Economies, Volume 12, Issue 5 (May 2024) – 11 articles

Water scarcity is an important threat to food security in the Tigris–Euphrates river system. Water scarcity is a huge worldwide problem that results from the rapid increase in water demand, which exceeds the amount of available water. The most significant problems currently affecting countries are food insecurity water scarcity. The Tigris–Euphrates river system countries suffer from different political issues, such as the Syrian war and internal civil conflicts in Iraq. In addition, this area consists of only three countries: Iraq, Syria, and Turkey, but it affects the entire Middle East. Turkey has established many irrigation projects compared to Iraq, which still suffers from the previous American invasion. Therefore, this study examines the Tigris–Euphrates river system (using two countries) to examine the relationship between water scarcity and food security from 1992 to 2020. This study will be conducted using a fixed and random regression approach over 18 years. The results show a negative relationship between water scarcity and food security in the short run, at a 10% significance level, and a long-term positive relationship of 1%. Thus, the use of research and development and the encouragement of investments will help policymakers to develop a nexus between water scarcity and food security. Full article

Efficiency in stock markets is essential for economic stability and growth. This study investigates the efficiency and herding behavior of the stock markets from the top economies of the world (known as G20 countries). We classify stock market indices using MSCI classification for the developed and emerging markets to provide a comparative examination using the latest data and by employing the robust multifractal detrended fluctuation (MFDFA) method. In addition to the full sample, the analysis uses sub-sample periods to reveal the hidden features and efficiencies of the G20 markets during the Russia–Ukraine War and COVID-19 for the first time. The findings show the availability of varied multifractality among all G20 stock markets during the overall and crisis periods, exhibit long-range correlations, and may support the fractal market hypothesis. In addition, Italy remains the least efficient, while Germany remains the most efficient stock market. The sub-sample results further reveal unevenness in the local fluctuations and resultant higher inefficiency considering the sheer magnitude and impact of crises on the G20 stock markets. However, the efficiency of developed stock markets performed better as compared to emerging markets. The study of G20 stock markets is useful and provides several implications for a wider audience. Full article

The energy revolution in Saudi Arabia has accelerated significantly since 2016, driven by the National Vision 2030. Significant changes to energy subsidies took place, and the renewable energy sector has seen rapid growth. The paper presents an empirical analysis of the Saudi energy transition by emphasizing the drivers of fuel consumption in KSA. It primarily attempts to explore the long-run (LR) connection between oil consumption and several economic variables such as economic growth, crude oil prices, investment, and the labor force in Saudi Arabia (KSA) from 1991 up to 2021. The paper implemented the vector error correction model (VECM) and performed different diagnostic tests to provide more evidence about the validity and robustness of the tests. The empirical findings highlighted how important the labor force, savings, GDP, and crude oil price are in determining oil consumption for KSA. The law of demand is significantly present, which negatively affects oil consumption for KSA as an oil exporting country. The results also supported the existence of a long-term direct correlation between the variables and oil consumption. Furthermore, the short-term estimation highlighted that only saving has a negative impact on oil consumption for a single lagged period. Our findings provide governments and regulators with further incentive to slow the expansion in oil consumption, as a larger labor force is demanding more oil to attain the target, faster economic growth, and increased savings are all contributing factors. Our findings are significant because they can assist policymakers, investors, and regulators in generating more efficient oil substitutes and making them affordable for the economy. Full article

In a quest to illuminate Kazakhstan’s economic horizon within a sustainable context, this study delved into the complex interplay of sustainable tech innovation, investment in sustainable infrastructure, and natural resource management. The study assesses the potential for green economy development by introducing the adoption of sustainable practices as the mediator and corporate social responsibility as the moderator in the examined relationships. We employed a cluster sampling technique, focusing on government sector employees in Kazakhstan. The choice of this sector stemmed from its pivotal role in shaping national policies. A time-lagged approach was incorporated, collecting data at two distinct time points to capture the dynamic evolution of green initiatives over time. As the data unfolded, sustainable tech innovation, investment in sustainable infrastructure, and natural resource management emerged as significant predictors for adopting environmentally responsible practices leading to green economy development. This development process, we found, was further augmented by the moderating influence of corporate social responsibility. Hence, our findings contribute both practical and theoretical insights to the discourse on sustainable economic development. In addressing the intricate interplay of technological, infrastructural, and resource-related factors, this study provides guidance for Kazakhstan’s ongoing transition towards a more sustainable and resilient economic trajectory. Full article

This study seeks to investigate the potential effects of the recent pandemic (COVID-19) on capital structure dynamics. The Gulf Cooperation Council (GCC) is a fascinating topic for this study because of its distinct economic characteristics. The analysis draws upon a cross-country dataset covering 208 non-financial listed firms across five GCC countries, with data spanning the years 2010 to 2022. Capital structure is a dependent variable and is measured by total debt to equity, equity multiplier, and short-term debt ratios, while the COVID-19 pandemic, firm size growth, return on assets, tangibility, and growth were applied as independent variables. Using the generalized least squares (GLS) method, findings demonstrated that COVID-19 has a significant and positive influence on debt-to-equity and equity multiplier ratios but a negative one on short-term debt ratio. Thus, non-financial firms increased their debt financing and transferred debt from short-term to long-term funding. In addition, firm-specific factors, such as firm size, tangibility, and macroeconomic factors, such as GDP growth, positively and significantly impact capital financing. Conversely, profitability has a negative relationship with financial leverage. There is a lack of empirical research on how COVID-19 affects the financial structure of non-financial listed companies in GCC nations. Consequently, by filling the previously specified gaps, this study provides proof to support the idea of using debt financing to raise capital for economic recovery. GCC policymakers need to give priority to ensuring that firms have convenient access to inexpensive finance in light of the financial consequences caused by COVID-19. This will guarantee that companies have the resources necessary to bounce back and support economic growth. Full article

This study deals with the evolution of fuels’ prices over time in the EU. The central research inquiry revolves around whether there exists any correlation among the trajectories followed by national prices in the gasoline and diesel markets. The EU, and more specifically the Euro-Area, by its construction, is treated as an OCA (Optimum Currency Area). In an OCA, certain conditions are met to ensure the smooth functioning of a common currency. The fuel price synchronization is essential because it contributes to the effective implementation of policies and promotes stability across the entire macroeconomy. The study covers the period of 2017–2022. For each type of fuel and year, we construct an individual network where network nodes represent the EU member states while the edges connecting these nodes represent strong temporal fuel price correlations among the member states. The properties of the resulting networks are analyzed within a Complex Network framework. Our goal is twofold: first, to detect any potential convergence or divergence in the trajectories of the prices, and second, to investigate the impact of tax and duty implementation on the co-movements of the prices. The empirical findings show that diesel markets have a more pronounced pattern of price co-movements compared to the gasoline markets. Moreover, the application of fuel taxation policies seems to adversely affect the co-movements of prices. Full article

This paper analyzes one of the causes of the current gender-unbalanced situation in the labor market: the discrimination that individuals face at work due to their commitment to unpaid care work. It aims at finding mechanisms that may induce a change from the current unbalanced situation to a world in which males and females are found in more equal shares in all professions and at all levels. I construct a formal model that includes the heterogeneity of individuals regarding their family commitments and I investigate how it affects the individual’s optimal labor market participation. The welfare of individuals with commitment to family duties is reduced for two different reasons: for not being able to participate as much in the labor market and thus receive a lower labor income and for not being able to contribute as much to their family commitments. I compare the results for the female and male sections of the society and I illustrate the observed gender gaps in terms of labor market participation, income levels, and the overall utility obtained. I find that even though the gender wage gap may be alleviated with reductions in the cost associated to unpaid care work, the gender utility gap will persist. Full article

Tajikistan holds the eighth position globally in terms of hydropower potential, estimated at 527 terawatt-hours (TWh), with a technically exploitable capacity of 317 TWh. Only 4–6 percent of this immense potential is currently utilized. In this paper, employing a combination of the Johansen cointegration test, vector autoregression, and the Granger-causality test on annual data from 1993 to 2021, we examine the causality relationship between electricity production and key macroeconomic variables, including gross domestic product (GDP), GDP per capita, exports, imports, final consumption, capital investment, and employment, in Tajikistan. The empirical findings reveal a positive unidirectional causality from electricity production to exports and imports. A positive bidirectional or feedback causality is found between electricity production and variables such as GDP, GDP per capita, final consumption, and employment. No causality relationship between electricity production and variables such as trade openness and capital investment is observed. The exploration of complex causal relationships between electricity production and key macroeconomic variables in Tajikistan, as revealed in this study, offers a modest yet meaningful addition to academic discourse. It presents insights that may inform policymakers and stakeholders, albeit with a recognition of the limitations inherent in the findings. These insights could potentially guide the formulation of sustainable development strategies and shed light on the underutilized potential of the country’s hydropower resources. Full article

For several decades, multinational enterprises (MNEs) have offshored their manufacturing activities to low-cost countries to achieve significant productivity gains. However, changes in the relative competitiveness of countries, social effects of deindustrialization in advanced economies and the vulnerability of global value chains (GVCs) revealed by the COVID-19 pandemic have encouraged some firms, supported by governments, to “reshore” part, or all of their offshore industrial operations back to their home country. Reshoring decisions are motivated by a variety of endogenous and exogenous factors that are empirically analyzed in this paper to understand how reshoring policies implemented by governments can more effectively address the factors driving the firms’ location decisions. A review of the reshoring policies implemented in Europe, the UK and the US is conducted to provide general policy recommendations regarding policy instruments, SMEs, innovation and regionalization of value chains. This paper fills a gap in the literature by connecting the micro-level supply chain management analysis of firms’ reshoring drivers with the macro-level economic policy perspective on reshoring. The review of existing reshoring policies calls for an in-depth analysis by the manufacturing sector and at the local level. Full article

This study advances the understanding of the Preferred Habitat Model’s capacity to shed light on the inter-market transfer of mean returns and the diffusion of price volatility in Pakistani investment markets. It examines the extent to which returns in one market exert a systematic influence on returns across others under the potential sway of interest rate policy shifts, USD exchange rate volatility, and domestic inflation trends. Employing a methodological arsenal that includes the GARCH process, enhanced by Dynamic Conditional Correlations (DCC), as well as the Markov Switching Model, this research assesses the propagation of mean returns and volatility across markets. The analysis uncovers significant linkages between monetary policy and stock market indices, underscoring the profound impact of monetary policy on cross-market performance transmission. These insights are pivotal for regulators overseeing the nuanced interaction between monetary policy and market performance. They are crucial for local and international investors interested in developing economies, especially in Pakistan’s markets. Full article

This paper endeavours to investigate whether a complex tax system influences firms’ propensity toward tax evasion across countries. To achieve the objectives of this study, we utilised the World Bank Enterprise Survey and the World Bank’s Doing Business databases covering more than 46,000 companies from 83 countries. Our study revealed that the increased time required to pay taxes and higher total tax payments were associated with a greater extent and incidence of tax evasion among firms. The consistency of these benchmark regression results was proven through endogeneity analysis and several robustness tests. Furthermore, our heterogeneity analyses showed that the effect of tax complexity on firm tax evasion was more prominent in low- and lower-middle-income countries and also in the primary industry. These findings offer promising evidence for policymakers, particularly in low- and lower-middle-income countries where the majority of companies operate in the primary industry. Addressing the complexity of the tax system could potentially mitigate the adverse impact on tax evasion levels in these countries. Furthermore, our spatial analysis provides valuable insights, emphasising the potential impact of tax complexity in neighbouring countries and underscoring the necessity for policymakers in the home countries to strategise on harmonising and streamlining their tax systems. Full article