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on Financial Development and Growth |
| By: | Abdul Abiad; Bin (Grace) Li; Giovanni Dell'Ariccia |
| Abstract: | Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless", and average growth during these episodes is about a third lower than during "normal" recoveries. Aggregate and sectoral data suggest that impaired financial intermediation is the culprit. Creditless recoveries are more common after banking crises and credit booms. Furthermore, sectors more dependent on external finance grow relatively less and more financially dependent activities (such as investment) are curtailed more during creditless recoveries. |
| Keywords: | Bank credit , Banking crisis , Business cycles , Credit expansion , Cross country analysis , Developed countries , Economic growth , Economic recovery , Emerging markets , Financial crisis , Industrial investment , Private sector , |
| Date: | 2011–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/58&r=fdg |
| By: | Matthias Göcke (University of Giessen) |
| Abstract: | A model with two different production sectors and endogenous growth based on the accumulation of sector-specific human capital due to learning-by-doing is presented. Accumulation of experience is measured by means of sectoral production output aggregated over time. Growth is controlled by a dynamic optimisation of the use of time for working in the different sectors or for leisure. Transitional dynamics of production growth, especially of structural change towards a 'new' sector (with relatively scarce experience), of the optimal sectoral distribution of working time and of leisure as well as the corresponding steady state levels are derived and a numerical simulation is performed. |
| JEL: | C61 D90 J22 O41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201111&r=fdg |
| By: | Elias Soukiazis (Faculdade de Economia Universidade de Coimbra / GEMF); Micaela Antunes (Faculdade de Economia Universidade de Coimbra) |
| Abstract: | The aim of this paper is to explain growth performance in Portugal in the last decades through a multi-equation system with cumulative growth characteristics. The model uses a demand-orientated approach to determine the main relationships which explain growth through a virtuous cycle. The idea is to identify the driving forces of growth with causal linkages and feedback tendencies that turn the process self-sustained. The multi-equation growth model is estimated by 3SLS to capture more efficiently the interrelations between the main growth forces and to control for the endogeneity of the regressors. Our evidence shows that the proposed model can successfully be used to explain the Portuguese growth performance, highlighting the importance of exports competitiveness as the key factor in this process. The cumulative growth process can be interrupted at some points mainly due to the incapacity of transferring productivity gains into domestic prices and to turn the economy more competitive. Capital accumulation is also shown not to affect productivity growth and domestic prices not to improve exports competitiveness. These are the main drawbacks of the Portuguese economy that could explain the failure to achieve higher growth rates in the last decades. |
| Keywords: | Cumulative growth, multi-equation system, exports competitiveness, productivity gap, 3SLS regressions |
| JEL: | O1 O3 O4 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2011-06&r=fdg |
| By: | Oded Galor |
| Abstract: | # |
| Keywords: | Education, Gender Gap, Human capital, Income distribution, Inequality, Devel- opment, Unified Growth Theory |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2011-7&r=fdg |
| By: | Luc Laeven; Fabian Valencia |
| Abstract: | We collect new data to assess the importance of supply-side credit market frictions by studying the impact of financial sector recapitalization packages on the growth performance of firms in a large cross-section of 50 countries during the recent crisis. We develop an identification strategy that uses the financial crisis as a shock to credit supply and exploits exogenous variation in the degree to which firms depend on external financing for investment needs, and focus on policy interventions aimed at alleviating the bank capital crunch. We find that the growth of firms dependent on external financing is disproportionately positively affected by bank recapitalization policies, and that this effect is quantitatively important and robust to controlling for other financial sector support policies. We also find that fiscal policy disproportionately boosted growth of firms more dependent on external financing. These results provide new evidence of a quantitatively important role of credit market frictions in influencing real economic activity. |
| Keywords: | Banking crisis , Banking sector , Capital , Central banks , Credit , External shocks , Financial crisis , Financial sector , Liquidity management , Monetary policy , |
| Date: | 2011–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/45&r=fdg |
| By: | Gonzalo Salinas; Cheikh A. Gueye; Olessia Korbut |
| Abstract: | Economic stagnation in Sub-Saharan Africa (SSA) has led several economists to question the region’s ability to attain sustained economic growth, some of them arguing for the need to shift away from natural resource - based exports. Yet, we find that low growth has not been common to all SSA countries and that those that achieved political stability and significantly liberalized their economies experienced high growth in income per capita, as high as ASEAN-5 countries. This group of SSA countries attained high growth while maintaining their specialization in natural resource exports. Our analysis also rejects the hypothesis of reverse causality: that good growth performance allowed countries to attain political stability or liberalize their economies. |
| Keywords: | Cross country analysis , Economic growth , Economic reforms , Economic stabilization , Exports , Natural resources , Political economy , Sub-Saharan Africa , Trade liberalization , |
| Date: | 2011–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/40&r=fdg |
| By: | Vahram Stepanyan; Kai Guo |
| Abstract: | We examine changes in bank credit across a wide range of emerging market economies during the last decade. The rich time-series and cross-section information allows us to draw broader lessons compared to many existing researches, which focus on a specific set of emerging market economies or on shorter time periods. Our results show that domestic and foreign funding contribute positively and symmetrically to credit growth. The results also indicate that stronger economic growth leads to higher credit growth, and high inflation, while increasing nominal credit, is detrimental to real credit growth. We also find that loose monetary conditions, either domestic or global, result in more credit, and that the health of the banking sector also matters. Finally, we discuss some policy lessons. |
| Keywords: | Bank credit , Banking sector , Credit expansion , Cross country analysis , Economic growth , Emerging markets , Inflation , Monetary policy , |
| Date: | 2011–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/51&r=fdg |
| By: | Mishra, Saurabh; Lundstrom, Susanna; Anand, Rahul |
| Abstract: | Can increasing sophistication in service exports lead to economic growth? Although services were historically produced primarily for domestic consumption, they are gradually becoming more productive, tradable and unbundled. The authors construct an index of"service exports sophistication"to document this phenomenon. Panel data estimations indicate a positive association between growth in per capita income and higher sophistication of service exports. The results also suggest that this phenomenon is growing in importance over time. Considering the limits of traditional industrialization in igniting global growth, the results provide an alternative channel. |
| Keywords: | Economic Theory&Research,Public Sector Corruption&Anticorruption Measures,Commodities,Housing&Human Habitats,Banks&Banking Reform |
| Date: | 2011–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5606&r=fdg |
| By: | Troy Matheson |
| Abstract: | We develop monthly indicators for tracking growth in 32 advanced and emerging-market economies. We test the historical performance of our indicators and find that they do a good job at describing the business cycle. In a recursive out-of-sample forecasting exercise, we find that the indicators generally produce good GDP growth forecasts relative to a range of time series models. |
| Keywords: | Business cycles , Developed countries , Economic growth , Economic indicators , Emerging markets , Forecasting models , Time series , |
| Date: | 2011–02–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/43&r=fdg |
| By: | Marcos Poplawski-Ribeiro; Jan-Christoph Rulke |
| Abstract: | The paper uses survey data to analyze whether financial market expectations on government budget deficits changed in France, Germany, Italy, and the United Kingdom during the period of the Stability and Growth Pact (SGP). Our findings indicate that accuracy of financial expert deficit forecasts increased in France. Convergence between the European Commission's and market experts’ deficit forecasts also increased in France, Italy, and the United Kingdom, particularly during the period after SGP’s reform in 2005. Yet, convergence between markets’ forecasts and those of the French, German, and Italian national fiscal authorities seems not to have increased significantly during the SGP. |
| Keywords: | Budget deficits , Cross country analysis , Economic forecasting , Economic growth , European Economic and Monetary Union , Fiscal policy , Fiscal stability , France , Germany , Italy , United Kingdom , |
| Date: | 2011–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/48&r=fdg |
| By: | Miguel Ramirez (Department of Economics, Trinity College) |
| Abstract: | This paper addresses the important question of whether public investment spending on economic infrastructure enhances economic growth and labor productivity in Argentina. Following the lead of the endogenous growth literature, it presents a simple modified production function that explicitly includes the positive or negative externality effects generated by public investment. The paper estimates a dynamic labor productivity function for the 1960-2007 period that incorporates the impact of public and private investment spending and the labor force (rather than the rate of population growth). Single break (Zivot-Andrews) unit root and cointegration analysis suggest that (lagged) increases in public investment spending on economic infrastructureBas opposed to overall public investment spendingB have a positive and significant effect on the rate of labor productivity growth. In addition, the model is estimated for a shorter period (1970-2007) to capture the impact of foreign direct investment. The estimates suggest that foreign direct investment spending has a lagged positive and significant impact on labor productivity growth, while increases in the labor force have a negative effect . Thus, the findings call into question the politically expedient policy in many Latin American countries, including Argentina during the 1990s and early 2000s, of disproportionately reducing public capital expenditures to meet reductions in the fiscal deficit as a proportion of GDP. |
| Keywords: | Public investment, labor productivity, Argentina, single-break unit root, cointegration |
| JEL: | C22 O10 O40 O50 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:tri:wpaper:1101&r=fdg |
| By: | Abiad, Abdul; Dell'Ariccia, Giovanni; Li, Bin |
| Abstract: | Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless," and average growth during these episodes is about a third lower than during "normal" recoveries. Aggregate and sectoral data suggest that impaired financial intermediation is the culprit. Creditless recoveries are more common after banking crises and credit booms. Furthermore, sectors more dependent on external finance grow relatively less and more financially dependent activities (such as investment) are curtailed more during creditless recoveries. |
| Keywords: | credit crunch; Credit cycles; financial crises; financial dependence |
| JEL: | E32 E44 G21 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8301&r=fdg |