Asian Journal of Economic Modelling

Revisiting the Phillips curve: An empirical study of the relationship between inflation and unemployment in North Africa

Allal Zahir — 2025-04-29

This study examines the empirical relevance of the Phillips curve in North African economies (Morocco, Algeria, Tunisia, Egypt, Libya, and Mauritania) over the period 1991–2023. Given the region’s unique structural characteristics and socio-economic constraints, it investigates whether the theoretical negative relationship between inflation and unemployment holds. Using a Vector Error Correction Model (VECM), the analysis explores both short-term and long-term dynamics between these two variables, based on macroeconomic data from international financial institutions and national statistical agencies. The findings reveal a significant positive correlation in the long run, where a 1% increase in unemployment is associated with a 1.06% rise in inflation. These results challenge the conventional applicability of the Phillips curve in economies characterized by widespread labor informality, high exposure to external shocks, and inflationary pressures largely driven by external factors. The study highlights the need to reassess macroeconomic models to better reflect the structural realities of North African economies. It also underscores the importance of adapting monetary and fiscal policies to address inflationary pressures while fostering employment growth. From a policy perspective, structural reforms should be prioritized to enhance economic resilience and ensure more effective inflation and labor market management in the region.

Investigating the effects of policy interest rate on the Thai economy in the FAVAR framework

Adirek Vajrapatkul — 2025-05-23

The policy rate is a crucial monetary policy tool used by central banks to control economic conditions. Its main channel works via a transmission mechanism in which shocks to the policy rate proliferate through the financial system, which then affects the real economy. This study looks at how monetary policy affects the Thai economy and how it works by using a Factor-Augmented Vector Autoregressive (FAVAR) model, which can include both visible and hidden factors in the analysis, unlike traditional VAR methods. To achieve the objective of this study, monthly data from the Bank of Thailand database for the period between January 2011 and December 2023 were collected and analyzed using Principal Component Analysis, Vector Autoregressive technique, Granger causality tests, and impulse response analysis. The results indicate that interest rate hikes have temporary adverse effects on consumer confidence, retail sales, and asset prices. In addition, the findings show the interplay between interest rate shocks and labor markets, represented by worker outflow, employment levels, and job vacancies. The results also reflect the effective transmission of monetary policy through the money market channel, as market interest rates were aligned with the policy rate shock. These results suggest that monetary policy should be implemented in a balanced manner while considering the interconnections between various aspects of the economy. These results justify some supportive fiscal and labor market policies to promote consumption and reduce the adverse effects of monetary policy tightening.

Macroeconomic determinants of inclusive growth in South Africa: An application of the autoregressive distributed model

Zizo Makala — 2025-05-23

Despite South Africa’s economy being more advanced than most emerging African economies, it remains the most inequitable country in the world, revealing that regardless of the growth strides, the benefits of growth are barely equitably distributed among the different society groups in the country. Literature indicates that while economic growth is essential, it is insufficient for improving living standards for many South Africans. Against this background, the study examines the factors driving inclusive economic growth in the country using macro data from 1991-2020. A model based on the Social Opportunity Function was estimated to link the measure of inclusive growth and its determinants in the study. The ARDL bounds testing approach to cointegration was employed to evaluate the effect of the different variables employed in the study on inclusive growth. The results show a long-term positive impact of initial income levels, foreign direct investment (FDI), population growth, and trade on inclusive growth, while gross fixed capital formation and inflation negatively affect inclusivity. These findings imply that the government must continue to address the challenges of unequal access to opportunity and skewed income distribution in the country. Moreover, authorities should pursue policies to improve macroeconomic stability to increase FDI inflow and eliminate barriers that prevent it. This will foster inclusiveness in economic growth.

Corporate governance and financial performance: What is the relationship? The case of Moroccan companies listed on the stock exchange

Reda Elafi — 2025-06-24

The main objective of this research is to critically examine the relationship between corporate governance and performance and to identify the true determinants of performance. This study attempts to critically examine the quality of corporate governance while analyzing the impact of internal mechanisms on performance in order to verify whether governance actually has an effect on performance. This study aimed to determine a performance-based governance score. The research question was therefore formulated as follows: What are the determinants of "good governance," based on the level of performance, in the context of Moroccan companies? The results indicate that there is, however, a governance mechanism, namely the size of the board of directors, that appears to positively influence performance. The age of the CEO and the number of meetings are not determinants of performance. This result appears to be corroborated by the analysis of significant differences between companies based on their specific characteristics. The practical implications are consistent with providing a tool that could help companies make decisions to better address low-performing individuals.

A panel analysis of FDI inflows and poverty reduction in ECOWAS sub region: Implication for the Sustainable Development Goal 1

Timothy. A. Aderemi — 2025-07-01

This study investigated the relationship between FDI and poverty reduction in the ECOWAS sub-region from 1990 to 2023. The study employed an ex-post-facto research design. Annual data were sourced from WDI and UNCTAD, respectively. Consequently, this study used the panel ARDL method to estimate the collected data. The findings revealed, among other things, that a long-run convergence existed between FDI and poverty reduction. FDI and poverty reduction had a negative relationship in the long run (β1 = -0.0040, t = 1.2393), but it was not significant. Trade openness and poverty reduction had a significant negative relationship (α2 = -0.0007, t = 2.5194). Policymakers of the ECOWAS sub-region should adopt stable economic policies to avoid FDI inflow-driven setbacks in poverty reduction in this area. Policymakers in the ECOWAS sub-region must develop trade policies to create active trade pathways with the global economy because trade openness negatively affects poverty reduction. Achieving SDG 1 (zero poverty) will be challenging for ECOWAS member states to accomplish before 2030 if FDI inflow-driven setbacks in poverty reduction are not addressed.

Leveraging green bonds through green innovation for effective CO₂ mitigation: The moderating roles of institutions, market development and business sophistication

Nhung Hong Dao — 2025-07-01

The urgent need to improve environmental performance in line with global commitments highlights the critical role of green finance in driving sustainable development. This paper explores the impact of green bonds on greenhouse gas emissions through the mediating role of green innovation. We clarify the effect by collecting and analyzing secondary data from 70 countries from 2012 to 2020 by adopting a country-fixed effects model and a moderated mediation analysis. Empirical results support the hypothesis that green bonds promote environmental quality through the mediating role of green innovation. The findings affirm the significance of sources from green bonds for implementing green innovation. We also validate our findings in different settings with the mediating roles of institutional quality and supporting conditions for innovation at the country level. We found statistical evidence supporting the three proxy variables. Countries with high-quality institutions and strong innovation support can reduce CO2 emissions by utilizing green bonds to conduct green innovation. Our results highlight the importance of green bonds in facilitating green innovation and the role of institutions, markets, and business supporting conditions in reducing CO2 emissions.

Efficiency of airline industry amid market shocks: Evidence from Indian market

Poonam Dhaliwal — 2025-07-01

The airline industry plays a vital role in the economy, but recently, it has encountered challenges leading to financial instability and even the permanent closure of several well-established airlines. The failure of airline companies creates ripple effects; therefore, it is imperative to measure their efficiency. The present paper analyzes the efficiency of the Indian airline industry from 2003 to 2023 and investigates the impact of the global financial crisis, demonetization, and COVID-19 on efficiency. The results of the Mann-Whitney test proclaim the significant negative impact of demonetization on low-cost carriers and the overall industry. However, full-service carriers are discerned not to be significantly affected by demonetization because they mostly have corporate bookings that use banking channels to transfer funds. The financial crisis and COVID-19 have a profound impact on the efficiency of airlines. The results reveal that efficiency decreased after COVID-19 due to stringent travel restrictions and lockdowns. It is observed that Indian airlines are not operating at an optimal scale of operation, highlighting the need to function in consonance with market demand. The full-service carriers need to diversify their offerings for sustainability. The results are expected to be highly fruitful for the global airline industry, market regulators, and policymakers.

Fiscal dynamics in fragile economies: A VAR analysis of revenue mobilization and government spending in Somalia

Ali Yassin Sheikh Ali — 2025-07-03

This paper aims to analyze the interplay of revenue mobilization and government spending in fragile countries, contrasting the case of Somalia with a focus on fiscal spending, revenue, grants, and tax strategies. The study used quarterly time series data sourced from the Somali Ministry of Finance. Preliminary diagnostic tests, including Augmented Dickey-Fuller (ADF), Phillips-Perron (PP), and KPSS, revealed mixed orders of integration, I(0) and I(1). The cointegration test showed the absence of cointegration, as confirmed by Johansen and bounds tests, justifying the application of the Vector Autoregression (VAR) model in analyzing short-run dynamics and interdependencies. The study found that indirect taxes serve as a key component of revenue generation, exhibiting a stable relationship with government spending. It also found that grants significantly affect government spending, indicating the dependency of fiscal operations on external support. Additionally, there is a strong, significant positive association between total revenue and government spending, highlighting the need for appropriate fiscal policy. Policy recommendations include strengthening tax administration and anti-corruption measures. Furthermore, reforms should focus on modernizing tax systems through digital initiatives and governance reforms, improving indirect taxes for greater coverage, and diversifying revenues to reduce dependency on external assistance.

Investment relationship corporate social responsibility and profitability of insurance enterprises

Tran Van Hai — 2025-07-03

The objective of this study is to clarify the impact of social responsibility on the profitability of insurance companies operating in Vietnam. As a service business, the vessel absorbs risk for the economy. The database was collected online by the authors. The survey period was from May 2024 to November 2024. Secondary data were collected from 2013 to 2023. The research results were based on 712 responses from insurance company employees, insurance consumers, and domestic insurance experts. Using quantitative research methods, PLS-SEM linear structural modeling was performed using SPSS and AMOS 20 software. The results indicate that CSR is positively correlated with the profitability of insurance businesses, primarily through the responsibility of insurance companies to consumers. Recommended solutions include: 1) Commitment to the quality of CSR reporting; 2) Protecting consumer rights through model transaction contracts; 3) Implementing a code of business ethics; 4) Addressing issues in the insurance compensation settlement process. The study supplements basic theories for insurance businesses and recommends that they actively invest in CSR programs to enhance profitability.

Corporate social responsibility and innovation performance in Chinese firms with R&D investments as a mediator

Cheng Yingxiang — 2025-07-03

Motivated by the important role of innovation in firms’ competition and development, this study explores whether Corporate Social Responsibility (CSR) affects firms’ innovation performance. Using a qualitative approach, the relevant literature is reviewed, theoretical analysis is conducted, and hypotheses are developed. The empirical examinations utilize publicly listed Chinese A-share market company data from 2011 to 2020, which contains 23,962 firm-year observations. This study employs double-fixed-effect Ordinary Least Squares (OLS) regression to estimate the baseline model. The results show that CSR positively influences firms' innovation performance, suggesting that CSR activities foster innovation. Subsequently, the study confirms these findings through robustness checks, including alternative measures, periods, and Two-stage OLS regression. Using the Sobel test, the research also examines how R&D investments mediate the relationship between CSR and innovation performance, confirming R&D as a mediator. The findings highlight the critical role of CSR in enhancing firms’ innovation performance. It also emphasizes the importance for policymakers to establish regulations requiring companies to undertake CSR, including economic, social, and environmental responsibilities. Additionally, practitioners should focus more on CSR and foster a CSR culture to improve innovation performance and better meet stakeholder demands.