil is traded in US dollars. Oil and exchange rate are considered to be essential factors for domestic economies for developing countries like the Kingdom of Eswatini. The purpose of the study is to investigate the causal relationship between Lilangeni-dollar exchange rate and crude oil price by using the Toda-Yamamota approach. The study used daily time series from January 01st, 2005 to April 30th, 2018 of nominal exchange rate of Lilangeni (Eswatini currency [SZL]) vis-à-vis United States dollar (USD) data as well as the global price of Brent crude oil data that was used as a proxy for the Global crude oil price. The results from the Toda-Yamamoto Granger causality test revealed that there is a unidirectional causality from the global oil price to the Eswatini’s nominal exchange rate (SZL/USD). Hence the study concluded that the global crude oil price influence the Eswatini’s nominal exchange rate. Therefore the study recommends that in the formulating of Eswatini’s exchange rate policy emphases should be on the global oil prices in order not to misalign the Eswatini’s currency.

Energy security, electricity, population and economic growth: The case of a developing South Asian resource-rich economy

Economic growth and increasing population is driving the demand for energy in developing economies globally including South Asia. Energy security concerns have heightened in these economies, consequently, raising questions in their ability to meet the key sustainable development goals. This paper specifically examines the inter-relationships between energy security captured through the channel of electricity availability based on electricity consumption and economic output in a multivariate framework incorporating the effects of capital formation and population for Nepal, a developing economy in South Asia. Time series econometrics based on the ARDL bounds test approach to cointegration and the Toda-Yamamoto Granger causality tests are used to examine and test for long run equilibrium relationships and causality between 1975 and 2014. We find that there is no long-run relationship between electricity consumption and economic output for Nepal, distinguishing it at the regional level for South Asia. However, a 1% increase in population increases electricity consumption by 4.16% in the long-run. We propose that large scale development of available renewable energy such as hydropower and improvements in energy efficiency will not only strengthen energy security in the long-run but also will help tackling climate change in South Asian developing economies like Nepal.