Md. Shahadat Hossain, Lee Chin, Rusmawati Said and Suryati Binti Ishak

DOI: https://doi.org/10.6000/1929-7092.2020.09.23

Published: 04 June 2020

Abstract: Bangladesh is one of the top ten remittance recipient countries and the contribution of remittance to the GDP has increased dramatically in recent years. This study examines the role of remittances on GDP growth in Bangladesh and Time series data for decades from 1996 to 2019 extracted from the World Bank database as well as Bangladesh Bank statistics were used. The study was conducted being motivated from conflicting results that have emerged in the literature on the impact of remittance on the economic growth of different countries. Using ordinary least squares (OLS) and Pearson correlation method, the empirical results of the study have been consistent with some previous studies while also contrasted to some literature on the impact of remittances on GDP, Gross Domestic Savings and Domestic Expenditure of a country. We have found that the remittances have a significant impact on the growth of GDP as well as Gross Domestic Savings and Domestic Expenditure. Since, there are no recent studies on the role of remittances on GDP, therefore, the findings of the study provide a significant insights for policymakers for strengthening policies and regulations relating to harnessing remittances for economic growth. Implications of the study have been discussed.

Keywords: Remittances, Economic Growth, Development Level, Bangladesh.

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P.N. Brusov, T.V. Filatova, N.P. Orekhova, V.L. Kulik, S.-I. Chang and Y.C.G. Lin

DOI: https://doi.org/10.6000/1929-7092.2020.09.25

Published: 18 June 2020

Abstract: The first serious study (and first quantitative study) of influence of capital structure of the company on its indicators of activities was the work by Nobel Prize Winners Modigliani and Miller. Their theory has a lot of limitations. One of the most important and seriouse assumptions of the Modigliani – Miller theory is that all financial flows as well as all companies are perpetuity. This limitation was lift out by Brusov–Filatova–Orekhova in 2008 (Filatova et al. 2008), who have created BFO theory – modern theory of capital cost and capital structure for companies of arbitrary age.

Despite the fact that the Modigliani–Miller theory is currently a particular case of the general theory of capital cost and capital structure – Brusov–Filatova–Orekhova (BFO) theory – it is still widely used at the West.

In current paper we discuss one more limitation of Modigliani – Miller theory: a method of tax on profit payments. Modigliani – Miller theory accounts these payments as annuity–immediate while in practice these payments are making in advance and thus should be accounted as annuity–due.

We generalize the Modigliani–Miller theory for the case of advance payments of tax on profit, which is widely used in practice, and show that this leads to some important consequencies, which change seriously all the main statements by Modigliani and Miller. These consequencies are as following: WACC starts to depend on debt cost kd, WACC turns out to be lower than in case of classical Modigliani–Miller theory and thus company capitalization becomes higher than in ordinary Modigliani–Miller theory.We show that dependence of equity cost on leverage level L is still linear, but the tilt angle with respect to L–axis turns out to be smaller: this could lead to modification of the divident policy of the company.

Correct account of a method of tax on profit payments demonstrates that shortcomings of Modigliani – Miller theory are dipper, than everybody suggested: the underestimation of WACC really turns out to be bigger, as well as overestimation of the capitalization of the company. This means that systematic risks arising from the use of modified Modigliani – Miller theory (MMM theory) (which is more correct than "classical' one) in practice are higher than it was suggested by the "classical" version of this theory.

Keywords: Modigliani–Miller theory, advance payments of tax on profit, Brusov–Filatova–Orekhova theory, annuity–immediate, annuity–due.

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Melcah Pascua Monsura

DOI: https://doi.org/10.6000/1929-7092.2020.09.24

Published: 04 June 2020

Abstract: When economic growth does not translate into poverty reduction and it remains a challenge, it is crucial to examine income mobility since income is a measure of individual economic status or poverty status. To understand the role of economic growth on welfare when there is income mobility, this study measured the Philippine households’ income mobility utilizing pseudo-longitudinal panel data from the Family Income and Expenditures Survey (FIES) of 2003 to 2012. Using various income mobility indices such as chi-square, average jump index and Shorrocks mobility index, the results revealed that the households’ income movement was more mobile than expected. This means that the households’ income status improved through time, low-income rank moved to higher-income rank in a given income distribution. In addition, short-run income inequality was reduced by 87.30 percent (87.30%) when there was income mobility. The presence of income mobility in the country was mainly due to the transfer effect which indicates that households did not take the economic opportunities of economic growth to increase their economic status.

Keywords: Economic status, income distribution, income inequality, income mobility, welfare.

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David Bote and Stephen Mago

DOI: https://doi.org/10.6000/1929-7092.2019.08.161

Published: 27 December 2019

Abstract: Poverty reduction is one the efforts poised towards the achievement of Sustainable Development Goals (SDGs). The Eastern Cape Province is one of South Africa provinces with the highest rate of adult poverty (67.3%) coming after the Limpopo province which registers 67.5%. The objectives of the paper are to; i) identify and analyse the challenges of using microcredit as a poverty reduction tool and ii) propose strategies that could be used to enhance the efficacy of microcredit as a poverty reduction tool. A survey of available literature was adopted in this study to achieve the objectives. We used the ‘traditional or narrative literature review’ methodology to gather relevant information. The paper suggests strategies that can be used to enhance the impact of microcredit programmes on poverty reduction in the province. We have revealed the importance of microcredit as a poverty reduction tool. We also revealed that it has been in existence for a long time in the province but has not adequately contributed on poverty reduction across the province. The principal findings outline some of the main challenges associated with microcredit and the results suggest that removing key challenges can improve the scale and impact of microcredit.

Keywords: Microcredit, poverty, poverty reduction, microfinance, Sustainable Development Goals.

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