Domestic Output Research Articles

Financial resilience, growth and risk sharing in the EU

We build a financial resilience index capturing the structure and stability features of financial systems and benchmark EU financial systems against their ability to enhance stable growth and international risk sharing. The index comprises financial openness, market orientation, equity deepening, maturity structure, and institutional soundness. Our results show that: (i) EU financial systems are highly heterogeneous and converge to a clustered pattern; (ii) the index is highly significant in growth regressions, suggesting that financial structure and institutional soundness are key to enduring growth; (iii) the heterogeneity of EU financial systems has implications for the vulnerability to domestic output shocks: the risk-sharing mechanism is more effective in the market-based and institutionally sound economies that group in the top financial clusters, whereas unsmoothed consumption is higher in economies belonging to the low-resilience clusters, especially in the aftermath of the global financial crisis, when the credit channel is significantly downsized.

How Do Household Coping Strategies Evolve With Increased Food Insecurity? An Examination of Nigeria's Food Price Shock of 2015–2018

ABSTRACTFaced with a significant devaluation of its currency and a surge in food prices, the Nigerian government prohibited the use of foreign currency for food imports. This essentially blocked the importation of numerous food items under the guise of stimulating the domestic output of these staples. Consequently, food prices in Nigeria increased despite a global decline in food prices, and the incidence and severity of food insecurity escalated. This study examines the changes in the types and severity of coping mechanisms for food insecurity resulting from the food price shock caused by the oil price crash, currency devaluation, and restrictions on foreign exchange. Nigeria's General Household Survey Panel data from 2012 and 2015, during periods of high oil prices, is compared with data from 2018 when oil prices had remained low, the currency had been devalued, and the treasury had been depleted. Alongside detailed descriptive statistics, logistic and hurdle regressions are employed for statistical analysis. Findings indicate a rise in the percentage of Nigerian households grappling with food insecurity from 2015 to 2018. During this period, 68.7% of households resorted to at least one coping mechanism, 31.8% adopted six or more coping strategies, and 43.2% resorted to severe coping strategies. The issue stems not primarily from natural disasters or conflicts but from a failure in macroeconomic and agricultural economic policies. Our findings confirm that these policies come at great cost, particularly to female‐headed households, single‐parent households, households headed by elderly people, and other vulnerable populations, pushing them deeper into food insecurity.

Research on the Dynamic Interrelationship between Economic Policy Uncertainty and Stock Market Returns

This paper employs the Panel Vector Autoregression (PVAR) method to examine the dynamic interrelationship between Economic Policy Uncertainty (EPU) and stock market returns. The existing literature has not reached a consensus on the relationship between EPU and stock market returns, and there is a lack of comparative analysis of domestic and foreign EPU. Therefore, this paper is the first to incorporate domestic and foreign EPU, stock market returns, and output into a unified framework, considering the dual impact of domestic and foreign EPU shocks. Additionally, the generalizability of the results is ensured by including a large sample of nine emerging and eleven advanced economies. The main findings are as follows: First, a positive shock to foreign EPU leads to a decline in stock market returns and is stronger than the impact of domestic EPU. Second, a positive shock to stock market returns reduces both domestic and foreign EPU. Third, a rise in stock market returns promotes domestic output growth, while increases in domestic and foreign EPU suppress domestic output growth. Finally, the United States is a net exporter of EPU rather than a net importer.

Effects of supply chain bottlenecks and fiscal stimulus on inflation dynamics in the COVID-19 pandemic era: a case of South Korea*

ABSTRACT We employ an augmented New Keynesian Phillips curve, integrating a global supply chain bottleneck index and comprehensive fiscal stimulus packages, to quantitatively examine the impact of these variables on inflation rates in South Korea using monthly time-series data from 2010 to 2023. The results reveal three key findings. First, the Global Supply Chain Pressure Index (GSCPI), serving as a proxy for global supply chain bottlenecks, has an overall statistically insignificant effect on inflation throughout the observation period. However, during the pandemic, its effect on inflation was statistically significant. Second, the detrended government stimulus packages, proxied by government transfers or government fixed investment, also demonstrated a significant escalating effect on inflation during the pandemic. These findings suggest that both cost-push and demand-pull factors contributed to recent inflation surges. Third, conventional determinants of inflation, such as expected inflation, the domestic output gap, and crude oil prices, consistently influence inflation, aligning with existing literature.

Design of novel IoT-based solar powered PV pumping systems for agricultural applications in diverse climatic zones of India

Irrigation is a crucial component of the agriculture industry. The gross domestic output of India is about 15 % derived from its farmers. Crop failure is common among farmers, primarily because of inadequate irrigation techniques and irregular power and water supplies. To begin with, a survey of farmers from various parts of India was undertaken in this regard, and the results indicated that most of them lacked an effective irrigation system. An inventive solar-powered irrigation system devised and deployed to address this problem includes an automated Internet of Things (IoT) system. This IoT system, which functions based on the moisture content of the soil, plays a crucial role in ensuring that the crops receive the right amount of water at the right time. Furthermore, the PV pumping system addresses irrigation issues in various Indian climate conditions, including composite, warm and humid, cold, moderate, hot, and dry. The locations chosen for these climate conditions are Jaisalmer in Rajasthan, Bangalore in Karnataka, Itanagar in Arunachal Pradesh, Patna in Bihar, and Amaravati in Andhra Pradesh. Performance ratios range from 0.514 to 0.739, system and pump efficiencies from 61 % to 88.80 %, and 57.10 %–58.60 %, respectively.

Analysis of k-means clustering algorithm in advanced country clustering using rapid miner

In the era of globalization, the understanding of developed countries is no longer limited to the level of per capita income alone. As part of the analysis of developed countries based on aspects of government revenue, income balance, national savings, and domestic output based on sales. This research aims to cluster and to find out how these economic indicators are interrelated and affect the status of a country as a developed country. The K-means algorithm is used to identify patterns of countries with similar economic characteristics. From the research conducted, there are 4 clusters generated based on the characteristics of developed countries.

Macroeconomic Determinants of Remittances Inflow in Nepal

Background: The phenomenon of international migration and remittances has gained significant attention in recent years, particularly in the context of developing countries like Nepal. In 2020 alone, remittance flows to low- and middle-income countries (LMICs) reached $540 billion. In many developing nations worldwide, including Nepal, migration has become an important source of income and foreign exchange, providing critical support for households and contributing to economic growth. Objective: To investigate the effect of various macroeconomic factors on remittance inflow in Nepal. Methods: Using the ARDL approach to co-integration, the study examines Nepal's short-run and long-run macroeconomic determinants of remittances, utilising annual data from 1993 to 2021. Results: The study finds that global oil prices, nominal exchange rate, and domestic output influence remittance inflow in Nepal. None of the macroeconomic variables affect remittance inflow significantly in the short run, while the oil price is positive and significant in the long run. The study also identifies the existence of a correction mechanism in the case of remittances whenever deviations from the long-run equilibrium occur. Furthermore, a negative association between domestic GDP and remittances corroborates the common finding that remittances are countercyclical and altruistic. Implications: The study has major policy implications, highlighting that remittance inflows are affected by external factors and that there is a negative relationship between domestic GDP and remittance inflows. These findings should be considered when formulating policies related to foreign employment and remittance inflows. Paper Types: Research Paper JEL classification: B22, F24, C22

Monetary Policy, Oil Rents, Exchange Rate and Consumer Prices Nexus: A Case Study of Pakistan

This research examines the effects of monetary policy in the form of nominal money supply, economic growth, exchange rate, and oil rents on domestic prices for Pakistan's economy. By taking an annual data series, this research reports evidence of mixed integrated order of the data series. The estimates of the ARDL bounds test suggest that consumer prices have a long-run cointegrating relation with its factors. The findings also highlight that the money supply supports the causality thesis, indicating that when the money supply stretches, it accelerates domestic prices. Moreover, it is also exposed that domestic output, exchange rates, and oil rents have significant and appreciating effects on consumer prices in both time spans. These results are robust to the diagnostics used in this research ensuring the reliability of the results. Based on these results, money supply and exchange rate should be controlled by the policymakers in such a way that it should not allow domestic prices to rise. Moreover, an attempt should be made via which increase in domestic out, and oil rents should remain greater than the increase in prices.

Efficacy of Monetary Policy Transmission During the Flexible Inflation Targeting Regime in India

This article builds a Structural Vector Autoregressive model and employs non-recursive identification restrictions to examine the effectiveness of the Monetary policy transmission mechanism in India during the Flexible Inflation Targeting regime (2016–2023). The results indicate that policy rate shocks have a significant negative impact on domestic output and prices during this regime. The findings further, reveal evidence of an exchange rate puzzle during the Flexible Inflation Targeting regime. Our results give credence to the RBI’s move towards a Flexible indicator targeting approach as all the macroeconomic variables of interest, that is, Domestic output and inflation produce plausible estimates in response to a monetary policy shock. JEL Classification: C32, E52, E5, E52, F41

Economic impacts of power-to-liquid fuels in aviation: A general equilibrium analysis of production and utilization in Germany

The aviation industry faces an urgent need to adopt sustainable aviation fuels for significant decarbonization. Power-to-Liquid (PtL) fuel is considered a potential game changer, but questions remain about the wider economic impacts of introducing PtL fuel in the aviation sector. This paper examines the economic impacts of introducing PtL fuel blending quotas along with a price policy consisting of a kerosene tax and PtL fuel subsidies for the case of Germany. Based on a detailed supply chain analysis, we apply a social accounting matrix and a computable general equilibrium model to take into account both, the production and utilization perspectives of PtL jet fuel. Our results show that the influence of low blending quotas is mainly limited to the aviation sector, with a 10 % blending quota increasing consumer prices by 7.9 % and reducing aviation industry output by 3.1 %. When quota levels increase, however, the effects go beyond the air transport system. On inter-sectoral level, we identify three main patterns: First, industries that substantially contribute to the PtL fuel supply chain, such as metal products and electrical equipment, see increasing levels in both, domestic production, and imports. Second, aviation upstream industries like transport infrastructure and aircraft production see reduced domestic production and imports. Third, aviation downstream industries, such as delivery services and travel agencies, see substitution effects, where imports partly replace domestic output. Macroeconomic indicators are affected negatively by the quota scenarios, but the relative impact is low as the maximum decrease in the gross domestic product (GDP) does not exceed 0.35 %. PtL fuel production subsidies can largely mitigate the decrease in aviation demand but come at the cost of a stronger reduction in the GDP and government income. Moreover, the sensitivity analysis emphasizes that various assumptions and parameters, such as the cost projections of PtL fuel, import options, and elasticities of demand, affect the intensity of economic consequences. Our analysis implies the trade-offs of policymaking between sectoral and macroeconomic interests in the context of sustainable fuels. The main contribution of this study is the investigation of the broader economic effects resulting from the adoption of PtL fuels in aviation. In particular, the production as well as the utilization perspective are considered simultaneously in this study.

The Extent, Excessiveness and Sustainability of Afghanistan’s Current Account

This article empirically investigates the extent, excessiveness and sustainability of Afghanistan’s current account (CA) deficits using quarterly data from 2004-Q2 to 2019-Q4. The framework of this article is the intertemporal approach to the CA using the present value model. First, a descriptive analysis of Afghanistan’s CA is conducted. Next, a bivariate vector auto-regressive (VAR) model is applied to estimate the optimal CA of the economy, which can be compared to the actual one to determine how excessiveness the actual CA is relative to the optimal one. The Augmented Dickey-Fuller and Johnson co-integration tests are applied to examine the necessary and sufficient conditions for the sustainability of the CA. Findings indicate that Afghanistan’s actual CA deficits are excessive and too variant relative to the optimal one; therefore, the deficit is considered problematic. The empirical results further disclose that Afghanistan’s CA is unsustainable. The lack of co-integration between real net output and real private consumption and between exports and imports suggests that the unsustainability is mainly due to the weakness of domestic production in satisfying internal demand and the failure of real export volume to equilibrate the trade balance. Hence, this study recommends increasing the level of domestic output, and reduction in imports supported by improvements in saving rate, infrastructure and export to improve the CA. JEL Codes: F14, F32, F39, C22

A MODEL OF GROSS CAPITAL FLOWS: RISK SHARING AND FINANCIAL FRICTIONS

AbstractThis article builds a two‐country model of gross capital flows where agents share tradable output risk using two bonds, subject to stochastic collateral constraints. Equilibrium portfolios are short in domestic bonds and long in foreign bonds because the endogenous movements of the real exchange rate provide a hedge against domestic output shocks. Under negative domestic shocks, these external positions transfer wealth from home to abroad. During the Great Recession, the model shows that such wealth transfer from the United States mitigated the consumption drop abroad. Quantitatively, financial frictions account for about half of the collapse in U.S. gross flows in 2008.

Impacts of Monetary and Fiscal Policies on Price and Currency Stability in Bangladesh

This study investigates the effect of monetary and fiscal policies on inflation and exchange rate in Bangladesh in light of recent high inflation and the currency crisis. The analyses employ data from 1991 to 2022 to examine the ability of monetary and fiscal policies to stabilize the economy by managing inflation and currency fluctuations. The ARDL bounds test approach is utilized to estimate the empirical relationships of the model specification from both monetarist and Keynesian perspectives. The study’s findings reveal that monetary and fiscal policies significantly impact inflation management, with monetary policy playing a more substantial role. The empirical relationship emphasizes that an increase in money supply and government spending positively affect inflation, with money supply having a greater impact on controlling domestic prices. Nevertheless, the study does not provide evidence that monetary and fiscal policies significantly influence exchange rate stabilization. The research indicates that enhancing the export sector, raising the amount of remittance inflows, reducing import reliance by promoting domestic production, prioritizing the reduction of fiscal reliance on monetary policy, and implementing a market-oriented exchange rate mechanism can aid in maintaining economic stability in terms of prices and currency. These outcomes provide valuable insight into the effectiveness of monetary and fiscal policies in stabilizing the economy and offer relevant policy implications for policymakers in Bangladesh.

Modelling asymmetries among consumer price index, currency price, gross domestic output and aggregate import demand in an emerging economy: the case of Nigeria

Modelling asymmetries among consumer price index, currency price, gross domestic output and aggregate import demand in an emerging economy: the case of Nigeria

The Role of Medicinal Plants in the Development of Afghanistan's Economy and Trade

Securing a favorable place in the global trade market and achieving sustainable economic growth are among the objectives of developing countries. A country's commercial status has significantly improved as a result of increased exports and improved economic conditions brought about by the growth of its domestic output. Medicinal plants (MPs) are a significant and productive part of the economies of the majority of countries, including Afghanistan. Afghanistan has an exceptional capacity for the production and export of MPs and herbal medications because of its unique geopolitical situation and climate. Because of their varied temperatures and geographic locations, the many provinces in the country offer considerable possibilities for the investment, commerce, and cultivation of these species. In addition to receiving basic healthcare, they may create jobs, stop the loss of the green flora so that certain significant wild species can be domesticated, and protect the environment with careful planning in this area. This article's goal is to review the contribution that MPs have made to the country's commerce and economic growth. Based on the results, it can be said that MPs have a multifaceted function in the expansion and growth of the Afghanistan's economy and commerce, and taking this into account, it is possible to understand the significance of these products on the list of significant exports from the Country. MPs are viewed as a potential link between biodiversity preservation, accessible healthcare, and sustainable economic growth.

Asymmetric role of the informal sector on economic growth: Empirical investigation on a developing country

The role of the informal sector in economic growth still remains an issue of debate. This study contributes to resolving this by taking into account the asymmetric effect of the informal sector on economic growth. The study applies the Non-linear Autoregressive Distributed Lag (N-ARDL) model to capture the asymmetric relationship between the informal sector activity and economic growth for the period 1982–2018 in Bangladesh. The estimation of the N-ARDL model reveals that the informal sector asymmetrically affects the domestic output and economic growth in Bangladesh for both the short-run and the long run. The study has observed an asymmetrically larger effect on output and economic growth from the falling contribution of the informal sector. Urbanization and capital growth also contribute to an increase in economic growth. Therefore, proper incentives and careful policy measures are suggested to effectively diminish the prevalence of informality and promote its transition towards a more formalized framework.

Macroeconomic impact and stock returns' vulnerability by size, solvency, and financial distress

We examine how firms' equity value, financing and credit quality respond to changing macroeconomic indicators. We provide evidence that the value of small, low-credit quality, and financially distressed companies are more vulnerable to labor market changes. Our findings show that the equity value of U.S. companies deteriorates when the economy experiences increased cost of capital from an inflation hike, a decrease in domestic output, and uncertainty in the labor market. Our findings are robust to changes in the sample period and after controlling for disparities across industries, states, and firms.

Asymmetric response of domestic production to exchange rate changes: Evidence from southeast Asian countries

This study explores the asymmetric effects of real effective exchange rate variation on domestic output in nine South East Asian nations. The study is the first thorough study on this issue for these countries. The results show that exchange rate fluctuations have asymmetric long‐run and short‐run effects on production in most nations. However, the findings vary across nations. Appreciation has a contractionary effect on production in most countries, while depreciation has an expansionary effect. In certain economies, an appreciation boosts domestic output whereas a depreciation diminishes it. Such conclusions can only be reached if appreciations and depreciations are separated, using non‐linear models.

Exploring the Influence of Education and Health Investments on Youth Employment Prospects in India

The discourse on labor engagement, underutilization, and unemployment has been a prominent focus in development literature, particularly in developing economies. These issues influence migration patterns and gross domestic output and, in some cases, contribute to youth restiveness. This study delves into the intricate relationship between investments in human capital, represented by spending on education and health, and its repercussions on youth employment outcomes in India. We gathered annual data spanning the years 1990 to 2021 from various Indian states. We employed the bootstrap-based bias correction for panel fixed effects estimation techniques to enhance the analytical accuracy. The findings of our investigation reveal that investments in human capital, encompassing both private and government health expenditures as well as expenditures on primary, secondary, and tertiary education, exert significant but varying impacts on youth employment in India. These results carry important policy implications. To effectively address the persistent challenge of youth unemployment in India, it is imperative to prioritize consistent and disproportionate investments in education over health. This shift in focus could prove instrumental in reversing the trend of youth unemployment and fostering sustainable economic growth.

Development focus of electronics industry in Russia: Shift from defense sector to market

The purpose of this research is to provide an analysis of the current status of the electronics industry in Russia and to suggest ways the government can invest in the industry to create a sustainable and competitive market. Research highlights the importance of the electronics industry in the global economy, and the need for Russia to invest in production and research to increase its domestic output. The study finds that the national strategy for the development of electronics in Russia needs to be more specific and rely on market trends. Research suggests that the government should provide clear funding for new and existing companies to build new facilities and improve research capabilities. Additionally, a feasibility evaluation model for project novelty in the electronics industry is proposed, which considers technology, facilities, funding, and compatibility. The paper emphasizes the significance of narrowing down general provisions of government documents to key development areas such as building factories or creating marketable products. It also recommends that during the recession of the technological cycle, Russia should make every effort to acquire mature equipment to overcome the shortage of semiconductors. The study finds that investing in mature equipment will ensure that the industry is sustainable over the long term. In conclusion, research recommends that Russia uses the current drop in demand for electronics manufacturing facilities to build a sustainable and competitive industry. By implementing these recommendations, Russia can improve both its domestic and international competitiveness in the electronics industry.