nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2008‒09‒29
four papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Financial Development and Economic Growth: A Panel Cointegration Analysis of Middle East Countries By Aslan, Alper
  2. Export Productivity, Finance, and Economic Growth: Are the Southern Engines of Growth Different? By Guariglia, Alessandra; Santos-Paulino, Amelia U.
  3. The Impact of Reform on Economic Growth in China: A Principal Component Analysis By Song, Ligang; Sheng, Yu
  4. Foreign Direct Investment, Domestic Investment, and Economic Growth in China: A Time Series Analysis By Tang, Sumei; Selvanathan, E.A.; Selvanathan, S.

  1. By: Aslan, Alper
    Abstract: In this paper the relationship between financial development and economic growth in Middle East countries as a group is examined via panel co-integration for a dynamic heterogeneous panel over the period 1990-2003. The results supported a positive and statistically significant equilibrium relation between financial development and economic growth for Middle East countries. In addition, control variables such as human capital, gross fixed capital, international trade and government spending on growth are found to be positive and statistically significant.
    Keywords: Financial Development; Growth; Panel Co-Integration
    JEL: O16
    Date: 2008
  2. By: Guariglia, Alessandra; Santos-Paulino, Amelia U.
    Abstract: Using a panel of 139 countries over the period 1992-2003, we analyse the links between export productivity, economic growth and financial development indicators. We then investigate whether the links observed in China, India and Brazil systematically differ from those observed in other countries in the sample. We find that both GDP per capita and investment generally exert a positive and significant effect on export productivity. Except for Brazil, financial development is not an important determinant of export productivity. Moreover, except for Brazil, export productivity plays a positive effect on growth, and so does financial development for both China and Brazil, but not for India. Finally, in both India and Brazil, FDI is negatively associated with growth
    Keywords: export productivity, financial development, FDI, growth
    Date: 2008
  3. By: Song, Ligang; Sheng, Yu
    Abstract: The study decomposes the sources of Chinese growth by first making a distinction between technological progress and technical efficiency in the growth accounting framework, and then identifying a series of reform programmes, such as urbanization, structural change, privatization, liberalization, banking and fiscal system reforms as the key components in institutional innovation which facilitate the improvement of technical efficiency and through which economic growth. These components are then incorporated into the model specification, which is estimated based on a panel dataset by applying the principal component analysis (PCA) to eliminate the multicollinearity problem. The results show that urbanization, liberalization and structural change in the form of industrialization are the most important components in contributing to the improvement of technical efficiency and hence growth, highlighting the importance of government policies aimed at enhancing further urbanization, openness to trade and industrial structural adjustments to sustain the growth momentum in China. The study also found that the potential for further enhancing growth through technical efficiency in China is considerable, which can be realized by deepening state-owned enterprises (SOEs) restructuring, and banking and fiscal system reform.
    Keywords: institutional reform, growth, technical efficiency, principal component analysis, stochastic frontier analysis
    Date: 2008
  4. By: Tang, Sumei; Selvanathan, E.A.; Selvanathan, S.
    Abstract: In this paper, we investigate the causal link between foreign direct investment (FDI), domestic investment and economic growth in China for the period 1988-2003. Towards this purpose, a multivariate VAR system with error correction model (ECM) and the innovation accounting (variance decomposition and impulse response function analysis) techniques are used. The results show that while there is a bi-directional causality between domestic investment and economic growth, there is only a single-directional causality from FDI to domestic investment and to economic growth. Rather than crowding out domestic investment, FDI is found to be complementary with domestic investment. Thus, FDI has not only assisted in overcoming shortage of capital, it has also stimulated economic growth through complementing domestic investment in China.
    Keywords: foreign direct investment, domestic investment, economic growth, multivariate VAR system, error correction model
    Date: 2008

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