Journal of Contemporary Macroeconomic Issues

The Impact of Climate Induced Agricultural Loan Recovery on Financial Stability; Evidence from the Emerging Economy Pakistan

Fakhrul Wahab — 2022-12-01

Abstract

Financial stability acts as a backbone for economic stability and sustainable growth. The flow and allocation of the financial resources to the most demanding economic sectors by ensuring the loans against their collateral values, but the loans to the agriculture sectors are sensitive to the climatic uncertain factors. The climate change crisis motivates us to explore the impacts of the climate change induced agricultural loan recovery on financial stability. In particular, we study whether a decline in agricultural loan recovery has any impact on financial stability. We use a panel of 82 districts over a period of 21 years i.e., 2000-2020 to estimate the impact of climate change induced agricultural loan recovery on financial stability. We apply Autoregressive Distributed lag (ARDL), Regression to estimate the impacts of climate change induced agricultural recovery on financial stability across the sampled districts. We find that the impact of climate induced agricultural loan recoveries and equities to liabilities ratio negatively impact the financial stability of Pakistani banks; profitability and non-performing loan (NPLs) positively impact the financial stability in the short run. In the long-run, NPLs significantly negatively impact the financial stability, return on assets is insignificant and other model variables loan recoveries, the retained earnings to assets ratio, and equities to liabilities ratio positively impact the financial stability

Fiscal Consolidation and, Current-Account Dynamics in South-Asian Countries.

Fareeha Riaz — 2022-12-01

The study observes the effect of fiscal-policy shocks upon current-account balances and, contributed to provide an insight that how fiscal-policy shocks can influence current-account. For this purpose, Panel Structural Vector Autoregressive (PSVAR) model has been employed to investigate the influence of fiscal-policy shocks upon current-account considering the selected South-Asian Countries for the time period of 1984-2019. It provides an understanding that in what manner, fiscal shocks can determine the structure of current-account, and the effectiveness of output shocks, and, government shocks to manage the current account deficits. The main contribution of present study is considering South-Asia as an emerging-market characterized by massive deficits in current-account and, macroeconomic instability. The results suggest that expansionary fiscal shocks policy reduces the deficit in current account, which specify a divergence from twin-deficit approach.

The Dynamic Relationship Between Financial Development and Economic Complexity in Pakistan

Maryam Arooj — 2022-12-10

Abstract

Globalization places lots of challenges for emerging nations seeking long-term economic development. These are linked to several other issues, low exports as a consequence of worldwide competitiveness, low foreign currency reserves, rising fuel prices, WTO regulations, and so on. To overcome these obstacles, it is necessary to compete on a global scale. This can be attained by increasing specialization through technological innovation, new manufacturing methods, product diversification, etc. The current global competitive situation and complexity increased pace of the latest technological, financial development, and innovation led this study to examine this relationship in the case of a developing country like Pakistan. The objective of the study is to determine the dynamic relationship between financial development and economic complexity using annual time series analysis from 1990-2019, that was less evident in existing literature in case of Pakistan best of the authors’ knowledge. The modeling approach of this study was conducted by using economic complexity theory based on comparative advantage theory. The ARDL bond testing approach is used for empirical estimation. The findings suggests that, cointegration exists in the model, financial development positively impacted the economic complexity in Pakistan during the reference period. Thus, it is recommended that the State Bank of Pakistan should adopt flexible financial policies and ease of doing business, expands bank networks, which increases people’s access to finance and raises their capacity to invest in a business, research and Development.

Does Inflation and Economic Growth Affect Unemployment? Evidence From SAARC Countries

Ali Zeb — 2022-12-23

Several studies have tested the relationship between inflation, economic growth, and unemployment. However, most studies investigate these linkages using data on single/individual countries involving two of these variables in most cases, thereby impeding a broader investigation. This paper analyzes the relationship between inflation, economic growth, and unemployment in a sample comprising SAARC countries. This is accomplished by analyzing panel data on these countries from 1990 to 2015 using fixed effects. Results indicate that economic growth and inflation on their own negatively affect unemployment in SAARC countries. Conversely, the combined impact of economic growth and inflation on unemployment is positive and statistically significant. The study further finds that certain control variables, such as human capital, trade, and foreign direct investment, negatively impact unemployment in SAARC countries.

Detection of Price Bubbles in Social Media Stock Markets

Mumtaz Ahmed — 2022-12-31

Price bubbles are a common occurrence in the financial and asset markets. There exist numerous studies on detecting price bubbles considering different sectors of countries across the globe, however, very limited work is available on stock price bubbles related to social media. The present research takes a lead and detects multiple and periodically collapsing bubbles in stock prices of four popular social media platforms, namely, Facebook, Pinterest, Snapchat, and Twitter. The empirical analysis is based on the recently developed state of art generalized supremum augmented Dickey-Fully (GSADF) testing approach by Phillips et al. (2015) and it has the advantage of detecting multiple and periodically collapsing bubbles in contrast to rival approaches of bubble detection. The empirical results based on weekly and monthly closing prices spanning over the period 2012 to 2020, provide interesting insights regarding the existence and date stamping of periodically collapsing (multiple) bubbles. The empirical results may be helpful for social media developers and investors to forecast their future decisions.

Workers' Remittances and Children’s Education: The Case of Pakistan

Misbah Nosheen — 2022-12-31

The study's goal is to discover how remittances affect Pakistani children's access to a quality education. To answer the issue, the paper analyzes data latest (2018-2019) version of the Pakistan Social Living Standard Measurement Survey (PSLM). The results of the logit and probit models show that remittance-receiving families are more likely than non-receiving families to have educated children. Furthermore, remittances show that changing the pattern of monthly transfer amount increases the chance of children enrolling in school by 0.15 percent. Furthermore, urban families have greater marginal impacts than rural families. Thus, there should be a balance where job possibilities for educated individuals are created within the nation. Low-skilled workers, on the other hand, are prepared to work abroad and support their home economies through remittances.

Foreign Direct Investment by Multinational Firms and Transfer of Technology to Developing Nations like Nepal

Quratulain — 2022-12-31

Foreign direct investment (FDI) is a vital source of capital for the financial growth of developing countries. This study was conducted to find out the FDI by international companies and the allocation of technology, with a particular focus on developing nations like Nepal. The data was collected through secondary resources, i.e., journals, books, reports, websites, etc. The results were analyzed under the policies related to FDI. This study found that Nepal’s laws and regulations governing foreign investment are controlled by the Foreign Investment and Technology Transfer Act (FITTA) (1992). The effect of MNCs in Nepal is that small local businesses are becoming more export-oriented, especially in wool and carpet. Furthermore, MNCs offer a bundle that includes new technology, funding, access to markets, and managerial approaches for the formation and distribution of services and goods. Nepal has encouraged FDI inflows in recent years by creating an investor-friendly environment and implementing reforms related to FDI. The benefits of FDI depend on the technical skills of the companies in the host country. So, there is a need for Nepal to improve technical skills in the country to attract more FDI to increase GDP in the country.

Governance as a Stimulator for Foreign Direct Investment in Pakistan: A Non-Linear ARDL Approach

Mahnaz Muhammad Ali — 2022-12-31

This paper aims to emphasize governance as the driving force for foreign direct investment in the case of Pakistan. The research occupies times series data over the time frame 2000 to 2021 for analysis. Based on unit root approximation, the research employs the non-linear autoregressive distributed lagged modeling (NARDL) approach for empirical investigation. The research regresses governance effectiveness, population growth, domestic savings, and remittances on foreign direct investment. According to NARDL statistics, an increase in governance effectiveness will lead to a 45 percent increase in foreign investment inflows, while a decline in governance effectiveness may incur a 39 percent decline in foreign investment inflows. The study concludes that foreign direct investment in developing economies like Pakistan largely depends on governance and its effectiveness. Besides, population growth sustains a strong static influence on foreign investment inflows. All remaining variables such as domestic savings and remittances have also confirmed their statistical significance.