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ECONOMIC ISSUES

Volume 26 (2021)

Part 1, March

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Part 1, March

Efficiency of Financial Integration, Foreign Direct Investment and Output Growth: Policy Options for Pollution Abatement in Africa (p.1)

by E P Mesagan

Abstract: This paper evaluates the impact of financial integration on environmental pollution through foreign direct investment and output growth channels between 1980 and 2017. The study employs panel cointegration techniques using the fully modified ordinary least squares to estimate the country-specific and panel data from the five largest African nations. The findings show that financial integration positively impacts pollution in Nigeria, Algeria, Egypt, Angola, and in the panel, while it reduces pollution in South Africa. Also, financial integration lowers pollution through the foreign investment channel in the panel, Nigeria, Egypt, Angola and Algeria, but not in South Africa. Lastly, financial integration increases pollution through the output growth channel in the panel, Algeria, South Africa, Nigeria and Angola, but not in Egypt. Pollution-reduction policies are then recommended for the African region.

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Does UK social housing affect housing prices and economic growth? An application of the ARDL model (p.21)

by F Chorley and C Liu

Abstract: This paper aims to establish a relationship between social housing, house prices and the whole economy using ARDL models. We find that there is a negative relationship between social housing and house prices in the short run but no evidence in the long term. Additionally, social housing was found to be inversely related to the economic growth of the UK economy in the long run but not in the short run. Based on these findings, increasing social housing can benefit younger families with affordability issues in the short term without causing any long-term concerns in the housing market. However, it does not help economic growth in the long run. Therefore, the government must consider a balance of trade-off between the housing market and the whole economy.

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Does the Covid-19 Shock Matter for Monetary Policy? (p.45)

by N Apergis

Abstract: This paper explores for the first time how the Covid-19 shock affects a monetary policy rule after it has been separated from other potential structural shocks. The novelty of this empirical analysis will illustrate explicitly why monetary authorities can respond immediately to the pandemic crisis by cutting policy rates. The findings show that central banks behave differently to different types of shock, with the long-run responses of policy rates to inflation meeting the Taylor principle for the Covid-19 shock. The results are robust to alternative modelling specifications. Monetary policy rules that explicitly consider the pandemic crisis can play a vital role in limiting the economic and financial damage caused by efforts to contain Covid-19 and, in that way, can help support the strict public health measures that are needed to save lives and set the stage for economic recovery.

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US Export Earnings from and Import Payments to German Industries: Role of the Real Exchange Rate and Asymmetry (p.57)

by M Bahmani-Oskooee, R Nouira and Sami Saafi

Abstract: We add to the new literature findings on the asymmetric effects of exchange rate changes on a country's export and import values by considering nearly 20 industries that trade between the US and Germany. These industries contribute more than 90 per cent of the trade between the two countries. We find short-run asymmetric effects of exchange rate changes on export and import values in nearly all industries. However, short-run asymmetric effects translate into long-run asymmetric effects in four US exporting industries with a total trade share of 21.62 per cent and six US importing industries with a total trade share of 34.53 per cent. These findings were absent when we first estimated a traditional symmetric or linear model. The approach helped us to identify industries whose exports earning (imports value) could benefit from dollar depreciation (appreciation) and vice versa.

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