Financial Integrational Effects on Macroeconomic Instability in India

2017 ◽  
Vol 11 (2) ◽  
pp. 143-166
Author(s):  
Niranjan R.
Keyword(s):  
Financial Development ◽  
Financial Integration ◽  
Trade Openness ◽  
Jel Classification ◽  
Financial Openness ◽  
Vector Error Correction ◽  
Vector Error ◽  
International Financial Integration ◽  
Macroeconomic Instability ◽  
Negative Effect

The nexus between international financial integration and economic growth continues to be one of the most debated issues among macroeconomists, and these debates often raise several issues from the theoretical and policy perspectives. Financial integration can catalyse financial development, improve governance and impose discipline on macro-policies. However, in the absence of a basic pre-existing level of supporting conditions, financial integration can aggravate instability (Khadraoui, 2010). In addition, economic theory suggests that increased financial openness intensifies macroeconomic instability. This article investigates the financial integrational effects on macroeconomic instability in terms of output, consumption and investment volatility by employing the vector error correction model (VECM) with empirically reasonably parameters for an emerging economy, India, for the period 1989–2014. From the results, it is evident that financial openness has had a significant effect on output, consumption and investment volatility. Financial development has had a statistically significant negative effect on output, consumption and investment volatility. Similarly, trade openness and terms of trade significantly influence output, consumption and investment volatility. JEL Classification: F36, F41, F43, E32

scholarly journals How Does International Financial Integration Really Affect Post-Transition Countries' Growth? Empirical evidence from the CEE-10 countries

2021 ◽  
Vol 10 (3) ◽  
pp. 117-136
Author(s):  
Mehmed Ganić ◽  
Mahir Hrnjić
Keyword(s):  
Financial Development ◽  
Financial Integration ◽  
Southeastern Europe ◽  
Panel Unit Root Tests ◽  
Financial Openness ◽  
Dynamic Panel ◽  
Fdi Inflows ◽  
Long Run ◽  
International Financial Integration ◽  
Dynamic Panel Analysis

Abstract This paper seeks to empirically explore how an international financial integration influences a country’s GDP growth. The long run relationship is tested by PMG estimator for the sample of ten EU countries from Central, Eastern and Southeastern Europe (CEE-10 countries) between 1995 and 2017. Prior to the conducting of dynamic panel analysis based on PMG estimators, several panel unit root tests were conducted, as well as panel co integration tests. The findings offer mixed impact financial integration on growth. Among the measures of financial integration, growth of the CEE-10 countries is mostly driven in the long run by FDI inflows as well as remittances and financial openness. On the contrary, the study suggests a reversal relationship between growth and financial integration measured by Gross Foreign Assets and Liabilities in percentages of GDP. It might be explained with a fact that CEE-10 countries have not yet reached a certain level of financial development in order to benefit from financial integration. The study concludes that international financial integration does not per se enhance economic growth and country’s growth in the CEE-10 countries can be reached at a higher level of financial integration, further increase their financial openness and financial development.

scholarly journals Impact of Economic Growth, Financial Development, and Trade Openness on Environmental Degradation in Egypt

2020 ◽  
Vol 10 (1) ◽  
pp. 98-102
Author(s):  
Farman M. Ahmed ◽  
Dlawar M. Hadi ◽  
Aso K. Ahmed
Keyword(s):  
Economic Growth ◽  
Co2 Emissions ◽  
Financial Development ◽  
Trade Openness ◽  
Negative Influence ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Difference Form

This paper examines the effects of economic growth, financial development, and trade openness on the environment quality measured by CO2 emissions over the period of 1965–2014 in the case of Egypt. In this study, the series were stationary at their first difference form, and thus, a long-run model was adopted using the vector error correction model technique. The results confirm that the variables are cointegrated, indicating the long-run relationship between the variables. The empirical findings reveal a negative influence of economic growth and financial effect of the previous period of CO2 emissions, these effects are not significant in the short run. Any deviations from the long-run equilibrium return quickly, representing 59% speed of adjustment. The study proposes new policy insights into reduce CO2 emissions, especially in the long run.

The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia

2018 ◽  
Vol 53 (4) ◽  
pp. 211-224 ◽  
Author(s):  
Gan-Ochir Doojav
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Trade Balance ◽  
Developing Economies ◽  
Jel Classification ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Short Run ◽  
Exchange Rate Depreciation

For resource-rich developing economies, the effect of real exchange rate depreciation on trade balance may differ from the standard findings depending on country specific characteristics. This article employs vector error correction model to examine the effect of real exchange rate on trade balance in Mongolia, a resource-rich developing country. Empirical results show that exchange rate depreciation improves trade balance in both short and long run. In particular, the well-known Marshall–Lerner condition holds in the long run; however, there is no evidence of the classic J-curve effects in the short run. The results suggest that the exchange rate flexibility may help to deal effectively with current account deficits and exchange rate risk. JEL Classification: C32, C51, F14, F32

scholarly journals PENGARUH FINANCIAL DEVELOPMENT TERHADAP PERTUMBUHAN EKONOMI DI INDO

2020 ◽  
Vol 2 (1) ◽  
pp. 75
Author(s):  
Nia Putri Kunanti ◽  
Melti Roza Adry
Keyword(s):  
Economic Growth ◽  
Money Supply ◽  
Financial Development ◽  
Linear Regression Analysis ◽  
Trade Openness ◽  
Control Variable ◽  
Secondary Data ◽  
Negative Effect ◽  
Private Credit ◽  
Positive Effect

This study aims to determine how the influence of financial development on economic growth in Indonesia. Financial development indicators are M2 money supply, bank assets, private credit and trade openness. Where inflation and trade openness as a control variable and economic growth as the dependent variable. The data used in this study are secondary data from 2005 quarter 1 to 2018 quarter 4 which were collected through documentation and related agencies. This study uses multiple linear regression analysis and error correction models. The results of this study indicate that: (1) the money supply M2 has a negative effect on economic growth in Indonesia; (2) Bank assets have a negative effect on economic growth in Indonesia; (3) Private credit has a positive effect on economic growth in Indonesia; (4)) trade openness has a positive effect on economic growth in Indonesia.

scholarly journals Relationship between Trade Openness and Inflation: Empirical Evidences from Pakistan (1976-2010).

2011 ◽  
Vol 50 (4II) ◽  
pp. 853-876 ◽  
Author(s):  
Sehar Munir ◽  
Adiqa Kausar Kiani
Keyword(s):  
Error Correction ◽  
Trade Openness ◽  
Value Added ◽  
Error Correction Model ◽  
Series Data ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Unit Root Testing ◽  
Vector Error

This study empirically verifies the existence of significant relationship between inflation and trade openness for Pakistan using annual time-series data for the period of 1976 to 2010. The basic objective of this study is to examine the Romer‘s hypothesis for Pakistan with real agriculture value added, real exchange rate, real gross domestic product, financial market openness, money and quasi money and used trade openness, import openness and export openness ratios separately as explanatory variables with inflation rate as dependent variables. For this purpose, we have used multivariate Johansen (1998) and Johansen and Juselius (1990) Maximum Likelihood Cointegration Approach and a Vector Error Correction Model (VECM) and the expected empirical findings shows that there is a significant positive long-run relationship between inflation and trade openness, which rejects the existence of Romer‘s hypothesis for Pakistan. JEL classification: B26, E31, P24, P44 Keywords: Trade Openness, Inflation, Unit Root Testing, Multivariate Cointegration Approach, Vector Error Correction Model, Pakistan

scholarly journals Does Meaningful Relationship Exist Between Trade Liberalization and Economic Growth? A Case Study of a Small Open Economy

2021 ◽  
pp. 63-79
Author(s):  
Adedapo Odebode ◽  
Olajide Sunday Oladipo
Keyword(s):  
Economic Growth ◽  
Trade Liberalization ◽  
Open Economy ◽  
Trade Openness ◽  
Small Open Economy ◽  
Jel Classification ◽  
Appropriate Technology ◽  
Vector Error Correction ◽  
Meaningful Relationship ◽  
Alternative Measures

Using quarterly data between 1981q1 and 2018q4, the paper investigates the relationship between trade liberalization and economic growth in Nigeria. Exploring Johnasen cointegration technique and the Vector Error Correction (VEC) method, the paper considers three alternative measures of trade liberalization to determine whether the response of economic growth to trade liberalization is sensitive to the choice of the indicators of trade liberalization under consideration. The paper finds significant effects of trade liberalization on the economy. The paper recommends that government should implement policies that will promote trade openness in Nigeria. This may be achieved by establishing bilateral and multi-lateral agreements that are favourable and that will support appropriate technology transfer to domestic producers. JEL classification numbers: F31, F13, F41. Keywords: Trade liberalization, Tariffs, Economic growth, Nigeria.

scholarly journals Savings Mobilization and Financial Development during the Multicurrency Regime Period in Zimbabwe

2017 ◽  
Vol 9 (3(J)) ◽  
pp. 152-162
Author(s):  
Kunofiwa Tsaurai
Keyword(s):  
Financial Development ◽  
Time Series Data ◽  
Empirical Literature ◽  
Series Data ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
The Subject ◽  
The Relationship

This paper seeks to investigate the relationship between savings and financial development in Zimbabwe using both autoregressive distributive lag (ARDL) and vector error correction model (VECM) approaches for comparison purposes with monthly time series data from January 2009 to August 2015. Four distinct hypotheses emerged from the literature and these are the savings-led financial development, financial development-led savings, feedback effect and the insignificant/no relationship hypothesis. The existence of diverging and contradicting views in empirical literature on the subject matter is evidence that the linkage between savings and financial development is still far from being concluded. Both F-Bounds and Johansen co-integration tests observed that there is a long run relationship between savings and financial development in Zimbabwe. What is even more unique about this study is that both ARDL and VECM noted the presence of a bi-directional causality relationship between savings and financial development in the short and long run in Zimbabwe. The implication of this study is that in order to increase economic growth, Zimbabwe authorities should increase savings mobilization efforts in order to boost financial development, which in turn attracts more savings inflow into the formal financial system.

scholarly journals The Infrastructure–Growth Nexus in Nigeria: A Reassessment

2019 ◽  
Vol 11 (1-2) ◽  
pp. 41-58
Author(s):  
Godday Uwawunkonye Ebuh ◽  
Ifeoma Betty Ezike ◽  
Tersoo Shimonkabir Shitile ◽  
Ebow Suleiman Smith ◽  
Timipre Mary Haruna
Keyword(s):  
Policy Formulation ◽  
Jel Classification ◽  
Output Growth ◽  
Infrastructure Development ◽  
Real Economy ◽  
Causality Test ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Financial Infrastructure

This article re-examines the link between infrastructure development and output growth in Nigeria for policy formulation and implementation. The article employed the Granger causality test based on the time series vector error correction model (VECM) to reinvestigate the nexus between infrastructure investment and economic growth in Nigeria, using quarterly data from 1997:Q1 to 2017:Q4. This study, therefore, interrogates and accepts the infrastructure–growth hypothesis that increased financial infrastructure and infrastructure stock stimulates long-run real economy expansion in the Nigerian context. JEL Classification: H54, E23, C23

scholarly journals Financial Development and Energy Consumption in Sub-Saharan Africa: Evidence From Panel Vector Error Correction Model

SAGE Open ◽  
2020 ◽  
Vol 10 (3) ◽  
pp. 215824402093543
Author(s):  
Chigozie Nelson Nkalu ◽  
Samuel Chinwero Ugwu ◽  
Fredrick O. Asogwa ◽  
Mwuese Patricia Kuma ◽  
Queen O. Onyeke
Keyword(s):  
Energy Consumption ◽  
Error Correction ◽  
Granger Causality ◽  
Financial Development ◽  
Sub Saharan Africa ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Sub Saharan

This study examines the nexus between financial development and energy consumption/use in Sub-Saharan Africa (SSA) using a panel vector error correction model (VECM), cointegration, and Granger causality tests over the period ranging from 1975 to 2017. The annual panel time-series data generated from the World Bank database were tested for unit-roots processing using both the Levin–Lin–Chu and Im–Pesaran–Shin before proceeding to Johanson cointegration technique, the results of which motivated the choice of adopting the panel VECM rather than panel vector autoregression in the methodology. From the estimation result especially on the variables of interest, there exists a positive and statistically significant relationship between financial development and energy consumption in the long run, but not statistically significant in the short run. Further findings from the panel Granger causality test shows a unidirectional causality running from financial development to energy consumption, gross domestic product per capita, population growth to urbanization with no feedback. Among a series of policy recommendations, the monetary authorities in Sub-Saharan African countries should ensure optimal utilization of financial instruments and technologies available in the system to enhance more robust financial development to boost efficiency in energy consumption in the region in line with the sustainable growth theory.

scholarly journals The Effect of Inflation on Financial Development Indicators in Iran (2000–2015)

2017 ◽  
Vol 12 (2) ◽  
pp. 53-62 ◽  
Author(s):  
Mahyar Hami
Keyword(s):  
Financial Development ◽  
Time Series Data ◽  
Banking System ◽  
Series Data ◽  
Vector Error Correction ◽  
Development Indicators ◽  
Vector Error ◽  
Equilibrium Relationship ◽  
Proposed Model ◽  
Integration Test

Abstract Inflation and financial development are among the factors that influence economic growth and the interaction between them is a major issue in developing countries. The aim of this paper is to investigate the effect of inflation on financial development indicators in Iran using seasonal data over 2000-2015. To achieve the research objectives, time series data were collected from World Bank and seasonal inflation rate, with 5 financial development indicators were used to measure the research variables. Then I applied Johansen Co-integration Test and Vector Error Correction Model to estimate the proposed model. The results show that inflation has a negatively significant effect on financial depth and also positively significant effect on the ratio of total deposits in banking system to nominal GDP in Iran during the observation period. Also the existence of an equilibrium relationship between inflation and other 3 indicators of Iran`s financial development used in this study was rejected.

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