An analysis of Granger causality between sovereign credit rating and economic growth in Sub-Saharan Africa
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Received September 4, 2020;Accepted October 20, 2020;Published November 9, 2020
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Author(s)Link to ORCID Index: https://orcid.org/0000-0001-7477-3514
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Link to ORCID Index: https://orcid.org/0000-0002-0136-3343 -
DOIhttp://dx.doi.org/10.21511/imfi.17(4).2020.08
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Article InfoVolume 17 2020, Issue #4, pp. 85-93
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Interest in the relationship between credit rating and economic growth is growing as emerging economies increasingly integrate into international financial markets. Without credit ratings, developing economies would not have been able to successfully issue their sovereign bonds to support economic growth. Therefore, this paper examines a causality relationship between Standard & Poor’s long-term foreign currency sovereign credit ratings and economic growth in 19 Sub-Saharan countries over the period from 2003 to 2018. The results of the Granger causality tests show a unidirectional causality from sovereign credit ratings to economic growth, not vice versa. This implies that economic growth is not significant in determining sovereign credit ratings. It can thus be concluded from these findings that sovereign credit ratings are proactive actions by rating agencies that are relevant in determining future economic growth. Thus, investors benefit from utilizing credit ratings to prevent inherent information asymmetry in fundamental economic factors. Therefore, it is important for policy makers to pay attention to sovereign credit ratings when formulating macroeconomic policies.
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JEL Classification (Paper profile tab)G00, G40
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References26
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Tables6
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Figures1
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- Figure 1. Responses to Cholesky’s one S.D. impulse responses
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- Table 1. Panel unit root test results
- Table 2. Lag order selection criteria
- Table 3. VAR model estimates
- Table 4. Pairwise Granger causality test results
- Table 5. VAR residual normality test for standardized residuals
- Table 6. VAR residual heteroskedasticity test results
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Data curation
Misheck Mutize, Virimai V. Mugobo
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Conceptualization
Misheck Mutize, Virimai V. Mugobo
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Formal Analysis
Misheck Mutize, Virimai V. Mugobo
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Funding acquisition
Misheck Mutize, Virimai V. Mugobo
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Investigation
Misheck Mutize, Virimai V. Mugobo
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Methodology
Misheck Mutize, Virimai V. Mugobo
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Project administration
Misheck Mutize, Virimai V. Mugobo
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Resources
Misheck Mutize, Virimai V. Mugobo
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Software
Misheck Mutize, Virimai V. Mugobo
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Supervision
Misheck Mutize, Virimai V. Mugobo
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Validation
Misheck Mutize, Virimai V. Mugobo
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Visualization
Misheck Mutize, Virimai V. Mugobo
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Writing – original draft
Misheck Mutize, Virimai V. Mugobo
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Writing – review & editing
Misheck Mutize, Virimai V. Mugobo
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Data curation
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Optimizing the performance of mean-variance portfolios in various markets: an “old-school” approach
Investment Management and Financial Innovations Volume 15, 2018 Issue #1 pp. 190-207 Views: 1746 Downloads: 548 TO CITE АНОТАЦІЯThe authors study the performance of mean-variance optimized (MVO) equity portfolios for retail investors in various markets in the U.S. and around the world. Actively managed equity mutual funds have relatively high fees and tend to underperform their benchmark. Index funds such as exchange traded funds still charge appreciable fees, and only deliver the performance of the benchmark. The authors find that MVO portfolios are relatively easy to manage by a retail investor, and that they tend to outperform their benchmark or, at worst, equal its performance, even after adjusting for risk. Moreover, they show that the performance of these funds is not particularly sensitive to the frequency at which they are rebalanced so that, in the limit, an investor might have to rebalance his/her portfolio only once a year. This last finding translates into very low trading costs, even for retail investors. Thus, the authors conclude that MVOs offer an easy, cheap alternative to invest in the world’s equity markets.
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IFRS and stock exchange development in sub-Saharan Africa: a logistic model
Investment Management and Financial Innovations Volume 17, 2020 Issue #3 pp. 397-407 Views: 995 Downloads: 740 TO CITE АНОТАЦІЯThis study examines the impact of International Financial Reporting Standards (IFRS) on the stock exchange development (SED) in sub-Saharan Africa (SSA). The essence is to offer suggestions on how the adoption of IFRS in the SSA region can benefit their SED. The study employed logistic regression analysis of data for 40 SSA countries for the period 2010–2018. Data were extracted from the World Bank’s World Development Index (WDI) database, sampled countries’ stock exchange websites, and the IFRS website. The dependent variable (SED) took two values: 1 – if a stock exchange is established in the observed country’s period, otherwise – 0. The model result was well fitted: p < 0.0001, correctly classified an overall SED accuracy up to 84.84% and excellent area predictive power at a receiver operator characteristic of 0.9347. The study observed that IFRS had high degree of co-movement with SED, and changes in IFRS had a strong positive impact on SED. Besides, changes in market size, ICT infrastructure, and public sector management and institution (PSMI) had a positive and significant impact on SED. The odd ratio of SED compared to non-SED is greatest with IFRS (40.67 times), and for the other variables, the ratios are: market size (4.02), ICT infrastructure (1.26), and PSMI (2.73), respectively. On a greater extent, SSA countries should allow the use of IFRS for financial reporting to expedite SED.
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Relationship between macroeconomic variables and primary public offerings in Peru
Celeste Lucero Barzola-Castro, Franklin Cordova-Buiza
, Arthur Giuseppe Serrato-Cherres
doi: http://dx.doi.org/10.21511/pmf.14(1).2025.10
Public and Municipal Finance Volume 14, 2025 Issue #1 pp. 117-128 Views: 777 Downloads: 251 TO CITE АНОТАЦІЯPrimary public offerings (PPOs) play an essential role in capital markets by providing financing for projects that contribute directly to a country’s economic development. Macroeconomic conditions have a significant influence on the effectiveness of these offers since they affect the government’s ability to issue sovereign bonds and manage its debt efficiently. Therefore, the present study seeks to determine the relationship between macroeconomic variables and PPOs in the capital market in Peru during the period 2019–2023, employing a quantitative methodology, non-experimental design, basic type, which uses SPSS software for Pearson correlation analysis. The results show that the impact of macroeconomic variables on PPOs is diverse. A weak inverse relationship was identified between public spending and PPOs (correlation of –0.140), suggesting that increases in public spending could discourage the issuance of PPOs. In addition, a moderately strong inverse relationship was found between fiscal deficit and PPOs (correlation of –0.620), indicating that higher fiscal deficits could have a significant negative effect on PPO issuance. A weak negative relationship was also observed between non-financial public sector debt and PPOs (correlation of –0.215), implying that high levels of debt may limit the ability of the capital market to develop new offerings. These findings suggest that, although macroeconomic variables impact PPOs, the magnitude of their influence varies. Furthermore, macroeconomic stability is key to capital market development, given its effect on sovereign bond issuance.