Financial development, FDI and economic growth: evidence from Sudan

2018 ◽  
Vol 45 (8) ◽  
pp. 1236-1249 ◽  
Author(s):  
Abdalla Sirag ◽  
Samira SidAhmed ◽  
Hamisu Sadi Ali
Keyword(s):  
Economic Growth ◽  
Least Squares ◽  
Financial Development ◽  
Unit Root ◽  
Structural Break ◽  
Ordinary Least Squares ◽  
Series Data ◽  
Content Type ◽  
Long Run ◽  
Cointegration Tests

Purpose The effect of foreign direct investment (FDI) on economic growth is widely believed to be contingent on the development of the financial sector. Nevertheless, as the possibility that the effect of financial development on growth being contingent on FDI has been neglected in existing literature, the authors have investigated it in this paper. In general, the purpose of this paper is to examine the effect of financial development and FDI on economic growth in Sudan using annual data from 1970 to 2014. Design/methodology/approach Since most of the macroeconomic variables are subject to unit root problem, the time series data are assessed using unit root and cointegration tests with/without structural break. Moreover, the study uses the fully modified ordinary least squares and the dynamic ordinary least squares techniques to estimate the long-run model. Findings The results of the cointegration tests provide evidence that a long-run relationship exists among variables even after accounting for the structural break. The results show that financial development and FDI are positive and significant in explaining economic growth in Sudan. Financial development is found to be more beneficial to economic growth than FDI. Moreover, the findings reveal that FDI leads to better economic performance through financial development. Interestingly, the findings of the study show that the effect of financial development on economic growth is further enhanced by the inflows of FDI. Research limitations/implications The government should focus on promoting FDI in more productive sectors. In addition, further cooperation with multinational enterprises is needed to increase FDI in the country. Originality/value This is the first paper that empirically examines both the interlinked impact of FDI on growth through financial development and the impact of financial development on economic growth through FDI in Sudan using appropriate econometric methods.

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

The impact of financial development, economic growth and energy consumption on environmental degradation

2015 ◽  
Vol 26 (5) ◽  
pp. 666-682 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri ◽  
Geetilaxmi Mohapatra
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Financial Development ◽  
Environmental Degradation ◽  
Series Data ◽  
Development Economic ◽  
Content Type ◽  
Indian Economy ◽  
Long Run ◽  
The Impact

Purpose – The purpose of this paper is to investigate the impact of financial development, economic growth and energy consumption on environment degradation for Indian economy by using the time series data for the period 1971-2011. Design/methodology/approach – The stationary properties of the variables are checked by ADF, DF-GLS, PP and Ng-Perron unit root tests. The long-run relationship is examined by implementing the Autoregressive Distributed Lag bounds testing approach to co-integration and error correction method (ECM) is applied to examine the short-run dynamics. The direction of the causality is checked by VECM framework and variance decomposition is used to predict exogenous shocks of the variables. Findings – The empirical evidence confirms the existence of long-run relationship among the variables. Financial development appears to increase environmental degradation in India. The main contributors to environmental degradation are: economic growth, energy consumption financial development and urbanization. The results also lend support to the existence of environmental Kuznets curves for Indian economy. Research limitations/implications – The present study suggests that environmental degradation can be reduced at the cost of economic growth or energy efficient technologies should be encouraged to enhance the domestic product with the help of financial sector by improving environmental friendly technologies from advanced economies. Originality/value – This paper proposes to make a contribution to the existing literature through examining the relationship between financial development and environmental degradation in Indian economy during 1971-2011 by employing modern econometric techniques.

Does financial development improve environmental quality in Turkey? An application of endogenous structural breaks based cointegration approach

2018 ◽  
Vol 29 (2) ◽  
pp. 368-384 ◽  
Author(s):  
Javaid Ahmad Dar ◽  
Mohammad Asif
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Environmental Quality ◽  
Unit Root ◽  
Structural Breaks ◽  
Energy Use ◽  
Financial Sector ◽  
Content Type ◽  
Long Run ◽  
Endogenous Structural Breaks

Purpose The purpose of this paper is to investigate the long-run effect of financial sector development, energy use and economic growth on carbon emissions for Turkey, in presence of possible regime shifts over a period of 1960-2013. Design/methodology/approach Along with the conventional unit root tests, Zivot-Andrews unit root test with structural break has been employed to check the stationarity of variables. The cointegrating relationship between variables is investigated by using the autoregressive distributed lag bounds test and Hatemi-J threshold cointegration test. Findings The results confirm a cointegrating relationship between the variables. The long-run relationship between the variables has gone through two endogenous structural breaks in 1976 and 1986. Development of financial sector improves environmental quality whereas energy use and economic growth degrade it. The results challenge the validity of environmental Kuznets curve hypothesis in Turkish economy. Research limitations/implications The study uses domestic credit to private sector as a proxy for development of financial sector. The model can be improved by constructing an index of financial development instead of using a single determinant as a proxy for financial development. Practical implications The study may pave the way for policy makers to capture important environmental pollutants in better way and develop effective and efficient energy and economic policies. This may make significant contribution to curbing CO2 emissions while sustaining economic growth. Originality/value This is the only study to examine long-run impact of financial sector development on carbon emissions, using the threshold cointegration approach. Hence, the study is a gentle request to reduce the possible omitted variable econometric estimation bias and fill the gap in the existing literature.

A CONTEMPORARY RE-EXAMINATION OF MALAYSIA’S ECONOMIC GROWTH: THE ISSUES OF EQUITY, EFFICIENCY AND LIBERALIZATION

2017 ◽  
Vol 62 (02) ◽  
pp. 509-530 ◽  
Author(s):  
AZFAR HILMI BAHARUDIN ◽  
YAP SU FEI
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Least Squares ◽  
Financial Development ◽  
Direct Investment ◽  
Positive Relationship ◽  
Empirical Investigation ◽  
Ordinary Least Squares ◽  
Statistical Relationship ◽  
Long Run

This paper is an empirical investigation on economic growth for Malaysia, with focus on income inequality, foreign direct investment (FDI), financial development and trade. Co-integrating regression procedures namely, fully modified ordinary least squares (FMOLS), canonical co-integrating regression (CCR) and dynamic ordinary least squares (DOLS) were employed. Positive relationship between growth with financial development and trade are found to be consistent across all estimations. Income inequality on the other hand though negative, does not seem to exhibit robust significant statistical relationship with growth. The orders of integration for variables used have been demonstrated to be governed such that a long-run relationship prevails.

The role of ICT infrastructure, innovation and globalization on economic growth in OECD countries, 1996-2017

2020 ◽  
Vol 11 (2) ◽  
pp. 193-215 ◽  
Author(s):  
Meta Ayu Kurniawati
Keyword(s):  
Economic Growth ◽  
Least Squares ◽  
Forecast Error ◽  
Rapid Development ◽  
Oecd Countries ◽  
Ordinary Least Squares ◽  
Infrastructure Development ◽  
Content Type ◽  
Long Run ◽  
Ict Infrastructure

Purpose The rapid development of information and communication technology (ICT) over the past decade has enabled heterogeneous economic sectors to be more integrated, leading to a significant effect on nation’s growth across OECD countries. The objective of this study is to estimate the short run and long run inter-linkages among ICT, innovation technology, globalization, and economic growth for the period 1996-2017 in OECD countries. Design/methodology/approach This research provides some sophisticated methodologies by using principal component analysis to construct ICT and innovation indices and follow up by employing the panel cointegration test, pooled mean group regression, fully modified ordinary least squares and dynamic ordinary least squares as sophisticated estimation techniques, panel Granger causality and forecast error variance decomposition to examine the robustness of the causal association in the findings. Findings The empirical results herein suggest that ICT, innovation and globalization positively contribute to economic growth, while the causality findings reveal strong endogenous relationships among both ICT mobile and internet use, innovation development, globalization and economic growth in both short and long run. The findings further imply that OECD countries have yet to promote economic growth from ICT infrastructure expansion, the enlargement of technology innovation and the spread of globalization. Practical implications The particular policy recommendation is to reinforce the investment and establishment of a reliable ICT infrastructure as well as innovation technology to create sustained economic growth in this progressively interconnected world. Originality/value This study is valuable from policy and decision-makers’ perspective, as it highlights the significance of ICT infrastructure development, innovation enlargement and globalization to elevate the economic growth in OECD countries.

scholarly journals Threshold Effects of Import Dependence on Economic Growth in Nigeria

2021 ◽  
Vol 15 (2) ◽  
pp. 198-219
Author(s):  
Oziengbe Scott AIGHEYISI
Keyword(s):  
Economic Growth ◽  
Least Squares ◽  
Threshold Model ◽  
Threshold Level ◽  
Ordinary Least Squares ◽  
Growth Effect ◽  
Series Data ◽  
Threshold Effects ◽  
Long Run ◽  
The Relationship

This study uses annual time series data spanning 1981–2018 to investigate the threshold effects of import dependence on economic growth in Nigeria. The ordinary least squares (OLS) and the fully modified OLS (FMOLS) techniques are employed for estimation of a quadratic regression model to determine the nature of the relationship between aggregate import dependence and economic growth. It is found that the relationship is concave, that is, it follows an inverted-U shape. The conditional least squares estimator is thereafter employed to estimate the threshold model specified to determine the threshold level of import dependence. The study finds a threshold level of 26% for aggregate import dependence. Below this threshold, import dependence positively affects economic growth; above the threshold, the growth effect of import dependence is adverse. Furthermore, it is found that the long-run growth effect of Inflation is adverse, and investment is favourable to long-run economic growth. Based on these findings, the paper recommends efforts by Nigeria’s government to reduce import dependence below the estimated threshold of 26%, control inflation and encourage investment so as to enhance the growth of the nation’s economy.

A validity of environmental Kuznets curve under the role of urbanization, financial development index and foreign direct investment in Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdul Farooq ◽  
Ahsan Anwar ◽  
Muhammad Ahad ◽  
Ghulam Shabbir ◽  
Zulfiqar Ali Imran
Keyword(s):  
Economic Growth ◽  
Unit Root ◽  
Environmental Kuznets Curve ◽  
Direct Investment ◽  
Structural Break ◽  
Cointegration Analysis ◽  
Kuznets Curve ◽  
Content Type ◽  
Long Run

PurposeThis research aims to inspect the existence of the “environmental Kuznets curve” (EKC) in the presence of foreign direct investment (FDI), financial development (FD) and urbanization throughout 1972–2018 for Pakistan.Design/methodology/approachFor time series analysis, Phillips and Perron (PP) and Augmented Dickey–Fuller (ADF) unit root tests are used to confirm the level of integration. For robustness, Kim and Perron (2009)’s structural break unit root test is employed, which identifies the order of integration in the presence of structural break years. Further, combined cointegration analysis is performed to confirm the existence of a long-run association between underlying variables. Furthermore, autoregressive distributed lag (ARDL) analysis is employed for the robustness of the cointegration approach.FindingsThe cointegration analysis confirms the existence of a long-run association among variables. The authors find a positive and significant impact of urbanization, FD and foreign development on environmental degradation in the long run. Similarly, only FDI increases environmental degradation in the short run. In addition, the authors find an inverted U-shape relationship between economic growth and environmental quality which, further, confirms the presence of EKC in Pakistan.Originality/valueThis research contributes to applied economics in many ways: the combined effect of urbanization, FD, FDI and economic growth on carbon dioxide (CO2) emission is checked simultaneously. To avoid ambiguity, this study constructs the FD index through the principal component analysis (PCA). Moreover, the role of structural breaks has been considered through the analysis. Novel Bayer-Hanck combined cointegration analysis is employed to detect the existence of long-run relationships among underlying variables.

The Role of Financial Development in Economic Growth of Nepal: ARDL Approach of Cointegration with Structural Break Analysis

2020 ◽  
Vol 3 (4) ◽  
Author(s):  
Ramesh C. Paudel ◽  
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Time Series Data ◽  
Financial Institution ◽  
Structural Break ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Ardl Approach

This paper, using the most recent index of financial development as developed in Svirydzenka (2016), examines the role of financial development in the economic growth of Nepal. This paper employs the Autoregressive distributed lag (ARDL) approach of cointegration with the structural break in time series data for the period of 1980-2017. Nepal is a unique country with a population of about 30 million with high demographic dividend and big markets in the neighbours, the earlier entrant in the liberalization and reform in the region, endowed with lots of natural resources and beauties, and comparatively cheaper labor force in the region but it remains as one of the poor landlocked developing countries sandwiched between two emerging economies, namely China and India. The results show that financial development has a strong long-run positive relationship with economic growth. Therefore, developing the strategies for the proper financial development improving the financial institution quality and widening the financial market to improve capital formation would be a way to accelerate the economic growth in Nepal.

An empirical relationship between financial development indicators and human capital in some selected Asian countries

2017 ◽  
Vol 44 (3) ◽  
pp. 337-349 ◽  
Author(s):  
Madhu Sehrawat ◽  
A.K. Giri
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Development Economic ◽  
Asian Countries ◽  
Content Type ◽  
Development Indicators ◽  
Long Run ◽  
Panel Granger Causality

Purpose The purpose of this paper is to investigate the relationship between financial development indicators and human capital for Asian countries using the annual data from 1984-2013. Design/methodology/approach The stationarity of the variables are checked by Levin-Lin-Chu, Im-Pesaran-Shin, Fisher-type augmented Dickey-Fuller and Philips-Perron panel unit-root tests. The Pedroni’s and Kao’s panel co-integration approaches are employed to examine the long-run relationship among the variables. To estimate the coefficients of co-integrating vectors, both panel dynamic ordinary least squares (PDOLS) and fully modified ordinary least squares (FMOLS) techniques are used. The short-term and long-run causality is examined by panel granger causality. Findings The Pedroni’s and Kao’s co-integration approaches support the existence of the long-run relationship among the indicators of financial development, economic growth and human capital. The PDOLS and FMOLS estimators revealed that both financial development indicators and economic growth variable act as an important driver for the increase in human capital. The results of panel granger causality indicate that causality runs from indicators of financial development, economic growth and public spending on education to human capital. Originality/value There is hardly any study that examine the impact of financial development indicators and economic growth on human capital in Asian economies, therefore the present study fill the research gap in the literature.

The role of financial development in economic growth: empirical evidence from Indian states

2015 ◽  
Vol 10 (4) ◽  
pp. 765-780 ◽  
Author(s):  
Madhu Sehrawat ◽  
A K Giri
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Ordinary Least Squares ◽  
Annual Data ◽  
Indian States ◽  
Content Type ◽  
Long Run ◽  
Panel Granger Causality ◽  
Integration Test

Purpose – The purpose of this paper is to examine the relationship between financial development and economic growth in Indian states using annual data from 1993 to 2012. Design/methodology/approach – The stationarity properties are checked by Levin-Lin-Chu and Im-Pesaran-Shin panel unit root tests. The study employed the Pedroni’s panel co-integration test to examine the existence of long-run relationship and the coefficients of co-integration are examined by fully modified ordinary least squares. The short term and long-run causality is checked by panel granger causality. Findings – The co-integration test confirms a long-run relationship between financial development and economic growth for Indian states. The results support the supply leading hypothesis and highlight the importance of financial development in economic growth in Indian states. The findings also indicate that bank-centric financial sector of India has the potential of economic growth through credit transmission. Research limitations/implications – The present study recommends for appropriate reforms in financial market to attain economic growth in India. The findings will be useful for India’s policymakers in order to maintain the parallel expansion of financial development and economic growth. Originality/value – Till date, there is no study that includes all 28 states in analyzing the role of financial development in economic growth for Indian economy by applying latest econometric techniques. Further, the study uses gross domestic state product instead of net domestic state product as proxy for economic growth because of the presence of different depreciation rates.

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