Economic Issues Volume 24

ECONOMIC ISSUES

Volume 24 (2019)

Part 1, March

Please select from the titles below:

Articles

C Li and Y Luo, Spillover Effects of Foreign Direct Investment: Evidence from the West Midlands of England,Vol.24, No.1, p.1-20
S A Churchill, Income and Ethnic Fractionalisation: Evidence from British Microdata, Vol.24, No.1, p.21-34
E Goulas, C Kallandranis and A Zervoyianni, Voting Behaviour and the Economy: Evidence from Greece, Vol.24, No.1, p.35-58
S K Gnangnon, Does the Impact of Aid for Trade on Export Product Diversification depend on Structural economic policies in Recipient-Countries Vol.24, No.1, p.59-87

Book Reviews

Part 2, September

Please select from the titles below:

Articles

Book Reviews

Part 1, March

Spillover Effects of Foreign Direct Investment: Evidence from the West Midlands of England (p.1)

by C Li and Y Luo

Abstract: This paper investigates the spillover effects of inward foreign direct investment (FDI) on firm-level productivity growth in the West Midlands of England for 2,198 firms operating in 75 industries over the period 2004–2011. In contrasts to earlier literature that emphasises the importance of backward linkages in both advanced and emerging market economies, our empirical analysis suggests there are strong forward spillovers from FDI taking place, through the linkages between foreign affiliates and their local consumers in downstream sectors in the West Midlands. However, we only find zero or weak positive spillover effects through backward and horizontal linkages.

Full text pdf

Income and Ethnic Fractionalisation: Evidence from British Microdata (p.21)

by S A Churchill

Abstract: Are income levels of a population affected by the degree of ethnic diversity in the population? This study attempts to answer this question, contributing to both the literature on the determinants of income, and the debate on the implications of ethnic diversity. Specifically, we examine the effects of ethnic diversity on household income. We argue that variations in the degree of ethnic diversity across British neighbourhoods can explain a substantial part of the differences in income levels. Using data from the European Values Study, we measure diversity using indices of ethnic fractionalisation for British neighbourhoods, and measure income using household income. We adopt econometric methods that account for endogeneity and find evidence of a negative effect of ethnic diversity on income. We further propose several potential channels that link ethnic fractionalisation to income. Specifically, we explore trust, social capital, discrimination and inequality as important channels through which ethnic diversity influences income. Results are robust to several sensitivity checks.

Full text pdf

Voting Behaviour and the Economy: Evidence from Greece (p.35)

by E Goulas, C Kallandranis and A Zervoyianni

Abstract: This paper examines the relationship between Greek voters’ behaviour and the economy, paying particular attention to the effect on two non-traditional, antisystemic parties, Syriza and Golden Dawn. We use data based on actual vote shares across 13 Greek peripheries from four general elections over the period 2004–2012. Our results are in accordance with the prediction of the punishmentsanctioning model, namely that incumbents are supported by voters in good times, whereas voters punish them during bad times. In this vein, we document that worsening economic conditions since 2008 have led the Greek electorate to reduce support for traditional parties and move to non-traditional populist parties, like the left-wing Syriza and the ultra-right-wing Golden Dawn. Yet we find an asymmetry between these two non-systemic parties: while electoral support for Syriza is found to be strongly influenced by changes in per-capita GDP growth and unemployment, this is not the case for Golden Dawn. Indeed, our estimates suggest that the increased electoral support for Golden Dawn has been related mainly to the forced fiscal deficit cuts associated with Greece’s bailout programme. This suggests that the Greek electorate does not believe that Golden Dawn can effectively address the country’s economic problems.

Full text pdf

Does the Impact of Aid for Trade on Export Product Diversification depend on Structural economic policies in Recipient-Countries (p.59)

by S K Gnangnon

Abstract: This paper examines the extent to which Aid for Trade interventions interact with long-term structural economic policies in recipient countries, to affect these countries’ export product diversification path. These include trade policy, international financial policy and domestic financial development. We additionally consider institutional and governance quality which, by contributing to the promotion of a supportive business environment, could also alter countries’ path of export product diversification. The analysis focuses on 112 countries over the period 2002–2015 and uses the system Generalised Method of Moments approach. Results suggest that Aid for Trade is conducive to export product diversification in countries that implement greater trade policy liberalisation, or have greater financial openness, or better institutional and governance quality. However, Aid for Trade tends to enhance export product concentration in countries with higher levels of financial development.

Full text pdf

Part 2, September

by S K Gnangnon

Abstract: This paper examines the extent to which Aid for Trade interventions interact with long-term structural economic policies in recipient countries, to affect these countries' export product diversification path. These include trade policy, international financial policy and domestic financial development. We additionally consider institutional and governance quality which, by contributing to the promotion of a supportive business environment, could also alter countries' path of export product diversification. The analysis focuses on 112 countries over the period 2002-2015 and uses the system Generalised Method of Moments approach. Results suggest that Aid for Trade is conducive to export product diversification in countries that implement greater trade policy liberalisation, or have greater financial openness, or better institutional and governance quality. However, Aid for Trade tends to enhance export product concentration in countries with higher levels of financial development

Full text pdf

US Bilateral Trade with Euro Area Members: An Asymmetry Analysis of the J-Curve Effect (p.21)

by M Bahmani-Oskooee and H Harvey

Abstract: Recent application of nonlinear asymmetry error-correction modeling and cointegration has revealed more support for the J-curve phenomenon compared to symmetric and linear ARDL approach. We add to this literature by considering the bilateral trade balance of the US with each of the 12 original members of the euro area. While the linear approach supported the J-curve effect only for the US trade balance with three countries (Greece, Italy, and Luxembourg), the nonlinear approach supports it for the US trade balance with five partners (Finland, Greece, Italy, Luxembourg, and Portugal). Clearly, introducing nonlinear adjustment of the real exchange rate yields more support for the J-curve effect.

Full text pdf

Perceptions and opinions of non-economics majors regarding economics - evidence from German survey data (p.37)

by M Sidki and D Boll

Abstract: This paper investigates whether the common factors that motivate economics majors to study economics also apply to non-economics majors. Using data from a survey of business students from Germany, this paper explores the reasons for increased interest in economics based on perceptions and opinions regarding economics. The results suggest that the influence of opinions regarding economics aligns with related research; therefore, future income and job-related expectations are also relevant motivational factors for non-economics majors. This is also true in relation to the students' perceptions of their experiences with economics lectures. The calculation of marginal effects enables additional insights into the interdependencies of the identified factors. The influences not only hold on average but also indicate a predominantly consistent pattern when moving by one point on the Likert scale.

Full text pdf

Modelling Alternative Macroprudential Policies with Financial Frictions (p. 57)

by S Yu

Abstract: This paper studies the effectiveness of macroprudential policy in a New Keynesian DSGE model with financial frictions. The financial sector is modelled vis-à-vis Gertler and Karadi (2011) with endogenous bank leverage ratio. Macroprudential policies operate independently of standard monetary policy targeting price stability, and the simulation results show that they can mitigate shocks and stabilise credit. First, a countercyclical feedback rule to regulate the loan-to-value (LTV) ratio of the borrowing household is imposed. On the other hand, a proportional tax policy is implemented to restrict the leverage ratio of financial intermediaries during economic booms. The LTV ratio regulation significantly dampens economic fluctuations but shifts credit towards the business sector. Comparatively, the tax policy stabilises the aggregate credit market more effectively by directly controlling the balance sheet of financial intermediaries. Nonetheless, policymakers may face high administering and monitoring costs when implementing the tax policy, as well as a notable trade-off between economic growth and financial stability. The qualitative results remain robust when a "leaning-against-the-wind" monetary policy is introduced. The paper concludes with an extended discussion on the potential trade-off between the pursuit of price and finance stability.

Full text pdf

Top of page