|
on Financial Development and Growth |
| By: | Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn) |
| Abstract: | This contribution investigates the direct and indirect causal interactions between financial deepening, trade openness and economic growth for 13 Latin American and Caribbean countries. Using a rather general approach to identify indicators for financial deepening and to detect Granger causality within a VAR/VECM framework, we find almost no evidence for the popular hypothesis of finance-led growth. Evidence of bidirectional finance-growth causality is stronger but mostly unstable in the long run. Most results indicate a demand-following or insignificant relationship between finance and growth in Latin America. This finding seems to be consistent with regard to the weakness and deficiencies of the region's financial systems. Further, there is no evidence that finance indirectly and unilaterally induces growth via the channel of trade openness. Thus, policies that prioritize financial and trade liberalization cannot be supported by this study. Instead, a holistic policy approach seems to be preferable that promotes the determinants of both real sector growth and financial development. As a result, financial factors may positively and significantly contribute to economic development in the region. |
| Keywords: | Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Latin America and Caribbean |
| JEL: | C32 O16 O55 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:wpaper:17&r=fdg |
| By: | Thomas Gries (University of Paderborn); Manfred Kraft (University of Paderborn); Daniel Meierrieks (University of Paderborn) |
| Abstract: | This contribution tests for causality between financial deepening, trade openness and economic development for 16 Sub-Saharan African countries. An advanced econometric methodology is used to add to existing empirical evidence. Only limited support is found for finance promoting regional development. In particular, support for the popular hypothesis of finance-led growth is not substantial. In general, it is found that financial deepening and trade openness have swayed regional development only marginally. Thus, development strategies prioritizing financial sector or trade liberalization cannot be supported. Instead, a holistic policy approach taking into account other fundamental development factors is advocated. |
| Keywords: | Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Sub- Saharan Africa |
| JEL: | C32 O16 O55 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:pdn:wpaper:15&r=fdg |
| By: | André Farber (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.); Nguyen Huu Tu (The Bureau of the Central Committee of the Communist Party of Vietnam); Tran Tri Dung (InvestVietnam Corp., Vietnam); Quan-Hoang Vuong (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles, Brussels.) |
| Abstract: | This study focuses on those substantial changes that characterize the shift of Vietnam’s macroeconomic structures and evolution of micro-structural interaction over an important period of 1991-2008. The results show that these events are completely distinct in terms of (i) Economic nature; (ii) Scale and depth of changes; (iii) Start and end results; and, (iv) Requirement for macroeconomic decisions. The study rejected a suspicion of similarity between the contagion of the Asian financial crisis in 1997-98 and economic chaos in the first half of 2008 (starting from late 2007). The depth, economic settings of, and interconnection between macro choices and micro decisions have all grown up significantly, partly due to a much deeper level of integration of Vietnam into the world’s economy. On the one hand, this phenomenon gives rise to efficiency of macro level policies because the consideration of micro-structural factors within the framework has definitely become increasingly critical. On the other and, this is a unique opportunity for the macroeconomic mechanism of Vietnam to improve vastly, given the context in which the national economy entered an everchanging period under pressures of globalization and re-integration. The authors hope to also open up paths for further empirical verifications and to stress on the fact that macro policies will have, from now on, to be decided in line with changing micro-settings, which specify a market economy and decide the degree of success of any macroeconomic choices. |
| Keywords: | Financial system; inflation; economic growth; interest rate; exchange rate; FDI; FPI; banking sector; stock markets; monetary and fiscal policy; Vietnam. |
| JEL: | G10 G18 E22 E31 E44 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:08-023&r=fdg |