Finance & Economics Review
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Emerging Challenges in Rural Non-Farm Sector and Inequality in Rural India: Insight from IHDS Survey
Get PDFPurpose: This paper highlights the changing patterns of income diversification and the effects of various socio-economic factors influencing the non-farm (NF) income of rural households in India. The study also explores the inequality effects of the non-farm earnings of the households by using the Fields inequality decomposition.
Method: The study compares and evaluates the determinants and trends of inequality in 2004-2005 and 2011-2012 in the NF sector. It uses nationally representative data from two rounds of the Indian Human Development Survey (IHDS), which includes a panel of 36,278 households at all levels in India. The Censored Least Absolute Deviation (CLAD) model is used to estimate household determinants for non-farm income. The Fields decomposition decomposes total income inequality by considering the socio-economic factors.
Results: The study finds that variations in non-farm earnings have increased. Field\u27s Income Inequality Decomposition estimates show that income inequalities between households are significantly high due to factors such as education, level of the household head, land ownership, and population density, but also appear to be declining in 2011-12. Also, the earning gaps based on gender, age, and geographical zones have increased.
Implications: Overall, the non-farm income during the studied period was observed to be biased towards the better-off households. However, it opened up opportunities for underprivileged households as well. The non-farm sector has huge potential in augmenting incomes for unprivileged rural households. Therefore, the government should pay attention to this sector as a means of reducing income inequality and alleviating poverty
Projected Productivity of Cash Crops in Different Climate Change Scenarios in India: Use of Marginal Impact Analysis Technique
Get PDFPurpose: This study assesses the impact of climatic and geographical factors on the yield of potato, cotton, groundnut, sesame, linseed, sugarcane, rapeseed & mustard, and sunflower seeds using state-wise panel data in India during 1971-2013. Thereupon, it estimates the expected yield of aforesaid crops in different climate change scenarios.
Methods: Cobb-Douglas production function model is used to estimate the regression coefficients of climatic and geographical factors with the yield of aforesaid crops.
Results: The empirical result shows that maximum temperature, minimum temperature, rainfall, and precipitation have a significant impact on the yield of potato, groundnut, sesame, linseed, sugarcane, rapeseed & mustard, sunflower seeds. The projected results indicate that yield of sesame, linseed, rapeseed & mustard, potato, and cotton crops may decline by 0.16%, 0.83%, 5.65%, 14.68%, and 23.31% respectively due to one unit change in average maximum and minimum temperature, actual precipitation, and rainfall during crop seasons.
Implications: The Agriculture department of the government should encourage farmers to implement crop-specific policies to mitigate the negative impact of climate change in agriculture.
Limitations: Application of fertilizer, quality of seeds, cost of cultivation, farm management practices, irrigated area, demographic factors (e.g., population growth, urbanization, industrialization, etc.), and ecosystem services (e.g., water, soil fertility, and land) have a significant impact on the yield of cash crops. However, these variables were not included to predict the yield of cash crops in this study. Thus, this study acknowledged this limitation and existing researchers can incorporate these variables in further study
Dynamics of Crude Oil Price Change and Global Food Commodity Prices
Get PDFPurpose: This study investigates the effect of crude oil price fluctuations (price change as well as volatility) on wheat, sugar, corn, and fertilizers price changes.
Methods: The study employs Markov switching dynamic regression, Dynamic Conditional Correlation (DCC), and Generalized Autoregressive Conditional Hetrosekadicity (GARCH) on monthly data covering the period from January 1988 to April 2018.
Results: The findings of the research support evidence of two states. State 1, pertains to the low volatility of crude oil price, and state 2 belong to the case of the high volatility of crude oil prices. Our results indicated that at state 1, an increase in crude oil prices leads to a decline in food commodity prices, while in state 2, an increase in crude oil price levels causes an increase in food commodity prices. Results of Dynamic Conditional Correlation (DCC) GARCH estimates indicate the coefficients of oil price levels are significant and positively associated with the conditional volatility of the four commodity prices.
Implications: The findings of the research imply that volatility in global food commodity prices is not due to oil price volatility but due to the oil price levels attained at extreme points.
Originality: The paper investigates the impact of different volatility levels of crude oil prices on global food commodity prices
Impact of Economic and Noneconomic Factors on Inflow of Remittances into Bangladesh: Application of Robust Least Squares Method
Get PDFPurpose: Remittance plays an important role in the economy of Bangladesh. It also contributes to the change in the social structure and standard of living. The purpose of the study is to identify the economic and non-economic determinants of the remittance inflow into Bangladesh.
Methodology: The study considered two types of variables as the determinants of the remittance inflow: economic and non-economic. Economic determinants of remittances inflows included exchange rate, education, economic growth rate, and market interest rate. The non-economic determinants covered control of corruption, government effectiveness, and political stability. Monthly data were used for the case of economic determinants from 2014 to 2020 and annual data were used in the case of non-economic determinants from 1996 to 2018. The marginal effect of each variable has been analyzed by using the Robust Least Squares (RLS) method.
Results: The estimated results of this study state that, economic determinants like capital formation and education factors have a positive and significant impact on remittances inflows in both static and dynamic cases. However, the exchange rate does not create a positive impact due to volatility. The RLS estimation shows the control of corruption has a positive impact on remittances inflows whereas government effectiveness and political stability hurt remittances inflows in Bangladesh.
Implications: The current study identified the significant determinates of remittances inflows in Bangladesh. The findings have implications for policy formulation as regard remittances and non-resident Bangladeshis
Do Financial Sector Reforms Influence Manufacturing Sector Performance in Nigeria?
Get PDFPurpose: The study empirically investigates whether or not financial sector reforms influence manufacturing sector performance in Nigeria.
Method: A weighted index covering the gradual progression, scope, dimensions, and institutional changes involved in the reform and regulation of the financial sector is constructed for the study. Annual time series data covering the period 1986-2020 were used for the study. Cointegration and error correction modeling techniques were utilized for the empirical analysis.
Results: The empirical results show evidence of a short-run dynamic and a long-run equilibrium relationship between financial sector reforms and manufacturing sector performance in Nigeria. Specifically, financial sector reforms, credit to the private sector, electricity supply, and capacity utilization positively drive manufacturing sector performance in Nigeria. Further findings show that the exchange rate and interest rate variables are negatively and significantly related to manufacturing sector performance.
Implications: Based on the empirical evidence, the continuous reforms of the financial sector are imperative to enhance its credit intermediation role to the real sector of the economy, particularly, the manufacturing sector. The provision of accessible, reliable, and stable electricity supply, as well as sound, stable and competitive macroeconomic policy environment and appropriate institutional framework are also imperative.
Originality: The study is unique in the sense that it utilized a weighted index of several key dimensions of the progression and institutional changes involved in the reform of the financial sector, thereby sufficiently capturing the whole process of financial reforms in Nigeria
Global Financial Crisis and the Nigerian Capital Market
Get PDFPurpose: This paper examined the impact of the global financial crisis on the capital market in Nigeria from 1980-2018. It specifically aimed to determine the impact of the currency crisis and liquidity crisis on the capital market in Nigeria.
Methods: The study was time series data based. Data were generated from the Central Bank of Nigeria Statistical Bulletin. The variables were subjected to descriptive statistics and the \u27Augmented Dickey-Fuller\u27 (ADF) unit root test prior to the \u27Auto-Regressive Distributed Lag\u27 (ARDL) model.
Results: The outcome of descriptive statistics demonstrated that the parameters were not normally distributed. Also, the ADF unit root test demonstrated that one of the parameters was stationary at I(0) while the remaining two were stationary at I(1). Based on the ARDL results, it was observed that in the short run, the financial crisis has an indirect influence on the performance of Nigerian capital markets. Liquidity crisis, a proxy for the depletion of external reserves has a strong influence on the capital market. The long-run result showed that there is a long-run association amongst the variables.
Implications: In view of these findings, the paper recommends that the government should fine-tune its policy mix to ensure that the capital market and the economy do not suffer from the global economic crisis as it takes place
Financial Literacy and Financial Inclusion as Tools to Enhance Small Scale Businesses’ Performance in Southwest, Nigeria
Get PDFPurpose: The study sought to examine the impact of financial literacy and financial inclusion on small businesses’ overall performance with special reference to Southwest Nigeria.
Methods: Descriptive survey research sketch was adopted for this study, while the purposive sampling method was employed to choose forty small scale businesses registered with SMEDAN from each state capital of South Western of Nigeria that engaged in petty trading, bakeries, block-making, soup-making, tailoring, and agro-allied, totaling 240 participants as a sample size for the study. Data were collected by using a closed-ended questionnaire designed for the study, while simple percentage, mean, standard deviation, Pearson Product Moment Correlation (PPMC), and Ordinary Least Square (OLS) was used to analyze the data.
Results: The findings disclose that financial literacy and financial inclusion jointly and independently affect small businesses’ performance. It revealed a positive and significant relationship between financial literacy and financial inclusion. However, the study depicts that majority of business operators did not have financial knowledge such as working capital management, accounting records system, financial reporting, cashbook maintenance, income statement, daily cash reconciliation, internal control on cash, and cash budget. Also, the study confirmed that the majority of small business entrepreneurs are financially excluded from micro-financing, emergency loans, employ purchase financing, business bank loans, and micro-insurance plan Services.
Implications: The implication of this study is that if the Central Bank of Nigeria partnership with other professional organizations to promote financial literacy and inclusion programs to all business entrepreneurs across the nation, it will motivate more business entrepreneurs in Nigeria to have access to finance.
 
Private Sector Credit and Entrepreneurial Growth in Nigeria (1986 – 2018)
Get PDFPurpose: The role of entrepreneurial activities in the economic development process cannot be underestimated. How entrepreneurial growth in Nigeria has been affected by commercial banks’ credit to the private sector was examined in this study.
Methods: Autoregressive Distributive Lag (ARDL) was the estimation technique applied, while the Granger Causality was for effect assessment using annual data from 1986 to 2018.
Result: The study found that entrepreneurial growth in Nigeria was significantly affected by private sector credit.
Implications: There is a need for banks to cut down their fee on lending to entrepreneurs. Commercial banks charge as high as 22 percent to give loans to the private sector, and this is considered among the highest in the world. This makes it difficult for entrepreneurs to access fund from banks which make them resort to co-operative societies for finance. Equally, the Central Bank of Nigeria should lower the monetary policy rate to a single digit, let say 9 percent as against the current rate of 14 percent. This to a reasonable degree will make banks at least lower their fee/interest rate to lend to entrepreneurs
Strategic Role of Efficiency to Cash Management: Evidence from Cash Flow Statement of Selected Manufacturing Companies in Nigeria
Get PDFPurpose: The study aims to examine the strategic role of efficiency to cash management, more specifically as it relates to cash generated from operations of manufacturing companies in Nigeria.
Method: Annual cash flow statements of selected manufacturing companies in Nigeria for ten years (2009 -2018) were used to conduct the Pooled Test, Random Test, Fixed Effect, and Hausman Test.
Results: The results showed that efficiency has a significant effect on the cash management of manufacturing companies in Nigeria generally coupled with that of the proxies employed (CULC, LTDC, INTC, and EARQ) to measure cash management.
Implications: In view of the empirical evidence, the study proffered that cash generated from the operation is very crucial and the most reliable means of generating funds for operation because it is internal; unlike funds generated from investing and financing activities
Government Expenditure and Economic Discomfort in Nigeria: An ARDL Approach
Get PDFPurpose: Government expenditure affects the behavior of both producers and consumers, and influence the distribution of income and wealth in the economy. But, a cursory look at government expenditure (recurrent and capital) in Nigeria over the year, showed that expenditure has been on the increase but the rate of increase has not translated into economic comfort (reduction in poverty and unemployment rates). Due to this assumption, this paper examined government expenditure and economic discomfort in Nigeria.
Methods: Annual time-series data from 1990-2018 were obtained from the CBN Statistical Bulletin (various issues) and the World Bank report. The descriptive statistics, ADF unit root test, and ARDL model serves as the analytical tools.
Results: Based on the empirical result, the paper concluded that government capital expenditure has a negative and significant relationship with economic discomfort. On the other hand, government recurrent expenditure is positively and insignificantly related to economic discomfort.
Implications: This result implies that while the increase in capital expenditure will depress economic discomfort, an increase in the recurrent component of the expenditure will not help to reduce economic discomfort. Based on these conclusions, the paper recommended amongst others that more government capital spending should be encouraged as it plays a critical role in reducing both poverty and unemployment rates in Nigeria