MICROCREDIT COVERAGE IN MALAYSIAN MACROECONOMIC CONTEXT: AN EVIDENCE USING PANEL DATA ANALYSIS

This paper aims to examine the effect of macroeconomic condition on microcredit coverage in Malaysia. The Microcredit Organizations (MO) was established to complement the mainstream financial institutions but challenges remain with microcredit performances associated with microcredit coverage. The paper accordingly investigates the effects of macroeconomic condition on microcredit coverage in the Malaysian context. To achieve the objective, the static panel data technique is adopted, which comprises 13 states and three Federal Territories in the country, spanning 2011 to 2015. The findings reveal the resiliency of MO towards macroeconomic conditions in Malaysia. The increase in the inflation rate and agriculture GDP (LNAGDP) share shows significant negative and positive effects (non-resilient) on microcredit coverage. The main findings will assist in addressing the newly identified macroeconomic condition to improve on micro credit performance. Policy implications emanating from the study are expected to be relevant to the government, MOs and borrowers. The government accordingly can make important contributions to borrowers by maintaining macroeconomic stability (inflation and LNAGDP share) through appropriate policies in order to achieve good microcredit coverage. MOs may revisit the existing quality regulation (MOs risk weighing loan disbursement) based on the macroeconomic condition which, in turn, can be used in outreaching more microcredit borrowers. Finally, this study may also help to elucidate specific understanding of the government and MO objectives in outreaching microcredit borrowers. Keywords: microcredit coverage, macroeconomic condition, microcredit organisation, Malaysia

The impact of macroeconomic condition on investment-cash flow sensitivity of Indian firms

Purpose The purpose of this paper is to investigate the impact of the macroeconomic condition on investment-cash flow sensitivity (ICFS) of Indian firms and examine whether the effect of macroeconomic condition on ICFS depends on the size and group affiliation of the firm. Design/methodology/approach An empirical investigation is conducted using a dynamic panel data model or more specifically system generalized method of moments (GMM) estimation technique. Findings Empirical findings postulate that the availability of cash flow influences the investment decisions which depicts that Indian manufacturing firms are internally as well as externally financially constrained. This study finds that good economic condition (period of high GDP growth rate) reduces the ICFS, although this effect is stronger for small-sized and standalone firms than the large-sized and business group affiliated firms. The authors find that macroeconomic condition has a positive and significant effect on investment decisions. Research limitations/implications This study has considered only the non-financial sector. The future research could explore the effect of macroeconomic condition on ICFS might be affected by firm other characteristics such as firm age and firm capital structure. Social implications The government should provide loan on the low rate to the small-sized firms and standalone firms because it is very difficult for these firms to finance their investment during the bad economic condition (period of low high GDP growth rate). Originality/value This study contributes to the existing literature by analyzing the impact of the macroeconomic condition on ICFS as well as investment decisions of the Indian manufacturing firms, which is an unexplored issue from an emerging market perspective. To the best of my knowledge, this is a first-ever study which explores the effect of macroeconomic condition on investment decisions with respect to business group affiliation and firm size.

The Impact of El Nino on Inflation in Regional Indonesia: Spatial Panel Approach

The study about the relationship between climate and economy is essential because it’s understanding is the key to formulate the effective economic policy. El Nino is one of the climate phenomena's that directly impact Indonesia, so it is necessary to analyze its effect on the macroeconomic condition such as inflation. This study aims to analyze the impact of El Nino as an external factor and the impact of another relevant economic factor on the macroeconomic condition such as inflation at the regional level (province) in Indonesia. The method used is a spatial panel method to capture the effect of inter-regional spatial interactions. The results show that El Nino has a positive effect on inflation in the southern Indonesian provinces that are affected by El Nino, but no effect in northern Indonesia. The other significant determinants of regional inflation are minimum wage, local revenue, local government spending, and infrastructure. There is significant spatial dependence on regional inflation in Indonesia, indicating that the inflations of its neighboring provinces influence the inflation of a province.