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.

Role of demographic factors in economic growth of South Asian countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kashif Munir ◽  
Faqeer Syed Umaid Shahid
Keyword(s):  
Economic Growth ◽  
Life Expectancy ◽  
South Asian ◽  
Demographic Factors ◽  
Fertility Rate ◽  
Dependency Ratio ◽  
Asian Countries ◽  
Content Type ◽  
Long Run ◽  
Short Run

PurposeThis study examines the long-run and short-run impact of demographic factors, i.e. life expectancy, fertility rate and young dependency ratio in determining the economic growth of South Asian countries.Design/methodology/approachThe theoretical foundation of the study relies on demographic transition theory and incorporates life expectancy, fertility rate and young dependency ratio into the production function by means of human capital component. The study uses annual panel data of four South Asian courtiers, i.e. Bangladesh, India, Pakistan and Sri Lanka from 1980 to 2018 and utilizes panel ARDL model to analyze the long run and short run impact of demographic factors on economic growth.FindingsResults show that real stock of capital, fertility rate and life expectancy are positively related with economic growth, while an increase in young dependency ratio reduces economic growth in South Asian countries in the long run. Short-run dynamics show that real stock of capital and life expectancy have insignificant impact on economic growth, while young dependency ratio has negative and significant as well as life expectancy has positive and significant impact on economic growth in South Asian countries. Unidirectional causality exists from young dependency ratio and fertility rate to GDP per capita in the short run.Practical implicationsGovernment has to design policies for better health and education facilities to yield high economic growth as well as better infrastructure and macroeconomic stability to facilitate capital accumulation in the region to foster economic growth.Originality/valueThis study considerably adds into the existing literature by providing better understanding of various demographic aspects and their economic inference by highlighting the demographic changes that South Asia has endured. This study is also beneficial for policymakers and growth analysts in generating effective and sustainable policies regarding population dynamics and economic development of the region.

Foreign aid and growth nexus: empirical evidence from South Asian countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nihar Ranjan Jena ◽  
Narayan Sethi
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
South Asian ◽  
Least Square ◽  
Asian Countries ◽  
Content Type ◽  
Ordinary Least Square ◽  
Asian Region ◽  
Long Run ◽  
Short Run

PurposeThe purpose of this paper is to empirically examine the effectiveness of foreign aid in improving economic growth prospects in the South Asian region from 1996 to 2017.Design/methodology/approachA sample of eight South Asian countries for the period 1996–2017 is being considered for this study. This study uses various econometrics tools such as Pedroni and Johansen–Fisher panel cointegration test, panel fully modified ordinary least square and panel dynamic ordinary least square (PDOLS) to ascertain the long-run and short-run dynamics among the variables under consideration.FindingsThe empirical results found that long-run, as well as the short-run relationship, exist among foreign aid, economic growth, investment, financial deepening, price stability and trade openness of the South Asian economies. The authors also found unidirectional causality running from foreign aid to economic growth. Both the long-run relationship as well as short-run causality between foreign aid and economic growth is unequivocally positive.Originality/valueThis study uses a dynamic macroeconomic modeling framework to assess the impact of aid flows on economic growth in South Asian economies. Taking into account the diversity of level of growth experienced by the eight countries in the Asian region, this study uses an appropriate regression technique, i.e. PDOLS whose results are robust. Therefore, the policymakers in these countries are well-advised to implement suitable policy measures to ensure optimum utilization of foreign capital resources garnered by way of receipt of foreign aid and build on for stronger future economic growth.

Does trade interdependency lead linkages between stock markets? A case of South Asian countries

2019 ◽  
Vol 15 (3) ◽  
pp. 490-506 ◽  
Author(s):  
Rakesh Kumar
Keyword(s):  
Sri Lanka ◽  
South Asian ◽  
Stock Prices ◽  
Stock Markets ◽  
Asian Countries ◽  
The South ◽  
Regional Trade ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to test the dynamic linkages among the stock markets of four South Asian countries (India, Pakistan, Bangladesh and Sri Lanka) in the backdrop of trade interdependency. Design/methodology/approach Listed indices are used to serve the proxy of stock markets of four countries for the period: January 2000–December 2018. The study uses the autoregressive distributed lag model and Granger causality techniques in multivariate frameworks while focusing on intraregional trade as an exogenous factor for testing the long- and short-run causality in the given data set, hence raising the quality of statistical inference. Findings The results highlight that India and Pakistan are net exporters to the South Asian region, while Bangladesh and Sri Lanka are net importers from the region. While testing the stock markets linkages, the expanded intraregional trade volumes (exports plus imports) have occurred with the significant cointegration of stock markets of India and Pakistan with the other stock markets in the long run. In the short run, the stock markets of India, Pakistan and Sri Lanka report bidirectional causality without having significant spillovers of intraregional trade on the stock prices. Research limitations/implications The study relies on the multivariate techniques with stock prices and regional trade share as the exogenous variables. Further the regulatory, political and economic conditions of sample countries are fundamentally different which in turn affect their degree of trade interdependency and integration between the stock markets. Practical implications Nonsignificant cointegration of the stock markets of Sri Lanka and Bangladesh highlights the possibility of portfolio diversification in the long run, while the significant bidirectional causalities between the stock markets highlight the lesser degree of portfolio diversifications in the short run. Originality/value Pioneer efforts are made to examine the dynamic linkages between the South Asian stock markets while focusing on regional trade interdependency. The results provide new insight in the dynamics of stock returns of South Asian stock markets in the backdrop of intraregional trade.

Does Financial Liberalization and Trade Openness Promote Growth in South Asia?

2010 ◽  
pp. 101-132
Author(s):  
Muhammad Arshad Kahn
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Trade Liberalization ◽  
Inflation Rate ◽  
Financial Liberalization ◽  
Trade Openness ◽  
Real Output ◽  
Domestic Investment ◽  
Long Run ◽  
Short Run

This chapter examines the hypotheses that trade liberalization and financial liberalization jointly enhances economic growth in the four South Asian countries including Bangladesh, India, Pakistan and Sri Lanka for the period 1970-2007 using bounds testing approach to cointegration. The results suggest that in the long-run except for Bangladesh, financial development plays no role in promoting economic growth in these countries. Furthermore, the results suggest that trade openness plays a significant role in promoting economic growth in Bangladesh and India, while exerts negative effect on Pakistan and no effect on Sri Lanka. The share of domestic investment influences real output significantly in Bangladesh, India and Pakistan. In the long- as well as short-run two-way causality between real output, trade openness, share of investment and inflation rate exists for the case of Bangladesh and India. For the case of India two-way causality between finance and growth exists in the short-run. For the case of Pakistan, there is an evidence of long-run causality between real output, finance, trade openness, share of investment and inflation rate. However, in the short-run, two-way causality between real output, trade openness and share of investment is existed and one-way causality between inflation rate, trade openness and share of investment is also observed. No evidence of short-run causality between finance and growth and vice versa for Pakistan has been seen. Finally, for Sri Lanka, an evidence of long-run causality between real output, finance, trade openness and investment share has been found. In the short-run one-way causality between finance-growth, trade-finance, trade-growth and trade-investment has been obtained. These mixed results suggest that the authorities may focuses more and more on the trade liberalization. In addition, there is a need to further deepen the banking and stock markets and provide investment friendly environment to enhance domestic investment which, in turn, promotes economic growth.

Re-examining the twin deficit hypothesis for major South Asian economies

2019 ◽  
Vol 12 (3) ◽  
pp. 265-287
Author(s):  
Shruti Shastri
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Interest Rate ◽  
Sri Lanka ◽  
South Asian ◽  
Current Account ◽  
Transmission Mechanism ◽  
Asian Countries ◽  
Content Type ◽  
Long Run

Purpose The purpose of this study is to revisit the twin deficit hypothesis (TDH) and provide insights into the transmission mechanism connecting budget deficits and current account deficits for five major South Asian countries, namely, India, Bangladesh, Pakistan Sri Lanka and Nepal for the period 1985-2016. Design/methodology/approach This study uses a multivariate framework including real interest rate, real exchange rate and real gross domestic product to avoid the possibility of incorrect inferences caused by omission of relevant mediating variables. The long-run relationship and causality are investigated through the autoregressive distributed lag bounds testing approach and Toda Yamamoto approach, respectively, for each individual country. The robustness of the results is assessed with the help of Westerlund’s cointegration test and group mean fully modified ordinary least squares (GM-FMOLS), group mean dynamic ordinary least square (GM-DOLS) and common correlated effect mean group (CCEMG) estimators in the panel framework. Findings Both time series and panel evidences indicate long-run relationship between budget balance (BB) and current account balance (CAB) together with the mediating variables. The results indicate bi-directional causation between the two balances for India and Bangladesh, TDH for Pakistan and Sri Lanka and the reverse causation from CAB to BB for Nepal. Regarding the transmission mechanism, the results indicate the absence of the causal chain postulated by Mundell–Fleming, which predicts that BB causes CAB via interest rate and exchange rate. A CCEMG estimate of the import demand function reveals a positive government spending elasticity of imports suggesting that BB affects CAB by direct impact through demand. Originality/value This study augments the twin deficit literature on South Asian countries by providing insights into the transmission mechanism connecting the BB and CAB. Moreover, the study provides robust evidences on the TDH by using both time series and panel data techniques.

Factors affecting level of unemployment in South Asia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aiza Shabbir ◽  
Shazia kousar ◽  
Muhammad Zubair Alam
Keyword(s):  
South Asian ◽  
Unemployment Rate ◽  
Significant Relationship ◽  
Good Governance ◽  
Asian Countries ◽  
Economic Variables ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Government

PurposeThis study aims to investigate the short-run and long-run relationship between economic variables and the unemployment rate in South Asian countries.Design/methodology/approachA panel Vector Error Correction (VECM) model is used to establish the long-run and the short-run relationship between unemployment rate and selected economic variables. Data were collected from WDI, WGI and FDSD for the year's 1994–2016.FindingsThe finding of the study showed a negative and significant relationship at the 5% level of significance among governance, internet users, mobile cellular subscriptions, fixed broadband subscriptions and human capital with an unemployment rate of South Asian economies. On the other hand, financial activity (credit) and population growth have a positive and significant relationship with the unemployment rate.Research limitations/implicationsIn the light of our findings clear that employment problems can only be created if the government does not put in place adequate measures to control the population and allocate resources equitably, giving a sense of belonging to all citizens. Therefore, to provide the controlled population with the necessary employment opportunities, it is necessary to allocate resources efficiently and to launch projects aimed at creating jobs.Practical implicationsTransparency or merit is the basis of good governance and the very first step to achieving the goal of good governance is to fight against corruption. It provides a complete justification for providing good quality management records, financial controlling and managerial systems.Originality/valueThe connections between governance and unemployment are complex and need to be studied in a detailed manner. There is the absence of literature that strongly interfaces good governance to unemployment; the fundamental work in this regard is Farid (2015). They locate a solid relationship between good governance and improving external debt situation by in Pakistan a time series analysis. But there is no research in the context of South Asian countries between governance and unemployment.

Effect of economic growth, trade openness, urbanization, and technology on environment of Asian emerging economies

2018 ◽  
Vol 29 (6) ◽  
pp. 1123-1134 ◽  
Author(s):  
Kashif Munir ◽  
Ayesha Ameer
Keyword(s):  
Economic Growth ◽  
Emerging Economies ◽  
New Technologies ◽  
Trade Openness ◽  
Kuznets Curve ◽  
Stirpat Model ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to analyze the long-run as well as short-run effect of economic growth, trade openness, urbanization and technology on environmental degradation (sulfur dioxide (SO2) emissions) in Asian emerging economies. Design/methodology/approach The study utilizes the augmented STIRPAT model and uses the panel cointegration and causality test to analyze the long-run and short-run relationships. Due to the unavailability of data for all Asian emerging economies, the study focuses on 11 countries, i.e. Bangladesh, Hong Kong, India, Indonesia, Iran, Malaysia, Pakistan, Philippines, Singapore, Sri Lanka and Thailand, and uses balance panel from 1980 to 2014 at annual frequency. Findings Results showed that the inverted U-shape hypothesis of the environmental Kuznets curve holds between economic growth and SO2 emissions. While technology and trade openness increases SO2 emissions, urbanization reduces SO2 emissions in Asian emerging economies in the long run. Unidirectional causality flows from urbanization to SO2 emissions and from SO2 emissions to economic growth in the short run. Practical implications Research and development centers and programs are required at the government and private levels to control pollution through new technologies as well as to encourage the use of disposed-off waste as a source of energy which results in lower dependency on fossil fuels and leads to reduce emissions. Originality/value This study contributes to the existing literature by analyzing the effects of urbanization, economic growth, technology and trade openness on environmental pollution (measured by SO2 emissions) in Asian emerging economies. This study provides the essential evidence, information and better understanding to key stakeholders of environment. The findings of this study are useful for individuals, corporate bodies, environmentalist, researchers and government agencies at large.

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.

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.

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.

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