The Nexus between Export Incentive and Export Performance in Ethiopia

The increasing reliance on public external debt stocks in Africa and other developing countries has raised the question of debt sustainability, especially in the face of Covid-19, which has forced many counties (both developed and developing) into an unforeseen and unplanned recession. This study contributes to the literature on debt sustainability by examining the effect of public debt on capital formation in Sub-Saharan Africa (SSA) from 2000 to 2008 using the pooled mean group estimation approach. The debt variables considered are external debt stock, debt service on external debt, and interest payment on external debt. Consistent with the overhang theory, our results show that increasing external debt stock and interest payment on external debts only have a marginal impact on capital formation in the short run and exerts a serious negative effect in the long run. Our results also show that debt service burden has a positive effect on gross fixed capital formation in the long run. Therefore, we argue that despite being faced with a huge debt service burden resulting from large external debt stock, SSA countries are not neglecting investments in critical infrastructures needed to drive economic growth. However, we recommend that increasing government revenue base, minimizing economic waste associated with public expenditure, and intensifying negotiations for debt relief may be a plausible way out.

This study investigates the short and long run effect of diverse sources of macroeconomic instability on the inflow of foreign direct investment (FDI). The stability of the business environment of a host country will determine the extent to which these economies will absorb shocks and make the economy attractive to foreign investors. We evaluate the role played by macroeconomic instability conditions in determining the inflow of FDI in Sub-Saharan African (SSA) economies, where FDI inflow have been relatively low and macroeconomic instability variables like inflation, external debt and exchange rate has persistently shown volatile trends as compared to other regions in the world. This study employs the Pooled Mean Group (PMG), Mean Group (MG) and Dynamic fixed effect (DFE) autoregressive distributive lag (ARDL) estimation approaches which account for both non-stationarity and heterogeneity effects, in a panel of 31 SSA countries and covers the period 1990 to 2017. We equally employ first and second generation panel unit root test, cross sectional dependence test and cointegration test. The Hausman test is used to select the most efficient estimation technique between the MG, PMG and DFE techniques. The results reveal a negative but insignificant effect of inflation on FDI both in the short and long run. Equally, a positive but insignificant effect of external debt and a negative but insignificant effect of exchange rate are observed in the short run. In the long run, external debt significantly crowds out FDI while exchange rate significantly crowds in FDI in the sub-Saharan African sub region. Based on the findings, we recommend that debt contracted in the sub region should be channeled to productive use like road infrastructure and renewable energy, while currency depreciation should be encouraged in order to render investors within this region more competitive. The used of monetary and fiscal policies should be employed to tackle macroeconomic uncertainty. Capital account regulation should equally be adopted to ensure a competitive real exchange rate. Equally, the debt carrying capacity of each economy should be identified in order to avoid debt unsustainability or payment and servicing default.

This paper pore over the role of export trade incentives schemes on export performance there on Economic growth. Data used in the paper is collected from different offices and websites like Ethiopian Revenue and Customs Authority, National Bank of Ethiopia, and National Bank of Ethiopia and Development Bank of Ethiopia. Data collected is analyzed using tables and correlation analysis. The result of the study revealed that government uses Fiscal as well as financial schemes as export incentives. Following the incentives the total export value and volume of major export items is increasing from time to time. Correlation analysis result shows that export value and fiscal incentives have positive relationship whereas; the correlation between export value and financial incentives is negative. The government is expected to do more in provision of both financial and fiscal incentive schemes so as to strengthen the contribution of this sector to the economy. Keywords: Financial Incentives, Fiscal Incentive, Trade, Export, Growth , Ethiopia DOI: 10.7176/JAAS/68-06 Publication date: September 30 th 2020

PurposeThis study aims to examine the symmetric and asymmetric impact of external debt on inflation in Sudan from 1970 to 2020 within a multivariate framework by including money supply and the nominal effective exchange rate as additional inflation determinants.Design/methodology/approachThe authors utilize an Auto Regressive Distributed Lag (ARDL) model to examine the symmetric impact of external debt on inflation, while the asymmetric impact is examined using a Nonlinear ARDL (NARDL) model. The existence of a long-run relationship between inflation and external debt is tested using the bounds-testing approach to cointegration, and a vector error-correction model is estimated to determine the short parameters of equilibrium dynamics.FindingsThe linear ARDL model results show that external debt has no statistically significant impact on inflation in the long run. On the contrary, the results of the NARDL model show that positive and negative external debt shocks statistically affect inflation in the long run. The estimated long-run elasticity coefficients of the linear and nonlinear ARDL models reveal that the domestic money supply has a statistically significant positive impact on inflation. In contrast, the nominal effective exchange rate has a statistically significant negative impact on inflation.Practical implicationsThe reliance on symmetric analysis may not be sufficient to uncover the existence of a linkage between external debt and inflation. Proper external debt management is crucial to control inflation rates in Sudan.Originality/valueTo date, no empirical study has assessed the external debt-inflation nexus and its potential asymmetry in Sudan, and the current study aims to fill this gap in the literature.

A free float in the exchange rate has been recorded in the Sri Lankan rupee over the past few years affecting the Sri Lankan economy to a significant extent. This study intended to examine the factors affecting the exchange rate variability in Sri Lanka during the period from 1991 to 2020. For the study secondary data were obtained from the World Bank and the Central Bank of Sri Lanka. The exchange rate was considered as the dependent variable while inflation rate, merchandise trade, Gross Domestic Product (GDP) growth, foreign direct investments, balance of payments and external debt were considered as independent variables. Augmented Dickey Fuller (ADF) test was used to examine the stationary of the time series data, and Autoregressive Distributed Lag (ARDL) was adopted to figure out the long-run and short-run relationship between the variables. The results of ARDL bound test confirmed that there is a co-integration relationship between the variables, and the results of the error correction model revealed the significant impact of inflation rate, merchandise trade, Gross Domestic Product growth, foreign direct investments, balance of payments and external debt on exchange rate in both short run and long run. In the short run, balance of payment and GDP have no significant impact on the changes in exchange rate, and the results confirmed that there is a Exchange rate indicates negative relationships with external debt, inflation, and merchandise trade. Finally, the results confirmed the exchange rate is in a negative relationship with FDI and GDP in the long run.

This paper analyzes the effects of changes in relative commodity prices on the distribution of income among factors of production in the context of two models of a simple, two-good economy. In the first model capital is treated as a specific factor in each industry, with labor mobile between industries. The assumption of specificity determines the direction of factor income changes, with magnitudes depending on substitutability between factors and on intensities of factor use within the two industries. In the second model, capital is viewed as a quasi-fixed factor. For the short run, this model is identical to the model first considered. For the long run, this model is identical to the Stolper-Samuelson model in which the direction and magnitude of factor income changes depend solely on relative factor intensities. The difference between the short-run and long-run determinants of changes in factor incomes gives rise to a conflict between factor owners' short-run and long-run interests.

There is a direct link between global warming and hunger in emerging West African nations like Ivory Coast, where the population is overgrowing, and food insecurity is rising. This work aims to examine and explore climate change's effects on agriculture production in Ivory Coast from 1990 to 2019. Various stationarity tests, including the Phillips-Perron (PP) and the Augmented Dickey-Fuller (ADF), are applied to determine the variables' order of integration. The autoregressive distributed lag (ARDL) approach is employed to model the long- and short-run relationships between temperature, rainfall, carbon dioxide emissions, domestic credit, gross capital formation, and agriculture sector and subsectors. The present study uses the Johansen cointegration test to verify the long-run cointegration of the ARDL estimation. The findings reveal that all the variables are integrated into order zero or one. Cointegration tests demonstrate a valid long-term association between the variables. Agriculture and related subsectors in Ivory Coast were found to benefit from increasing temperature over the long run, except for the fishery subsector, where the impact is negligible. In the short run, temperature’s effect is positive on aggregate agriculture, although it is not statistically significant. Its effect is beneficial to agriculture's subsectors, except for fishery production. In both runs, Ivory Coast’s aggregate agriculture sector and fishery subsector are negatively affected by rainfall. An insignificant favorable effect of rainfall is found on crop production in both runs. The estimated results indicated that the role of CO2 is positive on agriculture and crop production in both run estimations. However, CO2 does not impact livestock production. It has a long-term positive influence on fishery production but no effect in the short run. Domestic credit is found to have a beneficial influence on agriculture and its subsectors in both runs, except for crop and livestock production, where the effect is negative and insignificant in the short run. Gross capital formation negatively impacts agriculture and its subsectors in Ivory Coast, except crop production, where it only has an insignificant beneficial effect in the short run. The same is true for fishery production, which only had a significant favourable impact effect in the short run. For the government and policymakers, the findings guide the formulation of suitable policies to address global warming's effects on agriculture and guarantee sustainable food production for the increasing population.

PurposeThe aims of the paper are to investigate IT software and service export function for India. First, cointegration tests have been used to investigate the long-run equilibrium relationship of the given variables. Second, long-run coefficients and associated error correction mechanism are estimated.Design/methodology/approachAnnual time series data on IT software and service exports, human capital, exchange rate, investment in IT, external demand and openness index have been used for the present study during the period 1980–2017. The data are collected from the National Association of Software and Service Companies (NASSCOM), Planning Commission of India, University Grants Commission (UGC) of India, real effective exchange rate (REER) database and World Bank development indicators. Auto regressive distributed lag (ARDL) model is used to analyze both short-run and long-run dynamic behaviour of economic variables with appropriate asymptotic inferences.FindingsResults of the analysis show the stable long-run equilibrium relationship among the given variables. It is found that external demand, exchange rate, human capital and openness index have a substantial long-run impact on the IT software and service exports. We also found that the coefficient of error correction term is negative and significant at 1% of the level of significance, which confirms the existence of stable long-run relationship which means adjustment will take place when there is a short-run deviation to its long-run equilibrium after a shock.Research limitations/implicationsThere may be other determinants of software and service exports apart from those considered by the present study. Due to the non-availability of data, the study considers only important determinants that determine the software and service exports in India. The IT exports are an emerging and dynamic field of economic activity and the rate of change is so rapid that the relevance of individual factors may change over time. The study period is also limited to available data.Practical implicationsThe paper has implications for achieving sustainability in IT software and service exports growth. It is recommended that policies directed at improving the performance of IT software and service exports should largely consider the long-run behaviour of these variables.Originality/valueThis paper focuses on originality in the analysis of the relationship among the given variables including IT software and service exports, human capital, exchange rate, investment in IT, external demand and openness index in India. All the work has been done in original by the authors, and the work used has been acknowledged properly.

Purpose The study examines the impact of real exchange rates and asymmetric real exchange rates on real stock prices in Malaysia, the Philippines, Singapore, Korea, Japan, the United Kingdom (UK), Germany, Hong Kong and Indonesia. Design/methodology/approach This study uses the asymmetric autoregressive distributed lag (ARDL) approach and non-linear autoregressive distributed lag (NARDL) approach. Findings The asymmetric ARDL approach shows more economic variables are found to be statistically significant than the ARDL approach. The asymmetric real exchange rate is mostly found to have a significant impact on the real stock price. Moreover, real output and real interest rates are found to have a significant impact on the real stock price. The Asian financial crisis (1997–1998) and the global financial crisis (2008–2009) are found to have a significant impact on the real stock price in some economies. Research limitations/implications Economic variables are important in the determination of stock prices. Originality/value It is important to examine the impact of asymmetric real exchange rate on the real stock price as the depreciation of real exchange rate could have different impacts than the appreciation of real exchange rate on the real stock price. The previous studies in the literature mostly found the significant impact of nominal exchange rate on the nominal stock price.

Exporting has been one of the fastest foreign expansion strategies in the last two decades. The purpose of this study is to investigate the role of an exporter's location in the development of export-related resources and capabilities, which will have an impact on the degree of export performance. The relationship between export-related resources, capabilities, and export performance are examined in this study. A total of 300 questionnaires were sent out to coffee and sesame exporters. However, only 253 surveys were used for analysis. The SmartPLS 3 software was used to analyse the data using the Partial Least Squares (PLS) technique. The study's findings suggest that access to location-specific resources and skills are critical antecedents for a company's ability to build export-related resources and capabilities in order to improve export performance. The geographic location of a company has a considerable and beneficial impact on human resource capability (β =0.67, p=0.001). Information capability was not significantly influenced by human resource capability ((β =0.082, P=0.259). Information capability ((β =0.656, p=0.001) is significantly influenced by organizational planning capability ((β =0.452, p=0.001). Satisfaction Export Performance ((β =0.431, p=0.01) has been significantly and positively influenced by information capability. New Product Development Capability influences strategic export performance significantly and positively ((β =0.330, p=0.001). Strategic export performance ((β =-0.035, P= 0.820) and satisfaction with export performance ((β =0.050, P= 0.625) were not affected by relationship capability. These data suggest that when it comes to exporting, rural businesses face significantly greater obstacles than those in metropolitan areas. The outcomes of this study will assist managers of remote-area businesses in developing equally appealing recruitment and reward practices in order to compete with businesses in urban areas. Furthermore, the outcomes of this study advise that export firm managers think carefully about the resources and capabilities required to improve their export performance.

Nigeria's sustainable economic growth and sustainability, is highly dependent on the structure of her accumulated capital, which in recent years has been extensively drained. These have resulted in Nigeria’s increasing debt burden, since it is the only reliable source of income for her economic growth. External debt has been steadily increasing, prompting questions about its sustainability. The high debt servicing cost has constrained government spending on social services and infrastructure, limiting capital investment. This study examined the intertemporal impact of external borrowing on capital accumulation in Nigeria for the period of 1981–2023. The dual gap theory and debt overhang model were used as a theoretical framework for this study. Gross fixed capital formation, external debt stock, domestic debt stock, external debt servicing, nominal interest rate, national savings, and exchange rate were the variables used for the analysis. An autoregressive distributed lag (ARDL) regression procedure was employed. The results showed that external debt has a positive and statistically significant impact on gross fixed capital formation in Nigeria in the long run. In contrast, there is a negative and significant impact in the short run. The domestic debt indicated an insignificant negative impact in both the long and short run. The result also indicated an unattainable debt-to-GDP. This study recommended that domestic borrowing should be discouraged and avoided completely if possible. External borrowing is still the most viable source of capital accumulation for investment and infrastructural development. However, external debt servicing is not sustainable in Nigeria current capital accumulation, therefore saving policies should be encouraged, such as the introduction of a sovereign wealth fund and excess crude account.

This paper has examined the impact of lending rate on firms’ investment decision in Ghana. The Autoregressive Distributed Lag (ARDL) estimation framework was applied to time series data from 1980 to 2011. We found that lending rate has significant negative impact on private investment in both short run and long run in Ghana. It was also found that real GDP has a significant direct impact on private investment in both the short run and the long run periods. Our findings have important implications for investment policy in Ghana.

Dutch Disease, Real Effective Exchange Rate Misalignments and Their Effect on GDP Growth in the EU

Dutch Disease, Real Effective Exchange Rate Misalignments And Their Effect on GDP Growth in the EU

Every economy has experienced an expansion in international trade in recent years, and some developing countries frequently experience persistent trade deficits. The investigation of the short-term and long-term relationships between trade balance and its macroeconomic determinants is the main goal of this study. In particular, the study explores the impact of the real exchange rate, foreign direct investment, inflation, budget deficit, private consumption, real money supply, and gross domestic product on the trade balance. For this purpose, the paper employed an autoregressive distributed lag (ARDL) bounds test co-integration model that covered the period from 1980 to 2020. The data were mainly gathered from the annual reports of the Central Bank of Sri Lanka, the World Development Indicators, and the UNCTAD database. The findings show a co-integration between the trade balance and selected macroeconomic variables. The study found that real exchange rate and foreign direct investment have a statistically significant and positive association with trade balance, indicating these two determinants will improve the trade balance in the long run. The real exchange rate balances the trade deficit following currency devaluation through expansion in real exports and collapse in real imports. The real exchange rate, however, is insignificant, with positive signs in the short run indicating that Sri Lanka has no J-curve effect. Further, the results demonstrate that in the long run, the budget deficit, private consumption expenditure, and real money supply have a negative impact on the trade balance. However, there is no evidence that inflation and trade balance are related over the short and long term. The results of this analysis suggest that the government should focus on exchange rate policy, followed by monetary and fiscal policies, in order to improve Sri Lanka's trade balance.