The Effects of Financial and Political Risks on Economic Risk in Southern European Countries: A Dynamic Panel Analysis

Kırıkkaleli, Derviş; Onyibor, Kelvin

doi:10.5430/ijfr.v11n1p381

Cited by 7 publications

(5 citation statements)

References 44 publications

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“…Also, our outcome supports the findings of Karnane and Quinn (2019), Roe and Siegel (2011), and Alesina and Perotti (1996) in that they underline that political instability lowered the amount of investment and then it inevitably worsened economic growth. From the risk perspective, this finding also supports Kirikkaleli (2020) and Kirikkaleli and Onyibor (2019) outcomes. These outcomes highlight the importance of sound political stability in developing and developed countries, especially for the growing Islamic finance-based countries, as the government has an active role in the Islamic economy by entering the market acting the regulatory of economic activities (TKBB, 2016).…”

Section: Discussionsupporting

confidence: 69%

“…Results found that the Swedish economy was adversely affected by US policy uncertainty. Finally, the recent study by Kirikkaleli and Onyibor (2019) investigated the financial and political risks on economic risk in the Southern European countries, considering the 2008 to 2009 global financial crises as the global risk. Results show that political risk has created economic vulnerabilities in Southern European countries.…”

Section: Literature Reviewmentioning

confidence: 99%

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Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests

Kırıkkaleli

Torun

et al. 2021

Sage Open

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This study aims to examine the causal and long-term effects of domestic finance, political risks, and global risk on domestic economic risk in QISMUT countries, namely Qatar, Indonesia, Saudi Arabia, Malaysia, UAE, and Turkey, covering the period of 1997Q1 to 2015Q2. The study used the threshold cointegration test, which involves Gregory and Hansen Cointegration and Hatemi-J Cointegration tests. The tests endogenously combined possible regime shifts in the long-run relationship of the underlying variables. Our results reveal (i) the presence of cointegration among the time series variables with endogenous structural breaks. The linear Toda-Yamamoto causality and nonlinear—Diks and Panchenko and Hatemi-J—causality test shows (ii) changes in domestic financial risk significantly lead to changes in economic risk in the QISMUT countries; (iii) domestic political risk causes economic risk in Indonesia, Qatar, Saudi Arabia, UAE; (iv) global risk affects significantly on economic risk in Saudi Arabia, Turkey, and UAE. Critical policy intervention could include governors in the QISMUT countries should control financial stability indicators such as domestic and foreign debts, exchange rate, and liquidity problems to control macroeconomic dynamics in their respective markets.

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Section: Discussionsupporting

confidence: 69%

Section: Literature Reviewmentioning

confidence: 99%

Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests

Kırıkkaleli

Torun

et al. 2021

Sage Open

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“…Zaidi [95] and Chen [96] found the bidirectional causality between economic growth and financial development in the 31 OECD countries and 16 Central and Eastern European countries, respectively. Kondoz, Kirikkaleli [97] and Kirikkaleli and Onyibor [98] found casual links between financial risk and economic risk in South American countries and Southern European countries, respectively. However, contradictory evidence (negative or insignificant effect) of financial development on economic growth also exists in the literature [99,100].…”

Section: Economic Growth and Financial Developmentmentioning

confidence: 98%

Economic Growth in Six ASEAN Countries: Are Energy, Human Capital and Financial Development Playing Major Roles?

Rahman

Nghiem

2022

Sustainability

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This study aims to investigate whether energy consumption, human capital and financial development played an important role in economic growth using a panel dataset of six ASEAN countries over the period 1995–2017. Various econometric techniques—the cross-sectional dependence, panel unit root, panel cointegration, long-run panel estimates, and panel Granger causality tests—are applied. The results of panel data analyses show that all the selected variables positively contribute to the economic growth of the countries. However, all the six ASEAN countries still rely primarily on physical capital and labour for their economic growth. The findings of country-wise tests indicate that there exists a positive relationship between economic growth and financial development in Cambodia, while human capital positively contributes to the economic growth of Indonesia, Malaysia, the Philippines, Thailand and Vietnam. The causality test exhibits unidirectional causality from energy consumption to economic growth and from economic growth to financial development in both the short and long run. The findings suggest that inclusive development strategies that provide the opportunity for all sectors to grow will result in the desirable three e’s of sustainable economic development: equitable, effective and efficient.

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“…Unfortunately, all these turning events are not in the literature. A previous study by Kirikkaleli and Onyibor (2020) on Southern European Countries and Kirikkaleli (2016) on the Balkan countries found a negative relationship among variables. To best of our knowledge, no study has focused on this topic in Northern African countries.…”

Section: Introductionmentioning

confidence: 75%

“…For instance, in 1990, the banking crisis in Sweden plummeted private investment by 35%, with GDP falling for three consecutive years, a total of −5.1% in 1991-1993, and overall the country went into a significant recession during the same period (Englund, 2016;Stockhammar & Österholm, 2016). The studies by Cassette and Farvaque (2014), Kirikkaleli and Onyibor (2020), and Kirikkaleli (2016) have reported adverse effects of financial risk from the post-World War II period until the present time, the most significant challenge faced by the country's economy. On the contrary, Arcand and Fafchamps (2012), Cecchetti and Kharroubi (2012), and Rousseau and Wachtel (2011), among other studies, have failed to find a definite link between financial risk and economic stability.…”

Section: Literature Reviewmentioning

confidence: 99%

The Effect of Domestic Risks and Arab Spring on Economic Risk in Northern African Countries: Findings From the First- and Second-Generation Panel Approaches

Kırıkkaleli

Torun

Sowah

2020

The Review of Black Political Economy

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For decades, domestic risks belonged to the category of issues that are difficult to understand because information is fragmented or incomplete. However, paradoxically it has been suggested by many researchers that domestic risks involve complex combinations of structural and institutional weakness, bad governance, and regional contagion wrapped in a paradigm of high levels of trade, capital, and information flows, resulting in economic risk. This study employ first- and second-generation panel-based estimators—Westerlund cointegration, fully modified ordinary least square (FMOLS), dynamic ordinary least square (DOLS), and dynamic common correlated effects mean group (D-CCEMG)—to explore both short-run and long-run nexus between domestic risks and economic risks in Northern African countries from 1997Q2 to 2018Q4. To our knowledge, no study has applied these econometric techniques to investigate interlink-ages among domestic risks, economic risks, and as well as including dummy variable of Arab Spring in Northern African countries. Our empirical findings reveal that (a) financial and political stabilities positively affect economic stability, and (b) Arab Spring negatively affected economic stability. Our analysis confirms that domestic risks involve institutional weakness and bad governance region in regional contagion. Given this new insight on economic risk, policymakers should develop a strong financial system that promotes economic growth.

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The Effects of Financial and Political Risks on Economic Risk in Southern European Countries: A Dynamic Panel Analysis

Cited by 7 publications

References 44 publications

Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests

Modeling Economic Risk in the QISMUT Countries: Evidence From Nonlinear Cointegration Tests

Economic Growth in Six ASEAN Countries: Are Energy, Human Capital and Financial Development Playing Major Roles?

The Effect of Domestic Risks and Arab Spring on Economic Risk in Northern African Countries: Findings From the First- and Second-Generation Panel Approaches

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