The impact of external debt on total factor productivity and growth in HIPCs: non-linear regression approaches

Purpose The purpose of this study is to provide an empirical analysis of the impact of external debt on total factor productivity (TFP) and growth along with the TFP channel through which external debt affects the growth of heavily indebted poor countries (HIPCs). Design/methodology/approach This study uses panel data econometrics; basically, the seemingly unrelated regression (SUR) and alternative non-linear (panel threshold) models. For robustness check, it also uses panel-corrected standard errors, feasible generalized least squares and SUR (using alternative variables). Findings External debt significantly reduces both TFP and growth. Besides, it confirms that the relationship between external debt and TFP and gross domestic product growth is non-linear. Further external debt can affect the growth of HIPCs through the TFP channel. However, the threshold model result reveals weak evidence of threshold values although there are some threshold values of 67 and 54 for TFP and growth models, respectively. Originality/value To the best of the authors’ knowledge, this is the first study on most concerned countries (HIPCs) that shows a detailed and complete analysis of the TFP channel and the impact of external debt on growth. Thus, it provides appropriate and sound policies that consider the unique characteristics of the countries. Unlike most previous findings, this study does not support an inverted U-shape relationship between external debt and growth. Further, it provides insights into the relationships among TFP, external debt and growth. Moreover, it considers basic panel econometric tests like cross-sectional dependence, uses a non-linear simultaneous equations model along with the alternative non-linear model and is supported by different robustness checks.

Environmental impact assessment of CPEC: a way forward for sustainable development

Purpose Human-induced changes in climate have affected the environment to the extent that any more economic development at the cost of the environment will be too costly. Thus, sustainable development options posing no additional harm to the environment are the only viable option. This study aims to examine the likely environmental impacts of infrastructural developments through the China–Pakistan Economic Corridor (CPEC). Design/methodology/approach There is a scarcity of academic debate and discussion on the environmental impact of CPEC developments in laws and policies on the environment. The qualitative approach is followed in this study and official documents and reports are used to investigate the environmental challenges posed by CPEC. Findings The findings show three possible environmental concerns which could increase the climate change vulnerability of Pakistan. The coal-fired power plants are the most prominent threat based on their CO2 contributions and smog. Second, cutting more than 54,000 trees for roads infrastructure will increase CO2 concentration along the CPEC route. Third, increasing vehicle trafficking by up to 7,000 trucks per day on Karakorum Highway alone will release 36.5 million tons of additional CO2. Originality/value It is essential to rethink the environmental cost of CPEC. The study suggests economic and legal cooperation between Pakistan and China as a way forward to deal with climate change issues. Environmental laws should be a vital part of CPEC projects to ensure their safety, security and sustainability.

Economic complexity and price competitiveness dependence: empirical evidence using panel models

Purpose As economies with high economic complexity and productive capabilities may easily adapt their productive structure due to product differentiation and innovation, the central variable of competitiveness for these countries is the product quality, not price. On the other hand, the price can be an important determinant of less complex countries, and hence, real exchange rate (RER) misalignments may have long-term impacts. This paper aims to empirically assess variations in the magnitude of the impact in RER misalignments on output growth subject to countries’ economic complexity. Design/methodology/approach The estimation technique used is the generalized method of moments-System estimator as this method is robust to reverse causality. Heterogeneous regressions using interaction models are undertaken to analyze to what extend promoting economic complexity can reduce price competitiveness dependence and allow countries to grow faster without relying on cost competitiveness. Findings Estimates show that economic complexity (which measures technological and productive capabilities) determines cross-country differences regarding the effects of RER misalignments on countries’ long-term growth rates. The results suggest that exchange rate devaluations may not be effective for countries at the top end of the technological ladder while an overvalued RER may damage the long-term growth rate of countries with low levels of economic complexity. Originality/value This paper contributes to the literature by empirically investigating the impact of RER misalignments in countries with distinct technological and productive capabilities based on the recent developments of countries’ economic complexity analysis. It investigates whether more diversified and complex economies are less sensitive to RER misalignments as they can adapt their production, undertake other tasks, create new products and increase the quality of products they produce. Less complex economies, on the other hand, are less capable of innovating because it demands productive capabilities they do not have, and hence, they are more dependent on their current export basket.

Do “inferior” jobs always suffer from a wage penalty? Evidence from temporary workers in Cambodia and Pakistan

Purpose This paper aims to investigate the wage gap between temporary and permanent workers in Pakistan and Cambodia. Design/methodology/approach Quantile regression estimator is likely to be the most relevant to the sample. Findings The estimates indicate the presence of a temporary employment wage penalty in Pakistan and contrarily a wage premium in Cambodia. Moreover, quantile regression estimates show that wage differentials could greatly vary across the wage distribution. The wage gap is wider at the bottom of the wage distribution in Pakistan, suggesting a sticky floor effect that the penalty of being in temporary jobs could be more severe for disadvantaged workers. By contrast, a glass ceilings effect is found in Cambodia, indicating that the wage premium is small at the bottom and becomes high at the top of the pay ladder. Originality/value Despite the rise of temporary jobs in the past several decades, the empirical evidence on wage differentials between temporary and permanent workers is extremely limited in developing Asian countries. This paper is the first research work that systematically examines the temporary-permanent wage gap in selected Asian countries, based on their National Labor Force Survey data.

Examining stakeholder’s contribution and developing a framework for food banking implementation in Ghana

Purpose This paper aims to ascertain stakeholder’s willingness to contribute towards food banking implementation and further develops a framework for implementing food banks in developing country, Ghana. Design/methodology/approach Structured questionnaire was used to obtain response from 385 respondents using multistage sampling technique. Descriptive statistics was used to determine frameworks for food banking, whereas Heckman two-stage regression was used to analyse factors influencing stakeholder’s willingness to contribute towards food banking. Findings The results revealed that respondents preferred food banking with pantry, which is similar to the American model. Respondents were willing to contribute a minimum of (GH₵1–200, US$ ¢ 0.17-34.12) cedis and a maximum of GH₵ (400–600, US$ 68.23-102.35) monthly towards food bank implementation. Age, marital status and household head had a negative influence on stakeholders’ willingness to contribute towards food banking implementation, whereas income level and food bank awareness influenced willingness to contribute towards food bank implementation positively. Practical implications The study gives insight on stakeholder’s willingness to contribute towards food banking via cash or kind and further develops a framework for implementing food banking in Ghana. Social implications This study provides empirical contributions and vital information about stakeholders preferred food banking models and framework for implementing food banking, which Government can use as a social intervention policy to help vulnerable Ghanaians. In addition, findings from the study can enlighten and guide non-governmental organizations, individual philanthropists and other corporate bodies who want to contribute to food security, food poverty, hunger alleviation and development through food banking implementation. Originality/value In a developing country such as Ghana where there remains a paucity of food banking research, this study adds to existing literature by providing vital information of stakeholders preferred food banking models and frameworks for implementing food banking.

Does bribing lead to extra convenience or is it a barrier to longitudinal growth? Empirical evidence from South American Firms

Purpose This paper aims to study how firms’ longitudinal and dynamic growth will be affected by their bribing decisions to address the controversies existing in the extant literature on the impacts of briberies. Design/methodology/approach The authors acquired information from Enterprise Survey by the World Bank and compiled a unique panel data set including firms from five South American countries between 2006 and 2017. The authors used multiple methods to estimate firms’ productivity. A comprehensive inspection of firms’ longitudinal development using a two-step estimation method that addressed the endogeneity issue was then conducted. Findings Bribery could significantly shorten the waiting time for resources to become available. However, bribery also substantially and robustly slows down firms’ productivity growth over time. Meanwhile, a bribing firm is very likely to bribe again in the future. Originality/value This paper contributes to the extant literature by pioneering the empirical study of firms’ bribing decisions and their longitudinal growth. First, the authors constructed unique panel data and established a longitudinal investigation upon firms’ dynamic growth after bribing, filling the literature gap by studying the time-lagging effect of bribery on firms’ growth. Second, the authors performed a comprehensive overview of South American firms’ growth by looking into the dynamics of their production, employment, resource delay and productivity across years. Third, the authors found that bribing exerted contingent impacts upon firms’ growth, reconciling the mixed evidence in the literature.

Monetary policy and market interest rates: literature review using text analysis

Purpose This paper aims to examine the relationship between monetary policy and market interest rates. This paper examines the efficiency of interest rate channel used in monetary regulation as well as implementation of monetary policy under low interest rates. This paper examines and reviews the scientific literature published over the past 30 years to determine primary research areas, to summarize their results and to identify appropriate measures of monetary policy to be used in practice in changing economic environment. Design/methodology/approach This paper reviews 94 studies focused on the relationship between monetary policy and market interest rates in terms of meeting the goals of macroeconomic regulation. The articles are selected on the basis of Scopus citation and bibliometric analysis. A major feature of this paper is the use of text analysis (data preparation, frequency of terms and collocations use, examination of relationships between terms, use of principal component analysis to determine research thematic areas). Using the method of principal component analysis while studying abstracts this paper reveals thematic areas of the research. Thus, the conducted text analysis provides unbiased results. Findings First, this paper examines the whole complex of relationships between monetary policy of central banks and market interest rates. Second, this research reviews a wide range of literature including recent studies focused on specific features of monetary policy under low and negative rates. Third, this study identifies and summarizes the thematic areas of all the researches using text analysis (transmission mechanism of monetary policy, efficiency of zero interest rate policy, monetary policy and term structure of interest rates, monetary policy and interest rate risk of banks, monetary policy of central banks and financial stability). Finally, this paper presents the most important findings of the studied articles related to the current situation and trends on the financial market as well as further research opportunities. This paper finds the principal results of studies on significant issues of monetary policy in terms of its efficiency under low interest rates, influence of its instruments on term structure of interest rates and role of banking sector in implementation of transmission mechanism of monetary policy. Research limitations/implications The limitation of the review is examining articles for the study period of 30 years. Practical implications Central banks of emerging economies should apply the instruments and results of the countries' monetary policies reviewed in this paper. Using text analysis this paper reveals the main thematic areas and summarizes findings of the articles under study. The analysis allows presenting the main ideas related to current economic situation. Social implications The findings are of great value for adjusting the monetary policy of central banks. Also, these are important for people because these show the significant role of monetary policy for the economic growth. Originality/value Using text analysis this paper reveals the main thematic areas (transmission mechanism of monetary policy, efficiency of zero interest rate policy, monetary policy and term structure of interest rates, monetary policy and interest rate risk of banks, monetary policy of central banks and financial stability) and summarizes findings of the articles under study. The analysis allows defining the current ideas relevant to the monetary policy of developing countries. It is important for central banks because it examines the monetary policy problems and proposes optimal solutions.

Can altcoins become viable alternatives to African fiat currencies?

Purpose The paper aims to examine the asymmetric response of three major altcoins to shocks in six African fiat currencies in a time-frequency space. Design/methodology/approach Data are for the period 10th August 2015 to 2nd February 2019 at a daily frequency. The authors capture the time and frequency information in the return series of the currencies using the ensemble empirical mode decomposition. The authors implemented quantile regression and quantile-in-quantile regression on the decomposed series to test the response of altcoins to both positive and negative shocks in the fiat currencies across time to see if the altcoins are viable alternatives to African fiat currencies. Findings The outcome of the study suggests that altcoins behave differently from African fiat currencies and are viable alternative digital currencies and good hedges for African fiat currencies from the medium-term. Research limitations/implications Policymakers in Africa and across the globe can follow this paper to mitigate currency crises by adopting altcoins as alternatives to fiat currencies. Forex traders can also mitigate trade risk by using altcoins to hedge dollar/African fiat currency exchange rate risk. Originality/value The research was conducted by the authors and has not been published in any journal.

Effectiveness of non-farm diversification on rural household income – evidence and policy implications from India

Purpose Doubling farming households’ income through occupational diversification to the non-farm sector has been advocated to be of paramount importance in an agrarian economy such as India. The purpose of this paper is to analyse the effects of non-farm activities on rural household incomes in four different Indian states by using a propensity score matching technique and developing an endogenous switching model. Design/methodology/approach The research is based on secondary data taken from four quinquennial rounds of employment and unemployment surveys conducted by the National Sample Survey Organization. Findings The matching results indicate a maximum monthly rise in per capita income of Rs. 60 in Gujarat and a minimum increase of Rs. 18 in Rajasthan among rural households employed in the non-farm sector as compared to the farm sector. The findings confirm that rural non-farm structural diversification cannot be viewed as a blueprint for increasing rural household incomes in different states. Further, it suggests the need to segmenting the different states on the basis of agricultural development for increasing rural incomes. Research limitations/implications The study argues that Indian states with a strongly developed farm sector i.e. Gujarat and Punjab are not ideally suited to undergo structural changes in their economic pursuit. The estimates suggest that the transition of rural households from farm to non-farm-sector activities is a very weak strategy in agriculturally developed states of Gujarat and Punjab, whereas non-farm diversification becomes a pivotal strategy for increasing rural household incomes in less agriculturally developed states such as Rajasthan and Uttar Pradesh. A contrasting point that arises from these evidence is that although diversification to the non-farm sector leads to higher income, but the resultant figures are very scanty. Originality/value The present study contributes to the existing literature by providing evidence and policy implications on rural non-farm diversification in India and its impact on the rural household income. The study can help the policymakers in framing policies aiming at increasing the income of the rural household through the structural transition of the rural economy.

Are export earnings from India’s bilateral intra-industry trade with the US and China robust enough?

Purpose This paper aims to explore whether India’s export basket in the bilateral intra-industry trade (IIT) with two of its top trading partners characterize robust export earnings or not. This is pertinent for two reasons. First, India has a persistent problem of current account deficit for over decades now. Second, whether India’s export diversification strategy by participating in global value chains to improve export share in the world market led to the problem of the fallacy of composition. Design/methodology/approach This study considers bilateral trade data between India-USA and India-China at the HS-6 digit level over the period 1990–2018. The magnitude of total IIT is computed using the Grubel and Lloyd (1971) index. This paper then uses the unit value dispersion criterion to disentangle the magnitude of total IIT into horizontal and vertical IIT. Through a stepwise econometric exercise, this paper explores the attributes of exported goods in the IIT basket in terms of the directions of ToT, export share and export-price elasticity. Findings Across the two country pairs, the major contributors to the upsurge in IIT are five manufacturing industry groups of chemical, plastics and rubber, textiles, base metals and machinery and mechanical appliances. Across the industry groups, the dominant form of IIT has been low vertical IIT. Most of the industry groups do not characterize robust export earnings as the commodity groups have an elastic demand and an increasing trend of Terms of Trade (ToT). The exceptions are the industry groups of chemicals and textiles in India-China and India-USA, respectively. Research limitations/implications The concern of slim export earnings in most industry groups offers scepticism in maintaining the sustainability of the current account. The problem of the fallacy of composition also cannot be ruled out given the dominance of low vertical IIT. This study argues that these industry groups need to engage in labour market reforms and require access to easy credit to achieve competitiveness in the world market. Originality/value The analysis performed in this paper attempts to integrate the Prebisch-Singer hypothesis in the context of IIT. Empirical evidence to such an issue is not profound.