Gazi Hassan

Do Remittances Facilitate a Sustainable Current Account

We examine how workers’ remittances impact on the current account. In doing so, we focus on how remittances affect the sustainability rather than size of current account balances. We find that the presence of remittances make it more likely that exports and imports are cointegrated thereby lending support to weak sustainability where increased remittances are associated with a faster speed of current account adjustment (lower persistence), particularly for those countries characterised by already highly persistent current account balances. We find that remittances are beneficial to the current account balance. This is in contrast to a literature that emphasises an adverse Dutch disease impact of workers’ remittances on the real exchange rate in terms of reduced external competitiveness.

Stock market uncertainty and interest rate behaviour: a panel GARCH approach

ABSTRACT Using a dynamic panel GARCH model for Asian countries, we find that interest rates are significantly lower when stock market uncertainty is high. Evidence of a positive relationship between stock market uncertainty and interest rate volatility is also provided.

Do Remittances Diminish Social Violence

Abstract This paper represents the first attempt to formalise the relationship between remittances and social violence by developing a model that predicts that migrants’ remittances lead to the reduction of social violence in the recipient economy under the condition that remittances increase the average product of labour. Using homicide data as an indicator of social violence, we tested our model’s prediction. Controlling for the endogeneity problem with appropriate instruments, we found that remittances tend to reduce social violence. We performed sensitivity analysis on remittances in the empirical specification and found it robust with an unchanged negative sign.

Sovereign credit ratings, growth volatility and the global financial crisis

Using monthly data from January 1996 to May 2010 for a panel of 76 developed and emerging economies and adopting an instrumental variable (IV) estimation technique by correcting for both heterogeneity and endogeneity with the generalized two-stage least squares (G2SLS, EC2SLS) procedure method suggested by Balestra and Varadharajan-Krishnakumar (1987) and Baltagi and Li (1995), this article provides empirical evidence that volatility of per capita GDP growth is reduced when there are positive changes in credit ratings; in other words when sovereign credit risk improves. To deal with potential simultaneity between sovereign credit ratings and output volatility, a system (3SLS) approach is undertaken, and our findings remain robust. By weakening the volatility dampening effects of ratings changes, it is found that the global financial crisis (GFC) has enhanced macroeconomic volatility. One of the channels via which sovereign rating changes affect growth volatility is the financial markets’ repricing of sovereign default risk that is reflected in sovereign credit default swap (CDS) spreads and its volatility.

The Impact of Market-wide Volatility on Time-varying Risk: Evidence from Qatar Stock Exchange

This study examines the impact of market-wide volatility on time-varying risk using the heteroscedastic market model with EGARCH (1,1) specification. Using daily sector returns from the Qatar Stock Exchange (QSE) market over the period 2007–2015, we find that in terms of systematic risk, the large sectors are as vulnerable to overall market volatility as the small ones. In addition, the results reveal evidence for asymmetry in time-varying risk due to the impact of market-wide shocks on sector returns. Specifically, we find that market-wide upswings reduce the systematic risk for industrials, while market-wide downswings increase the systematic risk for real estate, telecommunication and transportation. Our modified model survives a battery of robustness checks.

Remittances, Human Capital and Poverty: A System Approach

ABSTRACT:The international remittances sent back home by migrant workers have a profound impact on the developing countries of Asia, Africa, Latin America, and the Middle East. According to World Bank, official international remittances sent home by migrant workers represent the second most important source of external funding in developing countries. Estimated official international remittances are around

The Real Impact of Basel Ratings-Based Capital Rules on the Finance-Growth Nexus

440 billion in 2015 and are about twice as large as the level of official aid-related inflows to developing countries. While estimating the effects of remittances on economic growth tend to be rather difficult and controversial, measuring their welfare effects are less so. Remittances have been found to have poverty reducing impact in many studies. The usual methods used in these studies to gauge the effect of remittances on poverty have been OLS or instrumental variable (IV) regression. While these are valid approaches, one of their shortcomings is to overlook that remittances and poverty are both endogenous and jointly determined in a system. This paper estimates the effect of remittances on poverty in an unbalanced panel of 37 economies using a system of equations framework. Although there are some earlier studies that recommend the use of system approach, they tend to impose i.i.d condition on the error term. This paper relaxes the i.i.d. error assumption and adopts the multiple equation generalized method of moments (GMM) estimator because it produces consistent and efficient estimates when non-i.i.d. errors are present. The obtained results show that remittances significantly reduce poverty in the sample of a remittances dependent countries. The point estimates provide a robust estimation of remittances-poverty nexus and are consistent with those found in the literature. Furthermore, since it is likely that poverty itself can be a significant determinant of remittances flows, the estimated elasticities are measured on the basis when both remittances and poverty are jointly determined. The results also suggest that the dynamics of remittances is related to the overall level of human capital of the general population as well as to those living under poverty. Specifically, we find that the flows of remittances decline with improvement in the health factor of the general population but increase as health conditions of the poor people tend to improve. Likewise, there is also some evidence that remittances tend to rise with increases in educational attainments of the general population, but more likely to fall as the poor people become more educated. As a poverty reduction strategy, a stable macroeconomic environment is required so that the migrants are assured of the safety of the use of their money sent back home.

Can macroeconomic factors explain equity returns in the long run? The case of Jordan

We investigate whether ratings-based banking regulation introduced under the Basel capital framework has had any impact on the finance-growth nexus via the foreign credit channel. Using data on GDP growth per capita and cross-border bank lending to 77 countries between 1999 to 2013 we find that since the implementation of Basel 2 capital rules, risk weight changes mapped to sovereign credit rating revisions have exerted a more significant effect on economic growth in both recipient and lender countries. We also find direct evidence to indicate that the practice of global banks in increasing their foreign lending to investment grade sovereigns given their lower risk-weights has contributed to lower economic growth in these recipient countries. However, the adverse effects of the Basel capital rules are ameliorated in the presence of more open financial markets with better developed banking systems.

Nonlinear growth effect of remittances in recipient countries: an econometric analysis of remittances-growth nexus in Bangladesh

There is a growing literature on how macroeconomic variables can have effects on equity returns in both developed and emerging stock markets. We test for the long run relationship between some key macroeconomic indicators and equity returns in Jordan. Using both General-to-Specific (GETS) methodology and the Autoregressive Distributed Lag (ARDL) approach to cointegration, we find that the trade surplus, foreign exchange reserves, the money supply and oil prices are important macroeconomic variables which have long run effects on the Jordanian stock market. The results are broadly consistent with similar studies carried out for other emerging economies.