nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒04‒27
twelve papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. The Effect of Growth Volatility on Income Inequality By Ho-Chuan (River) Huang; WenShwo Fang; Stephen M. Miller
  2. Banking Market Structure, Liquidity Needs, and Industrial Growth Volatility By Ho-Chuan (River) Huang; Stephen M. Miller
  3. The Causal Relationship between Imports and Economic Growth in the Nine Provinces of South Africa: Evidence from Panel-Granger Causality Tests By Tsangyao Chang; Beatrice D. Simo-Kengne; Rangan Gupta
  4. Endogenous growth and intellectual property rights: a North-South modelling proposal By Mónica L. Azevedo; Óscar Afonso; Sandra T. Silva
  5. Is Africa's recent growth sustainable? By Andersen, Thomas Barnebeck; Jensen, Peter Sandholt
  6. Loans Growth and Banks’ Risk: New Evidence By Juan Sebastián Amador Torres; José Eduardo Gómez G.; Andrés Murcia Pabón
  7. The Costs of Increasing the Fertility Rate in an Endogenous Growth Model By Stauvermann, Peter J.; Ky , Sereyvath; Nam, Gi-Yu
  8. Productivity and Economic Growth in the Canadian Provinces, 1997 to 2010 By Gu, Wulong<br /> Lee, Beatrix
  9. The Effect of Public Capital on Aggregate Output – Empirical Evidence for 22 OECD Countries – By Wesselhöft, Jan-Erik
  10. Government Solvency, Austerity and Fiscal Consolidation in the OECD: A Keynesian Appraisal of Transversality and No Ponzi Game Conditions By Azizi, Karim; Canry, Nicolas; Chatelain, Jean-Bernard; Tinel, Bruno
  11. The expectations-driven US current account By Hoffmann, Mathias; Krause, Michael U.; Laubach, Thomas
  12. The impact of gender wage gap on sectoral economic growth – cross-country approach By Joanna Wolszczak-Derlacz

  1. By: Ho-Chuan (River) Huang (Department of Banking and Finance, Tamkang University); WenShwo Fang (Department of Economics, Feng Chia University); Stephen M. Miller (Department of Economics, University of Nevada, Las Vegas)
    Abstract: This paper assesses the long-run effect of growth volatility on income inequality using a comprehensive panel of annual U.S. state-level data during the 1945 to 2004 period. Using the pooled mean group (PMG) estimator, we find overwhelming evidence supporting the hypothesis that larger growth volatility positively and significantly associates with higher income inequality. In addition, our key finding is robust to alternative lag structures, conditioning variables, inequality measures, volatility indicators, and time periods.
    Keywords: Income Inequality, Growth Volatility, Mean Group Estimator, Pooled Mean Group Estimator
    JEL: C23 D31 O40
    Date: 2012–04
  2. By: Ho-Chuan (River) Huang (Department of Banking and Finance, Tamkang University Author-Name: WenShwo Fang; Department of Economics, Feng Chia University); Stephen M. Miller (Department of Economics, University of Nevada, Las Vegas)
    Abstract: While the existing literature acknowledges the effect of banking structure on industrial growth as well as the effect of financial development on industrial growth and its volatility, we examine whether banking structure, given bank (financial) development, exerts any nontrivial effect on industrial growth volatility. We show that bank concentration magnifies industrial growth volatility, but reduces the volatility in sectors with higher external liquidity needs. The reduction in industrial growth volatility mostly reflects the smoothing in the variance of real value added per firm growth. Finally a variety of sensitivity checks show that our findings remain for different model specifications, banking market structure measures, liquidity needs indicators, and omitted variables.
    Keywords: Bank Concentration, External Liquidity, Bank Development, Industrial Growth Volatility.
    JEL: G2 O16 E32
    Date: 2012–12
  3. By: Tsangyao Chang (Department of Finance, Feng Chia University, Taichung, Taiwan); Beatrice D. Simo-Kengne (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: This paper examines the causal relationship between imports and growth in nine provinces of South Africa for the period 1996-2011, using panel causality analysis, which accounts for cross-section dependency and heterogeneity across regions. Our empirical results support unidirectional causality running from economic growth to imports for Gauteng, Mpumalanga, North West, and Western Cape; a bi-directional causality between imports and economic growth for KwaZulu-Natal; and no causality in any direction between economic growth and imports for the rest of provinces. This suggests that import liberalisation might not be an efficient strategy to improve provincial economic performance in South Africa. Indeed, provincial imports tend to increase in some provinces as economic growth improves.
    Keywords: Imports, Economic Growth, Dependency and Heterogeneity, Panel Causality Test
    JEL: C33 F14 R11 R12
    Date: 2013–04
  4. By: Mónica L. Azevedo (Faculdade de Economia, Universidade do Porto); Óscar Afonso (CEF.UP, Faculdade de Economia, Universidade do Porto); Sandra T. Silva (CEF.UP, Faculdade de Economia, Universidade do Porto)
    Abstract: In what form should the Intellectual Property Rights (IPR) be treated in an endogenous growth model? What are the effects of introducing IPR into a North-South endogenous growth model? In this paper, we develop a general equilibrium endogenous growth model that emphasizes the IPR enforcement effects on growth, in a scenario of North-South technological knowledge diffusion. The economy consists of three sectors, and firms are engaged in step-by-step innovation. In line with the literature, we introduce an IPR parameter that makes imitation more difficult. We find that, in steady state, the increases in IPR protection result in decreases in the growth rate. This result is in line with the literature, which argues that the enforcement of IPR does not always have a positive effect on economic growth and highlights that there is much more work to be done in this field of study, given that the existing results are not consensual. To sum up, we present some suggestions for future research which can help to clarify the relationship between IPR and endogenous growth.
    Keywords: Intellectual Property Rights (IPR), economic growth, North-South model
    JEL: O33 O34 O41
    Date: 2013–04
  5. By: Andersen, Thomas Barnebeck (Department of Business and Economics); Jensen, Peter Sandholt (Department of Business and Economics)
    Abstract: In this paper we argue that the answer is yes. Our optimism rests on the finding that differences in the level of institutional quality predict cross-country variation in African economic growth during the period 1995-2011. This finding is quite robust. It holds in OLS, LAD and 2SLS settings; it holds for different measures of institutions and different measures of economic growth; and it holds for the period before and the period after the global financial crisis. We also show that changes in institutional quality predict cross-country variation in African economic growth. Moreover, if we split our sample in two equally sized groups, a high-growth and a lowgrowth group, then the high-growth group has experienced a statistically significant increase in institutional quality, whereas the low-growth group has not. Overall, this makes probable that institutions has played an important part in Africa’s recent growth acceleration. The continent has seen many false dawns, caused in large part by ups in commodity prices, but a growth acceleration driven by institutions is likely to signify a genuine African takeoff.
    Keywords: Institutions; economic growth; Africa
    JEL: O11 O43 O47
    Date: 2013–04–15
  6. By: Juan Sebastián Amador Torres; José Eduardo Gómez G.; Andrés Murcia Pabón
    Abstract: This study provides new evidence on the relationship between abnormal loan growth and banks’ risk taking behavior, using data from a rich panel of Colombian financial institutions. We show that abnormal credit growth during a prolonged period of time leads to an increase in banks’ riskiness, supported by a reduction in solvency and an increase in the ratio of non-performing loans to total loans. We also show that abnormal credit growth played a fundamental role in the bank-failure process during the late 1990s financial crisis in Colombia. Our results have important implications for financial regulation and macro-prudential policy.
    Date: 2013–04–11
  7. By: Stauvermann, Peter J.; Ky , Sereyvath; Nam, Gi-Yu
    Abstract: In this paper, we apply an Overlapping Generations (OLG) model with endogenous fertility and a pay as you go (PAYG) pension system to find out what are the economic consequences of different policy measures to increase the number of children. Especially, we take into account the introduction of a child dependent PAYG pension system, child allowances financed by a labor income tax, and a reduction of the child rearing costs. Some authors have shown that in small open economies with exogenous growth it is possible to increase the fertility without harming any generation. Here we show that this is impossible in a model with endogenous growth.
    Keywords: Fertility, endogenous growth, pay-as-you-go pension, child allowances
    JEL: D10 H5 J13
    Date: 2013–01
  8. By: Gu, Wulong<br /> Lee, Beatrix
    Abstract: This paper provides a provincial perspective on the slowdown in productivity and economic growth in the total business sector in Canada between 2000 and 2010 compared to the late 1990s. It uses the most recent provincial multifactor productivity database.
    Keywords: Business performance and ownership, Manufacturing, Economic accounts, Productivity accounts
    Date: 2013–04–17
  9. By: Wesselhöft, Jan-Erik (Helmut Schmidt University, Hamburg)
    Abstract: Based on new estimates of public and private capital stocks for 22 OECD countries we study the dynamic effect of public capital on the real gross domestic product using a vector autoregression approach. Whereas most former studies put effort on examining the effects of public capital in a single country, this paper covers a large set of OECD countries. The results show that public capital has a positive effect on output in the short-, medium- and long-run in most countries. In countries where the effect is negative, possible explanations as the different productivities of investments, crowding out or high growth rates of government debt are analyzed.
    Keywords: Public capital stock; VAR model; Cointegration; OECD countries
    JEL: C32 E60 H54
    Date: 2013–04–17
  10. By: Azizi, Karim; Canry, Nicolas; Chatelain, Jean-Bernard; Tinel, Bruno
    Abstract: This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). First, on the unbalanced panel of 21 countries from 1961 to 2010 available in OECD database, those two conditions were simultaneously validated only for 29% of the cases under examination. Second, those two conditions were more frequent in the 1980s and the 1990s when monetary policies were more restrictive. Third, in tune with the Keynesian view, when the real interest rate is higher than the GDP growth, it corresponds to 75% of the cases of the increases of the debt/GDP ratio but to only 43% of the cases of the decreases of the debt/GDP ratio (fiscal consolidations).
    Keywords: Government solvency, Austerity, Fiscal Consolidation, No-Ponzi Game condition, transversality condition, Keynesian countercyclical budgetary policy, monetary policy, economic growth.
    JEL: E43 E5 E6 H6 O4
    Date: 2013–04–24
  11. By: Hoffmann, Mathias; Krause, Michael U.; Laubach, Thomas
    Abstract: Since 1991, survey expectations of long-run output growth for the U.S. relative to the rest of the world exhibit a pattern strikingly similar to that of the U.S. current account, and thus also to global imbalances. We show that this finding can to a large extent be rationalized in a two-region stochastic growth model simulated using expected trend growth filtered from observed productivity. In line with the intertemporal approach to the current account, a major part of the buildup of the U.S. current account deficit appears to be driven by the optimal response of households and firms to improved growth prospects. --
    Keywords: open economy,stochastic trend growth,Kalman filter,news shocks
    JEL: F32 E13 E32 D83 O40
    Date: 2013
  12. By: Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland)
    Abstract: We propose an empirical analysis of testing the relationship between gender wage gap and economic growth. The study takes into account 12 manufacturing sectors in 18 OECD countries for the period between 1970 and 2005.We use industrial statistics (EU KLEMS, 2008) on female and male wages that distinguish between wages paid to different groups of workers classified according to skill level: high, medium and low. We estimate augmented production function where the male-female wage differentials constitute a potential channel influencing growth (positively or negatively). Our research is motivated by the ambiguous results of previous empirical studies (e.g.: Seguiono, 2000; Busse and Spielmann, 2006; Seguino, 2011; Schober and Winter-Ebmer, 2011). Our main findings indicate that gender wage gap for high, medium and low-skilled workers is negatively correlated with sectoral growth. At the same time we confirmed the positive role of trade and human capital. The results are confirmed in number of robustness checks.
    Keywords: gender wage gap, economic growth, manufacturing sectors
    JEL: J16 J31 F43
    Date: 2013–04

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