Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Arun Kumar Giri ◽  
Geetilaxmi Mohapatra ◽  
Byomakesh Debata
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Technological Development ◽  
Content Type ◽  
Significance Level ◽  
Long Run ◽  
Non Linear ◽  
Causality Tests ◽  
Asymmetric Causality

PurposeThe main purpose of the present research is to analyze the relationship between technological development, financial development and economic growth in India in a non-linear and asymmetric framework.Design/methodology/approachThe study employs the nonlinear autoregressive distributed lags model (NARDL) and Hetemi J asymmetric causality tests to explore nonlinearities in the dynamic interaction among the variables. The stationarity properties of data are checked by using Ng–Perron and ADF structural break unit root tests. The unit root test confirms that the variables are non-stationarity in level and are differenced stationary.FindingsThe study finds that there is a cointegrating relationship between technological development, financial development and economic growth in the long run. The findings suggest that a positive shock in technological development increases economic growth (coefficient value 1.497 at 1% significance level) and a negative shock will harm economic performance (coefficient value −0.519 at 1% significance level). A long-term positives shock in financial development boosts the economy (coefficient value 1.08 at 5% significance level) and negative shock hampers the economic performance (coefficient value −1.09 at 5% significance level). The asymmetric causality test result confirms bi-directional causality between technological development and economic growth and unidirectional causality from negative economic growth to negative technological development and bi-directional causality between economic growth and financial development, unidirectional negative financial development to economic growth.Research limitations/implicationsThe results of this research can significantly facilitate stakeholders and policymakers in devising short-term as well as long-term policies for financial development and technological innovation to achieve sustainable long-run economic growth in India.Originality/valueThis paper is the first of its kind to empirically examine the cointegrating and causal relationship between technology, financial development and economic growth in India using non-linear asymmetric cointegration and causality tests.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

The impact of financial development, economic growth and energy consumption on environmental degradation

2015 ◽  
Vol 26 (5) ◽  
pp. 666-682 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri ◽  
Geetilaxmi Mohapatra
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Financial Development ◽  
Environmental Degradation ◽  
Series Data ◽  
Development Economic ◽  
Content Type ◽  
Indian Economy ◽  
Long Run ◽  
The Impact

Purpose – The purpose of this paper is to investigate the impact of financial development, economic growth and energy consumption on environment degradation for Indian economy by using the time series data for the period 1971-2011. Design/methodology/approach – The stationary properties of the variables are checked by ADF, DF-GLS, PP and Ng-Perron unit root tests. The long-run relationship is examined by implementing the Autoregressive Distributed Lag bounds testing approach to co-integration and error correction method (ECM) is applied to examine the short-run dynamics. The direction of the causality is checked by VECM framework and variance decomposition is used to predict exogenous shocks of the variables. Findings – The empirical evidence confirms the existence of long-run relationship among the variables. Financial development appears to increase environmental degradation in India. The main contributors to environmental degradation are: economic growth, energy consumption financial development and urbanization. The results also lend support to the existence of environmental Kuznets curves for Indian economy. Research limitations/implications – The present study suggests that environmental degradation can be reduced at the cost of economic growth or energy efficient technologies should be encouraged to enhance the domestic product with the help of financial sector by improving environmental friendly technologies from advanced economies. Originality/value – This paper proposes to make a contribution to the existing literature through examining the relationship between financial development and environmental degradation in Indian economy during 1971-2011 by employing modern econometric techniques.

Exports, financial development and economic growth in Pakistan

2014 ◽  
Vol 13 (2) ◽  
pp. 155-170 ◽  
Author(s):  
Muhammad Shahbaz ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Error Correction Model ◽  
Causality Analysis ◽  
Bounds Testing ◽  
Causality Test ◽  
Correction Model ◽  
Content Type ◽  
Long Run

Purpose – This paper aims to explore the relationship between exports, financial development and economic growth in case of Pakistan. Design/methodology/approach – The autoregressive distributed lag bounds testing approach to cointegration and error correction model are applied to test the long-run and short-run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach. Findings – The analysis confirms cointegration for the long-run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. Originality/value – This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.

Does financial development improve environmental quality in Turkey? An application of endogenous structural breaks based cointegration approach

2018 ◽  
Vol 29 (2) ◽  
pp. 368-384 ◽  
Author(s):  
Javaid Ahmad Dar ◽  
Mohammad Asif
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Environmental Quality ◽  
Unit Root ◽  
Structural Breaks ◽  
Energy Use ◽  
Financial Sector ◽  
Content Type ◽  
Long Run ◽  
Endogenous Structural Breaks

Purpose The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence of possible regime shifts over a period of 1960-2013. Design/methodology/approach Along with the conventional unit root tests, Zivot-Andrews unit root test with structural break has been employed to check the stationarity of variables. The cointegrating relationship between variables is investigated by using the autoregressive distributed lag bounds test and Hatemi-J threshold cointegration test. Findings The results confirm a cointegrating relationship between the variables. The long-run relationship between the variables has gone through two endogenous structural breaks in 1976 and 1986. Development of financial sector improves environmental quality whereas energy use and economic growth degrade it. The results challenge the validity of environmental Kuznets curve hypothesis in Turkish economy. Research limitations/implications The study uses domestic credit to private sector as a proxy for development of financial sector. The model can be improved by constructing an index of financial development instead of using a single determinant as a proxy for financial development. Practical implications The study may pave the way for policy makers to capture important environmental pollutants in better way and develop effective and efficient energy and economic policies. This may make significant contribution to curbing CO2 emissions while sustaining economic growth. Originality/value This is the only study to examine long-run impact of financial sector development on carbon emissions, using the threshold cointegration approach. Hence, the study is a gentle request to reduce the possible omitted variable econometric estimation bias and fill the gap in the existing literature.

Financial development, FDI and economic growth: evidence from Sudan

2018 ◽  
Vol 45 (8) ◽  
pp. 1236-1249 ◽  
Author(s):  
Abdalla Sirag ◽  
Samira SidAhmed ◽  
Hamisu Sadi Ali
Keyword(s):  
Economic Growth ◽  
Least Squares ◽  
Financial Development ◽  
Unit Root ◽  
Structural Break ◽  
Ordinary Least Squares ◽  
Series Data ◽  
Content Type ◽  
Long Run ◽  
Cointegration Tests

Purpose The effect of foreign direct investment (FDI) on economic growth is widely believed to be contingent on the development of the financial sector. Nevertheless, as the possibility that the effect of financial development on growth being contingent on FDI has been neglected in existing literature, the authors have investigated it in this paper. In general, the purpose of this paper is to examine the effect of financial development and FDI on economic growth in Sudan using annual data from 1970 to 2014. Design/methodology/approach Since most of the macroeconomic variables are subject to unit root problem, the time series data are assessed using unit root and cointegration tests with/without structural break. Moreover, the study uses the fully modified ordinary least squares and the dynamic ordinary least squares techniques to estimate the long-run model. Findings The results of the cointegration tests provide evidence that a long-run relationship exists among variables even after accounting for the structural break. The results show that financial development and FDI are positive and significant in explaining economic growth in Sudan. Financial development is found to be more beneficial to economic growth than FDI. Moreover, the findings reveal that FDI leads to better economic performance through financial development. Interestingly, the findings of the study show that the effect of financial development on economic growth is further enhanced by the inflows of FDI. Research limitations/implications The government should focus on promoting FDI in more productive sectors. In addition, further cooperation with multinational enterprises is needed to increase FDI in the country. Originality/value This is the first paper that empirically examines both the interlinked impact of FDI on growth through financial development and the impact of financial development on economic growth through FDI in Sudan using appropriate econometric methods.

GDP, energy consumption and financial development in Italy

2018 ◽  
Vol 12 (1) ◽  
pp. 28-43 ◽  
Author(s):  
Cosimo Magazzino
Keyword(s):  
Energy Consumption ◽  
Granger Causality ◽  
Financial Development ◽  
Oil Prices ◽  
Content Type ◽  
Real Gdp ◽  
Long Run ◽  
Causality Tests ◽  
Granger Causality Tests ◽  
Toda And Yamamoto

Purpose This study aims to explore the relationship among energy consumption, real income, financial development and oil prices in Italy over the period 1960-2014. Design/methodology/approach Different econometric techniques – such as the General Methods of Moment (GMM) or the AutoRegressive Distributed Lags (ARDL) bounds test – are usually used in the empirical analysis. Moreover, both the Toda and Yamamoto causality tests and the Granger causality tests are applied to the data. Findings The results of unit root and stationarity tests show that the variables are non-stationary at levels, but stationary in first-differences form, or I(1). The ARDL bounds F-test reveals an evidence of a long-run relationship among the four variables at 1% significance level. Moreover, an increase in real GDP and oil prices has a significant effect on energy consumption in the long run. The coefficients of estimated error correction term are also negative and statistically significant. In addition, the paper explores the causal relationship between the variables by using a VAR framework, with Toda and Yamamoto but also Granger causality tests, within both multivariate and bivariate systems. The findings indicate that energy consumption is affected by real GDP. Originality/value The study also filled the literature gap of applying ARDL technique to examine this relevant issue for Italy.

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.

Economic growth, renewable and nonrenewable energy consumption nexus in India

2020 ◽  
Vol 14 (4) ◽  
pp. 777-792 ◽  
Author(s):  
Shruti Shastri ◽  
Geetilaxmi Mohapatra ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Renewable Energy ◽  
Energy Consumption ◽  
Renewable Energy Consumption ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
The Impact ◽  
Asymmetric Causality ◽  
Nonrenewable Energy

Purpose The purpose of this paper is to examine the nexus among economic growth, nonrenewable energy consumption and renewable energy consumption in India over the period 1971-2017. Design/methodology/approach This study uses nonlinear autoregressive distributed lags model and asymmetric causality test to explore nonlinearities in the dynamic interaction among the variables. Findings The findings indicate that the impact of nonrenewable energy consumption and renewable energy consumption on the economic growth is asymmetric in both long run and short run. In long run, a positive shock in nonrenewable energy consumption and renewable energy consumption exerts a positive impact on growth. However, the negative shocks in nonrenewable energy consumption produce larger negative effects on the growth. The results of nonlinear causality test indicate a unidirectional causality from nonrenewable energy consumption and renewable energy consumption to economic growth and thus support “growth hypothesis” in context of India. Practical implications The findings imply that policy measures to discourage nonrenewable energy consumption may produce deflationary effects on economic growth in India. Further, the findings demonstrate the potential role of renewable energy consumption in promoting economic growth. Originality/value To the best of the authors’ knowledge, this study is the first attempt to explore nonlinearities in the relationship between economic growth and the components of energy consumption in terms of renewable and nonrenewable energy consumption.

scholarly journals Effect of energy and CO2 consumption on the economy in Sub-Sahara Africa

2020 ◽  
Vol 5 (1) ◽  
Author(s):  
Josiah Chukwuma Ngonadi ◽  
Sun Huaping ◽  
Joy Okere ◽  
John Uche Ngonadi
Keyword(s):  
Economic Growth ◽  
Democratic Republic Of Congo ◽  
Sub Saharan Africa ◽  
Co2 Production ◽  
Special Effects ◽  
Economy Growth ◽  
Long Run ◽  
Causality Tests ◽  
Sub Saharan

The study focused on the long-term related effect among energy consumption (EC), CO2 production and economy growth (EG) of 12 randomly selected countries in sub-Saharan Africa. We used validation and causality tests in the 2008-2018 annual record. Special effects vary from country to country, in the long term, strong consumption of energy and economy growth in many countries has been linked with an increment in air pollution. The observation of the longitudinal study showed economic growth resulting in short-term CO2 emissions in Benin, the Democratic Republic of Congo, Ghana, Nigeria and Senegal, reflecting a lack of economy. This would not be possible without affecting the environment. The effect between CO2 and EG in Gabon, Nigeria and Togo has shown that environmental policies aimed at reducing pollution can be harmful. economic growth. In addition, long-term economic and CO2 production in Nigeria has been closely linked to the long-term links to Congo and Gabon. In the long-run, greenhouse gas emissions are the result of EC, EG and CO2 emission in Benin, Ivory Coast, Nigeria, Senegal, South Africa and Togo.

Testing tourism-led growth hypothesis in Laos?

2018 ◽  
Vol 73 (2) ◽  
pp. 242-251 ◽  
Author(s):  
Phouphet Kyophilavong ◽  
John Luke Gallup ◽  
Teerawat Charoenrat ◽  
Kenji Nozaki
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Tourism Development ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Causality Tests ◽  
Econometric Approach ◽  
Growth Hypothesis

Purpose The purpose of this paper is to investigate the tourism-led growth hypothesis in Laos. Design/methodology/approach The authors test the tourism-led growth hypothesis using autoregressive distributed lag (ARDL) cointegration estimation (Pesaran et al., 2001) and Granger causality tests. Findings The results of this paper show that when tourism is forcing variable, there is no long-run relationship between tourism development and economic growth. The Granger causality test demonstrates that there is a uni-directional causality running from economic growth in tourism. Social implications The empirical results and policy recommendation may be useful for other small developing countries. Originality/value This study is the first study to investigate the relationship between tourism development and growth in Laos, using a relatively new econometric approach – ARDL bound testing.

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