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Article
Publication date: 19 February 2020

Oyakhilome Ibhagui

The threshold regression framework is used to examine the effect of foreign direct investment on growth in Sub-Saharan Africa (SSA). The growth literature is awash with…

Abstract

Purpose

The threshold regression framework is used to examine the effect of foreign direct investment on growth in Sub-Saharan Africa (SSA). The growth literature is awash with divergent evidence on the role of foreign direct investment (FDI) on economic growth. Although the FDI–growth nexus has been studied in diverse ways, very few studies have examined the relationship within the framework of threshold analysis. Furthermore, even where this framework has been adopted, none of the previous studies has comprehensively examined the FDI–growth nexus in the broader SSA. In this paper, within the standard panel and threshold regression framework, the problem of determining the growth impact of FDI is revisited.

Design/methodology/approach

Six variables are used as thresholds – inflation, initial income, population growth, trade openness, financial market development and human capital, and the analysis is based on a large panel data set that comprises 45 SSA countries for the years 1985–2013.

Findings

The results of this study show that the direct impact of FDI on growth is largely ambiguous and inconsistent. However, under the threshold analysis, it is evident that FDI accelerates economic growth when SSA countries have achieved certain threshold levels of inflation, population growth and financial markets development. This evidence is largely invariant qualitatively and is robust to different empirical specifications. FDI enhances growth in SSA when inflation and private sector credit are below their threshold levels while human capital and population growth are above their threshold levels.

Originality/value

The contribution of this paper is twofold. First, the paper streamlines the threshold analysis of FDI–growth nexus to focus on countries in SSA – previous studies on FDI-growth nexus in SSA are country-specific and time series–based (see Tshepo, 2014; Raheem and Oyınlola, 2013 and Bende-Nabende, 2002). This paper provides a panel analysis and considers a broader set of up to 45 SSA countries. Such a broad set of SSA countries had never been considered in the literature. Second, the paper expands on available threshold variables to include two new important macroeconomic variables, population growth and inflation which, though are important absorptive capacities but, until now, had not been used as thresholds in the FDI–growth literature. The rationale for including these variables as thresholds stems from the evidence of an empirical relationship between population growth and economic growth, see Darrat and Al-Yousif (1999), and between inflation and economic growth, see Kremer et al. (2013).

Details

Journal of Economic Studies, vol. 47 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

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Article
Publication date: 5 May 2020

Arcade Ndoricimpa

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Originality/value

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.

Details

Journal of Economics and Development, vol. 22 no. 2
Type: Research Article
ISSN: 1859-0020

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Article
Publication date: 25 May 2020

Sachin Gupta and Anurag Saxena

The operational aspects of supply chain, when handled correctly, results in diminishing the impact of the bullwhip effect. The purpose of this study is to analyze the…

Abstract

Purpose

The operational aspects of supply chain, when handled correctly, results in diminishing the impact of the bullwhip effect. The purpose of this study is to analyze the impact of operational and financial variables on the bullwhip effect. Various operational factors that contribute to the bullwhip effect in a supply chain are identified and their impact on variability in production is measured at manufacturer’s end in the supply chain.

Design/methodology/approach

Ten different sectors of the Indian economy are identified and analyzed on the basis of bullwhip effect. The ratio of change in production with respect to change in demand is taken as a metric to measure the bullwhip effect. Initially, the impact of identified variables on bullwhip effect is analyzed using the linear regression analysis and then to gain more insights, the threshold regression model is applied according to the change in bullwhip ratio.

Findings

The study identifies four threshold regions in which bullwhip ratio is changing its slope considerably. The operational and financial variables impacting bullwhip effect differently in these four regions provide useful insights about how the variables are impacting the bullwhip effect.

Research limitations/implications

Past 11 years of observations on identified operational and financial variables are studied for ten different sectors. The operational and financial variables are identified on basis of available literature but may not be exhaustive in nature.

Practical implications

The present study implies that the emphasis must be given to the magnitude of the bullwhip ratio. Strategies must be adopted that result in mitigation of bullwhip effect. Such mitigation strategies must not only be restricted on the basis of type of product or sector, perhaps they must be on the basis of threshold region of bullwhip ratio.

Originality/value

The study suggests a novel approach to study the bullwhip effect in supply chain management using the application of threshold regression considering the bullwhip ratio as a threshold variable.

Details

Journal of Global Operations and Strategic Sourcing, vol. 13 no. 2
Type: Research Article
ISSN: 2398-5364

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Article
Publication date: 31 July 2020

Xiaoxue Zhou, Yu Li and Yao Zhang

The purpose of this paper is to explore the threshold effect of firm size on technological innovation using panel data from 2007 to 2012 for listed enterprises in China's…

Abstract

Purpose

The purpose of this paper is to explore the threshold effect of firm size on technological innovation using panel data from 2007 to 2012 for listed enterprises in China's manufacturing sector.

Design/methodology/approach

Considering the aim of research question is to examine the nonlinear relationship, this paper utilizes the threshold regression proposed by Hansen's (2000).

Findings

Based on a threshold regression model using panel data from 2007 to 2012 for listed enterprises in China's manufacturing sector, we find a series of new results. This nonlinear relationship is under the restrictions and impacts of various factors, such as industry characteristics and government subsidies. The results suggest that the threshold regression model well explains the complicated nonlinear relationship and transition process, and it can also shed light on management practice and policy.

Originality/value

There are categorical arguments regarding why firm size is not as effective as before in explaining the monotonic principle of industrial innovation, especially for establishing an effective industrial policy in a particular situation. One of the important reasons is that we have begun to adopt a new perspective from the nonlinear view on the relationship between firm size and industrial innovation. In this study, we have examined the threshold effect of firm size on industrial technological innovation, which is the most representative nonlinear relationship.

Details

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

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Article
Publication date: 20 May 2020

Tobias Burggraf, Toan Luu Duc Huynh, Markus Rudolf and Mei Wang

This study examines the prediction power of investor sentiment on Bitcoin return.

Abstract

Purpose

This study examines the prediction power of investor sentiment on Bitcoin return.

Design/methodology/approach

We construct a Financial and Economic Attitudes Revealed by Search (FEARS) index using search volume from Google's search engine to reveal household-level (“bankruptcy”, “unemployment”, “job search”, etc.) and market-level sentiment (“bankruptcy”, “unemployment”, “job search”, etc.).

Findings

Using a variety of quantitative methodologies such as the transfer entropy model as well as threshold regression and OLS, GLS and 2SLS estimations, we find that (1) investor sentiment has strong predictive power on Bitcoin, (2) household-level sentiment has larger effects than market-level sentiment and (3) the impact of sentiment is greater in low sentiment regimes than in high sentiment regimes. Based on these information, we build a hypothetical trading strategy that outperforms a simple buy-and-hold strategy both on an absolute and risk-adjusted basis. The results are consistent across cryptocurrencies and regions.

Research limitations/implications

The findings contribute to the ongoing debate in the literature on the efficiency of cryptocurrency markets. The results reveal that the Bitcoin market is not efficient in the sense of the efficient market hypothesis – asset prices do not fully reflect all available information and we were able to “beat the market”. In addition, it sheds further light on the debate whether Bitcoin can be considered a medium of exchange, i.e. a currency or an investment product. Because investors are reallocating their Bitcoin holdings during times of increased market sentiment due to liquidity needs, they obviously consider bitcoin an investment product rather than a currency.

Originality/value

This study is the first to examine the impact of investor sentiment measured by FEARS on Bitcoin return.

Details

Review of Behavioral Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 11 January 2020

Friday Osemenshan Anetor

This study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between…

Abstract

Purpose

This study aims to examine the relationship between private capital inflows, financial development and economic growth in 28 sub-Saharan African (SSA) countries between the periods 1995 and 2017.

Design/methodology/approach

The study used a secondary source of data obtained from the world development indicator (WDI) and used the system generalized method of moments (SGMM) and dynamic panel threshold regression to analyze the data.

Findings

The study found that foreign direct investment has a negative and significant impact on the economic growth of SSA. The study also found that portfolio investment has a positive impact on economic growth but it is statistically insignificant. However, when portfolio investment interacted with financial development, it became positive and statistically significant presupposing that financial development is a necessary condition for portfolio investment to exert impact on economic growth. Further, the study showed that the interaction of foreign direct investment with financial development has a negative and significant effect on economic growth. Finally, the study found the minimum threshold of financial development at 42.66 per cent.

Practical implications

Policymakers in SSA should be cautious and critical in the kind of foreign direct investment they attract as the open door policy to attract all kinds of foreign direct investment would not bring about the desired result. Also, policymakers in the region should develop and implement policies that would deepen and strengthen the financial system to foster the development of the country’s financial sector and accelerate economic growth.

Originality/value

The contribution of the study lies in establishing a minimum threshold of financial development; thus, providing a clear-cut direction for policymakers in SSA countries in their pursuit of financial development and economic growth.

Details

International Journal of Development Issues, vol. 19 no. 1
Type: Research Article
ISSN: 1446-8956

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Article
Publication date: 20 September 2019

Lord Mensah, Divine Allotey, Emmanuel Sarpong-Kumankoma and William Coffie

This paper aims to test whether a debt threshold of public debt has any effect on economic growth in Africa.

Abstract

Purpose

This paper aims to test whether a debt threshold of public debt has any effect on economic growth in Africa.

Design/methodology/approach

The authors applied the panel autoregressive distributed models on 38 African countries with annual data from 1970 to 2015. It was established that the threshold and the trajectory of debt has an impact on economic growth.

Findings

Specifically, the authors found that public debt hampers economic growth when the depth is in the region of 20 to 80 per cent of GDP. Based on debt trajectory, this study established that increasing public debt beyond 50 to 80 per cent of GDP adversely affects economic growth in Africa. The study also finds that the persistent rise in debt also has adverse effect on economic growth in the African countries in the sample. It must be known to policymakers that the threshold of debt in developing countries, and for that matter African countries, are less than that of developed countries.

Practical implications

This study suggests threshold effects between 20 and 50 per cent; this should be a guide for policymakers in the accumulation of debt stock. Interestingly, the findings suggest some debt trajectory effect, which policymakers might consider by increasing efforts to reduce debt levels when they fall between 50 to 80 per cent of GDP. This implies that reducing such debt levels can help African countries increase their economic growth.

Originality/value

The study is unique because it seeks to add new evidence on the relationship between public debt and growth in the African region, by considering the impact of the persistent growth of public debt on economic growth.

Details

International Journal of Development Issues, vol. 19 no. 1
Type: Research Article
ISSN: 1446-8956

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Article
Publication date: 5 October 2015

Andrew Phiri

The purpose of this paper is to investigate asymmetric cointegration and causality effects between financial development and economic growth for South African data…

Abstract

Purpose

The purpose of this paper is to investigate asymmetric cointegration and causality effects between financial development and economic growth for South African data spanning over the period of 1992-2013.

Design/methodology/approach

This study makes the use of the momentum threshold autoregressive (M-TAR) approach which allows for threshold error-correction (TEC) modeling and Granger causality analysis between the variables. In carrying out an empirical analysis, the author uses six measures of the financial development variables against gross domestic per capita, that is, three measures which proxy banking activity and another three proxies for stock market development.

Findings

The empirical results generally indicate an abrupt asymmetric cointegration relationship between banking activity and economic growth, on the one hand, and a smooth cointegration relationship between stock market activity and economic growth, on the other hand. Moreover, causality analysis generally reveals that while banking activity tends to Granger cause economic growth, stock market activity is, however, caused by economic growth increase.

Originality/value

This study contributes to the literature by examining asymmetries in the cointegration and causality relations by using both banking and stock market proxies against economic growth for the South African economy.

Details

Studies in Economics and Finance, vol. 32 no. 4
Type: Research Article
ISSN: 1086-7376

Keywords

Content available
Article
Publication date: 2 September 2019

Toan Luu Duc Huynh

This paper aims to shed light on an impact of Google keywords on the number of new businesses (and an amount of capital registered) in Vietnam, the Southeast Asian…

Abstract

Purpose

This paper aims to shed light on an impact of Google keywords on the number of new businesses (and an amount of capital registered) in Vietnam, the Southeast Asian country, after the year of an entrepreneur, 2016.

Design/methodology/approach

This study uses a rich set of quantitative techniques from VAR Granger and threshold regression. The whole sample period covers the data (keywords, number of new businesses, an amount of capital invested to register) from the first week of 2016 to October 2018, which includes 144 observations in total.

Findings

The findings suggest that the relationship between Google does not persist in the long run. There is a short-run shock, might cause a change to the frequency of the other keywords rather than the number of firms (or an amount of capital). However, under the number of firms’ threshold, keywords have the both positive and negative impacts on entrepreneurs whereas a higher threshold of capital, keywords show their roles to predict an amount of money for registering firms.

Practical implications

The Vietnamese Government and executives are advised to consider the Google keywords “entrepreneur” (in Vietnamese) and “start-up”, which cause a decline in entrepreneurial movements. In addition, the current period is going to inverse from the previous one in terms of the number of firms and an amount of capital. Finally, there are two critical thresholds: 1,602 companies and 35,010m VND for the keywords' influence.

Originality/value

This study contributes empirical evidence of technological change and entrepreneurship and contributes to the existing literature by discussing how this relationship under the threshold.

Details

Asia Pacific Journal of Innovation and Entrepreneurship, vol. 13 no. 2
Type: Research Article
ISSN: 2398-7812

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Article
Publication date: 4 June 2020

Friday Osemenshan Anetor

The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human…

Abstract

Purpose

The purpose of this study is to analyze the mediating effect of human capital in foreign direct investment (FDI) and growth nexus and establish the threshold of human capital in 28 sub-Saharan African (SSA) countries over the period 1999–2017.

Design/methodology/approach

This study used a secondary source of data obtained from the World Development Indicator and used the system generalized method of moments and dynamic panel threshold regression (TR) to analyze the data.

Findings

This study found that FDI and human capital have no significant impact on the economic growth in SSA. However, when the interactive term of FDI and human capital was introduced in the model, the economic growth effect of FDI became positive and significant, while the coefficient of the interactive term is negative and significant. This presupposes that SSA does not have a sufficient high-quality workforce that can absorb and transform the spillover benefits of FDI into economic growth. As a result, this study applied the TR to determine the minimum level of human capital and established a threshold level at 63.91%.

Practical implications

It, therefore, becomes pertinent for policymakers in the SSA region to have a human capital policy to build up their absorptive capacities to fully take advantage of FDI.

Originality/value

The contribution of this study lies in establishing a threshold of human capital at 63.91% for countries in the SSA region.

Details

International Journal of Development Issues, vol. 19 no. 3
Type: Research Article
ISSN: 1446-8956

Keywords

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