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on Financial Development and Growth |
| By: | Prakash Kannan |
| Abstract: | Recoveries from recessions associated with a financial crisis tend to be sluggish. In this paper, we present evidence that stressed credit conditions are an important factor constraining the pace of recovery. In particular, using industry-level data, we find that industries relying more on external finance grow more slowly than other industries during recoveries from recessions associated with financial crises. Additional tests, based on establishment size, on alternative definitions of financial crises, and on corporate-government interest rate spreads, support the findings. Moreover, for subsets of industries where financial frictions are more severe, we find much stronger differential growth effects. |
| Keywords: | Bank credit , Banking crisis , Business cycles , Credit , Developed countries , Economic models , Economic recession , Economic recovery , External financing , Financial crisis , Industrial sector , Production growth , |
| Date: | 2010–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/83&r=fdg |
| By: | James B. Ang; Jakob B. Madsen |
| Abstract: | Using data for six Asian miracle economies over the period from 1953 to 2006, this paper examines the extent to which growth has been driven by R&D and tests which second-generation endogenous growth model is most consistent with the data. The results give strong support to Schumpeterian growth theory but only limited support to semi-endogenous growth theory. Furthermore, it is shown that R&D has played a key role for growth in the Asian miracle economies. |
| JEL: | O30 O40 |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2010-05&r=fdg |
| By: | Óscar Afonso (CEF.UP, OBEGEF and Faculdade de Economia, Universidade do Porto, Portugal); Sara Monteiro (Nice Sophia Antipolis University, Faculty of Law, Political Science, Economics and Management, CEMAFI, Nice, France); Maria Thompson (NIPE, Departamento de Economia, Universidade do Minho, Portugal) |
| Abstract: | We propose a theoretical growth model with which to frame analytically the Quadruple Helix Innovation Theory (QHIT). The aim is to emphasise the investment in innovation transmission mechanisms in terms of economic growth and productivity gains, in one-high-technology sector, by stressing the role played by the helices of the Quadruple Helix Innovation Model: Academia and Technological Infrastructures, Firms of Innovation, Government and Civil Society. In the existing literature, the relationship between the helices and respective impacts on economic growth does not appear clear. Results are fragile due to data weakness and the inexistence of a theoretical framework to specify the relationship between the helices. Hence our motivation for providing the QHIT with a theoretical growth model. Our intent is to model the importance of emerging, dynamically adaptive, and transdisciplinary knowledge and innovation ecosystems to economic growth. We find that higher economic growth rate is obtained as a result of an increase in synergies and complementarities between different productive units, or an increase in productive government expenditure. |
| Keywords: | Economic Growth, Quadruple Helix Innovation Model, Innovation Ecosystems |
| JEL: | O10 O18 O31 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:por:fepwps:370&r=fdg |
| By: | Óscar Afonso (Universidade do Porto); Sara Monteiro (Nice Sophia Antipolis University, Faculty of Law, Political Science, Economics and Management); Maria João Ribeiro Thompson (Universidade do Minho) |
| Abstract: | We propose a theoretical growth model with which to frame analytically the Quadruple Helix Innovation Theory (QHIT). The aim is to emphasise the investment in innovation transmission mechanisms in terms of economic growth and productivity gains, in one-high-technology sector, by stressing the role played by the helices of the Quadruple Helix Innovation Model: Academiaand Technological Infrastructures, Firms of Innovation, Government and Civil Society. In the existing literature, the relationship between the helices and respective impacts on economic growth does not appear clear. Results are fragiledue to data weakness and the inexistence of a theoretical framework to specify the relationship between the helices. Hence our motivation for providing the QHIT with a theoretical growth model. Our intent is to model the importance of emerging, dynamically adaptive, and transdisciplinary knowledge and innovation ecosystems to economic growth. We .nd that higher economic growth rate is obtained as a result of an increase in synergies and complementarities between different productive units, or an incease in productive government expenditure. |
| Keywords: | Economic Growth; Quadruple Helix Innovation Model; Innovation Ecosystems. |
| JEL: | O10 O18 O31 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:12/2010&r=fdg |
| By: | Leo F. Goodstadt (Hong Kong Institute for Monetary Research, Trinity College, University of Dublin, The University of Hong Kong) |
| Abstract: | An Anglo-American regulatory ¡¥culture¡¦ became associated with 30 years of worldwide economic reforms, global growth and monetary stability. American and British officials identified major sources of instability in their own financial markets before 2007 but remained non-interventionist, invoking the concepts of virtuous markets and moral hazard. They also ignored the policy defects revealed by past crises. Despite record banking losses and fiscal imbalances during the global crisis, their current resistance to regulatory reforms is supported by a powerful political and business consensus. |
| Keywords: | Non-Interventionism, Basel, Virtuous Markets, Moral Hazard, Regulatory Culture |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:322009&r=fdg |
| By: | Michele Cavallo; Anthony Landry |
| Abstract: | Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports have been an increasing source of growth for the US economy: the average contribution of capital-goods imports to growth in U.S .output per hour has increased noticeably since 1967. |
| Keywords: | Imports ; Capital investments ; Productivity - United States ; Economic development |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:47&r=fdg |
| By: | Gianni De Nicolò; Luciana Juvenal |
| Abstract: | This paper documents the dynamics of financial integration for major advanced and emerging markets economies during the 1994-2009 period, assesses whether advances in integration have had a significant direct positive impact on countries' growth opportunities, and identifies some of the channels through which financial integration may indirectly foster growth. Three main results are obtained. First, financial integration has progressed significantly worldwide and has been fastest in emerging markets. Second, a country's speed of integration predicts its future risk-adjusted growth opportunities, while improved riskadjusted growth opportunities may predict future advances in integration, but not in all cases, suggesting a causal relationship from financial integration to improved real prospects. Third, advances in financial integration foster increased financial openness, financial development, and the liquidity of equity markets, but the reverse does not necessarily hold. Policies aimed at fostering financial integration may be necessary, albeit not sufficient, to allow countries to reap its benefits. |
| Keywords: | International finance ; Financial risk management |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2010-012&r=fdg |
| By: | Raphael A. Espinoza; Ananthakrishnan Prasad; H. L. Leon |
| Abstract: | Motivated by the global inflation episode of 2007-08 and concern that high levels of inflation could undermine growth, this paper uses a panel of 165 countries and data for 1960-2007 to revisit the nexus between inflation and growth. We use a smooth transition model to investigate the speed at which inflation beyond a threshold becomes harmful to growth, an important consideration in the policy response to rising inflation as the world economy recovers. We estimate that for all country groups (except for advanced countries) inflation above a threshold of about 10 percent quickly becomes harmful to growth, suggesting the need for a prompt policy response to inflation at or above the relevant threshold. For the advanced economies, the threshold is much lower. For oil exporting countries, the estimates are less robust, possibly reflecting heterogeneity among oil producers, but the effect of higher inflation for oil producers is found to be stronger. |
| Keywords: | Cross country analysis , Developed countries , Economic growth , Economic models , Emerging markets , Inflation , Monetary policy , Oil exporting countries , Production growth , |
| Date: | 2010–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/76&r=fdg |
| By: | Abu-Qarn, Aamer |
| Abstract: | This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards. |
| Keywords: | Growth; Middle East; Israeli-Arab conflict; Causality; Generalized Forecast Error Variance Decomposition |
| JEL: | O53 H56 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22275&r=fdg |
| By: | Lucas Bretschger (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland); Roger Ramer (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland); Florentine Schwark (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland) |
| Abstract: | The paper develops a new type of CGE model to predict the effects of carbon policies on consumption, welfare, and sectoral development in the long run. Growth is fully endogenous, based on increasing specialization in capital varieties, and specic in each sector of the economy. The benchmark scenario is calculated based on the endogenous gains from specialization which carry over to policy simulation. Applying the model to the Swiss economy we nd that a carbon policy following the Copenhagen Accord entails a moderate but not negligible welfare loss compared to development without any negative eects of climate change. Energy extensive as well as capital and knowledge intensive sectors prot in the form of increased growth rates. |
| Keywords: | Carbon policy, CGE models, energy and endogenous growth, heterogeneous capital |
| JEL: | Q54 C63 O41 Q43 Q56 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:10-129&r=fdg |
| By: | Miguel A. León-Ledesma (Department of Economics, Keynes College, University of Kent, Canterbury, Kent, CT2-7NP, United Kingdom.); Peter McAdam (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alpo Willman (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | Capital-labor substitution and total factor productivity (TFP) estimates are essential features of growth and income distribution models. In the context of a Monte Carlo exercise embodying balanced and near balanced growth, we demonstrate that the estimation of the substitution elasticity can be substantially biased if the form of technical progress is misspecified. For some parameter values, when factor shares are relatively constant, there could be an inherent bias towards Cobb-Douglas. The implied estimates of TFP growth also yield substantially different results depending on the specification of technical progress. A Constant Elasticity of Substitution production function is then estimated within a “normalized” system approach for the US economy over 1960:1–2004:4. Results show that the estimated substitution elasticity tends to be significantly lower using a factor augmenting specification (well below one). We are able to reject Hicks-, Harrod- and Solow-neutral specifications in favor of general factor augmentation with a non-negligible capital-augmenting component. Finally, we draw some important lessons for production and supply-side estimation. JEL Classification: C15, C32, E23, O33, O51. |
| Keywords: | Constant Elasticity of Substitution, Factor-Augmenting Technical Change, Technical Progress Neutrality, Factor Income share, Balanced Growth. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101175&r=fdg |
| By: | Marcus BERLIANT; FUJITA Masahisa |
| Abstract: | How is long run economic growth related to the endogenous diversity of knowledge? We formulate and study a microeconomic model of knowledge creation, through the interactions among a group of heterogeneous R & D workers, embedded in a growth model to address this question. In contrast with the traditional literature, in our model the composition of the research work force in terms of knowledge heterogeneity matters, in addition to its size, in determining the production of new knowledge. Moreover, the heterogeneity of the work force is endogenous. Income to these workers accrues as patent income, whereas transmission of newly created knowledge to all such workers occurs due to public transmission of patent information. Knowledge in common is required for communication, but differential knowledge is useful to bring originality to the endeavor. Whether or not the system reaches the most productive state depends on the strength of the public knowledge transmission technology. Equilibrium paths are found analytically. Long run economic growth is positively related to both the effectiveness of pairwise R & D worker interaction and to the effectiveness of public knowledge transmission. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:10024&r=fdg |