March 2018 (Journal of Accounting, Finance and Economics)

March 2018 (Journal of Accounting, Finance and Economics)

Total Articles - 9


Author: To Kim Ngoc and Nguyen Khuong Duy

Pages 15 – 32

Author: Muntasir Murshed and Syed Yusuf Saadat

Mobilization of domestic revenue is of paramount importance in the context of the South Asian region since most of these regional countries are dependent on multidimensional development assistance which are expected to exhibit a decreasing trend in future. However, the low ratio of tax revenue to GDP scenario across South Asia is a major area of deep concern for the associated countries that have been ineffective in making remarkable improvements in their respective tax-GDP ratio. Thus, this paper aims to fill the gap in existing literature by modeling the tax evasion phenomenon across Bangladesh, India, Pakistan, Sri Lanka and Nepal. The authors employ annual data of relevant macroeconomic variables for the time period between 2001 and 2015. As part of the regression model, the authors express the tax-GDP ratio as a function of macroeconomic factors attributing to tax compliance in these countries. Fixed effects panel estimation techniques along with Vector Error Correction Model approach and Granger Causality test were also considered for robustness of the findings. Moreover, the authors also consider an additional model to investigate the linearity of the relationship between tax-GDP ratio and macroeconomic aggregates of national income. The results reveal that political stability and the existing conditions of the public services have positive impacts on the tax-GDP ratio. Moreover, the findings also confirm a non-linear relationship between tax-GDP ratio and per capita GDP and GDP growth rate since the estimated slope coefficients are found to be negative initially but they become positive following the inclusion of the squared terms of GDP and GDP per capita. In light of the estimations, it is found that the threshold levels of per capita GDP and GDP growth rate are 14, 563 US$ and 5.1% respectively and political instability is found to attribute to tax evasion in South Asia.

Pages 33 – 41

Author: Bob Namvar

The recent economic upturn after the recession of 2007-2009 has been more sluggish than most previous recoveries. The new tax laws will lead to more government borrowing to finance its budget deficit which will raise the interest rate and crowd out households and firms which will reduce aggregate spending and will have a contractionary impact on the American economy. Although there is no consensus about a solution for recession, there are some economic policy recommendations which can help a contracted or sluggish economy. Specifically, a better distribution of income improves the US economy especially during the economic downturn and or the slow recovery. Using time series data for 1949-2017(Q3), the empirical estimates confirm the hypothesis that the propensity to spend out of average and below average income is greater than the propensity to spend out of high income. Any policies, such as recent changes in tax laws in favor of high income will reduce aggregate spending and will have a contractionary impact on the economy. Any policies leading to shifts of income from high income to average and below average income will increase the aggregate spending and have an expansionary impact on the economy. Therefore, a better distribution of income improves the US economy both during the economic slowdown and the recovery after 2007-2009 recession.

Pages 42 – 57

Author: Quan Cheng and Alex Ng

The strand of literature on Chinese firm performance shows that state ownership clearly has influence. This state-performance relationship is found to be linear, concave and convex shaped which remains to be resolved yet there are few studies. The authors study a large and recent sample of 27,896 Chinese publicly listed firm year observations during 2001-2011 using panel regressions. The authors show that state ownership is related to financial performance as measured by Tobin's Q and stock returns. Our results affirm a non-linear, concave relationship between state ownership and financial performance. The authors also show how firm governance plays a clear role in Chinese firm performance.

Pages 58 – 75

Author: Muntasir Murshed

The aim of this paper is to bridge the gap in the literature by empirically shedding light on the impacts of trade openness on facilitation of renewable energy transition in 38 selected countries across South Asia, Southeast Asia, Sub Saharan Africa, Latin America and Caribbean Islands. Annual data in, panel framework, stemming from 2000 to 2014 is incorporated in this paper and the Three-Stage Least Squares (3SLS) panel data estimation methodology is applied. In addition, Granger causality tests, and its pre-requisites are also considered to understand the long run causal associations as well. In light of the estimated results, it is found that trade openness, in general, does not contribute to renewable energy within the economy but it does enhance the energy use efficiency. Moreover, the results in this paper support the fact that inflow of FDI is conducive to the attainment of most of the energy sustainability targets enlisted under the United Nations 2030 Sustainable Development Agenda. The paper also finds evidence suggesting a paradoxical effect of remittances with regard to the overall renewable energy transition. According to the results, the inflow of remittance increases the consumption of renewable energy but it simultaneously reduces its share of the total energy consumption as well. Thus, this paper can be a cornerstone in designing crucial public policies aimed at facilitation of renewable energy use in quest of attainment of energy sustainability across the globe.

Pages 76 – 95

Author: Muntasir Murshed

Bangladesh is a lower middle income country that has followed an export-led growth strategy to develop its economy over the years which signifies the importance of Terms of Trade (TOT) movements a crucial macroeconomic tool that can dictate its volume of trade. However, despite the fact that a TOT improvement is aimed to generate positive externality on various macroeconomic indicators, it is empirically acknowledged to trigger Inflation as well, mainly through movement in the exchange rates. The aim of this paper is to fill the gap in empirical literature by investigating the linearity relationship between TOT and inflation in context of Bangladesh. In addition, this paper also looks forward to identifying the causal association between TOT and inflation in Bangladesh using annual time series data from 1980 to 2014. A multivariate model was used in which inflation was expressed as a function of TOT and other controlled variables. Augmented Dickey-Fuller test is used to determine the stationarity of the variables considered in the model. Ordinary Least Squares method is also tapped to estimate the slope coefficients attached to the independent variables in the model. Chow Break-point test and CUSUM test are applied to identify possible structural breaks in the data set. In addition, Johansen Cointegration test is employed to understand the long run associations between the variables while the Granger Causality tests provide the causal associations as well. The results confirm an inverted-U shaped non-linear relationship between TOT and inflation in Bangladesh. Moreover, the transition of the country's exchange rate regime from a fixed to the flexible framework is unable to inflict significant influence on the TOT-inflation nexus. The causality tests reveal that TOT improvement in not inflationary in the long run.

Pages 96 – 108

Author: Saina Abolmaali and Fraydoon Rahnamay Roodposhti

Portfolio Optimization and selection of the efficient frontier from Mean-Variance Markowitz(1952) model is easily accessible in the conditions with no constraints.However, it cannot be used to fulfil the investors’ needs based on having different constrains such as number of the assets in a portfolio. Since the Markowitz model is not the answer to these investors, there should be other methods to provide the optimal risk and return combination. Therefore, Meta-Heuristic methods have become a highly active area of research in this field. This paper tries to construct portfolios rooted in constrains regarding the number of assets involved in a portfolio having the inspiration of Ant Colony Algorithm; moreover, the study is targeted to find the best efficient frontier for the proposed algorithm. Next, sharp ratio has been employed as the fitness function of the portfolio which tries to optimize portfolio selection by optimizing the sharp ratio. In addition, an efficient frontier for ant colony algorithm has been set and demonstrated that the algorithm functions more efficiently when we confine the number of assets to a precise number.

Pages 109 – 133

Author: Muntasir Murshed and Farzana Awlad Mredula

Corruption is perceived to be a major factor hindering sustainable development all around the globe. The aim of this paper is to shed light on the corruption-sustainable development nexus from the perspective of select 47 countries across Asia, Africa and Latin America and the Caribbean (LAC). The paper attempts to estimate the elasticities of socioeconomic and environmental development indicators with regard to corruption and other macroeconomic fundamentals using annual data from 2000 to 2015. In addition, the paper also tests the Environmental Kuznets’s Curve hypothesis in a panel framework and estimates the threshold levels of income at which the environmental degradation takes place with economic growth. Panel unit root and cointegration tests are used while the Three-Stage Least Squares (3SLS) estimation technique is employed to calculate the associated elasticities. Moreover, in order to check the robustness of the relationships, Panel Vector-Error Correction Model (VECM) and Granger causality test are also considered to understand the short run and long-run causal associations between the variables. In light of the estimated results, corruption is found to have a negative relationship with socioeconomic development across the Asian, African and LAC subpanels. In addition, corruption negatively affects environmental development in the context of the Asian and African subpanels while positively affecting in context of the LAC subpanel. Moreover, the findings also suggest that the EKC hypothesis holds true only in the cases of the full panel and the LAC subpanel, with the threshold per capita GDP being around 12,000 US$ and 12,780 US$, respectively. This paper also finds short run bidirectional causality between corruption and socioeconomic development in the context of all the countries cumulatively which did not hold to be true in the long run.

Pages 134 – 166

Author: Muntasir Murshed

This paper aims to investigate the Harberger-Laursen-Metzler effect in the context of fourteen selected countries from South and Southeast Asia using relevant annual data from 2000 to 2016. In addition, an attempt is made to link terms of trade shocks to initiation of the Dutch Disease problem in the local economies. Two subpanels are also considered to detect the possible SAARC and ASEAN region-specific nature of the association between terms of trade and current account balance. The study employed panel fixed effects estimation techniques to estimate the elasticities of the explanatory variables considered in the paper. Panel cointegration, vector error correction model and Granger causality tests are also considered for robustness of the findings. According to the findings, a non-linear relationship between terms of trade and current account movements is identified, revealing evidence of Obstfeld-Svensson-Razin effects which states that the HLM effect depends on the persistent nature of the TOT shock. Moreover, shocks in the terms of trade are found to be ineffective in stimulating the Dutch Disease problem.

Total Articles- 9

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