Economic Journal of Emerging Markets

The role of economic freedom in the development of international tourism in Asian countries

Buu Kiem Dang — 2024-10-21

Purpose ― This paper aims to investigate the influence of economic freedom and its components, namely business freedom and trade freedom, on international tourist arrivals in Asian countries. Additionally, it examines the effect of important macroeconomic factors, such as foreign direct investment, exchange rates, political stability, GDP per capita, and inflation on international tourist arrivals in Asian countries.
Methods ― The GMM two-step estimation system is used to analyze data from 25 Asian countries from 1995 to 2020.
Findings ― The results show that economic and trade freedom positively influence tourism, while business freedom has a less distinct impact. Inflation positively contributes to tourist arrivals. Exchange rates and political stability show inconclusive effects.
Implications ― The study recommends that governments prioritize expanding economic freedom to boost international tourism.
Originality ― This is the first study on the impact of economic freedom on developing international tourism in Asian countries.

Islamic bank stability and efficiency: A cross-country analysis

Faaza Fakhrunnas — 2024-10-27

Purpose ― The study investigates the impact of the efficiency of Islamic banks on banking stability.
Method ― A panel data analysis using the Least Square Dummy Variable Corrected (LSDVC) method is employed to examine the impact of efficiency on banking stability in Islamic banks. The study has a sample of 54 Islamic banks across eight countries from 2013 to 2021.
Findings ― The findings reveal that the efficiency of Islamic banks has a positive and significant effect on banking stability. In addition, financial turmoil negatively and significantly affects the stability of Islamic banks but does not significantly affect institutional development. Additionally, financial turmoil can influence how effectively Islamic banks manage their businesses in response to banking stability. The outcomes are robust across various robustness methods.
Implications ― The results imply that the efficiency of Islamic banks has a pivotal role in banking stability, considering the efficiency level. To ensure the stability of Islamic banks, practitioners and regulators of Islamic banks have to achieve and maintain the efficiency of Islamic banks by implementing the required policies and guidelines.
Originality/Value ― Previous studies examining the impact of Islamic banks' efficiency on banking stability remain limited. The paper fills the research gap by examining how Islamic bank efficiency affects banking stability, considering the effects of financial turmoil and institutional development.

Is the Romer Hypothesis valid for Newly Industrialized Countries? Evidence from panel ARDL

Hüseyin Çelik — 2024-10-29

Purpose ― This study investigates the effect of trade openness on inflation, referred to as the Romer hypothesis, for Newly Industrialized Countries (NICs) from 1990 to 2022.
Methods ― It uses a panel ARDL method and the Dumitrescu-Hurlin (2012) causality test. Economic growth, credit, and money supply are included in the model as independent variables.
Findings ― The findings reveal no statistically significant long-term and short-term relationships between trade openness and inflation. However, money supply has statistically significant positive effects on inflation in the long run, while economic growth and credit exhibit no statistically significant impact. In the short run, money supply and economic growth reduced inflation. According to the Dumitrescu-Hurlin (2012) panel causality test, a bidirectional relationship exists between inflation and economic growth, money supply, and credit, while a unidirectional relationship is observed between inflation and trade openness.
Implications ― Reducing the external dependency of sectors that rely on imported inputs is necessary to mitigate the adverse effects of trade openness on inflation in NICs. It is crucial to ensure that monetary policy helps align money supply and credit expansions with real sector trends.
Originality ― This research is pioneering in its focus on testing the Romer hypothesis for Newly Industrialized Countries (NICs).

Skill bias in the labour market: Evidence from Iran

Mehdi Mohebi — 2024-10-29

Purpose ― Most global economies are dealing with the issue of skill bias. In developing and underdeveloped countries, skill bias poses a problem by preventing the educated from participating in the economy's production function, especially in the long run. This paper expands on the skill-wage relationship and investigates this issue in the case of Iran from 1981 to 2021.
Methods- Applying Impulse Responses from VECM and the Structural VAR model separates the relationship between skill and wage into short- and long-term effects. The structural wage model was estimated using the structural vector auto-regression model.
Findings ― The results show that skill played a significant role in wage determination only for three periods in the short run, and the effect was neutral in the long run. This means that skill accumulation through advancement in graduate and postgraduate study is unlikely to increase wages in the long run.
Implication ― According to the findings, skill bias implies that education attainment in the Iranian labour market can only improve wages to a minimum extent. This also proves that factors other than education determine wage growth in the economy.
Originality ― The skill-wage relationship has not been a focus of studies in education outcome fields. Moreover, in the case of Iran, this investigation is novel, and there is a lack of studies on the relationship between compensation and skill.

Effects of foreign direct investment on climate change in the Asian region

Ehsanullah — 2024-10-30

Purpose ― This research aims to empirically investigate and compare the effects of foreign direct investment on climate change in five South Asian nations.
Methodology ― This research uses yearly data covering 1980–2020 in five South Asian nations: Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Vector Autoregressive (VAR) methods with variance decomposition and impulse response function provide the basis of the empirical data for comparison analysis.
Findings ― This research shows that foreign direct investment's impact on pollution ranges from 1% to 10% in four countries and 16.13% in Pakistan. This indicates that in five South Asian states, there is little endogenous correlation between foreign direct investment and pollution. Furthermore, a shock to foreign investment improves the environmental conditions in Bangladesh and India while harming the growth of other nations.
Implications ― The impact of foreign direct investment on pollution may vary based on each country's economic situation. Public efforts to enhance capital goods, education, health, and infrastructure are essential for reducing pollution and attracting foreign investment. Therefore, improved transparency and governance are essential for a positive relationship between growth and foreign investment.
Value/Originality ― This research contributes to analyzing and comparing the effects of foreign direct investment on climate change in five South Asian nations using Vector Autoregressive (VAR) methods.

Do governance indicators have a role in remittances-growth nexus in Egypt?

Abdulrhman Alamoudi — 2024-10-31

Purpose ― Drawing on annual data from 1996 to 2022, this study aims to examine the effect of Egypt’s real GDP growth.
Methods ― Autoregressive Distributed Lag (ARDL) and Cointegration technique are applied by first examining the stationarity of the series by utilizing the Augmented-Dicky-Fuller (ADF) unit root test. The bound cointegration test is then implemented to evaluate the existence of cointegration among the variables.
Findings ― The results indicate that the GDP growth rate has a long-run positive relationship with remittance inflows in Egypt. This paper also finds that the average governance indicators in Egypt, which include government effectiveness, political stability, control of corruption and regulatory quality, voice and accountability, and the rule of law, could help facilitate the long-run effect of remittances on GDP growth.
Implication ― The findings imply that maintaining high levels of governance indicators is essential for helping Egypt benefit from remittances and enhancing its economic growth.
Originality/value ― The study is a pioneer in including the average governance indicators in the remittance-growth nexus study for Egypt. Its purpose is to assess whether governance quality affects the nexus and whether there exists a threshold for the average governance indicators below which the flow of remittances does not encourage economic growth.

Indonesia’s export growth decomposition in ASEAN and ASEAN dialogue partners

Nur Rakhman Setyoko — 2024-10-31

Purpose ― This paper evaluates Indonesia's trade integration efforts and their impact on export competitiveness from 1989 to 2021. It examines the evolution of trade arrangements, starting with the ASEAN Preferential Trade Arrangement (APTA) and progressing to bilateral agreements.
Methods ― Based on Leamer and Stern, the Constant Market Share Analysis (CMSA) measures Indonesia’s export competitiveness over the years.
Findings ― The results indicate no significant improvement in competitiveness during the analysis period, with export growth primarily driven by the effect of world growth. Although competitiveness did not shift markedly over time, it remained positive overall, suggesting a buffer effect during economic crises.
Implications ― The paper suggests Indonesia should pursue deeper trade integration and unilateral economic reforms. Drawing on Korea’s experience, combining export promotion policies with trade agreements could enhance market access and foster internal competitiveness.
Originality ― This study provides long-term insights into Indonesia’s export competitiveness amidst global trade integration efforts and offers policy recommendations based on the success of Korea’s trade reforms.

Impact of greenhouse gas emission, renewable energy, and economic growth on health expenditure in Southeast Asia: A comparative analysis of econometric models

Resa Mae R. Sangco — 2024-10-31

Purpose — The study explores the effects of greenhouse gas emissions, renewable energy, and economic growth on health expenditures across Southeast Asia while comparing the performance of different econometric models for accuracy in analysis.
Method — To analyze the relationships among variables, the study employs three econometric models, the Autoregressive Distributed Lag Model, the co-integration Model, and the Quantile Regression Model, using annual data from 2000 to 2020.
Findings — The results reveal that greenhouse gas emissions and GDP significantly influence health expenditure in all three models. However, the significance of renewable energy consumption varies, with only the quantile regression model indicating a significant relationship with health expenditure. Model comparison based on Mean Squared Error (MSE) suggests that the autoregressive distributed lag (ARDL) model provides the most accurate predictions. Also, it found that there is a short-run and long-run causal effect of GHG and GDP on health expenditure, as well as health spending on GDP.
Implication — This study helps to understand how economic growth, environmental factors, and healthcare spending interact to develop sustainable policies to address health and environmental problems in Southeast Asia.
Originality — This research contributes to the body of knowledge examining the impact of economic and environmental factors on health expenditures in Southeast Asia through a comparative analysis of different econometric models.