nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2009‒05‒09
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. The Analysis of ‘Leading Sectors’: A Long term view of 18 Latin American economies By Acevedo, Alejandra; Mold, Andrew; Perez Caldentey, Esteban
  2. FDI and Economic Growth in Malaysia By Karimi, Mohammad Sharif; Yusop, Zulkornain
  3. Determinants of the Long Run Growth Rate of Bangladesh: An ARDL Approach By Rao, B. Bhaskara; Hassan, Gazi
  4. Balanced growth and structural breaks: Evidence for Germany By Herzer, Dierk; Kemper, Niels; Zamparelli, Luca
  5. Stability under Learning: the Neo-Classical Growth Problem By Orlando Gomes
  6. From socialism to capitalism: 1989-2007 By Kitov, Ivan
  7. Collinearity in growth regressions: The example of worker remittances By Ziesemer, Thomas
  8. Economic Growth and Institutional Reform in Modern Monarchies and Republics: : A Historical Cross-Country Perspective 1820-2000 By Bjørnskov, Christian; Kurrild-Klitgaard, Peter

  1. By: Acevedo, Alejandra; Mold, Andrew; Perez Caldentey, Esteban
    Abstract: In the 1950s and 60s, in Latin America structuralism was considered as the preeminent form of analysis of economic development and growth. Nowadays, in contrast, as a mode of analysis structuralism is distinctly unfashionable, and has been superceded by newer endogenous growth theories, which build on earlier neoclassical contributions. Beyond broad endorsements of enhancing human capital, promoting infrastructure provision and the importance of sustaining investment levels, it is arguable whether endogenous growth theories been able to shed much light on the dynamics of growth. This paper revindicates the utility of structuralist analysis in the analysis of Latin American growth patterns. Through some simple empirical tests, it explores the relationship between economic growth and structural performance. Using as high a level of disaggregation as the data allows, we use dynamic panel data analysis together with a steady state model to calculate the elasticities of sectoral growth to overall output. The implications for resource allocation and policies to promote particular sectors are discussed.
    Keywords: Growth; Structural Change; Latin America; Kaldor Growth Laws; Economic Development
    JEL: B52 O40 O14
    Date: 2009–06
  2. By: Karimi, Mohammad Sharif; Yusop, Zulkornain
    Abstract: Abstract: This study examines the causal relationship between foreign direct investment and economic growth. Methodology is based on the Toda-Yamamoto test for causality relationship and the bounds testing (ARDL). Time-series data covering the period 1970-2005 for Malaysia, the study found, in the case of Malaysia there is no strong evidence of a bi-directional causality and long-run relationship between FDI and economic growth. This suggests that FDI has indirect effect on economic growth in Malaysia
    Keywords: Foreign direct investment; Toda-Yamamoto test; bounds testing (ARDL); economic growth. Malaysia
    JEL: C32 O10 F14 F21 F43
    Date: 2009–03–26
  3. By: Rao, B. Bhaskara; Hassan, Gazi
    Abstract: This short paper conducts growth accounting to estimate total factor productivity (TFP) for Bangladesh and analyses its key determinants. According to Solow (1956) the long run equilibrium growth rate equals TFP. Estimated show that trade openness, foreign direct investment and development of financial sector increase TFP. Inflation and government expenditure have negative effects on TFP.
    Keywords: Solow Model; Total Factor Productivity; Growth Accounting; Bangladesh
    JEL: O11 O10
    Date: 2009–05–02
  4. By: Herzer, Dierk; Kemper, Niels; Zamparelli, Luca
    Abstract: One of the central hypotheses of the neoclassical growth literature is the balanced- growth hypothesis, which predicts that output, consumption, and investment grow at the same rate. Empirically, this implies that the consumption-to-output ratio and the investment-to-output ratio must be stationary and that consumption and investment must be cointegrated with output. This paper tests these implications with respect to Germany, using unit root tests and cointegration techniques that allow for an endogenously determined structural break. We find that the long-run growth path of the German economy is consistent with the balanced-growth hypothesis if we allow for a structural break associated with the worldwide productivity slowdown of the early 1970s.
    Keywords: Balanced growth × Unit roots × Cointegration × Endogenous structural breaks
    JEL: C32 D91 E23
    Date: 2009–03
  5. By: Orlando Gomes (Instituto Politécnico de Lisboa - Escola Superior de Comunicação Social and UNIDE-ERC)
    Abstract: A local stability condition for the standard neo-classical Ramsey growth model is derived. The proposed setting is deterministic, defined in discrete time and expectations are formed through adaptive learning.
    Keywords: Neo-classical Growth, Adaptive Learning, Stability Analysis, Monetary Policy.
    JEL: O41 C62 D83
    Date: 2008–05
  6. By: Kitov, Ivan
    Abstract: The transition of former socialist countries to capitalist economic system is modelled for the period between 1989 and 2007. The transition is entirely defined by three empirical parameters and the model describes only the evolution of real GDP per capita since the start of the disintegration of socialism. It is found that the transition has practically finished in many Central and Eastern European countries and their economic evolution is driven by forces associated with capitalist system. In the long run, the future evolution of the former socialist countries has to follow the same path as observed in other developed countries in the past. Even in the case of perfect economic performance, the studied countries will never catch up the most advanced countries. In Russia and some countries of the Former Soviet Union, the transition process has not been completed.
    Keywords: socialism; capitalism; transition; economic modelling; GDP per capita
    JEL: P20 P10 O12
    Date: 2009–04–28
  7. By: Ziesemer, Thomas (UNU-MERIT, Maastricht University)
    Abstract: The sign of worker remittances in growth regressions is heavily disputed in the literature. Comparing two growth regressions with different signs for the remittance variable we show that collinearity with the lagged dependent variable might indicate that collinearity should be investigated comprehensively and might lead to a change in specifications which differ in the variance inflation factors (VIF). In our case the variance inflation factor for remittances depends on the use of a five or one-year lag of the lagged dependent. In the regression with a VIF below ten, the standard critical value, the sign of remittances is positive.
    Keywords: Growth, Remittances
    JEL: F24 O11 O15 O40
    Date: 2009
  8. By: Bjørnskov, Christian (Department of Economics, Aarhus School of Business); Kurrild-Klitgaard, Peter (Dept. of Political Science)
    Abstract: Standard theoretical arguments suggest that republics ought to grow faster than monarchies and experience lower transitional costs following reforms. We employ a panel of 27 countries observed from 18202000 to explore whether regime types and institutional reforms have differential growth effects in monarchies and republics. A set of Barrotype regressions show that there are no significant growth differences between the two regime types and that the effects of incremental reforms do not differ between them, but that those of largescale reforms do. Specifically, we find a strong “valleyoftears” effect of large reforms in republics while monarchies benefit from such reforms in the tenyear perspective adopted here. We offer some tentative thoughts on the underlying mechanisms responsible for the results.
    Keywords: Growth; Institution; Reform; Monarchy
    JEL: D72 N00 O10 P14 P16 P17 P48 P51
    Date: 2008–07–30

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