Applied Economics Journal <p>Applied Economics Journal (ISSN: 2586-9124) is a double blind peer-reviewed journal devoted to the applications of economic theories, concepts and methodologies to analyze well-defined research issues. It encourages empirical analysis, simulation, prediction and forecasting research. While it is aimed at academics and policy makers interested in the Thai and Asian economies, the journal also considers articles that deal with global issues. The primary criteria for selecting papers are originality, quality, and contribution to the field. The categories of articles include commentary, review articles, research articles and book reviews. &nbsp;AEJ is indexed in the Thai-Journal Citation Index Centre (TCI), IDEAS/RePEc, CAB Abstracts, Google Scholar, ASEAN Citation Index (ACI) and Emerging Sources Citation Index (ESCI). Two issues are published a year, in June and December. All articles are open access. No submission fee and page charge.</p> The Center for Applied Economics Research (CAER) en-US Applied Economics Journal 2586-9124 <p style="text-align: justify;">Submission of a manuscript to Applied Economics Journal will be taken to imply that the author(s) guarantee that the paper is an original work, has not been published, and is not being considered for publication elsewhere either in printed or electronic form. The author(s) have obtained permission from the copyright holder to reproduce in the article material not owned by them, that author(s) have acknowledged the source, and that this article contains no violation of any existing copyright or other third party right or any material of an obscene, indecent, libelous or otherwise unlawful nature and that the article does not infringe the rights of others. The author(s) will indemnify and keep indemnified the editors and Applied Economics Journal, Center for Applied Economics Research (CAER), Faculty of Economics, Kasetsart University against all claims and expenses. The author(s) agree that the publisher may arrange for the article to be published and sold or distributed on its own, or with other related materials, and could reproduce and/or distribute in printed, electronic or any other medium whether now known or hereafter devised, in all languages, and to authorize third parties to do the same.</p> Editorial Note <p>This issue of <em>Applied Economics Journal</em> (AEJ) consists of six research papers and a review article covering a wide range of economic issues across several countries. The first paper investigates and identifies ways to foster the sufficiency economy philosophy among small rice farmers in Northern Thailand. In the second paper, data envelopment analysis is employed to evaluate government efficiency in Sumatra, Indonesia. The third paper examines the optimal mix of size, timing, and policies of fiscal policy action—currently a topic of heated contention—using the Markov-switching vector autoregression model to study the effects of Pakistan’s fiscal policy shocks. The fourth paper draws on Goal 12 of the United Nations’ Sustainable Development Goals to analyze the responsiveness of environmental sustainability to non-performing loans in Africa. The effects of monetary policy on economic growth in Ghana and those of financial development on poverty in African emerging economies are discussed in the fifth and sixth articles, respectively. The final article reviews the barriers to scalable start-up entrepreneurship, as well as the contribution of these start-ups to local economic development in emerging economies. The editorial team hopes that the empirical evidence and analysis presented in this issue will be beneficial to academic researchers and policymakers, particularly in developing countries.</p> Waleerat Suphannachart Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 i i Contents Waleerat Suphannachart Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 ii ii Progressing Towards a Sufficiency Economy in Small Rice Farming Households in Northern Thailand <p>This study’s purposes are to evaluate and search for ways to progress towards a Sufficiency Economy (SE) in small farming households. The data were taken from farmer self-evaluations by assigning scores to their practices and activities to reflect whether and how far they follow the concept of a sufficiency economy, in both the production and the personal life domains. A total of 447 samples of small rice-based farming households in Chiang Mai Province covered in this study are categorized into those pursuing three different production systems. The investigation reveals that the households in the alternative farming system have a higher degree of a SE than those in the conventional and the subsistence farming systems which are almost at the same SE level. From the ordered logit regression, nine factors were identified as being able to contribute to the higher level of farming households in practicing according to the Sufficiency Economy Philosophy (SEP) including; 1) more than 12 years of educational attainment, 2) farming in the irrigated area which enables the farmers to have adequate water for agricultural production and involve a diversity of farming activities and systems, which in turn leads to the next factor, 3) taking up a wide range of economic activities, 4) household savings, 5) positive attitude toward a rice farming career, 6) willingness and sharing which includes being satisfied with the external environments comprising the next three factors, 7) good social surroundings, 8) access to financial sources, and 9) availability of good public infrastructure. The presence of all of these nine factors will make the farmers ready to learn and practice the principles of SEP more intensively.</p> Pirapong Prabripu Aree Wiboonpongse Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 1 19 Assessing the Local Government Efficiency: Evidence from Sumatra, Indonesia <p>The purposes of this research were to assess the relative efficiency of local government spending in Sumatra, Indonesia and to analyze the determinants of this efficiency. Data Envelopment Analysis (DEA) and multiple regression were employed for a data set of the spending of 154 local governments in 2016. Three inputs were used to measure the relative efficiency: (i) direct personnel spending per capita, (ii) spending on goods and services per capita, and (iii) capital spending per capita. The two outputs applied were life expectancy and years of schooling. The results show that, of the 154 local governments, 16, across eight provinces in Sumatra, were relatively efficient. Furthermore, population density and per capita gross regional domestic product significantly and positively affected local government efficiency. However, the general purposes grant per capita did not affect local government efficiency. Regional expansion did not cause the new split-region governments to be more relatively efficient than the governments of their parent regions.</p> Roosemarina Anggraini Rambe Kodrat Wibowo Ratu Eva Febriani Septriani Septriani Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 20 44 Regime Switches in Pakistan's Fiscal Policy: Markov-Switching VAR Approach <p>Pakistan’s economy experienced many ups and downs during the last four decades. These structural shifts (asymmetries) cannot be detected via linear econometric models. This paper employs the Markov Regime-Switching vector autoregression (MS-VAR) model with time-varying transition probabilities to identify the high and low growth regimes. After establishing structural shifts in the data, next, we estimate the linear VAR model in each regime to test the effects of fiscal shocks on output, and we also test the twin deficit hypothesis as well as the crowding-out investment effect. Different specifications of MS-VAR models with Constant Transition Probability (CTP) and time-varying transition probability (TVTP) were tested, among which the best fit model with four regimes is chosen for analysis. The four regimes identified are the low growth regimes from 1973 to 1979 and from 1989 to 1999 and the high growth regimes from 1980 to 1988 and from 2000 to 2010. The results from the subsample analysis show that the response of output to positive spending shock is increasing in high growth regimes and decreasing in low growth regimes. Similarly, a tax shock has a statistically insignificant impact on output except for the last regime where a tax shock is positively associated with output growth. An expansionary fiscal policy crowds-out private investment in low growth regimes (i.e. in first and third regimes) while a positive effect on private investment is observed during high growth regimes (second and fourth regimes). Lastly, twin deficit is observed in all regimes.</p> Wajid Ali Iftikhar Ahmad Asif Javed Sara Rafig Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 45 76 Analysis of the Responsiveness of Environmental Sustainability to Non-Performing Loans in Africa <p>This study draws on Sustainable Development Goal 12 to analyze the responsiveness of environmental sustainability to non-performing loans (NPLs) in Africa over the period 2000–2016. We explore (1) how environmental sustainability reacts to shocks from NPLs and (2) heterogeneous responses of environmental sustainability to NPLs. We employed Generalized Method of Moment (GMM) style panel Vector Autoregressive and panel quantile regression models to investigate the phenomenon. Our results revealed that conditioning on other sustainability determinants, environmental sustainability responds negatively to NPLs. The impulse response function revealed that the impact of one standard deviation shock in rising NPLs on environmental sustainability is negative from year 1 to year 6 and equal to zero from years 7 to 10. Besides, the quantile regression revealed heterogeneous responses indicating that compared with countries distributed along a high environmentally sustainable path, countries on a low environmentally sustainable path suffer more environmental issues resulting from rising NPLs.</p> Albert Henry Ntarmah Yusheng Kong Eric Cobbinah Micheal Kobina Gyan Emmanuel Kwaku Manu Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 77 109 Effect of Monetary Policy on Economic Growth in Ghana <p>This paper seeks to examine the role of monetary policy as an instrument for growth in the Ghanaian economy. The study was conducted based on yearly data from 1983 to 2017. Economic growth was the regressand in the study, with money supply, inflation, and the lending rate as the regressors. The ARDL bounds test technique was employed to investigate cointegration among the variables. The results confirmed the presence of cointegration among the variables. The results also showed the money supply as having a significant positive effect on growth in Ghana in the long run but a significant negative effect on growth in the short run. The lending rate however, was found to have an insignificant negative effect on growth in the long run but a significant positive effect on growth in the short run. Therefore, on the basis of the research findings, it is recommended that money supply be regulated in such a way that it does not lead to uncontrollable inflation, as inflation has a significant negative impact on economic growth at least in the short run, while persistent inflation in the long run is inimical to economic growth. It is further recommended that the lending rate be managed properly in order for investment to be accelerated to boost economic growth.</p> Adamu Braimah Abille Desmond Mbe-Nyire Mpuure Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 110 124 Re-examining the Nexus Between Financial Development and Poverty Reduction: Evidence from Emerging Economies <p>During the past two decades, the research on financial development and growth has gained a lot of coverage. This research looks at the degree to which financial development helps alleviate poverty. Cointegration estimation of the system, called the FMOLS, was applied over the period 1995–2015 to a panel of five African emerging economies. Using liquid liability as a percentage of GDP and bank domestic credit as a percentage of GDP as the main financial development indicators, the findings indicate that both financial development indicators minimize poverty. Other factors such as economic growth and inflation are not statistically significant. Government spending, on the other hand, does not tend to affect poverty irrespective of the measure of financial growth employed. These findings suggest that while financial growth is capable of reducing poverty, it must be combined with a reduction in inflation, as well as other macroeconomic variables. The use of liquid liability and bank domestic credit as measures of financial growth is robust to the results.</p> Michael Appiah Doreen Idan Frowne Derrick Tetteh Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 125 144 Scalable Start-up Entrepreneurship and Local Economic Development in Emerging Economies <p>Scalable start-up entrepreneurs work closely with technological innovation in order to improve people’s welfare and provide solutions to current issues. Despite the high risk inherent in start-ups, they have become a trending type of business in the world and therefore deserve adequate attention from scholars. This study aims to explore barriers to scalable start-up entrepreneurship. It further explores their contribution to local economic development in emerging economies by reviewing secondary data and existing literature. The lack of financial resources, government support, opportunity awareness role models, and managerial skills, in addition to the fear of failure, family pressure and ineffective entrepreneurship training, are common barriers to creating start-ups. Nevertheless, their contribution to local economic development is noteworthy. Scalable start-up entrepreneurs attract local and foreign investment and regenerate income, positively contributing to GDP per capita. They also play a role in job creation, helping governments to reduce poverty and increase the welfare of their citizens. Start-ups also create efficiency through e-commerce, helping local products to become more competitive in both local and global markets. By collaborating with governments, scalable start-ups can foster technological developments and become strategic partners of larger corporations. Start-ups can even increase people’s welfare by providing solutions to environmental issues that are a consequence of substantial development in emerging economies.</p> Donny Susilo Copyright (c) 2020 Applied Economics Journal 2020-09-12 2020-09-12 27 2 145 163