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The Nonlinear Effect of Public Debt on Economic Growth in Jordan over the Period 1980 - 2018
Eman Abdel Khalek Fseifes,
Talib Mohammad Warrad
Issue:
Volume 9, Issue 2, April 2020
Pages:
60-67
Received:
1 February 2020
Accepted:
17 February 2020
Published:
25 February 2020
Abstract: At reasonable levels, public debt enhances growth and promotes welfare. However, at high levels it turns out to be detrimental. When does the effect of public debt change from good to bad? To address this question locally, this study investigates empirically the long-run relationship between public debt and economic growth in Jordan, using time series data over the period 1980 - 2018. The modeling of the debt–growth relationship is based on theoretical arguments and empirical considerations and analyzed by adopting both linear and non-linear specifications. The model is estimated by fully modified ordinary least squares (FM-OLS) approach, the empirical results confirm that public debt is negatively associated with economic growth in the long-run. On the other hand, investment, labor force growth, and openness of trade are found to be positively associated with economic growth in the long-run. There is an evidence of non-linearity between public debt and economic growth in the long-run, with only high levels of debt exceeding 78 percent of GDP, having a significant negative effect on growth. This result demonstrates an inverted U-shaped curve in the debt-growth relationship in Jordan, in other words, the direction of the effect of public debt on economic growth transforms smoothly from positive to negative depending on the level of indebtedness. Accordingly this study emphasizes the need to take actions not only to alleviate public debt but also to place it on a descending pathway in the long-term. As analyzing the relationship between public debt to GDP ratio and economic growth has demonstrated to be necessary for governments to shape suitable fiscal policy guiding principles. It is recommended that the government is permitted to accumulate debt to no more than 78% of GDP; otherwise it will exert a negative effect on the economy.
Abstract: At reasonable levels, public debt enhances growth and promotes welfare. However, at high levels it turns out to be detrimental. When does the effect of public debt change from good to bad? To address this question locally, this study investigates empirically the long-run relationship between public debt and economic growth in Jordan, using time ser...
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Infant Industries Protectionism: The Case of Automobile Industry in Malaysia
Issue:
Volume 9, Issue 2, April 2020
Pages:
68-72
Received:
22 November 2019
Accepted:
24 February 2020
Published:
28 February 2020
Abstract: Having a competitive advantage in infant industry is a vital factor for a country to be efficient in protecting it since usually those infant industries lack the economic scales needed to survive in the market. The protectionism started in eighteenth century in USA as a suggestion for the government to promote the economy. The paper covers several tools are used such as; tariffs and tariff rebates, quotas, governmental subsidies and import-substitution industrialization (ISI). Theoretically it was proved the possibility of achieving the desired results. Then the paper illustrated Malaysia as a case of study that faced several failed stories of providing protection of its automobile infant industry; Proton and Perdua automobile companies were investigated. The results showed that those policies and tools used became a burden on the government budget without being able to compete internationally after decades of protection. Many reasons behind this shock fact such as the tendency of being secure which yield to conceal the truth of being prepared to face the global market competition without protection shields from the government. Also, those countries provided protectionism slowed down economically which led to more obstacles for the protected infant industries to be competitive internationally. Even the efforts of connecting the infant industry with strategic foreign partner have failed miserably in Malaysia. Hence as a recommendations for future attempts of protecting infant industries; the time span of protection should be predetermined and be flexible to adjust simultaneously. In addition, the government should monitor the protected firms to let them disclose the truth. Also, there should be a mix of protection tools used to achieve the optimal goal which is not only to protect the infant domestic industries but to promote them and be internationally competitive and that result can be reflected in growth of the economy.
Abstract: Having a competitive advantage in infant industry is a vital factor for a country to be efficient in protecting it since usually those infant industries lack the economic scales needed to survive in the market. The protectionism started in eighteenth century in USA as a suggestion for the government to promote the economy. The paper covers several ...
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Impact of Taxation on Economic Growth in an Emerging Country
Alaaeddin Al-tarawneh,
Mohammd Khataybeh,
Sami Alkhawaldeh
Issue:
Volume 9, Issue 2, April 2020
Pages:
73-77
Received:
13 February 2020
Accepted:
25 February 2020
Published:
6 March 2020
Abstract: Tax revenue and economic growth in Jordan have been undertaking an upward growth path in absolute terms. A number of studies indicated mixed results for the effect of taxes on economic growth. Numerous of these studies found a negative relationship, others found that taxes affect economic growth positively. So this paper trying to investigate the short and long run effects of taxation on economic growth in an emerging country, Jordan. Annual data for the time period 1980 – 2018 used to develop an Auto-Regressive Distribution Lag (ARDL) approach. Results of the bounds test specify that the variables of economic growth, taxes, capital and trade are cointegrated. The empirical results of the estimated model confirm that there is a negative short and long run relationship between taxes and economic growth in Jordan. Also results of the cointegration estimation indicate that the short run deviations from long run equilibrium is adjusted by 60% towards long run equilibrium each year. Thus the paper proposes that fiscal policy is essential to promote sustainable economic growth. Therefore policy makers of the fiscal policy should take in account a tax rates that are appropriate to make enough revenues needed to finance government utility expenses that promote economic growth.
Abstract: Tax revenue and economic growth in Jordan have been undertaking an upward growth path in absolute terms. A number of studies indicated mixed results for the effect of taxes on economic growth. Numerous of these studies found a negative relationship, others found that taxes affect economic growth positively. So this paper trying to investigate the s...
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Empirical Analysis of Factors Influencing Economic Growth Rate in Bangladesh
Fatema Jannat,
Mohammad Rubel Miah,
Mohammad Omar Faruk,
Shafiqul Alam
Issue:
Volume 9, Issue 2, April 2020
Pages:
78-82
Received:
12 January 2020
Accepted:
4 February 2020
Published:
10 March 2020
Abstract: Economic growth rate plays an important role in the development of a country. Bangladesh has tremendous success to increase its economic growth rate and now it is known as the fastest-growing developing country in the world. This paper explores the important factors that influence the economic growth rate in Bangladesh. The data for the analysis is extracted from the United Nations Conference on Trade and Development from 2000 to 2015. For bivariate analysis, the correlation coefficient is measured and for multivariate analysis, multiple linear regression model is fitted. For the statistical analysis, the statistical software R program is used. The bivariate analysis shows that gross national income, export merchandise, import merchandise, foreign direct investment, population, remittance pay, remittance receive are correlated with the gross domestic product. Pearson’s correlation between GDP and balance of payment, ICT import and ICT export is found to be very low. The factors which are moderately or highly correlated with the GPD have been used in the multivariate model. The most significant factors that influence the gross domestic product is gross national income and remittance received. The study also found that export merchandise and import merchandise have a significant impact on the economic growth in Bangladesh.
Abstract: Economic growth rate plays an important role in the development of a country. Bangladesh has tremendous success to increase its economic growth rate and now it is known as the fastest-growing developing country in the world. This paper explores the important factors that influence the economic growth rate in Bangladesh. The data for the analysis is...
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The Gridlock-Proof Functionality in Real Time Gross Settlement Systems
Issue:
Volume 9, Issue 2, April 2020
Pages:
83-93
Received:
21 February 2020
Accepted:
5 March 2020
Published:
10 March 2020
Abstract: The last two decades of the XX century marked the starting point for the central banks across the globe to move their payment and settlement systems into Real Time Gross Settlement (RTGS) mode. Despite the fact that RTGS systems can effectively eliminate the credit exposure between the paying bank and the receiving bank at the interbank level by means of fast final and irrevocable money transfer, there is another serious problem associated with these systems. RTGS systems turned out to be liquidity-demanding arrangements, as opposed to deferred net settlement systems. Thus, the efficiency of liquidity management arrangements is the precondition of smooth RTGS operation, especially in tough times when liquidity is a systemic shortage. If liquidity management is inefficient, the RTGS system may stop operating properly by terminating in the grid-lock state brining chaos to the national economy. In this research we suggest the practical approach to solve the problem of seeking the maximization of aggregate value of payment instructions under liquidity shortage, including the most severe scenarios. The classification of the RTGS queue statuses is suggested and discussed. Some complementary results are articulated, including: (a) the statement that the formal mathematical optimization problem lies in the NP class of the computational complexity (the class of problems solved in polynomial time by nondeterministic Turing machine); (b) the equivalence between MaxFlow-MinCost problem (from the network flow theory) and the dual linear problem of the linear program relaxation of the initial optimization problem; (c) the illustration that no optimization strategy, other than the suggested one, can deliver substantially better optimization results. Despite enormous efforts, there were no previous research results reasonably claiming the near optimality of liquidity optimization strategy in RTGS systems under severe liquidity shortages. The results of this research may help the central banks and other RTGS system operators to ensure the protection of their payment systems from future liquidity crises and bring the resilience of respective national economies to the next level of sustainability.
Abstract: The last two decades of the XX century marked the starting point for the central banks across the globe to move their payment and settlement systems into Real Time Gross Settlement (RTGS) mode. Despite the fact that RTGS systems can effectively eliminate the credit exposure between the paying bank and the receiving bank at the interbank level by me...
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