scholarly journals Public debt and economic growth: contemporary evidence from a developing economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sam Kris Hilton
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Granger Causality ◽  
Public Debt ◽  
Consumption Expenditure ◽  
Government Consumption ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Investment Spending

Purpose Considering the continuous rise in the public debt stock of developing countries (particularly Ghana) with the unstable economic growth rate for the past decades and the recent borrowing because of the impact of COVID 19, this paper aims to examine the causal relationships between public debt and economic growth over time. Design/methodology/approach The paper uses a dynamic multivariate autoregressive-distributed lag (ARDL)-based Granger-causality model to test the causal relationships between public debt and economic growth [gross domestic product (GDP)]. Annual time-series data that spanned 1978–2018 were sourced from the World Bank Development Indicator database and the IMF fiscal Affairs Department Database and WEO. Findings The results reveal that public debt has no causal relationship with GDP in the short-run but there is unidirectional Granger causality running from public debt to GDP in the long run. Again, investment spending has a negative bi-directional causal relationship with GDP in the short-run but they have a positive bi-directional causal relationship in the long run. Conversely, no short-run causal relationship exists between government consumption expenditure and GDP but long-run Granger causality runs from government consumption expenditure to GDP. Finally, public debt has a positive impact on the inflation rate in the short run. Practical implications The findings imply that government(s) must ensure high fiscal discipline to serve as a precursor for the effective and efficient use of recent borrowing, that is, the loans should be used for highly prioritized projects (preferably investment spending) that are well evaluated and self-sustained to add positively to the GDP. Originality/value This paper provides contemporary findings to augment extant literature on public debt and economic growth by using variables and empirical models, which prior studies could not sufficiently cover in a developing country perspective and affirms that public debt contributes to GDP only in the long run.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

LPG consumption and economic growth, 1975-2016: evidence from Cameroon

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jean Gaston Tamba
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Liquefied Petroleum Gas ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
Gas Consumption ◽  
The Government ◽  
Energy Efficiency Policies

Purpose This paper aims to examine the causal relationship between liquefied petroleum gas consumption and economic growth in Cameroon over the period from 1975 to 2016. Design/methodology/approach The methodology of this study is based on the unit root, cointegration and causality tests. Cointegration is performed with both Johansen and autoregressive distributed lag bounds approach, while causality is done with the Granger test based on the error correction model (ECM) and Toda-Yamamoto procedure. Findings The cointegration methods confirm the existence of a level relationship, whereas the causal tests of the ECM reveal the existence of a short-run unidirectional causal relationship ranging from liquefied petroleum gas (LPG) consumption to economic growth and a bidirectional causal relationship between long-term and high-causality variables. With the Toda-Yamamoto procedure, unidirectional causality is found to run from economic growth to liquefied petroleum gas consumption. Research limitations/implications These findings imply that an increase in liquefied petroleum gas consumption leads to an increase in economic growth. As a result, supporting energy efficiency policies that aim to reduce liquefied petroleum gas consumption is not an option for Cameroon. Given that LPG consumption shares are still low in Cameroon, the government ought, thus, to increase LPG subsidization, vulgarize and favor policies aimed at encouraging LPG consumption to increase LPG deposits nationwide. This would help increase LPG consumption and consequently could increase economic growth in Cameroon. Originality/value LPG is a fossil fuel and is the less GHG emitter and it is considered as a modern source of energy for cooking in Cameroon households. It scarcity calls on energy policymakers to question the influence LPG consumption could have on economic growth in the short- and long-run. Thus, this paper could contribute to solving the issue of deforestation in Cameroon, especially in the Sahel zone; through the substitution of firewood consumption by LPG consumption in households.

The short-run and long-run dynamics among FDI, trade openness and economic growth: using a bootstrap ARDL test for co-integration in selected South Asian countries

2020 ◽  
Vol 9 (2) ◽  
pp. 279-295 ◽  
Author(s):  
Hummera Saleem ◽  
Malik Shahzad Shabbir ◽  
Muhammad Bilal khan
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Causal Relationship ◽  
South Asian ◽  
Trade Openness ◽  
Asian Countries ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

PurposeThe purpose of this study is to analyze the dynamic causal relationship between foreign direct investment (FDI), gross domestic product (GDP) and trade openness (TO) on a set of five selected South Asian countries.Design/methodology/approachThis study used newly developed bootstrap auto regressive distributed lags (ARDL) cointegration test to examine the long-run relationship among FDI, GDP and TO for selected South Asian countries for 1975–2016.FindingsThe economic growth (EG) is significantly related to TO for Bangladesh, India and Sri Lanka and the expansion of TO is crucial for growth in these countries. The results show that all countries (except Bangladesh) found the existence of long-run cointegration between FDI, GDP and TO, whereas FDI is a dependent variable. These results concluded that FDI and TO are contributing to EG in these selected countries.Originality/valueThis study is one of the first attempts to investigate the causal relationship and address the short and long dynamic among FDI, GDP and TO regarding five south Asian countries such as Bangladesh, India, Nepal, Pakistan and Sri Lanka.

Research publications and economic growth in South Africa: an empirical investigation

2016 ◽  
Vol 43 (7) ◽  
pp. 662-675
Author(s):  
Nicholas M Odhiambo ◽  
Lydia Ntenga
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Causal Relationship ◽  
Series Data ◽  
Bounds Testing ◽  
Content Type ◽  
Research Publications ◽  
Long Run ◽  
Ardl Bounds Testing ◽  
Short Run

Purpose – The purpose of this paper is to examine the causal relationship between research publications and economic growth – using time-series data from South Africa. The paper attempts to answer two critical questions: is there a long-run relationship between research publications and economic growth in South Africa? Do research publications from South African researchers Granger-cause economic growth? Design/methodology/approach – Unlike some of the previous studies, the current paper uses a trivariate ECM-based Granger-causality model to examine this linkage. Specifically, the study incorporates education as an intermittent variable between research and economic growth. In addition, the paper uses the recently developed autoregressive distributed lag (ARDL)-bounds testing procedure, which has numerous advantages, especially when the sample size is small. Findings – The results of this study show that there is a long-run relationship between research publications and economic growth in South Africa. The results also show that there is a distinct causal flow from research publications to economic growth in South Africa. This applies both in the short-run and in the long-run. Other results also show that: there is a short-run bidirectional causality between research publications and education; and there is a short-run bi-directional causality between education and economic growth, but a long-run unidirectional causal flow from education to economic growth. Practical implications – The findings of this paper underscore the crucial role that research plays in economic growth and development. Overall, the findings of this study show that research in South Africa is pro-growth. This implies that the recent significant increase in government expenditure on research and innovation, which is aimed at increasing the country’s scientific research outputs, is likely to pay off. Originality/value – To the best of the authors’ knowledge, this paper is the first of its kind to examine in detail the dynamic causal relationship between research outputs and economic growth in South Africa – using the recently developed ARDL-bounds testing approach within a trivariate setting.

Bank competition, financial innovations and economic growth in Ghana

2014 ◽  
Vol 5 (1) ◽  
pp. 30-51 ◽  
Author(s):  
Anthony Adu-Asare Idun ◽  
Anthony Q.Q. Aboagye
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Innovation ◽  
Bank Competition ◽  
Content Type ◽  
Financial Innovations ◽  
Long Run ◽  
Short Run ◽  
The Relationship ◽  
Finance Growth Nexus

Purpose – This paper takes the finance-growth nexus further by looking at the relationship between bank competition, financial innovations and economic growth in Ghana. The purpose of this paper is to find the causality among bank competition, financial innovations and economic growth in Ghana. Design/methodology/approach – The relationship between bank competition, financial innovations and economic growth was established through the framework of the endogenous growth model. In addition, the paper employed the bound testing ARDL cointegration procedures to enable us to establish both short-run and long-run relationship between bank competition, financial innovations and economic growth. Granger causality test were also estimated to determine the direction of causality. Findings – The results showed that, in the long run, bank competition is positively related to economic growth while financial innovation is negatively related to economic growth. In the short run, bank competition is negatively related to economic growth. By the same token, financial innovation is positively related to economic growth in the short run. In terms of causality, the results showed that there is unidirectional Granger causality from bank competition to economic growth. However, there is bidirectional Granger causality between financial innovation and economic growth. Practical implications – The study therefore, recommends for more regulations toward a more competitive banking system with more innovative products tailored toward mobilization of savings and investment to growth induced sectors of the economy. Originality/value – This paper provides a time series perspective to the finance-growth nexus and highlights the potential contribution of effective banking development to the economic welfare of the Ghanaian citizens.

scholarly journals Impact of Tourism on Economic Growth of Nepal: Is Tourism-Led Growth Hypothesis Valid for Nepal?

2022 ◽  
Vol 13 (1) ◽  
pp. 93-110
Author(s):  
Kumar Bhattarai ◽  
Roshan Karmacharya
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Series Data ◽  
Outcome Variable ◽  
Consumption Expenditure ◽  
Government Consumption ◽  
Long Run ◽  
Short Run ◽  
Growth Hypothesis ◽  
Volume Of Trade

A voluminous study is available on tourism-growth nexus as tourism industry received considerable attention as a potential source of economic growth. This paper empirically examines the impact of tourism on economic growth of Nepal by using time series data of 1976-2020 and applying autoregressive distributed lag (ARDL) approach. Real GDP was used as proxy measure of economic growth, which was the outcome variable whereas the variable of interest was tourism receipts. Foreign aid, total volume of trade and ratio of government consumption expenditure to GDP were taken as control variables. The result of ARDL model shows that tourism has no significant impact on economic growth of Nepal in both short-run and long-run. However, total volume of trade has positive and significant effect on economic growth in short-run whereas foreign aid, total volume of trade and ratio of government consumption expenditure to GDP have positive and significant effect on economic growth in the long-run. In such context of tourism and growth relationship, tourism-led growth hypothesis is rejected for Nepal.

Africa-China investment and growth link

2018 ◽  
Vol 11 (2) ◽  
pp. 132-150 ◽  
Author(s):  
Isaac Koomson-Abekah ◽  
Eugene Chinweokwu Nwaba
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Policy Design ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
External Threats ◽  
Long Run ◽  
Macroeconomic Indicators ◽  
Short Run

PurposeThis paper aims to investigate China–Africa Investment link, using over two decades of FDI’s data. During the specified periods, African economic growth path has been predominantly upward trending, despite multiple external threats. This impressive growth was partly because of the growth of FDI stock across the region. This study explores the various sources of FDI to Africa, mainly China’s FDI’s and how they influence African macroeconomic indicators, i.e. unemployment, export and import activities.Design/methodology/approachPesaran autoregressive distributive lag (ARDL) is used as a framework to test the short-run and long-run relationship of indicators. Granger causality test checked the causality between growth and macroeconomic indicators.FindingsThe link between China’s FDI and African economic growth reported a negative/declining effect in both short and long run. In the long run, the effect of world FDI on growth was significant but not the in the short run. However, US FDI to Africa, China Export and Import from Africa reported an insignificant effect on growth. There was no evidence of Okun’s law, as a decrease in Africa unemployment does not increase growth. Overall, China’s FDI’s inflows to Africa are allocated to capital-intensive activities which has less labor employability. The Granger causality test reported a uni-directional link between growth and all series, except for human capital which experienced no link at all in all directions. Despite the issue of socio-infrastructure militating against growth in the region, African economy is likely to perform better, if more FDI’s are channeled into labor-intensive activities, because it has a reductive effect on unemployment.Research limitations/implicationsThe research considered point annual FDI data but not accumulated stock and is a macro-based study, i.e. regional economy.Practical implicationsThis paper bridged the literature gap in African investment performance by providing an empirical justification in understanding the inflow of FDI, especially China. This is a useful guard in policy design and implementations in the attraction of the right type of investment, so as to reduce unemployment and promote growth.Originality/valueThe authors confirm that this study has not been published elsewhere and is not under consideration in whole or in part by another journal.

Does Public Debt Service Expenditure Crowd-Out Economic Growth? Empirical Evidence from an African Developing Country

2019 ◽  
Vol 64 (3) ◽  
pp. 23-38
Author(s):  
Talknice Saungweme ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Time Series Data ◽  
Policy Formulation ◽  
Debt Service ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
The Impact

Abstract This paper contributes to the ongoing debate on the impact of public debt service on economic growth; and it provides an evidence-based approach to public policy formulation in Zimbabwe. The empirical analysis was performed by applying the autoregressive distributed lag (ARDL) technique to annual time-series data from 1970 to 2017. The study findings reveal that the impact of public debt service on economic growth in Zimbabwe is negative in the short run but positive in the long run. The results are suggestive of the existence of a crowding-out effect of public debt service in Zimbabwe in the short run and a crowding-in effect in the long run. In view of these findings, the government should consider fiscal and financial policies that promote a constant supply of long-term finance, long-term fixed investments, and extension of a government securities maturity structure so as to ensure sustainable short- and long-term public debt service expenditures. The study further recommends the strengthening of non-distortionary revenue mobilisation reforms to reduce market distortions and boost domestic investment.

Has the low level of economic growth spurred informal sector activities in Uganda? An empirical analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Stephen Esaku
Keyword(s):  
Economic Growth ◽  
Informal Sector ◽  
Shadow Economy ◽  
Time Series Data ◽  
Series Data ◽  
Content Type ◽  
Low Level ◽  
Revenue Collection ◽  
Long Run ◽  
Short Run

PurposeIn this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.Design/methodology/approachUsing annual time series data from Uganda, drawn from various data sources, covering the period from 1991 to 2017, the authors apply the ARDL modeling approach to cointegration.FindingsThis paper finds that an increase in economic growth significantly reduces the size of the shadow economy, in both the long and short run, all else equal. However, the long-run relationship between the shadow economy and growth is non-linear. The results suggest that the rise of the shadow economy could partially be attributed to the slow and sluggish rate of economic growth.Practical implicationsThese findings imply that addressing informality requires addressing underlying factors of underdevelopment since improvements in economic growth also translate into a reduction in the size of the shadow economy in the short and long run.Originality/valueThese findings reveal that the low level of economic growth is an issue because it spurs informal sector activities in the short run. However, as the economy improves, it becomes an incentive for individuals to operate in the informal sector. Additionally, tackling shadow activities in the short run could help improve tax revenue collection.

scholarly journals Dynamic Relationship Between Energy and Economic Growth: Evidence from D8 Countries.

2011 ◽  
Vol 50 (4II) ◽  
pp. 437-458 ◽  
Author(s):  
Sarwat Razzaqi ◽  
Faiz Bilquees ◽  
Saadia . Sherbaz
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Energy Use ◽  
Demand And Supply ◽  
Dynamic Relationship ◽  
Long Run ◽  
Production And Consumption ◽  
Short Run ◽  
Oil Embargo ◽  
The Relationship

Energy sector has a vital influence on an economy, on both demand and supply sides. Therefore, energy production and consumption bear great importance for the developing world. The oil embargo of 1970‘s and its impact on major macroeconomic variables throughout the world attracted many economists to examine the relationship between energy and economic prosperity. The researchers have been unable to establish a definitive direction of causality between the two variables. The purpose of this study is to empirically investigate the dynamic relationship between energy use and economic growth in the D8 countries. The evidence gathered through application of VAR Granger Causality, Johansen Cointegration and VECM proves existence of short-run and long-run correlation between energy use and economic development in all countries. The results supported either uni-directional or bi-directional causality in the D8 countries except for Indonesia in short-run where non-causality was established between the two variables. JEL classifications: C22; Q43. Keywords: Energy Use, Economic Growth, D8, VAR Granger Causality, Cointegration, VECM

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