The Effects of Primary Budget Deficits on Economic Growth: Evidence from Kenya

Aims: The paper attempts to examine the effects of primary budget deficits on economic growth. It reviews the nature and direction of causality between primary budget deficit and economic growth. In the recent years, these have been debated both in developed and developing countries. In contributing to this ongoing debate, the study analyzes the case for Kenya from 1980 to 2016. The evidence is intended to provide policy insights for macroeconomic stability and sustained economic growth for shared prosperity in Kenya. Study Design: The study employs quantitative time-series research design by utilizing Stata econometrics software. Place and Duration of Study: Sample: Evidence from Kenya, from 1980 to 2016. Methodology: The study employs unit root tests, Johansen cointegration analysis, a dynamic vector error correction model and a multivariate Toda-Yamamoto Granger-causality representation. Results: The findings establish that the primary budget deficit, gross fixed capital formation, real interest rate, terms of trade, inflation growth and financial innovation have significant effects on GDP per capita growth in Kenya. Primary budget deficit has a strong and significant effect on GDP per capita growth both in short-run and long run. In the short-run, the results revealed that the primary budget deficit had a positive effect on economic growth which turned negative in the long-run. There was a unidirectional causality running from primary budget deficit to economic growth. Conclusion: The study concludes that both in the short run and long run, primary budget deficit has strong and significant causal effects on economic growth in Kenya. The evidence underscores the need for the authorities to reduce high primary budget deficits, interest payments and domestic borrowings and strictly apply the golden rule of public finances to boost long term inclusive growth, in Kenya.

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Exploring Economic Growth and Environment Nexus in Nine Southeastern European Countries

Economic Themes ◽

10.2478/ethemes-2018-0015 ◽

2018 ◽

Vol 56 (2) ◽

pp. 253-268

Author(s):

Petar Mitić ◽

Slobodan Cvetanović

Keyword(s):

Economic Growth ◽

Co2 Emissions ◽

Renewable Energy Sources ◽

Gdp Per Capita ◽

Speed Of Adjustment ◽

Long Run ◽

Short Run ◽

Policy Measures ◽

Per Capita ◽

Trading Scheme

Abstract This paper investigates the interdependence between environmental degradation (CO2 emissions) and economic growth (GDP per capita) in nine SEE countries over the period 1992 – 2016. The results of Granger causality testing indicate that in the short run there is a positive bidirectional causal relationship between CO2 emissions and GDP per capita, but in the long run, there is causality running just from GDP per capita to CO2 emissions, with the 2.0279% speed of adjustment. In pursuit of adequate policy measures, SEE countries need to work on inclusion of non-EU countries into European Union’s Emissions Trading Scheme, further developing carbon taxation policies and using renewable energy sources on a larger scale.

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Personal remittances, banking sector development and economic growth in Israel: A trivariate causality test

Corporate Ownership and Control ◽

10.22495/cocv13i1c9p5 ◽

2015 ◽

Vol 13 (1) ◽

pp. 1014-1027

Author(s):

Kunofiwa Tsaurai

Keyword(s):

Economic Growth ◽

Banking Sector ◽

Gdp Per Capita ◽

Series Data ◽

Long Run ◽

Banking Sector Development ◽

Integration Test ◽

Short Run ◽

Causality Relationship ◽

Per Capita

The current study investigates the causal relationship between personal remittances and economic growth using Israel time series data from 1975 to 2011. In a bid to contain the omission-of-variable bias not addressed in many past studies on this topic, this study included banking sector development as a third variable in the relationship between personal remittances and economic growth to create a tri-variate causality framework. Personal remittances as a ratio of GDP, domestic credit to private sector by banks as a ratio of GDP and GDP per capita were used as proxies for personal remittances, banking sector development and economic growth respectively for the purposes of this study. It used the Johansen co-integration test to examine the existence of the long run relationship and vector error correction model (VECM) to determine the direction of causality between personal remittances, banking sector development and economic growth both in the long and short run. The findings reveal that: (1) there is a significant long run causality relationship running from GDP per capita and banking sector development towards personal remittances, (2) there is an insignificant long run causality relationship running from personal remittances and GDP per capita towards banking sector development, (3) there is no long run causality relationship running from personal remittances and banking sector development towards GDP per capita and there is no short run causality relationship between the three variables that were under study in Israel. The author therefore recommends the authorities of Israel to speed up the implementation of banking sector development and economic growth programmes in order to increase the quantity of personal remittances inflows

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Does Environmental Stress Affect Economic Growth: Evidence from the Gulf Cooperation Council countries?

10.21203/rs.3.rs-263018/v1 ◽

2021 ◽

Author(s):

Osama Daifalla D. Sweidan ◽

Khadiga Elbargathi

Keyword(s):

Economic Growth ◽

Environmental Stress ◽

Panel Cointegration ◽

Positive Influence ◽

Cointegration Analysis ◽

Distributed Lag ◽

Distributed Lag Model ◽

Long Run ◽

Short Run ◽

Per Capita

Abstract This paper empirically investigates the influence of environmental stress on economic growth in the GCC countries during (1995-2016). We use a panel cointegration analysis and compute an autoregressive distributed lag model. Our paper is motivated by the high CO2 emissions per capita and environmental stress in these countries relative to other countries. We assume that the income per capita is a function of the natural resource’s rents and environmental stress. Our findings show that environmental stress has a positive and significant effect on economic growth, mainly in the long run. Further, the natural resources’ rents have a significant positive effect in the short run, while the long run impact is negative. Our paper’s policy implication states that economic policymakers should monitor and evaluate future environmental stress outcomes in these countries. There is no guarantee that the positive influence prevails. Therefore, they should diversify their economies and energy resources.Jel Classification: Q51, Q56.

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An Empirical Analysis on the Relationship between Health Care Expenditures and Economic Growth in the European Union Countries

European Journal of Medicine and Natural Sciences ◽

10.26417/ejmn.v2i1.p12-17 ◽

2018 ◽

Vol 2 (1) ◽

pp. 12

Author(s):

Çiğdem Börke Tunalı ◽

Naci Tolga Saruç

Keyword(s):

Economic Growth ◽

European Union ◽

Health Expenditure ◽

Gdp Per Capita ◽

The European Union ◽

Long Run ◽

European Union Countries ◽

Short Run ◽

Per Capita ◽

The Relationship

This paper empirically investigates the relationship between health expenditure and economic growth in the European Union countries over the period 1995-2014. By using the Dumitrescu-Hurlin Test (Dumitrescu and Hurlin, 2012) which is developed to test Granger causality in panel datasets (Lopez and Weber, 2017), it is found that there is a unidirectional relationship between these variables and gross domestic product (GDP) per capita Granger causes health expenditure per capita. After determining the direction of the relationship between health expenditure per capita and GDP per capita we estimate the short run and the long run effects of GDP per capita on health expenditure per capita by using Mean Group (MG) and Pooled Mean Group (PMG) estimators which are developed by Pesaran and Smith (1995) and Pesaran, Shin and Smith (1999) respectively. According to the estimation results, GDP per capita has a positive effect on health expenditure per capita both in the short run and the long run.

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The Impact of Human Capital Development on Economic Growth in Ethiopia: Evidence from ARDL Approach to Co-Integration

American Journal of Trade and Policy ◽

10.18034/ajtp.v1i3.374 ◽

2014 ◽

Vol 1 (3) ◽

pp. 127-136 ◽

Cited By ~ 1

Author(s):

Kidanemariam Gidey Gebrehiwot

Keyword(s):

Economic Growth ◽

Human Capital ◽

Gdp Per Capita ◽

School Enrolment ◽

Real Gdp ◽

Long Run ◽

Real Gdp Per Capita ◽

Short Run ◽

Per Capita ◽

The Government

The main objective of the study was to investigate the long run and short run impact of human capital on economic growth in Ethiopia (using real GDP per capita, as a proxy for economic growth) over the period 1974/75-2010/2011. The ARDL Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short run impact of Human capital on Economic growth. The finding of the Bounds test shows that there is a stable long run relationship between real GDP per capita, education human capital, health human capital, labor force, gross capital formation, government expenditure and official development assistance. The estimated long run model revels that human capital in the form of health (proxied by the ratio of public expenditure on health to real GDP) is the main contributor to real GDP per capita rise followed by education human capital (proxied by secondary school enrolment). Such findings are consistent with the endogenous growth theories which argue that an improvement in human capital (skilled and healthy workers) improves productivity. In the short run, the coefficient of error correction term is -0.7366 suggesting about 73.66 percent annual adjustment towards long run equilibrium. This is another proof for the existence of a stable long run relationship among the variables. The estimated coefficients of the short-run model indicate that education is the main contributor to real GDP per capita change followed by gross capital formation (one period lagged value) and government expenditure (one period lagged value). But, unlike its long run significant impact, health has no significant short run impact on the economy. Even its one period lag has a significant negative impact on the economy. The above results have an important policy implication. The findings of this paper imply that economic performance can be improved significantly when the ratio of public expenditure on health services to GDP increases and when secondary school enrolment improves. Such improvements have a large impact on human productivity which leads to improved national output per capita. Hence policy makers and / or the government should strive to create institutional capacity that increase school enrolment and improved basic health service by strengthening the infrastructure of educational and health institutions that produce quality manpower. In addition to its effort, the government should continue its leadership role in creating enabling environment that encourage better investment in human capital (education and health) by the private sector.

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An Empirical Analysis on the Relationship between Health Care Expenditures and Economic Growth in the European Union Countries

European Journal of Natural Sciences and Medicine ◽

10.26417/682jde51h ◽

2021 ◽

Vol 4 (2) ◽

pp. 11

Author(s):

Çiğdem Börke Tunalı ◽

Naci Tolga Saruç

Keyword(s):

Economic Growth ◽

European Union ◽

Health Expenditure ◽

Gdp Per Capita ◽

The European Union ◽

Long Run ◽

European Union Countries ◽

Short Run ◽

Per Capita ◽

The Relationship

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Energy consumption and growth in South Asia: evidence from a panel error correction model

International Journal of Energy Sector Management ◽

10.1108/ijesm-10-2013-0002 ◽

2015 ◽

Vol 9 (3) ◽

pp. 295-310 ◽

Cited By ~ 9

Author(s):

Harishankar Vidyarthi

Keyword(s):

Economic Growth ◽

Energy Consumption ◽

South Asia ◽

Capital Formation ◽

Fixed Capital ◽

Gdp Per Capita ◽

Content Type ◽

Long Run ◽

Fixed Capital Formation ◽

Per Capita

Purpose The purpose of the paper is to empirically examine the relationship between energy consumption and economic growth for a panel of five South Asian economies, namely, India, Pakistan, Bangladesh, Sri Lanka and Nepal over the period from 1971 to 2010 within a multivariate framework. Design/methodology/approach The study uses Pedroni cointegration and Granger causality test based on panel vector error correction model to examine long-run equilibrium relationship and direction of causation in the short and long run between energy consumption and economic growth using energy inclusive Cobb–Douglas production function for a panel of five South Asia countries, namely India, Pakistan, Bangladesh, Sri Lanka and Nepal. Findings Pedroni’s panel cointegration test indicates the long-run equilibrium relationship between economic growth per capita, energy consumption per capita and real gross fixed capital formation per capita for panel. Further, 1 per cent increase in energy consumption per capita increases the gross domestic product (GDP) per capita by 0.8424 per cent for the panel. Causality results suggest bidirectional causality between energy consumption per capita, gross fixed capital formation per capita and GDP per capita in the long run and unidirectional causality running from energy consumption per capita and gross fixed capital formation per capita to GDP per capita in the short run. Practical implications These South Asian countries should implement an expansionary energy policies through improving the energy infrastructure, energy efficiency measures and exploiting massive renewables’ availability for low-cost, affordable clean energy access for all, especially in the yet unserved rural and remote areas for further stimulating economic growth. Originality/value Implementing energy efficiency measures and massive renewables development (wind, solar and hydropower) may help the affordable and clean energy access and reducing fossils fuel dependence and its associated greenhouse emissions in South Asia.

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Determinants of Budget Deficit in Nigeria

Journal of International Business, Economics and Entrepreneurship ◽

10.24191/jibe.v6i1.14199 ◽

2021 ◽

Vol 6 (1) ◽

pp. 1

Author(s):

Maimuna M Shehu ◽

Ibrahim M Adamu

Keyword(s):

Budget Deficit ◽

Budget Deficits ◽

Cointegrating Vector ◽

Long Run ◽

Johansen Cointegration ◽

Short Run ◽

Johansen Cointegration Test ◽

The Government ◽

One Year ◽

High Level

This paper investigates the factors governing the determination of budget deficit in Nigeria from 1981q1 through 2016q4. Our methodology is based on Johansen cointegration and Vector Error Correction model (VECM) approach. The result from the Johansen cointegration test suggests one cointegrating vector, which indicates the existence of a long run cointegrating relationship. Evidence from the long run and short run parameters suggest that exchange rate, interest rate and one year lag of budget deficit are the major determinants of budget deficit. Therefore, to achieve a realistic fiscal surplus, the government should determine a high level of accountability in its fiscal operations. In addition, any fiscal surplus should be channeled into productive investments to diversify the economy and reduce the likelihood of potential budget deficits.

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AID AND GROWTH IN BANGLADESH: A REASSESSMENT

JOURNAL OF EUROPEAN ECONOMY - No 1 (2018) ◽

10.35774/jee2018.04.422 ◽

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).

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Does the Export-Led Growth Hypothesis Hold for Services Exports in Emerging Economies?

Eurasian Journal of Business and Economics ◽

10.17015/ejbe.2021.027.04 ◽

2021 ◽

Vol 14 (27) ◽

pp. 63-75

Author(s):

Okpeku Lilian ONOSE ◽

◽

Osman Nuri ARAS ◽

Keyword(s):

Economic Growth ◽

Emerging Economies ◽

Emerging Countries ◽

Distributed Lag ◽

Autoregressive Distributed Lag ◽

Long Run ◽

Short Run ◽

Per Capita ◽

Positive Effect ◽

Growth Hypothesis

The export-led growth hypothesis states a positive relationship between the growth of exports and long-run economic growth. This study examines the validity of the export-led growth hypothesis of services exports in 5 emerging economies, including Brazil, India, Nigeria, China, and South Africa (BINCS), for the period of 1980-2019. The study employs the panel mean group autoregressive distributed lag (ARDL) procedure to identify a causal relationship between services exports and gross domestic product (GDP) per capita. The findings show that the export-led growth hypothesis in services only has a positive effect on economic growth in the short run while other variables, including foreign direct investment (FDI), gross capital formation, and labour, increase economic growth in the long run. Hence, the emerging countries should focus more on internal investment to boost growth in the long and short run.

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