Inflation, capital accumulation and economic growth in import-dependent developing countries

The analytical framework of this paper makes use of a hexa-variate panel vector autoregressive (PVAR) approach on balanced annual panel data from 30 sampled import-dependent developing economies for the period, 1970-2006. The variables included in the empirical PVAR model are inflation, capital accumulation, output growth rate, interest rate, exchange rate, terms of trade and import dependence. Our empirical results suggest that the long-run static impact of capital accumulation and economic growth on inflation is negative. Besides, inflation and economic growth had dampening effects on capital accumulation contemporaneously in the long run. The short-run dynamics also indicate that while it is possible for any previous disequilibrium in inflation, capital accumulation and economic growth relationship to be corrected overtime, the speed of adjustment to equilibrium is so sluggish that it will take a very long time for this to manifest. Exchange rate and money supply produce short-run dynamics that drive price levels in import-dependent developing economies. It is, therefore, recommended that in order to reduce inflation in import-dependent economies, demand management policies should be used in the short run, while macroeconomic policies should be directed at enhancing economic growth and capital accumulation in the long run.Inflation; Capital Accumulation; Economic Growth; Panel VAR; Import-Dependent Developing Economies

Multi-Dimensional Analysis of Poverty in Ghana Using Fuzzy Sets Theory

The paper studies the multidimensional aspects of poverty and living conditions in Ghana. The aim is to fill the vacuum that has been left by traditional uni-dimensional measures of deprivation based on poverty lines, exclusively estimated on the basis of monetary variables such as income or consumption expenditure. It combines monetary and non-monetary, and qualitative and quantitative indicators, including housing conditions, the possession of durable goods, equivalent disposable income, and equivalent expenditure, with a number of composite human welfare measures. The study employs the fuzzy-set theoretic framework to compare levels of deprivation in Ghana over time usig micro data from the last two rounds of the Ghana Living Standard Surveys (1991/1992 and 1998/1999). The estimation results of the membership functions, depicting the levels of deprivation for the various categories of deprivation indicators, show a composite deprivation degree of 0.2137 for the whole country in 1998/99 as compared to 0.2123 in 1991/92. This deprivation trend reveals that poverty levels hard scarcely changed in Ghana. In fact, it even rose slightly during the nineties, contrary to the uni-dimensional analytical GLSS 4 report of an overall broadly favourable trend in poverty in Ghana during the 1990s.Ghana, fuzzy set, multi-dimensional poverty, composite deprivation or poverty index

International remittances – the panacea for underdevelopment? A comparative panel data analysis of Sub-Saharan Africa and Latin America

In this paper we analyzed a dynamic cross-country panel dataset on 31 sampled developing countries involving 16 Latin America and the Caribbean, and 15 Sub-Sahara African countries within the framework of Blundell-Bond Generalized Method of Moments (GMM). Our results show that generally the impact of remittance inflows on overall development differ across regions. Specifically, the paper reveals that the positive role of international remittances in the development process of underdeveloped economies is more pronounced in Sub-Saharan Africa than in Latin America and the Caribbean sub-region where remittances actually retard socioeconomic development prospects. It would, therefore, be politically imprudent and economically suicidal, to over-depend on international remittances as the panacea for the underdevelopment of Sub-Saharan Africa, Latin America and the Caribbean. The contribution of this paper is unique because it has examined the long-run impact of international remittances on overall socioeconomic development which takes into account real per capita income, income disparity, and other socioeconomic equity factors incorporated into the construction of Human Development Index

Inflation, capital accumulation and economic growth in import-dependent developing countries

The analytical framework of this paper makes use of a hexa-variate panel vector autoregressive (PVAR) approach on balanced annual panel data from 30 sampled import-dependent developing economies for the period, 1970-2006. The variables included in the empirical PVAR model are inflation, capital accumulation, output growth rate, interest rate, exchange rate, terms of trade and import dependence. Our empirical results suggest that the long-run static impact of capital accumulation and economic growth on inflation is negative. Besides, inflation and economic growth had dampening effects on capital accumulation contemporaneously in the long run. The short-run dynamics also indicate that while it is possible for any previous disequilibrium in inflation, capital accumulation and economic growth relationship to be corrected overtime, the speed of adjustment to equilibrium is so sluggish that it will take a very long time for this to manifest. Exchange rate and money supply produce short-run dynamics that drive price levels in import-dependent developing economies. It is, therefore, recommended that in order to reduce inflation in import-dependent economies, demand management policies should be used in the short run, while macroeconomic policies should be directed at enhancing economic growth and capital accumulation in the long run

International remittances – the panacea for underdevelopment? A comparative panel data analysis of Sub-Saharan Africa and Latin America

In this paper we analyzed a dynamic cross-country panel dataset on 31 sampled developing countries involving 16 Latin America and the Caribbean, and 15 Sub-Sahara African countries within the framework of Blundell-Bond Generalized Method of Moments (GMM). Our results show that generally the impact of remittance inflows on overall development differ across regions. Specifically, the paper reveals that the positive role of international remittances in the development process of underdeveloped economies is more pronounced in Sub-Saharan Africa than in Latin America and the Caribbean sub-region where remittances actually retard socioeconomic development prospects. It would, therefore, be politically imprudent and economically suicidal, to over-depend on international remittances as the panacea for the underdevelopment of Sub-Saharan Africa, Latin America and the Caribbean. The contribution of this paper is unique because it has examined the long-run impact of international remittances on overall socioeconomic development which takes into account real per capita income, income disparity, and other socioeconomic equity factors incorporated into the construction of Human Development Index

The impact of remittances on economic growth in small-open developing economies

The essence of this study is to verify the macroeconomic implications of cross-border remittances for economic growth prospects of small-open developing economies for the period, 1996-2006. A set of dynamic panel model, specified within the framework of Blundell-Bond Generalized Method of Moment (GMM) was empirically analyzed. Using annual panel data from 31 small-open developing countries from Sub-Saharan Africa, Latin America and the Caribbean, this paper argues that, contemporaneously, remittances contribute significantly to economic growth in small-open developing economies. Remittances, however, contribute more to long-run economic growth in Latin America and the Caribbean than to Sub-Saharan Africa. In dynamic terms, remittances retard economic growth, but with overall positive impact across these regions

The impact of remittances on economic growth in small-open developing economies

The essence of this study is to verify the macroeconomic implications of cross-border remittances for economic growth prospects of small-open developing economies for the period, 1996-2006. A set of dynamic panel model, specified within the framework of Blundell-Bond Generalized Method of Moment (GMM) was empirically analyzed. Using annual panel data from 31 small-open developing countries from Sub-Saharan Africa, Latin America and the Caribbean, this paper argues that, contemporaneously, remittances contribute significantly to economic growth in small-open developing economies. Remittances, however, contribute more to long-run economic growth in Latin America and the Caribbean than to Sub-Saharan Africa. In dynamic terms, remittances retard economic growth, but with overall positive impact across these regions

Remittances, Exchange Rate, and Monetary Policy in Ghana

Within the context of the Ghanaian macroeconomy, this paper explores the monetary factors underlying the changing levels of remittance inflows, and the implications of remittance inflows for monetary aggregates, interest rate, exchange rate, and the domestic price level. The theoretical framework of the study is based on a modified variable-price Mundell-Fleming model. A five-variable Vector Autoregressive (VAR) Model is estimated using quarterly data between 1983(4) and 2005(4). The estimated static long-run model shows that monetary aggregates, exchange rate, and interest rate positively impact on remittance inflows while domestic price level negatively impact on remittance inflows. Monetary aggregates, exchange rate, interest rate and domestic price level impact on one another while remittances positively drive itself, monetary aggregates, exchange rate and interest rate. The impulse response functions reveal that remittance inflows respond to its own shocks but not to shocks emanating from monetary aggregates, exchange rate, interest rate, and the price level. Variance decompositions show that, during the first quarter, remittances are self-driven. Since remittances are significantly impacted by monetary aggregates, exchange rate, interest rate, and the domestic price level, prudent monetary and exchange rate policies should be specially formulated and selectively conducted to attract international remittances to Ghana.Remittances; Monetary Aggregates; Exchange Rate; Vector Autoregressive Model