Existence Of Long-run Relationship Research Articles

Microfinance, Financial Inclusion and Economic Welfare in Africa: A Panel Investigation

This study explores the relationship between microfinance, financial inclusion, and economic welfare in a sample of 23 African countries for the period of 2004 to 2023 using annual time series data. We measured microfinance with the number of Branches of Microfinance banks, Microfinance Borrowers, Microfinance outstanding deposits, Microfinance outstanding loans; financial inclusion number of registered mobile money accounts per 1,000 adults; the number of mobile money agent outlets par 1,000 adults; and digital card ownership; governance and institutional quality with Rule of law, regulatory quality, and government effectiveness; and economic welfare with household consumption; while we controlled for the inflation rate, interest rate and exchange rate. These variables were estimated using Panel Least Squares, Fully Modified OLS (FMOLS), Dynamic OLS (DOLS), and Panel Autoregressive Distributed Lag (ARDL) estimation techniques. The result of the cointegration revealed that cointegration exists between the variables of the model. Findings from the aforesaid estimation techniques show that there is the existence of long-run relationships between microfinance, financial inclusion, and economic welfare since the coefficients of the microfinance and financial inclusion variables are statistically significant. The coefficients of the error correction terms which measure the effects of the short-run dynamics of the model suggest that the speeds of adjustment from the long run to the short run in the models would be 76%, 61%, 83%, 67%, 68%, 34%, and 80% respectively for all the specified models. Following the findings of the study, conclusions were drawn and the study suggests that microfinance institutions should adapt to the digitization of their products and services for wider coverage on one hand; the government should provide digital financial amenities to create a fertile ground for micro-financial institutions to rely on to maximize the welfare of the economy.

The Relationship between Inward Foreign Direct Investment, Economic Growth and Carbon Emissions: A Case of Italy from G7 Countries

Recently, a significant amount of carbon dioxide emissions has grabbed the attention of global community. Thus, this study attempts to investigate the impact of inward foreign direct investment, and economic growth on carbon dioxide emissions in case of Italy. We took Italy as our sample country as it has committed to achieve carbon neutrality by 2050. We took annual time series data for the dependent variable (CO2) and explanatory variables (GDP, FDI, Natural Resources) for the period ranging from 1990 to 2021. To examine the long run relationship between the variables we used autoregressive distributed lags bounds test of cointegration. The empirical findings revealed the existence of long-run relationships among the variables of the model. Furthermore, we also found that natural resources unidirectionally caused CO2 and GDP.

Building Resilience for Transformational Recovery: An Analysis of Monetary Policy and Economic Growth in West Africa before and Following the COVID-19 Periods

This study investigates the effectiveness of monetary policy in the pre and post COVID-19 periods in West Africa. The panel fully modified ordinary least squares (FMOLS) was used. Before the estimation, the correlation analysis and summary statistics were done. Unit root test was carried out to ascertain whether the data series are stationary or not and the panel cointegration test was used to determine the existence of long run relationship among the variables. The findings indicate that monetary policy has 12.3% negative and significant effects on economic growth in the periods before COVID-19, while it has insignificant effect after the pandemic. Furthermore, monetary policy has 21.01% negative and significance effects on inflation in the pre COVID-19 era, while it has 52.5% negative and significant effect on inflation after the pandemic. This indicates that the effectiveness of the central bank’s efforts to affect and control inflation has declined after COVID-19. Causes for this could include the pandemic’s effect on supply chains, demand, and the weaker economic environment. On this basis, the monetary authority should create an economic environment that will play a crucial role in determining the effectiveness of monetary policy in the post-COVID-19 periods to foster economic recovery.

Do Changes in Demographic Factors Affect Public Health Expenditures? The Case of Turkiye

The main objective of this study is to analyze the effect of demographic factors on public health expenditures in the Turkish economy for the period between 1980 and 2021. Time series methods are employed in this analysis. The stationarity of the variables is tested with the conventional unit root test, while Zivot-Andrews unit root test is employed to identify potential structural breaks in the data. The existence of long-run relationships between non-stationary variables is investigated using the ARDL bounds test method. According to the analysis results, a persistent and statistically significant association exists between public health expenditures and GDP, contingent upon variables such as the old dependent population ratio, urbanization, and population. While increases in national product decrease public health expenditures, increases in demographic variables cause an overall rise in total public health expenditures. Increasing life expectancy, changing demographic structure, urbanization, and advances in medical technology have significantly increased health expenditures. Policymakers must establish strategies to boost the representation of the private sector in the health market if public health spending is to be sustainable and efficient.

Nexus between infrastructural development and economic growth: Evidence from Bangladesh through auto-regressive distributive lag and nonlinear auto regressive distributive lag analysis

This study aims to scrutinize the influence of infrastructure on the economic growth of Bangladesh, employing an extensive time series analysis spanning from 1973 to 2020. Utilizing Principle Component Analysis, two distinct indices were constructed to gauge the dimensions of economic and social infrastructure. Subsequently, Auto-Regressive Distributive Lag (ARDL) and Nonlinear Auto Regressive Distributive Lag (NARDL) bound tests were employed to assess the existence of long-run relationships among the variables under examination. The findings indicate a significant and positive contribution of economic infrastructure to both long and short-term production expansion. Upon further disaggregation into negative and positive shocks, consistent results emerge. An increase (decrease) in the economic infrastructure (EI) index by one unit corresponds to an upsurge (subside) of 0.16% (0.17%) in economic growth. In contrast, social infrastructure (SI) exhibits no significant long-run association with GDP growth. The discerned pattern suggests that EI play a pivotal role in driving aggregate output, while SI display a lag. Despite this, it is imperative to underscore the importance of SI for human development. Consequently, adopting a comprehensive and strategic approach, encompassing vision, ensuring quality inclusivity, and anti-corruption measures, is imperative for Bangladesh to fully realize the transformative potential of its infrastructure investments and foster sustained economic growth.

Fiscal policy, interest rate and the manufacturing sector performance in Nigeria

In this paper, the influence of fiscal policy (government expenditure and taxation) and interest rate on the manufacturing sector of the Nigerian economy was explored for the period 1981 to 2021. The study utilized the autoregressive distributed lag (ARDL) model approach since some of our variables were integrated at level and others at first difference, and the bounds test reporting the existence of long run relationship in the model. Findings of the study indicated that in the short run, government expenditure and its one-period lag exerted a negative and significant influence on manufacturing sector performance; value added tax exerted a positive and significant effect on manufacturing sector performance while its one-period lag exerted a negative and significant effect; and interest rate exerted a positive and significant effect on manufacturing sector performance. In the long run, government expenditure put forth a negative but insignificant effect on manufacturing sector performance; while value added tax and interest rate exert positive and significant effect. In the disaggregated model, recurrent expenditure exerts a negative and significant effect; capital expenditure exerted a positive and significant effect; value added tax exerted a negative and significant effect; and interest rate put forth a positive and significant influence on manufacturing sector performance. The study recommended that there is need for a reduction in the cost of governance as a huge proportion of public spending is used in running the government other than being utilized in stirring critical sectors that could stir manufacturing sector performance.

Foreign Direct Investment, Energy Consumption and Greenhouse Gas Emissions in Nigeria

This paper investigated the nature of the relationship that exists between foreign direct investment, energy consumption, and greenhouse gas emissions in Nigeria between 1990 and 2020. The investigation was done using the ARDL method of analysis. The bounds cointegration test found the existence of long run relationship among the variables. The long run estimation result showed that foreign direct investment in Nigeria has a negatively significant impact on greenhouse gas emission in the short run and long run. The result also shows that AGO consumption has a negatively insignificant impact on greenhouse gas emission in the short run and long run. While PMS consumption has a positively significant impact on greenhouse gas emission in the long run. The model goes on to propose the use of government policies that would promote FDI investment in Nigeria and a more business friendly environment

The Impact of Government Expenditure on Industrial Sector Productivity in Tanzania

This study examines the impact of government expenditure on industrial sector productivity in Tanzania. The analysis was based on secondary annual time series data. Using data from 1980 to 2011, the study employs the Auto Regressive Distributed Lag (ARDL) bounds testing approach cointegration to examine the existence of long-run relationships and the error correction model (ECM) for the short-run relationships. All variables involved are integrated of order one while the error correction model estimates indicate the existence of a long-run relationship between government expenditure and the industrial sector productivity. Granger causality pair-wise test was conducted in determining the relationship among the variables. Analytical results show the existence of positive causality; therefore, government expenditure has significant impact on the industrial sector productivity. From a policy point of view, the focus should be on the government to adopt fiscal policy instruments with significant impact on industrial sector productivity.

Private Sector Financing of Public Infrastructure, Exchange Rate Dynamics and, Economic Growth Process in Nigeria

This study examined the nexus between private sector financing of public infrastructure, exchange rate dynamics and economic growth in Nigeria through the application of unit root, cointegration test, and granger causality. The result of the cointegration techniques suggests the existence of long run relationship among the variables. Granger causality result show that economic growth plays a pivotal role in driving infrastructure investment. However, the immediate feedback loop from infrastructure investment to economic growth is less clear, possibly due to the time lag inherent in the realization of infrastructure benefits. Other economic factors like interest rates, exchange rates, inflation, and FDI are influenced by broader macroeconomic and global conditions, showing less direct causality with infrastructure investment and economic growth in the short term. It is therefore recommended that Government at all levels must promote Public-Private Partnerships (PPP) to leverage private sector expertise and financing in infrastructure projects. Clear and transparent PPP frameworks will attract more private investments. Additionally, the Central Bank of Nigeria (CBN) should carefully manage interest rates to balance economic growth with inflation control. High interest rates can deter private investment, so a balanced approach is necessary

Relative Effectiveness of Monetary and Fiscal Policy Measures on the Economic Growth of Nepal

This study assesses the long run and causal relationship of various monetary and fiscal policy measures with the economic growth of Nepal. Annual time series data from the fiscal year 1976/77 to 2021/22 are used and analyzed employing econometric method of cointegration and Vector Error Correction Model (VECM) for the assessment and draw inferences applying r programming. All the variables exhibit stationarity at first order difference and are co-integrated. In the long run, monetary policy measures, broad money supply has the negative relation but interest rate and exchange rate have the positive relation with the economic growth. Fiscal policy measures under consideration total revenue, total expenditure and total trade are negatively related with the long run economic growth. However, neither the fiscal nor the monetary policy measures indicate the significant relationship with the economic growth in short run. The negative and significant coefficient of Error Correction Term (ECT) suggests the convergence of variables towards long term equilibrium. The cumulative sum (CUSUM) tests indicate the stability of the coefficients in the model, and the diagnostic tests reveal the absence of serial correlation and heteroscedasticity in the model. Finally, Granger causality test shows the existence of causal relationship between the independent and dependent variables. This study concludes the existence of long run relationship of monetary and fiscal policy measures with the economic growth in Nepal and monetary policy measures appear to be relatively effective than that of fiscal policy measures in stimulating the economic growth of Nepal.

AN ARDL ANALYSIS ON THE EFFECT OF OIL PRICE INSTABILITY ON FOREIGN RESERVE IN NIGERIA (2015-2022)

The paper employed auto regressive distributive lag (ARDL) model to examine the effect of oil price instability on foreign reserve in Nigeria using recent monthly time series data over the period of 2015-2022. The results of ARDL Bound cointegration indicated a presence of cointegration in the model which confirms an existence of long run relationship between oil price instability and foreign reserve. The findings of ARDL long run analysis show that oil price instability have negative and significant effect on foreign reserve. Likewise, inflation rate has a negative and significant effect on foreign reserve. On the other hand, oil revenue is found to have a positive and significant effect on foreign reserve. Furthermore, the ARDL short run estimates indicate that an existence of a short run relationship between oil prices and foreign reserve. From the findings, the coefficient of error correction term indicates that about 30% of the discrepancy between the actual and the long run or equilibrium value of foreign reserve is corrected or eliminated each month. Furthermore, the results of granger causality test indicate a unidirectional causality between oil price instability and foreign reserve. Based on the empirical findings, the paper suggests the need for the policy makers to adopt policy framework that will get rid of corruption and ensure macroeconomic stability. Policymakers should also take steps to mitigate the negative effects of oil price fluctuations on foreign reserve in Nigeria.

Exploring the impact of natural Resource utilization on human capital development: A sustainable development perspective

The COVID-19 pandemic has had a profound impact on societies worldwide, highlighting the need for sustainable development practices. This study focuses on the N-11 countries, aiming to investigate the influence of coal rent, oil rent and mineral rent on human capital by controlling the role of economic growth and financial development from 1990 to 2021. The study analysis begins by conducting preliminary tests to address cross-section dependency, slope heterogeneity, unit root, and cointegration to ensure robust and accurate findings. The study employed the Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) techniques for the panel data analysis. The LM cointegration method results reveal the existence of long-run relationship among the study variables. These test findings revealed that natural coal rent, oil rent and mineral rent are positively and significantly associated with human capital. We observe that economic growth and financial development also helpful to increase the human development level in these group of countries. Based on these finding, this study suggests different policy implication for these group of countries which will help policymakers to reach on consensus. Exploring the impact of natural resource utilization on human capital development from a sustainable development perspective during COVID-19 highlights the need for informed policy decisions. By considering the economic, social, and environmental dimensions, policymakers can create a resilient and sustainable future. Integrating sustainable development principles, embracing technology and innovation, and fostering international cooperation are essential to ensure a positive impact on human capital development in the face of resource utilization challenges.

Analysis of the Relationship between Interest Rate, Exchange Rate and Economic Growth in Nigeria

This study analyses the relationship between interest rate, exchange rate and economic growth in Nigeria spanning from 1980-2022. Data for the study were obtained from World Development Indicators. The study undertook unit root test using the Augmented Dickey Fuller (ADF) method. Consequently, based on the outcome of the ADF result, the research used Auto-regressive Distributive Lag (ARDL) model to determine the existence of a long-run interactive relationship between interest rate, exchange rate, and economic growth in Nigeria. The Auto-regressive distributive Lag (ARDL) bound test result of the long-run interactive relationship between the variables reported the existence of long-run relationship. The study further revealed that the interaction between real interest rate and exchange rate on growth of gross domestic product is negative, but statistically significant both in the long-run and previous period of the short-run. Similarly, the interaction between lending interest rate and exchange rate is negatively related with growth of gross domestic in the long-run. However, deposit interest rate and exchange rate recounted a positive but insignificant interactive relationship. It has been suggested, among other recommendations, that the Central Bank of Nigeria (CBN), should raise deposit interest rate in order to incentivize individuals to save a greater portion of their income. This will enable financial institutions to enhance their capacity to allocate more cash towards investment, thereby fostering economic growth.

Analysis of Fishery and Forestry Ventures and Poverty Reduction in Nigeria

Fishery and forestry ventures are sub-sectors of agriculture with the potential for poverty reduction through employment creation, value addition, and improvement in export earnings. Nevertheless, they have received relatively less attention from all levels of government in Nigeria. This paper examined the effect of fishery and forestry ventures on poverty reduction in Nigeria between 1976 and 2022. Ex-post facto research design was adopted. Data were sourced from CBN annual statistical bulletin, the National Bureau of Statistics, publications of the World Bank, as the Federal Ministry of Agriculture and Rural Development. NARDL was adopted for data analysis. Phillip-Peron Unit root tests revealed a uniform order of integration, while Co-integration Bounds test revealed no existence of long-run relationship between the fishery and forestry ventures and poverty reduction. Findings revealed that agricultural production in fishery and forestry has no significant long-run nexus with poverty reduction in Nigeria. The paper recommended that the Federal Department of Fisheries should engage reputable research institutes and colleges in the fishery industry in Nigeria to train and retrain participants in the sub-sectors to provide skilled workforce in the development of sustainable fishery production towards poverty reduction in Nigeria. The paper also recommended that regulatory agencies in the forestry sub-sector in Nigeria appoint more supervisors and enforcement officers to ensure adequate regulation of the industry towards adding maximum economic value to the exploration and exploitation of the forestry resources in Nigeria by reducing leakages and ensuring that adequate taxes and levies are paid including collection of relevant penalties from defaulters in order to attain sustainable income generation and poverty reduction among the accredited participants.

Human Capital Development and Economic Growth: Evidence from Nigeria

This study examined the impact of human capital development on economic growth in Nigeria from 1981 to 2021using the autoregressive distributed lag (ARDL) method. Annual time series data on the dependent variable, real gross domestic product growth rate (RGDPG), alongside the independent variables, including government expenditure on education, government expenditure on health as well as gross fixed capital formation were sourced and collected from Central Bank of Nigeria [1] Statistical Bulletin, while the annual time series data on primary, secondary and tertiary school enrolments were collected from UNESCO [2] Institute for Statistics. The series were tested for stationarity using the Augmented Dickey Fuller (ADF) unit root test. The result showed a mix of variables integrated of order one, I(1) and of order zero, I(0). The Bounds test for cointegration showed the existence of long run relationship amongst the variables as the F-statistic value of approximately 3.43 was found to be higher than the 5% upper bounds value of 3.28. The results of the ARDL method of analysis revealed that in the long run, government expenditure on education and tertiary school enrolment had insignificant negative impact on economic growth while government expenditure on health, gross fixed capital formation, primary and secondary school enrolments had insignificant positive impacts on economic growth. On the other hand, in the short run, while government expenditure on education exhibited significant negative impact on economic growth, government expenditure on health had significant positive impact on economic growth. Gross fixed capital formation impacted positively on economic growth, primary school enrolment had negative impact while secondary and tertiary enrolments had positive impact on economic growth. Consequently, the study recommended among others that the government should set incremental annual targets expenditure on health aimed at achieving the Abuja agreement of 15% of total public expenditure in the health sector. This will create multiplier effect in the long run and serve as a boost to economic growth in the country.

Impact of Foreign Loan on Economic Growth of Pakistan: A Time Series Analysis

This study examines effect of foreign loan on economic growth in Pakistan. The study uses time series data for the period of 1972-2022 and collects data from Economic Survey of Pakistan, SBP and WDI. ADF test results shows that variable inflation is stationary at level, while gross domestic product growth rate, foreign loan, and FDI are stationary at 1st difference. So, the study uses ARDL approach to detect the relationship between variables because integration order mixed. The ARDL model results shows that there is existence of long run relationship among all variables. The study results show that foreign loan has negative, FDI has positive, and inflation has negative effect on economic growth of Pakistan. This study recommends that Pakistan should overcome foreign loan and give friendly environment to foreign investors so that more and more FDI comes to country, that will help to improve economic growth of Pakistan.

Tax policy and economic growth: Evidence from Ghana

The government of Ghana implemented an Economic Recovery Program (ERP) in 1983, aimed at the restoration of fiscal discipline towards increasing revenue and promoting economic growth. In spite of the fiscal reforms’ growth in tax, revenue continues to lag behind that of government expenditure and compares poorly with revenue performance in other parts of the world. Economic growth in the country also settled around 5 per cent level for two decades after the introduction of the fiscal reforms. This paper examined the effect of tax policy measures on economic growth and explored the tax revenue threshold that optimizes economic growth using time series data for the period 1970 - 2020. The data sets involve GDP per capita, stock of human capital, physical capital, growth rate of working population, and six (6) tax indicators namely: import duty, excise tax, company tax, personal income tax, income and property tax, and value added tax. The results of the unit root test reveal that all the variables are stationary at levels and first difference. The bounds test signals the existence of long run relationship among the variables at 1 per cent level of significance. Employing the Autoregressive Distributed- Lag technique, the findings suggested that economic growth benefits from increases in import taxes and company taxes more than the other types of taxes both in the short and long run. However, increases in the share of value added taxes and personal income taxes were found to have deleterious effect on economic growth in Ghana. A threshold level of 14.48 per cent of tax revenue - GDP ratio was found to be optimal level of taxes that impact economic growth. The study recommends that broadening, nurturing and sustaining tax base should be the utmost target of policy to ensure significant increase in the total government revenue to promote economic growth.

Foreign Exchange Rates Dynamics and Stock Market Performance in an Emerging Economy: Evidence from Nigeria

This study focused on the connection between foreign exchange rates dynamics and stock market performance in Nigeria (1995 to 2021). The paper set out to examine the effects of foreign exchange rates movements on the stock market performance in Nigeria. The data for the study were obtained solely from the Central Bank of Nigeria statistical bulletin. The Naira-U.S Dollar, Naira-British Pounds, Naira-Euro, and Naira-Swiss Franc exchange rates were proxies for the foreign exchange rate dynamics, while stock market performance was represented by stock market capitalization. The vector error correction mechanism (VECM) and the Pairwise Granger Causality tests were employed to analyze the secondary data. Results revealed the existence of long run relationship between foreign exchange rate dynamics and stock market performances in Nigeria though with an insignificant impact. In addition, a uni-directional causality was observed running from market capitalization to naira US-dollar exchange rate among others. It was therefore concluded that foreign exchange rates dynamics have an insignificant impact on stock market performances in Nigeria. Thus, there is need to align Nigeria’s economic stabilization policies in order to effectively achieve currency stability (of the naira). Policies such as outright ban on importation of items that can be produced locally should be pursued vigorously. This will no doubt boost aggregate domestic demand for such products and also go a long way in enhancing the value of the naira and by extension stock market outlook in Nigeria.

Comparison Of Autoregressive Distributed Lag Model And Vector Error Correction Model Analysis On The Effect Of Some Macroeconomic Variables On Gdp In Nigeria

This research work employed Autoregressive distributed lag (ARDL) and Bound Test for co-integration with Vector Error Correction (VEC) Models for estimation of long run and short run effect on Gross Domestic Product (GDP) in Nigeria. In order to achieve this, annual data on GDP, Unemployment, Exchange, and Interest rate from 1980-2017 The Augmented Dickey Fuller (ADF) Test revealed that the variables are stationary at first difference .ARDL and bound test for co-integration revealed that the decision whether to accept or reject either of the hypotheses is inconclusive. Johansen confirmed the existence of long run relationship between the variables. VECM long run estimate indicated that there is positive and significant effect of Exchange rate and Unemployment rate on GDP while Interest rate had negative significance effect on GDP.ARDL long run estimate indicated that only Unemployment rate had significant effect on GDP. ARDL short run estimate among the variables revealed that the coefficient of the ECM(-1) had a correct sign and statistically significant at 5% level which also indicated that the system corrects its previous period at the speed of adjustment by 46% per annum, it was also revealed that interest rate was positive and statistically significant in the short run . While VEC short run estimate revealed that no any variable has significant effect on GDP and that the coefficient of the ECM(-1) had a correct sign and was statistically not significant at 5% level which also indicated that the system had its previous period correct at the speed of adjustment by 12% per annum,. The models were stable for forecasting, no serial correlation, multicollinearity, heteroskedasticity and the residuals are normally distributed

Investigating the relationship between market value added (MVA) and economic value-added momentum (EVAM): empirical evidence from Turkiye

Purpose- This study aims to investigate the possible relationship between market value added (MVA) and economic value-added momentum (EVAM). Besides, any possible linkage between leverage (in terms of the degree of combined leverage) and market value added is also tested. Methodology- This study conducts a time series analysis to the quarterly data of manufacturing industry, comprising Borsa Istanbul (BIST) listed manufacturing firms for the period of 2001.q2-2022.q4 to test MVA-EVAM relationship. It employs autoregressive distributed lag (ARDL) bounds testing approach, developed firstly by Pesaran and Shin (1999) and further revised by Pesaran, Smith and Shin (2001). The stationarity of the series is tested by the Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) unit root tests. Findings- Empirical findings from ARDL bounds testing approach refers the existence of long-run relationships between market value added and economic value added momentum; and market value added and degree of total leverage. The coefficients of the long-run form of ARDL model reveal that both economic value-added momentum and degree of combined leverage have statistically significant and negative effects on market value added. The estimated short-run coefficients indicate that economic value added momentum has significantly negative effect on market value added created as similar to the long-run finding. Another finding is that though leverage has significantly positive effect on market value added in the short-run, this positive effect turns out to be negative in lag one period. Conclusion- This study contributes to the literature on MVA-EVA relationship by employing autoregressive ARDL bounds testing approach to manufacturing industry comprising Borsa Istanbul (BIST) listed manufacturing firms of Turkey as an emerging market. Besides, the research model includes EVAM -as an independent variable- that is so rarely considered in existing literature. Keywords: Market value-added, economic value-added momentum, leverage, time series analysis, ARDL bounds testing approach. JEL Codes: G32, C32, C58