Effect of Public Investment on Private Investment: Evidence from Ethiopia

This study examined the effect of public investment on private investment and their relative effects on Ethiopia economic growth. The study employed the ARDL bounds testing approach. The empirical results revealed that public investment has a crowding-in effect on private investment in the long run which means, public investment stimulates private investment in the long run. However, the study revealed that public investment has a crowding out effect on private investment. In the other word, public investment has no direct impact on economic growth in the long run. However, private investment has a significant positive impact on economic growth in the long run while it is negatively related to economic growth in the short run. This suggests that private investment positively contributes to economic growth more than public investment. In addition, economic growth is positively associated with private investment although it is statistically insignificant in the long run. This implies that it is prudent for policy makers not to cut back on the efficient component of public investment and increase infrastructural public investment to a level that promotes private investment in the long run thereby indirectly fostering economic growth.

Investigating the Nexus Between FDI and Institutional Quality: Evidence from Morocco

This article investigates the relationship between institutional quality and foreign direct investment (FDI) in Morocco using a large set of institutional quality variables over the period 1970–2016. The study uses ARDL bounds testing approach with structural breaks and Granger causality. The analysis is then extended to the disaggregated sub-components to discern the inherent dynamics of institutional quality. The study finds several relationships between FDI and various aspects of institutional quality. Results from both models conclude with policy recommendations.

Long-Run Determinants of Nigerian Inflation Rate: ARDL Bounds Testing Approach

Inflation is a problem in all facets of life and all economic entities. The government of any nation is concerned with ensuring that her plans are not frustrated by unpredictable and galloping prices. This paper studies the dynamic causal relationship between inflation rate (measured by consumer price index (CPI)), exchange rate, gross domestic product (GDP), money growth, and oil export in Nigerian during 2005: Q1 to 2019: Q4. The ARDL bounds testing approach and error correction model were used to verify whether there was a long-term relationship between the inflation rate and four determinants (exchange rate, GDP, money growth, and oil export). The results of our study showed that the current inflation CPI, the exchange rate, GDP, and money growth would still affect the next quarter's inflation rate in Nigeria. However, the oil export has no significant effect on the inflation rate. Moreover, we find the long-run cointegration relationship between inflation CPI, the exchange rate, and money. The cointegration relationship will be achieved in a short time (during the next two quarters of the year).

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.

Investigating the Long-run and the Short-run Relationship Between Domestic Macroeconomic Forces and Indian Equity Market: Evidence Based on ARDL Bounds Testing Approach

Understanding the effect of domestic macroeconomic forces on equity market is essential since macroeconomic forces have a systematic effect on the equity market returns. The present study uses monthly observations from India for the period from January 2012 to December 2019 to investigate the long-run and short-run relationship between the domestic macroeconomic forces and equity market. The study employed the autoregressive distributed lag (ARDL) bounds testing approach and pair-wise granger causality test to attain the objective. The long-run empirical results indicated that the Indian equity market and the domestic macroeconomic forces are cointegrated. The long-run coefficients of foreign exchange rate and money supply are found to be significant. The short-run coefficients suggest that money supply, inflation and foreign exchange rate significantly influence the Indian equity market. The study also observed the presence of feedback mechanism between foreign exchange rate and Indian equity market. The study provides the policy and managerial implications.

Nexus between Nitrous Oxide Emissions and Agricultural Land Use in Agrarian Economy: An ARDL Bounds Testing Approach

This paper analyses the relationship between Nitrous Oxide emissions, agricultural land use, and economic growth in Pakistan. Agriculture largely contributes to Nitrous Oxide emissions. Hence, models of agriculture induced Nitrous Oxide emissions are estimated in addition to models of total Nitrous Oxide emissions. Estimated models accommodate more flexible forms of relationship between economic growth and emissions than those of the widely adopted models in testing the Environmental Kuznets Curve. The Auto-Regressive Distributed Lag (ARDL) bounds testing approach to co-integration and the vector error correction model approach is applied to test the Environmental Kuznets’s Curve hypothesis for Pakistan and to detect the directions of causality among variables using the time series data for the period 1971 to 2012. Results indicate that an N-shaped rather than an inverted U-shaped relationship exists in the case of Pakistan. The tipping values for total Nitrous Oxide emissions and agriculturally induced Nitrous Oxide emissions indicate that Pakistan passes through a phase of increasing environmental degradation. Increases in agricultural land use and per capita energy use will increase the level of Nitrous Oxide emissions. However, controlling Nitrous Oxide emissions from agricultural land use and per capita, energy use without adversely affecting economic development will be a serious policy challenge for Pakistan.