scholarly journals Crowding-out Hypothesis in a Vector Error Correction Framework: A Case Study of Pakistan

2001 ◽  
Vol 40 (4II) ◽  
pp. 633-650 ◽  
Author(s):  
Kalim Hyder
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Budget Deficit ◽  
Public Investment ◽  
Private Investment ◽  
Vector Error Correction ◽  
The Public ◽  
Vector Error ◽  
Development Expenditure ◽  
Negative Effect

Under the umbrella of the IMF stabilisation programmes, Pakistan has pursued a policy of fiscal consolidation since 1988. A look at the budget deficit from 1988 onwards reveals that the policy has only been marginally successful. Even this fragile accomplishment of the Fund-based programme has been achieved at a much greater cost: the reduction in budget deficit has only been materialised because of the curtailment of development expenditure component of total fiscal outlays [Social Policy and Development Centre (2001)]. Economic theory suggests that development expenditure component of fiscal outlays, which also equals net investment by the public sector,1 has a significant relationship with both the rate of private investment and economic growth. If public investment increases, fewer funds will be available for private investment. Competition will thereby drive the interest rates up leading to lower level of private investment. Neo-classicals believe that this process will only result in a redistribution of gross national between the public and the private sector and the rate of economic growth will remain intact. On the other hand, Keynesians argue that the multiplier effect of higher public spending will be larger as compared to the induced negative effect of reduced private investment on the rate of economic activity and, therefore, gross national product will increase.

REGIONAL CONVERGENCE OF ECONOMIC GROWTH DURING POST-REFORM PERIOD IN INDIA

2014 ◽  
Vol 59 (02) ◽  
pp. 1450012 ◽  
Author(s):  
JAGANNATH MALLICK
Keyword(s):  
Economic Growth ◽  
Growth Models ◽  
Public Investment ◽  
Private Investment ◽  
Club Convergence ◽  
Conditional Convergence ◽  
Indian States ◽  
Middle Income ◽  
The Public ◽  
Long Run

This paper examines the club-convergence and conditional convergence of economic growth of the major 15 states in India over the periods from 1993–1994 to 2004–2005 by using dynamic fixed effect growth models. The result finds that there is club-convergence within the middle income states. There is also evidence of the convergence of per capita income among Indian states by conditioning private investment and public investment along with other factors of economic growth. This paper is innovative in separating the significance of private investment from the public investment in the long-run dynamics of income in Indian states. This paper suggests that regional disparity in income can be reduced by equitable allocation of private investment and equitable distribution of public investment.

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 The Impact of Islamic Bank Financing, Government Spending, and Investment on Economic Growth in Indonesia

2021 ◽  
Vol 10 (2) ◽  
pp. 299-310
Author(s):  
Nofrianto Nofrianto ◽  
Yunie Muliana ◽  
Adi Cahyadi
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Vector Error Correction ◽  
Islamic Bank ◽  
Vector Error ◽  
Bank Financing ◽  
Negative Effect ◽  
Financing And Investment ◽  
Quantitative Descriptive ◽  
The Impact

This study aims to analyze the effect of Islamic bank financing, government spending, and investment on economic growth in Indonesia from 2003 to 2019. A quantitative descriptive methodusing the Vector Error Correction Model (VECM) analysis was applied. The results showed that in the short term, the variables of Islamic bank financing, government spending, and investment did not have a significant effect on economic growth. This shows that these variables require enough time to affect the economic growth. However in the long term, the results showed that Islamic bank financing and investment respectively have a significant, negative effect on economic growth, while government spending has a positive and significant effect on economic growth in Indonesia.JEL Classification: F22, F24, I32, J01, O15How to Cite:Nofrianto, Muliana, Y., & Cahyadi, A. (2021). The Impact of Islamic Bank Financing, Government Spending, and Investment on Economic Growth in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 10(2), 299-310. https://doi.org/10.15408/sjie.v10i2.20469.

scholarly journals Does Exchange Rate Volatility Affect Economic Growth in Nigeria?

2020 ◽  
Vol 12 (7) ◽  
pp. 54
Author(s):  
Tule Kpughur Moses ◽  
Oboh Ugbem Victor ◽  
Ebuh Godday Uwawunkonye ◽  
Onipede Samuel Fumilade ◽  
Gbadebo Nathaniel
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Gdp Growth ◽  
Impulse Response Functions ◽  
Vector Error Correction ◽  
Wald Tests ◽  
Vector Error ◽  
Bidirectional Relationship ◽  
Negative Effect

This study used monthly data from 2003 to 2017 to analyze the effects of USD/NG₦ exchange-rate volatility on Nigeria’s economic growth. The results from generalized autoregressive conditional heteroscedasticity (GARCH) and vector error correction model (VECM) analyses indicated that USD/NG₦ volatility had a significant effect on the country’s gross domestic product (GDP) growth. The results of the Granger causality/block exogeneity Wald tests and impulse-response functions also indicated that USD/NG₦ volatility had a significant negative effect on the country’s GDP growth. Moreover, USD/NG₦ exchange-rate volatility was found to exhibit short-term unidirectional causality for economic growth. However, a bidirectional relationship was confirmed between narrow money supply and economic growth. Yet, it was also found that the interbank exchange rate, which is a semiofficial Forex window, had little effect on Nigeria’s economic growth—a strong indication that a large portion of the productive sector lacks access to this Forex platform.

scholarly journals Exploring the Channels of Transmission between External Debt and Economic Growth: Evidence from Sub-Saharan African Countries

Economies ◽  
2021 ◽  
Vol 9 (2) ◽  
pp. 50
Author(s):  
Adewale Hassan ◽  
Daniel Meyer
Keyword(s):  
Economic Growth ◽  
Public Investment ◽  
Generalized Method Of Moments ◽  
External Debt ◽  
Private Investment ◽  
African Countries ◽  
Linear Effect ◽  
Negative Effect ◽  
Sub Saharan ◽  
Ssa Countries

This study aimed to determine the channels through which external debt transmits its impact on economic growth in sub-Saharan African (SSA) countries. To this end, panel data comprising 30 SSA countries were investigated for the period 1985–2019, using the system generalized method of moments (GMM) estimation technique. The study identified public investment, private investment and total factor productivity as channels transmitting the non-linear effect from external debt to economic growth. Furthermore, the interest rate was also confirmed as a channel but with a direct effect. Contrariwise, the estimates indicated that savings are not a channel of transmission from external debt to economic growth in SSA. These findings call for urgent action from SSA countries to reduce their external debt stocks and implement alternative macroeconomic non-debt strategies to improve the identified channels to counteract the negative effect of high external debt on them.

scholarly journals The Effect of Islamic Financial Inclusion on Economic Growth: A Case Study of Islamic Banking in Indonesia

2021 ◽  
Vol 4 (1) ◽  
pp. 976-985
Author(s):  
Fauziyah Adzimatinur ◽  
Vigory Gloriman Manalu
Keyword(s):  
Economic Growth ◽  
Financial Inclusion ◽  
Third Party ◽  
Islamic Banking ◽  
Vector Error Correction ◽  
Vector Error ◽  
Long Run ◽  
Negative Effect ◽  
Positive Effect

This research aims to examine the effects of financial inclusion in Islamic banking on economic development in Indonesia. The economic growth indicator is represented by the Industry Production Index (IPI) while the financial inclusion indicator is represented by the amount of Third Party Funds, the amount of financing, the number of Third Party Funds accounts, and the number of financing accounts. The data used is time series from January 2011 to February 2020. The Vector Error Correction Model (VECM) is used to analyze the data. The results show that in the long run, inflation has a positive effect, while in the short term, inflation has a positive effect on lag one and has a negative effect on lag 2. While the financial inclusion indicator shows that the financial inclusion of Islamic banking in Indonesia has a positive effect on economic growth. 

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 MACROECONOMIC EFFECTS OF BUDGET DEFICIT IN NIGERIA

2021 ◽  
Vol 4 (4) ◽  
Author(s):  
Obiageli Gloria Akamobi ◽  
Ijeoma Blessing Unachukwu
Keyword(s):  
Economic Growth ◽  
Budget Deficit ◽  
Inflation Rate ◽  
Public Investment ◽  
Private Investment ◽  
Series Data ◽  
Labour Force Participation Rate ◽  
Deficit Financing ◽  
Research Findings ◽  
Macroeconomic Effects

This study probed the macroeconomic effects of budget deficit in Nigeria. Specifically, it seeks to probe the effect of budget deficit on private investment and public investment in Nigeria by adopting the ADF unit root test and ARDL model, Granger Causality test and the short-run diagnostics and stability using annual time series data covering 37 years from 1981 to 2019. The variables employed include – Growth rate of real gross domestic product, private investment (Gross Fixed Capital Formation) as a percentage of GDP, public investment measured as ratio government capital expenditure to GDP, budget deficit, money supply measured as ratio of GDP, inflation rate measured by annual year-on-year inflation rate, interest rate, labour force participation rate. The research findings admitted that, budget deficit have positive and significant impact on economic growth in Nigeria. Therefore, government budget deficit has no crowding out effect on investment. The study also reveals that budget deficit has negative and insignificant impact on private investment in Nigeria. In addition, further investigation shows budget deficit have positive and significant impact on public investment in Nigeria. Also, the study asserts that there is unidirectional causality running from budget deficit to economic growth, private investment and public investment. Based on the research findings of this study, Government must ensure and maintain strong fiscal discipline without compromising the wellbeing of the citizenry by allocating budget spending to sectors that can translate the deficit into high economic growth both in the short and long runs. Furthermore, budget deficit financing in Nigeria should be focused on the productive sectors of the economy. This is because deficit financing has merely resulted in economic instability indicating that sound policies are needed to achieve economic stability in Nigeria. JEL: E02, H61, E22 <p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0778/a.php" alt="Hit counter" /></p>

scholarly journals Post-Crisis Household Savings Behavior in Romania

2019 ◽  
Vol 1 (1) ◽  
pp. 17-33
Author(s):  
Dan-Gabriel Anghel ◽  
Adina-Ionela Străchinaru
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Linear Growth ◽  
Household Savings ◽  
Growth Trend ◽  
Savings Behavior ◽  
Monthly Data ◽  
Vector Error Correction ◽  
Vector Error ◽  
Vector Error Correction Models

Abstract The recent linear growth trend recorded by net savings in Romania is very intriguing. We thus study household savings behavior using Vector Autoregression and Vector Error Correction models on a sample of post-2007 monthly data. Contrary to common economic theory, we find that real interest rates do not influence the loan and savings behavior of Romanian households in our sample, despite their significant volatility and, even, negative recorded values. The results indicate a change in attitude and in risk perception of Romanian households in the aftermath of the financial crisis in 2008, in the way that has significantly decreased their preference for present consumption in favor of savings. Despite the significant increase in net savings, we also find that they have not significantly contributed to economic growth.

scholarly journals How the Crowding-out Effect Hypothesis Stands Under a Financial System Liberalised: The Mexican Economy Case

2021 ◽  
Vol 12 (5) ◽  
pp. 246
Author(s):  
Benjamin Garcia Paez
Keyword(s):  
Public Investment ◽  
Empirical Work ◽  
Financial System ◽  
Private Investment ◽  
Developed Countries ◽  
The Public ◽  
Negative Effect ◽  
Financial Liberalisation ◽  
Effect Hypothesis ◽  
Work Done

This paper revisits the financial-liberalisation hypothesis predicting one negative effect of public investment on private investment, which led to the de-regularisation of the financial system in Mexico and many other Less-developed Countries (LDCs) so as to probe whether such tenet hold today even when the role played by the public sector has evolved from having a direct intervention in credit allocation scheme to the fulfilment of a limited duties such as the surveillance of the money and capital markets under a financial liberalization environment. Considering Mexico as a case study, an econometric exercise over the 1970-2019 period is tried crunching official statistical data. Besides a brief introduction, the second section discusses theoretical issues concerning the effects of public investment on private investment, likewise some empirical work done in this field. The third section develops the methodology used to taste the net effect of public investment on private investment and presents also the results estimates. Finally, some conclusions derived from the empirical evidence found in the analysis and a brief discussion are laid down.

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