Economic Growth In Short Run Research Articles

Comparative Analysis Between Export-Led Growth and Import-Led Growth: A Study on Developing Eight (D-8)

The main objective of the study is to investigate the comparative influence of import and export on economic growth of developing countries in the world, using Export-Led Growth (ELG) and Import-Led Growth (ILG) hypothesis. The study has used purposive sampling technique and selected the member countries of D-8 such as Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey as sample. Total import, total export, and GDP growth rate, as indicator of economic growth, have been used as variables for the study. The study has selected time series and panel data of the variables from year 2001 to year 2015. To detect unit root of variables, Augmented Dickey Fuller (ADF) Test and Phillips-Perron (PP) Unit Root Test have been used. Moreover, the cointegration among variables has been examined using Johansen Cointegration Test. The study has also used Vector Autoregressive (VAR) model and Vector Error Correction (VEC) model to define the presence of short run and long run causality. Finally, Granger Causality Test has been used to examine the presence of unidirectional and bidirectional causality among the variables in short and long-run. The study shows that the variables have unit root at level and have become stationary at first and second difference. In most of the selected countries, the study has found cointegration and unidirectional causality among the variables. In Bangladesh, both import and export have been found to contribute to economic growth in short run, and the relationship is unidirectional. Moreover, these have been found to influence economic growth of Nigeria in long run. On the other hand, the study has discovered economic growth and export of Turkey to granger-cause its import in short and long run. However, along with economic growth, import has been found to granger-cause export of Egypt and Indonesia in short run, and export of Malaysia in long run. Finally, Pakistan and Iran have been found to have no granger-causality among import, export and economic growth.

Nexus of Economic Growth and Public Expenditure in India

The major aim of the paper is to empirically examine the growth effects of public expenditure in the Indian context. The study utilizes annual time series data for the period spanning from 1981 to 2012. Fully-Modified Ordinary Least Square (FMOLS) and Dynamic Ordinary Least Square (DOLS) procedure of cointegration technique is applied to examine long-run equilibrium relationship among economic growth, public expenditure, and inflation. Two-stage Least Squares (2SLS) regression method is employed to check the stability of the parameters estimated by FMOLS and DOLS. Granger causality in VAR block exogeneity test is used to look into the short-run causal relationship among the considered variables. The major finding of the study shows increase in public expenditure leads to increase economic growth in the long-run and supports the Keynesian approach. In the short-run economic growth causes rise in public expenditure and a rise in public expenditure creates inflationary pressure in the economy. Both in the short-run and in the long-run inflation adversely affects economic well-being. In the short-run public expenditure fails to create the growth effect because of the inflationary effects of public spending which winds up growth effect.

Trade openness and economic growth volatility: An empirical investigation

AbstractThis paper investigated the impact of trade openness on economic growth volatility of Ghana from 1970 to 2013, using cointegration and error correction techniques. Our findings show that both the long and short run economic growth volatility is positively influenced by changes in trade openness. Volatility in domestic credit to private sector, shocks after the economic liberalization and financial openness contributed negative to economic growth volatility in the short run. The major policy implication of our paper is that developing economies should take into consideration their own realities in their trade policies to limit economic growth volatility.

Modelling the CO2 emissions and economic growth in Croatia: Is there any environmental Kuznets curve?

This paper investigates the existence of environmental Kuznets curve in Croatia for the period of 1992Q1-2011Q1. To fulfil to goals of the paper, Autoregressive Distributed Lag (ARDL) and VECM method has been applied. Results show the existence of inverted U-shape relation between CO2 emissions and economic growth in long run that is the validity of EKC. Granger causality based on VECM approach shows bi-directional causality between CO2 emissions and economic growth in short run and uni-directional causality from economic growth to CO2 emissions in long run. DOLS and FMOLS results confirm the robustness of long run results. Variance decomposition and Impulse response also show similar results. Beauty of the paper is the consistency of results from different techniques.

Liquidity Risk and Time-Varying Correlation between Equity and Currency Returns

Using data on twenty major OECD countries over time, this paper documents a new evidence on real equity and real currency prices: higher real returns in the home equity market relative to foreign counterparts are generally associated with real home currency depreciation at a monthly frequency, but this negative correlation breaks down or even reverses during times of relatively higher aggregate economic uncertainty or volatility. This paper also proposes one plausible explanation for this time-varying correlation structure. The suggested model is based on a long-run risks type model, combined with time-varying liquidity risks in stock markets. With recursive preference for the early resolution of uncertainty and a negative link between the level of short-run economic growth and equity market liquidity volatility, the model demonstrates that severe short-run economic uncertainty overturns the otherwise negative link between the real currency and real relative equity returns.

Impact of agricultural exports on economic growth in Ethiopia: The case of coffee, oil seed and pulses

A Thesis Submitted to the Graduate School in partial Fulfilment of the Requirements for the Award of the Masters of Science Degree in Agricultural and Applied Economics of Egerton University. Advisors: Prof. Job Kibiwot Lagat (PhD) and Dr. Delessa Daba (PhD)

The nexus of financial deepening, economic growth, and poverty: The case of Pakistan

This study investigates the nexus of financial development, economic growth, and poverty for Pakistan over a prolonged period of time, 1960- 2012. Autoregressive Distributed Lag (ARDL)-Bounds testing approach to co integration and Unrestricted Error Correction Model (UECM)along with VECM Granger causality have been applied to examine the long-run dynamic relationship among financial development, economic development and poverty. For that purpose, we have developed two models and adopted a new and relatively strong proxy for financial development. The results suggest that financial development negatively affects both long-run and short-run economic growth. However, financial development is found to be positively affecting per capita consumption in the long run.

Effects of terms of trade on growth performance of India

This study investigates the effect of terms of trade on economic growth of India by using the annual time series data from the period of 1980 to 2010. The ARDL bound testing cointegration confirms the significant positive relationship between terms of trade and economic growth in the long run as well as in the short run. Results of Granger causality, Toda and Yamamoto Modified Wald causality and variance decomposition tests confirm the bidirectional causal relationship between terms of trade and economic growth in India. Rolling window estimation indicates that the terms of trade is having positive long-run coefficients throughout the sample period. Results of CUSUM and CUSUM of square suggest that there is no structural instability in the residuals of equation of economic growth in short run. It is suggested that beneficial terms of trade is better for economic growth in India. At this stage we can set the direction of future research that the relationship between commodity groupwise and countrywise bilateral terms of trade with economic growth should be analyzed. These results would be helpful for policy makers of India to frame growth enhancing countrywise as well as commodity-wise trade policies.

Physical Infrastructure and Economic Growth in El Paso

Prior research on the impacts of public capital stocks on economic growth has generally used either national macroeconomic or multijurisdictional regional data. This study attempts to contribute to this area of the discipline by using time series data for a single metropolitan economy. To allow for both short-run and long-run effects, an error-correction modeling framework is used for the empirical analysis. Because comprehensive public infrastructure stocks are not published for El Paso, Texas, estimates for those variables are calculated using information regarding annual public capital investment data. Estimation results indicate that physical infrastructure investment may disrupt short-run economic growth but does improve long-run metropolitan economic performance.

Economic Growth, Energy Consumption and Carbon Emissions in China: A Cointegration Analysis

This paper studies the relationships between economic growth, energy consumption and carbon dioxide emissions using an autoregressive distributed lag (ARDL) procedure and Engle-Granger causality test in China over the period 1965-2011. The empirical results show that GDP, energy and carbon emissions have appeared to be cointegrated. Moreover, there exists unidirectional causality from energy consumption to economic growth and carbon emissions to economic growth in short run. It has also been found that energy consumption and carbon emissions promote economic growth in long run. Some policy implications have been proposed finally.

An Empirical Analysis of Energy Consumption, CO<sub>2</sub> Emissions and Economic Growth: The Nigerian Case: 1980-2009

This research thesis investigates the effects of the short run and long run causal link (Granger causality relationship) between energy consumption, economic growth and carbon emissions in Nigeria (using Nigerian data over the period 1980 – 2009) including labor, investment in gross fixed capital formation, trade openness, total expenditure on education and labor force in the model. The Augmented Dickey Fuller (ADF) and Philip Perron (PP) Test were employed to examine the stationary state of the data while the Johansen co-integration test was employed to determine if there exist a long run relationship among the variables before estimating the model. The stationary test results indicate that none of the variables are stationary at levels in both tests while the cointegration results indicate that there are four co-integrating equations associated with our variables. Furthermore, applying the techniques of VECM version of Granger causality to find whether there exist a bi-directional or uni-directional causality between energy consumption, economic growth and carbon emissions in the short and long run. The statistical findings indicate that a neutral hypothesis holds in the short run (economic growth and energy consumption and carbon emissions are not related) and a bi-causal relationship holds in the long run between economic growth and energy consumption. This result does not suggest the existence of an EKC hypothesis in the long run, however, the standard polynomial functions (linear, quadratic and cubic) were estimated to confirm the existence of the EKC (‘U’) curve or ‘N’ shape curve and to find the main driving forces affecting carbon emissions patterns and the relationship between economic growth and carbon emissions. After conducting further diagnostic tests (ARCH test, normality test of residual term, white heteroscedasticity and model specification test- ramsey reset test) to determine the correctness of the specification of our model or robustness of our model, the emerging results prove that none of the variables influences carbon emissions in the long run including GDP and thus no EKC (‘U’) curve or ‘N’ shape curve was obtained. Therefore, the conclusion from our study is that although in the short run no causality is found between economic growth, energy consumption and carbon emissions, there is a strongly interdependent relationship between economic growth and energy consumption in the long run. Hence, proper environmental and energy policy should be adopted at appropriate time to protect natural capital (environment) which may control the vulnerability of climate change.

Does oil abundance harm growth?

This article explores whether natural resource abundance is a curse. Our results reveal that oil abundance has a positive effect on both long-run income levels and short-run economic growth.

China’s evolution toward an authoritarian market economy—a predator–prey evolutionary model with intelligent design

The following study, integrating public choice theory and evolutionary game theory, develops a predator–prey model with intelligent design to explain the “evolutionary-institutional perspective” that is a well-accepted premise in transitional economics. In the model, growth-oriented central government leaders are intelligent designers of institutional change, provincial and local officials are potential predators, and private firms are potential prey. The model finds that reductions in discriminatory policies are the major institutional contributors to China’s market miracle, whereas improvements in the rule of law and in the protection of private property rights are not needed for short-run economic growth.

A Causal Relationship between Financial Market Development and Economic Growth

Problem statement: This study investigated the causal relationship be tween financial market development and economic growth for United Kingdom for the period 1965-2007 using a Vector Error Correction Model (VECM). Questions were raised whether financial market development causes economic growth or reversely taking into acc ount the negative effect of interest rate. The objective of this study was to examine the causal r elationships between these variables using Granger causality tests based on a Vector Error Correction Model (VECM). Approach: To achieve this objective classical and panel unit root tests were carried out for all time series data in their level s and their first differences. Johansen co-integration an alysis was applied to examine whether the variables are co-integrated of the same order taking into acc ount the maximum eigenvalues and trace statistics tests. A vector error correction model was selected to investigate the long-run relationship between financial market development and economic growth. Finally, Granger causality test was applied in order to find the direction of causality between th e examined variables of the estimated model. Results: A short-run increase economic growth of per 1% lea ded to an increase of stock market index per 0.6% in United Kingdom, while an increase of interest rate per 1% leaded to a decrease of stock market index per 1.59% in United Kingdom. The estimated coefficient of error correction term found statistically significant with a negative sign, whi ch confirmed that there was not any problem in the long-run equilibrium between the examined variables. The results of Granger causality tests indicated that there is a bilateral causal relationship betwe en economic growth and financial market development. Conclusion: Therefore, it can be inferred that economic growth has a positive effect on financial market development, while interest rate h as a negative effect on it in United Kingdom.

Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis

This paper explores whether natural resource abundance is a curse or a blessing. In order to do so, we firstly develop a theory consistent econometric model, in which we show that there is a long run relationship between real income, the investment rate, and the real value of oil production. Secondly, we investigate the long-run (level) effects of natural resource abundance on domestic output as well as the short-run (growth) effects. Thirdly, we make use of a non-stationary panel approach which explicitly estimates the long-run relationships from annual data as opposed to the dynamic and static panel approaches which might in fact estimate the high-frequency relationships. Fourthly, we account for cross-country dependencies that arise potentially from oil price shocks and other unobserved common factors, and allow countries to respond differently to these shocks. Finally, we explicitly recognize that there is a substantial heterogeneity in our sample, consisting of 53 oil exporting and importing countries with annual data between 1980-2006, and adopt the methodology developed by Pesaran (2006) for estimation. This approach considers different dynamics for each country and is consistent under both cross-sectional dependence and cross-country heterogeneity. We also check the robustness of these results by using the fully modified OLS method of Pedroni (2000). Our non-stationary approach also allows for country-specific unobserved factors, such as social and human capital, to be captured in the fixed effects and the heterogeneous trends together with any omitted factors. Our estimation results, using the real value of oil production, rent or reserves as a proxy for resource endowment, reveal that oil abundance has a positive effect on both long run income levels and short run economic growth. While we accept that oil rich countries could benefit more from their natural wealth by adopting growth and welfare enhancing policies and institutions, we challenge the common view that oil abundance affects economic growth negatively.

The Impact of Tourism on Economic Growth in Island Economies

AbstractIsland economies are generally well known tourist destinations and it is presumed that thus sector contributes a lot to their economy. In spite of this, we have not come across any empirical study that investigates the contributions of tourism to economic growth for these countries. Using a panel data of 12 island economies for the years that span from 1990 to 2006, this study explores the potential contribution of tourism to economic growth and development within the conventional augmented Solow growth model. Since economic growth is argued to be essentially a dynamic phenomenon, in addition to fixed effect estimates, we additionally employed Generalised Methods of Moments (GMM) method to account for these issues. The results show that tourism significantly contribute both to the current level of gross domestic product and the economic growth of island economies as do investments in physical and human capital and also openness. Moreover, growth is observed to be a dynamic phenomenon as judged by the positive and significant lagged dependent variable from the GMM estimates. Our findings imply that island economies could enhance their short-run economic growth by strategically strengthening their tourism industries.

Impact of Tourism on Economic Growth and Development in Africa

During the 1990s, Africa experienced a rise in tourist arrivals from 8.4 million to 10.6 million and a growth in receipts from US$2.3 billion to US$3.7 billion. According to the World Tourism Organization, the tourism industry in sub-Saharan Africa enjoyed a robust annual market share growth rate of 10% in 2006. In spite of this, there are few empirical studies that investigate the contributions of tourism to the economic growth and development of African economies. Using panel data of 42 African countries for 1995 to 2004, this study explores the potential contribution of tourism to the economic growth and development within the conventional neoclassical framework. The results show that receipts from the tourism industry contribute significantly both to the current level of gross domestic product and to the economic growth of sub-Saharan African countries, as do investments in physical and human capital. The authors' findings imply that African economies could enhance their short-run economic growth by strengthening their tourism industries strategically.

Construction investments and economic growth in Western Europe

The research task in the present study is to examine the statistical relationship between gross domestic product and a broad group of construction and, furthermore, the presence of crowding-out within the construction industry in Europe. The empirical analyzes support the findings of no crowding-out effect within the construction industry. Contrary, it seems that investments in especially infrastructure will have a complementary filling-in effect by an increase in both residential and other building construction. The Granger causality tests are not conclusive. However, the results imply that GDP Granger cause total construction in the short run, but not vice versa. Furthermore, infrastructure investments Granger causes GDP in the short run. The overall conclusion is that public infrastructure policies have an effect on short-run economic growth but only a weak effect on the long run and that there exist a filling-in effect from other types of construction. Furthermore, residential construction does have a long-run effect on economic growth.

An investigation on the causal relationships between banking concentration and economic growth

This paper explores the causality between concentration in the banking industry and economic growth. Two empirical tests are performed for Italy over the period 1991–2001: the first one is a standard Granger–Sims causality test, the second one studies the direction of causality by taking into account the impact of changes in banks' internal and external factors on their own market shares. The results show that in the short-run economic growth is predominantly caused by banking consolidation, while in the long-run a reverse causation direction emerges, so that economic expansions tend to reduce market shares and thus favour a stronger competition in the industry.

Geographic Deregulation of Banking and Economic Growth

State-level U.S. data for 1965 through 1994 are used to test for the effect of bank deregulation on economic growth. In particular, this study tests whether intrastate branch and interstate bank deregulation, measured by the activities of banks and bank holding companies, expedites growth in real per capita income through its effect on the size of banking markets. The empirical analysis supports the hypothesis that such deregulation enhances short-run economic growth.