scholarly journals Remittances, financial development and economic growth: Empirical evidence from Lesotho

2014 ◽  
Vol 3 (4) ◽  
pp. 116-124
Author(s):  
Athenia Bongani Sibindi
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Financial Development ◽  
Foreign Currency ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error ◽  
Per Capita ◽  
Complementarity Hypothesis

Increasingly remittances now constitute a great source of foreign currency inflows for many developing countries. In some instances remittances have outpaced the growth of foreign direct investment (FDI). Amongst others, remittances can be used as a vehicle of savings mobilisation as well as fostering the supply of credit by providing liquidity to the market. In this article we investigate the causal relationship between the remittances, financial development and economic growth in Lesotho for the period 1975 to 2010. We make use of per capita remittances, real per capita broad money supply and real per capita growth domestic product as the proxies for remittances, financial development and economic growth respectively. We then test for cointegration amongst the variables by applying the Johansen procedure and then test for Granger causality based on the vector error correction model (VECM). Our results confirm the existence of at least one cointegrating relationship and also indicate that the direction of causality runs from remittances to the economy without feedback. The results also suggest that financial development Granger causes economic growth without feedback which is consistent with ‘supply-leading’ growth hypothesis. The results also confirm a causal relationship running from financial development to remittances without feedback. The results also lend credence to the “complementarity’ hypothesis in that, remittances complement rather than substitute financial development in bringing about economic growth.

scholarly journals The Relationship between Financial Sector Development and Economic Growth in Nigeria: Cointegration with Structural Break Approach

2019 ◽  
Vol 8 (5C) ◽  
pp. 1081-1088
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Financial Development ◽  
Structural Break ◽  
Financial Sector ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Financial Sector Development ◽  
Vector Error

This research investigates the relationships between the financial sector development and economic growth in Nigeria, using annual time series data for the period between 1981 to 2015. This research examines the long-run relationship between the financial sector development and the economic growth in Nigeria, and applies the Gregory and Hansen (1996a, b) cointegration approach with one endogenously determined structural break and the vector error correction model. This research finds out that, there exist cointegration among the financial development, trade openness and economic growth with structural break date in 2010 and the results from the vector error correction model finds there is significant and negative relationship between financial development and the economic growth in Nigeria in the study period. In addition, the findings of this study indicate that accounting for structural break in VECM improves the significance and thus reliability of the model applied. The estimated model is found to have passed diagnostic tests and is found to be stable. The paper recommends that to achieve the desired economic growth level financial development should be supported with other proactive measures such as sound institution and basic infrastructure to complement the effort of financial sector reforms. Moreover, future analysis should always consider the structural breaks while conducting macroeconomic empirical analysis as it helps in avoiding having spurious results

Innovation, ICT penetration, trade and economic growth in developing and developed countries: a VECM approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Parul Singh ◽  
Areej Aftab Siddiqui
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Developing Nations ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Content Type ◽  
Vector Error Correction ◽  
Vector Error ◽  
Short Run ◽  
Developed Nations

Purpose The development in information communication and technology (ICT) has led to many changes such as reorganization of economics, globalization and trade. With more innovation processes being organized and adopted across technologies, trade, etc., these are getting more closely related and needs fresh research perspective. This study aims to empirically investigate the interrelationship between ICT penetration, innovation, trade and economic growth in 20 developed and developing nations from 1995 to 2018. Design/methodology/approach The present paper examines both long-run and short-run relationships between the four variables, namely, innovation, ICT penetration, trade and economic growth, by applying panel estimation techniques of regression and vector error correction model. ICT penetration and innovation indices are constructed using principle component analysis technique. Findings The findings of the study highlight that for developed nations, growth, trade and innovation are significantly interlinked with no significant role of ICT penetration While for developing nations, significant relationship is present between growth and trade, ICT penetration and innovation. With respect to trade, in case of developed nations, significant relationship is present with ICT penetration. While for developing nations there is no significant result for trade promotion. On further employing the vector error correction model, the presence of short run causality between growth, trade and innovation in case of developed nations is established but no such causality between variables for developing nations is seen. Originality/value The present paper adds to the existing strand of literature examining interlinkage between innovation and growth by introducing new variables of ICT penetration and innovation.

scholarly journals Impact of conventional banking financing and Islamic banking financing on economic growth 2008-2018

2020 ◽  
Vol 6 (6) ◽  
pp. 1272
Author(s):  
Hasymi Nur Baehaqy ◽  
Eko Fajar Cahyono
Keyword(s):  
Economic Growth ◽  
Error Correction ◽  
Significant Relationship ◽  
Sampling Technique ◽  
Error Correction Model ◽  
Islamic Banking ◽  
Vector Error Correction Model ◽  
Correction Model ◽  
Vector Error Correction ◽  
Vector Error

This research aims to know Impact of conventional banking financing and Islamic banking financing on economic growth 2008-2018. In this study the authors used a saturated sampling technique found in Non-Probability Sampling. The analysis technique used is VECM (Vector Error Correction Model). Based on the results of the study indicate that there is a one-way relationship on several variables, namely Conventional Banking Financing to GDP and Conventional Banking Financing to Islamic Banking Financing, In the long run, Conventional Banking Financing has a positive and significant relationship to GDP, whereas Islamic Banking Financing has a negative and significant relationship to GDP.Keywords: Banking Financing, Economic Growth, GDP (Gross Domestic Product), VECM (Vector Error Correction Model)

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.

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