The role of institutions in output growth volatility-financial development nexus

2016 ◽  
Vol 43 (6) ◽  
pp. 910-927 ◽  
Author(s):  
Ibrahim Dolapo Raheem ◽  
Kazeem Bello Ajide ◽  
Oluwatosin Adeniyi
Keyword(s):  
Financial Development ◽  
Measurement Errors ◽  
Output Growth ◽  
Policy Implications ◽  
Output Volatility ◽  
Reverse Causality ◽  
Data Set ◽  
Content Type ◽  
Growth Volatility

Purpose The purpose of this paper is to investigate the role of institutions in the financial development-output growth volatility nexus. It provides new channels through which financial development can dampen the output growth volatilities of the countries under investigation. Design/methodology/approach A comprehensive data set for 71 countries covering the period from 1996 to 2012 and the System GMM approach were used. The choice of the methodology is to deal with endogeneity issues such as measurement errors, reverse causality among other issues. Findings A number of findings were emanated from the empirical analysis. First, the estimates provided evidence of the volatility-reducing effect of financial development. Second, institutions do not have the same reducing influence on output growth volatility. Third, the interaction of financial development and institutions showed that the output volatility reduction arising from financial development is enhanced in the presence of improved institutions. Research limitations/implications The policy implications derived from this study are in twofolds: first, it is important for policymakers to formulate policies that would ensure and enhance the development of the financial sectors, since its importance in minimizing output volatility has been established. Second, institutional quality should be developed so as to further enhance the growth volatility-reducing influence of financial development. Particularly, institutions should be improved along the multiple dimensions captured in the analysis. Originality/value To the best knowledge, the novelty of this study to the literature is the introduction of institutions, which is hypothesized to increase the dampening effects of financial development in output growth volatility.

Output growth volatility, remittances and institutions

2015 ◽  
Vol 14 (3) ◽  
pp. 190-203 ◽  
Author(s):  
Kazeem Bello Ajide ◽  
Ibrahim D. Raheem ◽  
Oluwatosin Adeniyi
Keyword(s):  
Output Growth ◽  
Method Of Moment ◽  
Data Set ◽  
Research Attention ◽  
Content Type ◽  
The Impact ◽  
Growth Volatility ◽  
Practical Implications ◽  
Governance Reforms

Purpose – The purpose of this paper is to empirically examine the role of institutions on the remittances–output growth volatility relationship. Design/methodology/approach – The data set of this paper is limited to 71 remittances recipient countries. In an attempt to deal with endogeneity issues, the paper adopts the use of system generalised method of moment (GMM). Findings – First, in consonance with earlier studies, the growth volatility reducing influence of remittances flows was established. Second, unlike the extant literature, the growth volatility reduction potential of remittances was found to be more pronounced in the presence of well-functioning institutions. Finally, the interaction of remittances with our six institutional quality measures showed that growth volatility reduced considerably with better institutions. Practical implications – In terms of policy, remittances recipient countries need to simultaneously pursue economic and governance reforms. Both of these will enhance the counter-cyclicality of remittances and possibly other capital flows. Originality/value – Substantial efforts have been devoted to investigating the impact of remittances on output growth volatility, while very little research attention has been devoted to analysing the impact of institutions on the remittances–output growth volatility nexus.

The persistent effect of banking crises on investment and the role of financial markets

2014 ◽  
Vol 6 (1) ◽  
pp. 64-77 ◽  
Author(s):  
Felix Rioja ◽  
Fernando Rios-Avila ◽  
Neven Valev
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Banking Crisis ◽  
Banking Crises ◽  
Output Growth ◽  
Long Term Effects ◽  
Content Type ◽  
Negative Effect

Purpose – While the literature studying the effect of banking crises on real output growth rates has found short-lived effects, recent work has focused on the level effects showing that banking crises can reduce output below its trend for several years. This paper aims to investigate the effect of banking crises on investment finding a prolonged negative effect. Design/methodology/approach – The authors test to see whether investment declines after a banking crisis and, if it does, for how long and by how much. The paper uses data for 148 countries from 1963 to 2007. Econometrically, the authors test how banking crises episodes affect investment in future years after controlling for other potential determinants. Findings – The authors find that the investment to GDP ratio is on average about 1.7 percent lower for about eight years following a banking crisis. These results are robust after controlling for credit availability, institutional characteristics, and a host of other factors. Furthermore, the authors find that the size and duration of this adverse effect on investment varies according to the level of financial development of a country. The largest and longer-lasting decrease in investment is found in countries in a middle region of financial development, where finance plays its most important role according to theory. Originality/value – The authors contribute by finding that banking crisis can have long-term effects on investment of up to nine years. Further, the authors contribute by finding that the level of development of the country's financial markets affects the duration of this decrease in investment.

scholarly journals Ownership feature and firm performance via corporate innovation performance

2018 ◽  
Vol 25 (2) ◽  
pp. 239-250 ◽  
Author(s):  
Dung Nguyen ◽  
Hoai Nguyen ◽  
Kien S. Nguyen
Keyword(s):  
Firm Performance ◽  
Positive Impact ◽  
Policy Implications ◽  
Ownership Concentration ◽  
Likelihood Method ◽  
Sales Growth ◽  
Reverse Causality ◽  
Data Set ◽  
Content Type ◽  
Cmp Model

Purpose The purpose of this paper is to investigate the simultaneous relationship among ownership concentration, innovation and firm performance of the small- and medium-sized enterprises (SMEs) in Vietnam during the 2011–2015. By employing a Conditional Mixed Process (CMP) model, the findings show that: there is no impact of ownership concentration on innovation, but it has a positive impact on sales growth; innovation positively affects firm performance; and there exists a positively reverse causality from sales growth to innovation. Design/methodology/approach In this study, the authors propose the adaption of CMP model (Roodman, 2011). The nature of the first stage dependent variable – Innovation – is a binary one while the dependent variable Performance is continuous. Therefore, a model that can adapt the binary nature of the dependent variable and perform the estimation of a system of equations such as CMP model is preferred. The CMP framework is substantially that of seemingly unrelated regression, but with application in a larger scope. This approach is based on a “simulated maximum likelihood method” suggested by Geweke–Hajivassiliou–Keane algorithm. Findings By applying CMP method, this study examines the simultaneous relationship among ownership concentration, innovation and firm performance of the SMEs in Vietnam from 2011 to 2015. The findings indicate that: there is no impact of ownership concentration on innovation, but it has a positive impact on sales growth; innovation positively affects firm performance; and there exists a positively reverse causality from sales growth to innovation. Research limitations/implications In spite of the efforts to explore the simultaneous relationship among ownership concentration, innovation and firm performance of the SMEs in Vietnam, the study still has some limitations which are promising further research directions. First, the SME surveys by Central Institute for Economic Management do not have much information about other types of ownership including state-owned and foreign ownership. Therefore, possible further studies with richer data sets may explore the impacts of different types of ownership on firm innovation and performance. Second, other types of innovation such as organizational innovation, marketing innovation can also be investigated in further studies in a richer data set for the case of Vietnam SMEs. Originality/value The findings show that: there is no impact of ownership concentration on innovation, but it has a positive impact on sales growth; innovation positively affects firm performance; and there exists a positively reverse causality from sales growth to innovation. The policy implications insist on facilitating SMEs with easier access to capital via loans with preferred interest or trust loans without collateral, training programs for the labor force and SME leaders, and reduction of unnecessary administrative procedure.

scholarly journals Output Growth Volatility and Remittances: The Case of ECOWAS

2018 ◽  
Vol 6 (2) ◽  
pp. 23
Author(s):  
Deekor Leelee Nwibari ◽  
Gbanador Clever A.
Keyword(s):  
Generalized Method Of Moments ◽  
Well Being ◽  
Output Growth ◽  
Set Covering ◽  
Annual Data ◽  
Output Volatility ◽  
Data Set ◽  
Left Behind ◽  
The Impact ◽  
Growth Volatility

The study on output growth volatility and remittances: the case of ECOWAS is to determine the impact of remittances on output growth volatility. To achieve this, the study adopts the theory of altruism which posits that the migrant derives a positive utility from the well-being of the family left behind. A panel annual data set covering 15 remittances recipient ECOWAS member nations for the period ranging from 1995 to 2015 were utilized. The study utilizes a panel system Generalized Method of Moments (GMM) technique and both the static and dynamic panel estimation approaches to examine the impact of remittances on growth volatility. Results show that remittances appear to be inducing output volatility in ECOWAS member countries. As a result, the study suggests among others, the encouragement of policies that will foster increasing influx of remittances to the region by the concern authorities in order to stabilize volatility of any form in the region.

Trade Openness, Financial Development Index and Economic Growth

2014 ◽  
Vol 6 (4) ◽  
pp. 362-375 ◽  
Author(s):  
Dogga Satyanarayana Murthy ◽  
Suresh Kumar Patra ◽  
Amaresh Samantaraya
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Trade Openness ◽  
Output Growth ◽  
Domestic Demand ◽  
Policy Implications ◽  
Content Type ◽  
Development Index ◽  
Long Run ◽  
Financial Development Index

Purpose – The purpose of this article is to examine the inter-relationship and direction of causality among three macroeconomic variables such as trade liberalization, financial development and economic growth. Design/methodology/approach – The empirical analysis is based on the principal component analysis as method to construct financial development index (FDI), augmented Dickey–Fuller and Phillips–Perron tests as the unit root test, Johansen’s co-integration test and VECM for direction of causality in the long run among TOP, FDI and economic growth. Findings – The empirical results confirmed that there exists a long-run association among trade openness, financial development and economic growth. This study has also found that there is bidirectional causality between financial development and growth. However, the causality runs from growth to finance is stronger than that from finance to growth. This study also observed unidirectional causality that runs from financial development and economic growth to trade openness. Research limitations/implications – The policy implications that could be drawn from the present study is that, initiation of financial reforms to improve the size of financial system would lead to higher economic growth. Another key implication from this study is that because trade openness has no effect on both domestic financial sector development and output growth, it would be better to deploy the resources into creating a sustained domestic demand rather than concentrating more on the external front in general and trade openness in particular. Originality/value – The study constructs a summary IFD for India by taking into account four broad financial development indicators for the period 1971-2012. The present paper also suggests that it would be better to deploy the resources to create a sustained domestic demand rather than concentrating more on the external front in general and trade openness in particular.

Linkages between investment flows and financial development

2014 ◽  
Vol 5 (3) ◽  
pp. 269-299 ◽  
Author(s):  
Simplice A. Asongu
Keyword(s):  
Financial Development ◽  
Single Equation ◽  
Policy Implications ◽  
Data Set ◽  
Financial Intermediary ◽  
Content Type ◽  
Vector Autoregressive ◽  
Financial Depth ◽  
Short Run ◽  
Mainstream Literature

Purpose – The purpose of this paper is to introduce previously missing financial components (efficiency, activity and size) in the assessment of the finance-investment nexus. Design/methodology/approach – Vector autoregressive models in the perspectives of Vector Error Correction Model and short-run Granger causality are employed. There is usage of optimally specified econometric methods as opposed to purely discretionary model specifications in mainstream literature. Findings – Three main findings are established: first, while finance led investment elasticities are positive, investment elasticities of finance are negative; second, but for Guinea Bissau, Mozambique and Togo, finance does not seem to engender portfolio investment; and finally, contrary to mainstream literature, financial efficiency appears to impact investment more than financial depth. Practical implications – Four policy implications result: first, extreme caution is needed in the use of single equation analysis for economic forecasts; second, financial development leads more to investment flows than the other way round; third, financial allocation efficiency is more relevant as means to attracting investment flows than financial depth; and finally, the somewhat heterogeneous character of the findings also point to shortcomings in blanket policies that are not contingent on country-specific trends in the finance-investment nexus. Originality/value – First, contrary to the mainstream approach we use four measures of financial intermediary development (depth, efficiency, activity and size) as well as four types of investment flows (domestic, foreign, portfolio and total). Second, the chosen investment and financial indicators are derived upon preliminary robust correlation analyses from the broadest macroeconomic data set available on investment and financial intermediary flows.

scholarly journals On financial development and economic growth in Egypt

2019 ◽  
Vol 1 (2) ◽  
pp. 70-86
Author(s):  
Mahmoud Mohieldin ◽  
Khaled Hussein ◽  
Ahmed Rostom
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Developing Economies ◽  
Policy Implications ◽  
Data Set ◽  
Content Type ◽  
Time Series Modelling ◽  
Per Capita ◽  
Real Growth ◽  
The Relationship

Purpose This paper aims to discuss the evolution of the Egyptian banking sector and the main trends in financial development in Egypt. The purpose of this study is to examine empirically the relationship between the development of the financial sector and economic growth in Egypt between 1980 and 2016. Design/methodology/approach The paper draws comparisons based on critical financial indicators between Egypt and selected emerging markets and developing economies. It uses a new data set of financial development indexes released by the International Monetary Fund. This paper uses econometric time series modelling of bivariate regressions for real growth per capita and measures of financial development to assess the relationship between financial development and economic growth in Egypt. Findings There are three specific findings based on the empirical analysis. First, there is a strong association between real growth per capita and financial development measured by money supply to GDP. Second, access to and the efficiency of banking services are not associated with real per capita income. Third, the Financial Markets Access Index – which compiles data on market capitalization outside of the top ten largest companies and the number of corporate issuers of debt – indicates a robust association with real per capita GDP. Originality/value The paper uses advanced empirical investigation techniques and new data sets available to assess the critical relationship between finance and growth in Egypt. The main policy implications of the empirical results of this paper suggest a stronger focus on promoting a more proactive role for the financial services industry in Egypt. In particular, there is a critical role for bank financing to support the private sector to maintain an inclusive growth momentum. Further development of the capital market will promote sustainability of such economic growth.

Foreign Direct Investment and Output Volatility Nexus: A Global Analysis

2021 ◽  
pp. 001573252110421
Author(s):  
Aisha Tauqir ◽  
Muhammad Tariq Majeed ◽  
Sadaf Kashif
Keyword(s):  
Least Squares ◽  
Fixed Effects ◽  
Global Analysis ◽  
Ordinary Least Squares ◽  
Output Growth ◽  
Output Volatility ◽  
Fdi Inflows ◽  
Estimation Techniques ◽  
Growth Volatility

Volatility in output growth remains a genuine concern around the globe because of its detrimental effects on growth, poverty and welfare. In the realm of output volatility, the role of FDI and its consistency is particularly important and worth considering. This article examines the role of FDI inflows and specifically the instability in it on output growth volatility using a panel dataset of 141 world economies for the period 1971–2017. The study employs a variety of estimation techniques like pooled ordinary least squares (POLS), LS fixed effects (FE), LS random effects (RE), two stage least squares (2SLS) and generalised methods of moments (GMM). Findings of the study suggest that FDI acts as the volatility reducing factor, whereas uncertainty in it increases output volatility. On the policy front, this study recommends policies that not only encourage FDI inflows but also ensure the inflows to be more consistent and stable. Our results are robust corresponding to various above-mentioned estimation techniques and sensitivity analysis. JEL Codes: C23, E32, F21

Market responsiveness: antecedents and the moderating role of external supply chain integration

2017 ◽  
Vol 32 (1) ◽  
pp. 30-45 ◽  
Author(s):  
Tuan Luu
Keyword(s):  
Supply Chain ◽  
Supply Chain Integration ◽  
Manufacturing Companies ◽  
Data Set ◽  
Content Type ◽  
Business Context ◽  
Market Responsiveness ◽  
Positive Effect ◽  
Ambidextrous Leadership

Purpose The interaction between opening and closing behaviors of ambidextrous leadership produces “change” force throughout the organization in proactive response to market forces. This research aims to assess the role of ambidextrous leadership in fostering entrepreneurial orientation (EO) and market responsiveness. The research also seeks an insight into how external supply chain integration moderates the positive effect of EO on market responsiveness. Design/methodology/approach Research data were collected from 327 meso-level managers and 517 subordinates from chemical manufacturing companies in the Vietnam business context. Findings Research findings shed light on the positive effect of ambidextrous leadership on EO, which in turn contributes to market responsiveness. The moderation role that external supply chain integration plays on the EO–market responsiveness linkage was also grounded on the data set. Originality/value Through the identification of the predictive roles of ambidextrous leadership and EO for market responsiveness, the current research indicates the convergence between leadership, EO and market responsiveness research streams.

Do intraday week effect in currencies hourly trading reflect leverage and asymmetric anomalies? Policy implications for traders

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wajid Shakeel Ahmed ◽  
Muhammad Sohaib ◽  
Jamal Maqsood ◽  
Ateeb Siddiqui
Keyword(s):  
Emerging Economies ◽  
Garch Model ◽  
Study Data ◽  
Policy Implications ◽  
Asymmetric Effect ◽  
Data Set ◽  
Content Type ◽  
Study Results ◽  
Rational Choices ◽  
Trading Pattern

Purpose The purpose of this study is to determine if intraday week (IDW) effect of the currencies reflect leverage and asymmetric impact in currencies market. The study data set comprises of intraday patterns of 15 currencies from developed and emerging economies. Design methodology approach The study applies the exponential generalized autoregressive conditional heteroscedasticity (E-GARCH) model technique to observe the IDW leverage and asymmetric effect after introducing hourly dummies variables, namely, IDWmon, IDWwed, IDWfrid and IDWfrid-mon. Findings The study results favor the propositions and confirm that IDW effect do exist in the international forex markets in relation to hourly trading pattern for respective currencies. Mostly, currencies do depreciate on Monday and Wednesday compared to the rest of the days. However, on the last trading day, i.e. Friday currencies observe an appreciation pattern which is for both economies. The results have an evidence of leverage and asymmetric effect confirmed by the E-GARCH model as a result of press releases and influence by micro-factors in the currency markets. Practical implications The study believes to have theoretical connection related to the better understanding of currencies trend for developed and emerging economies, as the IDW effect exists. Moreover, confirmation of both the leverage and asymmetric effect in observed currencies would be able to assist the investors in making rational choices during the trading hours and would confirm considerable profits through profit incentivized strategies. Originality value The study not only add knowledge to the previous study work in relation to the hourly trading pattern of currencies with reference to the IDW effects but also highlights the leverage and asymmetric effect in currencies that will help in formulating future trading strategies particular to emerging economies.

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