Research on the effects of market integration on carbon emissions

Purpose The purpose of this paper is to analyze the linear and nonlinear effects of market integration on carbon emissions and explore the direct and indirect paths of market integration on carbon emissions through path analysis. Design/methodology/approach The authors first conduct a measurement and contrastive study of the market integration and carbon emissions of China’s 28 provinces from year 1995 to 2015. Then, the linear effect of market integration on carbon emissions is analyzed by using the fixed-effect model. Next, based on the path analysis method, the direct and indirect paths of market integration’s impact on carbon emissions are explored. Finally, the panel threshold regression model is used to evaluate the effect of market integration on carbon emissions under different situations of geographic distance. Findings The results show that first, the improvement of market integration can increase carbon emissions in the form of a linear relationship. Second, market integration not only has a direct and positive impact on the carbon emissions, but also has an indirect and positive impact on carbon emissions through the level of economic development, and a negative impact on carbon emissions through technological level. Third, an increase in market integration can reduce its positive effect on carbon emissions, but the improvement of economic growth and technology level can both enhance the positive effect of market integration on carbon emissions. Research limitations/implications This paper focuses on the impact of market integration on carbon emissions in 30 provinces in China, while, the authors do not conduct a comparative analysis of different regions, so there are certain limitations. In addition, policy interaction between regional governments is also a key factor affecting carbon emissions, but this paper does not consider the effect of policy interaction, future follow-up research will try to incorporate it into the analytical models. Practical implications An important practical implication of this research is that market integration should be regarded highly in China’s energy conservation and emission reduction efforts. The research results have important reference value for policy authorities to formulate relevant policies. That is, the government can play a more active role in the process of integration through breaking the regional blockade and interest barriers to comprehensively improve resource utilization efficiency and technical level, and ultimately achieve regional low-carbon development. Originality/value This paper explores the effects of market integration on China’s carbon emissions based on different methods and perspectives, and confirms that market integration plays a vital role in China’s carbon emissions through economic growth and technological progress. Notably, based on the studied results, some specific and practical suggestions are proposed in this paper so as to reduce carbon emission and realize the sustainable development of economy and society in China.

Aid-Growth Association and Role of Economic Policies: New Evidence from South and Southeast Asian Countries

The present article aims to study the implications of foreign aid on GDP per capita in the seven middle-income countries of South and Southeast Asia from 1990 to 2016. The influence of foreign aid on GDP per capita is studied in a policy-driven environment, for which a policy index using government consumption expenditure, inflation and trade openness is constructed. The outcomes of the study confirm that aid–policy interaction has a significant and positive impact on economic growth in the region. The results are calculated using the two-stage least-squares model, as foreign aid is included as an endogenous variable in the study. This approach enables us to assess the indirect effect of monetary, fiscal and trade policies on GDP per capita, as the constructed policy index is used as an instrument for foreign aid. The results of the study ascertain that besides current aid–policy interaction, the preceding years’ aid–policy interaction also has a positive and significant impact on GDP per capita in the region. The inclusion of a policy index in the analysis enables us to evaluate the effectiveness of economic policies while determining the level of GDP per capita in South and Southeast Asian countries. Therefore, the study proposes that while assessing the influence of aid-financed programmes on GDP growth of a country, the economic policies of recipient countries need to be considered. The bottom line is that foreign aid, economic policies and economic growth of aid-recipient countries are inextricably linked.

DO HETEROGENEOUS EXPECTATIONS CONSTITUTE A CHALLENGE FOR POLICY INTERACTION?

Yes, indeed; at least for macroeconomic policy interaction. We examine a Neo-Classical economy and provide the conditions for policy arrangements to successfully stabilize the economy when agents have either rational or adaptive expectations. For a contemporaneous-data monetary policy rule, the monetarist solution is unique and stationary under a passive fiscal/active monetary policy regime if monetary policy appropriately incorporates expectational heterogeneity. In contrast, the active fiscal/passive monetary policy regime's fiscalist solution is prone to explosiveness due to empirically plausible expectational heterogeneity. Nevertheless, this can be a well-defined, rather orthodox equilibrium. For operational monetary policy rules, only the results for the fiscalist solution prevail. Moreover, our results are plausible from an adaptive learning viewpoint.