nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2012‒03‒21
five papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Energy Consumption and Economic Growth: Evidence from Nonlinear Panel Cointegration and Causality Tests By Tolga Omay; Mubariz Hasanov; Nuri Uçar
  2. India’s Growth Spillovers to South Asia By Iyabo Masha; Ding Ding
  3. Gender inequality and economic growth: a time series analysis for Pakistan By Pervaiz, Zahid; Chani, Muhammad Irfan; Jan, Sajjad Ahmad; Chaudhary, Amatul R.
  4. Growth and Election Outcomes in a Developing Country By Poonam Gupta; Arvind Panagariya
  5. Asset bubbles, economic growth, and a self-fulfilling financial crisis: a dynamic general equilibrium model of infinitely lived heterogeneous agents By Kunieda, Takuma; Shibata, Akihisa

  1. By: Tolga Omay (Cankaya University, Department of International Trade Management); Mubariz Hasanov (Hacettepe University, Department of Economics); Nuri Uçar (Hacettepe University, Department of Economics)
    Abstract: In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7 countries covering the period 1977-2007. Moreover, we estimate a nonlinear Panel Vector Error Correction Model in order to analyze the direction of the causality between energy consumption and economic growth. By using nonlinear causality tests we analyze the causality relationships in low economic growth and high economic growth regimes. Furthermore, we deal with the cross section dependency problem in both nonlinear panel cointegration test and nonlinear Panel Vector Error Correction Model.
    Keywords: Nonlinear panel cointegration; nonlinear Panel Vector Error Correction Model; cross section dependency
    JEL: C12 C22
    Date: 2012
  2. By: Iyabo Masha; Ding Ding
    Abstract: This study investigates the role of India’s economy in explaining the observed growth in South Asia, taking into consideration other sources of growth endogenous to the countries in the region. Since a review of key variables indicates that India’s bilateral trade and financial linkages with South Asian countries (SAC) are relatively weak, the paper analyses the spillover effects by focusing on growth more generally with India’s growth as an explanatory variable. The results of the panel growth regressions suggest that India’s growth has good explanatory power for growth in other SAC after 1995.
    Keywords: Economic growth , Economic integration , South Asia , Spillovers , Trade liberalization ,
    Date: 2012–02–23
  3. By: Pervaiz, Zahid; Chani, Muhammad Irfan; Jan, Sajjad Ahmad; Chaudhary, Amatul R.
    Abstract: This paper attempts to analyze the impact of gender inequality on economic growth of Pakistan. An annual time series data for the period of 1972-2009 has been used in this study. We have regressed growth rate of real gross domestic product (GDP) per capita on labour force growth, investment, trade openness and a composite index of gender inequality. The results reveal that labour force growth, investment and trade openness have statistically significant and positive impact whereas gender inequality has a significant and negative effect on economic growth of Pakistan.
    Keywords: Gender inequality; Economic Growth; Time Series
    JEL: F43 J16
    Date: 2011
  4. By: Poonam Gupta (NIPFP, India); Arvind Panagariya (Columbia University)
    Abstract: With the exception Brander and Drazen (2008), who use a comprehensive cross-country database consisting of both developed and developing countries, the hypothesis that rapid growth helps incumbents win elections has been tested exclusively for the developed countries (e.g., Ray Fair 1978). But since sustained rapid growth offers the prospect of pulling vast numbers of the voters out of poverty within a generation, such an effect is far more likely to be present in the developing rather than developed countries. In this paper, we offer the first test of the hypothesis on a large developing and poor country, India, which has seen its economy grow 8 to 9 percent recently. We first generalize the Fair model to allow for multiple candidates instead for just two and then test it using cross-state data. We find quantitatively large and statistically robust effect of growth on the prospects of the candidates of the state incumbent parties to win elections. Specifically, we use the data on 422 candidates in the 2009 parliamentary elections and show that the candidates of incumbent parties in high-growth states have much better prospects of victory than those in low-growth states.
    Keywords: India, growth, elections, developing country, poverty
    Date: 2011–08
  5. By: Kunieda, Takuma; Shibata, Akihisa
    Abstract: We develop a dynamic general equilibrium growth model with infinitely lived heterogeneous agents to describe a self-fulfilling financial crisis accompanied by an asset bubble burst as a rational expectations equilibrium. Because of financial market imperfections, asset bubbles appear under mild parameter conditions even though we assume infinitely lived agents. Although these bubbles have both a crowd-in liquidity effect and a crowd-out effect on investment, the former effect always dominates the latter. Thus, a self-fulfilling financial crisis accompanied by an asset bubble burst results in an economic recession. This phenomenon is consistent with empirical observations on financial crises in the existing literature. In addition, we present an effective government policy to avoid self-fulfilling financial crises.
    Keywords: Crowd-in effect of bubbles; Financial market imperfections; Sunspots; Self-fulfilling financial crisis; Economic growth
    JEL: E44
    Date: 2012–03–13

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