Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach
Purpose ―Current paper assesses the impact of macroeconomic variables on Pakistan's economic growth. Method ― This study analyzed the data using the Markov Regime switching (MS) model using monthly data for 1981-2020. Firstly, BDS and CUSUM square tests were applied to detect the non-lineari...
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| Format: | Article |
| Language: | English |
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Universitas Islam Indonesia
2022-04-01
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| Series: | Economic Journal of Emerging Markets |
| Subjects: | |
| Online Access: | https://journal.uii.ac.id/JEP/article/view/21214 |
| _version_ | 1811240619178196992 |
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| author | Asma Fiaz Nabila Khurshid Ahsan ul Haq Satti |
| author_facet | Asma Fiaz Nabila Khurshid Ahsan ul Haq Satti |
| author_sort | Asma Fiaz |
| collection | DOAJ |
| description |
Purpose ―Current paper assesses the impact of macroeconomic variables on Pakistan's economic growth.
Method ― This study analyzed the data using the Markov Regime switching (MS) model using monthly data for 1981-2020. Firstly, BDS and CUSUM square tests were applied to detect the non-linearity of the model.
Results ―The model is non-linear, so the Markov regime-switching model is used for analysis. Each regime's mean and variance are highly significant and show a high growth regime with high volatility and a low growth regime with low volatility. Furthermore, the results show that inflation, interest rate, and trade openness negatively impact while real effective exchange rates positively affect development in both regimes. The negative effect of interest rate, exchange rate, inflation, and trade openness become more pronounced in low growth regimes.
Implication ― This study suggests that policymakers should consider the non-linear behaviour of macroeconomics. This will help to formulate better policies for the economy's economic growth.
Originality ―The current research adds to the existing literature by identifying the non-linear effect of growth indicators on economic growth, which was previously neglected in the case of Pakistan.
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| first_indexed | 2024-04-12T13:23:24Z |
| format | Article |
| id | doaj.art-e2980e7553d84269bd52ff875cd4e348 |
| institution | Directory Open Access Journal |
| issn | 2086-3128 2502-180X |
| language | English |
| last_indexed | 2024-04-12T13:23:24Z |
| publishDate | 2022-04-01 |
| publisher | Universitas Islam Indonesia |
| record_format | Article |
| series | Economic Journal of Emerging Markets |
| spelling | doaj.art-e2980e7553d84269bd52ff875cd4e3482022-12-22T03:31:24ZengUniversitas Islam IndonesiaEconomic Journal of Emerging Markets2086-31282502-180X2022-04-01141Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach Asma Fiaz0Nabila Khurshid1Ahsan ul Haq Satti2School of Economics, Quaid-e-Azam University, Islamabad, PakistanDepartment of Economics, Comsats University Islamabad, Islamabad, PakistanPakistan Institute of Development Economics, Quaid-e-Azam University, Islamabad, Pakistan Purpose ―Current paper assesses the impact of macroeconomic variables on Pakistan's economic growth. Method ― This study analyzed the data using the Markov Regime switching (MS) model using monthly data for 1981-2020. Firstly, BDS and CUSUM square tests were applied to detect the non-linearity of the model. Results ―The model is non-linear, so the Markov regime-switching model is used for analysis. Each regime's mean and variance are highly significant and show a high growth regime with high volatility and a low growth regime with low volatility. Furthermore, the results show that inflation, interest rate, and trade openness negatively impact while real effective exchange rates positively affect development in both regimes. The negative effect of interest rate, exchange rate, inflation, and trade openness become more pronounced in low growth regimes. Implication ― This study suggests that policymakers should consider the non-linear behaviour of macroeconomics. This will help to formulate better policies for the economy's economic growth. Originality ―The current research adds to the existing literature by identifying the non-linear effect of growth indicators on economic growth, which was previously neglected in the case of Pakistan. https://journal.uii.ac.id/JEP/article/view/21214Macroeconomic variableseconomic growthnexusnon-linearMarkov switching modelPakistan. |
| spellingShingle | Asma Fiaz Nabila Khurshid Ahsan ul Haq Satti Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach Economic Journal of Emerging Markets Macroeconomic variables economic growth nexus non-linear Markov switching model Pakistan. |
| title | Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach |
| title_full | Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach |
| title_fullStr | Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach |
| title_full_unstemmed | Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach |
| title_short | Revisiting the macroeconomic variables and economic growth nexus: A Markov regime-switching approach |
| title_sort | revisiting the macroeconomic variables and economic growth nexus a markov regime switching approach |
| topic | Macroeconomic variables economic growth nexus non-linear Markov switching model Pakistan. |
| url | https://journal.uii.ac.id/JEP/article/view/21214 |
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