nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2008‒09‒20
three papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Financial Development and Growth: A Re-Examination using a Panel Granger Causality Test By Christophe Hurlin; Baptiste Venet
  2. Financial Structure and Corporate Growth: Evidence from Italian Panel Data By Silvia Giannangeli; Giorgio Fagiolo; Massimo Molinari
  3. Exploiting Non-Linearities in GDP Growth for Forecasting and Anticipating Regime Changes By David N. DeJong; Hariharan Dharmarajan; Roman Liesenfeld; Jean-Francois Richard

  1. By: Christophe Hurlin (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans); Baptiste Venet (Leda - Laboratoire d'Economie de Dauphine - Université Paris Dauphine - Paris IX)
    Abstract: In this paper we investigate the causal relationship between financial development and economic growth. We use an innovative econometric method which is based on a panel test of the Granger non causality hypothesis. We implement various tests with a sample of 63 industrial and developing countries over the 1960-1995 and 1960-2000 periods. We use three standard indicators of financial development. The results provide support for a robust causality relationship from economic growth to the financial development. On the contrary, the non causality hypothesis from financial development indicators to economic growth can not be rejected in most of the cases. However, these results only imply that, if such a relationship exists, it can not be easily identified in a simply bi-variate Granger causality test.
    Keywords: Granger Causality Tests; Panel Data; Financial Development; Economic Growth
    Date: 2008–09
  2. By: Silvia Giannangeli; Giorgio Fagiolo; Massimo Molinari
    Abstract: We study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). We expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to expand, but rather to increase debt. We also find that firm growth is highly fragile as it is positively correlated with non-financial liabilities and it is not sustained by a long-term debt maturity. Finally, quantile regressions suggest that fast-growing firms are characterized by higher growth/cash-flow sensitivities and heavily rely on external debt, but seem to be less bank-backed than the rest of the sample. Overall, our findings suggest that the link between firms’ investment and expansion decisions is far more complicated than postulated by standard tests of investment/cash-flow sensitivities.
    Keywords: Firm growth; Financial structure; Cash flow; Financial constraints; Gibrat law; Quantile regressions
    Date: 2008–09–11
  3. By: David N. DeJong; Hariharan Dharmarajan; Roman Liesenfeld; Jean-Francois Richard
    Abstract: . . .
    Date: 2008–09

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