Journal of Contemporary Macroeconomic Issues

Public Sector Governance, Economic Stability and Mediating Role of Public Debt for World Economies.

Shamaila Zareen — 2024-12-04

Several economic theories conclude that the relationship between public sector governance and macroeconomic stability is direct as better public sector governance improves economic stability or reduces macroeconomic instability. However, the literature provides us positive, negative and insignificant relationship between the both. Following the idea, our study aims to evaluate the mediating role of public debt in governance-stability association. For estimation, we have used a panel data of 102 developed and developing nations for the period 1996-2021 and employed one-way random effect estimator for the SUR system, as suggested by Biørn (2014). Our findings show that the public sector governance effectively improves macroeconomic stability through the channel of public debt for developed economies, however in the case of developing economies the role of public debt is quite opposite and relationship is negative. Moreover, public debt contributes positively in maximizing the macroeconomic stability for developed economies and the results demonstrate that well managed and smaller public debt mediates the governance-stability association. In developing economies, the public sector management policy should be reviewed and public debt should be managed at minimum possible level as the developed economies are having a comparatively manageable and constructive public debt. So, it is concluded that public sector governance improves the macroeconomic stability not only directly, but also indirectly through the channel of public sector debt.

Deciphering the Dynamics of Economic Development and Green Energy: An In-depth Analysis of OECD Nations

Saeed Ur Rahman — 2024-12-04

Worldwide, fossil fuel is employing to achieve the sustainability in the long term which is considered the main source of climate change and environmental degradation. Therefore, renewable energy is encouraging to develop and adopt alternative methods of power generation. This study aims to investigate the impact of economic development, trade openness, and technological progress on the adoption of green energy in OECD countries. For this objective a panel dataset of OECD is organized spanning from 1979-2022. Further, Fully Modified OLS and Dynamic OLS are employed to spotlight the fluctuating relationship among the parameters. The findings indicate that these factors have a dynamic and fluctuating relationship, with economic development fostering long-term adoption of green energy but impeding it in the short term. The study underscores the significance of international trade and technological advancement in advancing renewable energy use, with technological progress playing a crucial role in OECD countries. Ultimately, the research concludes that there is a substantive connection between economic growth, free trade, technological advancement, and green energy use in these countries. This study suggested that implementing policies that encourage trade openness, technological innovation, and sustainable economic development is essential to achieving ambitious renewable energy objectives and reducing carbon emissions.

Improving Pakistan’s Fiscal Policy: A Blueprint for Sustainable Development and Economic Growth

Haider Abbas — 2024-12-04

Historically, the fiscal policy of Pakistan has confronted with the challenges like structural inefficiencies, recurring fiscal deficit, and narrow tax base that has impede the sustainable development. Pakistan’s economic performance has experienced upheaval due to the 2022’s flash flooding and consumption-led growth model. However, following the successful completion of International Monetary Fund (IMF) standby agreement have contributed to the early signs of recovery that has improved cash inflows, robust agricultural growth rate of 6.5%, and exchange rate stabilization have collectively promoted economic stability in the FY2024. Nevertheless, primary challenges still persist; this paper through mixed method approach critically analyzes structural inefficiencies and provides findings for policymakers to bolster the Pakistan’s economy. Thus, the Policy recommendations suggest comprehensive measures to achieve economic sustainability.

Governance, Corruption and Income Inequality: A Panel Study of Selected Asian Countries

Faisal Abbas — 2024-12-09

The study investigated the relationship among governance, corruption, and income inequality in selected Asian countries over period 2000-2021. Data for Governance (Political Governance and Institutional Governance) was taken from World Governance Indicators (WGI). Principal Component Analysis (PCA) was used to create the governance index by using four indicators of WG: Political stability; no violence and voice & accountability; Rules of law and Control of corruption. Data of income inequality (Gini index) had been collected from Global Consumption and Income Project (GCIP). Data on corruption perception index (CPI) as proxy for corruption were taken from Transparency International. Fully Modified and Dynamic OLS (FMOL and DOLS) were used for dynamic analysis. The study explored inverse connection between governance and income inequality while positive impact of corruption on income inequality. Study suggested that the country should improve the quality of Governance as it leads to the improvement in the institutions. The improved institutions and politically stable country can reduce the corruption and income inequality. Finally, policymakers should establish the governance improving policies to tackle the corruption and income inequality.

Financial Inclusion and Development as Catalysts for Human Development: Insights from Selected Asian Economies

Rihaab Fareed — 2024-12-09

The current study reveals that financial inclusion and financial development are important determinants of human development in a few selected Asian nations. The authors have contributed panel data for 8 economies for the years starting from 2005 to 2018. The human development index is considered a dependent variable. It also checks for the impact of the number of commercial bank branches and the number of ATMs separately, taking the latter as a proxy for financial inclusion. Further, in this research, an attempt is also made to analyse the impact of financial inclusion on the human development index. It is found, by using fixed and random effect method, that the financial inclusion with all the other explanatory factors has significantly boosted up the human development of the Asian economies. Our results suggested the maximum monetary approach and services to promote human development in an economy. Much focus shall be made on better provision for education to brighten up the standard of living. It also suggests from the study a stable environment for more production, growth, and development.

The Asymmetric Effects of Exchange Rate Volatility on Trade Flows of Pakistan

Nimra Gul — 2024-12-13

This research investigates the effects of asymmetric volatility exchange rate on Pakistan's trade performance with major trade
partners. The effects of exchange rate trade (import & export) by utilizing variables such as real bilateral exchange rate, bilateral exchange rate volatility, and economic activities measured for Pakistan's major trading partners from 1985 to 2020.The researcher uses non-linear ARDL and linear ARDL techniques for estimation. They also apply co-integration tests, with the F-test being used for lagged value significance and the t-test for establishing significance. The linear ARDL of export and import in the short-run reveals that exchange rate volatility positively impacts Pakistan's exports. In the long run, all the partners positively impact imports.

An Interaction Effect of Human Capital and Democracy on Income Inequality in South Asia: A Panel Data Analysis

Syeda Nazia Bahar — 2024-12-16

The global rise in the disparity of income has been the subject of numerous political and public discussions in the wake of the most recent economic crises. The objective of the current study is to empirically investigate the impact of human capital and democracy on income inequality. This study analyzed the interaction between democracy and income inequality from 2000 to 2020. The balanced panel data is collected from South Asia and regressed by applying three different statistical techniques (Pooled OLS, Fixed Effect Model, and Random Effect Model). The Levin-Lin Chu test, the Hardri LM test, and the IM-Pesaran-Shin test have all been used to address the order of integration in the study. The White test, the Brush-Pagan test, the Brush-Pagan LM test, and the Hausman test were all used in this study to increase reliability. The outcomes of every diagnostic test support Fixed-Effect Model estimation (FEM). The results revealed that human capital and the interaction term (human capital*democracy), govt. health expenditures are negatively associated with income inequality whereas, population growth, trade openness, and infrastructure have been positively related to the income inequality in South Asian countries during the specified period. The study concludes that democracy plays an essential role in reducing income gaps, by enhancing human capital. The outcomes suggest that the role of democracy in reducing the income inequality gaps should not be overemphasized particularly in South Asian countries.

Impact of Foreign Aid and IMF Programme on Economic Growth in Pakistan

Naeem Akram — 2024-12-20

Foreign aid has been recognized as an important source of external financing in developing countries. Considering the significance of foreign aid in Pakistan, present study has attempted to empirically analyse the impact of foreign aid and IMF programme on economic growth in Pakistan. The Autoregressive Distributed Lags (ARDL) technique has been employed to estimate the model using . time series data from 1975 to 2020. The study finds that foreign aid exhibits a negative impact on economic growth both in the short run as well in the long run. The study further reveals that loans have a negative, while the grants portray significantly positive impact on economic growth. Similarly, in long run role of IMF is positive for economic growth of the country, however, in the short run, its impact is negative. The major policy implications for the government of Pakistan is to avoid foreign economic assistance and rely on, internal resource generation by increasing its revenue. Foreign aid requires an efficient external debt management and its payment obligations at the lowest possible cost consistent with a prudent degree of risk.

The Impact of Financial Development, Urbanization and Renewable Energy Consumption on CO2 Emissions in MENA Countries

Maham Rafique — 2024-12-24

This study aims to explore the influence of financial development, urbanization, and renewable energy consumption on CO2 emissions in MENA countries over 2011 to 2023 by fixed effects regression model. The results of this study indicate that the financial development is positively related to carbon emissions by financing investments in the carbon intensive industries, while renewable energy compensate fossil fuels in energy mix and reduce emissions.
Contrary to the urbanization exhibits a negative effect on emissions, indicating that better urban infrastructure and energy efficiency are related to lower carbon outputs. Foreign direct investments also mitigate emissions by the insertion of modern-day technologies, and higher economic complexity (expressed through trade openness and
gross fixed capital formation) are associated with greater number of emissions due to industrial activity. Because otherwise, it said MENA countries would need to support so-called sustainable urbanization; greater investments in renewable energy and financial development must be realigned with environmental goals to strike a balance between economic growth and climate mitigation.

Determinants of Capacity Utilization of Firms: A Comparative Analysis of Developing and Developed Countries

Muhammad Zahid — 2024-12-27

This paper employs data from more than 100 World Bank Enterprise Surveys of different developed and developing countries to analyze the determinants of capacity utilization in firms between 2007-2023. Appling Tobit model, the results show that while developed countries have more access to capital, technology, reliable electricity, better management, and sound infrastructure with fewer challenges, In developing countries problems such as energy constraints, informal competition limit capacity utilization of firms. Whereas the ownership concentration has mixed effects. The analysis also highlights the importance availability to finance, digital readiness, innovation, and choice of destination market. Results also highlight that access to finance and inadequate supply of workers are the biggest challenges the firms face in the wake of capacity utilization.

The Role of Investments in Energy in Enhancing Environmental Sustainability in Developing Countries

Aqeel Ahmad — 2024-12-31

Investment in energy is essential for fostering environmental sustainability by facilitating the shift to greener energy sources. This study seeks to examine the influence of investments in energy on environmental sustainability. The research utilized panel data from 88 developing countries covering the period from 1990 to 2022. The investment in energy through corporate partnerships and public-private partnerships serves as proxies for measuring energy investment. The study's findings revealed a positive correlation between GDP per capita (GDPPC) and carbon emissions; however, the square of GDP per capita (GDPPC²) and health expenditures (HE) exhibited a negative correlation with carbon emissions. The Government should promote investment in renewable energy initiatives to enhance sustainable development in developing nations.

The Effects of Defense Expenditure on Economic Growth of Pakistan

Muhammad Zubair — 2024-12-30

The main aim of this paper is to analyze the effect of defense expenditure on output growth of Pakistan and used series data from 1975 to 2018 period. The study used the ARDL techniques to analyze the data and the ECM was also used to check the convergence to the long run (LR) equilibrium. This study found that Defense expenditure (DE) has positive and noteworthy impact on output growth. The study concluded that the defense expenditure was mandatory to influence the economic growth (GGDP) of Pakistan. The study recommended that the government should be to promote economic growth which in turn provides resources to finance defense expenditures and spend more on the defense sector to achieve higher economic growth, create a peaceful environment.