Capital Formation Research Articles

Import Trade Liberalization and Economic Growth Rate in Nigeria

Proponents of ‘free trade’ agree that increasing trade through liberalization would lead to economic growth and overall development of the economy. However, statistics have shown that Nigeria’s economy has not fared better despite the adoption of numerous trade liberalization policies by successive administrations. Hence, this study examined the relationship between trade liberalization and economic growth in Nigeria from 1986 to 2023, using the Autoregressive Distributed Lag (ARDL) technique to identify the long-run and short-run effects of trade liberalization policies on economic growth in Nigeria. The time-series data used in this study were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, World Bank Development Indicators, National Bureau of Statistics (NBS), and National Population Commission (NPC). The GDP growth rate was used as the dependent variable, while the Average Import Tariff (AIT) was used as the independent variable. The confounding variables in the model include Foreign Direct Investment (FDI), Institutional Quality (INSQ), Remittances, Exchange Rate, Gross Fixed Capital Formation, Domestic Credit to the Private Sector, and Secondary School Enrollment. The findings show that trade liberalization in Nigeria had a significant negative impact on economic growth in the short-run, while a significant positive impact was recorded in the long-run. This study, therefore, recommended targeted tariffs for vulnerable sectors of the economy, increasing efficiency in non-oil revenue collection, institutional and infrastructural reforms, which will help to amplify the long-term benefits of trade liberalization. Keywords: Trade Liberalization, Economic Growth, AIT, Institutional Quality, ARDL.

Role of Human Capital and Renewable Energy in Shaping Economic Growth of Pakistan

The aim of this study is to investigate the relationship between human capital, renewable energy, foreign direct investment and economic growth in Pakistan. For this purpose, secondary data ranging from 2000 to 2023 is used. Economic growth is used as the dependent variable, while human capital, physical capital, renewable energy, and foreign direct investment are used as independent variables. The Auto-Regressive Distributed Lag (ARDL) model technique is used for analysis. The results of this study indicate that, in the short run, physical capital positively impacts economic growth, while all other variables have a negative impact. However, renewable energy and foreign direct investment are found to be insignificant in influencing economic growth. In the long-run results, physical capital has a negative and insignificant impact, while human capital, renewable energy, and foreign direct investment positively impact economic growth. Policymakers and government officials should focus on improving education, particularly skill-based education, fostering public-private partnerships to enhance productivity and capital formation, providing incentives for renewable energy technologies, and implementing investor-friendly policies and tax incentives to attract foreign direct investment.

Analyzing the influence of agricultural raw material imports on agricultural growth in 48 Sub-Saharan African countries

This study examines the impact of agricultural raw material imports (ARMI) on economic growth in 48 Sub-Saharan African countries from 1990 to 2023. Given the critical role of agriculture in the region, the research seeks to understand how access to imported agricultural inputs influences productivity and overall economic development. A gravity model framework is employed to analyze the relationship between ARMI and gross domestic product (GDP). The study incorporates panel data spanning over three decades, controlling for key economic indicators such as gross fixed capital formation and rural population. The results indicate a statistically significant positive correlation between ARMI and GDP, suggesting that imported agricultural inputs play a vital role in enhancing productivity and driving economic growth. Additionally, gross fixed capital formation and rural population are identified as significant determinants of economic performance in the region. The study underscores the importance of facilitating agricultural imports to support sustainable economic development. It highlights the need for a strategic approach to optimize the benefits of ARMI and strengthen the agricultural sector's contribution to GDP growth. Policymakers should implement supportive policies and structural reforms to enhance the effective utilization of agricultural imports. This includes improving trade facilitation, infrastructure, and investment in agricultural value chains to ensure long-term economic prosperity in Sub-Saharan Africa.

What has influenced the growth and structural transformation of China’s cultural industry? — Based on the input-output bias analysis

ABSTRACT This study uses the structural decomposition and bias analysis models to find the factors influencing the development of China’s cultural industry. The data comes from the input-output tables published by the National Bureau of Statistics of China from 2012 to 2020. The findings reveal that technological advancement is the main factor influencing the cultural industry, with a significantly greater impact than other factors. Besides, household consumption is another vital element in the industry’s growth, but the impact strength is relatively weaker than technological advancement. Contributions of government consumption, capital formation, and net export are observed to have a minor effect on the cultural industry’s development. Therefore, the government should strengthen its support for the cultural industry, promote the expansion of cultural consumption, and strengthen its support for technological innovation to ensure the long-term development of the cultural industry as a national soft power.

Toward sustainable development: Unfolding the nexus among exports, foreign direct investment, capital formation, natural resource rent, unemployment, and low-carbon transition in Morocco

Toward sustainable development: Unfolding the nexus among exports, foreign direct investment, capital formation, natural resource rent, unemployment, and low-carbon transition in Morocco

THE IMPACT OF FOREIGN DIRECT INVESTMENT ON SUSTAINABLE ECONOMIC GROWTH, RESPECTIVELY ON INEQUALITIES BETWEEN COUNTRIES

This study aims to examine the effects of FDI (foreign direct investment) on sustainable economic growth in 73 countries and to analyze the impact of FDI on inequalities between countries. The economic growth of a country is measured by the real gross domestic product per capita (GDPpc). The inequalities between countries are measured by the Sustainable Development Goals score, respectively the SDG10 score (reduced inequalities) and the SDG8 score (decent work and economic growth). The study shows that the statistically significant impact of exogenous variables on GDPpc or SDG10 score, differs from one group of countries to another, as follows: (1) in small countries (the size of the population), purchasing power index of exports (PPexp) negatively affects GDPpc, while productive capacities index and FDI inward positively affect GDPpc; (2) in large countries, PPexp (negatively) and GDP growth (positively) affect SDG10; (3) in developed countries, PPexp negatively affects GDPpc; (4) in developing countries Gross Fixed Capital Formation Inward (positively) and GDP growth (negatively) affect GDPpc. FDI inward and Gross Fixed Capital inward have negative impact on SDG10, while FDI outward and Gross Fixed Capital outward positively affect SDG10, only in developing countries; (5) in high-income countries, FDI positively affects GDPpc; (6) GDP growth has a positive and statistically significant impact on SDG10 only in upper-middle countries. The multiple regression coefficients that highlight the impact of exogenous variables on SDG8, do not highlight differences between high-income, upper-middle-income and lower-middle-income countries.

THE ROLE OF STOCK MARKET AND ECONOMIC GROWTH IN NIGERIA

Nigerian stock exchange has existed since 1961, it truly began to operate effectively when the civilian government returned to power in Nigeria in 1999. Until recently, the trading activity in the Nigerian stock market was quite limited; as a result, the prices exhibited considerable stability, which can be seen by analyzing the turnover ratio during that time frame. Most research conducted on the Nigerian stock market has focused on market efficiency.This study examines the role of the stock market in driving economic growth in Nigeria over the period 1993 to 2023, utilizing the Ordinary Least Squares (OLS) regression method. By analyzing time series data, we assess the impact of stock market indicators such as market capitalization, stock turnover ratio, and trade volume on Nigeria's Gross Domestic Product (GDP). The OLS approach is employed to investigate the linear relationship between stock market performance and economic growth, addressing potential challenges such as multicollinearity, autocorrelation, and heteroskedasticity within the dataset. Results reveal a statistically significant, positive correlation between stock market development and economic growth in Nigeria, suggesting that an efficient stock market may stimulate economic expansion by facilitating capital formation and resource allocation. This study offers insights for policymakers, emphasizing the need to strengthen Nigeria’s stock market infrastructure and regulatory environment to foster sustainable economic growth.

Productive efficiency in the Caribbean and Latin America under free trade

Analysis of the Nonparametric Economic Efficiency Index revealed that measures of economic efficiency were higher in the Caribbean, but the variation in the measure was also greater in this region compared with Latin America. In both regions allocative efficiency contributed more to economic efficiency compared with technical efficiency, with the measure of allocative efficiency being greater in Latin America while measures of technical efficiency were greater in the Caribbean. Both regions showed improved economic efficiency following Covid. Regression analysis reveals that in the Caribbean, literacy rate, private sector access to credit, fixed capital formation and access to electricity have a positive impact and tax on income and the exchange rate had stronger negative impact. In Latin America, the exchange rate and market size had a stronger impact on economic efficiency.

Investment and capital–labour relations in India’s organised manufacturing sector

ABSTRACT This study is conducted against the backdrop of a significant investment crisis in India’s manufacturing sector during the second decade of the twenty-first century, marked by a substantial slowdown in capital formation. Adopting theoretical approaches from heterodox economic schools, the study seeks to explore the determinants of investment in India’s organised manufacturing sector. Through empirical analysis, the study establishes a relationship between the rate of profit and the investment rate, revealing that the conflict between capital and labour is the most critical factor determining investment rates in the short and long run. Furthermore, the analysis is extended to different size classes of manufacturing units (Large, Medium, and Small). The study shows that while technological factors determine investment in Large size class, effective demand plays a key role in Medium size class, and distributional struggles acquire a dominant part in determining investment in the Small size class. Based on the empirical findings and the global economic context, the study proposes policy interventions, emphasising the need for an active and engaged state in the economic sphere. This includes increased public research, public investment, demand management, and labour welfare to ensure sustained long-term growth and investment in the manufacturing sector.

The Impact of Child Labour on Human Capital Formation in Nepal

The Impact of Child Labour on Human Capital Formation in Nepal

Statistical Modelling of Nigeria’s Gross Fixed Capital Formation Using Fréchet-based Distributions

This study employed a quantitative research design to statistically model Nigeria’s Gross Fixed Capital Formation (NGFCF) using Fréchet-based distributions, assessing its distributional properties and economic implications. A secondary dataset from 1981 to 2020 was sourced from the Central Bank of Nigeria’s Statistical Bulletin and the World Bank national accounts data. The research approach involves both empirical analysis and simulation techniques to examine NGFCF's statistical behaviour. A log transformation was applied to NGFCF to stabilize variance and improve normality, which was tested using the Anderson-Darling (AD) test statistic. Four Fréchet-based distributions Kumaraswamy Fréchet (KF), Exponentiated Fréchet (EF), Beta Fréchet (BF), and standard Fréchet (F) were considered for modelling NGFCF. The Maximum Likelihood Estimation (MLE) method was employed for parameter estimation, and model performance was evaluated using the Akaike Information Criterion (AIC), Bayesian Information Criterion (BIC), and Likelihood Ratio Test (LRT). Simulated sample sizes were analyzed to assess model robustness. The Exponentiated Fréchet distribution exhibited the best fit, as evidenced by the lowest AIC and BIC values and the highest LRT statistics, making it the most suitable model for capturing the heavy-tailed nature of NGFCF. These findings highlight the role of flexible statistical models in economic forecasting and risk assessment, providing a refined approach to understanding Nigeria’s capital formation patterns.

Unveiling the Possibilities to Minimize the External Debt Burden Through Remittances in Top Remittance's Recipient Countries: A Quantile Regression Approach

ABSTRACTDespite considerable inflows from worker remittances, foreign direct investment (FDI), and foreign grants, many top remittance‐receiving countries continue to grapple with a growing external debt burden, posing a critical issue for policymakers and researchers. This study seeks to explore strategies to reduce external debt by investigating factors that either contribute to or mitigate foreign borrowing. Using panel data from 1991 to 2022, drawn from the World Development Indicators (WDI), the study applies Westerlund, Pedroni, and Kao co‐integration tests alongside Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) to address econometric challenges like serial correlation, autocorrelation, endogeneity, and unit roots. To ensure robustness, the study validates findings through Canonical Correlation Analysis and quantile regression, reinforcing the FMOLS and DOLS results. The analysis indicates that worker remittances, FDI, and economic growth significantly alleviate the external debt burden, while factors like debt servicing, gross capital formation, and imports exacerbate it, leading to increased borrowing. Based on these findings, the study recommends that governments enhance economic growth by channeling remittances through formal means and investing them in high‐return, productive sectors. Additionally, controlling debt servicing and imports is suggested to better manage external debt.

Assessing the Impact of the Knowledge Economy on Economic Growth in Selected Arab Countries: A Panel Data Analysis (2010–2020)

This study demonstrates the impact of the knowledge-based economy in economic growth in Jordan, Qatar, Kuwait, Saudi Arabia, Oman, Bahrain, UAE, Egypt, Lebanon, Algeria, Tunisia, and Mauritania using annual Panel-Data analysis from 2010 to 2020. The knowledge economy is represented by total enrolment rate in secondary school, the total number of articles published in journals and the number of phones per 100 people. The study found a positive statistically significant effect of total capital formation, rate of participation in the labour force (15-64 years) and the total enrolment rate in secondary school on economic growth while also finding a negative statistically significant effect of trade and total number of published articles (a pillar of innovation in Knowledge-Based Economy) on economic growth. There is no statistically significant effect of the number of phones per 100 people (a pillar of information in a knowledge based economy) on economic growth. Only one of the three indicators of knowledge economy positively affects the economic growth. The other two indicators are either negatively affects economic growth or statistically insignificant.

The significance of foreign direct investment (FDI) and trade openness: evidence from nine European economies

This study examines the impact of foreign direct investment (FDI) and trade openness on economic growth in nine European countries using World Bank data (1995–2021). The analysis employs the Pooled Mean Group (PMG) Autoregressive Distributed Lag (ARDL) model to capture both short- and long-run dynamics. The findings indicate that FDI has a positive short-term effect but a negative long-term impact on economic growth. Similarly, trade openness stimulates growth in the short run but exerts a negative influence in the long run. Gross fixed capital formation has no immediate effect on GDP per capita but contributes positively in the long term. Granger causality tests reveal a unidirectional relationship from GDP per capita to both trade openness and gross fixed capital formation, while a bidirectional relationship exists between gross fixed capital formation and trade openness. These findings suggest the need for balanced policy measures to maximize the benefits of FDI and trade openness while mitigating long-term risks. Policymakers should focus on strengthening domestic industries, enhancing economic resilience, and implementing strategies to improve the absorptive capacity of FDI to optimize its long-run contributions to growth.

Infrastructure Development and Economic Growth in South Sudan

Purpose: The purpose of this study was to examine the infrastructure development and its contribution to the economic growth of South Sudan with emphasis on transport, communication and electricity. The dependent variable was economic growth, measured by the growth rate of gross domestic product, and the independent variables to measure infrastructure were road transportation, communication, and electricity. Methodology: Qualitative methodology was used through face to face interviews using an interview guide and focused group discussions from a sample of 200 respondents comprising of the directors from the Ministry of Infrastructure, Ministry of Finance, Members of parliament and local government as the representative of the common citizens selected using stratified sampling technique. The data collected was analyzed descriptively into themes and interpreted. Findings: The findings revealed that infrastructure played a significant role in the economic growth of the country. Road Transportation, communication, and electricity had a positive impact in development of the country. However the absence of economic resilience and the inability need to fill the technology gap and insufficient production of basic needs contributed to inequality and states’ disparities. Unique Contribution to theory, Practice and Policy: The study findings were aligned to the theory of infrastructure-led development, which states that public capital, in which infrastructure is included as necessary input in the production process, contributes to economic growth. The study recommended that South Sudan should adopt strategies and policies that will increase the quantity and quality of infrastructure development, as well as a capital formation strategy accompanied by human capital development and high institutional quality.

Does the Arab-Israeli conflict deter foreign direct investment in Israel?

ABSTRACT This article investigates the impact of military confrontations between Israel and its Arab neighbours on the inward Foreign Direct Investment (FDI) in Israel from 1970 to 2022. Employing a robust weighted least squares (RWLS) approach with M-estimation, the study incorporates a set of control variables to conduct a thorough analysis of stylised facts before delving into econometric modelling. The econometric model considers 6FDI the dependent variable with conflict occurrence represented as a binary variable. Control variables encompass economic growth, inflation, labour force, gross fixed capital formation, governance quality, and openness rate. Findings show that the Arab-Israeli conflict negatively affects FDI, aligning with expectations, with an average drop of $2 billion net inward FDI each time a conflict occurs. Pre-conflict pro-active diplomatic efforts can prevent hostilities, while post-conflict diplomacy is essential for rebuilding trust, negotiating agreements, and fostering an environment conducive to economic recovery and FDI.

Exploring the influence of financial development, renewable energy, and tourism on environmental sustainability in Tunisia

We examine the case of Tunisia to empirically assess the impact of financial development, renewable energies, tourism, capital formation, and industrialization on environmental protection from 1988 to 2021. Given the heterogeneity between countries in terms of environmental conditions, energy consumption and production, and infrastructure, the results may be distinct from the previous studies. Using the Autoregressive Distributed Lag (ARDL) model, the findings show that tourism and industrialization increase carbon emissions, whereas financial development, renewable energy, and capital formation lower them. One percent increase in renewable energy helps reduce carbon dioxide emissions by 0.80% in the long run and 0.57% in the short run. The rate of adjustment towards equilibrium was 0.48%. Other methods, including Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Canonical Cointegrating Regression (CCR), confirm the accuracy of our results. These findings provide policymakers in Tunisia and other countries with similar contexts with a solid basis for designing programs to improve environmental protection.

The Impact of Remittances on Economic Growth in a Remittance Receiving Country

The study is to examine the impact of remittances on economic growth, in particular how the development of domestic financial sector influences a country’s capacity to take advantage of remittances. Bangladesh’s remittances, specifically inflows, are an important source of income support and economic growth. Employing ARDL model on a dataset of 46 years from 1976 to 2021, this study finds that remittances boost growth in Bangladesh with developed financial systems. The study also finds that capital formation is positively associated with economic growth in the long run while remittance is negatively influencing economic growth. Thus, policies should focus on developing the financial system, reducing the cost of remitting and encouraging migrants to send remittances using formal channels.

Sustainable Tourism Development in Pakistan: Economic Opportunities and Environmental Challenges

The tourism sector in Pakistan has gained immense importance due to country’s rich cultural heritage, natural beauty, and famous religious sites. The tourism industry is required to be environmentally sustainable because it causes challenges of increased energy consumption, capital investment, waste generation, and CO2 emissions. The instant study was meant to evaluate the relationship between development of tourism industry and the degradation of environmental quality in Pakistan with a particular focus on trade and infrastructure development. The time series data from 1991 to 2023 was derived from World Development Indicators and secondary data sources from Household Integrated Economic Survey. A mixed-methods approach was employed which blended numerical data analysis and thematic insights. The ARDL model was deployed to look for the long-and short-term relationship between environmental quality, trade, tourism, and Gross Fixed Capital Formation (GFCF). The effectiveness of environmental regulations and practices prevailing in Pakistan were evaluated for environmentally sustainable tourism. The results indicated that the dependent variables of trade, tourism, and GFCF had negative relationship with environmental quality in Pakistan. It was further evaluated that there was severe deficit of enforcement of effective regulations and practices for environmentally sustainable tourism development in the country. It was concluded that the sustainable development strategies e.g. environmentally friendly trade policies, climate resilient infrastructure, and sustainable tourism practices may be prioritized by the government and the policy framers for mitigating the adverse impacts of tourism development.

Net Reverse Transfers from Latin America and The Caribbean: A Critical Note

This paper investigates whether the surge in private capital inflows Latin America and the Caribbean (LAC) has experienced in recent decades has also been accompanied by a significant outflow of profits and interest payments to foreign companies and their respective governments. It documents that there has been a massive reverse transfer of resources from the region to the developed countries of the world, particularly during the 2015-2023 period. The amounts transferred are not only large in absolute terms, but also relative to regional gross domestic product (GDP) and gross fixed capital formation (GFCF) for several countries of the region, including Chile and Mexico. This represents foregone opportunities for domestic investment in physical and human capital and may further undermine the already strained capacity of the region to generate future income and employment opportunities for its growing population. It is beyond the scope of this short paper to address the important question of whether the financial and technological (managerial) knowhow foreign capital ostensibly brings to the region is enough to offset the negative effects emanating from the unprecedented reverse transfer of resources in recent decades. The paper is organized as follows. The first section focuses on the surge in Net Foreign Direct Investment (FDI) during the 1990-2022 period. This is followed by a discussion of the unprecedented reverse transfers the region experienced during the period, particularly 2015-2023. The third section presents results for a labor productivity growth (error correction) equation for Mexico during the 1970-2020 period and the estimates suggest that, once remittances of profits are deducted, the impact of the growth rate in the net foreign capital stock per worker on labor productivity growth is diminished significantly, ceteris paribus. The last section is the conclusion.