Do Governance Indicators Matter for Economic Growth? The Case of Sri Lanka

2019 ◽  
Vol 65 (2) ◽  
pp. 430-450
Author(s):  
T. Vinayagathasan ◽  
R. Ramesh
Keyword(s):  
Economic Growth ◽  
Sri Lanka ◽  
Political Stability ◽  
Estimation Methods ◽  
Series Data ◽  
Scatter Plot ◽  
Correlation Test ◽  
Governance Indicators ◽  
Long Run ◽  
Traditional Approaches

This study attempts to identify the impact of governance indicators on economic growth using time series data for Sri Lanka from 1996 to 2016 published by the World Bank. The Phillips–Perron (PP) unit root test confirmed that all the variables are integrated in order one and suggested the use of cointegration technique to identify the long-run relationship between the variables. All the lag length selection criteria except Schwarz Information Criterion (SIC) advocated the use of one lag as an optimal lag length for this study. Johansen cointegration method detected three cointegrating relationships among the variables. Further, this technique identified a significant and positive relationship between government effectiveness (GE) and gross domestic product per capita (GDPPC) in the long run. This result is in contrast to all the three traditional approaches, such as correlation test, scatter plot and ordinary least squared (OLS), in which they do not identify any clear relationship between them. Moreover, Johansen test found a negative and statistically significant link between political stability and absence of violence (PSAV) and GDPPC in the long run, while all three traditional approaches identified a positive correlation between them. The findings of this study indicate a negative association between rule of law (ROL) and GDPPC in the long run, which coincides with theory, some of the empirical studies and with findings of all three traditional approaches used in this study. Even though OLS did not identify a significant relationship between control of corruption (COC) and GDPPC, Johansen test, correlation test and scatter plot detected a significant and negative correlation between them in the long run as expected by the theoretical evidence. Granger’s causality test identified the bidirectional causality between GE and ROL and unidirectional causality between ROL and COC. However, relationship between governance variables and GDPPC vary based on the estimation methods. These findings suggest that the policymakers need to take considerable attention on the above when they formulate and implement policy to improve GE.

scholarly journals Hypothesizing directional causality between the governance indicators and economic growth: the case of Afghanistan

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Mohammad Naim Azimi ◽  
Mohammad Musa Shafiq
Keyword(s):  
Economic Growth ◽  
Rule Of Law ◽  
Time Series Data ◽  
Political Stability ◽  
Wald Test ◽  
Series Data ◽  
Vector Autoregressive ◽  
Government Effectiveness ◽  
Governance Indicators ◽  
The Government

AbstractThis paper examines the causal relationship between governance indicators and economic growth in Afghanistan. We use a set of quarterly time series data from 2003Q1 to 2018Q4 to test our hypothesis. Following Toda and Yamamoto’s (J Econom 66(1–2):225–250, 1995. 10.1016/0304-4076(94)01616-8) vector autoregressive model and the modified Wald test, our empirical results show a unidirectional causality between the government effectiveness, rule of law, and the economic growth. Our findings exhibit significant causal relationships running from economic growth to the eradication of corruption, the establishment of the rule of law, quality of regulatory measures, government effectiveness, and political stability. More interestingly, we support the significant multidimensional causality hypothesis among the governance indicators. Overall, our findings not only reveal causality between economic growth and governance indicators, but they also show interdependencies among the governance indicators.

scholarly journals Political Stability and its Impact on Economic Growth of Pakistan (1988-2018): A Time Series Analysis

2020 ◽  
Vol 6 (1) ◽  
pp. 273-282
Author(s):  
Majid Hussain Phul ◽  
Muhammad Saleem Rahpoto ◽  
Ghulam Muhammad Mangnejo
Keyword(s):  
Economic Growth ◽  
Time Series ◽  
Time Series Data ◽  
Political Stability ◽  
Series Data ◽  
Explanatory Variables ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Positive Effect

This research paper empirically investigates the outcome of Political stability on economic growth (EG) of Pakistan for the period of 1988 to 2018. Political stability (PS), gross fixed capital formation (GFCF), total labor force (TLF) and Inflation (INF) are important explanatory variables. Whereas for model selection GDPr is used as the dependent variable. To check the stationary of time series data Augmented Dickey Fuller (ADF) unit root (UR) test has been used,  and whereas to find out the long run relationship among variables, OLS method has been used. The analysis the impact of PS on EG (EG) in the short run, VAR model has been used. The outcomes show that all the variables (PS, GFCF, TLF and INF) have a significantly positive effect on the EG of Pakistan in the long run period. But the effect of PS on GDP is smaller. Further, in this research we are trying to see the short run relationship between GDP and other explanatory variables. The outcomes show that PS does not have such effect on GDP in the short run analysis. While GFCF, TLF and INF have significantly positive effect on GDP of Pakistan in the short run period.

Modelling the Nexus Between Foreign Aid and Economic Growth: A Case of Afghanistan and Egypt

2021 ◽  
Vol 39 (2) ◽  
Author(s):  
Muhammed Ashiq Villanthenkodath ◽  
Ubaid Mushtaq
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Time Series Data ◽  
Trade Openness ◽  
Political Stability ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
Annual Time Series ◽  
And Control

This paper tries to explore the existence of a long-run relationship between foreign aid and economic growth by using the data from the two highest foreign aid recipient countries. Using the annual time series data from 1965 to 2017 this study uses several econometric models such as Johansen and Juselius cointegration, Granger causality and vector auto regression to establish the long and short-run relationships among foreign aid inflows and economic growth while also considering financial development and trade openness from both the countries. The empirical results suggest that no long-run relationship exists among foreign aid inflows and economic growth for both the countries. However, unidirectional causality running from foreign aid to economic growth is indicative in both countries. Therefore, the findings in this paper support the adequate need for foreign aid for effective economic growth amid an upright policy environment, related issues of conditionality and political stability. Our results are robust to independent, and control variables and estimation techniques are also on par with robustness.

scholarly journals The Relationship between Electric Power Consumption, Foreign Direct Investment and Economic Growth in Sri Lanka

2020 ◽  
pp. 21-31
Author(s):  
S. Maheswaranathan
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Sri Lanka ◽  
Direct Investment ◽  
Time Series Data ◽  
Empirical Finding ◽  
Electricity Consumption ◽  
Series Data ◽  
Long Run ◽  
Bound Test

Purpose: This paper investigates the long run relationship between electricity consumption, foreign direct investment and economic growth in Sri Lanka. Design/Methodology/Approach: The annual time series data over the period 1970–2017 is considered to this study. Augmented Dickey–Fuller (ADF) unit root analysis is employed for examining the stationary properties of the variables. Consequently, Autoregressive Distributed Lag (ARDL) analysis is employed to examining the short- run and long-run relationship between electricity consumption, foreign direct investment and economic growth in Sri Lanka. Further, this study used the diagnostic tests such as the residual normality test, heteroskedasticity and serial autocorrelation tests for misspecification to validate the parameter estimation outcomes achieved by the estimated model. CUSUM test is applied to test the stability of the model. Collected data were analyzed using STATA version 15. Findings: The findings of the bound test confirm that the variables are cointegrated. Further the results reveal that there is a statistically positive significant relationship between electricity consumption, foreign direct investment and economic growth in Sri Lanka in the long run and short term. The empirical finding reveals that one percent increase in electricity consumption and foreign direct investment increases the GDP by 1.5 percent and 12.9 percent in the long run respectively.

Modelling the Nexus Between Foreign Aid and Economic Growth: A Case of Afghanistan and Egypt

2021 ◽  
Vol 39 (1) ◽  
Author(s):  
Muhammed Ashiq Villanthenkodath ◽  
Ubaid Mushtaq
Keyword(s):  
Economic Growth ◽  
Foreign Aid ◽  
Time Series Data ◽  
Trade Openness ◽  
Political Stability ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
Annual Time Series ◽  
And Control

This paper tries to explore the existence of a long-run relationship between foreign aid and economic growth by using the data from the two highest foreign aid recipient countries. Using the annual time series data from 1965 to 2017 this study uses several econometric models such as Johansen and Juselius cointegration, Granger causality and vector auto regression to establish the long and short-run relationships among foreign aid inflows and economic growth while also considering financial development and trade openness from both the countries. The empirical results suggest that no long-run relationship exists among foreign aid inflows and economic growth for both the countries. However, unidirectional causality running from foreign aid to economic growth is indicative in both countries. Therefore, the findings in this paper support the adequate need for foreign aid for effective economic growth amid an upright policy environment, related issues of conditionality and political stability. Our results are robust to independent, and control variables and estimation techniques are also on par with robustness.

Fish Exports and Economic Growth: The Pakistan’s Experience

2019 ◽  
Vol 20 (2) ◽  
pp. 279-296 ◽  
Author(s):  
Syed Tehseen Jawaid ◽  
Mohammad Haris Siddiqui ◽  
Zeeshan Atiq ◽  
Usman Azhar
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Positive Impact ◽  
Impulse Response Function ◽  
Policy Implications ◽  
Sensitivity Analyses ◽  
Series Data ◽  
Distributed Lag ◽  
Long Run ◽  
Short Run

This study attempts to explore first time ever the relationship between fish exports and economic growth of Pakistan by employing annual time series data for the period 1974–2013. Autoregressive distributed lag and Johansen and Juselius cointegration results confirm the existence of a positive long-run relationship among the variables. Further, the error correction model reveals that no immediate or short-run relationship exists between fish exports and economic growth. Different sensitivity analyses indicate that initial results are robust. Rolling window analysis has been applied to identify the yearly behaviour of fish exports, and it remains negative from 1979 to 1982, 1984 to 1988, 1993 to 1999, 2004 and from 2010 to 2013, and it shows positive impact from 1989 to 1992, 2000 to 2003 and from 2005 to 2009. Furthermore, the variance decomposition method and impulse response function suggest the bidirectional causal relationship between fish exports and economic growth. The findings are beneficial for policymakers in the area of export planning. This study also provides some policy implications in the final section.

scholarly journals Non-bank financial institutions and economic growth: Evidence from Africa’s three largest economies

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Ronald Rateiwa ◽  
Meshach J. Aziakpono
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Financial Institutions ◽  
Time Series Data ◽  
Bank Lending ◽  
Series Data ◽  
The Sustainable Development ◽  
Long Run ◽  
The Relationship

Background: In order for the post-2015 world development agenda – termed the sustainable development goals (SDGs) – to succeed, there is a pronounced need to ensure that available resources are used more effectively and additional financing is accessed from the private sector. Given that traditional bank lending has slowed down, the development of non-bank financing has become imperative. To this end, this article intends to empirically test the role of non-bank financial institutions (NBFIs) in stimulating economic growth.Aim: The aim of this article is to empirically test the existence of a long-run equilibrium relationship between economic growth and the development of NBFIs, and the causality thereof.Setting: The empirical assessment uses time-series data from Africa’s three largest economies, namely, Egypt, Nigeria and South Africa, over the period 1971–2013.Methods: This article uses the Johansen cointegration and vector error correction model within a country-specific setting.Results: The results showed that the long-run relationship between NBFI development and economic growth is relatively stronger in Egypt and South Africa, than in Nigeria. Evidence in respect of Nigeria shows that such a relationship is weak. The nature of the relationship between NBFI development and economic growth in Egypt is positive and significant, and predominantly bidirectional. This suggests that a virtuous relationship between NBFIs and economic growth exists in Egypt. In South Africa, the relationship is positive and significant and predominantly runs from NBFI development to economic growth, implying a supply-leading phenomenon. In Nigeria, the results are weak and mixed.Conclusion: The study concludes that in countries with more developed financial systems, the role of NBFIs and their importance to the economic growth process are more pronounced. Thus, there is need for developing policies targeted at developing the NBFI sector, given their potential to contribute to economic growth.

Export-led Growth Hypothesis: Econometric Evidence from Malaysia

2013 ◽  
Vol 14 (2) ◽  
pp. 94-112
Author(s):  
Hassanudin Mohd Thas Thaker ◽  
Tan Siew Ee ◽  
Sushant Vaidik
Keyword(s):  
Economic Growth ◽  
Time Series Data ◽  
Series Data ◽  
Vector Error Correction ◽  
Distributed Lag ◽  
Long Run ◽  
Paper Cover ◽  
Econometric Evidence ◽  
Augmented Dickey Fuller ◽  
Growth Hypothesis

The objective of this paper is to test the validity of the Export-led Growth Hypothesis (ELGH) in the Malaysian economy. Malaysia has always been considered to have attained its growth primarily through exports (Okposin, Bassey, Hamid, Halim, and Boon, 1999; Mun, 2008; Mahathir, 1990). In the past, several studies on this topic have been conducted but their analyses were limited to relationships using Bound-testing, Autoregressive –Distributed Lag (ARDL) and the Toda Yamamoto analysis. Empirical data and analysis in our paper cover a 21 – year span and quarterly time-series data (1991:Q1 – 2012:Q4) are used to test this ELG hypothesis. Also, many dynamic econometric measures including the Augmented Dickey Fuller (ADF) and Phillip – Perron (PP) unit root tests, Cointegration test as well as the Vector Error Correction model (VEC) for the long run have been applied. Based on these generic models, both real exports and capital stock (productivity) are found to have stimulated positive adjustments to economic growth in the long run whereas real exchange rate is found to have influenced economic growth negatively. Overall, our conclusion is that the ELG hypothesis seems applicable to Malaysia in the long run.

Does Public Debt Service Expenditure Crowd-Out Economic Growth? Empirical Evidence from an African Developing Country

2019 ◽  
Vol 64 (3) ◽  
pp. 23-38
Author(s):  
Talknice Saungweme ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Time Series Data ◽  
Policy Formulation ◽  
Debt Service ◽  
Series Data ◽  
Long Run ◽  
Short Run ◽  
The Impact

Abstract This paper contributes to the ongoing debate on the impact of public debt service on economic growth; and it provides an evidence-based approach to public policy formulation in Zimbabwe. The empirical analysis was performed by applying the autoregressive distributed lag (ARDL) technique to annual time-series data from 1970 to 2017. The study findings reveal that the impact of public debt service on economic growth in Zimbabwe is negative in the short run but positive in the long run. The results are suggestive of the existence of a crowding-out effect of public debt service in Zimbabwe in the short run and a crowding-in effect in the long run. In view of these findings, the government should consider fiscal and financial policies that promote a constant supply of long-term finance, long-term fixed investments, and extension of a government securities maturity structure so as to ensure sustainable short- and long-term public debt service expenditures. The study further recommends the strengthening of non-distortionary revenue mobilisation reforms to reduce market distortions and boost domestic investment.

Relationship between Budget Deficit and Economic Growth: Evidence from Ethiopia

2021 ◽  
Vol 2 (2) ◽  
pp. 10-15
Author(s):  
Desalegn Emana
Keyword(s):  
Economic Growth ◽  
Interest Rates ◽  
Budget Deficit ◽  
Time Series Data ◽  
Negative Impact ◽  
Positive Impact ◽  
Negative Relationship ◽  
Nominal Exchange Rate ◽  
Series Data ◽  
Long Run

This study examined the relationship between budget deficit and economic growth in Ethiopia using time series data for the period 1991 to 2019 by applying the ARDL bounds testing approach. The empirical results indicate that budget deficit and economic growth in Ethiopia have a negative relationship in the long run, and have a weak positive association in the short run. In line with this, in the long run, a one percent increase in the budget deficit causes a 1.43 percent decline in the economic growth of the country. This result is consistent with the neoclassical view which says budget deficits are bad for economic growth during stimulating periods. Moreover, in the long run, the variables trade openness and inflation have a positive impact on Ethiopian economic growth, and on the other hand, the economic growth of Ethiopia is negatively affected by the nominal exchange rate in the long run. Apart from this, in the long run, gross capital formation and lending interest rates have no significant impact on the economic growth of the country. Therefore, the study recommends the government should manage its expenditure and mobilize the resources to generate more revenue to address the negative impact of the budget deficit on economic growth.

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