Sustainability of Fiscal Policy in Economic and Monetary Community of Central Africa: An Analysis Based on Panel Data

The objective of this paper is to study the long-term sustainability of fiscal policies in CEMAC, following the pioneering approach of Hamilton and Flavin [10]. Over the period from 1992 to 2012, first and second generation panel stationarity tests suggest that total public expenditures, total revenues, the primary budget balance and public debt are stationary. As a result, fiscal policies are sustainable in the long run within the area. There is a unidirectional causality between government revenues and expenditures. Decisions to increase expenditures are made on the basis of the availability of revenues.

Real interest rate differentials between Central and Eastern European countries and the euro area

Research background: The question of changes in real interest rates differentials between the Euro Area and the CEE countries in the last years is raised because of two main reasons. The first rationale is related to the growing importance of external financial factors for the CEE economies and their monetary autonomy. The second reason is associated with the unprecedented shift in monetary conditions in the EMU, brought about by negative interest rates policy and unconventional policies, and the way it impacts the real rates in the CEE economies. Purpose of the article: This paper aims at exploring the relationship between real interest rates in the Euro Area and ten countries: Albania, Bulgaria, the Czech Republic, Hungary, North Macedonia, Moldova, Poland, Romania, Turkey, and Ukraine. The analysis covers the years of 1999-2018, including periods before and after the financial and economic crisis. Methods: We employ Markov-switching regression to construct the ex-ante real interest rates series in each country, using monthly data on short-term interest rates and CPI inflation rates. A battery of unit root and stationarity test, both standard and panel ones, is applied to examine the real interest rate parity, also allowing for a structural break in the rate differentials. Findings & Value added: We provide detailed evidence on the real interest rates differentials for all of the CEE countries vis-à-vis the Euro Area. We find that, while panel stationarity tests point to the stability of real rate differentials, there are significant dissimilarities across the countries, and the results of the univariate tests are often mixed. At least half of the economies, however, reveal similar patterns of stationarity in real rates relationships. At the same time, we find differentials for the Czech Republic, Hungary, and Poland, countries highly integrated into the EMU economy, to be unstable over time.

EXTERNAL SHOCKS, STRUCTURAL BREAKS AND UNEMPLOYMENT HYSTERESIS IN SELECTED ASIAN COUNTRIES

This paper re-examines the hypothesis of unemployment hysteresis using panel data for 11 Asian countries for the period from 1980 to 2008. This study employs a variety of panel data unit root tests recently advanced by Bai and Ng (2004), Pesaran (2007) and Chang and Song (2009). The advantage of these tests is that they are able to exploit the cross-section variations of the series. In addition to these tests, a new powerful panel stationarity test proposed by Carrión-i-Silvestre et al. (2005) is applied which exploits the cross-section variations of the series and also allows for different numbers of endogenous breakpoints in the series. Our findings stress the importance of accounting exogenous shocks in the series and provide stronger evidence against the hypothesis of unemployment hysteresis for the countries analyzed. We also discover critical economic affairs which may cause the unemployment rates to fluctuate significantly. Policy implications are proposed through our observations.

Debt Servicing and Sectoral Economic Growth in Kenya

The study objective was toestablish the effect of debt servicing on sectoral economic growth as well as the moderating effect of inflation on the relationship between debt servicing and sectorial economic growth in Kenya. The study employed Auto Regressive Distributed Lag model. Eleven sectors that receive government expenditure were analyzed while adopting positivist philosophy and a causal research design. The Study period covered the year 2006 to the 2015.Secondary data for the study period were collected from Statistical Abstracts of Kenya National Bureau of Statistics and Debt Servicing Reports from Kenya National Treasury. Panel Stationarity Test and Heterogeneity Test were conducted as preliminary tests whereas Hausman Test was carried out to choose efficient estimator from Pooled Mean Group, Dynamic Fixed Effects and Mean Group Estimators. The study established that in the long run, debt servicing has a significant effect on sectoral economic growth. In addition, the study established that inflation has a significant moderating effect on the relationship between debt servicing and Sectoral economic growth in the long run at the significance level of 0.05. The study concluded that debt servicing has a significant effect on sectoral economic growth in Kenya in the long run and no effect in the short run. Additionally, inflation enhances the influence of debt servicing on sectoral economic growth in the long run. The study further confirms that Kenya is not facing a debt overhang problem. The study recommends that if the government must borrow, the loans should be concessional in nature with long term repayment periods. The government should ensure that reasonable levels of inflation are achieved.

Moderating Effect of Political Risk on the Relationship between Capital Expenditure and Sectoral Economic Growth in Kenya

The study sought to determine the effect of capital expenditure on Sectoral economic growth and the moderating effect of political risk on the relationship using Auto Regressive Distributed Lag model. The study targeted 11 sectors that receive government expenditure and adopted positivist philosophy and a causal research design. Secondary data for the period 2006-2015 was collected from Kenya National Bureau of Statistics Statistical Abstracts, Kenya National Audit Office reports and Political Risk Group reports. The study conducted Hausman Test, Panel Stationarity Test and Heterogeneity Test as preliminary tests. The study found that capital expenditure has a significant effect on Sectoral economic growth both in the long run and short run. The study further found that political risk has a significant moderating effect on the relationship between capital expenditure and Sectoral economic growth in the long run at the significance level of 0.05. The study concluded that capital expenditure has an effect on sectoral economic growth in Kenya both instantaneously and in the long run. As well, Political risk curbs the effect of capital expenditure in the long run. The study recommends enhancement of capital expenditure. Additionally, the government should enhance political stability to accelerate growth.