Do the black market and the official exchange rates converge in the long run?

Establishing cointegration and long-run convergence between the official and the black market exchange rates is a way of testing foreign exchange market efficiency. Earlier research employed the Engle-Granger or Johansen method to test for cointegration between the two rates. Since either method requires each rate to be non-stationary, exchange rates that did not possess this property had to be excluded from analysis. However, with the introduction of the bounds testing approach to cointegration, no exchange rate needs to be excluded since this relatively new technique does not require pre-unit root testing. This paper employs monthly data from 27 developing countries and the bounds testing approach to cointegration by Pesaran et al. (2001) to show that in 22 out of 27 countries, not only are the two rates cointegrated but in all countries the black market exchange rate causes the official rate to adjust and converge toward the black market rate in the long run.     

Export specialization and economic growth around the world

This paper empirically investigates the extent to which technological characteristics in exports affect the patterns of trade-led economic growth across countries. Data of the Balassa index, which captures a country's revealed comparative advantage, are obtained for industries classified by technological intensity. Regression results based on a sample of 71 countries since 1970 suggest that economies have tended to grow more rapidly when they have increasingly specialized in exporting high-technology as opposed to traditional or low-technology goods. The findings are robust to the presence of various control variables as well as the consideration of parameter heterogeneity and in the endogeneity of export structures.     

The relationship between trade,FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model

The relationship between foreign direct investment (FDI), trade openness and economic growth in host countries remains one of the most important issues in the economic literature and met with renewed interest in recent years mainly for countries suffering from unemployment problems and lack of technological progress. This paper examines this issue for Tunisia by applying the bounds testing (ARDL) approach to cointegration for the period from 1970 to 2008. The bounds tests suggest that the variables of interest are bound together in the long run when foreign direct investment is the dependent variable. The associated equilibrium correction is also significant, confirming the existence of a long-run relationship. The results also indicate that there is no significant Granger causality from FDI to economic growth, from economic growth to FDI, from trade to economic growth and from economic growth to trade in the short run. Even though there is a widespread belief that FDI can generate positive spillover externalities for the host country, our empirical results fail to confirm this belief for the case of Tunisia. They go against the generally accepted idea considering the positive impact of FDI on economic growth to be automatic. The results found for Tunisia can be generalized and compared to other developing countries which share a common experience in attracting FDI and trade liberalization.     

Is corruption bad for economic growth? Evidence from Asia-Pacific countries

This study utilizes the bootstrap panel Granger causality approach, which incorporates both cross-sectional dependence and heterogeneity across countries, to investigate whether corruption negatively impacts economic growth in thirteen Asia-Pacific countries over the 1997–2013 period. The empirical results show that there is a significantly positive causality running from corruption to economic growth in South Korea, a significantly positive causality running from economic growth to corruption in China and no significant causality between corruption and economic growth for the remaining countries. According to the empirical results, we do not support the common perception that corruption is bad for economic growth for all thirteen Asia-Pacific. On the contrary, results of this study suggest that the “grease the wheels” hypothesis is supported for South Korea. Additionally, results of this study indicate that for most Asia-Pacific countries, policy makers’ use of anti-corruption policies to promote a country's economic development may not be effective. Finally, results of this study also suggest that for China, increase in economic growth leads to an increase in corruption.     

Foreign and domestic growth drivers in Eastern Europe

This paper analyses the growth effects of capital formation, exports and FDI as major, drivers of economic development in Eastern Europe. The fundamental innovations are, identified by empirically and theoretically motivated short- and long-run restrictions in, structural cointegrated vector autoregressions. Impulse responses and variance, decompositions reveal quite different growth effects in various Eastern European countries. Generally, a strong reliance on exports goes along with higher GDP, and FDI bears, substantial potential for fostering economic growth. It is shown that the recent worldwide, recession clearly hit Eastern Europe through the export channel, whereas the recovery is, mainly supported by positive demand shocks.     

The effects of corruption on growth performance of the mena countries

This article aims at testing the effects of institutional characteristics on growth in countries of the Middle East and North Africa (MENA) region. For this purpose we consider conditional convergence in terms of initial conditions, macroeconomic performance, trade openness, government size, natural resource abundance and institutional and political structures for a sample of 90 countries over the period 1960–2000. We use regional indicators and MENA-specific variables in order to test for the effects of each variable on the growth performance of the MENA economies. We highlight the direct and indirect impacts of both corruption and bureaucratic quality on the MENA growth compared to the other regions of the world.     

The effect of World Bank trade adjustment assistance on trade and growth, 1987–2004: Is the glass half full or half empty?

This paper studies the association between trade reform, growth, and trade adjustment assistance in a sample of developing countries that underwent trade reforms during 1987–2004. Our analysis explicitly differentiates between a group of countries that received trade adjustment loans from the World Bank and a non-recipient group. The results suggest that trade adjustment assistance is positively associated with economic growth after trade reform in the medium to long run. In comparison to a pre-reform period and to the non-recipient group, the recipient countries registered 0.2 percent higher growth of real GDP per capita, 5.0 percent higher import growth, and 2.5 percent higher export growth over a period of three to five years after trade reform.     

Revisiting the concentration versus spreading debate as a successful export growth strategy: the case of UK SMEs exporting agricultural-related products

This paper investigates the behaviour of small and medium sized enterprises (SMEs) that export agricultural-related products from the UK. Although a body of knowledge exists on both the areas of export strategy and competitiveness, empirical data has tended to relate to manufacturing as opposed to agricultural products. Multivariate quantitative analysis of survey data and subsequent findings from interviews indicate that limited statistical differences exist between the competitiveness of agricultural firms that employ as a growth strategy an approach which concentrates on key export markets compared with those that spread their efforts over a number of markets. Firm size, experience and commitment are investigated as co-variates within the analysis. Implications for policy-makers are drawn from the findings.     

Foreign capital inflows, economic growth and stock market capitalization in Asian countries: an ARDL bound testing approach

This study investigates the effects of foreign capital inflows and economic growth on stock market capitalization in 18 Asian countries by using the panel data from the period of 2000–2010. The ARDL bound testing cointegration approach confirms the valid long run relationship between the considered variables. Results indicate that foreign direct investment has significant negative and economic growth has significant positive relationship with the stock market capitalization, whereas, the results of workers’ remittances is found insignificant in long run. The error correction model confirms the significant positive relationship of economic growth and workers’ remittances while, FDI has negative and significant impact on stock market capitalization in short run. Results of causality test based on Toda and Yamamoto (J Econom 66: 225–250, 1995) show the bidirectional causal relationship of foreign direct investment and economic growth with stock market capitalization. However, no causal relationship is found in between workers’ remittances and stock market capitalization. It is suggested that investor should not idealize the inflow of workers’ remittances to invest in Asian stock markets in long run. Simultaneously, size of the economy is a better leading indicator for Asian stock markets. On the other hand, inflows of FDI may mislead the investor to invest. Investor should keep on eye whether FDI come in the competition of domestic market or not? If this happens so investor should not invest in the stock market of host country.     

Economic growth and environmental impact: evaluating alternatives

The environment is no longer to be considered a free good, whether it is utilized for economic growth or is affected by it.This is an exploratory paper attempting to depict a conceptual framework for policy planning embodying growth, environmental and societal variables. The aim is to identify a comprehensive framework and suggest an operationally feasible set of methodologies and processes. In view of the limitations of the current theoretical andmethodological framework, the suggested heuristic approach is an attempt to develop and specify a realistic and convenient process for operational purposes. Moreover, any future developments in theory, methodology, measurement and information is considered to be complementary to, rather than competing with, the proposed framework. The contention is that while the on-going research undertakings are expected to improve the theoretical and methodological framework of the existing body of doctrine, there appears to be a need for a systematic operational framework for policy planning keeping in prospects realism, reasonableness andcertain balances. Sufficient flexibility should be maintained to adjust the particular aspects of the system in light of new information and experience.In summary, the issues of growth and the resultant environmental and societal implications are expounded upon and a conceptual framework is suggested for the process of national priority setting.The desirability of continued growth for the developed and developing countries is predicated upon the premise that environmental and societal variables are to be explicitly embodied in the allocation process so that the composition, structure and the rates of economics growth are compatible with the quality of life (Q/L).     

The impacts of gender inequality in education on economic growth in Tunisia: an empirical analysis

The positive contribution of women’s education to the economy and society has long been known in many countries, particularly in developing countries, to attract more attention. A large number of literatures on women’s education clearly suggest that educating a woman is equivalent to educating a family and that this woman is better educated than her counterparts, men, in many respects. The low level of education of women in Muslim countries, most of which are in developing countries. The increase in the level of education depends on the elimination of gender inequalities in education. Muslim countries must use all their resources to achieve their economic development goals. Women’s participation in the economy is a major economic resource that is not widely used in Muslim countries. The literature (Dollar and Garti in Gender inequality, income, and growth: are good times good for women? World Bank Working Paper, 21–2 1999; Barro in The Contribution of Human and Social Capital to Sustained Economic Growth and Well Being, Canada Government, Portage 2001; Schltz 2002; Klasen 2002; Knowles et al. in Oxf. Econ. Pap. 54 118–149 2002) suggests that gender equality has a positive effect on economic growth. Taking into account Muslim countries, it can reasonably be argued that the rate of the gender effect on economic growth is higher in developing countries. This paper analyzes the impact of gender inequality in education on economic growth for tunisia will be explored, using econometric techniques. The document will take into account all variables of primary school graduation, obtaining a high school diploma, obtaining a high school diploma and obtaining a University degree with economic growth will be examined in detail for the period 1970–2009. At this level Women’s contribution to the economy is threefold. The first is that the increase in the level of human capital, as a result, decrease the fertility rate of women. The second argument is that the infant mortality rate could decrease by decreasing the fertility rate of women. Third, raising the level of education of women can affect the level of education of the next generation positively. In this context, in order to understand the long-term relationships between these variables, i.e. gender inequality in education and economic growth, a co-integration approach will be applied. The empirical results show that there is a long-term relationship between these variables.     

Donors and domestic politics: Political influences on foreign aid effort

The vast majority of scholarship on foreign aid looks at either the effectiveness of foreign aid or why particular countries receive aid from particular donors. This paper takes a different approach: what are the domestic sources of support for foreign aid? Specifically, how does the donor's domestic political and economic environment influence ‘aid effort’? This paper uses a time-series cross-sectional data set to analyze the influence of changes in political and economic variables. As governments become more conservative, their aid effort is likely to fall. Domestic political variables appear to influence aid effort, but only for aid to low income countries and multilaterals while aid effort to middle income countries in unaffected. This suggests that models solely emphasizing donor economic and international strategic interests as determinants of donor aid policy may be mis-specified. These results also suggest sources of aid volatility that might influence recipient growth prospects.     

EXPORTS, URBAN GROWTH, AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICAN COUNTRIES

Several cross-countries regression analyses have revealed that exports positively contribute to economic growth in less developed countries, implying that apart from the increases in the stocks of labor and capital, growth can also be stimulated by reallocating resources from the less efficient non-export sector to the more productive export sector. This paper re-specifies the relation between exports and economic growth for non-urban goods exporting African countries. The impact of exports on the growth rate of national income is analyzed along with that of the growth of population in the urban region.     

Export discoveries, diversification and barriers to entry

The literature on the relationship between economic diversification and development established that diversification rises with development up to a point. Some have argued that market failures reduce private investments that are necessary to find out whether a new product can be exported profitably, thus implying that the threat of entry can reduce export discoveries and consequently hamper diversification. In parallel, the trade literature on the “extensive margin” of trade has focused on the role of fixed costs of exporting, which affects the number and types of firms that enter into exporting activities. This article presents data suggesting that export diversification and export discoveries are correlated over the course of development, and it provides an empirical test of market failures that might deter export discoveries. The findings suggest that the threat of entry by imitators reduces the number of export discoveries within countries and industries for a given rate of growth of non-discovery exports. However, this market-failure effect is less pronounced when allowing for inter-industry spillovers, whereby export discoveries in one industry lead to discoveries in another industry. The policy implication is that barriers to entry should not be used to protect innovators from the threat of imitation, but governments could consider interventions that directly focus on stimulating export discoveries.     

Electricity consumption and economic growth empirical evidence from Pakistan

The present article uses the Autoregressive Distributed Lag (ARDL) bounds testing procedure to identify the long run equilibrium relationship between electricity consumption and economic growth. Toda Yamamoto and Wald-test causality tests have identified the direction of the causal relationship between these two variables in the case of Pakistan in the period between 1971 and 2008. Ng-Perron and Clement-Montanes-Reyes unit root tests are used to handle the problem of integrating orders for variables. The results suggest that the two variables are in a long run equilibrium relationship and economic growth leads to electricity consumption and not vice versa.     

Health human capital and economic growth in Sub-Saharan African and OECD countries

This paper investigates the effects of health human capital on the growth rate of per capita income in Sub-Saharan African and OECD countries. Using an expanded Solow growth model, panel data, and a dynamic panel estimator, we find that the growth rate of per capita income is strongly and positively influenced by the stock of, and investment in, health human capital after controlling for other variables. The stock of health human capital affects the growth rate of per capita income in a quadratic way: the growth impact of health human capital decreases at relatively large endowments of health stock. Our estimates suggest that 22% and 30% of the transition growth rate of per capita income in Sub-Saharan African and OECD countries respectively, can be attributed to health. The structure of the relationship between health human capital and the growth rate of income in Sub-Saharan African countries is similar to the structure of the relationship in OECD countries. This implies that increased stocks of health human capital leads to higher steady state income. Our results have interesting policy implications.     

Political Variables in Cross-country Growth Analysis

The recent boom in cross-country growth analysis has renewed the empirical interest in political sources of economic growth. A large number of studies have tested political variables in growth regressions and a very heterogenous set of variables has been proposed to measure economically relevant differences in the political systems of countries. This paper distinguishes five categories of relevant political variables: democracy, government stability, political violence, policy volatility, and subjective perception of politics. For each of these categories, the specification, testing method, and results of the most relevant studies are presented and are critically discussed. The paper concludes that measures of democracy are least successful and measures of policy volatility and subjective perception of politics most successful as explanatory variables in cross-country growth regressions.     

A theory of foreign investment: Possibility,modes and timing

This paper analyzes the possibility, modes and timing of foreign investment and it is shown that all these are simultaneously determined. The determining variables are differential efficiency and variable cost of operation, together with export and technology transfer costs, as well as costs/benefits which are generally associated with differences in production environment originating from both home and/or host countries. The modes considered are: Foreign Direct Investment and Joint Venture, although the method could be generalized to take into account other modes.     

Can export performance be explained by attitudinal differences?

There are striking differences in the performances of the UK and West German mechanical engineering industries. This paper suggests that attitudes of senior management of both countries can explain a large proportion of these differences. Focusing primarily on export performance, 81 variables collected from 210 companies are analysed. In seven major areas the attitudes of both groups of executives are significantly apart. Based on these results, it is possible to correctly classify 89 of the companies as belonging to the UK or West German mechanical engineering industries.     

The linkages among energy consumption,economic growth,relative price,foreign direct investment,and financial development in Malaysia

The aim of this study is to analyse the causal relationship among energy consumption, economic growth, relative price, financial development (FD) and foreign direct investment in Malaysia using a multivariate framework. This study covers a sample from 1972 to 2009. Both the Johansen–Juselius cointegration test and bounds testing approach to cointegration consistently suggest that the variables are cointegrated. We find that energy consumption and economic growth Granger causes each other in the short and long run. In addition, both FDI-led growth and finance-led growth hypotheses are also supported by the findings from this study. Ultimately, energy is a prominent resource for financial sector development in Malaysia because we find that energy consumption Granger causes FD. Policymakers should implement a dual strategy that, on one hand, increases investment in energy infrastructure to ensure that the supply of energy is sufficient for the financial sector and economic development, while, on the other, encourages R&D in green technology such as exercising proper soil conservation techniques and sustainable farming practices in order to reduce the consumption of fossil fuels. By doing so, environmental problems such as carbon dioxide emissions can be minimised without affecting economic growth and financial sector development in Malaysia.