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on Financial Development and Growth |
| By: | David Rosnick |
| Abstract: | This issue brief examines the International Monetary Fund's (IMF's) economic growth projections for Latin America and the Caribbean through 2014. It finds that for some countries – most notably Venezuela and Argentina – the IMF’s projections inexplicably portend a prolonged negative impact of the current world recession, even as countries harder-hit by the downturn, such as Mexico, recover. In other cases, such as Haiti, the IMF projects a surprisingly big growth spurt. |
| JEL: | F F33 F34 F37 O O5 O54 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:epo:papers:2009-16&r=fdg |
| By: | Nganou, Jean-Pascal; Wodon, Quentin; Zoyem, Jean-Paul; Mabushi, Eric; Kebede, Ephrain |
| Abstract: | Due in part to 40 years of cyclical violence, economic growth in Burundi has remained well below the sub-Saharan Africa average, and Burundi is now the third poorest country in the world. The status quo is unacceptable, and it is essential that the Government drive the changes needed to achieve sustainable growth. This chapter provides an overview of past and current macroeconomic trends and describes how the poverty profile could influence policy reforms. |
| Keywords: | Burundi; growth; poverty |
| JEL: | O4 I32 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15409&r=fdg |
| By: | Juan Carlos Echeverry |
| Abstract: | Colombia is an interesting case study within emerging countries. Through 150 years of democratic tradition and seven decades of sound fiscal and monetary policies, the country has displayed institutional strength and economic growth, in spite of strong external shocks, rent- seeking by sectoral business confederations, and, recently, narco-traffickers and guerrillas. Reforms made during the nineties, just as in other Latin American nations, did not result in the expected take-off in growth. In Colombia, the reason lies partly in the consequences of discovering considerable oil reserves, the escalation of the internal conflict, the fiscal consequences of the 1991 Constitution and huge fiscal commitments related to pensions and social expenditure. In the current decade Colombia has made vast progress in invigorating the sources of economic growth, improving welfare of the poorest strata of population and reinstating the rule of law across the country. The current international crisis poses a considerable challenge in terms of growth and threatens social advancement achieved so far. |
| Date: | 2009–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:005541&r=fdg |
| By: | Nganou, Jean-Pascal; Wodon, Quentin; Zoyem, Jean-Paul; Mabushi, Eric; Kebede, Ephraim |
| Abstract: | Due in part to 40 years of cyclical violence, economic growth in Burundi has remained well below the sub-Saharan Africa average, and Burundi is now the third poorest country in the world. The status quo is unacceptable, and it is essential that the Government drive the changes needed to achieve sustainable growth. This chapter provides an overview of past and current macroeconomic trends and describes how the poverty profile could influence policy reforms. |
| Keywords: | Burundi; growth; poverty |
| JEL: | O4 I32 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15408&r=fdg |
| By: | Willenbockel, Dirk; Robinson, Sherman |
| Abstract: | Changes in international trade flows and world prices are major channels through which the global financial crisis will hit developing countries. The recession in the ‘global North’ triggered by the financial crisis and the resulting slowdown of growth in China and other major emerging economies will generate declines in demand for exports from developing countries, along with a reversal of the beneficial terms-of-trade trends that have favoured net exporters of primary commodities over the last few years. How these trade shocks and terms-of-trade trends affect economic performance and welfare in low-income countries depends on country-specific characteristics and requires a differentiated analysis across countries. This study uses a multi-region computable general equilibrium (CGE) world trade model to gauge the impact of a slowdown in economic activity in the OECD on trade performance, world prices, and aggregate welfare in the rest of the world with a particular focus on the least developed countries (LDCs) in sub-Saharan Africa and Asia. The results of the simulation analysis indicate the degree of vulnerability of different developing countries and regions distinguished in the model to impacts arising from the recession via the trade channel. |
| Keywords: | Global financial crisis; terms of trade; recession |
| JEL: | C68 F17 F47 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15376&r=fdg |
| By: | Fuchun Li |
| Abstract: | The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the data. Simulation studies show that the test has reasonable size and good power to detect financial contagion, and that Forbes and Rigobon's test (2002) is conservative, suggesting that their test tends not to find evidence of contagion when it does exist. The author's new test is applied to investigate contagion from a variety of recent financial crises to the Canadian banking system. Three empirical results are obtained. First, compared to recent financial crises, including the 1987 U.S. stock market crash, 1994 Mexican peso crisis, and 1997 East Asian crisis, the ongoing 2007 subprime crisis has been having more persistent and stronger contagion impacts on the Canadian banking system. Second, the October 1997 East Asian crisis induced contagion in Asian countries, and it quickly spread to Latin American and G-7 countries. The contagion from the East Asian crisis to the Canadian banking system was not as strong or as persistent as that of the ongoing subprime crisis. However, it had a stronger impact on emerging markets. Third, there is no evidence of contagion from the 1994 Mexican peso crisis to the Canadian banking system. Contagion from that crisis occurred in Argentina, Brazil, and Chile, but the contagion effects of that crisis were limited to the Latin American region. |
| Keywords: | Financial stability; Central bank research; Econometric and statistical methods |
| JEL: | C12 G15 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:09-14&r=fdg |
| By: | Michael Clemens; Samuel Bazzi |
| Abstract: | Despite intense concern that many instrumental variables used in growth regressions may be weak, invalid, or both, top journals continue to publish studies of economic growth based on problematic instruments. Doing so risks pushing the entire literature closer to irrelevance. We illustrate hidden problems with identification in recent prominently published and widely cited growth studies using their original data. We urge researchers to take three steps to overcome the shortcomings: grounding research in somewhat more generalized theoretical models, deploying the latest methods to test sensitivity to violations of the exclusion restriction, and opening the “black box” of the Generalized Method of Moments (GMM) with supportive evidence of instrument strength. |
| Keywords: | IV, instrumental variables, , 2SLS, two-stage least squares, Generalized Method of Moments, GMM, Blundell-Bond, Arellano-Bond, exclusion restriction, economic growth, regression, weak instruments, valid instruments, overidentification, underidentification, identification problem, growth determinants, foreign aid, institutions, geography, legal origins, too many instruments. |
| JEL: | F35 C12 O4 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:171&r=fdg |
| By: | Beugelsdijk, S.; Smulders, J.A. (Tilburg University, Center for Economic Research) |
| Abstract: | In this paper we develop a formal model of economic growth and two types of social capital. Following extant literature, we model social capital as participation in two types of social networks: first, closed networks of family and friends, and, second, open networks that bridge different communities. Higher levels of social capital may crowd out economic growth through a reduction of working time. At the same time, participation in intercommunity networks reduces incentives for rent seeking and cheating, promoting economic growth. We test our hypotheses in a sample of European regions using unique data from the European Value Studies (EVS). Our findings show that it is important to distinguish between the nature of the social interaction. |
| Keywords: | social capital;economic growth;Europe;regions |
| JEL: | O40 R11 Z13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200927&r=fdg |
| By: | Girardin Eric |
| Abstract: | This paper reports the European experience with a basket currency, the ECU. The ECU was initially introduced as a reference unit and later became the anchor of the European Monetary System. Public policy was complemented by private sector initiatives and use of the ECU for denomination of financial instruments. In practice, it turned out that a basket currency entails considerable unexpected technical complexities. There are no iron-clad economic principles and therefore there is some room for political considerations. In Europe three criteria were used for determining the weights: GDP shares, international trade shares, and financial market indicators. In addition, weights will change with exchange rate movements. Appreciating currencies will experience increasing weights and depreciating currencies decreasing weights. This may require a correction mechanism for political acceptability. In Europe, weights were rescaled by political authorities every five years. From an economic view point, weights depend critically on the purpose of the basket currency: is it a reference indicator, is it a currency for international transactions, or is it a parallel currency? Thus, before weights are to be discussed a clear vision of the role of the basket currency would be desirable. The vastly different growth performance among Asian economies also suggests a preference to forward rather than backward-looking measure. Turning then to the different functions of a basket currency, the use of basket currencies as a divergence indicator, or as a financial instrument in regional financial markets before elaborating a road map for the development of a basket currency in Asia is examined.[ DP 116] |
| Keywords: | Currency; Fixed Currency Unit; Monetary Unit; Basket Currency; Fixed Exchange Rate; Asian Currency Unit; European Currency Unit; Parallel Currency; Hard Currency Unit; Divergence Indicator; Short Maturities; Long Maturities; Cost-Benefit Analysis; Zero-Sum Game |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:1972&r=fdg |
| By: | Ravindra H Dholakia |
| Abstract: | Gujarat, West Bengal, Karnataka, Maharashtra, Kerala and Tamil Nadu were the major contributors to the growth acceleration in India after 1991-92. Although the Regional Disparity may increase temporarily, causality test provides support to the hypothesis about spread effects. The Regional growth targets assigned by the 11th Plan in India seem to rely on the spread effects of economic growth acceleration in the better off states to achieve its 9 percent growth target and reduce regional disparity in the long run. To strengthen spread effects, the domestic economy should be further integrated and interlinked with free flow of goods, services and factors of production. [W.P. No. 2009-03-06] |
| Keywords: | Growth Acceleration; Annualised Growth Rates; Growth Among Regions; Granger-Causality; Wald test; Regional Growth Targets; Policy Implications |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:1982&r=fdg |
| By: | Sadraoui Tarek (LORIA - ABC (Apprentissage et Biologie Computationnelle) - CNRS : UMR7503 - INRIA - Université Henri Poincaré - Nancy I - Université Nancy II - Institut National Polytechnique de Lorraine); Naceur Ben Zina (LORIA - ABC (Apprentissage et Biologie Computationnelle) - CNRS : UMR7503 - INRIA - Université Henri Poincaré - Nancy I - Université Nancy II - Institut National Polytechnique de Lorraine) |
| Abstract: | This paper investigates the relationship between private and public investment in R&D, while taking into account the effect of several instruments policies such as subsidies and taxes. We design a new look of knowledge spillovers and R&D cooperation to explain the contribution of public and private R&D on growth. We propose a heterogeneous dynamic panel data model to consider the endogenous effect of R&D investment. We also distinguish between the estimated long and short run results. Our results based on a sample of 23 countries over the period 1992-2004 indicate that both public and private investments in R&D are complementary. By establishing an endogenous growth model, the estimates indicate that public and private R&D depends on the host country's human capital investment. Results indicate that foreign direct investment is a more significant spillover channel than imports. |
| Keywords: | R&D investment; Technology Spillovers; Complementarities; Economic growth; Dynamic Panel Data; Cointegration; Unit root test; Private investment; Public investment; R&D cooperation |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00388525_v1&r=fdg |
| By: | Redding, Stephen J |
| Abstract: | Although a rich and extensive body of theoretical research on new economic geography has emerged, empirical research remains comparatively less well developed. This paper reviews the existing empirical literature on the predictions of new economic geography models for the distribution of income and production across space. The discussion highlights connections with other research in regional and urban economics, identification issues, potential alternative explanations and possible areas for further research. |
| Keywords: | Industrial Location; Market Access; Multiple Equilibria; New Economic Geography |
| JEL: | F12 F14 O10 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7307&r=fdg |
| By: | Commendatore, Pasquale; Panico, Carlo; Pinto, Antonio |
| Abstract: | This paper deals with the influence of different types of government expenditure on growth. It widens that proposed by the literature which follows the lines set by Barro (1990) because it adds the changes working through the demand side, generated by the variations in the distribution of the net income of the economy, to those working through the supply side, generated by the variations in factor productivity. The analysis considers a government sector with a balanced budget and an autonomous and nonlinear investment function, interpreted along a Kaleckian and a Classical-Harrodian line. It shows under which conditions different types of government expenditure are beneficial or detrimental for economic growth, comparing some results with those reached by Barro (1990) and points out the emergence of phenomena like multiple equilibria, hysteresis and low growth traps. |
| Keywords: | Distribution; Growth; Government expenditure; post-Keynesian theory; Nonlinearity |
| JEL: | E62 E12 E25 O41 |
| Date: | 2009–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:15364&r=fdg |