The dynamic causality between ESG and economic growth: Evidence from panel causality analysis

Ho, Sy-Hoa and OUEGHLISSI, Rim and EL FERKTAJI, Riadh (2019): The dynamic causality between ESG and economic growth: Evidence from panel causality analysis.

Abstract

The relationship between Environmental, Social and Governance (ESG) performance and economic growth is a controversial topic in economic literature. This paper applies the Granger causality test developed by Dumitrescu and Hurlin (2012) with an optimal lag length selection technique proposed by Han et al. (2017) to examine the causality relationship between ESG performance and economic growth for a set of 118 countries over the period 1999-2015. The empirical results show the presence of a bidirectional relationship between environmental and social performance and economic growth, while a unidirectional relationship from governance to growth for all countries. Unlike the clear overall pattern of the full sample results, the empirical evidence for different income groups of countries is mixed.

• Item Type: MPRA Paper
• Language: English
• Keywords: ESG, GDP per capita, Granger causality estimation
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

References

Ajilore, O. T. and D. Elumilade (2007). Does corruption matter for nigeria long run growth: Evidence from cointegration analyses and causality tests? The International Journal of Business and Finance Research 1 (2), 69{79. Aye, G. C. and P. E. Edoja (2017). Effect of economic growth on co2 emission in developing countries: Evidence from a dynamic panel threshold model. Cogent Economics & Finance 5 (1), 1379239{137. Belardi, J. A. and M. Albertal (2009). Policies to reduce vulnerability and increase exibility to respond to shocks over the long term. Technical report, World bank. Bloom, D. E. and G. Fink (2014). The economic case for devoting public resources to health. In J. Farrar, P. Hotez, T. Junghanss, G. Kang, D. Lalloo, and N. White (Eds.), Manson's Tropical Diseases: Twenty- Third Edition, Chapter 4, pp. 23{30. Elservier. Castiglione, C., D. Infante, and J. Smirnova (2015). Environment and economic growth: is the rule of law the go-between? the case of high-income countries. Energy, Sustainability and Society 5, 1{7. Cracolici, M., M. Cu�aro, and P. Nijkamp (2010). The measurement of economic, social and environmental performance of countries: A novel approach. Social Indicators Research 95 (2), 339{356. Dumitrescu, E.-I. and C. Hurlin (2012). Testing for granger non-causality in heterogeneous panels. Economic Modelling 29 (4), 1450 { 1460. Fodha, M. and O. Zaghdoud (2010). Economic growth and pollutant emissions in tunisia: An empirical analysis of the environmental kuznets curve. Energy Policy 38 (2), 1150{1156. Hall, R. E. and C. I. Jones (2007). The value of life and the rise in health spending. The Quarterly Journal of Economics 122 (1), 39{72. Han, C., P. C. B. Phillips, and D. Sul (2017). Lag length selection in panel autoregression. Econometric Reviews 36 (1-3), 225{240. Hsiao, C. (2003). Analysis of Panel Data (2 ed.). Econometric Society Monographs. Cambridge University Press. Im, K. S., M. Pesaran, and Y. Shin (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115 (1), 53 { 74. Khan, M. (2007). Governance, economic growth and development since the 1960s. DESA Working Paper No. 54 . Law, S. H., T. C. Lim, and N. W. Ismail (2013). Institutions and economic development: A granger causality analysis of panel data evidence. Economic Systems 37 (4), 610{624. Margaretic, P. and S. Pouget (2018). Sovereign bond spreads and extra-financial performance: An empirical analysis of emerging markets. International Review of Economics & Finance 58, 340 { 355. 12 Mazumdar, K. (2000). Causal ow between human well-being and per capita real gross domestic product. Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measure- ment 50 (3), 297{313. McCulloch, N. E. M. and D. N. Nguyen (2013,). Does better provincial governance boost private investment in vietnam? IDS Working Papers 2013 (414): 127 2013, 1{27. Montfort, M., R. Tapsoba, and S. Tapsoba (2014). A quality of growth index for developing 340 countries: A proposal. IMF Working Paper 14/172 134, 675{710. Moon, H., B. Perron, and P. Phillips (2007). Incidental trends and the power of panel unit root tests. Journal of Econometrics 141 (2), 416{459. Saboori, B., M. Sapri, and M. bin Baba (2014). Economic growth, energy consumption and co2 emissions in oecd (organization for economic co-operation and development)'s transport sector: A fully modified bi-directional relationship approach. Energy 66 (C), 150{161. Saidi, K., H. Toumi, and S. Zaidi (2017). Impact of information communication technology and economic growth on the electricity consumption: Empirical evidence from 67 countries. Journal of the Knowledge Economy 8 (3), 789{803. Stone, M. (1979). Comments on model selection criteria of akaike and schwarz. Journal of the Royal Statistical Society. Series B (Methodological) 41 (2), 276{278. Tran, T. A.-D., M. H. Phi, and D. Diaw (2017). Export diversification and real exchange rate in emerging latin america and asia: A southnorth vs. south-south decomposition. The Journal of International Trade & Economic Development 26 (6), 649{676. UNDP (1997). Human development report 1997. Technical report, United Nations Development Programme, 39, 297-298.