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Economics and business journals focus on publishing papers coming from the fields of applied economics, corporate finance, financial investments, markets, institutions, industrial organization, international trade, marketing and similar.
Business and Economics
Abstract
Although the Feldstein-Horioka (1980) puzzle has been one of the most widely discussed problems in macroeconomics literature, long-run evidence regarding the validity of the Puzzle is missing. To extend the existing literature, we revisit the Puzzle for the case of the United Kingdom (UK) using data that covers almost two centuries, 1830–2016. We analyze the data using conventional and novel econometric methods to capture the stochastic properties of the variables and ensure robustness. To this end, well-known autoregressive distributed lag (ARDL) and recently developed nonlinear ARDL and Fourier ARDL (FARDL) models are implemented. The coefficients derived from the ARDL, NARDL, and FARDL are 0.58, 0.64, and 0.56, respectively. All results show a long-term relationship between investment and savings rates in the UK. The obtained empirical results indicate that even in the long run, there is evidence for the existence of the Puzzle.
Abstract
This paper, using the OECD DAC's ODA (Official Development Assistance) database and UN Comtrade's trade data, empirically demonstrates that donor countries can utilize development aid as an instrument to build stable trade relationships and expand trade with recipient countries by strategically directing aid to targeted recipients. The empirical results indicate that a bilateral donor-recipient pair is more likely to establish a stable trade relationship and experience greater growth in bilateral trade flows than in the absence of such aid. The effects of aid on trade stability persist across various settings: whether the trade type is export or import, whether the traded goods are final or intermediate, and whether the aid is provided as loans or grants. The impacts of aid on fostering bilateral trade growth are also significant. Particularly, concessional loans are far more effective than grants in promoting donor-recipient trade growth, especially in stimulating the recipient's imports from the donor. These findings suggest that donor countries can leverage development aid as a strategic measure to mitigate the risk of global supply chain disruptions and secure overseas export markets during external trade shocks, such as the global financial crisis and the COVID-19 pandemic.
Abstract
The paper decomposes the real and nominal exchange rate volatility using the component GARCH specification to examine their impact on foreign direct investment (FDI) in 23 transition economies at aggregated and disaggregated levels. The paper employs instrumental variables within the SYS-GMM estimation procedure to provide the results' reliability and consistency. According to the results, the impact of long-run real exchange rate volatility on FDI differs among economic activities. These findings may be explained by the fact that the key motives of foreign investors entering the manufacturing sector will likely differ from those of foreign investors entering the financial intermediation or transport and communication sector. On the other hand, the short-run real exchange rate volatility and the long- and short-run nominal exchange rate volatility are not significant determinants of FDI in the transition economies covering the period from 2000 to 2023.
Abstract
We propose a novel probability approach to examine the sustainability of the current account balance by generating density forecasts and calculating the probability that the current account balance will be lower than a specified threshold. We define a current account as sustainable by having a low probability of the current account deficit exploding. We use a vector autoregressive model to generate density forecasts up to five years ahead. We apply the method to ten countries that had high current account deficits in the past and find cases with both high and low probability of sustainability. We analyse historical episodes to illustrate the predictive capability of our framework and find that our method would have worked well in the past. We further find that the sustainability risk does not relate to whether the government or the private sector is the main driver of the deficit.
