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Article
Publication date: 2 August 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa…

Abstract

Purpose

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Design/methodology/approach

The purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Findings

The results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion.

Originality/value

Unlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

Details

Journal of Financial Regulation and Compliance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1358-1988

Keywords

Open Access
Article
Publication date: 23 June 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

Abstract

Purpose

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

Design/methodology/approach

Empirical estimations verifying various relationships are performed using the limited information maximum likelihood (LIML) estimation technique.

Findings

The results suggest that institutional quality enhances the pace of financial development among economies in the sub-region all things being equal. In a further micro-level analysis where components of institutional quality index are examined separately, the study’s results suggest that effective governance, regulatory quality, rule of law and accountability tend to have a significant positive impact on financial sector development.

Research limitations/implications

Findings of the study suggest that policies geared towards improving governance and regulatory institutions can augment development of the financial sector among economies in SSA; governments and policymakers are therefore encouraged to resource noted institutions to play effective roles for the development of the financial sector.

Originality/value

Compared to related studies, this study reorients existing paradigm, which emphasizes the role of governance and institutional variables in the economic growth discourse. The authors’ empirical inquiry rather focuses on how governance and institutional structures influence regional financial development dynamics. Specifically, this study differs from most macro-level studies found in literature because it examines the impact of hitherto unexamined governance and institutional variables on financial development among economies in SSA.

Details

Journal of Economics and Development, vol. 24 no. 3
Type: Research Article
ISSN: 1859-0020

Keywords

Article
Publication date: 1 February 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This paper examines the role price fluctuations associated with internationally traded commodities play in inflationary conditions and inflation uncertainty among…

Abstract

Purpose

This paper examines the role price fluctuations associated with internationally traded commodities play in inflationary conditions and inflation uncertainty among economies in Sub-Saharan Africa.

Design/methodology/approach

Using a panel 32 countries from the sub-region from 1996 to 2019, this study employed Two-Step System Generalized Method of Moments (GMM) estimation technique in its analysis.

Findings

Empirical evidence demonstrates that fluctuations in forex-adjusted price of crude oil, gold and cocoa have significant positive impact on inflation while forex-adjusted changes in price of cotton tend to have significant negative influence on consumer price inflation among economies in the sub-region. Additionally, the study found that gold, cocoa and cotton price changes on the international market have significant positive impact on inflation uncertainty in the sub-region (rise in price leads to increase rate of inflation uncertainty). Furthermore, improved regulatory quality and growth in output growth (GDP per capita growth) were found to help in stabilizing inflation uncertainty (reduce inflation uncertainty) among economies in the sub-region during periods of persistent growth in general price levels.

Originality/value

The study present a different approach based on individual economy forex-adjusted global prices of internationally traded commodities instead of general prices often used in the literature and assessed the effects such adjusted commodity prices have on inflation and inflation uncertainty. Additionally, the moderating role of regulatory quality and output growth between surmised nexuses are also examined.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 12 October 2021

Rexford Abaidoo, Elvis Kwame Agyapong and Kwame Fosu Boateng

This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking…

Abstract

Purpose

This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from three main perspectives; bank liquidity reserves, overall bank risk and bank capital adequacy.

Design/methodology/approach

Data were compiled from various sources for 30 emerging economies from 2002 to 2018 and were analyzed using the two-step system generalized method of moments estimation technique.

Findings

The study finds that all things being equal, the magnitude and direction of impact of commodity price volatility on bank stability among economies in Sub-Saharan African (SSA) depend on the type and nature of the commodity in question; and the bank stability proxy used. For instance, an increase in crude oil prices is found to foster stability in the banking industry (proxied by bank liquid reserves) but insignificant when stability in the banking industry is proxied using other banking sector parameters. Additionally, government effectiveness and corruption control have varying moderating influences on how volatility associated with prices of internationally traded commodities influence various proxies for banking industry stability.

Originality/value

This study highlights the effect of fluctuations in prices of key internationally traded commodities (adjusted for foreign exchange impact) that are important sources of revenue among economies in SSA on banking sector stability from liquidity, overall risk and capital adequacy perspectives. The influential role of governance in the relationship between volatility in the price of commodities and bank stability is also revealed by the study.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 7 November 2016

Rexford Abaidoo and Florence Ellis

This study aims to explore potential paradigm shift in how “global economies” react to adverse macroeconomic conditions from key dominant economies such as the US and the…

9336

Abstract

Purpose

This study aims to explore potential paradigm shift in how “global economies” react to adverse macroeconomic conditions from key dominant economies such as the US and the Chinese economies. This is done by examining how economic activities within key economies around the world react to, or are impacted by, modeled adverse macroeconomic condition emanating from the Chinese and the US economies.

Design/methodology/approach

To verify potential paradigm shift in how external macroeconomic uncertainty impacts “global” industrial productivity and overall gross domestic product (GDP) growth within selected economies, this study opts for seemingly unrelated regression (SUR) model. Adoption of this method has been influenced by the potential for correlated error terms between modeled adverse macroeconomic condition, industrial productivity and GDP growth variables being tested in a two-equation system.

Findings

Empirical results based on SUR analysis find no evidence of this potential paradigm shift within the time frame examined in the study. Estimated results suggest that notwithstanding the recent growth surge of the Chinese economy, macroeconomic happenings within the US economy still exert significantly more influence on key economies around the world. For instance, this study finds that macroeconomic uncertainty associated with the US economy significantly constrains both industrial productivity and overall GDP growth within most of the economies tested, whereas the same condition emanating from the Chinese economy seems to rather have a weak positive impact on the same macroeconomic variables.

Research limitations/implications

Research results are strictly limited to the focus time frame for this study; it is likely that expanded data involving more years beyond what was analyzed in this study could yield different results.

Originality/value

This study is an original research based on data from a reputable US federal institution.

Details

Journal of Financial Economic Policy, vol. 8 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 16 May 2019

Rexford Abaidoo

The purpose of this study is to empirically examine the extent to which volatility associated with corporate performance could be attributed to specific adverse…

Abstract

Purpose

The purpose of this study is to empirically examine the extent to which volatility associated with corporate performance could be attributed to specific adverse macroeconomic conditions in a bivariate causality analysis.

Design/methodology/approach

The study uses the Toda–Yamamoto Wald test approach to Granger causality analysis in verifying significant causal interactions if any, between corporate performance volatility and seven macroeconomic conditions or variables.

Findings

This study finds that economic policy uncertainty and macroeconomic uncertainty tend to have bidirectional causal interaction with corporate performance volatility. In addition, estimated results further suggest significant unidirectional causal interaction between corporate performance volatility and inflation expectations, exchange rate volatility, inflation and inflation uncertainty, with direction of causality running from the macroeconomic variables toward corporate performance volatility. This study, however, found no significant causal interaction between corporate performance volatility and recessionary probability or likelihood of recession.

Practical implications

This study’s conclusions could have significant and critical policy implications for key corporate policymakers responsible for corporate performance strategy. Various causal interactions identified could inform policy framework and, subsequently, strategies geared toward minimizing volatility associated with performance during episodes of any of the various macroeconomic conditions examined in this study.

Originality/value

The uniqueness of this study stems from its focus on corporate performance volatility instead of corporate performance and potential causal interactions it might have with key adverse macroeconomic conditions, some of which have not been examined in previous studies according to reviewed literature.

Details

Journal of Financial Economic Policy, vol. 11 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 30 November 2021

Rexford Abaidoo and Elvis Kwame Agyapong

This paper aims to evaluate how strands of differing investments influence stability in the banking industry using data from 37 countries in Sub-Sahara Africa from 2000 to 2018.

Abstract

Purpose

This paper aims to evaluate how strands of differing investments influence stability in the banking industry using data from 37 countries in Sub-Sahara Africa from 2000 to 2018.

Design/methodology/approach

Empirical analyses in the study were carried out using a two-step system Generalized Method of Moments estimation methodology.

Findings

Empirical results suggest that generally, growth in investments by governments, foreign investments and private domestic investments have a significant positive impact in stabilizing the banking industry. The empirical estimates further suggest that macroeconomic conditions such as macroeconomic uncertainty adversely affects the liquid reserve position of banks even during periods of appreciable growth in investments.

Originality/value

The authors present a different approach to the banking industry discourse. Instead of surmise the relationship with the direction of impact often emanating from the banking industry to other variables of interest or conditions, this study rather examines how investment dynamics among economies influence the stability of the banking industry overtime. In contrast to related studies, this study examines how strands of investment variables influence the stability of the banking industry. Specifically, this study is modeled to examine the extent to which variability in investment growth (using different investment variables) affect stability in the banking industry.

Details

Journal of Financial Regulation and Compliance, vol. 30 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 6 January 2021

Rexford Abaidoo

This study examines dynamics of global and regional financial market efficiency; and how specific features of the market and other conditions influence variability in such…

Abstract

Purpose

This study examines dynamics of global and regional financial market efficiency; and how specific features of the market and other conditions influence variability in such efficiency.

Design/methodology/approach

The study employs fixed effects statistical approach in its examination of how specific features of financial markets influence variability in its efficiency.

Findings

This study finds that individual IMF defined economic regions tend to exhibits significantly different financial market efficiency characteristics given specific market features and conditions. In regional level comparative analysis (e.g. Europe, Africa, Asia–Pacific etc.) this study finds that incidence of financial market uncertainty is the dominant condition with significant effect on financial market efficiency across all the IMF regions. In the global level analysis, empirical estimates presented suggest that financial market uncertainty, financial institutional depth and financial institutional efficiency tend to have significant positive influence on global financial market efficiency all things being equal. In the same analysis however, this study finds that financial market and financial institutional access growth has significant negative impact on financial market efficiency.

Originality/value

The uniqueness of this study compared to related ones found in the literature stems from its focus on financial market efficiency at the global, and IMF defined regional block level instead of on a specific economy as often found in the literature. Additionally, in contrast to other related studies, this study further examines the role of global financial market uncertainty in its financial market efficiency analysis. Financial market uncertainty variable may be unique to this study because the variable is derived through an econometric process from a base variable.

Details

American Journal of Business, vol. 36 no. 3/4
Type: Research Article
ISSN: 1935-5181

Keywords

Article
Publication date: 13 July 2021

Rexford Abaidoo and Elvis Agyapong Agyapong

This paper aims to examine the impact of commodity price changes (crude oil, cocoa, coffee, cotton and gold) on the international market on development (development…

Abstract

Purpose

This paper aims to examine the impact of commodity price changes (crude oil, cocoa, coffee, cotton and gold) on the international market on development (development proxied by the human development index) (HDI) among emerging economies in Sub-Saharan Africa (SSA).

Design/methodology/approach

Empirical estimates verifying theorized relationships in question were performed using the two-step system generalized method of moments framework.

Findings

Results from the empirical estimates suggest that a percentage increase in the prices of crude oil, cocoa and gold in the world market have a significant positive influence on development among economies in the sub-region all things being equal; however, similar price changes in cotton and coffee showed a negative effect on development. Further empirical estimates suggest that the extent to which prices of key commodities such as crude oil, influence development in the sub-region benefit less from institutional variables such as government effectiveness, corruption control and political stability. The same institutional variables, however, were found to augment how changes in cocoa prices influence development among economies in the sub-region.

Originality/value

This study specifically examines the extent to which commodity price fluctuations impact a holistic measure of development, (HDI which inherently captures economic growth) among emerging economies such as those in the SSA region, and how such relationship may be moderated by conditions such as corruption control and government effectiveness. The review suggests that such a study is rare, did not find any specific empirical inquiry focusing on what this study is designed to accomplish. A major gap or deficit identified among most reviewed studies is the failure to verify how the surmised relationship between movements in prices of commodities traded on the international market and development is moderated by institutional factors such as corruption control, government effectiveness and political stability. This study specifically examines such interaction effects in its empirical analysis.

Open Access
Article
Publication date: 3 August 2021

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run.

Abstract

Purpose

This study examines how specific micro-level macroeconomic indicators influence corporate performance volatility among US corporate bodies in the short run.

Design/methodology/approach

The study employs error correction autoregressive distributed lagged (ARDL) model (ECM) to examine how micro-level variables influence volatility associated with corporate performance in the short run.

Findings

This paper finds that disaggregated or micro-level variables examined, tend to exhibit features that are not readily apparent from the aggregate variable from which such variables are derived. For instance, reported empirical estimate suggests that, growth in expenditures on services and nondurable goods tend to lower volatility associated with corporate performance, whereas government expenditures and expenditures on durable goods rather worsens volatility associated with corporate performance, all things being equal. Additionally, presented empirical estimates further provide evidence suggesting that macroeconomic uncertainty and inflation uncertainty significantly moderate or influence the extent to which disaggregated variables impact corporate performance volatility.

Originality/value

Compared to related studies in the reviewed literature, this study rather examines volatility associated with corporate performance instead of the corporate performance indicator itself. Additionally, this paper also examines how disaggregated variable instead of aggregate variables impact such volatility. Finally, the moderating role of key macroeconomic conditions in such a relationship is also examined.

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