scholarly journals Democracy and Growth Nexus in Indonesia

2020 ◽  
Vol 20 (2) ◽  
pp. 208-221
Author(s):  
Azwar Iskandar ◽  
Achmat Subekan
Keyword(s):  
Economic Growth ◽  
Least Squares ◽  
Granger Causality ◽  
Control Variable ◽  
Political Stability ◽  
Ordinary Least Squares ◽  
Causality Test ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

The objective of this study is to analyze the causality between democracy and economic growth in Indonesia for the period of 1995 to 2017. More specifically, this paper  also attends to investigate the existence of a long-run relationship between them. This study perform a multivariate cointegration test with political stability as a control variable and cross-check this long-run relationship with an autoregressive distributed lag (ARDL) model approach to cointegration. This study also use the Granger causality test within a vector error correction model (VECM) framework and estimate three different models using a non-linear specification: Ordinary Least Squares (OLS) estimation, Fully Modified OLS (FM-OLS) and Dynamic Ordinary Least Squares (DOLS). The results show cointegration among the variables specified in the model when political stability is taken into account. Indeed, for economic growth and democracy to move together in the long run, they need to be associated with political stability. The tests for Granger causality conducted show a long-run causality running from GDP and political stability to democracy. In other word, the economic growth and political stability Granger cause democracy. It is the economic performance that influences democracy and not the reverse. In short-run, there is neutrality causation between democracy and growth, democracy and political stability, growth and political stability. These results suggest that economic growth through strong institutions is a precondition for democratization.

The relationship between financial development and economic growth in Eswatini (formerly Swaziland)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Siphe-okuhle Fakudze ◽  
Asrat Tsegaye ◽  
Kin Sibanda
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Financial Development ◽  
Granger Causality Test ◽  
Causality Test ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

PurposeThe paper examined the relationship between financial development and economic growth for the period 1996 to 2018 in Eswatini.Design/methodology/approachThe Autoregressive Distributed Lag bounds test (ARDL) was employed to determine the long-run and short-run dynamics of the link between the variables of interest. The Granger causality test was also performed to establish the direction of causality between financial development and economic growth.FindingsThe ARDL results revealed that there is a long-run relationship between financial development and economic growth. The Granger causality test revealed bidirectional causality between money supply and economic growth, and unidirectional causality running from economic growth to financial development. The results highlight that economic growth exerts a positive and significant influence on financial development, validating the demand following hypothesis in Eswatini.Practical implicationsPolicymakers should formulate policies that aims to engineer more economic growth. The policies should strike a balance between deploying funds necessary to stimulate investment and enhancing productivity in order to enliven economic growth in Eswatini.Originality/valueThe study investigates the finance-growth linkage using time series analysis. It determines the long-run and short-run dynamics of this relationship and examines the Granger causality outcomes.

scholarly journals Government Spending and Economic Growth in Ghana: Evidence from Granger Causality Analysis

2017 ◽  
Vol 3 (2) ◽  
pp. 50-58 ◽  
Author(s):  
Lucy Anning ◽  
Wang Haisu ◽  
Joshua Sunday Riti
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Government Spending ◽  
Causality Analysis ◽  
Economic Activities ◽  
Bounds Testing ◽  
Causality Test ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

In spite of the diverse major issues affecting the economy of Ghana over the years, the economy continues to experience a downward spiral in its economic growth. Taking into account three opining views regarding government spending and economic growth, this study sets to investigate the causal nexus fractious and economic growth in Ghana. We apply the autoregressive distributed lag (ARDL) bounds testing approach to co-integration and the vector error correction model (VECM)-Granger causality test to evaluate both long- and short-run parameters including the direction of causation with data spanning from 1980 and 2015.The empirical results show evidence of co-integration for the existence of a long-run relationship between the dependent and independent variables. The Granger causality tests, in addition, indicated causal independence between government spending and economic growth within the time framework of the study in the economy of Ghana. Government spending has a cause effect on economic growth in Ghana. However, government spending channeled into a more fractious use with the building of resilience and infrastructural development that are self-liquidating if encouraged will enhance economic activities in the short run and also propel growth in the long run in the Ghana.

scholarly journals The Impact of Imports and Exports Performance on the Economic Growth of Somalia

2017 ◽  
Vol 10 (1) ◽  
pp. 110
Author(s):  
Ali Abdulkadir Ali ◽  
Ali Yassin Sheikh Ali ◽  
Mohamed Saney Dalmar
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Ordinary Least Squares ◽  
Growth Strategy ◽  
Causality Test ◽  
Econometric Methods ◽  
Long Run ◽  
Augmented Dickey Fuller ◽  
Short Run ◽  
The Impact

In this paper the impact of exports and imports on the economic growth of Somalia over the period 1970-1991 was investigated. The study applied econometric methods such as Ordinary Least Squares technique. The Granger Causality and Johansen Co-integration tests were also used for analysing the long term association. By using Augmented Dickey-Fuller (ADF) and Phillip-Perron (PP) stationarity test, the variables proved to be integrated of the order one 1(1) at first difference. Johansen test of co-integration was used to determine if there is a long run association in the variables. To determine the direction of causality among the variables, both in the long and short run, the Pair-wise Granger Causality test was carried out. It was found that economic growth does not Granger Cause Export but was found hat export Granger Cause GDP. So this implies that there is unidirectional causality between exports and economic growth. Also there is bidirectional Granger Causality between import and export. The results show that economic growth in Somalia requires export-led growth strategy as well as export led import. Imports and exports are thus seen as the source of economic growth in Somalia.

scholarly journals Reverse Causality between Fiscal and Current Account Deficits in ASEAN: Evidence from Panel Econometric Analysis

Mathematics ◽  
2021 ◽  
Vol 9 (10) ◽  
pp. 1124
Author(s):  
Maran Marimuthu ◽  
Hanana Khan ◽  
Romana Bangash
Keyword(s):  
Interest Rate ◽  
Least Squares ◽  
Current Account ◽  
Current Account Deficit ◽  
Ordinary Least Squares ◽  
Reverse Causality ◽  
Causality Test ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

This study aims to explore the causal relationship between fiscal deficit (FD) and current account deficit (CAD) along with policy recommendations based on long-run and short-run dynamics and sensitivities. A panel data span from 1990 to 2019 is analyzed based on panel unit root tests, panel co-integration with auto-regressive distributed lag (ARDL), panel co-integration regression with fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS), and causal analysis with the Dumitrescu and Hurlin (DH) technique. The results disclosed that all tested variables are stationary at the first difference I(1) except the real interest rate (IR), which is stationary at level I(0). The ARDL estimates suggested that there is a long-run relationship between tested variables and 92% annual convergence is possible for long-run equilibrium. The FMOLS and DOLS estimates indicated that the CAD is sensitive towards the FD and the exchange rate. The DH causality test showed that the CAD is significantly affecting the FD, supporting the current account targeting hypothesis. Furthermore, it is observed that the interest rate is acting as a moderating factor between the FD and the CAD because it causes both the deficits. Thus, reverse causality is concluded from the CAD to the FD. These results have macroeconomic implications for fiscal policy in the Association of South-East Asian Nations (ASEAN-10).

scholarly journals The Impact of Industrialization, Trade Openness, Financial Development, and Energy Consumption on Economic Growth in Indonesia

Economies ◽  
2021 ◽  
Vol 9 (4) ◽  
pp. 174
Author(s):  
Khalid Eltayeb Elfaki ◽  
Rossanto Dwi Handoyo ◽  
Kabiru Hannafi Ibrahim
Keyword(s):  
Economic Growth ◽  
Energy Consumption ◽  
Least Squares ◽  
Financial Development ◽  
Correction Term ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

This study aimed to scrutinize the impact of financial development, energy consumption, industrialization, and trade openness on economic growth in Indonesia over the period 1984–2018. To do so, the study employed the autoregressive distributed lag (ARDL) model to estimate the long-run and short-run nexus among the variables. Furthermore, fully modified ordinary least squares (FMOLS), dynamic least squares (DOLS), and canonical cointegrating regression (CCR) were used for a more robust examination of the empirical findings. The result of cointegration confirms the presence of cointegration among the variables. Findings from the ARDL indicate that industrialization, energy consumption, and financial development (measured by domestic credit) positively influence economic growth in the long run. However, financial development (measured by money supply) and trade openness demonstrate a negative effect on economic growth. The positive nexus among industrialization, financial development, energy consumption, and economic growth explains that these variables were stimulating growth in Indonesia. The error correction term indicates a 68% annual adjustment from any deviation in the previous period’s long-run equilibrium economic growth. These findings provide a strong testimony that industrialization and financial development are key to sustained long-run economic growth in Indonesia.

scholarly journals TRADE OPENNESS AND ECONOMIC GROWTH: EMPIRICAL EVIDENCE FROM INDIA

2014 ◽  
Vol 16 (1) ◽  
pp. 188-205 ◽  
Author(s):  
Qazi Muhammad Adnan Hye ◽  
Wee-Yeap Lau
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Granger Causality ◽  
Trade Openness ◽  
Granger Causality Test ◽  
Causality Test ◽  
Long Run ◽  
Rolling Window ◽  
Short Run ◽  
The Impact

The main objective of this study is to develop first time trade openness index and use this index to examine the link between trade openness and economic growth in case of India. This study employs a new endogenous growth model for theoretical support, auto-regressive distributive lag model and rolling window regression method in order to determine long run and short run association between trade openness and economic growth. Further granger causality test is used to determine the long run and short run causal direction. The results reveal that human capital and physical capital are positively related to economic growth in the long run. On the other hand, trade openness index negatively impacts on economic growth in the long run. The new evidence is provided by the rolling window regression results i.e. the impact of trade openness index on economic growth is not stable throughout the sample. In the short run trade openness index is positively related to economic growth. The result of granger causality test confirms the validity of trade openness-led growth and human capital-led growth hypothesis in the short run and long run.

scholarly journals The Effect of Higher Education on Growth: A Cointegration Analysis

2013 ◽  
Author(s):  
Murat Mustafa Kutlutürk ◽  
Hakan Kasım Akmaz ◽  
Ahmet Çetin
Keyword(s):  
Higher Education ◽  
Granger Causality ◽  
Cointegration Analysis ◽  
Annual Data ◽  
Causality Test ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Short Run ◽  
The Relationship

In this study the relationship between higher education and economic growth was investigated using annual data between 1988 and 2012 for Turkey. To see short and long run effects of higher education on growth the Autoregressive Distributed Lag (ARDL) testing approach was used. In this investigation ratio of higher education graduates in employment was used as an explanatory variable. Zivot and Andrews test was implemented for the variables. The long and short run effects of higher education on growth was found significant. Granger causality test was implemented and one way Granger causality from higher education to growth was determined.

The Relevance of the Tourism-Led Growth Hypothesis to Malaysia

2017 ◽  
pp. 188-202 ◽  
Author(s):  
Chor Foon Tang ◽  
Eu Chye Tan
Keyword(s):  
Economic Growth ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Developed Countries ◽  
Causality Test ◽  
Full Sample ◽  
Aggregated Data ◽  
Long Run ◽  
Short Run ◽  
Disaggregated Data

This paper explored whether the tourism-led growth (TLG) hypothesis is empirically relevant to Malaysia based upon both full sample and rolling sample analyses. Data from January 1995 to December 2010 have been utilised for the purpose. Instead of relying upon aggregated data of tourist arrivals, disaggregated data of arrivals from 12 major tourism markets are relied upon for more insightful and accurate findings. The empirical results suggest that there was cointegration between Malaysia's economic growth and tourist arrivals from these tourism markets. However, the results of the full sample Granger causality test indicate that only 2 out of 12 tourism markets contributed to economic growth in the short-run. The TLG hypothesis is only supported in the long run by tourist arrivals from 10 out of the 12 tourism markets. The rolling-based Granger causality test shows that it is also these 10 markets situated mostly in developed countries that could provide a stable support for the TLG hypothesis.

scholarly journals A Dynamic Analysis of the Impact of Fiscal Adjustment on Economic Growth: Evidence From Pakistan

SAGE Open ◽  
2021 ◽  
Vol 11 (2) ◽  
pp. 215824402110271
Author(s):  
Ibrar Hussain ◽  
Jawad Hussain ◽  
Arshad Ali ◽  
Shabir Ahmad
Keyword(s):  
Economic Growth ◽  
Causality Test ◽  
Distributed Lag ◽  
Fiscal Adjustment ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Empirical Calibration ◽  
Short Run ◽  
S Model ◽  
The Impact

This study claims to be the first in assessing the short-run and long-run impacts of both the size and composition of fiscal adjustment on the growth in Pakistan. Empirical calibration has been made on Mankiw et al.’s model, while the Autoregressive Distributed Lag (ARDL) techniques of Pesaran et al. have been employed to carry out the estimation. To cure the problem of degenerate cases, the ARDL techniques have been augmented with the model of Sam et al. The analysis supports the hypothesis of “expansionary fiscal contraction” in the long run. The analysis reveals that the spending-based adjustment enhances the economic growth, whereas the tax-based adjustment would reduce the growth in the long run in the case of Pakistan. The Granger causality test indicates that the fiscal adjustments have been weakly exogenous, thereby allowing feedback effect from the economic growth toward the fiscal adjustment. Thus, the objective of sustained economic growth can be achieved through the spending-based consolidation measures.

scholarly journals Economic Growth, Domestic Investment, Real Exchange Rate and Trade Openness in India: A multi-cointegration analysis

2016 ◽  
Vol 12 (3) ◽  
pp. 169-184
Author(s):  
Md. Samsur Jaman
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Real Exchange Rate ◽  
Granger Causality ◽  
Trade Openness ◽  
Granger Causality Test ◽  
Domestic Investment ◽  
Causality Test ◽  
Long Run ◽  
Short Run

This study examines the relationships between economic growth, gross domestic investment, real exchange rate and trade openness in Indian Economy using the Johansen –Juselius cointegration test and VEC Granger causality test. The results suggest that there exists a long-run relationship among the variables. All the estimated coefficients of the long-run equation have the correct positive signs and significant at least at the 5 per cent level. Specifically, in the long run, a 1% increase in Gross Domestic Investment (GDI) increases 0.066% in economic growth. Similarly, a 1% increase in trade openness leads to 0.082% increase in economic growth and a 1% increase in real exchange rate leads to 0.26% increase in economic growth. Thus, in the long run, Gross Domestic Investment (GDI), trade openness and real exchange rate have positively impact on economic growth. The results from the VEC Granger causality test suggest that in the short run only economic growth has short run impact on Gross Domestic Investment (GDI). The other variables have no short run impact on each other. Thus, there is a unidirectional causality from economic growth to GDI, but there is no feedback effect.

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