Government expenditure and economic growth nexus in ECOWAS countries

2019 ◽  
Vol 36 (3) ◽  
pp. 204-225 ◽  
Author(s):  
Olumide Olusegun Olaoye ◽  
Monica Orisadare ◽  
Ukafor Ukafor Okorie
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Method Of Moments ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Government Expenditure ◽  
West African ◽  
Economic Data ◽  
Content Type ◽  
Vector Autoregressive

Purpose The purpose of this paper is to examine the direction of causality between government expenditure and economic growth in the Economic Community of West African States (ECOWAS) countries. Design/methodology/approach The study adopts the recently developed panel vector autoregressive (PVAR) by Love and Abrrigo (2015) and two-step system generalized method of moments (GMM) in order to resolve the inherent problems of endogeneity and persistence in economic data. Findings The results from the study show no evidence of either unidirectional or bidirectional causal relationship between government expenditure and economic growth in ECOWAS member countries. Originality/value Unlike previous studies that adopted cointegration technique, we adopt a system GMM through the application of a dynamic PVAR framework within the framework of panel data analysis in order to address the possibility of feedback effect in the causal relationship between government expenditure and economic growth. In addition the PVAR also allows us to model shocks across countries.

Bank-based and market-based development and economic growth: an international investigation

2019 ◽  
Vol 36 (3) ◽  
pp. 365-394 ◽  
Author(s):  
Isaac Boadi ◽  
Daniel Osarfo ◽  
Perpetual Boadi
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Method Of Moments ◽  
Design Methodology ◽  
Generalized Method Of Moments ◽  
Fixed Effect ◽  
Relative Impact ◽  
Content Type ◽  
Regional Effects ◽  
Development Policies

Purpose The purpose of this paper is to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60countries. Design/methodology/approach This study uses fixed effect and generalized method of moments (GMM) to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60 countries. The study further controls regional effects and the Asian crisis, as well as the global economic crisis. Findings The empirical results of the study revealed that market-based development positively affects economic growth. Besides, market-based financial development indirectly promotes investment, which has the potential to strongly enhance growth. The findings of this study, therefore, provide more support to pro-market-based financial development policies in these regions. Interestingly, bank-based development has no direct impact on development, but indirectly encourages investment, which also promotes growth. Originality/value This paper is the first of its kind to empirically examine fixed effect and GMM to investigate the relative impact of bank-based and market-based financial developments on economic growth from 1984 to 2015, using 60 countries.

Does foreign direct investment cause economic growth? A dynamic panel data analysis for SADC countries

2016 ◽  
Vol 11 (3) ◽  
pp. 316-332 ◽  
Author(s):  
Edmore E Mahembe ◽  
Nicholas M Odhiambo
Keyword(s):  
Economic Growth ◽  
Data Analysis ◽  
Causal Relationship ◽  
Low Income ◽  
Panel Data Analysis ◽  
Low Income Countries ◽  
Middle Income ◽  
Fdi Inflows ◽  
Content Type ◽  
Middle Income Countries

Purpose – The purpose of this paper is to examine the causal relationship between inward foreign direct investment (FDI) and economic growth in Southern African Development Community (SADC) countries over the period 1980-2012. It also investigates whether the causal relationship between FDI inflows and economic growth is dependent on the level of income. Design/methodology/approach – In order to assess whether the causal relationship between FDI inflows and economic growth is dependent on the level of income, the study divided the SADC countries into two groups, namely, the middle-income countries and the low-income countries. The study used the recent panel-data analysis methods to examine this linkage. The Granger causality test for the middle-income countries was conducted within a vector-error correction mechanism framework; while that of the low-income countries was conducted within a vector autoregressions framework. Findings – The results for the middle-income countries’ panel show that there is a uni-directional causal flow from GDP to FDI, and not vice versa. However, for the low-income countries’ panel, there was no evidence of causality in either direction. The study concludes that the FDI-led growth hypothesis does not apply to SADC countries. Research limitations/implications – Methodology applied in this study is a bivariate framework which is likely to suffer from the omission of variable bias (Odhiambo, 2008, 2011). Second, the Granger causality analysis employed in this only investigates the direction of causality and whether each variable can be used to explain another, but does not directly test for the mechanisms through which FDI leads to economic growth and economic growth leads to FDI. Practical implications – Future studies may include a third variable such as domestic savings, exports, or financial development in a trivariate or multivariate panel causality model. A more complete analysis which seeks to explain the channels through which FDI impacts growth is suggested for future studies. Lastly, sector level analysis will help policy makers draft effective industrial policies, which can guide allocation of incentives. Social implications – The results of this study support the Growth-led FDI hypothesis, but not the FDI-led growth hypothesis. In other words, it is economic growth that drives FDI inflows into the SADC region and into Southern Africa, and not vice versa. This implies that the recent high economic growth rates that have been recorded in some of the SADC countries, especially the middle-income countries, have led to a massive inflow of FDI into this region. Originality/value – At the regional level, SADC as a regional bloc has been actively pursuing policies and strategies aimed at attracting FDI into the region. Despite the important role of FDI in economic development, and the increase in FDI inflows into SADC countries in particular, there is a significant dearth of literature on the causal relationship between FDI and economic growth. The study used the recent panel-data analysis methods to examine the causal relationship between FDI and economic growth in SADC countries.

Government spending and economic growth: a trivariate causality testing

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olumide Olaoye ◽  
Olatunji Afolabi
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Government Spending ◽  
Institutional Environment ◽  
Method Of Moment ◽  
Content Type ◽  
Vector Autoregressive ◽  
Public Resources ◽  
Causality Testing ◽  
High Level

PurposeThis paper investigates whether institutional environment influences the relationship government spending and economic growth in ECOWAS over the period 2008–2017.Design/methodology/approachThe study adopts the recently developed panel vector autoregressive (PVAR) by Abrigo and Love (2015) and a two-step system generalised method of moment (GMM).FindingsThe results from the study show no evidence of either unidirectional or bidirectional causal relationship between government spending and economic growth in ECOWAS. Our findings reveal that government spending when associated with high level of corruption, oversized government and a waste of public resources will not cause economic growth.Originality/valueUnlike previous studies, we resolve the inherent problems of endogeneity and persistence in economic data. Likewise, we depart from existing studies that examined the causal relationship in a bivariate framework and adopt a trivariate causality testing.

Fiscal variables and growth convergence in the ECOWAS

2016 ◽  
Vol 7 (2) ◽  
pp. 147-163
Author(s):  
Cosimo Magazzino
Keyword(s):  
Economic Growth ◽  
Government Expenditure ◽  
West African ◽  
Causality Analysis ◽  
African Countries ◽  
Content Type ◽  
Long Run ◽  
Fiscal Balance ◽  
Sub Saharan ◽  
The Relationship

Purpose – The purpose of this paper is to assess the relationship among fiscal variables (net lending, government expenditure and revenue) and economic growth in Sub-Saharan African countries. Design/methodology/approach – Using yearly data for the period between 1980 and 2011 in 15 Economic Communities Of West African States (ECOWAS) countries, the relationship among fiscal variables, economic growth and trade is investigated, through various econometric techniques. Findings – Government expenditure and revenue show pro-cyclical effects in West African Economic and Monetary Union (WAEMU) and ECOWAS countries, while fiscal balance has a pro-cyclical nature for WAEMU during the years 1999-2011. Moreover, a weak long-run relationship between government expenditure and revenue emerge, but only in the case of West African Monetary Zone (WAMZ) countries. Granger causality analysis showed mixed results for WAEMU countries, while for four out of six WAMZ countries (Gambia, Liberia, Nigeria, and Sierra Leone) the “tax-and-spend” hypothesis holds, since government revenue would drive the expenditure. Finally, in the last three decades, cyclical component of economic growth has reduced its fluctuations, both for WAEMU and WAMZ member States. Originality/value – This is the first study on the effects of fiscal policies in the ECOWAS countries.

Re-examining the government expenditure–growth nexus in ECOWAS countries

2020 ◽  
Vol 36 (4) ◽  
pp. 277-301 ◽  
Author(s):  
Olumide Olusegun Olaoye ◽  
Monica Orisadare ◽  
Ukafor Ukafor Okorie ◽  
Ezekiel Abanikanda
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Institutional Environment ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
Government Expenditure ◽  
Institutional Quality ◽  
Empirical Modeling ◽  
African Countries ◽  
Content Type

PurposeThe purpose of this study is to investigate the effect of government expenditure on economic growth in 15 Economic Community of West African States (ECOWAS) countries over the period of 2005–2017. More precisely, this paper investigates whether institutional environment influences the effect of government spending on economic growth.Design/methodology/approachThis study adopts the generalized method of moments-system method of estimation to address the problem of dynamic endogeneity inherent in the relationship. Similarly, unlike previous studies which assume that the disturbances of a panel model are cross-sectionally independent, we account for cross-section dependency and cross-country heterogeneity inherent in empirical modeling using Driscoll and Kraay's nonparametric covariance matrix estimator, adjusted for use with both balanced and unbalanced panels along with Monte Carlo simulations.FindingsThe authors find that though, government spending has a positive impact on economic growth but the level of institutional quality adversely affect that positive impact. This suggests that the institutional environment in ECOWAS countries is a drag and not a push factor for government fiscal operations and/policies. Thus, the results provide empirical evidence that there is a conditional relationship between government spending and economic growth in African countries. That is, the effect of government spending on economic growth is dependent on the quality of institutions. Lastly, these findings suggest that in order for government spending to contribute to economic growth, African countries must develop a strong institutional environment.Originality/valueUnlike previous time series studies for African countries which concentrated on the two variable case, we include institutional quality as a third variable to underline the potential importance of institutional quality for economic growth in ECOWAS countries.

Government spending shocks and economic growth: additional evidence from cyclical behavior of fiscal policy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Olumide Olusegun Olaoye ◽  
Ukafor Ukafor Okorie ◽  
Oluwatosin Odunayo Eluwole ◽  
Mahmood Butt Fawwad
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Government Spending ◽  
Generalized Method Of Moments ◽  
The State ◽  
Fiscal Policies ◽  
Asymmetric Effect ◽  
Content Type ◽  
Spending Shocks ◽  
The Business Cycle

PurposeThis study examines the asymmetric effect of government spending on economic growth in Nigeria over the period 1980–2017. Specifically, this study investigates whether the response of economic growth to government spending shocks differs according to the nature of shocks on them. In addition, the authors examine whether the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Design/methodology/approachThe study adopts the linear fiscal reaction function in addition to the nonlinear regression model of Hatemi-J (2011, 2012), Granger and Yoon (2002), which allows us to separate negative shocks from positive shocks to government spending. Similarly, the authors adopt the generalized method of moments (GMM) techniques of Hansen (1982) to account for simultaneity and endogeneity problems inherent in dynamic model.FindingsThe authors’ findings reveal that there is evidence of asymmetry in the government spending–economic growth nexus in Nigeria over the period of study. Specifically, the authors find that the response of economic growth to government spending shocks differs according to the nature of shocks on them. More specifically, the study established that the stabilizing effects of fiscal policies are dependent on the state of the business cycle.Originality/valueUnlike the traditional method of modeling asymmetry, which adopts the simple inclusion of a squared government spending term or by the inclusion of a cubic government spending term, the model adopted in this study allows us to model shocks and show how the responses of economic growth to government expenditure differ according to the nature of shocks on them.

Assessing the bank profitability in the MENA region

2014 ◽  
Vol 7 (3) ◽  
pp. 305-332 ◽  
Author(s):  
Rim Ben Selma Mokni ◽  
Houssem Rachdi
Keyword(s):  
Method Of Moments ◽  
North Africa ◽  
Banking Sector ◽  
Middle Eastern ◽  
Generalized Method Of Moments ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Conventional Banks ◽  
Econometric Technique

Purpose – Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region? Design/methodology/approach – The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009.The authors estimate models using the generalized method of moments in system, of Blundell and Bond (1998). They exploit an up-to-date econometric technique which takes into consideration the issue of endogeneity of regressors to evaluate the comparative profitability of Islamic and conventional banks in the MENA region. Findings – Empirical analysis results show that the determinants’ significance varies between Islamic and conventional banks. Profitability seems to be quite persistent in the MENA region reflecting a higher degree of government intervention and may signal barriers to competition. Originality/value – The main interest is to develop a comprehensive model that integrates macroeconomic, industry-specific and bank-specific determinants. The paper makes comparison of the performance between two different banking systems in the MENA region. The authors consider a variable crisis to gain additional insights into the impacts of the financial crisis on MENA banking sector.

Impact of Health and Agriculture Financing on Economic Growth in Nigeria

2021 ◽  
Vol 7 (18) ◽  
pp. 37-58
Author(s):  
Rasaki Olufemi KAREEM ◽  
◽  
Olawale LATEEF ◽  
Muideen Adejare ISIAKA ◽  
Kamilu RAHEEM ◽  
...  
Keyword(s):  
Economic Growth ◽  
Federal Government ◽  
Causal Relationship ◽  
Agricultural Sector ◽  
Time Series Data ◽  
Capital Expenditure ◽  
Government Expenditure ◽  
Health Sector ◽  
Series Data ◽  
The Impact

The study focused on the impact of health and agriculture financing on economic growth in Nigeria from 1981 to 2019. The study utilized the time series data which was extracted from Central Bank of Nigeria annual statistical bulletin. Unit Root test was performed with the use of Augmented Dickey-Fuller test in order to ascertain the stationarity of all the variables and they were all found to be stationary at order 1 in the two specified models (composite and disaggregated). Error Correction Model (ECM) was used to analyze the data in order to determine the speed of adjustment from the short run to the long run equilibrium state. Casualty test was used to confirm causal relationship among the variables of interests. The study revealed that Federal Government expenditure in Health sector has a significant effect on economic growth in Nigeria. Federal Government expenditure in Agricultural sector equally had a positive effect on economic growth but surprisingly not significant. Considering the disaggregated form, Federal Government capital expenditure in both Health and Agricultural sectors have positive and statistically significant effect on economic growth while Federal Government recurrent expenditure on health has a positive and statistically insignificant effect in economic. It was also revealed that there is causal relationship among the variables. Based on the findings, the study concluded that Federal Government Expenditure in Health Sectors and Agriculture Sectors have effect on economic growth in Nigeria.

scholarly journals Determinants of Basmati Exports from Pakistan: A Panel Data Analysis

2021 ◽  
Vol 3 (1) ◽  
pp. 12-18
Author(s):  
Muhammad Munwar Hayat ◽  
Raheela Khatoon
Keyword(s):  
Panel Data ◽  
Method Of Moments ◽  
Negative Impact ◽  
Positive Impact ◽  
Panel Data Analysis ◽  
Generalized Method Of Moments ◽  
Trading Partner ◽  
Dummy Variable ◽  
Export Competitiveness ◽  
The Impact

This paper aims to estimate the impact of different factors of basmati exports from Pakistan to its trading partner. Results are obtained by using the Generalized Method of Moments (GMM) model and panel data methodology with a sample of 22 countries for the period of 2003-2019. To estimate the impact of different variables on basmati exports Generalized Method of Moments (GMM) model is used on the panel dataset. The results revealed that the inflation rate of Pakistan has a negative and significant effect on the export competitiveness of Pakistani basmati. The exchange rate of Pakistan has a positive and significant impact on the basmati export, the population of Pakistan has a negative and significant impact on basmati export. Basmati production in Pakistan also has a significant and negative impact on basmati export. The Gross Domestic Product (GDP) of Pakistan has a significant and positive impact on the basmati export while the GDP of the trading partner has a significant and negative impact on the basmati export. The dummy variable for joint border also has a positive and significant impact on basmati exports of Pakistan.

scholarly journals Testing the Environmental Kuznets Curve Hypotheses in Chinese Provinces: A Nexus between Regional Government Expenditures and Environmental Quality

2021 ◽  
Vol 18 (18) ◽  
pp. 9667
Author(s):  
Ayoub Zeraibi ◽  
Daniel Balsalobre-Lorente ◽  
Khurram Shehzad
Keyword(s):  
Economic Growth ◽  
Environmental Quality ◽  
Generalized Method Of Moments ◽  
Government Expenditure ◽  
Least Square ◽  
Government Expenditures ◽  
Chinese Government ◽  
Low Carbon ◽  
Nitrogen Emissions ◽  
Per Capita

With rapid economic growth, the Chinese government expenditures at various levels have increased adequately. At the same time, the environmental quality in China has deteriorated significantly. In this study, provincial-level data for 31 Chinese provinces during 2007–2017 are used to investigate the impacts of government expenditure on the emissions of three specific measures of environmental degradation. The main objective of this study is to examine the influence of government expenditures, economic growth per capita, environment protection expenditure, and added second-sector value on environmental quality by measuring sulfur dioxide (SO2), chemical oxygen demand (COD), and ammonia nitrogen emissions (AN). Moreover, the study applied the generalized method of moments (GMM) and the fully modified least square (FMOLS) to estimate the co-integration relationship among the underlying factors. The results demonstrate a significant direct effect of government expenditure on improving environmental quality overall in the Chinese provinces, which increases with the level of economic growth. However, the results also confirmed the inverted N-shaped relationship between the pollution factor and economic growth per capita. Our key findings lead toward the manifestation and emphasis of the importance of appropriate policies for restoring government expenditure and, at the same time, strengthening the relationship between the industrial sector and environmental policy standards. Significantly, governments in developing countries should allocate larger budgets for environmental projects in their fiscal reforms for the sake of moving to greener and more inclusive economies with low-carbon activities.

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