Vector Error Correction Granger Causality Research Articles

Does environmental quality respond (a)symmetrically to (in)formal economies? Evidence from Nigeria

PurposeSeveral studies have examined the effect of formal economy (usually proxy by economic growth) on environmental quality; however, the symmetric and asymmetric impact of the informal economy on environmental quality has not been examined in Nigeria. Therefore, this study aims to explore the short- and long-run (a)symmetric effect of formal and informal economies and financial development on Nigeria’s environmental quality between 1984 and 2017.Design/methodology/approachThe study uses ecological footprint to measure environmental quality. An increase in ecological footprint suggests a fall in environmental quality. Informal economy is calculated as a percentage of GDP using the currency demand approach. Autoregressive distributed lag (ARDL), nonlinear ARDL cointegration framework and vector error correction granger causality are used as estimation techniques.FindingsThe study’s outcomes establish the existence of asymmetric structure in the link between economic activities and the environment both in the short and long run. The asymmetric results reveal that positive and negative changes in the formal economy increase the ecological footprint in both periods. Hence, activities in the formal economy reduce environmental quality. On the other hand, positive and negative changes in the informal economy only positively influence the ecological footprint in the long run. In contrast, it negatively impacts the ecological footprint in the short run. This suggests that activities in the informal economy worsen the long-run environmental quality. Financial development has a positive influence on the ecological footprint, thus degrading the environmental quality. Furthermore, in the short run, a unidirectional relationship from the formal economy to the ecological footprint, while a bidirectional causality exists between informal and formal economies. Meanwhile, a unidirectional causality from the (in)formal economies and financial development to the ecological footprint was found in the long run.Practical implicationsThe outcome of this study shows that both informal and formal economies contribute to ecological footprint; therefore, mainstreaming the informal economy into the formal economy will further increase the problem of environmental degradation and worsen environmental quality.Originality/valueThe study investigates the symmetric and asymmetric effect of formal and informal economies on environmental quality in Nigeria, which is largely missing in the empirical literature.

Remittances-finance-growth trilogy: Do remittance and financial development complement or substitute each other to affect growth in Nigeria?

The study examines the absorptive role of financial development in the remittance-growth nexus in Nigeria between 1986-2017. In particular, the shortrun, long-run, and causal links between remittances, financial development, and economic growth in Nigeria are investigated using an autoregressive distributed lag bounds test and vector error correction Granger causality. The result shows that financial development and remittances contribute positively to economic growth. Furthermore, findings from the moderating role suggest that financial development and remittances serve as substitutes to affect growth in the short run; however, financial development and remittances perform a complementary role in influencing economic growth in the long run. In addition, the causality tests indicate a one-way relationship from economic growth to financial development as well as bidirectional causality between remittances and financial development in the short run, while financial development and remittances Granger cause economic growth in the long run. The outcome of this study suggests there are time lags in the relationship between remittances, financial development, and economic growth in Nigeria. The implications of the findings are discussed.

Environmental kuznets curve and causal links between environmental degradation and selected socioeconomic indicators in Bangladesh.

This study has investigated the Environmental Kuznets Curve (EKC) hypothesis and focuses on the resource stock of the country in relation to the selection of environmental degradation indicators. Acknowledging the critical role of the EKC for policy formulation and development strategies, this study has examined the validity of the EKC hypothesis by exploring the relationship between economic growth, urbanization, energy consumption, trade openness, human capital and ecological footprints for the period 1972–2018 in Bangladesh. The autoregressive distributive lag bounds testing approach is applied for this purpose, taking into account the structural break in the time series. A fully modified OLS estimation has also been applied as the robustness check of the results. Results from the empirical analysis confirm the existence of the EKC in Bangladesh in both the long run and short run. The causal nexus among the variables is examined by applying the Vector Error Correction Granger causality test. The causality test result shows that economic growth and urbanization cause ecological footprints in both the short run and the long run. Based on this result, it can be inferred that economic growth activities in Bangladesh can be continued and extended with minimal ecological cost through structural economic change and proper environmental management.Graphic abstract

The role of nuclear energy in the correction of environmental pollution: Evidence from Pakistan

The global warming phenomenon emerges from the issue of climate change, which attracts the attention of intellectuals towards clean energy sources from dirty energy sources. Among clean sources, nuclear energy is getting immense attention among policymakers. However, the role of nuclear energy in pollution emissions reduction has remained inconclusive and demand for further investigation. Therefore, the current study contributes to extend knowledge by investigating the nexus between nuclear energy, economic growth, and CO2 emissions in a developing country context such as Pakistan for the period between 1973 and 2017. The auto-regressive distributive lag model summarizes the nuclear energy has negative effect on environmental pollution as it releases carbon emission in the environment. Moreover, vector error correction Granger causality provides evidence for bidirectional causality between nuclear energy and carbon emissions. These interesting findings provide new insight, and policy guidelines provided based on these results.

Analysis on Bioeconomy’s Contribution to GDP: Evidence from Japan

This study analyzes seven bioeconomy sectors with the aim of establishing the leading contributing sectors to gross domestic product (GDP), and also determines the future relationship between bioeconomy and the national economy in Japan. We use data from World Input–Output Database (WIOD), International Renewable Energy Agency (IRENA), and the World Bank Group for this analysis. First, we use principal component analysis (PCA) techniques to identify the bioeconomy sectors that contribute significantly to the national economy. We find through the PCA that all the bioeconomy sectors that we analyzed contribute almost uniformly and significantly to the national economy. We also find forestry and wood sectors to be the most significant contributing bioeconomy sectors. We use the autoregressive distributed lag (ARDL) bounds test to prove the existence of short-run and long-run relationships between bioeconomy and gross domestic product (GDP). We finally use the vector error correction Granger causality model to establish a bicausality between bioeconomy and GDP in the long-run, but not in the short-run.