Current Issue

2013, Volume 2, Number 2


Ayesha Mushtaq and Khalid Zaman (2013) Impact of macroeconomic factors on tourism receipts: evidence from SAARC region, European Economics Letters, Volume 2, Number 2, Page 38-43.

Abstract: The purpose of this study is to examine the impact of various macroeconomic factors i.e. per capita GDP; Gross capital formation; trade openness and consumer price index on  tourism receipts in selected South Asian Association for Regional Cooperation (SAARC) countries (namely, Bangladesh, Bhutan, Nepal, Pakistan and Srilanka) by using  pooled least square, fixed effect and random effect model. The analysis was carried out for the period from 1995 to 2011. By and large, the results reveal that per capita GDP and trade openness both have a positive impact on tourism receipts, as if there is one percent increase in per capita GDP and trade openness, tourism receipt increases by 1.437 percent and 1.982 percent respectively, however, gross capital formation has a significant negative impact on tourism receipt in SAARC region. The results of fixed effect model, which absorb the country specific shocks, show that both per capita GDP and trade openness has a positive impact on truism receipt. However, the magnitude of coefficient varies from pooled OLS to fixed effect model. The final model which incorporate both country and time specific shocks reveal that both per capita GDP and trade openness  have a significant impact on tourism receipt, however, the magnitude of the variables in random effect model is less than pooled OLS and fixed effect model. The Hausman model results show that fixed effect model is considered as the best model in the selected SAARC region. Download at:

Juan M.C. Larrosa (2013) Economic examples of latent budget analysis, European Economics Letters, Volume 2, Number 2, Page 44-49.

Abstract: Latent budget analysis is a classification technique that allows clustering identification by using compositional data. This paper presents examples of how this technique deals with the unit-sum constraint by establishing an initial independence model to which subsequent models are compared in terms of their relative fitness degree. In fact, latent budget analysis does not impose linearity, homogeneity, or even specific distributions on data. Examples analyzed in this work help to understand some important relationships between capital stock composition and income or food diet composition in a heterogeneous sample of countries. Download at:

Simplice A. Asongu and Oasis Kodila-Tedika (2013) Crime and conflicts in Africa: consequences of corruption?, European Economics Letters, Volume 2, Number 2, Page 50-55.

Abstract: With earthshaking and jaw-breaking levels of corruption in the African continent, the question on the extent to which corruption influences crime still remains unanswered. This paper assesses the effect of corruption (corruption-control) in 38 African countries using updated data. We find that, crime is highly positively (negatively) correlated with corruption (corruption-control). The potential mitigation effect (by corruption-control) is higher than the corresponding positive effect of corruption, implying corruption-control offsets crime emanating beyond the corruption mechanism (inter alia, other poor governance mechanisms). The relationship is statistically strong when controlling for the number of police officers, age dependency, per capital economic prosperity, level of education, government effectiveness and population density. Given that crime is proxied by the level of organized internal conflict, the findings also sustain the substantial role of corruption in the birth and propagation of conflicts within and across Africa. Policy implications are discussed. Download at:

Simplice A. Asongu (2013) How do institutions matter in the income-equalizing effect of mobile phone penetration? European Economics Letters, Volume 2, Number 2, Page 56-61.

Abstract: The object of this paper is to complement theoretical ‘mobile penetration’ literature with empirical evidence in a dual manner: on the one hand, assess the income-redistributive effect of mobile phone penetration and; on the other hand, the instrumentality of good governance in this nexus. Main findings suggest an equalizing income-redistributive effect, with a higher magnitude in the presence of government quality instruments. It follows that, good governance is a necessary condition for a higher income-equalizing effect of mobile phone penetration. The empirical evidence which deviates from mainstream country-specific and microeconomic survey-based approaches is on 52 African countries. ‘Mobile phone’-oriented poverty reduction channels are also discussed. Download at:

Kai Andree and Mike Schwan (2013) A note on hospitals incentives to collude on low quality in a spatial context, European Economics Letters, Volume 2, Number 2, Page 62-65.

Abstract: This paper analyzes the incentive for a cartel agreement between hospitals. For this purpose we extend a quality competition model developed by Montefiori (2005). We investigate that collusion on a low provided quality level will lead to higher profits for both hospitals. Therefore both hospitals benefit from an agreement. Further we can see if one hospital breaks the cartel rules, while the other stick to the agreement, the defrauding hospital can make additional profits. In addition we study the profits under an infinite time horizon. Under a given specific strategy played by the hospitals, we obtain a particular discount factor under which an agreement still holds. Download at:

Mohamed Jellal and Mohamed Bouzahzah (2013) Transparency and corruption: an optimal taxation policy, European Economics Letters, Volume 2, Number 2, Page 66-70.

Under Principal-Agent-Supervisor paradigm, we examine in this paper how a tax collection agency changes optimal schemes in order to lessen the occurrence of corruption between the tax collector and the taxpayer. Indeed, the Principal, who maximizes the expected net fiscal revenue, reacts by decreasing tax rates when the supervisor is likely to engage in corrupt transaction with taxpayer. Therefore, the optimal policy against collusion and corruption may explain the rational of the greater reliance on indirect taxes than on direct taxes both in developed and developing countries. Dowload at:

Sandeep Mazumder (2013) High inflation and the sacrifice ratio, European Economics Letters, Volume 2, Number 2, Page 71-76.

A vast literature exists that measures the amount of real GDP that is lost when trend inflation is lowered by a percentage point, known as the sacrifice ratio. Ball (1994)’s episodic method of selecting disinflation episodes and calculating the sacrifice ratio is the most widely-used method of measuring these output costs of disinflation. However, this method constrains the disinflation episodes to be ones where trend inflation at the start of an episode is low or moderate. All cases of high inflation, and even hyperinflations, are automatically discarded in the literature. This paper seeks to address what happens if we do not discard the disinflation episodes in cases where inflation is “high.” We find that the sacrifice ratio is much lower when considering cases of high inflation. Moreover, we find that the speed of disinflation has no significant effect on high inflation sacrifice ratios, but trade openness does have a highly negative and significant impact. Furthermore, the evidence indicates that greater trade openness enhances the credibility bonus that can be achieved with more central bank independence in economies that have high inflation. Download at: