Journal of Developing Economies

Effect of Food Exports on Economic Growth: Fresh Insights from Italy

Abdelhafidh Othmani — 2024-11-20

This paper aims to explore the relationship between food exports and economic growth in Italy. To achieve this objective, we utilize annual data spanning from 1990 to 2021, employing cointegration analysis and the ARDL Model. The empirical findings reveal a positive impact of food exports on long-term economic growth. However, despite this positive correlation, our examination of stylized facts uncovers a downward trend in the share of food exports over the analysis period. While acknowledging the role of food exports as a contributor to economic growth, this underscores the need for the Italian authorities to acknowledge the sector’s significance and implement new economic policies and trade reforms to fortify this area of economic activity.

The Effect of Interest Rates and Inflation on Economic Growth in ASEAN-5 Countries

Dewi Karina Purnomo — 2024-11-20

This study aims to empirically test the effect of interest rates and inflation on economic growth, with gross capital formation as a control variable. This research uses panel data from 5 ASEAN countries, namely Indonesia, Malaysia, the Philippines, Singapore, and Thailand in 2004 – 2021 and was tested using the Random Effect Model (REM) analysis technique. The results of this study explain that interest rates and inflation have a simultaneous effect on economic growth. Another finding from this study is that interest rates have a significantly negative effect on economic growth and inflation has a significant positive effect on economic growth. However, this study is subject to several limitations. First, it solely focuses on ASEAN-5 countries, thus limiting the generalizability of the findings to other developed and developing nations. Second, the study’s reliance on annual data from 2004 to 2021 excludes more recent data, potentially overlooking current economic trends. Third, the static panel method utilized with the REM analysis only provides a broad overview of the relationships between interest rates, inflation, and economic growth, lacking deeper insights into long-term and short-term dynamics. Fourth, while the study covers the period including the COVID-19 pandemic, it fails to thoroughly explore its impact and provide detailed explanations. Thus, future research should consider expanding the scope beyond ASEAN-5, incorporating more recent data, employing dynamic panel methods, and thoroughly investigating the implications of significant events such as the COVID-19 pandemic on the examined relationships.

Investigating The Nexus of Child Marriage and Economic Growth in Indonesia

Muhammad Syaikh Rohman — 2024-11-20

The issue of ending child marriage attracts global attention, especially in developing countries. However, the link between married children and economic growth remains in question. The purpose of this article is to utilize regional macroeconomic indicators to quantify the association between child marriages and the Indonesian economy. The analysis shows a negative relationship between marriage at a young age and the economy using panel regression and simultaneous equations model. The results also demonstrate that marriage at an early age might decrease economic growth, as it has an undesirable effect on health and education. Therefore, this paper delivers a suggestion related to the policy strategies, primarily educational policies and health, that support the Indonesian Government in ending child marriage.

Impact of Macroeconomic Variables and Mortality Rates Under 5 on CO2 Emissions: A Case Study of Lithuania

Atif Yaseen — 2024-11-20

This study examined how Lithuania’s CO₂ emissions were affected by macroeconomic variables and mortality rates between 1995 and 2020. ARDL analysis, cointegration regression, diagnostics test, and robustness test were used to quantify the impact of mortality rates, macroeconomic variables, and CO₂ emissions. The findings of the unit root test confirmed that all variables are stationary. Similarly, the ARDL bound test values show that the variables are cointegrated and that a long-run relationship exists between them. However, the ARDL methods both showed that mortality rates, trade openness, and economic growth have a significant positive impact on CO₂ emissions. Hence, renewable energy consumption helps reduce CO₂ emissions. Furthermore, diagnostic tests confirmed no serial correlation, no heteroscedasticity exists, and robust tests also show that the model is stable. While cointegration regression results are similar to the ARDL model test. The study analysis suggests the essential policy recommendations aimed at reducing CO₂ emissions and the need to improve health sectors (specifically, mortality rates under 5). This study expands the existing literature on environmental economics, and its findings will help improve policy and frameworks in Lithuania to reduce carbon emissions.

Public Debt – Economic Growth Nexus: A Systematic Literature Review

Tryson Yangailo — 2024-11-20

The purpose of this study was to present a systematic literature review on the public debt-economic growth nexus. The objective was to provide policymakers and researchers with significant insights on the impact of public debt on economic growth and to provide reliable evidence on the gaps in the literature that require their urgent attention. The study used a systematic review of the literature contained in two databases, namely Semantic Scholar and Google Scholar. The study shows that public debt above the threshold is detrimental to economic growth, while low public debt is conducive to growth, and that the degree of non-linearity in the debt-growth relationship varies considerably depending on the economic status and debt burden of the country. Policymakers in each country should identify the tipping point at which further public debt begins to impede growth. Debt policy should take into account not only fiscal constraints, but also the effectiveness of governance and the possible consequences of eroding public confidence. The study also shows that institutional quality, public investment, production expenditure, foreign direct investment and exports are among the variables that significantly affect the relationship between public debt and economic growth. Policymakers should control the level of public debt and its drivers to support longer-term economic growth. The study also recommends that countries account for public debt and ensure that such debt is acquired only to finance profitable investments that generate future returns, and not for consumption, deficit reduction, wasteful spending, or political purposes.

Indonesia’s External Debt Odyssey: Impact of Fiscal and Political Changes from 1999 to 2023

M. Munip Utama — 2024-11-20

This study aims to identify the factors influencing Indonesia’s dependence on external debt. The data utilized in this research consist of a time series covering the period from 1999 to 2023 on a quarterly basis. The endogenous variable in this study is Indonesia’s external debt, while the exogenous variables encompass fiscal deficit, tax income, inflation rates, and the volatility index. The instrumental variables employed include lags of both endogenous and exogenous variables. Additionally, dummy variables are incorporated for the four government regimes. Two estimation models consistently present a coherent picture. The dynamic fixed-effect model utilized in this research indicates that dependence on external debt is a legacy of previous governments in both models. Historical factors from prior external debt play a pivotal role in determining Indonesia’s external debt level, and the impact of current and past tax revenue periods contributes positively to Indonesia’s ability to increase debt, even though only current tax revenue has a significant impact. Theoretically, fiscal deficits and global economic instability are considered important indicators, but this study found that neither has a consistent and significant influence on Indonesia’s external debt. Controlling inflation rates is also crucial in curbing borrowing behavior from foreign entities. Government regime transitions do not appear to contribute significantly to the management of external debt. Based on the R-squared adjustment test and the Wald test, it is revealed that the exogenous variables, instrumental variables, and dummy variables in this study effectively explain the variation of the endogenous variable.

The Impact of Trade Integration on Poverty Reduction in ECOWAS

Akinyemi Christopher Afolabi — 2024-11-20

This paper examines the impact of trade integration on poverty reduction in the Economic Community of West African States (ECOWAS). To investigate the impact of trade integration on poverty reduction, data for all fifteen member countries of ECOWAS on the number of poor people, bilateral trade, trade openness, exchange rate, foreign direct investment, interest rate, inflation rate, and import tariff were collected from the World Bank, WTO, IMF and WDIs from 2010 to 2019. After various tests, heteroscedasticity was found to be present. Therefore, to address this problem, the Feasible Generalized Least Squares (FGLS) method was used to examine the aforementioned impacts. The results showed that trade openness, bilateral trade, exchange rate, and import duties significantly impact poverty. The results indicated that trade integration is significant in reducing poverty within ECOWAS. The study recommends measures to enhance the effectiveness of trade integration as it has an important impact on reducing poverty in the region. First, ECOWAS should implement policies to support smaller countries in improving their productive capacities to compete effectively within the region. Secondly, harmonization of exchange rates by creating a common currency would facilitate smoother trade flows and contribute to poverty reduction. Member countries should prioritize trade with other ECOWAS nations, implement policies to ensure that foreign investments benefit the local economies, and focus on exporting finished goods rather than raw materials to create employment opportunities and support poverty reduction efforts.

Intention of Muslim Millennials to Invest in Islamic Peer-to-Peer Lending in Indonesia

Shochrul Rohmatul Ajija — 2024-11-20

Fintech Peer-to-peer (P2P) lending sharia is an evolution of sharia financial institutions through the use of technology in its operational processes. The millennial generation who grew up with technology has a greater talent in utilizing technology and has deeper insights compared to the previous generation. The purpose of this study is to analyze the determinants that influence Muslim millennials to invest in the Islamic P2P lending sector and determine strategies to improve its effectiveness. Latent variables Attitude Towards Behavior (AT), Subjective Norm (SN), Perceived Behavioral Control (PBC), Financial Literacy (FL), and Behavioral Intention (BI) are selected and analyzed using Structural Equation Modeling (SEM) using SmartPLS. This study used an accidental sampling method which was carried out for 30 days of data collection, where 200 respondents were collected. The respondents were specifically the millennial Muslim generation who had invested in financial institutions at least once. The results showed that all latent variables had a significant influence and PBC had the largest contribution. There are three latent variables that have a significant positive effect on BI, namely AT, PBC, and FL. Meanwhile, only SN has a significant negative effect on BI. Therefore, it is necessary to increase literacy in the Indonesian community. Regulators and implementers must collaborate and synergize in improving Islamic financial literacy in Indonesia. For further research development, other variables or samples from different groups can be used to further enrich literacy in Islamic P2P lending.

Budget Institutions and Macro-Fiscal Forecast Errors in Sub-Saharan Africa: Indicator-Level Analysis

Adekunle Sarafa Alade — 2024-11-20

The annual fiscal budget of any economy gives projections about key economic indicators. Forecasts of these key variables are often at variance with actual realisations at the end of the fiscal year, thereby inducing animal spirits in Sub-Saharan Africa. Past studies focused on the roles of budget institutions and considered only two indicators of budget institutions- centralization and rules and control, thereby ignoring other indicators- transparency, comprehensiveness, and credibility and sustainability indices. This study therefore investigated the roles of budget institutions on macro-fiscal forecast errors, using all existing indicators of budget institutions in SSA. This study was based on rational expectations theory. Empirical models were formulated for growth, inflation, and fiscal balance forecast errors. A panel of data that spanned 2006 to 2021 for 43 countries was gathered. Forecast values were estimated from country’s annual budget speeches, World Development Indicators and Fiscal Space Database. Indices of various indicators of budget institutions were constructed using information from the Collaborative African Budget Reforms Initiative (CABRI), Open Budget Index of the International Business Partnership (IBP) and Public Expenditure and Financial Analysis (PEFA). The models were estimated using GMM System) estimation technique. Estimated results show that only budget procedural rules and credibility and sustainability indices have significant and negative effect on fiscal balance forecast error. No evidence was found that growth and inflation forecast errors were influenced by budget institutions. The implication of this finding is that fiscal budgets based on established procedures and with some level of credibility and sustainability matter for reducing fiscal balance forecast error.

Analysis of The Influence of The Value of Non-Cash Payment Transactions on The Amount of Money Supply in Indonesia

Mazraaten Thoyyibah — 2024-11-20

This literature explains the influence of credit card, debit card, and e-money transaction values on Indonesia’s M1 and M2 money supplies. Time series data from January 2010 to August 2023 are used taken from the official websites of Bank Indonesia and the Central Statistics Agency . The Vector Error Correction Model (VECM) is the analysis method employed. According to the study’s findings, the M1 and M2 money supply is significantly impacted by the value of debit card transactions in both the short and long term. While it has a large short-term impact on M1 and M2, the credit card transaction value variable has a negligible long-term impact on M2. In addition, the value of e-money transactions demonstrates that they have a large impact on M1 both in the short and long terms. On the other hand, it has a significant impact on M2 in the short term but not on M2 in the long run.