The Dynamic Relationship between Globalization and Economic Growth: Its Implication on Business Policy
Main Article Content
Keywords
Globalization, Economic growth, Business policy
Abstract
The purpose of this study is to investigate the relationships between globalization and economic growth in Indonesia. Three globalization indices, economic globalization index, social globalization index and political globalization index, are used to measure the globalization. Johansen’s (1988) cointegration approach is used to estimate the model by using annual data from 1980 to 2014. The results indicate that there is a long-run cointegration relationship between globalization and economic growth in Indonesia. Globalization stimulates Indonesian economic growth in the long run. Meanwhile, political globalization implies short-run effect on the economic growth in Indonesia. From the policy perspective, this results support the argument that the government should take the international integration policy to sustain long-run economic growth.
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References
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Soren, J. (1995). Likelihood-based inference in cointegrated vector autoregressive models. OUP Catalogue.
Tambunan, T. T. (2010). The Indonesian experience with two big economic crises. Modern Economy, 1(03), 156. doi:10.4236/me.2010.13018
Tang, C. F., & Tan, E. C. (2015). Does tourism effectively stimulate Malaysia's economic growth? Tourism management, 46, 158-163. doi: 10.1016/j.tourman.2014.06.020
Toda, H. Y., & Phillips, P. C. (1993). Vector autoregressions and causality. Econometrica: Journal of the Econometric Society, 1367-1393. doi:10.2307/2951647
Wu, T., Perrings, C., Kinzig, A., Collins, J. P., Minteer, B. A., & Daszak, P. (2017). Economic growth, urbanization, globalization, and the risks of emerging infectious diseases in China: a review. Ambio, 46(1), 18-29. doi:10.1007/s13280-016-0809-2
Ying, Y.-H., Chang, K., & Lee, C.-H. (2014). The impact of globalization on economic growth. Romanian Journal of Economic Forecasting, 17(2), 25-34.
Azam, M., & Ahmed, A. M. (2015). Role of human capital and foreign direct investment in promoting economic growth: evidence from Commonwealth of Independent States. International Journal of Social Economics, 42(2), 98-111.
Chiawa, M., Torruam, J., & Abur, C. (2012). Cointegration and causality analysis of government expenditure and economic growth in Nigeria. International Journal of Scientific & Technology Research, 1(8), 165-174.
Chu, H.-P., Chang, T., & Sagafi-nejad, T. (2016). Globalization and Economic Growth Revisited: A Bootstrap Panel Causality Test. Cyrus Chronicle Journal, 1(1), 23-37. doi: 10.21902/2573-5691/2016.v1i1.4
Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: Journal of the Econometric Society, 1057-1072. doi: 10.2307/1912517
Dogan, B., & Deger, O. (2016). How Globalization and Economic Growth Affect Energy Consumption: Panel Data Analysis in the Sample of BRIC Countries. International Journal of Energy Economics and Policy, 6(4), 806-813.
Dreher, A. (2006). Does globalization affect growth? Evidence from a new index of globalization. Applied Economics, 38(10), 1091-1110. doi: 10.1080/00036840500392078
Dreher, A., Gaston, N., & Martens, P. (2008). Measuring Globalisation. Gauging its Consequences Springer, New York.
Elveren, A. Y., Örnek, İ., & Akel, G. (2012). Internationalisation, growth and pay inequality: a cointegration analysis for Turkey, 1970–2007. International Review of Applied Economics, 26(5), 579-595. doi: 10.1080/026921271.2011.624499
Engle, R. F., & Granger, C. W. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica: Journal of the Econometric Society, 251-276. doi: 10.2307/1913236
Ghosh, A. (2017). How does banking sector globalization affect economic growth? International Review of Economics & Finance, 48, 83-97. doi: 10.1016/j.iref.2016.11.011
Granger, C. W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 424-438. doi: 10.2307/1912791
Hamdi, F. (2013). The impact of globalization in the developing countries. Developing Country Studies, 3(11), 142-144.
Iqbal, J. (2011). Forecasting performance of alternative error correction models.
Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of economic dynamics and control, 12(2-3), 231-254. doi: 10.1016/0165-1889(88)90041-3
Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica: Journal of the Econometric Society, 1551-1580. doi: 10.2307/2938278
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—with applications to the demand for money. Oxford Bulletin of Economics and statistics, 52(2), 169-210. doi: 10.1111/j.1468-0084.1990.mp52002003.x
Kilic, C. (2015). Effects of Globalization on Economic Growth: Panel Data Analysis for Developing Countries. Petroleum-Gas University of Ploiesti Bulletin, Technical Series, 67(1).
Levy, B. (2012). The role of globalization in economic development. Available at SSRN 2233648. doi: 10.2139/ssrn.2233648
Lo, D., Hong, F., & Li, G. (2016). Assessing the role of inward foreign direct investment in Chinese economic development, 1990–2007: Towards a synthesis of alternative views. Structural Change and Economic Dynamics, 37, 107-120. doi: 10.1016/j.strueco.2016.01.004
Moghaddam, A. A., & Redzuan, M. R. (2012). Globalization and economic growth: A case study in a few developing countries (1980-2010). Research in World Economy, 3(1), 54. doi: 10.5430/rwe.v3n1p54
Nayyar, D. (2009). Developing countries in the world economy: the future in the past?
Ohlan, R. (2017). The relationship between tourism, financial development and economic growth in India. Future Business Journal, 3(1), 9-22. doi: 10.1016/j.fbj.2017.01.003
Oyvat, C. (2010). Globalization, wage shares and income distribution in Turkey. Cambridge Journal of Regions, Economy and Society, 4(1), 123-138. doi: 10.1093/cjres/rsq032
Patunru, A. A., & Rahardja, S. (2015). Trade protectionism in Indonesia: Bad times and bad policy.
Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335-346. doi: 10.1093/biomet/75.2.335
Rao, B. B., & Vadlamannati, K. C. (2011). Globalization and growth in the low income African countries with the extreme bounds analysis. Economic Modelling, 28(3), 795-805. doi: 10.1016/j.econmod.2010.10.009
Ray, S. (2012). Globalization and economic growth in India: A Granger causality approach. JL Pol'y & Globalization, 2, 18.
Salifou, C. K., & Haq, I. u. (2017). Tourism, globalization and economic growth: a panel cointegration analysis for selected West African States. Current Issues in Tourism, 20(6), 664-667. doi: 10.1080/13683500.2016.1175421
Samimi, P., & Jenatabadi, H. S. (2014). Globalization and economic growth: Empirical evidence on the role of complementarities. PloS one, 9(4), e87824. doi: 10.1371/journal.pone.0087824
Sargan, J. D. (1964). Wages and prices in the United Kingdom: a study in econometric methodology. Econometric analysis for national economic planning, 16, 25-54.
Schwarz, J., & Mathijs, E. (2017). Globalization and the sustainable exploitation of scarce groundwater in coastal Peru. Journal of cleaner production, 147, 231-241. doi: 10.1016/j.jclepro.2017.01.067
Shahzad, S. J. H., Shahbaz, M., Ferrer, R., & Kumar, R. R. (2017). Tourism-led growth hypothesis in the top ten tourist destinations: New evidence using the quantile-on-quantile approach. Tourism management, 60, 223-232. doi: 10.1016/j.tourman.2016.12.006
Soren, J. (1995). Likelihood-based inference in cointegrated vector autoregressive models. OUP Catalogue.
Tambunan, T. T. (2010). The Indonesian experience with two big economic crises. Modern Economy, 1(03), 156. doi:10.4236/me.2010.13018
Tang, C. F., & Tan, E. C. (2015). Does tourism effectively stimulate Malaysia's economic growth? Tourism management, 46, 158-163. doi: 10.1016/j.tourman.2014.06.020
Toda, H. Y., & Phillips, P. C. (1993). Vector autoregressions and causality. Econometrica: Journal of the Econometric Society, 1367-1393. doi:10.2307/2951647
Wu, T., Perrings, C., Kinzig, A., Collins, J. P., Minteer, B. A., & Daszak, P. (2017). Economic growth, urbanization, globalization, and the risks of emerging infectious diseases in China: a review. Ambio, 46(1), 18-29. doi:10.1007/s13280-016-0809-2
Ying, Y.-H., Chang, K., & Lee, C.-H. (2014). The impact of globalization on economic growth. Romanian Journal of Economic Forecasting, 17(2), 25-34.