Asian Journal of Economic Modelling

How does economic growth impacted by economic freedom? A case study of the Middle East Region

2025-08-06T22:55:04-05:00

The study aimed to analyze the impact of economic freedom on economic growth and foreign direct investments concerning a country's political stability. The research employed a correlation design. It focused on 11 Middle Eastern countries over a period of 22 years. The study used the Autoregressive Distributed Lag (ARDL) method to estimate short- and long-term relationships. Results demonstrated that economic freedom significantly and positively affects economic growth in the long run, while civil liberties positively influence both economic growth and foreign direct investment in both the short and long term. Conversely, the study found that political rights have a negative impact on long-term growth, suggesting that in the Middle East, democratic expansion is associated with policy uncertainties that hinder growth. Additionally, the findings indicated that foreign direct investment in the Middle East is driven by civil liberties rather than political stability or economic freedom, highlighting the importance of institutional transparency. Overall, the findings emphasize the significance of institutional quality as a key driver of sustained economic performance in the region. Therefore, Middle Eastern governments should implement structural reforms to safeguard trade and economic freedoms.

Assessing microcredit's role in enhancing economic well-being among low-income individuals in Sub-Saharan Africa

2025-08-11T21:08:32-05:00

The study assesses the impact of microcredit on the economic welfare of low-income households across SSA from 2009 to 2019. The study used econometric methods, including panel regression models and the Generalized Method of Moments (GMM), to evaluate microcredit's role in enhancing economic well-being among low-income individuals in SSA. The choice of GMM was to address potential endogeneity. The results demonstrated the effectiveness of microcredit in alleviating poverty. The findings suggest that poverty reduction strategies should incorporate microcredit alongside improvements in education, infrastructure, and healthcare to achieve optimal outcomes. The study also identified education, population growth, per capita GDP, and transformed agriculture as critical factors in ensuring microcredit's effectiveness in improving economic well-being among low-income individuals in SSA. Microcredit is a valuable tool for enhancing economic well-being among low-income populations. Governments, financial institutions, and stakeholders must make deliberate efforts to sustain and expand microcredit in impoverished environments. Microcredit has the potential to address the low-income syndrome in SSA and reduce income inequality across social classes.

Examining the linkage and structural transformation effects of nickel industrialization: A case of South Halmahera, Indonesia

2025-08-11T21:39:15-05:00

The global surge in electric vehicle demand has intensified focus on green economies. Indonesia, home to the world's largest nickel reserves, enacted a nickel ore export ban to maximize domestic value-added through downstream industrialization, notably in South Halmahera, North Maluku. We examine the effects of nickel downstream processing by estimating multiplier impacts for mining and manufacturing sectors at regional and national levels, identifying structural transformation in South Halmahera, and assessing the competitiveness relative to North Maluku Province. Several methods were used, such as the Leontief inverse matrix of updated Input–Output (IO) and Interregional Input–Output (IRIO) tables, shift-share (SS), and location quotient (LQ). We find that manufacturing multipliers have grown substantially, but with significant leakage as benefits largely flow to other provinces. SS analysis also indicates rising productivity, labor reallocation into manufacturing, and the emergence of supporting sectors. LQ results confirm a sharp, although temporary, increase in manufacturing competitiveness that also boosts mining productivity. Despite transformative effects on nickel industrialization, much of the value-added potential remains uncaptured due to weak local integration. Developing reliable supporting industries is crucial to attaining economic diversification for long-term sustainable growth, considering the limited amount of nickel reserves.

Study on the dynamic relationship among economic policy uncertainty, bitcoin and energy price

2025-09-11T08:15:33-05:00

Bitcoin has garnered significant interest among investors, policymakers, practitioners, and market participants, with factors such as the Russia-Ukraine war and the constantly changing global uncertainties making crude oil prices unstable. The purpose of this paper is to examine the dynamic impact of Economic Policy Uncertainty (EPU) on the linkage between Bitcoin and crude oil prices using the TVP-VAR method, which represents a major starting point of this study. Through model analysis, it was found that, first, in the study examination, the linkage between EPU and the Bitcoin market is relatively high, implying the possibility of diversified relations. Second, the relationship between EPU and crude oil prices is quite significant in the short run, and the results also show that EPU's impact on crude oil prices is much more stable than on Bitcoin, a crucial factor to consider when assessing the impact of uncertainty on the interaction between Bitcoin and crude oil price markets. Third, there is evidence that Bitcoin’s hedging properties for crude oil prices throughout the sample period are undeniable, having significant policy implications for policymakers and market participants. Therefore, in studying economic variables, EPU is an important influencing factor that policymakers and investors need to consider.

Impact of remittances, foreign direct investment and gross capital formation on economic growth in Timor-Leste: Strategies for sustainable development

2025-09-12T08:54:29-05:00

Timor-Leste is highly dependent on oil, and diversification of productive sectors is essential for attracting foreign direct investment (FDI) and remittances as contributions to GDP. This study analyzes the impact of remittances, FDI, and gross capital formation (GCF) on economic growth in Timor-Leste, with a focus on sustainable development strategies. Using an autoregressive distributed lag (ARDL) model, the analysis investigates short- and long-term dynamics among these critical economic indicators: remittances, FDI, GCF, and GDP growth from 2006 to 2023. The findings indicate that while FDI exerts a negative long-term impact on GDP, it plays a positive role in the short term. In contrast, GCF significantly increases economic growth in the long term. However, remittances do not have a significant impact on GDP in either the short or long term. Furthermore, Granger causality tests confirm that FDI significantly predicts GDP growth, emphasizing its crucial role in the economic development of Timor-Leste. Based on these insights, this study outlines strategic policy recommendations to enhance the effectiveness of FDI and capital formation in driving sustainable economic growth. These suggestions include targeted policies to boost FDI inflows and strengthen GCF, such as improving infrastructure, strengthening institutional frameworks, and promoting diversification of key sectors. By aligning investment strategies with the Sustainable Development Goals, Timor-Leste can reduce its reliance on oil and achieve more robust economic growth. These insights provide valuable guidance to policymakers and decision-makers seeking to leverage FDI and capital formation for long-term prosperity.

Poverty reduction and digitalization in Indonesia: The conditional role of human capital and economic growth in an underdeveloped province

2025-09-12T09:37:25-05:00

The purpose of this study is to explore how human capital could help close the digital divide in Indonesian areas currently under development. Digitalization is proxied by MSMEs actively using e-commerce platforms (≥ transactions/month), sourced from the Ministry of Communication and Informatics. Using panel data from the 10 provinces with the lowest human development index (HDI) in Indonesia from 2019 to 2023, we contrast the efficiency of digitalization with conventional development drivers. Spatial econometrics analysis confirms significant poverty spillovers across contiguous provinces (ρ=0.22; p < 0.01), indicating that local poverty dynamics are interlinked with neighboring regions. Fixed-effects panel regression and spatial econometrics analysis reveal statistically significant inverse associations between the Human Development Index (HDI) and poverty. Digitalization significantly reduces poverty only after HDI exceeds a threshold of 65 (β= -0.133; p < 0.05), confirming the critical role of human capital as a prerequisite. This study has practical implications, showing that the equally crucial expenditures in education, healthcare, and community capacity building contribute to closing the digital divide in Indonesia because digital inclusion depends on human capital. The phased strategy proposed emphasizes human capital as the fundamental component of efficient digital integration, supporting the philosophy of inclusive development.

The impact of transfer pricing on tax avoidance with foreign ownership as a moderating variable: Evidence from Vietnam

2025-09-12T10:48:53-05:00

With the rise of globalization and the proliferation of multinational enterprises, transfer pricing practices have become increasingly complex and contentious. This issue has become particularly significant in the context of developing economies, including Vietnam, where special incentives with flexible mechanisms are considered key to creating an attractive investment climate for foreign investors. Arising from this, the study investigated the relationship between transfer pricing and tax avoidance in Vietnam from 2020 to 2023. The study sampled 217 industrial companies listed on the Hanoi Stock Exchange and the Ho Chi Minh Stock Exchange and extracted data from the annual reports of these companies. Data were analyzed using descriptive statistics as well as quantitative models. The results revealed that foreign ownership magnifies the relationship between transfer pricing and tax avoidance, suggesting that foreign-owned companies may engage more aggressively in transfer pricing activities to minimize their tax liabilities. Regarding the control variables, company size, company growth, and asset tangibility were positively associated with tax avoidance activities. Lastly, a contribution of this study is the pressing need for policymakers to enhance regulatory oversight and enforcement measures to address transfer pricing abuses.