A Study of Economic Resistance to Business Environment: A Comparative Study of the Scandinavian and MENA Countries

اقتصاد و توسعه منطقه ای

Article 5, Volume 26, Issue 18, June 2020, Pages 109-136   

Document Type: Research article

DOI: 10.22067/erd.v26i18.74595

Authors

vahid arshadi^{* 1}; hossein amiri²; maasumeh barani³

¹Assistant Professor of Economics Department of Islamic Economics, Research Center of Islamic Studies in the Humanities Ferdowsi University of Mashhad (FUM)

²Assistant Professor, Department of Islamic Economics and Banking, Kharazmi University

³Phd Student of Economics in Razi University

Abstract

 
Introduction
Considering the harmful and destabilizing effects of crises and shocks on the business environment, in this study, using panel models and using the annual data of the Scandinavian and MENA countries for the period 2016-2010, the effect of economic resistance indices along with other macroeconomic variables on the business environment index is examined. By implementing strategies to maximize their country's resistance to shocks, they strive to provide the path and pattern of sustainable economic growth and development with the least strain.
Theoretical Foundations
In the 1990s, the importance of "business environment" as a link between micro and macroeconomics space was raised in economic literature. The Index of Improvement or Ease of Business environment, due to the nature of its formation, has a new and unique approach that has been put on the World Bank's agenda since 2003 under the title of ease of doing business index. De Soto (2000) has been involved in designing the concept of the business environment and policymaking to remove barriers in the way of the private sector as the main strategy of economic development above all economists. The business environment is an influencing factor on the performance of firms that managers or owners of firms strive to improve.
 
 
Review of literature
Economic resistance including economic growth and improvement of the business environment is a topic that has been studied in recent years, on both national and international levels. This section discusses some of these studies.
In a paper using a computable general equilibrium model, Rose (2004), studied the economic resistance of water in Portland, ​​Oregon against simulated earthquakes with a default of 6.1 Richter and water cut-off for 3 to 9 weeks before and after the study period. The existence of a price mechanism under critical circumstances can increase economic resilience.
Briguglio et al. (2008) in a study using a systematic model and a composite index analyzed economic resilience and economic vulnerability of 86 countries to the financial crisis in the period of 2001-2003. Based on the two components of intrinsic vulnerability and level of resilience, countries are divided into four categories: 1- worst (high intrinsic vulnerability and low resilience) 2- best (low intrinsic vulnerability and high resilience). 3- self-made (high intrinsic vulnerability and high resilience) and 4- spoiled boy (low intrinsic vulnerability and low resilience). Pakistan and Bangladesh have low vulnerability and resilience. Costa Rica, Estonia, Malaysia, and China are self-made. Developed countries such as Australia, Canada, France, Japan, and Germany have a low intrinsic vulnerability and high resilience (best).
Methodology and results
This study examines the impact of economic resistance on the business environment for the two groups of MENA and Scandinavia over the period 2010-2016 using a panel data model with the software Eviews8. To this end, we first introduce the panel data model. Panel data is a dataset that observes observations by a number of cross-sectional variables (i) over a given time period (t).
In this study, after performing the Unit Root Test and other tests, the model of self-explanation with wide interval (ARDL) and estimation of short-term and long-term coefficients using the integrated group method (PMG) has been used.
Conclusion and suggestions
The present study examines the impact of economic resistance on the business environment based on Briguglio et al. (2008)'s model of economic resilience using a panel data model for Scandinavian and Mina countries during 2016–2010.
The results of this study showed that both groups of Scandinavian and MENA economic resilience index have a positive and significant effect on the business environment index. In Scandinavia and MENA, GFCF and Inflation Rate (IF) have a positive and significant effect on the business index. Foreign Investment (FDI) and Per capita Production (IG) have a positive and significant effect on MENA. But for the Scandinavian countries, it has no significant effect on the business index (DB).
According to the results of research in the countries under study, it is necessary to consider the following to improve the business environment, especially for productive economic sectors (industrial and agricultural):
Improving the resilience of the national economy by improving the efficiency of the government's financial system and monetary system;
Applying the component of economic resistance, extroversion approach by increasing the diversity of export goods and trade parties of the target countries; Reducing government deficit by less harmful methods
The focus of creating productive employment in economic programs;
Taxation of large incomes of unproductive sectors;
Lack of reliance on exogenous variables to provide national resources such as oil revenues;
Proper use of domestic financial capital by improving the business environment;

Keywords

Economic Resistance; Business Space; Panel Data

References

 

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