Long-run Impact Research Articles

Forced Displacement and Social Capital: Long-Run Impact of the Indian Partition

Forced Displacement and Social Capital: Long-Run Impact of the Indian Partition

Long-Run Impact of Welfare Reform on Educational Attainment and Family Structure

Long-Run Impact of Welfare Reform on Educational Attainment and Family Structure

Impact of Monetary Policy on Inflation and Investment in Pakistan: A Time Series Analysis

Purpose: This study aims to explore the impact of monetary policy on inflation and investment in Pakistan.
 Methodology: Our study employs the Autoregressive distributed lag model (ARDL) over the time of 1972 to 2019.
 Findings: The empirical findings show that in the long-run impact of money supply has significant and positive on investment and other variables trade, foreign direct investment, gross domestic saving, services are also positively associated with the investment. While other variables interest rate and exchange rate negatively linked with investment. Empirical findings of the second econometric model show the core variable money supply has a significant and positive on inflation including other variables foreign direct investment, exchange rate, exports and government expenditures on education but other variables interest rate, gross domestic saving and agriculture output negatively linked with inflation.
 Implications: The study indicates that a stable monetary policy should be introduced to improve a country's economic development. Monetary policy should be used to build an agreeable environment of uncertainty that draws both domestic and outside investors to promote economic growth. Economic growth can be accomplished by encouraging efficient monetary policy steps for inflation stability and attractive interest rates.

Evaluation of Systematic Monetary Influences in Pakistan’s Perspective

Traditional macroeconomic theories establish relationship among certain macroeconomic variables based on assumptions of perfect competition and resulting flexible prices. Theories based on these assumptions might not hold for developing economies due to imperfect market structure and fragile financial institutions. This study attempts to analyze the quantity theory of money (QTM) and Phillips curve (PC) relationship from long-run perspective for economy of Pakistan. QTM relates complete absorption of money growth effect into inflation, and PC establishes negative relationship between inflation and unemployment. In the long-run, money is assumed to have only inflationary or nominal effect. Therefore, presence of any long-run tradeoff between inflation and unemployment, once inflations is a pure monetary phenomenon in the long-run, cast serious doubts regarding long-run neutrality of money. Autoregressive distributed lag (ARDL) modelling approach is opted to analyze long-run impact of money growth on inflation, and long-run effect of inflation on unemployment. The long-run relationship between inflation and unemployment is statistically insignificant for economy of Pakistan. Furthermore, results of this study show that inflation, even in the long-run, does not adjust as theorized in QTM.

Macroeconomic Variables and Gross Domestic Product: Evidence from Sri Lanka

The main objective of the study is to investigate the empirical relationship between macroeconomic variables and real gross domestic product (GDP) in Sri Lanka. Exchange rate, government spending, interest rate, money supply and unemployment rate were considered as selected macroeconomic variables. Real GDP was considered as a dependent variable. The current study used annual time series data over the period from 1990 to 2019 which were collected from the annual reports of the Central Bank of Sri Lanka. Stationary of the data was tested using the Augmented Dickey-Fuller test. Johansen co-integration rank test, max Eigen value test, Vector Error Correction along with Wald causality test were used to estimate the relationship between macroeconomic variables and GDP. At the 5% level of significance, the co-integration rank test and max Eigen value test revealed that there are four co-integration equations exist in this study. Therefore, it was concluded that selected macroeconomic variables have long-run impact on GDP. Likewise VEC and Wald test revealed that the all the selected macroeconomic variables causes GDP in the short run. The results support the theoretical prediction that macroeconomic variables would play an active role in GDP. The study, therefore, concludes that macroeconomic variables are driving GDP in Sri Lanka. Thus, growth-oriented macroeconomic policies should be established for protecting poor people in the country.

The impacts of IPO financing and monetary policy on economic growth in Bangladesh: Evidence from a dynamic assessment

Bangladesh is considered a fast-growing emerging economy and the new Asian tiger. The increasing need for capital funds in Bangladesh is largely met by banks, mainly due to the country’s underdeveloped nature of the stock market. Bank financing is assumed to be influenced by monetary policies, particularly, by bank rates adopted each year by the central bank of Bangladesh. On the other hand, while some studies stress the need for strengthening the debt and equity securities markets to support Bangladesh’s fast economic growth, debates swirl about whether or to what extent the stock market contributes to economic growth in the country. To address the understanding gap, in this paper, we examine the impact of capital financing through equity initial public offerings (IPO) and bank rate on the economic growth of Bangladesh. We use annual data from 1981 to 2019 and employ an autoregressive distributive lag (ARDL) framework to examine the long-run and short-run impacts of IPO financing and bank rate on GDP growth rate. Our findings suggest the existence of a long-run cointegrating relationship between IPO financing, bank rate, and GDP growth. We find that IPO financing does not have a significant long-run impact but shows only a one-period short-run positive impact on economic growth. On the other hand, bank rate shows a long-run negative and a one-period short-run positive impact on economic growth. Findings overall suggest that IPO financing does not significantly contribute to long-run economic growth while giving only a temporary boost. Further, increases in bank rate - as one would expect - depress economic growth in the long-run, while generating herd behavior immediately. Our findings stress the need for encouraging more quality IPO issuances, increasing the issuance size, and ensuring proper utilization of the funds by IPO issuers to make the capital market a key driver of economic growth.

Financial Performance of Micro-Finance Institutions in India

Micro-finance institutions (MFIs) in most developing countries, including India, are seen as essential of the tools to eradicate poverty and raise the standard of living of rural poor. Therefore, the sound functioning of MFIs has a huge long-run impact on the outreach of the rural poor. However, the performance of MFIs is often measured in terms of their social impact on the rural poor, while the financial indicators are ignored. In this context, the study analysed the major determinants of the financial performance of the 20 MFIs in India using panel regression. The results of the study revealed that financial indicators such as operating selfsufficiency, return on assets, and size (assets of the MFIs) had a positive impact on increasing the performance of MFIs. Further, the active borrowers increase efficiency, while passive borrowers had a negative impact on the performance of the MFIs. Similarly, a low level of debt to equity ratio, operating expenses to assets ratio, and low percentage of women borrowers could lead to the sound financial performance of MFIs.

On the environmental effects of development and non-development expenditure in India: Evidence from an asymmetric ARDL model

The main purpose of this study is to model and measure the impact of development and non-development expenditure on the carbon dioxide emissions (per capita metric tons) in India over 1980–2018. The Asymmetric ARDL approach (NARDL), an advanced econometric technique, was applied to examine the nexus between CO2 emissions, development and non-development expenditure, national income, energy consumption and population. The short-run and long-run results establish a statistically significant relationship between carbon emissions and the explanatory variables. The long-run asymmetrical results indicate that energy consumption and national income growth pollute the environment. However, we did not find any significant long-run impact of population on pollution levels in India. Furthermore, the results reveal that increase in development expenditure leads to environmental degradation and non-development expenditure mitigates pollution. No evidence of the applicability of EKC was found in India. The authors conclude that a reasonable method of tackling the threat of environmental degradation is to remove distortions in public expenditure policy. We recommend the government to phase out fiscal benefits to pollution-prone economic activities and thus spend the money saved on pollution abatement efforts.

Heterogeneous effect of oil production on environmental degradation: panel evidence from OPEC member countries

PurposeThe purpose of this paper is to look at the asymmetric effect of oil production on environmental degradation in OPEC member countries from 1970–2019.Design/methodology/approachThe authors build a nonlinear panel ARDL–PMG model using the Shin et al. (2014) nonlinear autoregressive distributed lag (ARDL) approach in panel form to assess both the short- and long-run impact of positive and negative oil production movements on CO2 emissions.FindingsThe result demonstrates that the variables are cointegrated. According to the linear long run coefficients, oil production, FDI inflows and economic growth both have a positive and significant relationship with CO2 emissions, implying that they deteriorate environmental quality in OPEC countries, while renewable energy has a negative relationship with CO2, implying that increasing renewable energy improves environmental quality. The asymmetric findings prove that positive and negative shocks of oil production exert a positive effect on carbon emissions in short run and long run.Research limitations/implicationsTo begin with, the empirical assessments do not include all OPEC member nations; researchers are advised to resolve this constraint by looking at the economies of other OPEC members. Albeit the lack of data for other energy sources may serve as another constraint of this research, future research is expected to broaden the current framework via other energy sources such as nuclear, electricity, biomass, solar as well as wind.Originality/valueThe research adds to the body of knowledge as many of the prevailing studies in the literature failed to look at the asymmetric effect of oil production on the quality of environment. This is another gap in the literature that the current study is set out to fill. This study adds oil production as an explanatory variable and helps to extend the existing literature for OPEC countries, which could propose a solution to deal with ensuing environmental issues.

Does Innovation Make Nations More Healthy? Evidence from Developing and Developed Countries

Our main contribution in this paper consists of analyzing long-run interactions between health status and innovation in the form of R&D activities accounting for possible economic development. For this purpose, we are based on a sample of fifteen developed and fifteen developing countries across the world during the period 2000–2017. As the principal interest is on the long-run effect, it is not essential to be concerned about the variable lags through which innovation will impact health. Therefore, to get the asymptotically efficient long-run impact of innovation on health, we have introduced both dynamic OLS and fully modified OLS for developed countries. Further, we have employed a technique based on panel ARDL methods for developing countries which deals with the stationary series problem of different orders to monitor possible association between population health and innovation in the long-run horizon. Our empirical results support long- and short-run causality running from R&D activities to health in all developed countries, whereas the just-mentioned causality prevails only in the long-run in case of developing countries. Finally, to check the robustness of the said association, we have implemented neural network-based NARX technique to validate the prediction of health status on the basis of R&D activities, and eventually, NARX supports our hypothesis in case of long-run through back-propagation. Policy recommendation includes the encouragement of more R&D activities and R&D-related policy implementation in both developed and developing nations to opt for better health status.

Bringing Health Care to Appalachia: The Long-Run Impact of a Rural Health Care System

The U.S. government has supported rural hospitals through direct subsidies and staff recruitment programs. However, little is known about the long-run impact of large-scale changes to rural health care. The authors explore the long-run trajectory of Appalachian counties where a coal mining union introduced a pioneering rural health care program in the 1950s, anchored by a chain of high-quality hospitals. Hospital beds per capita in counties where the union built its hospitals are persistently high through 2006, even when compared to similar counties and accounting for a variety of supply- and demand-side factors. In particular, union counties defied a national hospital consolidation trend starting in the 1980s. Results are consistent with a supply-side explanation where the scale and/or innovation of the union's investment allowed hospital markets to thrive and attract patients from a broad geography.

Does the monetary policy have any short-run and long-run effect on economic growth? A developing and a developed country perspective

PurposeThe study aims to empirically examine the relationship between monetary policy and economic growth, as well as to explore the long-run and the short-run effect of monetary policy on the economic growth of a developing country (Bangladesh) and a developed country (the United Kingdom).Design/methodology/approachDepending on data availability, the study employed secondary data covering the period of 1980–2019. The augmented Dickey–Fuller test and the Phillips–Perron test were used for the stationarity test. Further, the F-bounds test was run to justify the long-run relationship between monetary policy and economic growth. Thereafter, long-run coefficients were revealed from the auto-regressive distributed lag (ARDL) model and short-run coefficients from the error correction model. Furthermore, the vector error correction model (VECM) Granger causality approach was employed to demonstrate the causality of studied variables. Lastly, different diagnostics tests ensured the robustness of the models.FindingsF-bounds test outcomes suggest that monetary policy has a long-run relationship with economic growth in both countries. Long-run coefficients revealed that money supply has a positive long-run impact on economic growth in both countries. Unlike the UK, the exchange rate exhibits an adverse effect on the economic growth of Bangladesh. The bank rate seems to promote economic growth for the UK. Findings also depict that increase in lending interest rates hurts the economic growth for both countries. Besides, the short-run coefficients portray random effects at different lags in both cases. Lastly, causality among studied variables is revealed using the VECM Granger causality approach.Originality/valueThe novelty of this study lies in consideration of both developing and developed countries in the same study.

The short and long-run impact of empowering customers in corporate social responsibility initiatives

Rather than just informing customers about their corporate social responsibility initiatives, many for-profit firms have sought to engage their customers in these activities. Previous research assessing the impact of these programs has focused on short-run effects on customer behavior, typically documenting positive effects. We report the results of a quasi-experiment, in which customers either received information about a firm's charitable campaign or were given that information and the opportunity to vote for the charitable recipient. Our results demonstrate that the long-run effect is the reverse of the short-run effect. In the short term, inviting customers to vote (vs. information only) increases the average size of customers’ shopping baskets. However, in the long-run the effects are reversed; merely providing information (rather than inviting customers to vote) has a more positive long-term impact on customer purchasing. The long-run effects are much larger than the short-run effects, such that focusing solely on the short-run outcome would result in decisions that lower overall profits. These results have important managerial implications for firms seeking to engage customers in their charitable giving initiatives.

The asymmetric and threshold impact of external debt on economic growth: new evidence from Egypt

PurposeWithin a multivariate framework, this study examines the asymmetric and threshold impact of external debt on economic growth in Egypt during the period 1980–2019.Design/methodology/approachThe paper uses a nonlinear autoregressive distributed lag (NARDL) bounds testing approach to cointegration and a vector error-correction model to estimate the short- and long-run parameters of equilibrium dynamics. A multiple structural breaks model is estimated to test nonlinearity in the relationship between external debt and economic growth.FindingsResults of the NARDL model show a robust statistically significant negative long-run impact on economic growth stemming from both positive and negative external-debt-induced shocks. In terms of magnitude, on the one hand, the impact of external-debt-induced negative shocks exceeds that of the positive. In the short and long run, on the other hand, the growth impact of external debt in Egypt is symmetric. There is also support for the nonlinearity hypothesis in which a negative impact on growth of external debt obtains once the threshold level of external debt-to-GDP ratio equals or exceeds 96.7%.Practical implicationsIdentifying the threshold level after which external debt becomes harmful to economic growth would help inform policymakers in Egypt about maximum external debt levels that can be sustained without impairing economic growth.Originality/valueThe current study makes a substantial contribution to the extant literature on the debt-growth tradeoffs. It breaks ground by being the first tract that examines, using a NARDL model, asymmetry and nonlinearity of debt-growth tradeoffs in Egypt.

The Long-Run Impact of Bond Market on the Growth of the Capital Market in Nigeria

The capital market as a market for long term funds is considered a catalyst for economic growth, particularly in a developing economy like Nigeria, and bond market is an essential component of the capital market. This study examined the long-run impact of bond market on the growth of the capital market in Nigeria, covering the thirty nine years period from 1981 to 2019. It utilised empirical method to analyse the secondary and time series data obtained for the study from the Central Bank of Nigeria Statistical Bulletin, and employed the Auto Regressive Distributed Lag (ARDL) bound test and co-integration analysis to examine the relationship between the variables. The study found out that bond market has a positive influence on the growth of the capital market in Nigeria, especially in the long run; and recommended that there is a need for the introduction and availability of more investment instruments like derivates, to boost volume of transactions on the capital market, and secondly, that both the states and federal governments should continue to float more bonds as debt instruments, not only to access funds, but to further deepen the capital market.

The asymmetric nexus of entrepreneurship and environmental quality in a developing economy

In spite of the vital role entrepreneurship plays in an economy, recent observations especially from the perspective of climate-related economic activities are indications for the inclusive probe of other salient elements responsible for environmental challenges. Considering the aforementioned framework, therefore, this study explores the asymmetric impact of entrepreneurship on the environmental quality for a developing economy such as Turkey. In a unique dimension, this study utilizes the nonlinear autoregressive distributed lag model with the aid of yearly data from 1985–2016 while incorporating other related determinants of environmental sustainability. The estimation results depict the presence of asymmetric short-run and long-run impact of the explanatory variables on environmental quality. Interestingly, the results confirm a negative impact of entrepreneurial activities, energy utilization, financial development, and economic growth on the environmental quality irrespective of the nature (either positive or negative) of the shock in the short and long run. However, a positive (negative) shock in trade openness worsens (improve) environmental quality in the short and long run. Furthermore, the investigation affirms the existence of the environmental Kuznets curve (EKC) for Turkey. The main outcome from this paper shows that entrepreneurship has a crucial effect on the environment of Turkey. Generally, this study suggests the introduction of incentives to motivate the creation of sustainable businesses, technological innovation, and smart cities to mitigate its negative impact on the environment is far begging for critical attention in the country.

The impact of fiscal policy on total factor productivity growth in a developing economy: evidence from Botswana

Most empirical work on the nexus between fiscal policy and total factor productivity (TFP) is focussed on aggregate analysis and lack sector-specific evidence required to guide effective policy decisions. Our study addresses this gap by analysing the impact of fiscal policy on sectoral TFP growth in Botswana between 1984 and 2016 using the Autoregressive Distributive Lag method. The results suggest that focussing on aggregate TFP growth masks specific issues which are peculiar to various economic sectors. For instance, mineral tax, other tax revenue, and expenditure on social services were found to have a significant long-run positive impact on the TFP growth in the primary sector only, while a negative impact is witnessed in the secondary and tertiary sectors. SACU revenue has a positive impact on TFP growth in both the primary and tertiary sectors, while productive spending boosts TFP growth across all sectors. In addition, both the value-added tax and the non-mining income tax have a negative impact on TFP growth across all sectors. The speed of adjustment was found to be high in the primary sector compared to other sectors. The findings single out the importance of taking into account sector-specific fiscal policies in influencing sectoral TFP growth.

Investigating the Dynamic Impact of FDI Inflows and Economic Growth on Environmental Degradation: Evidence From FMOLS and DOLS for Selected Asian Countries

The study examines the dynamic relationship between foreign direct investment (FDI) inflows, economic growth, and environmental degradation and investigates the long-run validity of the environmental Kuznets curve (EKC) and the pollution haven hypothesis (PHH) for selected Asian countries over the period 1990–2019. Additionally, this study aims to discover the longrun impact of energy consumption, globalization, and population density on environmental degradation by employing a panel cointegration approach, fully modified ordinary least squares (FMOLS), and dynamic ordinary least squares (DOLS). The findings provide clear evidence of the existence of EKC and PHH in Asian countries for the period 1990–2019 in the long run. The findings reveal that economic growth has a highly significant and positive role in depleting environmental quality, but this effect gets reversed in the long run as, after a certain turning point, economic growth increases, and the quality of the environment gets better. Moreover, FDI inflows and energy consumption have a positive long-run impact on CO2 emissions, thus contributing to environmental degradation. The study recommends that governments and policymakers should strategically devise and implement CO2 reduction policies, such as carbon pricing, to encourage economic growth and to improve the quality of the environment, with the ultimate goal being to achieve sustainable development. Moreover, the use of cleaner energy should be promoted, and innovations and technological developments should be encouraged for hydropower, wind power, solar energy and other facilities around the world.

Currency Depreciation Nexus Country's Export: Evidence from Georgia

The recent shocks in demand and supply caused by Covid-19 influence and the current depreciation of the Georgian Lari (GEL) reduced the trust of economic agents in currency. There is no objective macroeconomic reason that would change their attitude to the future of currency for the better. Depreciation of a currency impacts all the components of GDP, leading to myriad problems in economic growth. The depreciation of the national currency is generally perceived as positively affecting the country's export. The study analyzes the impact of Georgian Lari's exchange rate depreciation on Georgia's export using monthly GEL exchange rate data from May 2006 to April 2020. The paper employs Autoregressive Distributed Lag Model (ARDL) for its advantages of measuring cointegration, usefulness in the small samples, and being unbiased in measuring a long-run relationship between variables. Outcomes indicate that the exchange rate depreciation has an inverse long-run impact on export in the long-run period. The exchange rate impact on Georgia's export shows inelastic demand for Georgia's export goods. The study contributes to the literature while providing the implication of currency depreciation on exports of the Georgian economy. The estimated value of the exchange rate has been found to exert no direct pressure on the amount of export. In the paper, possible reasons for such implications are also examined. Paper found that the control variable interest rate also has an inverse impact on Georgia's export performance in the long-run as well as in the short-run. International reserves positively influence the export in the long-run with a high significance level. The paper also discusses possible ways of stabilization of national currency.

Public Expenditure and Economic Growth of Nepal

This study intended to evaluate the trends of public expenditure and to show the relationship between public expenditure and economic growth in Nepal. In order to fulfill these objectives, the chart, correlation, and regression were employed by using time series data sets over the period of 1974/75 to 20108/19. Economic growth (RGDP) (proxied as the real GDP with rebasing 2009/10) as dependent variable and recurrent expenditure (RE), capital expenditure (CE), expenditure on education (EE), expenditure on health (HE), and expenditure on transportation and communication (TCE) were proxied as public expenditure. The study revealed that there is positive correlation between dependent and predictors. The results of regression also confirmed that there is positive relationship between public expenditure on economic growth of Nepal. Particularly, HE and TCE had negative relationship with RGDP. This study applied 45 annually observed times series data sets and mainly fitted regression model to examine the relationship between public expenditure and economic growth in Nepal. The main policy implication of this study is that government and concern body should give more concern about capital expenditure for enhancing productive activities and attention about recurrent expenditure. Also, education, health, and transportation and communication are the economic infrastructure, so government should most attention to increase expenditure on these sectors that may produce long-run impact on economy.