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on Financial Development and Growth |
| By: | Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Neil Foster (The Vienna Institute for International Economic Studies, wiiw); Jesus Crespo-Cuaresma |
| Abstract: | We analyse the robustness of potential determinants of the differences in the long-run growth rate of GDP per capita across EU regions using quantile regression. We propose using Bayesian Model Averaging (BMA) methods on the class of quantile regression models in order to assess the set of relevant covariates in cross-regional growth regressions allowing for different effects across quantiles of the growth variable. The results indicate that the set of robust growth determinants differs across quantiles. The set of robust variables includes skill endowment and initial GDP per capita when not and physical investment when taking country fixed effects into account. However, even when a variable is found to be robust across quantiles the estimated impact on growth of that variable is often found to differ across the quantiles. |
| Keywords: | economic growth, Bayesian Model Averaging, quantile regressions, International Trade and Competitiveness, Services |
| JEL: | C11 C21 R11 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:wii:wpaper:54&r=fdg |
| By: | Schularick, Moritz; Taylor, Alan M. |
| Abstract: | The crisis of 2008-09 has focused attention on money and credit fluctuations, financial crises, and policy responses. In this paper we study the behavior of money, credit, and macroeconomic indicators over the long run based on a newly constructed historical dataset for 12 developed countries over the years 1870-2008, utilizing the data to study rare events associated with financial crisis episodes. We present new evidence that leverage in the financial sector has increased strongly in the second half of the twentieth century as shown by a decoupling of money and credit aggregates, and we also find a decline in safe assets on banks' balance sheets. We also show for the first time how monetary policy responses to financial crises have been more aggressive post-1945, but how despite these policies the output costs of crises have remained large. Importantly, we can also show that credit growth is a powerful predictor of financial crises, suggesting that such crises are |
| Keywords: | banking; central banking; financial stability; liquidity; monetary policy |
| JEL: | E44 E51 E58 G20 N10 N20 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7570&r=fdg |
| By: | Gavin C Reid; Zhibin Xu |
| Abstract: | This paper reports on one of the first empirical attempts to investigate small firm growth and survival, and their determinants, in the Peoples’ Republic of China. The work is based on field work evidence gathered from a sample of 83 Chinese private firms (mainly SMEs) collected initially by face-to-face interviews, and subsequently by follow-up telephone interviews a year later. We extend the models of Gibrat (1931) and Jovanovic (1982), which traditionally focus on size and age alone (e.g. Brock and Evans, 1986), to a ‘comprehensive’ growth model with two types of additional explanatory variables: firm-specific (e.g. business planning); and environmental (e.g. choice of location). We estimate two econometric models: a ‘basic’ age-size-growth model; and a ‘comprehensive’ growth model, using Heckman’s two-step regression procedure. Estimation is by log-linear regression on cross-section data, with corrections for sample selection bias and heteroskedasticity. Our results refute a pure Gibrat model (but support a more general variant) and support the learning model, as regards the consequences of size and age for growth; and our extension to a comprehensive model highlights the importance of location choice and customer orientation for the growth of Chinese private firms. In the latter model, growth is explained by variables like planning, R&D orientation, market competition, elasticity of demand etc. as well as by control variables. Our work on small firm growth achieves two things. First, it upholds the validity of ‘basic’ size-age-growth models, and successfully applies them to the Chinese economy. Second, it extends the compass of such models to a ‘comprehensive’ growth model incorporating firm-specific and environmental variables. |
| Keywords: | Chinese private firms, models of small firm growth, choice of location, customer orientation |
| JEL: | D21 M13 L25 L26 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:0913&r=fdg |
| By: | Fanti, Luciano; Gori, Luca |
| Abstract: | We analyse an overlapping generations economy with two sectors of production: a capital-intensive commodity sector and a labour-intensive services sector. First, we consider an economy with exogenous population and study the effects of a change in the individual preference for old-aged services that causes a reallocation of labour between sectors on per capita income. Then, we compare the results with the standard Diamond (1965) style one-sector economy. Second, we endogenise fertility founding that a reallocation of labour in favour of the services sector causes an additional beneficial effect on per capita income with respect to the model with exogenous population. Third, we further introduce endogenous lifetime through public health investments, showing that multiple regimes of development may exist. In this context, the a rise in the preference for old-aged services may help escaping from poverty. |
| Keywords: | Fertility; Life expectancy; OLG model; Public health expenditure; Services market |
| JEL: | O41 I18 |
| Date: | 2009–11–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18869&r=fdg |
| By: | Daniel Chiquiar; Manuel Ramos Francia |
| Abstract: | We address the role that deep, structural factors may have as determinants of Mexico’s economic growth. We argue that Mexico’s poor growth performance appears to be associated not only with shorter-run events such as the "lost decade" of the eighties, but also with supply-side features of the economy that have been present for at least four decades. Mexico’s low competitiveness and poor growth potential seem to reflect an institutional framework that tends to support rigid, non-competitive market structures, and incentives that promote the allocation of resources towards unproductive rent-seeking activities relatively more than into investment, production, productivity, and adoption of superior technologies. We present examples of input markets where we believe these issues are central. We conclude that solving this situation requires microeconomic policies that lead to fundamental changes in the incentive structure of the economy. |
| Keywords: | Competitiveness and growth, productivity, efficiency, comparative advantage. |
| JEL: | O31 O43 O12 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2009-11&r=fdg |
| By: | Neil Bruce; Stephen J. Turnovsky |
| Abstract: | We construct a unified overlapping-generations (OLG) framework of equilibrium growth that includes the Blanchard “perpetual youth” model, the Samuelson model, and the infinitely-lived representative agent growth model as limit specifications of a “realistic”, two-parameter survivorship function. We analyze how demographic conditions affect the equilibrium growth and savings rates in an economy by computing equilibrium rates under different specifications of the survivorship function. Differences in population growth rates, life-expectancies, retirement durations, and the degree of concavity of the survivorship function are found to have significant impacts on equilibrium growth rates. The observed effects are consistent with some cross-country correlations between demographic conditions and growth rates. We also identify a potential “Malthusian growth trap” in economies where life expectancy is short, fertility rates are high, and households work most of their lives—conditions often found in less developed economies. |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:udb:wpaper:uwec-2009-21-r&r=fdg |
| By: | Robert A. Blecker; Arslan Razmi |
| Keywords: | exports, exchange rates |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2009-22&r=fdg |
| By: | Joseph A. Clougherty |
| Abstract: | Motivated by the general lack of empirical scholarship concerning the cross-national environment for competition policy, I present measures here of the overall resources dedicated to competition policy and the merger policy work-load for thirty-two antitrust jurisdictions over the 1992-2007 period. The data allow analysing a number of perceived trends in competition policy over the last two decades, and allow the generation of some factual insights concerning these trends: e.g., the budgetary commitment to competition policy in the cross-national environment for antitrust has substantially increased over this period; budgetary increases appear to be commensurate with increased antitrust workloads; yet, the role of economics does not appear to have substantially increased relative to the role of law. Moreover, I am also able to provide some evidence that budgetary commitments to antitrust institutions yield economic benefits in terms of improved economic growth: i.e., higher budgetary commitments to competition policy are associated with higher levels per-capita GDP growth. <br> <br> <i>ZUSAMMENFASSUNG - (Entwicklungen in der Wettbewerbspolitik und Wirtschaftswachstum: Eine länderübergreifende empirische Untersuchung) <br>Zu den Rahmenbedingungen für Wettbewerbspolitik gibt es kaum länderübergreifende empirische Forschung. Dieser Mangel soll in der vorliegenden Studie behoben werden, in der die Gesamtausgaben für Wettbewerbspolitik und die Arbeitsbelastungen von 32 Kartellbehörden im Zeitraum von 1992 bis 2007 untersucht werden. Die Daten bieten die Möglichkeit, eine Anzahl von erkennbaren Entwicklungen in der Wettbewerbspolitik innerhalb der letzten zwei Jahrzehnte zu analysieren. Folgende Erkenntnisse resultieren: die Gesamtausgaben für Wettbewerbspolitik sind länderübergreifend in der betrachteten Periode erheblich gestiegen; zur Etatsteigerungen sind auch die Arbeitsbelastungen der Behördenmitarbeiter entsprechend gestiegen; dabei hat die ökonomische Expertise jedoch im Vergleich zur juristischen offenbar nicht an Einfluss auf die Wettbewerbspolitik gewonnen. Außerdem kann gezeigt werden, dass die Bereitstellung von finanziellen Mitteln für die Wettbewerbbehörden eines Landes wirtschaftlichen Nutzen stiftet, was sich in einem höheren Wirtschaftswachstum gemessen als höheres BIP-Wachstum pro Kopf niederschlägt.<i> |
| Keywords: | Competition Policy, Trends, Growth |
| JEL: | L40 K21 O40 C23 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:fsiv2009-16&r=fdg |
| By: | Robert A. Blecker; Gerardo Esquivel |
| Abstract: | The post-Keynesian tradition contains two different models of long-run growth in open economies -- the model of export-led cumulative causation (ELCC) originally conceived by Nicholas Kaldor and the model of balance-of-payments-constrained growth (BPCG) developed by A.P. Thirlwall. These models diverge significantly in their core underlying assumptions. For example, they disagree about whether long-term gains in relative price competitiveness are possible and whether import demand constrains long-run growth. The two modeling approaches also yield conflicting policy implications. For example, some ELCC models imply that a domestic demand stimulus can boost long-run growth by sparking a virtuous circle of cumulative causation (including an endogenous increase in productivity growth), while most BPCG models imply that only policies that raise the income elasticity of export demand or lower the income elasticity of import demand can permit faster growth in the long run. The fact that both models have found econometric support suggests that each contains empirically supported elements, but the tests that have been conducted to date have not had sufficient power to distinguish between them. This paper will present both models in a common analytical framework to compare their theoretical differences and policy implications. The paper will argue that a generalized BPCG model that allows for financial flows and relative price effects can incorporate the cumulative causation feedbacks from the ELCC approach while also imposing the balance of payments equilibrium condition that is missing from the latter. The paper will also explore under what conditions different versions of the models apply. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2009-24&r=fdg |
| By: | Robert A. Blecker |
| Abstract: | The post-Keynesian tradition contains two different models of long-run growth in open economies -- the model of export-led cumulative causation (ELCC) originally conceived by Nicholas Kaldor and the model of balance-of-payments-constrained growth (BPCG) developed by A.P. Thirlwall. These models diverge significantly in their core underlying assumptions. For example, they disagree about whether long-term gains in relative price competitiveness are possible and whether import demand constrains long-run growth. The two modeling approaches also yield conflicting policy implications. For example, some ELCC models imply that a domestic demand stimulus can boost long-run growth by sparking a virtuous circle of cumulative causation (including an endogenous increase in productivity growth), while most BPCG models imply that only policies that raise the income elasticity of export demand or lower the income elasticity of import demand can permit faster growth in the long run. The fact that both models have found econometric support suggests that each contains empirically supported elements, but the tests that have been conducted to date have not had sufficient power to distinguish between them. This paper will present both models in a common analytical framework to compare their theoretical differences and policy implications. The paper will argue that a generalized BPCG model that allows for financial flows and relative price effects can incorporate the cumulative causation feedbacks from the ELCC approach while also imposing the balance of payments equilibrium condition that is missing from the latter. The paper will also explore under what conditions different versions of the models apply. |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2009-23&r=fdg |
| By: | Matthew A Cole; Robert J R Elliott; Jing Zhang |
| Abstract: | In this paper we investigate the relationship between economic growth and industrial pollution emissions in China using data for 112 major cities between 2001 and 2004. Using disaggregated data we separate FDI inflows from Hong Kong, Macao and Taiwan from those of other foreign economies. We examine two industrial water pollution indicators (wastewater and petroleum-like matter) and four industrial air pollution indicators (waste gas, sulphur dioxide, soot and dust). Our results suggest that most air and water emissions rise with increases in economic growth at current income levels. The share of output of domestic and foreign owned firms increases several pollutants in a statistically significant manner while output of firms from Hong Kong, Macao and Taiwan either reduces pollution or is statistically insignificant. |
| Keywords: | FDI, economic growth, pollution, cities |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:09-15&r=fdg |
| By: | Gregory de Walque; Olivier Pierrard; Abdelaziz Rouabah |
| Abstract: | This paper develops a dynamic stochastic general equilibrium model with interactions between a heterogeneous banking sector and other private agents. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real data and used for simulations. We show that liquidity injections reduce financial instability but have ambiguous effects on output fluctuations. The model also confirms the partial equilibrium literature results on the procyclicality of Basel II. |
| Keywords: | DSGE, Banking sector, Default risk, Supervision, Money |
| JEL: | E13 E20 G21 G28 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:bcl:bclwop:cahier_etudes_35&r=fdg |