Trading Systems and Growth Process in ASEAN-5 Economics

This study centers on the analysis of effect of two main trade relations - multilateral and regional trade liberalizations, on the macroeconomic variables (GDP growth rates, foreign direct investment, and wage rate) of five ASEAN countries namely Malaysia, Indonesia, the Philippines, Singapore and Thailand. The study covers the period 1976- 2000. Endogenous growth model built on the framework of Bronsztein et al. (1998) is utilized and Generalised Least Square (GLS) fixed effects estimation technique is applied to estimate the parameters. Convergence hypothesis is also tested in the data. Four measures of trade liberalisation - trade share, Dollar's exchange rate distortion, average tariff and regional trade arrangement (RTA) dummy for participation regional trade arrangements, are constructed. The main results are that multilateral trade liberalisation and participation in regional trade arrangement lead to faster growth rate. This implies that maintaining stable exchange rate, tariff on selected key products, and high trade share boost economic iii [ a ~ growth in ASEAN region. Regional groupings could be utilized to achieve stable economic growth. Other important determinants of the cross-country growth rates are wage rate, employment level and FDI emphasizing the importance of incentives to workers and technology to improve total factor productivity per worker. Also multilateral trade liberalisation accelerates FDI, while regional trade liberalisation decelerates it. Other factors that influence the location of FDI in the regional economies are wage rate (low labour cost), employment level, human capital and initial GDP. Market size is not an important factor in the location of FDI in ASEAN countries in the regional and multilateral trading system. Where it is significant, its effect is negative. There is no noticeable effect of multilateral trading system on wage rate but regional trade liberalisation has. The most important determinants of wage rate in ASEAN region are GDP growth rates and FDI and employment level in both trade liberalisations. The impact of multilateral trading system on total factor productivity is positive with exchange rate distortion index and negative with average tariff. Regional trade liberalisation leads to low total factor productivity. The factors influencing total factor productivity are FDI, wage rate and export intensity in both trade liberalizations. Our data detect unconditional and conditional P - convergence. The conditional P -convergences in either trade liberalization 2re similar. This shows that ASEAN colintries can follow either of trading system to achieve the long run steady state equilibrium

Bank Lending and Output Growth in Nigeria

This paper examines the relationship between bank lending and output growth in Nigeria over the period 1981 to 2012 using annual data obtained from secondary sources. Specifically, the study examines the impact of sector level bank lending on output growth of three selected sectors measured by index of production. Using the Johansen-Fisher combined panel cointegration methodology and panel Fully Modified Ordinary Least Squares (FMOLS) as a method of estimation, the results provide evidence of a negative significant relationship between bank lending and output growth of the sectors under consideration (namely, agriculture, manufacturing, and mining and quarrying). Howerver, a positive significant relationship is found between human capital measured by secondary school enrolment and output growth of the sectors. This study concludes that the expansion needed to boost output growth in these sectors is hampered by financial constraints made possible by high interest rates charged by financial institutions and that output growth is not only a function of finance as most firms do show but also a function of human capital (that is, labour embodied with knowledge). Therefore, to ensure output growth, there is the need for government intervention to increase the volume of credit that goes to these sectors and enforcement of compliance with monetary policy guidelines. Futhermore, labour needs to be retrained on relevant skills required and there is the need for reduction in budget or current account deficit in order to drive interest rates down. Keywords: Bank lending, Output growth, Nigeri

Financial Development, Currency Union and Dynamic Growth in West Africa: A Panel Investigation

The objectives of this paper are to investigate the effect of financial development and currency union on the growth of West African economies and to determine if the financial development is necessary for currency union to be more beneficial to growth in West African region. A modified model of Alfaro et al, (2004) was adopted. The sample was drawn from 12 West African countries - five  from West African Monetary zone and seven from West African Economic and Monetary Union countries. System GMM was employed to estimate the parameters. The results indicate that the effect of the currency union on West African economies is consistently negative except when interacting with market based financial system. The level of financial development is low. This implies that forming currency union will not be a good policy option at this level of financial development in West Africa as asymmetry shocks and monetary policies across countries differ. Harmonization of financial system is desired for common currency to yield intended effects. Keywords: financial development, currency union, West Africa, growth JEL Classification: F4, F360, G

Bank Lending and Output Growth in Nigeria

This paper examines the relationship between bank lending and output growth in Nigeria over the period 1981 to 2012 using annual data obtained from secondary sources. Specifically, the study examines the impact of sector level bank lending on output growth of three selected sectors measured by index of production. Using the Johansen-Fisher combined panel cointegration methodology and panel Fully Modified Ordinary Least Squares (FMOLS) as a method of estimation, the results provide evidence of a negative significant relationship between bank lending and output growth of the sectors under consideration (namely, agriculture, manufacturing, and mining and quarrying). However, a positive significant relationship is found between human capital measured by secondary school enrolment and output growth of the sectors. This study concludes that the expansion needed to boost output growth in these sectors is hampered by financial constraints made possible by high interest rates charged by financial institutions and that output growth is not only a function of finance as most firms do show but also a function of human capital (that is, labour embodied with knowledge). Therefore, to ensure output growth, there is the need for government intervention to increase the volume of credit that goes to these sectors and enforcement of compliance with monetary policy guidelines. Furthermore, labour needs to be retrained on relevant skills required and there is the need for reduction in budget or current account deficit in order to drive interest rates down. Keywords: Bank lending, Output growth, Nigeri

Business Mentoring and Domestic Entrepreneurship in Nigeria’s Manufacturing Sub-sector: The place of Foreign Direct investment Inflows

Although there is a fairly extensive literature on the theory of foreign direct investment, not much of it is useful in providing insights into its effect on domestic entrepreneurship in Nigeria. This paper looks at the theoretical basis for business mentoring, examines the influence of foreign direct investment (FDI) inflow on domestic entrepreneurship in Nigeria’s manufacturing sub-sector from 1973 to 2010 while employing OLS technique. Results identified a positive and highly significant effects of each of human capital and infrastructural development on activities on Nigeria’s manufacturing sub-sector while each of manufacturing FDI, market size and anti-FDI policies has a negative and highly significant effect on activities in Nigeria’s manufacturing sub-sector. This paper therefore recommends that policies on investment should be geared towards wooing foreign investors into the manufacturing sub-sector while giving the diversification of the country’s productive base a top priority. Keywords: Domestic entrepreneurship, Foreign Direct Investment, Spill-ove

Economy-wide impacts of carbon emission: a post-Keynesian analysis

The need for government intervention and appropriate public policy to protect environment is the most agreed issue among today's economists. It is apparent that any carbon- reduction policy such as carbon tax, regulations to modify productions or changes in emission permits will involve economic costs. However, the short-term economic costs should not be looked at as disincentives and cannot be a justification for inaction. Recognising this point, the intention of this chapter is to investigate economy-wide impacts of unexpected variation in carbon emission (such as imposing a carbon reduction policy, or increased pollutants) by empirically developing and implementing a Post Keynesian open multi sector model.\ud \ud This chapter first will provide an overview of the environmental effects of economics growth and industrialisation with special indication of carbon emission, and then aims to recognize historical relationships between carbon emission and macroeconomic indicators. Later in the chapter, we depart from the literature on carbon emission – growth nexus and for the first time examine the reaction of key macroeconomic indicators to shocks in CO2 emission. Theoretical framework used in this study follows the Post-Keynesian theory of growth and distribution. The outcome of post-Keynesian assumption is that more investment and accelerated endogenous technological change leads to higher employment rate, increased export volumes, and consequently achieves higher economic growth. Empirical analysis in the study is conducted for Australia by using time series data covering the period of 1980-2011, and by employing Vector Autoregressive (VAR) model and impulse response functions. In the conclusion, we summarises the results and we argue about dynamic impacts of carbon and related reduction policies on the economy

Foreign direct investment, financial markets and growth dynamics in MENA oil producing countries: a panel investigation

The objective of this paper is to examine whether foreign direct investments (FDI) in extractive sector enhances growth, using data from seven MENA oil producing countries; namely Bahrain, Kuwait, Oman, Qatar, United Arab Emirates, Saudi Arabia and Iran over the period 1980 to 2004. We employ fixed effects estimation technique to estimate the coefficients of our models. The main findings are: First, the effect of FDI is very small, and it can have positive spillovers in the host countries if there are adequate absorptive capacities – well developed financial markets and human capital. Second, the financial markets are inadequate to spur growth and enhance the role of FDI in the growth process in MENA oil producing countries. The paper opines that policy focus should be towards improving the absorptive capacities, as growth should evolve internally, not externally

Innovation and Competitiveness: Mechanisms for Surmounting Trade Barriers in Global Market for Natural Resources

Abstrac

Trading systems, foreign direct investment and economic growth: Evidence from Asean countries

Over a decade the regional trade relations are growing in number and scope giving rise to trade policy dilemma among the developing nations. This paper presents empirical evidence on the effect of the regional trading system along with multilateral trading system and foreign direct investment (FDI) on the economic growth of ASEAN-5 countries (namely Malaysia, Singapore, Thailand, Indonesia and the Philippines) over the period 1976 to 2002. Three measures are constructed for each trading system and fixed effects estimation technique is applied to estimate the parameters of the model. The results reveal that multilateral trading system leads to faster growth rate than the regional trading system. Most of its measures are positive and are significant. The effect of regional trading system on growth rate is rather mixed. With the exception of RTA, the measures of regional trading system are negative giving inconclusive result on direction of the effect of regional trade bloc on economic growth. The effect of FDI on growth rate is more pronounced when the country is liberalising broadly. This implies that regional groupings can be utilized as a second best alternative to improve economic growth in ASEAN economies. © EuroJournals, Inc. 2006