Search results

The purpose of this paper is to examine the convergence analysis of public debt among Indian states using annual data from 1990‒1991 to 2014‒2015.

The paper tests this hypothesis using club convergence technique propounded by Phillips and Sul (2007).

The results reveal the existence of debt divergence for overall Indian states. States are formed into four clubs on the basis of their level of debt, and three clubs support the hypothesis of club convergence. Further, the total public debt decomposes into three compositions such as market loans, bank loans and loans and advances from the central government. The existence of convergence is found for market loans and bank loans; however, the presence of divergence is found in case of loans and advances for overall states.

Since public debt plays an important role for fiscal health of the Indian states, findings of this study suggest to squeeze the fiscal consolidation further for Indian states whose debts as a percentage to gross state domestic product are on the higher side. Further, the examination of debt convergence helps to manage debt level among the states because heavy dependence on public debt could retard investment and economic growth.

Whereas bulk of empirical studies emphasize on examining the linkage between public debt and economic growth, and issue on debt sustainability across Indian states, examination of convergence of debt and its compositions (markets borrowings, bank loans and loans and advances from the central government) among the Indian states is scanty.

This study examines the effect of public debt on the economic growth of OECD countries by disentangling the effect into permanent and transitory components. The study covers 37 OECD countries.

The Mundlak decomposition was employed to decompose the effect of public debt into its transitory and permanent effect on economic growth. To account for potential endogeneity problem, the Hausman and Taylor estimator was employed to estimate the decomposed model. Further, the study disaggregated the OECD model into country group models for further analysis of the dynamics of the relationship between the variables.

The findings of the study reveal that in the full OECD model public debt exerts a significant negative permanent and positive transitory effect on economic growth. This was robust to alternative model specifications. The magnitude of the negative permanent effect of debt was found to be larger than the positive transitory effect. Further, the estimates of the disaggregated models reveal that though public debt has a negative permanent effect across all the country groups, it was not the case for the transitory effect of debt. Also, a net public debt model was estimated, and its effect on public debt was found to be largely insignificant, exhibiting a Ricardian-like behaviour.

To the best of our knowledge, this is the first study, particularly in the OECD context that employed the Mundlak transformation to examine the permanent versus transitory effect of public debt on economic growth.

This study aims to interrogate dynamic asymmetric relationships between public debt and economic growth in Southern African Developing Communities (SADC), over the period 2000–2018.

The study employed a panel smooth transition regression (PSTR) technique to analyse dynamic asymmetric relationships between public debt and economic growth, and the threshold effect at which public debt hampers economic growth.

The findings indicate that there is a significant nonlinear effect of debt on economic growth in SADC. The study discovered a debt threshold of 60% to GDP at which debt beyond this threshold deteriorates long-term growth. The low-debt regime was found to be positive and statistically significant, while the high-debt regime is detrimental for long-term growth. Fiscal policymakers ought to consider the adoption of well-coordinated debt policies that aims to strike a balance between sustainable public debt and economic growth, within a reasonable threshold target.

The study focusses on asymmetric and threshold analysis of public debt on economic growth in SADC using sophisticated panel smooth transition regression (STAR). This study provides rigorous empirical evidence within the SADC perspective in which previous studies have predominantly been confined in advanced economies.

Gulf Cooperation Council (GCC) was set up in 1981 between Bahrain, Oman, Qatar, Saudi Arabia, United Arab Emirates and Kuwait for strengthening cooperation and economic development in the region. The GCC has made strides towards economic consolidation by forming a customs union and a common market. The long-term vision is to create an Economic and Monetary Union (EMU) with a single currency. Progress towards the EMU has been slow and the recent oil price plunge has led to concerns regarding sustainable growth of member countries due to their significant dependence on oil and lack of diversification. The purpose of this paper is to analyse the scope of an EMU in the GCC against the backdrop of current oil crisis and examine sustainability of such a union. The paper studies convergence criteria similar to the ones followed by the accession countries of the European EMU in the 1990s preceding the introduction of the single currency Euro.

The paper draws its practical approach from the experience of the European Monetary Union, though the original idea of the single currency in Optimum Currency Areas was conceived by Mundell (1961). The present paper analyses macroeconomic time-series variables (e.g. GDP, budget deficits, debt, growth rates, inflation rates, exchange rates) for GCC during the period 2005-2014. Data has been sourced from United Nations Conference on Trade and Development (UNCTAD), The World Bank and International Monetary Fund (IMF) databases to study the convergence criteria adopted by the EMU countries for the introduction of the Euro.

The paper concludes that GCC economies are similar in terms of their structural and economic fundamentals. Most elements of the convergence criteria that were followed by the accession countries in Europe are fulfilled by the GCC member states, particularly during 2011-2014. The GCC states look similar in terms of sustainable growth, price stability and exchange rate stability – three aspects of convergence met by the European Union states. However, heavy dependence on oil and lack of diversification from oil and hydrocarbon-related products in the gross domestic product (GDP) composition of GCC states pose severe risks to the potential union. Fiscal vulnerabilities of these economies to oil price shocks, such as the current oil price crisis, create concerns for such a union during oil price lows. Widely divergent fiscal deficit-to-GDP ratios and rising debt-to-GDP ratios during periods of low oil prices imply the lack of sound and unsustainable public finances for some of the GCC states. The divergence has stemmed from widely different break-even oil prices for government budgets within the GCC and also due to varying degrees of oil dependencies between the member states. The scope of a successful and more sustainable EMU can be further explored once the GCC economics have achieved adequate diversity from oil.

The study is useful to policy makers, central banks, businesses and researchers since it highlights the EMU as a feasible option for the GCC states. The sustainability of the EMU is contingent on diversification of these economies in the future from oil and oil-related products. The study can be utilized by policy makers as a strategy to further restructure GCC economies towards greater resilience and integration prior to accession to the GCC EMU.

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

This paper aims to assess the factors that may explain the International Public Sector Accounting Standards (IPSAS) convergence, considering Hofstede’s cultural dimensions as the theoretical reference for the cultural approach proposed. Additional factors include countries’ contextual and macroeconomic characteristics.

Logistic and probit regression models were used to identify the factors that may explain the IPSAS (fully or adapted) use by countries, including 166 countries in this assessment (59 for those whose cultural dimensions are available).

The findings consistently indicate collectivism and indebtedness levels as explanatory factors, providing insights into cultural dimensions along with macroeconomic characteristics as a relevant factor of countries’ convergence to IPSAS.

There are different levels of IPSAS convergence by countries that were not considered. This aspect may hide different countries’ characteristics that may explain those options, which could not be distinguished in this paper.

As a result of this paper, the International Public Sector Accounting Standards Board may gain insights that can be applied within the IPSAS due process to overcome the main challenges when collaborating with national authorities to achieve a high level of convergence. This analysis may include how to accommodate countries’ cultural differences as well as their contextual and macroeconomic characteristics.

There is a trend of moving toward accrual-based accounting standards by countries. Because the public sector embraces a new culture following the IPSAS path, it is relevant to assess if there are cultural factors, besides contextual and macroeconomic characteristics, that may explain the countries’ convergence to those standards.

To the best of the authors’ knowledge, this is the first cross-country analysis on the likely influence of cultural dimensions on IPSAS convergence as far as the authors’ knowledge.

This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through credit to private sector.

The study sampled 37 selected African economies for the years 1991–2018, and it applied a pooled mean group (PMG) estimator to account for short-run and long-run causal effects, and confirmed short-run adjustments towards the long-run convergences between the variables. Specific suitable tests were also applied.

Evidence confirms positive impacts of both capital formation and final consumption expenditures on financial development in the short run and long run. The moderation of population structures on expenditure structures help to speed up convergences.

This work attests its innovation by accounting for the separate effects of the expenditure types, the moderation effects of young and mature populations for capital and final consumption expenditure on financial development among selected economies in Africa.

The purpose of this study is to seek to re-examine the threshold effects of public debt on economic growth in Africa.

This study applies panel smooth transition regression approach advanced by González et al. (2017). The method allows for both heterogeneity as well as a smooth change of regression coefficients from one regime to another.

A debt threshold in the range of 62–66% is estimated for the whole sample. Low debt is found to be growth neutral but higher public debt is growth detrimental. For middle-income and resource-intensive countries, a debt threshold in the range of 58–63% is estimated. As part of robustness checks, a dynamic panel threshold model was also applied to deal with the endogeneity of debt, and a much higher debt threshold was estimated, at 74.3%. While low public debt is found to be either growth neutral or growth enhancing, high public debt is consistently detrimental to growth.

The findings of this study show that there is no single debt threshold applicable to all African countries, and confirm that the debt threshold level is sensitive to modeling choices. While further analysis is still needed to suggest a policy, the findings of this study show that high debt is detrimental to growth.

The novelty of this study is twofold. Contrary to previous studies on Africa, this study applies a different estimation technique which allows for heterogeneity and a smooth change of regression coefficients from one regime to another. Another novelty distinct from the previous studies is that, for robustness checks, this study divides the sample into low- and middle-income countries, and into resource- and nonresource intensive countries, as debt experience can differ among country groups. Further, as part of robustness checks, another estimation method is also applied in which the threshold variable (debt) is allowed to be endogenous.

A spectre is hunting embryonic African monetary zones: the European Monetary Union crisis. The purpose of this paper is to assess real, monetary and fiscal policy convergence within the proposed WAM and EAM zones. The introduction of common currencies in West and East Africa is facing stiff challenges in the timing of monetary convergence, the imperative of central bankers to apply common modeling and forecasting methods of monetary policy transmission, as well as the requirements of common structural and institutional characteristics among candidate states.

In the analysis: monetary policy targets inflation and financial dynamics of depth, efficiency, activity and size; real sector policy targets economic performance in terms of GDP growth at macro and micro levels; while, fiscal policy targets debt-to-GDP and deficit-to-GDP ratios. A dynamic panel GMM estimation with data from different non-overlapping intervals is employed. The implied rate of convergence and the time required to achieve full (100 percent) convergence are then computed from the estimations.

Findings suggest overwhelming lack of convergence: initial conditions for financial development are different across countries; fundamental characteristics as common monetary policy initiatives and IMF-backed financial reform programs are implemented differently across countries; there is remarkable evidence of cross-country variations in structural characteristics of macroeconomic performance; institutional cross-country differences could also be responsible for the deficiency in convergence within the potential monetary zones; absence of fiscal policy convergence and no potential for eliminating idiosyncratic fiscal shocks due to business cycle incoherence.

As a policy implication, heterogeneous structural and institutional characteristics across countries are giving rise to different levels and patterns of financial intermediary development. Thus, member states should work towards harmonizing cross-country differences in structural and institutional characteristics that hamper the effectiveness of convergence in monetary, real and fiscal policies. This could be done by stringently monitoring the implementation of existing common initiatives and/or the adoption of new reforms programs.

It is one of the few attempts to investigate the issue of convergence within the proposed WAM and EAM unions.

In an effort to make audit reports more informative to users, the Public Company Accounting Oversight Board and the International Auditing and Assurance Standards Board adopted a standard that requires auditors to disclose key audit matters (KAMs). This paper aims to explore the impact of the risk information provided by KAMs on corporate debt contracting.

In China, the KAM standard went into effect for A + H cross-listing companies in 2017 and became mandatory for all listed companies in 2018. This study takes this as an exogenous shock to examine the impact of the KAM disclosures on debt contracting. This study also designs a path analysis to open the “black box” between the risk information in KAMs and the risk perception of creditors. Moreover, This study conducts a textual analysis on the KAMs information based on samples after the release of the KAM standard.

This study conducts difference-in-difference tests and find that the KAM disclosures decrease interest rates and increase the proportion of long-term debt. Path analyses reveal that the KAM disclosures lead to more favorable debt characteristics through decreasing information asymmetry. This study also finds that the more KAMs are disclosed, the more favorable debt characteristics are and that different categories of KAMs have different effects on debt contracting.

This paper highlights the benefits of KAM disclosures, which are consistent with the convergence argument of risk information disclosures. Investors’ reactions to KAMs are mixed because of the differences in how professional investors and nonprofessional investors interpret information. This study provides evidence of incrementally informative nature of KAMs from the perspective of debt holders, who are professional information users.