nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2009‒03‒07
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Finance and Growth: The Role of Islamic Contracts By Ismail, Abdul Ghafar; Tohirin, Achmad
  2. Local financial development and growth By Kendall, Jake
  3. Lasting Bang for the Stimulus Buck: Priorities for the 2009 Federal Budget By William B.P. Robson; Alexandre Laurin; Finn Poschmann
  4. Out on a Limb: Assessing the Fiscal Sustainability and Effectiveness of the 2009 Federal Budget By Alexandre Laurin; Colin Busby; Benjamin Dachis
  5. Financial Dollarization: Short-Run Determinants in Transition Economies By M. Emranul Haque; Kyriakos C. Neanidis
  6. Endogenous Growth, Backstop Technology Adoption and Optimal Jumps By Simone Valente
  7. Does Information and Communication Technologies Sustain Economic Growth? The Underdeveloped and Developing Countries Case By Burcu Türkcan; Erkan Erdil; Ý. Hakan Yetkiner
  8. Low fertility and long run growth in an economy with a large public sector By Zamac, Jovan; Hallberg, Daniel; Lindh, Thomas

  1. By: Ismail, Abdul Ghafar; Tohirin, Achmad
    Abstract: Although, Islamic law has been in existence for more than fourteen hundred years, but its implementation have been subjected to the willingness of the rulers in the passage of history and civilization. Although, the study on financial contracts has been extensively reviewed, the role of Islamic contracts is not highlighted, except those in the historical institutional and contract theory literatures. The study that link finance and growth takes many dimensions. One of the dimensions is law and finance view. In the beginning, the studies that link the former only look at the finance variables and economic variables. Further development analyses the relationship at the system level, i.e. discussion whether bank-based vs. market-based matters on growth. Islamic finance comes up with its distinctive contracts and products of profit-loss sharing. It may give different character and notion in the financial system in particular and in the economic system in general. This paper is aimed at discussing Islamic laws which are relevant to finance. Most importantly the aspect of contracts as foundation for the distinctive Islamic financial products, i.e. the one resembling profit-loss sharing nature containing cooperative spirit, will be analysed to establish a strong connection with financial stability as pre-requisite to achieve the economic growth.
    Keywords: Islamic law; finance; profit-loss sharing
    JEL: K2 G2 K4
    Date: 2009–02
  2. By: Kendall, Jake
    Abstract: Using a unique sample of net domestic product data for districts in India, I investigate the connection between banking sector development, human capital, and economic growth at the sub-national level. Using disaggregate data avoids many of the omitted variable problems that plague cross-country studies of the finance-growth connection and facilitates an instrumentation strategy. The findings show that the growth of many districts in India is financially constrained due to lack of banking sector development, and that the relationship between finance and growth may be non-linear. For the districts in the sample, moving from the 75th percentile of credit/net domestic product to the 25th percentile implies an average loss of 4 percent in growth over the 1990s. This indicates that the gains from increased banking sector outreach may be large. The analysis shows that human capital deepening can reduce the effect of the financial constraint and help decouple growth from financial development. In a district at the 25th literacy percentile, the implied growth loss due to a constrained banking sector is twice as large as in a district at the 75th literacy percentile. Thus, higher levels of human capital may activate alternative growth and production channels that are less finance intensive.
    Keywords: Banks&Banking Reform,Access to Finance,,Economic Theory&Research,Debt Markets
    Date: 2009–02–01
  3. By: William B.P. Robson (C.D. Howe Institute); Alexandre Laurin (C.D. Howe Institute); Finn Poschmann (C.D. Howe Institute)
    Abstract: Unusual economic and political circumstances surround the framing of the 2009 federal budget. A period of global spending outrunning productive capacity has ended with financial crisis and recession in much of the world, Canada included. The sudden slump has prompted demand for, and expectations of, fiscal action.
    Keywords: fiscal policy, Canadian government budget
    JEL: E62 E61 E66
    Date: 2009–01
  4. By: Alexandre Laurin (C.D. Howe Institute); Colin Busby (C.D. Howe Institute); Benjamin Dachis (C.D. Howe Institute)
    Abstract: The 2009 federal budget proposed a $40 billion economic stimulus package spanning two years and projecting a return to balanced budgets within five. The projected quick recovery of federal finances relies primarily on aggressive assumptions about future interest rates, growth of program expenditures and effectiveness of the economic stimulus plan.
    Keywords: fiscal policy, Canadian Federal budget
    JEL: E62 E63
    Date: 2009–01
  5. By: M. Emranul Haque; Kyriakos C. Neanidis
    Abstract: This paper tests the proposition that fiscal transparency, measured by a newly constructed data on budget openness, can be a powerful control on corruption. This result is robust to the choice of index of corruption, conditioning variables, country sample, exclusion of outliers, and the use of different instrumentation and estimation techniques.
    Date: 2009
  6. By: Simone Valente (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We study a two-phase endogenous growth model in which the adoption of a backstop technology (e.g. solar) yields a sustained supply of essential energy inputs previously obtained from exhaustible resources (e.g. oil). Growth is knowledge-driven and the optimal timing of technology switching is determined by welfare maximization. The optimal path exhibits discrete jumps in endogenous variables: technology switching implies sudden reductions in consumption and output, an increase in the growth rate, and instantaneous adjustments in saving rates. Due to the positive growth e¤ect, it is optimal to implement the new technology when its current consumption bene.ts are substantially lower than those generated by old technologies.
    Keywords: Backstop technology, Discrete jumps, Endogenous growth, Exhaustible resources, Optimal Control
    JEL: O33 Q32 Q43
    Date: 2009–02
  7. By: Burcu Türkcan (Department of Economics, Ege University); Erkan Erdil (Department of Economics, Middle East Technical University); Ý. Hakan Yetkiner (Department of Economics, Izmir University of Economics)
    Abstract: This paper tests the impact of ICT on economic growth for underdeveloped and developing countries by using a panel dataset for the period of 1995-2006. We first develop the theory between ICT and economic growth. We show that ICT capital has a positive effect both on long-run and transitional income per capita, if it is considered as a factor of production. Next, we estimate a panel data set with 131 underdeveloped and developing countries under the assumption that ICT is one of the determining factors of economic growth. We find that ICT has positive and significant effect on economic growth even after the use of some control variables.
    Keywords: ICT, economic growth, Panel Data, GMM, human capital, developing countries, underdeveloped countries
    JEL: C33 O5 O33
    Date: 2009–01
  8. By: Zamac, Jovan (Institute for Future Studies); Hallberg, Daniel (Institute for Future Studies); Lindh, Thomas (Centre for Labour Market Policy Research (CAFO))
    Abstract: Recently it has been suggested that low fertility countries may be caught in a trap that is hard to get out of. One important mechanism in such a trap would be social interaction and its effect on the ideal family size. Such social interaction mechanisms are hard to capture in formal models, therefore we use an agent based simulation model to investigate the issue. In our experimental setup a stable growth and population path is calibrated to Swedish data and using the Swedish social policy setup. The model is provoked into a fertility trap by increasing relative child costs linked to positive growth. Even rather large increases in child benefits are then insufficient to get out of the trap. However, the small number of children temporarily enables the economy to grow faster for several decades. Removing the adaptation of social norms turns out to disarm the trap.
    Keywords: Low fertility trap; Social norms relative income; Economic growth
    JEL: J13 O40
    Date: 2008–12–07

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