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on Financial Development and Growth |
| By: | Chudik, Alexander (Federal Reserve Bank of Dallas); Mohaddes, Kamiar (Federal Reserve Bank of Dallas); Pesaran, M. Hashem (Federal Reserve Bank of Dallas); Raissi, Mehdi (Federal Reserve Bank of Dallas) |
| Abstract: | This paper investigates the long-run effects of public debt and inflation on economic growth. Our contribution is both theoretical and empirical. On the theoretical side, we develop a cross-sectionally augmented distributed lag (CS-DL) approach to the estimation of long-run effects in dynamic heterogeneous panel data models with cross-sectionally dependent errors. The relative merits of the CS-DL approach and other existing approaches in the literature are discussed and illustrated with small sample evidence obtained by means of Monte Carlo simulations. On the empirical side, using data on a sample of 40 countries over the 1965-2010 period, we find significant negative long-run effects of public debt and inflation on growth. Our results indicate that, if the debt to GDP ratio is raised and this increase turns out to be permanent, then it will have negative effects on economic growth in the long run. But if the increase is temporary then there are no long-run growth effects so long as debt to GDP is brought back to its normal level. We do not find a universally applicable threshold effect in the relationship between public debt and growth. We only find statistically significant threshold effects in the case of countries with rising debt to GDP ratios. |
| JEL: | C23 E62 F34 H60 |
| Date: | 2013–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:162&r=fdg |
| By: | Islam, Faridul; Shahbaz, Muhammad; Rahman, Mohammad Mafizur |
| Abstract: | The paper implements the autoregressive distributed lag (ARDL) bounds testing, supplemented by the Johansen-Juselius (JJ) approaches to cointegration to explore a long run relation among energy use, economic growth, financial development, capital, and trade openness in Australia. We also apply the vector error correction model (VECM) to understand the short run dynamics. The study period, 1965 – 2009, is hallmarked by major shocks across the globe which can potentially cause structural break in the series. To recognize this possibility, we implement the Zivot-Andrews (1992) and the Clemente et al. (1998) tests. The results confirm the long run relationship among the series. The Granger causality test shows bidirectional causality between energy consumption and economic growth; financial development and energy consumption; trade openness and economic growth; economic growth and financial development; energy consumption and trade openness; and financial development and trade openness. The findings offer fresh perspectives and insight for crafting energy policy for sustained economic growth. |
| Keywords: | Energy, Financial Development, Trade, Structural Break, ARDL, Australia |
| JEL: | E00 |
| Date: | 2013–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52546&r=fdg |
| By: | Sebri, Maamar; Ben Salha, Ousama |
| Abstract: | The current study investigates the causal relationship between economic growth and renewable energy consumption in the BRICS countries over the period 1971-2010 within a multivariate framework. The ARDL bounds testing approach to cointegration and vector error correction model (VECM) are used to examine the long-run and causal relationships between economic growth, renewable energy consumption, trade openness and carbon dioxide emissions. Empirical evidence shows that, based on the ARDL estimates, there exist long-run equilibrium relationships among the competing variables. Regarding the VECM results, bi-directional Granger causality exists between economic growth and renewable energy consumption, suggesting the feedback hypothesis, which can explain the role of renewable energy in stimulating economic growth in BRICS countries. |
| Keywords: | ARDL; BRICS; Granger causality; Economic growth; Renewable energy. |
| JEL: | C32 Q2 Q3 Q4 |
| Date: | 2013–12–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:52535&r=fdg |