Foreign Direct Investment And Poverty Reduction

This paper provides a detailed survey of the literature on the impact of foreign direct investment (FDI) on poverty reduction, outlining the theoretical and empirical relationship between these variables. Although a number of studies have been done on the impact of FDI on poverty reduction, the majority of these studies have focused on the indirect impact of FDI on poverty reduction. The bulk of the literature reviewed supports the positive effects of foreign direct investment on poverty reduction, although a few studies have also found foreign direct investment to have an adverse or insignificant effect on poverty reduction. This study differs fundamentally from previous studies in that it focuses on the direct impact of FDI on poverty reduction, giving a detailed review of the nature of this relationship

Are Banks And Stock Markets Positively Related? Empirical Evidence From South Africa

In this study, we examine the relationship between banks and stock market development in South Africa.  The study attempts to answer one critical question: Are banks and stock markets positively related in South Africa? The bank development is proxied by the ratio of the domestic credit to the private sector to GDP (DCP/GDP), while the stock market development is proxied by the ratio of the stock market capitalisation to GDP (CAP/GDP).Unlike the majority of the previous studies, the current study uses the newly introduced ARDL-Bounds testing approach, as proposed by Pesaran  et al. (2001), to examine this linkage. The empirical results show that there is a distinct positive relationship between banks and stock markets in South Africa. The results apply irrespective of whether the model is estimated in the short run or in the long run. Other results show that in the short run, the stock market development in South Africa is positively determined by the level of savings, but negatively affected by the rate of inflation and the lagged values of the stock market development. However, in the long run, the stock market is positively determined by real income and the inflation rate. &nbsp

Interest Rate Deregulation, Bank Development And Economic Growth In South Africa: An Empirical Investigation

In this paper the dynamic relationship between interest rate reforms, bank-based financial development and economic growth is examined – using two models in a stepwise fashion. In the first model, the impact of interest rate reforms on financial development is examined using a financial deepening model. In the second model, the dynamic causal relationship between financial development and economic growth is examined, by including investment as an intermittent variable in the bi-variate setting, thereby creating a simple tri-variate causality model. Using cointegration and error-correction models, the study finds strong support for the positive impact of interest rate reforms on financial development in South Africa. However, contrary to the results from some previous studies, the study finds that financial development, which results from interest rate reforms, does not Granger cause investment and economic growth. In addition, the study finds a uni-directional causal flow from investment to financial development and prima-facie causal flow from investment to growth. The study, therefore, concludes that although interest rate reforms impact positively on financial depth in South Africa, the causal relationship between financial depth and economic growth tends to take a demand-following path. Moreover, given the causal flow from investment to financial development and a prima facie causal flow from investment to growth, it is likely that the economic development in South Africa is driven largely by the growth of the real sector rather than the financial sector

Does bank-based financial development spur economic growth? Empirical evidence from the Democratic Republic of Congo (DRC)

In this study, we examined the dynamic causality between financial development and economic growth in the Democratic Republic of the Congo (DRC), using time-series data from 1965 to 2015. Unlike some previous studies, the current study used three proxies to examine this linkage. These are liquid liabilities as a percentage of GDP (FD1), deposit money bank assets as a percentage of GDP (FD2), and bank deposits as a percentage of GDP (FD3). In addition, the study used savings and inflation as intermittent variables, thereby creating a multivariate Granger-causality model, and limiting the omission-of-variable bias, which has been found in some previous studies. Using the ARDL bounds testing approach, the study found that there is a short-run causal relationship between financial development and economic growth in the DRC, but the direction of causality is dependent on the proxy used to measure the level of financial development. When financial development was proxied by liquid liabilities as a percentage of GDP, unidirectional Granger-causality was found to prevail in the short run, running from economic growth to financial development. However, when deposit money bank assets as a percentage of GDP and bank deposits as a percentage of GDP were used as proxies, causality between financial development and economic growth was found to be bidirectional, but only in the short run. The study recommends that policy efforts in the DRC should be directed at developing both the financial sector and the real sector in the short run as both sectors have been found to be mutually beneficial to each other in the main, in this study.Economic

POTROŠNJA ENERGIJE I FINANCIJSKI RAZVOJ U JUŽNOJ AFRICI: EMPIRIJSKO ISTRAŽIVANJE

This paper examines the dynamic relationship between energy consumption and financial development in South Africa during the period 1980- 2013. In order to address the omission of variable bias, the study has included economic growth as an intermittent variable between financial development and energy consumption. Unlike some previous studies, this study uses three proxies for financial development: i) domestic credit to the private sector as a percentage of GDP as a proxy for financial institutions’ depth; ii) bank credit to bank deposits as a proxy for financial institutions’ stability; and iii) bank lending-deposit spread as a proxy for financial institutions’ efficiency. Using the ARDL bounds testing approach to cointegration and Granger-causality test, the obtained results show that there is a distinct long-run unidirectional causal flow from financial development to energy consumption in South Africa. This applies irrespective of which proxy has been used to measure the level of financial development. The study also finds that there is a long-run unidirectional causality from economic growth to energy consumption, and a unidirectional causality from economic growth to financial development when bank lending-deposit interest rates spread is used as a proxy for financial development. This, therefore, implies that energy consumption in South Africa is largely driven by the growth-led financial development in the long run.Ovaj rad istražuje dinamički odnos između potrošnje energije i financijskog razvoja u Južnoj Africi u razdoblju od 1980. do 2013. godine. Kako bi se izbjegla pristranost varijabli, istraživanje uključuje ekonomski rast kao diskontinuiranu varijablu između financijskog razvoja i potrošnje energije. Za razliku od prethodnih istraživanja, ovo istraživanje koristi tri supstituta za financijski razvoj: i) domaći kredit privatnom sektoru kao postotak BDP-a kao supstitut za dubinu financijskih institucija; ii) bankovni krediti bankovnim depozitima kao supstitut za stabilnost financijskih institucija; i iii) širenje kreditnih depozita banaka kao supstitut za učinkovitost financijskih institucija. Koristeći ARDL pristup testiranja granica kointegracije i Grangerov test uzročnosti, rezultati istraživanje pokazuju da postoji izrazito dugoročan jednosmjerni uzročni tok od financijskog razvoja do potrošnje energije u Južnoj Africi. To se potvrđuje bez obzira koji je pokazatelj korišten za mjerenje razine financijskog razvoja. Istraživanje također pokazuje da postoji dugoročna jednosmjerna kauzalnost od ekonomskog rasta do potrošnje energije i jednosmjerna kauzalnost od ekonomskog rasta do financijskog razvoja kada se raspon kamatnih stopa na depozite banaka koristi kao supstitut za financijski razvoj. To, dakle, implicira da je potrošnja energije u Južnoj Africi u velikoj mjeri potaknuta dugoročnim financijskim razvojem uslijed gospodarskog rasta

The Impact Of Inflation On Financial Sector Development: Experience From Zambia

This study examines the impact of inflation on financial development in Zambia during the period between 1980 and 2011. The study attempts to answer two critical questions: 1) Is there a long-run relationship between inflation and financial sector development in Zambia? 2) Does inflation in Zambia have any negative effect on financial sector development? The study uses the recently developed ARDL-bounds testing approach to examine this linkage. In order to address the problem of omission of variable bias, the study incorporates other variables, such as government expenditure, trade volume and GDP per capita in the financial development model, alongside inflation – thereby, creating a simple multivariate model. Using the domestic credit to the private sector as a proxy for financial development, the study finds that there is a long-run relationship between inflation and financial development in Zambia. The study also finds that there is a distinctively negative relationship between inflation and financial development. The results apply, irrespective of whether the model is estimated in the short run or in the long run

Inflation Dynamics And Economic Growth In Tanzania: A Multivariate Time Series Model

This study examines the short-run and long-run causal relationship between inflation, investment and economic growth in Tanzania. In the main, the study incorporates investment in a bivariate setting between inflation and economic growth – hence, creating a trivariate model. The study attempts to answer one critical question: Does inflation have any significant influence on economic growth and investment in Tanzania? Using the ARDL-bounds testing approach, the study finds a unidirectional causal flow from inflation to economic growth – without any feedback response. The study also finds that investment in Tanzania unambiguously causes economic growth. The results apply irrespective of whether the causality is estimated in the long run or in the short run

The Role Of Interest Rate Reforms In Lesotho: An Empirical Investigation

This paper examines the efficacy of interest rate reforms in Lesotho during the period 1972-2009. The study attempts to answer one critical question: Does interest rate liberalisation positively or negatively affect financial deepening in Lesotho? The study examines this linkage by regressing the financial depth variable on real income, deposit rate, foreign aid, the expected inflation and the lagged value of financial depth. Using the ARDL-Bounds testing approach, the study finds that there is a positive relationship between interest rate reforms and financial deepening in Lesotho, meaning that interest rate reforms lead to financial deepening in Lesotho. The results apply regardless of whether the financial deepening model is estimated in the short run or in the long run. Other results indicate that: i) An increase in real GDP has a positive effect on financial deepening in Lesotho - both in the short run and in the long run; ii) expected inflation has a positive effect on financial deepening in the short run; and iii) foreign aid has a negative effect on financial deepening in Lesotho in the short run

Financial development and economic growth in Uganda: A multivariate causal linkage

In this study, we have explored the dynamic causal relationship between financial development and economic growth in Uganda during the period from 1980 to 2015. Although the finance-growth nexus debate had been raging for decades, Uganda, just as many other low-income sub-Saharan African countries, has not yet received adequate coverage on the subject. To eliminate the variable-omission-bias associated with some previous studies, two intermittent variables namely, savings and inflation, have been included alongside financial development and economic growth in a multivariate Granger-causality setting. In addition, five proxies of financial sector development have been used in the current study, namely money supply, deposit money bank assets as a percentage of bank assets, liquid liabilities to GDP, private credit by deposit money banks to GD, and bank deposits to GDP. Using the ARDL approach, the findings of the study reveal that the direction of causality between financial development and economic growth in Uganda is not clear-cut. It varies from one model to the other, depending on the proxy used for financial development. When financial development is proxied by liquid liabilities to GDP and bank deposits to GDP, a unidirectional causality from financial development to economic growth is found to prevail. When deposit money bank assets to bank assets ratio is considered a proxy of financial development, a bi-directional causality between financial development and economic growth is found to predominate. Finally, when money supply and private credit by deposit money banks to GDP proxies are used, no causality is found to exist between financial development and economic growth in either direction. Based on these results, it is recommended that when drafting policies aimed at boosting economic growth, policymakers should target growth-led financial development proxies as policy implementation outcome may vary depending on the targeted financial development proxy.Economic

Is tourism a spur to economic growth in South Africa: An empirical investigation

In this study, the dynamic Granger-causality between tourism development and economic growth in South Africa was empirically examined during the period 1995-2016. The study was motivated by the growing important role of the tourism sector in economic growth and development. It was also motivated by the limelight that the South African tourism sector has been enjoying in recent years, on the one hand, and the lack of sufficient coverage of tourism-growth nexus studies in many sub-Saharan African countries, on the other hand. Unlike some previous studies that used one proxy, the current study used two tourism proxies, namely tourist arrivals and tourism revenue, to examine this link. In addition, the study used exchange rate and foreign direct investment as intermittent variables in a multivariate Granger-causality model in order to address the omission-of-variable bias. To enhance the robustness of the results, the study also used two measures of tourism revenue, namely total tourism revenue and total tourism revenue as a percentage of GDP. Using the auto-regressive distributed lag (ARDL)-bounds testing approach and the error correction model, the study found that the direction of causality between tourism development and economic growth in South Africa is sensitive to the proxy used and the time under consideration. When the tourist arrivals variable is used as a proxy for tourism development, bidirectional causality between tourism development and economic growth is found to prevail in the short run, while a unidirectional causality from economic growth to tourism development is found to dominate in the long run. However, when tourism revenue is used as a proxy, a feedback relationship is found to prevail, but only in the short run. The result is robust across the two different measures of tourism revenue. The study, therefore, recommends that short-term policy efforts should be directed at developing the tourism sector and the real sector as both sectors have been found to reinforce each other in the short run, irrespective of the tourism proxy used.Economic