Autoregressive Distributed Lag Bound Test Research Articles

FINANCIAL DEVELOPMENT, JUDICIAL CORRUPTION, AND ECONOMIC GROWTH: EVIDENCE FROM NIGERIA

This paper assesses the impact of financial development, institutions, and judicial corruption, on economic growth as well as causality among the variables in Nigeria over the period of 1980 to 2016 using Autoregressive Distributed Lag (ARDL) Model and Granger Causality Test. The former takes care of both long-run and short-run dynamic effects of financial development, institutions, and judicial corruption as they affect economic growth while the latter captures the flow of causality among the variables. The ARDL Bound test result reveals existence of cointegration among the variables. The short-run result shows that judicial corruption is negatively and significantly related to economic growth while in the long-run, a positive but insignificant relationship exists. It also reveals that exchange institutions have significant negative relationship with economic growth. However, the results of Granger causality test showed that there is unidirectional causality running from judicial corruption to economic growth. In all, the study concludes that justice delayed is growth denied. The study therefore recommends that the institution of justice be reformed, civil litigations be discharged on time and judicial independence be restored accordingly. Keywords: financial development, Institutions, Judicial Corruption, Economic Growth, ARDL, Granger-Causality.

Monetary Policy Dynamics and the Nigeria’s Global Competitiveness: The Missing Link

Despite the series of monetary policies adopted by the Nigerian government over time, the (Nigerian) economy in comparison to other countries in the world like South Africa, the USA, Ghana, and the like is still improvised. Still, inconsistency between monetary policy formulation and implementation remains another major issues yet unattended to. It is in this regards that, the current study is dedicated towards examining the effect of monetary policy dynamics and the Nigeria’s global competitiveness from 1992 to 2021 (i.e., 30 years) using Autoregressive Distributed Lag (ARDL) model. The study disclosed that, the variables are integrated at level and first difference while the ARDL Bound test evidenced that, the series cointegrates. Specifically, monetary policy rate has a positive minimal effect on Nigeria’s global competitiveness, while the CRR improved Nigeria’s global competitiveness significantly. However, both lending rates and exchange rates have a significant negative effect on economic competitiveness. Consequently, the paper concludes that both the cash reserve ratio and the Nigeria’s demeaning state are attributed to the high exchange rate (EXR) and high lending rates. Thus, the paper submits that the current monetary policy rates are sustained and that all DMBS should adhere to the stipulated Cash Reserve Ratio (CRR) since it has improved the Nigeria’s global competitiveness significantly. Lastly, the study confirmed that, the missing link is the policy surmount on the part of the Nigerian government.

Investigating the Dynamic Relationship between Exchange Rate and Trade Balance in Egypt: ARDL Bounds Testing Approach

Exchange rate policies are among the most important economic tools in the country for their impact on the balance of payments in general and the balance of trade. This study used the autoregressive distributed lag (ARDL) model to estimate the long-term relationship between the exchange rate and the trade balance deficit while clarifying the impact of potential determinants during the period 1990 to 2021 in Egypt. The data for trade balance and its economic determinants (exchange rate, foreign direct investment, and money supply) was obtained from the World Bank. The results indicated that the best model was ARDL (2,1,2,3). The exchange rate is found to have a significant negative effect on the trade balance, confirming the perceptions of the economic theory. The money supply is positively and significantly related to the trade balance while there is no significant effect of foreign direct investment in the long term on the trade balance deficit. Economic adjustments between the four variables occur in the short run (after about 14 months only). The study recommends continuing the policy of liberalizing the exchange rate while working on expanding the production base to increase exports.

CENTRAL BANK INTERVENTION FUND AND AGRICULTURAL OUTPUT IN NIGERIA: AN ARDL APPROACH

This paper examines the impact of central bank financial intervention funds on Nigeria's agricultural exports from 1990 to 2020 with the specific objective of determining the extent to which the funds are financed by the Agricultural Credit Guarantee Fund (ACGSF) in the agricultural sector concerned. Agricultural exports both short-term and long-term during the period were under review. The study uses annual time data obtained from the CBN and WDI database. The Auto-Regressive Distributed Lag (ARDL) technique and the ARDL Bound test were used to determine the short-term and long-term relationships of the variables. The results show that ACGSF shows a positive and significant relationship of agricultural export growth in the short run with coefficients of 0.23, 0.33 and 0.19, but a negative and insignificant relationship of agricultural export in the long run. The analysis also shows a positive and insignificance of employment in agriculture in relation to agricultural production in the short term, while negative and significant in the long term. The 68.3% of the change in the dependent variable, as revealed by the adjusted R2, is due to the combined effect of the independent variables. The study therefore seeks for greater and appropriate funding of the government scheme or monetary authority to have a positive impact on long-term agricultural exports in Nigeria and should ensure immediate repayment of loan(s) to the qualified farmer to avoid diversion, political influence and delay in poor implementation process due to bank deposits of money in the country.

How Oil Price Changes Affect Inflation in an Oil-Exporting Country: Evidence from Azerbaijan

This research study aims to explore the inflationary effects of oil price rises in the case of Azerbaijan. The study covers 1997–2021 yearly data to estimate long- and short-term impacts while considering “oil price—money supply” interactions. Autoregressive Distributed Lag Bounds testing (ARDLBT), Fully Modified Ordinary Least Squares (FMOLS), and Canonical Cointegration Regression (CCR) cointegration methods are applied simultaneously. The research findings are: (1) oil price is a significant long-term determinant of inflation in Azerbaijan, affecting overall prices directly and indirectly via the money supply; (2) the effect is statistically significant in the short-term and happens indirectly, moderated by the money supply; and (3) oil price moderates the impact of the money supply over inflation in the short-term. A major limitation of the current study is that it omits the possible moderation impact of oil prices over inflation in Azerbaijan through the resulting inflationary pressure due to oil price rises in trade-partner countries and the government’s fiscal policy. Research findings require the Central Bank to consider indirect effects of oil price changes, especially due to money supply changes, when targeting inflation and addressing policy sustainability in Azerbaijan.

The Effect of Inflation and Unemployment on GDP: Evidence from Bangladesh

This study aims to investigate the impact of inflation and unemployment on GDP in Bangladesh from 1991 to 2021. The study utilizes unit root tests, the Autoregressive Distributed Lag (ARDL) Bound test, and the Error Correction Model (ECM) to analyze the relationships between these variables. The results indicate that GDP and inflation are stationary at both the level and first difference, while unemployment is stationary at the first difference and at the same time all three variables are stationary at the first difference. The ARDL Bound test reveals that both inflation and unemployment are harmful to GDP, hindering its growth over time. The F-statistics indicate a consistent relationship between the variables. The Error Correction Model shows a high correlation between the variables in both the short- and long-term, accounting for 82% of the equilibrium deviation. The findings suggest that policymakers should pay attention to the levels of inflation and unemployment in the country, as they have a significant impact on GDP growth.

DRIVERS OF AGRICULTURAL FOREIGN DIRECT INVESTMENT AND ITS IMPACT ON FOOD PRODUCTION IN NIGERIA

Foreign Direct Investment is one of the growth promoters in many sectors of the economy including the agricultural sector. The study analysed the drivers of agricultural FDI and gauge its impact on food production in Nigeria. Annual time series data spanning from 1975 to 2017 were obtained from Central Bank of Nigeria, National Bureau of Statistics and World Bank’s Development Indicators Database. Descriptive analysis, stationarity analysis with Augmented Dickey Fuller and Philip Perrons’ unit root tests, co-integration test with Autoregressive Distributed Lag Bound test, Autoregressive Distributed Lag-Error Correction Model analysis were done to obtain results for the study. ARDL-ECM results showed that GDP at P≤0.1, government expenditure on agriculture at P≤0.1, inflation rate at P≤0.01 and real exchange rate at P≤0.01 levels of significance were the significant determinants of FDI inflow to agricultural sector in Nigeria in the long run model. In the short run, GDP at P≤0.1, government expenditure on agriculture at P≤0.1 and real exchange rate at P≤0.01 levels of significance were the significant drivers of Agricultural FDI in Nigeria. The speed of adjustment (ECM (-)) was 102.74%. Agricultural FDI also had significant long run and short run impact on food production in Nigeria at 1% and 1% levels of significance, respectively. The study concluded that FDI inflow had significant positive impact on agricultural sector in Nigeria. It was recommended that government should promote policies that are directed at employing all promotional resources to attract more FDI inflow to the agricultural sector so as to boost its productivity and contribution to the overall economy of Nigeria.

Impact of financial development on inclusive growth in Nigeria

This study examined the impact of financial development on inclusive growth in Nigeria using a timeseries data obtained from secondary sources between 1999 and 2019. Financial development was measuredusing broad money supply and domestic credit to private sector, while inclusive growth was measuredfrom income perspective using per capita GDP and from expenditure perspective using householdconsumption expenditure. The data were mainly obtained from World Development Indicators data basefor various years. The data were analysed using Autoregressive Distributed Lag Bound test approach. Theresults of the ARDL revealed that financial development proxy with broad money supply exert significantpositive impact on per capita income and household consumption expenditure in both short and long run.On the contrary, domestic credit to private sector has significant negative impact on per capita income inshort and long run while the impact on household consumption expenditure was not significant in bothshort and long run. The study therefore recommends that the government can use broad money supply asone of the financial development instruments to promote inclusive growth in Nigeria. in addition, attentionshould be paid to the allocation of funds to private sector and the efficiency of such fund in order to reverseunproductive impact of fund allocated to private sector on inclusive growth in Nigeria.Key words: inclusive growth, financial development, trade openness, broad money supply.

THE IMPACT OF BANKING CONCENTRATION ON INVESTMENT AND ECONOMIC GROWTH IN JORDAN

This paper aims to investigate the impact of banking concentration on investment and economic growth for the Jordanian economy. It utilizes annual sample for the period between 1980 and 2018. The study examines the effectiveness of the Structure-Conduct-Performance (SCP) hypothesis and the other Efficient-Structure (ES) hypothesis for the case of Jordan. The Augmented Dickey-Fuller (ADF) and cointegration tests are used and the results indicate to the appropriateness of the following econometric techniques: Autoregressive Distributed Lag Bound test (ARDL), the fully modified OLS (FMOLS) and generalized methods of moments (GMM). The estimation results indicated to negative relationship between concentration index and both investment spending and the rate of real economic growth. The study recommended that the Central Bank of Jordan should continue to allow new banks to enter the banking market to reduce the impact of concentration as much as possible to achieve competitive gains in the Jordanian banking sector.Keywords: Banking Concentration, FMOLS, GMM, Investment, Economic Growth.JEL Classification: G210DOI: https://doi.org/10.32479/ijefi.10891

The Role of Political Stability, Labor Market and Education on Migration: The Empirical Evidence from Sri Lanka

This study employs annual data from Sri Lanka over the period of 1990 – 2018 in order to investigate the impact of political instability and the existence of violence, unemployment rate, wage differential and level of education on migration. ADF unit root test confirmed that none of the variables are I(2), which allows us to examine the long run relationship between the variables using Autoregressive Distributed Lag (ARDL) Bound testing method. AIC is suggested to adapt ARDL (1, 0, 0, 2, 0) model among the top 20 models. ARDL Bound testing approach identified the cointegrating relationship between the variables. The results of both ARDL Bound test and the ARDL version of ECM detected that unemployment rate, political instability and the existence of violence/terrorism and level of education have a positive and significant impact on net migration whereas wage differential do not have significant impact on it even though it affect the net migration negatively both in the long run and in the short run respectively. Also, the coefficients of long run results and the Wald test confirm that the impact of unemployment rate is higher than wage differential, political instability and level of education on net migration in the long run. The result of CUSUM test of selected ARDL model discloses that the estimated model is stable and this model passes the all the diagnostic test. Moreover, Granger causality test identified a causal relationship that stemming from unemployment to net migration, wage differential to net migration, political instability to net migration and level of education to net migration. These findings could be useful to policy makers when they formulating and implementing the policy related to labor markets and good governance.

Impact of investment on GDP and non-oil GDP in Azerbaijan

The causal relationship among, investment and growth is mixed and controversial both the oretically and empirically. There is large empirical literature which examines the investment-growth nexus. This paper examines the causal relationship among, investment and economic growth in Azerbaijan using months’ time series data from 2010-2019. Results for Augmented Dickey‒Fuller (ADF), Phillips−Perron (PP) and Kwiatkowski−Phillips−Schmidt−Shin (KPSS) unit root tests show that all variables under consideration are I(1). Result from the Auto Regressive Distributed Lag Bounds Testing (ARDLBT) indicates that there exists cointegration among gross domestic investment, gross domestic product. Investment have significant positive effect on economic growth of Azerbaijan both in the short-run and in the long-run.

The impact of Inflation and Unemployment on Economic Growth in Jordan: AN ARDL Bounds Testing Approach

This paper examines the effect of inflation (INFR) and unemployment rate (UNR) on economic growth which is measured by Gross Domestic Product (RGDP) in percent on in Jordan for the period 1976-2016. To achieve this objective unit root, Augmented Dickey Fuller test was used. Subsequently, the Autoregressive distributed Lag ( ARDL) bounds testing approach and Error Correction Model (ECM-ARDL) model are applied to examine the both long-run and short-run causality issues between the variables under consideration. The empirical results of the study revealed, the results of the unit root test indicate that Real Gross Domestic Product growth (RGDPG), unemployment and inflation are tested at first difference then the problem of unit root has disappeared and hence they have become stationary at first difference. The bounds tests suggest that the variables of interest are bound together in the long-run when RGDPG is the dependent variable. Also, there is a long run relationship amongst the variables when INFR is the dependent variable. The results indicate also that there is no significant Granger causality from INFR to UNR and from RGDPG to UNR and from RGDPG to INFR and from INFR to RGDPG as well the short run. The results of this study can be used by all respected authorities in Jordan, especially authorities of economic and social institutions, so that they could attempt to reduce and control unemployment and inflation to achieve economic growth.

Macroeconomic Effects of Foreign Aids on Poverty Level in Nigeria

This study examines the effect of foreign aids on poverty level in Nigeria using Autoregressive Distributed Lag (ARDL) approach. Data spanned from 1980-2015 were sourced from World Bank development indicators, Central Bank of Nigeria Statistical Bulletin and National Bureau of Statistics. From the ARDL Bound test approach to co-integration, the result of the study showed that foreign aids help in reducing poverty, but does not have a significant effect on the level of poverty in Nigeria. The study therefore argued that foreign aids could be effective in Nigeria if multilateral and multidimensional aids system were adopted which should be directed to different areas in the Nigerian economy. Also, proper care and monitoring needs to be put in place in order to checkmate any attempt for corruption especially in a situation where private individuals would divert foreign aids to solve private needs.

How Fiscal Policy Affects Non-Oil Economic Performance in Azerbaijan?

The role of fiscal policy in promoting economic growth has been subject to many studies since its suggestion by Keynes who stated expansionary/contractionary impact of public expenditures/taxes. In this context, effectiveness of fiscal policy use to develop non-oil sector in resource rich economies should be studied. This paper investigates short- and long-run effects of budget expenditures and tax-related budget revenues (direct transfers from oil fund excluded) over non-oil GDP while controlling for oil price volatility and oil production in case of Azerbaijan. Autoregressive Distributed Lag Bounds Testing (ARDLBT) Approach to cointegration is employed for data covering 2000Q1-2015Q2. Estimation results theoretically consistent and statistically significant long-run effects of both budget expenditures and tax-related budget revenues. However, in the short-run, the effects are contrary to the theoretical expectations. Findings are useful for Azerbaijan fiscal policy makers especially in the current complicated nature of economic processes in the economy due to oil related challenges.

Electricity consumption–economic growth nexus in Uganda

ABSTRACTThis paper empirically examines electricity consumption–economic growth nexus in Uganda from 1981 to 2013. Autoregressive distributed lag-bounds testing and Granger causality tests are employed for analysis. The results confirm the existence of long-run relationship between electricity consumption and economic growth and vice versa. In addition, the Granger causality test results confirm conservation hypothesis in the short run and feedback hypothesis in the long run. Therefore, the paper recommends Ugandan authorities not only to develop energy policies geared toward promoting efficient energy use but also to expand electricity infrastructure to address increased electricity demand to support economic growth.

Impact of Fiscal Decentralization on Non-Oil Economic Growth in a ResourceRich Economy

The paper investigates effects of fiscal decentralization on non-oil sector development in case of Azerbaijan for the quarterly period of 2002 through 2013. Results obtained from Autoregressive Distributed Lag Bounds Testing approach show that share of local expenditures and revenues in total, measures of fiscal decentralization, have negative impact on non-oil GDP. This finding is consistent with other studies outcomes and can be considered adequate for the Azerbaijani economy due to the number of institutional constraints. The results of the research would provide a good insight for policy makers in implementing economic reforms to develop institutional aspects of decentralization and thus make it supportive for non-oil economic growth.