Articles

The Importance of MSMEs for Poverty Alleviation: A Story from Indonesia

/in /by

Objective: This study examines poverty in Indonesia from an economic approach and discusses the importance of micro, small, and medium enterprises (MSMEs). It focused on the impact of these enterprises on poverty in the country.

Methodology: The analysis incorporated an autoregressive model wherein total workers in MSMEs and economic growth rate as explanatory variables. Annual time series data for the period of 2007-2019 has been used. The study also reviews the earlier empirical studies on the relationship between the growth of MSMEs and poverty alleviation in many other countries/regions. It represents the descriptive analysis of the explanatory variables and trends in poverty and MSMEs’ workforce. The poverty-reducing impact of the increase in MSMEs’ workers has been examined.

Findings: The result is significant which implies that MSMEs can play a very important role in poverty alleviation in Indonesia. The results of the study imply that a strong MSME base is required for the development of the economy and poverty alleviation in the country.

Noverlty: There are many studies regarding MSMEs in Indonesia. However, empirical research regarding the impact of the growth of employment opportunities in MSMEs on poverty levels in Indonesia is still very rare. Therefore, this research fills this gap and at the same time stimulates further research.

The Interrelationship between Economic Growth and Tax Revenues in Cambodia

/in /by

The relationship between economic growth and the growth rate of tax revenues on goods and services, tax revenue on income, profit, and capital gain, and tax revenue on international trade and transaction was analyzed using a VAR model. All variables in this study were found to be integrated of order one, therefore the model was run using first differences. The lag length of the model was determined to be optimal at lag-two based on the information criterion. The estimated results of the model successfully passed all diagnostic tests, including tests for residual normality, serial correlation, and heteroscedasticity. Since all the inverse roots of the AR characteristic polynomial were within the unit circle, the model was deemed stable. The empirical findings from the VAR model indicated that the growth rate of tax revenue on income, profit, and capital had the most significant impact on economic growth, ranging from 2.3505% to 2.7155%. This was followed by tax revenue on goods and services, ranging from 0.5776% to 0.5954%, and tax revenue on international trade and transaction, ranging from 0.2747% to 0.5930%. Furthermore, the response of the growth rate of all tax revenues to changes in the economic growth rate exhibited a cyclical pattern around its mean.

Shariah Stocks, Sukuk, and Shariah Mutual Funds on the Economic Growth of Indonesia: The Role of Exchange Rate

/in /by

This study aims to analyze the influence of Shariah stocks, Sukuk, and Shariah mutual funds on Indonesia’s economic growth during 2012-2021, with the exchange rate as a moderating variable. The research utilized a quantitative approach and secondary data from the Financial Services Authority, the Central Statistics Agency, and the Bank of Indonesia. Descriptive statistics, normality tests, multicollinearity tests, autocorrelation tests, heteroskedasticity tests, and multiple linear regression analyses were employed to test the hypotheses. The findings revealed that Shariah stocks, Sukuk, and Shariah mutual funds significantly impacted Indonesia’s economic growth. Individually, Sukuk and Shariah mutual funds positively influenced economic growth, while Shariah stocks did not have a significant effect. Furthermore, the exchange rate moderated the relationship between Shariah stocks, Sukuk, and Shariah mutual funds and economic growth. The implications of this study highlight the importance of developing the Shariah financial market in Indonesia and the need for supportive policies to foster its growth. However, this study is limited by secondary data and a limited period. Future research should consider expanding the scope of data and extending the time frame to gain a more comprehensive understanding of the influence of Shariah stocks, Sukuk, and Shariah mutual funds on Indonesia’s economic growth.

JCI Correlation with JII and LQ45 on The Indonesia Stock Exchange

/in /by

Investors who invest want to earn profits from the funds invested in the capital market. This study will see whether Economic Growth, SBI, Dollar Exchange, LQ-45 and JII affect the JCI.

The method of analysis is multiple regression (Multiple Regression Analysis) and the research data is processed using the SPSS (Statistical Package for Social Science) program and the research period is from 2010 to 2021.

The conclusion is that Economic Growth, SBI, Dollar Exchange and JII have no significant effect on the JCI, while LQ-45 has a significant effect on the JCI. Simultaneously Economic Growth, SBI, Dollar Exchange, LQ-45 and JII have a significant effect on the JCI for the period 2010 to 2021.

Contributions of Electricity and Gas Sub-Sector to Economic Growth in Nigeria: A Linear Approach

/in /by

Industrial policies were developed to stimulate and provide opportunities for prospering industrial activities following the decline of investment in the agricultural sector. This followed the discovery of crude oil in Nigeria. Electricity, gas, steam and air-conditioner, an industrial sub-sector is very crucial and requisite channel for industrial development, whether for automated, machines services or computer manufacturing processes. Failure in energy and power supply, as well as gas flaring remains a fundamental problem in Nigeria’s development. This study examined the impact of electricity and gas sub-sector of industrial sector on economic growth in Nigeria using data from 1980 to 2020. Vector error correction mechanism was used to determine the impact of the independent variables on the dependent variable. In the short run, our study shows the existence of positive, non-significant impact of electricity and gas output on economic growth. However, in the long run there was positive significant impact of electricity and gas output on economic growth in Nigeria within the period of study. The implication of the result is that adequate production and utilization of electricity and gas will spur economic activities that will generate economies of scale; since every component of the economy (industry, urbanization, modernized farming, etc) extensively demand for electricity and gas. Also, efficiency of electricity and gas would reduce energy bills for poor households, helps the nation to tackle greenhouse gas emissions. The continues gas flaring and consistent power cut in electricity in Nigeria affected industrial sector in Nigeria. This study showed that there is positive significant impact of electricity and gas on economic growth if there is intentional implementation of power policy with conscious disciplinary actions to control defaulters and make substantial investment that would stimulate industrial activities to spur economic growth.

Economic Growth and Government Expenditure in ASEAN Countries: A Threshold Approach

/in /by

This study examines the effect of government spending on the economic growth of ASEAN countries between 2000 and 2020, using estimates for panel data. The results show that government spending responds positively to the economic growth of ASEAN countries. Intriguingly, this study finds a threshold level for government spending that reduces economic growth if governments let it exceeds 26.82 percent of GDP. Therefore, this study recommends that ASEAN governments need to pursue targeted and rational spending policies.

Privatization of SOEs a Shift from Protectionism and a Factor of Economic Growth

/in /by

: In the framework of economic development, we argue that privatization of State Owned Enterprises (SOEs) is unarguably one of the gateways to succeeding in economic growth. It provides the basis for perfect market competition, promoting employment, reducing government expenditure burden on its budget, promoting employment growth and provides efficient services, boost innovation and the technological revolution of especially developing countries which is an undisputable evidence for economic growth seen for example in Asia and China to be specific. China and a good number of countries with perfect market structures, early economic successes can be largely accredited to privatization of their underperforming SOEs model of promoting economic growth.  In this article, we will attempt to draw the attention of readers on the conjectural background of privatization of SOEs, its effects in promoting economic growth and strategies of its implementation drawing from the experiences of other countries. We used descriptive analysis approach to describe the facts and effects about the significance of privatization of SOEs in economies that are opening up or still moving up the economic development ladder. The paper also draws lessons from developed economies like the US where privatization is a symbol of a capitalist and free market society, although focusing on developing countries with specific reference to Sierra Leone, bench marking the case of China. We discovered that privatization helps government save more and improve efficiency largely through competition that motivates development as well as innovation.

Investigating the Relationship between Unemployment and Inflation in Nigeria

/in /by

This study considered the impact of inflation on unemployment in Nigeria viz avis selected macroeconomic variables. The researcher adopted co integration, vector error correction model and VEC Granger causality test econometric procedure in the analysis of the data employed. The specific objectives of the study are; (i) to determine the extent to which inflation impact on unemployment in Nigeria within the period of study, (ii) to examine if government expenditure have any significant impact on unemployment in Nigeria within the period of study, (iii) to estimate the significant impact of foreign direct investment on unemployment in Nigeria within the period of study; (iv) to investigate the extent of direction of causality between unemployment and inflation in Nigeria within the period of study. The results of the research revealed long run relationship among estimated variables, VECM result showed a positive significant relationship between inflation and unemployment in the short run and long run, government expenditure and foreign direct investment maintained negative relationship with unemployment both in the short and long run. The VEC Granger causality test indicated causality among UNEM, INF and TGEX. The research recommended that (i) government should focus on policy and strategy that can attract foreign direct investment into the country, (ii) government should try to maintain low inflation rate through suitable monetary policy; (iii) government should encourage investment platforms and enabling environment for effective and efficient national output; and (iv) Government should consciously increase fiscal space for capital activities and projects that are capable of generating income, increase domestic and public spending, improve economic status and reduce unemployment. This paper concluded that the Philip’s curve hypothesis does not apply in Nigeria within the period of study as the result failed to establish an inverse relationship as postulated by A.W. Philips.

Islamic Financial Development between Investment and Economic Growth in the MENA Region and East Asia and the Pacific

/in /by

The purpose of this paper is to study, in the first place, the theoretical relationship between Islamic financial development, investment and economic growth. Second, we empirically try to discover the interaction between “Islamic financial development, investment and economic growth”. Our empirical study highlights the direct effects of Islamic financial development on growth and investment. Finally, we also clarify the indirect effects of Islamic financial development on growth through Investment and vice versa, also on other socio-economic indicators over the period from 1990 to 2018, while using the model with simultaneous equations for the MENA region and East Asia and the Pacific.

External Debt and Economic Growth in CFA Countries: Political Institutions Matter?

/in /by

The aim of this paper is to analyse the relation between quality of institutions, external debt and economic growth in the CFA zone. The main contribution of this paper is the endogenous determination of the threshold for quality of institutions beyond and above which external debt affect economic growth differently. The methodology focuses on the estimation of a Panel Smooth Transition Regression (PSTR) model inspired by González et al. (2005). The sample includes 10 countries on the period 1985-2015 on annual frequency. From the empirical analysis, we derive the following conclusions: in countries with lower corruption and a high level of democracy, the level of debt for which the effect of debt on growth becomes negative is higher. This implies that poor institutional quality prevents a country from taking full advantage of its credit opportunities. As a result, only countries with good institutions can fully benefit from the advantages of external debt for economic growth.