Granger Causality Test

The link between team payroll and competitive balance plays a central role in the theory of team sports but is seldom investigated empirically. This paper uses data on team payrolls in Major League Baseball between 1980 and 2000 to examine the link and implements Granger causality tests to establish whether the relationship runs from payroll to performance or vice versa. While there is no evidence that causality runs from payroll to performance over the entire sample period, the data shows that the cross section correlation between payroll and performance increased significantly in the 1990s. As a comparison, the paper examines the relationship between pay and performance in English soccer, and it is shown that Granger causality from higher payrolls to better performance cannot be rejected. We argue that this difference may be a consequence of the open market for player talent that obtains in soccer compared to the significant restrictions on trade that exist in Major League Baseball.

summarizes his personal viewpoint on testing for causality, and outlines what he considers to be a useful operational version of his original de¯nition of causality (Granger (1969)), which he notes was partially alluded to in . This operational version is based on a comparison of the 1-step ahead predictive ability of competing models. However, Granger concludes his discussion by noting that it is common practice to test for Granger causality using in-sample F-tests. The practice of using in-sample type Granger causality tests continues to be prevalent.

This paper evaluates whether Nigeria is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted over the last one decade. The paper reviews literature on selected conditions for successful implementation of IT and then ...

Abstract. In this paper we study the relationship of fiscal policy and economic performance of some core countries in the EU. Our aim is to find out whether public deficit and public debt have consequences for real variables in the economies we consider. The background of our ...

The Masters Hypothesis is the claim that unprecedented buying pressure in recent years from commodity index investors created massive bubbles in food and energy prices. A number of recent studies investigate the empirical relationship between index investment and price movements in agricultural futures markets. One line of research uses time-series regression tests, such as Granger causality tests, to investigate the relationship between price movements and index positions. This research provides little evidence in support of the Masters Hypothesis in agricultural futures markets. A second line of research uses cross-sectional regression tests and studies in this area provide very limited evidence in favor of the Masters Hypothesis for agricultural futures markets. A third line of research investigates whether there is a significant relationship between commodity index trading and the difference, or spread, between futures prices of different contract maturities. These studies report a range of results depending on the type of test. However, the bulk of the evidence indicates either no relationship or a negative relationship, which is once again inconsistent with the Masters Hypothesis. Overall, this growing body of literature fails to find compelling evidence that buying pressure from commodity index investment in recent years caused a massive bubble in agricultural futures prices. The Masters Hypothesis is simply not a valid characterization of reality.

There are a number of studies which consider the relation between military spending and economic growth using Granger causality techniques rather than a well-defined economic model. Some have used samples of groups of countries, finding no consistent results. Others have focused on case studies of individual countries, which has the advantage of the researchers bringing to bear much more data than the cross country samples a nd a greater knowledge of the structure of the economy and the budget. This paper adds to the literature by providing an analysis of two countries Greece and Turkey, which are particularly interesting case studies given their high military burdens, the bad relations between the two and the resulting arms race in the area. In addition to analysing the data using standard "pre-cointegration" Granger causality techniques, this paper employs modern vector autoregressive (VAR) methodology that utilises cointegration via Granger's representation theorem. The standard Granger causality tests suggest a positive effect of changing military burden on growth for Greece, but this is not sustained when the cointegration between output and military burden is taken into account. The only evidence of significant Granger causality is a negative impact of military burden on growth in Turkey.

The 1990s have witnessed pronounced boom-bust cycles in emergingmarkets lending, culminating in the Asian financial and currency crisis of 1997-8. By examining the links between sovereign credit ratings and dollar bond yield spreads over 1989-97, this paper aims at broad empirical content for judging whether the three leading rating agencies -Moody's, Standard & Poor's and Fitch IBCA -can intensify or attenuate boom-bust cycles in emerging-market lending. First, an event study exploring the market response for 30 trading days before and after rating announcements finds a significant impact of imminent upgrades and implemented downgrades for a combination of ratings by the three leading agencies, despite strong anticipation of rating events. Second, a Granger causality test, by correcting for joint determinants of ratings and yield spreads, finds that changes in sovereign ratings are mutually interdependent with changes in bond yields. These findings are based on many more observations than just the highly publicized crisis episodes in Mexico and Asia. They imply that sovereign ratings have the potential to moderate euphoria among investors on emerging-market bonds, but that the rating agencies have failed to exploit that potential over the past decade.

This study objective to examine the relationship between gold prices, oil prices and KSE100 return. This study important for the investor whose want to invest in real assets and financial assets. This study helps investor to achieve the portfolio diversification. This study uses the monthly data of gold prices, KSE100, and oil prices for the period of 2000 to 2010 (monthly). This study applied Descriptive statistics, Augmented Dickey Fuller test Phillip Perron test, Johansen and Jelseluis Co-integration test, Variance Decomposition test to find relationship. This study concludes that Gold prices growth, Oil prices growth and KSE100 return have no significant relationship in the long run. This study provides information to the investors who want to get the benefit of diversification by investing in Gold, Oil and stock market. In the current era Gold prices and oil prices are fluctuating day by day and investors think that stock returns may or may not affected by these fluctuations. This study is unique because it focuses on current issues and takes the current data in this research to help the investment institutions or portfolio managers.

The research investigates the impact of the different determinants on leverage conservatism which is one of the significant effects of financial distress. The paper examines leverage conservatism over the three consecutive years (1984 to 2001). 'Granger Causality Test' explores the causality relationship between our dependent and independent variables. The result reveals that some of the variables do not create any causal relationships but the empirical results imply the considerable effects to adopt conservative policy. Moreover, we implement 'Augmented Dickey-Fuller test (ADF') to find stationary or non stationary of leverage variables of the sample firms'.

In this study, we test whether the overconfidence bias explains several stylized market anomalous, including a short-term continuation (momentum), a long-term reversal in stock returns, high levels of trading volume and excessive volatility. Using data of French stocks market, we find empirical evidence in support of overconfidence hypothesis. First, based on a restricted VAR framework, we show that overconfident investors overreact to private information and underreact to public information. Second, by performing Granger-causality tests of stock returns and trading volume, we find that overconfident investors trade more aggressively in periods subsequent to market gains. Third, based on a two GARCH specifications, we show that self attribution bias, conditioned by right forecasts, increases investors overconfidence and trading volume. Fourth, the analysis of the relation between return volatility and trading volume shows that the excessive trading of overconfident investors makes a contribution to the observed excessive volatility.

This paper calculates Theil's entropy index to measure the extent of productivity differences across 92 countries for the period from 1970 to 2003. While there is evidence of increasing differences in productivity across these countries, we observe different patterns when we group the countries by income levels. These differences seem to be decreasing among middle income developing and developed countries whereas they seem to be widening among low and high income developing countries. The results of our multivariate time series analysis also suggest that FDI increases productivity differences among low and high income developing countries whereas GDI reduces these differences among low income countries in the long-run. Granger causality test results indicate that while an increase in GDI leads to a decline in growth of trade, a higher growth of trade appears to be important for attracting FDI to middle income countries. Furthermore, a reduction in productivity differences and a higher FDI growth lead to higher growth of trade in developed countries.

Indian stock market has seen a prodigious growth among the emerging economies. The Nifty 50 index has doubled from 5866 pts to 10,440 pts from 2013 to 2019. Due to trade de-regularisation, flow of foreign investments and exchange rate fluctuations in the Indian stock exchanges has witnessed a greater volatility. Post financial crisis of 2008-2009, Foreign Institutional Investment flows are considered as a major cause for oscillation in stock exchanges of India. The growth seen in investments by Institutional Investors of both foreign (FII) and domestic (DII) in the last decade had been phenomenal from 53,404 crores to 1, 11,333 crores and from 24, 354 Crores to 82,595 Crores respectively. In this background, efforts have been made to study the interactions between purchases and sales of FII's and DII's, and the returns of Nifty 50. Employing Granger causality tests, it finds that there is a two-way directional connection established between FII and DII. However, the study does not find any statistically significance causality by FII's and DII's on returns of Nifty 50 indicating that neither FII nor DII cause volatility in the returns of nifty 50.

The research aims to test the Environmental Kuznets Curve (EKC) hypothesis and analyses the causality relationship between carbon (CO 2) emissions, energy consumption, and Gross Domestic Product (GDP) per capita in the case of Gulf Cooperation Council-GCC-countries using the time series data for the period 1990-2014. Using the Vector Error Correction Model (VECM), it indicates that the EKC hypothesis does not hold in five of the six countries, and the inverted U-shaped curve was identified only in the UAE, regarding the direction of causality with Granger Causality and Vector Auto-Regressive (VAR) tests. It appears to be a unidirectional causality going from economic growth represented in GDP per capita to energy consumption. Such results suggest that reducing energy consumption and controlling CO 2 emissions policies could be adopted in the GCC economies without much concern about its effects on economic growth.

This paper examines the association between government policy interventions, Foreign Direct Investment (FDI) and exports in Taiwan and China by applying the LP (Lumsdaine and Papell, 1997), approach allowing two endogenous structural breaks. This paper further explores the cointegrating relationship between FDI and exports in Taiwan by using the Johansen and Juselius (1990) approach and causal relationships between FDI and exports in both Taiwan and China by using the Granger causality tests respectively. We found that significant trend breaks in the FDI and export time series detected in both countries coincided with extensive government interventions, mainly in the form of Export Processing Zones (EPZ), encouraging FDI during a transition period from import substitution to export orientation. The results emerging from our research indicate no long-run cointegrating relationship in Taiwan and one-way causal relationship flows from exports to FDI in China and FDI to exports in Taiwa...

This paper investigates the long-run and the short-run dynamics between tourism and economic growth in Singapore. Using the bounds test developed by , cointegrating relationship between tourism and economic growth is not found. The standard Granger causality test reveals that there is a unidirectional Granger causality from economic growth to tourism. This study provides evidence to support growth-led tourism hypothesis. JEL classification: O10, C22

According to the U.S. Energy Information Administration, LNG is projected to become a much larger share of U.S. natural gas consumption, rising from current levels of around 2.5% of total natural gas consumption to 12.4% by 2030. Because natural gas and LNG are substitutes, natural gas prices are expected to be an important determinant of LNG imports. Furthermore, an increasing share of LNG is traded under short-term contracts with spot shipments being diverted to markets offering the highest returns (netbacks). Natural gas prices as well as LNG transportation costs are important determinants of LNG netbacks. This paper examines the empirical relationship between U.S. LNG imports, the Henry Hub price of natural gas, and a proxy for LNG transportation costs using monthly data from 1997 to 2007. Granger causality tests, error variance decomposition, and impulse response analyses using a VAR model are employed to establish Granger-causality as well as the dynamics of natural gas prices and LNG transportation innovations on LNG imports.

Since the 1990s economists have devoted considerable attention to the study of the relationship between financial markets development and economic growth. In particular, the emergence of stock markets with economic development is an intriguing and interesting aspect of such a relationship, and yet relatively unexplored. This paper examines the most recent findings in the theoretical and empirical literature trying to determine the rationale behind the development of stock markets along the path of growth and the nature of the interrelationship between real and financial variables.

Purpose -This study aims to investigate the dynamic relationships between oil price shocks and Indian stock market. Design/methodology/approach -The study used daily data for the period starting from January 2001 to March 2013. In this study, Johansen's cointegration test, vector error correction model (VECM), Granger causality test, impulse response functions (IRFs) and variance decompositions (VDCs) test have been applied to exhibit the long-run and short-run relationship between them. Findings -The cointegration result indicates the existence of long-term relationship. Further, the error correction term of VECM shows a long-run causality moves from Indian stock market to oil price but not the vice versa. The results of the Granger causality test under the VECM framework confirm that no short-run causality between the variables exists. The VDCs analysis revealed that the Indian stock markets and crude oil prices are strongly exogenous. Finally, from the IRFs, analysis revealed that a positive shock in oil price has a small but persistence and growing positive impact on Indian stock markets in short run. Originality/value -The study would enhance the understandings of the interaction between oil price volatilities and emerging stock market performances. Further, the study would enable foreign investors who are interested in Indian stock market helps in understanding the conditional relationship between the variables.

Granger causality test is employed to examine the both long-run and short-run causality issues between the variables by using quarterly data from 1994 to 2008. These causality results reveal that there is causal relationship between FDI, export and economic growth in four out of ten countries considered.

In this study, we test whether the overconfidence bias explains several stylized market anomalous, including a short-term continuation (momentum), a long-term reversal in stock returns, high levels of trading volume and excessive volatility. Using data of French stocks market, we find empirical evidence in support of overconfidence hypothesis. First, based on a restricted VAR framework, we show that overconfident investors overreact to private information and underreact to public information. Second, by performing Granger-causality tests of stock returns and trading volume, we find that overconfident investors trade more aggressively in periods subsequent to market gains. Third, based on a two GARCH specifications, we show that self attribution bias, conditioned by right forecasts, increases investors overconfidence and trading volume. Fourth, the analysis of the relation between return volatility and trading volume shows that the excessive trading of overconfident investors makes a...

A facsimile apparatus uses a single memory in a facsimile system and a printer system without using an interface between the two systems. In the facsimile apparatus, a FAX controller stores data received via a communication line. A recording control circuit fetches data from the memory via a data bus, and records an image based on the fetched data. A memory intervention circuit outputs a data bus selection signal, and switches an address of access to the recording medium and a connection of the data bus. Thus, a single memory is shared between a facsimile system and printer system.

Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. In this paper, we re-examine the causal relationship between government expenditure and economic growth by conducting the panel Granger causality test recently developed by and by utilizing a richer panel data set which includes 182 countries that cover the period from 1950 to 2004. Our empirical results strongly support both Wagner's law and the hypothesis that government spending is helpful to economic growth regardless of how we measure the government size and economic growth. When the countries are disaggregated by income levels and the degree of corruption, our results also confirm the bi-directional causality between government activities and economic growth for the different subsamples of countries, with the exception of the low-income countries. It is suggested that the distinct feature of the low-income countries is likely owing to their inefficient governments and inferior institutions.

There is a two-way relationship between foreign direct investment (FDI) and environment that may have negative or positive effects on welfare. However, FDIenvironment relationship is controversial and needs further investigation. To this end, the present research work uses a dynamic panel model to assess the effect of FDI inflows on pollution emissions in developing countries. Three equations are examined empirically. This is to assess the effect of FDI inflows in developing countries on carbon dioxide, energy use and biochemical oxygen demand (BOD) emissions level. A fixed effect panel data model with heterogonous slopes is used to account for differences within countries. The model is estimated using the error correction approach. In addition, the direction of the relationship between FDI flows and environment is studied using Granger causality test. The empirical results do not settle the FDI-environment debate and suggest focusing the analysis on individual county basis. Conclusions and policy implications for developing countries are also given. Policy implications highlight the importance of using effective policies to reduce pollution emissions and to regulate FDI-environment relationship.

This study examines the long-run relationship between carbon emissions and energy consumption, income and foreign trade in the case of China by employing time series data of 1975-2005. In particular the study aims at testing whether environmental Kuznets curve (EKC) relationship between CO 2 emissions and per capita real GDP holds in the long run or not. Auto regressive distributed lag (ARDL) methodology is employed for empirical analysis. A quadratic relationship between income and CO 2 emission has been found for the sample period, supporting EKC relationship. The results of Granger causality tests indicate one way causality runs through economic growth to CO 2 emissions. The results of this study also indicate that the carbon emissions are mainly determined by income and energy consumption in the long run. Trade has a positive but statistically insignificant impact on CO 2 emissions.

There has been an extensive debate on the relationship between real economy and stock market performance especially in the context of emerging markets. This paper examines the causal relationships between the stock market performance and select macro economic variables in India, one of the advanced emerging markets using monthly data for the period starting from July 1997 to June 2011. We use Correlation, Factor analysis to detect the problem of Multicollinearity among the explanatory variables, ADF and PP Unit root stationarity test, Regression, ARCH test to check for heteroskedasticity, Granger Causality test to examine the short term causal relation and Johansen Co-integration test to examine the bi-variate and multi-variate long term relation. Impulse Response analysis has also been performed to check the response of stock market indicators to shocks created in the real economy with the help of graphs. Monthly index values of BSE Sensex are used as a proxy for aggregate stock re...

This study evaluates the ability of the Fama and French Three Factor model to explain a cross section of stock returns in the Karachi Stock Exchange (KSE). Following Fama and French factor approach, we sorted six portfolios by size and book to market. The sorted portfolios were constituted to represent stocks from each and every sector of KSE. Using Daily returns from January 2003 to December 2007, the excess returns for each portfolio were regressed on market, size and value factors. Our findings, in general, supported the notion of the three factor model. The three factor model was able to explain the variations in returns for most of the portfolios and the results remain robust when the sample was reduced to control for the size effect. Our findings are consistent with most of the studies that suggested the validity of the three factor model in emerging markets. These results warrant for the inclusion of size and value factors for valuation, capital budgeting and project appraisals, thus, having substantial implications for fund managers, analysts and investors. JEL Classification: G11, G12, G14. Abstract This study attempts to discern the relationship between economic and financial development in Pakistan for the period 1973 -2006. Vector error-correction modeling is used to identify the causality between economic and financial development and the exogeneity of the variable(s) in the model. These error correction terms have been derived from Johansen's multivariate cointegrating procedure. Results indicate that, in the long run, economic development causes financial development. Furthermore, the real output variable is found to be exogenous. Thus, financial development is seen to be ineffective in terms of economic development determination in Pakistan. JEL Classification: C59, O16.

This study examines the long-run relationship between carbon emissions and energy consumption, income and foreign trade in the case of China by employing time series data of 1975–2005. In particular the study aims at testing whether environmental Kuznets curve (EKC) relationship between CO2 emissions and per capita real GDP holds in the long run or not. Auto regressive distributed lag (ARDL) methodology is employed for empirical analysis. A quadratic relationship between income and CO2 emission has been found for the sample period, supporting EKC relationship. The results of Granger causality tests indicate one way causality runs through economic growth to CO2 emissions. The results of this study also indicate that the carbon emissions are mainly determined by income and energy consumption in the long run. Trade has a positive but statistically insignificant impact on CO2 emissions.

A global profusion of coal provides many countries with opportunities for economic growth. The direction of causality between coal consumption and economic growth is useful for policy making, however, existing empirical evidence have failed to reach a consensus. This paper examined the liaison between coal consumption and economic growth for Pakistan over the period 1971-2009. The endogenous two-break LM unit test, derived in , is used to assess the order of integration of the variables and structural breaks in the data series. Application of the Autoregressive Distributed Lag (ARDL) bounds test reveals a cointegrating relationship between real income, real capital stock, labour and coal consumption, and further application of General to Specific GETS), Engle and Granger (EG), Stock Watson's Dynamic Ordinary Least Squares (DOLS) and Phillip Hansen's Fully Modified Ordinary Least Squares (FMOLS) methods show statistical robustness of the estimates. The elasticity with respect to coal consumption is positive and significant. The Vector Error Correction Model (VECM) based Granger causality test is also applied for both short-and long-run situations. 2 These facts have been extracted from the World Development Indicators (2010).

The study seeks to investigate empirically the direction and shape of causality among trade openness, investment and economic growth using data for Bangladesh during the period 1980-2006. Although in most cases, statistically reliable evidence of cointegration is sufficient to testify the existence of a long-run relationship among the variables of a particular model, Granger causality test provides a more dependable tool for determining the direction of the causality in particular. In order to achieve the objective of the study, modern econometric methodologies such as unit root tests; cointegration tests; and the Granger causality tests have been applied across all the variables of our model using a trivariate framework of regression equations. The test results indicate that there exists a long-run equilibrium relationship between trade openness, national income growth and total investment. Furthermore, empirical results of Granger causality confirm that there exists unidirectional causality between economic growth and investment; between trade openness and economic growth; and between trade openness and investment. The results, however, support the conventional presumption about the relationships between economic growth and investment; and between trade openness and economic growth while contradicts with that between trade openness and investment.

The main purpose of this article is twofold to analyze: (a) the long-term relation among the commodities prices and between spot electricity market price and commodity prices, and (b) the short-term dynamics among commodity prices and between electricity prices and commodity prices. Data between 2002 and 2005 from the Spanish electricity market was used. Econometric methods were used in the

The study examines the relationship between the development of the stock market and economic growth in Malaysia using annual data from 1982 to 2014. The development of the stock market represented three indicators, namely the turnover ratio, the shares value traded ratio and the market capitalization ratio. Augmented Dickey-Fuller stationarity test was carried out prior to the use of a bound test approach for co-integration and causality testing. The findings of the co-integration analysis showed that there is evidence of a long-run relationship between economic growth and the development of the stock market. Further examination of the causal relationship showed proof of the shortrun interaction between economic growth and the development of the stock market. These findings may be of importance to policymakers in formulating growth policy and financial decision-making by investors.

The increased episodes of the financial crises throughout the world in the 1990s motivated research interests to identify the channels through which such crises spread from one country to the entire region and across regions and to suggest policies to avoid the worst of such crises. Researchers have identified several factors that may spark and induce contagion of the crisis. Strong trade and financial market linkages may contribute to contagion of the crises. This also implies that, even economies with strong fundamentals could not escape contagion. This study attempts to identify and trace the alleged origin and the subsequent path of the currency contagion using data from a sample of selected Asian countries. For empirical estimation, we use high frequency data (daily observation) on exchange rates from 1994 to 2002. We split the sample in to four periods (full, pre -crisis, crisis and post-crisis periods), construct a multivariate GARCH model and apply Granger causality test to ...

Scholars have always been puzzled about government revenue and expenditure in Nigeria over the years especially given the fact that the most important macroeconomic objectives of every government which includes price stability, full employment, balance of payment equilibrium and sustainable economic growth are not being attained. The questions as to how the government disburses funds have raised concerns which are the purpose of this study. This research work empirically aims to analyse the impact of government expenditure on economic growth in Nigeria using secondary data spanning 1985 to 2018. This data was collected from World Bank databank as well as Central Bank Statistical Bulletin. The variables adopted in the course of this research include: Gross Domestic Product as the dependent variable, capital expenditure, recurrent expenditure, external debt and exchange rate. The research work makes use of the unit root test which tests for stationarity, cointegration test which tests for long run impacts, granger causality test which estimates the direction of causality between variables and error correction mechanism which measures short run impacts as well as the overall stability of the analysis. Following the estimation of the model, it was discovered that the variables were all stationary at first difference. The co-integration test indicated that there exists only one co-integrating equation, hence, this still means that there exist long run impacts between the variables. The results from the granger causality test revealed that a unidirectional relationship exists between capital expenditure and economic growth, and also recurrent expenditure and economic growth Based on the results obtained from the tests carried out, we can therefore conclude that government expenditure plays a vital role in economic growth of the nation especially the developing nations like Nigeria. Therefore, for Nigeria to increase the proportion of revenue in order to spur expenditure significantly, there needs to be an expansion of productive activities in other sectors of the economy (other than the oil sector) in order to diversify the revenue base of the country

Scholars have always been puzzled about government revenue and expenditure in Nigeria over the years especially given the fact that the most important macroeconomic objectives of every government which includes price stability, full employment, balance of payment equilibrium and sustainable economic growth are not being attained. The questions as to how the government disburses funds have raised concerns which are the purpose of this study. This research work empirically aims to analyse the impact of government expenditure on economic growth in Nigeria using secondary data spanning 1985 to 2018. This data was collected from World Bank databank as well as Central Bank Statistical Bulletin. The variables adopted in the course of this research include: Gross Domestic Product as the dependent variable, capital expenditure, recurrent expenditure, external debt and exchange rate. The research work makes use of the unit root test which tests for stationarity, co-integration test which tests for long run impacts, granger causality test which estimates the direction of causality between variables and error correction mechanism which measures short run impacts as well as the overall stability of the analysis. Following the estimation of the model, it was discovered that the variables were all stationary at first difference. The co-integration test indicated that there exists only one co-integrating equation, hence, this still means that there exist long run impacts between the variables. The results from the granger causality test revealed that a uni-directional relationship exists between capital expenditure and economic growth, and also recurrent expenditure and economic growth. Based on the results obtained from the tests carried out, we can therefore conclude that government expenditure plays a vital role in economic growth of the nation especially the developing nations like Nigeria. Therefore, for Nigeria to increase the proportion of revenue in order to spur expenditure significantly, there needs to be an expansion of productive activities in other sectors of the economy (other than the oil sector) in order to diversify the revenue base of the country.

In this paper we investigate the relationship between per capita income and foreign aid for a panel of131 (alternatively 52) recipient countries over the period 1960 to 2006 by employing annual data and 5-year averages. Reliance on standard panel estimation techniques (such as 2-ways FE estimation, panel GMM and SUR estimation) points to some pitfalls (impossibility of possible cointegration between

Policy makers need to know the relationship among energy use, economic growth and environmental quality in order to formulate rigorous policy for economic growth and environmental sustainability. This study analyzes the nexus among energy consumption, affluence, financial development, trade openness, urbanization, population and CO2 emissions in Ethiopia using data from 1970–2014. The ARDL cointegration results show that cointegration exists among the variables. Energy consumption, population, trade openness and economic growth have positive impact on CO2 in the long-run while economic growth squared reduces CO2 emissions which confirms that the EKC hypothesis holds in Ethiopia. In the short-run urbanization and energy consumption intensify environmental degradation. Toda-Yamamoto granger causality results indicate the bi-directional causality between energy consumption and CO2 emissions, CO2 emissions and urbanization. Financial development, population and urbanization cause economic growth while economic growth causes CO2 emissions. Causality runs from energy consumption to financial development, urbanization and population which in turn cause economic growth. From the result, CO2 emissions extenuation policy in Ethiopia should focus on environmentally friendly growth, enhancing consumption of cleaner energy, incorporating the impact of population, urbanization, trade and financial development.

The paper examines the effect of inflation on the growth rate in economies with underground, or” non-market”, sectors. The model incorporates a non-market good into an endogenous growth cash-inadvance economy with human capital. Taxes on labor and ...

Nowadays, the impact of oil price shocks is pervasive as it virtually affects all facets of human endeavor. As such, it is pertinent that we should know the relationship between oil price shocks and the macroeconomy. Therefore, this paper assesses empirically, the effects of oil price shocks on the real macroeconomic activity in Nigeria. Granger causality tests and multivariate VAR analysis were carried out using both linear and non-linear specifications. Inter alia, the latter category includes two approaches employed in the literature, namely, the asymmetric and net specifications oil price specifications. The paper finds evidence of both linear and non-linear impact of oil price shocks on real GDP. In particular, asymmetric oil price increases in the non-linear models are found to have positive impact on real GDP growth of a larger magnitude than asymmetric oil price decreases adversely affects real GDP. The non-linear estimation records significant improvement over the linear estimation and the one reported earlier by ). Further, utilizing the Wald and the Granger multivariate and bivariate causality tests, results from the latter indicate that linear price change and all the other oil price transformations are significant for the system as a whole. The Wald test indicates that our oil price coefficients in linear and asymmetric specifications are statistically significant. JEL Classification Codes E32, E37

By employing battery of time series techniques, the paper empirically examines the short-and long-run finance-growth nexus during the post-1997 financial crisis in Malaysia. Based on the ARDL [2, 1, 2, 1] model, the study documents a long-run equilibrium between economic growth, finance depth and inflation. Granger causality tests based on the VECM further reveals that there is a unidirectional causality running from finance to growth in Malaysia, thus supporting "the finance-growth led hypothesis" or "the supply-leading view". Based on the VDCs and IRFs, the study discovers that the variations in the economic growth rely very much on its own innovations. To promote growth in the country, priority should be given for long run policies, i.e., the enhancement of existing financial institutions both in the banking sector and stock market and the preservation of low rate of inflation below two digits.

We seek to address formally the question raised by in his Elmhirst lecture as to the direction of causality between agricultural value added per worker and Gross Domestic Product (GDP) per capita. Using the Granger causality test in the panel data analyzed by Gardner for 85 countries, we find overwhelming evidence that supports the conclusion that agricultural value added is the causal variable in developing countries, while the direction of causality in developed countries is unclear. We also examine further the use of the Granger causality test in integrated data and provide evidence that the performance of the test can be increased in small samples through the use of the bootstrap.

The paper investigates the impact of FDI on economic growth for a panel of 39 Sub-Saharan African countries for the period 1980–2005 in an extended Cobb Douglas production function. Taking into account the possible existence of endogeneity in FDI modeling, the study employs both static and dynamic panel data estimates. Results from the analysis suggest that FDI is an important