The Economics and Finance Letters

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No. 4

Bancassurance - Growth Guaranteed in India

Pages: 104-113
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Bancassurance - Growth Guaranteed in India

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DOI: 10.18488/journal.29/2014.1.4/29.4.104.113

Citation: 3

Anisa Jan , Hasnan Baber

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Anisa Jan , Hasnan Baber (2014). Bancassurance - Growth Guaranteed in India. The Economics and Finance Letters, 1(4): 104-113. DOI: 10.18488/journal.29/2014.1.4/29.4.104.113
The life insurance industry in India is and has been growing at a rapid rate since opening up of the sector in 2000. The size of the country, an assorted set of people pooled with problems of connectivity in rural areas, makes insurance selling in India a very difficult task. Life insurance companies require vast circulation strength and incredible human resource to come out to such a huge customer base. This delivery will undergo a sea transformation as various insurance companies are trying to bring insurance products into the lives of the common man by making them available at the most critical financial point, the local bank branch, through Bancassurance. Simply put, bancassurance is the method through which insurance products are sold to customers at their local banks.
Contribution/ Originality
This study contributes in the existing literature by looking at insurance product when get sold at critical financial point i.e bank. It highlights the potential growth of bancassurance in India with vast population and only small percent market of insurance is tapped so far. This paper will find the motivation of banks to sell insurance products through their own channels. 

Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework

Pages: 90-103
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Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework

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DOI: 10.18488/journal.29/2014.1.9/29.4.90.103

Citation: 6

Ugochukwu E. Anigbogu , Eleanya K. Nduka

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  1. Abiodun, L.N. and O.O. Elisha, 2012. Stock prices, stock market operations and Nigerian economic growth: A granger causality modelling. Global Advanced Research Journal of Management and Business Studies, 1(10): 375–383.
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Ugochukwu E. Anigbogu , Eleanya K. Nduka (2014). Stock Market Performance and Economic Growth: Evidence from Nigeria Employing Vector Error Correction Model Framework. The Economics and Finance Letters, 1(4): 90-103. DOI: 10.18488/journal.29/2014.1.9/29.4.90.103
This study examines the long-run and causal relationship between stock market performance and economic growth in Nigeria for the period from 1987Q1 to 2012Q4 ¬inclusive. The study employs the Augmented-Dickey Fuller test for unit root, the Johansen (1995) Maximum Likelihood cointegration technique and Vector Error Correction Model framework to capture long-run and short-run relationships in the cointegrating vectors of Nigerian stock market and economic growth. The study further employs Granger (1969) Causality, Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) to capture shocks transmission and AR root graph for stability. The optimum lag length was selected based on the Schwartz and Hannan-Quin information criteria. The results of the cointegration test confirm that there exists a long-run relationship between stock market performance and economic growth, while the causality test results suggest that stock market performance causes economic growth with feedback. The Impulse Response Function (IRF) and Forecast Error Variance Decomposition (FEVD) suggest that shocks from the stock market do not impede economic growth. Furthermore, the result of the AR root graph indicates that the Nigerian stock exchange market is not stable.  Hence, the current reforms and policies going on in the Nigerian stock exchange should be sustained to boost investors’ confidence and participation.
Contribution/ Originality
The paper’s primary contribution is finding that the Nigerian stock market is not stable.

Structural Breaks and the Long-Run Stability of Demand for Real Broad Money Function in Nigeria: A Gregory-Hansen Approach

Pages: 76-89
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Structural Breaks and the Long-Run Stability of Demand for Real Broad Money Function in Nigeria: A Gregory-Hansen Approach

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DOI: 10.18488/journal.29/2014.1.4/29.4.76.89

Citation: 1

Eleanya Kalu Nduka

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Eleanya Kalu Nduka (2014). Structural Breaks and the Long-Run Stability of Demand for Real Broad Money Function in Nigeria: A Gregory-Hansen Approach. The Economics and Finance Letters, 1(4): 76-89. DOI: 10.18488/journal.29/2014.1.4/29.4.76.89
This study examines the long-run demand for real broad money function and its stability in Nigeria for the period from 1970 to 2012 inclusive. The study employs the Augmented-Dickey Fuller and Phillips-Perron tests for unit root, the Gregory and Hanson (1996a; 1996b) cointegration test to capture endogenous structural breaks in the cointegrating vectors of Nigerian long-run money demand function, cumulative sum of recursive residuals (CUSUM) and cumulative sum of recursive residuals squares (CUSUMSQ) tests for structural stability proposed by Brown et al. (1975). In estimating the canonical specification models, extended specifications are also presented. The results of the cointegration test suggest that demand for real broad money went through a regime shift in 2005. The results further confirm that there exists a long-run relationship amongst real broad money demand, real income, real domestic interest rate, real exchange rate, rate of inflation and foreign interest rate. However, the result of CUSUMSQ shows that the demand for money function is stable, but has undergone some temporary periods of instability.  Hence, the apex bank in Nigeria can target the broad money (M2) aggregate to achieve macroeconomic objectives.
Contribution/ Originality
The paper’s primary contribution is finding that the Nigeria’s demand for money function has undergone some periods of instability. This finding is in contrast with the findings of previous studies. This explains the inability of the apex bank to match money supply with money demand.

The Role of Bank Loans in Monetary Policy Transmission in Malaysia

Pages: 70-75
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The Role of Bank Loans in Monetary Policy Transmission in Malaysia

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DOI: 10.18488/journal.29/2014.1.4/29.4.70.75

Citation: 2

Yu Hsing

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Yu Hsing (2014). The Role of Bank Loans in Monetary Policy Transmission in Malaysia. The Economics and Finance Letters, 1(4): 70-75. DOI: 10.18488/journal.29/2014.1.4/29.4.70.75
This study examines whether the bank lending channel holds for Malaysia based on a simultaneous-equation model consisting of the demand for and supply of bank loans. The three-stage least squares method to employed to estimate regression parameters. There is evidence of the bank lending channel for Malaysia because bank loan supply reacts negatively to the interbank rate and because monetary easing to purchase government bonds leads to more bank deposits and bank loan supply. In addition, depreciation of the Malaysian ringgit or a higher world interest rate results in a decrease in bank loan supply.
Contribution/ Originality
This paper’s primary contribution is to include the exchange rate and the foreign interest rate in bank loan supply, to employ a three-stage least squares method to estimate bank loan demand and supply separately, and to prove the effectiveness of monetary policy transmission.

Rate of Return Would Not Increase To the Extent of Annuity Saving Discount

Pages: 66-69
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Rate of Return Would Not Increase To the Extent of Annuity Saving Discount

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DOI: 10.18488/journal.29/2014.1.4/29.4.66.69

Yin-Ching Jan , Yu-Chun Lin

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  1. Caks, J., 1977. The coupon effect on yield to maturity. Journal of Finance, 32(1): 103-115.
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Yin-Ching Jan , Yu-Chun Lin (2014). Rate of Return Would Not Increase To the Extent of Annuity Saving Discount. The Economics and Finance Letters, 1(4): 66-69. DOI: 10.18488/journal.29/2014.1.4/29.4.66.69
This note demonstrates that when there is a discount on uniform cash flow, the rate of return would not increase to the extent of the discount. The extent to which the rate of return would increase depends on the investment horizon.
Contribution/ Originality
The relationship between annuity and rate of return had been well developed. The paper’s primary contribution is to provide the effect of the annual saving discount on the rate of return.

Foreign Direct Investment (FDI) and Employment: A Case of Province of Punjab, Pakistan

Pages: 59-65
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Foreign Direct Investment (FDI) and Employment: A Case of Province of Punjab, Pakistan

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DOI: 10.18488/journal.29/2014.1.4/29.4.59.65

Naila Sarwar , Mohammad Shujaat Mubarik

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Naila Sarwar , Mohammad Shujaat Mubarik (2014). Foreign Direct Investment (FDI) and Employment: A Case of Province of Punjab, Pakistan. The Economics and Finance Letters, 1(4): 59-65. DOI: 10.18488/journal.29/2014.1.4/29.4.59.65
Foreign direct investment is considered a significant source of capital inflows in developing countries. Along with its several impacts, FDI also influences the employment level of the host country. This study investigated the impact of foreign direct investment on employment in the province of Punjab, Pakistan. We employed the annual data from 1984-2010 to test this relationship. The stationary of the variables was checked by applying ADF test. To find the relationship among variables, we applied ARDL approach. We found existence of co-integration between FDI and employment. Results also illustrated a significant long run direct relationship between variables. 
Contribution/ Originality
This study contributes in the existing literature by looking into the FDI-employment relationship from provincial perspective. To best of our knowledge, such type of study in case of Province of Punjab has not been conducted.  Further, it highlights whether increasing FDI in Punjab affects employment or not. Thence, findings of the study can be useful in devising the economic policies related to employment and foreign direct investment in Punjab province.

Long-Run Relationships and Causality Tests Between Military Expenditure and Economic Growth in India

Pages: 49-58
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Long-Run Relationships and Causality Tests Between Military Expenditure and Economic Growth in India

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DOI: 10.18488/journal.29/2014.1.4/29.4.49.58

Citation: 14

Masoud Ali Khalid , Alhaji Bukar Mustapha

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Masoud Ali Khalid , Alhaji Bukar Mustapha (2014). Long-Run Relationships and Causality Tests Between Military Expenditure and Economic Growth in India. The Economics and Finance Letters, 1(4): 49-58. DOI: 10.18488/journal.29/2014.1.4/29.4.49.58
Economists recognize that the public expenditure has an impact on economic growth. The rising level of military spending over other classes of public expenditure like economic and social services has raised a serious concern among scholars and have been at the core of recent development literature and thinking.   In this study, we focus on to reexamine the effects of military spending on economic growth in India using annual data from the period of 1980 to 2011. The analysis is carried out within a multivariate setting that includes real GDP, real government military expenditure, population and real export.. In this paper, the autoregressive distributive lags (ARDL) cointegration approach is used to reexamine the long-run relationships among the variables. We then employ the Granger causality test to identify the direction of causality. The results for ARDL tests indicate that there is a significant relationship between military expenditure and economic growth in the short run, while the long run results suggest otherwise. While the estimated granger causality outcomes, revealed a unidirectional relationship between GDP and military spending.
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An Inventory Model with Lost Sale is Time Dependent

Pages: 39-48
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An Inventory Model with Lost Sale is Time Dependent

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DOI: 10.18488/journal.29/2014.1.4/29.4.39.48

Ying-Chieh Chen , Po-Yu Chen

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Ying-Chieh Chen , Po-Yu Chen (2014). An Inventory Model with Lost Sale is Time Dependent. The Economics and Finance Letters, 1(4): 39-48. DOI: 10.18488/journal.29/2014.1.4/29.4.39.48
In this paper, we shall construct an inventory model with partially backlogged shortage and Poisson demand. In the shortage period, we assume that lost sale is dependent on the length of waiting time. Under these assumptions, we find the optimal planning and shortage periods such that the expected profit per unit time is maximized. Also, we can estimate the optimal expected backordered quantity and the expected order quantity.
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The Impact of Human Capital on Economic Growth: Evidence from Tunisia Using Star and Stecm Models

Pages: 30-38
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The Impact of Human Capital on Economic Growth: Evidence from Tunisia Using Star and Stecm Models

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DOI: 10.18488/journal.29/2014.1.4/29.4.30.38

Citation: 2

Nidhal Mgadmi , Houssem Rachdi

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Nidhal Mgadmi , Houssem Rachdi (2014). The Impact of Human Capital on Economic Growth: Evidence from Tunisia Using Star and Stecm Models. The Economics and Finance Letters, 1(4): 30-38. DOI: 10.18488/journal.29/2014.1.4/29.4.30.38
Human capital is one of the most important drivers for economic growth. This paper aims to outline theoretical and empirical frameworks for thinking about the role of human capital in a model of endogenous growth. Only a small set of recent papers investigated the relationship between different educational levels and economic growth in one country. This first study conducted in Tunisia contributes to the existing literature by using Smooth Transition Autoregressive models (ESTAR, LSTAR) referring to non-linear least squares (NOLS) procedure to underline this non-linear relationship. The advantage of our modeling strategy is that the relationship between human capital and growth is nonlinear. The principal empirical finding conducted in Tunisia over the period 1974-2012 is that human capital exerts a significant influence on economic growth. 
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Labor and Economic Growth in Zimbabwe

Pages: 24-29
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Labor and Economic Growth in Zimbabwe

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DOI: 10.18488/journal.29/2014.1.4/29.4.24.29

Clainos Chidoko

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Clainos Chidoko (2014). Labor and Economic Growth in Zimbabwe. The Economics and Finance Letters, 1(4): 24-29. DOI: 10.18488/journal.29/2014.1.4/29.4.24.29
The study investigates the impact of labour on economic growth in Zimbabwe. The research uses a simple Ordinary Least Squares regression modeling method. The results suggest that labour and capital impact positively on Zimbabwe’s economic growth. The study recommends the government to pursue an employment-intensive strategy. It also recommends the government to develop an education and training system geared towards employment creation. 
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