nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2012‒04‒17
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Financial development and economic growth in Poland in transition: causality analysis By Gurgul, Henryk; Łukasz , Lach
  2. Energy Consumption and Economic Growth in China: A Reconciliation By A. Talha Yalta; Hatice Cakar
  3. Asymmetric trade liberalization, sector heterogeneity and industry productivity growth By Antonio Navas Ruiz
  4. A note on excess money growth and inflation dynamics: evidence from threshold regression By Saumitra, Bhaduri; Raja, Sethudurai
  5. Investment for Patience in an Endogenous Growth Model By Taketo Kawagishi
  6. Does Education Matter for Economic Growth? By Michael S. Delgado; Daniel J. Henderson; Christopher F. Parmeter
  7. A Regional Model of Endogenous Growth with Creative Destruction By Steven Bond-Smith
  8. Revisiting the growth-inflation nexus: a wavelet analysis By Saumitra, Bhaduri

  1. By: Gurgul, Henryk; Łukasz , Lach
    Abstract: The economic literature suggests that the efficient allocation of resources by the financial system speeds up economic development and reduces poverty. However, there are economists who find financial development to be the result of economic growth. This study examines causal relationship between economic growth and financial development in Poland on the basis of quarterly data for the period Q1 2000 – Q4 2009. The empirical research was performed in two variants: bank– and stock market–oriented approaches. The results suggest causality running from the development of the stock market to economic growth and from economic growth to the development of the banking sector. This implies that the direction of causality strongly depends on which particular area of the financial sector is considered. Empirical results were found to be robust both to the type of common variable applied and the specification of testing procedure, which clearly validates major conclusions of this paper.
    Keywords: financial development; economic growth; transition economies; Granger causality
    JEL: C32 O16 E44
    Date: 2011–09–10
  2. By: A. Talha Yalta; Hatice Cakar
    Date: 2012–04
  3. By: Antonio Navas Ruiz (Dpto. Fundamentos del Análisis Económico)
    Date: 2012–03
  4. By: Saumitra, Bhaduri; Raja, Sethudurai
    Abstract: We test the effect of excess money growth on inflation using Threshold Regression technique developed by Hansen (2000). The empirical test is conducted using annual data from India for the period from 1953-54 to 2007-08. The results clearly exhibits that the relationship is not linear and without a strong credit growth, excess money growth has lesser inflationary effects.
    Keywords: Excess Money Growth; Quantity Theory of Money; Inflation and Threshold Regression
    JEL: E51
    Date: 2012–04–11
  5. By: Taketo Kawagishi (Kyoto University)
    Abstract: This paper explores a one-sector AK model in which time preference depends on private investment in future-oriented resources along the lines of Becker and Mulligan (1997). Assuming that time preference is also affected by the social level of such investment and that of consumption, we show that multiple balanced growth path (BGP henceforth) equilibria can exist, and provide the conditions for multiple BGP equilibria. Furthermore, we clarify that the equilibrium path is indeterminate in the high-growth BGP equilibrium, while it is determinate in the low-growth BGP equilibrium. We also discuss the effect of a subsidy policy to private investment in future-oriented resources on an endogenous growth rate.
    Keywords: One-sector AK model; Endogenous time preference; Multiple balanced growth path equilibria; Subsidy policy
    JEL: E32 H23 O40
    Date: 2012–04
  6. By: Michael S. Delgado (Department of Economics, State University of New York at Binghamton); Daniel J. Henderson (Department of Economics, State University of New York at Binghamton); Christopher F. Parmeter (Department of Economics, University of Miami)
    Abstract: Empirical economic research typically uses education as a proxy for human capital. However, research aimed at validating the inclusion of education measures in growth regressions has yet to reach a consensus, often finding that the sign and significance of education depends on the sample of observations or the specification of the model. The goal of this paper is to reconcile the conflicting empirical evidence and validate (or invalidate) the inclusion of education in international growth regressions by providing a rigorous and systematic search for significance of education. Using methods which are largely immune to model misspecification, we examine six of the most comprehensive education databases in an attempt to identify a robust empirical link between mean years of schooling and economic growth rates. Contrary to a few recent papers that have identified significant nonlinearities between education and growth, our results show that the inclusion of mean years of schooling in growth regressions is not warranted.
    Keywords: Human Capital, Education, Irrelevant Variables, Least-Squares Cross-Validation, Nonparametric
    JEL: C14 J24 I20 O10 O40
    Date: 2011
  7. By: Steven Bond-Smith (University of Waikato)
    Abstract: We examine endogenous growth through vertical innovations in a two region model with partial regional and varietal knowledge spillovers. This paper extends the growth literature by adding a regional endogenous growth model with improvements in product quality, instead of a product variety engine for growth, where we account for partial knowledge spillovers in R&D. Starting with the quality ladders endogenous growth model we add traditional goods production by unskilled workers, location as a factor in R&D spillovers, migration of knowledge workers and vary the freeness of trade. Production of each manufactured variety is contestable through vertical innovation based on available knowledge and as a result, firms choose a location to maximise the productivity of R&D, maintain their niche monopoly and minimise transport costs. With contestability, knowledge spillovers provide for additional growth and the partial nature of spillovers causes an additional clustering effect encouraging agglomeration. Growth is highest when there is full agglomeration in one location, as knowledge spillovers are greater with manufacturing concentration. Agglomerated locations are reliant on local inter-varietal knowledge spillovers for growth while peripheral locations rely on trade and regional knowledge spillovers. In the long run, locations experience equal growth rates. If a location becomes agglomerated, it has higher long-run wages and higher growth rates during the transition to the long run. The model offers policy implications for lagging economies to improve inter-regional knowledge spillovers while agglomerated economies should be more concerned with business interaction within the region. Policies which reduce barriers to migration will increase long run growth rates by accelerating the transition to agglomeration.
    Keywords: endogenous growth; new economic geography; innovation; knowledge spillovers; agglomeration; quality ladders; creative destruction
    JEL: O41 R10
    Date: 2012–04–07
  8. By: Saumitra, Bhaduri
    Abstract: Motivated by the concern that the recent surge in inflation could retard growth, the paper revisits the nexus between inflation and growth from the perspective of an emerging economy, India. Examining this relationship using a wavelet multi resolution analysis with varying time scale decomposition suggests a strong and persistent negative relationship between growth and inflation for a short time scale, while it is not significant for a longer time scale.
    Keywords: Inflation Growth Wavelet
    JEL: E31
    Date: 2012–04–10

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