On The Contribution of Interest Expense (Income) on Total Output

A decrease in interest rate in traditional view of monetary policy transmission is linked to a lower cost of borrowing which eventually results into a greater spending in investment and a bigger GDP. However, a decrease in interest rate is also linked to a decrease in interest income which, in turn, affects the aggregate demand and total GDP. So far, no concerted effort has been made to investigate this positive inter-relation between interest income and GDP in the existing literature. Here in the first place we intuitively describe the inter-relation between interest income and output and then provide a micro-foundation of our intuitive reasoning in the context of a small endowment economy with finitely-lived identical households. Then we try to uncover the impact of nominal interest income on the macroeconomy using multiplier theory for a panel of some 04 (four) OECD countries. We define and calculate the corresponding multiplier values algebraically and then we empirically measure them using impulse response analysis under structural panel VAR framework. Large, consistent and positive values of the cumulative multipliers indicate a stable positive relationship between nominal interest income and output. Moreover, variance decomposition of GDP shows that a significant portion of the variance in GDP is attributed to interest income under VAR/VECM framework. Finally, we have shown how and where our analysis fits into the existing body of knowledge.

Informal Sector Taxation and Enforcement in African Countries: How plausible and achievable are the motives behind? A Critical Literature Review

Taxation is a fundamental tool for revenue generation, economy building and sustainability, reducing market externalities, regulating trade, stimulating representation and achieving tax justice as well as building state accountability and responsiveness. The informal sector in developing countries has been considered a hindrance to effective domestic revenue mobilisation, hence the rejuvenated focus to bring the sector into the tax baskets. Through a critical literature review, this study sought to identify the varying motivations tabled by the various stakeholders (policymakers, scholars and tax administrators) in literature on the need to administer tax on this sector and to strengthen enforcement and to evaluate the plausibility of these motives critically. Literature search was done through Google scholar and this was also aided by snowballing. The motives were aggregated into five major groups: the magnitude of the sector and revenue implications, growth motive, the governance gains, equity considerations and the boosting of tax morale and compliance in the formal sector. This study, therefore, conducted a profound evaluative analysis of literature on these motivations, pinpointing any voids that future research could address and accordingly sought to contribute to the guidance offered to policymakers on how to improve IS taxation. In order to balance the mobilisation of revenue needs and the sector’s contribution to other government objectives such as those outlined in the United Nations Sustainable Goals 1, 8 and 10 on poverty, decent work and economic growth, and reduced inequalities, governments and policymakers need to make an informed analysis.

Monetary Policy Dynamics in the United States

The recognised approach to designing an optimal monetary policy model is based on the central bank’s ability to mitigate losses using a quadratic criterion subject to the linear structure of the economy. This study examines the United States Federal Reserve’s (Fed) monetary policy in different economic environments. It provides an empirical solution to the central bank’s optimisation problem when preferences are asymmetric in both in˛ation and output gaps. The study tested for structural breaks and uncovered potential evidence of nonlinearities in the Fed’s reaction function, which provides more information on policy objective. The empirical evidence suggests that the Fed’s policy rate differs in these periods. This strongly indicates the presence of asymmetry. Further evidence suggests that the predictive power of the estimated model increases when a smoothing process is allowed.

What determines governments’ response time to COVID-19? A cross-country inquiry on the measure restricting internal movements

After the appearance of the first COVID-19 cases and deaths, countries’ responses were enacted at different points in time. This paper explores the factors behind the timeliness of travel restriction policies at the onset of the pandemic. Using instrumental variable techniques on a sample of 149 countries, our empirical exercise shows that while urban population and political stability are conducive to a prompt activation of a government’s lockdown policy after initial cases, a country’s wealth and the rule of law may produce an opposite effect. When the time from first deaths is considered, the presence of a female leader, net migration levels, voice and accountability, and political stability are associated with a quicker launch of a domestic travel restriction policy, while democracy and a country’s wealth may represent an obstacle to an immediate policy activation.

Formal Credit Constraint and Prevalence of Reciprocal Loans in Rural China

The unique feature of the rural credit market in China is the dominance of zero collateral and zero-interest reciprocal lending and its long-term coexistence with the formal loan. This paper investigates the association between formal credit constraint and prevalence of reciprocal loans in rural China. Based on the identification of rural households’ credit constraint status, we examine the effects of credit constraint on the utilization of informal reciprocal loans. We find that formal credit constraint significantly increases rural borrowers’ reliance on reciprocal loans, whereas the “debt of gratitude” imposes an uncertain obligation on rural borrowers, and discourages them from borrowing amongst relatives and friends.

Nigeria: Is There an Environmental Kuznets Curve for Fluorinated Gases?

The environmental Kuznets curve is a relationship between various indicators of environmental degradation and income per capita. Empirical studies have produced mixed results concerning Environmental Kuznets Curve hypothesis given the different indicators of environmental degradation used. But there has not been any validation of Environmental Kuznets Curve for powerful greenhouse gases like fluorinated gases that have a global warming effect up to 23 000 times greater than carbon dioxide (CO2), and their emissions are rising strongly. This paper aimed to test the applicability of the Environmental Kuznets Curve in Nigeria from 1970-2018 by deploying the Auto Regressive Distributed Lag methodology, the bounds test shows that there’s a long-run equilibrium relationship between Gross Domestic Product per capita, square of Gross Domestic Product per capita, alternative and nuclear energy, combustible renewable and waste, and adjusted savings: net forest depletion. Nonetheless, the results do not support the Environmental Kuznets Curve hypothesis both in the short-run and long-run and inverted U-shaped relationship was not found between fluorinated greenhouse gas emissions and growth in Nigeria. However, adopting fluorinated gas recycling and destruction processes, optimizing production to minimize emissions, and replacing these gases with alternatives are suggested for industrial users.

Impacts of Improved Seed Maize Technology Adoption on Productivity and Technical Efficiency in Northern Ghana

Improved seed is one of the crucial ingredients for promoting agricultural productivity, farmers’ livelihood, and global food security. The present study uses an endogenous treatment regression model (ETRM) to evaluate the impacts of improved seed maize technology (ISMT) adoption on technical efficiency and productivity using data from maize farmers in northern Ghana. The findings show that ISMT adoption impacts positively on technical efficiency. Adoption of ISMT enhanced technical efficiency by 16.1% and increased maize productivity by 33.8%. The study recommends dissemination of improved maize seeds to farmers and other interventions such as provision of fertilizer to enhance farmers’ technical efficiency and productivity.

Public Spending on Health as Political Instrument? – Regime-type dependency of public spending

The paper argues that the level of public spending on health varies according to the type of political regime in a country. A simple political economic model is employed to analyse the rationale of policy makers when implementing healthcare policy. The theory of dictatorship as described by Wintrobe (1990, 1998, 2001) is used to differentiate between the types of autocratic regimes. Furthermore, an empirical analysis is conducted for 170 countries for the years 1995-2014. We found that public spending on health is decreasing with the level of political freedom. At the same time, public spending on health care competes with military expenditures. Moreover, public spending on health in neighbouring countries affects the level of public spending within the country.

Fiscal Rule in Africa

Fiscal policy has recently been encouraged to increase competition, monitor Africa’s debt to GDP and improve its economic growth. Importantly, the present fiscal situation in most African countries will seem to have significant consequences for both public and private investments. This paper examines whether fiscal policy and investment matters for GDP growth in a panel of forty-eight (48) African countries for the period 1970-2017. The empirical evidence explored is based on the Fixed Effect (FE) and System Generalised Method of Moment (GMM) estimators. The results suggest that public and private investment among selected African countries has a positive impact on GDP growth. The findings further indicate that fiscal policies must play a more prominent role in sustaining potential private and public investments, especially as debt servicing among the African’ countries examined may have serious shortcomings on sustainable economic growth

Innovative Empirical Model for Predicting National Banks’ Financial Failure with Artificial Intelligence Subset Data Analysis in the United States

The principal objective of this research study was to investigate the impact of the Great Economic Recession of 2008 on national banks’ equity investment valuations and create an empirical model for predicting national banks’ financial failure in the United States. The focal period of the study was from 2009 to 2012, and public data sources used. It is not known to what extent national banks’ stock value investments are based on the return on equity. This causal-comparative study explores the degree to which national banks’ value investment in terms of the price to earnings ratio impacts their return on equity and the extent to which these banks’ stock value investment in terms of dividend yield impacts their return on equity. We used statistical modeling and the machine learning model to find hidden patterns in the input data. The principal finding of this research is that the median earnings per share in 2012 and the dividend yield in 2009 were significantly larger than the median return on equity in 2009 and 2012. Additionally, the dividend yield in 2012 was significantly smaller than the median return on equity in 2012. These findings can contribute to improving our understanding of how banks can predict financial failure using the new machine learning features of artificial intelligence to build an early warning system with the innovative risk measurement tool.