Government Consumption Expenditure Research Articles

The Influence of the Banking Sector on Economic Growth and Commodity Prices: A Panel Data Analysis of Spain, France, and Romania

This study aims to investigate the impact of the banking sector on economic growth and commodity prices. Through panel data analysis, the research explores the relationship between the banking sector and economic growth in Spain, France, and Romania from 2000 to 2020. The findings reveal a positive correlation between the strength of the banking sector and economic growth across these nations, underscoring its pivotal role in fostering economic expansion and subsequently improving commodity prices. Additionally, this study evaluates various regulatory measures crucial ensuring the banking sector’s sustainability and preventing financial crises, including credit risk management, lending policies, liquidity constraints, and international financing and investment strategies. By analyzing the interplay between regulatory measures and banking sector performance, incorporating variables such as non-performing loans, household debt, liquid liabilities, government consumption expenditure, foreign investments, and trade openness, this research provides policymakers with valuable insights to formulate effective strategies for promoting economic stability and ensuring the sustainability and growth of the banking sector.

Nexus among Exchange Rate Volatility, Inflation, and Economic Growth: A Panel Data Analysis

This study undertakes an examination of the intricate relationships among exchange rate fluctuations, inflation, and economic growth within South Asian nations, namely Pakistan, India, Bangladesh, Sri Lanka, and Nepal. Spanning the temporal horizon from 1990 to 2021, the research endeavors to unveil the repercussions of exchange rate instability on economic growth—a formidable challenge confronted by monetary authorities and policymakers in South Asia. The central focus lies on comprehending the dynamics of exchange rate volatility, inflationary pressures, and their collective impact on economic growth. In the pursuit of these objectives, GDP per capita serves as the yardstick for economic growth, while independent variables encompass a spectrum including broad money supply, exchange rate volatility, inflation, government consumption expenditures, and gross fixed capital formation. The quantification of exchange rate volatility entails the utilization of both the standard deviation and the GARCH (1,1) models. Subsequent to an in-depth analysis, the initial unit test results undergo reevaluation, incorporating the Breusch-Pagan LM, Pesaran CD, and Pesaran scaled LM tests to discern cross-sectional dependence. To address potential data non-stationarity while considering cross-sectional dependence, the Pesaran-CIPS and Pesaran's CADF tests are applied. A pivotal aspect of the research involves the application of a Feasibly Generalized Least Squares (FGLS) regression model. The outcomes of the FGLS panel data regression illuminate a noteworthy finding: exchange rate volatility, quantified through both techniques, significantly and adversely influences economic growth. In contrast, inflation exhibits a statistically insignificant negative impact on economic growth. The study culminates by proffering specific recommendations to policymakers, urging concerted efforts to ensure exchange rate stability and foster sustained economic growth.

The Effect of Exchange Rate and Exchange Rate Uncertainty on Domestic Consumption in SAARC Member Countries from 2005 to 2020

The exchange rate and its uncertainty are the key economic variables that influence other macroeconomic variables through various channels. Domestic consumption will be influenced by the exchange rate and its uncertainty. This research investigates the impact of the exchange rate and its uncertainty on the private sector consumption of the member countries of the South Asian Association for Regional Cooperation (SAARC) from 2005 to 2020. The data has been extracted from the World Bank websites, the Asian Development Bank, and the Ministry of Finance of Afghanistan. The uncertainty of the exchange rate data has been extracted using the ARCH method, and the research model has been estimated using the GLS method. The research results indicate that the exchange rate and its uncertainty have a significant and positive effect on private-sector consumption. The positive relationship between the exchange rate and its uncertainty with consumption is consistent with the theory of currency pass-through. Additionally, the impact of income on domestic consumption is positive and statistically significant, while the impact of government consumption expenditure on private-sector consumption is negative and significant.

Fresh Insight on the Determinants of Economic Growth with Focus on Inflation-Growth Nexus Evidence from Developing Countries

This study is the empirical effort of inquiring the link between inflation and economic growth in the context of other factors determining economic growth in selected developing countries. While utilizing Generalized Method of Moments (Difference and System GMM), the study found an inverse insignificant connection between inflation and economic growth. Furthermore, the sample developing countries tend to have highly positively evaluated by their lagged economic growth as well as the government consumption expenditures and agriculture sector productivity and all of these are having robust role on economic growth. Additionally, the economic impact of trade openness and money supply is mixed and even significant in some cases designating that developing countries can improve their economic growth through financial and trade development. These findings help rethink economic policy makers in developing countries for following inflation targeting policies and to utilize their public developmental expenditures to improve their primary sector (agriculture) productivity in order to enhance economic growth.

Taylor rules: Consequences for wealth and income inequality

This paper compares the consequences of “active” vs. “passive” Taylor rules for wealth and income inequality. Since the distinction is operative only along transitional paths, we compare the implications for two forms of government expenditure that generate such transitions. Our results confirm that the contrasting effects obtained previously for the aggregate economy have significant distributional consequences. For an active Taylor rule, whether the government increases its expenditure on consumption, or productively, wealth inequality will increase. Expenditure on the two public goods yields divergent paths for income inequality. Government consumption expenditure raises income inequality; productive government expenditure reduces it. If the Taylor rule is passive, an increase in either form of government expenditure reduces wealth inequality initially and over time. Income inequality initially increases, but declines over time, although remaining above its previous steady-state level.

The composition of public spending and the inflationary effects of fiscal policy shocks

The paper uses structural proxy-vector autoregressions to separately identify shocks to US government investment and government consumption expenditures. Positive public investment shocks robustly raise inflation and have a weak and insignificant impact on labor productivity. In contrast, positive public consumption shocks induce a significant fall in inflation together with a strong and persistent increase in hourly productivity. The empirical findings are consistent with a model where demand shocks have an endogenous effect on productivity due to variable technology utilization. Increases in government investment, despite adding to a productive public capital stock, induce a relatively low endogenous increase in productivity and goods supply in the short run and thus are inflationary, whereas government consumption shocks can lead to a temporary productivity increase and inflation decrease if technology utilization is relatively inexpensive to vary.

Import intensities of final demand components and their implications for economic openness: The case of the Czech Republic

AbstractThe article deals with the estimation of import intensities of exports, final consumption expenditures and gross fixed capital formation. It uses the input-output methodology of computing direct and indirect imports to the final demand components, which compares with regression estimates. Unlike the widely used turnover approach, the results contribute fundamentally to knowledge about the genuine openness of the Czech economy with regard to how much value-added is exported. In 2015, the highest import intensity for exports amounting to 52%, closely followed by 49% for investments. Household consumption worked with 41% import intensity, while general government consumption expenditures showed the lowest import intensity of 16%. Based on our input-output findings, the true openness of the Czech economy can be revealed. While turnover of exports to GDP reached 80% in 2019, the value-added approach showed only a half, i.e., 40% value-added was exported. It implies a contra-intuitive conclusion that even in a relatively small and highly integrated country into the globalized economy, there is a 60% majority of the non-tradeable goods.

Determinants of GDP Growth in the Philippines: 1970-2020

Gross Domestic Product Growth (GDPG) is one of the driving factors of economic development. The study aims to create an econometric model for the determinants of GDP growth in the Philippine setting. It also tackles a new approach while giving insights into how the selected variables of the researchers affect economic growth. The analysis used Gretl to acquire the results needed for the study. Microsoft Excel, on the other hand, was used to generate the trendlines of the variables. The result of the analysis shows that there is a significant relationship between the variables: General Government Consumption Expenditure (GGCE), Household and NPISHs Final Consumption Expenditure (HFCE), and Exports of Goods & Services (EoGS), the dependent variable, GDPG, also increases/decreases respectively. However, the relationship to Foreign Direct Investment (FDI) does not have a significant relationship with GDPG. Overall, the graphs have shown a positive uptrend; however, due to economic shocks, the economy experienced a rapid decline, especially between the years 1980-1990 and 2020 during the COVID-19 pandemic.

Improving economic security for older persons by public pension schemes: evidence from National Transfer Accounts for India.

This paper develops a framework for analysis of distribution related policy issues (i.e. inequality, poverty and inequity) for ensuring economic security for India's older persons by the public old-age pension systems with special reference to Indira Gandhi National Old Age Pension Scheme (IGNOAPS). The analysis is focused on (a) measurement of age-specific and intra-generational inequity by Lifecycle Deficit in the framework of National Transfer Accounts (NTA), (b) relationship between this inequity and poverty and inequalities in distribution of income and consumption and (c) role of current public funded IGNOAPS to improving economic security or reducing inequity for the elderly generation. The entire analysis is based on the benchmark year 2004-05 and a comparative analysis between 2004-05 and 2011-12. Main results show (a) remarkable age and intra-generational patterns for the older persons in labour income, consumption, income and consumption inequalities, consumption poverty and inequality-adjusted inequity and (b) efficacy of poverty-linked universal IGNOAPS to improve economic security or reducing the inequity for the older persons at a national cost of less than 0.20% of total revenueor consumption expenditure of Government of India. These results offer empirical evidence for design and implementation of redistributive policies for the older persons by integrating the objectives of reduction in economic inequalities, poverty and inequity. Such policies have wider implications for attainment of select UN-SDG goals, especially goals related to age-specific reduction in poverty and inequalities. The approach, results and implications of this paper are of general relevance for other developing countries in Asia and Africa if their economic policies aim at improving economic security of the older person in the framework of NTA methodology.

Application of multi-level analysis in modeling economy productivity

The purpose of the paper is to examine the factor that influence the productivity in the EU Member States. In the paper a multi-level analysis was applied. The research showed that the systematic transformation of the economy towards modern branches in favor of the traditional ones caused an increase in productivity. On the other hand, it is impossible to completely replace the former. Hence, the most appropriate direction seems to be a gradual increase in efficiency in underdeveloped sectors of the economy without abandoning them entirely. What is especially interesting, it was found that positive changes in final consumption expenditure of general government negatively affect productivity. Thus, there is a dilemma related to the scope of the impact of fiscal policy and regulations in the economy.

INFLATION DETERMINANTS AND POLICY MEASURES: EMPIRICAL ANALYSIS FOR PAKISTAN

Appropriate economic choices are very much dependent on stability of prices. It will bring certainty regarding purchasing power of the money. This research uses Johenson cointegration approach covering time duration from 1980 to 2018. The empirical estimates of this study shows that in long run all explanatory variables (unemployment, government consumption expenditures, unit price of imports, interest rate and money supply) have momentous influence in accelerating inflation in Pakistan. The findings show that decrease in unemployment and increase in unit value of imports will enhance inflation in long run. Due to the decrease in the government consumption expenditure there will be low investment, low production, and increased aggregate demand associated with high inflation. There exists positive relation between interest rate and inflation. The increase in money supply enhances inflation. Lagged value of error correction model is significant having appropriate sign. Furthermore, this study uses Granger Causality test to check the existence of uni or bi directional relationship among highlighted variables.

Bayesian model averaging approach of the determinants of foreign direct investment in Africa

The possibility of misinforming policy direction is undoubtedly high when factors determining foreign direct investment (FDI) are haphazardly selected owing to the diverse nature of the underlying FDI theories, thus leading to model uncertainty. To resolve the econometric and policy concerns, this study re-investigates the determinants of FDI for 53 African economies for which comprehensive data are available using the Bayesian Model Averaging (BMA) technique over the period, 1984–2018. Interestingly, unlike the previously conducted studies on FDI determinants, variables such as gross fixed capital formation, trade openness, exchange rate, secondary school education, democratic regime type and mobile subscriptions per 100 people take preeminent positions over other explanatory variables for the continent. However, government consumption expenditure, inflation, GDP per capita, capital openness and credits to the private sectors constitute the major deterring factors of FDI into the continent. These variables altogether remain the substantive predictors of FDI into African continent out of the 23 explanatory variables used. Similarly, differences are observed in the determinants of FDI across the regions of the continent. Thus, assuming the general policy framework to region specific concerns may not be efficient policy menu to attracting foreign capital flows. In light of the preceding, understanding the salient African-wide determinants as well as each region's idiosyncratic details regarding the determinants hold a promising path to tread in attracting foreign direct investment.

The Impact of Inflation on Economic Growth in Nigeria

This study investigates the impact of inflation on economic growth in Nigeria. The study employs the Autoregressive Distributed Lag (ARDL) model on the selected variables that are GDP, inflation, interest rate, money supply and government consumption expenditure from 1990-2020 (31 years). The findings from ARDL model reveal that inflation, interest rate and money supply exert significant negative impact on economic growth while government consumption expenditure exerts significant positive impact on the economic growth. Based on the findings, a more aggressive effort is needed by the government and monetary authorities to tackle the inflation and interest rate fluctuations to forestall the negative impact on the economic growth by ensuring their appropriate rates that will stimulate economic growth. Also the study recommends that government should ensure an appropriate level of money supply that will keep appropriate level of interest rate to avoid plunging the economy into liquidity trap to achieve an intrusive economic growth.

Natural Resource Rents and Economic Growth Paradox, the Analysis of Resource Curse and Its Transmission Channels in West Africa: The Role of Public Expenditure Policy

The study analyses the natural resource curse through the component of public expenditure policy, namely productive and unproductive expenditures, as plausible channels transmitting the resource curse in West Africa. The study examines which channel is the most prominent transmitter among public expenditure, Dutch disease, rent-seeking, and political institutions. A dynamic panel was adopted for the 1998-2018 period using Feasible Generalised Least Squares (FGLS) and Dynamic Ordinary Least Squares (DOLS) estimation techniques. The results confirmed the resource curse hypothesis in West Africa via productive expenditure and rent-seeking behaviour as the only relevant transmission channels. Moreover, productive expenditure interacting with natural resource rents mitigates the resource curse and can reverse it under a certain threshold. On the other hand, unproductive expenditure through government consumption expenditure exacerbates the resource curse. The findings suggest that appropriate productive expenditure policy measures in terms of fixed capital formation, and a diligent fight against corruption can overturn the resource curse over time.

Alternative energy and natural resources in determining environmental sustainability: a look at the role of government final consumption expenditures in France.

The global community is concerned about several environmental changes. Climate change, desertification, destruction of tropical rainforests, erosion of coastal ecosystems, soil resource loss, overfishing, species extinction, and loss of biodiversity are all contributing factors. Many commentators contend that these issues make up a cumulative, sustained human impact on the environment that has profoundly changed the surface of the Earth. We explore the effects of alternative energy sources, natural resources, and government consumption expenditures on French environmental sustainability from 1990 through 2018 under the environmental Kuznets curve (EKC) framework. We apply advanced econometric methodologies for empirical analysis. Our long-run estimates indicate that alternative and nuclear energy, natural resources, and government final consumption expenditures are negatively associated with CO2 emissions, while economic growth is positively related to CO2 emissions. CO2 emissions are negatively correlated with the square root of economic growth (EKC), thereby supporting EKC. As economic growth increases, environmental sustainability deteriorates. Eventually, EKC will make a positive contribution to environmental improvement. Future research directions, research limitations, and policy implications are discussed.

Dinamika Perekonomian Indonesia Sisi Pengeluaran: Sebelum dan Setelah Adanya Covid-19

The management of fiscal policy in Indonesia will have a positive impact on the market and can provide guarantees for the Indonesian economy. This study aims to determine the effect of PMTB, Household Consumption Expenditure, Government Consumption Expenditure, Indirect Expenditure and Direct Expenditure on GRDP seen from before and before the covid-19 pandemic. This study uses annual data, namely 2019 before the pandemic and 2020 before the pandemic from each province in Indonesia. The method used in this research is the dummy panel method which is processed through a eviews 10 programs for the period 2019 and 2020, the data used is sourced from the Central Statistics Agency and the Ministry of Finance's DJPK from 34 provinces in Indonesia. Based on the results of the study, it can be said that either partially PMTB, household consumption expenditure, government consumption expenditure, indirect expenditure and direct expenditure have a significant effect on GRDP and there is no significant effect between GRDP before the covid-19 pandemic (2019) and after the COVID-19 pandemic. the COVID-19 (2020) pandemic. Keywords: covid-19, economy, expenditure

The impact of oil supply shocks on real economic activity: new evidence based on the proxy SVARs

ABSTRACT The existing literature on the impact of oil supply shocks on real economic activity after the mid-1980s still fails to reach an agreement. This may be partly due to different identification assumptions and model specifications corresponding to the oil supply shock, and partly due to the oil supply shock identified previously is endogenous to real economic activity. In this paper, based on the proxy structural vector autoregressions (SAVRs), we identify an oil supply shock that is exogenous to real economic activity, and then study the impact of this shock on U.S. real economic activity. We find exogenous oil supply shocks have a very large and persistent impact on U.S. real economic activity after the mid-1980s. Besides, several new possible transmission channels through which exogenous oil supply shocks can influence U.S. real GDP are detected. Specifically, unfavorable exogenous oil supply shocks can lower the consumer sentiment index (CSI) and consumer confidence index (CCI), decrease real net exports of goods and services (NEGS) through the terms of trade (TOT) effect, and reduce real government consumption expenditures and gross investment of state and local (GCEGISL), thus leading to a decline in real GDP. These newly detected transmission channels are very important for policymakers.

Financial Sector Development and Economic Growth Nexus: Empirical Evidence from Sierra Leone

The study examines the nexus between financial sector development and economic growth in Sierra Leone over the period 1980-2018. The stationarity test result shows that the order of integration of variables included in the model was a mixture of I (0) and I (1). Therefore, the study employs the bounds testing approach to Cointegration and error correction models developed within the Autoregressive Distributed Lag (ARDL) framework to explore the long-and short-run effects of financial sector development on economic growth. The study uses two different measures of financial development including, credit to the private sector and broad money. The study also investigates whether there are other determinants of economic growth. Evidence of short-run dynamics was found amongst the various financial development indicators and economic growth. The results showed that credit to the private sector and broad money influenced economic growth in the short-run. Again, inflation and government consumption expenditure were found to impede economic growth in the short-run. Contrarily, Gross capital formation and FDI were found to stimulate economic growth in the short-run. The study recommends that policy makers should take caution in the choice of financial development indicator as a policy instrument for the attainment of growth and development. Again on the basis of empirical evidence, policies to improve the accessibility of affordable credit by the private sector, including small and medium scale enterprises should be enforced

Impact of Tourism on Economic Growth of Nepal: Is Tourism-Led Growth Hypothesis Valid for Nepal?

A voluminous study is available on tourism-growth nexus as tourism industry received considerable attention as a potential source of economic growth. This paper empirically examines the impact of tourism on economic growth of Nepal by using time series data of 1976-2020 and applying autoregressive distributed lag (ARDL) approach. Real GDP was used as proxy measure of economic growth, which was the outcome variable whereas the variable of interest was tourism receipts. Foreign aid, total volume of trade and ratio of government consumption expenditure to GDP were taken as control variables. The result of ARDL model shows that tourism has no significant impact on economic growth of Nepal in both short-run and long-run. However, total volume of trade has positive and significant effect on economic growth in short-run whereas foreign aid, total volume of trade and ratio of government consumption expenditure to GDP have positive and significant effect on economic growth in the long-run. In such context of tourism and growth relationship, tourism-led growth hypothesis is rejected for Nepal.

The three-dimensional impacts of governance on economic growth: Panel data evidence from the emerging market

In a modern economy, good governance is considered a prominent factor for economic growth (Liu, Tang, Zhou, & Liang, 2018). However, Sub-Saharan Africa has a poor track record of good governance and economic growth (Fayissa & Nsiah, 2013). Therefore, this study is aimed to investigate the impact of governance on economic growth in Sub-Saharan Africa. Panel data that covers a period from 2005 to 2019 for 34 countries and the principal component analysis (PCA) method are employed to achieve the stated objective of the study. The selected fixed- and random-effect estimations showed that among the six-governance quality indicators control of corruption, government effectiveness, regulatory quality, and rule of law positively affect real GDP per capita (economic growth) while political stability and absence of violence and voice and accountability are statistically insignificant to affect real GDP per capita. The estimations result of composite governance indicators confirmed that except for the political dimension of governance both the economic and institutional dimensions of governance, as well as overall composite governance indexes, positively affect the economic growth of the region. Besides, foreign direct investment, the government fixed capital formation and gross domestic product growth affect real GDP per capita positively in all models while government consumption expenditure and age dependency ratio negatively affect real GDP per capita. Therefore, in addition to the existing support in the improvement of the political activities in Sub-Saharan Africa, concerned bodies should also focus to enhance the economic and institutional dimensions of governance in the region