Cointegration

About: Cointegration is a research topic. Over the lifetime, 17130 publications have been published within this topic receiving 506215 citations.

Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis

Abstract: This paper explores whether natural resource abundance is a curse or a blessing. In order to do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) effects of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we make use of a non-stationary panel approach which explicitly estimates the long-run relationships from annual data as opposed to the dynamic and static panel approaches which might in fact estimate the high-frequency relationships. Fourthly, we account for cross-country dependencies that arise potentially from oil price shocks and other unobserved common factors, and allow countries to respond differently to these shocks. Finally, we explicitly recognize that there is a substantial heterogeneity in our sample, consisting of 53 oil exporting and importing countries with annual data between 1980-2006, and adopt the methodology developed by Pesaran (2006) for estimation. This approach considers different dynamics for each country and is consistent under both cross-sectional dependence and cross-country heterogeneity. We also check the robustness of these results by using the fully modified OLS method of Pedroni (2000). Our non-stationary approach also allows for country-specific unobserved factors, such as social and human capital, to be captured in the fixed effects and the heterogeneous trends together with any omitted factors. Our estimation results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both long run income levels and short run economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.

Revisiting the environmental Kuznets curve (EKC) hypothesis in India: the effects of energy consumption and democracy.

Abstract: The study revisits the position of the environmental Kuznets curve (EKC) hypothesis in India by incorporating the role of energy consumption and democratic regime in the environmental degradation function for the period 1971-2014. Employing Zivot-Andrews nonstationarity test, Bayer-Hanck cointegration test, autoregressive distributed lag (ARDL) model, and vector autoregressive model (VECM) Granger causality test, the results found the integration order of I(1) and a stable cointegration among the series. The result validates the EKC hypothesis for India and further divulges that while energy consumption increases environmental degradation both in the long run and short run; the effect of democracy in reducing environmental degradation is weak (statistically insignificant) in the long run but strong (statistically significant) in the short run. The finding from the VECM Granger causality test indicates a long-run causality between the fundamental variables and environmental degradation. Furthermore, the results of the short run show a unidirectional Granger causality running from energy consumption to environmental degradation, energy consumption to real income, and energy consumption to square of real income. Therefore, our findings suggest that energy conservation policy should be prioritized towards harnessing energy from clean sources to mitigate environmental degradation and spur economic growth.