nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒12‒29
four papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Budget Policy and Economic Growth By Georgy Idrisov; Sergey Sinelnikov-Murylev
  2. This Time They're Different: Heterogeneity;and Nonlinearity in the Relationship;between Debt and Growth By Markus Eberhardt; Andrea Filippo Presbitero
  3. International Financial Integration and The Nigerian Economic Performance: a Var Modeling Approach By Evans, Olaniyi
  4. Volatility and Growth: Governments are Key By Jetter, Michael

  1. By: Georgy Idrisov (Gaidar Institute for Economic Policy); Sergey Sinelnikov-Murylev (Gaidar Institute for Economic Policy)
    Abstract: This article examines the relationship between government budgetary policy and the pursuit of accelerated economic growth. The authors review the academic debate over long-term economic growth and associated short-term fluctuations and conclude that Russian budgetary intended to smooth fluctuations in economic activity are of limited effect and that there are no opportunities for increasing public expenditure in the medium and long-term. For these reasons, the structure of expenditures must be changed and budgetary institutions must be transformed with a view to creating the preconditions for economic growth in the long-term.
    Keywords: economic growth, budgetary policy, government expenditure.
    JEL: O23 O4 H5
    Date: 2013
  2. By: Markus Eberhardt (School of Economics, University of Nottingham, UK, Centre for the Study of African Economies, Department of Economics, University of Oxford, UK); Andrea Filippo Presbitero (International Monetary Fund, Universit… Politecnica delle Marche - MoFiR)
    Abstract: We study the long-run relationship between public debt and growth in a large panel of countries. Our analysis takes particular note of theoretical arguments and data considerations in modelling the debt-growth relationship as heterogeneous across countries. We investigate the issue of nonlinearities ('debt thresholds') in both the cross-country and within-country dimensions, employing novel methods and diagnostics from the time-series literature adapted for use in the panel. We find some support for a nonlinear relationship between debt and long-run growth across countries, but no evidence for a common debt threshold within countries over time.
    Keywords: common factor model, economic growth, nonlinearity, public debt
    JEL: C23 E62 F34 O11
    Date: 2013–12
  3. By: Evans, Olaniyi
    Abstract: Since it is believed that having access to a broader base of capital is a key requirement for economic growth, then financial integration is necessary because it expedites flows of capital from developed economies with rich capital to developing economies like Nigeria with limited capital. The major objective of this paper is to empirically investigate the relationship between international financial integration and the Nigerian economic performance, using annual time series data from 1970 to 2012. In order to do this, the study employs KPSS unit root test, Johansen cointegration test, VAR modeling, impulse response function, variance decomposition and granger causality. Empirical results show that there is a short-run relationship between international financial integration and economic growth. All the variables including, the ratio of net capital inflows to GDP and the ratio of FDI to GDP appear with the expected positive signs (except trade openness) and are statistically significant in the Nigerian economy. The findings have a strong implication on financial and international policy in Nigeria. The major implication is that further integration into the global economy would require sustained policy reforms, improved governance, and public-private investments in social, human, and physical infrastructure. The study suggests that rigorous efforts should be made by policy makers to improve infrastructural investment for the attraction of foreign capital.
    Keywords: financial integration, economic growth, FDI, GDP flows of capital, foreign capital, VAR modeling, impulse response function, variance decomposition and granger causality
    JEL: F2 F23 F34 F35 G14 G22 G28
    Date: 2013–12
  4. By: Jetter, Michael (Universidad EAFIT)
    Abstract: There exists a persistent disagreement in the literature over the effect of business cycles on economic growth. This paper offers a solution to this disagreement, suggesting that volatility carries a positive direct effect, but also a negative indirect effect, operating through the insurance mechanism of government size. Theoretically, the net growth effect of volatility is then ambiguous. The paper reveals the underlying endogeneity of government size in a balanced panel of 95 countries from 1961 - 2010. In practice, the negative indirect channel dominates in democracies, but with less power to choose public services in autocratic regimes the positive direct effect takes over. Consequently, volatile growth rates are detrimental to growth in democracies, but beneficial to growth in autocracies. The empirical results suggest that a one standard deviation increase of volatility lowers growth by up to 0.57 percentage points in a democracy, but raises growth by 1.74 percentage points in a total autocracy. These findings point to a crucial intermediating role of governments in the relationship between volatility and growth. Both the size of the public sector and the regime form assume key roles.
    Keywords: economic growth, volatility, business cycles, government size, regime form
    JEL: E32 H11 O43 P16
    Date: 2013–12

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