Arti Prasad

Export-Led Growth Hypothesis: Evidence from Papua New Guinea and Fiji

Purpose - This paper aims to examine the export-led growth hypothesis for Fiji and Papua New Guinea (PNG). Design/methodology/approach - The paper investigates the export-led growth hypothesis for Fiji and PNG who have been facing dismal economic growth performances over the last couple of decades. Findings - Findings of the study suggest that for Fiji there is evidence of export-led growth in the long-run, while for PNG there is evidence of export-led growth in the short-run. Originality/value - The findings of this paper have important messages for policy makers given that export sectors in both countries investigated are underdeveloped due mainly to a sustained period of political instability.

Tourism and Economic Growth: A Panel Data Analysis for Pacific Island Countries

The contribution of tourism to the economic growth of Pacific Island countries (PICs) has achieved significance in the past decade. The shift in the economic policies of the PICs from the late 1980s has been decisively away from import substitution and agriculture to urban-based manufacturing and services sectors. Tourism is the main component of the services sector in the PICs. The contribution of tourism to economic growth in Fiji, Tonga, the Solomon Islands and Papua New Guinea is expected to grow. The authors use panel data for the four PICs to test the long-run relationship between real GDP and real tourism exports. They find support for panel cointegration and the results suggest that a 1% increase in tourism exports increases GDP by 0.72% in the long run and by 0.24% in the short run.

An Empirical Investigation of the Relationship between Government Revenue and Expenditure: The Case of the Fiji Islands

Purpose - Understanding the relationship between government revenue and government expenditure is important from a policy point of view, especially for a country like Fiji, which is suffering from persistent budget deficits. The aim of this paper is to investigate the relationship between government revenue and expenditure for Fiji. Design/methodology/approach - The Johansen test for cointegration and Granger causality test are used to conduct the empirical analysis. Findings - The key findings are that: government revenue and government expenditure in both the aggregate and disaggregate sense are cointegrated; in the short-run government expenditure Granger causes government revenue in an aggregate sense, departmental expenditure Granger causes aggregate revenue, and there is bidirectional causality running between government expenditure and customs duties; and in the long-run there is evidence of fiscal synchronization, implying that expenditure decisions are not made in isolation from revenue decisions. Research limitations/implications - This fiscal synchronization has not been able curb the current account deficit in Fiji. Moreover, the confirmation of the spend-tax attitude of the government does not bode well for the level of investments and skilled human capital in Fiji as this may perpetuate tax increases in the future. Given that the Fiji Government is currently trying to rein in the escalating level of fiscal deficit, it is an opportune time for them to engage in extensive expenditure reforms. Originality/value - The findings of this paper should allow policy makers to make informed decisions. Furthermore, the paper is different from others because apart from examining the revenue and expenditure in an aggregate sense, it also considers the different components of revenue and expenditure.

A test of the Wagner's hypothesis for the Fiji islands

In this article we examine Wagners law for Fiji for the period 1970 to 2002. Using the Johansen (1988) test for cointegration, we find one cointegration relationship between national output and government expenditure. Using five different long run estimators, we find robust results on the impact of national income on government expenditure. The elasticity ranges from 1.36 to 1.44, implying that a 1% increase in income leads to a 1.36–1.44% increase in government expenditure. Moreover, we find that in the long run national income Granger causes government expenditure. While these results are consistent with Wagners law, we warn policy makers that because Fijis total debt stands at around 69% of GDP, in future the bulk of expenditure will go towards debt financing at the expense of productive sectors.

Modelling Fiji-US Exchange Rate Volatility

In this article, we examine the Fiji–US exchange rate volatility using daily data for the period 2000 to 2006. Our modelling framework is based on the EGARCH model. We find robust evidence of conditional shocks having a positive effect on exchange rate volatility, shocks having asymmetric effects on exchange rate volatility and shocks having a transitory effect on exchange rate volatility.

Evidence on PPP from a cointegration test with multiple structural breaks

Despite a plethora of studies on purchasing power parity (PPP), those that take a cointegration approach have found mixed evidence on PPP. The goal of this article is to obviate existing tensions in the PPP literature by using a simple test for cointegration between nominal exchange rate and relative prices that accounts for multiple structural breaks. We find that for 14 out of 15 OECD countries, there is evidence of a cointegration relationship between nominal exchange rate and relative prices at the 5% level. Only for Japan, we find evidence for cointegration at the 2.5% level. These results suggest overwhelming evidence of support for PPP for the OECD countries.