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1 – 10 of over 17000Khurram Ejaz Chandia, Muhammad Badar Iqbal and Waseem Bahadur
This study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to…
Abstract
Purpose
This study aims to analyze the imbalances in the public finance structure of Pakistan’s economy and highlight the need for comprehensive reforms. Specifically, it aims to contribute to the empirical literature by analyzing the relationship between fiscal vulnerability, financial stress and macroeconomic policies in Pakistan’s economy between 1971 and 2020.
Design/methodology/approach
The study develops an index of fiscal vulnerability, an index of financial stress and an index of macroeconomic policies. The fiscal vulnerability index is based on the patterns of fiscal indicators resulting from past trends of the selected variables in Pakistan’s economy. The financial stress in Pakistan is caused from the financial disorders that are acknowledged in the composite index, which is based on variables with the potential to indicate periods of stress stemming from the foreign exchange market, the securities market and the monetary policy components. The macroeconomic policies index is developed to analyze the mechanism through which fiscal vulnerability and financial stress have influenced macroeconomic policies in Pakistan. The causal association between fiscal vulnerability, financial stress and macroeconomic policies is analyzed using the auto-regressive distributive lags approach.
Findings
There exists a long-run relationship between the three indices, and a bi-directional causality between fiscal vulnerability and macroeconomic policies.
Originality/value
This study contributes to the development of a fiscal monitoring mechanism, which has the basic purpose of analyzing the refinancing risk of public liabilities. Moreover, it focuses on fiscal vulnerability from a macroeconomic perspective. The study tries to develop a framework to assess fiscal vulnerability in light of “The Risk Octagon” theory, which focuses on three risk components: fiscal variables, macroeconomic-disruption-associated shocks and non-fiscal country-specific variables. The initial contribution of this work to the literature is to develop a framework (a fiscal vulnerability index, financial stress index and macroeconomic policies index) for effective and result-oriented macro-fiscal surveillance. Moreover, empirical literature emphasized and advised developing countries to develop their own capacity mechanisms to assess their fiscal vulnerability in light of the IMF guidelines regarding vulnerability assessments. This study thus attempts to fulfill the said gap identified in literature.
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Pragati Priya and Chandan Sharma
The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty.
Abstract
Purpose
The study examines how the liquid assets holdings among non-financial Indian firms vary due to tightening monetary policy and increasing macroeconomic uncertainty.
Design/methodology/approach
The authors analyze 5,640 firms for the period 2011–2021. The authors first estimate India’s monetary policy shocks by decomposing the exogenous shocks from the systematic component of monetary policy changes. The authors then examine the effects of the estimated monetary policy shocks and a range of macroeconomic and policy uncertainty indicators on companies’ cash and bank balances to asset ratios using two-step system generalized method of moments (GMM) estimators.
Findings
The authors find that monetary policy shocks cause the cross-sectional variances for the firms’ liquidity holdings to increase. In anticipation of macroeconomic volatility, companies respond to these shocks after taking into account all the firm-level information to minimize the opportunity costs of holding extra cash or too few cash balances that can hamper firms’ operations. Furthermore, compared to other shocks, the contribution of inflation-induced shocks is predicted to be the largest in the cross-sectional deviation of the firm’s cash holdings. The authors also find that low-growth, older and financially constrained firms observe lesser heterogeneity in their cash holdings as they tend to hold cash as a precautionary buffer.
Originality/value
The authors’ approach to the analysis is unique in many ways. To address potential transmission bias, the authors use nowcasts and forecasts of real gross domestic product (GDP) growth and inflation to generate a series of exogenous monetary policy shocks for identifying unanticipated changes in short-term interest rates. Subsequently, the authors estimate how these shocks affect the cross-sectional deviation of liquid assets. For estimating the effects of macroeconomic uncertainty on corporate cash demand, the authors utilize a range of proxies for uncertainty. Unlike previous attempts, the authors offer evidence for a developing and fast-emerging economy.
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This essay aims to analyze the process of structural adjustment in developing countries. Its focus is on macroeconomic stabilization in the short‐term, but the analysis is…
Abstract
Purpose
This essay aims to analyze the process of structural adjustment in developing countries. Its focus is on macroeconomic stabilization in the short‐term, but the analysis is situated in a wider context to consider how it relates to the implications of structural reform in the medium‐term and the prospects for economic growth in the long‐term.
Design/methodology/approach
The paper begins by setting out the contours of the orthodox, the Keynesian and the heterodox perspectives on stabilization and adjustment to highlight the differences. Such different perspectives on macroeconomic theory and policy, it suggests, are attributable to differences in objectives, assumptions and beliefs. These are made explicit.
Findings
The paper argues that the relationship between stabilization and growth is characterized by inter‐connections rather than trade‐offs and suggests that outcomes depend on modes of adjustment. It also provides a macroeconomic analysis of government deficits and public finances, which are critical in the process of adjustment. This highlights the macroeconomic significance of government deficits and points to the fallacies of deficit fetishism based on accounting frameworks. The intersection of economics and politics in the design and implementation of macroeconomic policies is also explored.
Practical implications
Going beyond a critique of orthodox stabilization programmes, it shows that there are alternatives in macro‐management for economies in crisis, for which it is necessary to shift the focus from the financial to the real economy, from the short‐term to the long‐term, and from equilibrium to development.
Originality/value
The paper develops a heterodox perspective on the macroeconomics of structural adjustment and public finances. And, it sets out an alternative framework which straddles time horizons, to understand the restructuring of economies over time.
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The objective of this paper is to explore the sensitivity of industry‐specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of…
Abstract
Purpose
The objective of this paper is to explore the sensitivity of industry‐specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry‐specific South African stock market indices and evaluates the sensitivity of these indices to various unanticipated macroeconomic shocks.
Design/methodology/approach
The authors begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian vector autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing them to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR.
Findings
The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data, however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.
Originality/value
To the best of the authors' knowledge, this is the first study conducted on South Africa which analyses the impact of a wide range of unanticipated macroeconomic shocks on stock returns. This paper improves on earlier efforts by using measures of monetary policy, as well as other macroeconomic news, which more cleanly isolates the unanticipated elements of the monetary policy variable and other macroeconomic indicators, in studying the impact of these surprises on stock returns in South Africa.
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Olumide O. Olaoye and Mulatu F. Zerihun
The study investigates the effectiveness of government policies to mitigate the impact of a pandemic. The study adopts the small open economy of Nigeria for the following reasons…
Abstract
Purpose
The study investigates the effectiveness of government policies to mitigate the impact of a pandemic. The study adopts the small open economy of Nigeria for the following reasons. First, Nigeria is the largest economy in SSA. Second, Nigeria was also significantly impacted by the COVID-19 pandemic.
Design/methodology/approach
The study employed the time-varying structural autoregressive (TVSVAR) model to control for the potential asymmetry in fiscal variables and to control for the shift in the structural shift, following a macroeconomic shock. As a form of robustness, the study also implements the time-varying Granger causality to formally assess the temporal instability of the variable of interest.
Findings
The results show that an oil price shock is an important source of macroeconomic instability in Nigeria. Importantly, the results indicate that the effects of fiscal policy are strongly time varying. Specifically, the results show that fiscal policy helps to stabilize the economy, (i.e. they help to reduce inflation and spur output growth) following macroeconomic shock. Further, the Granger test shows that fiscal policy helped to spur growth in Nigeria. The research and policy implications are discussed.
Originality/value
The study accounts for the time-varying effects of fiscal policy.
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Johnson Worlanyo Ahiadorme and Linda Akoto
Little is known about the quantitative impact of macro policies on disaggregated variables. This study investigates the effects of macroeconomic policies and cost/supply shocks on…
Abstract
Purpose
Little is known about the quantitative impact of macro policies on disaggregated variables. This study investigates the effects of macroeconomic policies and cost/supply shocks on sectoral output growth.
Design/methodology/approach
We analyzed empirical evidence from Ghana using a Structural Vector Autoregression approach.
Findings
The results show that the transmission of various macro policies and supply/cost shocks is conditional on sectoral idiosyncrasies. Fiscal programs contribute the most to agricultural output growth and the least to industrial production. The downturn from rising costs and supply disruptions is more severe and lasting in the agriculture sector than in the service sector. The evidence shows that fiscal consolidation centered on government consumption cuts would not drag growth over the medium-term.
Practical implications
Our results show that the structural characteristics of a country may play an important role in understanding the output effects of macro policy changes. The empirical evidence shows that targeted policies are needed to complement countercyclical macroeconomic policies to facilitate broad-based economic recovery.
Originality/value
Research on the impact of macro policy shocks on the real economy has usually focused on the behavior of highly aggregated variables. In this research, we focus on disaggregated, sector-level variables to unveil the idiosyncrasies in the performance of disaggregated variables that are usually concealed when studying the behavior of aggregate variables. This study also contributes a different angle to the debate on supply shocks by examining how cost shocks are propagated through the various sectors of the economy.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2023-0876
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Gabriel Caldas Montes and Júlio Cesar Albuquerque Bastos
The purpose of this paper is to analyze the influence of macroeconomic variables and economic policies on expectations and confidence of entrepreneurs. It provides an econometric…
Abstract
Purpose
The purpose of this paper is to analyze the influence of macroeconomic variables and economic policies on expectations and confidence of entrepreneurs. It provides an econometric analysis of the expectation transmission channel under inflation targeting in Brazil, emphasizing the effect of inflation targeting credibility on the business confidence of industrial entrepreneurs.
Design/methodology/approach
Based on ordinary least square (OLS), generalized method of moments (GMM) and vector autoregression (VAR), the paper provides empirical evidence about the influence of inflation targeting credibility and macroeconomic policies on expectations and confidence of entrepreneurs and, as a consequence, on industrial production.
Findings
The evidence for the Brazilian economy suggest that monetary and fiscal policies as well as the credibility of the monetary regime affect economic activity by their impact on expectations of entrepreneurs.
Research limitations/implication
Development of macroeconomic stability is important to the expectations formed by entrepreneurs and, therefore, for industrial production. In particular, inflation targeting credibility stimulates industrial production, since it increases the confidence of entrepreneurs about the functioning of the economy and their businesses.
Originality/value
The results suggest new insights about the influence of economic policies on the real side of the economy, pointing out that the conduct of economic policies in emerging countries with inflation targets are likely to affect the expectations of entrepreneurs and therefore their production decisions.
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Bijoy Rakshit and Yadawananda Neog
The main purpose of this paper is to empirically investigate the effect of macroeconomic uncertainty on environmental degradation in India over the period 1971–2016. Additionally…
Abstract
Purpose
The main purpose of this paper is to empirically investigate the effect of macroeconomic uncertainty on environmental degradation in India over the period 1971–2016. Additionally, this paper considers the role of financial development, energy consumption intensity and economic growth in explaining the variation of environmental degradation in India.
Design/methodology/approach
The authors applied the power generalized autoregressive conditional heteroskedasticity model to measure inflation volatility and used it as a proxy for macroeconomic uncertainty. From a methodological perspective, the authors employ the autoregressive distributive lag bound testing model to establish the long-run equilibrium association between the variables. The Toda–Yamamoto causality approach has been used to examine the direction of causality between the variables.
Findings
Findings suggest that macroeconomic uncertainty exerts a positive effect on carbon emissions, indicating that higher inflation volatility, as a proxy for macroeconomic uncertainty, hinders India's environmental quality. Financial development, economic growth and energy consumption intensity have also adversely impacted environmental quality.
Practical implications
The negative association between macroeconomic uncertainty and environmental degradation calls for some stringent policy actions. While formulating policies to promote growth and maintain stability, policymakers and government stakeholders should take into account the environmental effects of macroeconomic policies. There is a need to implement more environmental-friendly technologies in the financial sector that could reduce carbon emission.
Originality/value
To the best of the authors' knowledge, this study is the first that considers the role of macroeconomic uncertainty along with financial development and energy intensity in an emerging economy like India.
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