Economic Issues Volume 26

ECONOMIC ISSUES

Volume 26 (2021)

Part 1, March

Please select from the titles below:

Articles

E P Mesagan, Efficiency of Financial Integration, Foreign Direct Investment and Output Growth: Policy Options for Pollution Abatement in Africa, Vol.26, No.1, p.1-19
F Chorley and C Liu, Does UK social housing affect housing prices and economic growth? An application of the ARDL model, Vol.26, No.1, p.21-43
N Apergis, Does the Covid-19 Shock Matter for Monetary Policy?, Vol.26, No.1, p.45-55
M Bahmani-Oskooee, R Nouira and Sami Saafi, US Export Earnings from and Import Payments to German Industries: Role of the Real Exchange Rate and Asymmetry, Vol.26, No.1, p.57-73

Book Reviews

Part 2, September

Please select from the titles below:

Articles

Book Reviews

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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Part 2, September

Aid for Trade and Import Product Diversification: To What Extent Does Export Product Diversification Matter? (p.1)

by S K Gnangnon

Abstract: The literature on the effect of Aid for Trade (AfT) has shown that AfT flows can be associated with greater export product diversification in recipient-countries. However, the import product diversification effect of AfT interventions hasreceived scant attention in this literature. The present article aims to fill this gap by examining whether AfT flows affect import product diversification when countries diversify their export product baskets. The empirical results suggest that AfT flows are associated with greater import product diversification in countries that diversify their export product baskets. This finding applies both to total AfT flows and its three major components, namely AfT flows for economic infrastructure, AfT flows for productive capacity, and AfT flows dedicated to trade policy and regulation. Additionally, the magnitude of the positive effect of total AfT flows on import product diversification increases as recipient-countries enjoy a convergence of their export product structure towards the world’s export product structure. On another note, the empirical analysis reveals that AfT flows induce greater import product diversification in countries that further liberalise their trade policies. These results have important policy implications for both donors and recipient-countries.

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On potential debt monetisation for China’s post-Covid recovery: what can we learn from the past? (p.39)

by Z Cao and Z Ou

Abstract: A measure of the degree of debt monetisation is constructed for its impact on the business cycle, to be studied in a standard VAR model. Debt monetisation is hardly stimulative, as it raises public demand that crowds out almost as much demand from the private sector. However, it generates inflation, presumably because of inflationary expectations. Nevertheless the impact of debt monetisation on business cycle dynamics is trivial, given the low efficiency of the monetary transmission mechanism. Unless policy proposals are for extraordinarily aggressive moves, or they are accompanied by monetary reforms which facilitate monetary transmission, the recent debate on debt monetisation, we argue, possesses more theoretical meaning than practical meaning for China’s post-Covid recovery.

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Date stamping on the explosiveness of public debt: Evidence from the USA (p.57)

by R Bhuyan, I Tarannum and N Hassan

Abstract: This paper examines the existence of explosive behaviours of public debt in the USA. Using the Supremum Augmented Dickey-Fuller (SADF) and Generalised SADF tests on data ranging from 1966 to 2018, we show that there is evidence of the beginning and end of several public debt explosiveness in the US. We observe that each explosiveness originates when the Backward Supremum Augmented Dickey-Fuller (BSADF) statistic exceeds its corresponding 95 per cent critical value and ends when its BSADF falls below that critical value. Further analysis shows that the explosive behaviours are dynamically positively correlated with trade openness and unemployment. The detected explosive debt suggests that fiscal sustainability is challenged and sound fiscal policies are absent. In order to keep on financing the costs of new debt issuance, government revenue sides are discussed.

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Are Environmental Taxes Effective in Curbing Air Pollution? Evidence from the United Kingdom (p.73)

by S Basu Roy and S G Dastidar

Abstract: There is mounting evidence that emissions of greenhouse gases trigger harmful environmental changes which, in turn, exert immense pressure on governments to reduce environmental damage, without impeding the rate of economic growth. Consequently, governments have been employing a variety of instruments, including taxes, at their disposal. In this context, the study examines the empirical relationship between environmental taxes and air pollution for the UK over the period 1997–2017, by employing the Vector Autoregression method and Granger causality tests. The econometric findings indicate that only energy taxes have been successful in curbing air pollution, whereas other environmental taxes, such as transport, pollution and resource taxes, have failed to exert any significant impact on air quality. We argue that factors such as ineffectiveness of the landfill tax, lack of efficient waste management practices and shortcomings in the motor vehicle tax system are offsetting the impacts of pollution and transport taxes.

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