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1 – 10 of 27This paper aims to examine the feasibility of a Common Currency Area (CCA) among ten MENA (Middle East and North Africa) Countries. The ten sample countries constitute the six GCC…
Abstract
Purpose
This paper aims to examine the feasibility of a Common Currency Area (CCA) among ten MENA (Middle East and North Africa) Countries. The ten sample countries constitute the six GCC Countries and the four Agadir nations.
Design/methodology/approach
Macroeconomic data for the 34‐year‐period 1970‐2003 is used. Feasibility is examined by analyzing the symmetry of response of countries within each group to a common external shock. The impulse response functions (IRF) from a Vector Autoregression Model is used. The strength of linkages within each economic bloc was examined using Pearson pairwise correlation and variance decomposition.
Findings
Among GCC countries, the results show the existence of strong linkages among the monetary variables, signifying strong monetary sector integration. Such integration however is lacking where the real sector is concerned. Despite the symmetry seen in the impulse response functions, variance decomposition showed the absence of any meaningful influence of countries on each other within the bloc. Amongst the Agadir nations, the results show no correlation in real output growth, some correlation among monetary variables but no symmetry whatsoever in response to external shocks. The variance decomposition too did not show mutual influence intra group.
Practical implications
The lack of real sector integration will present a challenge to GCC's desired goal of a CCA by 2010. The Agadir nations appear to be simply a loosely knit economic grouping with little integration of any kind. Thus, hopes of a CCA among Agadir nations is far too premature.
Originality/value
The paper concludes that the GCC is, at present, a quasi‐monetary bloc with little real sector integration.
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The purpose of this study is to examine the effect of Islamic banks (IBs) and macroeconomic variables on economic growth in Saudi Arabia, the United Arab Emirates, Kuwait…
Abstract
Purpose
The purpose of this study is to examine the effect of Islamic banks (IBs) and macroeconomic variables on economic growth in Saudi Arabia, the United Arab Emirates, Kuwait, Malaysia, Qatar, Bahrain and Bangladesh.
Design/methodology/approach
Based on these criteria, 672 observations from 24 IBs in Saudi Arabia, the United Arab Emirates, Kuwait, Malaysia, Qatar, Bahrain and Bangladesh were chosen for further investigation. Time series analysis is a well-known method for determining if model variables are stationary and how long-term relationships function through cointegration analysis. This study uses impulse response function (IRF) and variance decomposition (VD) methodologies to demonstrate how each macroeconomic variable shock influences the short-term dynamic path of all system variables.
Findings
Islamic banking promotes economic growth, especially in Saudi Arabia, the UAE, Kuwait, Malaysia, Qatar, Bahrain and Bangladesh. The findings of the Islamic banking VDC test have a direct and long-term effect on economic growth.
Research limitations/implications
The literature on this topic can be improved in a number of ways, including by adopting a more robust method to analyze over a longer time frame. By researching specific financing in various areas of the economy, one can gain a deeper understanding of Islamic financing. This will enable the identification of sectors that contribute to economic expansion. Future research should examine combining nations with pure Islam and dual-banking systems to acquire sufficient data.
Practical implications
This paper has practice and research implications. It recommends adopting the nation’s successful experiment with the Islamic banking system as a model for attaining economic growth through Islamic financing. To replicate this successful experiment, government-based decision-makers and monetary policy experts must collaborate to make Islamic money flows simple and rapid through financial channels that enhance economic growth.
Originality/value
The study of the contribution of Islamic banking to economic growth in developing nations, particularly those with the highest total assets (TAs) and total deposits (TDs) in the world, remains of modest value. To the best of the authors’ knowledge, this is the first study to empirically assess the impact of IBs in developing nations, particularly those with the highest TAs and TDs in the world, on economic growth as measured by gross domestic product (GDP).
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Manzoor Hassan Malik and Nirmala Velan
The purpose of this paper is to present the growth trends in IT industry after the period of globalization in 1990s and to investigate the short-run and long-run dynamics between…
Abstract
Purpose
The purpose of this paper is to present the growth trends in IT industry after the period of globalization in 1990s and to investigate the short-run and long-run dynamics between IT software and service exports, globalization and economic growth in India.
Design/methodology/approach
Annual time series data on IT exports, net national product and openness index have been collected from National Association of Software and Service Companies, the Reserve Bank of India database on Indian economy and the World Bank for the present study. The methodology adopted for studying the first objective are growth trend models, descriptive statistics and graphs prepared on the basis of data from the IT sector. Growth trends in key performance variables, such as total output, export, domestic output and employment have been analyzed. In the case of second objective, vector auto regression model has been used based on variance decomposition and impulse response function to capture the short-run and long-run dynamics between IT exports, globalization and economic growth in India.
Findings
Results of the growth trend model show the relative growth performance of software services receipts shows its strong advancement compared to the other sub-components of current account of balance of payments of India. It is found that economic growth responds positively to the shocks in IT exports and openness of economy. Further, IT software and service exports and openness index contribute to economic growth more in the long-run rather than in the short run.
Research limitations/implications
The IT software and service exports is dynamic field of economic activity amid heavy dependence on both domestic and external economic and political environment; hence, the rate of change is so rapid, and the relevance of factors may change over time.
Practical implications
The paper has implications for achieving sustainability in IT software and service exports growth. It is recommended that economic growth can be enhanced by implementing policies that not only improve the efficiency of the sector but also focus on optimization of the potential of the Indian IT industry.
Originality/value
This paper focuses on originality in delineating the growth trends and analysis of capturing the short-run and long-run dynamics between IT exports, globalization and economic growth in India.
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Amrial, Ahmad Mikail and Tika Arundina
Studies linking monetary policy to inflation and unemployment rates in the context of the Phillips curve are limited to conventional economics. On the other hand, research related…
Abstract
Purpose
Studies linking monetary policy to inflation and unemployment rates in the context of the Phillips curve are limited to conventional economics. On the other hand, research related to application of the dual monetary policy is limited to discussion of monetary policy transmission lines, especially in Islamic banking channels. Therefore, this study aims to determine the monetary policy response in implementation of the dual monetary policy to two important indicators in the macro economy, namely, inflation and unemployment. In addition, the study reveals the relevance of the Phillips curve in Indonesia.
Design/methodology/approach
The method used is vector auto regression vector autoregression (VAR) with monthly data from February 2005 to October 2016 for the first model and semi-annual data from February 2005 to August 2017 for the second model. Analysis of VAR estimation in this research uses the impulse response function (IRF) to analyze the degree of sensitivity or responsiveness to a shock between variables and the variance decomposition (VD) application to analyze how the proportion of each independent variable’s contribution affects the money supply.
Findings
The result shows that monetary policy has responded appropriately to the problems of inflation and unemployment. However, inflation generates a bigger response than unemployment. Bank Indonesia considers the inflation expectations aspect of both conventional and Islamic references. Finally, the concept of the Phillips curve proves to be irrelevant in Indonesia.
Practical implications
The central bank is expected to build a more effective policy for transmission from the monetary sector to the real sector to effectively overcome the problems of inflation and unemployment. Furthermore, Indonesia needs to increase policies to overcome problems on the supply side.
Originality/value
The results of this study provide new insights into application of the dual monetary policy toward inflation and unemployment.
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Alisha Mahajan and Kakali Majumdar
Trade of environmentally sensitive goods (ESGs) is often exposed to countries with less stringent regulations suggesting that those countries have comparative advantage in the…
Abstract
Purpose
Trade of environmentally sensitive goods (ESGs) is often exposed to countries with less stringent regulations suggesting that those countries have comparative advantage in the polluting sector. The Group of Twenty (G20) members are among the highest polluters, globally. Different stringency policies are enacted time to time in G20 to control environment pollution. However, the impact of policy stringency on export performance of ESGs is seldom examined. The paper aims to address some of the issues concerning this matter.
Design/methodology/approach
The present study aims to address the short run and long-run association between Revealed Comparative Advantage of ESGs and Environmental Policy Stringency Index for the period of 1990–2019 in G20. Periodic fluctuations and time adjustment mechanism are also studied. Second Generation Panel Cointegration, Vector Error Correction, Impulse Response Function and Variance Decomposition methods are employed to address the objectives.
Findings
Result is evident that more exposure to stringent environmental regulations reduces the comparative advantage of ESGs in the long run. But there is no evidence of the short-run relationship between the variables. The possible reason could be that new regulations enacted prove fruitful in the long run.
Originality/value
The novelty of the study is to focus on inter linkages between stringency and global export competitiveness in G20, almost nonexistent in the past studies. The study also provides a road map to policymakers to find out potential ways for sustainable development by balancing environmental stringency measures and international trade.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2022-0560
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Sohil Idnani, Masudul Hasan Adil, Hoshiar Mal and Ashutosh Kolte
This paper aims to understand the effect of a change in Economic Policy Uncertainty (EPU) of India and the USA on investors' sentiment in the Indian context, consisting of Sensex…
Abstract
Purpose
This paper aims to understand the effect of a change in Economic Policy Uncertainty (EPU) of India and the USA on investors' sentiment in the Indian context, consisting of Sensex returns and volatility index (Vix).
Design/methodology/approach
The authors employ bounds testing approach to cointegration to capture the short-and long-run effects of EPU on investors' sentiment, along with impulse response functions and variance decompositions to check the effect of a shock on Sensex and Vix.
Findings
The study concludes the existence of a cointegrating relationship for both models, that is, Vix and Sensex. In the long-run, changes in EPU_India affect Vix and Sensex positively and negatively, respectively. On the other hand, EPU_USA affects Vix and Sensex positively. Furthermore, Gregory and Hansen (1996) cointegration with endogenous structural break reveals a long-run cointegrating relationship for both models.
Research limitations/implications
The effect of EPUs on investors' sentiment reveals that when there is an uncertain event that adversely affects the stock prices, investors should not make haste to take a decision as the impact on stock prices perturbation might be temporary. Therefore, one should persevere for the dip in prices to hit the desired target.
Originality/value
Various studies look at the effect of cross-country EPU on the home country, However, there is no such study in the Indian context. The present study examines the impact of India's EPU on investors' sentiments after controlling the USA's EPU, one of India's largest trading partners and a key determinant of global economic policy.
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Abdulkadir Abdulrashid Rafindadi, Aliyu Buhari Isah and Ojonugwa Usman
This paper aims to empirically examine the impact of economic development and energy consumption in Saudi Arabia (the leading OPEC giant and the Arab energy icon country) between…
Abstract
Purpose
This paper aims to empirically examine the impact of economic development and energy consumption in Saudi Arabia (the leading OPEC giant and the Arab energy icon country) between 1971 and 2015, whilst incorporating globalization, financial development and capital accumulation.
Design/methodology/approach
This study uses econometric tools and the analytical framework based on the autoregressive distributed lag (ARDL) model.
Findings
The study found that, unlike economic development, globalization and financial development increased energy consumption. Also, capital accumulation created a boost in the country’s energy consumption. Results of variance decomposition indicate that the innovative shocks in globalization and financial development affected energy consumption at the rates of 15.28% and 28.98%, respectively, over 15 years’ period, while shocks in capital accumulation affected energy consumption at a rate of only about 1.24%. In addition, the results of impulse response function show that globalization and economic development were highly responsive to shocks in financial development, and capital accumulation greatly spurred financial development.
Research limitations/implications
The findings of this study have implication for promoting an efficient and sustainable energy systems that enhance sustainable development based on the accrued benefits of globalization, financial development and capital accumulation.
Originality/value
Given the increasing level of globalization, financial development and energy consumption, our study uses econometric tools and the analytical framework based on the ARDL model to revisit how energy consumption is influenced by economic development in Saudi Arabia by incorporating other determinants of energy consumption such as globalization, financial development and capital accumulation. The results were validated based on the innovative accounting.
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Verena Tandrayen Ragoobur and Jason Narsoo
The paper investigates into the human capital–economic growth nexus by arguing that investment in early education and health helps in achieving higher economic growth. Early…
Abstract
Purpose
The paper investigates into the human capital–economic growth nexus by arguing that investment in early education and health helps in achieving higher economic growth. Early investment in human capital matters most for economic growth than the increase in human capital over the years.
Design/methodology/approach
A dynamic vector error correction model (VECM) together with the impulse response function and variance decomposition are used on data for Mauritius from 1983 to 2019. The paper distinguishes between the short-run and the long-run effects of human capital measured by the pupil–teacher ratio in pre-primary education and life expectancy at birth.
Findings
This study’s findings reveal that investment in early education and health has contributed positively to growth performance. There is evidence for long-run growth effects arising from a positive shock in the education and health indicators.
Originality/value
This paper contributes to both the theoretical and empirical literature on the human capital–growth nexus. Mauritius as a natural resource poor small economy is an important case study as it has started early in investing in its people to promote economic growth.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-11-2021-0674.
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This paper investigates the structural model of vector autoregression (SVAR) of the interdependent relationship of inflation, monetary policy and Islamic banking variables (RDEP…
Abstract
Purpose
This paper investigates the structural model of vector autoregression (SVAR) of the interdependent relationship of inflation, monetary policy and Islamic banking variables (RDEP, RFIN, DEP, FIN) in Indonesia. By using monthly data for the period 2001M01-2019M12, the impulse response function (IRF), forecasting error decomposition variation (FEDV) is used to track the impact of Sharīʿah variables on inflation (prices).
Design/methodology/approach
This research uses quantitative approach with SVAR model to reveal the problem.
Findings
The empirical results of SVAR, the IRF show that policy shocks have a negative impact on all variables in Islamic banking except the equivalent deposit interest rate (RDEP). The impact of both conventional (7DRR) and Sharīʿah (SBIS) policies has a similar pattern. While the transmission of Sharīʿah monetary variables as a policy operational target in influencing inflation is positive. In addition, the FEDV clearly revealed that the variation in the Sharīʿah financial sector was relatively large in monetary policy shocks and their role in influencing prices.
Originality/value
The empirical results of SVAR, the IRF show that policy shocks have a negative impact on all variables in Islamic banking except the equivalent deposit interest rate ‘RDEP’. The impact of both conventional “7DRR” and Sharīʿah “SBIS” policies has a similar pattern. While the transmission of Sharīʿah monetary variables as a policy operational target in influencing inflation is positive. In addition, the FEDV clearly revealed that the variation in the Sharīʿah financial sector was relatively large in monetary policy shocks and their role in influencing prices.
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Minsoo Lee, Donghyun Park, Arnelyn Abdon and Gemma Estrada
This chapter investigates the impact of the euro crisis on Asia’s short-term economic outlook. This chapter tries to answer this question by examining both the trade and financial…
Abstract
This chapter investigates the impact of the euro crisis on Asia’s short-term economic outlook. This chapter tries to answer this question by examining both the trade and financial channels of crisis transmission. More specifically, it looks at the effect of euro crisis on Asian exports and growth, contagion from EU financial markets to Asian financial markets, and influence of EU bank lending on credit growth in Asia. The chapter also touches upon Asia’s policy space to assess how well the region is positioned to weather another major external shock. This chapter finds that the impact of euro crisis on developing Asia points to a sizable but manageable short-term impact. Furthermore, our analysis points to a significant effect on the region’s financial systems, especially its banking sector. This chapter informs policymakers of the impact of the euro crisis and advice to continue to keep a close eye on eurozone developments and their ramifications for their economies.
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