Environmental policy stringency and comparative advantage of environmental sensitive goods: a study of textile exports in G20 countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Alisha Mahajan ◽  
Kakali Majumdar
Keyword(s):  
Environmental Policy ◽  
Comparative Advantage ◽  
Export Performance ◽  
Environmental Policies ◽  
Policy Implications ◽  
Global Trade ◽  
Porter Hypothesis ◽  
Content Type ◽  
Long Run ◽  
Environmentally Sensitive

PurposeTextile, listed as one of the highly environmentally sensitive goods, its trade is susceptible to be influenced by the implementation of stringent environmental policies. This paper aims to investigate the long-run relationship between revealed comparative advantage (RCA) and Environmental Policy Stringency Index (EPSI) for textile exports of G20 countries in panel data setup.Design/methodology/approachApart from trend analysis, the authors have employed Pedroni and Westerlund panel cointegration method and fully modified ordinary least square (FMOLS) method to study the long-run relationship between RCA and EPSI in presence of cross-sectional dependence.FindingsA strong link between trade and environmental stringency is observed for textile in the present study. For G20 countries, slight evidence of the Pollution Haven Hypothesis has also been witnessed in the study. Correspondingly, the results reveal the presence of long-run association between the variables under study, implying that stringent environmental policies reduce RCA for some countries, whereas some countries witness the Porter hypothesis.Research limitations/implicationsThe results imply that policy formulation should not aim at limiting the efforts of connecting RCA to environmental stringency but to set trade policies in a wider framework, considering environmental concerns, as these are inseparable subjects. However, this study also provides relevant real-world implications that can support further research.Practical implicationsThe present study has important implications for textile exporters such as green innovations. The Porter hypothesis can be a beneficial tool for G20 exporters in enhancing their export performance, especially for the ones dealing in environmentally sensitive goods. This study offers relevant policy implications and provides directions for future research on global trade and environment nexus.Originality/valueThis study deals in a debatable area of research that evaluates the interlinkages between environmental stringency and global trade flows in the G20 countries. An important observation of the study is the asymmetrical nature of policy stringency across different countries and its impact on trade. The unavailability of updated data is the limitation of the present study.

The impact of energy consumption and merchandise exports on CO2 emission in the United Nations geoscheme regions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chamil W. Senarathne ◽  
Prabhath Jayasinghe
Keyword(s):  
Energy Consumption ◽  
Environmental Policy ◽  
United Nations ◽  
Developed Countries ◽  
Data Sampling ◽  
Porter Hypothesis ◽  
Content Type ◽  
Long Run ◽  
The Impact ◽  
Practical Implications

Purpose While sustainable development policies are mostly set based on United Nations (UN) geoscheme classification, no study attempts to examine the impact of influential economic variables such as energy consumption (EC) and merchandise exports (ME) on carbon dioxide (CO2) emission in the UN geoscheme regions. The purpose of this paper is to examine the possible impact of EC and ME on CO2 emission in UN geoscheme classification regions such as Africa, America, Arab, Asia and Europe. Design/methodology/approach This paper uses autoregressive distributed lag (ARDL), Pedroni panel cointegration and panel Granger causality methodologies covering an annual panel data sampling period from 1971 to 2014. Findings The results show that there is bidirectional causality between all three variables in the European and American panel except for the non-causality from CO2 to EC in the American panel. These findings suggest possible consequences of weaker energy efficiency (even under environmental policy tightening) and strong demand for energy-intensive economic activities in those regions. Developed countries with higher environmental policy tightening (America and Europe) show significant estimates from the chosen tests supporting the Porter hypothesis. EC and ME have a long-run impact on CO2 emission in American and European panels. The African region has the least environmental impact of pollution from ME. Practical implications The ME and EC have a direct significant impact on CO2 emission in America and Europe. As these causalities, co-integrations and their impacts share a long-run equilibrium relationship, policymakers must design long-term industry policies such as cleaner production techniques focusing on environmentally sustainable practices. Also, it is suggested that the policymakers must ensure that they implement more robust policies and standards for environmental-friendly export production. Originality/value This is the first paper that examines the impact of EC and ME on CO2 emission in UN geoscheme regions. The findings of this paper provide theoretical implications supporting Porter hypothesis and practical implications for policymaking.

Impact of Environmental Tax on Comparative Advantage of Food and Food Products: A Study of G20 Countries in Light of Environmentally Sensitive Goods

2021 ◽  
pp. 001946622110352
Author(s):  
Alisha Mahajan ◽  
Kakali Majumdar
Keyword(s):  
Comparative Advantage ◽  
Food Products ◽  
Environmental Taxes ◽  
Environmental Tax ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Environmentally Sensitive ◽  
The Relationship

Many countries are under constant fear that environmental policies might negatively influence the international competitiveness of polluting industries. In this study, we aim to evaluate the relationship and impact of the environmental tax on comparative advantage of trade in food and food products industry, considered to be one of the highly environmentally sensitive industries. This study also investigates, whether this relationship differs among countries covered in G20, with the help of correlation analysis. We select panel autoregressive distributed lag approach for this study as it can analyse long-run as well as short-run association even when the variables are stationary at different orders of integration. Using panel data from G20 countries over the period of 21 years that is from 1994 to 2015, it is concluded that when we allow environmental taxes to interact with the revealed comparative advantage (RCA) of G20 nations, the overall impact of the environmental tax on the RCA is negative in the long period. It is therefore suggested that countries should follow Porter hypothesis to stimulate innovations resulting from strict environmental regulations that affect the environment in least possible manner. JEL Codes: C01, C23, C33, F18, O57, Q5

The force of globalization reshaping the local institutions: evidence from the Organization of Islamic Cooperation member countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nahla Samargandi ◽  
Kazi Sohag ◽  
Ali Kutan ◽  
Maha Alandejani
Keyword(s):  
Government Expenditure ◽  
Policy Implications ◽  
Institutional Setting ◽  
Cross Sectional ◽  
Policy Makers ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Nonlinear Relation ◽  
Political Globalization

PurposeThe authors reinforce the existing literature on the effect of overall globalization on institutional quality (IQ), while incorporating the effects of economic, political and social aspects of globalization, human capital, government expenditure and population growth. To this end, the authors estimate panel data models for a sample of 36 member countries of the Organization of Islamic Cooperation (OIC) during 1984–2016.Design/methodology/approachThe authors employ the cross-sectional autoregressive distributed lags (CS-ARDL) approach.FindingsThe study’s investigation affirms the presence of an inverted U-shaped (nonlinear) relation between overall globalization and IQ indexes for the sample countries, which suggests no additional room for improvement in IQ. It also underpins the existence of an inverted-U-shaped (nonlinear) relation between political globalization and IQ. In contrast, economic and social globalizations have a U-shaped relation with IQ, implying more scope for improvement.Research limitations/implicationsThe findings have key policy implications. First, policy makers should consider a long-run approach for improving IQ and globalization over time. Second, quick reforms in the short run may not improve IQ.Practical implicationsThe results suggest that policy makers should approach the globalization process from a long-run perspective as well by designing appropriate strategies to provide a continuous but gradual increase in globalization so as to systematically monitor the threshold limits to IQ from improving globalizationOriginality/valueTo the best of the authors’ knowledge, this work is the first to empirically investigate the overall role of globalization in promoting IQ under the conditions of short-run heterogeneity and long-run homogeneity. The authors focus on the member countries of the OIC, many of which are ruled by authoritarian regimes and suffer from a poor domestic institutional setting.

scholarly journals New empirics of monetary policy dynamics: evidence from the CFA franc zones

2016 ◽  
Vol 7 (2) ◽  
pp. 164-204 ◽  
Author(s):  
Simplice Asongu
Keyword(s):  
Monetary Policy ◽  
Granger Causality ◽  
Money Supply ◽  
Monetary Union ◽  
Policy Implications ◽  
Content Type ◽  
Long Run ◽  
Wide Range ◽  
Short Run ◽  
Cfa Franc

Purpose – A major lesson of the European Monetary Union crisis is that serious disequilibria in a monetary union result from arrangements not designed to be robust to a variety of shocks. With the specter of this crisis looming substantially and scarring existing monetary zones, the purpose of this paper is to complement existing literature by analyzing the effects of monetary policy on economic activity (output and prices) in the CEMAC and UEMOA CFA franc zones. Design/methodology/approach – VARs within the frameworks of Vector Error-Correction Models and Granger causality models are used to estimate the long- and short-run effects, respectively. Impulse response functions are further used to assess the tendencies of significant Granger causality findings. A battery of robustness checks are also employed to ensure consistency in the specifications and results. Findings –H1. monetary policy variables affect prices in the long-run but not in the short-run in the CFA zones (broadly untrue). This invalidity is more pronounced in CEMAC (relative to all monetary policy variables) than in UEMOA (with regard to financial dynamics of activity and size). H2. monetary policy variables influence output in the short-term but not in the long-run in the CFA zones. First, the absence of cointegration among real output and the monetary policy variables in both zones confirm the neutrality of money in the long term. With the exception of overall money supply, the significant effect of money on output in the short-run is more relevant in the UEMOA zone, than in the CEMAC zone in which only financial system efficiency and financial activity are significant. Practical implications – First, compared to the CEMAC region, the UEMOA zone’s monetary authority has more policy instruments for offsetting output shocks but fewer instruments for the management of short-run inflation. Second, the CEMAC region is more inclined to non-traditional policy regimes while the UEMOA zone dances more to the tune of traditional discretionary monetary policy arrangements. A wide range of policy implications are discussed. Inter alia: implications for the long-run neutrality of money and business cycles; implications for credit expansions and inflationary tendencies; implications of the findings to the ongoing debate; country-specific implications and measures of fighting surplus liquidity. Originality/value – The paper’s originality is reflected by the use of monetary policy variables, notably money supply, bank and financial credits, which have not been previously used, to investigate their impact on the outputs of economic activities, namely, real GDP output and inflation, in developing country monetary unions.

Doha disagreement delineates Saudi-Iranian rivalry

2016 ◽  
Keyword(s):  
Saudi Arabia ◽  
Comparative Advantage ◽  
Oil Prices ◽  
Short Term ◽  
Content Type ◽  
Industrial Action ◽  
Long Run

Significance Many producers, facing budgetary pressures because of low oil prices, support output restraint, but they need to act in concert. Russia and Saudi Arabia have offered a freeze rather than cuts, and Riyadh is not prepared to adopt any stance that provides a comparative advantage to regional rival Iran. Impacts Prices could rise somewhat in the short term due to the drop in Kuwaiti production caused by industrial action. Another factor pushing up oil prices could be any further upward revision to the expected contraction in US crude output. Downside risks dominate in the long run, owing to producers' inaction, record inventories and the return of interrupted supplies.

Impact of foreign direct investment and international tourism on long-run economic growth of Estonia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amin Sokhanvar ◽  
Glenn P. Jenkins
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Growth Strategy ◽  
Policy Implications ◽  
International Tourism ◽  
Potential Threat ◽  
Fdi Inflows ◽  
Economic Growth Rate ◽  
Content Type ◽  
Long Run

PurposeInternational tourism and FDI inflows have generated detectable beneficial impacts on the economy of Estonia in the last decades. However, recently, poor international market conditions mostly caused by the trade war and COVID-19 pandemic have been a potential threat to these two factors. Besides, the poor performance of investments in recent years is behind the stagnation of productivity in Estonia. This study examines the dynamics of the effects of these factors on the rate of economic growth in Estonia and provides policy implications in line with sustained recovery.Design/methodology/approachA nonlinear ARDL technique is employed in this study to investigate the long-run effects of FDI and the degree of tourism specialization on economic growth rate.FindingsOur findings indicate that the economic growth rate of Estonia in the long run has been positively affected by both the rate of FDI inflows and international tourism.Originality/valueThis is the first study that employs a non-linear approach to investigate the dynamics of long-run effects of FDI and tourism specialization on the rate of economic growth in Estonia and provides policy implications in line with optimal growth strategy considering the economic structure, the current level of productivity and available potentials in this economy.

Do trade reforms affect changes in patterns of comparative advantage?

2016 ◽  
Vol 20 (3) ◽  
pp. 281-296
Author(s):  
Namsuk Choi
Keyword(s):  
Trade Liberalization ◽  
Comparative Advantage ◽  
Time Series Data ◽  
Poor Country ◽  
Export Performance ◽  
Series Data ◽  
Trade Reform ◽  
Content Type ◽  
Trade Reforms

Purpose The purpose of this paper is to examine the effects of foreign trade liberalization and trade reforms on the process of structural upgrading, and explore the extent to which they provide impetus for exports. Design/methodology/approach This paper accounts for trade liberalization dates, cumulative years in open regime, and the density of 1,006 products in the patterns of comparative advantage for 132 countries from 1975 to 2000. The effects of trade liberalizations and trade reforms in open regime on future export performance are estimated by using various empirical strategies. Findings This paper finds that the speed of moving from simple poor-country goods to rich-country goods in export depends not only on having a route to nearby goods of increasingly higher value, but also on the increase in the cumulative years in open regime. In particular, a 1 percent change in the relatedness across products with trade reform in open regime increases the probability of exporting a new product by 2.0 percent more. Originality/value A contribution of this paper is that it measures the extent to which trade reform in open regime affects the evolution of comparative advantage, even after taking account of the role of relatedness of exported products as in the Hausmann and Klinger (2006, 2007). In this paper, empirical findings of a comprehensive product level cross-country time-series data analysis may contribute to generalize the role of trade reform on structural upgrading not only for a pro-competitive export country like Korea but also for a typical developing country.

Trade Openness, Financial Development Index and Economic Growth

2014 ◽  
Vol 6 (4) ◽  
pp. 362-375 ◽  
Author(s):  
Dogga Satyanarayana Murthy ◽  
Suresh Kumar Patra ◽  
Amaresh Samantaraya
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Trade Openness ◽  
Output Growth ◽  
Domestic Demand ◽  
Policy Implications ◽  
Content Type ◽  
Development Index ◽  
Long Run ◽  
Financial Development Index

Purpose – The purpose of this article is to examine the inter-relationship and direction of causality among three macroeconomic variables such as trade liberalization, financial development and economic growth. Design/methodology/approach – The empirical analysis is based on the principal component analysis as method to construct financial development index (FDI), augmented Dickey–Fuller and Phillips–Perron tests as the unit root test, Johansen’s co-integration test and VECM for direction of causality in the long run among TOP, FDI and economic growth. Findings – The empirical results confirmed that there exists a long-run association among trade openness, financial development and economic growth. This study has also found that there is bidirectional causality between financial development and growth. However, the causality runs from growth to finance is stronger than that from finance to growth. This study also observed unidirectional causality that runs from financial development and economic growth to trade openness. Research limitations/implications – The policy implications that could be drawn from the present study is that, initiation of financial reforms to improve the size of financial system would lead to higher economic growth. Another key implication from this study is that because trade openness has no effect on both domestic financial sector development and output growth, it would be better to deploy the resources into creating a sustained domestic demand rather than concentrating more on the external front in general and trade openness in particular. Originality/value – The study constructs a summary IFD for India by taking into account four broad financial development indicators for the period 1971-2012. The present paper also suggests that it would be better to deploy the resources to create a sustained domestic demand rather than concentrating more on the external front in general and trade openness in particular.

Does terrorism hamper FDI inflows? A pre and post 9/11 analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Imtiaz Arif ◽  
Amna Sohail Rawat ◽  
Lubna Khan
Keyword(s):  
Design Methodology ◽  
Policy Implications ◽  
Sample Period ◽  
Fdi Inflows ◽  
Content Type ◽  
Empirical Estimates ◽  
Pooled Mean Group ◽  
Long Run ◽  
The Relationship

PurposeThis research intends to determine the role of terrorism in defying foreign direct investment (FDI) in top terror effected economies.Design/methodology/approachPanel data on FDI and terrorism from top terror effected economies spanning from 1987 to 2018 were used and the relationship for whole sample was investigated. Later the sample period was divided into pre (1987–2001) and post 9/11 (2002–2018) subsample and same relationship was tested to investigate the normalization of terror effect on FDI. The method of Pooled Mean Group (PMG) was used to test the hypothesis.FindingsThe results showed a negative but statistically insignificant impact of terrorism on the FDI inflows in the long run. Later the sample period was divided into pre (1987–2001) and post 9/11 (2002–2018) subsample. The empirical estimates for pre and post 9/11 periods indicated a negative and statistically significant relationship between terrorism and FDI for pre 9/11 period, and a negative but statistically insignificant relationship between the two variables for post 9/11 period.Originality/valueThe findings suggest several important policy implications for the terror affected countries and are further discussed in the study.

The effects of announcement of green policies on equity portfolios

2016 ◽  
Vol 31 (2) ◽  
pp. 138-155 ◽  
Author(s):  
Vikash Ramiah ◽  
Thomas Morris ◽  
Imad Moosa ◽  
Michael Gangemi ◽  
Louise Puican
Keyword(s):  
Environmental Sustainability ◽  
Abnormal Returns ◽  
Systematic Risk ◽  
Environmental Policies ◽  
Wealth Creation ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Equity Portfolios ◽  
The Impact

Purpose – This paper aims to investigate the impact of 75 announcements of environmental policies on British equities over the period 2003 to 2012. In particular, the research has the following specific objectives: finding out whether there is wealth creation/destruction for investors as a result of the announcements of green policies and identifying changes in risk structure following the introduction of green policies. Design/methodology/approach – Using event study methodology and non-parametric tests, the authors attempt to find out whether announcements of environmental/sustainability policies are value constructive or destructive for equity investors. The CAPM is fitted with interaction variables to measure the change in systematic risk following announcements. Findings – The results show that the UK market is particularly sensitive to domestic, international and nuclear announcements. Cumulative abnormal returns in the range of 30-40 per cent were recorded in certain sectors. Consistent with the emerging literature, the authors observe that environmental policies induce changes in the systematic risk of businesses, both in the short run and the long run. Originality/value – To the best of authors’ knowledge, the literature does not provide any answer as to how the risk and return of British equity portfolios change following the announcement of green policies in the aftermath of the Kyoto Protocol on climate change. Furthermore, the literature does not differentiate among various categories of announcements (domestic, international and nuclear). Therefore, this paper bridges the gap in the literature on these two grounds.

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