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Book part
Publication date: 23 June 2016

Alexander Chudik, Kamiar Mohaddes, M. Hashem Pesaran and Mehdi Raissi

This paper develops a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in large dynamic heterogeneous panel data models…

Abstract

This paper develops a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in large dynamic heterogeneous panel data models with cross-sectionally dependent errors. The asymptotic distribution of the CS-DL estimator is derived under coefficient heterogeneity in the case where the time dimension (T ) and the cross-section dimension (N ) are both large. The CS-DL approach is compared with more standard panel data estimators that are based on autoregressive distributed lag (ARDL) specifications. It is shown that unlike the ARDL-type estimator, the CS-DL estimator is robust to misspecification of dynamics and error serial correlation. The theoretical results are illustrated with small sample evidence obtained by means of Monte Carlo simulations, which suggest that the performance of the CS-DL approach is often superior to the alternative panel ARDL estimates, particularly when T is not too large and lies in the range of 30–50.

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Book part
Publication date: 30 May 2018

Albert A. Okunade, Xiaohui You and Kayhan Koleyni

The search for more effective policies, choice of optimal implementation strategies for achieving defined policy targets (e.g., cost-containment, improved access, and…

Abstract

The search for more effective policies, choice of optimal implementation strategies for achieving defined policy targets (e.g., cost-containment, improved access, and quality healthcare outcomes), and selection among the metrics relevant for assessing health system policy change performance simultaneously pose continuing healthcare sector challenges for many countries of the world. Meanwhile, research on the core drivers of healthcare costs across the health systems of the many countries continues to gain increased momentum as these countries learn among themselves. Consequently, cross-country comparison studies largely focus their interests on the relationship among health expenditures (HCE), GDP, aging demographics, and technology. Using more recent 1980–2014 annual data panel on 34 OECD countries and the panel ARDL (Autoregressive Distributed Lag) framework, this study investigates the long- and short-run relationships among aggregate healthcare expenditure, income (GDP per capita or per capita GDP_HCE), age dependency ratio, and “international co-operation patents” (for capturing the technology effects). Results from the panel ARDL approach and Granger causality tests suggest a long-run relationship among healthcare expenditure and the three major determinants. Findings from the Westerlund test with bootstrapping further corroborate the existence of a long-run relationship among healthcare expenditure and the three core determinants. Interestingly, GDP less health expenditure (GDP_HCE) is the only short-run driver of HCE. The income elasticity estimates, falling in the 1.16–1.46 range, suggest that the behavior of aggregate healthcare in the 34 OECD countries tends toward those for luxury goods. Finally, through cross-country technology spillover effects, these OECD countries benefit significantly from international investments through technology cooperations resulting in jointly owned patents.

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Article
Publication date: 15 June 2021

Amna Zardoub

Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be…

Abstract

Purpose

Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – foreign direct investment, remittances and official development assistance – can be a key factor in the development of the economy. The purpose of this study is to analyze the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been used. As part of this study, an attempt was made to use a combined autoregressive distributed lag (ARDL) panel approach to study the short-term and long-run effects of financial flows on economic growth. The results indicate ambiguous effects. Economically, the effect of financial flows on economic growth depends on the investor’s expectations.

Design/methodology/approach

To study the short-run and long-run effects of financial flows on economic growth, this paper considers an empirical approach based on the panel ARDL. This model makes it possible to distinguish between the short-run effect and the long-run one. This type of model is based on three estimators, namely, mean group, pooled mean group (PMG) and dynamic fixed effect.

Findings

Results confirm the existence of a long-run relationship because the adjustment coefficient (error correction parameter) is negative and statistically significant. This paper finds that the PMG estimator is more consistent and more efficient. In the short-run, foreign direct investment do negatively affect economic growth, the effect is no significant in the long-run. On the other hand, the effect of remittances on economic growth is significant in the short-run. However, it is no significant in the long-run. Finally, the results suggest that the effect of official development assistance on economic growth is insignificant; both in the long-run and in the short-run.

Originality/value

To study the interaction between financial flows and economic growth, some empirical methodology are used such as the dynamic panel data and the autoregressive vector (VAR) model. In this study, we apply the panel ARDL model to analyze the short-run and the long-run effect for each financial flow on economic growth. The objective is to study the heterogeneity on dynamic adjustment in the short-term and long-term.

Details

PSU Research Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2399-1747

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Article
Publication date: 6 August 2021

Chamil W. Senarathne and Prabhath Jayasinghe

While sustainable development policies are mostly set based on United Nations (UN) geoscheme classification, no study attempts to examine the impact of influential…

Abstract

Purpose

While sustainable development policies are mostly set based on United Nations (UN) geoscheme classification, no study attempts to examine the impact of influential economic variables such as energy consumption (EC) and merchandise exports (ME) on carbon dioxide (CO2) emission in the UN geoscheme regions. The purpose of this paper is to examine the possible impact of EC and ME on CO2 emission in UN geoscheme classification regions such as Africa, America, Arab, Asia and Europe.

Design/methodology/approach

This paper uses autoregressive distributed lag (ARDL), Pedroni panel cointegration and panel Granger causality methodologies covering an annual panel data sampling period from 1971 to 2014.

Findings

The results show that there is bidirectional causality between all three variables in the European and American panel except for the non-causality from CO2 to EC in the American panel. These findings suggest possible consequences of weaker energy efficiency (even under environmental policy tightening) and strong demand for energy-intensive economic activities in those regions. Developed countries with higher environmental policy tightening (America and Europe) show significant estimates from the chosen tests supporting the Porter hypothesis. EC and ME have a long-run impact on CO2 emission in American and European panels. The African region has the least environmental impact of pollution from ME.

Practical implications

The ME and EC have a direct significant impact on CO2 emission in America and Europe. As these causalities, co-integrations and their impacts share a long-run equilibrium relationship, policymakers must design long-term industry policies such as cleaner production techniques focusing on environmentally sustainable practices. Also, it is suggested that the policymakers must ensure that they implement more robust policies and standards for environmental-friendly export production.

Originality/value

This is the first paper that examines the impact of EC and ME on CO2 emission in UN geoscheme regions. The findings of this paper provide theoretical implications supporting Porter hypothesis and practical implications for policymaking.

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Article
Publication date: 28 February 2019

Getaneh Mihret Ayele

The purpose of this paper is to examine whether real exchange rate devaluation improves the current account balance of four highly indebted low-income countries of East Africa.

Abstract

Purpose

The purpose of this paper is to examine whether real exchange rate devaluation improves the current account balance of four highly indebted low-income countries of East Africa.

Design/methodology/approach

The pooled mean group (PMG) approach is used for panel data from four countries over the period 1970–2016. The paper also applied bound testing and ARDL model for time-series data from individual sample countries.

Findings

The panel PMG/ARDL estimation result reveals that real exchange rate devaluation has no significant impact on the current account balance, both in the short and long run. However, the time-series analysis using the bound testing and restricted ARDL estimation suggests that real exchange rate devaluation improves the current account balance in the long run for only Ethiopia. The overall empirical results reveal that the current account balance would improve with the rising domestic income while it deteriorates with increasing foreign income and external indebtedness in the long run.

Originality/value

The paper is original.

Details

African Journal of Economic and Management Studies, vol. 10 no. 2
Type: Research Article
ISSN: 2040-0705

Keywords

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Article
Publication date: 3 June 2014

Mejda Bahlous and Rosylin Mohd. Yusof

The purpose of this paper is to assess the benefits to investors of international diversification among only Islamic funds. Compared to conventional investors who are not…

Abstract

Purpose

The purpose of this paper is to assess the benefits to investors of international diversification among only Islamic funds. Compared to conventional investors who are not restricted in their choice of funds, Islamic investors are restricted to investing in shari’a-compliant funds, thus giving up some diversification benefits. The possibility of international diversification among only Islamic funds may thus help Islamic investors to invest in accordance to their religious beliefs and still benefit from diversification.

Design/methodology/approach

The paper assesses the benefits of diversification by analyzing the extent of co-integration among four regional Islamic funds and by estimating the short-term and long-term structural dynamics of and among these funds. The paper uses an Autoregressive-Distributed Lag (ARDL) approach to testing the long-run relationships among these funds and use variance decomposition and impulse response functions to examine the structural dynamics of the relationship between these funds. These methods can also be used for predictive purposes and represent, in authors opinion, a useful approach that complements the traditional methodology of static covariance matrix to find the efficient frontier at a given moment in time.

Findings

The results indicate that international diversification can help reduce risk if Asia Pacific Islamic funds and MENA region Islamic funds are invested contemporaneously and/or Asia Pacific Islamic funds and North America Islamic funds, and/or Europe funds and MENA funds. The paper also finds that investors would benefit from investing in North American funds and MENA funds both in the long run and in the short run. Conversely, the paper finds that Europe funds and North American funds are co-integrated in the long-run precluding the opportunity for substantial diversification benefits from these particular portfolio mixes.

Research limitations/implications

The long-run analysis helps passive fund managers and investors in composing their portfolio by providing evidence that some portfolio mixes of different regional Islamic funds lead to better risk return performance than one regional Islamic fund portfolios. The short-run analysis however helps the active fund managers and investors as it suggests that diversifying in the short run and reviewing their portfolio on a regular basis would be beneficial as well.

Originality/value

This analysis justifies the promotion of Islamic finance as the negative correlation between several Islamic funds across the regions studied suggests better opportunities of investments via international diversification making Islamic funds more desirable.

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Article
Publication date: 28 September 2021

Stephen Esaku

In this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.

Abstract

Purpose

In this paper, the authors examine how economic growth shapes the shadow economy in the long and short run.

Design/methodology/approach

Using annual time series data from Uganda, drawn from various data sources, covering the period from 1991 to 2017, the authors apply the ARDL modeling approach to cointegration.

Findings

This paper finds that an increase in economic growth significantly reduces the size of the shadow economy, in both the long and short run, all else equal. However, the long-run relationship between the shadow economy and growth is non-linear. The results suggest that the rise of the shadow economy could partially be attributed to the slow and sluggish rate of economic growth.

Practical implications

These findings imply that addressing informality requires addressing underlying factors of underdevelopment since improvements in economic growth also translate into a reduction in the size of the shadow economy in the short and long run.

Originality/value

These findings reveal that the low level of economic growth is an issue because it spurs informal sector activities in the short run. However, as the economy improves, it becomes an incentive for individuals to operate in the informal sector. Additionally, tackling shadow activities in the short run could help improve tax revenue collection.

Details

African Journal of Economic and Management Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-0705

Keywords

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Article
Publication date: 9 July 2020

Kashif Munir and Faqeer Syed Umaid Shahid

This study examines the long-run and short-run impact of demographic factors, i.e. life expectancy, fertility rate and young dependency ratio in determining the economic…

Abstract

Purpose

This study examines the long-run and short-run impact of demographic factors, i.e. life expectancy, fertility rate and young dependency ratio in determining the economic growth of South Asian countries.

Design/methodology/approach

The theoretical foundation of the study relies on demographic transition theory and incorporates life expectancy, fertility rate and young dependency ratio into the production function by means of human capital component. The study uses annual panel data of four South Asian courtiers, i.e. Bangladesh, India, Pakistan and Sri Lanka from 1980 to 2018 and utilizes panel ARDL model to analyze the long run and short run impact of demographic factors on economic growth.

Findings

Results show that real stock of capital, fertility rate and life expectancy are positively related with economic growth, while an increase in young dependency ratio reduces economic growth in South Asian countries in the long run. Short-run dynamics show that real stock of capital and life expectancy have insignificant impact on economic growth, while young dependency ratio has negative and significant as well as life expectancy has positive and significant impact on economic growth in South Asian countries. Unidirectional causality exists from young dependency ratio and fertility rate to GDP per capita in the short run.

Practical implications

Government has to design policies for better health and education facilities to yield high economic growth as well as better infrastructure and macroeconomic stability to facilitate capital accumulation in the region to foster economic growth.

Originality/value

This study considerably adds into the existing literature by providing better understanding of various demographic aspects and their economic inference by highlighting the demographic changes that South Asia has endured. This study is also beneficial for policymakers and growth analysts in generating effective and sustainable policies regarding population dynamics and economic development of the region.

Details

Journal of Economic Studies, vol. 48 no. 3
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 4 May 2020

Bisharat Hussain Chang, Suresh Kumar Oad Rajput, Niaz Ahmed Bhutto and Zahida Abro

Recent literature has shifted to examining whether exchange rate volatility symmetrically or asymmetrically affects the trade flows. This study aims to extend the existing…

Abstract

Purpose

Recent literature has shifted to examining whether exchange rate volatility symmetrically or asymmetrically affects the trade flows. This study aims to extend the existing literature by examining the effects of extremely large to extremely small changes in exchange rate volatility series on the US imports from Brazil, India, Mexico and South Africa.

Design/methodology/approach

For examining the effects of extreme changes, multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model is used and the exchange rate volatility series is divided into quintiles and deciles. It helps to examine the effects of each quintile/decile of exchange rate volatility series on the US imports.

Findings

Findings indicate that the effects of extremely large changes in the exchange rate volatility series significantly differ from the effects of extremely small changes in the exchange rate volatility series on the US imports.

Practical implications

The findings of this study are very important. These findings help to consider the effect of extreme changes before devising policies related to trade flows.

Originality/value

This study mainly focuses on US imports from Brazil, India, Mexico and South Africa. In addition, this study extends the existing literature by using a novel methodology called MTNARDL model.

Details

Studies in Economics and Finance, vol. 37 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

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Abstract

Details

The Impacts of Monetary Policy in the 21st Century: Perspectives from Emerging Economies
Type: Book
ISBN: 978-1-78973-319-8

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