Sector Rotation with Leading Macroeconomic Indicators

In this study, an attempt has been made to examine whether the theory of sector rotation has been empirically valid in the Indian equity market, during the period April, 2000 to March, 2020. The time period has been divided into many sub-periods according to the real GDP growth rate and the annualized returns of eleven stock market indices have been analyzed in different periods. Going forward, leading macroeconomic indicators, which coincide with overall economy, have been taken and their association with stock market indices have been analyzed through statistical measures to assess any possible forecasting. In the first part of the study, cyclical and non-cyclical sectors have been found to beat the benchmark index during periods of growth and stagnancy, respectively, but no particular ordinality was observed. Amongst the leading economic variables, M3 Money Supply was found to have high degree of association with some indices, namely Sensex, Healthcare, CDGS, Consumer Durables and IT, but no linear relation was observed.

Impact of External Debt on Economic Growth Rate: An Empirical Evidence from Pakistan

The major objective of this study is to check the effect of external debt on the GDP growth of Pakistan. For this purpose annual time series data were used for the period 1980 to 2020. Augmented Dickey-Fuller test was applied to check the stationary status of the data and the least square method was applied for the estimation of the results. For the analysis GDP growth rate was taken as a dependent variable and other variables, such as economic growth (Annual %), inflation rate (CPI %), Foreign Direct Investment net inflow (% of GDP), multi-lateral debt services (% of public and publically generated debt service), Total debt service (% of GNI), Short term debt (% of total reserves) were taken as explanatory variables. Findings revealed that the total debt and multilateral debt negatively affect the GDP growth rate, whereas, FDI and short term debt are positively associated with growth rate. It is suggested that to improve the economic growth Pakistan should focus on investment projects and there is a need to implementation better policies for foreign debt utilization

The Impacts of Population Aging on China’s Economy

The Chinese economy had an extraordinary average GDP growth rate of 8.50 percent from 1980 to 2018. However, the implementation of one-child policy in the late 1970s has depressed the total fertility rate to below the replacement rate since 1992. China thus experienced an increasing composition of older populations in the past three decades, which puts pressure on Chinese economic growth and makes its eye-catching economic growth potentially unsustainable. This study develops an overlapping generations (OLG) model to investigate the impacts of this demographic transition in the Chinese economy. This study conducts six policy reform exercises to examine measures that could improve the sustainability of fiscal and pension systems. The simulation results indicate that a mild tax increase on either wage income or consumption does not improve the fiscal stance but creates distortionary effects on saving and consumption behaviors. Of the pension reform measures considered, the combination of extending the mandatory retirement age and cutting the replacement ratio offers the most significant improvement to pension sustainability. However, increasing the contribution rate of the working-age population has the least effect on pension sustainability and a noticeable distortionary effect on the consumption ratio and saving rate.

Cointegration and causality analysis between foreign direct investment, exports and economic growth in the republic of Croatia

The main objective of this paper is to analyze the causal relationship between foreign direct investment (FDI), exports, and economic growth in the Republic of Croatia for the period 2000-2020 and determine the implications of research results on corporate management. The management of the investment enterprise is usually interested in high returns, whereas the management of the recipient enterprise is interested in higher productivity, spillovers, and larger market share on domestic and international markets. Several methodological approaches, including unit root tests, cointegration tests, and Granger causality test, were used to assess the relationship between gross domestic product (GDP) growth rate, on the one side, and the share of FDI and total exports of goods and services in real GDP, on the other side. The results of cointegration tests indicated there is no long-term relationship between the real GDP growth rate, the share of FDI, and the share of exports of goods and services in real GDP. Based on the Granger causality test, it cannot be concluded that there is no causal relationship between the analysed variables. Finally, the paper discusses the implications of the conducted research for corporate management. The results indicate that managers are not discouraged by the fact that FDI is not correlated to economic growth, as investment decisions are determined by numerous factors and not primarily by the growth rate of a recipient country.

How Selected Macroeconomic Factors Affect the Corporate Profitability of Transportation and Storage Companies in Selected European Economies

The goal of most companies is to make a certain amount of profit, to which all-important business decisions are a subject. The importance of this goal is evidenced by the fact that profitability indicators belong to the key indicators of business success. Unfortunately, profitability is affected by many often-unpredictable factors, which usually come from the external environment of the company. In this research, these factors are represented by GDP growth rate, inflation rate, reference interest rate, unemployment rate, gross fixed capital formation and the exchange rate against the euro. The aim of the research is to find out whether selected factors influence the company’s profitability or not. Companies of the transportation and storage industry coming from eight selected economies of Central and Eastern Europe are the subject of the analysis. The industry will be analysed at the level of fifteen sub-industries using the Generalized Method of Moment. The data cover the period 2010–2018 and provide information on approximately 25,000 companies. The size of the sample does not allow the results to be summarized in one sentence, but they showed that companies in the selected industry are for the most part negatively affected by the reference interest rate of the economy.

Economic Growth in the Western Balkans: A Panel Analysis

This paper investigates how typical macroeconomic indicators affect the economic growth of Western Balkans countries. A static panel empirical investigation for the period 2010 to 2019 has been conducted using GDP growth rate as the dependent variable, while independent variables in focus include foreign direct investments, remittances, unemployment rate, population growth rate, and control of corruption. The most interesting finding is that a rising share of remittances positively affects economic growth. This might indicate that even when remittances are used for non-investment purposes, they might increase domestic production of consumption and intermediate goods. There is also evidence of a non-linear relationship between FDI and economic growth, which may be a consequence of undeveloped capacities to use the positive side of FDI. To foster economic growth policy-makers should focus on reforms that target sectors that show sharp declines in FDI and remittances inflows, including also a need for better control of corruption in the region.

Cyprus Economy in the Light of Debt Problem

The model created by using the independent variables of total income, total capital, total savings, government expenditures, and employment, which I think has a significant impact on the growth of the Cyprus economy, has been examined in the light of the debt problem. Annual time-series data from 1995Q to 2017Q were obtained from the Cyprus State Planning Office in Cyprus. Unrestricted VAR (Vector Autoregression) model was used to test the causal relationship of the variables considered. Empirical findings revealed that some variables such as Wald test results for 78 lags, respectively, affect the GDP growth rate together. In particular, it was observed that there are bidirectional influences between employment, government expenditures, total capital, and savings which are not estimated in former studies. In addition, total income and total savings coefficients have a unidirectional influence on employment. It has been observed that the expenditure and savings coefficients also affect the total income.

International Trade and Economic Misery in African Countries with Low Human Development

Puzzled by the demeaning level of poverty most African countries continue to grapple with despite their extensive participation in international trade, the study attempts to examine the encumbrances that tend to impede African countries from optimally reaping the developmental gains inherent in partaking in international trade, which seems to also worsen the economic misery the inhabitants endlessly contend with. The System Generalized Method of Moments (System-GMM) estimation technique was used in the study which involves 17 African countries and spans from 1995 - 2018. While misery index is used to measure economic misery, the impact of international trade on economic misery is captured by means of its effect via economic misery, economic growth rate, balance of payment, total export, manufacture export and exchange rate. The results of the study reveal that balance of payments, total export, manufacture export, per capita GDP growth rate, exchange rate and lagged form of economic misery all have positive effect on economic misery. While the effects of total export, manufacture export, per capita GDP growth rate, and exchange rate on economic misery are significant, those of balance of payments and lagged form of economic misery are insignificant. While the study recommends that international trade be engaged strategically such that it results in favourable balance of payments, it also encourages the discarding of obsolete trade policies such as outright bans on importation of certain commodities. Bilateral trade agreements are recommended over multilateral trade agreements, since they are more mutually beneficial and binding on the parties involved

Investigating the Impact of External Debt on Economic Growth: A Case Study of Pakistan

This article is an attempt to evaluate the effect of external debt on economic growth for during the period of 1980–2016. The Augmented Dickey Fuller (ADF) test is used for determining stationarity, whereas the ADF test results exhibit that the variables used found are . The empirical results indicate that external debt and total debt service have deleterious and statistically significant impacts on GDP growth rate. The other explanatory variables namely human capital by life expectancy, exports, and Foreign Direct Investment (FDI)reveals significantly positive significant influence on GDP growth rate. Appropriate policy should be adopted by the policy makers to reduce external debt, increase volume of exports and enhance more foreign investment, it will boost economic growth in the country.