Search results

The primary objective of this research is to assess the influence of financial development, institutional quality and renewable energy consumption on India’s carbon emissions.

This study utilises econometric methodologies, specifically the autoregressive distributed lag (ARDL) model and Toda–Yamamoto causality tests, to explore the interplay among renewable and non-renewable energy consumption, financial development, economic growth, institutional quality, trade openness and carbon emissions in India spanning the years 1996–2019.

The research indicates that in India, greater utilisation of renewable energy, enhanced financial development and improved institutional quality are linked to lower carbon emissions. On the contrary, an escalation in carbon emissions is related to the consumption of non-renewable energy and greater trade openness. The Toda–Yamamoto causality tests reveal one-way causal relationships from institutional quality, financial development, non-renewable energy consumption and economic growth to CO2 emissions. Furthermore, the study identifies reciprocal causation, demonstrating that carbon dioxide emissions influence renewable energy consumption and trade openness.

This study recommends that forthcoming research expand its focus by integrating more comprehensive indicators such as consumption, production, transport-based CO2 emissions or ecological footprint. Additionally, to bolster the rigour of future inquiries, researchers might consider exploring alternative regression analysis methods like NARDL and STAR.

This study addresses a significant gap in the existing literature by being the first empirical investigation into the effects of renewable energy consumption, institutional quality and financial development on carbon emissions in the Indian economy. Unlike prior research, we consider a comprehensive financial development and institutional quality index, providing a more holistic perspective. This unique approach contributes valuable insights into the environmental challenges faced by the Indian economy, offering a nuanced understanding of the complex dynamics of environmental degradation in this region.

The debate surrounding whether fiscal actions are responsible for inflation has been a central focus in macro-public finance. In this regard, the present study makes a novel attempt to assess the nexus between fiscal deficit and inflation in the presence of output growth, trade openness and money supply using a balanced panel dataset from Brazil, Russia, India, China, and South Africa (BRICS) economies.

In conducting the empirical analysis, the study initially addresses the issues of cross-section dependency, heterogeneous slope coefficients and nonstationarity. The assessment of long-run cointegration was carried out by using novel third-generation cointegration tests introduced by Westerlund and Edgerton (2008) and Banerjee and Carrion-i-Silvestre (2017). The authors utilise the advanced and latest estimation technique, the cross-section augmented autoregressive-distributed lag (CS-ARDL) model, for long-run and short-run analyses. Finally, to investigate the causal relationship between fiscal deficit and inflation within a panel framework, this study employs the novel test (JKS) introduced by Juodis et al. (2021).

Using recent econometric tests, the study validates the existence of cross-sectional dependency and slope heterogeneity. The results of the third-generation cointegration test by Westerlund and Edgerton (2008) and Banerjee and Carrion-i-Silvestre (2017) show that the variables are cointegrated in the long run. The CS-ARDL model revealed a positive relationship between inflation and fiscal deficit. The implication of this finding suggests that the fiscal deficit plays an inflationary role in BRICS economies. Finally, the JKS causality test results found a bi-directional causal association between fiscal deficit and inflation.

The findings suggest several significant policy recommendations. It is recommended that a well-executed fiscal consolidation strategy be adopted to attain sound fiscal health and lower inflation. A disciplined fiscal approach is not only vital for effective monetary policy but also essential for maintaining macroeconomic stability. Monetary authorities must establish credible practices to effectively manage the macroeconomic system, and policy stances should align with the specific needs of the economy. The bidirectional causality between fiscal deficit and inflation suggests that relying solely on fiscal measures is inadequate for managing inflationary pressures or stabilising fiscal balances. Thus, a more comprehensive approach is required, including measures such as sustaining economic growth, reducing import dependency, diversifying exports and ensuring exchange rate stability.

Numerous empirical studies have explored the link between fiscal deficit and inflation. However, most research studies within BRICS economies have focused on individual countries rather than considering the group as a whole. This limited scope may fail to capture the unique characteristics and interactions within these economies. To the best of the author’s knowledge, the present study is the first attempt to examine the issue from a panel perspective across BRICS economies. The methodological novelty of the present study is that it represents the first attempt, at least within emerging market economies, to investigate the nexus between fiscal deficit and inflation using second- and third-generation econometric models. From a policy perspective, the authors highlight that BRICS economies must prioritise fiscal discipline through measures such as reducing unproductive expenditure and improving tax collection. Close coordination between fiscal and monetary authorities is essential to ensuring that monetary policy supports fiscal consolidation efforts while maintaining price stability.

In the backdrop of persistent internal and external imbalances, the nexus between fiscal imbalance and current account imbalance remains a subject of debate among economists, policymakers, research scholars and governmental organisations. Nevertheless, there is no definitive consensus, either theoretical or empirical, especially within the SAARC region. This evident lack of unequivocal solid agreement underscores the pressing necessity for further empirical inquiry into the twin deficits hypothesis. In this regard, the present study makes a novel attempt to re-examine the twin deficits hypothesis for major SAARC economies in a non-linear fashion using a balanced data set from 1985 to 2021.

In our empirical analysis, we addressed several methodological challenges in examining the relationship between fiscal balance and current account balance. Initially, we tackled cross-section dependency, heterogeneous slope coefficients and non-stationarity issues. We employed the panel Fourier unit root test by Nazlioglu and Karul to detect smooth breaks and non-linearity. Long-run cointegration was assessed using novel third-generation cointegration tests introduced by Westerlund and Edgerton (2008) and Banerjee and Carrion-i-Silvestre (2017). The non-linear dynamics were examined using the method of moments quantile regression (MMQR). Finally, to investigate the causal relationship between fiscal deficit and current account deficit within a panel framework, we employed the novel JKS test.

The MMQR analysis reveals that the fiscal balance has a positive and significant impact on the current account balance across all quantiles except the lower quantiles (first to third). The magnitude of the coefficient for fiscal balance increases from lower to higher quantiles, suggesting that countries with lower fiscal deficits manage their current account balances more efficiently. Likewise, a positive and significant impact of the saving-investment balance on the current account balance is observed across all quantiles, with the coefficient decreasing as quantiles increase. This indicates that a wider saving-investment gap leads to a more pronounced deterioration in the current account balance. The exchange rate also significantly influences the relationship, highlighting a strong exchange rate channel in transmitting fiscal policy shocks to the current account balance. These findings are corroborated by robustness checks using fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimators. The JKS causality test confirms the bi-directional causality between fiscal and current account balances, further validating the results.

Our study has profound policy implications, suggesting that the “size” of fiscal deficit significantly impacts external balances and broader macroeconomic goals in SAARC economies. Policymakers are urged to implement prudent fiscal policies, enhance revenue generation, and promote fiscal discipline to achieve economic stability and sustainability. Minimising unproductive consumer spending and improving tax collections are also recommended to manage external imbalances effectively. Our research offers valuable insights for policymakers and researchers striving to foster sustainable economic development in the SAARC region.

Most macroeconomic variables do not always behave symmetrically and linearly. As a result, it is likely that these variables exhibit asymmetric and non-linear behaviour in response to cyclical and structural changes. Therefore, employing asymmetric and non-linear econometric approaches, rather than the usual symmetrical analysis, to understand the behaviour of the current account and fiscal balance in SAARC economies is rational. Existing empirical studies predominantly focus on the twin deficits hypothesis, neglecting the influence of the saving-investment balance on both fiscal and current account balances. Our research aims to fill this gap by integrating the saving-investment balance into the twin deficits model, thus providing a pioneering analysis that expands our understanding of the relationship between internal and external imbalances. The methodological novelty of our study lies in the fact that this is the first study, at least in the SAARC region, to investigate the non-linear dynamics and causality direction in the twin deficits hypothesis using the MMQR and the JKS causality test.

The main purpose of this study is to investigate the agriculture-induced environmental Kuznets curve (EKC) hypothesis in South Asian economies (SAE).

This study employs econometric techniques, including Westerlund cointegration tests, cross-sectional augmented distributive lag model (CS-ARDL) and Dumitrescu and Hurlin (DH) causality tests to investigate the relationship between renewable and non-renewable energy consumption, agriculture, economic growth, financial development and carbon emissions in SAE from 1990 to 2019.

The CS-ARDL test outcome supports the presence of the agriculture-induced EKC hypothesis in SAE. Additionally, through the application of the DH causality test, the study confirms a unidirectional causality running from renewable energy consumption (REC), fossil fuel consumption (FFC), economic growth (GDP) and squared economic growth (GDP²) to carbon dioxide (CO₂) emissions.

This study proposes that future research should extend comparisons to worldwide intergovernmental bodies, use advanced econometric methodologies for accurate estimates, and investigate incorporating the service or primary sector into the EKC. Such multidimensional studies can inform various methods for mitigating global climate change and ensuring ecological sustainability.

Environmental degradation has been extensively studied in different regions and countries, but SAE face significant constraints in addressing this issue, and comprehensive studies in this area are scarce. This research is pioneering as it is the first study to investigate the applicability of the agriculture-induced EKC in the South Asian region. By filling this gap in the current literature, the study provides valuable insights into major SAE and their environmental challenges.