nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2012‒02‒20
ten papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Growth vs. level effect of population change on economic development: An inspection into human-capital-related mechanisms By Raouf BOUCEKKINE; B. MARTINEZ; J. R. RUIZ-TAMARIT
  2. Cointegration growth, poverty and inequality in Sudan By Mohamed Hassan, Hisham
  3. Decomposition of ethnic heterogeneity on growth By Yamamura, Eiji
  4. Granger causality between energy use and economic growth in France with using geostatistical models By Amiri, Arshia; Zibaei, Mansour
  5. Democracy and External Shock Resilience in Developing Countries. Evidence from the Great Recession By Essers, Dennis
  6. Is Economic Growth Criminogenic for Firms In Developing Economies? By Islam, Asif
  7. Through which channels can remittances spur economic growth in MENA countries? By Mim, Sami Ben; Ali, Mohamed Sami Ben
  8. The Conditions for a Balanced Growth in a Model with Public Finance: an Analytic Solution By Carboni, Oliviero; Russu, Paolo
  9. The Fiscal-Growth Nexus By António Afonso; João Tovar Jalles
  10. Real Exchange Rate and Economic Growth: Evidence from Chinese Provincial Data (1992 - 2008) By Jinzhao Chen

  1. By: Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), Center for Operations Research and Econometrics (CORE) and GREQAM,Aix-Marseille University, France); B. MARTINEZ (Department of Economics, Universidad Complutense de Madrid (Spain)); J. R. RUIZ-TAMARIT (Department of Economic Analysis, Universitat de Valencia (Spain), and Department of Economics, Université Catholique de Louvain (Belgium) (IRES))
    Abstract: This paper studies the different mechanisms and the dynamics through which demography is channelled to the economy. We analyze the role of demographic changes in the economic development process by studying the transitional and the long-run impact of both the rate of population growth and the initial population size on the levels of per capita human capital and income. We do that in an enlarged Lucas-Uzawa model with intergenerational altruism. In contrast to the existing theoretical literature, the long-run level effects of demographic changes, i.e. their impact on the levels of the variables along the balanced growth path, are deeply characterized in addition to the more standard long-run growth effects. We prove that the level effect of the population rate of growth is non-negative (positive in the empirically most relevant case) for the average level of human capital, but a priori ambiguous for the level of per capita income due to the interaction of three transmission mechanisms of demographic shocks, a standard one (dilution) and two non-standard (altruism and human capital accumulation). Overall, the sign of the level effects of population growth depend on preference and technology parameters, but numerically we show that the joint negative effect of dilution and altruism is always stronger than the finduced positive human capital effect. The growth effect of population growth depends basically on the attitude to intergenerational altruism and intertemporal substitution. Moreover, we also prove that the long-run level effects of population size on per capita human capital and income may be negative, nil, or positive, depending on the relationship between preferences and technology, while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long term.
    Keywords: Human Capital, Population Growth, Population Size, Endogenous Growth, Level Effect, Growth Effect
    JEL: C61 C62 E2 J10 O41
    Date: 2011–10–28
  2. By: Mohamed Hassan, Hisham
    Abstract: This analytical review explores the links between growth, poverty and inequality in Sudan for the period 1956-2003. This paper build upon different models to investigate empirically the relationship between economic growth – as measured by GDP per capita growth- and inequality as measured by Gini coefficient (the growth, inequality and poverty triangle hypotheses), using data from the national and international sources. The paper tries to answer the following questions: i) whether growth, inequality and poverty are cointegrated, ii( whether growth Granger causes inequality, iii) and whether inequality Granger causes poverty. Finally, a VAR is constructed and impulse response functions (IRFs) are employed to investigate the effects of macroeconomic shocks. The results suggest that growth; poverty and inequality are cointegrated when poverty and inequality are the dependent variable, but are not cointegrated when growth is the dependent variable. In the long- run the causality runs from inequality, poverty to growth, to poverty. In the short-run causal effects, runs from poverty to growth. Thus, there is unidirectional relationship, running from growth to poverty, both in the long- run and short run
    Keywords: growth; poverty; inequality; Sudan
    JEL: D63 C22 A10 C01
    Date: 2008–05
  3. By: Yamamura, Eiji
    Abstract: Ethnic heterogeneity influences economic growth through various channels such as efficiency improvement, capital accumulation, and technological progress. However, it is open to discussion exactly how ethnic heterogeneity affects these channels. Hence, this paper attempts to examine the effects of heterogeneity on economic growth using data envelopment analysis. The empirical results of the estimations show that heterogeneity has a negative effect on efficiency improvements. However, heterogeneity has no effect on technological progress and capital accumulation. This implies that ethnic heterogeneity hinders positive externalities such as information spillover, which hampers economic growth.
    Keywords: Ethnic fractionalization; Ethnic polarization; Efficiency improvement; Capital accumulation
    JEL: H11 O43
    Date: 2012–01–28
  4. By: Amiri, Arshia; Zibaei, Mansour
    Abstract: This paper introduces a new way for investigating linear and nonlinear Granger causality between energy use and economic growth in France over the period 1960_2005 with using geostatistical models (kiriging and IDW). This approach imitates the Granger definition and structure and also, improves it to have better ability for probe nonlinear causality. Results of both VEC and Improved-VEC (with geostatistical methods) are almost same. Both show the existence of long run unidirectional causality from energy consumption to economic growth. The geostatistical analyzing shows there are some Exponential functions in VEC structure instead of linear form.
    Keywords: Granger causality; Energy consumption; GDP; Geostatistical model; France
    JEL: Q4
    Date: 2012–02–02
  5. By: Essers, Dennis
    Abstract: While some developing countries appear to have been largely unaffected by the Great Recession that originated in advanced economies, others took a severe blow in 2008-2009. A number of recent studies have attempted to explain the observed heterogeneity of developing country growth performances during the latest global financial and economic crisis by linking it to pre-crisis macro-economic and financial country features - with rather mixed success. In this newly emerging body of research, surprisingly little attention has, however, been paid to institutional differences between countries, and the variation in political institutional arrangements more particularly. The current paper takes a first shot at bridging this hiatus by gauging the impact of democracy on the crisis growth of developing countries. From a theoretical point of view, and as suggested in the political economy literature, democracy could be either growthretarding or growth-enhancing in times of economic crisis, the overall effect ultimately being an empirical question. Using a cross-section sample of more than 100 non-advanced countries and controlling for a range of macroeconomic, financial and standard institutional factors as well as pre-crisis trends, we find evidence suggesting that, on the whole, democratic country features are negatively correlated with growth performance during the 2008-2009 global crisis. Our findings are seemingly robust to the use of various sets of controls, different estimators, several country subsamples and alternative measures of democracy and crisis growth.
    Keywords: Global Financial Crisis, Growth, External Shocks, Democracy
    Date: 2012–01
  6. By: Islam, Asif
    Abstract: Several studies have explored the relationship between economy level crime rates or individual level crime and economic growth. However, few studies have examined the relationship between economic growth and crime against firms which is an important issue especially for developing economies. Using data for about 12,000 firms in 27 developing countries we find that economic growth has a negative effect on crime. We also find that several macro-economic factors can weaken or strengthen the relationship between crime and economic growth. The results are robust to various sensitivity checks.
    Keywords: Crime; Firms; Economic Growth; Development
    JEL: O10 K42 O50 O40
    Date: 2012–12–15
  7. By: Mim, Sami Ben; Ali, Mohamed Sami Ben
    Abstract: This paper studies the remittances' effect on economic growth. Using panel data techniques, the authors estimate several specifications to provide support of such relationship for MENA countries over the period 1980-2009. The findings provide new robust evidence on how remittances are used in MENA countries and show the main channels which may interfere in this process. Estimation outcomes show that the most important part of remittances is consumed and that remittances stimulate growth only when they are invested. Moreover, empirical results suggest that remittances can enhance growth by encouraging human capital accumulation. Human capital is therefore an effective channel through which remittances stimulate growth in MENA countries. --
    Keywords: Workers' remittances,economic growth,panel data,MENA zone
    JEL: E21 F21 G22 J61 O16
    Date: 2012
  8. By: Carboni, Oliviero; Russu, Paolo
    Abstract: This paper studies the equilibrium dynamics of a growth model with public finance where two different allocations of public resources are considered. The model simulta- neously determines the optimal shares of consumption, capital accumulation, taxes and composition of the two different public expenditures which maximize a representative household’s lifetime utilities for a centralized economy. The analysis supplies a closed form solution. Moreover, with one restriction on the parameters ( = ) we fully de- termine the solutions path for all variables of the model and determine the conditions for a balanced growth.
    Keywords: growth models; fiscal policy; public spending composition
    JEL: H50 H20 O40
    Date: 2011
  9. By: António Afonso; João Tovar Jalles
    Abstract: We assess the fiscal-growth nexus with a large country panel, accounting for the usually encountered econometric pitfalls. Our results show that revenues have no significant impact on growth whereas expenditures have negative effects. The same is true for the OECD with the addition that government revenue has a negative impact on growth. Taxes on income are usually detrimental to growth, as well as public wages, interest payments, subsidies and government consumption have a negative effect on growth. Social spending is detrimental to growth; spending on education and health boosts growth; and there is weak evidence supporting causality running from expenditures and revenues to output and TFP.
    Keywords: budgetary decomposition, crises, panel analysis.
    JEL: C23 E62 H50
    Date: 2012–01
  10. By: Jinzhao Chen (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper studies the convergence, and the role of internal real exchange rate on economic growth in the Chinese provincial level. Using informal growth equation à la Barro [1991] and dynamic panel data estimation, we find conditional convergence among the coastal provinces and among inland provinces. Moreover, our results show that the real exchange rate appreciation has a positive effect on the provincial economic growth.
    Keywords: Real Exchange Rate ; Economic Growth ; China ; Generalized method of moments
    Date: 2012–02

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