Arcade Ndoricimpa

This study examines the asymmetries in the tax-spending nexus for Burundi using a three-variable model. The study employs a threshold cointegration test with asymmetric adjustment advanced by Enders & Siklos (2001). The findings indicate that government spending, taxes and grants are cointegrated with asymmetric adjustment. Causality tests from the estimated asymmetric error correction model suggest that in the short run there is an independent relationship between government spending and taxes in Burundi. Pertaining to the impact of grants, the results show that grants encourage the government of Burundi to spend more, but, conversely, they also discourage tax revenue, which is known as the tax displacement hypothesis. The findings further show that only government spending responds to budgetary disequilibrium, and this occurs when the budget situation is worsening. This implies that in Burundi, to restore the equilibrium when the budget situation is worsening, the adjustment is ma...

This study examines nonlinearities in the inflation-growth nexus in Africa. A dynamic panel threshold regression is applied to account for the potential endogeneity bias in the model. The findings of this study confirm the existence of nonlinearities in the inflation-growth nexus. An inflation threshold of 6.7% is estimated for the whole sample, 9% for the sub-sample of low-income countries and 6.5% for middle-income countries. The findings suggest that low inflation is growth-enhancing for the sub-sample of middle-income countries but neither affects economic growth for the whole sample nor for the sub-sample of low-income countries. However, inflation above the threshold is detrimental to economic growth for all the cases considered. The findings of this study may be useful to African monetary policymakers as they decide on inflation targets to adopt to avoid the detrimental effects of high inflation while reaping the growth benefits of low inflation.

Abstract This study examines how tax performance is associated with tax reforms and civil conflicts in Burundi. The results from a regression analysis on a tax equation indicate that total tax revenue, international trade taxes and income taxes, are not associated with civil conflicts. However, taxes on goods and services are found to be negatively associated with civil conflicts. The results show also that total tax revenue and the tax categories are not associated with tax reforms. The reasons why tax revenue performance may not have been associated with tax reforms, include the prevalence of fiscal corruption, the negative effects of conflicts on the economy, abusive tax exemptions, and failure to focus on widening the tax base. There is a need to rethink the implementation of tax reforms in Burundi to enhance their effectiveness.

PurposeThis study reexamines the sustainability of fiscal policy in Sweden.Design/methodology/approachTo test the sustainability of fiscal policy, two approaches are used; the methodology of Kejriwal and Perron (2010), testing for multiple structural changes in a cointegrated regression model and time-varying cointegration test of Bierens and Martins (2010), and Martins (2015).FindingsUsing the first approach of testing for multiple structural changes in a cointegrated regression model, the results indicate that government spending and revenue are cointegrated with two breaks. An estimation of a two-break long-run model shows that the slope coefficient increases from 0.678 to 0.892 from the first to the second regime, implying that fiscal deficits were weakly sustainable in the first two regimes, from 1800 to 1943, and from 1944 to 1974. Further, results from time-varying cointegration test indicate that cointegration between spending and revenue in Sweden is time-varying. Fiscal de...

PurposeThis study reexamines the sustainability of fiscal policy in Sweden.Design/methodology/approachTo test the sustainability of fiscal policy, two approaches are used; the methodology of Kejriwal and Perron (2010), testing for multiple structural changes in a cointegrated regression model and time-varying cointegration test of Bierens and Martins (2010), and Martins (2015).FindingsUsing the first approach of testing for multiple structural changes in a cointegrated regression model, the results indicate that government spending and revenue are cointegrated with two breaks. An estimation of a two-break long-run model shows that the slope coefficient increases from 0.678 to 0.892 from the first to the second regime, implying that fiscal deficits were weakly sustainable in the first two regimes, from 1800 to 1943, and from 1944 to 1974. Further, results from time-varying cointegration test indicate that cointegration between spending and revenue in Sweden is time-varying. Fiscal de...

PurposeThe purpose of this study is to seek to re-examine the threshold effects of public debt on economic growth in Africa.Design/methodology/approachThis study applies panel smooth transition regression approach advanced by González et al. (2017). The method allows for both heterogeneity as well as a smooth change of regression coefficients from one regime to another.FindingsA debt threshold in the range of 62–66% is estimated for the whole sample. Low debt is found to be growth neutral but higher public debt is growth detrimental. For middle-income and resource-intensive countries, a debt threshold in the range of 58–63% is estimated. As part of robustness checks, a dynamic panel threshold model was also applied to deal with the endogeneity of debt, and a much higher debt threshold was estimated, at 74.3%. While low public debt is found to be either growth neutral or growth enhancing, high public debt is consistently detrimental to growth.Research limitations/implicationsThe find...

Purpose This study aims to undertake an institutional analysis of capital flight and examine the drivers of capital flight from Burundi. Design/methodology/approach Given the episodes of political instability and poor governance which have characterized Burundi’s landscape in the past decades, coupled with macroeconomic instability which has been prevailing, political, economic and institutional factors are used to explain the trend and magnitude of capital flight which were recorded. An econometric analysis using robust least squares is also used to examine the determinants of capital flight from Burundi. Findings The estimation results seem to be sensitive to capital flight measurement used, but in general, they suggest that external debt, political instability and wars, as well as exports, are the main drivers of capital flight from Burundi. Research limitations/implications The findings of this study imply that to discourage capital flight, the government of Burundi should promo...

Aims: This paper examines the causal links among Foreign Direct Investment (FDI), exports and economic growth in Burundi. Methodology: The paper applies bootstrap causality tests to account for non-normality in error terms and the presence of ARCH effects in which case the Wald statistic does not follow the usual distribution thus biasing causality tests. Results: The findings reveal that there is no causality whatsoever among FDI, exports and economic growth in Burundi, rejecting FDI-led export, export-led growth and FDI-led growth hypotheses.

The recent rapid fall in oil prices and its impacts on foreign exchange earnings and reserves in Nigeria has resulted in a number of internal and external imbalances putting serious threat to the stability of the economy. This study therefore examines whether devaluation or floating exchange rate regime is an option to consider given the recent challenges in the nation's policy space. A behavioural equilibrium exchange rate approach is used to determine the extent of exchange rate misalignment complemented with a structural vector autoregressive (SVAR) model to examine the impact of currency devaluation on trade balance, domestic output and inflation. The result reveals the existence of an overvalued currency misalignment in recent times; while there is weak evidence to support that devaluation will improve the trade balance. Hence, floating the currency will be an adequate policy option given the current reality. This is expected to boost investors’ confidence, creates needed automatic adjustment mechanism and makes the tradable goods sector more competitive, resulting in more favourable external balances. However, this requires a concerted effort at boosting the nation's supply capacity through implementation of structural reforms in both oil and the non-energy sector to diversify Nigeria's production and export base.

The study examines the long-run relationship between exports and imports in East African Community (EAC) member states in order to test for the sustainability of current account deficits. The study adopts the threshold cointegration test advanced by Enders and Siklos (2001). The findings suggest that imports and exports are cointegrated for Burundi, Kenya and Uganda with a cointegrating coefficient which is less than 1, whereas for Rwanda and Tanzania they are not cointegrated. This would imply that the current account deficits are weakly sustainable for Burundi, Kenya and Uganda, but unsustainable for Rwanda and Tanzania. Since use of panel data has a number of advantages over pure time-series data, panel cointegration test suggested by Pedroni (1999, 2004) was also applied and the results indicate that exports and imports are cointegrated for the EAC countries as a panel with a cointegrating coefficient statistically equal to 1. However, caution is needed in interpreting panel data results, especially when heterogeneity dimension among the cross-sections is not taken into account. The findings of this paper highlight the need for EAC countries to put in place policies to reduce their current account deficits; for Rwanda and Tanzania, to regain their external stability and for the rest of the EAC countries, to reinforce the sustainability of current account deficits which was found to be weak.

PurposeThis study reexamines fiscal deficit sustainability in South Africa.Design/methodology/approachThe study applies three cointegration testing approaches, namely testing for multiple structural changes in a cointegrated regression model, time-varying cointegration test and asymmetric cointegration test.FindingsThe results point to the existence of a level relationship between government revenue and spending. In addition, the long-run equilibrium relationship between government revenue and spending in South Africa is found to be characterized by breaks. As such, assuming a constant cointegrating slope may be misleading. Results from time-varying cointegration and an estimation of a cointegrated two-break model indicate that cointegrating coefficient has been time-varying but has remained less than 1 for the entire study period, indicating that fiscal deficits have been weakly sustainable. This finding is also confirmed by the results from an estimated asymmetric error correction...