Two-way Granger Causality Research Articles

Data correlation and causal analysis for traffic flow prediction

Globally, traffic congestion has become a major issue due to several issues, including the rapid urban population increase, deteriorating infrastructure, improper and disorganized traffic signal timing, and a lack of real-time data. According to INRIX, a well-known provider of traffic data and analytics, the effects of this problem on U.S. travelers in 2017 were astronomical, totaling $305 billion in wasted fuel, lost time, and increased transportation costs in congested locations. Given the limitations of building new roads, communities must investigate cutting-edge tactics and technology to ease traffic while taking practical and economical restraints into account. This study employs the Granger causality test on a dataset of 48,120 entries, primarily focusing on the variables: number of VEHICLEs and number of intersection JUNCTIONs. The objective is to ascertain the potential mutual influence between these two variables. Initial results indicate a two-way Granger-causality between the variables, implying a feedback relationship. This discovery is fundamental in understanding traffic data dynamics and could be instrumental in enhancing traffic data prediction models.

Assessing the effect of green credit on risk-taking of commercial banks in China: Further analysis on the two-way Granger causality

Green credit is a new financial instrument that has emerged in response to the call for the transformation of the “green economy" model. It aims to utilize financial means to support green industries and environmental projects, serving as a crucial lever for the integration of social and economic benefits. It also represents a significant developmental direction for the future credit business of banks. Leveraging microdata from 36 banks spanning the years 2007–2022, this study explores the correlation between green credit and the risk-taking behavior of commercial banks in China, building upon the DID model. Meanwhile, Granger causality tests are employed to investigate the bidirectional relationship between these two core objects. The research results indicate that green credit has a short-term mitigating effect on the risk-taking behavior of commercial banks. This risk-mitigating effect is more pronounced among banks with smaller assets and lower profitability. However, this effect diminishes over time, ultimately resulting in an increased propensity for risk-taking in the long run. Moreover, this highlight posits that the credit risks of banks do not influence the implementation of green credit policies. Consequently, this paper offers essential reference value for the risk management practices of commercial banks in the emerging economies and other global countries.

Compliance relationship analysis between environmental governance attention and environmental quality in the Beijing–Tianjin–Hebei region

This study analyzes the changes and allocation characteristics of environmental governance attention in the Beijing–Tianjin–Hebei region based on the government work report from 2002 to 2020 and explores the compliance relationship between environmental governance attention and environmental quality. The results show that the allocation of local government environmental governance attention shows high consistency with that of the central government, and the overall environmental governance attention shows a fluctuating upward trend. There is a long-term stable co-integrated relationship between environmental governance attention and environmental quality in the Beijing–Tianjin–Hebei region, as well as a two-way Granger causality relationship in the short term. The non-linear influence of environmental governance attention on the environmental quality in the Beijing–Hebei–Tianjin region can be described using the LSTR2 model. During 2004–2016, environmental governance attention often had non-linear effects on the environmental quality. Since 2016, there has been a stable linear relationship between environmental governance attention and environmental quality. Finally, some policy suggestions on improving the local performance evaluation system and establishing a collaborative environment system for the Beijing–Tianjin–Hebei region have been put forward for the government.

An examination of economic growth determined by foreign direct investment and the institutional environment: a subnational perspective

PurposeThe purpose of this paper is to analyse the relationship between foreign direct investment (FDI) inflows and economic growth with a special focus on the institutional environment at the state level. FDI-led economic growth and economic growth-led FDI have two dominant theoretical foundations, but empirical research supports contradictory findings. These perspectives largely ignore the institutional environment, assuming institutions to be background information.Design/methodology/approachTo examine the causal relationship between FDI, the Granger causality method has been used. The impact of FDI inflows and other institutional factors on economic growth has been examined using the panel data regression method. The principal component analysis (PCA) method has also been used to develop indexes for some variables.FindingsResults indicate a two-way Granger causality between FDI inflows and economic growth at the state level. Infrastructures, education expenses, labour availability and gross fixed-capital formation (GFCF) are positive and significant determinants, whilst corruption and FDI inflows are leaving negative impact on state-wise economic growth.Originality/valueThis study contributes to the body of the literature in four different ways: first, it empirically examines the trends and patterns of subnational FDI inflow and economic growth disparity in India; second, it examines the causality between FDI and economic growth. Third, with the institution-based paradigm in international business, it investigates how institutional variables affect the expansion of the economy. Fourth, it extends prior research by examining the link at the state level using a large panel data set made up of 29 states and 7 union territories (UTs) over the years 2000–2019.

Infrastructure Spending and the Regional Financial Development: Evidence from the Eastern African Belt and Road Initiative Countries

This paper examines the causal relationship between infrastructure spending and regional financial development in Eastern Africa, including Ethiopia, Kenya, Tanzania, Rwanda and Uganda, for 2007–2017 within a trivariate vector autoregressive framework. We use the Global Financial Development Database from the World Bank. We extend the conventionally accepted ratio of financial development by including the Belt and Road Initiative (BRI) spending as an additional variable. The empirical strategy involves applying the Granger causality tests using the cointegration and vector error correction methodology. We find evidence of a two-way Granger causality: (1) between the BRI spending and regional financial development and (2) between the BRI spending and regional growth. These findings suggest that an increase in infrastructure spending, particularly in transport, telecommunications and energy, positively affects regional financial development in Eastern Africa and increases the unbanked population’s inclusion in the region.

Do Internet Development and Urbanization Foster Regional Economic Growth: Evidence from China’s Yangtze River Economic Belt

Internet development and urbanization are widely perceived to have a significant impact on the economy and sustainability in China. However, existing studies fail to consider their interaction patterns and directions with economic growth in China’s Yangtze River Economic Belt (YREB). This study applies a bootstrap panel Granger causality test to examine the causal relationships between Internet development, urbanization, and regional economic growth for the YREB‘s 11 provinces. The main findings are as follows: (1) Internet development, urbanization and regional economic growth exhibit cross-sectional dependence and province-specific heterogeneity in the YREB. (2) Granger causality from Internet development to economic growth exists in most provinces, while Granger causality from economic growth to Internet development and two-way Granger causality are only observed in economically developed provinces, such as Shanghai, Jiangsu, Zhejiang, and Chongqing. (3) Granger causality from urbanization to economic growth exists in nine provinces, except for Hubei and Guizhou. However, the reverse Granger causality is only confirmed in Jiangsu, Anhui, and Hubei. This suggests that urbanization significantly improves economic growth efficiency, but the effect of economic growth on urbanization is restricted by regional bias policies. Therefore, the local government should implement tailored economic policies and establish an interactive mechanism to help China leverage its potential for economic growth and sustainability.

Determining the (A)symmetric Role of Business–Consumer Confidence in Outward–Inward Tourism in Russia: A Competitiveness Perspective

Tourism activities in Russia, prior to the coronavirus pandemic and the Ukraine–Russia conflict, reportedly recorded a desirable boost, thus prompting the formulation of the country’s new Tourism Development Strategy for 2035. Considering this observation, the current study examines the determinants of the Russia’s inbound and outbound tourism, but especially from the perspective of linear and nonlinearity role of market—business and consumer—confidence over the quarterly period 2010Q1–2020Q4. The result shows that negative and positive shock in business confidence and consumer price index positively affects international arrivals to Russia in the short and long run, but with a negative shock in business confidence showing a larger effect. A shock (irrespective of the direction) in the consumer leading indicator leads to decline in international arrivals in the short and long run. We also found that a shock (mostly negative) in the consumer confidence reduces the numbers of Russian travellers to foreign tourist destinations in the short- and long-term period. However, a negative shock in business confidence encourages Russians to embark on touristic visit to destinations, while there is no significant effect arising from the shock in the consumer price index. Moreover, for symmetric evidence, there is a significant two-way Granger causality from BCI to outbound tourism, and from CLI to outbound tourism especially in the medium term, while a one-way causality exists from CPI to outbound tourism in the short and medium term.

Heterogeneous dependence among cryptocurrency, green bonds, and sustainable equity: New insights from Granger-causality in quantiles analysis

With the rapid development of cryptocurrencies and the increasing importance of environmentally friendly investments, their environmental impacts have become a new research area in financial economics. Thus, this study examines the heterogeneous causal relationships among cryptocurrencies, green bonds, and sustainable equities from July 31, 2014, to August 11, 2022. The use of Granger-causality in quantiles analysis allows us to assess causality in each quartile and provides insights into how the three investment instruments interact under different market conditions. The results reveal the existence of strong tail dependence between green bonds, sustainable equities, and cryptocurrency, indicating two-way Granger-causality among them.

Asian ageing: The relationship between the elderly population and economic growth in the Asian context.

The elderly population and economic growth have been a contentious topic among researchers. Regardless of the economic growth rate, the population and its growth have a stimulating influence on economic development. This study aims to explore the relationship between the elderly population and economic growth in 15 Asian countries, based on secondary data gathered from the WDI (World Development Indicators) from 1961 to 2021. This research contributes to filling the empirical gap, capturing the Granger causality concerning the relationship between the elderly population and economic growth in the Asian context in a single study. The empirical findings highlighted a one-way Granger causality from economic growth to the elderly population for India, Japan, Malaysia, and Singapore while vice versa for Bangladesh, China, and Pakistan. Furthermore, for Nepal, there is a two-way Granger causality, while there is no Granger causality for remaining countries. To the best of the authors' knowledge, this study has been the first to investigate the relationship between the elderly population and economic growth for Asian nations, using a lengthy data series and a Granger causality test. The main findings will assist the governments, policymakers, and foreign investors in effective decision-making in this regard.

Synergistic Interconstruction of the Green Development Concept in Chinese Rural Ecological Agriculture

The development of industrialization has overwhelmed an ecological environment damaged by the modern agricultural method. The development of a circular economy, which focuses on green development while balancing the development of agricultural production capacity, has led to the emergence of ecoagriculture. This study examines the impact of the green development concept on farmers’ income, using the practice of the green development concept of ecoagriculture in Guangdong province, China, as an example. The study uses the entropy method to verify whether the green development concept advocated by top-down policies genuinely benefits farmers’ living standards. The study results are as follows. First, the green development concept’s application in Guangdong province’s agricultural production and the two-way granger causality relationship between farmer income and food production interact. Second, chemical fertilizers and pesticides have played an important role in promoting the development of agricultural production. Third, in the long run, the greater the use of chemical fertilizers and pesticides will reduce farmers’ incomes. In summary, from the perspective of sustainable development, green development will promote increased income for China’s farmers and improve rural development. It is essential to implement the concept of green development in the process of rural modernization.

The pathway to the natural gas industry: Financial development, coal consumption, and carbon dioxide emissions in P.R. China.

This paper revisits the causal links between financial development, coal consumption, and CO2 emissions in P.R. China over the 1977-2017 period to validate the development of its natural gas industry. It uses a Bootstrap ARDL bound test with structural breaks to establish stationarity, short- and long-run dynamics, and causality of the series. The results show there are no long-run relationships among these three variables, but a Granger causality test does indicate the presence of both a two-way Granger causality between coal consumption and CO2 emissions, and a one-way Granger causality running from financial development to both coal consumption and CO2 emissions. These results have important policy implications for the Chinese government's efforts to meet its commitment at the 75th UN General Assembly to achieve carbon neutrality. In that context, the promotion of its natural gas industry, including carbon pricing mechanisms and taxation schemes while enacting environmentally friendly energy abatement policies become a must.

Analysis on the correlation between credit scale of financial institutions and stock market price data

This paper analyzes the degree of association between credit size of financial institutions and stock market prices in China based on monthly data from November 2006 to November 2016 using impulse response function because of VAR time series model. The results show that there is a two-way Granger causality between the credit size of financial institutions and stock market prices when the lag order is 2. The impact of credit size of financial institutions on stock market price shocks is larger in the short-term, and this effect rapidly decreases to near zero after the med-long term. Conversely, the med-long term shocks to the credit size of financial institutions are larger than the short-term shocks by stock market prices.

EXPENDITURE ON WELL-BEING, HIV PREVALENCE AND PERFORMANCE OF ECONOMIC GROWTH IN EAST AND SOUTHERN AFRICAN SUB- REGIONS

This study was motivated by the dearth of current studies on the linkages among HIV,GDP and disaggregated outlay on well-being in Eastern and Southern African regions. Hence, the main focus of this study is to investigate the nature and direction of the Hsiao causality among HIV, GDP and disaggregated outlay on well-being in Eastern and Southern African regions. Aggregate time series data from 1994 to 2020 on these variables were used to test the unit root, cointegration and Hsiao causality bivariate regression model specified for each region. The results are mixed for the two regions: for the East African sub-region, the results suggest that total outlay on well-being does not Hsiao Granger cause GDP but GDP does (portending a one-way Granger causality). But for the Southern African sub-region, the results suggest that total outlay on well-being Hsiao Granger causes GDP and GDP Hsiao Granger causes Outlay on well-being (suggesting a two-way Granger causality).
 Keywords: Outlay On Well-Being; Growth; HIV Prevalence; East Africa Region; Southern Africa Region.

Does renewable energy consumption reduce energy ecological footprint: evidence from China

The modern economic growth paradigm relies heavily on natural endowments. Renewable energy as a permanent energy source has the potential to reduce the ecological footprint (EF). We adopt the Vector Autoregressive model to examine the impact of renewable energy consumption on the energy EF and use the quantile regression method to test the heterogeneity and asymmetry between energy EF and photovoltaic, wind energy, and biomass energy. The results show that renewable energy has a long-term negative impact on the EF, and for every 1% increase in renewable energy consumption, the energy EF will decrease by 2.91%. The contribution of renewable energy consumption to reducing the EF is 1.34% on average. There is no two-way Granger causality between renewable energy consumption and energy EF. The reduction effect of wind energy consumption on the energy EF varies the most, followed by biomass energy and photovoltaic. In addition, under different energy EF distribution conditions, the impact of photovoltaic or wind energy or biomass energy consumption on the energy EF is different.

The relationship between institutional ownership and idiosyncratic volatility: evidence from the stock markets of China and the USA

PurposeThis paper investigates the relationship between institutional ownership and idiosyncratic volatility in Chinese and the USA stock markets and explores the potential explanations.Design/methodology/approachIn this paper, the authors use the panel data regressions and the dynamic tests of two-way Granger causality in the panel VAR model to examine the relationship between institutional ownership and idiosyncratic volatility in Chinese and the USA stock markets.FindingsThe authors find that the institutional ownership in the Chinese (the USA) stock market is significantly and positively (negatively) related to idiosyncratic volatility through various tests. This paper indicates that institutional investors in the USA are more prudent and risk-averse, while the Chinese institutional investors are not because of high risk-bearing capacity.Originality/valueThis paper deepens the authors’ understanding on the relationship between institutional ownership and idiosyncratic volatility and in the USA and the Chinese stock markets. This paper explains the opposite relationships between institutional ownership and idiosyncratic volatility in the stock markets in China and USA.

AN ASSESSMENT OF COINTEGRATION AND CAUSALITY RELATIONSHIPS BETWEEN BIST 50 AND KATILIM 30 INDICES

Ülkemizin sermaye piyasası platformu Borsa İstanbul'da (BIST) işlem gören KATILIM endeksleri son yıllarda her profilden yatırımcının ilgi odağı olmuştur. Bu çalışmada, BIST 50 geleneksel endeksi ile İslami prensiplere uygun faaliyet gösterdiği belirlenen 30 şirketin hisselerinden oluşan KATILIM 30 endeksi getirileri arasındaki uzun dönemde denge ve kısa dönem ilişkileri araştırılmıştır. Her iki endekse ait veri seti 06.01.2011 tarihinden 30.09.2021 tarihine kadar olan dönemin günlük kapanış değerlerinden oluşmaktadır. Johansen eşbütünleşme analizi sonucunda endeks getirileri arasında uzun dönemde en az 2 eşbütünleşme bulgusu; çift yönlü Granger nedensellik analizi neticesinde ise yalnızca BIST 50 endeksinden KATILIM 30 endeksine doğru tek yönlü istatistiksel olarak anlamlı nedensellik bulgusu saptanmıştır. Buradan hareketle, kısa dönemde geleneksel endekslerin İslami endeks getirileri üzerinde belirleyici bir etkisinin olduğu ve iki farklı metodolojiye dayalı olarak işlem gören bu araçların eşbütünleşik olmaları sebebiyle birbirinden ayrışmadıkları, dolayısıyla Modern Portföy Teorisi çerçevesinde BIST 50 ve KATILIM 30 endeksleriyle yapılacak portföyün yatırımcı açısından faydalı olmayacağı öngörülmüştür.

Real Estate Economic Development Based on Logarithmic Growth Function Model

Abstract This article uses a logarithmic growth model to analyze the correlation between the national economy and real estate. It reveals the Granger causality between the national economy and the real estate economy. The results show a long-term equilibrium relationship and a two-way Granger causality between real estate prices and economic growth. Excessive growth in real estate prices will create bubbles and will also drive economic growth backward.

Tourism demand forecasting from the perspective of mobility: a brand-new predictive variable generated from intercity population mobility big data

ABSTRACT Few studies have investigated tourism demand forecasting from a mobility perspective. We explore whether population mobility data improve the ability to forecast tourist volumes in scenic spots. We selected Jiuzhaigou and Mount Siguniang in China as study cases and ensured the robustness of the results using single- and multistep rolling evaluation techniques. The findings reveal a significant correlation, long-term cointegration, and two-way Granger causality between intercity population flow and tourist flow. The comparison model with population flow as a variable outperforms the benchmark model. We prove the feasibility of leveraging population flow in tourism demand forecasting and suggest further research.

The effect of financial development on economic growth and income distribution: an empirical evidence from lower-middle and upper-middle-income countries

ABSTRACT Financial development and its relationships with economic growth and income inequality have recently received considerable attention. The present study investigates the relationships between financial development and (i) economic growth, using data from 44 countries; (ii) economic inequality, using data from 42 middle-income countries. Estimates are obtained through a panel Autoregressive Distributed Lag (ARDL) model for a period of 23 years (1995-2018). Results reveal that financial development contributes to economic growth in both groups of countries in the long run. However, the contribution financial development makes to economic growth is more noticeable in the case of upper-middle income countries. Additionally, Granger causality test based on Vector Error Correction (VEC) showed two-way Granger causality between financial development and economic growth. Findings disclosed an inverted U-shaped association between financial development and income inequality for both lower-middle income and upper-middle income countries. This study can aid policymakers in designing policies that can strengthen financial systems, thereby enhancing economic growth and reducing income inequality.

Trade openness and real effective exchange rate volatility: The case of Vietnam

2004–2020. The study was conducted in the context that Vietnam’s trade openness is increasing, causing significant challenges in macro management, including exchange rate management. The authors use vector autoregression model and Granger causality test to test this relationship. The study used a vector autoregression model and Granger causality test to investigate the causal relationship between trade openness and real effective exchange rate volatility in Vietnam over the period 2004–2020. The study was conducted in the context of Vietnam’s trade openness index rising, causing significant challenges in macro management, including exchange rate management. The study takes a new approach (i) using Vietnam’s real effective exchange rate relative to 143 trading partners; and (ii) examining the impact of economic growth on trade openness and exchange rate volatility. The research results indicate that trade openness has a two-way Granger causality with effective real exchange rate volatility in Vietnam at the 1% significance level. Specifically, the effect of trade openness on real exchange rate volatility is positive at a 1-period lag and 4-period lag. Meanwhile, real exchange rate fluctuations have a negative effect on trade openness with a 1-period lag. At the same time, the study also finds that increased economic growth reduces real effective exchange rate volatility and increases Vietnam’s trade openness. On that basis, the study proposes implications for the management of trade openness and exchange rate management in the current Vietnamese context.