Examining the Roles of Institutional Quality and Financial Openness in Enhancing Economic Performance: Evidence from BRICS Countries

Purpose: The aim is to examine the roles of institutional quality and financial openness on the economic performance of BRICS, using annual series that covered the period from 1996 to 2020. Methods: Principal component analysis (PCA) was used to select the institutional quality variables, while analysis of the study was conducted under the panel data random effect model. Findings indicate that FDI inflows and capital account openness positively impacted on GDP per capita significantly; however the impact of FDI outflows on GDP per capita, though positive, was not significant. Moreover, control of corruption and government effectiveness both had positive and significant impact on GDP per capita, while trade openness impacted GDP per capita negatively, though the result was not significant. Findings: The outcome of the study reveals that the economy of the BRICS improved by removing restrictions on capital controls which retard capital inflows, but liberalization of trade had adverse effect on growth in the bloc. Equally revealed in the study is that effective government which reduces corrupt tendencies lead to improved economic performance. The study therefore recommends the removal of all bottlenecks that hinder FDI inflows and the building of strong institutions in BRICS. Practical Implications: With respect to the institutional variables employed in the study, findings revealed that when governance is effective, it encourages improvement in the economy. Effectiveness in governance encourages reduction in corruption which is the bane of underdevelopment in many developing countries. Originality/Value: The panel random effect results showed that of the three financial openness indicators employed,  FDI inflows and capital account openness significantly impacted on GDP per capita positively, while the impact of FDI outflows was positive but negligible

Shocks to Monetary Policy Instruments: Does Credit to the Private Sector Respond in a Similar Manner to Public Sector Credit in Nigeria? A Vector Autoregressive Approach

This paper aims to investigate the response of private and public sector credit to shocks in monetary policy instruments with a view to ascertaining if the responses differ. The study utilized the vector autoregressive (VAR) model with monthly data covering the period from 2010M1 to 2021M8. Findings show that credit to private sector responds positively to shocks in money supply and monetary policy rate (MPR) in all periods. However, the response to cash reserve requirement (CRR) was negative beginning from period five, and it also responded negatively to foreign interest rate shock. On the other hand, credit to government was found to respond positively to shocks in money supply up to period two and CRR in all the periods, but it responded negatively to MPR starting from period three. The results of the variance decomposition show that other than shocks to itself, which was 100% in the first period, shocks to other variables influence private sector credit. Also, other than shocks to itself, which was 99.89% in the first period, shocks to other variables lead to shocks to credit to government. We therefore recommend that policies used to influence financial intermediation should factor in the sensitivity of both public and private sectors to these policy instruments and the impact of exogenous shocks should be factored into policy formulation

Regulatory Quality, Rule of Law and Foreign Direct Investment Inflows: Evidence from the Economic Community of West African States

In literature, the role of institutions in stimulating FDI inflows has been documented. This study examined the contributions of two institutional-quality variables, regulatory quality and the rule of law, in attracting FDI in the Economic Community of West African States (ECOWAS). The study used an annual series covering the period from 2000 to 2020 using three different estimation techniques: the panel ARDL, the panel FMOLS, and the panel DOLS. Findings reveal that while the rule of law had a negative and significant impact on FDI inflows under the panel ARDL and FMOLS, the impact of regulatory quality was negative and significant under the panel ARDL and DOLS. The short-run ARDL results revealed that only the population growth rate positively and significantly impacted FDI inflows. However, in the long run, findings showed that while the population growth rate had a positive and significant impact on FDI inflows under the ARDL, the impact of GDP was positive and significant in all the models. The exchange rate was also found to negatively and significantly impact FDI inflows in all the models. The study consequently recommends building strong institutions through collaboration among the member countries while improving human capital and economic growth

Regulatory Quality, Rule of Law and Foreign Direct Investment Inflows: Evidence from the Economic Community of West African States

In literature, the role of institutions in stimulating FDI inflows has been documented. This study examined the contributions of two institutional-quality variables, regulatory quality and the rule of law, in attracting FDI in the Economic Community of West African States (ECOWAS). The study used an annual series covering the period from 2000 to 2020 using three different estimation techniques: the panel ARDL, the panel FMOLS, and the panel DOLS. Findings reveal that while the rule of law had a negative and significant impact on FDI inflows under the panel ARDL and FMOLS, the impact of regulatory quality was negative and significant under the panel ARDL and DOLS. The short-run ARDL results revealed that only the population growth rate positively and significantly impacted FDI inflows. However, in the long run, findings showed that while the population growth rate had a positive and significant impact on FDI inflows under the ARDL, the impact of GDP was positive and significant in all the models. The exchange rate was also found to negatively and significantly impact FDI inflows in all the models. The study consequently recommends building strong institutions through collaboration among the member countries while improving human capital and economic growth