Forum for Economic and Financial Studies

The curse of dependency: Examining structural change in African economies

Ernest Alang Wung, Joslanie Douanla Tameko, Muhamadu Awal Kindzeka Wirajing — Wed, 12 Feb 2025 06:01:15 +0000

This study investigates the effect of external dependency on structural change in 54 African countries between 1990 and 2021. The Two-Step System Generalized Method of Moments strategy is adopted to control for potential endogeneity problems. Findings reveal that structural change in Africa is strongly impaired by the level of external dependency. This is since all proxies of external dependency are negatively and statistically significant with all structural change proxies. For instance, under agricultural productivity, external debts stocks (EDS) give an eigen value (β) of 0.879, standard coefficient (SC) = 0.162, and p = 0.000; for external debt services (DSED), β = 0.240, SC = −0.040, and p = 0.972; and for personal remittances received (PRR), we have β = 0.764, SC = −0.133, and p = 0.031. Depicting that, the more African countries rely on the external world for change, the less they realize this change. The results remain consistent after accounting for income differences by segmenting African countries into low- and middle-income groups. As suggestions to policymakers, for structural change to concretely take place in Africa, the rate of external dependence should be limited, and resources in Africa and local methods of growth should be used rather than copying from the Western world. Though the results are valid across income groups and Africa, the case of countries could be more significant.

The role of artificial intelligence in enhancing economic efficiency and innovation

Mirjana Dejanović — Mon, 17 Feb 2025 01:04:03 +0000

The European Union (EU) has prominently embraced AI to boost sustainable economic growth and global competitiveness, particularly in manufacturing, healthcare, and finance. AI-driven automation has revolutionized production processes, optimizing resource allocation and efficiency. In healthcare, AI applications have improved diagnostics and personalized therapy, advancing medical research and patient care. In finance, AI algorithms have streamlined operations, strengthened fraud detection, and supported informed decision-making, improving market stability. The adoption of AI within the EU has significantly improved economic efficiency and encouraged innovation, promising productivity gains, improved health outcomes, and optimized financial services. Future efforts should focus on strategic investments in AI research, ethical deployment, and regulatory frameworks to maximize benefits while effectively managing challenges. This abstract summarizes the EU’s progress in AI adoption and its implications for sustainable economic development, positioning AI as a pivotal driver of innovation. In Serbia, AI offers potential to reduce costs, boost profitability, mitigate risks, and capitalize on business opportunities, facilitating informed decisions that foster sustainable economic growth.

Designing a general economic model to incentivize maintaining infrastructure in informal settlements

Bruce Cahan — Mon, 24 Feb 2025 06:44:24 +0000

This paper sketches the design for a general economic model (GEM) quantifying how informal settlements (also known as slums) function and interact with ancillary urban or rural regions. The GEM is an essential tool for calculating the incentive fee payable to residents of the informal settlement to maintain housing, healthcare, schools, water, sanitation, or other infrastructure improvements and investments made by third parties and to identify potential payors or funders of the incentive fee. It is suggested that the GEM resolve limitations of traditional cost-benefit analyses (CBAs) in order to better calculate such incentive fee amounts and ascertain the parties willing to pay them. To understand how the GEM fills data gaps and helps fund national commitments to the United Nations 2030 Sustainable Development Goals (SDGs), the financial constraints on two countries, Fiji and Indonesia, as exacerbated by the Coronavirus COVID-19, and Indonesia’s village finance modernization scheme (Siskeudes) are discussed.

Identifying solutions to ensure the financial security of the enterprise in current conditions

Victoria Postolache — Wed, 26 Feb 2025 05:38:04 +0000

The issue of ensuring the economic security of enterprises has become increasingly pressing, encompassing a wide array of components, including technical, technological, financial, intellectual, human resources, fiscal, legal, property, and informational dimensions. In light of current economic conditions, research highlights the imperative of developing and implementing an effective mechanism to secure the financial dimension of an enterprise’s economic security. This has emerged as one of the foremost priorities. A well-designed mechanism to safeguard financial security is expected to provide robust solutions to address the challenges encountered throughout an enterprise’s operational trajectory. The objective of this research endeavor is to ascertain viable solutions that will ensure the stability and resilience of the financial security system through the implementation of a range of management tools. The primary goal of these tools is to mobilize the enterprise’s internal and external reserves in an effective manner. In this context, attaining the intended objectives necessitates not only a comprehensive examination of the theoretical and methodological underpinnings of financial security but also the formulation of a system of essential financial prerequisites. Such a system must support the enterprise’s sustainable growth and development, both in the short and long term, while being adaptable to the specific economic conditions and sectoral characteristics in which the enterprise operates.

Unemployment and the informal economy in Uganda: An empirical investigation

Stephen Esaku, Salmon Mugoda — Thu, 27 Feb 2025 08:35:34 +0000

This paper investigates the relationship between unemployment and the informal economy in Uganda. Using annual time series data from Uganda, covering the period from 1991 to 2017, we apply the ARDL method to investigate this relationship. The results indicate a positive and statistically significant relationship between unemployment and the shadow economy in both the long- and short-run. This implies that an increase in unemployment increases the shadow economy in both the long- and short-run. These findings reveal that a high level of unemployment is detrimental to the formal economy since it spurs informal sector activities in both the short-and long-run. These results suggest that any attempt to regulate unemployment without tackling informal sector activities may not succeed unless they are addressed simultaneously. Furthermore, the results also imply that curbing informality requires implementing fiscal, economic and political reforms aimed at ensuring proper functioning of the business environment.

Assessing the future influence of tourism-related factors on economic growth in selected south Asian countries through a random forest approach

Sujan Acharya, Md Shahriar Kabir Sajib, Ahnaf Aiman Abdi, Golam Mahadi — Wed, 05 Mar 2025 07:59:14 +0000

The study applies sophisticated machine learning techniques to measure the effect induced by important tourism indicators upon the GDP of six South Asian countries from 2001–2019. Among the models tested, the Random Forest model demonstrated the highest predictive accuracy, making it the most effective approach for analyzing GDP determinants in the region. It was determined from a World Development Indicators dataset analysis through the use of a Random Forest model what were the main determinants behind GDP growth for all countries in the area. Tourist arrivals and international tourism expenditure are good indicators of economic growth, while the unemployment rate and population growth have only minor effects. Other tourism-related factors contribute very significantly toward explaining any possible variation in GDP growth. Therefore, these results are important from the standpoint of the formulation of policies related to tourism toward maximizing its contribution to the economies of South Asia. For such policies to result in maximizing contributions from tourism, investments need to focus on the development of tourism infrastructure and international marketing to effect sustainable tourism development environments. Such policies are also very important with respect to unemployment and demographics. This work offers an evidence-based perspective to inform policymakers in developing investment in tourism infrastructure, international tourism promotion, and sustainable tourism practice. Such investment will greatly empower the South Asian economies to reconfigure tourism as a key driver of sustained economic growth and globally improved competitiveness.

Integration between Islamic financial technology and Islamic financial principal to improve performance of SMEs in Indonesia

Mon, 10 Mar 2025 01:30:21 +0000

This study investigates the integration of Islamic financial technology and principles and their impact on small and medium enterprise (SME) performance in Indonesia. Utilizing a quantitative research methodology, the study employs a correlational design to examine the relationships between Islamic financial technology adoption, adherence to Islamic financial principles, and SME performance metrics. The research sample comprises 230 Muslim SME owners from Java Island, selected through stratified random sampling. Data collection involved structured questionnaires designed to measure the adoption levels of Islamic financial technology, adherence to Islamic financial principles, and various indicators of SME performance. The study employed multiple regression analysis to assess the relationships between the variables. Results indicate statistically significant positive correlations between the implementation of Islamic financial technology, adherence to Islamic financial principles, and SME performance. The regression model accounts for 79.5% of the variance in SME performance. Islamic financial technology adoption emerged as a particularly strong predictor of improved SME outcomes, suggesting the potential for technological innovation within an Islamic financial framework to drive business success. This research contributes to the growing body of literature on Islamic finance and financial technology in emerging markets. It provides empirical evidence for the potential synergies between Islamic financial principles and modern financial technology in enhancing SME performance in Indonesia. The findings have implications for policymakers, financial institutions, and SME owners in leveraging Islamic financial technology to promote sustainable economic growth.