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.
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.
mohammad alizadeh; Abolghasem Golkhandan
Abstract
The main objective of this paper is to analysis the impact of information and communication technology (ICT) on energy consumption in the MENA region selected countries during the period 1995-2011. For this purpose, used the model presented by Sadorsky (2012) and three indicators that measured ICT: the ...
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The main objective of this paper is to analysis the impact of information and communication technology (ICT) on energy consumption in the MENA region selected countries during the period 1995-2011. For this purpose, used the model presented by Sadorsky (2012) and three indicators that measured ICT: the number of Internet users, the number of mobile lines and the number of telephone lines. Also, estimated and analyzed the short run and long run elasticities between the variables of the model using a system generalized method of moments (GMM-SYS). The results show that the development of ICT with each three measured indices, increased energy consumption per capita in MENA region selected countries in the short run and long run. So that a one percent increases in this indicator, average of energy consumption increases in the short run and long run respectively 0.007 and 0.089 percent.
Mohammad Alizadeh; Abolghasem Golkhandan
Abstract
Abstract
In this context, this article tries to presents a conceptual model of the factors affecting the government size and empirical test through econometric generalized methods of moments (GMM) by using data from 15 developing countries, review relationship between fiscal decentralization and the ...
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Abstract
In this context, this article tries to presents a conceptual model of the factors affecting the government size and empirical test through econometric generalized methods of moments (GMM) by using data from 15 developing countries, review relationship between fiscal decentralization and the government size. The results of dynamic panel data indicate a positive effect of income and expenses fiscal decentralization and meaningless effect of vertical imbalance on the government size and therefore cannot approve the Leviathan hypothesis for the countries studied. Other results of this study indicate a positive and significant influence on the government size of GDP per capita (confirmed the Wagner’s low), the degree of openness of the economy (confirmed the Rodrik hypothesis) and democracy net and it negative influence of degree of urbanization.
Keywords: Fiscal Decentralization, Government Size, Developing Countries, Leviathan Hypothesis, Generalized Method of Moments (GMM).
JELClassification: C23, H5, H7.
