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The present study has two objectives. First, one is to clarify the terms, “co-movement” and “co-integration” in the context of stock market indices. Second, to investigate empirically, whether an emerging stock market index represented by Nifty has moved together with DJI and N225 during the study period and whether they are co-integrated or not. This chapter tries to search out an answer for co-movement and co-integration staying within the theoretical framework through an extensive review of the literature. Moreover, the present study is unique because it tries to focus mostly on the pros and cons of financial integration and trade liberalization and the contributing factors responsible for trade and financial integrations leading to co-movement and co-integration among the countries considered in this study. India is taken as a proxy for an emerging economy. Furthermore, this chapter considers America and Japan as proxies for the developed countries around the globe and a significant country among the APAC nations, respectively. The empirical results reveal that not only three indices are highly correlated but they also possess a co-integrating relationship. This establishes the fact that neither is there any scope of international diversification in the short run nor in the long run. However, the Granger causality test results point out the fact that Nifty granger causes DJI and N225 during the study period.

In this chapter, the relationship between terrorism and military expenditure and between terrorism and foreign capital inflow has been studied empirically with Indian data. We considered an index for terrorism based on the number of terrorism incidents, the number of deaths and the number of injuries. Data are collected from the period of 1977–1978 to 2016–2017 on the incidence of terrorism, obtained from the data released by Government of India in July 2016. Augmented Dicky–Fuller (ADF) test is used for unit root and stationarity checks. Johansen co-integration test is performed for testing the presence of co-integrating relationship between Index of terrorism and military expenditure and also between FDI flow and index of terrorism. As a result, a co-integrating relationship is also found between terrorism and military expenditure but not between terrorism and foreign capital inflow. Vector error correction model (VECM) is used to study both the short-run and the long-run relationships between the variables.

During the post-globalization period, tariff imposition on manufacturing trade has a possible effect on the economy of developed and developing nations. Along with the volume and balance of trade, the study accounts for both export and import separately in order to observe their dynamisms under the tariff regime and makes comparisons between developing and developed countries. Using the World Development Indicators and World Integrated Trade Solution databases of World Bank (2020) on China (developing nation) and the United States (developed nation) over the period of 1970–2019, the co-integration tests and thereafter vector error correction models indicate that the relationship between tariff and manufacturing trade is positive and statistically significant.

The goal of this study is to look into the connection between Sri Lanka’s fiscal deficit and inflation. Sri Lanka is currently experiencing one of its worst inflation crises in its history, necessitating an investigation into how fiscal deficit affects inflation, as it has been experiencing an ever-increasing fiscal deficit for the last four decades. The quantitative methodology is employed in this study using annual data from 1977 to 2019 following the ARDL technique in the analysis. The findings showed that both in the long run and the near term, Sri Lanka’s fiscal deficit had a positive and significant link with inflation. The policymakers should increase the revenue through the taxes in order to bridge the fiscal deficit. As a developing country, it cannot afford to continue with the ever-increasing fiscal deficit which has become a burden to country. Also, it is the responsibility of each government to think carefully to reduce its massive expenditure which has become a common feature in the country for the last four decades. Cutting down government expenditure can improve the economic growth and well-being of the citizens too. The government should therefore concentrate on short-term investment programmes that will benefit the country while doing the same in the long run.

This chapter offers an empirical examination of the impact of World Governance indicators (WGIs) on stock market development. The understanding is based on the premise of institutional economics that strong institutional governance, in terms of laws and regulations, results in positive developments in financial institutions.

The data which covers the years 1996–2016, include all world countries where a stock market operates. The authors use standard statistical tools that include Johansen co-integration test, linearity, normality tests, and regression analysis, together with discriminant analysis as a robustness check.

The empirical findings show that (a) a negative association exists between Voice and Accountability and stock market development, (b) a positive association exists between each of Political Stability, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption, and stock market development for most World’s regions stock markets, (c) both Voice and Accountability and Political Stability indicators are the major influential indicators for the stock market development across world stock markets.

This chapter offers quantitative evidence about the benefits of strong institutional governance to stock market development. In addition, the chapter offers significant guidelines to policymakers regarding the institutional factors that can be enhanced to promote stock market development.

This paper presents new evidence of the relationship between financial market development (banking sector) and economic growth for a set of seven Middle East and North African economies over the period 1965–2002. We find evidence that in six of the seven countries, banking-sector development Granger causes increases in economic growth. However, in three of those six countries, economic growth also Granger causes banking development. Our co-integration analysis reveals that there is a stable long-run equilibrium relationship between banking-sector development and economic growth for all our countries. However, based on vector error-correction models, there is limited evidence that banking-sector development boosts economic growth in the short run.

Today, many countries strive to develop their small and medium scale enterprises (SMEs) sectors because of their acknowledged capacity to facilitate the optimal utilization of locally available resources while engaging local technology for the production of goods and services for local consumption as well as export trade. Also in area of agriculture, these enterprises serve as means of sustainable food production, improve employment generation, combat food shortage, and enhance economic growth and development. However, the growth performance of this sector in Nigeria has been dwindling over time, which requires government expenditure (GE) policy intervention. Therefore, this study examines the influence of public expenditure on the growth of SMEs in Nigeria employing unit root and co-integration tests for the period 1981–2019. The results reveal that SMEs and selected macroeconomic variables have a long-run relationship with SMEs output performance. It also shows that GE has direct and significant impact on the growth of SMEs in Nigeria, while government deficit financing (GDF) has adverse and insignificant effects on the Nigeria SMEs both in the short- and long-run period. Inflation rate (INF) has an inverse but significant effect on the growth of SMEs in Nigeria both in the short- and long-run periods. This study thus recommends, among others, that government should ensure the proper management of capital expenditure and recurrent expenditure in raising the growth of SMEs in Nigeria to achieve inclusive growth.

One major source of inflation in India is her import of intermediate inputs. In the modern globalized world, where India is deeply integrated with the world economy, exchange rate affects inflation through various channels. This chapter attempts to gauge the extent of exchange rate pass through to inflation. Using the co-integration framework, this chapter finds considerable evidence of imported inflation in the long run, almost 40%–74% for CPI-IW. At the same time, we also discern evidence of short-run price stickiness of CPI-IW. However, for CPI-AL, the extent of pass-through is a meager 14%. This is due to the fact that CPI-IW gives more weightage to imported components while CPI-AL gives more weight to food and clothing, which are mainly domestically produced.