nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2011‒05‒30
nine papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Exports and Italy’s economic development: a long-run perspective (1863-2004) politiche abitative e domanda potenziale (o inevasa) By Barbara Pistoresi; Alberto Rinaldi
  2. A Schumpeterian model of entrepreneurship, innovation, and regional economic growth By Batabyal, A.A.; Nijkamp, P.
  3. Kaldor-Verdoorn’s law and increasing returns to scale: a comparison across developed countries By Ofria, Ferdinando; Millemaci, Emanuele
  4. Governance Quality and Economic Growth By Tao Kong
  5. The review of financial repression policies and banking system in Iran By Dehghan Nejad, Omid
  6. Economic growth and the balance-ofpayments constraint: The case of the Spanish regions, 1988-2008 By Oscar Bajo-Rubio; Carmen Díaz-Roldán
  7. How Do Business and Financial Cycles Interact? By Claessens, Stijn; Kose, Ayhan; Terrones, Marco E
  8. The Choice of CES Production Techniques and Balanced Growth By Miguel A. Leon-Ledesma; Mathan Satchi
  9. Do exports cause growth? Some evidence for the new EU members By Oscar Bajo-Rubio; Carmen Díaz-Roldán

  1. By: Barbara Pistoresi; Alberto Rinaldi
    Abstract: This paper investigates the relationship between real export and real GDP in Italy from 1863 to 2004 by using cointegration analysis and causality tests. The outcome suggests that these variables comove in the long run but the direction of causality depends on the level of economic development: in the period prior to WW1 the growth of the Italian economy led that of exports, while in the post-WW2 period the causal relationship was reversed with the expansion of exports that determined the growth of the Italian economy
    Keywords: Export led growth hypothesis, unit root tests, cointegration analysis, Granger – causality
    JEL: F43 O11 N1 N7
    Date: 2011–05
  2. By: Batabyal, A.A.; Nijkamp, P.
    Date: 2011
  3. By: Ofria, Ferdinando; Millemaci, Emanuele
    Abstract: The object of this study is to investigate the validity of the Kaldor-Verdoorn’s Law in explaining the long run determinants of the labor productivity growth for the manufacturing sector of some developed economies (Western European Countries, Australia, Canada, Japan and United States). We consider the period 1973-2006 using data provided by the European Commission - Economics and Financial Affairs. Our findings suggest that the law is valid for the manufacturing of Italy, US, Belgium and Australia. Capital growth and labor cost growth do not appear relevant in explaining productivity growth. The estimated Verdoorn coefficients are found to be stable throughout the period.
    Keywords: increasing returns; Kaldor-Verdoorn law; productivity growth; manufacturing sector
    JEL: C32 O47 O57
    Date: 2010–10–23
  4. By: Tao Kong
    Abstract: Among both academics and the wider development community there seems to be a general acceptance of the value of good governance and its role in promoting economic growth. However, beyond this general statement, there is a lack of deeper theoretical understanding as to why good governance is expected to foster economic growth and how such effects may take place. We governance quality as the capacity of a government to internalize externality. A theoretical model is developed to formally integrate governance quality into an endogenous growth framework. We elucidate the underlying mechanisms, through which governance quality affects economic performance: governance quality affects the productivity of public investment and in turn has an impact on economic performance. We also highlight that the endogeneity of governance quality and development stages have strong implications for the governance-growth relationship.
    JEL: O41 O43 P16
    Date: 2011–01
  5. By: Dehghan Nejad, Omid
    Abstract: The methods of determining the banking interest rate are the main issues in the Iranian economy, this note provides the analysis of banking interest rate and the ways of providing and allocating financial resources in Iran and also, discusses why the financial repression policies in the monetary and banking system do not allow the Iranian economy to growth in its full capacity.
    Keywords: Banking Interest Rate; Financial Repression; Monetary and Banking System; Financial Resources
    JEL: E5
    Date: 2011–04–26
  6. By: Oscar Bajo-Rubio (Universidad de Castilla-La Mancha); Carmen Díaz-Roldán (Universidad de Castilla-La Mancha)
    Abstract: The balance of payments can act as a constraint to the rate of growth of output, on putting a limit to the growth in the level of demand to which supply can adapt. This effect might be even stronger for regional economies, presumably more integrated among them. In this paper, we examine this issue for the case of the Spanish regions over the period 1988-2008, and calculate their balance of payments-constrained growth rates. By comparing these balance of payments-constrained growth rates with the actual growth rates, we would be able to assess whether the balance of payments has worked as a constraint to economic growth for the Spanish regional economies in the period analyzed.
    Keywords: Economic growth, External deficit, Spanish regions
    JEL: F41 F43 O40
    Date: 2011–05
  7. By: Claessens, Stijn; Kose, Ayhan; Terrones, Marco E
    Abstract: This paper analyzes the interactions between business and financial cycles using an extensive database of over 200 business and 700 financial cycles in 44 countries for the period 1960:1-2007:4. Our results suggest that there are strong linkages between different phases of business and financial cycles. In particular, recessions associated with financial disruption episodes, notably house price busts, tend to be longer and deeper than other recessions. Conversely, recoveries associated with rapid growth in credit and house prices tend to be stronger. These findings emphasize the importance of developments in credit and housing markets for the real economy.
    Keywords: asset busts; booms; credit crunches; financial crises; recessions; recoveries
    JEL: E32 E44 E51 F42
    Date: 2011–05
  8. By: Miguel A. Leon-Ledesma; Mathan Satchi
    Abstract: We show that allowing firms a choice of CES production techniques (via the distribution parameter between capital and labor) can result in a new class of production functions that produces short-run capital-labor complementarity but yields a long-run unit elasticity of substitution. This is shown to occur if we provide a mathematical framework for this choice that maintains strict essentiality of the production process and satisfies the requirement of unit-invariance. The class of production functions derived are consistent with a balanced growth path even in the presence of capital-augmenting technical progress. The approach yields a simple yet powerful way of introducing CES-type production functions in macroeconomic models.
    Keywords: Balanced growth; production technique; biased technology;elasticity of substitution Multiplier; North-South Models; Global Imbalances
    JEL: E25 O33 O40
    Date: 2011–05
  9. By: Oscar Bajo-Rubio (Universidad de Castilla-La Mancha); Carmen Díaz-Roldán (Universidad de Castilla-La Mancha)
    Abstract: In this paper, we analyze the relationship between international trade and economic growth, from the point of view of one of the most traditional hypothesis within this field, namely, the export-led growth hypothesis. To this end, we apply Grangercausality tests, in a cointegration framework, to data on exports and GDP of the eight CEECs that became members of the EU in 2004.
    Keywords: Economic growth, Exports, Transition countries
    JEL: F41 F43 O40
    Date: 2011–05

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