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on Financial Development and Growth |
| By: | Ageli, Mohammed Moosa; Zaidan, Shatha Mousa |
| Abstract: | This paper investigates the nexus between financial sector development and economic growth in the Saudi economy over the period 1970-2012 by using four alternative proxies for financial development and several techniques including unit root tests, the co-integration test, the Granger Causality Test, and the Vector Error Correction Model (VECM). We used time series econometrics techniques to examine the causal relationship between financial sector development and economic growth in the Saudi economy. The results obtained from the analyses show that there is a positive relationship between financial sector development and economic growth in Saudi Arabia. The development of the financial system will thus have a positive impact on the growth of the Saudi economy. |
| Keywords: | Financial Sector Development, Unit Root test, co-integration test, Vector Error Correction Model (VECM), Augmented Dickey Fuller (ADF), Economic Growth, Saudi Arabia |
| JEL: | E44 O11 O53 |
| Date: | 2013–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46591&r=fdg |
| By: | Karine Gente (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS); Miguel A. León-Ledesma (University of Kent); Carine Nourry (Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS) |
| Abstract: | Empirical evidence on the growth benefits of capital inflows is mixed. The growth benefits accruing from capital inflows also appear to be larger for high savings countries. We explain this phenomenon using an OLG model of endogenous growth in open economies with borrowing constraints that can generate both positive and negative growth effects of capital inflows. The amount an economy can borrow is restricted by an endogenous enforcement constraint. In our setting, with physical capital and a pay-as-you-go pensions system, the steady state is unique. However, it can either be constrained or unconstrained. In a constrained economy, opening up to equity and FDI inflows can be bad for growth because it makes the domestic interest rate too low, which endogenously tightens borrowing constraints. Agents decrease savings and investment in productivity-enhancing activities resulting in lower growth. Results are reversed in an unconstrained economy. We also provide a quantitative analysis of these constraints and some policy implications. |
| Keywords: | Overlapping generations, endogenous credit constraint, capital flows, endogenous growth. |
| JEL: | F43 F34 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1329&r=fdg |
| By: | Ageli, Mohammed Moosa |
| Abstract: | In This paper investigates the nexus relationship between tourism expenditure and Non Oil economic growth in Saudi Arabia over the period 1970-2012. Using Phillips and Perron (PP) unit root test-VAR approach with several techniques including Unit root tests, Johansen’s co-integration test, Granger Causality test and Vector Error Correction Model (VECM). We used time series econometrics techniques to examine the causal relationship between tourism expenditure and economic growth in the Saudi economy. The findings reveal that there is a bilateral causality and positive long-run relationship running from Non Oil-GDP to tourism expenditure. The results obtained from the analyses show that there is a positive relationship between tourism spending and economic growth in Saudi Arabia. The development of tourism sector will thus have a positive impact on the growth of the Saudi economy. Also, the results show that, in Saudi Arabia, the model of tourism expenditure is found to hold for Non Oil-GDP. |
| Keywords: | Tourism Expenditure, PP-VAR Approach, Phillips and Perron (PP) unit root test, Co-integration test, Vector Error Correction Model (VECM), Granger Causality, Economic Growth, Saudi Arabia |
| JEL: | C32 L83 O53 |
| Date: | 2013–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46602&r=fdg |
| By: | Nir Jaimovich; Sergio Rebelo |
| Abstract: | We study a model in which the effects of taxation on growth are highly non-linear. Marginal increases in tax rates have a small growth impact when tax rates are low or moderate. When tax rates are high, further tax hikes have a large, negative impact on growth performance. We argue that this non-linearity is consistent with the empirical evidence on the effect of taxation and other disincentives to investment and innovation on economic growth. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedacq:2013-02&r=fdg |
| By: | Ageli, Mohammed Moosa |
| Abstract: | Our goal in this paper is to explore the validity of Wagner’s Law in Saudi Arabia during the period (1970-2012) for real oil GDP and Non-oil GDP. Wagner’s Law investigated that fundamental economic growth is validity to the public sector growth. In the previous studies have been tested the six versions of Wagner’s law to support the existence of long-run relationship between government expenditure and economic growth. We used a method as a time series econometrics techniques to examine how far Wagner’s Law validity can be applied in Saudi economy. The results obtained from the analyses find that the Wagnerian proposition can explain the growth of government in Saudi Arabia, which holds for both the oil and non-oil income cases. The findings also note that the existence of strong causality for all of Wagner’s law versions in the long run. |
| Keywords: | Wagner’s Law, Co-integration, Error Correction Model (ECM), Augmented Dickey Fuller (ADF), Government Expenditure, Economic Growth, Saudi Arabia |
| JEL: | C32 H50 O53 |
| Date: | 2013–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46594&r=fdg |
| By: | Ageli, Mohammed Moosa; Zaidan, Shatha Mousa |
| Abstract: | This study investigates the causality relationship between defence expenditures and Non Oil economic growth in Saudi Arabia over the period 1970-2012. Using Unit root tests, Johansen’s co-integration test and Granger Causality test. In this paper we found the existence of bi-directional causality relationship running from Non Oil-GDP to defence expenditure. The results show that, in Saudi Arabia, the model of defence expenditure is found to hold for Non Oil-GDP. |
| Keywords: | Defence Expenditure, Economic Growth, Unit Root test, Co-integration test, Granger causality and Error Correction Models (ECM), Saudi Arabia |
| JEL: | C12 H56 N15 |
| Date: | 2012–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46590&r=fdg |
| By: | Shahbaz, Muhammad; Ozturk, Ilhan; Afza, Talat; Ali, Amjad |
| Abstract: | The present study deals with an empirical investigation between CO2 emissions, energy intensity, economic growth and globalization using annual data over the period of 1970-2010 for Turkish economy. We applied unit root test and cointegration approach in the presence of structural breaks. The direction of causality between the variables is investigated by applying the VECM Granger causality approach. Our results confirmed the existence of cointegration between the series. The empirical evidence reported that energy intensity, economic growth (globalization) increase (condense) CO2 emissions. The results also validated the presence of Environmental Kuznets curve (EKC). The causality analysis shows bidirectional causality between economic growth and CO2 emissions. This implies that economic growth can be boosted at the cost of environment. |
| Keywords: | Carbon dioxide emissions, EKC, economic growth |
| JEL: | Q5 Q56 |
| Date: | 2013–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46610&r=fdg |
| By: | Erkan Goeren (University of Oldenburg - Department of Economics) |
| Abstract: | This paper investigates the empirical relationship between the two concepts of ethnicity and economic growth. Ethnicity is assumed to affect economic growth through a number of possible transmission channels that are generally included in crossâ€country growth regressions by proposing an extended econometric system of equations to describe growth and the channel variables. The system incorporates new channel variables for the potential indirect effects of ethnicity that are important in the process of economic development. The results, based on a sample of 95 countries for the period 1960-1999, suggest that the concept of ethnic fractionalization is a strong predictive measure for the direct effect of ethnicity on growth, whereas the concept of ethnic polarization has nonâ€negligible indirect economic effects through the specified channel variables. |
| Keywords: | ethnic diversity, fractionalization, polarization, transmission channels, economic growth |
| JEL: | O5 O11 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:zen:wpaper:14&r=fdg |
| By: | Shahbaz, Muhammad; Abosedra, Salah; Sbia, Rashid |
| Abstract: | This paper investigates the dynamic causal relationship between financial development, energy consumption and economic growth in Lebanon over the period 1993M1-2010M12.Our findings confirm the existence of cointegration among the variables. The results indicate that financial development and energy consumption, contribute to economic growth in Lebanon. The impact of energy consumption on economic growth is positive showing the significance of energy as a main stimulant of economic growth. Financial development is also found to play a vital role in enhancing economic growth. Economic growth and financial development also add in energy consumption. The study, therefore, recommends that in short run, policy makers should put more emphasis in developing strategies that would result in achieving higher mobilization of savings in order to boost Lebanese investors’ confidence and to also attract more foreign investment in Lebanon. Furthermore, desired financial policy to encounter the rising demand for energy by enhancing the process of capitalization of the energy sector is also very desirable. Our results further cautions of the use of policy tools geared towards restricting energy consumption in short run, something that is called for as part of national energy policy, as these may result in lower economic growth. Such conservation policies should be taken gradually and carefully as to not negatively impact the growth of the economy. However, in long run, the Lebanese government should shift its focus towards achieving higher economic growth, in order to boost its financial development and to sustain a steady flow of needed energy. In this regards, policymakers should put emphasis on the development of domestic energy resources to protect the country from any undesirable external energy shock given its extensive dependence on energy imports. |
| Keywords: | Economic growth, financial development, energy consumption |
| JEL: | C5 O1 O11 |
| Date: | 2013–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46580&r=fdg |
| By: | Karim Azizi (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Nicolas Canry (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Jean-Bernard Chatelain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Bruno Tinel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne) |
| 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. |
| Date: | 2013–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00818474&r=fdg |
| By: | Jonathan Chiu; Cesaire Meh; Randall Wright |
| Abstract: | The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them to those best able to implement them (technology transfer). But frictions in this market—including search, bargaining, and commitment problems—impede exchange and thus slow growth. We characterize optimal policies to subsidize research and trade in ideas, given both knowledge and search externalities. We discuss the roles of liquidity and financial institutions, and show two ways in which intermediation can enhance efficiency and innovation. First, intermediation allows us to finance more transactions with fewer assets. Second, it ameliorates certain bargaining problems, by allowing entrepreneurs to undo otherwise sunk investments in liquidity. We also discuss some evidence suggesting that technology transfer is a significant source of innovation and showing how it is affected by credit considerations. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedacq:2013-01&r=fdg |
| By: | Qazi, Ahmar Qasim; Zhao, Yulin |
| Abstract: | The study employs the panel data of 15 hi-tech industries over the period of 2000-2010 in order to examine the effectiveness of R&D with respect to productivity change and indentify the significant contributing factors with intensity in the Chinese hi-tech sector. The Malmquist Productivity Indexes are calculated by using the non-parametric programming technique and censored regression model is applied to conduct the empirical investigation. We find that on average, the sector is confronting productivity deterioration which is mainly due to the technical inefficiency. The Office Equipments industry has the highest productivity gain in our sample at the rate of, on average, 3.7% per year and all of which is caused by technical change. Furthermore, the electronic components industry is found to be the most efficient industry in the sector that drives an industry to have productivity progress on average, of 1.7% per year over the study period. At last, Tobit results indicate that spillovers through FDI and technology import are having significant and positive effect on the productivity progress. |
| Keywords: | Productivity Growth;DEA;Tobit Model |
| JEL: | C34 C61 D24 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46589&r=fdg |
| By: | Konstantin Yanovsky (Gaidar Institute for Economic Policy); Sergey Shulgin (Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | In this paper we tested the hypothesis of the "political" basis for the "economic" rights. We constructed our own variables of political regimes' classification for years 1820-2000. We found significant positive interdependencies between the Democracy's indicators and Economic Growth. Protection of the Private property rights requires, first and foremost, due guaranties for the personal immunity as a key precondition. Power to arrest discretionary undermines any formal guaranties of private property, low taxation benefits etc. Personal immunity should be defended even for "unpleasant" person (say, H. Ford or W. Gates) or for the chieftains' challengers (to make "rights of the meanest … respectable to the greatest"). It means the free speech; religious freedom and other "political rights" should be respected. Democracy, as political competition system weakens governments' power to break personal freedoms and property rights. |
| Keywords: | Rule of Law, Rule of Force, Personal Rights, Private Property Protection, Economic Growth |
| JEL: | P16 P50 N40 O43 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gai:wpaper:0058&r=fdg |
| By: | Joshua Aizenman; Brian Pinto; Vladyslav Sushko |
| Abstract: | We examine how financial expansion and contraction cycles affect the broader economy through their impact on real economic sectors in a panel of countries over 1960-2005. Periods of accelerated growth of the financial sector are more likely to be followed by abrupt financial contractions than are periods of slower financial sector growth. Sharp fluctuations in the financial sector have strongly asymmetric effects, with the majority of real sectors adversely affected by contractions, but not helped by expansions. The adverse effects of financial contractions are transmitted almost exclusively through the financial openness channel, with precautionary foreign exchange reserve holdings serving as a key buffer. |
| Keywords: | financial cycles, financial and trade openness, real transmission of financial shocks, foreign exchange reserves |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:411&r=fdg |
| By: | Ermişoğlu, Ergun; Akcelik, Yasin; Oduncu, Arif |
| Abstract: | It is a well-known fact that there is a strong relationship between bank credits and economic activity. Thus, it is a reasonable question whether credit data can be used in nowcasting GDP growth. It is important for policymakers to make on-time decisions with the most available data and nowcasting is an important tool when policies in question are needed to be made based on current figures. Most macroeconomic variables are made available to public after a considerable delay; however, banking credit data may be very valuable for the early estimate of current GDP as it is available only with a few days delay. In this paper, we aim to investigate the feasibility of using credit data in explaining the variability in Turkish GDP growth and as well as nowcasting it. For this purpose, we use credit impulse and new borrowing, two measures of credit flows. We show that credit impulse and new borrowing are significant in explaining the pattern of the Turkish GDP growth and they have significant contribution to nowcasting it. |
| Keywords: | Nowcasting GDP, Credit Impulse, New Borrowing |
| JEL: | C22 C53 E37 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46613&r=fdg |
| By: | Jianjian Jin |
| Abstract: | This paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities. I provide evidence that the jump risk in volatility of long run consumption growth is a key component of the equity risk premium and the variance risk premium in financial markets. Moreover, I find that matching the VIX dynamics during the calibration process is crucial when comparing different jump channels. Specifically, a jump-in-growth LRR model generates a good fit of the average variance risk premium, but a poor fit of the dynamics of the VIX or realized stock volatility. In contrast, a jump-in-volatility LRR model generates a smaller variance risk premium but better fits the VIX and the realized stock volatility dynamics. Finally, jump-in-volatility models generate predictability of returns by the variance risk premium that is more consistent with the data. |
| Keywords: | Asset Pricing; Economic models |
| JEL: | G12 G17 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:13-12&r=fdg |