nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒02‒08
seven papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Public Debt and Economic Growth in Advanced Economies: A Survey By Ugo Panizza; Andrea Filippo Presbitero
  2. The impact of volatility on economic growth By Aurelijus Dabušinskas; Dmitry Kulikov; Martti Randveer
  3. The relationship between international tourism and economic growth: the case of Morocco and Tunisia By Bouzahzah, Mohamed; El Menyari, Younesse
  4. Long and short-term effects of the financial crisis on labour productivity, capital and output By Oulton, Nicholas; Sebastia-Barriel, Maria
  5. Modelling Tails of Aggregated Economic Processes in a Stochastic Growth Model By Stéphane Auray; Aurélien Eyquem; Fréderic Jouneau-Sion
  6. Finance and Economic Development in a Model with Credit Rationing By Jean-Louis Arcand, Enrico Berkes, Ugo Panizza
  7. China's Growth in Transition: Implications for the Thai Economy By Dr. Nasha Ananchotikul; Dr. Pornpinun Chantapacdepong; Chotima Sitthichaiviset

  1. By: Ugo Panizza (UNCTAD and The Graduate Institute, Geneva); Andrea Filippo Presbitero (Universit… Politecnica delle Marche, MoFiR)
    Abstract: This paper surveys the recent literature on the links between public debt and economic growth in advanced economies. We find that theoretical models yield ambiguous results. Whether high levels of public debt have a negative effect on long-run growth is thus an empirical question. While many papers have found a negative correlation between debt and growth, our reading of the empirical literature is that there is no paper that can make a strong case for a causal relationship going from debt to economic growth. We also find that the presence of thresholds and, more in general, of a non-monotone relationship between debt and growth is not robust to small changes in data coverage and empirical techniques. We conclude with a discussion of the challenges involved in measuring and defining public debt and some suggestions for future research which, in our view, should emphasize cross-country heterogeneity.
    Keywords: Government Debt, Growth, OECD countries
    JEL: F33 F34 F35 O11
    Date: 2013–01
  2. By: Aurelijus Dabušinskas; Dmitry Kulikov; Martti Randveer
    Abstract: This paper investigates the impact of macroeconomic volatility on growth in a panel of 121 countries over the period 1980 to 2010. We confirm the Ramey and Ramey (1995) result that macroeconomic volatility is negatively related to economic growth using a different empirical methodology and a newer dataset. Among the issues that await further work are the interaction of financial development and volatility, potential non-linearities of the impact of macroeconomic volatility on growth, and issues related to the endogeneity of growth and volatility in the context of empirical growth regression models
    Keywords: economic growth, macroeconomic volatility, growth regressions, panel data
    JEL: E40 O40 C33
    Date: 2013–02–04
  3. By: Bouzahzah, Mohamed; El Menyari, Younesse
    Abstract: This study proposes to examine the impact of tourism activity on the economic growth of Morocco and Tunisia. We contribute here to the empirical literature on the tourism-led growth (TLG) hypothesis, by adopting the error correction model framework, the cointegration and Granger Causality tests between real tourism receipts, real effective exchange rate and economic growth in Morocco and Tunisia, for the annual period 1980-2010; two main results emerge from this analysis. First, contrary to the predictions of the TLG hypothesis, the Granger test results show that this hypothesis is only valid for short-term in the two countries of Maghreb. Second, the results show that in the long term, there is a strong unidirectional causality from economic growth to international tourism receipts.
    Keywords: TLG hypothesis; tourism receipts; economic growth; cointegration; Granger causality; Morocco and Tunisia
    JEL: C32 O57 L83 E01 F43
    Date: 2013–01
  4. By: Oulton, Nicholas (Bank of England); Sebastia-Barriel, Maria (Bank of England)
    Abstract: The behaviour of labour productivity in the United Kingdom since the onset of the recession in early 2008 constitutes a puzzle. Over four years after the recession began labour productivity is still below its previous peak level. This paper considers the hypothesis that economic capacity can be permanently damaged by financial crises. A model which allows a financial crisis to have both a short-run effect on the growth rate of labour productivity and a long-run effect on its level is estimated on a panel of 61 countries over 1955-2010. The main finding is that a banking crisis as defined by Reinhart and Rogoff on average reduces the short-run growth rate of labour productivity by between 0.6% and 0.7% per year and the long-run level by between 0.84% and 1.1% (depending on the method of estimation), for each year that the crisis lasts. A banking crisis also reduces the long-run level of capital per worker by an average of about 1%. The corresponding effect on GDP per capita is about double the effect on GDP per worker since there is a long-run, negative effect on the employment ratio.
    Keywords: productivity; financial; banking crisis; recession
    JEL: E23 E32 J24 O47
    Date: 2013–01–24
  5. By: Stéphane Auray (ENSAI); Aurélien Eyquem (Université de Lyon); Fréderic Jouneau-Sion (Université de Lille)
    Abstract: We present an annual sequence of wages in England starting in 1245. We show that a standard AK-type growth model with capital externality and stochastic productivity shocks is unable to explain important features of the data. We then consider random returns to scale. Moderate episodes of increasing returns to scale and growth are shown to be compatible with stationarity. Further, random returns to scale generate heteroskedasticity, a feature common to macroeconomic time series. Third, stationary distributions display fat tails if returns to scale are episodically increasing. We provide several inference results to support randomness of returns to scale.
    Keywords: Economic growth, Unified growth theory, Heteroskedasticity, Fat tails
    JEL: C22 C46 N13 O41 O47
    Date: 2012–10
  6. By: Jean-Louis Arcand, Enrico Berkes, Ugo Panizza (Graduate Institute of International Studies)
    Abstract: This paper develops a simple model with credit rationing and endogenous default risk in which the expectation of a bailout may lead to a financial sector which is too large with respect to the the social optimum. The paper concludes with a short discussion of how this model could be used as a building block for models aimed at endogenizing the probability of a bailout, and discussing the relationship between the size of the finanancial sector and economic growth in the presence of default risk.
    Date: 2013–02–01
  7. By: Dr. Nasha Ananchotikul (Bank of Thailand); Dr. Pornpinun Chantapacdepong (Bank of Thailand); Chotima Sitthichaiviset (Bank of Thailand)
    Abstract: China has rapidly emerged as a global economic superpower and is expected to remain the main growth driver in the next phase of the global economy. Questions often raised are: How long can China’s extraordinary growth be sustained? What direction the Chinese economy is heading towards and what does it imply about opportunities and risks for other countries, including Thailand from our point of interest? From a review of China’s growth pattern and an in-depth analysis of sources of growth, we put forward that, in the short to medium term, China’s potential output growth will remain strong driven mainly by continued capital deepening. In the longer term, however, factor market distortions, misallocation of resources, and the demographic shift in China will increasingly become the key bottlenecks to China’s sustainable growth. Realizing these growth limitations, the Chinese leaders have recently shifted the growth paradigm by resorting to technology leapfrogging in lifting productivity and moving up the value chain. This will significantly change the future pattern of production and exports in China. The Thai economy has greatly benefited from the rising of the Chinese economy through various trade channels. But in order for Thailand to continue to reap these benefits, a sole reliance on the same export pattern will not be enough. Thailand should learn from China’s success in productivity and industrial upgrading and technological advancement, as serious efforts in this direction are much needed for Thailand to escape the middle income trap.
    Keywords: consumption,China's Growth in Transition
    JEL: O14 O16 O25 O38 O43
    Date: 2012–10–21

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