Macroeconomics
Hadi Keshavarz; Ramezan Hosseinzadeh
Abstract
1- INTRODUCTION
Investigation of the importance and the impact of various factors on the economic growth of countries is crucial in short-term and long-term planning in various countries. Traditional theories and models of economic development only consider capital and labor as economic growth ...
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1- INTRODUCTION
Investigation of the importance and the impact of various factors on the economic growth of countries is crucial in short-term and long-term planning in various countries. Traditional theories and models of economic development only consider capital and labor as economic growth factors for nations and regions. Today, economists consider innovation, along with knowledge and technology, to be one of the fundamental variables in the economic development and development of countries.
Knowledge and innovation can generate social welfare in diverse regions and countries and contribute to achieving sustainable economic growth. In this regard, it is crucial to note that the path of innovation development varies across regions and countries, and that a distinct innovative geography is created based on these differences. The issue of inter-regional or inter-country spillover effects of various variables, such as innovation spillovers, is a second crucial aspect of economic growth and development planning in different regions or countries. Thus, innovation can impact both the economic development of the innovating country and the economic growth of neighboring countries with trade linkages to that country. Examination the spatial dimension of the problem will be crucial for determining how spillovers occur and their effectiveness in the innovation process as well as economic growth and development, whereas excluding inter-regional (inter-country) effects will bias the results and misleading results. On the other hand, considering the inter-regional (inter-country) effects of innovation and other variables in the model can help in the planning of regional development in different countries.
2- THEORETICAL FRAMEWORK
According to new theories, there are four distinct categories of innovation: product innovation, process innovation, organizational innovation, and marketing innovation. There is substantial evidence that various categories of innovation have distinct economic effects in countries. These differences are primarily attributable to variations in the level of pertinent externalities (spillovers) and the capacity of innovators to internalize the public benefits of these activities (fit). Thus, innovative knowledge penetrates the production process in two different ways. The first instance is when a company utilizes new technical knowledge developed during the production process. The second consequence is the spillovers of such knowledge. However, knowledge diffusion in other innovation institutions can only be observed once innovation and technology have reached a certain level.
The concept of knowledge spillover is closely associated with the correlation effect, where in the recipient of an innovation assimilates it to facilitate economic advancement. The spillover effect has the potential to yield beneficial outcomes by fostering innovation and facilitating economic progress, but it can also have negative consequences. The adverse impact of knowledge spillover primarily arises from external circumstances, as well as the inherent uncertainties and risks associated with research and development endeavors. Consequently, the inability of spillovers to fully realize the benefits of their research and development endeavors diminishes enterprises' motivation to allocate resources towards innovation. The positive impact of knowledge spillover is directed towards individuals or organizations that possess absorptive potential, enabling them to effectively assimilate and utilize sophisticated information and technology.
3- METHODOLOGY
The primary objective of the present study is to examine the direct and spillover effects of innovation on economic growth within the D8 group of countries during 2012 -2021. This investigation will be conducted through the utilization of a spatial econometric model. Spatial econometrics is widely regarded as a major development in the field of estimation, having emerged alongside the introduction of the "New Economic Geography (NEG)" theory. This technique is associated with the research conducted by Krugman (1991), Fujita, Krugman, and Venable (2001), as well as Venables and Puga (1998). The econometric models under consideration has the capability to incorporate both spillover and indirect impacts of variables, in addition to the direct effects that are typically addressed in classic econometrics.
4- RESULTS & DISCUSSION
Based on the results of the model, the direct effect of innovation index on economic growth has been positive and significant. Also, the indirect effects of this variable have been positive and significant. Therefore, it can be said that the amount of innovation in the studied countries has both domestic and international spillover effects (through the establishment of trade relations) on the economic growth of the countries.
5- CONCLUSIONS & SUGGESTIONS
Based on this, it is suggested that the studied countries pay special attention to the issue of innovation. Provide the necessary incentives to strengthen innovation in these countries, such as paying special attention to patents. Because having a patent is one of the motivating factors for innovation and further to achieve new technologies. This can be the basis for creating new processes in production, inventing new methods in countries. Paying attention to the spillover and indirect effects of innovation can also be very important. Based on this, it can be suggested that countries should pay attention to the fact that they prioritize the trade of goods with more knowledge (accumulation of knowledge and its transfer) in order to benefit more from the spillover effects of innovation. The higher the trade and especially the import of goods with knowledge and innovation, the countries can use the knowledge and innovation stored in these goods to strengthen knowledge and innovation within the country and economic growth will be strengthened.
Growth and development economics
Mobina Zarei; Seyed Parviz Jalili Kamju; Mahtab Tahmasebi; Ramin Khochiany
Abstract
1-INTRODUCTION
In the economy, education plays an important role in providing highly skilled human capital needed to create jobs, economic growth, and the welfare of individuals and society. Today, most economists believe that the lack of investment in human capital is the main reason for the ...
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1-INTRODUCTION
In the economy, education plays an important role in providing highly skilled human capital needed to create jobs, economic growth, and the welfare of individuals and society. Today, most economists believe that the lack of investment in human capital is the main reason for the low level of economic growth in developing countries, unless these countries use education and knowledge and promote the level of their professional skills. If they do not improve, the productivity and efficiency of labor and capital will remain at a low level and economic growth will be slow and with heavier costs. If the country has the required amount of human capital, it can be said that physical capital will be more productive. Human capital includes education, expertise, skills, and generally the quality of the workforce. Considering that one of the factors influencing the social welfare of countries is achieving a high economic growth rate, the assessment of the causes and factors affecting economic growth is always a special concern of economists, and several growth models have been designed for it.
2- THEORETICAL FRAMEWORK
Undoubtly development is necessary in all societies. Developed and developing countries use the same approach that can only be achieved through educational institutions. Therefore, education plays an effective role in improvement of societies to create continuous development in order to promote social and economic progress. Considering the importance of education costs for the development of countries' economies, it can be said that education costs help create wealth. The argument is that the ability to create, adopt, and improve technological and technical progress is associated with investment in human capital and the functioning of the educational system. Therefore, it is useful for countries to invest significantly in these areas in order to train the workforce and develop the necessary skills to increase economic growth and ensure the success of a country.
ncrease economic growth and ensure the success of a country.
3- MATERIALS & METHODS
The purpose of this research is to evaluate the effect of value-added education, high-level educational expenses and educational quality, trained workforce and capital stock on economic growth among urban households in the provinces of Iran in the period of 2006-2019. This research will use random dynamic panel by application of SAR spatial autoregression generalized moments model and with the use of Arellano-Bauer/Bundle-Band two-stage coefficients in order to estimate the econometric model.
In the spatial econometrics department, by forming the proximity matrix and then standardizing this matrix and finally by multiplying the standardized proximity matrix, a new variable is obtained in the dependent variable vector, which is called the spatial lag variable or the spatial lag variable, and thus with the presence of the lag variable spatial. The spatial econometric model is also dynamically estimated. In summary, all spatial models in the form of a spatial random dynamic panel model (SDPD) are as follows:
4-RESULTS & DISCUSSION
The results obtained from the model indicate that the independent variable of GMM has a positive and significant effect on economic growth, that is, part of the economic growth in these regions is due to their economic growth in the past years. The first spatial interval in the SAR model also has a positive and significant effect on the economic growth of other provinces. The added value of education has a positive and significant effect on economic growth with a coefficient of 0.12, when the added value of education increases, it means that the level of skill, knowledge and talent of the workforce increases, and the structure of the workforce leads to the use of skilled and capable personnel. The effect of human capital on economic growth will increase. Education expenditure also has a positive and significant effect on economic growth with a coefficient of 0.53. One of the ways to increase economic growth is creating a transformation in labor productivity and technological development. Promotion of the level of education requires investment in education and increasing educational facilities. Skilled and thoughtful manpower causes the development and expansion of the technologies produced and as the foundation of economic progress and development in the society, and thus by raising the level of education in the society, growth, the economy also increases. In Smith's main growth equation, labor force, land and capital stock are the main factors of production. Adam Smith explains growth as an endogenous phenomenon, according his point of view, economic growth depends on the decision and action of economic agents, especially their savings and investment behavior. Therefore, the capital stock has a positive and significant effect on economic growth with a coefficient of 0.0001, and the more the capital stock increases, the economic growth also increases. The labor force also has a positive effect on the economic growth of households by increasing it by a factor of 0.25. بیش ا
5- CONCLUSIONS
Based on the discussions of the theoretical foundations and according to the results obtained from the model, it shows that the workforce and the quality of education have a stronger effect on economic growth than the capital stock. In other words, it can be said that economic growth is strongly influenced by the human capital of workers. Therefore, the government should allocate more funds to the education and training organization. Hence the education and training should improve the quality of its schools in various scientific fields, as well as the higher education should raise the quality level of universities in the regions and provinces, especially the deprived areas, and the graduates, in addition to obtaining a degree from their abilities and skills. It is necessary for them to benefit in their educational fields and be able to move them from traditional methods to advanced and modern methods by entering the industry and agriculture sectors and be able to bring their province to high economic growth and development. According to the first spatial break of SAR, the increase in economic growth and development in one province leads to the spillover of economic growth and development to the neighbors’ provinces.
Samira Farajollahzade; Ahmad Sadraei Javaheri; sakine owjimehr
Abstract
1- INTRODUCTION
Financial innovation includes new financial instruments, the creation of new corporate structures, the formation of new financial institutions, the development of new methods of financial accounting and reporting. Such improvements in the financial system are key to ...
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1- INTRODUCTION
Financial innovation includes new financial instruments, the creation of new corporate structures, the formation of new financial institutions, the development of new methods of financial accounting and reporting. Such improvements in the financial system are key to financial productivity along with economic growth. It seems that the institutional conditions can affect how the development of financial markets affects economic growth. This is important in all countries, but it can be even more important in developing countries, usually not at the desired level of good governance index. In addition, another point that has been neglected in literature is the consideration of new financial instruments in the stock market. One of the financial innovations in the stock market is exchange-traded fund (ETF). The ETF allows the investor to have a diverse and low-risk portfolio. With this new instrument, passive funds are made available to investors.
In sum, considering the existing study gap, the present study examines the impact of financial innovation on the economic growth of developing and developed countries by considering the institutional quality.
2- THEORETICAL FRAMEWORK
There are six significant functions to financial innovation: Transfer funds, collect funds, manage risk, extract information to support decision making, address information asymmetry, and facilitate the purchase and sale of goods and services through the payment system. There should be no institutional, political, or regulatory barriers to financial innovation in performing these tasks. At best, government incentives should be set up to promote financial innovation.
Researchers examine the economic impact of financial innovation from two perspectives: The growth and innovation perspective and the fragility and innovation perspective. The growth and innovation perspective states that financial innovation improves the process of financial intermediation and, in turn, stimulates economic growth. The innovation and fragility perspective states that financial innovation leads to a more fragile and vulnerable financial system; therefore, it is an obstacle to economic growth. There is no consensus on which view is dominant.
Some studies show that innovation in the financial system can accelerate Bangladesh's economic growth through a positive effect on financial development and economic resources. Some studies, use research and development costs in the financial sector as a proxy for financial innovation and show that innovations are likely to contribute to economic growth, and incorrect regulation can be a barrier to growth. Another study shows that financial innovation (Financial Innovation Expenditures) significantly impacts economic growth.
Researchers believe that institutions, laws, regulations, and policies are essential for influencing financial innovation in the economy. Countries that encourage financial innovation accelerate the convergence of their economies into technology growth rates. Some studies also showed that financial innovation's impact is more substantial in countries with more security markets. Financial innovation positively affects growth in countries with more constraints on bank performance.
3- METHODOLOGY
We use a dynamic threshold panel model to investigate the nonlinear effect of financial innovation on economic growth.
4- RESULTS & DISCUSSION
The value of the threshold parameter in this study is 1.67, which is located between the lower (1.64) and upper (1.68) limits and is significant at the 10% confidence level. According to the results, the economic growth whit one lag variable with a coefficient of 0.28 has a positive and significant effect on economic growth. Significance of the effect of economic growth with a lag on economic growth indicates the dynamics of the behavior of this variable. The good governance index, which is considered as a threshold variable in this study, plays a role in the impact of financial innovation on economic growth. Thus, when the level of good governance index is lower than the threshold level, the effect of financial innovation on economic growth is 0.02 and when the level of good governance index is higher than the threshold level, the effect of financial innovation on economic growth is more and 0.04.
5- CONCLUSIONS & SUGGESTIONS
The present study results show that in the impact of financial innovation on economic growth, governments and economic institutions' role in enforcing laws related to good governance indicators cannot be ignored. Since the financial innovation in the stock market has a positive impact on economic growth, this effect has different consequences under the lower and upper levels of governance. In other words, financial innovation is meaningful and has a more substantial impact when good governance practices are implemented at higher levels; therefore, governments should strive to implement the criteria of good governance better. However, because countries differ in their institutional environment and definition of good governance indexes, implementing these practices may not produce the same results.
zana mozaffari; hassan farazmand; zahra omidi
Abstract
1- INTRODUCTION
Economic growth is one of the goals that every economy pursues, and the reason for this is the achievement of many benefits and advantages that are realized in the process of growth. Policy makers in every country seek to achieve a higher growth rate in their country.
Among ...
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1- INTRODUCTION
Economic growth is one of the goals that every economy pursues, and the reason for this is the achievement of many benefits and advantages that are realized in the process of growth. Policy makers in every country seek to achieve a higher growth rate in their country.
Among the types of assets, housing is considered one of the most important socio-economic components in a country. It is also argued that in the new theories, the development of the housing sector is one of the drivers of economic growth, so in this article, the impact of investment in housing on the economic growth of Iran's provinces during the years 2006-2019 has been examined.
2- THEORETICAL FRAMEWORK
According to the point of view of macroeconomics, considering that between 21 and 24% of the country's GDP is related to the housing sector (during the construction and operation period), the housing sector is considered as the driving engine of economic growth and the factor that strengthens it in the country. From the point of view of consumption and investment, housing also plays a significant role in national accounts.
In general, there are three different views on the relationship between investment in real estate and economic growth. The first point of view emphasizes that investment in real estate affects economic growth. The second point of view shows that economic growth affects investment in real estate. According to the third perspective, there is a mutual causal relationship between investment in real estate and economic growth.
3- METHODOLOGY
To estimate the research model, the econometric method of generalized moments of GMM has been used. The important feature of this estimation method is that there is no need to know the exact distribution of disturbance sentences. The main assumption of this method is based on the fact that disturbance terms are not correlated with instrumental variables. The method of generalized moments, by choosing the correct instrumental variable, by applying a weight matrix, can create a compatibility estimator for the conditions of heterogeneity and unknown autocorrelations.
4- RESULTS & DISCUSSION
The results show that the economic growth coefficient of the previous period was evaluated as 0.73. Based on the probability level corresponding to the t-statistic of this coefficient, it can be stated that the economic growth of the previous period had a positive and significant effect on the economic growth in the provinces of Iran. This result is consistent with economic theories and most previous studies such as Kazerooni et al (2018) and Mozaffari (2021). The variable coefficient of human capital has been evaluated as 0.16 and according to the probability level corresponding to its t-statistic, it can be stated that human capital has had a positive and significant effect on the economic growth of Iran's provinces. This result is in line with endogenous growth theories and previous empirical studies such as Kazerooni et al (2018) and Mozaffari (2021).
The size of the government also has a negative and significant effect on economic growth. So that the elasticity of the economic growth of Iran's provinces in relation to the government's current expenses is equal to -0.32.
The urbanization variable has a negative and significant effect on the economic growth of Iran's provinces. The negative sign of the variable coefficient of urbanization can be caused by the fact that the rate of urbanization has increased regardless of the process of providing the necessary infrastructure in the cities and increasing the expertise of the migrant workforce.
5- CONCLUSIONS & SUGGESTIONS
Investment in housing has a positive and significant effect on the economic growth of Iran's provinces during the research period. Which is compatible with the growth models and is in line with the studies conducted in the field of the effect of investment in real estate on economic growth, it is recommended that the government, in addition to paying special attention to capital expenditures in the field of housing; It has provided the necessary incentives and conditions for the investment of the private sector in the field of housing, so that the investment in this sector has increased, which on the one hand has increased the welfare and economic growth of the society, and on the other hand, it can reduce the lack of housing supply in this way, the Iranian market can be partially compensated. The effect of capital stock on the economic growth of Iran's provinces also has been positive and significant, which is in line with the existing theory in this field and previous studies, it is recommended that the government provide a mechanism and in the budgeting of the provinces. The discussion of the number of credits for the acquisition of capital assets should be given special attention in order to improve the economic growth of different regions of the country. Human capital and industrialization index have a positive and significant effect on the economic growth of Iran's provinces. Aggregation of industrial activities leads to growth by creating savings resulting from local aggregation. The effect of urbanization on the economic growth of Iran's provinces was negative and significant. Although the previous theory and studies show a positive and significant effect of urbanization rate on economic growth. Governments should pay attention to prevent the increase in the size of the government, because based on the results of this research, the economic growth has decreased with the increase in the size of the government, and the large involvement of the government in the economy can have negative consequences. This result is consistent with the results of most previous studies in developing countries.
Iran's economy
Hamid Khavari; taghi ebrahimi salari
Abstract
1- INTRODUCTION
Economic insecurity means the existence of risks limiting economic growth. On the other hand, considering that economic insecurity has important effects on consumption decisions, savings and labor market balance, it can be said that economic security is an important ...
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1- INTRODUCTION
Economic insecurity means the existence of risks limiting economic growth. On the other hand, considering that economic insecurity has important effects on consumption decisions, savings and labor market balance, it can be said that economic security is an important part of economic well-being, which is largely affected by the country's economic policies. Policies and programs to deal with inflation and especially the effect of monetary policies on the nominal and real variables of the economy is one of the most important topics in the literature of monetary economics. Price stability is considered as the main goal of monetary policy in almost all countries. In order to achieve low and stable inflation, effective and efficient tools should be used in monetary policy affairs. Of course, the correct understanding of the concept of inflation and the factors affecting is considered essential to achieve price stability. Economists believe that the costs that inflation imposes on society can be much more serious than the costs of slowing down economic growth. Instability resulting from inflation not only damages the credibility of macroeconomic policymakers, especially the central bank, but its continuation can also cause acute cases of political instability in countries. In this regard, demand management policies and especially monetary policies are one of the important tools to achieve these goals. Monetary policies are without a doubt the most direct influencing and determining factor of inflation, and by using and correctly guiding monetary policies, one can achieve stable economic growth while achieving low and stable inflation. Trade-off between inflation and unemployment has always been the concern of economists and basic theories such as the Phillips curve have been proposed in this regard. Economists have generalized the aforementioned trade-off and used economic growth instead of unemployment and put forward a concept called the sacrifice ratio. Sacrifice ratio shows the amount of lost production per 1% reduction in inflation, and along with the Phillips curve, it has always been very important in the direction of government and central bank policies, especially contractionary policies.
2- THEORETICAL FRAMEWORK
Based on this, the purpose of this study is to investigate the effects of inflation-fighting monetary policies on economic growth and security in Iran. As a result of the study, the costs of a deflationary policy are also measured in terms of lost production during the years (1998-2021). For this purpose, after examination the theoretical foundations of the research in relation to the concept and indicators of economic security, the benefits and harms of inflation on the risks that reduce economic growth and security, and the effects of policies to deal with inflation, a review of the background Studies of the studied subject are carried out.
3- METHODOLOGY
This research examines changes in economic growth and economic security index in Iran. Through modeling the application of a contractionary monetary policy for the period of 1988-2021 by using the Structural Autoregression model (SVAR).
4- RESULTS & DISCUSSION
Our results show that the contractionary impulse on the growth of the country's liquidity has a negative reaction on the growth of GDP per capita in the short run. But in the long run and gradually with the reduction of inflation, its initial effects will be moderated and the country's economic growth will improve. Based on this, the calculated production sacrifice ratio is -3.52. According to the results of the research, the negativeness of the calculated ratio means that in Iran's economy, the application of monetary policy to achieve a lower inflationary trend has a long effect interval (about five years). Over the years, production not only compensates for its initial decrease over time, but also increases by 3.52%. Also, in the examination of the relationship between the economic security index and the negative impulse of the monetary policy, it can be seen that it has a negative reaction in the short run, which is mostly due to the direct effects of the reduction in production growth and also the reverse effects of the growth of the prices on the economic security index. In the long run, the gradual decrease in inflation leads to the improvement of the economic security index. The results also show that both in the short run and in the long run, the most important variable affecting the changes in production growth is the impulse resulting from the economic security index, which indicates the great importance of the stability of economic conditions, whether the absence or reduction of unemployment risks, the risk of growth of health costs and private treatment shows the risk of poverty and risks caused by inflationary uncertainties.
5- CONCLUSIONS & SUGGESTIONS
To achieve the purpose of conducting the study we investigated the effects of disinflation monetary policies on the country's economic growth and security, as well as measuring the costs of a deflationary policy in terms of lost production during the period under review, first, the economic security index based on Ozberg and Sharp's study (2001) calculation and its trend was analyzed. Then, by specifying the theoretical model of the research, the stationary of the variables was checked by using the Augmented Dickey-Fuller test. The final variables used in this research are: economic security index, per capita GDP growth, liquidity growth and inflation changes. The results of the Augmeted Dickey-Fuller stationary test showed that all these variables have unit root. Next, the SVAR model was estimated and structural constraints were applied, and after that, impulse response functions and variance decomposition were analyzed. The results showed that the contractionary impulse on the growth of liquidity has a negative reaction on the part of production growth in the short run, but in the long run due to its moderating effects on the country's inflation, the economic growth gradually increased and its fluctuations trended up to 7 periods are completely lost. According to the definition of production sacrifice ratio, it measures the accumulated loss in real production as a result of a permanent decrease in the inflation process. It is observed that with the applied deflationary policy, it takes about 5 periods (years) for inflation to be permanently moved to a lower level. The reduction rate of inflation is about 0.17%. Also, the total production loss due to the application of this policy during the five-year period is equal to -0.6%. Therefore, the calculated sacrifice ratio is equal to -3.52. The negativeness of the calculated ratio means that in Iran's economy, applying monetary policy to achieve a lower inflationary trend has a long effect interval (about five years) and during these years, not only production compensates its initial decrease over time, but also increases by 3.52%. Also, in the examination of the relationship between the economic security index and the negative impulse of the monetary policy, it can be observed that it has a negative reaction in the short run, which is mostly due to the direct effects of the reduction in production growth and also the reverse effects of the growth of the prices on the economic security index. In the long run, the gradual decrease in inflation leads to the improvement of the economic security index. To summarize the degree of importance and the degree of influence of each variable, analysis of the variance of the prediction error of the production growth variable was used. The results of this study show that both in the short run and in the long run, the most important variable influencing changes in production growth is the impulse of the economic security index, which is very important for the stability of economic conditions, whether the absence or reduction of unemployment risks, the risk of growth of health costs. And private treatment shows the risk of poverty and risks caused by inflationary uncertainties. The results of the analysis of the variance of the prediction error of the economic security index variable also show, the most important factors explaining the changes in the country's economic security are different in the short and long run. According to the specified model, in the short run, changes in production growth and inflation cause more than half of the changes in the economic security index. But in the long run, their effects will decrease and the growth momentum of liquidity is able to explain about 10% of the changes in the economic security index. Therefore, the effect of the contractionary impulse of the growth of liquidity through reducing inflation and promoting the growth of GDP in the long run has a positive effect on the country's economic security index. According to the results obtained from the analysis of research results regarding Iran, inflation control policies are recommended despite its adverse effects on production levels in the short-term, taking into account the long-term positive effects on the security index and economic growth. and follow up policy makers.
International Economics
sarvoddin fathi; masod nonegad; hashem zare; ali haghighat
Abstract
1- INTRODUCTION
The selected member countries of the Islamic Conference, including Iran, with different cultural, social, economic and environmental structures, have high degrees of instability in economic variables. Economic growth and inflation in the economy of these countries, compared to the economy ...
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1- INTRODUCTION
The selected member countries of the Islamic Conference, including Iran, with different cultural, social, economic and environmental structures, have high degrees of instability in economic variables. Economic growth and inflation in the economy of these countries, compared to the economy of advanced countries, are more exposed to fluctuations. Experimental studies conducted in many of these countries show that there is a strong relationship between the real exchange rate and oil shocks and the performance of indicators such as inflation and economic growth. It has been developed and is being developed to examine the effects of oil shocks on the macroeconomic structure.
In fact, with the occurrence of positive oil shocks in the 1970s and the subsequent occurrence of the global economic recession, the attention of many researchers was directed to the study of the effects of oil shocks on the macroeconomic structure. On the other hand, the fluctuations caused by the real exchange rate due to creating uncertainty among the economic agents affects their future decisions to make investments (domestic and foreign). Since the investment is part of the demand of the entire economy and any disruption in it leads to disruption in production, therefore any change and fluctuation in the real exchange rate will also affect the economic variables.
2- THEORETICAL FRAMEWORK
Effects of independent variables on economic growth in oil exporting countries
Oil price shock: A decrease in the price of oil will reduce the government's oil revenues in oil exporting countries. Since the current expenses are sticky towards the bottom and it is not possible to reduce it easily when the oil revenues decrease, the decrease in oil revenues causes a decrease in infrastructure investments, which in turn decreases the production of the society.
Fluctuation of the real exchange rate: Fluctuation of the real exchange rate is due to the increase in the costs of producers due to the increase in the price of raw materials, intermediate goods and imported capital, which can lead to the weakening of domestic production and the reduction of economic growth.
Effects of independent variables on inflation in oil exporting
Oil price shock: An increase in oil prices will probably decrease the total supply. Because with the increase in the price of energy, companies buy less energy, so that the productivity of labor and capital, followed by potential production, decreases and the level of prices increases.
Volatility of real exchange rate: Increase in exchange rate fluctuations and uncertainty in it causes an increase the risk of international trade and increases the cost of trade, which causes a decrease in trade and a decrease in production and economic growth, and finally causes an increase in the price level.
Effects of independent variables on economic growth in oil importing countries
Oil price shock: An increase in oil prices by transferring income from importing countries to oil exporting countries causes a decrease in total demand and a slowdown in economic activities, resulting in a decrease in economic growth.
Fluctuations in the real exchange rate: With a decrease in the value of the currency, the price of imported goods increases. Now, if these imported goods are intermediate goods, the increase in their price leads to an increase in the production costs of goods that use these goods, which leads to a decrease in total production and economic growth.
Effects of independent variables on inflation in oil importing countries
Oil price shock: An increase in oil price leads to a decrease in disposable income in oil importing countries, and with an increase in production cost, it also reduces investment demand and increases the price level.
Volatility of the real exchange rate: An increase in the real exchange rate causes a decrease in the value of the national currency and an increase in the price of intermediate and capital imported goods, and causes an increase in production costs and, as a result, an increase in inflation.
3- METHODOLOGY
The current research is to investigate the effects of positive and negative oil price shocks, real exchange rate on economic growth and inflation in crude oil exporting and importing countries from two selected groups including twelve exporting countries (including Iran, Iraq, Saudi Arabia, United Arab Emirates, Algeria, Kuwait, Libya, Nigeria, Qatar, Ecuador, Angola, Venezuela) and twelve oil importing countries including (Malaysia, Egypt, Mali, Gabon, Tunisia, Togo, Sudan, Guinea, Indonesia, Pakistan, Bangladesh, Turkey) will use. A model that can take into account the asymmetric impact of shocks is called GARCH-exponential or EGARCH model, which was presented by Nelson (Nelson, 1991). The reason for inventing this model is that the ARCH model considers the effect of good and bad news equally, and on the other hand, all conditional variance coefficients must be positive. To achieve this goal, by adapting the study economic growth and inflation models are introduced as follows:
[1]
[2]
LVpoil (logarithm of positive oil price shock), LVnoil (logarithm of negative oil price shock), LInf (logarithm of inflation), LRER (logarithm of real exchange rate), LVRER (logarithm of volatility of real exchange rate), LK (logarithm of investment) LE, (logarithm of human capital) and coefficients β, γ, ψ, λ, δ reflecting short-term and long-term relationships between economic growth variables and inflation with It is explanatory variables. The coefficient ε is the error component and the index i represents the country and the index t represents the time.
4- RESULTS & DISCUSSION
Our results show that the research hypothesis that the reaction of economic growth and inflation to oil price shocks is asymmetric in both groups of oil exporting and importing countries. Also, the results of the tests and estimation of models show that real exchange rate volatility has a negative and positive effect on the economic growth and inflation of oil exporting countries and a positive effect on the economic growth and inflation of oil importing countries.
5- CONCLUSIONS & SUGGESTIONS
Policy recommendations
Oil exporting countries
1- Governments can disconnect their expenses from oil shocks by implementing stabilization mechanisms such as foreign exchange reserves.
Oil importing countries
1- Oil-importing countries, considering a strategic oil reserve, can use that strategic reserve at the time of a sudden increase in the price of oil and avoid the bad impact of the oil price shock on growth indicators.
Keywords: Oil Price Shocks, Real Exchange Rate Volatility, Economic Growth, EGARCH.
نصری NASRI; nasser safaie; ALI EGHBALI
Abstract
INTRODUCTION Information and communication technologies and their role in the economic growth of the country are one of the important concepts in sustainable development. In fact, information and communication technology are the motivation of globalization in the fields of culture, ...
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INTRODUCTION Information and communication technologies and their role in the economic growth of the country are one of the important concepts in sustainable development. In fact, information and communication technology are the motivation of globalization in the fields of culture, politics, economy, and society. This has a considerable effect on the advent of network society and inter-country awareness and it is the driving factor of global markets. According to the growth and development of academic research in the field of high technologies, SMEs play an important role in encouragement of entrepreneurship and economic prosperity in countries. Therefore, it is necessary to answer the question of what factors will lead to the growth and success of these companies in the field of information and communication technology. THEORETICAL FRAMEWORK Information and Communication Technology (ICT) is the consequence of the interaction of three distinct parts of a computer: information, communications, and telecommunications. The computer sector is considered the hardware and supplier of equipment and tools for ICT. Data and information flow as other pronouns and raw materials within the network. Telecommunication is the third part, which is responsible for establishment of communication between the other two parts. What is ultimately the combination of the three parts is called "information," which is used in different areas. Critical Success Factors (CSFs) are essential tools for identification of the set of activities that need to be done in order to achieve your business goals and missions. (CSFs) are a limited number of key factors in which achieving results guarantees the competitive performance of the organization, and if the results obtained in them are not satisfactory, the efforts of the organization in the desired period of time will not be satisfactory. The organization's strategic goals and missions focus on the goals and what needs to be achieved; CSFs, on the other hand, focus on the most important factors influencing what and how to achieve. METHODOLIGY This paper discusses "success" in information and communication technology (ICT) standards setting. The Fuzzy Analytical Hierarchy Process (FAHP) method was used to analyze data and prioritize the factors effective in the success of ICT’s companies. In this respect, 21 criteria in 5 different categories were extracted by using the expert’s opinion and previous research, and then were evaluated in the vicinity of the capital of Iran (Qom). RESULTS & DISCUSSION Focusing on internal organization management and establishing cordiality atmosphere among the employees to enhance teamwork and increase trust between them are the most basic and the most important factors in critical success of a company. Broadly speaking, development from the technical, high financial income and marketing aspect is the consequence of correct organization and management of corporation and its employees that if focused, can be helpful for the business. One of the major differences between this research and the previous ones is using native effective factors and comparing them with general key factors in other countries. Results showed that in-company management factors, technological and marketing factors, financial costs, governmental policies, and native features were the most important main criteria. The employee involvement and team work, focus on the customer’s needs, the state of the economy, conflict of interest between governmental and private sectors, and industrialization of the province were chosen as the most important sub-criteria effective on the success of the ICTI’s companies. CONCLUSIONS & SUGGESTIONS Intra-organizational factors are more important than external ones, such as the government’s policies, rules, and native features. It is worthwhile for the managers and founders of ICT firms to consider and prioritize these factors to be able to achieve success. For future research, the effect of the components on each other can be studied using ANP, and different methods such as SAW, TOPSIS, and ELECTRE can be used to prioritize the criteria. The results could be compared with each other. Studying the effects of local factors in other provinces of the country can also lead to different results.
Ali Tahmoorespur; mehdi behname; mahmood Hooshmand; Hasan Tahsili
Abstract
Extended Abstract
1- INTRODUCTION
Insurance is one of the useful tools of risk management to ensure the peace and comfort of people in the community. Considering the role of life insurance in helping people save and invest and its effective role in economic growth, we can understand the importance ...
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Extended Abstract
1- INTRODUCTION
Insurance is one of the useful tools of risk management to ensure the peace and comfort of people in the community. Considering the role of life insurance in helping people save and invest and its effective role in economic growth, we can understand the importance of this field of insurance in the economy of countries (impact on household economy in developed or developing countries). the purpose of this study is to investigate the relationship between growth of life insurance and economic growth in selected countries in the MENA region. Since there was no access to uniform statistics for all countries in the MENA region, the study was used on 13 selected countries in the region using balanced data for the period 1994-2017. In this study, in order to investigate the causal relationship between the growth of insurance industry activities and economic growth, the Demteresco and Herlein (DH) causality model has been used for the data panel.
2- THEORETICAL FRAMEWORK
Considering the important role of the insurance industry, especially life insurance in the economies of countries, the study of the impact and also the impact of life insurance on economic growth in previous research were studied, which are divided into two categories.
2-1- The Impact of Life Insurance on Economic Growth
Four factors (population, natural resources, investment and technology) play an important role in the process of economic growth, the most important of which is capital or financial resources. for this reason, access to financial resources is very important to increase economic growth. one of the most important prerequisites for economic growth in all countries is financial resources for productive investments. access to financial resources can be provided through various means such as foreign borrowing, sale of bonds, etc. but the best way to provide it is to use people's savings. insurance is one of the important channels of savings and important financial institutions, which in addition to providing security for economic activity, also plays a key role in providing investable funds.
The insurance industry leads to the development of investments in economic systems in two ways. on the one hand, by guaranteeing the coverage it provides, it reduces the effects of investment threatening factors that result in the expansion of investments, and on the other hand, insurance companies participate in various economic and commercial activities as investors from the resources at their disposal. this way in paving the paths that lead to the development of the country play an important role. the greater the share of insurance in the economies of countries (insurance penetration rate), the greater the impact on economic growth.
2-2- The impact of economic growth on life insurance
Studies have shown that there is a two-way relationship between economic growth and the growth of the insurance industry. in most studies, the per capita income index is considered as a proxy for economic growth. one of the factors that has a strong impact on increasing the demand for life insurance is the income of individuals. demand for life insurance increases as economic growth increases and, consequently, per capita income increases and, as a result, purchasing power increases. inflation also affects the demand for life insurance in two ways. first, inflation causes life insurance capital to be paid at a much lower real value than at the commencement date of the contract. in the context of inflation, if the insurance companies do not neutralize the negative impact of inflation on the real purchasing power of the insured capital by applying some appropriate methods, the purchase of life insurance policies will decrease day by day. as a result, it diverts people from the demand for life insurance and leads to safer or shorter-term investments. unemployment will have a negative impact on the demand for life insurance and, consequently, the growth of the insurance industry. according to research, one of the main motivations for buying life insurance is to protect family members against the early death of the breadwinner, and the amount of life insurance sales depends on the number of dependents on the breadwinner, which is called the dependency ratio (Campbell, 1980). With increasing population and increasing dependence on the breadwinner of the family, the risk of financial crisis of the family in the event of the breadwinner's death is felt more, so the need for insurance coverage in this area becomes more apparent.
3- METHODOLOGY
The main purpose of this study is to evaluate the causal relationship between economic growth and life insurance growth and their effectiveness. therefore, in order to investigate the causal relationship between the growth of life insurance activities and economic growth, the Demteresco and Herlein (DH) causality model has been used for the data panel. We first determined the effect of the economy and the insurance industry by examining the Demetresco Herlin causality test. then, in order to determine the effect of variables on each other, we used the pattern of simultaneous equations of panel data. to solve problems such as heteroskedasticity and heterogeneity, the research equations are estimated in three modes of primary model, resistant to heterogeneity and clustered (resistant to heterogeneity and heteroskedasticity) and in each of the mentioned models by two methods of estimators of instrumental variables (IV) and torque. Generalized Momentum (GMM) is used.
4- CONCLUSION & SUGGESTION
Undoubtedly, the economic growth of countries leads to higher per capita incomes. this increase in per capita income will increase the demand for life insurance and consequently the growth of life insurance will have a new impact on economic growth. in other words, with the increase in per capita income, we will see a double impact on economic growth. another indicator that affects the growth of life insurance is the level of education. the higher the level of education will cause the higher growth of life insurance. of course, this positive connection can be due to the increase in public awareness and, as a result, the effort to secure their families' future, as well as possibly the greater demand for urbanization. population growth, which has a positive effect on economic growth, can also be affected by per capita income index, life expectancy and education level. one of the important indicators that has a positive effect on the growth of life insurance is the good governance index. this index includes the index of accountability and the right to comment, political stability, the absence of violence / terrorism, the quality of regulation, the rule of law, the effectiveness of government and the control of corruption. undoubtedly, if the governments of this region pay attention to these indicators, we can expect them to face the growth of demand for life insurance as well as the growth of the economy.
Hossein Mohammadi; Alireza Sani Heidary
Abstract
Expended Abstract:
Introduction
In the last decades, economic growth is one of the important issues among researchers because economic growth rate is one of the important factors in investigating the performance of different countries' economic policies. So, an investigation of influencing ...
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Expended Abstract:
Introduction
In the last decades, economic growth is one of the important issues among researchers because economic growth rate is one of the important factors in investigating the performance of different countries' economic policies. So, an investigation of influencing factors on economic growth is necessary. Entrepreneurship can significantly impact economic growth by creating innovation, design, diversity of product production, and increasing the efficiency and competition of firms, and also higher economic growth will also increase the incentive of innovation and knowledge for entrepreneurs. Also, countries that are on the path to economic growth lead to motivating entrepreneurs innovation and knowledge. As a result, economic growth can affect creating entrepreneurship. Therefore, economic growth and entrepreneurship are recognized as two essential components in economic. In recent economic theories, institutional factors are influential in assessing the relationship between economic growth and entrepreneurship. Therefore, this research seeks to investigate the interaction effects between entrepreneurship and economic growth, emphasizing the quality of institutional factors using the simultaneous equation model and panel data for the OECD and OPEC in the 2000-2016 periods.
Theoretical Framework
Entrepreneurship is a purposeful activity to create, maintain, and develop profitable businesses. These entrepreneurial activities can be considered three sections: 1) Total entrepreneurial activities; 2) Opportunity for entrepreneurial activities; 3) The need for entrepreneurial activities. The combination of these three components creates a new index called global entrepreneurship. From the perspective of the institutionalism approach, the environment shaping the economy affects entrepreneurship dynamics within each country. This environment is known through interdependencies between growth, economic development, and institutions. Entrepreneurs are the main perpetrators of change that react to unplanned stimuli within the institutional framework.
Methodology
The present study seeks to assess the interactions between entrepreneurship and economic growth and its relation with institutional quality using the simultaneous equation approach in panel data for two groups of OECD and OPEC countries during the period 2000-2016. The two groups of OECD and OPEC countries differ significantly in terms of economic structure. So the results may be different for them. The selection of these two groups of countries can help obtain actual results of the relationship between entrepreneurship and economic growth and the role of institutional quality on them. Many studies have shown that there are two-way feedback effects between economic growth and entrepreneurship. This feedback on both sides leads to the bias results in the traditional regression. Therefore, in such cases, the system of simultaneous equations is used. In this research, instrumental variables (IV) and generalized method of moments (GMM) methods are used to estimate the equations. The explanatory variables for the economic growth equation are entrepreneurial index, institutional quality index, life expectancy, total government expenditures, fixed capital formation, and labor force growth. The explanatory variables for the entrepreneurship index equation are economic growth, the number of formal stages of starting a business, trust in ability and skill, and institutional quality index.
Results and Discussion
The results indicate that the variables of economic growth and entrepreneurship have a positive and significant effect on each other, and also the institutional quality variable also has a positive effect on the relationship between the two components. Also, for the OECD countries, the variables of life expectancy, the growth rate of fixed capital formation, and the labor productivity growth have a positive effect, and the total government expenditures hurt economic growth. For the OPEC countries, labor force growth has a positive effect, and total government expenditure has a negative effect on economic growth.
Conclusion and Suggestions
This research seeks to assess the interaction between entrepreneurship and economic growth with an emphasis on institutional quality. Based on the empirical findings, economic growth and entrepreneurship variables have a positive and significant effect on each other, and the institutional quality variable also has a positive effect on the relationship between the two components. According to the results, encouraging entrepreneurship, the growth of the real private sector in the economy, and the reduction of business start-ups to increase economic growth are recommended.
ali ahmadpourkacho; nazar dahmardeh
Abstract
Extended AbstractIntroductionToday, it is believable for the majority of economists that both physical and human capital accumulation and technological changes are unable to fully explain the difference of economic growth rates between countries. What which mentioned recently as the main key for ...
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Extended AbstractIntroductionToday, it is believable for the majority of economists that both physical and human capital accumulation and technological changes are unable to fully explain the difference of economic growth rates between countries. What which mentioned recently as the main key for economic growth in the literature are institutional quality and financial development. The particular importance of institutional and financial structure in economic growth has been at the frontier of research for recent decades. Various studies have emphasized the critical role of institutional quality reform in financial and economic development since it provides the necessary base for more efficient allocation of financial resources. Regarding institutional quality, it is an essential and necessary condition to enhance financial development, so in this context, suitable policies are demanded. Good governance improves the allocation of resources and increases the impact of financial development on growth. In other words, the effectiveness of financial development in order to achieve economic growth increases with the improvement of governance. MethodologyThe main aim of this paper is to study the effects of financial development and institutional quality on economic growth for the case of 27 member countries of Economic Development and Cooperation Organization (OECD) in 2002-2014, using Dynamic Panel Data analyses. In this paper, we used a weighted average of six indicators of accountability and accountability, political stability and lack of violence, government efficiency, order and regulation quality, rule of law and corruption control as an institutional indicator, and a weighted average of 18 variables, extracted from the World Bank, for the combined financial-financial development index. Statistical data of the variables, GDP to labor ratio, financial development indicators, gross fixed capital formation and work-force growth rate have been extracted from the World Development Index (WDI), and institutional quality indicators have been extracted from Worldwide Governance Indicators (WGI).Results and Discussion Institutional quality is another important factor affecting economic growth, and its significant positive coefficient suggests that institutional quality is one of the key variables that influences the economic growth of OECD member countries. The significant positive effect of institutional quality on the economic growth of OECD member countries is in accordance with the theoretical and empirical results of studies on these countries; because these counties have high ratings in institutional variables such as the quality of bureaucracy, the right to comment and responsivity and rule of law, which that highlight their improved judicial system, executive system and civil liberties and hence the institutional quality. The coefficient of the variable of financial development index in the estimating models shows that the weighted average of financial development indicators has a significant positive effect on the economic growth of OECD member countries. By reducing transaction costs and accessing information, the financial sector has led to equipped savings and facilitated funding. This, in turn, has resulted in higher investment and faster economic growth. This result is consistent with theoretical foundations (supply-side view) of financial development and economic growth. This positive effect indicates that the economies of OECD countries have the necessities and benefits of favorable financial markets that respond to the needs of the economy, including the goals of liberalization, privatization and balance and development, and in this regard, yields many favorable and preemptive effects for different sectors of the economy. Part of these favorable effects of financial markets, and in particular the capital market, stems from the efficient functioning of financial institutions in the financial markets of OECD countries, and the other huge part stems from the environment of the economy, and economic-social and cultural-legal structures of these countries. Accordingly, the interactive effect of financial development and institutional quality has been inserted into the model to measure the efficiency of financial development in the shadow of institutional quality on the economic growth of OECD member countries. The coefficient of the interactive effect of financial development and institutional quality also indicates the significant positive effect of financial development on the economic growth of OECD member countries. Conclusions & SuggestionsThe findings of this paper showes that financial development and institutional quality have significant positive effects on the economic growth of OECD member countries, which is in line with the expected theory in Economic Growth. Also, the interactive effect of financial and institutional development showes that in developed countries due to proper institutional structure, financial development improves economic growth. According to our results, in the case that countries want to make major changes in their economic growth, they need to address institutional reforms in different sectors. Therefore, in order to facilitate economic activities and achieve economic progress, the policy makers of the studied countries must have a simultaneous attitude toward the economy and politics, and make their policy with the presumption that two factors, financial development and institutional quality, reinforce each other and have a positive impact on economic growth.
sadegh bafandeh imandoust; ali mofidi
Abstract
The GCI combines 113 indicators. These indicators are grouped into 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, good market efficiency, labor market efficiency, financial market development, technological readiness, ...
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The GCI combines 113 indicators. These indicators are grouped into 12 pillars: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, good market efficiency, labor market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. These are in turn organized into three sub-indexes, in line with three main stages of development; basic requirements, efficiency enhancers and innovation and sophistication factors. In this paper, the effect of global competitiveness index (GCI) on economic growth has been studied. To this end, panel data of 42 countries collected in the period 2010 to 2014, and the model is estimated. The model estimation results show that the GCI score has positive and significant effects on GDP per capita growth among selected developed and developing countries.
Methodology
Competitiveness is defined as the set of institutions, policies, and factors that determine the level of productivity of a country. Many determinants drive productivity and competitiveness. Understanding the factors behind this process has occupied the minds of economists for hundreds of years, engendering theories ranging from Adam Smith’s focus on specialization and the division of labor to neoclassical economists’ emphasis on investment in physical capital and infrastructure and, more recently, to interest in other mechanisms such as education and training, technological progress, macroeconomic stability, good governance, firm sophistication, and market efficiency among others. While all of these factors are likely to be important for competitiveness and growth. In economic theory of stages of development, the GCI assumes that, in the first stage, the economy is factor-driven and countries compete based on their factor endowments— primarily unskilled labor and natural resources. Companies compete on the basis of price and sell basic products or commodities, with their low productivity reflected in low wages. Maintaining competitiveness at this stage of development hinges primarily on well-functioning public and private institutions (pillar 1), a well-developed infrastructure (pillar 2), a stable macroeconomic environment (pillar 3), and a healthy workforce that has received at least a basic education (pillar 4). As a country becomes more competitive, productivity will increase and wages will rise with advancing development. Countries will then move into the efficiency-driven stage of development, when they must begin to develop more efficient production processes and increase product quality because wages have risen and they cannot increase prices. At this point, competitiveness is increasingly driven by higher education and training (pillar 5), efficient goods markets (pillar 6), well-functioning labor markets (pillar 7), developed financial markets (pillar 8), the ability to harness the benefits of existing technologies (pillar 9), and a large domestic or foreign market (pillar 10). Finally, as countries move into the innovation-driven stage, wages will have risen by so much that they are able to sustain those higher wages and the associated standard of living only if their businesses are able to compete with new and unique products. At this stage, companies must compete by producing new and different goods using the most sophisticated production processes (pillar 11) and by innovating new ones (pillar12). The Global Competitiveness Index (GCI) has been used by the World Economic Forum to assess the level of productivity of an economy. Hall and Jones (1996) have shown that around 89 percent of the variation in GDP per capita is due to variation in the level of productivity. As a result, GDP per capita can be used as a proxy for the level of productivity of a country. The regress of the log level of GDP per capita on the GCI score reveals that about two-thirds of the variation in GDP per capita can be explained by the GCI. However, estimating a bivariate relation between the growth rate and the GCI would be a mistake. The reason for that lies in what economists call the “conditional convergence effect”, which posits that, all other things being equal, there is a natural tendency for poor economies to grow faster—a phenomenon known as conditional convergence. In other words, if all countries had the same investment and population growth rates and the same levels of productivity, then we should observe poor countries growing faster than rich ones. Conversely, if all countries had the same level of income, then those that were more competitive would experience higher rates of long-term economic growth. In reality, however, countries differ both in their levels of income and their levels of productivity, and therefore it is very hard to predict the relationship between the growth rate and the level of productivity with a bivariate correlation analysis that includes the initial level of income. Formally, in a growth convergence equation, the growth rate of GDP per capita of country is a positive function of the GCI score and a negative function of GDP per capita.
Results and Discussion
The model estimation results show that the GCI score has positive and significant effects on GDP per capita growth among selected developed countries and a %10 increase in a country’s GCI score would lead to an increase in the economic growth by 17.32588 percentage points. This amount is 15.49522 for selected developing and emerging countries. Results of this paper show that “net growth rate” against the GCI score, revealing a positive and strong correlation, which is consistent with the view that the GCI is a good proxy for the level of productivity or competitiveness of an economy.
mohammad jafari; abolghasem golkhandan; sahebe mohammadian mansoor; Azamossadat miry
Abstract
One of the economic problems in the developing countries is the debt problem. External debt occurs in the developing countries due to the elimination of the restrictions on the savings gap, the foreign exchange gap, and the fiscal gap in order to form the capital to accelerate the economic growth (Karakoy ...
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One of the economic problems in the developing countries is the debt problem. External debt occurs in the developing countries due to the elimination of the restrictions on the savings gap, the foreign exchange gap, and the fiscal gap in order to form the capital to accelerate the economic growth (Karakoy et al., 2012, p. 491). In contrast, borrowing and rising the external debt could be little in the economic growth of these countries due to theadverse economic effects such as debt overhang problems, crowding out effect, and uncertainty (Karakoy et al., 2012, p. 491). In general, there are three groups of theories regarding how to influence the external debt for the economic growth. The first group of theories relates reasonable debt levels to positive effects on growth; the second relates the high accumulated debt levels to the negative effects on growth (low growth), and the third combines those two effects while arguing that the impact of debt on growth is nonlinear by nature (Oleksandr, 2003). In this regard, the main purpose of this paper is to investigate the non-linear impact of the external debt on the economic growth in 8 Developing (8D) countries group including Indonesia, Iran, Bangladesh, Pakistan, Turkey, Malaysia, Egypt, and Nigeria.
Theoretical frame work
For the purpose of this paper, the researcher adopted the debt overhang theory. The debt overhang theory is based on the premise that if the debt will exceed the country's repayment ability with some probability in the future, the expected debt service is likely to be an increasing function of the country's output level. Thus, some of the returns from investments in the domestic economy are effectively taxed away by the existing foreign creditors while the domestic and new foreign investors are discouraged (Claessens, 1996). Under such circumstances, the debtor country shares only partially in any increase in output and exports because a fraction of that increase will be used to service the external debt. The theory implies that the debt reduction will lead to the increased investment and repayment capacity, thus, the portion of the outstanding debt becomes more likely to be repaid. When this effect is strong, the debtor is said to be on the wrong side of the debt Laffer curve. In this case, the debt Laffer curve is referred to the relationship between the amount of debt repaid and the size of the debt. However, the idea of the debt Laffer curve also implies that there is a limit at which the debt accumulation stimulates growth (Elbadawi et al., 1996). In reference to the debt Laffer curve, Lensink and White (1999) argue that there is a threshold at which more debt is detrimental to grow.
The liquidity constraint is captured as a crowding out effect, by which the requirement for the service debt reduces funds available for the investment and growth. A reduction in the current debt service should, therefore, lead to an increase in the current investment for any given level of future indebtedness (Cohen, 1993). Other channels which can affect the need to service a large amount of external obligations for the higher economic performance include the lack of access to the international financial markets and the stock debt on the general level of uncertainty in the economy (Claessens, 1996). However, debt has to be repaid. Funds borrowed will simply postpone the taxation. Hence, the purpose for which the funds are gained and their relative returns becomes crucial. If the government invests on the infrastructure such investments are capable of leading to the faster growth and the socio-economic development (Mowlaei & Golkhandan, 2014).
Methodology
In order to determine the reaction of the economic growth to the external debt and other traditional sources of growth, the following logarithmic production function in a Panel Smooth Transition Regression (PSTR) model is used. In this model, countries are denoted by the subscript i and the subscript t denotes the time period (1991-2013). Other variables are defined as follows: GDP: Gross domestic product per capita; ED: The ratio of the total external debt to the gross domestic product; INV: The ratio of the fixed gross capital formation to the gross domestic product; EDU: The ratio of the education expenditure to gross the domestic product; GOV: The ratio of the government final consumption expenditure to the gross domestic product; OPEN: The degree of the economic openness index by the ratio of the sum of exports and imports to the gross domestic product; POP: Population; INF: Inflation rate; r: The number of transfer functions; g: Transfer functions; q: Transmission (threshold) variable; : Slope parameter; c: The vector of threshold parameters.
Results & Discussion
The linearity test results indicated that there is a strong nonlinear relationship among variables under consideration. Moreover, considering one transition function with one threshold parameter, that represents a two-regime model, is sufficient to specification of nonlinear relationship among variables. The results indicated that the threshold value is 34.12 percent and the estimated slope parameter is 1.83. In order to provide the clearer evidence of the obtained results, two extent regimes were investigated:
First regime :
Second regime :
Based on the above results, in the first regime, the external debt has a little negative impact on the economic growth. Beyond the threshold level, in the second regime, this negative impact increases.
Conclusions & Suggestions
This paper investigates the threshold effects of the external debt on the economic growth in eight developing countries from 1991 to 2013 using Panel Smooth Transition Regression (PSTR) model as one of the most prominent regime-switching models. The linearity test results indicated a strong nonlinear relationship among the variables under consideration. Moreover, considering one transition function with one threshold parameter, that represents a two-regime model, is sufficient to specification of nonlinear relationship among variables. This negative impact increases if it is beyond the threshold value in the second regime. Therefore, not only the external debt has not played an important role in the acceleration of the economic growth in the eight developing countries; but also, its increase is the barrier to economic growth in these countries. The results have important implications for the policymakers of the eight developing countries. It is a major challenge for the governments to formulate a prudent debt management policy to control and maintain the level of indebtedness of their countries at a manageable level before it becomes too late and the country becomes involved in a debt overhang situation or, to a lesser extent, is in default.
gholamreza zamanian; javad harati; Hojat Tagizadeh
Abstract
Introduction
In 1980s many countries to finance their spending,used internal resources, especially bank credits. Government spending financing by non-bank was used in low level, because capital markets had not formed or were not strong in most countries and also financial assets were not available. ...
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Introduction
In 1980s many countries to finance their spending,used internal resources, especially bank credits. Government spending financing by non-bank was used in low level, because capital markets had not formed or were not strong in most countries and also financial assets were not available. After World War II and the effectiveness of US aid to Europe, several articles were written about the impact foreign aid. Some theories believe that foreign aid such as loans, block grants can provide economic growth, but increased lending to developing countries in the 1970s and followed debt crisis in 1982 quesioned the impact of external debt on economic growth.
According to International Debt Statistics published by the International Bank for Reconstruction and Development in 2015, total external debt of developing countries is about 5506 billion dollars, which Iran's share is 7647 million dollars . According to the report, China is the largest debtor among developing countries so that the external debt of this country is about 874 billion dollars. China's external debt in 2013 has increased more than 6 times than 2000.
One of the main challenges which most developing countries facing, is ways of financing the budget deficit and its impact on economic growth in these countries. Choosing financing instruments, especially liabilities are important for rapid economic development and being aware of the impact of these policies on macroeconomic variables is very important. How to finance the budget deficit is the key to financial sector reform. The purpose of this study was to estimate the effects of external debt, budget deficits and exports on economic growth in developing countries. For this purpose,panel data for the period 2003-2013 and GMM estimation method have been used.
Theoretical frame work
In general, there are three views to the use of external resources. The first view is theories that consider external sources important for growth and economic development. This view suggests that developing countries are known poor economies in terms of low savings and capital and low investment. In fact, developing countries because of low saving rate can not finance expenditures related to depreciation and replacement of capital goods. As a result, for such countries, external resources are critical to reach ideal economic growth. The second view includes theories that foreign aid is not essential for growth and development. Bauer and Yamey (1989) believe: "For developing countries, foreign aid is not necessary or sufficient for liberation from poverty, but it is possible to grow and develop without foreign aid if necessary conditions are provided and economic and social projects are done. Also if these conditions are not provide, economic development is not possible, even with the presence of foreign aid and foreign resources will be wasted ".The third view includes those views which know foreign unsufficient condition for economic growth, but believe that proper management of external debt, provides the possibility economic growth and development. The management includes allocated loans to the production of export goods and prevents the losses of received aid and so on (Gharabaghi, 1993).
Theoretical models about growth and foreign aid includes two gap patterns, Griffin theory, model three gaps and overhang hypothesis. Before the two-gap model, growth patterns often proposed based on the savings gap, But Chenery & Bruno (1962) showed savings gap is not the only limiting factor. Griffin (1970) by statistical analysis revealed that only 25 percent of the external debt is allocated to growth activities. In the other words , 75% foreign loans taken for consumption expenditures. One of the main criticisms about the two gap pattern was that received foreign loans apart from the savings and exchange gap may be due fiscal gap and budget deficit reduction. So third limitation was introduced for the growth, was the limitation of public financing gap. Bacha (1990) suggests that the economy could fill three gaps savings, foreign exchange and Budget deficit by external sources and enter the growth path. One of the main channels which external debt impact on economic growth through it, is Debt overhang (Krugman, 1988; Sachs, 1989). Large debt burden is an obstacle to investment, because investors expect return on investment reduce due to foreign creditors.
Methodology
In this study, the model Jayaraman & Liu (2009) is used:
That, RGDP represents real production as a numerical index, ED real external debt (GDP%), EXP real exports of goods and services (GDP%), BD real budget deficit (GDP%) and ε random error term. consumer price index (CPI) is used for real nominal variables. In this study the generalized method of moment's (GMM) is used to estimate the model. GMM estimator is developed by Arellano & Bond (1991) and Arellano & Bover (1995). Gmm estimation method used the two sets of cross-sectional data and time series data. The method can solve the endogeneity problems between explanatory variables. In this method, dependent variable is added to the equation with a lag as an explanatory variable (Abrishami et al., 2006). To solve the correlation between the lagged dependent variable and the error term, lag variables are used as instruments in GMM. Also consistent estimators of GMM, depends on the validity of the instruments used. To test this, the use of statistics proposed by Arellano & Bond (1991) and Arellano & Bover (1995), which is called Sargan test and validate the instruments used to measure (Yavari, et al.2010).
Results & Discussion
Based on the results, the total external debt and budget deficits have negative impact on economic growth so that one percent increase in the total external debt reduced economic growth by 0.7%. Also increase one percent in the budget deficit reduced economic growth 0.035%. While exports have a positive impact on economic growth so that one percent increases in exports increase economic growth 0.21%.
In the second model, short-term external debt has positive effects, but long-term external debt has a negative impact on economic growth. So that a one percent increase in short-term external debt, increases economic growth 0.032% and with an increase in long-term external debt, reduces economic growth of 0.12%. Budget deficit has a negative impact on economic growth, while exports had a positive effect, as a one percent increase in budget deficit, reduced economic growth 0.005% and a one percent increase in exports increased 0.24%.
Also estimated results for the two groups of countries: countries with upper-middle per capita income and lower-middle and lower-income countries , have been reflected. According to estimates, total external debt in both countries has a negative impact. While short-term external debt has positive impact on economic growth, but long-term external debt has negative impact on economic growth. Budget deficit and exports in countries with low and lower-middle income have positive impact on economic growth, while the upper-middle income countries have negative effects.
Conclusions & Suggestions
The results show that, long-term external debt and budget deficit have significant negative effects on economic growth in developing countries. However, exports and short-term external debt have positive impact on economic growth in developing countries. While the external debt is divided into 2 groups: short-term and long-term external debt, the results show that short-term external debt have positive impact on economic growth but long -term external debt have negative impact on economic growth. However, the budget deficit is a negative impact on economic growth but exports have positive impact n economic growth. According to the results, measures to reduce long-term external debt should be taken in developing countries and prevent the adoption of long-term debt or long-term debt become short-term debt. Also, due to the positive impact of exports on economic
majid aghaei; Mahdieh Rezagholizadeh
Abstract
This paper surveys economic growth and energy consumption relationship by new econometric methods in different sectors of Iran. this study uses panel error correction model and panel co integration and causality tests to investigate short run and long run relationship between energy and value added growth ...
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This paper surveys economic growth and energy consumption relationship by new econometric methods in different sectors of Iran. this study uses panel error correction model and panel co integration and causality tests to investigate short run and long run relationship between energy and value added growth in different sectors of Iran’s economy with regards to energy price in the time period of 1369 until 1389.Long run and short run coefficients estimation have done by using Dynamic Ordinary Least Square, Fully Modified Ordinary Least Square and Pooled Mean Group respectively.
Results show that increasing (decreasing) of energy consumption in different sectors of Iran’s economy cause to increase (decrease) in value added growth, so we accept Feedback hypothesis in this study because of existence of bidirectional relationship between energy consumption and economic growth in sectors of Iran economy. Energy price impact on economic growth in short run is negative but in long run is positive
hasan rezaee; mostafa salimifar
Abstract
Development of financial markets as an important factor in the economic growth process always has been of interest to economists. The purpose of this paper is to study the relationship between regional financial development and economic growth. This study uses provincial annual data over the period 2000-2011 ...
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Development of financial markets as an important factor in the economic growth process always has been of interest to economists. The purpose of this paper is to study the relationship between regional financial development and economic growth. This study uses provincial annual data over the period 2000-2011 by using panel data technique. The panel co integration techniques have been used to test and estimate the long-run equilibrium relationship between real GDP and the financial development indicators.
The results show that long-run positive relationship exists between the variables of insurance, banking and stock with economic growth. There is no Short- run causality from stock market to banking sector, But there is bidirectional causality between other variables in the short run and long run. In the long-run, volatility of GDP mainly described by the Impulse of GDP (59.7%), stock (29.74%) and little amount (0.5%) by bank ing development.
Hassan Heidari; Roghayyeh Alinezhad
Abstract
This study investigates the effects of the government effectiveness and financial development indices on economic growth in D-8 countries over the period 1996-2012, by applying the Panel Smooth Transition Regression (PSTR) model. For this purpose, we use Non-Linear Least Squares (NLS) method for estimation ...
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This study investigates the effects of the government effectiveness and financial development indices on economic growth in D-8 countries over the period 1996-2012, by applying the Panel Smooth Transition Regression (PSTR) model. For this purpose, we use Non-Linear Least Squares (NLS) method for estimation of model. The estimation results reject the linearity hypothesis, and estimate two regimes that give a threshold at government effectiveness of 0.192 for the countries under investigation. Moreover, our results demonstrate that the positive impact of government effectiveness and financial development indices on economic growth increases in high levels of calculated threshold for government effectiveness. The results also indicate education expenditure and openness index have a positive impact in both regimes, agricultural raw materials exports variable has a negative impact in first regime and positive impact in the second regime and inflation rate has a negative impact in both regimes on economic growth. Hence, improvement of government effectiveness and financial development and an efficient administrative system as well as efficient financial markets and banks in the D-8 countries lead to an increase in the economic growth and development.
Roohollah Babaki; Mostafa Salimifar
Abstract
Abstract
Production is a process by which a productive activity will require some conditions (before and after the start of the production). One of the most important pre-required factors for start up a production unit is suitable Business Environment. One of the most important factors that must be ...
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Abstract
Production is a process by which a productive activity will require some conditions (before and after the start of the production). One of the most important pre-required factors for start up a production unit is suitable Business Environment. One of the most important factors that must be provided after the start of production -During the production process and the time to market and export- is economic freedom.
Hence, this paper explores the impact of Business Environment and economic freedom on economic growth in 30 selected countries during 2004-2013. Panel data estimation results indicate that Business Environment and economic freedom have positive and significant relationship with economic growth.
Our findings show that the impact of economic freedom on economic growth is greater than the Business Environment.
Keywords: Business Environment, Economic Freedom, Economic Growth, Panel Data
JEL Classification: C23, K20, O41, O50
Michael Azimi
Abstract
One of the concepts which has always been studied by development scholars, is (un)equilibrium. The concept has been distinguished sectorally (agriculture/industry/service), economically (production/consumption) and regionally. Despite many advances in this field, there are plenty of countries which are ...
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One of the concepts which has always been studied by development scholars, is (un)equilibrium. The concept has been distinguished sectorally (agriculture/industry/service), economically (production/consumption) and regionally. Despite many advances in this field, there are plenty of countries which are suffering from the outcomes and impacts of imbalanced development (centralized development).
This study is trying to concentrate on the relationship between macroeconomic growth in national level and regional centralization of development. At first, development theories are concerned to find the nature of the relation. In fact, the answer of various theories is summarized. Then, by using secondary data in Iran the relationship is pursued.
The results show that centralized development is not concerned in conventional theories when the issue is the core of non-conventional ideas. In addition, quantitative indicators show strong negative correlation between macroeconomic growth and regionally centralized development in Iran while development process in this country has been more regionally centralized.
Mohammad Taher Ahmadi Shadmehri; Azam Ghezelbash; Mohammad Daneshnia
Abstract
Abstract
High economic growth always has been of interest to policy makers and administrators that these strategies have been proposed to achieve this. Energy is a production factor and its impact on economic growth can be observed , therefore in this study was investigate the causality between energy ...
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Abstract
High economic growth always has been of interest to policy makers and administrators that these strategies have been proposed to achieve this. Energy is a production factor and its impact on economic growth can be observed , therefore in this study was investigate the causality between energy consumption and economic growth in the ASEAN member countries, the period 1978 of 2008, for the purpose of the exam panel unit root, panel cointegration and panel vector error correction model is used.
The results of this study indicate that in this group of countries there is not co-integration relationship between energy consumption, economic growth and price growth. But there is the co-integration relationship between energy consumption and economic growth. However, long-term bilateral causality between energy consumption and economic growth in the short term, there is also a one-way causality from energy consumption to economic growth.
Keywords: economic growth, energy, causality, ASEAN, vector error correction model
JEL: G54, E23 ,F12
aliireza erfani
Abstract
Comparing the Effect of Information and Communication Technologies (ICTs.) on Economic Growth of Selected Developed and Developing Countries
Alireza Erfani
Assistant Professor, Faculty of Economics, Semnan University
Saeedeh Akbarzadeh Tabrik
M.A. in Economics, Semnan University
Mohammad NodehFarahani
M.A. ...
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Comparing the Effect of Information and Communication Technologies (ICTs.) on Economic Growth of Selected Developed and Developing Countries
Alireza Erfani
Assistant Professor, Faculty of Economics, Semnan University
Saeedeh Akbarzadeh Tabrik
M.A. in Economics, Semnan University
Mohammad NodehFarahani
M.A. in Economcs, Allameh University
Abstract
Studies about the effect of the ICT on the economic growth of developed countries in 1990s, have shown strong and positive direct relationship between ICT and economic growth in these countries. After a short period, this interactive relationship arises in some of the developing countries. But, since these countries have no necessary competition environment and have weak infrastructure, the condition of ICT’s effect on economic growth can be debatable.
Following Quah (2003) and Pojola (2002), in this study we survey and compare the effect of ICT on the economic growth of chosen developed and developing countries, using investment in ICT, capital stock, manpower, posts graduate registration number of students, and direct foreign investment data of 1995- 2006.
We estimate the parameters of the mode with panel data method. With regarding to the comparable methodology of the research, we use a dummy variable in the model for analyzing in this way.
The results indicate a positive and high significant relationship between economic growth and ICT in all chosen countries but stronger for developed countries.
Key words: information and communication technology (ICT), investing in ICT, economic growth
Mohammad-Hossein Hosseinzade Bahreini
Abstract
The Effect of Business Regulations on Economic Growth (A Selection of Developed and Developing Countries)
Mohammad-Hossein Hosseinzade Bahreini
Assistant Professor of Economics,Ferdowsi University of Mashhad
Mohammad Ali Falahi
Associate Professor of Economics,Ferdowsi University of Mashhad
Fatemeh ...
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The Effect of Business Regulations on Economic Growth (A Selection of Developed and Developing Countries)
Mohammad-Hossein Hosseinzade Bahreini
Assistant Professor of Economics,Ferdowsi University of Mashhad
Mohammad Ali Falahi
Associate Professor of Economics,Ferdowsi University of Mashhad
Fatemeh Erfany Jahanshahi
M.Sc. in Economics
Abstract
In this research, the relationship between business regulations and economic growth is examined.
Nowadays, firms face high regulation in starting business, employing production factors and other procedures of business. It seems one of the important obstacles of production and investment is cumbersome regulation in business environment. In different countries of the world, improvement in business environment and removal of obstacles in front of private sector are known as an economic strategy.
In this paper, regarding the importance of the subject, “Hardness of Business Regulations” index is made by using World Bank data for consideration of the effect of business regulations on economic growth. The model is estimated for 62 countries during 2003-2006 by panel data model. The result shows that hard business regulation has negative effect on economic growth in selected countries.
Key words: business environment, business regulations, economic growth, panel data.
JEL: C23, G18, K20
Mihandokht Kazemi; Mostafa salimifar; Saeede Sabze
Abstract
Abstract
This article seeks to investigate the effect of trading policies on economic growth in number of developing countries via comparison of in-ward and out-ward oriented trade policies effects. To achieve this, a pooling data analysis, panel data regression and fixed effect module were applied ...
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Abstract
This article seeks to investigate the effect of trading policies on economic growth in number of developing countries via comparison of in-ward and out-ward oriented trade policies effects. To achieve this, a pooling data analysis, panel data regression and fixed effect module were applied to justify the fact that trade liberalization has a positive impact on economic growth rate in mentioned countries and trade restriction will slow down the race of economic growth.
This comparison was carried out through countries classified into two major groups of in-ward and out-wards oriented trade policies and following four subgroups:
1. countries with trade policy quite out-ward oriented,
2. countries with trade policy moderately out-ward oriented,
3. The policy states moderately in-ward oriented and eventually
4. Countries with completely in-ward oriented trade policy.
The results vividly demonstrate the countries with out-ward oriented policy have developed better than the countries with in-ward oriented policy. On the other hand, among the countries with out-ward oriented trade policy, those that have adopted moderately out-ward oriented trade policy have experienced better results.
Keywords: Out-ward Oriented Trade Policy, In-ward Oriented Trade Policy, Economic Growth, Pooling Data, Panel Data Regression.
JEL: D43, F12, L13.
Mozhgan Moallemi
Abstract
Abstract:
Decentralization is a process in which local affairs are administrated by local authorities outside of activities of the central government. Today, decentralization policy is considered as one of the ways that most countries adopted to improve public sector performance. In this paper using ...
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Abstract:
Decentralization is a process in which local affairs are administrated by local authorities outside of activities of the central government. Today, decentralization policy is considered as one of the ways that most countries adopted to improve public sector performance. In this paper using geometric analysis, innovation that this paper represents, an econometric model is considered to evaluate the effects of the decentralization policy on economic growth.
The model is consistent with economic, political and social circumstances in Iran. This model investigates the effects of decentralization policy of the Third development plan on economic growth via estimatingappropriate indicators.
Estimation results reveal the fact that an increase in decentralization indicator has a positive effect on national economic growth despite the inappropriate distribution of powers among different provinces of the country.
Keywords: Decentralization, Local Governments, Economic Growth, Third Development Plan of Iran.
JEL Classification: H72، O41، C13.
