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.     

Capital mobility, foreign aid, and openness: further panel data evidence from sub-Saharan Africa

This study uses several alternative panel data estimation techniques (pooled ordinary least squares, fixed effects, and random effects) to examine the effect of domestic savings, foreign aid, the evolution of capital mobility over time, and openness on investment rates for a sample of 29 sub-Saharan African countries over the time period 1980 to 2001. The empirical evidence suggests the presence of capital mobility in line with previous studies of developing economies and that capital mobility has gradually increased over time. Moreover, foreign aid and openness both have positive and significant impacts on investment rates.     

Financial development and governance: A panel data analysis incorporating cross-sectional dependence

This study investigates bidirectional causality between governance and financial development using panel data of 101 countries from 1984 to 2013. The financial development–governance nexus is explored using econometric methods robust to cross-sectional dependence, and the relationship between different levels of development and openness is analyzed. Long-run equation estimates show clear evidence that financial development positively affects governance, and this positive impact is found to be robust to three different measures of governance. Further analysis shows that improving governance quality has a positive effect on financial development, while Granger causality tests demonstrate bidirectional causality between financial development and the governance measures. Finally, the impact of financial development on governance is dependent on a country’s level of development and openness. These findings underscore the crucial role of financial development in bringing about good governance reforms and economic growth that, in turn, can further develop the financial sector. As such, a symbiotic and synergistic relationship can persist between good governance, growth, and financial development. The findings provide significant motivation for policymakers to encourage openness and financial sector development to lift the standard of living, especially in emerging economies.     

Corruption, Growth, and Income Distribution: Are there Regional Differences?

This paper uses panel data from 61 countries at different stages of economic development over a 20-year period to investigate regional differences in the effect of corruption on economic growth and income distribution. Using two measures of corruption, we find that there are statistically significant regional differences in the growth and distributional impacts of corruption. The largest growth impact of corruption is found in African countries while OECD and Asian countries have the lowest growth impact. On the other hand, the largest distributional impact of corruption in found in Latin America. A 10% decrease in corruption increases the growth rate of income by about 1.7% in OECD and Asian countries, 2.6% in Latin American countries, and by 2.8% in African countries. A one standard deviation decrease in corruption decreases the gini coefficient of income distribution (0–1 scale) by 0.05 points, 0.14 points, 0.25 points, and 0.33 points in OECD, Asian, African, and Latin American countries, respectively. The results are robust to various specifications, measurement of corruption, measures of investment, as well as the conditioning variables. The results have interesting policy implications for economic growth, especially in low income countries with high rates of corruption.     

Foreign capital inflows and economic growth of Pakistan

This study investigates the relationship of foreign capital inflows, namely foreign direct investment, workers’ remittances, and external debt with economic growth of Pakistan by employing time series data from 1976 to 2015. Cointegration results indicate that foreign capital inflows and economic growth have a significant relationship with economic growth in the long run. Ordinary least square results indicate foreign direct investment has a significant and negative effect on economic growth, whereas a significant positive effect of remittances and external debts on economic growth is found. Rolling windows analysis highlights the yearly effect of three different models. Two different sensitivity analyses confirmed that initial results are robust. The final section concludes the study and provides some policy implications.     

Effects of Schumpeterian and Kirznerian entrepreneurship on economic growth: panel data evidence

Abstract

The relevant literature recognises Schumpeterian and Kirznerian entrepreneurship as mechanisms that can impact economic growth. This article seeks to explore the effects of these two types of entrepreneurship on economic growth across the three GEM (Global Entrepreneurship Monitor) economic ecosystems (factor-driven economy, efficiency-driven economy, innovation-driven economy). Using different databases, we applied unbalanced panel data for 43 countries (2009–2013). By estimating the econometric models, we were able to calculate the effects of these two types of entrepreneurship on economic growth in the three different types of economy. In terms of the overall model for GEM economies, neither Schumpeterian nor Kirznerian entrepreneurship return any statistically significant effects on the Global Competitiveness Index or on GDP growth. However, the Total Early-Stage Entrepreneurial Activity variable generates a positive effect on the Global Competitiveness Index. The results presented in this paper provide insights into entrepreneurship and the GEM entrepreneurial economic ecosystems.     

Impact of Islamic banking development and major macroeconomic variables on economic growth for Islamic countries: Evidence from panel smooth transition models

This study examines the nonlinear relationship between Islamic banking development, major macroeconomic variables and economic growth in Islamic countries. Using the panel smooth transition model, the results show a positive nonlinear relationship between Islamic banking development and economic growth. Moreover, the relationship between the macroeconomic variables and economic growth is asymmetric and regime-dependent. Further, by using the dynamic panel quantile model, we show that for many cases the Islamic banking variables lead economic growth across the quantiles. More specifically, foreign direct investment, oil production and inflation have a positive impact on economic growth during the normal financial development state, while government consumption, one-lag economic growth, terms of trade and financial development have a negative impact on economic growth for this state. The human capital index, education and the rule of law have an insignificant impact, regardless of the prevailing regime. The results for the separated oil-importing and oil-exporting economies are generally consistent with the combined sample regarding the Islamic banking development variables. As for the macro variables, they have a positive and significant (insignificant) effect on EG for the oil-importing (oil-exporting) economies for almost all models.     

The synergistic effect of insurance and banking sector activities on economic growth in Africa

It is widely understood that the insurance and banking sectors of every economy perform some functions in driving economic growth. What is not yet well documented is whether their roles are complimentary or substitutive. With the aid of the dynamic panel generalized method of moments (GMM) estimation technique, this paper evaluates the synergistic effect of both sectors on economic growth in a panel of 10 African countries that are responsible for most of the activities in the continent’s financial sector. The insurance-banking-growth nexus was also examined through bootstrap panel causality tests. The results show that the life insurance market and the banking sector, as well as the non-life insurance market and the banking sector, are complimentary. We find that, overall, the relationship between the insurance and banking sectors in Africa is a complimentary one and that their synergistic impact on economic growth is positive. The feedback hypothesis was also confirmed in the relationship between the insurance sector and economic growth and between the banking sector and economic growth.     

中国劳务输出对进出口贸易影响的实证分析

本文采用修正的贸易引力模型,应用中国与175个国家(地区)1995~2004年的面板数据,就中国劳务输出对进出口贸易的影响进行实证分析。对样本总体的回归结果表明,我国对外劳务输出与出口之间存在互补关系,劳务输出能够带动出口增加;而劳务输出对进口没有明显影响,二者之间呈现不显著的替代关系。对样本国家(地区)按区域和收入分组的回归结果与对样本总体的回归结果基本一致:我国对大多数国家(地区)的劳务输出与出口之间存在正相关关系,特别是外派劳务最为集中的东亚和南亚,劳务输出对出口有着明显的拉动作用;在进口方面,除拉美和加勒比海国家外,对其余各组国家(地区)的劳务输出与进口之间均为负相关关系,而这种关系通常不显著。     

Stock markets,banks and the sources of economic growth in low and high income countries

This paper studies the effects of stock markets and banks on the sources of economic growth, productivity and capital accumulation, using a large cross country panel that includes high- and low-income countries. Results show that, in low-income countries, banks have a sizable positive effect on capital accumulation. We find that stock markets, however, have not contributed to capital accumulation or productivity growth in these countries. Given the emphasis that has been placed in developing equity markets in developing countries, these findings are somewhat surprising. Conversely, in high-income countries, stock markets are found to have sizable positive effects on both productivity and capital growth, while banks only affect capital accumulation.     

Exploring the role of technology,tourism and financial development: an empirical study of Vietnam

Vietnam is one of the emerging and industrializing developing countries in East Asia that has experienced a growth in tourism, information and communications technology (ICT) and financial development over the last three decades largely supported by significant structural reforms to escalate its path towards modernization and industrialization by 2020. In this paper, we explore the short-run and long-run effects of tourism, ICT and financial development over the period 1980–2010. Further, we examine the causation between these contemporary drivers of growth. The results show tourism has a positive and statistically significant effect in the short-run whereas ICT and financial development have a momentous positive and significant effect in the long-run. The causality results show unidirectional causation from capital per worker, ICT and financial development to output per worker; from ICT and financial development to capital per worker; and from capital per worker to tourism. Further, we also note a bi-directional causation between tourism and output per worker indicating their mutually reinforcing effect in the economy.     

Money and economic development: A long-run perspective

This article explores the association between money and long-run economic growth in a panel of 27 countries over 200 years. It presents evidence of a complementarity between freedom and decentralisation of the monetary system in terms of their contribution to growth in GDP per capita. The significant and positive association between freedom and economic growth is found to be significantly stronger in a decentralised (market-based) than in a centralised (government-controlled) monetary system. For the average level of freedom across the 27 countries today, shifting from a centralised to a decentralised monetary system is predicted to almost double growth rates.     

Financial development,portfolio investments and the real economy in Africa

According to the conservative view, capital flows enhance economic growth. Focussing on Africa’s real economy, this study investigates the linkage between portfolio investments and real sector growth, and whether financial sector development strengthens this association. The study covers 30 countries over the period 1990–2017. We adopt the Lewbel instrumental variable general method of moments (IV-GMM) two-step robust estimator, which relies on heteroscedasticity for identification, while dealing with instrument insufficiency, unavailability, endogeneity and omitted variable bias. We found that portfolio equity has no growth impact on Africa’s real sector. Debt flows deter the growth of the overall real sector as well as the manufacturing and industrial sectors, but have no impact on agriculture and service growth. We found that financial development does strengthen the positive association between capital flows and economic growth, but this is dependent on the type of sector and portfolio investment, as well as on the degree of financial development. We control for known determinants of economic growth.     

Financial development and financial liberalization in Asia: Thresholds,institutions and the sequence of liberalization

This paper investigates whether financial openness leads to financial development after controlling for the level of legal/institutional development, and whether trade opening is a precondition for financial opening. The focus is on Asia. In a panel encompassing 87 less developed countries over the period 1980 to 2000, a higher level of financial openness is found to spur equity market development only if a threshold level of legal development has been attained, a condition which tends to prevail particularly among emerging market Asian countries. On the issue of sequencing, trade openness is found to be a prerequisite for successful inducement of financial development via capital account liberalization.     

Exploring the nexus between capital inflows and growth in Latin America and the Caribbean: a study of clusters led by Brazil and Mexico

In this paper, we used pooled regression within the ARDL approach and augmented Solow framework to explore the emerging uniformity and polarization in the two clusters led by Brazil and Mexico in Latin America and the Caribbean, adopted from Izquierdo and Talvi http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=35816781, 2011. The results show that effects of capital productivity and official development assistance are predominantly led by Brazil cluster while remittances, foreign direct investment and domestic credit are led Mexico cluster. While ODA is has a negative effect on the region’s growth, capital productivity, remittances, domestic credit and foreign direct investment are promising indicators for short-run and long-run growth in the region.     

External resources and economic growth: New evidence from EAGLE countries using PMG framework

This study attempts to explore the relationship between economic growth and external resources in the case of emerging and growth-leading economies (EAGLE). Among these economies, a panel of eight countries was studied over the period of 1986–2014. Empirical analyses were performed using panel cointegration and pooled mean group framework. Our findings support positive long- and short-run relationships between imports and gross domestic product (GDP). The results also reveal a negative and significant long-run relationship between foreign direct investment and GDP, whereas no significant evidence has been noted for the short run. Moreover, remittances in EAGLE countries have failed to justify any contribution to GDP in both long and short runs.     

Political Instability and Economic Growth: Implications of Coup Events in Sub-Saharan Africa

The study examines the differential roles of various elite political instability (PI) events—successful coups d'etat, abortive coups, or coup plots—in the growth of Sub-Saharan Africa. It analyzes World Bank economic statistics and data on the incidence of coups d'etat for 31 countries in a cross-country augmented production function framework that incorporates PI events as well as labor and capital as arguments. It finds that abortive coups, rather than successful coups, had the greatest adverse impact on economic growth over the 1960–1986 period. Coup plots were also observed to be growth-inhibiting. This deleterious "direct" effect of PI is observed to be channeled via the deterioration in the marginal productivity of capital, regardless of coup event. While abortive coups negatively influenced economic growth monotonically, however, the impacts of successful coups and coup plots appeared to be non-monotonic: negative generally but positive at very low levels of investment.     

A Dutch disease approach into the premature deindustrialization

We explore the main causes and consequences of the premature deindustrialization phenomena. We argue that local currency overvaluations mainly associated with a surge in capital inflows into the emerging market economies following the deregulation of their capital accounts severely hurt the output share of manufacturing industry. Applying the second generation estimators allowing for cross-section dependency (Augmented Mean Group and Common Correlated Effects Mean Group), we run a panel data regression model based on a sample of 39 developing countries in Latin America, Sub-Saharan Africa, East Asia, North America, and Europe from 1960 to 2017. We show that the baseline regression results are robust to different data sets, alternative real exchange rate/deindustrialization measurements, and dynamic model specifications. We find that an overvaluation of 50% which corresponds approximately to one and half standard deviations is associated with a contraction of manufacturing output share as high as 1,25% over the five year period. Moreover, the evidence suggests that the manufacturing competencies which have been eroded by local currency overvaluations in real terms cannot simply be brought back during the undervaluation periods. Hence, the need for a comprehensive industrial policy along with a firm use of capital controls and macroprudential measures given a robust institutional framework comes out as the main policy implication of our results, and they are duly discussed in light of recent developments in the literature.     

Development threshold,capital flows,and financial turbulence

We study capital flows in a panel of 130 countries, and derive the implications for the observed patterns of capital flows and capital controls before and into the crisis of 2008–11. We find that the size of capital flows is positively correlated with country's income level. In addition, capital flight has a non-linear relationship with the income level. Using the Hansen threshold estimation, we identify a three-stage threshold effect: for low-income countries (GDP per capita below US$ 3,000), capital flight increases as the income level rises; and only after the economy passes a threshold level (GDP per capita above US$ 5,000), capital flight declines with income. We conclude with a case study of Brazil and Korea, observing that the decisions to implement capital control measures tend to be pushed around by the feedbacks among economic growth, currency appreciation, and the global financial conditions.     

European integration,productivity growth and real convergence: Evidence from the new member states

We estimate the determinants of labor productivity growth in 8 new European Union (EU) member states that joined the Union in 2004. Our focus is on the impact of globalization and EU integration efforts on labor productivity growth. Previous studies test the impact of trade using either exports or trade openness. We also test the impact of imports separately on labor productivity growth. Using panel data for 1995–2006 period, we find that globalization has mixed effects. FDI and exports improve productivity, but imports hurt it. Regarding domestic variables, we find that human capital is the most important source of labor productivity growth in the new member states. There is also considerable adjustment of labor productivity towards EU15 levels, indicating significant “catching up” and hence real convergence. Policy implications of the findings are also discussed.