Brain drain and economic growth: evidence of productivity growth from brain circulation

This paper analyzes the effect of the so-called ‘brain drain’ on economic growth through the channel of growth in total factor productivity. We analyze panel data that measure the severity of brain drain, which are from IMD and the U.S. National Science Foundation. Our analysis shows that middle-income countries have more brain drain compared to the group of high-income countries. Also, emerging economies that grow fast tend to experience more brain drain. Our results from fixed effects regression models show that that brain drain has a significant and positive impact on economic growth, and the main channel is productivity growth. This can be considered as evidence of the positive effects of ‘brain circulation’, which is one of the brain drain phenomena that settlement of the talents in advanced countries can eventually help improve the productivity of home country by the sharing of advanced technologies and skills around them with colleagues in motherland. Therefore, a strategy of utilizing overseas resident talents should also be considered, alongside the brain-attraction policy.

The role of automatic stabilizers in business cycle: the case of indonesia

TThe use of large fiscal stimulus packages to dampen the impact of Covid-19 recently has raised concerns about the effectiveness of the discretionary fiscal policy. This paper aims at analysing the feasibility of automatic fiscal stabilisers to mitigate economic fluctuations in the case of Indonesia. Using the IMF standard model for quarterly data over the period of 2001(1) to 2019(4), we find that the role of automatic fiscal stabilisers is getting greater both in revenue and spending. This implies that the automatic fiscal stabilisers are feasible as the main fiscal policy instrument for economic stability goals in the future. However, given the existing circumstances, Indonesia has to reform economic, regulatory, and institutional ecosystems in adopting the automatic fiscal stabilisers.

The definitive VAT system and its impact on tax collection

Value Added Tax (VAT) is a significant source of fiscal revenues in the EU. However, the VAT treatment of cross-border supplies enables large-scale tax frauds, such as the Missing Trader Intra-Community (MTIC), which takes each year billions of euros from Member States' public budgets. In 2016 a definitive VAT system was proposed by the European Commission to respond to the shortcomings of the current temporary system. This new system should reduce the possibilities of MTIC fraud for intra-community transactions through the collection of VAT by the supplier in the same way as for domestic transactions. The tax collection by the supplier would impact the administrative costs of the financial authorities. This paper contributes to the discussion about the advantages and disadvantages of the newly suggested system. The analysis focuses on the study of the change in administrative costs and VAT revenues for individual Member States and across the EU. The results are that after implementing the definitive VAT system, total administrative costs of the Member States would increase at least by EUR 107 million, whereas total VAT revenues would rise by EUR 40 billion. This indicates the overall positive impact of the definitive VAT system for the EU. However, individual Member States would not benefit equally. The net exporters, whose intra-community supplies exceed the intra-community acquisitions, would spend more than others for the collection of VAT in connection with the international trade of goods.

Assessing the optimality of euro adoption in Romania through shock correlations

The present paper is concerned with the prospect of euro adoption in Romania. The study starts from the relevant literature of the Optimum Currency Areas and identifies the most widely acknowledged meta property and methodological model for this purpose: the SVAR Blanchard and Quah decomposition for identifying the supply and demand shocks. Employing the indicated model and the most recent data, we are able extract and analyse the underlying shocks that hit 34 European economic entities in the period 1995-2019, while also taking into account two crucial structural changes for the Romanian economy – central bank independence and EU accession. After performing the pairwise correlations between Romania and the rest of the economic entities for both the supply and demand disturbances, we map them on a bidimensional graph. We discover that while there is relevant integration and connectedness that ensures relatively high correlations between supply shocks, the politically-motivated monetary and fiscal policy disturbances that created ample and hectic demand side movements, are a factor of great concern for the prospect of single currency adoption in this Eastern European country. The findings support the view that there is room for the conduct of macro policies to become more supportive to the process of euro adoption and that the respect of convergence criteria would help in this respect. To our knowledge, this is the first study performing pairwise shock correlations between Romania and many other European economic entities, while also isolating the effect of post 2005 structural changes.

Political business cycle and fiscal discipline in Sub-Saharan Africa

We tested the Political Business Cycle theory in Sub-Sahara Africa. To provide an empirical explanation for this nexus, this paper used unbalanced panel data from thirty-six (36) Sub-Saharan African countries between 1990 and 2018. The system Generalized Method of Moment (GMM) developed by Arrelano-Bover/Blundell-Bond was employed to analyze the collected data. The results of the system GMM revealed that the fiscal deficit is significantly large in election years and the deficit spending spills into the year after the election, though not as high as in the election year. We could not, however, find a significant effect in the pre-election year. In addition, we found evidence suggesting that though democracy significantly lowers the fiscal deficit, it promotes higher deficit spending in the election year and the year after the election. Hence, the study established the existence of a political business cycle in Sub-Saharan African countries. The study thus recommends that sound economic policies should be put in place to reduce the persistent deficit in SSA so as to maintain sustainable fiscal health, as well as the sustainability of macroeconomics, particularly enhanced industrialization, as the study found that countries' fiscal deficits are lower in more industrialized countries in the region.

The financialisation of the fishing industry

Successive technical and organizational innovations have modelled the current structure and composition of the fishing industry. The market structure varies considerably between countries and the fish species they catch. There is a generalised global convergence towards an industrial-outsourced model, in which companies occupy a central and basic position in economic strategies. Two predominant key trends are identified: financialisation and the monopolisation of fishing areas. This paper begins with an analysis of the fishing sector from the perspective of the presence of investment funds that hold stakes in companies specialising in a principal region of Europe.

Natural resource abundance and broad-based financial development nexus in ASEAN countries: accounting for globalization and human capital

Sustainable resource consumption is important for the development of the financial system. Besides, an advanced financial system eases the transfer of revenues from production activities and export to productive investments. The influence of natural resource (NR) abundance on financial development (FD) is still an ongoing debate with conflicting results. However, this study applies a novel proxy for FD, which measures the efficiency, accessibility, and depth of the financial market and institutions. Therefore, the current study is a maiden attempt to explore the nexus between FD and NR abundance amidst globalization, human capital, and economic growth in ASEAN economies. Reliable panel econometric techniques, including second-generation unit root tests, Westerlund (2007) cointegration tests, and the Augmented Mean Group (AMG) estimator are employed on the data for the period 1990-2017. The preliminary tests affirm the existence of cross-sectional dependence, unit root, and cointegrating relationship among the variables. The findings from the study reveal that NR abundance reduces FD, while globalization, human capital and economic growth add to FD. A feedback causality exists between NR abundance and FD. Thus, this study argues that more investment in the manufacturing sector will ease the attainment of efficiency in financial sector accessibility and benefits from NR abundance.

Liquidity of commercial banks in Portugal and Spain

Liquidity is very important for the functioning of financial markets, especially for the banking sector, because one of the critical aspects in the banking business is precisely the process of transforming short-term funds and placing them in the medium and long term. This paper aims to comprehensively assess the liquidity positions of Portuguese and Spanish commercial banks through different liquidity ratios for the period from 2002 to 2015 and understand whether the liquidity management strategy differs by bank size. To this end, unconsolidated balance sheet data were used, which were obtained from the banks annual reports. The sample includes a significant part of the Portuguese and Spanish banking sector (not only by the number of banks, but also by the representation in banks total assets). The results obtained show that Spain's banks' liquidity indicator has decreased over the last four years. In contrast, bank liquidity indicator in Portugal varied slightly positively during the period 2002-2006 but decreased sharply between 2010 to 2015. Bank liquidity increased slightly during the period of the financial crisis in both countries, namely between from 2007 to 2009. Finally, it is concluded that smaller banks have less fluctuating liquidity management, i.e., large and medium-sized banks show greater variation in bank liquidity in the period under analysis, i.e., they are less liquid.

Governance and net-import dependency on food and agricultural products in Sub-Saharan Africa: does any causality exist?

Though most countries in Sub-Saharan Africa (SSA) are agricultural-based, the region is a net importer of food and agricultural products and experiences the highest level of food insecurity globally. The government have a joint goal of achieving a favourable balance of trade and food security; hence this study examines the causal relationship between quality of governance and net-import dependency on food and agricultural products for 25 SSA countries during the period 1995-2015. Principal component analysis is employed to develop a governance index based on the six worldwide governance indicators and a multivariate panel vector error correction framework applied to infer causality in the short and long run. The results reveal that a higher governance index is correlated with a lower net-import dependency ratio and the relationship is statistically significant. Evidence of unidirectional causality running from governance to net-import dependency is reported in 14 SSA countries, mainly in the long run. In conclusion, improving governance quality could support reduced food and agricultural net-import dependency through promoting agriculture production, exports and consequently reduced trade deficits in the long run. Hence, governance reforms in the region should be placed at the heart of the agricultural development agenda.

The effect of Euribor on banking profitability: evidence from the Spanish banking system

This paper studies the relationship between the Euribor rate and the return on average assets (ROAA) of the Spanish banking sector. We use quarterly time series data for the period 1995-2016. Our analysis also controls for bank factors, market concentration, the macroeconomic environment and time effects. The main purpose is to examine how the sector's ROAA varies with the slope of the yield curve. We find evidence of an inverse relationship between the Euribor rate and profitability. We also show that banking profitability is pro-cyclical and is positively related to the stock of performing loans and the national 10-year bond yield.