scholarly journals Endogenous monetary approach to optimal inflation–growth nexus in Swaziland

2020 ◽  
Vol 11 (4) ◽  
pp. 559-571
Author(s):  
Andrew Phiri
Keyword(s):  
Economic Growth ◽  
Optimal Level ◽  
Smooth Transition ◽  
Customs Union ◽  
Threshold Estimate ◽  
African Countries ◽  
Content Type ◽  
Economic Agents ◽  
Endogenous Growth Theory ◽  
Smooth Transition Regression

PurposeThe purpose of our study is to examine the inflation–growth nexus relationship for Swaziland between 1975 and 2016 with the intention of estimating an optimal level of inflation, which maxims economic growth or minimizes growth losses.Design/methodology/approachWe estimate on an endogenous monetary model of economic growth augmented with a credit technology using a smooth transition regression (STR) model, which allows us to estimate an optimal inflation rate characterized by smooth transition between different inflation regimes.FindingsOur empirical results point to an inflation threshold estimate of 7.64 per cent at which economic growth gains are maximized or similarly growth losses are minimized. In particular, we find that above this threshold economic agents may be able to protect themselves from inflation through credit technology and a more urbanized population and yet such high inflation adversely affects the influence of exports on economic growth. This noteworthy since a majority of government revenues is from trade activity via the country's affiliation with the Southern African Customs Union (SACU).Originality/valueThe major contribution of this paper is that it becomes the first to draw directly from endogenous growth theory to estimate the inflation threshold for any African country, which will hopefully pave a way for similar studies on other African countries.

Application of smooth transition regression (STR) model on the relationship between natural gas consumption and economic growth in Nigeria

2018 ◽  
Vol 12 (2) ◽  
pp. 284-296 ◽  
Author(s):  
Mukhtar Danladi Galadima ◽  
Abubakar Wambai Aminu
Keyword(s):  
Economic Growth ◽  
Natural Gas ◽  
Threshold Value ◽  
Optimal Level ◽  
Smooth Transition ◽  
Content Type ◽  
Smooth Transition Regression ◽  
Gas Consumption ◽  
Natural Gas Consumption ◽  
The Relationship

Purpose The purpose of this paper is to identify the level of natural gas consumption that can be adjudged as capable of improving the growth of the Nigerian economy, to investigate whether natural gas consumption is at optimal level in Nigeria and to examine the nature and rate to which natural gas consumption affects economic growth in Nigeria at low and high regimes. Design/methodology/approach The tool used to achieve the objectives of the paper is the smooth transition regression (STR) model. Findings The findings of the paper are that the relationship between natural gas consumption and economic growth in Nigeria is asymmetric, where the natural gas consumption threshold value in the country is 9085.36 standard cubic meters, whereas the level of its consumption in the country is below the optimal level. Further, in both low and high regimes, natural gas consumption has been found to have a positive and significant impact on economic growth in Nigeria. Practical implications The policy implication of the paper is that natural gas consumption in Nigeria should not be less than 9085.36 standard cubic meters and the country should intensify efforts to increase the level of natural gas consumption, as it is below the optimal level and its consumption bolsters the growth of Nigerian economy. Originality/value What is new in this paper is its ability to use the STR model. To the best of the authors’ knowledge, such methodology has not been adopted before in such a relation.

Economic growth and income inequality: a non-linear econometrics analysis of the SADC region, 1990–2015

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lindokuhle Talent Zungu ◽  
Lorraine Greyling ◽  
Nkanyiso Mbatha
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Threshold Level ◽  
Transition Function ◽  
Smooth Transition ◽  
Lower Growth ◽  
Content Type ◽  
Job Opportunities ◽  
Lm Test ◽  
Smooth Transition Regression

PurposeThe authors investigate the growth–inequality relationship, using panel data from 13 Southern African Development Community (SADC) countries over the period 1990–2015, to test the validity of the Kuznets and Tribble theories. Furthermore, the authors seek to determine the threshold level at which excessive growth hampers inequality.Design/methodology/approachThe panel smooth transition regression (PSTR) model has several stages. The authors applied the Lagrange multiplier (LM) test to find the appropriate transition variable amongst all candidate variables, to assess the linearity between economic growth and income inequality and to find the sequence for selecting the order m of the transition function. The authors then estimated the PSTR model, but before facilitating the results, the authors first used the wild cluster bootstrap (WCB)–LM-type test to assess the appropriateness of the selected transition.FindingsThe authors found that at lower growth, income inequality tends to be lower, while if growth increases above US$8,969, inequality tends to increase in the SADC region. The findings combine into a U-shaped relationship, contradicting the Kuznets and Tribble theories.Originality/valueThe contribution of this paper is that it becomes the first to provide the threshold level at which excessive growth increases inequality in the selected countries. This study proposes that policymakers should focus on activities aimed at stimulating growth, in other words, activities such as spending more on infrastructure, drawing up a suitable investment portfolio and spending on technological investment for countries that are below US$8,969. An improvement in these activities will create job opportunities, which in turn will add to economic growth and thus lead to lower income inequality and better social cohesion.

Asymmetric and threshold effects of public debt on economic growth in SADC: a panel smooth transition regression analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bongumusa Prince Makhoba ◽  
Irrshad Kaseeram ◽  
Lorraine Greyling
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Threshold Effect ◽  
Smooth Transition ◽  
Content Type ◽  
Advanced Economies ◽  
Smooth Transition Regression ◽  
Asymmetric Relationships ◽  
Panel Smooth Transition Regression

PurposeThis study aims to interrogate dynamic asymmetric relationships between public debt and economic growth in Southern African Developing Communities (SADC), over the period 2000–2018.Design/methodology/approachThe study employed a panel smooth transition regression (PSTR) technique to analyse dynamic asymmetric relationships between public debt and economic growth, and the threshold effect at which public debt hampers economic growth.FindingsThe findings indicate that there is a significant nonlinear effect of debt on economic growth in SADC. The study discovered a debt threshold of 60% to GDP at which debt beyond this threshold deteriorates long-term growth. The low-debt regime was found to be positive and statistically significant, while the high-debt regime is detrimental for long-term growth. Fiscal policymakers ought to consider the adoption of well-coordinated debt policies that aims to strike a balance between sustainable public debt and economic growth, within a reasonable threshold target.Originality/valueThe study focusses on asymmetric and threshold analysis of public debt on economic growth in SADC using sophisticated panel smooth transition regression (STAR). This study provides rigorous empirical evidence within the SADC perspective in which previous studies have predominantly been confined in advanced economies.

Investigating asymmetric effects of public debt on economic growth in South Africa: a smooth transition regression (STAR) approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bongumusa Prince Makhoba ◽  
Irrshad Kaseeram ◽  
Lorraine Greyling
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Public Debt ◽  
Smooth Transition ◽  
Content Type ◽  
Asymmetric Effects ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Smooth Transition Regression ◽  
Nonlinear Autoregressive

PurposeThe primary purpose of the study is to analyse the asymmetric effects of public debt on economic growth, using secondary data over the period 1980–2018 in South Africa.Design/methodology/approachThis study estimated a Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach, using time series data to analyse the asymmetric effect of public debt on economic growth in South Africa.FindingsThe findings revealed a significant nonlinear relationship between public debt and economic growth in South Africa. The results showed an inverted U-Shape relationship, implying a significant positive influence of public debt on economic growth during the low-debt regime. While during a high-debt regime, public debt exerted a significant negative effect on economic growth. The study proposes that policymakers ought to consider targeting a sustainable debt threshold that would enhance efficient use of public finances consistent with long-term economic prosperity.Originality/valueThis paper asymmetries and threshold effects between public debt and economic growth in South Africa, through the application of dynamic nonlinear models namely, Smooth Transition Regression (STAR) and Nonlinear Autoregressive Distributed Lag (NARDL) approach. Studies on the relationship under examination have predominantly been confined in advanced economies. This study provides rigorous empirical evidence from the South African perspective.

scholarly journals Executive pay and market value sensitivity

2016 ◽  
Vol 63 (4) ◽  
pp. 411-424
Author(s):  
Feng-Li Lin
Keyword(s):  
Firm Value ◽  
Optimal Level ◽  
Smooth Transition ◽  
Net Income ◽  
Executive Pay ◽  
Compensation Policy ◽  
Listed Firms ◽  
Smooth Transition Regression ◽  
High Level ◽  
Smooth Transition Regression Model

Executive pay relative to that of average workers has risen dramatically worldwide. Such a high level of executive pay raises the question of whether a steep rise in executive pay affects firm value. This study examined the relationship between executive pay and firm value. A panel smooth transition regression model is adopted to determine an optimal level of executive pay that maximizes firm value for a sample of 512 Taiwanese-listed firms over the period 2006-2011. The finding is that when the ratio of executive pay to net income after tax exceeds 2.71%, the firm value increases. The results suggest a correlation between large executive ownership (corresponding to high executive pay) and both increased operational efficiencies and firm value. These findings may be useful when contemplating executive compensation policy.

scholarly journals Environmental Performance and Economic Growth in Middle East and North Africa Countries

2019 ◽  
Vol 9 (24) ◽  
Author(s):  
Hichem Dkhili
Keyword(s):  
Economic Growth ◽  
Middle East ◽  
North Africa ◽  
Environmental Performance ◽  
Middle Eastern ◽  
Smooth Transition ◽  
African Countries ◽  
Mena Region ◽  
Mena Countries ◽  
The Impact

Background. Studies on environmental performance/quality and economic growth show inconclusive results. Objective. The aim of the present study is to assess the non-linear relationship between environmental performance and economic growth in the Middle East and North Africa (MENA) region from 2002–2018. Methods. A sample of fourteen (14) MENA countries was used in the present analysis. However, due to important differences between countries in this region, the whole sample was divided into two sub-samples; nine Middle Eastern countries (MEAS) and five North African countries (NAF). We performed the panel smooth transition regression model as an econometric approach. Discussion. Empirical results indicate a threshold effect in the environmental performance and economic growth relationship. The threshold value differs from one group of countries to another. More specifically, we found that the impact of environmental performance and economic growth is positive and significant only if a certain threshold level has been attained. Until then, the effect remains negative. Conclusions. The findings of the present study are of great importance for policymakers since they determine the optimal level of environmental performance required to act positively on the level of economic growth. MENA countries should seek to improve their environmental performance index in order to grow output. Competing Interests. The authors declare no competing financial interests.

scholarly journals Has Local Government Debt Promoted Economic Growth in developing countries? New evidence from a survey in China

2021 ◽  
Vol 235 ◽  
pp. 01014
Author(s):  
Tao Wu ◽  
Peng Zhong ◽  
Lingyue Wu
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Local Government ◽  
Local Governments ◽  
Bond Market ◽  
Smooth Transition ◽  
Government Bond ◽  
Open Market ◽  
Government Investment ◽  
Smooth Transition Regression

Based on the panel smooth transition regression (PSTR) model, this paper empirically analyzes the relationship between Chinese local government’s bond financing and economic growth, with the quarterly panel data of bonds issued by local governments and their investment and financing platform companies in the open market from 2008 to 2018 as samples. The research shows that there is a gradual non-linear relationship between local government bond market financing and economic growth in China. With the increase of the scale of local government bond market financing in China, the effect of bond market financing on economic growth will gradually decline and have a negative effect. This result means that for developing countries like China, it is not advisable to rely solely on government investment to drive economic growth.

Interest rate liberalization and economic growth nexus: does corruption matter?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdulhadi Aliyara Haruna ◽  
Abu Sufian Abu Bakar
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Positive Impact ◽  
Reform Process ◽  
Negative Effects ◽  
African Countries ◽  
Cross Sectional ◽  
Content Type ◽  
Interest Rate Liberalization ◽  
The Impact

Purpose This paper aims to examine the impact of interest rate liberalization on economic growth and the relevance of corruption in the five selected sub-Saharan African countries. Design/methodology/approach The study used the modified version of Driscoll and Kraay’s model by Hoechle, which solved the effects of cross-sectional dependence and heteroscedasticity. Findings The findings reveal a positive impact of the index on economic growth, and it was found that foreign direct investment (FDI) and credit to private sector by banks (CPSB) all stimulate economic growth. The interaction terms of corruption with FDI and CPSB indicate negative effects that show how corruption erodes the benefits of liberalization. Finally, the paper recommends the pursuit of appropriate policies with the sole aim of eradicating corruption and providing a conducive environment for business. Originality/value The paper developed a composite domestic financial liberalization index to capture the timing and essential dimensions of the reform process. The study investigates the effect of interest rate liberalization on economic growth and the relevance of corruption. Most of the recent and past studies only examined the impact of interest rate reforms on growth without investigating the relevance of corruption.

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