Unit Root Tests Research Articles

Investigating the persistence degree of environmental patent: application of panel SPSM-quantile unit root test

ABSTRACT This article analyzes the degree of persistence of shocks to environmental patents in the OECD countries from 1980 to 2022 by applying the panel quantile unit root (PQUR) test and sequential panel selection (SPS) method. Our results indicate that most OECD countries reveal similar stochastic behaviours, where low and extreme (middle and moderate high) quantiles behave as unit root (stationary) processes. According to our findings, except for the US, the time series of environmental patents of other OECD countries behaved as a unit root process in 2022. Accordingly, the mandatory and incentive pro-green innovation policies have long-lasting effects on the development of the patents.

Do bitcoin electricity consumption and carbon footprint exhibit random walk and bubbles? Analysis with policy implications

One of the main current focuses of global economies and decision-makers is the efficiency of energy utilization in cryptocurrency mining and trading, along with the reduction of associated carbon emissions. Understanding the pattern of Bitcoin's energy consumption and its bubble frequency can greatly enhance policy analysis and decision-making for energy efficiency and carbon emission reduction. This research aims to assess the validity of the random walk hypothesis for Bitcoin's electricity consumption and carbon footprint. We employed both traditional methods (ADF and KPSS) and recently proposed unit root techniques that account for structural breaks and non-linearity in the data series. Our analysis covers daily data from July 2010 to December 2021. The empirical results revealed that traditional unit root techniques did not confirm the stationarity of both bitcoin's electricity consumption and carbon footprint. However, novel structural break (SB) and linearity tests conducted enabled us to discover five SB episodes between 2012 and 2020 and non-linearity of the variables, which informed our application of the newly developed non-linear unit root tests with structural breaks. With the new methods, the results indicated stationarity after accommodating the SB and non-linearity. Furthermore, based on Phillips and Shi (2019)'s test, we identified certain bubble episodes in the bitcoin energy and carbon variables between 2013 and 2021. The major drivers of the bubbles in bitcoin energy consumption and carbon footprint are variables relating to the bitcoin and financial markets activities and risks, including the global economic and political risks. The study's conclusion based on the above findings informs several policy implications drawn for energy and environmental management including the encouragement of green investments in cryptocurrency mining and trading.

The nexus of tax avoidance and firms characteristics – does board gender diversity have a role? Evidence from an emerging economy

PurposeThis study examines the moderating role of female directors on the relationship between the firms’ characteristics and tax avoidance in an emerging economy.Design/methodology/approachThis study employs the second-generation unit root test and the generalised method of moments (GMM) techniques. The Kao residual cointegration test corroborates a long-run cointegration among variables.FindingsFemale directors demonstrate mixed and unusual findings. No significant impact of female directors on tax avoidance is found. In addition, the presence of female directors does not show any negative or significant moderating impacts on the relationship between leverage, firm age, board size and tax avoidance. However, having more female directors can negatively and significantly moderate the relationship between more profitable firms, larger firms and tax avoidance. These findings show that the board of directors could use the presence of female directors to maximise their opportunistic behaviour, such as to avoid tax.Research limitations/implicationsResearch limitations – The study is limited by considering only 62 listed firms. The scope could be extended to include non-listed firms.Practical implicationsResearch implications – There is increasing pressure for female directors on boards from diverse stakeholders, such as the European Commission, national governments, politicians, employer lobby groups, shareholders, and Fortune and Financial Times Stock Exchange (FTSE) rankings. This study provides input to decision-makers putting gender quota laws into practice. Our findings can help policy-makers adopt regulatory reforms to control tax avoidance practices and enhance organisational legitimacy. Policymakers can change their policy to include female directors up to the threshold suggested by the critical mass theory.Originality/valueThis is the first attempt in Bangladesh to explore the role of female directors in the relationship between the firms' characteristics and tax avoidance. The current study has significant ramifications for bringing gender diversity into practice as a component of good corporate governance.

İnsani Gelişme Endeksinin Bir Bileşeni Olan Yaşam Beklentisinin Farklı Gelir Grupları Açısından Yakınsaması

The argument that health indicators, which are one of the three equally weighted elements of the Human Development Index, have ceased to be an indicator of development was examined for the period between 1972 and 2020. In the first stage of the study, the evolution of life expectancy was examined descriptively in the context of the classification of the world's countries as high-income, middle-income (upper and lower middle) and low-income. If the average life expectancy in each group is taken as 100 in 1972, it can be seen that life expectancy has increased most in low-income countries (140.9), followed by middle-income (128.6) and high-income countries (112.8). In addition, this situation was analyzed using unit root tests. The series obtained by relating the average life value of the high-, middle-, and low-income groups to Japan, which represents the highest life value, are stationary at the level. Therefore, it is noteworthy that the development gap between countries in the world in terms of income is gradually deepening, giving rise to a divergence mechanism, while the development gap in terms of average life is gradually narrowing, that is, the existence of convergence in terms of average life. In the convergence of health, both humanistic motives and individual motives (the realization that if all humanity is not saved, as in the last pandemic, no one's salvation will be possible) have been effective.

Impacts of Fintech and natural resources on environmental quality: The role of renewable energy and carbon taxes: A panel QARDL approach

AbstractThe world is currently suffering from a significant environmental crisis characterized by global warming, rising sea levels, foods, and droughts. This has adversely affected the poorest nations, resulting in increased occurrences of both droughts and flooding that impact their means of livelihood. In order to address this issue, countries globally need to develop policies that efficiently reduce environmental destruction and achieve zero carbon emissions. A number of empirical estimates were used in this study. The Friedman, Frees, and Pesaran tests are used to evaluate cross‐sectional dependence. Unit root tests, such as the augmented Dickey–Fuller test, are used to assess the stationarity of variables. The Pedroni test is used in co‐integration analysis to find the long‐term relationships between variables, and a novel Panel quantile auto‐regression distributed lag methodology to investigate both long‐term and short‐run dynamics across G‐17 countries spanning from 2000 to 2021. The results clarify the pivotal role of carbon taxes, technological innovation, and renewable energy consumption in reducing carbon dioxide (CO2) emissions, thereby enhancing environmental quality, while the sustained use of natural resources is harmful to environmental quality. Furthermore, the finding reveals that Fintech's association with CO2 emissions negatively impacts environmental quality. The study also demonstrates the efficacy of environmental taxes in reducing CO2 emissions across, supporting for higher carbon pricing as a viable policy tool for environmental protection.

Forecast performance of noncausal autoregressions and the importance of unit root pretesting

AbstractBased on a large simulation study, this paper investigates which strategy to adopt in order to choose the most accurate forecasting model for mixed causal‐noncausal autoregressions (MAR) data generating processes: always differencing (D), never differencing (L), or unit root pretesting (P). Relying on recent econometric developments regarding forecasting and unit root testing in the MAR framework, the main results suggest that from a practitioner's point of view, the P strategy at the 10% level is a good compromise. In fact, it never departs too much from the best model in terms of forecast accuracy, unlike the L (respectively, D) strategy when the DGP becomes very persistent (respectively, less persistent). This approach is illustrated using recent monthly Brent crude oil price data.

Effect of International Trade on the Economic Growth of Nepal

The study explores the relationship between exports, imports, remittance, and economic growth of Nepal for the 1974/75 to 2021/22 fiscal year. Descriptive and analytical research designs were employed on time series data obtained from secondary sources. The Augmented Dickey-Fuller unit root test, co-integration technique, and Error Correction Model (ECM) were employed for empirical investigation. The impact of exports, imports, and remittances on economic growth was analyzed through the ordinary least square regression method for the long run relationship. The result reveals the existence of a long-run relationship between imports, remittances, and gross domestic product. The effect of exports and imports was statistically significant on the economic growth of Nepal and the effects of remittance was statistically insignificant on economic growth. The result emphasizes that the Government should ensure the export promotion policies to achieve Nepal's high and sustainable economic growth by investing in trade infrastructure and export subsidies and creating a favorable environment that encourages using remittance money to support productive sectors of the economy.

How do energy efficiency, technology, natural resources and globalization impact environmental sustainability? Fresh evidence from load capacity curve theory

For sustainable development, the roles of energy efficiency and renewable energy is undeniable. We are passing through the era of globalization and economies are expanding their economic activities across borders. In this scenario, nations are striving for sustainable economic development without hurting the climatic conditions. Therefore, this study employs Bai and Carrion-i-Silvestre unit root test and Westerlund cointegration tests. The variables were found to have mix order of integration and Westerlund test shows cointegration in the panel data. The Method of Moments Quantile Regression (MMQR) is used to ascertain the effects of energy efficiency and economic, environmental, and globalization factors on the load capacity factor (LCF), a measure of environmental quality in G-20 countries. Key findings supporting the Load Capability Curve (LCC) theory show that while initial economic growth (GDP) has a negative impact (coefficient of −0.035 at the median quantile), advanced economic growth (GDP2) improves LCF (coefficient of 0.513 at the 90th quantile and 0.388 at the median). The median quantile coefficient of 0.055 indicates a positive association between the consumption of renewable energy and LCF. Natural resources exhibit a coefficient of 0.061 at the 90th quantile and 0.037 at the median. However, there are drawbacks to both financial globalization and contemporary environmental technology; their coefficients at the median quantile are −0.021 and −0.058, respectively. The work suggests targeted strategies, including more stringent environmental legislation, backing for renewable energy, sustainable resource management, advancements in environmental technologies, regulation of financial globalization, and bolstering of international cooperation.

The Bank Concentration and Risk Exposure: Empirical Insights from Asian Countries

Background: The relationship between bank rivalry and stability is a subject of discussion in both theoretical and empirical research. The two competing theories, the (1) competition-stability and (2) competition-fragility theories, provide an alternate explanations, leading to controversy over the merger and acquisition policies implemented by Asian governments. This study examines the influence of bank rivalry, profitability, diversity, efficiency, and liquidity on bank stability in Asian countries. Methods: This study used annual data from 11 Asian countries spanning 14 years (2007-2020) and comprising 154 observations. The secondary data were extracted from the Global Financial Development Database (2023). The unit root test, cointegration test, and random effect model were the main methods employed in this work to assess stationarity, long-term relationships, and the influence of bank competition on stability in Asian nations, respectively. Results: The findings revealed that the bank concentration ratio (β = 1.975, p < .01) and cost-to-income ratio (β = -.375, p < .01) negatively affect bank stability, while the noninterest income-to-total income ratio (β = .180, p < .05), credit-to-deposit ratio (β = .346, p < .01), liquid assets-to-deposit ratio (β = .087, p < .05), and net interest margin (β = .036, p < .05) positively affect bank stability in Asian countries. Conclusion: This study concludes that bank competition and efficiency negatively affect bank stability, while income diversification, profitability, and liquidity positively affect bank stability in Asian countries. Novelty: Using a more recent dataset, this study analyzes the effects of competition on stability through cross-country analysis. This also offers extensive literature on the Asian context.

Testing the agriculture-induced Environmental Kuznets Curve with moderation effect of human capital and renewable energy: insights from BRICS economies.

The surge in economic growth and increased agricultural output can augment societal well-being whilst proliferating environmental stressors. So, the study tests the validity of the "agriculture-induced Environmental Kuznets Curve hypothesis" (AEKC) by assessing the varied environmental proxies that have yet to be accounted for earlier in the case of BRICS economies. Furthermore, most studies have utilised "first-generation econometric approaches" as the "cross-sectional dependency" has not been deemed in estimation. On account of this, the research employed "second-generation CIPS and CADF unit root test", "Westerlund cointegration test", "fully modified ordinary least square" (FMOLS) and "dynamic ordinary least square" (DOLS) to test the validity of AEKC in "BRICS countries" for 30years. A positive association between agriculture and "ecological footprint" has been found which evidences the presence of an "inverted U-shaped AEKC" in BRICS nations. Another finding shows that the favourable impact of agriculture towards climate change can be moderated by illustrating the interaction effect of "human capital" and "renewable energy" with "agriculture". Lastly, the investigation brings forth the policy repercussions and acumens for the BRICS governments and policymakers in halting climate change by using renewable energy in agriculture and building human capital.

Financial stability and environment degradation in Turkey: evidence from fourier ARDL approach

This study investigates the impact of financial stability on environmental degradation in Turkey, controlling for economic growth, renewable energy consumption, and primary energy consumption between 1990 and 2019. The study employs various statistical methodologies, including LS Unit Root, Fourier ARDL, DOLS, and FMOLS tests. The findings reveal an inverse relationship between financial stability and environmental degradation. Both economic growth and primary energy consumption are found to exacerbate environmental degradation. This study recommends that policymakers incorporate financial stability into policies aimed at reducing CO2 emissions. Furthermore, it emphasizes the importance of investing in renewable energy infrastructure and the transportation sector to effectively mitigate environmental degradation.

Cross-commodity market integration and price transmission in Thailand’s livestock sector

The ability to substitute goods and services is crucial for maintaining market stability during price fluctuations, particularly in the livestock market, where products are interchangeable. This study aimed to analyse market integration and asymmetric price transmission concerning livestock commodity prices in Thailand. Specifically, it focused on beef cattle, swine, broiler chicken, and chicken egg prices, using time-series data from January 2011 to December 2022. The analysis employed unit root tests to check if the time series data were stationary, Granger causality tests to determine the direction of relationships among livestock prices and an asymmetric price transmission model to examine short-term asymmetry and adjustment in cross-commodity prices. The findings indicate three directions of price integration in Thailand’s livestock market: from broiler chicken price to chicken egg price, from swine price to chicken egg price, and from swine price to broiler chicken price. The results suggest that price transmission in Thailand is symmetrical, demonstrating an efficient interdependent relationship. Thus, the findings indicate that chicken eggs are a substitute for broiler chickens and swine when prices fluctuate, while broiler chickens are a substitute for swine. The results reveal that chicken eggs can replace swine consumption more effectively than broiler chickens within Thailand. This study highlights that chicken eggs are the most effective substitute during livestock price fluctuations in Thailand, with broiler chickens being the second most effective. Consequently, stakeholders in the livestock supply chain, such as policymakers, entrepreneurs, and farmers, should understand the integration of different commodities and price transmission in Thailand’s livestock market. To guarantee market stability, stakeholders should manage the demand and supply of livestock commodities and acquire chicken eggs and broiler chickens during significant fluctuations in domestic livestock commodity prices

On the fiscal deficit and economic growth in sub-Saharan Africa: A new evidence from system GMM.

Using a two-step approach GMM, this study examines the short- and long-term effects of fiscal deficit on the economic growth of 42 Sub-Saharan African nations between 2011 and 2021. The World Development Index, the most reliable source, is where the panel data is taken from. Using the Levin-Lin-Chu and Hadri LM tests for unit root, it was determined that there is no risk of a random walk in the data. The study's findings indicate that while the fiscal deficit has short-term, positive, and significant benefits on the economic growth of SSA countries, it has long-term, negative repercussions. According to the system GMM's results, an increase in the fiscal deficit of SSA countries is linked to a short-term increase in economic growth of 0.036 percent, while an increase in the fiscal deficit of one percentage point is linked to a long-term decline in economic growth of SSA countries of 0.013 percent, holding all other factors constant. The study's findings also showed that the budget deficit has a larger positive short-run coefficient than a negative long-run coefficient. The study also revealed that while real effective exchange rates and inflation short-term hinder economic growth, gross fixed capital creation and real interest rates are the primary drivers of economic expansion. Long-term economic growth in the SSA countries is also found to be positively and significantly impacted by gross fixed capital formation. According to the study, SSA nations should manage their fiscal deficits and, in the long run, provide more funds for gross fixed capital development.

House price convergence in the very long run

AbstractWe examine the house price convergence across 12 OECD countries over the period 1905–2016. Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles. Focusing on several specific quantiles, 11 countries have significant convergence tendencies. Moreover, there are four definite patterns related to shocks in the relative house prices across quantiles.

Are shocks to entrepreneurship persistence? Case of a Resource-based economy

PurposeThis paper aims to investigate the stationary properties of entrepreneurship capital in the Iranian business sector. The investigation is conducted based on firm size (micro, small and medium, and large), sector (ISIC classification), and location (23 provinces) over the period 1981–2021.Design/methodology/approachTo achieve the purpose of the paper, we apply the Lagrange Multiplier (LM) unit root test with structural breaks.FindingsThe results of our study confirm the stationarity of entrepreneurship for the majority of our categorizations. Therefore, entrepreneurs' willingness to start a business is temporarily affected by sharp shocks, suggesting that the entrepreneurship trends in these categories will eventually revert to their long-run equilibrium. However, the time series of entrepreneurship in provinces such as Zanjan and Lorestan, as well as in the electrical machines and devices (code 31) sector, remain permanent. These findings can assist policymakers in each sector and location in designing effective policies to promote entrepreneurial activities.Research limitations/implicationsIn this study, the time period utilized was restricted, and there were no data accessible for an extended duration. Another limitation of this research is the absence of access to firm-level data on a shorter time scale, such as weekly or monthly.Originality/valueThe economic literature reveals that empirical studies on the persistence of entrepreneurship have received relatively less attention in the context of emerging and resource-based economies, compared to the increasing focus on them in developed countries. Therefore, to address this gap, this paper aims to extend the current empirical literature by presenting new evidence for the case of Iran, which has an emerging and resource-based economy.

The Velocity of Money and Lessons for Monetary Policy in Nigeria: An Application of the Quantile ARDL Approach

AbstractThe paper investigates the determinants and stability of the income velocity of money while accounting for structural breaks in its approach from the period Q1 1981 to Q4 2023 in Nigeria. The paper extends previous works by accounting for four velocities of money functions having accounted for structural breaks in its approach. The study adopted the Bai and Perron breakpoint test, the Zivot and Andrews, and Perron and Vogelsang structural break unit root tests to determine the break dates and the variables’ stationary properties. In analyzing the main results, the study used the quantile ARDL method to establish the determinants of income velocity of money in Nigeria, while it used the CUSUM tests to establish the stability of money velocity in Nigeria. The study found that the determinants of the velocity of money are per capita income, the exchange rate, financial development, inflation, and the interest rate across the four models. Furthermore, the four velocities of money functions were unstable for Nigeria using the cumulative sum and cumulative sum of squares tests. Consequently, the study recommends effective monitoring and the provision of sound monetary policies to ensure a stable and predictable velocity of money. This can be achieved by understanding and focusing on these key determinants and crafting informed strategies to manage economic growth and stability. This holistic approach ensures that the benefits of economic policies are felt broadly across the economy, ultimately bolstering overall financial health and enhancing the velocity of money, which is crucial for sustained economic progress.

Coevolution of technical change and income inequality in developed and developing countries

ABSTRACT Recent research challenges the long-held belief that economic growth, technical progress, and improved income distribution are inherently linked. Despite rapid technological advancements in recent decades, income inequality has increased. This study seeks empirical evidence on the relationship between technical change and income inequality, focusing on the roles of heterogeneity and appropriability. Using panel data from 75 countries (grouped into ‘developing’ and ‘developed’) from 1983 to 2015, the researchers applied cointegration tests, unit root tests, and a vector error correction model. They examined variables related to technology creation, diffusion, and the Gini index. The findings indicate that technical change, particularly when it is appropriable, often coevolves with increased income inequality. In developed countries, innovation rewards systems contribute to income disparities, while in developing countries, foreign technology transfer reinforces existing inequalities. The study suggests that without redistributive mechanisms, technical progress can lead to trade-offs that hinder overall development.

Study on stochastic convergence of China’s carbon emission efficiency

ABSTRACT Carbon emission efficiency (CEE) and its stochastic convergence are important indicators for achieving the strategic goal of carbon peaking and carbon neutrality. Thus, this paper firstly estimates the CEE of 30 provinces in China from 1995 to 2019 with the super efficiency of the SBM model. Then the panel unit root test method is adopted to test its stochastic convergence. The results show that the overall CEE has not reached the effective level, and the CEE level varies greatly among regions. There is a stochastic divergence of CEE in most regions from 1995 to 2001. While the CEE of most regions changes to convergence after 2002. From 1995 to 2019, the CEE of the western, northeast, and southwest regions diverge. While the CEE of the national level, the eastern, central regions, and the other six regions in the eight major economic zones converged stochastically. Among the divergent areas, the CEE of Heilongjiang, Guangxi, and Sichuan provinces are the main contributors to the CEE divergence. Therefore, it is the key to narrowing the differences in regional low-carbon development in China by significantly improving the CEE of each province.

The role of financial development, natural resources, and technology in determining green energy: New findings from the N‐11 countries

AbstractIn recent years, there has been a growing global emphasis on transitioning to renewable energy sources to mitigate the effects of climate change and promote sustainable development. The role of financial development, natural resources, and technology in determining the advancement of green energy has been a subject of ongoing research. This study examines the impact of financial development, natural resources, and technology on green energy development in N‐11 countries between 1990 and 2022, using economic growth and education as control variables. The empirical estimations are based on cross‐section dependence, testing for slope heterogeneity, second‐generation panel unit root tests, LM‐Bootstrap cointegration tests, fully modified ordinary least squares, and dynamic ordinary least squares. A 1% increase in natural resources is associated with a 0.0615% increase in the adoption of green energy. A 1% increase in education leads to a statistically significant increase of 1.0734% in the adoption of green energy financial development enables the deployment of renewable energy sources and access to financial resources. Natural resources determine the types of renewable energy technologies that are prioritized. Technological advancements drive the growth of renewable energy technologies and facilitate their integration into the energy mix. By analyzing the findings of recent studies on the N‐11 countries, we can gain valuable insights into the importance of these factors in advancing green energy and achieving sustainable energy development.

Exploring the nexus of geopolitical risk, green financing, and natural resource rents: A study of Russia's economic growth

Geopolitical risk encompasses various uncertainties arising from political, social, and economic factors, which can significantly influence a country's economic performance. Therefore in this study we analyzed the impact of geopolitical risk (GPR), green financing, and natural resource rents (NRR) on Russia's economic growth during 2000–2022 is examined in this study. The collected data is analyzed using simple quantile regression, the ADF unit root test, Johansen Co-integration, and other time series methods. A unit root test shows that level (1) data is stable and that variables are co-integrated. Quantile regression research shows that GPR positively impacts economic growth at the median and higher quantiles. In addition, green finance and commerce boost economic growth across all quantiles. The results support the resource curse hypothesis, which claims that NRR negatively affects economic growth. The Granger causality test shows that GDP and its explanatory components are causally related. These findings were compatible with quantile regression estimates after a parametric examination. The policy implications for researchers and politicians concerned with green finance, natural resource sustainability, and geopolitical dangers to economic growth are significant.