Unit Root Research Articles

The influence of climate change on crop production: Evidence from Somalia

The study examines the effect of climate change on crop production in Somalia for the period 1990 to 2022 obtained from the World Bank and FAOSTAT. Initial assessments were conducted on the data using various techniques, including the Correlation Matrix, Augmented Dickey-Fuller test, and Phillips-Perron unit root test. The findings from both the Bounds test and Johansen test demonstrate the existence of cointegration within the model. To estimate the parameter values of the regression model, three methods were employed: the Autoregressive Distributed Lagged (ARDL) model, Dynamic Ordinary Least Squares (DOLS), and Fully Modified Least Squares (FMOLS). The study's results demonstrate a positive and significant influence of foreign direct investment (FDI) on crop production. Specifically, the impact of FDI is found to be more pronounced in the long term compared to the short term. Similarly, the study finds that the harvested area and labor force have substantial positive impacts on crop production, both in the short run and long run. Based on the ARDL model results, the study finds that rainfall and temperature do not have a beneficial influence on crop production in both the short run and long run. This is becuase, Somalia is considered as one of the most susceptible countries to the effects of climate change globally. The paper advises Somalia's government to focus on developing heat-resistant crops to counter the opposing effects of temperature on crop production and ensure food security. It also requires a comprehensive agriculture funding-framework including emergency assistance.

ANALYSIS OF BUBBLES ASSETS FOR WEIGHTED AVERAGE INTEREST RATES APPLIED TO BANK LOANS

This study examines the existence of the "bubble effect" in the average interest rates of loans applied by banks to various types of loans for consumers. The purpose of this article is the research of the bubble formations in the average interest rates applied by the banks to consumer, housing (home), vehicle, and commercial loan types. This article examines the existence of bubbles in the average loan interest rates of banks in Turkey using the GSADF unit root test developed by Phillips et al. (2015). Bubble assets are analyzed with weekly data for the period June 2019–March 2023. Monte Carlo simulations performed obtained critical values for the GSADF unit root test. The results show that the bubble effect on housing loan interest rates is statistically significant at the 0.05 level. Against this, although the existence of a bubble effect in consumer, vehicle, and commercial loan interest rates has been determined, these bubbles are statistically insignificant.

Industrial Sector Performance and Labour Force Participation in Nigeria: A Gender Perspective

The literature on the role of industrialization in labour force participation in Nigeria is quite scanty. Besides, there is significant disparity between male and female labour force participation rates in the country. To this end, this study investigated the impact of industrial sector performance on labour force participation in Nigeria. The total industrial sector output was disaggregated into the outputs of the various components of the Nigerian industrial sector namely; manufacturing, mining and quarrying, utility and construction sectors. Total labour force participation rate was equally disaggregated into male and female labour force participation rates. Annual time-series data for the period 1981 to 2022 were used for the study. The Augmented Dickey-Fuller (ADF) unit root test, Johansen cointegration test, error correction model (ECM), and Granger causality test were the econometric techniques used in analysing the data. The findings from the study revealed that manufacturing sector, and mining and quarrying sector outputs have significant positive impact on male labour force participation rate; construction sector output has insignificant positive impact on male labour force participation rate while utility sector output has insignificant negative impact on male labour force participation rate. On the other hand, manufacturing sector, and mining and quarrying sector outputs have significant negative impact on female labour participation rate while utility and construction sectors’ outputs have insignificant positive impact on female labour force participation rate. The main conclusion from the study is that while the total industrial sector performance largely encourages male labour force participation, it largely discourages female labour force participation in Nigeria

Interplay of Foreign Direct Investment, Remittances, and Economic Growth: Insights from SAARC Countries

The current study focuses on finding and analyzing the nexus between remittances, foreign direct investment, and economic growth in SAARC countries. This study uses secondary balanced data of selected SAARC countries for the years 2000 to 2019. This study uses gross domestic product i.e., GDP, which serves as the proxy of economic growth, as the dependent variable. The core independent variables of this study include (FDI) foreign direct investment and remittances (RMTN). Additionally, gross capital formation (GCF) and carbon dioxide emissions (CO2) are the other two independent variables in this study. For the proxy for environmental degradation the study uses data of CO2 emissions. The data is collected from the world development indicators, WDI. The study focuses on how all the independent variables affect the growth of economy in selected SAARC countries which include Pakistan, India, Bangladesh, Sri Lanka, and Nepal. The study applies cross sectional dependence test, panel cointegration test, unit root tests, and PARDL (panel auto regressive distributed lag model), also called pooled mean group methodology, to obtain empirical estimates. The results of PARDL show that FDI, RMTN, and GCF are all positively and significantly related to GDP. This means that GDP or alternatively economic growth, is improving with rise in FDI, RMTN, and GCF in selected SAARC countries. The results show that CO2 emissions have a negative significant impact on GDP i.e., increase in pollution levels is harmful for the growth of the selected economies.

Impulse Response of External Debt Stock and Gross Capital Formation on Economic Growth in Bangladesh: Var Model, Granger Causality and Variance Decomposition Analysis

Purpose: This study employs an annual time series data set from 1987 to 2018 gathered from the World Development Indicators (WDI), 2021 to analyze the properties of external debt stock on financial progress(proxied by economic growth) in Bangladesh. Methodology: The objectives are determined using a variety of econometric techniques, including the Phillips-Perron (PP) unit root test, Var model, Johansen co integration test, Impulse Response Function (IRF), Variance decomposition function, and Granger causality test. The get the result of the Phillips-Perron (PP) unit root test which indicates the stationarity of all the variables at the initial difference. Findings: There is an expectant impact on financial progress (proxied by Gross Domestic Product Per capita) in Bangladesh, according to the short run Var model with the two independent variables External Debt Stock (proxied by public debt) and second lag of Gross Fixed Capital. Block Exogeneity/ Wald Tests and Johansen Co-integration test show that both lnEDS and lnGCF have a strong constructive impact on Bangladesh's financial progress in the short as well as long run. Pairwise, Granger Causality also indulgence the Bi-directional causality between lnGDPPC and lnEDS and Uni-directional causality from lnGCF to lnGDPPC. The influences of lnEDS and lnGCF on lnGDPPC are rising in the long term, showing that both variables are significantly exogenous on the dependent variable. Practical Implication: Bangladesh is now a fast-growing economy with several mega projects for infrastructural, human, and technological advancements such as roads, train, power, education, health, information technology, gas, and energy. External debt service and gross capital formation are crucial for Bangladeshi economic growth. The government should establish a priority aim for long-term economic growth by implementing suitable measures to control, maintain, regulate, and stabilize inflation at a reasonable level. Originality/Value: In a developing country, Savings within the country are insufficient to support investment for financial progress, according to the dual-gap theory and the Keynesian theory of public debt. As a result, bridging this gap for the required level of investment and achieving targeted economic growth will necessitate a bigger inflow of foreign aid or external borrowings. That’s why this study is very important. Limitations: Some limitations of this study include the absence of recent data with the factors. Also numerous factors can influence Bangladesh economic growth for instances, remittances, exchange rates and foreign direct investment all have a crucial impact on GDP growth.

A Co-Integration Approach to Assess the Impact of Nigeria Monetary Policy on Economic Growth

This research examines the impact of Nigeria’s monetary policy on her economic growth by developing a model that is able to investigate how monetary policy of the government has affected economic growth through the adoption of multi-variable regression analysis. GDP representing economic growth which was used as the dependent variable against the explanatory variables which is Monetary Policy Variables: money supply, exchange rate, interest rate, and inflation rate. The time series data is the market-controlled period covering 1960-2020. The study determined the relationship between monetary policy instruments and GDP, and it also determined the adequacy of the model. The study adopted a co-integration approach and also conducted a unit root test. The study showed that monetary policy variables included in the model has combined significant impact on GDP in Nigeria. In addition, the core finding of this study showed that exchange rate and money supply have positive and statistically significant relationship with GDP in Nigeria. However, inflation rate has negative impact on GDP and a non-statistically significant relationship with GDP, interest rate has positive and statistically insignificant relationship with GDP. The results from the study proved that monetary policy have a significant relationship with GDP. In conclusion, based on the outcome of the Study. The study recommended among others that the regulatory authority (CBN) is advised to reduce interest rates and increase money supply such that both loans and funds will be easily accessed by manufacturing/industrial outlets to enhance manufacturing output in the Nigeria economy.

Towards a Sustainable Future: Examining the Symmetric and Asymmetric Effect of Unstable Macroeconomic Factors on Initial Public Offerings Variability

The research seeks to explore the symmetric and asymmetric effects of renewable energy, technological innovation, and ecological footprint on the variability of initial public offerings in the unique institutional setting of the Pakistani IPO market. The study used yearly data on the Pakistani IPO market and the macroeconomic variables from January 1992 to December 2020. Further, the study employed the linear and Non-Linear ARDL to investigate the symmetric and asymmetric nexus among variables. For that purpose, the stationarity of the variables was predetermined using Augmented Dicker Fuller (ADF) and Phillips Perron (PP) unit root tests. Additionally, the F-bound test verifies that IPO issuance and macroeconomic drivers are co-integrated. The findings show a symmetric and asymmetric relationship between IPO variability and macroeconomic variables under study. Renewable energy and technological innovation have statistically positive effects on IPO variability. On the contrary, the ecological footprint has a significantly negative impact on IPO variability. The weak condition of the Pakistani IPO market could be attributed to the slow adoption of technological innovation, the transition to renewable energy, and a high ecological footprint that attracts stringent regulatory and environmental compliance costs of going public.

Modelling the Relationship between Air Pollution and Economic Growth in Somalia

Throughout human history, there has been a clear connection between pollution and the economy. However, the relationship between environmental harm and economic progress is complex, and disagreements between various academic disciplines have made it difficult to understand this phenomenon fully. A unit root test was conducted to gain more insight, which proposed the possibility of further empirical analysis. The Johansen cointegration method was also used to show a long-term connection between air pollution and economic growth. At the same time, the vector autoregressive model (VAR) indicated a short-term connection between the two. A Vector Error Correction Model (VECM) was then employed to estimate the relationship, and the findings confirmed the existence of the Environmental Kuznets Curve (EKC). The EKC demonstrates that economic growth has positive and negative effects on air pollution. The Granger causality test conducted in Somalia showed a causal link between economic growth and air pollution. The EKC model further supported this finding by demonstrating that economic growth has a statistically significant positive impact on greenhouse gas (GHG) emissions. This implies that Somalia has seen increased GHG emissions, leading to environmental degradation. Therefore, the Somali government must prioritise the implementation of a sustainable energy policy to improve air quality and prevent further environmental deterioration.

Powering Growth: The Dynamic Impact of Renewable Energy on GDP in ASEAN-5

This study investigates the dynamic relationships between renewable energy consumption, labor force, gross fixed capital (GFC), and GDP across ASEAN-5 nations from 1984 to 2020. Utilizing data from the World Development Indicators (WDI), the Energy Information Agency (EIA), and national labor statistics, we employ unit root tests, ARDL bound testing for cointegration, and Toda-Yamamoto causality procedures. Our findings indicate significant long-term cointegration between the studied variables in Indonesia and the Philippines, suggesting persistent economic relationships, while results for Malaysia show no cointegration and remain inconclusive for Thailand. The economic analysis reveals that GFC robustly drives GDP growth across these countries, whereas the impacts from labor force and renewable energy consumption are more variable. Causality tests further demonstrate that renewable energy consumption significantly fosters GDP growth in Indonesia, Malaysia, and Singapore, aligning with the growth hypothesis. Conversely, findings for the Philippines and Thailand support the neutrality hypothesis, indicating no direct causal impacts. These insights underline the crucial role of tailored renewable energy strategies to enhance economic growth and sustainability in ASEAN-5, providing valuable policy implications for regional energy governance.

Economic Diversification, Oil Revenue and Energy Transition in Oil Dependent Countries: A Wavelet Decomposition and Panel Data Approach

In oil-dependent countries, the energy transition process is ongoing and it appeals substantial and necessary adjustments in terms of diversification. We attempt to provide a systematic analysis of the connectedness between energy transition, oil revenue and economic diversification using novel econometric approach, wavelet decomposition and panel data estimation. Our attention will be focused on the dynamics and causal relationships between energy transition process and economic diversification by checking the role of oil revenue. We use second generation unit roots, and a particular attention is given to cross-sectional dependence of the series. Results show that correlations between wavelet components are absent in the short term, weak in the medium term, and moderate in the long-run. Causality tests support a bidirectional causality between economic diversification and energy transition and between economic diversification and net oil revenue, in the medium and long-run scale levels. Our results would have several prominent implications for policy makers, in oil-dependent countries, when designing energy transitions and economic diversifications strategies, and gives and insightful look about the future of these countries.

Education, Electricity Access, and Income Inequality in Nigeria

Education and electricity access are argued to be important determinants in the income inequality literature, especially with regard to developing countries. This present study explores in Nigeria the roles of both education and electricity access, as well as the interaction of the aforementioned variables for income inequality over the period of 1990 to 2019. Utilizing Autoregressive Distributed Lag (ARDL) estimation preceded by the Augmented Dickey-Fuller (ADF) unit root test and ARDL bounds test for cointegration, the study found that while there was no long-run relationship between income inequality and it's determining variables, including education and electricity access, in the short run, electricity access was significant for reducing income inequality, while education was not significant for income inequality in Nigeria. On the other hand, education in the presence of greater electricity access was found to play a significant role in raising income inequality in Nigeria. The policy implications derived from the study findings emphasized the need for greater creation of employment opportunities by the Nigerian government, while electricity is made affordable for greater access by the Nigerian populace and is adequate in supply. Recommendations were also proffered based on the findings of the study.

Testing the Environmental Kuznets Curve Hypothesis within the Context of Industrial Development through NARDL Model: The Case of France

Energy is one of the necessary and vital factors for the economic development of countries and the increase in living standards. The limited availability of conventional energy resources, in parallel with the rapid increase in energy consumption due to industrialization activities and technological developments, has encouraged countries to change their energy production policies and use alternative energy sources. For this purpose, in the study, the relationship and direction of the relationship between industrial production, CO2 emissions, energy use and economic growth in France are examined with the carrying out of the ADF, PP, KPSS unit root and the NARDL test for the period 1990–2023. The analysis findings reveal that the variables are cointegrated in the long-run and a 1% unit raise in energy consumption would trigger CO2 emissions by 0.46%. The increase in energy consumption in the long term affects both negatively and positively in the long term. While a 1% increase in energy consumption reduces carbon emissions by 0.48%, a 1% decrease causes a 0.35 decrease in carbon emissions. The positive increase in economic growth and the negative increase in energy consumption trigger environmental pollution by causing an increase in carbon dioxide emissions. There is interdependence between economic activities and environmental pollution. Policy makers need to adopt a strategic approach in solving the rapid industrialization phenomenon and the accompanying magnitude of energy consumption, the pressure on natural resources and the environmental pollution problems resulting from them. In this respect, it is an inevitable necessity for countries to continue multilateral negotiations in which the public sector, business world, academia and non-governmental organizations will take part in solving environmental problems.

Analysis of Private Sector Investment on Economic Growth in Nigeria

The study examined the effect of private sector investment on economic growth in the liberalised Nigerian economy 1990 to 2021. The data for this were analysed using descriptive and analytical tools. The study employed Auto-regressive distribution lags model (ARDL) estimation technique based on the unit root test to determine the effect of four major factors; Loan and Advances (LA), Interest rate (INTR) Exchange rate (EXR) and Inflation rate (INFR) on real gross domestic product (RGDP) which proxies economic growth. Findings revealed that there is negative and significant impact of Interest rate (INTR) Exchange rate (EXR) and Inflation rate (INFR) on economic growth in Nigeria. The study thus concludes that, by improving and strengthening private sector investment, economic growth would be enhanced in Nigeria. The study therefore recommends that in order to boost economic growth in Nigeria more emphasis should be placed on encouraging private investment through domestic and foreign financing.

Renewable Energy Consumption and Economic Growth in Nigeria Nexus

With rising rates of globalization, increasing climate change and economic growth, energy usage and energy security, governments are paying more attention to the impact of renewable energy consumption on the economies. The paper examines the relationship between renewable energy consumption and economic growth in Nigeria using a time series data from 1996 to 2021. The results of the unit root show mixed stationarity from our variables which result in the usage of ARDL technique of analysis. The long run results show that renewable energy was negative and significant thus, validates the conservative hypothesis. C02 was also negatively significant to RGDP while labor force was positively significant. The ECM shows 77% adjustment level backs to equilibrium. Granger causality test validated the feedback hypothesis of no causality among the renewable energy and the Nigeria economy.

Determinants of Private Investment in Ethiopia

The pillar for ensuring economic development is private investment. So that, the primary aim for this paper was to investigate key determinants of private investment in Ethiopia. The author used a quantitative research approach with an explanatory research design to realize the objective. The paper practically investigates whether Real GDP, inflation rate, real interest rate, foreign direct investment, tax rate, exchange rate, population growth rate, unemployment rate, international trade openness, education affect the growth of private investment in Ethiopia or not. The study mainly concentrated on thirty years of secondary data (i.e. from 1991 to 2020) on key variables. The data was obtained from a variety of sources including the NBE, IMF, WDA, CSA, and WB. Multiple regressions using the ARDL model with appropriate software E-views 9 was applied. The ECM is 110.6 percent that depicts the speed of adjustment from short run towards long run. The study also tests unit root (non-stationary), model stability, bounce, Johansson co integration, and diagnostic test. The main finding of the study showed that in real GDP, population growth rate, interest rate, trade openness, and unemployment rate were statistically significant at 5% level of significance in the long run and short-run and also exchange rate was a positive and statistically significant effect on private investment in short-run. And tax rate was insignificant in the short run. While FDI, Education, and inflation were statically insignificant both in short run and long run in this study. Finally, unemployment has a negative effect on private investment, the policy choice on the matter needs a cautious decision. To achieve the great short run and long run goals, it is advisable to employ integrated principle of action tools.

On autoregressive processes with Lindley-distributed innovations: modeling and simulation

In this paper, we develop an autoregressive process of order one, assuming that the innovation random variable has a Lindley distribution. The key properties of the process are investigated. Five distinct estimation techniques are used to estimate the parameters and simulation studies are conducted. The stationarity of the process is tested using a unit root test. The application of the proposed process to the analysis of time series data is demonstrated using real data sets. Based on some important statistical measures, the analysis of the data sets reveals that the proposed model fits well, and the errors are independent and Lindley-distributed.

Exploring the LCC Hypothesis in the Nordic Region: The Role of AI Innovation, Environmental Taxes, and Financial Accessibility via Panel ARDL

This study investigates the impact of artificial intelligence (AI) innovation on environmental sustainability in the Nordic region. Additionally, it tests the Load Capacity Curve (LCC) hypothesis by incorporating factors such as financial accessibility, environmental tax, and urbanization, using data spanning from 1990 to 2020. The methodology includes the Cross-Sectional Dependence test and the slope homogeneity test, revealing issues of heterogeneity and cross-sectional dependence. Furthermore, first and second-generation panel unit root assessments indicate that the variables are free from unit root problems. Panel Cointegration tests confirm that the variables are cointegrated in the long run. To analyze both short-run and long-run relationships, the study employs the Panel Autoregressive Distributed Lag (ARDL) model. The results from the Panel ARDL model support the LCC hypothesis in the Nordic region, showing a U-shaped relationship between income and load capacity factor. Moreover, AI innovation and environmental tax significantly and positively contribute to environmental sustainability in both the short and long run. In contrast, higher financial accessibility and urbanization degrade environmental sustainability over these timeframes. To validate the robustness of the Panel ARDL estimations, the study also uses Fully Modified OLS, Dynamic OLS, and Fixed Effects OLS approaches, all of which corroborate the ARDL findings. The study employs the D-H causality test to explore causal relationships among the variables. The test results reveal a unidirectional causal relationship between income and AI innovation to the load capacity factor and a bidirectional causal relationship between financial accessibility and the load capacity factor, as well as between urbanization and the load capacity factor. However, no causal relationship is found between environmental tax and the load capacity factor.

How Productivity, Capital Investment, Employment, Human Capital and Energy Are Affecting Economic Growth in Morocco? An ARDL, FMOLS, DOLS and CCR Approaches

Abstract This paper aims to scrutinize the effects of; productivity, capital investment, human capital, employment and energy intensity; on economic growth in Morocco under the Energy-augmented Cobb Douglas production function (CDPF) framework, using extended data from 1965 to 2022. The ADF unit root test confirmed the existence of cointegration among variables, then, the ARDL BTA/ECM model proved the presence of long-term relationship within, in which the explanatory variables progress all together positively and proportionally to generate economic growth, just as stipulate the standard CDPF. The outputs reliability was validated by FMOLS, DOLS, and CCR tests. Results implies that an additional unit in GDP corresponds, in terms of units to, 1.87 in productivity level, 0.12 in capital investment, 4.19 in of human capital, 0.98 in labor force and 2.52 in energy intensity, that Moroccan economy is human capital intensive unlike when it comes to physical capital. In the light of this findings, we think that Morocco should accelerate its industrial transition, proceed to a large modernization and mechanisation of its agriculture in order to inspire more productivity to its entire economy, keep acting in the sense of more structural reforms to improve the business environment, share out the public spending equitably following two dimensions, physical by upgrading local infrastructure to attract more investments, human by promoting human capital through education and social protection.

Co-movements between Stock Markets and Exchange Rates: Empirical Evidence from the G20 Nations

This study investigates the relationship between stock markets and exchange rate markets in the short and long run for G20 countries by analyzing weekly stock market returns and exchange rates from January 2008 to March 2023. This study uses the CD test for testing cross-sectional dependence in all the panel series, and unit root tests are employed to verify the stationarity properties of variables. Based on the above results, the panel ARDL model and PMG estimator are used to establish the long-run and short-run cointegrating relation between the stock and exchange rate markets. We have found a stable positive relationship between the stock markets and the exchange rate of G20 countries in the long run, but a negative association was found in the short run. These findings highlight the intricate dynamics between stock markets and exchange rates and the interconnectedness of G20 nations. The robust positive long-term correlation and the short-term negative association exhibit the differential impacts of macroeconomic variables over varying time horizons

Analyzing the Intricate Nexus of Ecological Footprint, Urbanization & Economic Growth in South Asia: A Panel 2SLS Analysis

The depletion of natural resources, environmental degradation, and climate change are critical global concerns. In South Asia, rapid urbanization and economic growth have improved living standards, but they have also exerted significant pressure on the environment. It is crucial to determine interconnectedness and common determinants of these factors to address the environmental challenges effectively and promote sustainable development. This study explores the relationship between environmental degradation, urbanization, and economic growth in five South Asian countries—Bangladesh, Nepal, Pakistan, Sri Lanka, and India, over the period 1994 to 2022. To analyze these connections, this study develops indices for infrastructure and governance using Principal Component Analysis (PCA). Several tests, including the Im, Pesaran, and Shin test and the Fisher and Pesaran Augmented Dickey-Fuller unit root test, are applied to ensure the stationarity of the variables. The Variance Inflation Factor is used to check for multicollinearity, and the Wald coefficient restriction test confirms the presence of simultaneity. Findings from the Panel Two-Stage Least Squares (2SLS) regression indicate a significant one-way positive relationship between economic growth and ecological footprint, suggesting that economic growth leads to an increased environmental impact. Additionally, urbanization shows a direct positive link to both ecological footprint and economic growth, although the reverse effects are not statistically significant. The study also finds that industrialization and infrastructure development significantly contribute to urbanization and environmental degradation. Infrastructure, however, negatively impacts economic growth, while globalization encourages urbanization and reduces environmental harm. Education is found to have a strong negative relationship with urbanization. The study concludes that achieving environmentally conscious economic growth in South Asia requires focusing on sustainable development goals, investing in green infrastructure, adopting eco-friendly industrial practices, and improving the education system in the region.