International Research Journal of Finance and Economics
 Issue 105
 February, 2013
A Survey of the Relationship between Economic Globalization and Economic Growth in MENA Countries
Ali Fegheh Majidi, Mohammad Omid Akhgar and Parvin Alimoradi Afshar
Globalization describes the ongoing global trend toward an unrestrained flow of trade and investment across borders which consequently results in the integration of international economy. As it expands economic freedom and competition, globalization is believed to raise the productivity and living standards of people. Therefore, in this paper we investigated the cause of Economic Globalization on Economic Growth in 21 MENA (Middle East and North Africa) countries based on panel data from 1970-2009. The results show that economic growth during this period of time in MENA countries increases as economy globalization increases.
Keywords: Economy Globalization, Economic Growth, Panel Data.
JEL Classification: C13, E00, O40.
Threshold GARCH Modeling of the Relationship between Output Volatility and Output Growth: An Application for Turkey
Serpil Türkyılmaz and Mesut Balıbey
In this study, the empirical relationship between output volatility and output growth is examined by using AR(3) TGARCH(1,1)-M model over the period 2002:01-2011:09 for Turkey. Firstly, the findings imply that the “in-mean” coefficient is statistically significant and output volatility affects output growth. Secondly, the empirical results support evidence of asymmetry between output volatility and output growth. Finally, the Granger Causality Test Results indicate that bidirectional causality exists between output volatility and output growth.
Keywords: AR(3) TGARCH(1,1)-M Model, Asymmetric Effect, Granger Causality Test, Output Volatility.
JEL Classification: 91B84, 62M10.
Exports Diversification and Economic Growth: Case of Jordan and Other Selected ARAB Countries
Khawlah Ali Abdalla Spetan and Nahil Saqfalhait
A large body of empirical literature has explored the linkages between exports diversification and output growth. However, empirical verification remains indecisive and the topic remains open to discussion. This paper examines the relationship between exports diversification and economic growth in Jordan and group of Arab countries including Jordan. Overall, we found that exports diversification had no significant effect on economic growth during the study period. This suggests that greater emphasis on exports diversification should be given to trade and industrial policies in Jordan and the other Arab countries. Efforts should be directed toward investigating exports sectors that enhance economic growth in each country in order to answer the question whether to specialize or to diversify.
Keywords: Exports diversification, economic growth, gross capital formation.
The Relationship Between R&D and Patent: A Panel Data Analysis
Ilker Murat Ar and Murat Can Genc
Innovation is one of the most important issues in today’s competitive environment. R&D and patent were used in the measurement of innovation activities. The objective of this paper is to investigate the relationship between R&D and patent for countries. Therefore, annual data on patent applications and R&D expenditures from 1996 to 2009 were collected for various countries. By using a panel of forty-two countries from 1996 to 2009 a panel causality analysis has been performed. Econometric results indicate that there is a unidirectional causality running from R&D expenditures to the patent applications of the residents. As a result, R&D activities have caused to the patent applications of the residents. However, R&D expenditures do not have a causality effect on patent in terms of the number of the applications of nonresidents and also the applications of the sum of nonresidents and residents. The importance of the causality findings indicates that R&D expenditures increase the patent applications of the residents. It was also provided many government policy recommendations to keep the effective relationships between R&D and patent.
Keywords: Innovation, R&D, Patent, Causality Analysis.
The Perceived Critical Success Factors (CSFs) of ERP Adoption in Emerging Countries: An Emperical Study on the Jordanian Organizations
Khalifeh Ziadat and Mahmoud Al-Jabali
The aim of this paper is to investigate the factors that critically affect the success of (ERP) adoption in developing countries by providing empirical evidence on the Jordanian organizations, motivated by the recent trend in DOI studies which emphasis the implied assumption that ERP technology faces additional and different range of economic, cultural and basis infrastructure challenges in developing countries compared to developed countries. Moreover, this study looks at how the perceived relative criticality of these factors differs across managerial level versus user level employees. The research identifies potential critical success factors (CSFs) which were then lumped into 13 logical groupings inclusive of all the sub-factors identified in the review of relevant literature. To assess the relative degree of criticality of each of the potential CSFs factors, a survey questionnaire was mailed to the respondents. 180 copy of the questionnaire were mailed to 90 non-financial companies listed at Amman Stock Exchange (two questionnaire copies were mailed to each involved company; one of them to be considered by the chief information officer as a representative of the managerial level employees, while the other questionnaire was supposed to be considered by the user level employees). The results show that “Top Management Support”, “Organizational Readiness”, and “Change Management Culture & Program,” have been proven to be perceived as the most important and critical factors for successful ERP adoption. Significant differences in the perceptions of CIOs-group and the end-users-group concerning “Communication”, “Top management support” and “Change management culture and user education and training” were detected.
Keywords: Enterprise resource planning; Critical success factors; Accounting information systems.
Evaluating the Impact of Listing on the Ghana Stock Exchange on Financial Performance using Data Envelopment Analysis
Robert A Baffour
The purpose of this study was to examine the extent to which listing on GSE impacts on the financial performance of listed companies by examining the performance of listed banks against that of unlisted banks. The efficiency performances of seven banks were examined from 2004 to 2010 using non-parametric Data Envelopment Analysis (DEA) both longitudinally and cross-sectionally. The DEA analysis was supplemented by, and compared to, traditional financial ratio analysis which provided additional insight into the financial performance of the banks. The findings show that the listed banks on the average performed better than the unlisted banks albeit not statistically significant. The out-performance of the listed banks to the unlisted banks was generally due to the strong financial performance of a particular international subsidiary bank. This result was also consistent with the ratio analysis.
Keywords: Stock Exchange, Financial Performance, Data Envelopment Analysis, Banking Performance
Integration Financiere Maghrebine: Defis ET Perspectives
Taleb Fatima, Benhabib Abderrezak and Hachemaoui Kamel
Dans le contexte maghrébin, deux raisons peuvent être avancer pour justifier l’intérêt qui doit être accordé à l’intégration régionale notamment sous son aspect financier, à savoir, la mondialisation et la réussite du modèle européen. L’objectif de ce travail est d’évaluer le potentiel d’intégration financière régionale maghrébine et ce à la lumière de l’expérience européenne. L’évaluation va se faire à travers trois paramètres à savoir: la libéralisation des marchés financiers, le contrôle prudentiel et l’harmonisation fiscale. Ces paramètres représentent, selon Plihon (2002), les politiques autours desquelles le modèle d’intégration européenne s’est articulé.
Keywords: intégration financière régionale, Union du Maghreb Arabe, contrôle prudentiel, harmonisation fiscale.
National Health Insurance and Tax Smoothing in Taiwan
Su-Hsing Hung and Ming-Jang Weng
Are the budget policies of Taiwan’s National Health Insurance (NHI) consistent with tax-smoothing theory? According to Ghosh (1995), when the surplus of a health insurance budget equals the expected present discount value of a change in health expenditure in later periods, the budget policy of NHI remains consistent with the assumptions inherent in tax-smoothing theory. The current study adopts Campbell’s (1987) vector autoregressions model to estimate the expected discount value of health insurance expenditure variations; it also uses the Wald test to determine whether the NHI’s actual budget surpluses are consistent with the expected present discount value of health insurance spending variations in the theoretical model. Empirical results indicate that the surplus in the actual health insurance budget is not consistent with optimal health insurance budget surpluses. In other words, the budget policies for NHI on Taiwan are not consistent with the optimal tax-smoothing path. These results remain as it was even the factor of structure breaks is included in the testing model.
Keywords: Time-Series Models, Government Expenditures and Health, Public Economics
Relationship between Institutional Ownership and Audit Delay and Impact of Information Asymmetry for the Companies Listed in Tehran Stock Exchange
Mahshid Jozi, Mehdi Meshki and Mahmoud Samadi Largani
TIn this research it has been tried to review the effect of company's institutional ownership on the degree of conservatism and the effect of conservatism of the delay in the audit of a company and also the effect of institutional ownership on this volume. For this study multiple regressions was used. The study was conducted in the period 2006-2011 in the Tehran Stock Exchange. Results show that there is no significant relationship between institutional ownership and audit delay but by surplus this kind of ownership this relation is better.
Keywords: Institutional ownership, delays in auditing, information asymmetry, conservatism
Redefining the Non-Cash Working Capital Formula, for Cash-Flow, Capital Budgeting, and Firm Valuation Calculations
Fernando Llano-Ferro
This paper revisits and analyses the Working Capital concept and calculations, concluding that a change is warranted in the Working Capital formula used for cash-flow, capital budgeting, and firm valuation purposes. In the traditional Working Capital formula, Accounts Receivable are calculated at “price-of-goods-sold” instead of at “price-of-goods-bought”. This leads to an over-estimation of Working Capital of the firm. The correction can be implemented with a very simple relationship. A numerical example is provided.
Keywords: Working Capital, Cash-Flow, Capital Budgeting, Firm Evaluation
JEL Classification: G31
Why Does Finance Matter for Economic Growth?
Giseok Nam
In this study I explain why finance matters for the economic growth. I describe the relationship between financial system and economic growth through the link between financial policy and financial structure, financial structure and financial functions, and financial functions and economic growth. The policy of financial institutions and financial markets financial sector policy determines the financial structure. In turn, the kind of the financial structure developed would affect the nature and magnitude of the financial services or financial functions. Finally these financial functions or services may affect the long run economic growth by influencing the mobilization of domestic and external resources for investments, and at the same time influencing the optimal allocation of these investment resources. In sum, efficient financial systems promote long-run economic growth through the encouragement of good corporate governance.
Keywords: Financial Policy, Financial Market, Economic Growth
JEL Classification: G21, G28
Are Government Bond Net Wealth? Empirical Evidence for Canada, Japan and US
Tito Belchior S. Moreira, Michel Angelo Constantino de Oliveira, George Henrrique de Moura Cunha, Ricardo Coelho de Faria and Carlos Vinícius Santos Reis
This paper aims to investigate of impact of fiscal variables on aggregated macroeconomic based on two distinct models. The first model tests the impact of government debt/M1 ratio on nominal interest rate. The second model tests the impact of interest payments on government debt/GDP ratio on demand for money. Both models are tested for a balanced panel of Canada, Japan and US over the period 1980-2006. We found evidence that Ricardian Equivalence does not holds for both models.
Keywords: Bond/money ratio; Ricardian equivalence; demand for money.
Measuring Technical Efficiency of Bank Branches: A Stochastic Frontier Analysis
Saâd Benbachir, Anas Benbachir and Yassine El Haddad
The aim of this paper is to estimate the stochastic frontier production function for panel data on bank branches and the technical inefficiency effects during the period 2007-2010. The parameters of a stochastic production frontier and the determinants of the inefficiency for a panel of 78 bank branches belonging to a regional Moroccan bank are estimated simultaneously using a maximum likelihood method proposed by Battese and Coelli (1992,1995). Empirically, the results of the analysis of the branches technical efficiency during the period considered have been conclusive. Indeed all the parameters of the production function and the coefficients of the factors explaining the inefficiencies were statistically significant. This suggests that the production frontier is stochastic and the variables chosen to explain technical inefficiencies have a significant effect except the revenue per employee variable. The analysis showed also that the mean efficiencies have varied very slowly during the period covered and reached just 1% almost every year.
Keywords: Stochastic frontier production, technical efficiency, cross-sectional model, panel data model, maximum-likelihood method
JEL Classification: G20
Energy Consumption and Economic Growth Relationship in the E7 Countries
Ferhat Pehlivanoğlu, Burcu Yavuz Tifikçigil and Tezcan Abasız
Since energy is one of the most important sources of industrialization and of the economic and social development, the researches on relationship between economic growth and energy consumption have become an important field of study. Energy is in a close relationship with all sectors in the economy and used as the main input in the production of almost all goods. In this context since 1990s, significant increases in energy consumption and economic growth have been observed in the E7 countries (China, India, Brazil, Russia, Indonesia, Mexico and Turkey). Various academic studies on E7 countries estimate that economic sizes of the E7 countries will pass in a large extent the economic sizes of the G7 countries’ in the middle of the 21th century. The ultimate aim of this study is to find the causal relationship between energy consumption and economic growth and the direction of this causality by using Holtz-Eakin Panel Causality Test regarding the E7 countries. In this study, energy consumption and gross national product data for the years 1990 - 2009 have been used. As a result, bi-directional relationship between economic growth and energy consumption has been found: While energy consumption affects economic growth, economic growth affects energy consumption in the E7 countries.
Keywords: E7 Countries, Energy Consumption, Economic Growth, Holtz-Eakin Panel Causality Test, JEL: D92
JEL Classification: G21
The Impact of Globalization on Government Size: Causality and Policy Implications for the Case of Greece
Andreas G. Georgantopoulos
This study investigates the causal links between trade openness and government size for an EMU member country, Greece, during the period 1960-2009. For this purpose, cointegration test, error correction model and Granger-causality analysis are employed. Robust empirical findings on the long-term relationship between the tested variables support the validity of the “compensation hypothesis”, since for the case of Greece trade openness granger-causes government size. Interpreting these results under this hypothesis, calculations could imply an increasing openness of the Greek economy, as globalization process requires, due to the fact that the government of Greece is under heavy pressure to support entities and social groups which have prejudiced from opening-up the national economy leading to a continuous increase of government spending. On the other hand, the increasing government size in Greece, created numerous fiscal and social problems (i.e. bureaucratization, corruption, declining competitiveness, state interventionism) leading to a severe financial crisis since 2009. One of the core problems of the Greek economy is the ever increasing government consumption, and various measures are under application at present (i.e. dismissal of public officers, budget cuts, privatization programs etc.) in order for the country to maintain economic prosperity. These contradictory evidence for the case of Greece could imply that an increasing government size may have positive effects protecting social groups against the threats of globalization, but on the other hand a continuously increasing government consumption that lacks of close monitoring, results in multiple negative consequences for the society and the national economy as a whole.
Keywords: Cointegration, Granger causality, error correction model, globalization, government size, Greece.