Commerce and Management
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Item Banking Sector Development and Economic Growth in Sri Lanka: An Econometric Analysis(Department of Finance, University of Kelaniya., 2022) Wijesinghe, M. D. J. W.; Dulanjani, P.Purpose: This study aims to explore the role of the banking sector in elevating the economic growth of Sri Lanka by identifying the short-run and long-run relationship between banking sector development and economic growth in Sri Lanka. Design/Methodology/Approach: This study uses annual data for the period 1960 to 2019 from World Bank's Global Financial Development Database and World Development Indicators. Odedokun's model, which assumes the causation between financial development to economic growth, is employed using the bound test within the ARDL framework. Findings: The estimated long-term parameter of the banking industry development indicator was found to be positively affected economic growth by supporting supply-led growth model. The estimations of the Error Correction Model provide a broad picture of the short-term relationship, and the results are highly consistent with the results of the long-term model. Granger Causality test found that the banking sector development granger cause to the GDP indicating a unilateral relationship. Originality: This study differs from the existing studies, which focus on the neoclassical one-sector aggregate production model. Financial development is input along with other real sector variables to identify the short-run and long-run relationship with the help of a newly developed econometric approach.Item Impact of fiscal policy on economic growth: A comparison between Singapore and Sri Lanka(Faculty of Commerce and Management Studies, University of Kelaniya., 2019) Sriyalatha, M. A. K.; Torii, H.The purpose of this paper is to examine the long-term impacts of fiscal variables on economic growth in Singapore and Sri Lanka from 1972 to 2017. Autoregressive Distributed Lag (ARDL)-ECM approach and some diagnostic and specification tests were employed to determine the impact of fiscal variables on economic growth on time series data. The results confirm that government expenditure, government revenue and investment expenditure positively and significantly affect in Singapore as well as Sri Lanka’s economic growth in the long run. This result is consistence with the theory of Keynesian views. Moreover, the Toda-Yamamoto’s Granger causality results reveal that there is bidirectional causality between inflation rate and economic growth in Singapore. Further, the results show that bidirectional causality relationship between investment expenditure and economic growth in Sri Lanka. Grounded on the premises that there are little or no studies on the impact of fiscal variables on Singapore and Sri Lankan economy with more recent data., this paper provides new evidence on the potential effect of fiscal variables on Singapore’s and Sri Lankan economic growth over the last four decades.Item Financial inclusion and institutional quality: Catalysts for economic growth in Asia-Pacific countries(Elsevier Ltd., 2025) Basnayake, D.; Naranpanawa, A.; Selvanathan, S.; Bandara, J. S.With 24% of unbanked people living in developing countries, policymakers nowadays pay attention to enhancing financial inclusion in poor segments of those countries. Advancing financial inclusion is a crucial challenge but holds prominence, given the minimal use of formal finance in Asia–Pacific countries. Moreover, institutions are pivotal in driving both financial and economic development. However, the effect of institutional quality on the financial sector has recently become a debatable topic with inconsistent empirical evidence. This paper examines the impact of financial inclusion on economic growth and how institutional quality affects the nexus between financial inclusion and economic growth in 37 Asia–Pacific countries from 2004 to 2021. The financial inclusion index and the institutional quality index are constructed using principal component analysis. Fixed-effect regression is used to find the effect of financial inclusion on economic growth and the impact of institutional quality on the nexus between financial inclusion and economic growth. The paper further examines the robustness of baseline results by adding more control variables, employing the system generalised method of moment, two-stage least square method, and panel quantile regression. The study findings show that the Asia–Pacific countries with inclusive finance promote economic growth, which is more pronounced with strong institutional quality contributing to the Theory of Finance and Growth and Institutional Theory. This study contributes to the new empirical evidence that financial inclusion improves economic growth in the Asia–Pacific countries while it is stronger with the presence of institutional quality.Item The Impact of Foreign Direct Investment on Economic Growth in Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Gunarathna, T.M.S.; Rajapakse, R.M.D.A.P.The growth of international production is driven by economic and technological forces. It is also driven by the on-going liberalization of Foreign Direct Investment (FDI) and trade policies. The growth of FDI has been focused in several studies examining the channels of transmission between FDI and growth. Economic models of endogenous growth were combined with studies of diffusion of technology in an attempt to show the effect of FDI on the economic growth of several economies The FDI is assumed to benefit to underprivileged country like Sri Lanka, not only by adding internal investment, but also in terms of employment creation, transfer of technology, increased domestic competition and other positive externalities. According to the Sri Lankan context Sri Lanka follow the attractive policies to accept FDI in to the country. As the result of this FDI has increased last year’s gradually. This paper seeks to identify that is there any relationship between foreign direct investment and economic growth in Sri Lanka. Data is collected by using secondary evidence. Data get from central bank report in Sri Lanka. Data is analysed using regression method. According to the data analysis there is positive relationship between FDI and Economic growth in Sri Lanka however the relationship is not significant.Item The Impact of Public Expenditure on Economic Growth in Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Wimalasiri, N.P.G.U.S.; Madurapperuma, M.W.The relationship between public expenditure has been one of the most searched issues in both developing and developed countries in the recent years. Public expenditure and policies related to public expenditure are important for a country and its macroeconomic stability. Hence, the objective of this study is to investigate the relationship between public expenditure and economic growth of Sri Lanka for the time period spanning from the year 1985 to 2015. A model developed by Ram (1986), as summarized by (Kweka & Morrissey, 1997) is used for the analysis. Total government expenditure is disaggregated in to three categories for the research purpose of this study as; government investment expenditure, government consumption expenditure and government human capital investment expenditure. Private investment was also added as an independent variable based on the econometric model employed for the study. All three categories of expenditure; government investment expenditure and government human capital expenditure were found to be insignificant in the regression, whereas private investment showed a positive and government consumption expenditure showed a negative significant relationship with regard to economic growth in Sri Lanka.Item Effect of Government Debt on Gross Domestic Production: Evidence from Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Silva, N.L.C.; Silva, N.K.L.; Perera, P.R.M.R.This paper investigates the relationship between government debt and gross domestic production in Sri Lanka. Objective of this study is to find the relationship between these two variables and the impact of government debt on economic growth. Data was collected through Central Bank of Sri Lanka and the data set proven to be normally distributed. Correlation and Linear Regression Model is used to ascertain relationships. Data sample represent annual time series data for the period of 15 years starting from 2000 to 2014. Results of the study is consistent with the Keynes View which proves that there is a positive impact of government debt on economic activities.Item Relationship between Stock Market Performance & Economic Growth: Empirical Evidence from Sri Lanka(Department of Accountancy, Faculty of Commerce and Management Studies, University of Kelaniya, Sri Lanka, 2016) Silva, N.K.L.; Perera, P.R.M.R.; Silva, N.L.C.In general, economic growth is an important factor which helps a country to become strong and prosper than the other nations in the world. Thus the attempt of this study is to identify the relationship between stock market performance and economic growth of Sri Lanka and to analyze how stock market performance affect to the economic growth of Sri Lanka. Quarterly data is collected from Central Bank of Sri Lanka, Department of Census and Statistics of Sri Lanka, and Colombo Stock Exchange for a period of sixteen years from year 2000 to 2015 to follow the analysis where All Share Price Index representing the Stock Market Performance is the independent variable while Real Gross Domestic Product representing the Economic Growth is the dependent variable. Data set is proven to be normally distributed. Econometric technique of simple regression model and correlation analysis were used to analyze the data using SPSS software in order to identify and further explain the relationship between stock market performance and economic growth of Sri Lanka. Findings of the study is parallel with the previous literature that discloses a strong positive relationship between stock market performance and economic growth of Sri Lanka. This study lengthens the literature, providing valued information to economists in developing countries and to the academia.Item Causality between Public Expenditure and Economic Growth in Sri Lanka: A Time Series Analysis(University of Kelaniya, 2012) Kesavarajah, M.This paper examines the causality between public expenditure and economic growth in Sri Lanka using time series annual data over the period of 1977-2009. In particular, this study keeps a special focused on various selected components of public expenditure by applying a multivariate cointegration and Vector Error Correction Modeling (VECM) techniques. The empirical evidence suggests, in long run, public expenditure on education, agriculture, health and transport and communication have positive and statistically significant effects on economic growth while defense expenditure shows a negative but a statistically significant effect on economic growth. Granger causality analysis confirms that there is a unidirectional causality running from education expenditure to economic growth, defense expenditure to economic growth, and agriculture expenditure to economic growth, which supports the existence of Keynesian hypothesis in Sri Lanka. Analysis also indicates that existence of bidirectional causality between health expenditure and economic growth, transport and communication expenditure and economic growth. Therefore, the findings of this study provide an important implication to policy makers to improve the efficiency of public expenditure by reallocating among sectors in a growth context.Item Financial market and allocation of capital in Sri Lanka(Department of Accountancy, University of Kelaniya, 2015) Chandrasiri, C.L.S.S.Financial markets appear to improve the allocation of capital. Across 65 countries, those with developed "Financial sectors increase investment more in their growing industries, and decrease investment more in their declining industries, than those with undeveloped "Financial sectors. The efficiency of capital allocation is negatively correlated with the extent of state ownership in the economy, positively correlated with the amount of "firm-specific information in domestic stock returns, and positively correlated with the legal protection of minority investors. In particular, strong minority investor rights appear to curb overinvestment in declining industries. It is now well established that a sounder financial system is associated with faster economic growth. Recent research that examines the details of this connection has important implications for economies in transition. Stock prices in rich countries move in highly idiosyncratic ways that convey information about changes in firms’ marginal value of investment. This information is important because it facilitates the rapid flow of capital to its highest value uses. In contrast, stock prices in low-income countries tend to move up and down en masse, and thus are of scant use for capital allocation. Stock return a synchronicity is highly correlated with the strength of private property rights in general - and shareholder rights in particular. Many countries have voided protecting these rights for many decades. In light of the research we survey, the persistence of such policies requires explanation. Another strand of new papers offers insights. In many countries an elite (often the descendants of industrial barons who grew rich off political “connections” during early stages of development) controls most large corporations through “pyramidal” corporate groups. This corporate control gives the elite vast rent-seeking powers, which it uses to limit outsiders’ property rights and outsiders’ access to capital. The latter is accomplished by keeping the stock market and financial system from functioning well. The initial stages of this process of “economic entrenchment” may be under way in many transition economies. Economic openness may limit this sort of “economic entrenchment”, and thus contribute to institutional reform and economic growth.