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The main purpose of this study is to examine the impact of different dimensions of institutional quality indices on the economic growth of Sub-Saharan African (SSA) countries.
Abstract
Purpose
The main purpose of this study is to examine the impact of different dimensions of institutional quality indices on the economic growth of Sub-Saharan African (SSA) countries.
Design/methodology/approach
The study uses a panel data set of 31 SSA countries from 1991 to 2015 and employs a two-step system-GMM (Generalized Method of Moments) estimation technique.
Findings
The study's empirical results indicate that investment-promoting and democratic and regulatory institutions have a significant positive effect on economic growth; however, once these institutions are taken into account, conflict-preventing institutions do not have a significant impact on growth.
Practical implications
The study's findings suggest that countries in the region should continue their institutional reforms to enhance the region's economic growth. Specifically, institutions promoting investment, democracy and regulatory quality are crucial.
Originality/value
Unlike previous studies that use either composite measures of institutions or a single intuitional indicator in isolation, the present study has employed principal component analysis (PCA) to extract fewer institutional indicators from multivariate institutional indices. Thus, this paper provides important insights into the distinct role of different clusters of institutions in economic growth.
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Musibau Adetunji Babatunde and Joshua Adeyemi Afolabi
The growing volume of trade misinvoicing in Sub-Saharan Africa (SSA) calls for serious concern, particularly given its effect on macroeconomic fundamentals. Despite the growing…
Abstract
Purpose
The growing volume of trade misinvoicing in Sub-Saharan Africa (SSA) calls for serious concern, particularly given its effect on macroeconomic fundamentals. Despite the growing body of literature on the growth effect of trade misinvoicing, empirical evidence on the role of governance in moderating the effect is quite scarce, particularly for SSA. The purpose of this paper is to provide insights into the growth effect of trade misinvoicing in SSA as well as the moderating role of governance in this regard.
Design/methodology/approach
The feasible generalised least square estimator was applied to analyse relevant data, spanning 2009–2018, of 35 SSA countries. Governance indicators were classified into economic, political and institutional governance, and their individual role in moderating the nexus between trade misinvoicing and economic growth was explored.
Findings
This paper showed the presence of cross-sectional dependence among SSA countries and long-run convergence of the estimated variables. The empirical finding showed that trade misinvoicing has a negative growth effect in the selected SSA countries, but both economic and political governance are crucial in lowering the observed negative growth effect.
Practical implications
To curtail trade misinvoicing, SSA policymakers should go beyond just designing anti-money laundering policies to effectively implementing the policies for improved growth prospects. More so, the government of each SSA country must devise means of strengthening governance and building effective, accountable and transparent institutional frameworks that will constantly check and discourage trade misinvoicing activities.
Originality/value
The originality of this paper stems from its novel assessment of the role governance plays in moderating the growth effect of trade misinvoicing in SSA using the feasible generalised least square estimator. It also details the strategies needed to effectively tackle trade misinvoicing.
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Hannah Mead Kling, Julia R. Norgaard and Nikolai G. Wenzel
This paper aims to study Catholic Social Theory (CST) and its implications for economic development. From the early days of CST through the papacy of Benedict XVI, the Church has…
Abstract
Purpose
This paper aims to study Catholic Social Theory (CST) and its implications for economic development. From the early days of CST through the papacy of Benedict XVI, the Church has been consistent about the promise and limits of markets. Markets offer the necessary foundation for human flourishing – but they must be ordered toward the common good and they carry the potential for spiritual loss. Pope Francis has changed course from over a century of CST, with a markedly different view of business, labor and free markets.
Design/methodology/approach
This paper summarizes 130 years of CST regarding the economy and describes the turn Pope Francis takes from this tradition. This paper discusses economic theory and analyzes the importance of markets for economic development and assesses Pope Francis’ economics in light of this theory.
Findings
This paper discusses the findings that – despite what we assume to be good intentions – the economics of Pope Francis would condemn billions to poverty. Others (Whaples, 2017a) have discussed the economics of Pope Francis.
Originality/value
Others (Whaples, 2017a) have discussed the economics of Pope Francis. This paper finds, however, that most of the critiques are too gentle, and do not recognize the full deleterious impact of the application of the new teachings.
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Md. Saiful Islam and Al Jamal Mustafa Shindaini
This study examines the impact of institutional quality (INQ) and human capital creation (HCC) on economic growth (EG) linkage in Bangladesh using an ARDL approach.
Abstract
Purpose
This study examines the impact of institutional quality (INQ) and human capital creation (HCC) on economic growth (EG) linkage in Bangladesh using an ARDL approach.
Design/methodology/approach
This study uses time-series annual data over the period 1990–2019. It formulates an INQ index based on international country risk guide (ICRG) data, employs public education outlay and expenditure on health data each as a portion of real gross domestic product (GDP) to measure HCC, while an increase in real GDP is used as a proxy for EG. It employs the ARDL technique and Toda–Yamamoto (T-Y) causality check to realize the study.
Findings
The ARDL analysis divulges that the variables have a long-run association; INQ affects long-run EG positively; expenditure on health stimulates EG rate in the long run, but does not impact the latter in the short-run; whilst government spending on education impacts long-term EG rate negatively but positively in the short-term. The T-Y causality test results reveal a feedback relationship between INQ and EG, and one-way causation from health expenditure to EG rate, and education outlay to EG rate and authenticate the ARDL estimation results.
Originality/value
The study is original. The novelty of the study is to employ an INQ index using the ICRG data on 12 different components which are converted into a single index through principal component analysis.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-12-2021-0732
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Julia R. Norgaard and Alexander Chase Cartwright
These zones offer participants a wide variety of incentives and can be found in sizes ranging from a few square acres to entire large cities. The diversity among SEZs presents an…
Abstract
Purpose
These zones offer participants a wide variety of incentives and can be found in sizes ranging from a few square acres to entire large cities. The diversity among SEZs presents an opportunity for new research.
Design/methodology/approach
Special economic zones (SEZs) have grown exponentially in popularity during the past few decades, in size and scope. They are often lauded as instruments central to enhancing economic growth in developing countries. However, the empirical evidence on the relationship between SEZs and growth is inconclusive.
Findings
The analysis concludes that corruption leads to the creation of smaller zones that are likely the products of rent-seeking.
Originality/value
The authors argue that SEZs can be effective vehicles for rent-seeking, especially geographically small zones and develop an empirical model to explore the relationship between zone size and the impetus for the zone creation, namely corruption. Specifically, the authors analyze whether these small zones are vehicles of economic growth or manifestations of country wide corruption.
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The purpose of this paper is to analyze the macroeconomic significance of transaction costs in microfinance intermediation and explain how the deposit mobilization and micro…
Abstract
Purpose
The purpose of this paper is to analyze the macroeconomic significance of transaction costs in microfinance intermediation and explain how the deposit mobilization and micro lending impact the microfinance transaction costs. It presents some empirical evidence as building blocks for the theory of financial intermediation that aims at strengthening the efficiency of financial intermediation in the context of preferential credit and or the microfinance sector.
Design/methodology/approach
The study uses the panel data consisting of different groups of banks in India (such as public sector banks, private banks and foreign banks) data across a period from March 1993 to March 2009 to estimate the panel VAR model to determine the determinants of transaction cost model in financial intermediation. The study also uses the panel Granger causality analysis to test the direction of causation to know the behavior of the operating expense of the banks in their financial intermediation process.
Findings
The study reveals that there is a positive direct relationship between operating expense and priority sector lending by banks. The findings show that the transaction costs act as a barrier for the banking firms in microfinance intermediation; and, the banks are able to manage the transaction costs of microfinance intermediation with an increase in overall deposit mobilization and increased non-microfinance lending. The study recommends that there is a need to upscale the functional efficiency of microfinance intermediaries.
Originality/value
This study offers to bridge the research gap and adds novel information to the literature on microfinance intermediation. It is the first empirical paper showing the macroeconomic significance of transaction costs in microfinance intermediation.
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The main objective of this study is to examine how political institutions affect economic performance in Ethiopia over the 1980–2019 time periods.
Abstract
Purpose
The main objective of this study is to examine how political institutions affect economic performance in Ethiopia over the 1980–2019 time periods.
Design/methodology/approach
Mainly, the impact of political institution indicators including, level of democracy, political violence, democratic accountability and regime durability have been examined using auto regressive distributed lag (ARDL) bound test approach to co-integration and the error correction model.
Findings
This study confirms that level of democracy and democratic accountability has an adverse long effect on the economic performance of Ethiopia. On the other hand, political violence has a negative short-run causal effect on economic performance in Ethiopia. The study concluded that the deterioration of political institutions harmfully affected economic performance in Ethiopia.
Practical implications
Government policymakers should primarily pay attention to promoting and changing those political institutions that harm economic performance. Additionally, better management of political violence has important implications for fostering the economic performance of Ethiopia.
Originality/value
This study provides some valuable evidence on the nexuses between political institutions and economic performance in Ethiopia. Likely, this is the first investigation on the subject under the consideration to use time analysis and will vigorously contribute to the literature as well by employing the ADRL bound test. Previous studies have examined the impact of the institution on economic growth on a cross-country basis. Further analysis is required to understand the effects of institutions such as level of democracy, political violence and democratic accountability on economic development.
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The purpose of this paper is to empirically compare and contrast the effect of the nature of the political regime vs the political instability (PI) on real output in a group of…
Abstract
Purpose
The purpose of this paper is to empirically compare and contrast the effect of the nature of the political regime vs the political instability (PI) on real output in a group of countries from the Middle East and North Africa (MENA) during the period 1980-2011. This part of the world has been going through a series of unstable political regimes and continuous PI events for over seven decades.
Design/methodology/approach
The author employs a time-series cross-sectional Prais-Winsten regression model with panel-corrected standard errors.
Findings
The author concludes that the relationship between the nature of the political regime and real output is mixed (negative and positive); this impact seems to get changed to a positive value whenever the regimes’ instability events are mitigated. However, the influence of PI on real output has a negative benchmark level. The author also notices that the effect of the political regime on real output is stronger over all the sample countries of the study. The results depart somehow from the previous studies’ findings. Therefore, the implication of the author’s conclusion is to investigate how and why the effects of these uncertainties turned positive.
Originality/value
The paper contributes to the literature from three perspectives. First, the author compares the effects on real output from different types of political system uncertainties. Second, the author extracts evidence on this topic from the most unstable region of the world, the MENA region. Third, the author uses a new econometric technique compared to the previous studies.
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Malavika Nair and Martha Njolomole
The purpose of this paper is to consider the success and failure of microfinance institutions in generating economic growth over the past 30 years and propose a dual criterion of…
Abstract
Purpose
The purpose of this paper is to consider the success and failure of microfinance institutions in generating economic growth over the past 30 years and propose a dual criterion of evaluation.
Design/methodology/approach
It surveys the empirical literature on microfinance and finds that while there has been small and localized success in various countries in improving access to credit, at the same time there has been a broader failure to generate economic growth. The authors argue that this broader failure should be viewed from the viewpoint of institutional failure or the lack of supporting institutions such as private property rights and stable rule of law within developing countries.
Findings
Using Baumol’s (1968) theory of entrepreneurship, the authors argue that the broader failure of microfinance is a case of poor institutional quality leading to unproductive or even destructive entrepreneurship rather than productive entrepreneurship. The paper also suggests a link between the literature criticizing foreign aid and this view on microfinance.
Originality/value
The paper provides a survey of the empirical literature on micro finance as well as a novel framework that aids in understanding both the localized small-scale success as well as broader failure to generate economic growth.
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Abdulkareem Alhassan and Abdulhakeem Abdullahi Kilishi
The primacy of institutions for economic progress has been established in the literature. Yet, less research attention is paid to the existence and persistence of weak economic…
Abstract
Purpose
The primacy of institutions for economic progress has been established in the literature. Yet, less research attention is paid to the existence and persistence of weak economic institutions in Africa. Thus, the purpose of this paper is to empirically explore the determinants of the quality of economic institutions in Africa.
Design/methodology/approach
Hausman–Taylor instrumental variable estimator of panel regression was employed for a sample of 43 Sub-Sahara African countries over the period 1995–2017.
Findings
The study finds that the existence and persistence of weak economic institutions in Africa is more of design than destiny. That is, weak economic institutions are created and sustained more by bad political institutions rather than cultural diversity and geographical factors. Therefore, strong political institutions need to be entrenched to reverse the equilibrium of weak economic institutions and dismal economic performance in the continent.
Practical implications
The study provides deep understanding of the determinants of economic institutions. This is imperative for policy makers, development agencies and stakeholders in designing viable economic policies and programs for the continent.
Originality/value
The novelty of the study is rooted in the examination of the factors responsible for the development and persistence of weak economic institutions in Africa. The idea is original because previous studies focus on political institutions and neglected economic institutions.
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