International Economics
Abolghasem Golkhandan; Sahebe Mohamadian Mansour
Abstract
1- INTRODUCTION
Globalization has been rising over the years and the trend seems perpetual. Ideas, technology, resources and final goods are progressively mobile across international borders. Consequently, the economic conditions in most developing countries are not exclusively decided by internal ...
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1- INTRODUCTION
Globalization has been rising over the years and the trend seems perpetual. Ideas, technology, resources and final goods are progressively mobile across international borders. Consequently, the economic conditions in most developing countries are not exclusively decided by internal policies and market situations. The world continues to witness intensified interdependence and competition between economies in addition to more benefits to developing countries in terms of more access to international markets, intensify technology transfer from more developed nations. On the other hand, nowadays militarization continues under the impact of technological advances, infrastructural development, geopolitical competition and growth in troop size. In this regard, one of the important economic debates is whether globalization leads to the expansion of militarization (positive causality from globalization to militarization) or helps to control it and promote peace (negative causality from globalization to militarization)? Or vice versa, is it the militarization that slows down the process of globalization (negative causality from militarization to globalization) or does it enable the presence in international markets (positive causality from militarization to globalization)?
According to these points, the aim of this paper is to examine the causality between globalization and militarization for the 12 Middle East countries that have the highest level of militarization in this region over the period 2000-2020.
2- THEORETICAL FRAMEWORK
There are arguments in favour of positive impact of globalisation on military expenditure. For instance, it is argued that globalisation stimulates defense spending over social expenditure. Moreover, security concessions in free trade arrangements makes it easy for governments to expand military expenditure, but put restrictions on social expenditure. There are arguments in favour of the negative impact of globalisation on military spending. It is opined that military expenditure should fall significantly due to economic liberalisation and globalization. With the rising quest for the acquisition of wealth through trade and economic liberalisation, countries are progressively hesitant to use military means to resolve inter-state disputes. Furthermore, with the emergence of the unparalleled forces of globalisation, particularly after the Cold War ended, the function of the state as provider of security is believed to be on the decrease.
Moreover, the reverse causation can also be applicable that is, in the presence of conflict and civil war the governments increase their military expenditures in order to promote the nation state and enhancing their territorial jurisdictions. As a result, internationalization or global integration needs to be forgone. In contrast to the increase in militarization due to the need to import technology and advanced weapons as well as the export of manufactured weapons, it enables the presence in international markets, which leads to the improvement of the level of globalization.
3- METHODOLOGY
The data used in this study covers the period 2000–2020 for the 12 Middle East countries that have the highest level of militarization in this region (Turkey, UAE, Egypt, Iran, Iraq, Lebanon, Jordan, Bahrain, Saudi Arabia, Kuwait, Oman and Israel). The chosen time period stems from the availability of data. The variables used in this study include the global militarization index (MIL), the overall globalization index (GLOB), and per capita real GDP (GDPC) as a control variable. The overall globalization index includes economic, social, and political globalization. The economic globalization (36%) consists of actual flows, trade and capital account restrictions. The social globalization (38%) involves data on personal contact, information flows, and cultural proximity. The political globalization (26%) consists of number of embassies in the country, membership in international organizations, participation in UN security-council missions, and international treaties. The variables are expressed in log forms. Data is obtained from the World Bank’s World Development Indicators, KOF Swiss Economic Institute’s overall globalization index, and Bonn International Center for Conversation (BICC).
The estimation of the model has also been done by using the causality test in heterogeneous mixed panels (Presented by Emirmahmutoglu & Kose (2011)), which is based on the Vector Auto Regressive (VAR) model and Wald tests with specific bootstrap critical values for each country. The panel causality method presented by Emirmahmutoglu & Kose (2011) consists of a system, including two sets of equations as follows:
(1)
and
(2)
In the above relationship, y indicates globalization and x refers to militarization. N is the number of panel members (j=1,..,N), t is the time period (t=1,..,T), l is the optimal lag length and is the maximum degree of stationary of the model variables between each of the panel members. To test for Granger causality in this system, alternative causal relations for each country are likely to be found: (1) there is one-way Granger causality from X to Y if not all are zero, but all are zero; (2) there is one-way Granger causality from Y to X if all are zero, but not all are zero; (3) there is two-way Granger causality between X and Y if neither nor are zero; and (4) there is no Granger causality between X and Y if all and are zero.
4- RESULTS & DISCUSSION
Empirical results show the existence of a positive one-way causality relationship from the side of militarization to globalization (the hypothesis of militarization leading to an increase in globalization) in Egypt and Israel, a negative one-way causality relationship from the side of militarization to globalization (the hypothesis of militarization leading to a decrease in globalization) in the countries of Turkey and the UAE, a negative one-way causality relationship from globalization to militarization (hypothesis of globalization leads to limiting militarization) in the country of Oman, a negative two-way causality relationship between militarization and globalization (feedback hypothesis) in the country of Kuwait and non-causality relationship between militarization and globalization (neutral hypothesis) for the countries of Iran, Iraq, Lebanon, Jordan, Bahrain and Saudi Arabia. Also, the non-causality relationship between globalization and militarization (or the neutral hypothesis) is confirmed for the total panel.
5- CONCLUSIONS & SUGGESTIONS
In general, based on the results, it can be said that globalization does not affect the process of militarization in the countries of the Middle East region and is not a threat to security in the countries of this region. Therefore, through globalization and moving towards an open economy, the countries of this region can provide the necessary platforms for things like attracting technology, capital and financial resources, regional and global arrangements, and joint investment in the fields of knowledge; Without this issue being a serious threat to security and the level of militarization in the Middle East region. Also, it is suggested that in the future studies, a more detailed examination of the research subject will be done by separating globalization into economic, political and social globalization types.
International Economics
atefe ahmadi; Abdol Karim Hosainpour
Abstract
1- INTRODUCTION
The expansion of trade among countries in recent years is one of the main reasons for economic growth. In order to achieve export development, it is necessary to use a principled and modern method to identify, determine and prioritize export target markets. In this ...
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1- INTRODUCTION
The expansion of trade among countries in recent years is one of the main reasons for economic growth. In order to achieve export development, it is necessary to use a principled and modern method to identify, determine and prioritize export target markets. In this regard, Bushehr province in the economic field (production, trade and services) with issues such as growth based on a single product and sector economy, weak technical and specialized knowledge in economic sectors, traditional production methods and lack of investment platforms in the sectors private and public aspect. Therefore, in the present research, in order to develop non-oil exports at the regional and national levels, by benefiting from the theories of comparative advantage, the activities with comparative advantage in export in Bushehr province are identified.
2- THEORETICAL FRAMEWORK
Based on different theories in the field of comparative advantage, countries or regions being rich in resources cause countries (regions) to have a potential relative advantage for exporting manufactured goods related to resource abundance. Also, the export of goods should be based on the trade costs and market size of the target countries. Therefore, according to the proposed theories, the export of goods based on the comparative advantage and the concentration of companies in a geographical area, while enjoying the benefits of forming an industrial cluster, causes the organization of industries and the specialization of activities.
3- METHODOLOGY
In this research, the cluster index method is used to investigate the concentration of industrial activities in the province. Due to this issue comparative advantage is one of the key concepts in international trade theory, and also one of the indicators that has been widely used in this field is the Balasa Revealed Comparative Advantage Index. After identification of the concentrated activities through the Balasa index and Balasa symmetry, the concentrated industrial activities with relative export advantage are identified and then based on a series of indicators, the target countries of Bushehr province are prioritized by using the numerical taxonomy method.
4- RESULTS & DISCUSSION
In the recent research, by benefiting from the theories of comparative advantage and using indices such as cluster index, Balassa index and Balassa symmetry index, concentrated industrial activities were identified and then has been determined the activities with comparative advantage in exports in the years 2005 to 2019. In the following, considering the importance of non-oil export development based on five relative import indicators, the number of countries participating in imports, the lack of advantage of the target country in product production, the average tariff and the distance between the target country and Bushehr province using the numerical taxonomy method of the most important markets were identified as the target of the selected product in the last statistical year (2021). According to the results obtained in the recent research, the activity of producing chemicals and chemical products has a relative advantage of export. Also, based on the final prioritization of the countries based on all the introduced indicators, it was determined that the countries of Turkmenistan, Tajikistan, Kyrgyzstan and Qatar are the most important target countries for the chemical products of Bushehr province, respectively, they have the first to fourth priority.
5- CONCLUSIONS & SUGGESTIONS
Bushehr province has opportunities and strengths in various fields of oil, gas, petrochemicals, power plants, agriculture and fisheries, mines, nuclear facilities, marine industries, commercial activities and proximity to the Persian Gulf. The results of calculating the cluster index indicate that each city in Bushehr province has a series of concentrated activities. Each of these activities can be susceptible to the formation of industrial clusters with a more detailed investigation. The results obtained from the calculations of revealed and revealed symmetric relative advantage indicators based on the statistics of added value and export of activities also showed that among the concentrated activities susceptible to cluster formation in Bushehr province, the activity of coke production and oil refining products; production of chemicals and chemical products. The production of pharmaceuticals and chemical and herbal medicinal products has a relative advantage in export. In addition, the results of the prioritization of the target countries showed that the countries of Turkmenistan, Tajikistan, Kyrgyzstan and Qatar are the most important target countries for the chemical products of Bushehr province. According to these results, it is suggested:
It is possible to form an industrial cluster in the production of chemical substances and chemical products in Asaluiye city.
Regional imbalances caused by the concentration of population and facilities in a province occur within a region, which are reduced by identifying and developing susceptible areas.
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.
