ICT Adoption and Stock Market Development in Africa: An Application of the Panel ARDL Bounds Testing Procedure

The nexus between Information Communication Technology (ICT) and stock market development has been predominantly based on studies of the developed markets and high-income economies of the world. The objective of this study was to examine the causal relationship between ICT adoption and stock market development in Africa. The study examined a panel of 11 African stock exchanges for the period 2008–2017 and employed the panel ARDL bounds testing procedure to test for cointegration and examine the causal relationship between ICT adoption and stock market development. The dependent variable employed was the stock market development index (FINDEX), while the independent variable was the ICT adoption index (ICTDEX), and the financial freedom index (FFI) was employed as a control variable. Firstly, the results of the study documented that the variables are cointegrated in the long term. Secondly, the results of the study documented a bi-directional causal relationship (complementarity) between ICT adoption and stock market development. In essence, ICT adoption and stock market development reinforce each other. Thirdly, the study established a causal relationship running from financial freedom to stock market development. This lends credence to the notion that financial market deregulation promotes stock market development. Lastly, a positive causal relationship that ran from financial freedom to stock market development was documented. This study contributes to the body of knowledge in the sense that it is the first study to examine the phenomenon of the ICT–stock market development nexus by employing a panel study. Hitherto, studies were mainly country-specific in nature. The findings of the research imply that policymakers should be more resolute when formulating ICT policies, as ICT adoption can drive stock market development and vice versa for better economic growth. Policymakers should embrace policies that support the deregulation of stock markets as this will lead to the development of the latter.

Asian stock market integration after the global financial crisis: an ARDL bound testing approach

PurposeThe Global recession of 2008 was the worst financial crisis in the postworld war economic history that brought in severe disruptions in global investments and capital flows. Not surprisingly, research interest in the field of market integration has considerably increased over the last decade. This paper analyses the dynamics of price integration among Asian financial markets during the postfinancial crisis period.Design/methodology/approachWe employ an Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration and a Granger Causality/Block Exogeniety test from a Vector Error Correction Model (VECM) on monthly stock index data of five leading Asian economies from April 2009 to March 2020.FindingsThe cointegration results could not produce any conclusive evidence of long-run relations between stock markets. There exists weak price convergence among markets, and financial integration is partial and in an imperfect form.Research limitations/implicationsStock price performance in China is closely “coupled” with that in India, but both markets appear to be the short-run predictors of Asian stock returns. The research uses only the benchmark stock indices of the selected economies. Consideration of mid-cap and small-cap segments where foreign investments are significant today can validate the findings further.Practical implicationsThe asymmetric pattern of price behavior of Asian markets has important implications for the pricing efficiency of national markets and offers arbitrage potentials for global investors to optimize returns through market diversifications on a long-term perspective. The finding definitely will be a great help to investors who are potentially interested in a trading strategy that offers greater returns with limited exposure to market risks.Originality/valueCompared with previous studies, the research uses the most recent data of leading Asian markets and applies the robust method of ARDL Bounds testing approach that allows us to understand better if the economic recoveries and advancement have had an effect on market coupling and stock price transmissions.

International Tourism and Economic Growth in Zimbabwe: An ARDL - Bounds Testing Approach

This study investigated the effect of international tourism development on economic growth in Zimbabwe, using time series data spanning over the period 1980 to 2017. The main aim of the study was to examine whether international tourism is a pathway to economic recovery in Zimbabwe. The study adopted the tourism growth model proposed by Balaguer and Cantavella-Jorda [1] and applied the Autoregressive Distributed Lag (ARDL) bounds testing approach and its associated Error Correction Model (ECM). The direction of causality between international tourism and economic growth was examined using the Granger causality test in an error correction framework. The findings of the study show that the Tourism-led Growth Hypothesis (TLGH) is valid both in the short-run and long-run while the Economic-Driven Tourism Growth Hypothesis (EDTGH) is valid in the long-run only. This implies that the resource allocation strategy for the Government of Zimbabwe should prioritize both international tourism and economic expansion. The study, therefore, recommends that the Government of Zimbabwe should allocate resources towards supporting the tourism sector to stimulate economic growth in the country. On the other hand, the study, guided by the validity of the EDTGH in the long run, suggests that the Government of Zimbabwe should also consider allocating resources to other sectors currently driving the economy, for example, the agriculture and manufacturing sectors; as this will stimulate economic expansion in the long run.

Impact of FDI and Electricity on the Economic Growth of Pakistan: A Long Run Cointegration and Causality Analysis

Since the 1980s, analysts have been debating the effect of foreign direct investment (FDI) and electricity consumption (EC) on the economic growth (GDP) of developing countries. The purpose of the study is to estimate the long-run relationship between FDI, electricity consumption and GDP of Pakistan for the period of 1971 to 2017, using ARDL bounds testing, FMOLS and Canonicals cointegration regression. For causality analysis, the study uses a VECM approach for short-run causality directions and MWALD/Toda Yamamoto approach for the long-run causality directions. The cointegration results of all the approaches state that there exists a positive and significant long-run relationship between the concerned variables. The impact of electricity consumption on economic growth is very strong as compared to FDI. Moreover, in the short-run, there is a unidirectional causality running from FDI to GDP and GDP to EC. In the long-run causality, the study finds unidirectional causality for FDI and bidirectional causality for EC with GDP.

Financial sector development and life insurance inclusion in India: an ARDL bounds testing approach

PurposeThis paper analyses the relationship between financial sector development (FSD) and life insurance inclusion in India during the period from 1971–1972 to 2016–2017. The study analyses the effect of financial deepening on life insurance inclusion in India.Design/methodology/approachThe study employs augmented Dickey–Fuller (ADF) unit roots test to check the stationarity properties of the time series data. It estimates a life insurance inclusion model using the auto-regressive distributed lag model (ARDL) bounds testing approach to cointegration.FindingsThe study finds evidence of a cointegrating relationship between financial deepening and life insurance inclusion in India. A significant error correction coefficient indicates automatic adjustments to short-run disequilibrium, reinforcing the cointegrating relationship between financial sector and life insurance inclusion.Research limitations/implicationsA major limitation of the study is that it excludes the first-time sum assured (FSA) contributed by the private sector life insurance companies due to lack of data availability.Practical implicationsThe results of the study call for faster expansion of the financial sector and provision of a low interest rate regime in the Indian economy. The study invokes the need for sufficient training to the personnel in the banking and non-banking institutions to cater to the complex needs of life insurance buyers.Originality/valueThe paper estimates the link between FSD and life insurance inclusion and introduces a new measure of life insurance demand, the life insurance inclusion, measured using the FSA.