Financial Capital Inflows Research Articles

Financial Capital Inflows, Manufacturing Exports and Economic Growth in Palestine: A Threshold Regression Analysis

Aims: The study examined the Optimal Level of the Financial Capital Inflows and Manufacturing Exports, Economic Growth in Palestine. Annual data from the (2000-2018) to Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), cross-border borrowing from the World Bank (Components Of Financial Capital Inflows) Financial Sector Development (FSD) real GDP (RGDP) and Manufacturing Exports (MEX) were no different from other Production Sources, Palestinian Monetary Authority (PMA) and Ministry of National Economy (MONE), Ministry of Finance and Planning (MOFP), Palestinian Central Bureau of Statistics (PCBS), Statistical Bulletin while data on Gross Capital Formation (GCF) and Human Capital (HC) was the source of the World Bank also curvature.
 Study Design: Cross-Sectional Survey Research (Qualitative & Quantitative).
 Place and Duration of the Study: Various Governmental Organizations in Palestine, between the periods (2000-2018).
 Methodology: Quantitative and Qualitative specification model, the equations used to examine the Optimal Level, impact and the relationship of Financial Capital Inflows and Manufacturing Exports on Palestinian Economic Growth, Threshold Regression Analysis was used to detect and verify the Optimal Level of Financial Capital Inflows by analyzing the data that have been collected from the Electronic Sources which available on the official websites of Governmental Organizations for the period (2000-2018). The methodology of the study revealed the relationship of the Optimal Level of Financial Capital Inflows with Manufacturing Exports on Economic Growth in Palestine. Data collection process and data analysis techniques employed to achieve the current study objective.
 Results: The study found that the optimization results showed that the Financial Capital Inflows of (CINF) Threshold value (21.77%) with a coefficient of (7.74) per year is the Optimal Level of Financial Capital Inflows in Palestine the Threshold Point Manufacturing Exports to any Financial Capital Inflows (CINF) of the Threshold value of Manufacturing Exports in Palestine. The study concludes that the Optimal Level for Financial Capital Inflows to Economic Growth is (21.77%); any Threshold Level above the sustainable level of Economic Growth will be adversely affected in Palestine.
 Conclusion: Findings of the study found that the Flow of Financial Capital Threshold exists for the Manufacture of Exports, and therefore recommends that excessive Financial Capital Inflows should be avoided in the country so that it does not make the conduct of Monetary Policy difficult, while the need of Financial Capital Inflows must be monitored well and directed to sectors (such as Industry, Agriculture, Mining and Quarrying) that have the absorptive capacity for them.

English

Zimbabwe’s economic progress is hinged on the performance of the agricultural sector, which supports the majority of the population. Bank credit empowers farmers to adopt inputs and technologies that are key for enhancing productivity and income. This study sought to establish the bank credit access trends among farmers in the Hurungwe District of Mashonaland West Province in Zimbabwe, comparing the current (2019-2015) and past (2014-2000) periods. A questionnaire was administered on a sample of 354 farmers. SPSS was used for data analysis. Credit access was significantly (p<0.05) influenced by the type of farmers, farmers’ education, age, farm size and alternative employment. Credit access was higher (p < 0.05) among Model A2 than Model A1 farmers, farmers with higher educational qualifications, aged between 46-55 years, with more than 35 hectares of farmland, and with alternative occupation. Failure to access bank loans by Model A1 farmers was ascribed to their lack of collateral assets, human capital and weather resilience infrastructure. Government should invest in irrigation infrastructure and create a conducive investment climate to stimulate financial capital inflows. Farmers should invest in physical and human capital to enhance their access to bank credit. Banks should devise collateral substitution models to avoid segregating poor farmers with productivity potential. Key words: Bank credit, capital formation, credit access, Model A1 farmer, Model A2 farmer.

Financial market determinants of the real cost of funds to public corporations in the US

Purpose The purpose of this study is to provide new empirical evidence on the impact of a variety of financial market forces on the ex post real cost of funds to corporations, namely, the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA. The study is couched within an open-economy loanable funds model, and it adopts annual data for the period 1973-2013, so that the results are current while being applicable only for the post-Bretton Woods era. The auto-regressive two-stage least squares (2SLS) and generalized method of moments (GMM) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of gross domestic product (GDP) and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long-term corporate bonds. Design/methodology/approach After developing an initial open-economy loanable funds model, the empirical dimension of the study involves auto-regressive, two-stage least squares and GMM estimates. The model is then expanded to include the federal budget deficit, and new AR/2SLS and GMM estimates are provided. Findings The AR/2SLS and GMM (generalized method of moments) estimations reveal that the ex post real interest rate yield on AAA-rated long-term corporate bonds in the USA was an increasing function of the ex post real interest rate yields on six-month Treasury bills, seven-year Treasury notes, high-grade municipal bonds and the Moody’s BAA-rated corporate bonds, while being a decreasing function of the monetary base as a per cent of GDP and net financial capital inflows as a per cent of GDP. Finally, additional estimates reveal that the higher the budget deficit as a per cent of GDP, the higher the ex post real interest rate on AAA-rated long -term corporate bonds. Originality/value The author is unaware of a study that adopts this particular set of real interest rates along with net capital inflows and the monetary base as a per cent of GDP and net capital inflows. Also, the data run through 2013. There have been only studies of deficits and real interest rates in the past few years.

An empirical investigation into the impact of US federal government budget deficits on the real interest rate yield on intermediate-term treasury issues, 1972–2012

This study provides new empirical evidence on the impact of the federal budget deficit on the real interest rate yields on intermediate-term debt issues of the US Treasury, represented herein by the ex post real interest rate yields on 3-year Treasury notes and 7-year Treasury notes, two interest rate measures that have received essentially no attention in the economics and finance literature in recent years. This study is couched within a loanable funds model that includes two ex post real interest rate yields, the monetary base as a per cent of GDP, the change in per capita real GDP, net financial capital inflows as a per cent of GDP and the budget deficit as a per cent of GDP. This study uses annual data for the study period 1972 to 2012, a time period that includes ‘quantitative easing’ monetary policies by the Federal Reserve. Two-stage least squares estimations reveal that the federal budget deficit, expressed as a per cent of GDP, exercised a positive and statistically significant impact on the ex post real interest rate yields on both 3-year and 7-year Treasury notes, even after allowing for quantitative easing and other factors. The study also considers the time period 1980 to 2012 and offers simple robustness testing.

Relationship of Growth, Capital Inflow and Saving in Thailand for a Period 1993-2007

Growth of Thailand gross domestic product (GDP) cannot be achieved rapidly by using only local resources, because the country suffers from a shortage of capital and modern technology (Peter, 2004). One of the ways to foster GDP of Thailand is to welcome FCI. This paper examines the relationship of FCI and domestic savings on the long run economic growth in Thailand based on quarterly time series data for the period of 1993-2007. The relationship of the model was estimated using Ordinary Least Square (OLS). The relationship also was estimated for Error Correction Mechanism (ECM). The purpose of ECM is to investigate the shot-term equilibrium relationship between the integrated variables in the growth relationship. The findings fully support the applicability of economic growth models. Both capitals give positive effect to economic growth, the effect from domestic capital, saving, is greater than foreign capital inflow. ECM results suggesting that growth adjust to the change in saving, financial capital inflow and labour availability in the long run. The relationships also suggest that, in the short run of changes in saving, financial capital inflows and labour ratio to population have a positive effect on short run changes in growth.

Financial Development, Openness Relation and the Role of Financial Institutions: A Case of Pakistan

There is a lack of empirical research on the specific relationship between financial institutions, capital account liberalization and trade-openness; but there is no particular and comprehensive study on the theme in case of Pakistan. This study investigates the importance of financial institutions, net financial capital inflows and trade-openness for financial sector's development. Further, it also examines the hypothesis by Rajan and Zingales (2003). In doing so, three approaches i.e. Johansen test, DOLS and ARDL bounds testing approach to cointegration have been applied for long-term relationship. The empirical results reveal that long-term relationship among variables is robust. Coefficient of net capital inflows is having positive impact on financial development. Trade openness is the main contributor to financial sector's development. On the other hand, financial institutions and economic growth also improve the efficiency of financial markets in the country. The rise in inflation declines the performance of financial sector.

China's economic growth and its real exchange rate

The shocks that underlie China's comparatively rapid growth include gains in productivity, factor accumulation and policy reforms that increase allocative efficiency. The well-known Balassa–Samuelson hypothesis links productivity growth in tradable industries with real appreciations. Yet it relies heavily on the law of one price applying for tradable goods, against which there is now considerable evidence. In its absence, other growth shocks also affect the real exchange rate by influencing relative supply or demand for home product varieties. This paper investigates the pre-conditions for the Balassa–Samuelson hypothesis to predict a real appreciation in the Chinese case. It then quantifies the links between all growth shocks and the Chinese real exchange rate using a dynamic model of the global economy with open capital accounts and full demographic underpinnings to labor supply. The results suggest that financial capital inflows most affect the real exchange rate in the short term, while differential productivity is strong in the medium term. Contrary to expectation, in the long term demographic forces prove to be weak relative to changes in the skill composition of the labor force, which enhances services sector performance and depreciates the real exchange rate.

Economic Openness, Democracy, and Income Inequality

Scholars have studied effects of economic openness and democracy on national income inequality in two literatures. In democracy studies, scholars agree democracy reduces inequality but empirical evidence is ambiguous. In globalization studies, effects of economic openness on inequality are debated but have not been rigorously examined. This article is the first systematic statistical study of the effects of both economic openness and democracy on income inequality. These effects need to be studied together. The authors measure national income inequality from a comprehensive Gini coefficient data set. Economic openness is measured from trade flows, foreign direct investment inflows, and financial capital inflows. The period studied is 1960 to 1996, the unit of analysis is a country decade, and the sample includes 69 countries. The authors find that democracy and trade reduce income inequality, foreign direct investments increase income inequality, and financial capital does not affect income inequality. Policy implications are discussed.

Patterns of Financial Capital Flows and Accumulation in the Post-1990 Turkish Economy

ABSTRACT The purpose of this paper is twofold: using time series econometrics, we first investigate the determinants of short-term foreign capital inflows for Turkey following its capital account liberalization in 1989. We next investigate the changing nature of the private investment function under post-capital account liberalization and deduce hypotheses on its correlation with capital inflows and the key macroeconomic prices, such as the exchange rate, the real rate of interest, and real wages. Our results suggest that financial capital inflows have a significant negative correlation with the industrial production index and trade openness, and are positively correlated with real currency appreciation. Fixed private investment was found to have an inconclusive relationship with financial capital inflows. Real wage costs were observed to carry a significant negative relationship with private investment, indicating that at a time of currency appreciation, investors had to rely on declining wage costs in order to keep their export competitiveness. Under the volatile and uncertain conditions of speculation-driven investment patterns, the downward flexibility of real wages has to be seen as a concomitant factor of the post-financial liberalization episodes.

Inflation, interest and exchange rates in the transition1

AbstractCentral and Eastern European economies have made extraordinary progress in their trade and exchange regimes. Surprisingly, instant convertibility was established for a great variety of exchange rate regimes. In spite of diversity, all these countries have followed a common pattern: severe initial undervaluation ‐ the cost of speed and unrestricted trade ‐ followed by rapid real revaluation and incipient protectionism. Since 1994 in many cases an embarrass de richesse has appeared: high capital inflows which are either inflationary or costly to sterilize. A major cause of these flows ‐ or at any rate of the high cost of sterilization ‐ is the presence of significant interest rate differentials higher than required to cover the risk of devaluation. These are the necessary consequence of a policy of positive real interest rates and of real revaluation from excessively undervalued exchange rates. Lower interest rates are recommended, both to stem financial capital inflows and to reduce the cost of their sterilization.