The Journal of Developing Areas最新文献

{"title":"The Lewis Growth Rule for Developing Economies","authors":"A. Andrews, O. Ijose","doi":"10.1353/jda.2022.0027","DOIUrl":"https://doi.org/10.1353/jda.2022.0027","url":null,"abstract":"ABSTRACT:For developing economies, adequate rates of capital formation are required for sustained economic growth, and policy makers have to consider the ratio of savings to invest in capital formation while still being supportive of other economic needs (e.g., servicing of current loans and payment of salaries and administrative overheads). We evaluated the expenditure-savings nexus of four emerging economies (i.e., Ghana, Botswana, Barbados, and Trinidad and Tobago) to investigate, in accordance with the seminal research of Sir Arthur Lewis, how the growth rates of savings and expenditure impact the accumulation of capital and, thus, spur economic development. Based on Lewis' research, we developed the Lewis Growth Rule (LGR) for developing economies – that is, emerging economies can best sustain economic development by maintaining a growth in savings that exceeds that of expenditure and by investing the surplus in the accumulation of capital. As a takeoff strategy for economic development, emerging economies' expenditure should grow by 5%–7%, whereas savings should grow by 7%–12%. We assessed the performance of the LGR by examining the two African and two Caribbean economies using data from the Penn World Tables. Our examination results of long-term trends in these economies demonstrate intermittent periods where the surplus gap as required by the LGR is observed with a downward trend for Barbados and Ghana, while upward for Botswana and Trinidad and Tobago. The impact of Ghana's significant continuous savings gaps on per capita GDP growth is significant over the analysis period. Barbados demonstrated a much lower marginal savings gap, but its positive impact on per capita GDP growth was much higher than that of Ghana. The findings have important implications for policy makers. While a savings gap is important for developing economies, political conflicts depress its impact on the real economy. Hence, the most important is the suggestion that, although critical to capital accumulation, the size of a positive savings gap does not have to be as large as Lewis' rule suggests for economic growth to be sustained. Coordinated government policies, growth supportive institutional arrangements, and investments in technology are also critical in unlocking high productivity that boosts and sustains real economic growth.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117312501","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Compensating Wage Differentials for Workplace Risks and Local Unemployment: New Evidence for Gender, Union, and Nonunion Workers in the USA","authors":"H. A. Mridha","doi":"10.1353/jda.2022.0035","DOIUrl":"https://doi.org/10.1353/jda.2022.0035","url":null,"abstract":"ABSTRACT:This study estimates the compensating wage differentials (CWDs) for work-related fatal injuries while controlling for the impact of local unemployment on the risk premium. The main argument is that the workers in occupations with fatal injury risk may not be fully compensated for workplacerelated injuries in high unemployment areas due to workers' weakening bargaining power. Two risk measures, employment-based and hour-based injury risks, are used to estimate the effects of different job risks on CWDs using both ordinary least squares (OLS) and the two-stage least squares (2SLS) methods. The risk measures are constructed from the Current Population Survey (CPS) and Bureau of Labor Statistics (BLS) data for the 2012-2016 period. The fatal injury risk data incorporate white and blue-collar occupations by gender and union membership status to estimate CWDs more accurately. The OLS estimates broadly support the theory of CWD. The CWDs for employmentbased fatal risks for union, nonunion, and female, and hour-based union workers increase when controlling for the local area unemployment, supporting a negative impact of unemployment on CWDs. Results show that, except for the employment-based male sample, the CWDs for union and male samples are larger than those for the nonunion and female samples. The endogeneity corrected results from the 2SLS confirm that workers receive the CWDs for their exposure to workplace-related fatal risks. However, results find no evidence of the effects of local area unemployment on the CWDs. The estimated values of a statistical life (VSL) of about $4.69 million to $31.79 million derived from OLS estimates are slightly above the estimates reported in the literature. These results are particularly important as an unbiased estimate of the CWD leads to the precise calculation of the VSL. The findings from this study would help policymakers understand the implication behind wage-fatality risk tradeoff in the workplace. The estimates of the VSL would allow them to design policies aimed at reducing workplace-related fatal injury risk and improving the worker's compensation system.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"25 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125635113","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Dynamic Effects of Foreign Aid, Trade Openness and Fdi on Economic Growth for West African Countries","authors":"O. Saibu, Ogbuagu Matthew Ikechukwu, P. Nwosa","doi":"10.1353/jda.2022.0034","DOIUrl":"https://doi.org/10.1353/jda.2022.0034","url":null,"abstract":"ABSTRACT:Several arguments have been raised about the tripartite relationship between capital inflows, trade openness and economic growth; and most especially on their role as economic stimulators. Despite the above, the role of capital inflows in the development process cannot be overemphasized since they ensure enhancement of technology transfer, efficiency and improvement in the quality of factor inputs. As alternative to aids and FDI, many West African countries embraced trade liberalisation policy with the belief that trade openness has the potential of enhancing economic growth by increasing the variety of intermediate inputs as well as the size of the domestic market. It is upon this premise that the current paper examines the individual, interactive and threshold effects of aid, FDI and trade openness on economic growth by employing panel autoregressive distributed lag (PARDL) and mean group (MG) estimation techniques on 14 West African countries using datasets from 1980 through 2018. The PARDL is adopted because of its dynamic nature and ability to obtain both short and long-term effects, while mean group technique records the uniqueness of individual West Africa countries and examine their degrees of sensitivity to regional characteristics. The results revealed that long run relationship was observed and aid, FDI and trade openness positively enhanced output growth. Second, the interactive effect of aid, trade openness and FDI was negative, but strengthens the individual effects in the long run period. Third, an average financial flows threshold of 8.3 percent is required to spur output growth to equilibrium. Fourth, MG estimation affirms that it is only in Senegal that the coefficients of these financial flow variables were sensitive to regional characteristics. These are the major contributions to knowledge. Thus, the paper recommends the need to embrace medium-and long-term policy framework which focuses on channelling funds from aid towards infrastructural and human development in order to accelerate future output growth. More so, regional representatives should concentrate efforts towards shifting their exports from primary to secondary and tertiary products so as to increase the value of trade transactions to members. Lastly, regional macroeconomic policies aimed at improving economic integration and regional sensitivity among members should be considered.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"226 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121625190","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Examining the Decisions of Technology Adoption and Intensity Through Time: Evidence from Kenya","authors":"Minrong Song, G. Kostandini, Eftila Tanellari","doi":"10.1353/jda.2022.0026","DOIUrl":"https://doi.org/10.1353/jda.2022.0026","url":null,"abstract":"ABSTRACT:We examine the sequential adoption decisions and the intensity of adoption of maize hybrid seeds the by small-scale agricultural producers in Kenya. Previous adoption literature has investigated sequential adoption for cases that do not have significant uncertainty and lack of resources as is the case of developing countries like Kenya or for cross-pollinating crops like maize. This study contributes to the literature on the dynamics of adoption of hybrid maize in developing countries by focusing exclusively on the factors that affect farmers' decision to dis-adopt or increase the intensity of adoption, controlling for access to extension services as well as last rainfall from previous seasons. In order to capture the dynamic process of adoption, we use a four-year panel data survey of 441 randomly selected householders who grew maize in various agro-ecological zones in Kenya. Our analysis employs a broad range of methods, including logit, tobit and double hurdle models, to investigate the adoption decisions of smallholders and to identify the attributes that contribute to smallholder's changes of hybrid seed usage over time across different regions in Kenya. We find that easy access to market and improvements in extension services help smallholder farmers to adopt hybrid seeds while lack of credit restricts adoption. Previous experiences with adoption of other technologies (e.g. tractor or fertilizer use) indicate a strong inclination to adopt hybrid seeds. With respect to the sequential behavior of initial adopters we find that credit restrictions, distance to market and adequate rainfall in the previous season are the main barriers for initial adopters to maintain adoption status and increase the use of hybrid seeds. The findings are of policy interest, since they suggest input complementarity and indicate that constraints to continuous adoption are derived from both biophysical and market infrastructure constraints. Knowledge of whether first adopters increase their seed usage from year to year can inform on farmers' cropping strategies and help identify longer-term successful technologies that increase their income and alleviate poverty.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"76 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127459691","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Relationship Between Sexual Violence and Girl-Child Primary School Education in Developing Countries","authors":"Godwin Okafor, J. Piesse","doi":"10.1353/jda.2022.0023","DOIUrl":"https://doi.org/10.1353/jda.2022.0023","url":null,"abstract":"ABSTRACT:All children have the right to quality education that respects their human dignity and their right to be protected from violence and abuse. However, in some developing countries this is not the case. According to the latest data from the United Nations Office on Drugs and Crime (UNODC), sexual violence in developing countries over the past 15 years rose by over 370%. Sexual violence on girls results in physical and psychological harm including long-lasting suffering. In this study, our interest mainly lies in the social impact sexual violence is likely to cause to the victims. This includes, but not limited to, rejection by family and community, exclusion from economic engagement, isolation, and the likelihood of further violence. All things being equal, all of the these will affect the demand for schooling and the desire to acquire formal education. Therefore, the contribution of this study is to quantify the impact of sexual violence on girl-child education in a broad range of developing countries. To achieve this, we used country-level data from 72 developing countries between 2003-2017. The pooled OLS and fixed effects techniques were then used in estimating the impact of sexual violence on different measures of girl-child education. The results of the estimations showed a negative relationship between sexual violence and the different measures of the girl-child education. For example, using the fixed effects results, an increase in sexual violence by one standard deviation from the sample mean, will reduce girls' enrolment rate and completion rate by 2.385% and 3.150% points, respectively. The results provide an interesting dimension to what is already known of the girl-child education and can aid policymakers in their interventions in improving educational outcomes for girls. With respect to policy implications from the findings, countries must formulate adequate responses to protect their young citizens from the cruelty of sexual abuse. In addition, effective support mechanisms for victims of sexual violence should be facilitated and sustained in developing countries. This will help in ameliorating some of the negative impact of their violent experiences and help to prepare them to re-enter society and return to education.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"94 14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129057141","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Urban Household Food Security: An Assessment of the Correlates of Micronutrient-Sensitive Dietary Diversity","authors":"Megbowon Ebenezer","doi":"10.1353/jda.2022.0039","DOIUrl":"https://doi.org/10.1353/jda.2022.0039","url":null,"abstract":"ABSTRACT:Increasing urbanization rate being experienced around the world and in South Africa has implications for the pursuit of development goals of reducing poverty and food insecurity. This is so because it sets up a new challenge in the fight against poverty, and food and nutrition insecurity from the conventional rural perspective to a dynamic urban one. Thus, this study accesses the dynamics of food and nutrition security with a focus on micronutrient-sensitive diets and the driving force among urban households in South Africa. Consequently, the data used to achieve the aim of this study were obtained from the 2018 General Household Survey (GHS) collected by Statistics South Africa. Micronutrient-Sensitive Dietary Diversity Score (MsDDS), descriptive analysis, chi-square test and Poisson regression models were employed to analyze the data. It is shown from the analyses that Group 4 (Vegetables) and Group 6 (Fruit) were consumed by a lower proportion of urban households in the 24-hour recall period. Likewise, food Group 4 and Group 6 were least consumed by households having low household dietary diversity score and medium household dietary diversity score. The result further shows that there is a significant difference between the count of micronutrient-sensitive dietary diversity food consumed and provincial location of the examined urban households. However, the respective average of the number of micronutrient-sensitive food consumed for WC (3.38), NC (2.95), FS (2.96) and NW (2.98) provinces are below the national mean of 3.44. The Poisson regression analysis shows that household head demographic characteristics (age, gender, marital status), educational attainment of the head (no education, primary education, certificate and diploma, higher education), employment sector of head, transfers, household size, province (EC, NC, FS, KZN and NW), house ownership status (rent free) significantly influence access to diverse micronutrient-sensitive diets. Based on these findings, there is a need for the South African government to intensify drives that promotes the health advantages of consuming fruits and vegetables. Supports and programmes that can boost peri-urban and rural vegetable farmers' capabilities to supply surplus vegetable products to urban dwellers should be initiated, this is a win-win initiative that will aid urban dwellers easy physical access to vegetable products while peri-urban and rural vegetable farmers maximize their income. The insufficiency of transfers warrants development of program that will aid the livelihood of urban households that largely depend on transfers. Expanding access to education to all members of household besides the head should be encouraged.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133719190","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Oil Price, Budget Deficit, and Monetary Policy: Evidence From Sub-Saharan Africa","authors":"Ficawoyi Donou-Adonsou, M. Diarra","doi":"10.1353/jda.2022.0031","DOIUrl":"https://doi.org/10.1353/jda.2022.0031","url":null,"abstract":"ABSTRACT:Oil prices have dropped sharply in recent years. If for some countries, the decrease represents tremendous benefits, for others, namely the oil-producing countries, it is a huge loss which is susceptible to cause budget deficit. With respect to such deficit, this study investigates the impact of budget deficit and public debt on monetary policy in Sub-Saharan Africa. We apply the panel instrumental variables (IV)-generalized method of moments (GMM) estimator to a pool of 44 countries over the period 1997-2017. The estimator implements IV/GMM estimation of the fixed-effects panel data models with endogenous regressors and is heteroskedastic and autocorrelation consistent. Regardless of the exporting or importing nature of the country, the results indicate no significant relationships between the fiscal variables and interest rates over the period 1997-2017. However, we find significant positive relationships between public debt and the discount rate and, to a lesser extent, between budget deficit and the discount rate, following the fall in oil prices from 2014. Put simply, monetary authorities have increased the discount rate from 2014. In the net oil-exporting countries, the evidence indicates from 2014 that public debt has significant positive impacts on the interest rates, whereas no significant impacts arise between budget deficit and interest rates. Monetary authorities in those countries seem to respond to the stock of debt rather than to its flow. In the net oil-importing countries, the results show a positive relationship between public debt and the discount rate following the fall in prices. Overall, our results suggest that monetary authorities may have been accommodating monetary policy, mainly through the discount rate, to prevent financial instability that may result from the falling oil prices since 2014. That is, tightening monetary policy may mitigate the inflationary pressure the long-standing decrease in oil prices may have created. Finally, while the falling oil prices should be good news for the oil-importing countries in terms of transportation and production costs, the results shed light on the fact that both oil-importing and exporting countries may be equally affected by the fall since the response of monetary authorities in the two sets of countries is very similar.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128726883","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Macroeconomic and Institutional Determinants of Capital Flight in Cameroon, Gabon and the Republic of Congo: A Comparative Analysis","authors":"Luc Nembot Ndeffo, Christophe Kuipou Toukam, André Melachio Tameko","doi":"10.1353/jda.2022.0025","DOIUrl":"https://doi.org/10.1353/jda.2022.0025","url":null,"abstract":"ABSTRACT:Cameroon, Congo and Gabon are characterized by an impressive flight of capital. Meanwhile, the macroeconomic variables of these countries are unstable and there is a degradation of governance indicators. This study examines the relationship between capital flight and the evolution of macroeconomic and institutional indicators in these three countries. The objective of the study is to identify the macroeconomic and institutional determinants of capital flight for the period 1970-2015 in Cameroon, Gabon and the Republic of Congo. Time series technique is used for the analysis. Appropriate tests are performed to verify the robustness of the results. The models are estimated through Autoregressive Distributed Lag approach. For each of the three countries considered in this paper, the results reveal a stable long-run relationship between capital flight and macroeconomic and institutional variables. In addition, some macroeconomic and institutional variables positively and significantly influence capital flight in each of the three countries. Policy implications are country-specific. For Cameroon, entrepreneurs should reinvest the profits from other growth sectors of the economy to ensure its diversification. In addition, natural resource rent management should be more transparent to limit capital flight. Anti-corruption structures should have more extensive powers to pursue the perpetrators of corruption before the competent courts. The application of the provisions of the constitution relating to the declaration of the property of the leaders occupying high positions should come into force to limit any hint of embezzlement of public funds. Concerning the Republic of Congo, the debt must be deeply restructured to make it sustainable. Leaders of anti-corruption structures should have a degree of autonomy in carrying out their mandate. Deadlines for dealing with corruption cases should be defined with a view to speeding up the procedures for sanctions. For Gabon, the main macroeconomic recommendation concerns the restructuring of the capital of multinational companies operating in Gabon. The state and private operators should take stakes in these multinationals to benefit from part of the dividends that can be reinvested locally and limit capital flight. In terms of political governance, efforts must be made to ensure that the country has strong institutions for transparent elections.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"48 4","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134545581","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Impact of Capital, Corruption, and Institutional Factors on the Stability of MENA Region Banks","authors":"M. Kassem","doi":"10.1353/jda.2022.0032","DOIUrl":"https://doi.org/10.1353/jda.2022.0032","url":null,"abstract":"ABSTRACT:The stability of commercial banks operating in the MENA region is still questionable even though they have faced a drastic favorable change after 2008. Most of bank's regulatory capital are controlled by corrupted governmental officials which led banks in this region to increase their risk-taking behavior at the expense of stability. This paper examines the impact of regulatory capital, economic, institutional, and political factors on the stability of commercial banks that are operating in the MENA region. The data employed in this study is a pooled cross-section and time series data of 13 banking system in the MENA region: Lebanon, Saudi Arabia, Qatar, Kuwait, Jordan, United Arab Emirates, Tunisia, Bahrain, Oman, Morocco, Egypt, Israel, and Turkey covering the period of 2000 to 2017. A dynamic Generalized-Method-of-Moments (GMM) estimator was adopted and a two-stage least squares (2SLS) regression method was conducted to check for robustness. Relying on the results of Hausman test, a fixed effects model was used. The following variables have shown a significant and positive relationship with bank stability; the equity (CAP), the profitability (ROA), the growth (ΔGDP), and the dummy Basel II (BAS2) variables. The positive impact of both capital and Basel II requirements on bank stability supports the regulatory hypothesis. Conversely, non-performing loans and bank's size negatively affected the stability of the banking sector. Regarding the institutional factors, the quality of governmental regulations and political stability have shown a positive relationship with bank's stability while the other variables (corruption, establishing new prudential rules, and freedom in speech) failed to show a significant relationship. The findings of this paper confirmed the progression of the additional capital requirements for MENA region banks. Moreover, a close supervision should be applied on large banks that might have the tendency to increase their risk-taking behavior to overcome the cost of the additional required capital. In additional, our findings verified that economic growth and operating environment play a crucial role on the stability of the banking sector. Finally, the results confirm that institutional-linked factors are more important than country-related regulations in enhancing bank's stability due to the presence of a well-designed Basel framework.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114409284","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Investigation on the Effects of External Shocks on Bangladesh's Economy: An Application of the Gvar Modelling Approach","authors":"Javed Bin Kamal, A. Hossain","doi":"10.1353/jda.2022.0028","DOIUrl":"https://doi.org/10.1353/jda.2022.0028","url":null,"abstract":"ABSTRACT:This paper uses the global vector autoregressive (GVAR) modelling approach to study (1) the effects of negative output shocks on Bangladesh's following trading partners on Bangladesh's economy: the United States, China, Eurozone, India and Saudi Arabia (2) positive global oil price shocks. To represent Bangladesh's macroeconomics, the GVAR model contains four key macroeconomic variables as endogenous variables. They are (1) real gross domestic product (GDP), (2) real exchange rate, (3) short-term interest rates, and (4) inflation. The specified GVAR model is estimated using quarterly data from 32 countries/regions from 1993Q4 to 2016Q4. The findings of this paper are consistent with theoretical predictions that external shocks can and will be transmitted to an open economy operating under a fixed or managed floating exchange rate system. For example, quantitatively, if the real output of Bangladesh's trading partners' falls by 1%, its output will fall by 0.39%, while the inflation rate of Bangladesh's trading partners' rises by 1%, and Bangladesh's inflation rate will increase by 1.38%. Although the negative output shock of the US economy will not significantly affect the Bangladeshi economy, the negative output shock of the Chinese economy will have a negative and significant effect on the Bangladeshi economy. The negative output shock on the US economy has caused the real exchange rate of Bangladesh's currency to appreciate and raised its short-term interest rate, although it is not statistically significant. Contrarily, a negative output shock to China or other economies devalues the real exchange rate of the Bangladeshi currency, although it is not statistically significant. However, Bangladesh's interest rates have not responded to negative output shocks from its trading partners (except the United States and Saudi Arabia), and they are not statistically significant. One policy implication of Bangladesh's inflation being overly sensitive to external inflation shocks is that Bangladesh can and should make its currency exchange rate more flexible to protect its economy from external price shocks. Unexpectedly, the external oil price shock did not seem to have a significant impact on the Bangladeshi economy. One explanation is that the impact of foreign inflation on Bangladesh's economy may have reflected the impact of oil prices.","PeriodicalId":286315,"journal":{"name":"The Journal of Developing Areas","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114903200","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}