This paper investigates the existence of a threshold level for inflation and how any such level affects the growth of Asian economies. We used dynamic panel threshold growth regression, which allowed us to work with fixed effect and endogeneity issues. We observed a nonlinear relationship between inflation and economic growth for 32 Asian countries over the period 1980-2009. We detected an inflation threshold of approximately 5.43%, at a 1% level of significance. We found that inflation hurts growth when it exceeds 5.43% but has no effect below this level. Different estimation methods determined that the effect of inflation on growth is robust. Our findings may be useful to central banks as a guide for inflation targeting.

This paper aims to examine the rationale and feasibility to minimise the budget deficit that maintains the public debt at manageable level without retarding economic growth. Accumulation of government debt may subsequently shape future budget deficit via policies aimed at deficit reduction. Government authorities substantiate austerity and deficit reduction arguing for a case of sustainable fiscal policy. Hence, this study investigates the relationship between public debt, budget deficit and tax policy reforms for fiscal consolidation in Sri Lanka for the period 1990-2019. The study found that direct tax revenue, indirect tax revenue, real GDP and consumer price index are negatively correlated with government debt to GDP ratio in the long run, while in the short run, only direct tax revenue affects it significantly. Whereas, government expenditure, budget deficit, lending interest rate and exchange rate have positive and statistically significant impact on government debt to GDP ratio in the long run, while only exchange rate affects it significantly in the short run. This study identified unidirectional causality relationship between GE and PD, TRD and PD, TRID and PD, RGDP and TRD, RGDP and EXR, CPI and TRD, CPI and TRID and bilateral causality between RGDP and TRID. Findings of this study suggest that there is a rationale and feasibility to achieve fiscal consolidation in Sri Lanka by tax policy reforms and adjustments of government expenditures. The necessity of tax reforms is reflected by the greater potentials of direct taxes over the indirect taxes to contribute for public debt reduction, both in the short run and long run.

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The article intends to investigate the relationship between corruption and poverty based on the panel data of SAARC countries over the period 1996–2019. We employed the panel ARDL of pooled mean group (PMG) technique to analyze the data and focus on capability poverty, using the human development index (HDI) as a proxy for poverty. The empirical findings of PMG of the ARDL model suggest that an increase in corruption score (COC) (i.e. decrease in corruption) and increase in women’s labor force participation rate (WLFPR) seem to have a significant impact either in eradicating poverty or increasing social welfare in the long run as well as in the short run. A random effect (RE) model also identified a significant positive relationship between corruption score and HDI, and WLFPR and HDI. A Dumitrescu-Hurlin pairwise panel Granger non-causality test detected a bilateral causality relationship between COC and HDI, and WLFPR and HDI, while unilateral causality ran from WLFPR to COC. The article contributes to examining the dynamics between corruption and poverty from the governance aspect, taking South Asia as a case study.

This study attempts to identify the impact of governance indicators on economic growth using time series data for Sri Lanka from 1996 to 2016 published by the World Bank. The Phillips–Perron (PP) unit root test confirmed that all the variables are integrated in order one and suggested the use of cointegration technique to identify the long-run relationship between the variables. All the lag length selection criteria except Schwarz Information Criterion (SIC) advocated the use of one lag as an optimal lag length for this study. Johansen cointegration method detected three cointegrating relationships among the variables. Further, this technique identified a significant and positive relationship between government effectiveness (GE) and gross domestic product per capita (GDPPC) in the long run. This result is in contrast to all the three traditional approaches, such as correlation test, scatter plot and ordinary least squared (OLS), in which they do not identify any clear relationship between them. Moreover, Johansen test found a negative and statistically significant link between political stability and absence of violence (PSAV) and GDPPC in the long run, while all three traditional approaches identified a positive correlation between them. The findings of this study indicate a negative association between rule of law (ROL) and GDPPC in the long run, which coincides with theory, some of the empirical studies and with findings of all three traditional approaches used in this study. Even though OLS did not identify a significant relationship between control of corruption (COC) and GDPPC, Johansen test, correlation test and scatter plot detected a significant and negative correlation between them in the long run as expected by the theoretical evidence. Granger’s causality test identified the bidirectional causality between GE and ROL and unidirectional causality between ROL and COC. However, relationship between governance variables and GDPPC vary based on the estimation methods. These findings suggest that the policymakers need to take considerable attention on the above when they formulate and implement policy to improve GE.