nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2007‒10‒27
three papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Investigating output cycles under two alternative financial systems By Sharon Blei
  2. The Relationship between FDI and growth under economic integration: is there one? By Marasco, Antonio
  3. Foreign Direct Investment and Economic Growth: Empirical Evidence from Sectoral Data in Indonesia By Abdul Khaliq; Ilan Noy

  1. By: Sharon Blei
    Abstract: Different financial systems vary in the way they contribute to the process of resource allocation in the economy and in the risk-sharing pattern that they bring about. It would therefore be plausible to expect different financial systems to differ in the way they affect real economic activity. I hereby provide a theoretic framework for the comparison and analysis of output cycles under two alternative financial systems: an equity-based financial system (EFS), in which a mutual fund functions as a financial intermediary, versus a debt-based financial system (DFS), in which a bank plays that role. The research points that DFS generates larger output cycles and a higher expected output than EFS. The mechanism that generates these results is the counter-cyclical effect of savings' behavior under EFS.
    Keywords: Financial markets ; Financial services industry
    Date: 2007
  2. By: Marasco, Antonio
    Abstract: This study is a contribution to the debate on the relationship between FDI and growth. The idea that the alleged link between FDI and growth is rather the consequence of both FDI and growth responding endogenously to economic integration is tested empirically. The results confirm precisely this point: it is not FDI as such but economic integration, in any form or shape that determines growth.
    Keywords: FDI; Growth; Economic Integration;
    JEL: O50 F02
    Date: 2007–06
  3. By: Abdul Khaliq (Department of Economics, Andalas University, Indonesia); Ilan Noy (Department of Economics, University of Hawaii at Manoa)
    Abstract: The paper investigates the impact of foreign direct investment (FDI) on economic growth using detailed sectoral data for FDI inflows to Indonesia over the period 1997-2006. In the aggregate level, FDI is observed to have a positive effect on economic growth. However, when accounting for the different average growth performance across sectors, the beneficial impact of FDI is no longer apparent. When examining different impacts across sectors, estimation results show that the composition of FDI matters for its effect on economic growth with very few sectors showing positive impact of FDI and one sector even showing a robust negative impact of FDI inflows (mining and quarrying). The sectors examined are: farm food crops, livestock product, forestry, fishery, mining and quarrying, non-oil and gas industry, electricity, gas and water, construction, retail and wholesale trade, hotels and restaurant, transport and communications, and other private and services sectors.
    Keywords: Foreign direct investment, economic growth, Indonesia
    JEL: F21 F23
    Date: 2007–10–01

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