nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2012‒01‒25
ten papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Welfare improving taxation on savings in a growth model By Long Xin; Pelloni Alessandra
  2. Causal links between trade, foreign direct investment and economic growth for Bangladesh By Syed Imran Ali Meerza
  3. Capital accumulation and growth in Central Europe, 1920-2006 By Bas van Leeuwen; Peter Földvari
  4. Energy Savings via Foreign Direct Investment? - Empirical evidence from Portugal By João Paulo Bento
  5. Growth and volatility reconsidered: reconciling opposite views By Bisio, Laura; Ventura, Luigi
  6. Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006) By ADESOYE, A. Bolaji; MAKU, Olukayode E.; ATANDA, Akinwande A.
  7. No Appealing Future For High Growth – Low Profitability Firms: Evidence from Turkey’s Top 1000 By Nuri Yildirim
  8. Fiscal policy, public expenditure composition and growth. theory and empirics By Willi, Semmlero; Alfred, Greiner; Bobo, Diallo; Anand, Rajaram; Armon, Rezai
  9. Model of Financial Development: A cluster analysis By Dalila NICET-CHENAF (GREThA, CNRS, UMR 5113)
  10. The Role of Human Capital in the Process of Economic Development: The Case of England, 1307-1900 By Alexandra M. de Pleijt

  1. By: Long Xin; Pelloni Alessandra
    Keywords: Capital Income taxes, R&D, growth effect, welfare effect
    JEL: E62 H21 O41
    Date: 2011–12
  2. By: Syed Imran Ali Meerza (Graduate Research Assistant, Department of Economics, South Dakota State University)
    Abstract: This study investigates empirically the causal relationship between trade, foreign direct investment (FDI) and economic growth of Bangladesh for the period of 1973 to 2008. To analyze this Johansen cointegration test and Granger causality test are used. The cointegration analysis suggests that there is a long run equilibrium relationship among the variables. The results of Granger causality test identifies that there is a causal relationship among the mentioned variables. According to the study, economic growth of Bangladesh leads both FDI and export growth and there is a unidirectional causal relationship between FDI and export with direction from export to FDI.
    Keywords: gross domestic product, foreign direct investment, export, Johansen cointegration test and Granger causality
    Date: 2012–01
  3. By: Bas van Leeuwen; Peter Földvari
    Abstract: Central and Eastern Europe is a region with widely divergent development paths. Up to WWII, these countries experienced comparable growth patterns. Yet, whereas Austria and West Germany remained part of the capitalist West and underwent periods of rapid growth, other countries, under state-socialist regimes, experienced on average far lower growth rates. The lack of data, however, often limits the possibilities of a detailed, quantitative analysis. In this paper, we use a new dataset on physical and human capital in seven Eastern and Central European countries for the period 1920-2006 to calculate the effect on economic growth. We analyse the effect of including the quality of education in human capital. This allows us to perform a growth accounting analysis with the several production factors for Central Europe between 1920 and the present. The difference in growth path across countries is partly explained by differences in efficiency.
    Keywords: Eastern Europe, human capital, physical capital, growth accounting, efficiency, long run growth
    Date: 2011–12
  4. By: João Paulo Bento (Research Unit in Governance, Competitiveness and Public Policy and Department of Economics Management and Industrial Engineering, University of Aveiro, 3810-193 Aveiro, Portugal)
    Abstract: This study runs a cointegration analysis on annual data from 1980 to 2007 to investigate the relationship between primary energy consumption, economic growth and net inflows of foreign direct investment with the Engle and Granger method, Stock-Watson dynamic ordinary least squares (DOLS), the bounds testing approach to cointegration and error correction modelling. The empirical results suggest that there is a stable long run linear cointegration relationship between these three variables. While income has a large and positive influence on energy consumption, the results point to a small but negative effect of foreign direct investment (FDI) on energy consumption. As for the short-run relationship among the series, the estimation and inference in the autoregressive distributed lag error correction model (ARDL) further confirm this link. These findings have important policy implications, since the promotion of appropriate structural policies aiming at attracting foreign investment can induce energy conservation without obstructing economic growth.
    Keywords: energy consumption, economic growth, foreign direct investment, cointegration
    JEL: Q54 F21
    Date: 2011–11
  5. By: Bisio, Laura; Ventura, Luigi
    Abstract: Many contributions in the recent literature have investigated over the relationship between growth and its volatility, without getting a clear and unambiguous answer. Besides reassessing the well-known effect of output volatility on growth as benchmark analysis, this study aims at looking into the "black box" of the business cycle volatility by disentangling the impacts of volatility of GDP major components - i.e. private consumption, private investment and government expenditure - on growth, simultaneously considered. Our empirical analysis unveils a remarkably robust and strong negative correlation of consumption volatility with mean growth, and a positive one with volatility of investment and of public expenditure. If these findings shed some additional light on the (still controversial) relationship between economic fluctuations and growth, they also make it possible to compare the relative impact of each component, with possibly relevant policy implications. Importantly, this might reconcile opposite views about the issue, in that different empirical results might originate from the relative importance across empirical studies of the various components of volatility.
    Keywords: growth and volatility; panel data estimation; GMM
    JEL: N10 E32 C23 O40
    Date: 2012–01
  6. By: ADESOYE, A. Bolaji; MAKU, Olukayode E.; ATANDA, Akinwande A.
    Abstract: This study critically examines the implications of capital flight on investment growth in Nigeria between 1970 and 2006, because of the consequential effect it has on economic growth. The time series data properties incorporated were examined using the Augmented Dickey-Fuller (ADF) unit root test and the results revealed that Investment, capital flight, interest rate and exchange rate were stationary at levels excluding exchange rate found to be integrated at first difference. The Augmented Engle-Granger (AEG) co-integration test employed to investigate the dynamic relationship between capital flight and investment level in Nigeria, revealed that there exist long-run interaction. Though, capital flight was found to exert positive but insignificant effect on investment growth during the review period. While, the short-run dynamic interaction as a result of the structural instability in the long-run was captured by the Error Correction Mechanism (ECM) model which was found inestimable due to the high collinearity existing among the incorporated variables. Policy recommendations were proffered base on the research findings.
    Keywords: Capital flight; Investment behaviour; Long-run; Stationarity; ECM; Cointegration; Nigeria
    JEL: E22 E00 C22 A10
    Date: 2012
  7. By: Nuri Yildirim (Yasar University)
    Abstract: The view that profitability, not growth, is the driving force behind the firm performance, and unprofitable high growth can not lead to financial success has often been discussed in the literature. In this study, I tested this hypothesis on Turkey’s top 1000 data using an extended version of the method of Davidson et al. (2009). My sample strongly supports the hypothesis that controlling for leverage, low growth-high profitability (profit) firms outperform high growth-low profitability (growth) firms regarding both directions of their transition to an upper state and a lower state in subsequent periods. The hypothesis that controlling for type of firm (growth or profit firm), leverage matters with respect to firm’s future performance is weakly supported by 3-year transition data.
    Keywords: Firm performance, growth, profitability, Turkey
    Date: 2011
  8. By: Willi, Semmlero; Alfred, Greiner; Bobo, Diallo; Anand, Rajaram; Armon, Rezai
    Abstract: This paper responds to the development policy debate involving the World Bank and the IMF on the use of fiscal policy not only for economic stabilization but also to promote economic growth and increase per capita income. A key issue in this debate relates to the effect of the composition of public expenditure on economic growth. Policy makers and some researchers have argued that expenditure on growth-enhancing functions could enhance future revenue and justify the provision of "fiscal space" in the budget. But there are no simple ways to identify the growth-maximizing composition of public expenditure. The current paper lays out a research strategy to explore the effects of fiscal policy, including the composition of public expenditure, on economic growth, using a time series approach. Based on the modeling strategy of Greiner, Semmler and Gong (2005) we develop a general model that features a government that undertakes public expenditure on (a) education and health facilities which enhance human capital, (b) public infrastructure such as roads and bridges necessary for market activity, (c) public administration to support government functions, (d) transfers and public consumption facilities, and (e) debt service. The proposed model is numerically solved, calibrated and the impact of the composition of public expenditure on the long-run per capita income explored for low-, lower-middle- and uppermiddle-income countries. Policy implications and practical policy rules are spelled out, the extension to an estimable model indicated, a debt sustainability test proposed, and the out-of-steady-state dynamics studied.
    Keywords: Infrastructure investment; Economic growth; Compostion of the public budget; Financing public expenditures; Public deficit; Public debt
    JEL: H4 E2 H1 H5 H2 E6 H3
    Date: 2011–07
  9. By: Dalila NICET-CHENAF (GREThA, CNRS, UMR 5113)
    Abstract: This article is a contribution to the analysis of financial development diversity in developing countries and lies within model of capitalism’s framework. By taking into account the degree of control of banking system and securities markets, our empirical analysis produces a three-group typology identifying an embryonic financial system, an intermediate financial system bank oriented and a financial system in maturity. Moreover, this typology cannot support the hypothesis of a model specific to emerging countries but a model for LDC countries and a model for developed countries.
    Keywords: Financial development, growth, models of capitalism, factorial analysis, and cluster analysis.
    JEL: O16 O10 O43 C8 F3
    Date: 2012
  10. By: Alexandra M. de Pleijt
    Abstract: Macroeconomic growth models underline the importance of human capital in the process of economic development. This analysis introduces a new proxy for human capital, which is educational attainment, and examines cohesion between education levels and growth for England between 1307 and 1900. The empirical evidence suggests no significant result between basic skills, such as reading and writing abilities, and growth of per capita GDP. More progressive human capital levels, as measured by average years of higher education, seem to have contributed to the process of development until the mid-eighteenth century.
    Keywords: Economic development, human capital, history of education, England
    Date: 2011–12

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