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Analysis of Causal Nexus between Defense Spending and Economic Growth in Nigeria: A Toda-Yamamoto Approach

Pages: 76-84
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Analysis of Causal Nexus between Defense Spending and Economic Growth in Nigeria: A Toda-Yamamoto Approach

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DOI: 10.18488/journal.29.2020.71.76.84

Ofino, Emmanuel Eromosele , Orisadare, Monica Adele

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Ofino, Emmanuel Eromosele , Orisadare, Monica Adele (2020). Analysis of Causal Nexus between Defense Spending and Economic Growth in Nigeria: A Toda-Yamamoto Approach. The Economics and Finance Letters, 7(1): 76-84. DOI: 10.18488/journal.29.2020.71.76.84
The research analysed the causal nexus between defense spending and growth in Nigeria. These were done with the aim to ascertain the causality direction between spending in defense sector and growth in Nigeria. Annual data from secondary sources spanning from 1980- 2017 were employed for the study. Defense spending data was gotten from the Statistical Bulletin of the Central Bank of Nigeria (CBN), whereas real Gross Domestic Product (RGDP) was gotten from World Bank Development Indicator (WDI). Toda-Yamamoto (TY) causality method was used to ascertain the causality direction between defense spending and economic growth. Lastly, empirical results using Toda-Yamamoto (TY) technique showed that there was no direction of causality between defense spending and economic growth within the research period since the probability value of LTOMILEX (0.38) and LRGDP (0.22) were higher than 0.05 level of significance. This denotes that defense spending did not granger cause economic growth and vis-a-ditto within the study. Therefore, the paper concluded that no direction of causality exist between defense spending and economic growth in Nigeria within the span of study.
Contribution/ Originality
This study contributes in the existing literature on the causal nexus between defense spending and economic growth. The study uses new estimation methodology of Toda-Yamamoto (TY). It originates new formula for analyzing the causality. Hence, the study documents no direction of causality between the variables.

Management of The CFA Franc: What are the Fundamentals of the Real Exchange Rate in West African Economic and Monetary Union (WAEMU)?

Pages: 57-75
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Management of The CFA Franc: What are the Fundamentals of the Real Exchange Rate in West African Economic and Monetary Union (WAEMU)?

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DOI: 10.18488/journal.29.2020.71.57.75

Kwami Ossadzifo Wonyra , Honore Tenakoua

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Kwami Ossadzifo Wonyra , Honore Tenakoua (2020). Management of The CFA Franc: What are the Fundamentals of the Real Exchange Rate in West African Economic and Monetary Union (WAEMU)?. The Economics and Finance Letters, 7(1): 57-75. DOI: 10.18488/journal.29.2020.71.57.75
Identifying the fundamentals of the real exchange rate of the CFA franc in West African Economic and Monetary Union (WAEMU) is the main objective of this paper. To achieve this, we used panel data over a period from 1984 to 2014. To achieve this objective, we use the Pooled Mean Group, inspired by the work of Pesaran, Shin, and Smith (1999) with data from secondary sources from the World Bank and the International Monetary Fund. The results obtained show that investment, government spending, trade openness and balance significantly influence the real exchange rate of the long-term CFA franc in WAEMU. With regard to the short-term relationship, the results show that only productivity and the trade balance are the fundamentals that significantly influence the real exchange rate of the CFA franc. It is then necessary to find a solution to this extroversion of WAEMU economies, which solution would be the promotion of the import substitution policy. A policy should be put in place to enable our economies to benefit from trade liberalization. This involves promoting exports of high value-added products in order to improve the external position of economies and to address the instability of commodity prices on which developing country exporters of primary goods depend.
Contribution/ Originality
This study contributes to the existing literature by Identifying the fundamentals of the real exchange rate of the CFA franc in West African Economic and Monetary Union (WAEMU).

Factors Affecting the Individual Stock Price Index (IHSI) Industrial Manufacturing Sector in Indonesia, Automotive Sub Sectors, and Components in Indonesia Stock Exchange (IDX)

Pages: 47-56
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Factors Affecting the Individual Stock Price Index (IHSI) Industrial Manufacturing Sector in Indonesia, Automotive Sub Sectors, and Components in Indonesia Stock Exchange (IDX)

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DOI: 10.18488/journal.29.2020.71.47.56

M. Noor Salim , Sutarjo .

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M. Noor Salim , Sutarjo . (2020). Factors Affecting the Individual Stock Price Index (IHSI) Industrial Manufacturing Sector in Indonesia, Automotive Sub Sectors, and Components in Indonesia Stock Exchange (IDX). The Economics and Finance Letters, 7(1): 47-56. DOI: 10.18488/journal.29.2020.71.47.56
This study aims to examine and analyze: (1) the Effect of Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA) and Return On Equity (ROE) on the Individual Stock Price Index (IHSI), ( 2) Effect of Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA), Return On Equity (ROE) and Individual Stock Price Index (IHSI) on Investment (INV), (3) Effect of Price Index Individual Share (IHSI) to Investment (INV). The population of this study is the Manufacturing Industry company in the Automotive and Components Industry sub-sector in Indonesia with an observation period from 2014 to 2018, consisting of a sample of 10 Automotive Industry companies and components. Data analysis techniques in this study used Panel Data Regression analysis, the regression model used was to combine cross-data data with time-series data. The results of data analysis prove that the variable Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA), Return On Equity (ROE) Simultaneous significant positive effect on the Individual Stock Price Index (IHSI), but together with or simultaneously Variable Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA), Return On Equity (ROE) and The Individual Share Price Index (IHSI) has a positive effect significant to Investment (INV), the Individual Stock Price Index (IHSI) variable has no significant impact on Investment (INV) either partially or simultaneously.
Contribution/ Originality
This research contributes to existing literature by examining (1) the Effect of Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA) and Return On Equity (ROE) on the Individual Stock Price Index (IHSI), ( 2) Effect of Current Ratio (CR), Debt of Equity Ratio (DER), Return On Assets (ROA), Return On Equity (ROE) and Individual Stock Price Index (IHSI) on Investment (INV), (3) Effect of Price Index Individual Share (IHSI) to Investment (INV).

An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia

Pages: 23-46
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An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia

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DOI: 10.18488/journal.29.2020.71.23.46

Muntasir Murshed , Seemran Rashid

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Muntasir Murshed , Seemran Rashid (2020). An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia. The Economics and Finance Letters, 7(1): 23-46. DOI: 10.18488/journal.29.2020.71.23.46
Inflows of foreign currencies into the developing economies, in particular, have been associated with the Dutch disease phenomenon whereby a surge in such inflows is believed to stimulate real appreciation of the real exchange rate. As a result, there could be deindustrialization impacts on the recipient economies following a growth in the non-tradable sector at the expense of the tradable sector's contraction. This paper empirically investigates the dynamics of real exchange rate responses to official development assistance, foreign direct investments and international remittances flowing into the four emerging South Asian economies Bangladesh, India, Pakistan, and Sri Lanka. The results from the extensive econometric analyses show that a 1% rise in the total volume of official development assistance and remittances received appreciates the real exchange rate by 0.18% and 0.23% respectively. In contrast, a 1% rise in FDI inflows was found to trigger a 0.19% depreciation of the real exchange rate. Furthermore, the Dumitrescu and Hurlin (2012) test results reveal unidirectional long run causalities running from official development assistances and FDI inflow to real exchange rate while certifying a bidirectional causal association between inward international remittances and the real exchange rate.
Contribution/ Originality
This paper makes a novel attempt to model the real exchange rate responses to foreign inflows, using panel-data estimators, in the context of the selected South Asian Economies.

Nexus between Non-Oil Sectoral Contribution and Economic Growth in Nigeria 1981-2018

Pages: 13-22
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Nexus between Non-Oil Sectoral Contribution and Economic Growth in Nigeria 1981-2018

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DOI: 10.18488/journal.29.2020.71.13.22

Akanimo Ernest Usoro , Wasiu Akintunde Yusuf , Bartholomew O. N. Okafor

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Akande, M. and O.-B. Adeyinka, 2015. Diversification of the Nigerian economy towards a sustainable growth and economic development. International Journal of Economics, Finance and Management Sciencess, 3(2): 107-114.Available at: https://doi.org/10.11648/j.ijefm.20150302.15.

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Akanimo Ernest Usoro , Wasiu Akintunde Yusuf , Bartholomew O. N. Okafor (2020). Nexus between Non-Oil Sectoral Contribution and Economic Growth in Nigeria 1981-2018. The Economics and Finance Letters, 7(1): 13-22. DOI: 10.18488/journal.29.2020.71.13.22
Nigeria has the largest economy in Africa and has the potential of rising through the world rankings to be among the top economies in the world. To achieve this however, diversification from over dependence on crude oil is required. Nigeria’s intrinsic potential lies beyond oil; harnessing this potential has become an imperative given the volatility of oil prices. This study identifies the non-oil sector as a priority sector with the most dominant transmission links to the overall economy. This sector in the medium-to-long term is key to boosting employment, reducing poverty and improving domestic food security. Therefore, the nexus between non-oil sector contribution and Nigeria economic growth is investigated, vis-a-vis the effect of government’s increased focus and investment in this sector. The study employed Autoregressive Distributed Lag (ARDL) model and Vector Error Correction Model (VECM). The reason for using this model is that it is simple and can be applied easily without consideration for the stationarity of the variables (at level or at first difference). The results confirmed the short-run relationship between the variables where non-oil revenue immediately impact the GDP growth of Nigeria by 8.49%. The study then conclude that the non-oil sector is crucial to the economic growth of Nigeria and therefore suggested increased government investment in the non-oil sector as well as strengthening of institutions.
Contribution/ Originality
This study provides a better understanding of the non-oil sector and the factors that enhances its ability to function at full capacity as well as the dangers that the over reliance on oil poses to the nation.

An Agnostic Analysis of Exchange Rate Movement in Ghana

Pages: 1-12
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An Agnostic Analysis of Exchange Rate Movement in Ghana

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DOI: 10.18488/journal.29.2020.71.1.12

Shuffield Seyram Asafo , Adelajda Matuka

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Shuffield Seyram Asafo , Adelajda Matuka (2020). An Agnostic Analysis of Exchange Rate Movement in Ghana. The Economics and Finance Letters, 7(1): 1-12. DOI: 10.18488/journal.29.2020.71.1.12
Based on quarterly data for the period 2006:3-2018:4, the effect of exchange movement on a set of price indices in Ghana is examined via a Bayesian Vector Autoregressive model. Using normal inverted-Wishart priors, the posterior estimates are generated by Markov Chain Monte Carlo draws via a sign restriction algorithm. Findings showed that the response of consumer prices (CPI), producer prices (PPI) and non-food prices (NFP) to exchange rate shocks is low and incomplete. Furthermore, the forecast error variance decomposition (FEVD) indicated that CPI is most responsive to exchange rate impulses than NFP and PPI. In addition, inflationary pressures in Ghana emanated from exchange rate sources other than monetary sources. The paper recommends “pricing in local currency” as a deliberate policy to insulate domestic prices from volatilities in the exchange rate.
Contribution/ Originality
This study used a new estimation methodology to examine the effect of exchange rate dynamics on prices in Ghana.