FDI Flows in resource-rich countries: does the quality of institutions matter?

Relevance. Foreign investment is likely to be attracted to resource-rich countries because of their wealth of natural resources. However, the fact that foreign direct investment (FDI) contributes less than 10% of these countries’ GDP indicates that FDI has a non-proportional impact when compared to the size of the natural resources. Hence, it is critical to identify the missing link impeding resource optimization through FDI.Research objective. Given the significance of FDI, the study seeks to ascertain whether the quality of institutions in resource-rich countries influences FDI inflows. This is significant because resource-rich countries may have other factors that encourage FDI but do not result in resource optimization.Data and methods. The study employed panel data analysis to analyze the impact of FDI on economic growth in resource-rich countries and the role of institutions in attracting FDI. The study relies on the Augmented Mean Group Estimator and on the annual data from the World Bank's World Development Indicator and the World Bank's World Governance Indicator for the top ten resource-rich countries.Results. Our preliminary evidence indicated that FDI had a positive and significant effect on economic growth in resource-rich countries. The extent of the influence, on the other hand, is minimal for all categories of countries. Our main results revealed that institutional quality has a significant pull effect on FDI, with trade openness playing a key role, particularly in resource-rich nations with well-developed institutions.Conclusions. We found that institutional quality plays a critical role in attracting FDI, which could have hampered natural resource optimization. Furthermore, countries with high institutional quality and less restrictive investment policies attract more foreign direct investment (FDI) than countries with low institutional quality and with investment policies ranging from moderate to restrictive. In general, resource-rich countries, particularly those with weak institutional qualities, should address the gap in institutional quality to attract more inward investment

Climate change and inclusive growth in Africa

Africa’s pursuit of inclusive and sustainable economic growth is impeded by many challenges, including climate change, whose effect is most apparent in the continent’s tropical regions. To this end, this study investigates the impact of climate change on achieving pro-poor economic growth in Africa. Predicated on poverty-inequality-climate analysis, the Augmented Mean Group (AMG) estimator is used to analyse data from 1996 to 2020 covering 51 African countries. The results reveal that climate change significantly impedes inclusive growth. Furthermore, evidence of a long-lasting negative effect of climate change on inclusive growth, which could be attributed to a lack of coping mechanisms among the poor and vulnerable groups, is found. Finally, the findings show a marginal impact of institutional quality and government spending on inclusive growth in the face of climate change. The study recommends more climate mitigation efforts and enhanced adaptation mechanisms, especially for the poor, as they are most vulnerable to the adverse effects of climate change

Inclusive growth in Africa:do fiscal measures matter?

In recent times, Africa has experienced remarkable economic growth; nonetheless, this advancement remains far from being considered inclusive, given the persistently high levels of poverty and income inequality across the continent. To this end, this study investigates the role of fiscal policy measures on inclusive growth using absolute and relative pro-poor measures of growth. The study utilizes panel data from 48 African countries spanning the period 1996 to 2020 and employs the Panel System Generalized Method of Moments (GMM) technique for analysis. Estimation results reveal a concerning trend where public debt service exacerbates both poverty and income inequality, underscoring the adverse consequences of mounting public debt pressures in the region. Interestingly, while government expenditure reduces inequality and worsens poverty, an increase in taxation reduces poverty but worsens income inequality. Further, an increase in taxation negatively affects the income shares of the bottom and middle-income groups while the top-income groups benefit. The findings of this study have significant policy implications for improving inclusive growth in the continent

Towards the recalibration of the US dollar’s international dominance

Purpose: The impact of United States (US) financial sanctions on the international dominance of the US dollar is examined.Design/methodology/approach: The survival analysis technique, which incorporates survival and hazard probabilities to determine the probability of central banks' reserve recalibration, is adopted for analysis.Findings: The result shows that the probability of central banks recalibrating the dollar share of their official reserve currencies would increase by 60% for every ten (10) additional financial sanctions by the United States. This could imply that more sanctions might have unintended consequences on the international reserve currency dominance of the US dollar.Originality: To the best of our knowledge, this study may be a novel attempt to use survival analysis to examine the impact of financial sanctions on the US dollar’s international reserve currency dominance

Relationship between Greenhouse gas emission, energy consumption, and economic growth : evidence from some selected oil-producing African countries

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Financial sanctions and the share of US dollar in global reserve currencies:evidence from the Least Absolute Shrinkage and Selection Operator (LASSO) model

The decline in the dollar’s share in global reserve currencies has generated debate on the effect of the United States’ financial sanctions. This study examines the effect of US financial sanctions on the dollar’s share in global reserve currencies by employing the Least Absolute Shrinkage and Selector Operator (LASSO) model. The estimates suggest that the imposition of financial sanctions by the US reduces the dollar’s share in global reserve currencies. This implies that although the US dollar remains the foremost global reserve currency, the imposition of financial sanctions may weaken its dominance

Geopolitical risks and price exuberance in European natural gas market

This study examines the impact of geopolitical risks on price exuberance within the European natural gas market. The analysis identifies several instances of price exuberance and demonstrates that increased geopolitical risk in Ukraine and the UK significantly increases price exuberance while that of Russia, mitigates the occurrence. This study finds that although geopolitical risks could significantly influence price exuberance in the European natural gas market, the effect differs across countries

Inflation effects of oil and gas prices in the UK: Symmetries and asymmetries

The United Kingdom is among the countries experiencing a cost-of-living crisis believed to be influenced, at least in part, by the dynamics of the international oil and gas markets. To this end, this study aims to achieve to achieve two objectives. Firstly, the dynamic association between the UK's inflation and oil and gas prices is examined. Further, the study examines whether the response of the UK's inflation to energy price dynamics is (a)symmetric. This study adopts wavelet coherency to determine the dynamic co-movement between energy prices and inflation. In addition, the dynamic simulated autoregressive distributed lag model (DS-ARDL) is used to examine the dynamic response of inflation to energy price changes. The estimation results reveal a symmetric response of inflation to gas price shocks. Further, the response of inflation to oil price shocks is asymmetric. Interestingly, the effect of gas price dynamics passes more strongly to inflation than to oil price dynamics. These findings suggest that a more diversified energy mix could help prevent substantial energy price pass-through to inflationary pressures

Inclusive Growth and Structural Transformation: The Role of Innovation and Digitalisation Spillover

Structural transformation is a compelling measure of economic progress as it shifts from less productive to more productive sectors, spurred by technological improvement and digitalisation. Despite the benefits of structural transformation in fostering economic growth, it has been contended that it will exacerbate income inequality. Given the critical role of digitalisation over the years in Africa, the current study investigates the pattern and impact of structural transformation on inclusive growth. To accomplish this, we utilised both absolute (poverty) and relative (income inequality) measures of pro-poor growth for all African countries. Using quantiles via moments panel model, we showed that the structural transformation from agriculture to services reduced the incidence of poverty (extreme poverty) while increasing inequality (Gini coefficient). On the other hand, manufacturing had no significant effect on poverty or inequality, indicating the region’s slow pace of industrialisation. Using income share measures, we found evidence of inequality across and within sectors, particularly in the services sector. Finally, we observed that digitalisation and technological processes significantly reduced the incidence of extreme poverty and inequality. Hence, the study recommends that Africa capitalise on its comparative advantage in the agricultural sector by establishing investment and manufacturing zones to develop the industrial sector. Furthermore, gains in the manufacturing sector could be realised through a concerted effort to improve the industrialisation process

An Analysis of Water, Energy and Food Nexus: A linear and Nonlinear Granger Causality Approach

The nexus between water, energy and food security has drawn attention among researchers and policymakers in recent times. Given that empirical works in the area are scanty, this paper empirically evaluates the water, energy and food security (WEF) relationship using both linear and non-linear Granger causality approach. By employing data for five (5) selected African countries, the results from the linear estimations showed mixed causality between the key variables (Water, Energy, and Food). Evidence of a non-linear causal relationship between the variables was not found because the estimates obtained were predominantly statistically insignificant. The findings of the study indicate the presence of unidirectional linear causality running from Water to Energy, which was found for three countries (Egypt, Nigeria, and South Africa). The study also found the presence of causality running from water to food in South Africa. On the other hand, no evidence of causality between energy and food was found