Efficacy of Macroeconomic Policies to Achieve Inclusive Growth: Evidence from Developing Countries

By: Zakia Batool & Arshad Ali Bhatti

This paper aims to analyse the interactive role of fiscal and monetary policies in promoting inclusive growth. In this attempt, we use a panel data of 51 developing countries for the period 1995-2017 and employ state-of-the-art panel data estimation methods. The paper concludes that expansionary fiscal and monetary policies both affect economic inclusiveness in the developing region. However, it is observed that high expenditures in developing countries, which lead to debt crises, not only directly affect economic inclusiveness but also reduce the effectiveness of monetary policy. Therefore, the governments in these countries may consider cutting their spending. Thus, an increase in the money supply with a low to median level of government expenditure is a favourable policy option. 

Publication Link: http://58.27.197.147/index.php/fjes/article/view/269

Small Farm Holder’s Wellbeing: Evidence From Punjab (Pakistan)

by: Muhammad Arshad Sakhani, Abdul Jabbar, & Arshad Ali Bhatti 

The study investigates the impact of income diversification on the well-being of small farm holders in Punjab, the most populated and agrarian province of Pakistan. It benchmarks the levels of well-being of small farm holders who opt income diversification (off-farm) with those who remain exclusively indulged in agricultural farm activities(onlyfarm). The data of 1607 farm families are retrieved from the PSLM (2015–16) survey to construct a fully representative well-being index using Principal Component Analysis (PCA). Empirical analysis is obtained through the treatment effect model. The results of the treatment effect show that income diversification has positively significant impact on household well-being and cast noticeable improvements in well-being of off-farm strata as compared to that of only-farm income earners. Furthermore, net saving, access to credit, dependence ratio, and farm size are the critical factors that enable land assets to have a favorable and substantial impact on both welfare and income diversification. Importantly improved education drives small farmers’ decision to diversify their sources of income.

Publication Link: https://journals.au.edu.pk/ojs/index.php/jbe/article/view/431

Socioeconomic and Political Determinants of Public Spending Allocations: A Panel Data Analysis of Aggregate and Sectoral Spending

 By: Babar Amin, Mirajul Haq, Arshad Ali Bhatti

A well-established segment of economic literature argues for an efficient allocation of resources to overcome poor growth performance, poverty, and inequality. However, the resource allocation response towards these economic issues varies across countries. Based on their respective socio-economic and political fabric, countries set priorities and accordingly allocate the available resources towards different sectors of the economy. The sectoral allocation of the available resource pie has repercussions for various economic variables like growth, poverty, and income inequality. In this context, this study contributes to the existing literature on the subject in two ways. First, this study aims to assess the factors that determine overall public spending across economies by focusing on socio-economic, political, and institutional factors. Second, the study examines the role of those factors in determining health, education, infrastructure, and defence spending. The study uses the panel data of 104 countries for the period 1990-2016 and employs FE-IV method to conclude that bureaucratic quality, democratic accountability, internal conflict, external conflict, government stability, and military involvement are the main institutional and economic variables determining public spending allocations at the aggregate and sectoral levels.

Publication Link: https://pssr.org.pk/article/socioeconomic-and-political-determinants-of-public-spending-allocations-a-panel-data-analysis-of-aggregate-and-sectoral-spending

Convergence in Human Development across Districts of Pakistan: Evidence from Club Convergence Test

 by: Noor Ahmed, Babar Hussain, Arshad Ali Bhatti

Studies on the convergence club have become a focal point in economic growth and development literature over the last three decades. This paper analyzes the club convergence hypothesis going beyond the traditional use of GDP per capita. It examines the convergence club of 97 Pakistani districts over the period 2004-20015. The analysis is based on an augmented index for measuring development through convergence and the clustering method of Phillips and Sul (2007). The index consists of 3 sub-indices of education, health, and household welfare level, with each index further composed of 5 indicators. The Principal Component Analysis (PCA) is used to aggregate these indicators to get sub-indices and a final development index. Results of the study indicate that the districts do not converge to the same long-run equilibrium. Instead of overall convergence, we find eleven convergence clubs and one non-convergent group for human development. The existence of clubs means that measures aimed at reducing disparities in human development and promoting regional growth should consider the specific characteristics revealed in the convergence analyses. Spatial differences thus need to be addressed mainly through pro-poor regional policies.

Publication Link: https://pssr.org.pk/issues/v5/2/convergence-in-human-development-across-districts-of-pakistan-evidence-from-club-convergence-test.pdf

Roles of Corporate Governance and Ownership Structure in Dividend Smoothing Behavior of Asian Firms

by: Shakil Ahmad, Zulfiqar Ali Shah, Arshad Ali Bhatti

The study explores the determinants of dividend smoothing behavior of Asian firms for 2009-2018. The study used a firm's specific characteristics, corporate governance, and ownership structure variables as determinants of dividend smoothing in some Asian markets (Pakistan, India, Sri Lanka, Malaysia, and Singapore). Based on gender critical mass theory, the study finds the presence of gender-critical mass is positive and significantly associated with firm dividend smoothing behavior; whereas, the presence of fewer women depicts a negative or insignificant association with dividend smoothing behavior. The moderating role of gender diversity between family ownership and dividend smoothing is also examined. Further, contrary to the agency theory-based explanations of dividend smoothing, we find that family firms follow a smooth dividend policy. These findings suggest that gender-critical mass, family ownership, and higher market to book value contribute positively to dividend smoothing behavior in the Asian market.

Publication Link: https://tuengr.com/V11A/11A13TM.pdf

The Income Tax Impact on Macroeconomic Indicators: A CGE Inquest for Pakistan Economy

 By: Ghulam Moeen-ud-Din, Arshad Ali Bhatti, Hasnain Abbas Naqvi

This study is to analyze the impact of an increase in income tax on Pakistan economy`s selected indicators like GDP, national income, imports, exports, the balance of trade, private and public sector investment. The assessment utilizes the latest SAM 2010-11, developed by Dorosh et al. (2015), for Pakistan`s economy and uses a Computable General Equilibrium Model, consistent with Lofgren et al. (2002). To investigate the effect, two experiments of 5%, and 10% increase in income tax are performed. The results reveal that increase in direct tax results in improvement with regards to all important macroeconomic indicators. However, rural households’ categories express lesser improvement in comparison to urban households’ groups. Our experiment suggests that an increase in income tax should steadily be implemented to overcome the deficit in the public budget. 

Publication Link: https://qurtuba.edu.pk/jms/default_files/JMS/14_2/14_2_10.pdf

Developing a Financial Stress Index for Pakistan

by: Haleema Sadia, Arshad Ali Bhatti, Eatzaz Ahmad

Abstract 

This paper develops a financial stress index for the Pakistan economy covering the post-reform period. We use time series data for the period 1993M1-2016M12 and employ principal component analysis to aggregate various components of financial markets, real economic activity, and political risk in a single financial stress index. The computed index successfully explains the known periods of financial stress in Pakistan. It stresses upon the political and economic risks as important contributors of financial stress along with financial market factors. This composite index assesses the stability of the financial system, which is a public policy concern in most emerging economies. Thus, we believe that it can serve as an important benchmark to describe the systemic risk in the financial system.

Pub. Link: https://imsciences.edu.pk/files/journals/vol11_2019/New%205%20M.pdf