Vector Error Correction Method Research Articles

Dynamics and competitiveness of Nigeria’s sesame production in international trade: Vector error correction method

This research study evaluated the dynamics and competitiveness of Nigeria’s sesame (Sesamum indicum) production in international trade. Secondary data were used, in the data period of 1982 to 2022 (41 years). The data used were sourced from NBS, CBN, FAO, World Bank publication, and General Household Survey-Panel (GHS-P) in conjunction with Federal Ministry of Agriculture and Rural Development. The econometric tools used were Augmented Dickey-Fuller (ADF) unit root test, Johansen co-integration test, Zivot – Andrews (Z-A), Lee Strazicich (LM) structural break unit root tests, and vector error correction model (VECM). The result of the ADF unit root test shows that all the test variables were stationary at first difference I (1). The results of the Johansen co-integration test for the time series data shows that the trace test statistics indicate 2 co-integrating equations, the Max-Eigen values also indicates 2 co-integrating equations. The estimated long run effect using VECM shows that area, yield, and world trade in oilseed, were positively and significantly related to the dynamics and competitiveness of Nigeria’s sesame seed in international trade. The real exchange rate had a negative coefficient and was non-significantly related to the dynamics and competitiveness of Nigeria’s sesame seed in international trade. The coefficient of the error correction term (ECM) is with the expected negative sign and statistically significant at 1% level of probability, this is an indication of a move back towards equilibrium with a magnitude of -0.95. Policies that would encourage exportation of sesame should be pursued and enhancing research activities on improving quality of sesame produced.

Composite Model Analysis in Forecasting the Malaysian Imports

For more than a century, forecasting models have been crucial in a variety of fields. Models can offer the most accurate forecasting outcomes if error terms are normally distributed. Finding out a good statistical model for time series predicting imports in Malaysia is the main target of this study. The decision made during this study mostly addresses Vector Error Correction Method (VECM), composite model (Combined regression-ARIMA), and ARIMA model. The imports of Malaysia from the first quarter of 1991 to the first quarter of 2023 are employed in this study’s quarterly time series data. The forecasting outcomes of the current study demonstrated that the composite model offered more probabilistic data, which improved forecasting the volume of Malaysia’s imports. The (ARIMA) mode, composite model, and VECM model in this study are linear models based on responses to Malaysia’s imports. Future studies might compare the performance of nonlinear and linear models in forecasting.

Renewable Energy and Economic Growth: Evidence from India

This article examines the nexus between economic growth and two renewable energy sources, namely wind and solar, to separate out the contrast between these two sources, for India deploying system generalised method of moments and vector error correction method suitable to capture the dynamic nature of panel data. Unlike most of the earlier studies, it takes into account cross-sectional dependence and addresses the issue of endogeneity. India has been chosen because despite India being one of the largest producers of renewable energy globally; the nexus is under-studied. This article finds the installation of solar energy capacity positively influences the Gross State Domestic Product (GSDP) growth. Moreover, there is a bi-directional positive relation between the installation of wind energy capacity and GSDP growth. Hence the adoption of renewable energy is helping the states to grow faster. However, the study found not much difference in the nature of the nexus between solar energy growth and wind energy growth for India. JEL Codes: O13, P28, P44, Q56

Investigating How International Trade Shapes Nigeria’s Economy

The study investigated how international trade shapes Nigeria’s economy during the period 1999-2022. The vector error correction method (VECM) was employed to examine the impact, while Augmented Dickey-Fuller (ADF) unit root test was conducted to ensure the stationarity of the time series data, and the Johansen co-integration test to assess the long-run relationship between the dependent and independent variables. Our results show that all variables, were stationary at first difference. The Johansen cointegration test conclusively demonstrated the existence of a long-run relationship among the variables. Furthermore, the results from the VECM reveal that the coefficients of the lagged value of foreign direct investment inflows (FDII) and non-oil export exhibit negative relationship with RGDP. The coefficient of the lagged value of non-oil import (NOIM) and exchange rate (EXCR) has positive impact with RGDP. The study recommends that government should create the enabling environment for investors to thrive. This will help increase the number of both foreign and domestic investors investing in Nigeria, and the output will be increased for domestic consumption and exportation.

Testing the Hedging Effectiveness of Gold Derivative Market in India

The purpose of this article is to estimate the hedging effectiveness of the Indian Gold Derivative Market from both the statistics of Static hedge methodology of Vector Error Correction Method and Time-Varying hedge methodology of DVEC-GARCH, covering the time span of 1st April 2005 till 31st March 2019, to account for any difference existence in both. The study is conducted to judge the performance of gold futures as a tool of risk management. The result reveals the fact that hedging effectiveness from both the methodologies are found to be 35%. The reason behind low hedging efficiency might be due to the fact that gold itself is used as a hedge instrument and always in demand by the Indian investors for varied reasons as well as its accessibility in various forms (Gold ETFs and Gold Bonds issued by Government). The hedgers’ participation may be less as compared to speculators with respect gold future hedging. The results of phase-wise analysis, that is, before crisis (2005–2007), the hedging efficiency comes out to be 26%, during the crisis (2008–2012) 38.7% and after the crisis (2013–2018) 40% from both the static and dynamic hedge ratio models. The results showed that with the outbreak of Global Financial crisis in 2007–2009 and European debt crisis in 2010–2012 and thereafter, gold futures are increasing use as a risk management tool, but still at a minimal level.

FDI and CO2 emissions in developing countries: the role of human capital.

FDI inflows remain an important source of economic growth and technology transfer for developing countries. However, the proponents of the pollution haven hypothesis (PHH) argue that FDI inflows may result in the production of polluted goods in poor economies. The empirical testing of PHH reveals conflicting outcomes on the subject. This study argues that foreign firms' choice of specific technologies and hence the validity of PHH can be determined by host countries' level of education. For developing economies having low levels of schooling, FDI inflows will accompany polluted technologies. Nonetheless, when education levels exceed certain thresholds, FDI inflows may reduce CO2 emissions. For our empirical investigation, we rely upon a large panel of 108 developing countries during 2000-2016. Our estimated outcomes, based on the panel cointegration method and panel vector error correction methods (P-VECM), confirm these moderating effects of human capital in the FDI-CO2 emissions nexus. The empirical results also confirm the presence of the environmental Kuznets curve (EKC) for developing countries. These results have important policy implications for the sample economies.

Relationship between Defense Expenditure and Economic Growth in Nepal

This research study investigates the impact of defense expenditure (DE) and export on Real Gross Domestic Product (RGDP) of Nepal. The RGDP is the dependent variable and defense expenditure and export are the independent variables. Data since 1974 to 2020 are taken from secondary sources of Nepal Rastra Bank, ministry of finance to find the relationship between them. Augmented Dickey- Fuller Test is run to test stationary condition in the variables. The Vector Error Correction Method (VECM) coefficient is significant and positive. There is no evidence that economic growth and the independent variables have a long-run relationship but there is short-run causality running from DE to RGDP and export to RGDP.The result of Granger Causality Test shows there exists unidirectional relationship between RGDP and DE. Similarly, there exists unidirectional relationship between RGDP and export but there is no relationship between DE and Export. Results confirm the variables are the determinants of economic growth in Nepal. So policy makers should consider on these variables for economic growth of the country.

PENGARUH BONUS DEMOGRAFI, PENGANGGURAN DAN INFLASI TERHADAP PERTUMBUHAN EKONOMI DI PROVINSI JAMBI

This study examined the effect of demographic bonuses, unemployment, and inflation on economic growth in Jambi Province. This study used secondary data from the Central Bureau of Statistics of Jambi Province during 2000-2021. The data were analyzed using the Vector Error Correction Method (VECM). All tests used in this study were Stationarity Test, Lag Length Criteria Test, VAR Stability Test, Cointegration Test, Granger Causality Test, and VECM Estimation. The results showed that in the short term, the demographic bonus (TPAK) and unemployment had a negative and insignificant effect, while inflation had a positive and insignificant effect on economic growth in Jambi Province. In the long term, Demographic Bonus had a positive and significant effect on economic growth in Jambi Province, while unemployment had a negative and insignificant effect, and inflation had a negative and significant effect on economic growth in Jambi Province.

Electronic Banking and Bank Performance: Evidence from Nigeria

The innovative advancement of the financial system has made deposit money banks all over the globe adopt a technological mode of meeting the customer’s needs, so it has to improve the level of deposits and withdrawals. Hence due to this innovation, this study examines the impact of electronic banking on bank performance in Nigeria. The secondary data collected from the central bank of Nigeria Statistical bulletin from 2009-2017 were subjected to Johansen Co-integration and Vector Error Correction Method (VECM). The findings revealed through the Johansen Co-integration results depict a long-run relationship between the variables. The Fully Modified Least Square depicts that Mobilepay and Webpay have a significant negative effect on NIM (Net Interest margin) while POS (Point of Sale) has a significant positive effect on NIM (Net Interest Margin). The bank should make sure POS (Point of Sale) and Website/Internet transactions are made available to rural and urban areas, so has to encourage different classes of account holders to transfer and receive cash quickly.How to Cite:Raymond, A., Ebenezer, A. M., Kehinde, O. I., & Lateef, Y. A., (2022). Electronic Banking and Bank Performance: Evidence form Nigeria. Signifikan: Jurnal Ilmu Ekonomi, 11(2), 371-382. https://doi.org/10.15408/sjie.v11i2.15540.JEL Classification: G21, G32, G51

Analysis of Farming Contribution to Economic Growth and Poverty Alleviation in the South African Economy: A Sustainable Development Goal Approach

The agricultural sector is important in South Africa because it contributes approximately 2.53 percent to the country’s Gross Domestic Product. Agriculture can contribute significantly to economic growth, by means of food production and job creation and thereby it can play an important role in reducing poverty. This study examines the impact of farming on economic growth and the possible role it plays in poverty alleviation in South Africa. The United Nation Department of Economic and Social Affairs highlights the first three sustainable development goals in line with poverty alleviation, zero hunger and good health and wellbeing for all. The article analysed the impact of farming on gross domestic product from 2002Q1 – 2021Q4 factoring in part of the period for COVID-19. A quantitative method approach was used with an application of the Vector Error Correction Method to check and analyse the behaviour of variables both in the short run and long run using E-views 12 software. Data was retrieved from the South African Reserve Bank, Statistics SA and Quantec. Results showed that variables where cointegrated meaning there was a long run relationship between the dependent variable GDP and the independent variables comprising of consumer price index, consumption, inflation, and unemployment used as proxies in understanding how farming affects economic growth and ultimately consumer well-being. Furthermore, it was found that without consumption there is no economic growth meaning the consumption of livestock, crops and export or trade between countries leads to growth. Employment is also needed in the farming industry, the availability of labour assists in faster production which leads to economic growth. Employment is also needed in the farming industry, the availability of labour assists in faster production which leads to economic growth. There be data on subsistence agriculture and ongoing collection of reliable statistics to monitor the success of this initiative are also needed.

EFFECT OF EXPORT IMPORT AND INVESTMENT ON ECONOMIC GROWTH IN INDONESIA (VECM ANALYSIS METHOD)

This study aims to know the effect of export, import and investment on economic growth in Indonesia. This study employis secondary data in the period 1967-2020 obrained from the World Bank. The data is analyzed by using Vector Error Correction Method (VECM). All tests used in this study are unit root test, lag length criterion test, cointegration test, Granger causality test and VAR stability test. The results showed that the export and import of Indonesia have a positive and insignificant effect on Indonesia economic growth both in short run and long run. Investment has a negative and insignificant effect on economic growth both in short run and long run in Indonesia.

Assessing the role of ICT, governance, and infrastructure on inbound tourism demand in India

PurposeThe main purpose of the present research is to explore the possible effectiveness of information and communication technology (ICT), infrastructure development, exchange rate and governance on inbound tourism demand using time series data in India.Design/methodology/approachThe stationarity of the variables is checked by using the ADF, PP and KPSS unit root tests. The paper uses the Bayer-Hanck and auto-regressive distributed lag (ARDL) bounds testing approach to cointegration to examine the existence of long-run relationships; the error-correction mechanism for the short-run dynamics and the vector error correction method (VECM) to test the direction of causality.FindingsThe findings of the research indicate the presence of cointegration among the variables. Further, long-run results indicate infrastructure development, word-of-mouth and ICT have a positive and significant linkage with international tourist arrivals in India. However, ICT has a positive and significant effect on tourist arrivals in the short run as well. The VECM results indicate long-run unidirectional causality from infrastructure, ICT, governance and exchange rate to tourist arrivals.Research limitations/implicationsThis study implies that inbound tourism demand in India can be augmented by improving infrastructure, governance quality and ICT penetration. For an emerging country like India, this may have far-reaching implications for sustaining and improving tourism sector growth.Originality/valueThis paper is the first of its kind to empirically examine the impact of ICT, infrastructure and governance quality in India using modern econometric techniques. Inbound tourism demand research aids government and policymakers in developing effective public policies that would reposition India to gain from a highly competitive global tourism industry.

The Government Expenditure and Crowding-Out Effect on Private Sector

تهدف هذه الدراسة قياس الأثر الذي يحدثه الإنفاق الحكومي بشقيه الجاري والرأسمالي على الائتمان الممنوح للقطاع الخاص في الأردن خلال الفترة الزمنية ( 2002 - 2021 )، واعتمدت هذه الدراسة منهج التحليل النظري والتحليل الوصفي بالإضافة إلى التحليل القياسي باستخدام منهجية Vector Error Correction Method (VECM) . حيث تم دراسة أثر المتغيرات المستقلة المتمثلة ب (النفقات الرأسمالية، والنفقات العسكرية، والإنفاق على فوائد الدين العام، وتعويضات العاملين) على المتغير التابع المتمثل بالائتمان الممنوح للقطاع الخاص وذلك باستخدام منهجية ( VECM ). وتوصلت الدراسة إلى وجود علاقة عكسية طويلة الأجل بين النفقات الرأسمالية والإنفاق على فوائد الدين العام على الائتمان الممنوح للقطاع الخاص. وأظهرت أيضاً وجود علاقة طردية طويلة الأجل بين تعويضات العاملين والنفقات العسكرية على الائتمان الممنوح للقطاع الخاص.

Investigating the Impact of Corruption on Poverty in Pakistan

Purpose: Corruption is one of the mega issues faced by developing countries like Pakistan. It not only erodes the macroeconomic performance of a country but also widens the gap between rich and poor by accelerating income inequality and poverty level. The present tries to examine the effects of corruption on poverty in Pakistan.
 Design/Methodology/Approach: The present research based on the secondary data from the Transparency International and World Bank database, from the period 1997 to 2019. The study has applied the Johanson Cointegration and Vector Error Correction Method (VECM) as an econometric technique. 
 Findings: The empirical findings conclude that corruption and inflation are significantly and positively associated with poverty in Pakistan. However, the employed labor force shows a negative relationship with the poverty rate.
 Implications/Originality/Value: Based on the results, the study suggested that for the reduction and eradication of corruption the present judiciary system should be improved. Supremacy of Law should be implemented.

Investigating the relationship between ICT, green energy, total factor productivity, and ecological footprint: Empirical evidence from Saudi Arabia

Today, the increasing use of technology and the industrial revolution are affecting the economy and the environment, such as the development of economies and the increase of the ecological footprint (EFP). This study focuses on the Kingdom of Saudi Arabia (KSA) to assess the impact of information and communication technologies (ICTs), green energy (renewable energy and electric power consumption), and economic activities (total factor productivity: TFP) on the environmental quality (EFP) by applying the Johansen cointegration technique and vector error correction method (VECM). Our empirical investigation shows a long-run negative and significant association between renewable energy, electricity consumption, technology trade, TFP, and EFP. The results also show that there is a negative and significant link between ICT and EFP in the short-run. The results of this research have potential importance for policymakers to address economic activities, green energy, and investment in ICTs and environmental issues simultaneously in the context of the KSA.

The Relationship between Air Pollution, Economic Growth, and Life Expectancy: Empirical Evidence from Indonesia

This study investigates the relationship between air pollution, economicgrowth, and life expectancy in Indonesia. The observation periodduring 1985-2019 used time-series data obtained from the WorldBank. Quantitative approach by applying two main models, namelythe autoregressive distributed lag (ARDL) model by considering theeffect of time-lapse and Granger causality with vector error correctionmethod. Research findings prove that air pollution has a negativeand significant effect on life expectancy in the long run. Economicgrowth has a positive and significant effect on life expectancy. In theshort run, the current life expectancy is positively and significantlyinfluenced by the life expectancy of the previous period. Air pollutionhas a negative and significant effect on life expectancy, and economicgrowth has a negative and significant effect on life expectancy. Anotherfinding in the Granger causality model is a two-way relationshipbetween air pollution and life expectancy. Other evidence exists of atwo-way relationship between economic growth and air pollution. Inaddition, evidence of a unidirectional relationship of economic growthwith life expectancy in the short run. The cointegration equationshows evidence of a long-run relationship between air pollution,economic growth, and life expectancy.

Investigating the relevance of Environmental Kuznets curve hypothesis in Saudi Arabia: towards energy efficiency and minimal carbon dioxide emission.

The Saudi economy is driven by the energy sector which mainly derived from petroleum-based resources. Besides export, the Kingdom’s consumption of this resource showed a significant increase which linearly promoting CO2 emission increment. Therefore, it is essential to model the Kingdom’s energy consumption to estimate the profile of her future energy consumption. This work explores modelling and multi-step-ahead predictions for energy use, gross domestic product (GDP), and CO2 emissions in Saudi Arabia using previous data (1980–2018). The dynamic interrelationship of the variable’s nexus was tested using the Granger causality and cointegration method in the short-run and long-run. In the long-run, the models reveal an inverted U-shape relation between CO2 emissions and GDP, validating Environmental Kuznets curve. When energy consumption is increased by 1%, there will be an increase in CO2 emissions by 0.592% at constant GDP, and when GDP is increased by 1%, there will be an increase in CO2 emissions by 0.282% at constant energy used. CO2 emissions appear to be both energy consumption and income elastic in Saudi Arabia in the long-run equilibrium. Granger causality based on vector error correction method reveals unidirectional causality from income to CO2 emissions, and bidirectional causality from CO2 emissions to energy consumption and vice versa in the short-run. In the long-run, bidirectional causality from income to CO2 emissions and vice versa and unidirectional causality from the used energy to CO2 emissions were observed. Also, there is a bidirectional causality from GDP to energy used and vice versa in the short-run, meaning that GDP and energy consumption are interdependent. Saudi Arabia needs to increase energy infrastructure investments and increase energy efficiency by implementing energy management policies, reducing environmental pollution, and preventing the negative effect on economic growth.Graphical abstract

Short-Term and Long-Term Price Forecasting Models for the Future Exchange of Mongolian Natural Sea Buckthorn Market

Sea buckthorn market floated uncertainly within a narrow range. The market situation provided upward pressure on prices, and producer and consumer interest were poor, coupled with weak prices in the regional markets. The objectives of the study are: 1) to estimate the relationship between wild Sea buckthorn (SB) price and Supply, Demand, while some other factors of crude oil price and exchange rate by using simultaneous Supply-Demand and Price system equation and Vector Error Correction Method (VECM); 2) to forecast the short-term and long-term SB price; 3) to compare and evaluate the price forecasting models. Firstly, the data was analyzed by Ferris and Engle-Granger’s procedure; secondly, both price forecasting methodologies were tested by Pindyck-Rubinfeld and Makridakis’s procedure. The result shows that the VECM model is more efficient using yearly data; a short-term price forecast decreases, and a long-term price forecast is predicted to increase the Mongolian Sea buckthorn market.

THE CAUSAL RELATIONSHIP BETWEEN PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN INDIA: VECM ESTIMATION

The relationship between public expenditure and economic growth is obvious, but the direction of the causality is not clear. This paper analyses the relative impact of the different components of public expenditure on economic growth. Specifically, this paper examines whether the level of government expenditure is managed to accelerate economic growth or whether the government expenditure is used excessively which may hurt the domestic economy because of increased taxes and/or high government borrowing. The vector error correction method is applied to the annual time series data for India from 1983 to 2020 for testing the long and short-run causality. The pair-wise Granger causality test indicates one-way causality moving from gross domestic product to total government expenditure and from gross domestic product to government revenue showing that the growth of the economy leads to an increase in both government revenue and expenditure. The estimated error correction coefficient is significantly negative indicating that the speed of adjustment between the shortrun dynamics and the long-run equilibrium is about 0.03%. The results show a stable long-run relationship between public expenditure and economic growth.

Evaluating the asymmetric effects of nuclear energy on carbon emissions in Pakistan

Achieving sustainable development requires an increasing share of green technologies. World energy demand is expected to rise significantly especially in developing economies. The increasing energy demands will be entertained with conventional energy sources at the cost of higher emissions unless eco-friendly technologies are used. This study examines the asymmetric effects of nuclear energy on carbon emissions for Pakistan from 1974 to 2019. Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests suggest that variables are integrated of order one and bound test of Autoregressive Distributed Lag (ARDL) and nonlinear ARDL confirm a long-run relationship among selected variables. The ARDL, Fully Modified Ordinary Least Squares (FMOLS), and Dynamic Ordinary Least Squares (DOLS) results show that the coefficient of nuclear energy has a negative and significant impact on emissions in both short and long run. Further, the NARDL finding shows that there exists an asymmetric long-run association between nuclear energy and CO2 emissions. The vector error correction method (VECM) results indicate that there exists a bidirectional causal relationship between nuclear energy and carbon emissions in both the short and long run. Additionally, the impact of nuclear energy on ecological footprint has been examined and our findings remain robust.