Does Financial Liberalization and Trade Openness Promote Growth in South Asia?

2010 ◽  
pp. 101-132
Author(s):  
Muhammad Arshad Kahn
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Trade Liberalization ◽  
Inflation Rate ◽  
Financial Liberalization ◽  
Trade Openness ◽  
Real Output ◽  
Domestic Investment ◽  
Long Run ◽  
Short Run

This chapter examines the hypotheses that trade liberalization and financial liberalization jointly enhances economic growth in the four South Asian countries including Bangladesh, India, Pakistan and Sri Lanka for the period 1970-2007 using bounds testing approach to cointegration. The results suggest that in the long-run except for Bangladesh, financial development plays no role in promoting economic growth in these countries. Furthermore, the results suggest that trade openness plays a significant role in promoting economic growth in Bangladesh and India, while exerts negative effect on Pakistan and no effect on Sri Lanka. The share of domestic investment influences real output significantly in Bangladesh, India and Pakistan. In the long- as well as short-run two-way causality between real output, trade openness, share of investment and inflation rate exists for the case of Bangladesh and India. For the case of India two-way causality between finance and growth exists in the short-run. For the case of Pakistan, there is an evidence of long-run causality between real output, finance, trade openness, share of investment and inflation rate. However, in the short-run, two-way causality between real output, trade openness and share of investment is existed and one-way causality between inflation rate, trade openness and share of investment is also observed. No evidence of short-run causality between finance and growth and vice versa for Pakistan has been seen. Finally, for Sri Lanka, an evidence of long-run causality between real output, finance, trade openness and investment share has been found. In the short-run one-way causality between finance-growth, trade-finance, trade-growth and trade-investment has been obtained. These mixed results suggest that the authorities may focuses more and more on the trade liberalization. In addition, there is a need to further deepen the banking and stock markets and provide investment friendly environment to enhance domestic investment which, in turn, promotes economic growth.

scholarly journals AID AND GROWTH IN BANGLADESH: A REASSESSMENT

2018 ◽  
pp. 422-440
Author(s):  
Sharif Hossain ◽  
Rajarshi Mitra ◽  
Thasinul Abedin
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Inflation Rate ◽  
Government Expenditure ◽  
Real Income ◽  
Domestic Investment ◽  
Real Gdp ◽  
Long Run ◽  
Short Run ◽  
Per Capita

Although the amount of foreign aid received by Bangladesh as a share of GDP has declined over the years, Bangladesh remains one of the heavily aiddependent countries in Asia. The results of most empirical studies that have examined the effectiveness of foreign aid or other forms of development assistance for economic growth have varied considerably depending on the econometric methodology used and the period of study. As the debate and controversy over aid-effectiveness for economic growth continue to grow, this paper reinvestigates the short-run and long-run effects of foreign aid received on percapita real income of Bangladesh over the period 1972–2015. A vector error correction model is estimated. The results indicate lack of any significant short-run and long-run relation between foreign aid and per-capita real income. Results further indicate short-run unidirectional causalities from per-capita real GDP to domestic investment (in proportion to GDP), from government expenditure (in proportion to GDP) to inflation rate, from inflation rate to domestic investment (in proportion to GDP), and from domestic investment to foreign aid (as percentages of GDP). Short-run bidirectional causality is observed between per-capita electricity consumption and per-capita real GDP, and between per-capita real GDP and government expenditure (in proportion to GDP).

The short-run and long-run dynamics among FDI, trade openness and economic growth: using a bootstrap ARDL test for co-integration in selected South Asian countries

2020 ◽  
Vol 9 (2) ◽  
pp. 279-295 ◽  
Author(s):  
Hummera Saleem ◽  
Malik Shahzad Shabbir ◽  
Muhammad Bilal khan
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Causal Relationship ◽  
South Asian ◽  
Trade Openness ◽  
Asian Countries ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

PurposeThe purpose of this study is to analyze the dynamic causal relationship between foreign direct investment (FDI), gross domestic product (GDP) and trade openness (TO) on a set of five selected South Asian countries.Design/methodology/approachThis study used newly developed bootstrap auto regressive distributed lags (ARDL) cointegration test to examine the long-run relationship among FDI, GDP and TO for selected South Asian countries for 1975–2016.FindingsThe economic growth (EG) is significantly related to TO for Bangladesh, India and Sri Lanka and the expansion of TO is crucial for growth in these countries. The results show that all countries (except Bangladesh) found the existence of long-run cointegration between FDI, GDP and TO, whereas FDI is a dependent variable. These results concluded that FDI and TO are contributing to EG in these selected countries.Originality/valueThis study is one of the first attempts to investigate the causal relationship and address the short and long dynamic among FDI, GDP and TO regarding five south Asian countries such as Bangladesh, India, Nepal, Pakistan and Sri Lanka.

Causality between VAT and economic growth in Nigeria: An ARDL bounds testing approach

2018 ◽  
Vol 6 (1) ◽  
pp. 55
Author(s):  
Hammed Agboola Yusuf ◽  
Irwan Shah Zainal Abidin ◽  
Normiza Bakar ◽  
Oluwaseyi Hammed Musibau
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Error Correction ◽  
Trade Openness ◽  
Value Added ◽  
Error Correction Model ◽  
Domestic Investment ◽  
Correction Model ◽  
Long Run ◽  
Short Run

Value Added Tax(VAT) is a consumption tax imposed at every stage of consumption level whose burden is burned by final consumer of goods and services. In most developing economies in the world, VAT as a source of revenue to the government that has been notable for its significant role in ensuring economic efficiency. However, VAT revenue has been underutilised in Nigeria due to a high level of corruption in the process of administering the tax. This study examines the impact of VAT, domestic investment and trade openness on economic growth in Nigeria from 1980 to 2016 using ARDL techniques. The research design is time series, and the data were analysed using time series unit root test, error correction model regression, short run and long run ARDL. The result found that VAT, domestic investment and trade openness had a positive and significant impact on real GDP. Also, corruption index is negative also significant in the long run. In the same vein, past value added tax had a negative and weak significant impact on real gross domestic product indicating convergence to long-run causality between economic growths and VAT and economic growth. The Error Correction Model (ECM (-1)) coefficient had a negative and statistically significant sign. This shows that 39 percent can quickly correct short-run deviation. The study, therefore,  recommends that tax administrative loopholes should be plugged for tax revenue to contribute immensely to the development of the economy since past VAT had a significant impact on economic growth.

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.

An Empirical Relationship between Trade Liberalization and Poverty: Comparative analysis of Selected SAARC Countries

2021 ◽  
Vol 39 (1) ◽  
Author(s):  
Ummara Ghazanfar ◽  
Rab Nawaz Lodhi ◽  
Marium Sara Minhas Bandeali ◽  
Arslan Khalil
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Trade Liberalization ◽  
Significant Relationship ◽  
Practical Implication ◽  
Empirical Relationship ◽  
Secondary Data ◽  
Long Run ◽  
Short Run ◽  
The Relationship

The purpose of this study is to examine the relationship between trade liberalization, economic growth and poverty in four SAARC countries (Bangladesh, India, Pakistan, and Sri Lanka). The quantitative research method is employed on secondary data of four SAARC countries. The data on poverty, trade liberalization and economic growth is collected from World Bank website for the period of 1980-2019. ARDL (Autoregressive Distributed Lag Approach) is used to uncover the relationship between trade liberalization, economic growth, and poverty. In the case of Bangladesh, we find a significant relationship between trade liberalization and poverty in the short run, but insignificant in long run. The results are the same when we used tariffs as a measure of trade liberalization.  In the case of India, no significant relationship exists between trade liberalization and poverty both in long run as well as in the short run.  In the case of Pakistan, no significant relationship exists between trade liberalization and poverty in the short run, but we find a significant relationship in the long run. When we used nominal tariff rate as a measure of trade liberalizations, then the significant relationship exists both in the long as well as in the short run. In the case of Sri Lanka significant relationship exist between the short run as well as in long run. This study has practical implication for policy makers in essence that only trade liberalization is not enough to reduce poverty in SAARC countries, there should be other structural transformational polices also be implement in order to get the full benefits of free trade policies. This study is unique in the sense that time series analysis on trade-poverty nexus in these four countries (Bangladesh, India, Pakistan, and Sri Lanka) is new contribution in existing literature.

scholarly journals Does international trade promote economic growth? An evidence from Brunei Darussalam

2020 ◽  
Vol 13 (2) ◽  
pp. 71-85
Author(s):  
Muhammad Tahir ◽  
Arshad Hayat
Keyword(s):  
Economic Growth ◽  
Trade Openness ◽  
Gear Up ◽  
Domestic Investment ◽  
Content Type ◽  
Significance Level ◽  
Brunei Darussalam ◽  
Long Run ◽  
Significance Levels ◽  
Short Run

Purpose The purpose of this paper is to explore the potential impact of trade openness on economic growth for the economy of Brunei Darussalam. Design/methodology/approach Empirical analyses are conducted using the autoregressive distributed lagged model (ARDL) procedure and the data used were spanning from 1989 to 2018. Findings The obtained results indicated a positive and statistically significant relationship between trade openness and economic growth. Similarly, the results also revealed that domestic investment and natural resources positively impacted economic growth. Further, this paper found that human capital has impacted economic growth both negatively and significantly, which is against the prior expectation. Moreover, in the short-run, trade openness and domestic investment have lost its significance level while all other variables have maintained both their significance levels and signs of their coefficients. Practical implications This paper has provided comprehensive evidence regarding the relationship between trade openness and economic growth for Brunei Darussalam. Therefore, the policymakers of Brunei are suggested to take practical steps to gear up trade liberalization, and hence attain higher growth. Further, a favorable attention is also needed toward economic diversification and encouraging domestic investment to accelerate the long-run economic growth. Originality/value As this is a comprehensive study on the economy of Brunei Darussalam, therefore, this paper expects that the policymakers would find it useful while formulating and exercising suitable policies related to trade openness.

Natural resources and economic growth: evidence from Brunei Darussalam

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Tahir ◽  
Umar Burki ◽  
Arshad Hayat
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Natural Resources ◽  
Trade Openness ◽  
Series Data ◽  
Domestic Investment ◽  
Content Type ◽  
Brunei Darussalam ◽  
Long Run ◽  
Short Run

PurposeThis paper explores the relationship between natural resources and economic growth of Brunei Darussalam, an underresearched area in the available literature.Design/methodology/approachAnnual data are sourced from reliable sources for the period 1989–2020. Appropriate cointegration techniques for time series data are employed to estimate the specified models and extract results.FindingsThe results provide evidence about the positive and significant role that natural resources have played in the economic growth of Brunei Darussalam. Similarly, trade openness and domestic investment have also positively and significantly impacted the long-run economic growth. On the other hand, the impacts of government expenditure and the growth of human capital on economic growth are although positive but insignificant statistically in the long run. The short-run results show that natural resources, government expenditures and domestic investment have influenced economic growth both positively and significantly. Moreover, the positive and significant impact of trade openness on economic growth, which was observed in the long run, turned negative and insignificant in the short run. Finally, the insignificant positive relationship between the growth of human capital and economic growth observed in the long run remained the same in the short run.Originality/valueThis paper studies the resource curse hypothesis for Brunei Darussalam for the first time, and therefore, the findings will be of significant interest for policymakers and researchers.

An Empirical Relationship between Trade Liberalization and Poverty: Comparative analysis of Selected SAARC Countries

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Ummara Ghazanfar ◽  
Rab Nawaz Lodhi ◽  
Marium Sara Minhas Bandeali ◽  
Arslan Khalil
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Trade Liberalization ◽  
Significant Relationship ◽  
Practical Implication ◽  
Empirical Relationship ◽  
Secondary Data ◽  
Long Run ◽  
Short Run ◽  
The Relationship

The purpose of this study is to examine the relationship between trade liberalization, economic growth and poverty in four SAARC countries (Bangladesh, India, Pakistan, and Sri Lanka). The quantitative research method is employed on secondary data of four SAARC countries. The data on poverty, trade liberalization and economic growth is collected from World Bank website for the period of 1980-2019. ARDL (Autoregressive Distributed Lag Approach) is used to uncover the relationship between trade liberalization, economic growth, and poverty. In the case of Bangladesh, we find a significant relationship between trade liberalization and poverty in the short run, but insignificant in long run. The results are the same when we used tariffs as a measure of trade liberalization.  In the case of India, no significant relationship exists between trade liberalization and poverty both in long run as well as in the short run.  In the case of Pakistan, no significant relationship exists between trade liberalization and poverty in the short run, but we find a significant relationship in the long run. When we used nominal tariff rate as a measure of trade liberalizations, then the significant relationship exists both in the long as well as in the short run. In the case of Sri Lanka significant relationship exist between the short run as well as in long run. This study has practical implication for policy makers in essence that only trade liberalization is not enough to reduce poverty in SAARC countries, there should be other structural transformational polices also be implement in order to get the full benefits of free trade policies. This study is unique in the sense that time series analysis on trade-poverty nexus in these four countries (Bangladesh, India, Pakistan, and Sri Lanka) is new contribution in existing literature.

scholarly journals Impact of Exchange Rate Management on the Nigerian Economic Growth: Empirical Validation

2019 ◽  
Vol 1 (2) ◽  
pp. 28-35
Author(s):  
Friday Osaru Ovenseri Ogbomo ◽  
Precious Imuwahen Ajoonu
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Inflation Rate ◽  
Government Expenditure ◽  
Least Square ◽  
Ordinary Least Square ◽  
Exchange Rate Management ◽  
Long Run ◽  
Short Run ◽  
The Impact

This paper examined the impact of Exchange Rate Management on economic growth in Nigeria between 1980 and 2015. The study was set to gauge how the management of exchange rate in Nigeria has impacted the economy. The study employed the Ordinary Least Square (OLS) method in its analysis. Co-integration and Error Correction Techniques were used to establish the Short-run and Long-run relationships between economic growth and other relevant economic indicators. The result revealed that exchange rate management proxy by various exchange rates regimes in Nigeria was not germane to economic growth. Rather, government expenditure, inflation rate, money supply and foreign direct investment significantly impact on economic growth in Nigeria. It is against this backdrop that the Nigerian economy must diversify her export base to create room for more inflow of foreign exchange.  

scholarly journals Do FDI and Public Investment Crowd in/out Domestic Private Investment in the SADC Region

2021 ◽  
Vol 19 (1) ◽  
pp. 3-25
Author(s):  
Eslon Ngeendepi ◽  
Andrew Phiri
Keyword(s):  
Capital Expenditure ◽  
Public Investment ◽  
Trade Openness ◽  
Government Expenditure ◽  
Private Investment ◽  
Policy Implications ◽  
Domestic Investment ◽  
Government Investment ◽  
Long Run ◽  
Short Run

Our study examines the crowding-in/out effect of foreign direct investment and government expenditure on private domestic investment for 15 members of the Southern African Development Community (SADC) for the period 1991–2019. The study employed the panel Pool Mean Group (PMG)/ARDL technique in estimating the short-run and long-run cointegration relationships between FDI, government capital expenditure and domestic private investment and adds three more variables for control purposes (interest rate, GDP growth rate and trade openness). For the full sample, FDI crowds-in domestic investment whilst government crowds-out domestic investment. However, in performing a sensitivity analysis, in which the sample was segregated into low and high income economies, both FDI and government investment crowd-in domestic investment whilst government expenditure crowds-out domestic investment in lower income SADC countries with no effect of FDI on domestic investment. Policy implications are discussed.

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