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on Financial Development and Growth |
| By: | Roman Horvath (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | We analyze 1334 estimates from 67 studies that examine the effect of financial development on economic growth. Taken together, the studies imply a positive and statistically significant effect, but individual estimates vary a lot. We find that both research design and heterogeneity in the underlying effect play a role in explaining the differences in results. Studies that do not address endogeneity tend to overstate the effect of finance on growth. While the effect seems to be weaker in poor countries, the effect decreases worldwide after the 1980s. Our results suggest that stock markets support faster economic growth than other financial intermediaries. We find no evidence of publication bias in the literature. |
| Keywords: | finance, development, growth, meta-analysis |
| JEL: | C83 G10 O40 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2013_04&r=fdg |
| By: | Andrea Vaona (Department of Economics (University of Verona)) |
| Abstract: | We investigate the link between inflation, growth and unemployment nesting a model of fair wages into one of endogenous growth of learning by doing and assuming that firms protect wages' purchasing power against inflation in exchange of worker's effort. Unemployment decreases with higher inflation and real growth rates. These effects tends to vanish as inflation and growth increase. Depending on the assumptions on learning-by-doing mechanisms, the effect of inflation on growth can be either nil or positive, but tiny. The Appendix shows that the short run effects of a monetary shocks mirror the long-run effects of inflation. |
| Keywords: | efficiency wages, money growth, long-run Phillips curve, trend inflation |
| JEL: | E3 E2 E4 E5 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:ver:wpaper:09/2013&r=fdg |
| By: | Y. Hossein Farzin (Department of Agricultural and Resource Economics, UC Davis, U.S.A, Oxford Centre for the Analysis of Resource Rich Economies (OxCarre), Department of Economics, University of Oxford, UK); Ronald Wendner (Department of Economics, University of Graz, Austria) |
| Abstract: | The standard neoclassical growth model with Cobb-Douglas production predicts a monotonically declining saving rate, when reasonably calibrated. Ample empirical evidence, however, shows that the transition path of a country’s saving rate exhibits a rising or non-monotonic pattern. In important cases, hyperbolic discounting, which is empirically strongly supported, implies transitional dynamics of the saving rate that accords well with empirical evidence. This holds true even in a growth model with Cobb-Douglas production technology. We also identify the cases where hyperbolic discounting is observationally equivalent to exponential discounting. In those cases, hyperbolic discounting does not affect the saving rate dynamics. Numerical simulations employing a generalized class of hyperbolic discounting functions that we term regular discounting functions support the results. |
| Keywords: | Saving Rate, Non-Monotonic Transition Path, Hyperbolic Discounting, Regular Discounting, Commitment, Short Planning Horizon, Neoclassical Growth Model |
| JEL: | D91 E21 O40 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2013.42&r=fdg |
| By: | Emilio Espino; Martin Gonzalez Rozada |
| Abstract: | This paper explores the qualitative and quantitative implications of optimal tax- ation in a developing economy when economic growth is endogenously determined. We di¤erentiate this class of economies from a developed economy in two aspects: 1. the informal sector is quantitatively signi…cant and, 2. tax-collecting technologies are more rudimentary. We characterize competitive equilibrium allocations and Ramsey allocations in the context of a small open economy in which the interest rate is endoge- nously determined, some workers can be hired in the informal market and imperfect tax-collecting technology can be heterogeneous across types of taxes. We calibrate the parameters of our model to the Chilean economy. Overall, our results suggest that capital should still be taxed but considerably less than actual taxes (that is, 10.78% versus 18.5%). Labor should be subsidized (to stimulate accumulation of human capital) while consumption taxes should be increased by 50% approximately (from 19% to 28%). As expected, the better collecting technologies, the higher the corresponding taxes. In this context, the resulting growth rate increases only slightly along the balanced growth path. |
| Keywords: | Optimal fiscal policy, economic growth, inefficient tax collecting technology |
| JEL: | E61 E62 H21 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:udt:wpecon:2013-06&r=fdg |
| By: | Alberto Bagnai (Université Gabriele D’Annunzio, Chieti, Italie); Arsène Rieber (Université de Rouen, France); Thi Anh-Dao Tran (UMR DIAL, IRD, Vietnam) |
| Abstract: | (english) Our paper examines the long run relationship between economic growth and the current account balance equilibrium by relying on the BoP constrained growth model. We find that Vietnam grew less than the rate predicted when the period 1985 to 2010 as a whole is considered, but with different behavior for the 1998-2010 sub-period. The relative price effect is neutral, allowing the volume effects to dominate in setting the BoP constraint. The high income elasticities of exports enable growth in the advanced countries to have a multiplier effect on the Vietnamese economy. However, this effect is hindered by a high ‘appetite’ for imports coming from Asia. We also assess the impact of the current crisis on Vietnam’s growth for the period 2011 to 2017. _________________________________ (français) En se basant sur le modèle de croissance contrainte par la balance des paiements, notre papier examine la relation de long terme au Vietnam entre la croissance économique et l'équilibre de la balance courante. Nous trouvons que sur l’ensemble de la période 1985-2010, le Vietnam a connu un taux de croissance inférieur à celui prédit par le modèle, mais avec une évolution divergente sur la souspériode 1998-2010. L'effet des prix relatifs est neutre, amenant les effets volume à prédominer dans la détermination de la contrainte de balance des paiements. Les élasticités de revenu élevées des exportations permettent à la croissance des pays avancés d'exercer un effet multiplicateur sur l'économie Vietnamienne. Cependant, cet effet est contrecarré par un appétit élevé d’importations venant d'Asie. Nous évaluons également l'impact de la crise actuelle sur la croissance du Vietnam pour la période 2011-2017. |
| Keywords: | Economic growth, BoP constrained growth model, Multi country model, Asia, Vietnam, Croissance économique, modèle de croissance contrainte par la balance des paiements, modèle multi-pays, Asie, Vietnam. |
| JEL: | E12 F43 O11 O53 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201306&r=fdg |
| By: | Strieborny, Martin (Department of Economics, Lund University) |
| Abstract: | Governments perpetually align their policies to satisfy shifts in voters' relative demand for economic growth versus social equality. Following such shifts, increases (decreases) in government interventions lower (raise) both inequality and growth. This mechanism generates a positive co-movement between inequality and growth. The pattern is weaker in countries where a culturally determined belief that the rich are deserving renders equality a less important objective in the first place. I develop this analytical result in the theoretical framework of Alesina and Angeletos (2005), and I provide robust empirical support for it in a panel of 38 countries over the period 1964-2004. |
| Keywords: | culture; inequality; growth |
| JEL: | O15 O40 P16 Z10 |
| Date: | 2013–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2013_015&r=fdg |
| By: | McKelvie, Alexander (Syracuse University); Brattström, Anna (Stockholm School of Economics); Wennberg, Karl (Ratio) |
| Abstract: | This paper seeks to untangle the relationship between new firm’s innovative activities and subsequent growth. We theorize about the inter-related roles of managerial growth willingness, inputs and outputs of innovative activities, and their subsequent link to sales growth. Investigating a longitudinal sample of 282 new Swedish firms reveals a complex set of mediating relationships that, when combined, help explain how innovation affects growth. First, we find growth willingness has an important relationship with innovative inputs such as R&D and market knowledge competence. Second, these inputs affect important innovative outputs such as new product development and the percentage of sales from new products. Third, these outputs directly affect growth – whereas the innovative inputs such as R&D do not have a direct impact. Taken together, our paper highlights the joint importance of managerial attitudes and strategic choices that help to shed new light on the effect of innovation on new firm growth. Implications for research and public policy are discussed. |
| Keywords: | New Firm Growth; Innovation; RD; Growth Willingness |
| JEL: | L22 L26 M13 |
| Date: | 2013–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0206&r=fdg |
| By: | Ayadi, Rym; Arbak, Emrah; Ben-Naceur, Sami; De Groen, Willem Pieter |
| Abstract: | This MEDPRO Technical Report explores the relationship between financial sector development and economic growth, using a sample of northern and southern Mediterranean countries for the years 1985-2009. The authors included several variables to measure the development of the financial sector to account both for quantity and quality effects. The results indicate that credit to the private sector and bank deposits are negatively associated with growth, which confirms deficiencies in credit allocation in the region and suggests weak financial regulation and supervision. On the stock market side, the results seem to indicate that stock market size and liquidity play a significant role in growth, especially when accounting for the quality of an institution. Investment, whether domestic or in the form of FDI, contributes significantly to economic growth. Stronger institutions and low inflation are key growth factors. Initial GDP has a persistently and significantly negative impact on growth, which implies that poorer countries are catching up richer countries in terms of economic growth. |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:eps:cepswp:7832&r=fdg |