scholarly journals Budget Deficits and Economic Growth: A Vector Error Correction Modelling of South Africa

2017 ◽  
Vol 9 (2(J)) ◽  
pp. 215-223
Author(s):  
Kagiso Molefe ◽  
Andrew Maredza
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Error Correction ◽  
Budget Deficit ◽  
Time Series Data ◽  
Series Data ◽  
Budget Deficits ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run

The primary motivation behind this study was to explore the consequential effects of budget deficit on South Africa`s economic growth. Six variables were used, namely: real GDP, budget deficit, real interest rate, labour, gross fixed capital formation and unemployment. The Vector Error Correction Model (VECM) was used to estimate the long-run equation and also measure the correction from disequilibrium of preceding periods. Using annual time series data spanning the period 1985 to 2015, empirical evidence from the study revealed that budget deficits and economic growth are inversely related. It was therefore concluded that high levels of budget deficit in South Africa have detrimental effects on the growth of the economy. The estimate of the speed of adjustment coefficient found in this study revealed that about 29 per cent of the variation in GDP from its equilibrium level is corrected within one year. The results obtained in this study are favourably similar to those in the literature and are also sustained by previous studies.

scholarly journals Budget Deficits and Economic Growth: A Vector Error Correction Modelling of South Africa

2017 ◽  
Vol 9 (2) ◽  
pp. 215
Author(s):  
Kagiso Molefe ◽  
Andrew Maredza
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Error Correction ◽  
Budget Deficit ◽  
Time Series Data ◽  
Series Data ◽  
Budget Deficits ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run

The primary motivation behind this study was to explore the consequential effects of budget deficit on South Africa`s economic growth. Six variables were used, namely: real GDP, budget deficit, real interest rate, labour, gross fixed capital formation and unemployment. The Vector Error Correction Model (VECM) was used to estimate the long-run equation and also measure the correction from disequilibrium of preceding periods. Using annual time series data spanning the period 1985 to 2015, empirical evidence from the study revealed that budget deficits and economic growth are inversely related. It was therefore concluded that high levels of budget deficit in South Africa have detrimental effects on the growth of the economy. The estimate of the speed of adjustment coefficient found in this study revealed that about 29 per cent of the variation in GDP from its equilibrium level is corrected within one year. The results obtained in this study are favourably similar to those in the literature and are also sustained by previous studies.

scholarly journals Government Expenditure and Economic Growth in South Africa: A Vector Error Correction Modelling and Granger Causality Test

2017 ◽  
Vol 9 (4) ◽  
pp. 164
Author(s):  
Kagiso Molefe ◽  
Ireen Choga
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Error Correction ◽  
Granger Causality ◽  
Time Series Data ◽  
Government Expenditure ◽  
Series Data ◽  
Vector Error Correction ◽  
Vector Error ◽  
The Relationship

Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. This study re-examine the relationship between government expenditure and economic growth in South Africa for the period of 1990 to 2015 using the Vector Error Correction Model and Granger Causality techniques. The time series data included in the model were gross domestic Product (GDP), government expenditure, national savings, government debt and consumer price index or inflation. Results obtained from the analysis showed a negative long-run relationship between government expenditure and economic growth in South Africa. Furthermore, the estimate of the speed of adjustment coefficient found in this study has revealed that 49 per cent of the variation in GDP from its equilibrium level is corrected within of a year. Furthermore, the study discovered that the causality relationship run from economic growth to government expenditure. This implied that the Wagner’s law is applicable to South Africa since government expenditure is an effect rather than a cause of economic growth. The results presented in this study are similar to those in the literature and are also sustained by preceding studies.

scholarly journals Government Expenditure and Economic Growth in South Africa: A Vector Error Correction Modelling and Granger Causality Test

2017 ◽  
Vol 9 (4(J)) ◽  
pp. 164-172
Author(s):  
Kagiso Molefe ◽  
Ireen Choga
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Error Correction ◽  
Granger Causality ◽  
Time Series Data ◽  
Government Expenditure ◽  
Series Data ◽  
Vector Error Correction ◽  
Vector Error ◽  
The Relationship

Previous studies generally find mixed empirical evidence on the relationship between government spending and economic growth. This study re-examine the relationship between government expenditure and economic growth in South Africa for the period of 1990 to 2015 using the Vector Error Correction Model and Granger Causality techniques. The time series data included in the model were gross domestic Product (GDP), government expenditure, national savings, government debt and consumer price index or inflation. Results obtained from the analysis showed a negative long-run relationship between government expenditure and economic growth in South Africa. Furthermore, the estimate of the speed of adjustment coefficient found in this study has revealed that 49 per cent of the variation in GDP from its equilibrium level is corrected within of a year. Furthermore, the study discovered that the causality relationship run from economic growth to government expenditure. This implied that the Wagner’s law is applicable to South Africa since government expenditure is an effect rather than a cause of economic growth. The results presented in this study are similar to those in the literature and are also sustained by preceding studies.

Development and Degradation: The Nexus between GDP, FDI, and Pollution in India

2020 ◽  
Vol 6 (1) ◽  
pp. 39-49
Author(s):  
Tripura Sundari C. U. ◽  
Anindita Mitra
Keyword(s):  
Error Correction ◽  
Time Series Data ◽  
Unit Root Test ◽  
Wald Test ◽  
Series Data ◽  
Kuznets Curve ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Per Capita

The nexus between development and environment has been a debatable topic for years, more so when foreign direct investment (FDI is used to accelerate the economy. Since environmental Kuznets curve may not be achievable by all economies and many studies have not been able to establish a consistent relationship between FDI and environment, this study determines the liaison between FDI, GDP, and pollution in India with time series data from 1990 to 2015. While per capita GDP plotted against per capita carbon dioxide (CO2) emission indicates an alarming positive relation, the co-integration between FDI, GDP, and CO2 tested using unit root test statistics (augmented Dickey–Fuller test) for stationarity and then by Johansen and Juselius’s multivariate co-integration technique show a long-run co-integration. Since the existence of a relationship between variables does not prove causality, the variables are phrased in a vector error correction (VEC) form and vector error correction mechanism (VECM) Granger causality/block exogeneity Wald test which reveals that FDI has a positive and significant impact on pollution and GDP attracts FDI. This transitive relation suggests that FDI in pollution-controlling technology would be a feasible solution to sustainable development.

scholarly journals An Analysis of the Relationships among Exports, Imports, Physical Capital and Economic Growth in Pakistan

2020 ◽  
Vol 4 (1) ◽  
pp. 1-1
Author(s):  
Syed Asfand Yar Shah ◽  
Naeem Ahmad ◽  
Wasim Aslam ◽  
Bilal Haider Subhani
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Physical Capital ◽  
Capital Formation ◽  
Series Data ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Augmented Dickey Fuller ◽  
Fixed Capital Formation

This review emphasized the relationship among capital formation, economic growth, exports and imports in case of Pakistan scenario using time series data from 1976 to 2015. Augmented Dickey Fuller Test, Johansen Co-integration, Vector error correction model and Granger Causality techniques have been used to check the relationships among exports, imports and economic growth. The results from this study show that the exports, imports, real GDP and gross fixed capital formation have a long run relationship and are co-integrated. This study uses the data of Pakistan and concludes that GDP doesn’t granger cause with the export and import while export and imports do granger cause with the GDP in the long run. Finding of the study also displays that physical capital formation has no impression over GDP. Previous study shows the positive relation among exports, imports, capital formation and economic growth while this study shows that in the long run capital formation and economic growth has no effect. Government subsidizes the exports and also increases the duty bills on imports that help boost the domestic industries manufacture the goods and motivate to produce the best quality of goods. JEL codes: F2, O47

scholarly journals Estimation of peach supply response in Colombia using a Vector Error Correction Model

ENTRAMADO ◽  
2021 ◽  
Vol 17 (1) ◽  
pp. 250-260
Author(s):  
Susan Elsa  Cancino ◽  
Giovanni Orlando Cancino-Escalante
Keyword(s):  
Time Series ◽  
Error Correction ◽  
Time Series Data ◽  
Series Data ◽  
Correction Coefficient ◽  
Vector Error Correction ◽  
Supply Response ◽  
Vector Error ◽  
Long Run ◽  
Augmented Dickey Fuller

An empirical study of peach supply response to own-price and yield in Colombia using time series data from 2000 to 2018 was undertaken. A quantitative, correlational and non-experimental research design was selected and the Johansen´s co-integration as well as the vector error correction framework were employed. The Augmented Dickey-Fuller test showed that the time series were integrated of order one and the Johansen´s co-integration confirmed the existence of a long-term relationship between the variables. Moreover, the short and long run coefficients for own-price and yield were statistically significant and presented the expected signs, however, estimated own-price elasticity was below unit suggesting it is not an important factor in peach supply response. Furthermore, the vector error correction coefficient (-0.32) was negative and in line with theory, which showed that in the long-run, the model converges towards equilibrium, however at a relatively slow pace. Therefore, it can be concluded that, overall, the proposed model contributes to the understanding of the dynamics in peach output supply.

scholarly journals The impact of economic growth on unemployment in South Africa: 1994-2012

2016 ◽  
Vol 13 (2) ◽  
pp. 246-255 ◽  
Author(s):  
Handson Banda ◽  
Hlanganipai Ngirande ◽  
Fortune Hogwe
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
South African ◽  
Time Series Data ◽  
Series Data ◽  
Vector Error Correction ◽  
Flexible Labor ◽  
Long Run ◽  
The Unemployed ◽  
The Impact

One of the most pressing problems facing the South African economy is unemployment, which has been erratic over the past few years. This paper analyzed the impact of economic growth on unemployment, using quarterly South African time series data from 1994-2012. The results of Johansen cointegration reflected that a long run equilibrium or relationship exists among the variables. In ascertaining the effects of macroeconomic variables thus REER, LP, GDP and BUG on unemployment in South Africa, the study utilized vector error correction model (VECM). The results of VECM indicated that GDP, BUG and REER have positive long run impact on unemployment whilst LP negatively impact unemployment. The study resulted in the following policy recommendation: South African government should redirect its spending towards activities that directly and indirectly promote creation of employment and decent jobs, a conducive environment and flexible labor market policies or legislations without impediments to employment creation should be created, and lastly government should prioritize industries that promote labor intensive. All this will help in absorbing large pools of the unemployed population thereby reducing unemployment in South Africa

scholarly journals Non-bank financial institutions and economic growth: Evidence from Africa’s three largest economies

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Ronald Rateiwa ◽  
Meshach J. Aziakpono
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Financial Institutions ◽  
Time Series Data ◽  
Bank Lending ◽  
Series Data ◽  
The Sustainable Development ◽  
Long Run ◽  
The Relationship

Background: In order for the post-2015 world development agenda – termed the sustainable development goals (SDGs) – to succeed, there is a pronounced need to ensure that available resources are used more effectively and additional financing is accessed from the private sector. Given that traditional bank lending has slowed down, the development of non-bank financing has become imperative. To this end, this article intends to empirically test the role of non-bank financial institutions (NBFIs) in stimulating economic growth.Aim: The aim of this article is to empirically test the existence of a long-run equilibrium relationship between economic growth and the development of NBFIs, and the causality thereof.Setting: The empirical assessment uses time-series data from Africa’s three largest economies, namely, Egypt, Nigeria and South Africa, over the period 1971–2013.Methods: This article uses the Johansen cointegration and vector error correction model within a country-specific setting.Results: The results showed that the long-run relationship between NBFI development and economic growth is relatively stronger in Egypt and South Africa, than in Nigeria. Evidence in respect of Nigeria shows that such a relationship is weak. The nature of the relationship between NBFI development and economic growth in Egypt is positive and significant, and predominantly bidirectional. This suggests that a virtuous relationship between NBFIs and economic growth exists in Egypt. In South Africa, the relationship is positive and significant and predominantly runs from NBFI development to economic growth, implying a supply-leading phenomenon. In Nigeria, the results are weak and mixed.Conclusion: The study concludes that in countries with more developed financial systems, the role of NBFIs and their importance to the economic growth process are more pronounced. Thus, there is need for developing policies targeted at developing the NBFI sector, given their potential to contribute to economic growth.

Export-led Growth Hypothesis: Econometric Evidence from Malaysia

2013 ◽  
Vol 14 (2) ◽  
pp. 94-112
Author(s):  
Hassanudin Mohd Thas Thaker ◽  
Tan Siew Ee ◽  
Sushant Vaidik
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Series Data ◽  
Vector Error Correction ◽  
Distributed Lag ◽  
Long Run ◽  
Paper Cover ◽  
Econometric Evidence ◽  
Augmented Dickey Fuller ◽  
Growth Hypothesis

The objective of this paper is to test the validity of the Export-led Growth Hypothesis (ELGH) in the Malaysian economy. Malaysia has always been considered to have attained its growth primarily through exports (Okposin, Bassey, Hamid, Halim, and Boon, 1999; Mun, 2008; Mahathir, 1990). In the past, several studies on this topic have been conducted but their analyses were limited to relationships using Bound-testing, Autoregressive –Distributed Lag (ARDL) and the Toda Yamamoto analysis. Empirical data and analysis in our paper cover a 21 – year span and quarterly time-series data (1991:Q1 – 2012:Q4) are used to test this ELG hypothesis. Also, many dynamic econometric measures including the Augmented Dickey Fuller (ADF) and Phillip – Perron (PP) unit root tests, Cointegration test as well as the Vector Error Correction model (VEC) for the long run have been applied. Based on these generic models, both real exports and capital stock (productivity) are found to have stimulated positive adjustments to economic growth in the long run whereas real exchange rate is found to have influenced economic growth negatively. Overall, our conclusion is that the ELG hypothesis seems applicable to Malaysia in the long run.

Relationship between Budget Deficit and Economic Growth: Evidence from Ethiopia

2021 ◽  
Vol 2 (2) ◽  
pp. 10-15
Author(s):  
Desalegn Emana
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Budget Deficit ◽  
Time Series Data ◽  
Negative Impact ◽  
Positive Impact ◽  
Negative Relationship ◽  
Nominal Exchange Rate ◽  
Series Data ◽  
Long Run

This study examined the relationship between budget deficit and economic growth in Ethiopia using time series data for the period 1991 to 2019 by applying the ARDL bounds testing approach. The empirical results indicate that budget deficit and economic growth in Ethiopia have a negative relationship in the long run, and have a weak positive association in the short run. In line with this, in the long run, a one percent increase in the budget deficit causes a 1.43 percent decline in the economic growth of the country. This result is consistent with the neoclassical view which says budget deficits are bad for economic growth during stimulating periods. Moreover, in the long run, the variables trade openness and inflation have a positive impact on Ethiopian economic growth, and on the other hand, the economic growth of Ethiopia is negatively affected by the nominal exchange rate in the long run. Apart from this, in the long run, gross capital formation and lending interest rates have no significant impact on the economic growth of the country. Therefore, the study recommends the government should manage its expenditure and mobilize the resources to generate more revenue to address the negative impact of the budget deficit on economic growth.

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