Empirical properties of duality theory

This research examines selected empirical properties of duality relationships. Monte Carlo experiments indicate that Hessian matrices estimated from the normalised unrestricted profit, restricted profit and production functions yield conflicting results in the presence of measurement error and low relative price variability. In particular, small amounts of measurement error in quantity variables can translate into large errors in uncompensated estimates calculated via restricted and unrestricted profit and production functions. These results emphasise the need for high quality data when estimating empirical models in order to accurately determine dual relationships implied by economic theory.     

Macroeconomic Volatility, Trade and Financial Liberalization in Africa

This paper examines the effects of financial and trade liberalization on growth volatility of real output and consumption in Africa. Our results suggest trade liberalization is associated with greater output and consumption growth volatility while financial liberalization increases the efficacy of consumption smoothing and stabilizes income and consumption growth. In addition, we find financial market depth and institutional quality operate jointly with trade and financial openness to reduce volatility in output and consumption growth. There is also evidence that good institutions which foster low inflation levels and volatility promote consumption and output growth stability.     

SOURCES OF ECONOMIC GROWTH AND TECHNOLOGY TRANSFER IN SUB‐SAHARAN AFRICA1

This paper provides some empirical evidence on the sources of growth in sub‐Saharan Africa (SSA). Within the classical convergence framework, several macroeconomic, socio and political factors are identified as affecting the steady state growth paths of the SSA countries. The rejection of the constant technology growth rate assumption implied by the linearised Solow‐Swan growth specification suggests differences in the economies' technology growth rates. An endogenous technology growth model is estimated to measure contributions of diminishing returns and technology transfer to the rate of conditional convergence in the region. The results carry important policy implications for improving the standard of living and economic growth rate of African countries.     

The role of exports,FDI and imports in development: evidence from Sub-Saharan African countries

The disappointing economic performance of Sub-Saharan African (SSA) economies in the late 1980s prompted reforms in foreign trade and Foreign Direct Investment (FDI) in the early 1990s. Using the Autoregressive Distributed Lag (ARDL) approach and Pedroni panel estimation procedures that allow for heterogeneity, this study found that exports and FDI have a significant impact on economic growth. Granger-type causality tests show the interrelatedness of exports, FDI, imports and income variables. The results also provide evidence of a two-stage causal chain of exports, imports and income. This article calls for more market-oriented policy reforms in SSA countries.     

Financial Globalization in Botswana and Nigeria: A Critique of the Thresholds Paradigm

Since the Asian financial crises, economists are more circumspect in their advocacy of ‘financial globalization’. A new consensus emerged which contends that increased financial liberalization and capital account openness may only produce economic benefits when countries are open to trade and have good institutions and policies in place. This paper critically reviews this consensus, which we term the ‘thresholds paradigm’, through a survey of the available literature and a comparative case study of two African countries that have undertaken financial and capital account liberalization: Nigeria and Botswana. The paper argues that the thresholds paradigm leaves important theoretical and policy-related questions unresolved, in particular, the origins of good institutions and policies. Further, while at first glance the paradigm appears to capture the divergent outcomes of financial globalization policies in Nigeria and Botswana, a deeper investigation reveals important factors that are neglected and occluded. The paper concludes that economists need to be more methodologically ambidextrous and must integrate institutional factors in their theoretical frameworks in order to better understand the outcomes of ‘financial globalization’ and to provide useful policy advice to developing countries contemplating financial reforms in the future.     

The Relationship between Australian Mutual Fund Fees and Risk‐Adjusted Performance in Differing Economic Conditions

We find that Australian mutual fund investors should avoid high fee funds as these funds generate relatively low after‐fee risk‐adjusted returns both unconditionally and in weak economic conditions. This result is different from some of the previous findings which showed that US mutual funds with relatively high expense ratios may generate relatively higher risk‐adjusted returns during recessions relative to non‐recessions, although their unconditional alphas may be negative. We find some support for the Glode hypothesis in surviving Australian wholesale funds. High‐fee surviving Australian wholesale funds perform relatively strongly in both weak economic conditions and unconditionally. High‐fee funds in other types of Australian mutual funds generally do not perform strongly either in weak economic conditions or unconditionally. Amongst low‐fee funds, we commonly find that those that perform well unconditionally and well in weak economic conditions do charge more than those that perform well unconditionally and poorly in weak economic conditions. Amongst low‐fee funds, it is often true that those that perform poorly unconditionally but well in weak economic conditions can charge more than those that perform poorly unconditionally and poorly in weak economic conditions.     

Knowledge spillovers and high-impact growth: Comparing local and foreign firms in the UK

This paper is concerned with entrepreneurial high-impact firms, which are firms that generate ‘both’ disproportionate levels of employment and sales growth, and have high levels of innovative activity. It investigates differences in the influence of knowledge spillovers on high-impact growth between foreign and local firms in the UK. The study is based on an analysis of data from UK Innovation Scoreboard on 865 firms, which were divided into ‘high-impact firms’ (defined as those achieving positive growth in both sales and employment) and low-impact firms (negative or no growth in sales or employment). More precisely, the paper investigates the influence of knowledge spillovers on high-impact growth of foreign and local firms, from regional, sectoral and firm size perspectives. The findings suggest that (1) firms’ access to regional knowledge spillovers (from businesses and higher education institutions) is more significantly associated with high-impact growth of local firms in comparison to foreign firms; (2) because knowledge spillovers are more likely to occur in high-tech sectors (compared to low-tech sectors), firms in high-tech sectors are more associated with high-impact growth. Nonetheless, the relationship is stronger for local firms compared to foreign firms; (3) because small firms have greater need for knowledge spillovers (relative to large firms), there is a negative relationship between firm size and high-impact growth, but the negative relationship is greater for UK firms in comparison to foreign firms. Implications are drawn for policy and research.     

Japanese Banks—A Risk Factor for the Japanese Economy

Original Papers

Japanese Banks—A Risk Factor for the Japanese Economy