Stability of the Nigerian M2 Money Demand Function in the SAP Period

This paper explores the stability of the M2 money demand function in Nigeria in the Structural Adjustment Program (SAP) period. The results from the Johansen and Juselius cointegration test suggest that real discount rate, economic activity and real M2, are cointegrated. The Hansen (1992), CUSUM and CUSUMQ stability test results indicate that the M2 money demand function in Nigeria is stable for the study period. The results of the study show that M2 is a viable monetary policy tool that could be used to stimulate economic activity in Nigeria.Money demand Nigeria Cointegration Stability Tests CUSUM CUSUMQ

Are Per Capita Real GDP Series in African Countries Non-stationary or Non-linear? What does Empirical Evidence Reveal?

This paper extends the applied time series literature in economic development, by testing whether the per capita real GDP time series in 27 African countries are non-stationary or non-linear and globally stationary over the relatively long period from 1960 to 2007. Using the non- linear unit root tests developed recently by Kapetanios, Shin and Snell (2003) the results show that in one-third of the countries, the series are stationary with non-linear mean reversion. Policy implications are indicated.Mean reversion, non-linear unit root tests, GDP per capita

An Examination of the Effect of Financial Inclusion on Financial Stability: Evidence From a Panel of Ten African Countries

This paper examines the impact of financial inclusion on financial stability for a group of 10 African countries using the system Generalized Method of Moments (GMM) panel estimator for the period running from 2004 through 2019. To shortlist the financial inclusion indicators, the study used the Principal Component Analysis to construct the financial inclusion index. Economic growth and inflation variables are used as control variables. To explore the stationarity of the variables, the study applied the Im, Pesaran, and Shin, ADF Fisher, and the PP-Fisher panel unit root tests. The sample countries include Botswana, Cameroon, Kenya, Madagascar, Morocco, Mozambique, Nigeria, Uganda, South Africa, and Zambia. The results from the panel unit root tests indicate that the four variables in the system, including the financial inclusion index, bank Z-score, economic growth rate, and inflation, are level stationary. The results from Pearson correlations provided cursory evidence that financial inclusion and financial stability are significantly positively correlated. The results from the GMM panel estimator indicate that financial inclusion has a significantly positive effect on financial stability. This finding entails that access to financial services engenders bank stability. Policy implications are discussed

A Comparative Analysis of the Determinants of the United States and U.K. Banks’ Profitability

This study investigates the determinants of the profitability of U.K. banks and compares them with already established and published determinants of the profitability of U.S. banks. Employing quarterly data, this paper further examines the historical and recent trends for all U.K. banks from 1996 to 2019 in the relationship between return and assets (ROA) and other bank internal (or endogenous) profitability contributors such as net interest margin (NIM), loan loss reserves, and external (or exogenous macroeconomic variables, such as the 30-year average mortgage rate, Gross Domestic Product (GDP) economic growth rate, unemployment rate, interest rate, and inflation rate by using the Generalized Method of Moments (GMM) estimator technique. The results show evidence of divergence in profit performance between U.S. and U.K. banks. Plausible explanations are put forward for these anomalous findings

A Cointegration Analysis of Investment Output Ratio in Bangladesh

In this article, we have estimated a neo-classical model of investment augmented with real rate of interest to proxy the user cost of capital for Bangladesh. Our results reveal that there is a equilibrium relationship between investment output ratio, real output and real rate of interest. The long run relationship persists even in the presence of structural breaks in the model

Convergence in Per Capita Energy Consumption among African Countries: Evidence from Sequential Panel Selection Method

This paper applies a battery of panel unit root procedures to test for convergence in per capita energy consumption among 22 African countries. Specifically, the study implements both the conventional panel unit root testing procedures and the Sequential Panel Selection Method (SPSM). The results from the standard panel unit root tests provide evidence of convergence in per capita energy consumption for the 22 countries as a group. However, these procedures lack the ability to separate the series in the panel into stationary and nonstationary groups. The results from the SPSM procedure provide support for per capita energy consumption convergence for Angola, Mozambique, Libya, Tanzania, Zambia, Ethiopia, Algeria, Senegal, Congo Republic, South Africa, Benin, Cameron, and Nigeria. For Tunisia, Cote d’Ivoire, Sudan, Gabon, Zimbabwe, Morocco and Togo, the results from the SPSM procedures suggest that their per capita energy consumption series have not converged with the other panel members. Keywords: Per capita energy consumption; SPSM; convergence; panel KSS unit root test JEL Classifications: C22; C23; Q4

A Cointegration Analysis of Investment Output Ratio in Bangladesh

In this article, we have estimated a neo-classical model of investment augmented with real rate of interest to proxy the user cost of capital for Bangladesh. Our results reveal that there is a equilibrium relationship between investment output ratio, real output and real rate of interest. The long run relationship persists even in the presence of structural breaks in the model

Nonlinear Real Exchange Rate Behavior: Are the African Currencies Exceptional?

Upon the discovering of nonlinear behavior of exchange in developed countries, Middle East and Asian regions in the recent literature, whether or not the African region is an exception remains an interesting but unaddressed issue. In this respect, this study demonstrates, via formal linearity test, that all the 13 selected African real exchange rates are also nonlinearly behaved. Further investigation through nonlinear stationary tests reveals that 11 of them are nonlinear stationary. The major implication of these results include: First, that there is a long run cointegration relation between the bilateral nominal exchange rates and their corresponding relative prices thereby validating the long run PPP in the African region. Second, the bilateral nominal exchange rates are mean reverting towards the PPP equilibrium positions. As such relative prices may be regarded as effective tool in evaluating the current alignment or misalignment of African exchange rate and hence forecasting and monitoring their future movements