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Examining the Causal Nexus between Foreign Direct Investment and Economic Growth in The Gambia Yahya Njie; Ebou Correa
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.66679

Objective: Foreign Direct Investment acts as a significant factor in enhancing the macroeconomic performance of host countries, especially those that are less developed or in transition. Thus, understanding the causal association between foreign direct investment and economic growth in The Gambia is important for shaping policies that promote sustainable development. This study examines the causal relationship between foreign direct investment and economic growth in The Gambia. Method: This study utilised annual time series data from 1970 to 2022, using the Vector Error Correction Model (VECM) in examining the causal relationship between Foreign Direct Investment and Economic Growth in The Gambia. Findings: The results show a significant causal relationship between Foreign Direct Investment and economic growth. Originality/Value: Prior studies show mixed results on the relationship between Foreign Direct Investment and GDP across countries. This study focuses on The Gambia to clarify the direction of causality and fill this gap. It contributes to the literature by applying the VECM model, which effectively handles non-stationary time series data and captures long-run relationships among cointegrated variables, providing useful insights for policymakers to promote growth and attract FDI. Practical/policy implication: The study recommends policymakers prioritize creating a business-friendly environment to attract more foreign direct investment. This could include offering incentives such as tax breaks, reducing regulatory barriers, and ensuring political stability to instill investor confidence.

Does Financial Development Benefit All? Insights from Indonesian Provincial Economies Edi Nur Alamsyah; Jean-Claude Maswana
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.67575

Objective: This study explores whether financial development benefits all regions equally by analyzing how the financial system influences economic growth across Indonesian provinces and examining the heterogeneity of this relationship across low- and high-income regions. Design/Methods/Approach: The study extends the Mankiw–Romer–Weil (MRW) growth framework by incorporating dynamic indicators of financial intermediation. Using a provincial panel dataset spanning 2010–2022, the analysis employs a two-step system GMM estimator to address potential endogeneity and capture growth persistence. Findings: Both real credit and deposit growth significantly enhance provincial economic performance; however, the benefits are unevenly distributed. The impact is markedly stronger in high-income provinces, where more advanced financial infrastructure amplifies the growth-enhancing role of finance. The findings remain robust across a range of sensitivity tests. Originality/Value: The study contributes novel subnational evidence on the finance–growth nexus within an emerging economy context. By introducing dynamic proxies of financial development within an extended MRW framework and explicitly accounting for regional income disparities, this study deepens the understanding of how financial systems shape uneven growth trajectories across provinces. Practical/Policy implication: The results underscore the need for region-specific financial policies. While high-income provinces would benefit from further market deepening and financial innovation, low-income regions require targeted interventions to enhance financial inclusion, literacy, and infrastructure, thereby fostering more inclusive and balanced economic development.

Does Coordination of Macro Policies Enhance Economic Growth? Evidence From West Africa Ephraim Ugwu; Christopher Ehinomen; Julius Ibitoye; Adeleke Omolade
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.69074

Objective: In West Africa, poor macroeconomic policy coordination among the managers of the economy has negatively impacted the macroeconomic stability of the region as well as the economic growth. This study investigates macro policies coordination and its impact on economic growth in West Africa, using a panel data set of 15 countries from 1980 to 2021. Design/Methods/Approach: Vector Autoregression (VAR) is used for evaluation. The study used descriptive statistics and panel unit root tests. An optimal lag length was selected based on five criteria, and the impulse response and Variance Decomposition were used for analysis. Findings: The panel stationarity tests reveal that the variables are stationary in first differences at the 5% significance level. The impulse response functions of the log of GDP to inflation showed a negative shock in the short and medium runs, and a positive shock in the long run. The response to the log of broad money supply indicates a positive response in both the short, medium, and long-run. The response to capital expenditure indicated a positive short-run effect, followed by a negative shock in the medium and long runs. While the trade policy variable indicated a positive response in the short, medium, and long run. The variance decomposition of the log of GDP showed that apart from its own variation, it can only be explained by a variation in broad money supply. Originality/Value: This study contributes to the existing literature by evaluating the coordination of macroeconomic policies across the member states of ECOWAS in both the short and long run for macroeconomic stabilization in the region. The implication of considering key macroeconomic factors will help in generating results for more reliable economic analysis and forecasts. Practical/Policy implication: The study therefore recommends tight fiscal measures and monetary policy expansion, as these would enhance growth in the region

Economic Dynamics and Sustainable Forestry: Pathways to Net Zero Emissions in Indonesia Erwinsyah
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.69318

Objective: The study examines the economic drivers and sustainability issues of Indonesia’s forestry sector, which are crucial for national economic growth, export revenues, and employment opportunities. The forest-based industry promotes monetary stability and poverty reduction, although it also produces considerable environmental externalities, particularly carbon emissions from deforestation and land-use changes. Design/Methods/Approach: This study uses a novel simultaneous-equations econometric model to analyze key factors influencing deforestation, including GDP growth, commodity prices, policy incentives, sustainable practices, and forest land availability, thereby capturing complex bidirectional relationships and feedback effects over the period 2000–2023. Findings: Results indicate that while economic growth and stable commodity prices reduce deforestation, high land management costs hinder sustainable practices. Given the limited influence of policy incentives, more complex financial and governance frameworks were required. Originality/Value: The study emphasizes the significance of Indonesia’s forest management strategies in the context of global environmental commitments and market demands for deforestation-free products, providing a nuanced econometric understanding of these interdependencies. Practical/Policy implications: Integrated forest management, financial support systems, legal reforms, and collaboration with international stakeholders are some of the recommendations that have been made to reconcile the goals of economic growth with environmentally sustainable development.

The Impact of Minimum Wage Policies on Energy Efficiency in Indonesia’s Manufacturing Industry Ega Pratama; Djoni Hartono
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.69662

Objective: This paper examines whether minimum wage policy affects firms’ energy efficiency, using evidence from Indonesia’s manufacturing sector. It studies how provincial minimum wage increases influence firm-level energy use and addresses a broader economic question of how labor regulation, a non-energy policy, shapes firms’ production behavior and resource allocation in an emerging economy. Design/Methods/Approach: The analysis uses firm-level panel data from large and medium manufacturing establishments in Indonesia for 2017–2019. Provincial economic indicators are matched to firms by location. The empirical strategy combines panel fixed-effects estimation with an instrumental variables approach to address potential endogeneity in minimum wage determination. Findings: Higher minimum wages are associated with lower firm-level energy intensity. The estimated magnitude indicates that a 1% increase in the provincial minimum wage corresponds to a measurable reduction in firms’ energy intensity. The effect is stronger among labor-intensive firms, consistent with firms adjusting production processes and adopting more efficient technologies in response to higher labor costs. Originality/Value: The study links labor market regulation to firm-level production efficiency and energy use. Unlike most research focusing on energy policy, it provides firm-level evidence that minimum wage policy can indirectly influence industrial energy efficiency in an emerging economy. Practical/Policy implications: Minimum wage adjustments may have implications beyond labor market outcomes. The findings suggest that wage-setting institutions can influence firms’ production choices and resource use, with potential efficiency gains arising from cost pressures. This indicates that labor regulation can complement policies aimed at improving industrial efficiency, while highlighting the importance of implementation and compliance mechanisms.

Remittances and Education in Developing Countries Ronaldo Nformi Taba Ndi; Francis Menjo Baye
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.72125

Objective: Remittances are now a key source of funds for local and national development in developing countries – alleviating liquidity constraints, boosting consumption, investments, and savings. Previous studies reveal mixed results on the association between remittances and education, probably because of their failure to explore the nature of the relationship. To contribute to this literature, the following research question is posed: is the remittances-education link non-linear? We investigate the nature of the association between remittances and education. Method: We use data spanning 2000-2020 from 75 developing economies sourced from the World Bank and the United Nations Development Programme. The Driscoll & Kraay error-correction fixed-effects method is used for the analysis and refined using the System Generalized Method of Moments (SGMM) estimator. Findings: We find that remittances have a U-shaped relationship with educational attainment. For example, baseline SGMM results show that, below the threshold of about 20% of GDP, any unit increase in remittances is associated with dwindling levels of educational attainment, and above this threshold, any unit increase in remittances is associated with improvements in educational attainment. These results are qualitatively consistent across alternative methods, genders, regions, levels of income, and transmission channels– an indication of robustness. Originality/value: Unlike previous studies that assume linearity, this study introduces a threshold analysis to identify the level of remittances (% of GDP) where the effect on education shifts from negative to positive. Practical/Policy implication: These findings are supportive of public policies such as foreign exchange interventions that promote competition and innovation to boost the inflow of remittances and protect remittance recipients and their investments in education.

Openness and Output Volatility in Sub-Saharan African Countries: Does Economic Freedom Matter? Dagim Tadesse Bekele; Adisu Abebaw Degu
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.75290

Objective: The role of financial and trade openness in output volatility has been widely debated, while the moderating role of economic freedom remains underexplored. This empirical study examines how economic freedom shapes the effects of financial and trade openness on output volatility in Sub-Saharan African countries. It focuses on overall economic freedom, financial freedom, and trade freedom, and provides empirical evidence relevant to volatility in developing economies. Design / Methods / Approach: Using panel data from 2012 to 2021, the study applies a two-step system Generalized Method of Moments estimation technique to control for endogeneity, unobserved heterogeneity, and dynamic effects. Measures of financial openness, trade openness, and economic freedom indices are included, along with interaction terms to capture the conditioning role of economic freedom. Findings: The result suggests that financial openness and trade openness have a significant positive effect on output volatility. But their role has changed to stabilizing when they interact with economic freedom indexes. Specifically, the impact of financial openness on output volatility is negative and statistically significant when both economic and financial freedom are high. Similarly, when there is more economic freedom and trade freedom, trade openness plays a minimizing role in output volatility. Originality/Value: This study is among the first to examine the mediating role of economic freedom in the relationship between openness and output volatility in SSA. By moving beyond direct effects of openness and disaggregating economic freedom into specific components, the research provides new institutional insights into the openness–volatility nexus in an underexplored regional context. Practical / Policy Implications: The results imply that trade and financial liberalization without institutional support can increase macroeconomic instability. Policies that strengthen economic and financial freedom should accompany openness reforms to improve shock absorption and promote macroeconomic stability.

Uncovering Indonesia’s Hidden Unemployment Through Google Trends: A Nowcasting-Oriented Mixed-Frequency Modeling Syfriza Davies Raihannabil; Achmad Maulana Andi Wicaksono; Rani Nooraeni
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.76834

Objective: The unemployment rate reported in official statistics does not fully capture labor market conditions as it overlooks hidden unemployment. These individuals, who appear to be employed, are not optimally engaged in economic activities. This study aims to nowcast hidden unemployment in Indonesia using high-frequency big data from Google Trends, thereby addressing the limitations of official statistics and providing more adaptive labor market indicators within the broader context of employment dynamics and policy evaluation. The research is empirical in nature. Design/Methods/Approach: The study employs time-series data, combining official statistics from the National Labor Force Survey (SAKERNAS) with search query data from Google Trends. Three econometric models — MIDAS, U-MIDAS, and BMF VAR — are applied to assess their performance in nowcasting hidden unemployment. The analysis is divided into pre-pandemic and combined periods to evaluate the model’s sensitivity to structural shocks, such as the COVID-19 pandemic. Findings: The results indicate that the MIDAS model outperforms the alternatives, with the lowest forecast errors (∆RMSE = 0.3538; ∆MAPE = 0.9028%) and the highest stability in capturing hidden dynamics of unemployment. Using the best-performing model, predictions for the first semester of 2025 indicate that hidden unemployment will reach 33.14 percent, reflecting persistent vulnerabilities in the labor market structure. Originality/Value: The study contributes to labor market research by integrating high-frequency big data with econometric nowcasting methods to estimate hidden unemployment, a phenomenon often overlooked in official statistics. This approach introduces a novel application of real-time indicators to enhance the timeliness and relevance of employment monitoring in emerging economies. Practical/Policy implication: The findings underscore the importance of adaptive employment policies that address hidden unemployment as a structural issue. By providing early indicators, this study offers policymakers timely insights to design responsive interventions, reduce labor market inefficiencies, and mitigate the risks of increasing employment disparities.

Regional Economic Development and Private Car Ownership in Java, Indonesia Andriana Kumalasari; Djoni Hartono
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.78729

Objective: This study examines the relationship between regional economic development and private car ownership across 114 cities and regencies on Java Island, Indonesia, between 2015 and 2023, using data from Statistics Indonesia (BPS) and the Ministry of Transportation. Methods: The study applies a Correlated Random Effects (CRE) panel model with instrumental variable techniques to identify both within- and between-associations and to address potential endogeneity. The analysis is conducted using the full sample and subsamples by region and by city/regency size to capture heterogeneous effects across Java. Findings: The results indicate that per capita regional GDP and mean years of schooling are positively and significantly associated with private car ownership across all cities/regencies. In the Jakarta Metropolitan Area (JMA), population density is negatively and significantly associated with private car ownership, reflecting the region’s disadvantages of private car use. Conversely, in large cities/regencies, road infrastructure has a negative and significant association with car ownership, but population density maintains a positive and significant association, indicating insufficient public transportation services. Originality/Value: This study contributes to the literature by providing the first Java-wide panel analysis that jointly estimates within- and between-effects and addresses endogeneity in the economic development–car ownership nexus. Practical/Policy Implication: In the JMA region, first- and last-mile connectivity should be strengthened. In large cities/regencies, integrated multimodal transport systems should be developed to suppress the growth of private car ownership. In small cities/regencies, the Central Government should play a key role in supporting investment and planning for sustainable transportation.

Nexus Between Development and Political System: Evidence from Lebanon Jassem Ajaka; Hassan Ayoub; Wadad Saad
Journal of Developing Economies Vol. 11 No. 1 (2026)
Publisher : Universitas Airlangga

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.20473/jde.v11i1.79728

Objective: This study examines the interrelationships among three fundamental spheres in Lebanon: the economic sphere, measured by economic growth; the political sphere, reflected in political stability and control of corruption; and the social sphere, measured by human development. Methods: Using a World Bank annual dataset from 1996 – 2019, the study employs four autoregressive distributed lag (ARDL) models that include the following variables: economic growth, political stability, control of corruption, and the Human Development Index (HDI). Each variable is considered as a dependent variable in a model that is regressed on the other remaining variables. Findings: Empirical results reveal that the dynamic interaction between these three spheres exists in the long run and the short run. These findings demonstrate how the variables examined in this study contribute to understanding the underlying mechanisms and policy effects relevant to the research question. Originality/Value: By examining the interrelationships among the three spheres (economic, political, and social spheres) within the Lebanese context, this study addresses an important gap in the literature on the Lebanese economy. Its findings offer policy-relevant insights and contribute to the broader discussion on the design of effective economic policy in Lebanon. Policy Implication: These findings indicate that initiating a developing process at the economic, political, and social levels is a necessary step that the Lebanese authorities must take to overcome the crises that Lebanon has suffered from for decades.

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Location Kota surabaya, Jawa timur INDONESIA

Abstract

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Contact Name
-

Contact Email
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Phone
-

Journal Mail Official
-

Editorial Address
-

Location
Kota surabaya,

Jawa timur

INDONESIA