Do institutions and good governance affect inward FDI? Empirical evidence from emerging countries

This study seeks to strengthen the existing literature by investigating the relationship between governance indicators and FDI inflows for the emerging countries (ECs) using a dynamic panel gravity model approach over the period 1996~2014. The empirical results reveal that among the six indicators of good governance, political stability, government effectiveness and regulatory quality are found to be robust determinants for FDI attractiveness in Emerging countries. The remaining three indicators, i.e. voice and accountability, rule of law, and control of corruption are found significantly and negatively associated with FDI inflows. The empirical results show also that larger per capita GDP difference between the investing partner and host country, high level of trade openness, low level of inflation rate, and better infrastructure are crucial factors to speed-up FDI inflows in ECs. However, this study provides strong evidence that ECs depict a large gap with regard to the quality of institutions and other macroeconomic factors and thereby their ability to attract FDI. To conclude, policymakers are required to improve the quality of institutions and business climate in order to attract more FDI in these countries

Développement de l'assurance, dépenses de santé et croissance économique dans les pays de l'OCDE: Nouvelle approche de causalité en panel

The aim of this article is to examine the effects of insurance development on health expenditure and economic growth for 31 Organization for Economic Cooperation and Development (OECD) countries covering the period 1995-2015, using a panel causality approach. We also tested the causal effect of national income and population density on health expenditure. The results confirm that, over the long term, insurance factors, national income and population density exhibit positive and statistically significant effects on health expenditure. The results also confirm that the insurance factor has greater income effects than the substitution effects on health expenditure. Regarding the short-term causality, the empirical results show that economic growth strengthens growth in health expenditure, while growth in insurance reduces growth in health expenditure. In the short term, the insurance factor produces crowded-out effects. The foregoing outcomes provide policy implications that governments should take into account the crowded short-term effects of private insurance sections on health expenditure when developing fiscal policies related to health expenditure

The Credit Channel Transmission of Monetary Policy in Tunisia

The purpose of this paper is to evaluate the importance of the credit channel in the monetary policy transmission mechanism in Tunisia. Using a VAR approach, we attempt to empirically examine the responses of the main aggregates of the Tunisian economy to monetary policy shocks over the period 1965-2015. Our empirical results showed that credit has a significant effect on investment and inflation. Indeed, the cointegration relationship, coupled with the weak exogeneity test, shows that credit is an endogenous variable and therefore the long-term equation found is a credit equation. The crucial role of credit channel is argued by the goal of price stability expected by any monetary policy. The analysis of monetary shocks shows the importance of exchange rate policy and the local currency devaluation on the financing mode. It is observed that Tunisian economy is dominated by external conditions. This dominance is confirmed by extensive using of external debts and trade agreements with the dominant countries. Ultimately, our findings suggest that policymakers should act on the level of economic activity and inflation, on two terms. The first is in short-run, by acting on the interest rate and the second is in long-run, by controlling the exchange rate

A Monetary Conditions Index and its Application on Tunisian Economic Forecasting

The main purpose of this article is to find out the extent of the influence of internal and external monetary conditions on Tunisian macroeconomic aggregates by constructing a synthetic index. Our contribution is, firstly, to calculate the weights assigned to domestic interest rate and the exchange rate based on the estimated coefficients respectively for these two indicators over the period 1965-2015. Secondly, based on the VAR model, we confirm the long-run dynamic between the selected variables. The analysis of shocks indicates that monetary conditions have a particular importance via their influence on economic activity and inflation. The latter is characterized by its significant negative impact on economic growth and by its contribution in linking between internal and external interest rates. Thirdly, we attempt, through a SVAR model, to examine the short run structural dynamics between the selected variables. Results reveal that the Tunisian economy is highly influenced by external monetary conditions. This influence is demonstrated through the dynamics of structural monetary policy shocks and exchange rate. In conclusion, our findings reflect that the exchange rate plays an increasing role in transmitting the monetary policy effect to the inflation rate and thus the real economy

Economic Growth, Financial Development and Income Inequality in BRICS Countries: Evidence from Panel Granger Causality Tests

The purpose of this paper is to examine the causal relationship between economic growth, financial development and income inequality for the BRICS countries, namely; Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1995-2015. We construct a composite financial sector development index for these countries by applying the principal component method on the main four proxies of financial development, that is, domestic credit to private sector to GDP ratio, domestic credit given by banks sector to GDP ratio, M2/GDP, and stock market capitalization to GDP ratio. Results of Pedroni panel cointegration and Kao residual panel cointegration tests confirm the valid long-run cointegration relationship between the considered variables. Fixed effects estimation results show that GDP per capita growth has a positive and significant effect on income inequality, while the coefficient of its squared term has negative and significant effect on income inequality. Similarly, financial development index appears to have a positive and statistically significant effect on income inequality, while its squared term has negative and statistically significant effect on income inequality. Our empirical findings support the financial Kuznets hypothesis of an inverted U-shaped relationship between economic growth, financial sector development and inequality in the BRICS countries over the study period. Our results are robust by employing POLS and GMM estimators. Results of Granger causality test shown that there is a unidirectional causality running from financial development index to income inequality, but a bidirectional causality between inflation and income inequality is found. However, there is no causal relationship between income inequality and economic growth. These findings are expected to help policymakers to reduce inequality in these countries through the improvement of taxation policies financial system

Economic Growth, Financial Development and Income Inequality in BRICS Countries: Evidence from Panel Granger Causality Tests

The purpose of this paper is to examine the causal relationship between economic growth, financial development and income inequality for the BRICS countries, namely; Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1995-2015. We construct a composite financial sector development index for these countries by applying the principal component method on the main four proxies of financial development, that is, domestic credit to private sector to GDP ratio, domestic credit given by banks sector to GDP ratio, M2/GDP, and stock market capitalization to GDP ratio. Results of Pedroni panel cointegration and Kao residual panel cointegration tests confirm the valid long-run cointegration relationship between the considered variables. Fixed effects estimation results show that GDP per capita growth has a positive and significant effect on income inequality, while the coefficient of its squared term has negative and significant effect on income inequality. Similarly, financial development index appears to have a positive and statistically significant effect on income inequality, while its squared term has negative and statistically significant effect on income inequality. Our empirical findings support the financial Kuznets hypothesis of an inverted U-shaped relationship between economic growth, financial sector development and inequality in the BRICS countries over the study period. Our results are robust by employing POLS and GMM estimators. Results of Granger causality test shown that there is a unidirectional causality running from financial development index to income inequality, but a bidirectional causality between inflation and income inequality is found. However, there is no causal relationship between income inequality and economic growth. These findings are expected to help policymakers to reduce inequality in these countries through the improvement of taxation policies financial system

Economic Growth, Financial Development and Income Inequality in BRICS Countries: Evidence from Panel Granger Causality Tests

The purpose of this paper is to examine the causal relationship between economic growth, financial development and income inequality for the BRICS countries, namely; Brazil, Russia, India, China, and South Africa, using annual panel data covering the period 1995-2015. We construct a composite financial sector development index for these countries by applying the principal component method on the main four proxies of financial development, that is, domestic credit to private sector to GDP ratio, domestic credit given by banks sector to GDP ratio, M2/GDP, and stock market capitalization to GDP ratio. Results of Pedroni panel cointegration and Kao residual panel cointegration tests confirm the valid long-run cointegration relationship between the considered variables. Fixed effects estimation results show that GDP per capita growth has a positive and significant effect on income inequality, while the coefficient of its squared term has negative and significant effect on income inequality. Similarly, financial development index appears to have a positive and statistically significant effect on income inequality, while its squared term has negative and statistically significant effect on income inequality. Our empirical findings support the financial Kuznets hypothesis of an inverted U-shaped relationship between economic growth, financial sector development and inequality in the BRICS countries over the study period. Our results are robust by employing POLS and GMM estimators. Results of Granger causality test shown that there is a unidirectional causality running from financial development index to income inequality, but a bidirectional causality between inflation and income inequality is found. However, there is no causal relationship between income inequality and economic growth. These findings are expected to help policymakers to reduce inequality in these countries through the improvement of taxation policies financial system