Military Economy and Economic Growth: Bidirectional Effects in Transition Economies of Eurasia

Recently, the worrisome rise of military economy in Eurasian transition economies has raised concerns on what is behind this trend and what are its economic consequences. Based on the evidence from 26 Eurasian countries selected into two subgroups “Russia+10” and “15 Central and Eastern European” (CEE) countries over the period from 1991 to 2019, this article focuses on the military economy overview in this region and demonstrates the result of panel data estimations of bidirectional relation between military economy indicators and economic growth. The study shows that in “Russia+10,” military expenditures to GDP and to government spending have a positive effect on growth, and economic growth has a negative influence on these two indicators. Moreover, armed forces to labor forces have a positive bidirectional relation with economic growth in “Russia+10.” For the samples of “15 CEE” and all Eurasian countries, there are not always statistically significant results to offer clear conclusion on bidirectional effects between military expenditures to GDP and to budget expenses and economic growth. Armed forces to labor forces show a positive effect on growth in Eurasia and “15 CEE” countries.

Does Tourism Affect Sustainable Development in MINT Countries?

Following the failure to achieve Millennium Development Goals by most countries in the world, Sustainable Development Goals are now at the center of developmental issues. Consequently, this study aims to examine if tourism can be an ally to sustainable development in MINT (Mexico, Indonesia, Nigeria, Turkey) countries between 1995 and 2018. The study uses adjusted net saving and international tourism receipts in these countries as measures of sustainable development and tourism, respectively. In achieving its objectives, the study employs the augmented mean group (AMG) estimation technique to estimate the long-run parameters. Besides, mean group (MG) and common correlated effects MG techniques are employed to check the robustness of the estimates obtained via the AMG approach. The results from the three estimators show that tourism is indeed an ally to sustainable development in MINT countries since there is a significant positive relationship between tourism and sustainable development. In other words, tourism can put the MINT countries on the path to sustainable development. This implies that any policy that will enhance the performance of the tourism industry will ensure sustainable development in MINT countries. Thus, the governments of MINT countries should focus basically on achieving sustainable tourism development, as this will translate to sustainable development in their countries.

Credit Constraints and Increased Firm-level Production Fragmentation: Evidence from India

Previous studies have underlined various rationales for production fragmentation from wage differentials, decreased trade costs, access to specialized skills and resources, access to new markets, and benevolent government policies, to technological advancement. However, the idea that a firm’s financing structure can influence its production structure remains less explored, more so empirically. Firms that are financially constrained find it difficult to complete the entire production process in-house and therefore tend to resort to production fragmentation. The current study investigates this link between the extent of credit constraints faced by firms and their outsourcing behavior using data from Indian manufacturing firms over a period of ten years. We also separately study this linkage for firms that tend to export more vis-à-vis firms that export less, to ascertain if increased exporting have relaxed the financial constraint of the firms. The results confirm the positive effect of credit constraints on outsourcing behavior. For a robustness check, subsample regressions and alternative measures of constraints are also analyzed. The study has important policy implications for developing countries such as India, where outsourcing may prove to be a profitable reorganization strategy for firms that are financially constrained.

Determinants of Foreign Direct Investment in Indonesia

We examine what determines the flow of foreign direct investment (FDI) in Indonesia, focusing on the role of institutional measures. A knowledge-and-physical-capital (KPC) model is applied to a panel dataset that covers 42 of Indonesia’s FDI partners from 2004 to 2012. Evidence shows that both horizontal and vertical FDIs coexist in the bilateral aggregate data of Indonesia’s FDI flows, but horizontal FDI appears to be dominant. This can be explained by the market size (proxied by the total GDP of both countries and similarity in incomes per capita) and the relative factor endowments (proxied by skilled labor and physical capital). The vertical FDI, on the other hand, could be only explained by the significant effect of unskilled labor. Institutional factors, particularly corruption, are apparently important in affecting Indonesia’s bilateral FDI flows. The results also show that a higher FDI level in Indonesia positively correlates with macroeconomic factors, open policy factors, and utility infrastructure factors.

The Use of Digitalization (ICTs) in Achieving Sustainable Development Goals

The article examines the use of information and communication technologies (ICT) in achieving sustainable development goals (SDGs). This link is conceptually and contextually analyzed in the global context whereby scholarly opinions and research works are discussed to substantiate the role that ICT can play in achieving SDGs. The article further examines the link in South Africa, using the country as a locus of the study. The article aims to find answers to the following research questions: How is ICT linked to all 17 SDGs? To what extent this link may accelerate SDGs’ implementation? What is the impact of ICT on accelerating SDGs? What are the challenges hampering the efficient utilization of ICT for SDGs’ implementation? The article uses a qualitative approach with desktop analysis to draw significant information. In addition, unobtrusive methods were applied, such as conceptual analysis and document analysis, to draw conclusions based on the findings. The findings confirm that despite ICT policies and infrastructure, the use and impact of ICT on SDGs is not always high. The article suggests that improvements are required at policy, institutional, department and individual levels. The suggestions can be applicable globally, based on the technological advancement and socio-economic development in country-specific contexts.

Dynamics of Information Acquisition: Does Investment in Information Technology Matter?

The purpose of the study is to develop a theoretical model to ascertain if the IT investment in the banking sector is capable of generating a new equilibrium with increased efficiency. The empirical strategy is to seek an indirect test for Jordanian banking sector by looking at the time profile of banking profits as a temporal function of IT investment. The study enquires if the banking sector, as an iterative process of credit allocation and information acquisition through IT investment, lead to a stable equilibrium? Does IT investment ensure stable market shares for Jordanian banks in the long run? The study finds that investment in IT has led the banking system in Jordan away from an efficient equilibrium. We also find that the banks in Jordan directly interact with each other, although they may have collusive arrangements with some of their rivals, this means the banking market is not fragmented.

External Shocks and Their Transmission Channels in Nigeria: A Dynamic Stochastic General Equilibrium Approach

The study examines the sources of external shocks and investigates their transmission channels in Nigeria using the trade-weighted variables from the country’s five top trading partners. Based on the assumption of the small open economy model, the study adopts the New Keynesian Dynamic Stochastic General Equilibrium Model on quarterly data between 1981 and 2018 using the Bayesian estimation technique. Findings from the study reveal that external shocks have a temporary and short-lived effect on the Nigerian economy. In addition, the article shows that oil price, foreign output, and foreign inflation shock have positive impacts on output gap and inflation, while the impact of foreign interest rate shock on the output gap and inflation is negative and not significant. The study also reveals that external shocks collectively explain 86% and 39%of total fluctuations in the output gap and inflation, respectively. Lastly, the study finds that external shocks transmit to the Nigerian economy via different channels. The study, therefore, concludes that terms of trade and exchange rate channels are the dominant transmitters of external shocks in Nigeria. Based on the findings from the study, important policy implications are highlighted.

The Impacts of Population Aging on China’s Economy

The Chinese economy had an extraordinary average GDP growth rate of 8.50 percent from 1980 to 2018. However, the implementation of one-child policy in the late 1970s has depressed the total fertility rate to below the replacement rate since 1992. China thus experienced an increasing composition of older populations in the past three decades, which puts pressure on Chinese economic growth and makes its eye-catching economic growth potentially unsustainable. This study develops an overlapping generations (OLG) model to investigate the impacts of this demographic transition in the Chinese economy. This study conducts six policy reform exercises to examine measures that could improve the sustainability of fiscal and pension systems. The simulation results indicate that a mild tax increase on either wage income or consumption does not improve the fiscal stance but creates distortionary effects on saving and consumption behaviors. Of the pension reform measures considered, the combination of extending the mandatory retirement age and cutting the replacement ratio offers the most significant improvement to pension sustainability. However, increasing the contribution rate of the working-age population has the least effect on pension sustainability and a noticeable distortionary effect on the consumption ratio and saving rate.

Trends and Determinants of FDI with Implications of COVID-19 in BRICS

Foreign direct investment (FDI) movement to any country is recognized as an important criterion for economic strength and potentiality. Hence, the present study analyzes the motives of FDI inflows through the determinants and channels, namely horizontal or vertical FDIs and the impact of COVID-19 on FDI Inflows in BRICS countries during the period 1990–2020. The Kinked Exponential (deterministic) trend, and Zivot and Andrew’s trend equations are applied for the growth analysis of FDI inflows. Regarding the estimation of channels of FDI inflows in terms of horizontal, vertical, and hybrid motivations, dynamic panel data analysis using GMM for BRICS economies together and ARDL-PMG for individual countries is made. The findings show significantly positive growth in FDI inflows in all BRICS countries except India during the first decade of the present century. After that, these countries have experienced either significantly or insignificantly declining trends, except India, where the trend has significantly increased during this later period. From the overall analysis, we see that both horizontal and vertical motivations play a dominant role in determining FDI inflows for the BRICS countries. However, from country-wise estimations, it is observed that both horizontal and vertical motives are dominant factors for FDI inflows to India and Russia. In contrast, the horizontal motive of it is significant for China. For Brazil and South Africa, no motive behind FDI inflows appears significant. The pandemic situation significantly impacts attracting FDI in Brazil, while it remains insensitive in the rest of the BRICS countries. The findings reveal that FDI determinants are country-specific. So, the BRICS countries can design proper FDI policy and adopt more reforms in attracting FDI that may help improve their economic situation.

Do Trade and Poverty Cause Each Other? Evidence from BRICS

Any two variables that are observable have one or the other form of relationship. This is particularly a statistical relationship. But for a statistical relationship to be cause and effect, a theoretical relationship is important. The theoretical relationship can be quantified to search for the evidence of causality. The possible outcomes can be no causality, unidirectional causality, or bidirectional causality. The present study aims at searching for evidence from BRICS countries regarding trade causing poverty or vice versa. Applied econometrics approach is used in the study. Panel econometric techniques have been employed to identify presence/absence of causality between the variables. Apart from this, the study also uses equality of means to identify whether trade and poverty proxies are symmetrical or asymmetrical. The study finds no causal relationship between trade and poverty for BRICS countries except that poverty headcount at $3.2 per day causes trade balance. With respect to the impact on the GINI index, lowest 10 percent income share and poverty headcount ratios are integral to reduce the inequality in the BRICS countries.