Volume 24, Issue 2 (2024)                   QJER 2024, 24(2): 143-173 | Back to browse issues page

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Hossaini S, Ghaderi S, Mozaffari Z, Amani R. COVID-19 and Economic Vulnerability in Countries with Different Income Levels A Panel Smooth Transition Regression Approach. QJER 2024; 24 (2) : 6
URL: http://ecor.modares.ac.ir/article-18-70497-en.html
1- M.Sc. in Economics, Department of Economics, Faculty of Humanities and Social Sciences, University of Kurdistan, Iran
2- Assistant Professor, Department of Economics, Faculty of Humanities and Social Sciences, University of Kurdistan, Iran , s.ghaderi@uok.ac.ir
3- Assistant Professor, Department of Economics, Faculty of Humanities and Social Sciences, University of Kurdistan, Iran
4- Department of Economic Development and Planning, Faculty of Management and Economics, University of Tarbiat Modares, Tehran, Iran
Abstract:   (934 Views)
Introduction
The Covid-19 pandemic, as one of the recent world crises, has brought costs to the economies, which has drawn the attention of researchers and politicians to the concept of economic vulnerability in the form of a warning index to evaluate this external shock. The main aim of this study is to investigate the impact of the COVID-19 pandemic on economic vulnerability in high, medium, and low-income levels countries. This study was conducted for 150 countries using the Panel Smooth Transition Regression (PSTR) approach over 2020-2021. In this regard, the Briguglio method was used to calculate the Economic Vulnerability Index. The results of this research indicate that the COVID-19 pandemic has had a positive and significant effect on the economic vulnerability of countries. The linear test results confirm the non-linear relationship between the variables. Moreover, by considering a transfer function with a threshold parameter (the level of COVID-19 morbidity and mortality), a two-regime model is presented to specify the non-linear relationship between the pattern variables for three groups of high, medium, and low-income countries. The slope parameter (transfer rate) for these three groups of countries is 5.9876, 6.1569, and 3.9987, respectively. The model estimation results show that in both linear and non-linear regimes, COVID-19 has a positive impact on the economic vulnerability of countries with high, medium, and low incomes, meaning that an increase in the COVID-19 pandemic has led to a decrease in the economic vulnerability of these groups of countries.

Methodology
Through extensive research and data collection, a sample of 150 countries for the period 2020-2021 has been selected. The primary criterion for selecting countries and the period is the availability of data. The research database includes sources such as the World Bank, the International Monetary Fund, and the United Nations Development Organization. The dependent variables in this study are the Vulnerability Index. The Vulnerability Index is constructed based on the Briguglio method using four components: 1) Trade openness 2) Export concentration 3) Dependency on strategic imports, and 4) Exposure to natural disasters. Other variables included in the model are the number of COVID-19 deaths, per capita gross domestic product (GDP), foreign direct investment, and remittances as a percentage of GDP, which have been collected from the World Bank and other reliable sources. This study used Panel Smooth Transition Regression (PSTR) approach. PSTR is a statistical model that is commonly used to analyze the non-linear relationships between economic variables. This model is particularly useful for investigating the behavior of variables that exhibit non-linear patterns or changes in their behavior over time. PSTR is a flexible model that can be used to capture the complex relationships between different variables, making it a popular choice in various fields, such as economics, finance, and social sciences. The PSTR model is an extension of the Smooth Transition Regression (STR) model, which is a non-linear regression model that allows for the specification of the transition function between two different regimes. In the PSTR model, the transition function is extended to include panel data, which allows for the analysis of the non-linear relationships between variables across multiple units, such as countries or firms, over time. PSTR is a powerful tool for analyzing the impact of various economic factors on different regions or countries. For example, it can be used to investigate whether the impact of a particular economic policy or event is uniform across different countries or regions, or whether it varies depending on the level of economic development or other relevant factors. Additionally, PSTR can be applied to different types of data, including cross-sectional, time series, and panel data, making it a versatile tool for analyzing a wide range of economic phenomena.
Results and Discussion
the vulnerability model indicates that the slope parameter, which represents the speed of transition from one regime to another, is equal to 1191.414, and the regime change location is 435.6, with the logarithm of its anti-value being 2213094. Therefore, as long as the COVID-19 pandemic (mortality) value is less than the anti-logarithm values, the variables will behave according to the first regime. If the value of the COVID-19 pandemic exceeds the anti-logarithm values, the variables will follow the second regime. Based on the results of the two regimes, it is evident that the COVID-19 pandemic variable has had a positive and significant impact, both linear and nonlinear on countries. This means that the increase in the COVID-19 pandemic has led to an increase in the economic vulnerability of countries. In other studies, such as Brzyska & Szamrej (2021), Marti (2021), and Puertas, it has been demonstrated that the COVID-19 pandemic has had a positive and significant effect on the vulnerability of countries in the European Union, which mostly includes high-income countries.
Conclusion
This paper examines the impact of the COVID-19 pandemic on economic vulnerability in 150 countries during 2020-2021. The results obtained from the Panel Smooth Transition Regression (PSTR) model confirm a nonlinear relationship between the variables and the presence of two threshold regimes with a threshold for economic vulnerability and model. It also indicates that the COVID-19 pandemic has a positive effect on vulnerability. This means that an increase in the COVID-19 pandemic has led to an increase in vulnerability and a decrease in economic resilience in these countries.
Article number: 6
Full-Text [PDF 1437 kb]   (500 Downloads)    
Article Type: Original Research | Subject: Health, Education, and Welfare
Received: 2023/07/13 | Accepted: 2023/08/4 | Published: 2024/05/20

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