Do both demand-following and supply-leading theories hold true in developing countries?

Chow, Sheung Chi; Vieito, João Paulo; Wong, Wing‐Keung

doi:10.1016/j.physa.2018.06.060

Cited by 29 publications

(16 citation statements)

References 55 publications

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“…As a note for future studies, a potential nonlinear causality relationship among the variables should be considered (see, for example, Bai et al [58,59] and Chow et al [60]). In addition, advanced diagnostic check (see, for example, Hui et al [61]) should be considered.…”

Section: Methodsmentioning

confidence: 99%

The Impact of Foreign Direct Investment on Environment Degradation: Evidence from Emerging Markets in Asia

Dao

Nguyen

et al. 2019

IJERPH

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This study is conducted to examine the concerns of the foreign direct investment (FDI) causing environment degradation and also to test the validity of the traditional Environmental Kuznets Curve (EKC) in the context of emerging markets in the Asian region. Data of these countries from 1980–2016 are utilised. This study employs panel cointegration Fully Modified Ordinary Least Squares (FMOLS), which treats the endogeneity problem, and its estimators are adjusted for serial correlation. Moreover, this study also uses panel Dynamic Ordinary Least Squares (DOLS), which includes contemporaneous value, leads and, lags of the first difference of the regressors to correct endogeneity problems and serial correlations. Findings from this study indicate that the pollution heaven hypothesis and the EKC curve are generally valid in the region. In addition, FDI has a strong impact on the environment.

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Section: Methodsmentioning

confidence: 99%

The Impact of Foreign Direct Investment on Environment Degradation: Evidence from Emerging Markets in Asia

Dao

Nguyen

et al. 2019

IJERPH

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“…The nonlinear causality test to the multivariate setting is extended [36,37], and the test is further extended to panel data [38]. Nonlinear Granger causality are also applied by some other scholars [43,44].…”

Section: Nonlinear Granger Causalitymentioning

confidence: 99%

The Three Musketeers Relationships between Hong Kong, Shanghai and Shenzhen Before and After Shanghai–Hong Kong Stock Connect

et al. 2019

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This study examines the sustainability of financial integration between China (represented by Shenzhen and Shanghai) stock markets and Hong Kong stock market over the period of pre and post launch of the Stock Connect Scheme. This paper aims to fill the gap in the financial literature by providing empirical research on the dynamics of the financial integration process, and examining the sustainability of financial integration among the three Chinese stock markets. We apply cointegration and both linear and nonlinear causalities to investigate whether the Shanghai-Hong

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“…Table 9 suggests that a nonlinear Granger causality relationship exists from the first financial development proxy to economic growth proxy for Brazil, Chile, and Peru, while there is causality relationship from economic growth proxy to the first financial development proxy for Chile, Guatemala, and Thailand. On the other hand, Table 10 (reader may refer to Chow, Vieito, and Wong (2018) for Table 10) suggests that a nonlinear Granger causality relationship exists from the second financial development proxy to economic growth proxy for Guatemala, Malaysia, and Turkey, and there is causality relationship from economic growth proxy to the second financial development proxy for Chile, India, Pakistan, Peru, and South Africa.…”

Section: Bivariate Non-linear Granger Causalitymentioning

confidence: 99%

“…We summarize the results of our bivariate linear and nonlinear causality tests in Table 11, reader may refer to Chow, Vieito, and Wong (2018) for Table 11.…”

Section: Bivariate Non-linear Granger Causalitymentioning

confidence: 99%

Do Both Demand-Following and Supply-Leading Theories Hold True in Developing Countries?

2018

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Acknowledgement:The authors are grateful to the Editor, Eugene Stanley, and seven anonymous referees for constructive comments and suggestions that led to a significant improvement of an early manuscript. The third author would like to thank Robert B. AbstractTo overcome the limitations of the traditional approach which uses linear causality to examine whether the supply-leading and demand-following theories hold. As certain countries will be found not to follow the theory by using the traditional approach, this paper first suggests using all the proxies of financial development and economic growth as well as both multivariate and bivariate linear and nonlinear causality tests to analyze the relationship between financial development and economic growth. The multivariate nonlinear test not only takes into consideration both dependent and joint effects among variables, but is also able to detect a multivariate nonlinear deterministic process that cannot be detected by using any linear causality test. We find five more countries in which the supply-leading hypothesis and/or demand-following hypothesis hold true than with the traditional approach. However, there is still one country, Pakistan, for which no linear or nonlinear causality is found between its financial development and economic growth.To overcome this limitation, this paper suggests including cointegration in the analysis. This leads us to conclude that either supply-leading or demand-following hypotheses or both hold for all countries without any exception. There will be some types of relationships between economic growth and financial development in any country such that either they move together or economic growth causes financial development or financial development causes economic growth without any exception. The finding in our paper is may be useful for governments, politicians, and other international institutions in their decision making process for the development of the countries and reducing poverty.JEL classification: G20; O40; C12

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Do both demand-following and supply-leading theories hold true in developing countries?

Cited by 29 publications

References 55 publications

The Impact of Foreign Direct Investment on Environment Degradation: Evidence from Emerging Markets in Asia

The Impact of Foreign Direct Investment on Environment Degradation: Evidence from Emerging Markets in Asia

The Three Musketeers Relationships between Hong Kong, Shanghai and Shenzhen Before and After Shanghai–Hong Kong Stock Connect

Do Both Demand-Following and Supply-Leading Theories Hold True in Developing Countries?

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