Asian Journal of Economic Modelling

Exchange rate, GDP, and inflation in Tunisia: ARDL evidence of a u-shaped relationship

Hassen Soltani — 2025-11-21

This paper investigates the nonlinear impact of the TND/USD exchange rate and real GDP on inflation in Tunisia over the period 1984–2023 using the autoregressive distributed lag (ARDL) bounds-testing approach. The analysis introduces quadratic terms to identify possible U-shaped or threshold relationships between the variables. Unit root tests confirm that all series are integrated of order one, I(1), and the bounds test indicates the existence of a long-run cointegration relationship (F-statistic ≈ 8.59). The estimated error-correction model suggests a rapid adjustment toward long-run equilibrium, as reflected by the significant and negative error-correction term (−1.64, p < 0.01). In the short run, inflation exhibits a partial exchange-rate pass-through, while in the long run, price dynamics are primarily influenced by real GDP growth. Quantitatively, the estimated turning points obtained from the quadratic specification occur at GDP ≈ 2.9 × 10¹⁰ (2015 USD) and EXCH ≈ 1.4 TND/USD, implying that inflation decreases up to these thresholds and rises beyond them. Overall, the results highlight the relevance of nonlinear monetary and exchange-rate policies that consider threshold effects to enhance price stability in the Tunisian economy.

Aggregate supply and demand determinants of economic growth in West Sumatra, Indonesia: A dynamic panel approach

Alpon Satrianto — 2026-01-19

This study investigates the determinants of economic growth in West Sumatra Province over the period 2011–2023, focusing on both supply- and demand-side factors. A dynamic panel regression model is employed using the Generalized Method of Moments approach, which is particularly suitable for addressing potential endogeneity issues and capturing temporal dynamics in panel data analysis. The explanatory variables include aggregate supply-side factors, namely lagged economic growth, investment, labor, technology, and the Human Development Index (HDI), as well as aggregate demand-side factors, consisting of household consumption, government expenditure, and net exports. The estimation results reveal that, on the supply side, previous economic growth, investment, technology, and HDI exert a positive and statistically significant impact on regional economic growth, while labor does not show a significant effect. On the demand side, household consumption and government expenditure are found to have significant positive influences, whereas net exports are not statistically significant, reflecting the limited contribution of export activities to the regional economy. These findings highlight the dual importance of supply-side improvements and demand-side reinforcement in sustaining economic growth.

Deep trade agreements and cross-border innovation collaboration: Evidence from ASEAN

Phukkhaphob Vorraakkatham — 2026-01-23

This study investigates whether deeper regional trade agreements (RTAs) increase the likelihood of co-patenting activities between ASEAN nations and innovative partners, addressing a potential gap in the literature. Unlike prior studies, we construct indices capturing co-invention and co-application of patents based on the fractional patent counting approach. A gravity-like model of cross-country technological collaboration is developed, incorporating fixed effects to account for unobserved heterogeneities at the country-pair level and time-varying characteristics that may influence cross-border links. The baseline results suggest that, although the static positive effects of trade integration on joint innovation activities are not immediately evident, agreements with a broader scope tend to promote such activities, particularly in the case of co-invention of patents. Sensitivity analyses indicate that RTAs containing provisions related to innovation are more likely to foster intra-bloc collaboration among signatories. Additionally, dynamic analysis reveals anticipation and phasing-in effects of trade policy changes, as evidenced by estimates of leads and lags in trade agreement indices. Overall, the findings demonstrate that deep trade integration has both short-term and long-term positive effects on collaborative innovation activities.

The spatial analysis of FDI, R&D and economic growth in China

Yuan Minhua — 2026-01-23

This study aims to examine the spatial spillover effects of foreign direct investment (FDI) and research and development (R&D) on China’s economic growth. Using panel data from 30 provinces between 2000 and 2022, the study applies spatial econometric models incorporating foreign trade openness, government expenditure, and population to capture interregional dynamics. The results reveal that both FDI and R&D significantly enhance provincial economic growth and exert positive spatial spillover effects on neighboring regions. Specifically, a 1% increase in FDI and R&D capital stock raises GDP by 0.02% and 0.05%, respectively, while interprovincial spillovers contribute 0.71% to the growth of adjacent provinces. These findings suggest that institutional innovation, regional cooperation, and the establishment of high-quality FDI-driven R&D centers are crucial to fostering a sustainable FDI–R&D–regional growth mechanism in China’s economy.

Ownership structure and dividend payout of listed firms in Bangladesh: An application of the Tobit model

Md Zakir Hosain — 2026-01-23

This study investigates the impact of ownership structure on the dividend payout of firms in Bangladesh over a fourteen-year period from 2008 to 2021. It considers managerial ownership, institutional ownership, and individual ownership, along with eight control variables, to identify their effects on dividend payout. The research employs multiple techniques to analyze the collected panel data, including the Tobit pooled and Tobit random effect models. To improve the efficiency of these models, the study applies bootstrap standard error estimation. The results reveal that institutional ownership (INSOW) is positively associated with dividend payout, indicating the influential role of institutional investors in dividend decisions. These findings are significant for investors, researchers, policymakers, and company management regarding dividend payout strategies. The study provides empirical validation for agency theory by demonstrating that institutional investors reduce monitoring costs, offering a clear policy impetus for regulators to encourage greater institutional ownership as a mechanism to protect minority shareholders. Additionally, it offers valuable insights into how various ownership structures influence dividend decisions in emerging countries, specifically within the context of Bangladesh. This research fills a notable gap in the existing literature on corporate payouts. The findings have important implications for investors, providing a framework for both individual and institutional investors to identify stable investment opportunities.

Does lowering and narrowing the inflation target band enhance the effectiveness of monetary policy transmission? Evidence from South Africa

Eliphas Ndou — 2026-01-27

The South African Reserve Bank has indicated since 2024 the urgency to lower the current inflation target (IT) band from 3-6% to a lower target point. This paper estimates the impact of various IT bands on the interest rate pass-through and the mark-up of repo rate changes to weighted lending rates in South Africa. It examines whether the interest rate pass-through to lending rates differs when inflation is within three ranges: (i) 0-3%, (ii) 3-6%, or (iii) above 6%. The findings suggest that the pass-through is higher and the mark-up is lower when inflation is between 0-3% compared to within the 3-6% band. Additionally, the paper explores the effects of narrowing the target band from 3-6% to 2-4%. Evidence indicates that narrowing the target band from 3-6% to 2-4% results in a higher interest rate pass-through to lending rates. These findings imply that the transmission of monetary policy is more effective when inflation is within the 2-4% range. Consequently, the SARB's adoption of a lower inflation target will enhance the transmission of policy rate changes to lending rates and reduce the mark-up.