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on Financial Development and Growth |
| By: | Ben Fredj, Imene; Schalck, Christophe |
| Abstract: | The relationship between financial development and economic growth were the subject of many recent theorical and empirical works [Shepherd, Hasan and Klapper, 2004; Gylfason, 2004; Rioja and Valev, 2003; Driffill, 2004; Haas, 2002; Carlin and Mayer, 2000]. These authors generally focused their analysis of the link finance- growth on the mature financial systems. As the Tunisian economy knew a long period of financial repression before starting the phases of liberalization, it would be more judicious to start by McKinnon and Shaw’s theory of “financial deepening” (1973) to then determinate the impact of Tunisian financial system development on economic growth. Indeed, McKinnon and Shaw were the first authors to analyze positive effects of financial liberalization policy on economic performance of less developed countries. To check the relevance of this assumption in Tunisian’s context, we built a model inspired of the model of King and Levine (1993) who by measuring instruments of economic and financial development appears good indicators of Tunisian economy’s financiarisation. The results of the empirical study on Tunisia stemming from causality tests within B-VAR framework nuance McKinnon and Shaw’s theorical contribution. Reciprocal relationships are only finding between the ratio of investment on the GDP and the loans granted to private and public sectors. The economic role of State is highlighted, over the period of pre-reforms as well as during the recent time. |
| Keywords: | financial repression; financial deepening; economic development; finance and growth; B-VAR |
| JEL: | O16 E44 G21 |
| Date: | 2004–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:1436&r=fdg |
| By: | Khemraj, Tarron |
| Abstract: | Despite deep financial reforms, sustained economic growth in Guyana is not forthcoming. The non-competitive nature of the commercial banking sector is proposed as the primary explanation. Non-regulated oligopoly banks will demand mainly excess liquidity, foreign assets, and a diminishing percentage of growth-augmenting investment loans. A monetary growth model is developed to formalize the analysis. The model predicts that a typical financial liberalization program will not engender positive growth if the rates of growth of excess liquidity and foreign assets in bank portfolios exceed the rate of growth of broad money supply. The model also predicts that indirect monetary policy will find it difficult to stimulate growth when the banking system is non-competitive. Therefore, the effect of money on real output can be neutral because of the investment choices of non-competitive banks. |
| Keywords: | financial liberalization; economic growth; oligopoly banking; indirect monetary policy |
| JEL: | O11 E5 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:1497&r=fdg |
| By: | Bertocco Giancarlo (Department of Economics, University of Insubria, Italy) |
| Abstract: | In recent years numerous studies have been published highlighting the role of financial structures in the development process of contemporary economies.1 These works represent a break with a widely-held theoretical view holding that income, wealth and economic growth are independent of the monetary and financial variables, and which thus considers money and the financial structure as neutral variables.2 In these recent studies there is always a reference to the pioneering work of Schumpeter; in many cases it is just a superficial mention, in other ones and in particular in the writings of Rajan and Zingales (2003a, 2003b, 2003c), important elements of Schumpeter’s theoretical framework are used. Hence, these works afford us an interesting opportunity to re-evaluate the importance of Schumpeter’s contribution.3 The thesis put forward in this paper is that while they do indeed highlight important elements of Schumpeter’s theory, Rajan and Zingales do not take the implications thereof into account and, furthermore, they neglect certain fundamental aspects of the Schumpeterian analysis that are closely connected with the parts that they consider. This renders their work incomplete, and prevents their analysis from achieving the coherence of Schumpeter’s theory. This paper is divided into two parts. In the first part, the most important points of the analysis of Rajan and Zingales are described; in the second part, the elements of Schumpeter’s theory that they overlook are pointed out, and it is shown that by using the Schumpeterian theoretical framework it is possible to analyse the relation between financial structure and economic system growth in a more coherent and in-depth way than the one used by Rajan and Zingales. |
| URL: | http://d.repec.org/n?u=RePEc:ins:quaeco:qf06011&r=fdg |