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Energy plays a dynamic role in an economy. To understand the different events taking place in the energy market and the importance of the energy sector in the national economy, energy demand has to be understood thoroughly. To the best of our knowledge, no studies have been conducted for modelling energy demand in Bangladesh. The aim of this paper is to create an energy demand model for Bangladesh on the basis of annual data covering from 1980-2015. In this paper, we employed Augmented Dickey Fuller (ADF) unit root test to check stationarity of the variables. Johansen’s Cointegration test is carried out to check the long run association ship among the variables. Granger Causality test and Vector Error Correction Model (VECM) are used to investigate the causalities among the variables of interest both in the long run and short run. Dynamic Ordinary Least Square (DOLS) method is used for estimating the long run price and income elasticities. All the variables are found to be stationary at their first differences. Cointegration test confirms the existence of cointegrating relationship among the variables. In the long run, there is no causal relationship between energy price and energy demand. Moreover, four more unidirectional relationships (energy demand to real income, household expenditure to energy demand, population to energy demand and energy demand to carbon emission) are observed. In the short run, there is a unidirectional causality running from energy price to energy demand and a bidirectional causality between energy demand and population. Estimation result reveals that the long run price and income elasticities are inelastic and income elasticity is smaller than price elasticity in absolute terms. Long run price and income elasticity are -0.75 and 0.45 respectively. As Bangladesh wishes to become upper middle income country by 2021, these findings might be useful for the policy makers to come up with appropriate combinations of policies so that demand for energy can be fulfilled optimally. Besides, policies ensuring cost reflective pricing scheme are encouraged to restructure the market. These will ensure energy security as well as can help the nation to achieve the desired goals effectively.

Neoclassical economic theory suggests there is a positive relationship between economic growth and growth in exports. An increase in exports leads to an increase in income due to the multiplier effect of production. This paper examines whether the Export-Led Growth (ELG) hypothesis is valid for India. Though the existing literature on this field is extensive, the results are ambiguous. Past studies have suffered from various methodological drawbacks. Early studies were hampered by a lack of time series data. The next stage used OLS analysis and simply assumed causation rather than testing for it. A third stage of investigations tested for Granger causality using the standard tests which was not applicable due to the presence of cointegrated variables. Therefore this paper re-investigates the ELG hypothesis for India; taking advantage the longer time series now available, with annual data from 1980 to 2013, and using more sophisticated tests. The paper tests for the presence of a long run relationship between exports and economic growth using the more robust autoregressive distributive lag (ARDL) bounds test for cointegration developed by Pesaran et al. (2001). The paper then tests for causality between exports and GDP using the Todo and Yamamoto (1995) and Dolado Lutkepohl (1996) (TYDL) causality test. The advantage of the latter test is that it indicates the direction of causality. The results indicate that exports have no significant long run impact on economic growth. While in the long run the result exhibits no relationship between exports and economic growth, the short run model is highly significant. Furthermore, the results indicate that capital formation, imports, real exchange rate and terms of trade are significant and have an impact on economic growth in the long and short run. The short run dynamics further indicate that the Indian economy recovers from a shock is relatively quickly. In addition, the causality test results show that there is a significant unidirectional causal relationship from GDP to exports but no causality is found from exports to GDP. Thus, the results show no support for the ELG hypothesis and indicate that India has not directly benefited from the trade reforms implemented in 1991. The findings suggest that to improve and sustain long run economic growth the government should target policies that further enhance domestic demand and capital accumulation.

Remittance flows have become a vital source of foreign exchange for many developing countries. As a result, the issue of whether they act as complements or substitutes for domestic investment remains an important avenue of research. We know that remittances can act as compensatory transfers, in which case altruistic motives may dominate. We also know that they can act as standard capital flows, where self-interest/investment motivates may dominate. Hence, the motives behind remittance flows can have a direct bearing on how they influence domestic capital formation. In addition, the short-run relationship between domestic investment and remittances may be different from their long-run relationship. In light of these considerations, this paper reexamines whether migrant remittances "crowd in" or "crowd out" investment in developing countries, using a sample of 47 developing and emerging economies. The paper employs recently developed panel cointegration techniques given that these can overcome a number of important issues. First, we explicitly account for cross-sectional dependence, outliers as well as cross-sectional heterogeneity. Second, since our variables of interest may be influenced by various factors emanating from, for example, domestic policy changes or global economic trends, we account for structural breaks and regime shifts. Third, the approaches we employ are robust to endogeneity and many forms of omitted variable bias. Fourth, we examine both the long-run as well as the short-run relationship between remittance flows and domestic investment, employing panel error correction model to uncover the short-run dynamics. Finally, we conduct a panel Granger causality analysis to establish whether these relationships are indeed of a causal nature. The results of the paper show that remittances form a long-run equilibrium relation with domestic investment. The results of the panel vector error correction model reveal the absence of a short-run relationship but the presence of a long-run bidirectional link between remittances and investment. Thus, remittances drive investment while investment itself causes more remittances, suggesting that remittances are not only driven by altruistic motives but also investment motives. This long-run (causal) two-way relationship is robust to a battery of sensitivity analyses. However, when the sample is disaggregated into regions, the results of the Asian sub-sample are statistically insignificant. We suspect that this is due to the low number of observations from that region. An important policy implication emanating from this study is that developing countries should improve the effectiveness of remittance inflows given that these can augment the rate of capital accumulation.

Exchange rate misalignment results in resource misallocation and could hamper overall economic growth. Persistent undervaluation leads to high levels of inflation which in turn creates macroeconomic instability while overvaluation leads to trade imbalances with consequential balance of payment problems. Since the redenomination exercise in 2007, the Ghana cedi has been consistently depreciating. This has sparked a lot debate in the public media and among academics concerning possible misalignment of the cedi. This paper investigates the behaviour of the Ghanaian cedi using the behavioral equilibrium exchange rate approach for the period 1980Q1 to 2013Q4. The Johansen cointegration and error correction modelling framework is employed in estimating a model of the real effective exchange rate. Unlike previous studies, this paper employs the real effective exchange rate computed by authors due to certain adjustments made in the International Monetary Fund, International Financial Statistics series. The results point to significant misalignment of the exchange rate with undervaluation before the redenomination in 2007 and overvaluation afterwards. The empirical finding of this study has implications for policy direction. Monetary authorities should seek to strike a balance between the two extremes of overvaluation and undervaluation. This may be achieved by pursuing a pure floating exchange rate system where the exchange rate is allowed to follow the path dictated purely by market forces, without any intervention by the Central Bank. Alternatively, a properly managed float system of exchange rates may be pursued. Hence, given the current state of overvaluation, a once-off devaluation of a minimum of 20% could be considered to bring the exchange rate close to its equilibrium. Subsequently, monetary authorities should closely monitor deviations from the equilibrium path and engage in timely interventions. In addition, policy should be directed at strengthening the economy’s fundamentals with particular attention to the export and productive sectors by creating a conducive business environment that promotes private investment and supports the production of high quality goods of international standard both for the external and domestic market.

From 1977 until 2014, the real effective exchange rate in France declined. Over the same period, the total value of stocks traded in proportion to the nation’s GDP increased. The data is consistent with economic theory - currency depreciation was followed by an increase in the total value of stock transactions (in proportion to GDP). The results of most regression analyses have shown that the relationship between currency depreciation and stock transactions are not always consistent with economic theory. The effect of currency depreciation on stock transactions can be either positive or negative due to various reasons, one of which is the omission of an important variable. Phylaktis and Ravazzolo (2005) showed that the lack of a significant relationship between exchange rate movements and stock transactions could be due to excluding the influence of the world capital markets. This paper builds on Phylaktis and Ravazzolo (2005) and tests the hypothesis that currency depreciation increases the total value of stock transactions in France. Annual data is obtained from the World Development Indicators of the World Bank. The total value of stocks traded is expressed as a percentage of GDP. The real effective exchange rate index is the nominal effective exchange rate divided either by a price deflator or by an index of costs. A trivariate VECM is estimated for the period 1977-2014. The paper investigates the short-run and long-run relationships between the real effective exchange rate and the total value of stocks traded in France. The effect of the U.S. stock market, representing the world capital markets, is also examined. The Dickey-Fuller Generalized Least Squares unit root test indicates that the variables are I(1). The Johansen cointegration test indicates a long-run relationship between the variables. Since AIC selected a model with 4 lags and the maximum rank of the cointegrating matrix is found to be 1, the VECM is estimated with 4 lags and 1 rank specification. The short-run results indicate that the adjustment coefficient is statistically insignificant; thus the estimated results are plausible in the short-run but not in the long-run. The short-run results indicate a significantly negative relationship between the real effective exchange rate and the total value of stock transactions in France; thus there is a close association between the stock market and the foreign exchange market in France. The short-run relationship between stock transactions in the U.S. and France is also found to be significantly negative.

The interaction between macroeconomic variables and share returns has been a debatable topic since decades. Much of the earlier studies have talked about significant relationships between stock market and macroeconomic indicators. In recent years Islamic finance has shown persistent growth worldwide. India has approximately 177 million Muslims, accounting for 12% of India's total population. Islamic finance differs from conventional investing in different ways like prohibition of gambling, pork, alcohol, entertainment, tobacco, profiting from interest rates etc. This paper aims to explore the long run and short run relationships of macroeconomic indicators and stock returns in the Indian context. The study is unique as it employs Shariah compliant indices to check on the stock market in India, a non - Islamic country. Data spans the period from January 2006 to July 2015. Monthly data is used and the selected macroeconomic variables are inflation rate (wholesale price index), interest rate (365 day government of India T-bill rate), money supply (M3) and exchange rate (US Dollar/Indian Rupee). 'Dow Jones Islamic Market India Total Return Index' is considered to track for the Shariah compliant stock index in Indian equity market. The study employs Johansen's co-integration and VECM to check for long run and short run equilibrium relationships. We check for long run equilibrium relationships through co-integration analysis. Johansen's test is a preferable multivariate cointegration test as it accounts for more than one cointegrating relationships. Granger causality is applied to check for the direction of causality. Variance decomposition in VAR system dynamics is also analyzed. Study reports the presence of a long run equilibrium relation between macroeconomic indicators and Dow Jones Islamic India market index. We are getting a positive and statistically significant relationship between WPI and stock returns as well as money supply and stock returns. Interest rate is showing negative and statistically significant relation with stock returns. Further uni-directional causality is observed from money supply and exchange rate to Dow Jones Islamic India market index. We can say that exchange rate as well as money supply granger causes Dow Jones Islamic India Market Index. Variance decomposition of exchange rate shows that 21.66% of variance in exchange rate is explained by Dow Jones index. Variance decomposition of Dow Jones index shows that money supply M3 explains 16.01% of variation in Dow Jones index. India's Islamic capital markets are showing signs of market inefficiency because of long run equilibrium relationships. This paper caters to the needs of Islamic investors and also to the policy makers as it provides a broad understanding of dynamic relationships between Shariah compliant stock returns and macroeconomic factors in India.

Malaysia has been experiencing sustained current account surplus during post-Asian crisis period. Although current account surplus is not as harmful as deficit, it cannot be sustained forever. Moreover, if the surplus is caused by bad reasons, such as, insufficient social insurance, inefficient financial intermediation, then it is reflected in deteriorating external competitiveness through more depreciated real exchange rate. Therefore, examination of current account sustainability is of crucial importance for the long-run health of the economy. Previous studies on Malaysian current account sustainability produce diverse results and leave it as an unsettled issue open to further research. In this backdrop this paper investigates the sustainability of Malaysia’s current account balance for the period 1970 – 2010. This paper employs inter-temporal budget constraint to understand the behavior of exports and imports of Malaysian economy. Autoregressive Distributed Lag (ARDL) method is applied to examine the long cointegrating relation between Malaysian exports and imports plus interest on external borrowing. Advantage of employing the ARDL method is that it does not require the variables to be integrated to the first order. This method can be applied to a set of stationary and nonstationary variables. The paper uses annual data over the periods 1970 – 2010. Export, import and Gross Domestic Product (GDP) data are in current US dollars. Interest payment on long-term external borrowing in US dollars is used as a proxy for interest on net foreign debt. Estimation results indicate that these two variables are cointegrated, which implies that Malaysia’s current account is sustainable in the long run. Strong sustainability requires the coefficient of cointegrating vector to be one. In addition to ARDL method, coefficient of cointegrating vector is estimated by two other methods, namely, fully modified OLS (FMOLS) and dynamic OLS (DOLS). All three estimations show that the long-run coefficient is greater than one. This indicates that in the long-run export increases more than import plus interest on external borrowing. Therefore, if the excess export earnings in the long run cannot be utilized productively current account surplus may not sustain. It is, therefore, concluded that Malaysian current account is weakly sustainable. This findings call for policy intervention at macro level to make efficient utilization of excess saving to boost economic growth through promoting social insurance, facilitating efficient financial intermediation and encouraging private investment.

Economists and policymakers often associate external competitiveness with the real exchange rate. This paper seeks to study Bangladesh’s external competitiveness by critically examining the determinants of the country’s real equilibrium exchange rate. While a number of studies have been done on Bangladesh in this area, no consensus has emerged on the determinants of real exchange rate. Few studies explicitly incorporate net foreign assets when modeling exchange rate change of Bangladesh. This paper plans to bridge this gap by developing a simple model in line with Musa (1984), Faruqee (1995), and Egert (2004). In this model, the current account in the long-run is driven by adjustment in the net foreign assets (NFA) towards a targeted level. Given a country’s long-run target for the stock of net foreign assets, the real equilibrium exchange rate then corresponds to a current account balance that is consistent with the income flows from this stock. The model is then tested by applying the autoregressive distributed lag (ARDL) bound testing approach by Pesaran et al. (2001) to the cointegration for the long-run and using the error correction model to examine the short-run dynamic relationship among real exchange rate, dual productivity differentials, net foreign assets, and real absorption. The empirical analysis is based on the annual data series from 1980 to 2014, collected electronically from the online databases of the IMF, the Penn World Table, and the World Bank. The empirical result show that, once shocked, real exchange rate convergence to equilibrium is quick with 64% of the adjustment occurring in the first year. The study finds that increased capital flow, greater real absorption, and faster productivity growth in the tradable sector relative to that of the non-tradable sector lead to real exchange rate appreciation. The estimated parameters are also stable. The paper then discusses policy implications and sheds some lights on the research limitations and future research considerations. For example, the paper recommends that Bangladesh should try to keep its currency relatively weak to protect domestic producers from foreign competition and strengthen their competitiveness to produce for and sell, particularly readymade garments, to world markets.

Sustained current account deficit and surplus are not good for an economy. Before 1997 financial crisis South East Asian countries experienced current account deficit, while after the crisis most of them have current account surplus. This paper is motivated by the absence of research on current account sustainability issues in selected crisis affected countries, namely, Indonesia, Malaysia, the Philippines, and Thailand, within the framework of panel cointegration and error correction methods. The paper employs panel unit root, panel cointegration and panel dynamic OLS (PDOLS) methods to assess current account sustainability. Based on an inter-temporal analytical framework the paper examines co-integrating relationship between export as percentage of GDP (indicated by X) and the sum of import and interest on long-term external borrowing, both as percentage of GDP (indicated by MM). The paper also estimates current account sustainability parameter by PDOLS. Annual data from 1970 to 2013 for Indonesia, Malaysia, the Philippines, and Thailand are sourced from World Development Indicator 2012 & 2014 . Exports, imports, and GDP data are in current US dollars. The interest payment on long-term external borrowing is used as a proxy for interest on net foreign debt. All variables are expressed as percentage of GDP. Different econometric tests indicate that X and MM are non-stationary at level; however, stationary at first difference. Panel co-integration tests indicate that the variables are co-integrated, which indicates that there is long-run equilibrium relationship between X and MM. Error correction parameter indicates that it takes less than four years to correct short-run disequilibrium. PDOLS estimate shows that the sustainability coefficient is 1 (one).Panel co-integration and PDOLS results together indicate that current accounts in the sample countries are strongly sustainable. This finding is consistent with previous single country study. This finding supports that the current account balance reflects the optimal decisions of the borrowers and lenders; therefore, policy intervention to correct the balance is unwarranted and could reduce welfare. To avoid future crises, policymakers should pay attention to other issues, such as supporting long-term capital flows and liberalizing short-term capital movements.

Brazil and USA are important trading partners. Brazil as a resource-rich country in Latin America and a vibrant emerging economy draws enormous US trade and investment interests. Inclusion in BRICS lifts Brazil as an emerging global economic force and BRICS as a group poses economic challenges to the developed world. The Brazil-US growing trade and fluctuating Real-Dollar exchange rate are a fascinating issue of empirical exploration. The principal objective of this paper is to study the dynamics between Brazil-US nominal trade balance and nominal Real-Dollar exchange rate. Monthly data are utilized from January 1999 through December 2013 since Brazil allowed floatation of Real beginning in January 1999. They are obtained from the Direction of Trade and International Financial Statistics, published by the IMF. The standard cointegration methodology is implemented. This is appropriate since macroeconomic and financial variables are very likely to be time-variant. The application of OLS on nonstationary variables would produce misleading inferences in presence of spurious correlation. Consequently, the efficient DF-GLS and NG-Perron tests for nonstationarity and their counterpart KPSS test for stationarity are applied. All of them confirm nonstationarity of both time series variables. Stationarity in both variables is restored on first-differencing of the level data depicting I(1) behavior. Consequently, the Johansen-Juselius procedure is implemented for cointegrating relationship. Both λmax and λtrace test statistics unveil no cointegration between nominal bilateral trade balance and exchange rate. In this backdrop, VAR model is estimated, as appropriate. The evidences on short-run bidirectional causal flows are strong with significant interactive feedback effects. In the case of reverse causality, the evidences are highly insignificant. The impulse response analysis depicts the existence of short-run bilateral J-curve that shows initial deterioration in trade balance for a while following exchange rate depreciation before improvement into positive territory. In this paper, the J-curve shows that currency depreciation by Brazil against the US dollar to improve its trade balance with the USA may work only in the short run. Progressive improvement in trade balance in the long run would, in fact, depend on prudent monetary and fiscal actions to enhance Brazil’s global competitiveness through improvement in labor productivity and modern technology adoption.

This paper examines the relationship between defence burden and real gross domestic products in Nigeria, using annual time series data. This study uses Johansen’s Cointegration approach to investigate the relationship between government’s military expenditure (defence burden) and real gross domestic products, among other variables. In light of the lingering controversy on military expenditure and growth nexus, this paper contributes to the existing literature using time-series data from Nigeria, a country with high military spending over the years to re-investigate the impact of military expenditures on economic growth and the direction of causality between military spending and economic growth. Specifically, this study discusses the long run relationship between military expenditure and economic growth using Johansen cointegration approach. The key variables used in the study include: military burden (military expenditure), real GDP, real education expenditure, real health expenditure. The nature of the relationship that exists between military expenditure and economic growth as well as the cointegrating vector, taking into cognizance all other variables is focus of this paper. The results of the study show that increased defence burden is harmful to the Nigerian economy, and there exists a negative long-run relationship between defence burden and increase in the growth of real gross domestic products, the impact of defence burden remains negative both in the short-run and long-run respectively. It is not sufficient to have cuts in military expenditure, but such reallocation from defence should be directed towards productive investment in other sectors of the economy in order to generate economic prosperity and enhance the welfare of the citizens. Implications of having a negative effect of defence burden on growth rate of real Gross Domestic Products result in crowding-out of private sector investment, retards economic progress or growth rate of real gross domestic products, and therefore, is an ineffective tool to stimulate the growth of the economy in Nigeria. Military expenditure cannot be an effective tool of fiscal policy (government revenue and expenditure to regulate the economy), from the results of the study both short-run and long-run impact are negative, hence, the role of military sector should be limited to the maintenance of internal law and order as well as the defence of the country against any form of external aggression. This study will be of immense significance towards shaping policies that relate to military spending in Nigeria.

Theoretically, it is believed that FDI is a principal factor supporting and accelerating economic enhancement of an economy over the years. FDI boosts the productivity of host countries and promotes economic development, as FDI may not only provide direct capital financing, but may also create positive externalities via the adoption of foreign technology and know-how. In this paper we focus our attention on Estonia, as a (former) transition economy. Estonia stands out as one of the most successful ones in terms of economic growth and institutional changes among former command economies, as in less than two decades Estonia has been able to build functioning market-economy-institutions virtually from scratch and has joined the European Union (EU) and the Euro-zone. This paper, using cointegration methodology for the period of 1994:Q1-2013:Q2 focuses on the causal relationship between FDI and real GDP in Estonia. The real GDP data is obtained from Eurostat (2005 = 100) while the FDI data is obtained from the Bank of Estonia. Exploring the cointegration test is done through two methods: the residual-based test of Engle and Granger (1987) and Johansen’s methodology. The cointegration tests require that series to be integrated of order one. For this reason we first test for the existence of a unit root using Augmented Dickey Fuller unit root test (ADF, 1979, 1981), and Kwiatkowski et al . (KPSS, 1992). We further investigate the causal relationship using Granger Causality analysis and Vector Error Correction Model (VECM). The stationarity tests show that the variables are integrated of order 1, confirming that FDI and GDP are not stationary. The Engle-Granger method shows that FDI and real GDP are not cointegrated. Continuing with Johansen Cointegration Test, which is more generally applicable than the Engle-Granger method, the findings indicate that both the real GDP and FDI series are cointegrated, hence, the variables have long term relationship in that they will not deviate arbitrarily from each other and that their deviations from long run equilibrium path are corrected. Finally, Granger Causality test provides evidence that GDP does respond to changes in FDI in the long run but not in the short run, besides FDI does Granger cause real GDP. Our findings demonstrate that FDI can be very useful for Estonia, and it will be interesting to examine whether such findings are essentially due to large share of FDI in the banking sector and/or due to large share of FDI from high-income countries.

The improved performance of the financial sector through its process of financial intermediation between savers and investors and between lenders and borrowers as well as the guidance of the funds those are available to the optimal investments lead to achieve the desired stable economic growth. Economists generally believe that high rates of inflation cause problems to some individuals and as well as for the whole economic performance. In general, low inflation rate with financial sector development plays a crucial and essential role in achieving sustained and stable economic growth. Therefore, maintaining inflation rate at low level and improving the financial sector performance are considering themain targets for policy makers to promote sustained and stable economic growth. So, the main purpose of this paper was to investigate empirically the relationship between inflation and financial sector development in Saudi Arabia for the period of 1982-2013.This paper used the autoregressive distributed lag (ARDL) bound testing approach suggested by Perasan et al. (2001) to examine the existence of the long-run relationship between the inflation rate and financial sector development. The advantage of the bounds testing approach is in its applicability irrespective of whether the underlying variables are purely I (0), purely I (1) or mutually co-integrated.All data were tested for stationarity using Augmented Dickey-Fuller (ADF) test and the Phillip-Perron (PP) test to determine the order of integration. The variables included in this study are: The credit to the private sector as percentage of GDP was used as a proxy of financial development and inflation rate measured by the consumer price index. The study also included two more control variables: trade openness and real gross domestic product. The main findings are as follows. First, tests results of the Augmented Dickey-Fuller (ADF) and Phillips – Perron (PP) showed that consumer price index (LCPI), real gross domestic product (LGDP) and trade openness (LOPEN) did not seem to be stationary at their level but they were at first difference. Accordingly, they were integrated of order one I (1). On the other side, both tests results of financial development (LFD) seemed to be stationary at its level. Accordingly, it was integrated of order zero I (0). Second, results showed that there was a statistically significant long-and-short run negative relationship between inflation and financial development. Third, there was statistically significant positive impact of previous financial sector’s policies on financial sector development.Forth, results indicated that there was statistically significant positive impact of economic growth on financial development. Fifth, there was a statistically significant negative impact of trade openness on financial development.Accordingly, inflation and trade liberalization policy are the main obstacles facing financial sector performance. Therefore, the policy makers can reduce inflation through the use of appropriate fiscal and monetary policies.

This paper examines causalities among foreign direct investment (FDI), economic growth (GTH), and financial development proxied by both equity market size (EQM) and bank credit to private sectors (BANK). We use a structural cointegration model with a vector error correction (VEC) mechanism to test for the short-term dynamics of the model. The results show that there is a reinforcing causal relationship between FDI and EQM, and between EQM and GTH in the short term, and that these variables cointegrate in the long term. As far as practical implications are concerned, the results reinforce that developed financial markets are an essential precondition for the positive impact of FDI on economic growth, reflecting host countries’ ability to exploit FDI more efficiently. Moreover, the paper provides further substance for the notion that a country with a well-developed financial market gains significantly from FDI inflow.

Most of the study of causal relationship of GDP or growth with Trade and Foreign Direct Investment in the context of India rely on cross country comparisons, or simple correlations/regressions disregarding nonstationarity properties, or at most on VAR or VECM or Johansen-Juselius cointegration technique of testing for Granger causality. The potential biases, pitfalls, influence of nuisance parameters and asymptotic unreliability of these techniques have been well documented in the literature and also briefly mentioned in this paper. Therefore, this paper employs the more recent and robust Toda-Yamamoto-Dolado-Lutkephol augmented VAR(p) technique for testing Granger causality among these three time series. This technique has been shown to provide more robust and asymptotically reliable results under wide variety of situations regarding the cointegration relationships among the time series. This study also focuses on the post liberalization period and clearly shows that the post- liberalization period significantly differs from the pre-liberalization period in the GDP-Export-FDI nexus. We find strong support for Export-led and Foreign Direct Investment led growth hypotheses only in the post liberalization period.

This paper tests the validity of Purchasing Power Parity (PPP) doctrine for Ghana using the conventional relative PPP equation. We conducted a univariate Augmented Dickey-Fuller unit root test on the model variables. Exchange rate and CPI data for Ghana and the USA were collected on annual basis for the period between 1970 and 2005 inclusive. The result of the PPP test shows non-rejection of the null hypothesis of the failure of PPP. The result of the unit root test suggests that Ghana's exchange rates are mean reverting. Exchange rates and inflation differentials were found to be stationary at the same order of integration. Consequently, cointegration is suspected between GHANEX and GHANINF, though this paper did not investigate the presence of cointegration because even if it exists, we conclude that there is a long-run relationship between the two variables. Based on the result, it is concluded that a common basket of goods, when quoted in either cedi or dollar is not expected to cost the same in both countries. From the policy point of view, we established that PPP can be used to assess the level of exchange rates.

This paper applies multivariate cointegration methodology and vector error-correction models to investigate the factors that are likely to contribute to economic growth and employment in Bangladesh. This paper concludes that exports, FDI and external remittances enhance both economic growth and employment in the short run. But the exchange rate depreciation seems contractionary, although the empirical evidence lacks abundance of clarity and robustness.

This paper develops a macroeconometric model for the Bangladesh economy using nine key macroeconomic variables employing annual data from 1974 to 2000. The methodology employed in this paper uses unit root and Johansen's cointegration tests followed by vector error correction model and variance decomposition to examine the dynamic relationships among macroeconomic variables. Our results show that within the context of Bangladesh, monetary policy is more important than fiscal policy. As significant amount of development expenditure for Bangladesh comes from foreign donation, it is also argued that this aid must be channeled to productive activities so that it contributes to economic growth. The domestic export base has also to be widened and diversified.

This paper examines the determinants of foreign direct investment (FDI) from Singapore to two main host destinations: China and Hong Kong. It allows policy makers and researchers to understand the differences/similarities in the determinants of FDI from Singapore to a developing country, China, and a developed country, Hong Kong. Annual time series data covers the period 1994 to 2014 is used. Commonly used determinants, such as gross domestic product per capita of a host country, gross domestic product per capita of Singapore, real interest rate of a host country and trade openness of a host country are utilized to study Singapore's outward FDI (OFDI). Because the sample has only 21 observations, autoregressive distributed lag based bounds testing approach to cointegration developed by Pesaran, Shin & Smith (2001) is used to estimate cointegrating regression among these variables. This approach is an appropriate econometric estimation technique because the estimated long-run coefficients obtained from the reparameterization of an ARDL model are super-consistent even in small sample size. The main findings show that gross domestic product per capita of a host country attracts FDI from Singapore to each of these countries. It is also observed that higher interest rates in these two host countries attract Singapore's FDI. The degree of openness of China influences the flows of Singapore's FDI to China positively, but not for Hong Kong. It is a surprise that this empirical study is unable to find evidence that gross domestic product per capita of Singapore has an influence on its own FDI outflows. The overall results reveal that the motives of multinational corporations (MNCs) from Singapore to invest abroad typically differ between developing and developed economies, depending upon their respective competitive advantages. In general, MNCs invest in more advanced economies, such as Hong Kong, due to its purchasing power and market potential. Same goes for the developing markets, such as China, that consists of cheaper labor and large market opportunities. For the developing economies, trade liberalization is proved to be the pull factor that attracts MNCs. The more open an economy, the greater the attraction it has to MNCs.

In this paper, we have explored the relationship between three key indicators of the health of any economy, namely, human development index (HDI), foreign direct investment (FDI) and gross domestic product (GDP). Three alternative models were assessed in the study to investigate the dynamics of the cause and effect relationship between the three variables. Thirty countries were selected for the purpose of the study on the basis of a positive change in their HDI ranks from 2012 to 2017. Further, the countries were categorized into countries with very high, high, medium and low HDI ranks. Annual FDI, HDI and GDP data for the period from 1990 through 2016 were used to investigate the nature of the relationship among the selected variables. The proposed models testing the outcome-explanatory variable relationship between FDI, HDI, and GDP were tested using cointegrating regression with panel dynamic least square model (DOLS) and panel fully modified least square model (FMOLS). The findings of the study show that HDI and FDI are the statistically significant variables that positively impact the changes in GDP. Further, the impact of HDI is of larger magnitude than FDI. However, GDP and FDI were not found to exert any statistically significant impact on HDI for the period under the study. Similarly, HDI and GDP were also not found to exert any significant impact on FDI. Before applying DOLS and FMOLS, stationarity was confirmed using five panel unit root tests, namely, LLC, IPS, Fisher-type tests using ADF and PP and Hadri. Thereafter, Pedroni residual cointegration test and Kao residual cointegration test were used to confirm the existence of cointegration among the variables, which is a necessary condition for applying DOLS and FMOLS. The study has key implications for the policymakers in search of models and plans to boost GDPs of their respective countries. Since HDI exerts more than proportionate positive impact on GDP, governments can focus on improving the three components of HDI, namely, life expectancy, adult literacy and education enrolment to promote economic growth. Further, since FDI exerts a positive impact on GDP, policymakers can strategize to make more friendly policies to attract foreign investors.

The three main theories of exchange rate behaviour, namely, the flow-oriented theory, the stockoriented theory, and the arbitrage pricing theory posit that there is a relationship between exchange rate movements and stock returns. In light of mixed and inconclusive results in existing studies on the relation between exchange rate and stock returns, this paper reinvestigates the sensitivity of the total value of stock transactions in Belgium (as a percentage of GDP) to changes in the real effective exchange rate over the period 1980-2014. We also examine the link between stock transactions in Belgium and the United States (as percentages of GDP). Annual data on the three variables are obtained from the World Development Indicators of the World Bank Group. Due to non-stationarity in time series data, the cointegration technique is applied. The results of the Dickey Fuller-Generalized Least Squares (DF-GLS) unit root test indicate that the variables are I (1). The Johansen (1995) cointegration test provides evidence of a long-run relation between the three variables. The results of the cointegration analysis indicate a significant positive long-run relation between stock transactions in Belgium (as a percentage of GDP) and the real effective exchange rate. The results also indicate a significant positive long-run relation between stock transactions in Belgium and the United States. The long-run coefficients are significant at the 1% significance level. The short-run adjustment coefficient has the expected negative sign, which indicates adjustment toward long-run equilibrium. Diagnostic tests are performed to test for autocorrelation and normality in error distribution. The model fails to reject the null hypothesis of no autocorrelation at lag order. The model fails to reject the null hypothesis that the errors are normally distributed. The stability test is also satisfied. Dynamic forecasts indicate an increase in the total value of stock transactions in Belgium over the next ten years. Orthogonalized shocks to the real effective exchange rate and the total value of stock transactions in the United States are found to have permanent effects on the total value of stock transactions in Belgium. The important policy implications following from the empirical analysis are presented and discussed.

In this paper, we investigate the short run and long run causal relationship between wholesale price index (WPI) and consumer price index (CPI) in India over the period from 1994 April to 2015 August. Using a linear cointegration and a nonlinear time series model of threshold cointegration with asymmetric error correction model and spectral Granger causality approach, the study attempts to find the linear and nonlinear cointegration relationship between WPI and CPI in India. Empirical results reveal the non-existence of linear cointegration between the WPI and CPI indices in India. Moreover, using consistent threshold autoregressive (C-TAR) and consistent momentum threshold autoregressive (CM-TAR) model, we find the evidence of non-linear cointegration between WPI and CPI in India over the period from 1994 to 2015. The consistent M-TAR model indicates the presence of threshold cointegration between WPI and CPI, which further suggests the consistent inflationary trends after 1995 in India due to rising per capita income and other macroeconomic indicators. Furthermore, results indicate that WPI and CPI are cointegrated with threshold error correction adjustment, and the adjustment towards long-run equilibrium is asymmetric. This further suggests that WPI and CPI respond differently to positive and negative deviations from the long-run equilibrium after the threshold level. Empirical results further indicate that adjustment towards longrun equilibrium tends to persist more for negative deviations and respond more quickly towards positive deviations. The spectral granger causality results do not reveal the causality from WPI to CPI. However, the Granger causality from the asymmetric error correction model reveals the unidirectional causality, which indicates that CPI Granger causes WPI, support the demand-push inflation in India. CPI Granger causes WPI at very low and high frequencies, which takes an average wavelength of more than 3.6 quarters time in a year. Furthermore, empirical results reveal that WPI and CPI reach equilibrium asymmetrically after the threshold level of the two percentages. In sum, results suggest that the Indian policymakers can emphasis on the demand side rather than supply-side inflation to control the level of inflation after the desired threshold level. Moreover, the central bank of India would give importance to control the unwarranted inflationary trend, which has been caused due to the CPI-based demand-side inflation.

The Financing Gap Hypothesis (FGH) proposed that foreign aid is needed to fill a financing gap created by low savings in less developed countries (LDCs) relative to the large investments needed for promoting economic development and poverty alleviation. In the 1980s, using the failure of foreign aid to alleviate poverty in LDCs as evidence, a neoclassical counterrevolution in development economics rejected this hypothesis. In its stead, they pointed to poor governance and anti-market statist LDC policies, not inadequate financing, as for the causes of LDC poverty and underdevelopment. The ensuing debate generated a plethora of empirical studies of the aid-growth relationship, whose findings remain inconclusive. While unconditional aid-optimist studies found significantly positive aid-growth relationships, with or without "good" policies, conditional aidoptimists found aid positively impacting growth in only countries that have "good" policies. Meanwhile, aid-pessimist studies reported insignificant or significantly negative aid-growth relationships. However, this literature was mostly based on regression analysis of cross-sectional data. As such, they do not address individual country characteristics that impact the aid-growth relationship. Secondly, they assumed aid-exogeneity, although aid-endogeneity seems more plausible. This makes those regression findings susceptible to endogeneity bias. Thirdly, cross-sectional regression estimates provide a snapshot of the aid-growth relationship at a given point in time. However, economic growth and poverty alleviation are long-run phenomena, which require an understanding of the long-run equilibrium aid-growth relationship. Cointegration analysis estimates long-run equilibrium relationships. Hence, it is appropriate for studying the aid-growth relationship. It also addresses endogeneity bias by assuming that all variables are endogenous. Finally, unlike cross-sectional analysis, individual-country cointegration analysis addresses country-specific characteristics. Given the above advantages of cointegration analysis, this paper uses Johansen's maximum-likelihood (JML) cointegration procedure and three single-equation cointegration estimators to investigate the long-run relationship between labor productivity and foreign aid in Sierra Leone. All four estimators find a positive and significant long-run aid-growth relationship. They also find that total factor productivity (TFP) is the most dominant factor in explaining labor productivity in the country. Consequently, it recommends using aid to promote TFP growth.

The relationship between economic growth and energy is a widely researched topic in the world of economics and there are quite many studies on the relationship between energy and sectoral output; however, to the best of our knowledge there have been none in the context of Bangladesh. This paper examines the causal relationship between energy consumption and output growth of Bangladesh both at aggregate and sectoral level using the annual data from 1980 to 2014. For the purpose of our study we have used the GDP at constant local currency as an indicator of economic growth while energy use has been used as a proxy for energy consumption. These variables have been taken from World Development Indicator (WDI) 2015 published by World Bank and EViews 7.0 has been used to run the tests in this study. To test our data for stationarity, we have run two tests which are the Augmented Dickey-Fuller (ADF) test and the Phillips-Perron (PP) test. Then to test for cointegration and causality between the variables, we used the Johansen cointegration method and the Granger Causality tests respectively. We find the variables to be stationary after running both the Augmented Dickey-Fuller (ADF) test and Phillips-Perron (PP) test. Using the Johansen cointegration method, we find that all the variables are cointegrated. Granger Causality tests reveal that at the aggregate level there is unidirectional causality running from GDP to energy consumption. Similarly, at the sectoral levels, there is unidirectional causality running from agricultural, industrial and services sector output to energy consumption. However, Vector Error Correction Model (VECM) test observes no causality between energy consumption and output at the macro level and at the sectoral level in the short run. Thus we can conclude that GDP or sectoral output is not energy dependent in Bangladesh and our findings are also consistent with the conservation hypothesis. Moreover, our short run results are consistent with the neutrality hypothesis. This further strengthens our conclusion that the economic growth of Bangladesh is not energy dependent. These results have important implications for policy as energy conservation policies can be applied in Bangladesh without hurting growth. Furthermore, it is evident that implementing subsidies in the energy sector will not contribute in achieving growth and cost reflective pricing policy would be more effective in Bangladesh. Nevertheless, the government of Bangladesh should invest in efficient energy production and utilize the various energy sources available to Bangladesh.

India, one of the fastest growing economies of the world is also one of the largest CO2 emitters in the world. Challenge before the country is to reduce this alarming emission levels without hindering its growth prospects. Against this backdrop, the present paper studies the dynamic causal relationships between India's CO2 emission, energy consumption, GDP growth and changing economic structure. The study uses cointegration and causality analysis for the same. ARDL bound testing approach along with Johansen-Juselius maximum likelihood procedure is applied to examine the existence of long run equilibrium relationship among the variables. Causal linkages between the variables are studied using Granger causality test in Vector Error Correction model framework. For this the study uses data on India for-CO2 emissions, primary energy consumption, GDP per capita and structural variables like, agriculture and service value added, urbanization, production of capital and intermediate goods and employment. Primary energy consumption, per capita GDP and trade openness explain variations in CO2 emissions over long run. Elasticity of CO2 emission with respect to energy consumption is 2 percent in long run and 1.8 per cent in short run. CO2 emissions are less responsive to changes in per capita GDP (0.52) and trade openness (0.10). Both trade openness and GDP per capita growth lower emissions by producing and exporting more labor-intensive environment friendly goods. Causality analysis shows that trade openness Granger causes CO2 emission both in short run and in long run while CO2 emission Granger causes service value added and production of capital and intermediate goods in the short run. Output in these sectors in turn Granger cause employment in the long run. Given the nature of causality, there is no way that India can reduce energy consumption in service sector or in capital and intermediate goods sector. Thus, faced with growing concern over rising emission levels and requirements to meet its growth potentials, India should take policies aiming at greater investment in and usage of cleaner energy, conservation of energy and improving energy efficiency. This way it can strike a balance between reducing its emission levels while maintaining its current growth momentum.

Although Classical theory postulates that there is a short-run trade-off between inflation and unemployment rates, numerous studies have shown that the relation between inflation and unemployment rates vary greatly across different sample periods, countries, estimation techniques and data sources. Due to the contrasting results obtained in previous studies, in this paper we investigate the short-run and long-run effects of unemployment rate, long-term interest rate, trade openness, budget deficit, money supply, economic growth rate and exchange rate on U.S. inflation rate over the period 1978-2014. The Augmented Dickey Fuller unit root test is performed. The variables are found to be integrated of order one. We apply the bounds testing approach proposed by Pesaran et. al (2001). The Johansen and Juselius (1990) and the Engle-Granger (1987) tests show that the variables are cointegrated. The Granger F-test is applied to the vector error correction model to investigate causal relationships between different pairs of variables. Results indicate short-run unidirectional causalities from interest rate, trade openness, economic growth rate and exchange rate to inflation rate, from interest rate to unemployment rate, from economic growth rate to trade openness, and from unemployment rate, trade openness, budget deficit, economic growth rate and exchange rate to money supply. Long-run causality is observed when inflation rate is an endogenous variable. In cointegration analysis, the adjustment coefficient is found to be statistically insignificant; thus, the results are considered plausible only in the short-run. Long-term interest rate and trade openness are found to have significant positive short-run effects on inflation rate. No significant short-run trade-off is observed between inflation and unemployment rates. The results of the cumulative sum (CUSUM) and cumulative sum of squares (CUSUMSQ) tests proposed by Borensztein et. al (1998) are within the critical bounds; thus all the coefficients in the error correction model are found to be stable. The diagnostic tests indicate that there is no evidence of serial correlation, and no problem of heteroscedasticity. The autoregressive conditional heteroscedasticity is not present in the short-run model. The test results also indicate that there is no problem of normality in error distribution. Based on the cointegration and causal analysis, we find no evidence to support a short-run Phillips curve for the U.S. economy for the period 1978-2014. A rise in inflation rate, due to a monetary expansion, is not found to have any significant short-run impact on unemployment rate in the U.S. economy for the sample period under study.

The relationship between economic growth and poverty reduction has long been researched in numerous studies around the world; yet, the results are far from being conclusive. Although it is now widely recognised that economic growth is good for poverty reduction through the trickle-down effect, alternative views still exist. This paper, therefore, investigates the dynamic causal linkage between poverty reduction and economic growth in Ethiopia during the period from 1970 to 2014. To address the omission of variable bias, the study includes financial development and investment as intermittent variables – thereby creating a multivariate Granger-causality model. The study uses two proxies to measure the level of poverty in Ethiopia, namely: household consumption expenditure and the infant mortality rate. The study further uses the newly developed autoregressive distributed lag (ARDL) bounds testing approach to cointegration and the ECM-based Granger-causality test to examine this linkage. The study finds that there is a short-run bi-directional causality between economic growth and poverty reduction – irrespective of which variable is used as a proxy for poverty reduction. However, in the long run, the study finds unidirectional causality from economic growth to poverty reduction (proxied by infant mortality rate); but it fails to find any causal relationship between household consumption expenditure and economic growth. The study, therefore, concludes that while poverty reduction and economic growth are mutually beneficial in the short run; in the long run, it is economic growth that leads to poverty reduction when the infant mortality rate is used as a proxy for poverty reduction. The study recommends that policy makers in Ethiopia should pursue both pro-poor policies and pro-economic-growth strategies in the short run; since poverty reduction and economic growth have been found to have a mutual causal relationship in the short run. It is further recommended that such policies should be complementary and mutually reinforcing. If the economic growth and poverty reduction policies are well crafted and co-ordinated; in the short run, a reduction in poverty could lead to an increase in economic growth – in a way that reinforces further reduction in poverty and inequality and benefits the population at large, while promoting higher economic growth in turn. However, in the long run, pro-growth policies should be prioritised; since economic growth has been found to Granger-cause poverty reduction in the long run. This would ensure that poverty in all its forms is reduced as far as is possible.

Urban induced industrialization, energy consumption, carbon emission and rising percapita automobile consumption have impelled society to brace for the heat wave like conditions. Over last 50 years (1956-2005), average annual temperature worldwide has been increased by 0.13 C degrees. Post 2005 period has even faced some unprecedented heat wave conditions across the globe starting from Europe in 2003, Greece in 2006, North America, 2006, India in 2010, 2013 and 2015, Australia in 2012. In this context, this paper empirically examines the importance of such unsystematic urbanization with respect to annual temperature change in case of so-called BRICS economies. For this we have collected data ranging from 1980 to 2012 for five economies namely Brazil, Russia, India, China and South Africa. Data w.r.t annual temperature, urbanization, energy consumption, carbon emission and foreign direct investment are mainly collected from World Bank, EIA and UNCTAD databases. In our empirical setup, we have employed Bayer-Hanck cointegration and different structural break tests. Our long run cointegration result shows that both pollution and annual temperature changes are well cointegrated and robust enough to capture the trend of global warming and environmental changes in an economy. Further, the evidence of structural break tests in forms of Zivot-Andrews Unit Root test and Gregory-Hansen cointegration tests are applied to ensure the breakpoint. It captures the condition of relative unsustainability from the year, when urbanization has exerted significant effect upon the environmental indicators and annual temperature variation. Furthermore, we apply chow forecast test to examine the significance of structural breaks in an economy during the period. The result shows that there exists no breakpoint in all these economies except Brazil during 1990-2012 period. The main policy implication emerging out of this study is that there must be the element of sustainability in industrialization and urbanization processes of the developing economies. The developing economies primarily must adopt the short term goal in attaining sustainability in a coordinated manner and switch over to the long term goal later. All our empirical investigations have confirmed that if such unbalanced growth is not controlled, then the effect of global warming on BRICS is quite imminent.

As a result of the dependency of United States (US) on Nigerian oil exports, coupled with her greatest share in Nigerian foreign direct investment, the recent global financial crisis of 2008/09 which emanated from the country spilled over to the Nigerian capital market, affecting majorly the financial sectors. Since the period of the crisis, the interests of the researchers have been gingered towards studying the interdependencies in financial market series of nations that are trading partners, particularly in relation to technological advanced economies like the US and the United Kingdom. This paper examines the effects of the global financial crisis on the Nigerian stock market. We use daily US stocks (S&P500, Nasdaq and Dow Jones industrial stock indices) and All Share Index (ASI) of Nigerian Stock Exchange, testing for long run equilibrium relationships between the Nigerian ASI and each of the US indices. Apart from the initial nonstationarities displayed by the stock time series, plots of a US stock index and ASI also display the possibility of possible co-movement over time, particularly during the crisis period. That called for possible test for cointegration. However, instead of restricting ourselves to integer degrees of differentiation we allow for the possibility of fractional values. Thus, we test for fractional integration, and the results first indicate that the ASI and the three US stock indices display similar orders of integration, which are all very close to 1. Testing for fractional cointegration, we do not find any significant evidence of a long run equilibrium relationship between the two markets. The lack of fractional cointegration can be due to the presence of breaks in the data that have not been taken into account. This is something very plausible in the context of the global financial crisis. Also, the fact that long-run relationships do not exist between each of the US stocks and the Nigerian stock markets does not imply no contagion effect. Contagion effect may be as forms of returns, shocks or volatility between the US and Nigeria market. This finding therefore calls for alternative testing procedure, other than cointegration, in other to establish the influence of United States economy on the Nigerian capital market.

This paper examines causality between financial development and economic growth for 10 Southern African Development Community (SADC) countries for the period 1994 to 2013. We employed the vector autoregression (VAR) approach to conduct Granger causality tests to determine the direction of causality relationship between financial development and economic growth. Before conducting Granger causality tests, we performed the following prerequisite tests: unit root tests to test for data stationarity, and cointegration tests to examine short-and long-run relationships between financial development and economic growth. Our results provide evidence of two of the three main views on the link between financial development and economic growth: the supply leading theory (financial development causes economic growth or positive causality); and the demand following response (economic growth causes financial development or reverse causality). Specifically, our empirical results suggest that when broad money (BM) and direct credit (DC) are used as measures of financial development, there is evidence of the demand following response for 50% and 60% of the sample, respectively. Results also showed that financial development caused economic growth in 20% and 30% of the sample when BM and DC are used to measure financial development, respectively. No evidence of causality was recorded for 30% and 10% of the countries when BM and DC were used to measure financial development, respectively. In light of the dominance of reverse causality and the presence of no causality for some countries, we conclude that financial liberalization failed to increase economic growth for 80% and 70% of the sample when broad money and domestic credit were used to measure financial development, respectively. The differences in the direction of causality across SADC countries could be due to a wide variation in the policies governing the financial sector, colonial origin and other institutional factors which shape the laws governing how banks and other financial institutions operate in different countries. Our findings suggest different policy routes for countries within the SADC region with regard to how they can grow their economies. Specifically, countries for which the reverse causality result holds should direct more resources towards stimulating economic growth through channels other than financial development in order to develop their financial sectors. On the other hand, we recommend that countries for which the financial development leading to economic growth result holds should channel more of their resources towards growing their financial sectors in order to drive economic growth.

Countries in the Middle East and Africa (MEA) have diverse economic structures. Some countries are oil exporters, some are oil importers and some countries are very poor, dependent on agriculture. Since current account is an important indicator of an economy’s health, it is of interest to examine if current account balances in MEA region are sustainable. However, empirical research paid scant attention to this issue. No study has been conducted before to examine this issue. The present paper makes an attempt to fill this research gap by employing panel data model over the period from 1995 to 2014 to examine current account sustainability in MEA countries. We follow intertemporal budget constraint approach and examine long-run relationship between export and import plus interest on net foreign debt. As we work with panel data, we pay special attention to cross-section dependence. We use annual data collected from World Development Indicators. All data (exports, imports and interest on long-term external borrowing) are in current US dollar and expressed as percentage of GDP. Interest payment on long-term external borrowing (also in current US dollar) is used as a proxy for interest on net foreign debt. Panel unit root test to cross-section dependence indicate variables are first-difference stationary. We next use panel cointegration and bootstrap critical values under null hypothesis to accommodate cross-section dependence. Panel cointegration result suggests that current account is sustainable. However, panel cointegrating regression estimation indicates that the value of sustainability coefficient is less than 1 (one), which implies that current account is weakly sustainable. As current account is weakly sustainable, it is desirable to make policy intervention at macro level to ensure strong sustainability. This may be achieved by accelerating ongoing trade reforms in MEA countries to boost export earnings and hence ensure the sustainability of external debt in the long run.

This paper investigates the role of safe haven assets i.e. gold and Islamic stocks in time-frequency domain for two different crises periods. Wavelet coherency squared coherence approach has been utilized on daily data of gold, DJIEM and stock returns of the BRICS markets for the period from January 1 st 1996 to December 31 st 2014. The results indicate that gold maintain its role as hedge for stock markets over short-run. In both crises periods, gold exhibits low correlation with stock markets. Over all, our results suggest that the hedge and safe haven ability of gold is market specific. Therefore, in Asian financial crises, gold proves as a strong safe haven for BRICS and Islamic index. However, in late 2005, gold prices start moving with BRICS equitey markets and show positive correlation for 32-128 days scale. This relationship effects gold’s ability to act as a financial protector against extreme negative shocks in global financial crises of 2007-09. In contrast, gold leads world Islamic emerging markets and displays negative relation across a range of frequencies and indicates safe haven effects for the returns of Islamic stock markets. This low correlation between gold and Islamic stock markets indicates that gold can provide diversification to the portfolios of Islamic stock markets. Panel cointegration analysis depicts that the Islamic emerging and BRICS equity markets are cointegrated and global investor should have to carefully monitor the risk associated with them. Based on these results we infer that gold investment has potential to safe guard the stock portfolios in short-run against extreme negative market shocks. However, in long-run, gold does not seem to be a strong safe haven. Further, Dow Jones world Islamic emerging market index shows low correlation with only conventional stock market of China. This suggests significant diversification benefits of Islamic stocks for Chinese investors.

This paper examines the long-run relationship between venture capital investment and per capita economic growth in the 19 European Economic Area (EEA) countries for the period 1989-2014. We use three different indicators of venture capital (VC) investment, namely VC at early stage investment, VC at later stage investment, and VC total investment. Using cointegration technique, the study warrants the support of long-run relationship between VC investment and per capita economic growth in a few cases, typically with reference to a particular VC indicator and per capita economic growth we use. Using vector auto-regressive (VAR) model for testing the Granger causalities, the study acknowledges mixed evidence of the relationship between the venture capital investment and per capita economic growth in the selected EEA countries, both by individual country and at the panel setting. In some instances, venture capital investment leads to per capita economic growth, lending support to supply-leading hypothesis (SLH) of VC investment-growth nexus. In other instances, it is the per capita economic growth that regulates the level of venture capital investment, lending support to demand-following hypothesis (DFH) of VC investment-growth nexus. There are also circumstances, where venture capital investment and per capita economic growth are mutually interdependent. That is the situation where both are self-reinforcing and offer support to feedback hypothesis (FBH) of VC investment-growth nexus. In addition, there are also instances, where the venture capital investment and per capita economic growth are independent of each other. This is the situation where both are neutral and offer support to neutrality hypothesis (NLH) of VC investment-growth nexus. To summarize, Granger causality results vary from country to country within the EEA countries, depending upon the type of venture capital investment and per capita economic growth that we use in a particular empirical exploration process. The policy implication of this study is that the economic policies should recognize the differences in the venture capital investment and per capita economic growth in order to maintain sustainable development in these EEA countries.

This paper employs Granger causality tests to examine linkages between economic growth, measured by changes in real per capita GDP, financial maturity, measured by an index – calculated by using principal component analysis, and the diffusion of telecommunications technology (DTT) in 21 Asian countries over the period 1961-2012. We advance on previous studies with (a) advanced estimation procedures (panel cointegration techniques and panel Granger causality tests); and (b) the inclusion of all three potentially two-way interacting variables conjointly. Our findings are not uniform: they vary based on the region and country that is studied. We find that in the case of Bangladesh, Philippines, Singapore, Saudi Arabia, and United Arab Emirates and for Total Asia, financial maturity leads to economic growth, lending support to the supply-leading hypothesis. This implies that economic growth depends upon the level of financial maturity of the countries. In the case of Hong Kong, South Korea, Pakistan, Sri Lanka, Indonesia, and Vietnam, economic growth leads to financial maturity, lending support to the demand-following hypothesis. This implies that economic growth determines the level of financial maturity. For Bangladesh, Philippines, Singapore, Saudi Arabia, United Arab Emirates, and Total Asia, financial maturity leads to economic growth, in line with the supply-leading hypothesis. In case of China, Hong Kong, Japan, India, Iran, Thailand, Kuwait, East Asia, South Asia, and West Asia, economic growth and financial maturity cause each other, lending support to both the demand-following and supply-leading hypotheses. Furthermore, in the case of India, Malaysia, and Philippines, economic growth leads to DTT, congruent with the demand-following hypothesis. On the other hand, in the case of Bangladesh, Sri Lanka, Singapore, Thailand, Saudi Arabia, United Arab Emirates, South Asia, South East Asia, and Total Asia, DTT leads to economic growth, lending support to the supply-leading hypothesis. By contrast, for China, Hong Kong, Japan, South Korea, Qatar, and East Asia, economic growth and DTT are self-reinforcing and subject to feedback consistent with both the demand-following and supply-leading hypotheses. Finally, in the case of Hong Kong, Pakistan, Indonesia, Philippines, Thailand, Vietnam, United Arab Emirates, South East Asia, and Total Asia, DTT leads to financial maturity, lending support to the supply-leading hypothesis, while for China, India, Kuwait, Qatar, and West Asia, financial maturity leads to DTT, lending support to the demand-following hypothesis. In case of Malaysia, financial maturity and DTT cause each other thus supporting both the demand-following and supply-leading hypotheses.

The purpose of this paper is to evaluate the association between inequality in energy intensity and social inequality in Indian cities, as these are the two predominant constituents of inequality in Indian socio-economic scenario. This study uses a bivariate cointegration based error correction model for assessing the causal association between the two inequality parameters, which are derived by using Theil’s second measure. Given the sustainable development objective set by the government of India, interaction between these two parameters may prove out to be significant for achievement of this objective. It has been hypothesized that nature of this interaction varies largely based on the nature of the cities, i.e. semi-urban, urban, and metropolitan. The analysis has been done on the full and segregated dataset to visualize how the interaction changes with the nature of the cities. For analysis purpose, data for 139 Indian cities for the period of 2001-2013 have been selected. From the data of income, population, and energy consumption, two parameters of this study have been designed by using Theil’s second measure. The analysis starts with checking the cross sectional dependence for both of the parameters. Subsequently, the stationarity of the data has been checked by using first generation unit root tests. Then, by employing the cointegration and error correction framework, the long run causal association has been assessed. For checking the short run causal association, Granger causality method has been applied. The data for this study have been collected form Ministry of Power, Govt. of India, Central Statistical Organization, India, and Census, India. Major findings of this study are, (a) for both the parameters and three segments, cross sections are independent, (b) the parameters are stationary at first difference, (c) there is long run cointegration relationship between them, and (d) the causal link between inequality in energy intensity and social inequality is unidirectional for the case of semi-urban cities, and it is bidirectional for the case of metropolitan and urban cities. For full dataset, causal link between inequality in energy intensity and social inequality is unidirectional. The Theil indices calculated for both the parameters show the trends of rising inequality for all the cities taken together. However, no significant trend was visualized for the individual strata of cities, for both of the parameters under consideration. This study summarizes that the economic growth achieved by India is not sustainable in nature. It can be achieved only by considering an inclusive growth framework, where social development will complement the growth objectives. Therefore, the fossil-fuel based economic growth agenda needs reconsideration, viewing the social dimensions of the cities.

The inflows of foreign direct investment, foreign aid and foreign trade have been on the increase in Nigeria in the past three decades. However, the relationship between these variables and economic growth has not been thoroughly explored in Nigeria. But theoretical literature posits that foreign direct investment, foreign aid and foreign trade have the capacities to accelerate economic growth. Hence, this paper examines the impact of foreign direct investment, foreign aid and foreign trade on economic growth in Nigeria. It also determines the short-run and long-run causal relationships between these variables and economic growth. It employs the Autoregressive Distributed Lag (ARDL) model-bounds test to examine the cointegration relationship as well as the short-run and long-run impacts. It also utilizes the Error Correction Model (ECM) procedure to investigate both the short-run and long-run causal relationships between the variables. It uses annual time series data covering the 1980–2015 period. Evidence from the study indicates that the variables are cointegrated. It also reveals that foreign direct investment, foreign aid and foreign trade have positive long-run impacts on economic growth in Nigeria. In the short-run, only foreign aid has positive impact on economic growth. The Granger causality results provide evidence of both short-run and long-run causality running from foreign aid and foreign trade to economic growth. We also show that short-run causality runs from foreign direct investment to economic growth. The possible channels through which these variables enhance economic growth include improvement in the stock of physical, human and institutional capital, technological and knowledge transfers, improved competitiveness and creation of jobs in the recipient country which are capable of boosting the productive capacity of the economy. The economic implication of this study is that foreign direct investment, foreign aid and foreign trade are important determinants of economic growth in Nigeria. Hence, an increase in these variables will boost the Nigerian economy. Therefore, to accelerate economic growth, the government should strengthen policies that are capable of accelerating foreign direct investment, foreign aid and foreign trade. Further opening-up of the economy and the promotion of greater cooperation with development partners will enhance economic growth in Nigeria.

This paper examines the relationship government expenditures and revenues in Nigeria by reposing the implicit assumption of a symmetric adjustment process underlying the standard cointegration and error correction model. The study estimates an asymmetric error correction model using the momentum threshold autoregression framework over the period 1961–2012. First, the results suggest that revenues and expenditures are cointegrated and that the adjustment process of the budgetary disequilibrium is asymmetric. Second, in the short-run there is evidence of a bi-directional causal relationship between government revenues and expenditures. Third, the long-run results show that revenues and expenditures respond to budgetary disequilibrium. The asymmetric adjustment reveals that revenues respond only to a worsening budget, and government expenditure respond to a worsening budget than for an improving budget.

Since the 1980’s, Turkish economy has revealed a dramatic growth. The purpose of the present study is to develop the import demand behavior of Turkey as an emerging economy and discover the long-run relation between the import demand and the components of GDP. One of the main reasons we adopt a disaggregated model to test aggregated import demand function estimation is that it deals with the potential aggregation bias when the different macro components have different import contents. The second reason is we believe that elimination of the biasedness will produce better forecasting results. This study examines the long-run and short-run elasticities of Turkey’s disaggregate import demand using an annual dataset that covers the period of 1980 to 2011. The error-correction modeling and cointegration analysis are the appropriate techniques since we try to discover the long-run relation between the import demand and components of GDP. First we determine the degree of integration of each variable in the model to apply the cointegration test that is known as an autoregressive distributed lag (ARDL). We collect the dataset from United Nations Statistical Division National Accounts Official Country Data and World Bank’s Development Indicators. This paper is one of the first studies to estimate import demand function of Turkey using the recent data which makes it different from earlier studies. Our results suggest that there is a long run relationship between the dependent variable and the control variables in the import demand function. All the explanatory variables are statistically significant in the long-run and the short-run as well. Our results also suggest that in the long run all of the included variables in the model are statistically significant. All the independent variables have inelastic effects on imports except total consumption. Relative price variable has a positive effect which may suggest in the short run importers cannot adjust price changes faster, consequently causing an increase in import expenditure bills. Thus, Turkish trade balance may get worsen if imports exceeds exports.

This paper estimates the acreage supply response of natural rubber in Thailand using cointegration methods. Results show that a unique long-run relationship exists between area planted, the rubber price and the replanting subsidy, and the rubber price is weakly exogenous. The short-run own price elasticity of acreage response is low at 0.04 whereas the corresponding long-run elasticity is 2.24, and the use of pricing policy takes a long lead time to take effect. The acreage elasticity in response to a change in the subsidy is 1.17 and the replanting subsidy is a key driver for increasing rubber production.

This paper reexamines the relationship between migrant remittances and economic growth using the most recent panel data (1977–2012) for some of the largest recipient countries of foreign remittances in the world namely, Bangladesh, India, Pakistan and the Philippines. A cross-sectional dependence test (CD) was employed which confirms the presence of cross sectional dependence in the panel. We employ CIPS panel unit root test that accounts for cross sectional dependence to test the stationarity of data. The long run relationship between economic growth and remittance was confirmed by the Panel Pedroni and Westerlund cointegration tests. Then, the Pooled Mean Group (PMG) regression technique was applied to estimate the short- and the long-run relationship between the two variables while controlling for country size and heterogeneity. The results indicate a highly significant long-run positive relationship between remittance and economic growth in these countries. However, there is an insignificant positive association between them in the short run. The error correction term in the short run is −0.037 suggesting that approximately 3% of the deviations in the short run from the long-run equilibrium are corrected each year. The overall results support the argument that remittances are playing increasingly important role for these countries' economies and as such, they should continue with their pro-remittance policies looking combined with diversifying their manpower exports. Although, the findings are consistent with most of the existing literature that support the positive role of migrants' remittances in spurring economic growth, scope exists for future research to identify various channels through which remittances impact not only growth but also other macro variables.

This paper aims to assess the sustainability of the current account of Bangladesh over the period of 1982–2012 using the intertemporal solvency model of Hakkio and Rush (1991) and Husted (1992). This approach examines the relationship between exports and imports plus unilateral transfer payments. We apply Johansen cointegration test and Dynamic Ordinary Least Square (DOLS) to evaluate the sustainability. Cointegration between inflows and outflows of current account implies that the intertemporal budget constraint is satisfied. Results of the Johansen cointegration test imply that there is a cointegrating relationship between exports and imports plus unilateral transfer payments. This indicates that Bangladesh’s current account is sustainable but result of DOLS estimation reveals that it is weakly sustainable.

The objective of this paper is to analyze the external sector on Cuban tobacco from the export demand perspective towards the euro area. A tobacco-specific exchange rate is built to better capture the distinctions of this sector when competing overseas. We apply cointegration in the Fully-Modified Ordinary Least Squares framework and complement an error correction mechanism. It is found that both long and short-run estimates of exchange rate elasticities are significantly inelastic but present, at the same time, a high degree of stability. This means that prices become a fundamental control variable for economic policy purposes. Moreover, there is statistical evidence that income elasticity plays a significant role in the determination of exports growth for Cuban tobacco.