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on Financial Development and Growth |
| By: | Frimpong, Joseph Magnus; Oteng-Abayie, Eric Fosu |
| Abstract: | The main objective for this paper is to study the causal link between FDI and GDP growth for Ghana for the pre- and post-SAP periods. We also study the direction of causality between the two variables, based on the more robust Toda-Yamamoto (1995) Granger no-causality test which allows the Granger test in an integrated system. Annual time-series data covering the period 1970-2002 was used. The study finds no causality between FDI and growth for the total sample period and the pre-SAP period. FDI however caused GDP growth during the post-SAP period. |
| Keywords: | Ghana; FDI; seemingly unrelated regression; Granger causality; cointegration |
| JEL: | O49 C32 F39 |
| Date: | 2006–08–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:351&r=fdg |
| By: | Chih Ming Tan; Xiaobo Zhang; Andros Kourtellos |
| Abstract: | In this paper, we investigate the relationship between foreign aid and growth using recently developed sample splitting methods that allow us to uncover evidence for the existence of heterogeneity and nonlinearity simultaneously. We also implement a new methodology that allows us to deal with model uncertainty in the context of these methods. We find some evidence that aid may have heterogeneous effects on growth across two growth regimes defined by ethnic fractionalization. In particular, countries that belong to a growth regime characterized by levels of ethnic fractionalization above a threshold value experience a negative partial relationship between aid and growth, while those in the regime with ethnic fractionalization below the threshold experience no growth effects from aid at all. Nevertheless, there exists substantial model uncertainty so that attempts to pin down the typology of these growth regimes as being decisively characterized by ethnic fractionalization remain inconclusive. When we account for model uncertainty, we find no evidence to suggest that the relationship between aid and growth is nonlinear. Overall, our results suggest that the partial effect of aid on growth is very likely to be negative although we cannot reject the hypothesis that aid has no effect on growth. In this sense, our findings suggest that aid is potentially counterproductive to growth with outcomes not meeting the expectations of donors. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tuf:tuftec:0614&r=fdg |
| By: | Pesola , Jarmo (Bank of Finland Research) |
| Abstract: | The macroeconomic determinants of banking sector distresses in the Nordic countries, Belgium, Ger-many, Greece, Spain and the UK are analysed using an econometric model estimated on panel data from partly the early 1980s to 2002. The dependent variable is the ratio of banks’ loan losses to lending. In ad-dition to the lagged dependent variable, the explanatory variables include a surprise change in incomes and real interest rates, both variables as a separate cross-product term with lagged aggregate indebtedness. The underlying macroeconomic account that this paper puts forward is that loan losses are basically gen-erated by strong adverse aggregate shocks under high exposure of banks to such shocks. The underlying innovations to income and real interest rates are constructed using published macro-economic forecast for these variables. According to the results, high customer indebtedness combined with adverse macroeco-nomic surprise shocks to income and real interest rates contributed to the distress in banking sector. Loan losses also display strong autoregressive behaviour which might indicate a feedback effect from loan losses back to macroeconomic level in deep recessions. The results can be used in macro stress-testing the banking sector. |
| Keywords: | financial fragility; shock; loan loss; banking crisis |
| JEL: | E44 G21 |
| Date: | 2005–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2005_013&r=fdg |