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Public Debt and Economic Growth in Sub-saharan African Countries: A Panel Data Analysis
Issue:
Volume 10, Issue 3, September 2021
Pages:
68-78
Received:
22 May 2021
Accepted:
10 July 2021
Published:
21 July 2021
Abstract: Most studies made on the effect of public debt on economic growth especially in high or middle-income economies separately or in both argues that debt has positive effect at early stage and then negative after some threshold beyond which it deteriorate economy (Laffer curve effect). In less developed countries like sub Saharan African (SSA) countries public debt is considered as a potential remedy to finance budget deficit. However, its role in economic growth is debatable over a long period. This depends on the way they utilize and inject it in the economy. Thus, this study aimed at investigating the impact of public debt on economic growth (real per-capita GDP) using panel data of 13 years (2005-2018) in 18 sub–Saharan African countries. The two-step system Generalized Method of Moment (2SSYS-GMM) method is employed and considering the two-way linkage between the two variables simultaneous equation model of two equations is used to identify the effect of public debt on economic growth. The results indicate that a negative and statistically significant bidirectional relationship between public debt and economic growth of the SSA countries considered in the panel. However, it doesn’t justify the Laffer curve (non-linear) effect of debt on economic growth. The result also shows that gross national saving, export and broad money has significantly positive effect on economic growth. Thus, the study recommends using debt fund in more productive ways to support the economy. Further, the countries should focus more on national savings mobilization, export promotion and improve money supply management than looking for more debt.
Abstract: Most studies made on the effect of public debt on economic growth especially in high or middle-income economies separately or in both argues that debt has positive effect at early stage and then negative after some threshold beyond which it deteriorate economy (Laffer curve effect). In less developed countries like sub Saharan African (SSA) countri...
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On the Country of Origin Effect of Eco-Label
Issue:
Volume 10, Issue 3, September 2021
Pages:
79-86
Received:
4 July 2021
Accepted:
13 July 2021
Published:
27 July 2021
Abstract: With the rapid development of global industrialization and urbanization, the ecological problems is increasingly aggravating. The consumers’ demand for safety and environment friendly food is increasing. Taking organic tomato as an example, we design the choice experiment to acquire 847 consumers’ relevant data from Shandong province, and use the random parameters logit model to investigate the consumers' preferences for organic labels from different countries (or districts). The results show that consumers have the highest willing to pay for EU organic label, the Chinese Hong Kong organic label, the Brazil organic label and the China organic label are behind successively. The influence of the ecological consciousness on the consumer preference is small. In general, consumers’ preference orders for organic labels from different countries (or districts) are the same for all ecological consciousness groups. The willingness to pay of the consumers in the low ecological consciousness group and the middle ecological consciousness group are very close, while the willingness to pay of the consumers in the high ecological consciousness group is slightly higher than that of the consumers in the low and middle ecological consciousness group. Food safety risk consciousness has significant effect on the consumer preference, and the larger differences exist between the organic labels which are from different countries. The character in effect of country of origin and its way of changing, maybe not only as the important basis of certificating service choice and target market positioning strategy of food provider, but also hope to have reference value for Chinese certification system reform and the development of certification food market.
Abstract: With the rapid development of global industrialization and urbanization, the ecological problems is increasingly aggravating. The consumers’ demand for safety and environment friendly food is increasing. Taking organic tomato as an example, we design the choice experiment to acquire 847 consumers’ relevant data from Shandong province, and use the r...
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The Role of Inclusive Finance in the Quest for Inclusive Growth
Israël Sawadogo,
Ndiack Fall
Issue:
Volume 10, Issue 3, September 2021
Pages:
87-93
Received:
25 May 2021
Accepted:
8 June 2021
Published:
24 August 2021
Abstract: This paper aims to assess the effect of inclusive finance on the level of inclusive growth in West African Economic and Monetary Union (WAEMU) countries. For that purpose, a synthetic indicator for inclusive growth is elaborated. Then, this indicator is used as an endogenous variable in a dynamic panel model including the main factors of the financial system as exogenous. About financial variables used in this paper, inclusive finance is apprehended by rate of use of banking services and microfinance penetration rate. In addition, the different types of bank interest rates are used in this analysis to show their effects on the evolution of inclusive growth. Results showed a positive and significant effect of the development of banking services on inclusion of growth in the (WAEMU) countries. However, the penetration rate of microfinance services did not show a significant effect on the evolution of inclusive growth of these economies. The levels of interest rates granted by banks according to the type of beneficiary (loans to individuals) or the item of use (equipment loans and consumer loans) negatively influence inclusive growth in the WAEMU countries. Overall, these results indicate that actions to promote the use of banking services would be beneficial to the process of inclusion of growth for WAEMU countries. With regard to microfinance services, actions must first focus on improving the efficiency of current microfinance services and then proceed to the popularization of these services.
Abstract: This paper aims to assess the effect of inclusive finance on the level of inclusive growth in West African Economic and Monetary Union (WAEMU) countries. For that purpose, a synthetic indicator for inclusive growth is elaborated. Then, this indicator is used as an endogenous variable in a dynamic panel model including the main factors of the financ...
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An Analytical Expression for Credit Valuation Adjustment Pricing with Wrong-Way Risk
Kelin Pan,
Chandra Khandrika
Issue:
Volume 10, Issue 3, September 2021
Pages:
94-104
Received:
23 May 2021
Accepted:
9 June 2021
Published:
6 September 2021
Abstract: Recently, financial institutions were required to provide the financial derivatives instrument level credit valuation adjustment (CVA) by the new accounting standard. CVA trading desks are facing difficulties to calculate a netting-set level CVA with wrong-way risk (WWR) since the dynamics of the exposures and probability of default (PD) are separated and calculated by different counterparty credit risk (CCR) computing systems. Another difficult work is that the netting-set level CVA mixed the pricing models for all trades under a netting-set. It is significant to develop a new CVA model that is based on the credit adjustment to the existing pricing model under one risk-neutral framework. This paper presents the work on CVA with WWR under the credit deterioration dynamics in both normal and stressed economic conditions. In terms of the double-correlation structure that is constructed based on the Gaussian latent variable models we propose an analytical expression of CVA for the fundamental financial derivatives such as futures or forwards contracts. The double-correlation structure captures the market- and asset-credit correlations. The proposed CVA pricing framework is based on the credit deterioration dynamics rather than default dynamics. The credit deterioration index (CDI) is defined as the limit of the credit deterioration variable and calculated using the rating agency credit rating transition data. The proposed CVA with WWR model is a function of the correlations, CDI, counterparty probability of default, loss given default, interest rate and volatility of the traded derivatives. The market- and asset-credit correlation parameters are calibrated to either the normal or stressed market. Under the stressed market, the scenario design, shock variable selection and shock magnitude are discussed. The numerical results show that the CVA is an increasing function of the market-credit correlation and a decreasing function of the credit rating. The stressed CVA is about four times higher than the normal CVA.
Abstract: Recently, financial institutions were required to provide the financial derivatives instrument level credit valuation adjustment (CVA) by the new accounting standard. CVA trading desks are facing difficulties to calculate a netting-set level CVA with wrong-way risk (WWR) since the dynamics of the exposures and probability of default (PD) are separa...
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