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An empirical analysis of government interventions in ECOWAS: evidence from dynamic panel threshold

Olumide Olusegun Olaoye (Economics, Obafemi Awolowo University, Ile-Ife, Nigeria) (ILMA University, Karachi, Pakistan)
Ambreen Noman (Business Administration, ILMA University, Karachi, Pakistan)
Ezekiel Olamide Abanikanda (Economics, Obafemi Awolowo University, Ile-Ife, Nigeria)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 21 July 2021

170

Abstract

Purpose

The study examines whether the growth effect of government spending is contingent on the level of institutional environment prevalent in Economic Community of West African States (ECOWAS).

Design/methodology/approach

The study adopts the more refined and more appropriate dynamic threshold panel by Seo and Shin (2016) and made applicable be Seo et al. (2019). The technique models a nonlinear asymmetric dynamics and cross-sectional heterogeneity simultaneously in a dynamic threshold panel data framework.

Findings

The results show that there is a threshold effect in the government spending-growth relationship. Specifically, the authors found that the impact of government spending on economic growth is positive and statistically significant only above a certain threshold level of institutional development. Below that threshold, the effect of government spending on growth is insignificant and negative at best. The findings suggest that government spending-growth nexus is contingent on the level of Institutional quality.

Originality/value

Unlike previous studies that adopt the linear interaction model which pre-impose a priori conditional restrictions, this study adopts the dynamic threshold panel framework which allows the lagged dependent variable and endogenous covariates.

Keywords

Acknowledgements

Data availability statement with submissions: The data that support the findings of this study are available from the corresponding author upon reasonable request.

The authors acknowledged that the publication is partly funded by ILMA University, Karachi, Pakistan.

Citation

Olaoye, O.O., Noman, A. and Abanikanda, E.O. (2021), "An empirical analysis of government interventions in ECOWAS: evidence from dynamic panel threshold", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-08-2020-0979

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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