Pub Date : 2022-10-02DOI: 10.1080/10168737.2022.2144925
Jaehyun Suh
A neoclassical model reveals that capital controls depress capital flows by adjusting the marginal benefits and costs of additional asset purchases. According to this view, their effectiveness might be dependent on the volume of flows. To study this possibility, we examined the associations between capital flows and controls using the Powell’s (2022) quantile regression methodology. The data used cover 43 emerging market economies between 1995 and 2019. Our results suggest that capital controls are differently associated with capital flows depending on the conditional distributions of capital flows and this implies capital controls could be effective but only when implemented appropriately depending on the volume of inward and outward capital flows. Therefore, the government must carefully and precisely set restrictions depending on the volume of capital flows, which might be an extremely challenging task.
{"title":"Effect of Capital Controls: A Quantile Regression Approach","authors":"Jaehyun Suh","doi":"10.1080/10168737.2022.2144925","DOIUrl":"https://doi.org/10.1080/10168737.2022.2144925","url":null,"abstract":"A neoclassical model reveals that capital controls depress capital flows by adjusting the marginal benefits and costs of additional asset purchases. According to this view, their effectiveness might be dependent on the volume of flows. To study this possibility, we examined the associations between capital flows and controls using the Powell’s (2022) quantile regression methodology. The data used cover 43 emerging market economies between 1995 and 2019. Our results suggest that capital controls are differently associated with capital flows depending on the conditional distributions of capital flows and this implies capital controls could be effective but only when implemented appropriately depending on the volume of inward and outward capital flows. Therefore, the government must carefully and precisely set restrictions depending on the volume of capital flows, which might be an extremely challenging task.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"530 - 555"},"PeriodicalIF":1.1,"publicationDate":"2022-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46814793","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-02DOI: 10.1080/10168737.2022.2142645
Jan R. Kim, Sungjin Cho
We develop a present-value model where the fundamental and non-fundamental components switch between distinct regimes. The non-fundamental component is specified as a periodically collapsing bubble of Balke and Wohar [Balke, N. S., & Wohar, M. E. (2009). Market fundamentals versus rational bubbles in stock prices: A Bayesian perspective. Journal of Applied Econometrics, 24(1), 35–75. https://doi.org/10.1002/jae.1025]. The fundamental component is constructed as in van Binsbergen and Koijen [van Binsbergen, J. H., & Koijen, R. S. J. (2010). Predictive regressions: A present-value approach. The Journal of Finance, 65(4), 1439–1471. https://doi.org/10.1111/j.1540-6261.2010.01575.x], by treating the expectations of market fundamentals as latent variables. Unlike existing methods, e.g. [Zhu, X. (2015). Tug-of-war: Time-varying predictability of stock returns and dividend growth. Review of Finance, 19(6), 2317–2358. https://doi.org/10.1093/rof/rfu047; Choi, K. H., Kim, C., & Park, C. (2017). Regime shifts in price-dividend ratios and expected stock returns: A present-value approach. Journal of Money, Credit and Banking, 49(2–3), 417–441. https://doi.org/10.1111/jmcb.12384; Chan, J. C., & Santi, C. (2021). Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach. Journal of Economic Dynamics and Control, 127, 1–26], ours requires no unnecessary approximations, accommodates flexible forms of regime-switching, and the resulting present-value formula is internally consistent.
{"title":"Developing a Regime-Switching Present Value Model: Switching Fundamentals and Bubbles","authors":"Jan R. Kim, Sungjin Cho","doi":"10.1080/10168737.2022.2142645","DOIUrl":"https://doi.org/10.1080/10168737.2022.2142645","url":null,"abstract":"We develop a present-value model where the fundamental and non-fundamental components switch between distinct regimes. The non-fundamental component is specified as a periodically collapsing bubble of Balke and Wohar [Balke, N. S., & Wohar, M. E. (2009). Market fundamentals versus rational bubbles in stock prices: A Bayesian perspective. Journal of Applied Econometrics, 24(1), 35–75. https://doi.org/10.1002/jae.1025]. The fundamental component is constructed as in van Binsbergen and Koijen [van Binsbergen, J. H., & Koijen, R. S. J. (2010). Predictive regressions: A present-value approach. The Journal of Finance, 65(4), 1439–1471. https://doi.org/10.1111/j.1540-6261.2010.01575.x], by treating the expectations of market fundamentals as latent variables. Unlike existing methods, e.g. [Zhu, X. (2015). Tug-of-war: Time-varying predictability of stock returns and dividend growth. Review of Finance, 19(6), 2317–2358. https://doi.org/10.1093/rof/rfu047; Choi, K. H., Kim, C., & Park, C. (2017). Regime shifts in price-dividend ratios and expected stock returns: A present-value approach. Journal of Money, Credit and Banking, 49(2–3), 417–441. https://doi.org/10.1111/jmcb.12384; Chan, J. C., & Santi, C. (2021). Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach. Journal of Economic Dynamics and Control, 127, 1–26], ours requires no unnecessary approximations, accommodates flexible forms of regime-switching, and the resulting present-value formula is internally consistent.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"477 - 490"},"PeriodicalIF":1.1,"publicationDate":"2022-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45165738","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-02DOI: 10.1080/10168737.2022.2143545
Jung Hur, Jinna Yoon
This paper studies the role of Multinational Factoryless Goods Producers (MFGPs) in the recent expansion of the wholesale and retail industries in Korea. We empirically investigate the impacts of the industry-level store entry rate of the MFGPs on labor productivity growth and store-entry and exit probabilities of Non-MFGPs which are the majority of firms in the industries. Our main results are as follows. First, the industry-level store entry rates of MFGPs are positively associated with increases in labor productivity growth of Non-MFGPs. Second, the industry-level store entry rates of MFGPs are positively related to the store-entry decision of Non-MFGPs. These findings may imply that the entries of MFGP stores contribute to the growth and expansion of the wholesale and retail industries as a whole.
{"title":"Multinational Factoryless Goods Producers and Expansion of the Wholesale & Retail Industry in Korea","authors":"Jung Hur, Jinna Yoon","doi":"10.1080/10168737.2022.2143545","DOIUrl":"https://doi.org/10.1080/10168737.2022.2143545","url":null,"abstract":"This paper studies the role of Multinational Factoryless Goods Producers (MFGPs) in the recent expansion of the wholesale and retail industries in Korea. We empirically investigate the impacts of the industry-level store entry rate of the MFGPs on labor productivity growth and store-entry and exit probabilities of Non-MFGPs which are the majority of firms in the industries. Our main results are as follows. First, the industry-level store entry rates of MFGPs are positively associated with increases in labor productivity growth of Non-MFGPs. Second, the industry-level store entry rates of MFGPs are positively related to the store-entry decision of Non-MFGPs. These findings may imply that the entries of MFGP stores contribute to the growth and expansion of the wholesale and retail industries as a whole.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"461 - 476"},"PeriodicalIF":1.1,"publicationDate":"2022-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43283917","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-10-02DOI: 10.1080/10168737.2022.2142644
Seung-Leul Kim, S. Lee
This study investigates eco-technology licensing strategy by a foreign firm that offers two-part tariff licensing contracts (i.e. combination of a per unit royalty and a lump-sum fee) to a domestic polluting firm under the strategic import tariff in the presence of an exogeneous emission tax. We particularly consider the possibility of negative royalty (or subsidised royalty per unit production) by the foreign licensor and compare the two different licensing cases with and without non-negative royalty. We find that given a lower level of emission tax, the licensor may choose negative royalty only when the import tariff is high. We also find that the optimal import tariff with non-restrictive licensing contract with a negative royalty is higher than that with restrictive one, but allowing a negative royalty is better for domestic welfare unless the emission tax is so high (or environmental damage is serious). Finally, we show find that the optimal import tariff under the two-part tariff licensing might have a negative relationship with an emissions tax.
{"title":"Foreign Eco-Technology Licensing Strategy and the Coordination of Import Tariff and Emission Tax Policies","authors":"Seung-Leul Kim, S. Lee","doi":"10.1080/10168737.2022.2142644","DOIUrl":"https://doi.org/10.1080/10168737.2022.2142644","url":null,"abstract":"This study investigates eco-technology licensing strategy by a foreign firm that offers two-part tariff licensing contracts (i.e. combination of a per unit royalty and a lump-sum fee) to a domestic polluting firm under the strategic import tariff in the presence of an exogeneous emission tax. We particularly consider the possibility of negative royalty (or subsidised royalty per unit production) by the foreign licensor and compare the two different licensing cases with and without non-negative royalty. We find that given a lower level of emission tax, the licensor may choose negative royalty only when the import tariff is high. We also find that the optimal import tariff with non-restrictive licensing contract with a negative royalty is higher than that with restrictive one, but allowing a negative royalty is better for domestic welfare unless the emission tax is so high (or environmental damage is serious). Finally, we show find that the optimal import tariff under the two-part tariff licensing might have a negative relationship with an emissions tax.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"510 - 529"},"PeriodicalIF":1.1,"publicationDate":"2022-10-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49480521","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-13DOI: 10.1080/10168737.2022.2100448
Chokri Zehri
We use a novel approach—instrumental variable quantile regression estimates—to analyze expected portfolio inflows to emerging economies. We consider country-specific conditions and the effectiveness of policy interventions when economies are faced with an adverse international financial shock. This approach allows differentiation between the short- and medium-term impacts. Our results suggest that macroprudential policies and foreign exchange actions may reduce the risks of large capital flow movements following an adverse international shock; however, capital flow management policies such as capital control stringency seem to be ineffective. Besides, there is little evidence that monetary policy and high quality of institutions can immediately protect emerging markets from the risks of international financial shocks. However, institutional quality may effectively dampen the impact of excessive flows in the medium term. These findings emphasize the limitations of previous studies, which focused merely on the short-term horizon.
{"title":"The Time-Varying Effects of Policies: Evidence from Capital Flows to Emerging Markets","authors":"Chokri Zehri","doi":"10.1080/10168737.2022.2100448","DOIUrl":"https://doi.org/10.1080/10168737.2022.2100448","url":null,"abstract":"We use a novel approach—instrumental variable quantile regression estimates—to analyze expected portfolio inflows to emerging economies. We consider country-specific conditions and the effectiveness of policy interventions when economies are faced with an adverse international financial shock. This approach allows differentiation between the short- and medium-term impacts. Our results suggest that macroprudential policies and foreign exchange actions may reduce the risks of large capital flow movements following an adverse international shock; however, capital flow management policies such as capital control stringency seem to be ineffective. Besides, there is little evidence that monetary policy and high quality of institutions can immediately protect emerging markets from the risks of international financial shocks. However, institutional quality may effectively dampen the impact of excessive flows in the medium term. These findings emphasize the limitations of previous studies, which focused merely on the short-term horizon.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"569 - 595"},"PeriodicalIF":1.1,"publicationDate":"2022-07-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48924261","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10168737.2022.2105378
Cephas Naanwaab
Recent trends in inequality have raised concerns among researchers and policymakers globally. The role of globalization, one of the leading forces driving this trend, continues to be intensely debated in academic and policy circles. Invoking standard trade theory, this paper analyses whether and the extent to which trade liberalization has contributed to the recent trends in inequality. The approach and findings of the paper are novel: previous studies of trade liberalization’s impact on inequality do not explicitly control the direction of trade. The empirical results show that trade liberalization is associated with decreasing income inequality overall, but contingent on the direction of trade, it has opposing effects: North–North and South–South trade are inequality-reducing while North–South trade is inequality-increasing. Simply put, liberalizing trade between countries of similar developmental levels does not raise inequality. This paper affirms, using recent data, that trade with developing countries raises inequality in developed countries. Additionally, it finds that North–South trade (particularly imports from high-income to low-income countries) may also raise inequality in developing countries, contrary to Heckscher–Ohlin–Stolper–Samuelson model predictions. Skill-biased technical change, a consequence of trade liberalization between North and South, is the main mechanism driving inequality increases in developing countries.
{"title":"The Impact of Trade Liberalization on Income Inequality: Does the Direction of Trade Matter?","authors":"Cephas Naanwaab","doi":"10.1080/10168737.2022.2105378","DOIUrl":"https://doi.org/10.1080/10168737.2022.2105378","url":null,"abstract":"Recent trends in inequality have raised concerns among researchers and policymakers globally. The role of globalization, one of the leading forces driving this trend, continues to be intensely debated in academic and policy circles. Invoking standard trade theory, this paper analyses whether and the extent to which trade liberalization has contributed to the recent trends in inequality. The approach and findings of the paper are novel: previous studies of trade liberalization’s impact on inequality do not explicitly control the direction of trade. The empirical results show that trade liberalization is associated with decreasing income inequality overall, but contingent on the direction of trade, it has opposing effects: North–North and South–South trade are inequality-reducing while North–South trade is inequality-increasing. Simply put, liberalizing trade between countries of similar developmental levels does not raise inequality. This paper affirms, using recent data, that trade with developing countries raises inequality in developed countries. Additionally, it finds that North–South trade (particularly imports from high-income to low-income countries) may also raise inequality in developing countries, contrary to Heckscher–Ohlin–Stolper–Samuelson model predictions. Skill-biased technical change, a consequence of trade liberalization between North and South, is the main mechanism driving inequality increases in developing countries.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"307 - 338"},"PeriodicalIF":1.1,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42828561","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10168737.2022.2098353
Helena Glebocki Keefe, Sujata Saha
This research assesses the impact of global monetary shocks stemming from quantitative easing policies in advanced economies on exchange rate volatility in emerging markets. Using panel ARDL (Autoregressive Distributed Lag) model, an asymmetric effect is detected showing that increases in quantitative easing have a significant impact on exchange rate volatility, whereas subsequent tapering does not. Moreover, the Fragile Five economies experience spikes in exchange rate volatility that are more than double what is detected in other emerging markets. Finally, the impact of foreign exchange intervention to offset the effect on volatility is significant across emerging markets and is, once again, larger in the Fragile Five economies. The results are supported using panel VAR (Vector Autoregression) estimations.
{"title":"Foreign Exchange and Global Monetary Shocks: The Asymmetric Effects of Advanced Economies’ Quantitative Easing on Exchange Rate Volatility in Emerging Markets","authors":"Helena Glebocki Keefe, Sujata Saha","doi":"10.1080/10168737.2022.2098353","DOIUrl":"https://doi.org/10.1080/10168737.2022.2098353","url":null,"abstract":"This research assesses the impact of global monetary shocks stemming from quantitative easing policies in advanced economies on exchange rate volatility in emerging markets. Using panel ARDL (Autoregressive Distributed Lag) model, an asymmetric effect is detected showing that increases in quantitative easing have a significant impact on exchange rate volatility, whereas subsequent tapering does not. Moreover, the Fragile Five economies experience spikes in exchange rate volatility that are more than double what is detected in other emerging markets. Finally, the impact of foreign exchange intervention to offset the effect on volatility is significant across emerging markets and is, once again, larger in the Fragile Five economies. The results are supported using panel VAR (Vector Autoregression) estimations.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"339 - 361"},"PeriodicalIF":1.1,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42888770","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10168737.2022.2114098
Soosung Hwang, Eunji Lee
We investigate details of the effects of sentiment on dollar exchange rates in six countries, in particular, during periods of extreme movements. Using the Generalized Sup Augmented Dickey-Fuller (GSADF) test, we first show evidence that there are periods of explosive patterns in the exchange rates during the sample period from January 2000 to December 2020. We then examine how sentiment affects the exchange rates during the periods of the extreme movements. Our results show that sentiment has significant effects on exchange rates only when the exchange rates decrease in extreme ways, i.e. the currencies appreciate sharply against the USD. Moreover, these sharp appreciations occur when sentiment in the six countries is more optimistic than that in the US. Therefore, our study shows that currency values appreciate by sentiment and this happens rapidly over a short period.
{"title":"The Effects of Sentiment on Extreme Movements in Exchange Rates","authors":"Soosung Hwang, Eunji Lee","doi":"10.1080/10168737.2022.2114098","DOIUrl":"https://doi.org/10.1080/10168737.2022.2114098","url":null,"abstract":"We investigate details of the effects of sentiment on dollar exchange rates in six countries, in particular, during periods of extreme movements. Using the Generalized Sup Augmented Dickey-Fuller (GSADF) test, we first show evidence that there are periods of explosive patterns in the exchange rates during the sample period from January 2000 to December 2020. We then examine how sentiment affects the exchange rates during the periods of the extreme movements. Our results show that sentiment has significant effects on exchange rates only when the exchange rates decrease in extreme ways, i.e. the currencies appreciate sharply against the USD. Moreover, these sharp appreciations occur when sentiment in the six countries is more optimistic than that in the US. Therefore, our study shows that currency values appreciate by sentiment and this happens rapidly over a short period.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"445 - 460"},"PeriodicalIF":1.1,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42101946","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-07-03DOI: 10.1080/10168737.2022.2100447
Hongkee Kim, Eui-hwan Park, Gyeahyung Jeon
This study aims to estimate the optimal leverage ratio of the Local Credit Guarantee Foundation (hereafter LCGF), which plays an important role in financing small and micro businesses in South Korea. The optimal leverage ratio refers to the rate of credit guarantee balance to capital at which the guarantee system can be soundly and stably operated while meeting the credit guarantee demand. The optimal leverage ratio of LCGF is derived using three methods: a sustainable budget constraint-based leverage ratio, an institutional objective maximizing leverage ratio, and a BIS ratio-based leverage ratio. Assuming that the average trend of the past ten years is maintained, the sustainable leverage ratio is evaluated to be 7.55. In addition, the institutional objective maximizing leverage ratio is estimated to be 7.24. When the optimal BIS ratio increases from 11.5% to 14%, the BIS ratio-based leverage ratio is evaluated to be between 8.39 and 10.21. The leverage ratio at the end of 2020, which was 9.16, is appropriate when using the BIS ratio, considering the COVID-19 crisis. However, it is judged to be slightly higher than the sustainable leverage ratio or the institutional objective maximizing leverage ratio.
{"title":"The Optimal Leverage Ratio of Credit Guarantee Institution: Case of Local Credit Guarantee Foundation in South Korea*","authors":"Hongkee Kim, Eui-hwan Park, Gyeahyung Jeon","doi":"10.1080/10168737.2022.2100447","DOIUrl":"https://doi.org/10.1080/10168737.2022.2100447","url":null,"abstract":"This study aims to estimate the optimal leverage ratio of the Local Credit Guarantee Foundation (hereafter LCGF), which plays an important role in financing small and micro businesses in South Korea. The optimal leverage ratio refers to the rate of credit guarantee balance to capital at which the guarantee system can be soundly and stably operated while meeting the credit guarantee demand. The optimal leverage ratio of LCGF is derived using three methods: a sustainable budget constraint-based leverage ratio, an institutional objective maximizing leverage ratio, and a BIS ratio-based leverage ratio. Assuming that the average trend of the past ten years is maintained, the sustainable leverage ratio is evaluated to be 7.55. In addition, the institutional objective maximizing leverage ratio is estimated to be 7.24. When the optimal BIS ratio increases from 11.5% to 14%, the BIS ratio-based leverage ratio is evaluated to be between 8.39 and 10.21. The leverage ratio at the end of 2020, which was 9.16, is appropriate when using the BIS ratio, considering the COVID-19 crisis. However, it is judged to be slightly higher than the sustainable leverage ratio or the institutional objective maximizing leverage ratio.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"402 - 417"},"PeriodicalIF":1.1,"publicationDate":"2022-07-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46154658","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2022-06-06DOI: 10.1080/10168737.2022.2083653
Isaac Appiah‐Otoo, A. Acheampong, Na Song, C. Obeng, I. Appiah
This study explored the role of financial development in foreign aid (measured by agriculture, humanitarian, health, economic infrastructure and services, and education aid) and economic growth relationship for 37 African countries spanning the 2002–2018 period. Using the instrumental variable generalized method of moments model, our findings indicated that while foreign aid impedes Africa’s growth, financial development spurs economic growth. The conditional effect analysis showed that financial development conditions foreign aid to spur economic growth. The country-specific analysis further showed that foreign aid has a higher growth elasticity in countries with relatively better financial systems, such as Mauritius, South Africa, Gabon, Tunisia, and Botswana, whilst the growth elasticity of aid is smaller in countries with a relatively weak financial system such as Malawi, Guinea Bissau, Sierra Leone, and the Democratic Republic of Congo. The study recommended the need for policymakers in Africa to implement innovative ways to improve domestic revenue mobilization. The study also recommended that policymakers in Africa should create an enabling environment that will enhance the development of Africa’s financial system to mitigate the adverse effect of aid on economic growth.
{"title":"Foreign aid—Economic Growth Nexus in Africa: Does Financial Development Matter?","authors":"Isaac Appiah‐Otoo, A. Acheampong, Na Song, C. Obeng, I. Appiah","doi":"10.1080/10168737.2022.2083653","DOIUrl":"https://doi.org/10.1080/10168737.2022.2083653","url":null,"abstract":"This study explored the role of financial development in foreign aid (measured by agriculture, humanitarian, health, economic infrastructure and services, and education aid) and economic growth relationship for 37 African countries spanning the 2002–2018 period. Using the instrumental variable generalized method of moments model, our findings indicated that while foreign aid impedes Africa’s growth, financial development spurs economic growth. The conditional effect analysis showed that financial development conditions foreign aid to spur economic growth. The country-specific analysis further showed that foreign aid has a higher growth elasticity in countries with relatively better financial systems, such as Mauritius, South Africa, Gabon, Tunisia, and Botswana, whilst the growth elasticity of aid is smaller in countries with a relatively weak financial system such as Malawi, Guinea Bissau, Sierra Leone, and the Democratic Republic of Congo. The study recommended the need for policymakers in Africa to implement innovative ways to improve domestic revenue mobilization. The study also recommended that policymakers in Africa should create an enabling environment that will enhance the development of Africa’s financial system to mitigate the adverse effect of aid on economic growth.","PeriodicalId":35933,"journal":{"name":"INTERNATIONAL ECONOMIC JOURNAL","volume":"36 1","pages":"418 - 444"},"PeriodicalIF":1.1,"publicationDate":"2022-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46647637","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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