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.

DETERMINANTS OF INFLATION IN INDIA IN A DYNAMIC SETUP

The present study empirically examines the factors accounting for inflation in India in an open economy framework by utilizing the bounds testing approach to cointegration for the 2006: Q3-2019: Q4 period. The findings reveal the existence of a long-run relationship with the household survey-based inflation expectation, real output, narrow money aggregate and interest rate as important determinants of inflation. The study concludes that inflation is well explained by a combination of structural and monetary factors. Notably, the significance of inflation expectation as an important explanatory variable corroborates the utilization of inflation forecast by the RBI as an intermediate target in the flexible inflation targeting framework. In this backdrop, it is imperative for RBI to conduct a high frequency inflation expectations survey of households to account for frequent information updation on the part of certain groups of households.

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).

DINAMIKA HUBUNGAN FOREIGN DIRECT INVESTMENT (FDI), MAKROEKONOMI DAN RETURN INDEKS SAHAM SYARIAH DI EMPAT NEGARA ASEAN

Negara-negara kawasan Asia Tenggara tengah menyongsong integrasi pasar modal. Kehadiran momentum itu, dibutuhkan kondisi ekonomi masing-masing negara yang stabil dan pasar modal yang menarik. Momentum ini juga merupakan kesempatan pasar modal syariah untuk lebih dikembangkan di kawasan ini. Penelitian ini bertujuan untuk menguji pengaruh Foreign Direct Investment (FDI) dan variabel ekonomi makro yakni pertumbuhan ekonomi, inflasi, suku bunga acuan dan nilai tukar terhadap return indeks saham syariah di empat negara ASEAN yaitu Indonesia, Malaysia, Thailand dan Singapura. Periode penelitian sejak kuartal IV tahun 2006 sampai dengan kuartal I tahun 2020. Metode yang digunakan dalam pembuktian empiris pada penelitian ini adalah Autoregressive Distributed Lag Bounds Testing Approach (ARDL). Penelitian ini menemukan hubungan kointegrasi jangka panjang pada semua negara objek penelitian. Dalam hubungan jangka panjang dan dinamika jangka pendek, penelitian ini menemukan adanya variasi hasil dan arah koefisien di 4 negara ASEAN. Kecepatan penyesuaian kembali keseimbangan jika terjadi goncangan berturut-turut Indonesia, Malaysia, Thailand dan Singapura adalah 44.7%, 65.4%, 43.5% dan 50.0% per bulannya.

WHAT DRIVES ENERGY CONSUMPTION IN BRICS COUNTRIES? EVIDENCE FROM ARDL BOUNDS TESTING APPROACH

Rapid urbanization, openness and growth in human development index are some of the leading determinants of energy consumption in developing countries, particularly in BRICS economies (Brazil, Russia, India, China and South Africa). Thanks to their innate tendency to converge to the growth path of developed nations, BRICS countries are under increasing pressure to limit high energy consumption — triggered by outsourcing from developed nations. This paper attempts to weigh the relative importance of various determinants of energy consumption in BRICS countries between 1980 and 2016, studying in-depth the long-run co-movement pattern of energy consumption with demographic characteristics (depicting demand pressure) and macroeconomic aggregates (depicting cheap production cost). By leveraging on the trade-off between domestic and foreign demand and by employing the autoregressive distributed lag bounds testing approach, we establish differential effects of various predictors: whilst an increase in population growth rate, gross domestic product and capital account openness exert a positive and significant impact on energy consumption in Brazil, China and South Africa, foreign direct investment (FDI) and human development appear to enhance energy consumption in India, China and South Africa. The growth in external demand and the FDI inflows appear to have pushed urbanization, leading to greater energy consumption during the study period. Keeping in mind the sustainability goal, stronger green energy practices and sustainable urbanization patterns are needed to curb excessive energy sources.

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.

Globalisation and Economic Growth in India: An ARDL Approach

This study aims to investigate the relation between globalisation, which includes foreign direct investment (FDI), exports, imports, foreign remittances and economic growth in India. To achieve the said objective, Autoregressive Distributed Lag bounds testing approach has been utilised. The study indicates that imports and FDI positively affect economic growth in India. On the other hand, exports and foreign remittances have negative and significant relationship with economic growth. This suggests that exports and foreign remittances take more time to spillover positive impact on economic performance of India. The findings suggest that FDI should be encouraged to promote exports, export-led growth and joint ventures with foreign investors in the country. JEL Codes: F30, F10, F10, F24, C22

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.