scholarly journals Financial Development and Economic Growth in Kenya: Evidence from the Asymmetric Autoregressive Distributive Lag

2021 ◽  
Vol 04 (05) ◽  
Author(s):  
Duncan O. Hongo ◽  
◽  
Liu Jie Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Financial Risk ◽  
Government Expenditure ◽  
Capital Formation ◽  
Long Run ◽  
State Expenditure ◽  
Positive Shock ◽  
Risk Managers

Appropriate changes in financial development are largely known to cause growth. Inflation, gross capital formation and government expenditure, believably, succinctly controls the effects and causes long term growth. This paper analyzed this effects for Kenya paying exceptional attention on their asymmetric effects. The most reliable and important results supported that positive asymmetries of financial development increases long run growth unlike the negative with reducing and weak effects. However, in case of financial dynamics and instabilities, economic growth responds negatively with a steep slump to shocks by declining financial development as positive gross capital formation shocks seems to plausibly control such nonlinear dynamics and positively causing growth. Also, sustainable inflation and prudent state expenditure spurs long term growth. Since this growth finance relationship supports the supply-leading hypothesis, there is need for specific financial development policies which would alongside support sustainable inflation and prudent expenditure if they are to spur real growth. Moreover, the financial risk managers are required to robustly prepare against the negative shocks by finance that have greater degenerating effects than by upturn from the positive shock.

scholarly journals The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL

SAGE Open ◽  
2020 ◽  
Vol 10 (1) ◽  
pp. 215824401989407 ◽  
Author(s):  
Hao Chen ◽  
Duncan O. Hongo ◽  
Max William Ssali ◽  
Maurice Simiyu Nyaranga ◽  
Consolata Wairimu Nderitu
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Government Spending ◽  
Capital Accumulation ◽  
Research Question ◽  
Government Expenditure ◽  
Model Specification ◽  
Long Run ◽  
Short Run ◽  
Auto Regressive

This study analyzed the asymmetric effects of financial development on economic growth using a model augmented with inflation and government expenditure asymmetries to inform model specification. The research question used entails, Do their asymmetry changes significantly influence growth? Using the nonlinear auto-regressive distributive lag (NARDL), the most significant results posit that positive shocks in financial development in the short run and its negative shocks in the long run increase and decrease economic growth, respectively. Regarding inflation, its positive (negative) shocks in both runs, respectively, reduce (increase) economic growth. In comparison, positive shocks in financial development that spur growth in the short run and negative shocks in financial development (government expenditure) that increase (reduce) growth are the most domineering effects as the rest of the shocks insignificantly affect growth. Results clearly demonstrate to an environment steered by stable and sustainable inflation that regulated government expenditure and comprehensive financial system deepening would positively cause economic growth. Therefore, appropriate policies that favor low inflation and reduced government spending, expansion of feasibly reformed financial institutions, capital accumulation, and increased resource mobilization should be instituted if real growth is to positively happen.

Foreign Direct Investment, Financial Development, and Economic Growth Nexus in Bangladesh

2020 ◽  
pp. 056943452093867
Author(s):  
Md. Noman Siddikee ◽  
Mohammad Mafizur Rahman
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Banking Sector ◽  
Negative Impact ◽  
Capital Formation ◽  
Long Run ◽  
Short Run ◽  
The Impact

This article aims to explore the short- and long-run impact of foreign direct investment (FDI), financial development (FD), capital formation, and the labor forces on the economic growth of Bangladesh. We applied the Granger causality test and Vector Error Correction Model (VECM) for this study. The World Bank data for the period of 1990–2018 are taken into account for the analysis. Our findings suggest, in the long run, capital formation has a positive impact, and in the short run, it has a negative impact on gross domestic product (GDP) implying a lack of higher efficiency is persisting in capital management. Similarly, labor forces have an insignificant impact in the short run and a negative impact in the long run on GDP, which confirms the presence of a huge number of unskilled laborers in the economy with inefficient allocation. The impact of FD is found tiny positive in the short run but large negative in the long run on GDP indicating vulnerability of banking sector. These also confirm fraudulence and inefficient use of the domestic credit supplied to the private sector. The impact of FDI is approximately null both in the short and long run, indicating Bangladesh fails to achieve the long-term benefits of FDI. Finally, this study suggests using FDI more in the capital intensive project of the public–private partnership venture than infrastructural development only and also improving the credit management policy of the banking sector. JEL Classifications: F21, F43, J21

scholarly journals Sustainability of the Moderating Role of Financial Development in the Determinants of Environmental Degradation: Evidence from Turkey

2021 ◽  
Vol 13 (4) ◽  
pp. 1844 ◽  
Author(s):  
Husam Rjoub ◽  
Jamiu Adetola Odugbesan ◽  
Tomiwa Sunday Adebayo ◽  
Wing-Keung Wong
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Environmental Degradation ◽  
Carbon Emissions ◽  
Capital Formation ◽  
Least Square ◽  
Long Run ◽  
Dynamic Ols ◽  
Moderating Role

One of the questions that remain unanswered in the literature on determinants of carbon emissions is the moderating effect of “financial development”. This becomes imperative, owing to the connection of carbon emissions to environmental degradation, which is considered to be one of the main challenges to sustainable development. Thus, this study investigated the moderating role of financial development in the determinants of carbon emissions for Turkey during the period of 1960 to 2016. Zivot–Andrew and Lee–Strazicich “unit root tests” were utilized to investigate the stationarity properties of the series. The cointegration among the variables employed was examined by utilizing the ARDL bounds test and Bayer–Hanck cointegration test. In contrast, the long-run causal relationship of the variables with carbon emissions was examined by using fully modified ordinary least square (FMOLS), dynamic OLS (DOLS), and Canonical Cointegrating Regression (CCR). The empirical findings reveal the significance of “economic growth”, “capital formation”, “energy consumption”, “urbanization”, and “financial development” as determinants of environmental degradation in Turkey. The study also found the significant moderating role of “financial development” in the relationship between “economic growth” and carbon emissions, capital formation and carbon emissions, and urbanization and carbon emissions. The environmental–financial related policies were suggested for the policymakers in Turkey to aid the reduction of carbon emission with the view of improving environmental quality.

scholarly journals Relationship between Trade Openness, Financial Development and Economic Growth of Nepal: Evidence from a Developing Country

2020 ◽  
Vol 2 (2) ◽  
pp. 206-224
Author(s):  
Shreezal G.C.
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Developing Country ◽  
Financial Development ◽  
Capital Formation ◽  
Fixed Capital ◽  
Technological Factors ◽  
Long Run ◽  
Fixed Capital Formation ◽  
The Impact

Background: Capital investment, financial and technological developments are essential drivers for the economic growth of developing countries like Nepal. These factors, directly and indirectly, contribute to the growth of the country. Technological factors such as FDI and trade allow technology and knowledge transfers to Nepal along with foreign investments, goods and services. The financial sector encourages investors by providing loans that further generates investment in the country. Similarly, the development of human capital further increases labor productivity. Nepal, being a developing country, lacks advanced infrastructure and technology, that are vital for pushing the economic growth in the country. Objective: This paper examined the effect of capital, labor, foreign direct investment, financial development and trade on the economic growth of Nepal using the endogenous growth model. Methods: The study employedthe ARDLboundstesting approach to test the long-run relationships introducing an error correction model to estimate both short and long-term relationships among the variables.The TY non-granger causality test was used to ensure robustness and check the direction of causality. Results: The results showed that gross fixed capital formation, population and financial development were significant and inducedpositive economic growth in the long run at a 1% level of significance whereas, the impact of FDI on economic growth was negative and significant at 1%. Conclusions: The study concludes that an increase in gross fixed capital formation, population and broad money supply positively impacts the economic growth of Nepal. However, technological factors such as FDI and trade do not adequately explain the economic growth due to low FDI inflows, political instability, poor infrastructure and import dependency. Implications: The study emphasized domestic investment and financial development of the country as they were found to be highly significant in the long run. Also, the human capital of the country should be developed by providing education and training as the population was found to be highly significant. The study also indicated that Nepal should push export as its share in the trade is very less. Moreover, policies such as legal reforms, incentives to foreign investors and infrastructural development to attract FDIs in Nepal should be formulated.

scholarly journals Relationship between Financial Development and Economic Growth: Empirical Evidence in Indonesia

2018 ◽  
Vol 10 (12) ◽  
pp. 37 ◽  
Author(s):  
Hafnida Hasan
Keyword(s):  
Economic Growth ◽  
Empirical Evidence ◽  
Granger Causality ◽  
Financial Development ◽  
Trade Openness ◽  
Government Expenditure ◽  
Long Run ◽  
Push Forward ◽  
Using Data ◽  
The Relationship

The aim of this paper to examine the relationship between financial development and economic growth in Indonesia by using data from 1986 until 2014. Johansen co-integration and Granger causality are utilized to analyze the data. The financial development is measured by the ratio of broad money and other control variables such as trade openness and government expenditure. The finding indicates that there is long run relationship between financial development and economic growth. Meanwhile, a unidirectional relationship had been found, it come from economic growth to financial development. Therefore, a policy to increase economic growth will push forward in proper to improve financial development in Indonesia.

Do Financial Development, Trade Openness and Political Stability Complement for Egypt’s Economic Growth?

2020 ◽  
pp. 2150001
Author(s):  
Zakaria Yakubu ◽  
Nanthakumar Loganathan ◽  
Narayan Sethi ◽  
Asan Ali Golam Hassan
Keyword(s):  
Economic Growth ◽  
Causal Relationship ◽  
Financial Development ◽  
Trade Openness ◽  
Government Expenditure ◽  
Political Stability ◽  
The Political ◽  
Annual Data ◽  
Long Run ◽  
Short Run

This study examines the complement of financial development, trade openness, political stability and integrating government expenditure on Egyptian economy using time series annual data covering the period 1977 until 2018. This study used the ARDL-ECM estimates to determine the long and short-run cointegration between the series. The estimated results indicated that the financial development enhances growth in the long-run, while the political stability undermined the economic growth in the long-run. Interestingly, we found financial development, trade openness and government expenditure Granger cause economic growth in the short-run, while political stability Granger causes economic growth in both short and long-run; and a similar result with the causal relationship appeared in the strong causal relationship condition. Overall, this study showed that both financial development and trade openness gave evidence of causing growth, but the political stability does not. Thus, the reform policies should continue, while adopting measures to ensure that all the determinants are complementing to growth in Egypt as they are all pivotal and it is imperative for policy analysts to put into perspective when formulating policies as the study captures a novel political stability variable towards growth.

Does corruption adversely affect economic growth in Tunisia? ARDL approach

2020 ◽  
Vol 23 (1) ◽  
pp. 38-54
Author(s):  
Anas Al Qudah ◽  
Azzouz Zouaoui ◽  
Mostafa E. Aboelsoud
Keyword(s):  
Economic Growth ◽  
Economic Development ◽  
Government Expenditure ◽  
Physical Capital ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
Per Capita ◽  
The Impact

Purpose This study aims to better understand the phenomenon of corruption in Tunisia in relation to its impact on economic development. The period of study is 1995 to 2014. The auto-regressive distributed lag (ARDL) model is adopted to examine the existence of a long-term relationship between the above-mentioned variables and also the direct and indirect consequences of corruption on economic development in Tunisia. Design/methodology/approach The study uses a modern econometric technique to estimating the long-term relationship (e.g. the co-integration) between corruption and economic development; using this technique also allows us to investigate the impact of corruption on economic growth. Findings The empirical results show that corruption has a negative effect on per capita gross domestic product (GDP) in Tunisia for the period under review. This effect is described as a direct effect of corruption in the long term; specifically, declines are observed in per capita GDP, over the long run, by almost 1 per cent, following a 1 per cent increase in the level of corruption. The results also show that corruption has indirect effects via transmission channels, such as investment in physical capital, which is positively significant in the presence of corruption. The same observation is made at the level of government expenditure during the previous year, while for those of the current year, the coefficient becomes negative but not significant. With respect to human capital, the impact of corruption on education expenditures is insignificant. Originality/value The paper begins with an overview of previous literature in this area. Given the nature of corruption and the differences in the meanings attributed to it, from one country to another and from one culture to another, the paper moves on to study the impact of corruption in Tunisia as a case study for one country with one socio-cultural environment. The authors then propose several methods and possible solutions, which could be implemented to deal with this problem.

scholarly journals Financial Development and Stock Traded Contributions towards Economic Growth

2015 ◽  
Vol 2 (1) ◽  
pp. 5-8
Author(s):  
Shehper Maryam Zafar ◽  
Nadia Bukhari
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Financial Development ◽  
Positive Relationship ◽  
Time Series Data ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
Long Term Impact

This purpose of this research is check the long run as well as short run impact of Financial Development and Stock traded on the economic growth in the scenario of Pakistan. The time series data has taken for the year 1988-2013. This paper utilized ARDL methodology to determine long-term impact of Financial Development and Stock Traded on Economic growth. Further Granger Causality Check has used to check a uni-directional relationship. The results of this test support that FD and stock traded has a uni-directional impact over economic growth. Further, it has depicted from ARDL that there is a positive relationship between FD and Economic Growth as well as Stock Traded and Economic Growth.

scholarly journals The Effect of Regional Fiscal Policy on Economic Growth in North Sumatera

2020 ◽  
Vol 3 (2) ◽  
pp. 15-20
Author(s):  
Laila Rohimah ◽  
Ahmad Albar Tanjung ◽  
Indah Permata Sari Pulungan
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Government Expenditure ◽  
Tax Revenue ◽  
Correction Model ◽  
Long Run ◽  
Short And Long Term ◽  
New Evidence ◽  
North Sumatra

The aim of this research is to evaluate and provide new evidence of the influence of regional fiscal policy with government expenditure instruments and tax revenue on economic growth in North Sumatra Province. The data used are quarterly data from 2011: 1 to 2017: 4 sourced from the Central Statistics Agency of North Sumatra Province (CSA). The analytical method used in this study is the error correction model (ECM) method. The findings of this study are that government expenditure (GE) has a positive and significant effect in the short and long term on the economic growth (PDB) of the province of North Sumatra during the study period. While tax revenue (TAX) in the long-run has a positive and significant effect, but in the short term, it has a positive but not significant effect on the economic growth (PDB) of the province of North Sumatra during the study period.

Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Arun Kumar Giri ◽  
Geetilaxmi Mohapatra ◽  
Byomakesh Debata
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Technological Development ◽  
Content Type ◽  
Significance Level ◽  
Long Run ◽  
Non Linear ◽  
Causality Tests ◽  
Asymmetric Causality

PurposeThe main purpose of the present research is to analyze the relationship between technological development, financial development and economic growth in India in a non-linear and asymmetric framework.Design/methodology/approachThe study employs the nonlinear autoregressive distributed lags model (NARDL) and Hetemi J asymmetric causality tests to explore nonlinearities in the dynamic interaction among the variables. The stationarity properties of data are checked by using Ng–Perron and ADF structural break unit root tests. The unit root test confirms that the variables are non-stationarity in level and are differenced stationary.FindingsThe study finds that there is a cointegrating relationship between technological development, financial development and economic growth in the long run. The findings suggest that a positive shock in technological development increases economic growth (coefficient value 1.497 at 1% significance level) and a negative shock will harm economic performance (coefficient value −0.519 at 1% significance level). A long-term positives shock in financial development boosts the economy (coefficient value 1.08 at 5% significance level) and negative shock hampers the economic performance (coefficient value −1.09 at 5% significance level). The asymmetric causality test result confirms bi-directional causality between technological development and economic growth and unidirectional causality from negative economic growth to negative technological development and bi-directional causality between economic growth and financial development, unidirectional negative financial development to economic growth.Research limitations/implicationsThe results of this research can significantly facilitate stakeholders and policymakers in devising short-term as well as long-term policies for financial development and technological innovation to achieve sustainable long-run economic growth in India.Originality/valueThis paper is the first of its kind to empirically examine the cointegrating and causal relationship between technology, financial development and economic growth in India using non-linear asymmetric cointegration and causality tests.

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