nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2011‒07‒27
fourteen papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Employment Growth, Inflation and Output Growth: Was Phillips Right?: Evidence from a Dynamic Panel By Guglielmo Maria Caporale; Marinko Skare
  2. Decomposition of ethnic heterogeneity on growth By Yamamura, Eiji
  3. Financial Development and Economic Growth in Latin America: Is Schumpeter Right? By Bittencourt, Manoel
  4. Growth effects of education with the extreme bounds analysis: some evidence from Asia By Rao, B. Bhaskara; Cooray, Arusha; Hassan, Gazi Mainul
  5. "The Rise and Fall of Export-led Growth" By Thomas I. Palley
  6. An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries By Harms, Philipp; Méon, Pierre-Guillaume
  7. On the impact of the TFP growth on the employment rate: does training on-the-job matter? By Eva Moreno-Galbis
  8. Capital Flow Types, External Financing Needs, and Industrial Growth: 99 countries, 1991-2007 By Joshua Aizenman; Vladyslav Sushko
  9. Growth, Colonization, and Institutional Development: In and Out of Africa By Bertocchi, Graziella
  10. Institutions, Inequality and Growth: A review of theory and evidence on the institutional determinants of growth and inequality By Richard Bluhm; Adam Szirmai; UNICEF Innocenti Research Centre
  11. Population, land and growth By Claire Loupias; Bertrand Wigniolle
  12. Low Fertility, Aging Population, and Economic Growth (Japanese) By YOSHIKAWA Hiroshi
  13. Globalization and China's Economic Growth (Japanese) By ITO Banri; YASHIRO Naomitsu
  14. Financial Development and Sectoral Output: Growth in 19th Century Germany By Westermann, Frank; Dieckmann, Katharina

  1. By: Guglielmo Maria Caporale; Marinko Skare
    Abstract: In this paper we analyse the short- and long-run relationship between employment growth, inflation and output growth in Phillips' tradition. For this purpose we apply FMOLS, DOLS, PMGE, MGE, DFE, and VECM methods to a nonstationary heterogeneous dynamic panel including annual data for 119 countries over the period 1970-2010, and also carry out multivariate Granger causality tests. The empirical results strongly support the existence of a single cointegrating relationship between employment growth, inflation and output growth with bidirectional causality between employment growth and inflation as well as output growth, giving support to Phillips' Golden Triangle theory.
    Keywords: Employment growth, inflation, output growth, Golden Triangle theory
    JEL: C23 E24 E31 E60
    Date: 2011
  2. By: Yamamura, Eiji
    Abstract: Empirical results from a random-effects regression model show that ethnic heterogeneity has a negative effect on growth. The negative effect is seen largely in the hampering of efficiency improvements, but not capital accumulation.
    Keywords: Ethnic fractionalization; Ethnic polarization; Efficiency improvement; Capital accumulation; Random-effects model.
    JEL: H11 O43
    Date: 2011–06–26
  3. By: Bittencourt, Manoel
    Abstract: In this paper we investigate the role of financial development, or more widespread access to all sorts of finance, in generating economic growth in four Latin American countries between 1980 and 2007. The results, based on panel time-series data and analysis, confirm the Schumpeterian prediction which suggests that finance authorises the entrepreneur to invest in productive activities, and therefore to promote economic growth. Furthermore, given the characteristics of the sample of countries chosen, we highlight not only the importance of a more open, competitive and therefore active financial sector in channelling financial resources to entrepreneurs, but also the relevance of macroeconomic stability (in terms of low inflation rates), and all the institutional framework that it encompasses (central bank independence and fiscal responsibility laws), as a necessary pre-condition for financial development, and consequently for sustained growth and prosperity in the region. --
    Keywords: Finance,growth,Latin America
    JEL: E31 N16 O11 O54
    Date: 2011
  4. By: Rao, B. Bhaskara; Cooray, Arusha; Hassan, Gazi Mainul
    Abstract: This paper uses the Extreme Bounds Analysis (EBA) to find robust and permanent growth effects of education by using enrolment ratios and its components in a panel of Asian countries. It is found that male and female primary and secondary enrolment ratios have robust but small permanent growth effects. However, the growth effects of male and female tertiary enrolment ratios are fragile and insignificant. In contrast to the existing estimates in the literature, which do not distinguish between the transitory and permanent growth effects, our estimated permanent growth effects are small but significant.
    Keywords: Education and growth; Solow Growth Model; Extreme bounds analysis and Total factor productivity.
    JEL: O11 O15
    Date: 2011–07–16
  5. By: Thomas I. Palley
    Abstract: This paper traces the rise of export-led growth as a development paradigm and argues that it is exhausted owing to changed conditions in emerging market (EM) and developed economies. The global economy needs a recalibration that facilitates a new paradigm of domestic demand-led growth. Globalization has so diversified global economic activity that no country or region can act as the lone locomotive of global growth. Political reasoning suggests that EM countries are not likely to abandon export-led growth, nor will the international community implement the international arrangements needed for successful domestic demand-led growth. Consequently, the global economy likely faces asymmetric stagnation.
    Keywords: Export-led Growth; Domestic Demand-led Growth; Economic Development; Stagnation
    JEL: F00 F01 F02 F10 F20 F50 O11 O19 O24
    Date: 2011–07
  6. By: Harms, Philipp; Méon, Pierre-Guillaume
    Abstract: We explore the effect of foreign direct investment (FDI) on economic growth in developing countries, distinguishing between mergers and acquisitions (M&As) and Greenfield investment. We find that these two types of FDI differ substantially with respect to their influence on growth. While Greenfield FDI substantially enhances growth, M&As have no effect, at best. We also demonstrate that, in contrast to Greenfield FDI, a larger volume of M&As results in an appreciated real exchange rate. The resulting loss in price competitiveness may explain the poor growth effect of the M&A variant of FDI. --
    Keywords: Growth,foreign direct investment,mergers and acquisitions,green-field investments
    JEL: F21 F23 F43 O16
    Date: 2011
  7. By: Eva Moreno-Galbis
    Keywords: TFP growth, unemployment, training, human capital depreciation, capitalization, creative destruction effect
    JEL: J23 J24 O33
    Date: 2010–12–15
  8. By: Joshua Aizenman; Vladyslav Sushko
    Abstract: We examine the differential impact of portfolio debt, portfolio equity, and FDI inflows on 37 manufacturing industries, 99 countries, 1991-2007, extending Rajan-Zingales (1998). We utilize external finance dependence measures in a series of cross-sectional regressions of manufacturing industries’ growth rates covering 17 years. Net portfolio debt inflows are negatively associated with growth during the mid 1990s. The magnitudes of the negative effect of surges in portfolio debt inflows on growth are substantial in the late 1990s for a number of countries. The effect of debt inflows on growth in the 2000s is rather muted. Surges in portfolio equity inflows also exhibit a negative association with aggregate growth in the manufacturing sector. For instance, the inflow surge during the financial liberalization period, 1993-1994, is associated with a sharp decline in aggregate manufacturing sector growth, but a rise in the growth of relatively more financially constrained industries. Equity inflows exhibited economically significant positive impact on the growth of financially constrained industries, unlike their negative impact on the average manufacturing growth rate. FDI inflows exhibit a positive association with aggregate manufacturing growth during most of the sample period, both at the aggregate level and specifically for the industries in need of external financing.
    JEL: F15 F21 F36 F43
    Date: 2011–07
  9. By: Bertocchi, Graziella
    Abstract: This essay investigates the determinants of the growth performance of Africa. I start by illustrating a broader research agenda which accounts not only for basic economic and demographic factors, but also for the role of history and institutional development. After reporting results from standard growth regressions, I analyze the role of Africa’s peculiar history, which has been marked by its colonization experience. Next I discuss the potential growth impact of state fragility, a concept which reflects multiple facets of the dysfunctions that plague the continent. The last topic I address is the influence, in and out of Africa, of the slave trades. The essay ends with critical conclusions and suggestions for further research.
    Keywords: Africa; colonization; Growth; history; institutions; slavery; state fragility
    JEL: H11 N17 O43
    Date: 2011–07
  10. By: Richard Bluhm; Adam Szirmai; UNICEF Innocenti Research Centre
    Abstract: The difference in the development experiences between the most developed countries and the least developed countries of today is vast. Luxembourg’s per capita income is 200 times larger than Liberia’s. Even within the developing world, growth is very unequal. East Asia and parts of Latin America are growing at impressive rates, while many other countries - especially in Sub-Saharan Africa - struggle with sluggish and volatile growth. This study discusses the theoretical challenge posed in identifying the mechanisms that link institutions and equitable economic growth at various levels of aggregation. The relationship between governance modes and institutions on the one hand, and economic growth and development on the other hand, may take very different forms. This relates to the question of whether a single and unique combination of institutions and governance modes is optimal for (equitable) growth, or whether different governance modes and institutions may lead to good or equitable growth performance in different locations and historical contexts.
    Keywords: development administration; growth policy; institutional framework;
    JEL: H1
    Date: 2011
  11. By: Claire Loupias (EPEE - Centre d'Etudes des Politiques Economiques - Université d'Evry-Val d'Essonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales); Bertrand Wigniolle (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper suggests a new explanation for changes in economic and population growth with a long run perspective, emphasizing the role of land in the development process. Starting from a pre-industrialization state called the "Malthusian regime&qot;, land and labor are the main production factors. The size of population is limited by the quantity of land available for households and by incomes. Technical progress driven by a "Boserupian effect" may push the economy towards a take-off regime. In this regime, capital accumulation begins and a "learning-by-doing" effect in production takes over from the "Boserupian effect". If this effect is strong enough, the economy can reach an "ultimate growth regime". In the different phases, land plays a crucial role.
    Keywords: Endogenous fertility, land, endogenous growth.
    Date: 2011–02
  12. By: YOSHIKAWA Hiroshi
    Abstract: This publication is in Japanese. Neither an English translation of the publication nor an English abstract is available.
    Date: 2011–01
  13. By: ITO Banri; YASHIRO Naomitsu
    Abstract: This publication is in Japanese. Neither an English translation of the publication nor an English abstract is available.
    Date: 2011–01
  14. By: Westermann, Frank; Dieckmann, Katharina
    Abstract: In this paper we re-evaluate the hypothesis that the development of the financial sector was an essential factor behind economic growth in 19th century Germany. We apply a structural VAR framework to a new annual data set from 1870 to 1912 that was initially recorded by Walther Hoffmann (1965). With respect to the literature, the distinguishing characteristic of our analysis is the focus on different sectors in the economy and the interpretation of the findings in the context of a two-sector growth model. We find that all sectors were affected significantly by shocks from the banking system. Interestingly, this link is the strongest in sectors with small, non-tradable goods producing firms, such as services, transportation and agriculture. In this regard, the growth patterns in 19th century Germany are reminiscent to those in today's emerging markets. --
    Keywords: Economic Growth,Financial Development,Sectoral asymmetries
    JEL: C22 N13 N23 O11
    Date: 2011

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