Deviation from Purchasing Power Parity: Evidence from Malaysia, 1973–1997

This paper presents an empirical test of Purchasing Power Parity (PPP) applied to the Malaysia ringgit for the period from 1973 (CPI) and 1984 (WPI) to 1997. Consistent with other research findings, it is detected that real exchange rate follows a random walk. Using multivariate cointegration methodology for the long-run relationship between real exchange rate and certain macro-economic variables, the study provides evidence supporting a long-run relationship between the real exchange rate and the current account balance and government spending, the last two variables have been not included in previous studies of this economy. The causality test between real exchange rate with the current account balance and government spending, however, does not receive support from the error-correction model. This suggests that both government spending and current account balance are not adequate to explain the changes in ringgit real exchange rate. The puzzle still remains unsolved.     

Estimating the future health care cost of population aging in South Africa

ABSTRACT

This paper analyses the relationship between health care expenditure and population aging in South Africa using yearly data from 1983 to 2015. Empirical evidence from an Autoregressive Distributed Lag approach to cointegration indicates that old dependency and life expectancy are major drivers of public health expenditure in South Africa besides the income. Particularly, when structural breaks are controlled for, income exhibits a long-term elasticity with respect to health spending greater than unity; suggesting that South African public health care has become a luxury good over time. Interestingly, South African public health spending is found to be responsive to demographic development only in the long run. This is consistent with the micro evidence that health expenditure increases with individual age with significant impacts in the long term. Finally, using economic and demographic projections statistics, we find that public health expenditure could roughly double in the next fifteen years ceteris paribus.     

The Money-prices Nexus for Malaysia: New Empirical Evidence from the Time-varying Cointegration and Causality Tests

Abstract

The main objective of this study is to empirically re-investigate the money-prices nexus for Malaysia through the Johansen multivariate cointegration and the modified Wald (MWALD) causality techniques. This study covered the monthly dataset from 1971:M1 to 2008:M11. The Johansen cointegration test suggests that the variables under investigation are co-move in the long run. Furthermore, the MWALD causality test shows a bidirectional causal relationship between money supply (M2) and aggregate prices, meaning that both the monetarist's and also the structuralists' views are vindicated in the Malaysian economy. However, the time-varying cointegration and causality tests indicate that the cointegrating and also the causal relationships are not stable over the analysis period. These results suggest that inflation in Malaysia is not purely a monetary phenomenon. Therefore, implementing a tighter monetary policy may not be an effective macro-economic instrument in managing the inflationary behaviour in the Malaysian economy.     

WAGNER'S LAW: AN ECONOMETRIC TEST FOR SOUTH AFRICA, 1960‐2006

The main objective for this paper is to test Wagner's law by analysing the causal relationships between real government expenditure and real income for South Africa for the period 1960‐2006. The paper tests the long‐run relationship between the two variables using the autoregressive distributive lag approach to cointegration suggested by Pesaran et al. We use the Granger non‐causality test procedure developed by Toda and Yamamoto, which uses a vector autoregression model to test for the causal link between the two. Evidence of cointegration is sufficient to establish a long‐run relationship between government expenditure and income. However, support for Wagner's law would require unidirectional causality from income to government expenditure. Therefore, cointegration should be seen as a necessary condition for Wagner's law, but not sufficient. This research does find a long‐run relationship between real per capita government expenditure and real per capita income. Results for the short‐run causality find bidirectional causality. On the basis of empirical results in this paper, one may tentatively conclude that Wagner's law finds no support in South Africa.     

Determinants of Malaysian Trade Balance: An ARDL Bound Testing Approach

Abstract

This paper examines the short- and long-run relationships between trade balance, real exchange rates, income and money supply in the case of Malaysia. The inclusion of income and money variables in the study is purposely to examine the monetary and absorption approaches to the balance of payments beside the conventional approach of elasticity, using exchange rates. Using the bound testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework, we investigate whether a long-run equilibrium relationship exists between trade balance and the determinants. Additionally, we adopt an innovation accounting by simulating variance decompositions (VDC) and impulse response functions (IRF) for further inferences. Using this approach, we find evidence of a long-run relationship between trade balance and income and money supply variables but not between trade balance and real exchange rate. The findings also suggest that Marshall–Lerner condition does not hold in the long-run for Malaysia and for policy wise the Malaysian trade balance/balance of payments should be viewed from absorption and monetary approaches.     

WAGNER'S LAW REVISITED: A NOTE FROM SOUTH AFRICA

The aim of this note is to reassess the validity of Wagner's law for South Africa for the period 1950‐2007 using cointegration and causality tests. The evidence shows causality running from income to government expenditure, thus supporting the Wagnerian proposition of an expanding public sector. Using five different long‐run estimators, we found that the size of South Africa's public sector was positively and significantly related to South Africa's national income. The elasticity ranges from 1.12 to 1.57, implying that a 1% increase in income leads to a 1.12‐1.57% increase in government expenditure.     

EXPLAINING THE GROWTH OF GOVERNMENT SPENDING IN SOUTH AFRICA

What determines government spending in South Africa? The paper estimates the determinants of real per capita government spending in the Republic of South Africa using annual data for the period 1960‐2007, a tumultuous period during which South Africa experienced a variety of internally imposed changes (e.g. the abolition of apartheid, changes in political institutions) and externally generated shocks (e.g. war, oil shocks). Using multivariate cointegration techniques, we find that per capita government spending, per capita income, the tax share and the wage rate are cointegrated, a result that supports the notion that government spending is associated not only with per capita income and the true cost of government service provision as given by the wage rate but also with the fiscal illusion caused by budget deficits. We also find evidence that per capita government spending was positively affected by external shocks. These external shocks seem to play a significant role in explaining the dynamics of government spending growth.     

老龄化背景下中国商业健康保险的社会保障作用研究

商业健康保险具有缓解社会保障支出的作用,对于社会保障具有积极影响。基于老龄化背景下针对中国商业健康保险的社会保障作用进行研究。研究结果发现当人均商业健康保险的保费收入增加时,全国社保基金中的人均医疗保险支出将可因此显著减少,这说明中国商业健康保险的发展有助于缓解社会保障支出,从而能够减轻政府财政支出的负担和压力,与当前政府所提倡的积极发展商业保险,从而推进"健康中国"的战略计划实行的政策相符。     

Government revenue, expenditure, and national income: A granger causal analysis of the case of Taiwan

An understanding of the causalities among government receipts, outlays and national income in developing countries may shed some light on the type of government finance favorable to economic prosperity. However, there is no consensus in theories and empirical studies about the causal order among the three variables. This study evaluates their causal relationships in Taiwan within a framework of trivariate autoregression model. We find that there are feedbacks between GNP and government expenditure, on the one hand, and between government revenue and GNP, on the other hand. But there is only a one-way causality running from government revenue to government expenditure. The two bidirectional causalities seem to fit the expectation of fiscal activism. However, the causal flow from government revenue to expenditure indicates the constraint of the former on the latter. Therefore, we call this general causal pattern among the three variables in Taiwan as “constrained fiscal activism.”     

Foreign Direct Investment and Services Trade: Evidence from Malaysia and Singapore

Abstract

Services trade is an important source of growth in Malaysia and Singapore. Both economies are export-oriented and actively court foreign direct investment (FDI) to advance their economic objectives of industrialization and economic development. This paper examines the causal linkages between inward FDI and the country's engagement in services trade in bi-variate and tri-variate VAR frameworks. The empirical findings for Singapore show evidence of bi-directional causality between inward FDI and the total trade volume in services (i.e. the absolute sum of payments and receipts) as well as between FDI and services imports (in the tri-variate specification). This may reflect her relative open foreign investment policy and free trade regime in services. For Malaysia, the evidence of causality is weaker and uni-directional, from inward FDI to services imports. These findings are consistent with the different stages of economic development and openness attained by the two sample countries, and they provide useful background for trade and foreign investment policies and development strategies.     

Population Ageing and Saving Rates in China,Japan and Korea: A Panel Granger Causality Analysis

Abstract

The world is ageing fast and East Asia is not an exception. Among the three major East Asian countries, Japan features the eldest society in the world, while China and Korea also witness a dramatic demographic transformation. One important impact of population ageing is on saving rates. In this paper we seek to investigate the causal relationship between demographics and savings in those three countries by employing a panel of data-set and innovative econometric technique – panel Granger causality test. On balance there is evidence supporting the argument that a growing younger population causes an increase in national saving, albeit not necessarily in household saving. The results are robust against different estimation procedures and parameters.     

Are people in the SADC region willing to pay more tax to fund public healthcare?

ABSTRACT

For Africa to develop and achieve sustainable development, African governments have to prioritise spending on public health. However, the current spending data shows that health spending is a continuing struggle for African countries. Many researchers have the view that African governments have to collect more tax to spend enough on public healthcare. The question here is what extent people are willing to pay more tax to increase spending on public healthcare? Employing a multilevel regression model on Afrobarometer survey data, this paper examined to what extent individual and country level factors influence people’s willingness to pay more tax to increase spending on public healthcare in 12 Southern African Development Community (SADC) member states. This study found that peoples’ trust in their government is an important determinant of willingness to pay more tax, while factors such as the country’s quality of democracy, economic condition, and current per capita health expenditure have no influence.     

Investigating causality among unemployment,income and crime in Taiwan: evidence from the bounds test approach

This paper examines the long-run and causal relationships among unemployment, income and crime in Taiwan. The results clearly indicate that there is a long-run level equilibrium relationship among unemployment, income and total crime. There are also long-run relationships among unemployment, income and theft and among unemployment, income and economic fraud. The causality test results from the ECM-VAR and level VAR models indicate that there is a neutral relationship among unemployment, income and total crime, and a neutral relationship among unemployment, income and all three categories of crime. It is concluded that there is no strong evidence in favor of the unemployment-led crime (ULC) or the crime-led unemployment (CLU) hypotheses in Taiwan.     

The Revenue–Expenditure Nexus: The Experience of 13 African Countries

Abstract: The aim of this paper is to investigate the causal relationship between government revenue and government expenditure for 13 African countries within a multivariate framework using a modified version of the Granger causality test due to Toda and Yamamoto (1995) . The empirical evidence suggests that there was a bi‐directional causality running between expenditure and revenue for Mauritius, Swaziland and Zimbabwe; no causality in any direction for Botswana, Burundi and Rwanda; unidirectional causality running from revenue to expenditure for Ethiopia, Ghana, Kenya, Nigeria, Mali and Zambia; and a uni‐directional causality running from expenditure to revenue for Burkina Faso only.     

新疆社会保障支出与农民收入增长的互动关系分析

改革开放以来,新疆农村经济社会发生了翻天覆地的变化,农民收入大幅度提高,生活水平显著改善,但城乡收入差距扩大的趋势仍未扭转,农民持续增收的难度不断加大。本文运用格兰杰因果检验的方法,对新疆社会保障的支出与农民收入增长的关系进行了分析,发现社会保障支出对农民收入增长具有重要的促进作用,而农民收入水平也同时影响着社会保障支出的变动,从而得出了二者互相促进、相辅相成的结论。     

The growth,poverty and inequality nexus in South Africa: Cointegration and causality analysis

This study empirically established the long-run relationship and causality effects that exist between growth, poverty and inequality. The analysis was carried out on a panel of nine South African provinces from 1995 to 2012. To capture poverty and inequality in a broader context, two measures of poverty (income and non-income) and three measures of inequality (income, education and land) were adopted for the study. The results confirm that there is a long-run relationship between growth, poverty and inequality. Notable results from the causality tests suggest that growth does not promote equal distribution of income in society but as income distribution begins to equalise, economic growth rises. This is regarded as growth–inequality disconnect. The unidirectional causality, which runs from income poverty to income inequality, suggests that a rising level of income poverty will lead to falling income inequality in the society; likewise, income inequality increases as non-income poverty declines.     

The export-led growth hypothesis: The role of the exchange rate, money, and government expenditure from Korea

This article examines the export-led growth hypothesis for Korea in five-variable vector autoregressive and vector error correction models from 1973:1 to 1994:4. Results of the vector autoregressive models indicate economic growth Granger-causing export growth, regardless of the sample period. However, results of the vector error correction models show bidirectional causality between export growth and economic growth when the multivariate generalization of the Granger causality tests are used. In the variance decompositions, the real exchange rate contains most information regarding future fluctuations in economic growth and export growth followed by money supply and government expenditure in the subsample and the full sample, with economic growth as a dependent variable. However, when the dependent variable is export growth, then the order of the magnitude in the full sample becomes the exchange rate, followed by economic growth, government spending, and money supply. The findings in this paper suggest that the omitted variables have masked or overstated the effect of exports on income or income on exports in prior studies.     

Untangling the web of causalities among four disaggregate government expenditures,government revenue and output in Taiwan

Using Taiwan data, this empirical study delves into the causal links among four disaggregate real government expenditures, real government revenue and real output. The results substantiate that there is (i) neutrality between real government revenue and real government expenditure on economic development; (ii) unidirectional causality from real government revenue to real government expenditures on national defence, on general administration and on education, science and culture, confirming the tax-and-spend hypothesis; (iii) neutrality between output and the four disaggregate government expenditures; and (iv) unidirectional causality from real output to real government revenue. Several implications emerge from our empirical results.     

The Interactions of Stock Prices and Exchange Rates in the ASEAN-5 Countries: New Evidence Using a Bootstrap Panel Granger Causality Approach

Abstract

Using a data-set from the ASEAN-5 countries over the January 2000–August 2013 period, this paper revisits the Granger causal nexus between the equity and foreign exchange markets by employing the bootstrap panel Granger causality approach developed by Kònya, which allows for both cross-sectional dependency and heterogeneity across countries. The results indicate a unidirectional causality from stock prices to exchange rates in Malaysia, the Philippines and Thailand and from exchange rates to stock prices in Indonesia. These findings have important implications for policy-makers and institutional investors who should rigidly monitor the dynamic linkages between stock price and exchange rate movements across the ASEAN-5 financial markets when making policy decisions and investing in these countries.     

Does Rising Income Inequality Reduce Life Expectancy? New Evidence for 26 European Countries (1995–2014)

An open debate these days is about how national income inequality could affect individuals’ health outcomes. Therefore, the present study aims to provide new evidence regarding life expectancy determinants and how they are related to the income inequality hypothesis. Precisely, it is provided new evidence on this relationship for 26 European countries during the period 1995–2014. The analysis is based on panel data techniques, with the latest data from both Eurostat and the OECD Health Statistics. Furthermore, data from the World Bank is also applied. Besides, we have tested the sensitivity of the estimates in our empirical analysis using three clusters of countries. Our results suggest that income inequality does not significantly reduce health in developed societies, like the European ones. Notwithstanding, as income inequality can be sometimes harmful for population health, these issues must be taken into account in order to improve health care policies.