Corruption – Poverty Nexus: Evidence from Panel ARDL Approach for SAARC Countries

The article intends to investigate the relationship between corruption and poverty based on the panel data of SAARC countries over the period 1996–2019. We employed the panel ARDL of pooled mean group (PMG) technique to analyze the data and focus on capability poverty, using the human development index (HDI) as a proxy for poverty. The empirical findings of PMG of the ARDL model suggest that an increase in corruption score (COC) (i.e. decrease in corruption) and increase in women’s labor force participation rate (WLFPR) seem to have a significant impact either in eradicating poverty or increasing social welfare in the long run as well as in the short run. A random effect (RE) model also identified a significant positive relationship between corruption score and HDI, and WLFPR and HDI. A Dumitrescu-Hurlin pairwise panel Granger non-causality test detected a bilateral causality relationship between COC and HDI, and WLFPR and HDI, while unilateral causality ran from WLFPR to COC. The article contributes to examining the dynamics between corruption and poverty from the governance aspect, taking South Asia as a case study.

The Dynamic Impact of Public External Debt on Capital Formation in Sub-Saharan Africa: The Pooled Mean Group Approach

The increasing reliance on public external debt stocks in Africa and other developing countries has raised the question of debt sustainability, especially in the face of Covid-19, which has forced many counties (both developed and developing) into an unforeseen and unplanned recession. This study contributes to the literature on debt sustainability by examining the effect of public debt on capital formation in Sub-Saharan Africa (SSA) from 2000 to 2008 using the pooled mean group estimation approach. The debt variables considered are external debt stock, debt service on external debt, and interest payment on external debt. Consistent with the overhang theory, our results show that increasing external debt stock and interest payment on external debts only have a marginal impact on capital formation in the short run and exerts a serious negative effect in the long run. Our results also show that debt service burden has a positive effect on gross fixed capital formation in the long run. Therefore, we argue that despite being faced with a huge debt service burden resulting from large external debt stock, SSA countries are not neglecting investments in critical infrastructures needed to drive economic growth. However, we recommend that increasing government revenue base, minimizing economic waste associated with public expenditure, and intensifying negotiations for debt relief may be a plausible way out.

Bank heterogeneity in interest rate pass-through: A panel evidence of Pakistan

This article examines the role of bank-level characteristics in determining the nature of interest rate pass-through from monetary policy rates to commercial banks’ lending rates in Pakistan. Several bank-level factors, namely market size, liquidity, capitalisation, profitability, and competition level, were used in analysing the pass-through mechanism. This study utilised a dynamic heterogeneous panel technique, namely the Pooled Mean Group (PMG) estimation for the sample of 12 private commercial banks, over the time span 2003:Q2 to 2015:Q4. Banks of smaller size, large capital, and higher liquidity were significantly affecting the interest rate pass-through procedure. Thus, to improve monetary policy’s transmission mechanism, Pakistan’s central bank should limit bank capitalisation and draw out excess liquidity from the banking sector.

Financial and Economic Factors Affecting Foreign Direct Investment - A Panel Estimation Study of the ASEAN-5 Countries

ASEAN's strength stems from its diversity, which generates a plethora of diverse market opportunities. Over the last few decades, Foreign Direct Investment (FDI) has risen significantly as a major source of international capital transfer, but the COVID-19 pandemic had a detrimental effect on FDI flows, with the outlook for ASEAN remaining highly unpredictable and contingent on the length of the crisis, the efficacy of policy efforts to encourage investment and to mitigate the economic consequences of the pandemic. This study examines the long-run relationships and short-run dynamic interactions between FDI and its determinants comprising of market size, trade openness, stock market capitalisation and financial development over the period 1970 to 2019. The study applies the dynamic heterogeneous panel estimation techniques of Mean Group (MG), Pooled Mean Group (PMG) and Dynamic Fixed Effects (DFE) to analyse a set of macro panel data of the ASEAN-5 countries, to establish the possible relationships between these variables. An analysis of the results reveals the existence of a long-run causality between FDI and its predictors, indicated by the significant error correction terms for the models tested in this study. There is evidence that market size and stock market capitalization significantly contribute to FDI, with market size being the most dominant contributor. Interestingly, the study also reveals that trade openness and financial development are not significant in determining FDI in the selected countries. The study concludes with an examination of policy implications and also sheds some light on the outlook of FDI in ASEAN-5 post Covid 19. Keywords: foreign direct investment, financial development, pooled mean group, ASEAN-5

Long-Run and Short-Run Effects of Trade Openness on Life Quality in Sub-Saharan Africa

This paper contributes to the understanding of the other neglected effects of trade openness by analysing how it affects life quality in sub-Saharan African countries over the period 2000–2016. We used two trade openness indicators, namely: Squalli and Wilson index and the rate of trade. The empirical evidence is based on a pooled mean group approach. With two panels differentiated by their colonial origin, the following findings are established: the trade openness variable measured by Squalli and Wilson index has no effect on life quality in the both groups of countries in the short-run. However, it has a positive and significant effect on life quality in the both group of countries in the long-run. The use of the rate of trade confirms the results in the both groups of countries in the long-run. The contribution of trade openness to life quality is 3.27 and 5.19 times higher in the Former British Colonies than that recorded in the Former French Colonies of SSA respectively to the use of Squalli and Wilson index and the rate of trade. Overall, we find strong evidence supporting the view that trade openness promotes life quality in SSA countries in the long run.

The Role of FDI on Structural Transformation among Sub-Saharan African and EAP Countries Using a Panel Data Approach

In recent decades the activities of multinational corporations have increased across the globe substantially having a massive flows of foreign direct investment. This paper empirically examines the role of FDI on structural transformation among Sub-Saharan African and EAP Countries Using a Panel Data Approach. To achieve the objective the study took 31 years panel data . The study used descriptive analysis and empirical methods of analysis. The panel Autoregressive Distributed Lag model with error correction models of Pooled Mean Group technique were employed after checking the possible assumptions of our economic series. The results of Im-Pesaran-Shin test confirms our economic series are stationary at level and first difference forms. Pedroni’s cointegration tests suggests the existence of co-integration between the variables. According to the descriptive analysis, on average structural transformation index (STI) is the highest for China (30.52%) followed by South Korea (25.86), while Ethiopia (4.85) is having the lowest. On other hand, the East Asian and Pacific (EAP) countries in the higher income category are performing better than Sub-Saharan African countries. In addition,Sub-Saharan Africa countries are by far having low level of FDI inflows as compared to EAP countries. Particularly, the FDI inflows for EAP countries in the higher income category is around USD 52 Billion, and while for low and middle income category SSA countries it accounts around USD 2.2 Billion and USD 85 million, respectively. More specifically, across countries in the panel the FDI inflow is the highest for China while on average Kenya is having the lowest FDI inflows. On the other hand, according to the ARDL model of Pooled Mean Group estimation technique in the long-run financial development indicator and FDI have positive impact on the structural transformation index of nations at 1percent level of significance for the full sample in the panel. Moreover, pooled mean group regression result among the Sub-Saharan African and EAP countries FDI has a significant but having different sign for the two group in predicting structural transformation. Particularly, for EAP countries FDI has a negative effect in the long run and a positive effect in the short-run on structural transformation index which are also statistically significant. While for Sub-Saharan African countries FDI has a positive and statistically significant effect on structural transformation both in the long run and short-run. Finally, the government of developing countries like SSAs should provide different incentive packages to attract FDI inflows, among others.

Migrant Remittances and Health Outcomes in the West Africa Monetary Zones (WAMZ)

This study investigated the impact of international migrant remittances on life expectancy rate for countries of West Africa Monetary Zones (WAMZ). Panel data set for the period (1990-2020) were used for the analysis. The study estimated pooled ordinary least square, fixed effect models, random effect models and pooled mean group estimate. The pooled mean group estimates showed that migrant remittance as a share of the gross domestic product has significant positive impact on life expectancy rate in both short and long- run. The result showed that in the, a 1% increase in migrant remittance as a share of the GDP will cause life expectancy rate to rise by 4.003% in the short-run, but 9.896% in the long-run. Other factors which include per capita income, HIV/AIDS and out-of-pocket health spending all significantly influence life expectancy rate at birth. We recommend that policies should be articulated that will incentivize remitting money home, and that the costs of remitting money home should be made less, while the channels improved on.