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Vol.4 No.3
September 2016

 Page Number

 Article Information

1-13

The Impact of FDI on Growth of Saudi Economy: An Empirical Evaluation of Manufacturing Sector

Hisham J. Bardesi

DOI: 10.15604/ejef.2016.04.03.001

Abstract

Foreign Direct Investment (FDI) inflows have produced considerable impact on the economy of the Kingdom of Saudi Arabia, both directly and indirectly, by playing major role in stimulating the growth potentials and providing stability to the Kingdom’s economy. This study aims to evaluate the impact of FDI inflows on the economy of Saudi Arabia in general, and on the manufacturing sector in particular, over the last few decades, more specifically over the period from 1968 to 2014, by using Ordinary Least Square (OLS) method. The results showed positive significant impacts, but limited, of FDI on manufacturing sector in Saudi Arabia during this period. The results also found positive impacts of labor, non-oil private capital formation, and the latest Foreign Investment Act (FIA) enacted in 2000. Finally, conclusion and recommendations to promote the role of FDI in developing the manufacturing sector of Saudi Arabia.

Keywords: FDI, MNCs, Economic Growth, Manufacturing Sector, FIA

14-24

US Dollar Stability and the Global Currency Reserves

Kristijan Gavranić and Dejan Milеtić

DOI: 10.15604/ejef.2016.04.03.002

Abstract

The participation of the United States in the First and the Second World War, as well as in the Vietnam War led to an increase in expenditures for the US national defense and the need to finance such expenditures from the primary emission. This further led to the rising inflation and the falling value of the dollar. Since today the US dollar holds a leading position in the world’s foreign exchange reserves, its decline would have an effect on reduction of the foreign exchange reserves value.

Keywords: Dollar, Foreign Exchange Reserves, Inflation, War, Expenditures, National Defense

25-42

The Hybrid Approach of Inflation Targeting: What Opportunities for an Emerging Economy Like Tunisia?

Hella Guerchi Mehri and Faycal Ben Ameur

DOI: 10.15604/ejef.2016.04.03.003

Abstract

After economic crises happening in many emerging countries, flexible exchange rates became a required   theoretical condition helping to target inflation. Many countries stopped using exchange rate as an anchor for monetary policy and started using inflation targeting framework. In emerging countries, monetary authorities work to stabilize the exchange rate because of their “fear of floating”. They are against high volatility of interest rate allowing speculative attacks and causing free fluctuations of their national currency. To avoid uncontrolled market movements, they have to choose between active and public exchange rate management and tight inflation targeting. In the same vein, Central bank of Tunisia follows financial measures linked closely to inflation without focusing especially on monetary aggregates in order to study a possible transition to targeting inflation strategy. It uses a simple Taylor rule where interest rates adjustment are guided by the anticipated inflation deviation from its original target and also by the gap between observed and potential GDP.As an emerging economy with a high degree of financial vulnerability, and facing different shocks, Tunisia should adopt a hybrid rule of inflation targeting in an open economy. This hybrid rule explicitly takes into account the evolution of the exchange rate in the reaction function of the central bank.

Keywords: Inflation Targeting, Hybrid Targeting Rule, Emerging Economy, Exchange Rate Regime

43-53

Investment in Anti-Counterfeit Label for Branded Firm – Take Maotai as an Example

Ran Wang and Weiwei Yang

DOI: 10.15604/ejef.2016.04.03.004

Abstract

The paper examines the anti-fake investment for the branded product market. Through the analysis of the special branded market, the conditions for the sustainable naturalized anti-fake equilibrium and subsidized anti-fake equilibrium are given. The paper shows that when the profit loss with entry deterrence is small, naturalized anti-fake equilibrium exists. When profit loss is intermediate, subsidized equilibrium exists. However, when profit loss with entry deterrence is really large, it would be beneficial to the society to have some degree of fake product and anti-fake is harmful to the society.

Keywords: Naturalized Anti-fake Equilibrium, Subsidized Anti-fake Equilibrium, Entry Deterrence

54-63

Analysis Factors that Influence Wage Disparity Between Female Workers in Urban and Rural Areas in South Sumatera

Lamazi, Syamsurijal A.K, Nurlina Tarmizi and Tatang A.M Sariman

DOI: 10.15604/ejef.2016.04.03.005

Abstract

This study aims to analyze the factors that influence wage disparity between working women (female workers) in urban and rural areas in South Sumatera in 2013 using cross-sectional data from Susenas 2013. Methods used in this study are wage equation of Mincer (1994) and wage decomposition model of Blinder-Oaxaca. The results show that average wage disparity between working women in urban and rural areas are 34.93%. This disparity is caused by endowment (independent) variables, namely, education, age, working hours (jam kerja), non-agricultural sector (non-pertanian), marital status (menikah), and the presence of children under the age of five (balita), by 11.82%. The rest of 88.18% are explained by other variables outside this study. Endownment variables such as senior high school (SMA) education, higher education (pendidikantinggi) and working hours (jam kerja) are also found to be the cause of an increase in wage disparity of working women in urban and rural areas.

Keywords: Women Wage Disparity, Endowment Factors, Blinder-Oaxaca, Women Workers

64-84

Evaluating the Short Run Effects of U.S. Crude Oil Inventory Levels on WTI Crude Oil Price from 1993 – 2013

Tobi Olasojiand and Elijah Acquah-Andoh

DOI: 10.15604/ejef.2016.04.03.006

Abstract

The focus of this research was to investigate the short-term influence of U.S. crude oil inventories on WTI crude oil prices from 1993 to 2013. This study is important for policy makers who wish to reduce the persistent and growing price volatility of crude oil and its related products as well as businesses such as airline companies who wish to make annual budgetary sales decisions. Using OLS multiple regression, cointegration, VECM and Ex-post forecast techniques; we provide evidence of an inelastic relationship in which a 1% increase in U.S. crude oil inventories is associated with 0.46% decrease in WTI crude oil prices; however this was only valid for 22% of WTI crude oil price variation. We also find that past data on U.S. crude oil inventories could be used to predict future WTI crude oil prices movement. Contrary to literature, the results of the VECM analysis indicate there is no short-run relationship between both variables over the trajectory.

Keywords: WTI Price, Crude Oil Inventories, Short Run

85-99

How CAFE Influences Auto Firms and Consumers? – Using Evidence from U.S. Market

Ran Wang and Weiwei Yang

DOI: 10.15604/ejef.2016.04.03.007

Abstract

This paper examines how the CAFE regulation influences the auto firms’ behavior and the consumers’ behavior. To be specific, I examine the influence of CAFE on three groups of auto firms’ pricing and production decision as well as the influence on consumers’ consumption decision on model choice and the vehicle miles to travel. Through estimating the simultaneous production and pricing equation system for firm, the paper indicates that previous literature that estimates the supply equation separately for each firm is misleading and CAFE regulation has different effects on unconstrained group, constrained group and fine-paying group through different channels. Also the CAFE regulation affects the consumer behavior since CAFE has unbalanced effects on prices of different auto models.

Keywords: CAFE, Firm Behavior, Consumer Behavior, Pricing Strategy, Production Strategy, Simultaneous Equation System

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