Flexibility in design: the multiple applications of a medium-sized empirical model for Denmark

Publisher Summary This chapter discusses the financial development and economic growth in underdeveloped countries. An observed characteristic of the process of economic development over time, in a market-oriented economy using the price mechanism to allocate resources, is an increase in the number and variety of financial institutions and a substantial rise in the proportion not only of money but also of the total of all financial assets relative to GNP and to tangible wealth. Typical statements indicate that the financial system somehow accommodates—or, to the extent that it malfunctions, it restricts—growth of real per capita output. Such an approach places emphasis on the demand side for financial services; as the economy grows it generates additional and new demands for these services, which bring about a supply response in the growth of the financial system. In this view, the lack of financial institutions in underdeveloped countries is simply an indication of the lack of demand for their services.

Nepal, like most developing nations, must overcome several economic obstacles in order to pursue sustainable economic growth and development through taxation. The issue over whether taxes are an effective instrument for fostering economic development and growth in the literature is still open since different studies have shown conflicting results on the impact of taxes on economic growth. The goal of the study is to determine the relationship between Nepal's economic growth and the tax revenue sources of the government, while also measuring the short and long run effects of changes in these revenue sources on economic growth. To forecast the change in economic growth due to changes in tax revenue sources, Autoregressive Distributed Lag (ARDL) is performed on time series secondary data for the period from 1974 to 2021. According to the findings, Non-Tax Revenue (NTR) have positive significant relationship, while Tax Revenue (TR) has a positive but insignificant relationship with Nepal's economic growth over the long run. Variables were found to be stationary at I (0) and I (1) using the Augmented Dickey-Fuller Test. According to the results of the bound test, Non-tax revenue is the cointegrated factor that affect Nepal's economic growth. The factor that has no impact on Nepal's economic growth is tax revenue. Non- tax revenue significantly affects Nepal's economic growth over the long run. As non-tax revenue has a positive impact on Nepal's economic growth and tax revenue have a negative impact on it, it is advised that policymakers concentrate on increasing the revenue collection from non-tax revenue sources in order to prosper and accelerate economic growth. In terms of economic growth, the study concludes that Nepal has experienced an increase over time. The study does find that the economic growth has been moderate. Key words: Tax Revenue, Non-Tax Revenue, ARDL, Gross Domestic Product, Nepal

This study examines the fiscal and macroeconomic effects of fuel subsidy removal in Nigeria during the postsubsidy period (2023–2025), focusing on fiscal reallocation and economic growth. Using annual time-series data for 2023–2025 and an Autoregressive Distributed Lag (ARDL) approach, the study investigates whether fiscal savings from subsidy elimination are redirected to productive sectors and how these allocations affect economic growth. Empirical findings indicate that subsidy removal significantly improves fiscal savings and partially enhances fiscal reallocation to capital and social sector spending. Fiscal reallocation positively influences economic growth, although short-term inflationary pressures and exchange rate depreciation moderate the benefits. The study concludes that fuel subsidy removal can promote sustainable growth if accompanied by effective fiscal reallocation, macroeconomic stability, and social protection policies.

Purpose Globalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – foreign direct investment, remittances and official development assistance – can be a key factor in the development of the economy. The purpose of this study is to analyze the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been used. As part of this study, an attempt was made to use a combined autoregressive distributed lag (ARDL) panel approach to study the short-term and long-run effects of financial flows on economic growth. The results indicate ambiguous effects. Economically, the effect of financial flows on economic growth depends on the investor’s expectations. Design/methodology/approach To study the short-run and long-run effects of financial flows on economic growth, this paper considers an empirical approach based on the panel ARDL. This model makes it possible to distinguish between the short-run effect and the long-run one. This type of model is based on three estimators, namely, mean group, pooled mean group (PMG) and dynamic fixed effect. Findings Results confirm the existence of a long-run relationship because the adjustment coefficient (error correction parameter) is negative and statistically significant. This paper finds that the PMG estimator is more consistent and more efficient. In the short-run, foreign direct investment do negatively affect economic growth, the effect is no significant in the long-run. On the other hand, the effect of remittances on economic growth is significant in the short-run. However, it is no significant in the long-run. Finally, the results suggest that the effect of official development assistance on economic growth is insignificant; both in the long-run and in the short-run. Originality/value To study the interaction between financial flows and economic growth, some empirical methodology are used such as the dynamic panel data and the autoregressive vector (VAR) model. In this study, we apply the panel ARDL model to analyze the short-run and the long-run effect for each financial flow on economic growth. The objective is to study the heterogeneity on dynamic adjustment in the short-term and long-term.

The openness of the economy and its intensive involvement in international trade and economic flows has an important role in stimulating economic growth and development of a national economy. The aim of the research is to determine the degree of impact and effects of exports, imports and foreign direct investment (FDI) on economic growth. The applied research methodology is a panel regression analysis on the example of six countries in the Western Balkans region in the period from 2000 to 2018. Three hypotheses were tested in this paper. H1: Exports have a positive effect on economic growth; H2: Imports contribute to GDP growth; H3: FDI has a positive impact on economic growth. The results show that all three variables have a positive, statistically significant impact on GDP. The greatest effect on economic growth in the analyzed sample has exports, which implies the conclusion of the inevitability of more intensive participation of these economies in international trade flows.

Many scholars have researched the connection between fiscal policy and economic growth and how fiscal policy can be a crucial factor for economic development and growth. Despite this, it still remains a critical debate amongst policymakers and scholars. Thus, this study fills the gap by analyzing the impact of fiscal policy on economic growth in Malaysia spanning 1990 to 2022. The secondary data from World Bank Indicators (WDI) is collected. This study examines the impact of fiscal policy (government expenditure) on Malaysia's economic growth by adding more macro factors such as unemployment, tax revenue, and inflation. This study employs the Autoregressive distributed lag (ARDL) model to examine the long-run correlation to meet this objective. Furthermore, various econometric models are employed, including the ARDL bound test and the error correction model (ECM), to check the relationship between the variables. Based on empirical results and findings, the study suggests that there is a strong relationship between GDP and expenditure, unemployment, tax revenue and inflation since the probability value is less than significant in the short-term relationship with constant and unrestricted constant form. Additionally, with the ARDL Model boundary test, government expenditure, unemployment, tax revenue, and inflation have a long-term relationship with GDP in Malaysia, where the F-statistic value is smaller than the lower boundary. Moreover, the Error correction method with restricted constant suggests a long-term link between the expenditure and GDP. Notwithstanding the results, fiscal policymakers must carefully evaluate the efficacy of government expenditure allocation to ensure that it is consistent with the long-term economic growth goals. The potential limitation of this study is its dependency on secondary data from the World Bank Indicators (WDI), which may not capture all relevant nuances of Malaysian fiscal policy and economic dynamics.

PurposeThe main objective of this paper is to examine how short- and long-term dynamics can be promoted through economic growth policies, financial inclusion initiatives, institutions and ICT infrastructure development. The study focuses on West African Economic and Monetary Union (WAEMU) member countries over for the period 2000–2020 and the empirical evidence is based on the autoregressive distributed lag (ARDL) method. Our empirical results show that the synthetic index variables of financial inclusion, ICT infrastructure development and individual or composite governance institutions indicators are positively and significantly interrelated in both the short and long runs. A dynamic combination of variables is essential for WAEMU countries to achieve long-term economic development. Policy implications are discussed.Design/methodology/approachConsistent with our goal of testing the dynamics of financial inclusion, governance and ICT on economic growth, we will estimate our equations using the ARDL panel method. ARDL models or autoregressive models with staggered or distributed delays are dynamic models. The particularity of these models is that they take into account temporal dynamics (i.e. expectations, adjustment delays and inter alia), so we adopted a lagged autoregressive model (ARDL). The popularity of the ARDL approach also stems from the fact that the cointegration of nonstationary variables is equivalent to an error correction (EC) process.FindingsThe empirical results simultaneously depict strong endogenous associations between these variables in the short and long run. The short-run analysis indicates that economic growth, financial inclusion, institutional quality and ICT infrastructure development are strongly interdependent. These union states, in their economic growth policies, encourage the financial inclusion (access and penetration of bank branches) of disadvantaged communities. However, efficient institutional policies reinforce this sustainable growth. The efficient use of telecommunications infrastructure requires the regulation of informal employment in WAEMU countries for the better deployment of efficient, secure and cost-effective digital financial payment systems (fintech).Research limitations/implicationsThe findings in this study evidently leave space for future research, especially as it concerns considering how composite governance can be employed as a moderating indicator for financial inclusion. In conclusion, there is an interdependence between financial inclusion, ICT, institutions and economic growth. An effective combination of these elements can create an ecosystem conducive to economic development by promoting access to financial services, harnessing the benefits of ICT and building robust institutions. However, challenges can also arise, such as the need for appropriate regulations and security guarantees for electronic transactions.Practical implicationsGovernments should strengthen financial inclusion and promote policies aimed at improving access to financial services, such as microcredits, mobile banking and initiatives for the unbanked. Financial education is crucial for enhancing financial inclusion. Educational programs that teach citizens how to use financial services can increase participation and stimulate economic growth. Moreover, policies should focus on improving digital infrastructure, such as broadband networks and data centers, to facilitate access to the internet and other technologies and to promote innovation and startups. Governments should strive to create a balanced regulatory framework that encourages investment and innovation while avoiding excessive regulation that could hinder growth. Implementing targeted regulatory reforms to improve efficiency and transparency can enhance investor confidence and support a more dynamic economic environment.Originality/valueThis work constitutes a considerable contribution to the literature on finance, institutions and growth in WAEMU countries and in terms of methodology. The findings in this study evidently leave space for future research, especially as it concerns considering how composite governance can be employed as a moderating indicator for financial inclusion. In conclusion, there is an interdependence between financial inclusion, ICT, institutions and economic growth. An effective combination of these elements can create an ecosystem conducive to economic development by promoting access to financial services, harnessing the benefits of ICT and building robust institutions.

This study investigates the relationships between foreign trade, employment and economic growth in Sudan over the period 1970-2017, with inflation and budget deficit as policy variables. Two autoregressive distributed lags (ARDL) models were estimated with trade and economic growth as determinants of youth employment and total employment. Two other models were estimated to investigate how trade and each type of employment affect economic growth separately. The empirical results from the four models revealed existence of long run relationships between foreign trade, employment and economic growth. In the short run, trade, economic and population growth rates have stronger effects on youth employment than on total employment. In the long run, youth employment is found to be positively affected by economic growth and investment but negatively affected by population growth and the budget deficit, while total employment is only affected by population growth rate. Economic growth is found to be much explained by youth employment than by total employment and foreign trade. The study concludes that the internal factors in terms of inflation, budget deficit, investment and salaried workers are more important to employment and economic growth than the performance of foreign trade sector of Sudan. The policy implication is that youth employment should be given priority in labor and trade openness policy than targeting employment as a whole. For trade openness to play positive roles on employment and economic growth in Sudan, corrective policies for volumes and types of exports and imports are urgently needed.

It is widely recognized that trade and foreign direct investment (FDI) inflows are important factors in long-term economic growth. Trade openness enhances skills through the adoption of imported superior production technology and innovative processes, and thus exerts a positive and significant impact on economic growth. Similarly, FDI augments and stimulates domestic investment, enhances technology transfer, increases export capacity and foreign exchange earnings, and thus promotes capital formation and long-run growth. This paper examined the empirical relationship between economic growth on one hand and trade and FDI flows on the other hand for Saudi Arabia during the last four decades (1970-2010). The autoregressive distributed lag (ARDL) methods to cointegration and the associated error correction model (ECM) are adopted. The results suggest that human capital, government expenditure, trade openness and infrastructure are important determinants of long run growth in Saudi Arabia. In contrast, FDI together with domestic private investment has impacted negatively on real gross domestic product (GDP). This is attributed partly to the dominant role of the public sector in the economy emanating from the huge oil resources, thereby leaving little room for the domestic and foreign private investment to play their role in the economy, and partly to the concentration of FDI in unproductive sectors. Nonetheless, the interaction of FDI either with government expenditure or with domestic investment could impact positively on growth. Efforts should therefore focus on enhancing the integration between these factors on long-term growth. Privatization, economic liberalization, and diversification measures are expected to provide real opportunities for domestic and foreign investment to play an important role in economic activity and growth. Key words: Saudi Arabia, FDI, unit roots, ARDL cointegration, ECM, trade.

This study explores the indirect effect of corona virus (COVID-19) infections on economic growth in Malaysia using the industrial production index (IPI) as a proxy. Since the prevalence of COVID-19 infection, Malaysia’s economy has experienced swindles in its growth, just like other countries economy, and the struggle for survival among countries in which Malaysia’s economy is not exceptional becomes the current issue. This study incorporates the COVID-19 indirect impacts on economic growth which is conditional to COVID-19 deaths. It also explains a way forward for recuperation among economic sectors for faster economic growth in Malaysia. This paper uses the Auto Regressive Distributed Lag (ARDL) model to explore the indirect effect of COVID-19 infections on economic growth conditional on COVID-19 deaths in Malaysia. As an empirical study, the data used were monthly secondary data and were obtained from reliable sources. The findings from the results of the ARDL model, considering the unconditional model show that COVID-19 infections have a negative relationship with economic growth in Malaysia. The conditional models used to find the indirect impact of COVID-19 on economic growth considering the interaction of the variables at mean, maximum and minimum, prove that COVID-19 has an indirect negative effect on economic growth when COVID-19 deaths are at their mean and maximum. The marginal effect result shows a negative relationship and significance at 1%, indicating that increase in COVID-19 infections leads to decrease in economic growth in Malaysia conditional to COVID-19 deaths

Nowadays economic performance and people's well-being are driven by various factors linked to technological improvement and industrialization. South Africa is one of the countries that adopted technology and innovation to improve its economic performance and employment conditions. However, the country is still facing a growing unemployment rate and sluggish economic growth. The current study investigated the role of industrialization in heightening employment and economic growth. The autoregressive distributed lag (ARDL) and error correction model (ECM) approaches were applied to time series data from 1998 to 2019. Empirical findings indicated that industrialisation has a significant impact on South African economic growth and employment opportunities. While automotive, food and beverage, chemical and metal industries positively affect economic growth; employment growth is fuelled by high production in food and beverage, chemical, automotive and metal industries. Nonetheless, high production in clothing and chemical industries have adverse effects on economic and employment growth respectively. In the short run, employment behaviour is determined by the production of metal, food and beverages industries while changes in economic growth are driven by production in the automotive and metal industries. Grounded on findings, South African policymakers should consider pro-industrialization strategies, especially in those industries whose production is highly demanded such as metal, food and beverages. These industries enhance trade and the latter improve economic growth and create employment.

Aims/ Objectives: To examine the impact of public health expenditure on economic growth in Benin. Study Design: Autoregressive Distributed Lag (ARDL) model analysis approach.Place and Duration of Study: E´ cole Nationale de Statistique, de Planification et de De´mographie (ENSPD), Universit ´e de Parakou, Benin, between January and April 2024.Methodology: This research utilizes data from the World Bank’s World Development Indicators (WDI) database, covering the period from 1977 to 2017. The method used is the Autoregressive Distributed Lag (ARDL) model analysis approach with tree models. The study adopts the human capital production function from Romer (1990) as a base model, which is modified to account for factors influencing the total productivity of the factors, following Romon’s (1998) approach.Results: The associated balance correction was negative and significant for each model, confirming the existence of long-term relationships. The results of the study also reveal that public health expenditure has a negative long-term and positive short-term impact on economic growth in Benin. Moreover, life expectancy at birth, in turn, has a positive effect on economic growth in the short and long term. Furthermore, Benin’s policy of openness to the outside world and the inflation rate has a negative impact in the short and long term on economic growth.Conclusion: The results of the selected model indicate that public health spending has a positive impact on economic growth in Benin in the short term, while its effect is negative in the long term.

PurposeThe purpose of this paper is to examine the relationship between financial inclusion (FI) and economic growth in India.Design/methodology/approachTo measure FI, a multidimensional time-varying index is proposed following the Human Development Index method. The long-run relationship between FI and economic growth is examined by using the autoregressive distributed lag (ARDL) approach to cointegration and nonlinear ARDL approach. Further, the direction of causality is investigated by employing the Toda–Yamamoto Granger causality test.FindingsThe linear cointegration test confirms a long-run relationship between FI and economic growth for India. The improvement in both demand-side and supply-side financial services has a positive impact on economic growth. These results suggest that India can attain long-run economic growth by improving the coverage of FI. However, there is no evidence of nonlinear cointegration, indicating that there is no asymmetric effect of FI on economic growth. Further, the causality test shows that FI granger causes economic growth but not vice versa.Research limitations/implicationsThe major limitation of the study is the availability of time series data for all important variables. The index for both demand- and supply-side indicators can be extended with several other important variables in later date once the data are available for those variables.Practical implicationsAs the study confirms that FI is one of the main drivers of economic growth, it is suggested that the policy maker emphasizing on financial sector reforms can enjoy economic growth in the long run, especially in developing countries. Therefore, the government and policy makers need to address the issues involved in access to financial services to spur economic growth.Originality/valueThe study examines the long-run relationship between FI and economic growth employing ARDL bound testing approach and nonlinear ARDL approach, separately for demand-side and supply-side indicators. Further, the study uses the Toda–Yamamoto granger causality to find the direction of causal flow between FI and economic growth.

This paper investigates the effects in short and long run of renewable and non-renewable energy, technological advancement, population, foreign direct investment, energy export, energy price, and carbon dioxide emissions on economic growth in Saudi Arabia as one of the largest oil producing and richest countries in the world and as a leading country in investing in modern technology, during 1990–2022 by using the Autoregressive Distributed Lag(ARDL) approach and the Vector Error Correction Model (VECM) Granger causality technique. In first step, the ADF and DF-GSL tests are used to identify the order of integration of variables. In the second step, the Bounds test and the Wald test are used respectively to verify the existence of long run cointegration relationships and the long run relationships between variables. In the third step, we have applied the ARDL approach to capture the effect of each variable on Saudi economic growth in long term. Finally, the VECM technique was used to detect the direction of causality running from variable to another. It is appearing that all variables are stationary in first difference, and there are a long run cointegration and relationships among variables. The results of ARDL estimation show that non-renewable energy, renewable energy, population, foreign direct investment, energy export, and energy price positively affect the Saudi economic growth. While technological advancement and carbon dioxide emissions have negative effects on the economic increase of Saudi Arabia. These two results appear important and useful because of their consequences. In effect, it could damage its worldwide standing and dishearten foreign investment, stopping economic diversification efforts and increasing the income inequality. Though, the results of VECM technique show four bidirectional causal relationships between economic growth and non-renewable energy, foreign direct investment, energy export, and energy price. The findings of this study have several policy implications for Saudi Arabia. First, Saudi government should continue investing in the energy sector. Second, to attract more FDI, Saudi government should continue its efforts to reduce bureaucracy, simplify regulations, and provide a business-friendly environment. This strategy can help transfer technology and knowledge. Third, the government should monitor and control energy prices, as these can significantly impact economic growth. The government should invest in technological advancement, as this can help reduce carbon dioxide emissions and improve energy efficiency; also, investing in human capital is essential for long-term economic growth. Policies that promote the health, education, and general well-being of the population can lead to a more productive and innovative workforce. However, the article reveals that technological advancements have a negative impact on economic growth in Saudi Arabia. This could be due to a number of factors, such as a lack of skilled workers to implement new technologies or a mismatch between the skills of the workforce and the needs of the economy. As solutions, Saudi government must invest in education and training can help address these challenges by developing a workforce capable of adapting to the changing needs of the economy and effectively using new technologies. Also, it's important to create science and technology parks to foster innovation and collaboration between businesses and universities. By taking these steps, the Saudi government can help create more diverse and knowledge-based economy, making it less dependent on oil and gas exports and more resilient to economic shocks.

Tax revenue is believed to provide developing countries with a stable and predictable fiscal environment to promote growth and to finance their social and physical infrastructural needs. However, the prior empirical results across different countries witness that the relationship between government tax revenue and economic growth can be negative, positive or neutral depending on countries economic exposure and stabilization policy experiences. Thus, this study examined the effect of tax revenue on economic growth of Ethiopia, from 1980 to 2018 by employing Autoregressive Distributed Lag (ARDL) approach. The enquiry also used Vector Error Correction Model (VECM) in order to observe how fast the co-integrated variables convergence in long-run and found expected negative sign. The stationarity properties of the data were detected using ADF and PP test statistics and the result confirms all the variables are stationary at level and first difference evidencing the effectiveness of ARDL model. The ARDL bound test result indicates that there is long run relationship between RGDP and independent variables. The empirical results are indication of long- and short-run positive impacts of government tax revenue on economic growth in Ethiopia. The result suggests that tax revenue exerted a positive and statistically significant effect on economic growth both in the long run and short-run implying that tax revenue enhances economic growth in Ethiopia. Furthermore, government expenditures on education and health as proxy of human capital and rate of inflation variables show a statistically significant and expected effect on real GDP in Ethiopia. Hence, the policy maker needs to give more effort to expand the tax base and should increase the efficiency of collection to stimulate overall economic growth in long and short run. JEL code: H2; O4; C22