nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒01‒26
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Is Volatility Good for Growth? Evidence from the G7 By Elena Andreou; Alessandra Pelloni; Marianne Sensier
  2. Government spending and economic growth: evidence from Nigeria By Aladejare, Samson Adeniyi
  3. Sustainable Economic Growth: Structural Transformation with Consumption Flexibility By López, Ramón; Yoon, Sang Won
  4. The Impact of Economic Freedom on Economic Growth in the SADC: An Individual Component Analysis By Vsevolod I. Gorlach and Pierre Le Roux
  5. Economic segregation and urban growth By Li, Jing
  6. Inflation, inflation uncertainty and output in Tunisia By Hachicha, Ahmed; Wen, Ming-Chang
  7. On the Relevance of Exports for Regional Output Growth in China By Christian Dreger; Yanqun Zhang
  8. Modernization of Agriculture and Long-Term Growth By Dennis Tao Yang; Xiaodong Zhu

  1. By: Elena Andreou (Department of Economics, University of Cyprus); Alessandra Pelloni (Department of Economics, Law and Institutions, University of Rome "Tor Vergata"); Marianne Sensier (School of Social Sciences, University of Manchester)
    Abstract: We provide empirical support for an analytical DSGE model with nominal wage stickiness where growth is driven by learning-by-doing and money shocks and their variance are allowed to impact on long-run output growth. In our theoretical model the variance of monetary shocks has a negative effect on growth, while output volatility is good for growth as a positive relationship exists. Using a bivariate GARCH-M model we test the empirical conditional mean and variance relationships of nominal money and production growth rates in the G7 countries. We corroborate the theoretical model predictions with evidence from Bonferroni multiple tests across the G7.
    Keywords: growth uncertainty, learning-by-doing, monetary uncertainty, multivariate GARCH-in-mean, nominal rigidity
    JEL: C32 E32 O42
    Date: 2013–01–08
  2. By: Aladejare, Samson Adeniyi
    Abstract: This study examines the relationships and dynamic interactions between government capital and recurrent expenditures and economic growth in Nigeria over the period 1961 to 2010. Real Gross Domestic Product (RGDP) was used as a proxy for economic growth in the study.The analytical technique of Vector Error Correction Model and Granger Causality were exploited. Based on the result findings, it is evident that the Wagnerian and Rostow-Musgrave hypothesis were applicable to the relationship between the fiscal variables used in this study in Nigeria. The study therefore recommended among others that: there should be effective channeling of public funds to productive activities, which will have a significant impact on economic growth; there should be joint partnership between the government and the private sector in providing essential infrastructural services that will promote economic growth and development, etc.
    Keywords: Economic growth; Capital expenditure; Recurrent expenditure; Vector Error Correction; Causality
    JEL: E62
    Date: 2013–01–18
  3. By: López, Ramón; Yoon, Sang Won
    Abstract: The standard theoretical literature has shown that environmental sustainability and positive economic growth are not incompatible as long as environmental policies are optimal. However, in showing this result earlier studies have relied on strong assumptions that may appear to charge the dice in favor of such result. Here we show that once the role of the consumption composition effect is recognized, environmentally sustainable economic growth may exist even if some of the most questionable assumptions used by the canonical models are relaxed. In particular, we show that sustainable growth is possible even if environmental and man-made factors of production are complement rather than highly substitutable as has been invariably assumed by the literature and even if technological change is entirely pollution-augmenting.
    Keywords: Environmental Economics and Policy, International Development, O44, Q01, Q56,
    Date: 2013–01
  4. By: Vsevolod I. Gorlach and Pierre Le Roux
    Abstract: The SADC is attempting to achieve development and economic growth. This paper investigates the relationship between economic freedom – in aggregate and on an individual component basis – on economic growth in the SADC. The annual data for 13 SADC countries from 2000 to 2009 are used to construct a generalised method of moments, dynamic panel-data model. When cross-sectional dependence of the error term, individual- and time-specific effects are controlled, economic freedom and GDP per capita are positively related and freedom Granger-causes growth. All five individual components are highly significant and are positively related to growth; however, the magnitude of the elasticity parameters varies. The causality among the individual freedom components indicates that linkages exist between certain of these components.
    Keywords: Economic freedom, economic growth, SADC, causality, elasticity
    JEL: C33 O43 O55
    Date: 2013
  5. By: Li, Jing
    Abstract: Many studies have investigated the socioeconomic consequences of residential economic segregation in U.S. urban areas. These studies mainly focus on the impact of economic segregation on the poor or minorities and almost universally find that economic segregation hurts these groups in many ways. However, few studies investigate how economic segregation relates to the economic growth of an urban area as a whole. While there are papers that study this issue theoretically, empirical evidence is lacking. The motivation of this paper is to fill this gap. Using U.S. census data, this study documents a significant negative relationship between the initial levels of economic segregation in 1980 and the subsequent economic growth, indexed by metropolitan population growth, in 1980-2000 in U.S. metropolitan statistical areas (MSAs). Holding other things constant, MSAs having higher initial levels of economic segregation experienced substantially slower subsequent population growth.
    Keywords: economic segregation; human capital externalities; social interactions; urban growth
    JEL: D62 O40 R11
    Date: 2012–12–20
  6. By: Hachicha, Ahmed; Wen, Ming-Chang
    Abstract: This study investigates the relationship between inflation, inflation uncertainty and output in Tunisia using real and nominal data. GARCH-in-mean model with lagged variance equation is employed for the analysis. The result shows that inflation uncertainty has a positive and significant effect on the level of inflation only in the real term. Moreover, inflation uncertainty Granger-causes inflation and economic growth respectively. These results have important implications for the monetary policy in Tunisia. --
    Keywords: GARCH-M model,inflation,inflation uncertainty,output
    JEL: C22 E31
    Date: 2013
  7. By: Christian Dreger; Yanqun Zhang
    Abstract: Despite high economic growth during the last decades, China is still vulnerable to shocks arising from industrial states. The advanced economies determine Chinese export performance, with subsequent effects on output growth. Using a production function approach, this paper examines to which extent regional GDP growth in China is export driven. In a panel of 28 Chinese provinces, series are splitted into common and idiosyncratic components, the latter being stationary. The results indicate cointegration between the common components of GDP, the capital stock and exports. In equilibrium, exports increase GDP by more than their impact expected from the national accounts. While exports and capital are weakly exogenous, GDP responds to deviations from the long run. An adjustment pattern can be detected for almost all regions, except of some provinces in the Western part of the country.
    Keywords: Chinese economy, panel co-integration, expert led growth
    JEL: F43 O11 C23
    Date: 2013
  8. By: Dennis Tao Yang; Xiaodong Zhu
    Abstract: This paper develops a two-sector model that illuminates the role played by agricultural modernization in the transition from stagnation to growth. When agriculture relies on traditional technology, industrial development reduces the relative price of industrial products, but has a limited effect on per capita income because most labor has to remain in farming. Growth is not sustainable until this relative price drops below a certain threshold, thus inducing farmers to adopt modern technology that employs industry-supplied inputs. Once agricultural modernization begins, per capita income emerges from stasis and accelerates toward modern growth. Our calibrated model is largely consistent with the set of historical data we have compiled on the English economy, accounting well for the growth experience of England encompassing the Industrial Revolution.
    Keywords: long-term growth, transition mechanisms, relative price, agricultural modernization, structural transformation, the Industrial Revolution, England
    JEL: O41 O33 N13
    Date: 2013–01–18

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