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EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS

Year 2022, Volume: 5 Issue: 1, 118 - 129, 30.06.2022
https://doi.org/10.46737/emid.1111894

Abstract

This study aims to determine whether globalization affects economic growth in Euro Area countries or not and the direction of the affect. The data used are annually and cover the period from 2000 to 2017. In the study, economic growth which is the dependent variable represents the annual GDP growth rate, and globalization which is the independent variable represents KOF globalization. Variables other than globalization that affect economic growth are included in the model as instrumental variables. These instrumental variables are labour force participation rate, foreign direct investments, external balance of goods and services and gross fixed capital formation. Eberhardt and Teal’s (2012) Augmented Mean Group Estimator (AMG) was conducted to foresee long-term coefficients. Consequently, globalization has not same effects on economic growth in each euro area country. Globalization has increasing effects on the economic growth in Italy, Portugal, Slovenia, and Spain but decreasing effect in Ireland, Lithuania and Luxembourg.

References

  • Adams, S.(2010). Globalization and Economic Growth in Sub-Sahara Africa. K. Deng (Eds.), Globalization, Today, Tomorrow, pp.(125-138),INTECH Publishing.
  • Afzal, M. (2007). The Impact of Globalization on Economic Growth of Pakistan, The Pakistan Development Review, 46(4), (pp. 723–734).
  • Alfaro, L.(2003). Foreign Direct Investment and Growth: Does the Sector Matter?, Harvard Business School, 1-31.
  • Breusch, T. and Pagan, A.(1980). The Lagrange Multiplier Test and Its Application to Model Specification in Econometrics, Review of Economic Studies 47,pp.239-254.
  • Chang, C.P. and Lee, C.C. (2010). Globalization and Economic Growth: a Political Economy Analysis for OECD Countries, Global Economic Review, 39(2), pp.151-173.
  • Cusack, T. R. (1997). Partisan Politics and Public Finance: Changes in Public Spending in the Industrialized Democracies, 1955–1989. Public Choice, 91(3–4), pp. 375–395.
  • Dollar, D. Kraay, A.(2004). Trade Growth and Poverty, The Economic Journal 114, pp. 22-49.
  • Dreher, A.(2006). Does Globalization Affect Growth? Evidence from a New Index of Globalization, Applied Economics, 38(10), pp. 1091-1110.
  • Eberhardt, M. and Bond, S.(2009). Cross-section Dependence in Nonstationary Panel Models: A Novel Estimator, MPRA Paper 17692, http://mpra.ub.unimuenchen.de/17692.pdf
  • Eberhardt, M.(2012). Estimating Panel Time-Series Models with Heterogeneous Slopes, The Stata Journal,12(1),(pp.61–71). European Commission, What is the Economic and Monetary Union? (EMU), Access Date: 01.07.2020, https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/economic-and-monetary-union/what-economic-and-monetary-union-emu_en
  • European Commission, Which Countries Use the Euro?, European Commission, Access date: 06.07.2020, https://europa.eu/european-union/about-eu/euro/which-countries-use-euro_en, 2020
  • Garrett, G. (1995). Capital Mobility, Trade, and the Domestic Politics of Economic Policy, International Organization 49 (4), (pp.657–687).
  • Gurgul H. and Lach L. (2014). Globalization and economic growth: Evidence from two decades of transition in CEE, Economic Modelling, 36, (pp. 99-107).
  • Haini, H. and Loon, P.W. (2022). Information Communication Technologies, Globalisation and Growth: Evidence from the ASEAN Economies, Economic Papers, The Economic Society of Australia, vol. 41(1), (pp.34-53).
  • Ohuabunwa M. and Iheanyichukwu, S.(1999). The Challenges of Globalisation to the Nigerian Industrial Sector, Nigerian Tribune,14, (pp.20-21).
  • Osterloh, S.(2012). Words Speak Louder Than Actions: The Impact of Politics on Economic Performance, Journal of Comparative Economics, 40(3), (pp.318–36).
  • Pesaran, M. H.(2004). General Diagnostic Tests for Cross Section Dependence in Panels, Discussion Papers on IZA, No. 1240, https://doi.org/10.17863/CAM.5113.
  • Pesaran, M. H. (2003).A Simple Panel Unit Root Test in The Presence of Cross Section Dependence. Cambridge Working Papers in Economic 0346, (pp.1-62). http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0346.pdf
  • Pesaran, M. H. and Yamagata, T.(2008). Testing Slope Homogeneity in Large Panels, Journal of Econometrics, 142(1), (pp.50-93).
  • Rao, B. and Vadlamannati, K.C. (2011). Globalization and Growth in the Low Income African Countries with the Extreme Bound Analysis, Economic Modelling, 28, (pp. 795-805).
  • Samimi, P.and Jenatabadi, H. S.(2014). Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities, PloS ONE, 9(4).
  • Shittu, W.O., Yusuf, H.A., El Houssein, A.M., Hassan, S. (2020). The Impacts of Foreign Direct Investment And Globalisation On Economic Growth In West Africa: Examining The Role Of Political Governance, Journal of Economic Studies, Vol. 47, No. 7, pp. 1733-1755
  • Swamy, PAVB. (1970). Efficient Inference in a Random Coefficient Regression Model, Econometrica 38, (2), (pp. 311–323). Yerdelen, F. (2020). İleri Panel Veri Analizi Stata Uygulamalı, 4th edition, İstanbul: Beta Basım Yayım Dağıtım.

EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS

Year 2022, Volume: 5 Issue: 1, 118 - 129, 30.06.2022
https://doi.org/10.46737/emid.1111894

Abstract

This study aims to determine whether globalization affects economic growth in Euro Area countries or not and the direction of the affect. The data used are annually and cover the period from 2000 to 2017. In the study, economic growth which is the dependent variable represents the annual GDP growth rate, and globalization which is the independent variable represents KOF globalization. Variables other than globalization that affect economic growth are included in the model as instrumental variables. These instrumental variables are labour force participation rate, foreign direct investments, external balance of goods and services and gross fixed capital formation. Eberhardt and Teal’s (2012) Augmented Mean Group Estimator (AMG) was conducted to foresee long-term coefficients. Consequently, globalization has not same effects on economic growth in each euro area country. Globalization has increasing effects on the economic growth in Italy, Portugal, Slovenia, and Spain but decreasing effect in Ireland, Lithuania and Luxembourg.

References

  • Adams, S.(2010). Globalization and Economic Growth in Sub-Sahara Africa. K. Deng (Eds.), Globalization, Today, Tomorrow, pp.(125-138),INTECH Publishing.
  • Afzal, M. (2007). The Impact of Globalization on Economic Growth of Pakistan, The Pakistan Development Review, 46(4), (pp. 723–734).
  • Alfaro, L.(2003). Foreign Direct Investment and Growth: Does the Sector Matter?, Harvard Business School, 1-31.
  • Breusch, T. and Pagan, A.(1980). The Lagrange Multiplier Test and Its Application to Model Specification in Econometrics, Review of Economic Studies 47,pp.239-254.
  • Chang, C.P. and Lee, C.C. (2010). Globalization and Economic Growth: a Political Economy Analysis for OECD Countries, Global Economic Review, 39(2), pp.151-173.
  • Cusack, T. R. (1997). Partisan Politics and Public Finance: Changes in Public Spending in the Industrialized Democracies, 1955–1989. Public Choice, 91(3–4), pp. 375–395.
  • Dollar, D. Kraay, A.(2004). Trade Growth and Poverty, The Economic Journal 114, pp. 22-49.
  • Dreher, A.(2006). Does Globalization Affect Growth? Evidence from a New Index of Globalization, Applied Economics, 38(10), pp. 1091-1110.
  • Eberhardt, M. and Bond, S.(2009). Cross-section Dependence in Nonstationary Panel Models: A Novel Estimator, MPRA Paper 17692, http://mpra.ub.unimuenchen.de/17692.pdf
  • Eberhardt, M.(2012). Estimating Panel Time-Series Models with Heterogeneous Slopes, The Stata Journal,12(1),(pp.61–71). European Commission, What is the Economic and Monetary Union? (EMU), Access Date: 01.07.2020, https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/economic-and-monetary-union/what-economic-and-monetary-union-emu_en
  • European Commission, Which Countries Use the Euro?, European Commission, Access date: 06.07.2020, https://europa.eu/european-union/about-eu/euro/which-countries-use-euro_en, 2020
  • Garrett, G. (1995). Capital Mobility, Trade, and the Domestic Politics of Economic Policy, International Organization 49 (4), (pp.657–687).
  • Gurgul H. and Lach L. (2014). Globalization and economic growth: Evidence from two decades of transition in CEE, Economic Modelling, 36, (pp. 99-107).
  • Haini, H. and Loon, P.W. (2022). Information Communication Technologies, Globalisation and Growth: Evidence from the ASEAN Economies, Economic Papers, The Economic Society of Australia, vol. 41(1), (pp.34-53).
  • Ohuabunwa M. and Iheanyichukwu, S.(1999). The Challenges of Globalisation to the Nigerian Industrial Sector, Nigerian Tribune,14, (pp.20-21).
  • Osterloh, S.(2012). Words Speak Louder Than Actions: The Impact of Politics on Economic Performance, Journal of Comparative Economics, 40(3), (pp.318–36).
  • Pesaran, M. H.(2004). General Diagnostic Tests for Cross Section Dependence in Panels, Discussion Papers on IZA, No. 1240, https://doi.org/10.17863/CAM.5113.
  • Pesaran, M. H. (2003).A Simple Panel Unit Root Test in The Presence of Cross Section Dependence. Cambridge Working Papers in Economic 0346, (pp.1-62). http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe0346.pdf
  • Pesaran, M. H. and Yamagata, T.(2008). Testing Slope Homogeneity in Large Panels, Journal of Econometrics, 142(1), (pp.50-93).
  • Rao, B. and Vadlamannati, K.C. (2011). Globalization and Growth in the Low Income African Countries with the Extreme Bound Analysis, Economic Modelling, 28, (pp. 795-805).
  • Samimi, P.and Jenatabadi, H. S.(2014). Globalization and Economic Growth: Empirical Evidence on the Role of Complementarities, PloS ONE, 9(4).
  • Shittu, W.O., Yusuf, H.A., El Houssein, A.M., Hassan, S. (2020). The Impacts of Foreign Direct Investment And Globalisation On Economic Growth In West Africa: Examining The Role Of Political Governance, Journal of Economic Studies, Vol. 47, No. 7, pp. 1733-1755
  • Swamy, PAVB. (1970). Efficient Inference in a Random Coefficient Regression Model, Econometrica 38, (2), (pp. 311–323). Yerdelen, F. (2020). İleri Panel Veri Analizi Stata Uygulamalı, 4th edition, İstanbul: Beta Basım Yayım Dağıtım.
There are 23 citations in total.

Details

Primary Language English
Subjects Economics
Journal Section Articles
Authors

Eylül Kabakçı Günay 0000-0001-5547-4316

Dilara Sülün This is me 0000-0001-8874-5194

Publication Date June 30, 2022
Published in Issue Year 2022 Volume: 5 Issue: 1

Cite

APA Kabakçı Günay, E., & Sülün, D. (2022). EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS. Ekonomi Maliye İşletme Dergisi, 5(1), 118-129. https://doi.org/10.46737/emid.1111894
AMA Kabakçı Günay E, Sülün D. EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS. Ekonomi Maliye İşletme Dergisi. June 2022;5(1):118-129. doi:10.46737/emid.1111894
Chicago Kabakçı Günay, Eylül, and Dilara Sülün. “EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS”. Ekonomi Maliye İşletme Dergisi 5, no. 1 (June 2022): 118-29. https://doi.org/10.46737/emid.1111894.
EndNote Kabakçı Günay E, Sülün D (June 1, 2022) EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS. Ekonomi Maliye İşletme Dergisi 5 1 118–129.
IEEE E. Kabakçı Günay and D. Sülün, “EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS”, Ekonomi Maliye İşletme Dergisi, vol. 5, no. 1, pp. 118–129, 2022, doi: 10.46737/emid.1111894.
ISNAD Kabakçı Günay, Eylül - Sülün, Dilara. “EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS”. Ekonomi Maliye İşletme Dergisi 5/1 (June 2022), 118-129. https://doi.org/10.46737/emid.1111894.
JAMA Kabakçı Günay E, Sülün D. EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS. Ekonomi Maliye İşletme Dergisi. 2022;5:118–129.
MLA Kabakçı Günay, Eylül and Dilara Sülün. “EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS”. Ekonomi Maliye İşletme Dergisi, vol. 5, no. 1, 2022, pp. 118-29, doi:10.46737/emid.1111894.
Vancouver Kabakçı Günay E, Sülün D. EVALUATION OF THE EFFECT OF GLOBALIZATION ON THE EURO AREA COUNTRIES’ ECONOMIC GROWTH WITH PANEL DATA ANALYSIS. Ekonomi Maliye İşletme Dergisi. 2022;5(1):118-29.