This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and over time…
Abstract
This paper provides a selective survey of the panel macroeconometric techniques that focus on controlling the impact of “unobserved heterogeneity” across individuals and over time to obtain valid inference for “structures” that are common across individuals and over time. We consider issues of (i) estimating vector autoregressive models; (ii) testing of unit root or cointegration; (iii) statistical inference for dynamic simultaneous equations models; (iv) policy evaluation; and (v) aggregation and prediction.
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Omowumi Monisola Ajeigbe and Olumide Sunday Adesina
The resistance of the energy sector in recent time has been tried by COVID-19 as the occurrence has added to the dampening down demand for crude oil which has resulted in…
Abstract
The resistance of the energy sector in recent time has been tried by COVID-19 as the occurrence has added to the dampening down demand for crude oil which has resulted in volatility in prices and dwindling production of crude oil at the global crude oil market. Dwindling demand and price decline can also be perceived as a trend in the electricity sector, the electricity price (ELECTP) and consumption. The consequences of individual policy response by countries in relation to the socio-economic impact of COVID-19 is yet to be known, and recent studies conducted in the continent are yet to document the impact of the pandemic on the oil-producing African countries. It is in the light of this that this study determined the effect of socio-economic shocks activated through the COVID-19 pandemic on the energy sector performance and economic development of Africa. Monthly data were sourced from the United States Energy Information Administration, COVID-19 geographic distribution worldwide, World Development Indicator and Trading Economics from 2019 (m12) to 2020 (m10). Seventeen oil-producing African countries were selected across the region based on data availability. The structural panel vector auto regression (SPVAR) analytical technique was used in estimating COVID-19 pandemic and socio-economic shocks on the energy sector performance proxied by oil production (OILP), ELECTP and economic development proxied by gross domestic product per capita (GDPPC) of the countries. Findings revealed that the COVID-19 pandemic transmits a negative shock to OILP and GDPPC while a positive shock is transmitted to ELECTP. The socio-economic variables also transmitted both the positive and negative shocks to OILP, ELECTP and GDPPC. Therefore, the study recommended that policies should be directed towards putting in place a shock-absorbing mechanism so as to cushion the effect of the identified shocks on the performance of the energy sector and the economic development of the countries.
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Foreign direct investment (FDI) inflows into any country, especially ASEAN countries, is affected by any improvement in the institutional quality (IQ) of competitors such as…
Abstract
Purpose
Foreign direct investment (FDI) inflows into any country, especially ASEAN countries, is affected by any improvement in the institutional quality (IQ) of competitors such as China. As generally investors make decisions by comparing two countries’ IQ, the ratio of two countries’ IQ matters more than a single country’s IQ. The purpose of this paper is to re-examine the role of IQ on FDI inflows in ASEAN countries for the period 1996-2013.
Design/methodology/approach
With limited information on IQ, this study pools eight ASEAN countries as the sample for analysis from 1996 until 2013. A panel dynamic approach – namely, dynamic ordinary least square and fully modified ordinary least square – is utilized.
Findings
This study confirmed that relative IQ significantly affects FDI inflows into ASEAN countries. The low effect is more reflective of the small portion of world FDI inflows into the ASEAN region.
Research limitations/implications
This study observes the crucial relationship between IQ and FDI – that the relative effectiveness of IQ in attracting FDI inflows depends heavily on the changes in both countries’ IQ. Hence, the effort of ASEAN countries to improve IQ and use it as a means to lure FDI inflows should go beyond a mere improvement. Focus should be on significant improvement of IQ so that multinational corporations will comfortably remain or inject new FDI into the country.
Practical implications
Every ASEAN country should double their efforts toward improving their IQ in order to attract future FDI.
Originality/value
Several studies have confirmed the role of IQ on FDI inflows. However, the majority of these studies have investigated the effect of IQ exclusively for a specific country even though some of them have used a panel of several countries’ data. On the other hand, investors normally evaluate their decision on whether or not to invest based on the relative terms, comparing several potential locations of investment at once. This study can be considered the first to explore the potential effect of IQ after taking into account the possibility of each ASEAN country’s IQ being easily offset by changes in the IQ of China.
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Export product concentration is common in developing nations, where raw materials and semi-manufactured commodities face rigid demand in international markets. This leads to the…
Abstract
Export product concentration is common in developing nations, where raw materials and semi-manufactured commodities face rigid demand in international markets. This leads to the monopolisation of exports, particularly when targeting the developed world. Association of Southeast Asian Nations (ASEAN) and South Asian Association for Regional Cooperation (SAARC) nations have prioritised diversification to boost exports and per capita income, globalising their economies. The normalised Hirschman index is employed to analyse the determinants influencing the diversification of exports in ASEAN and SAARC countries from 2018 to 2021. Except for the fuel intensity variable, the results show that structural transformation, competitive advantages, industrial sector expansion, institutional capability, local investment development, financial stability and overall economic performance positively promote export diversification intensity. The key result is that institutional strength helps nations rapidly diversify their exports, highlighting the importance of structural transformation in boosting exports and globalising economies.
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Nilendu Chatterjee and Dipak Kundu
The presence of economic power of BRICS nations could be felt from the late of nineteenth and beginning of twentieth century and during this period inflow of FDI also began to go…
Abstract
The presence of economic power of BRICS nations could be felt from the late of nineteenth and beginning of twentieth century and during this period inflow of FDI also began to go up and spread across all the sectors. FDI has not only looked to capture the huge market of these economies, but while doing so, it has helped these nations in their economics progress. Our main contribution in this paper consists of analyzing both short-run and long-run interactions between status of knowledge and FDI in the form of inflow of FDI and proportion of GDP used for R&D activities accounting for possible development of knowledge in BRICS nations. For this purpose, our work is based on a sample of these five nations during the period 2006–2017. By the help of panel data analysis and having performed all the necessary tests, we have introduced both dynamic OLS and fully modified OLS to get the efficient long-run impact of FDI on knowledge. Our empirical results support long-run and short-run causality running from FDI to knowledge in all BRICS nations. Our policy recommendation includes encouragement of more FDI in development of knowledge-related activities as well as increase in proportion of GDP spent on R&D in BRICS nations.
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This paper examines the effects of informal economic activities on the environmental degradation for the BRICS nations, with emphasis on use of energy, ecological footprints and…
Abstract
This paper examines the effects of informal economic activities on the environmental degradation for the BRICS nations, with emphasis on use of energy, ecological footprints and socio-economic conditions of these nations. The study considers empirical analysis of the BRICS economies, by means of a panel data set for the period 2000–2020, by using important environmental indicators like carbon-di-oxide (CO2) and ecological footprints (EFs). Long-run associations have been estimated by applying econometric techniques like dynamic ordinary least square (OLS) and fully modified OLS. The study reveals important implications for BRICS economies because in the long-run, the informal activities bear negative impact on environmental quality leading to a fall in the degradational indicators. The study is significant in the sense that it finds that good governance is required along with strong pollution control policies and social reform for the improvement in the environmental quality, so does the emphasis on the use of renewable energy because the use of non-renewable energy hurts the environment in the presence of informal economic activities. Our study has important policy findings as it prescribes that formalization of informal activities along with economic growth and good governance which ensure use of renewable energy can help to achieve green growth and sustainability.
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Badi H. Baltagi and Chihwa Kao
This chapter provides an overview of topics in nonstationary panels: panel unit root tests, panel cointegration tests, and estimation of panel cointegration models. In addition it…
Abstract
This chapter provides an overview of topics in nonstationary panels: panel unit root tests, panel cointegration tests, and estimation of panel cointegration models. In addition it surveys recent developments in dynamic panel data models.
Olayeni Olaolu Richard and Aviral Kumar Tiwari
The present study aims to analyse the sustainability of the trade deficits in the Association of Southeast Asian Nations (ASEAN)-5 countries using panel framework during the…
Abstract
Purpose
The present study aims to analyse the sustainability of the trade deficits in the Association of Southeast Asian Nations (ASEAN)-5 countries using panel framework during the period from 1965 to 2011.
Design/methodology/approach
The paper applied a battery of first- and second-generation panel unit root tests and Pedroni's, Kao and Chiang's, Westerlund, and Di Iorio and Fachin cointegration tests to achieve the objective.
Findings
The paper found the evidence of sustainable trade deficit in ASEAN-5 countries while utilizing panel unit root tests as well as panel cointegration tests.
Research limitations/implications
The findings have important macroeconomic policies implication for ASEAN-5 countries that these policies had been effective in leading exports and imports to long-run steady-state equilibrium relationship among the ASEAN-5 countries.
Originality/value
The main contribution of the paper is to show that the macroeconomic policies of ASEAN-5 countries had been effective in leading exports and imports to long-run steady-state equilibrium relationship. To the authors' best knowledge, in this area, this is the first study in the panel framework for ASEAN countries.
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Amritkant Mishra and Pritish Kumar Sahu
This study aims to examine the impact of geopolitical uncertainty and inflation on green energy consumption. In addition, it aims to reveal the cause-and-effect relationship among…
Abstract
Purpose
This study aims to examine the impact of geopolitical uncertainty and inflation on green energy consumption. In addition, it aims to reveal the cause-and-effect relationship among these variables.
Design/methodology/approach
The authors exert the panel dynamic ordinary least squares (OLS) approach of Kao and Chiang (2000) and the Granger non-causality method of Dumitrescu and Hurlin (2011). On the other hand, current study relies on the annual time series data of 29 countries from 1985 to 2022.
Findings
The panel dynamic OLS results confirm a long-run relationship between geopolitical uncertainty, inflation and green energy consumption. On the other hand, inflation negatively impacts green energy consumption, with high inflation levels potentially halting the transition. Conversely, geopolitical uncertainty shows no significant effect on green energy use, indicating a reliance on traditional energy sources. Moreover, the current investigation reveals the unidirectional causality from green energy consumption to inflation, while no short-run causality exists from inflation as well as geopolitical uncertainty to green energy consumption in the selected countries.
Research limitations/implications
The authors drew conclusions about the potential impact of geopolitical uncertainty and inflation on green energy uses by considering the macro-level data. However, this investigation further be enhanced by looking at such issues through the micro perspective by understating the thought and perspective of public on the implication of geopolitical uncertainty and inflation on green energy uses. Such micro-level, country-specific study would definitely help us to generate more concrete ideas about such themes.
Practical implications
The empirical findings have important implications for policymakers. Results suggest that high inflation negatively impacts green energy use, so policymakers must consider implementing measures to control the inflation while promoting green energy uses for economic prosperity and environmental sustainability. In the short run, green energy use leads to inflation. Therefore, macroeconomic policymakers can implement various subsidy policies for the general public to mitigate the short-term inflationary impact of green energy use.
Originality/value
This investigation is novel in three ways. First, it explores the impact of geopolitical uncertainty and inflation on green energy use, using Caldara and Iacoviello’s (2022) geopolitical risk index as a proxy of geopolitical uncertainty. Second, it uses panel data econometric analysis, a method that most previous studies have not contemplated for this type of investigation. Finally, by including both advanced and emerging economies, it provides valuable insights for policymakers to develop effective strategies related to green energy consumption for achieving sustainable economic development.
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Faheem Ur Rehman and Abul Ala Noman
Infrastructure deficiency in Southeast Asian countries is ever growing and touched to a level where it harms the local economy as well as the international sector of the country…
Abstract
Purpose
Infrastructure deficiency in Southeast Asian countries is ever growing and touched to a level where it harms the local economy as well as the international sector of the country. The gap between demand and supply for infrastructure is constantly on the upswing. The purpose of this study to investigate the effect of infrastructure on exports and foreign direct investment (FDI) inflow in selected Southeast Asian economies.
Design/methodology/approach
This study employs the pooled mean group (PMG) technique to velaborate that how the infrastructure affects export and FDI in the short run and long run during 1990–2018. For cointegration, Pedroni and Kao tests are used. Dynamic ordinary least square (DOLS) and the fully modified least squares (FMOLSs) estimators are employed for robustness check.
Findings
The findings support that aggregate and sub-indices of infrastructure significantly promote the export and FDI inflow in the long run. Also infrastructure, export and FDI inflow are cointegrated in the long run. FMOLS and DOLS found the most robust results.
Originality/value
Infrastructure development in determining trade and FDI has established a significant deal of attention in the modern era where a plethora of research studies encourage the opinion that better infrastructure attracts FDI and enhances export. However, this study uses a global infrastructure index, which comprises the sub-indices like transport, telecommunication, energy and financial sector, which gives us a clear picture regarding how Southeast Asia can catch up FDI and export benefits through infrastructure.