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Volume 8 Issue 3 (2014)

Economic Waves: The Effect of the U.S. Economy on the World Economy original article

pp. 247-256 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.143

Mario Arturo Ruiz Estrada

Abstract

This paper models the inter-connections between the U.S. economy and five major economic regions in the world, namely, Japan, China, ASEAN, Latin America, and the European Union, using an inter-linkage coordinate space. This space is represented graphically, with the U.S. economy placed in the center and the connected economic regions plotted along rays (axes) that are drawn from the center, each of which can have as many windows as are required at the predetermined perimeter levels. Using this model, this paper evaluates whether and how an economic recession or financial crisis in the U.S. economy can simultaneously affect the five aforementioned economic regions. Finally, this paper proposes the use of computer graphical animation to provide a visual representation of the concomitant effect of these economic waves in the same graphical space.

Keywords: econographicology; euclidean geometry; economic teaching

Is consumer confidence an indicator of JSE performance? original article

pp. 257-274 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.144

Kamini Solanki, Yudhvir Seetharam

Abstract

While most studies examine the impact of business confidence on market performance, we instead focus on the consumer because consumer spending habits are a natural extension of trading activity on the equity market. This particular study examines investor sentiment as measured by the Consumer Confidence Index in South Africa and its effect on the Johannesburg Stock Exchange (JSE). We employ Granger causality tests to investigate the relationship across time between the Consumer Confidence Index and market performance. The results show weak evidence of a contemporaneous relationship; however, significant evidence of a Granger caused relationship is apparent. Further, changes in investor sentiment Granger-cause changes in the two indices used, generally with a lag of 9 and 12 months, but not vice versa. Thus, we find that Consumer Confidence leads JSE performance during our sample period. Our research provides evidence contradicting the common perception of consumer confidence lagging market performance, particularly in the South African context.

Keywords: consumer confidence; financial markets; South Africa; behavioral finance

Household Income and Relationships with Different Power Entities as Determinants of Corruption original article

pp. 275-288 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.145

Asif Reza Anik, Siegfried Bauer

Abstract

This article adds to the corruption literature by identifying factors influencing Bangladeshi farm households’ probability of experiencing corruption in different service sectors. The econometric results show that households’ probability of being exposed to corruption can largely be explained through their income and their relationship with different power entities. The direction of the relationship between income and corruption vary across services. Relatively rich households have a higher probability of experiencing corruption in sectors such as education, health and electricity. These households are less likely to experience corruption in local government and agricultural extension services. The results here are contrary to the common trend in corruption research that addresses households’ aggregate corruption experiences. Households with relationships with different power entities have a lower probability of experiencing corruption than their counterparts without these types of relationships.

Keywords: corruption; income; relationship with power entity; probit model; Bangladeshi farm households

Remittances and the Dutch Disease in Sub-Saharan Africa: A Dynamic Panel Approach original article

pp. 289-298 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.146

Emmanuel Owusu-Sekyere, Reneé van Eyden, Francis M Kemegue

Abstract

This paper investigates the effect of remittance inflows on real exchange rates in sub-Saharan Africa (SSA) using annual data from 1980 to 2008 for 34 countries, the method of moments estimator developed by Arellano and Bover (1995) and the feasible generalized least squares estimator developed by Parks (1967) and Kmenta (1986). We find that when cross-sectional dependence and individual effects are controlled for, remittances to sub-Saharan Africa as a whole increase the underlying real exchange rates of recipient countries. However, this real exchange rate appreciation is mitigated by monetary policy interventions and the direction of fiscal expenditures towards tradable goods. Thus, the real exchange rate appreciation does not lead to the loss of export competitiveness or a worsening of the trade deficit in the countries in the panel.

Keywords: Dutch disease; remittances; real exchange rate; sub-Saharan Africa

Capital Budget Implementation in Nigeria: Evidence from the 2012 Capital Budget original article

pp. 293-314 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.147

Kanayo Kingsley Ogujiuba, Kizito Ehigiamusoe

Abstract

The performance of the capital budget has been a subject of debate between the legislative and executive arms of the Nigerian government since 1999. Available statistics suggest that the annual budget has not been able to improve the lives of Nigerians over the past several years because of the weak link between capital budget implementation and poverty reduction, as indicated by the prevailing low index of capture in public expenditures. Using descriptive analysis, this paper examines the capital budget implementation in Nigeria by focusing on the 2012 Federal Government Budget. The findings indicate that only 51% of the total appropriated funds for capital expenditures were utilized as of December 31st, 2012. The observed level of performance is insufficient to foster rapid economic development and reduce poverty. Some of the challenges that are responsible for the low performance include poor conceptualization of the budget, the inadequacy of implementation plans, the non-release or late release of budgeted funds, the lack of budget performance monitoring, the lack of technical capacity among MDAs, and delays in budget passage and enactment. The paper recommends that Nigerian government formulate a realistic and credible budget, release appropriated funds early to Ministries, Departments, and Agencies (MDAs), and strengthen MDAs’ technical capacity to utilize capital expenditures in order to improve the index of capture in public expenditures.

Keywords: budget; capital budget performance; capital expenditure

Influence of climate conditions on tax revenues original article

pp. 315-328 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.148

Mihai Mutascu

Abstract

In this paper, we investigate the effects of climate conditions on collected tax revenues, based on a panel-model approach. The dataset includes 123 countries and covers the period 1996-2010. The main results demonstrate that climate has a significant impact on tax revenues, the assumed function being nonlinear, with a cubic ⋂ and incomplete ⋃-shape. We also find that governments situated in temperate climate zones, with low to moderate temperatures (the ‘optimal temperature’ in our investigation), can ensure a good collection of tax revenues. The study suggests that a significant increase in collected tax revenues, without a major negative reaction by taxpayers, can be easily obtained by the public authority if situated in a temperate climate zone, that is, one with moderate temperatures.

Keywords: climate conditions; tax revenues; effects; tax policy

How Taxes and Spending on Education Influence Economic Growth in Poland original article

pp. 329-348 | First published in 25 September 2014 | DOI:10.5709/ce.1897-9254.149

Michał Konopczyński

Abstract

This paper investigates the relationship between economic growth in Poland and four types of taxes and human capital investment. We primarily rely on an exogenous growth model that merges the Mankiw-Romer-Weil model, augmented with learning-by-doing and spillover-effects, with selected elements from the literature on optimal taxation. We demonstrate that in the period 2000-2011, economic growth in Poland was primarily due to a rapid increase in the human capital stock (at a rate of 5% per annum) and only secondarily due to the accumulation of productive capital (2.7% annually). Simulations of tax cuts suggest that income taxes and consumption taxes restrict economic growth equally heavily. Simultaneously reducing all tax rates by 5 percentage points (pp) in Poland should increase annual GDP growth by approximately 0.4 pp. Increasing spending on education by 1 pp of GDP would increase the growth rate by approximately 0.3 pp.

Keywords: fiscal policy; income taxes; labor taxes; capital taxes; VAT; economic growth; human capital