Affect Economic Growth Research Articles

Political instability, ethnic fractionalization and economic growth

A number of developing countries have been experiencing high rates of ethnic fragmentation, corruption and political instability. The persistent poverty in many of these countries has led to an increased interest among both researchers and policy makers as to how these factors impact a country’s economic growth. Previous research has found mixed results as to whether ethnic fragmentation, corruption and political instability affect economic growth. However, this research has been focused on the direct impact of these variables on growth. This paper innovates by empirically modelling the impact of ethnic fractionalization and corruption on economic growth, both directly and indirectly through their role in affecting political stability. The analyses also add to the literature by testing a new data set with both fixed effects and GMM estimators. Results from a large panel data set of 157 countries from 1996–2014 finds that ethnic fractionalization and corruption negatively impact economic growth indirectly by increasing political instability, which has a negative direct effect on economic growth. Once the indirect effects are accounted for, ethnic fractionalization has no significant direct effect on growth. There is weak evidence to suggest that corruption may, in some countries, actually have a positive direct effect on growth by enabling firms to circumvent bureaucratic red tape, consistent with the “greasing the wheels” hypothesis. These results emphasize the importance of establishing strong institutions which are able to accommodate diverse groups and maintain political stability. Additional results find these implications to be particularly relevant for low-income and/or sub-Saharan African countries. The results also suggest that a country having a wide diversity of languages and religions need not be a hindrance to economic growth if a robust political system is in place.

Does Military Spending Nonlinearly Affect Economic Growth in South Africa?

Using annual data collected from 1988 to 2015, this study provides evidence of a non-linear relationship between military spending, economic growth and other growth determinants for the South African economy. The empirical study is based on estimates of a logistic smooth transition regression (LSTR) model and our empirical results point to an inverted U-shaped relationship between military spending and economic growth for the data. Furthermore, our empirical results suggest that the current levels of military spending, as a component of total government expenditure, are too high in the South African economy and need to be transferred towards more productive non-military expenditure in order to improve the performance of economic growth and other growth determinants.

How Does the Urban-rural Income Disparity Affect Economic Growth?

The overall relation of urban-rural income inequality to economic growth is complex. As the widening income gap between urban and rural areas, the rural residents are unwilling and unable to invest in human capital, which restricts China’s long-term economic growth. By empirically analyzing Chinese provincial panel data from 1995 to 2012, we find the material capital investment and the human capital investment have highly significantly positive coefficients for explaining economic growth, however, the urban-rural income disparity is significantly negative for the human capital investment, moreover, the change shows that there is a negative influence of urban-rural income disparity on the economic growth.

Financial development, Islamic finance and economic growth: evidence of the UAE

PurposeDoes Islamic finance affect economic growth? The empirical literature in this area seems to be in early stages and the results are often mixed and inconclusive. This paper aims to examine the causality between financial development in general, Islamic finance in particular and real economic growth in the United Arab Emirates (UAE).Design/methodology/approachUsing time series data from 1990 to 2012, a bivariate vector autoregressive model was used to document the financial development-Islamic finance-growth causal nexus and to forecast growth under various scenarios. A composite indicator, as a proxy for financial development, was determined using a non-parametric approach: data envelopment analysis.FindingsThe direction of causality runs from financial development to economic growth and the reverse causality does not drive this relationship; however, the real gross domestic product (GDP) causes Islamic financial development with no reverse effect. Furthermore, the forecasting results indicate that the past relation has been a proxy for the future where financial development leads to better progress in real economic activity. This will likely continue to stimulate the development of Islamic finance.Research limitations/implicationsBecause the financial markets in the UAE were established in 2000, this study ignored Islamic bonds and equity product. The value of the Sukuk listed on Dubai’s exchanges is around US$36.75bn (Thomson Reuters, 2015), reinforcing Dubai’s position as an international center for Sukuk activity. Among the most important tools of the Islamic financial sector, Sukuk deserves a closer empirical study. This can set the agenda for future work.Practical implicationsThe financial sector appears to be one of the main drivers of real economic activity. However, more effort in the area of Islamic finance is needed to promote Shari’ah-compliant economic activities and thus better contribute toward making Dubai-UAE the capital of the Islamic economy.Originality/valueA new indicator was used to evaluate the financial strength of the UAE and analyze its effect on economic development. In addition, as one of UAE’ emirates, Dubai declared its vision in 2013 to become the “capital of the Islamic economy”, this study analyzed the finance, Islamic finance and growth relations over the period 2013-2022.

Growth channels of human capital: A Chinese panel data study

This paper studies the growth channels of human capital using the provincial level panel data in post-reform China. Specifically, it aims at distinguishing between the “factor-accumulation channel,” whereby human capital augments production as an input factor, and the “productivity channel,” whereby human capital affects output by raising total factor productivity. Our system GMM estimation results support the hypothesis that different types of human capital affect economic growth through different channels: Basic human capital contributes to growth via the “factor-accumulation channel” and advanced human capital via the “productivity channel,” both individually and simultaneously.

Determinants of Economic Growth: A Comparative Analysis of Asian Countries

This paper investigated how Official Development Assistance (ODA), Foreign Direct Investment (FDI), export, population and raw materials prices affect economic growth in 21 Asian countries. These 21 Asian countries are categorized in to low and middle income based on a Gross National Income (GNI) of USD 3,000 as benchmark. The grouping was used in the Panel Comparative Analysis. Empirical results showed that ODA has more influence on economic growth among the middle-income Asian countries. However, it has little impact on the economic growth of low-income Asian countries. On the other hand, FDI brought positive impact on the economic growth of middle-income Asian countries. However, it did not have an impact on the economic growth of low-income countries. Export brought about more influence on the economic growth of the 21 Asian countries. On the contrary, the population has no impact on economic growth. Raw material prices have positive impact on the economic growth of both the low and middle-income Asian countries. To promote the speedy economic growth in Asia, developed countries should consider the political transparency among developing countries whenever ODA contribution is being made. The developing countries will give a variety of benefits to foreign investor through greenfield investment rather compared to brown-filed one.

Examining the Relationship Between Corruption, Economic Growth, Environmental Degradation, and Energy Consumption: a Panel Analysis in MENA Region

The aim of this study is to investigate whether energy consumption, corruption, environmental quality, and political instability affect economic growth in 13 Middle East and North African (MENA) countries over the period 1984–2012 using both the static (POLS, FE, and RE) and dynamic (Diff-GMM and Sys-GMM) panel data approaches. The empirical results show that the increased corruption directly affects economic growth, environmental quality, and energy consumption. However, corruption has an indirect effect on economic growth through energy consumption and environmental quality, an indirect effect on environmental quality through economic growth and an indirect effect on energy consumption through CO2 emissions and GDP. Indeed, energy consumption and CO2 emissions affected the economic growth. Meanwhile, economic growth effected CO2 emissions and energy consumption, and finally, CO2 emissions affected economic growth. Our paper addresses these important issues using the general method of moments (GMM) in panel data. We also find that economic growth in MENA countries reacts negatively to the environmental degradation and political instability. These empirical insights are of particular interest to policymakers as they help to build sound economic policies to sustain economic development.

Does Rule of Law Affect Economic Growth Positively?

Efficient institutional structure resolves the uncertainties in the market and the problem of asymmetric information, and thus creates a positive exogeneity, ensures the efficient distribution of the resources and makes a positive impact on the functioning of the economy. In addition to this, especially rule of law forms the basis of the socio-economic development. In the presence of the factors such as prevention of corruption and freedom of expression, institutional structure has a significant impact on economic growth. However, there are empirical studies that state that institutional efficiency boosts economic growth in developed countries, whereas it doesn’t have an impact or has a negative impact on economic growth in developing countries. For all these reasons, the impact of institutional efficiency on economic growth in developed, developing and underdeveloped countries will be analyzed in this study. In this study, the effect of institutional effectiveness on economic growth has been analyzed in both three country groups from 2002 to 2015 by using GMM. Dependent variable is GDP and the independent variables are institutional variables (rule of law, fight against corruption, voice and accountability). Based on our primitive findings we expect that developed institutions effect economic growth positively in develop countries unlike developing countries.

Globalization and Growth

How does globalization affect economic growth? We discuss mechanisms that link international integration to the incentives for knowledge accumulation and the efficacy of that process. First, integration facilitates the flow of knowledge across national borders. Second, integration affords innovators a larger potential market even as it subjects them to additional competition from foreign rivals. Third, integration encourages specialization according to comparative advantage. Finally, integration affects the incentives for technological diffusion. Taken together, the literature offers many theoretical insights. Some progress has also been made on the empirical side, although data and methodological impediments have left assessment and measurement lagging behind.

Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan *

AbstractWe study the economic effects of religious practices in the context of the observance of Ramadan fasting, one of the central tenets of Islam. To establish causality, we exploit variation in the length of daily fasting due to the interaction between the rotating Islamic calendar and a country’s latitude. We report two key, quantitatively meaningful results: (i) longer Ramadan fasting has a negative effect on output growth in Muslim countries, and (ii) it increases subjective well-being among Muslims. We find evidence that these patterns are consistent with a standard club good explanation for the emergence of costly religious practices: increased strictness of fasting screens out the less committed members, while the more committed respond with an increase in their relative levels of participation. Together, our results underscore that religious practices can affect individual behavior and beliefs in ways that have negative implications for economic performance, but that nevertheless increase subjective well-being among followers.

Do Unemployment and Inflation Substantially Affect Economic Growth?

Do Unemployment and Inflation Substantially Affect Economic Growth? Bello Malam Sa’idu, Auwal Abubakar Muhammad Abstract Unemployment and inflation are persistently complex and alarming problems to every economy. These twin macroeconomic variables are significant in influencing economic growth especially in developing economies. Thus, the aim of this study is to examine how unemployment and inflation substantially affect economic growth. To achieve this, three models were thoroughly subjected to quantitative analysis, namely; Ordinary Least Square (OLS) method, Augmented Dickey-Fuller (ADF) technique and Granger causality test. The result of the regression revealed that the coefficient of inflation is positive and statistically significant while unemployment is positive but has no significant effect on economic growth. This proves that inflation substantially affect economic growth, although unemployment has little substantial effect on it. Moreover, result of the unit root indicates that all the variables in the model are stationary whereas, the result of causality test suggests that unemployment does not granger causes economic growth and inflation, but economic growth and inflation Granger cause unemployment, also there exist Granger causality between economic growth and inflation. Therefore, the result suggests a one-way causation flowing from inflation to GDP. Consequently, the major policy implication of these results is that concerted efforts should be made by policy makers towards restructuring the economy, managing price instability and improving infrastructure. Full Text: PDF DOI: 10.15640/jeds.v3n1a13

Does Misaligned Currency Affect Economic Growth? – Evidence from Croatia

The main objective of this paper is to measure the currency misalignment of the Croatian kuna and to reveal whether it affects economic growth for the period 2001 (Q1) to 2013 (Q3). The estimate relies on recent cointegration techniques, VAR models and Granger causality tests. The findings show that there are two misalignment sub-periods for the Croatian kuna: undervaluation in the period from 2000Q1 to 2007Q4 and overvaluation in the period from 2008Q1 to 2013Q3. The evidence reveals that for the whole sample period, the Granger causality goes from misalignments (MISA) to GDP growth under the 10 percent significance level. However, for the two sub-periods no evidence of Granger causality from MISA to GDP growth or vice versa is found. The research also reveals that the currency misalignments in the observed period are relatively small.

How Business Cycle Volatility Affect Economic Growth in China? -An Empirical Study based on GARCH-M Model using the 1952-2012 Data

The considerable divergence in analyzing the relationship between business cycle volatility and economic growth calls for thorough empirical investigations, but according to the relationship between business cycle volatility and economic growth, foreign experience study did not get uniform results and the experience of the domestic research, less likely. This study attempts to make further test by constructing GARCH-M model with Chinese data from 1952 to 2012 and take the method of maximum likelihood to discuss the relationship between business cycle volatility and economic growth. The result, which is significant statistically, shows that business cycle volatility and economic growth in China is negatively correlated. Therefore, business cycle volatility will bring indirect welfare cost to the residents by decreasing economic growth rate. Stabilization policy will both suppress business cycle volatility and increase economic growth rate.

Does foreign direct investment affect economic growth? The case of Turkey

Purpose– The purpose of this paper is to analyze the impact of inward foreign direct investment (FDI) and international trade on economic growth in Turkey for the post-liberalization period (1980-2010).Design/methodology/approach– The paper employs the vector auto-regression model with four variables: real GDP growth, real inward FDI, the real import volume index and the real export volume index.Findings– Empirical results suggest a relationship between economic growth, inward FDI and exports.Practical implications– The results derived in this paper shed light on the relationship between FDI and international trade on economic growth for Turkey, which has been applying an export-led growth strategy since 1980, and has been implementing many regulations to attract foreign capital. It is evident that although Turkey's efforts and the importance of this issue, new policies and stabilization regulations must be established for the Turkish economy.Originality/value– This study contributes to the literature in at least two aspects. First, a comparative analysis of Turkey's inward and outward FDI with respect to different country groups was analyzed. Second, apart from other studies, the effect of inward FDI and international trade on Turkey's economic growth was tested utilizing an econometric method from 1980 to 2010, which is a relatively long time period for Turkey.

Does Higher Education Affect Economic Growth? The Case of Greece

The purpose of the study is twofold: first, it presents an extensive review of empirical studies that have examined the relationship between higher education and economic growth. Second, it estimates the effect of higher education on economic growth in Greece over the period 1960–2009. It applies the model introduced by Mankiw, Romer, and Weil (1992) by using the higher enrolment rates as a proxy of human capital. The paper employs cointegration and an error-correction model to test the causal relationship between higher education, physical capital investments and economic growth. The empirical analysis reveals that there is a long-run cointegrating relationship between higher education, physical capital investments and economic growth. The elasticity of economic growth with respect to higher education is 0.52%. The results also suggest that there is evidence of unidirectional long-run and short-run Granger causality running from higher education and physical capital investments to economic growth.

Does Religion Affect Economic Growth and Happiness? Evidence from Ramadan

We study the economic effects of religious practices in the context of the observance of Ramadan fasting, one of the central tenets of Islam. To establish causality, we exploit variation in the length of the fasting period due to the rotating Islamic calendar. We report two key, quantitatively meaningful results: 1) longer Ramadan fasting has a negative effect on output growth in Muslim countries, and 2) it increases subjective well-being among Muslims. We then examine labor market outcomes, and find that these results cannot be primarily explained by a direct reduction in labor productivity due to fasting. Instead, the evidence indicates that Ramadan affects Muslims' relative preferences regarding work and religiosity, suggesting that the mechanism operates at least partly by changing beliefs and values that influence labor supply and occupational choices beyond the month of Ramadan itself. Together, our results indicate that religious practices can affect labor supply choices in ways that have negative implications for economic performance, but that nevertheless increase subjective well-being among followers.

How Does WTI Crude Oil Affect Economic Growth of India?

How Does WTI Crude Oil Affect Economic Growth of India?

Research on the Three Industrial Structure and Economic Growth Empirical Based on the Cobb - Douglas Production Function

In this paper, the deformation of Cobb-Douglas production function was used to separate the Variable term, which the proportion of each industry affect economic growth, and further introduction of three industrial structure variables. The relationship between three industrial structures for 2001-2012 in Shaanxi and economic growth was analysis by the least squares estimation, the influence ratios, which industrial output value of share of GDP changes on effects of changes in economic growth can be acquired. The results showed that the adjustment of three industrial structure in Shaanxi conducive to economic growth, which meet the development of the three industrial structure in developed countries and consistent with the law in line with economic growth, namely a stable development of primary industry, optimizing the development of secondary industry, vigorous development of the tertiary industry.

Theoretical Considerations about the Possible Impact of Globalisation on Europe’s Economic Development

Abstract Scientific works (starting from 1873) of famous economists and political philosophers based on theoretical/philosophical considerations about the preconditions of changes on world economy of scope stipulate the inclusive analysis of factors which possibly influence the challenges of society and economy in the 21st century. It is very modern to claim that manifestation of globalisation is the origin of all changes. The European Commission states that about one-fifth of the increase in the economies of EU countries over the past 50 years depends on integration of the world economy, that is, globalisation. Taking this into account, the article presents theoretical considerations about the possible impact of globalisation on Europe’s economic development. Three scientific problems are raised: Does globalisation affect economic growth and how could this process be managed? Which are the derivatives of globalisation that influence positive changes in a country’s economy? Is it possible to eliminate or diminish the effect of the more negative aspects of globalisation? Among the research methods used in the article are theoretical comparative analysis of the scientific works, and analysis of legal documents as well as strategies and practical papers in this field. The article also presents three tasks: to systematise arguments presented in existing scientific works (theories) as well as in EU initiatives considering the phenomenon of globalisation, to highlight the tendencies in Europe’s economic development that are associated with globalisation, and to present recommendations for managing the influence of globalisation to the development of EU’s economy. The article presents systematised arguments of published scientific works (theories) as well as EU initiatives considering the phenomenon of globalisation. The impact, positive as well as negative, of globalisation on the development of economy is highlighted and the criteria for the manifestation of globalisation is systematised. This instrument could be used to assess the impact of globalisation on economic development

How Does International Business Affect Economic Growth?

The objective of the paper is to asses the role of foreign enterprises in the Czech economy and to compare the performance and structure of foreign and domestic firms. The analysis is based on the firm-level data during 2002-2007. It shows that role of foreign enterprises in the Czech economy has been growing however with different intensity as for sectors. Foreign firms have on average higher productivity than domestic firms across all sectors of the economy. The results indicate significant differences in allocation patterns between domestic and foreign firms. While domestic firms are mainly represented in marketing driven industries and in mainstream manufacturing industries, foreign enterprises are strongly represented in and capital intensive industries high-tech industries. The share of foreign firms in labor intensive industries is decreasing over time.