Linear and Nonlinear Causal Relationships Between International Reserves and Economic Growth: Evidence from India

Kashif, Mohammad; Singh, Satish Kumar; Thiyagarajan, S.; Maheshwari, Abhishek

doi:10.1177/2319510x19898633

Cited by 9 publications

(7 citation statements)

References 23 publications

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“…The outcome is in line with the general belief that effective management of foreign reserves can play a crucial role in promoting Nigerian economy. This discovery corroborates the findings of Kashif and Sridharan (2015), who observed a substantial positive influence of holding foreign reserves on long-term economic growth in Malaysia, India, and Brazil, respectively.…”

Section: Resultssupporting

confidence: 90%

External Debt and Nigeria's Economic Growth: Determinants and Implications

Ademola¹

2023

j.financ.econ.res

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Nigeria's economy has been largely dependent on external borrowing, which has resulted in an increasing debt burden. Policymakers and economists have debated the influence of external debt on economic growth. Therefore, this study analyzed how external debt affects Nigeria's economic growth and explored the factors that determine external debt in the nation. The study utilizes an Ex Post Facto research design, and data from the Central Bank of Nigeria and the World Bank report from 1990 to 2020 was used. Vector error correction regression model, granger causality test, unit root and co-integration tests were employed for the analysis. Findings revealed that external debt servicing, exchange rate and external debt have significant but adverse effect on economic growth, confirming the debt overhang effect. However, external reserves portends positive and significant effect on GDP. Moreover, empirical results revealed that trade openness, government expenditure, inflation and exchange rates are salient factors that affect external debts in Nigeria. In terms of causality, all the tested variables have causal relationship with external debt. The study recommends that Nigeria government needs to adopt a sustainable borrowing and debt management strategy to avoid excessive external debt accumulation and its negative implications for the economy.

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Section: Resultssupporting

confidence: 90%

External Debt and Nigeria's Economic Growth: Determinants and Implications

Ademola¹

2023

j.financ.econ.res

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“…The growth in GDP is unable to promote foreign exchange earnings in the country. Finally, Kashif (2016) examined the linear and nonlinear relationship between international reserves and economic growth in Algeria. The study found that there is bidirectional causality between international reserves and economic growth with respect to linear causality but a unidirectional causality exists running from economic growth to international reserves with respect to nonlinear causality.…”

Section: Causal Relationship Between Foreign Exchange Reserve and Eco...mentioning

confidence: 99%

Relationship between Foreign Exchange Reserves and Economic Growth in Tanzania: Application of Wald Granger-Causality Test

Jacob,

Magungu

2024

RPJ

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The study investigates the causal relationship between foreign exchange reserves and economic growth in Tanzania from 1990-2021. The study employed the Wald Granger-Causality Test to examine the causal relationship between variables. The results from the Wald Granger-Causality- Test revealed the unidirectional causal effect of economic growth on foreign exchange reserves. This implies that the value of economic growth can be used to predict the future value of foreign exchange reserves in Tanzania in the short and long run. In contrast, foreign exchange reserves cannot be used to predict the economic growth movement. Furthermore, findings indicated that foreign exchange reserves positively affect economic growth in the long run, implying that increasing foreign exchange reserves increases financial growth. Due to these findings, it can be concluded that foreign exchange reserves act as an integral catalyst for sustainable development in a country. Improving monetary policies and reserve management strategies would strike a balance between holding reserves and managing external debt. While reserves can be used to service debt and enhance creditworthiness, excessive reliance on reserves for debt servicing may deplete the buffer needed for crisis management. Policymakers must consider the country's specific circumstances and continually assess and adapt strategies to promote sustainable economic growth.

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“…Panda and Trivedi (2016) performed a study using quarterly data from 1996 to 2014; they have reported that foreign exchange reserves with RBI show a positive long-run relationship with money supply and trade openness and a negative long-run relationship with exchange rate volatility. Kashif and Sridharan (2015) performed a study on India’s reserves and have reported that economic growth is positively associated with IR, while trade openness is positively associated with IR. More recently, Nayak and Baig (2019) have conducted a study on factors influencing IR by using a long-run model, which was prepared by following a buffer stock model proposed by Frenkel and Jovanovic (1981).…”

Section: Review Of the Literaturementioning

confidence: 99%

Factors Associated with Growth in India’s International Reserves: VECM Analysis

Sreeram¹,

Sayed²

2022

Foreign Trade Review

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This study empirically examines the determinants of India’s international reserves in the long run and in the short run with seven other macroeconomic variables using the vector error correction model. The Johansen co-integration results indicate a positive long-run relationship between international reserves holdings and broad money M3 and foreign direct investment (FDI) inflows and negative relationship with external debt. The Granger causality test outcome also verifies the results, demonstrating that increase in broad money supply and FDI inflows are the reason for the accumulation in international reserves in India in the long run. M3 demonstrated a higher influence on international reserves suggesting that monetary policy is used widely in regulating the international reserves in India. This study also estimated the short-run dynamics and the tendency of the variables to reinstate to its long-run equilibrium. The error correction term coefficient entails a moderately low level of adjustment of international reserves holding, indicating that it is the other reason that the level of international reserves holding in India is high in the short run. JEL Codes: E51, F31, F41

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Linear and Nonlinear Causal Relationships Between International Reserves and Economic Growth: Evidence from India

Cited by 9 publications

References 23 publications

External Debt and Nigeria's Economic Growth: Determinants and Implications

External Debt and Nigeria's Economic Growth: Determinants and Implications

Relationship between Foreign Exchange Reserves and Economic Growth in Tanzania: Application of Wald Granger-Causality Test

Factors Associated with Growth in India’s International Reserves: VECM Analysis

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