Non-Linearity between Inflation Rate and GDP Growth in Malaysia

This study analyses the relationship between inflation rate and economic growth rate in the period 1970-2005 in Malaysia. A specific question that is addressed in this study is what the threshold inflation rate for Malaysia. The findings suggest that there is one inflation threshold value exist for Malaysia. This evidence strongly supports the view that the relationship between inflation rate and economic growth is nonlinear. The estimated threshold regression model suggests 3.89% as the threshold value of inflation rate above which inflation significantly retards growth rate of GDP. In addition, below the threshold level, there is statistical significant positive relationship between inflation rate and growth. Bank Negara (central bank of Malaysia) should pay attention to inflation phenomena and substantial gain can be achieved in low-inflation environment while conducting the new monetary policy.

Population growth and standard of living: A threshold regression approach

This study employs Hansen's (2000) threshold regression analysis to examine the relationship between population growth and per capita GDP in 117 countries. Threshold regression analysis allows controlling the quality of population when examining the relationship between the quantity of population and per capita income in a country. The paper uses Human Development Index (HDI) value as the threshold regression variable. In the course of the analysis, a sample of 117 countries was split twice and separated into four sub-samples. The threshold regression analysis revealed that there was a significant negative relationship between population growth and per capita GDP only in the countries with a low level of human development. In other words, quantitative expansion of population would have negative impact on standard of living only in the countries with low quality of population. The empirical findings of this paper support a proposition that the quality of population aspect should be included in the debate on the relationship between population expansion and economic development.

Does export dependency hurt economic development? Empirical evidence from Singapore

A rapid export growth in East Asia was once identified as a source of the sustainable economic development that the region enjoyed. However, the current global recession has turned exports from an economic virtue to a vice. There is a growing awareness that a heavy reliance on exports has caused a serious economic downturn in the region. The present paper chooses Singapore as a case study to examine the relationship between the origin of the East Asian Miracle (i.e. export dependency) and the economic growth. For this purpose, the study employs a causality test developed by Toda and Yamamoto. The empirical findings indicate that despite a negative long-run relationship between export dependency and economic growth, Singapore's heavy reliance on exports does not seem to have produced negative effects on the nation's economic growth. This is because the increase in export dependency was an effect, and not a cause, of the country's output expansion.

Equity market informational efficiency: history and development

In economics and finance, the term ‘efficiency’ has several distinct connotations. This term can be used to refer to allocation efficiency, informational efficiency, operational efficiency or technical efficiency.1 At the outset, it is necessary to clarify that in this chapter ‘efficiency’ only refers to informational efficiency, such that prices are based on the best available information (Howell and Bain, 2005: 540). According to Latham (1986), the most common implicit definition for informational efficiency is that prices will not change if all private information is publicized. Zou (2011) interprets this type of efficiency as the effectiveness of market information

Equity market anomalies: concepts, classifications, theories and evidence

At the outset, it is important to understand the meaning of ‘anomalies’. In general, anomalies are known as irregularities or deviations from the natural order (George and Elton, 2001). Anomalies that arise from the trading of financial instruments are referred to as the moments when security prices depart from their normal behaviour (Dana and Cristina, 2013). In relation to stock trading specifically, Hubbard (2008) defines anomalies as the trading opportunities derived from the investment strategies that allow for earning above-normal returns

Vertical Fiscal Imbalance, Economic Growth and Decentralization

Irrespective of the degree of tax and expenditure decentralization, every federation and unitary state face the problem of Vertical Fiscal Imbalance (VFI). The transfer dependency of subnational governments led them to substitute central transfers over their own revenue effort and this is historically evident in Pakistan. The contribution of provincial own revenues to the provincial expenditures is not much decent, which led to higher magnitude of VFIs. This paper is an empirical investigation of VFI, and its determinants. Based on a strongly balanced panel data at provincial (subnational) level from 1971 to 2021, we studied the effect of economic growth, tax decentralization, expenditure decentralization, and Eighteenth Amendment to the Constitution on VFIs. One of the key distinctions of this paper is modelling economic growth using per capita energy consumption which includes electricity, natural gas and set of petroleum products. Economic growth proxied through per capita energy consumption has negative association with VFI which means a corrective effect on VFI. Similarly, tax decentralization is also negatively associated with VFI, which obviously means corrective effect and less transfer dependency on federal government. To the contrary a positive association between expenditure decentralization and VFI is indicative that increase in government size/budget outlay are broadly financed through federal transfers thereby creating larger vertical fiscal imbalances. This also give policy prescription for future, that tax decentralization has disproportionality higher benefits compared to expenditure decentralization in terms of magnitude of VFIs. Based on different model specifications, we found that Eighteenth Amendment to the Constitution has both corrective and expansionary effect on VFIs

Exchange rate misalignment and capital inflows: an endogenous threshold analysis for Malaysia

This study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables. Keywords: Exchange rate misalignment, Capital inflows competitiveness, Threshold effect