nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2014‒03‒22
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Growth Theories By Claude Diebolt; Faustine Perrin
  2. The laffer curve and the debt-growth link in low-income Sub-Saharan African economies By Megersa, kelbesa
  3. Corruption’s and Democracy’s effects on Economic Growth By Zaouali, Amira
  4. Female labor force participation and economic growth– re-examination of U-shaped curve By Ewa Lechman
  5. Short- and long-term growth effects of special interest groups in the U.S. states: A dynamic panel error-correction approach By Cole, Ismail M.
  6. Budget deficit, money growth and inflation: Empirical evidence from Vietnam By Khieu Van, Hoang
  7. Growth or development: experience from Latin America By durongkaveroj, wannaphong
  8. Growth Strategy with Social Capital and Physical Capital- Theory and Evidence: the Case of Vietnam By Cuong Le Van; Anh Ngoc Nguyen; Ngoc-Minh Nguyen

  1. By: Claude Diebolt (BETA/CNRS (UMR7522), University of Strasbourg, France); Faustine Perrin (BETA/CNRS (UMR7522), University of Strasbourg, France)
    Date: 2014
  2. By: Megersa, kelbesa
    Abstract: The study of the link between debt and growth has been full of debates, both in theory and empirics. However, there is a growing consensus that the relationship is sensitive to the level of debt. Our paper tries to address the question of non linearity in the long term relationship between public debt and economic growth. Specifically, we set out to test if there exists an established ‘laffer curve’ type relationship, where debt contributes to economic growth up to a certain point (maximal threshold) and then starts to have a negative effect on growth afterwards. To carry out our tests, we have used a methodology that delivers a superior test of bell shapes, in addition to the traditional test based on a regression with a quadratic specification. The results show evidence of a bell-shaped relationship between economic growth and total public debt in a panel of low income Sub-Saharan African economies. This supports the hypothesis that debt has some positive contribution to economic growth in low-income countries, albeit up to a point. If debt goes on increasing beyond the level where it would be sustainable, it may start to be a drag on economic growth.
    Keywords: public debt, economic growth, laffer curve, low-income countries, Sub-Saharan Africa
    JEL: C1 C12 C14 C4 E62 G01 H5 H61 H63 H68 N17 O1 O11 O55 P52
    Date: 2014–03–12
  3. By: Zaouali, Amira
    Abstract: Economists have a long argue that political process such as democracy and corruption are important for economic growth. Our objective in this paper is to demonstrate that one of democracy's indirect posititive effects is its ability to mitigate the negative effect of corruption on economic growth. Although most democratic countries in our sample have a high level of corruption, the electoral mechanism inhibits leaders from engaging in acts of corruption that cause damage to economic performance and thus jeopardize their political survival. Utilizing a dynamic panel data approach for more than 40 countries over the period 2000- 2011, the results show that in democratic countries, corruption has no significant effect on economic growth, while the non-democratic countries suffer the negative effects of corruption that retard economic growth.
    Keywords: Corruption, Democracy, Economic Growth, dynamic panel.
    JEL: C23 E02 O43 O47
    Date: 2014–03–18
  4. By: Ewa Lechman (Gdansk University of Technology, Gdansk, Poland)
    Abstract: The paper contributes by providing new insights into the relationship between female labor force and economic growth in 162 countries over the period 1990-2012. We anticipate uncovering U-shaped impact of economic growth on female labor force. To examine the previous we deploy longitudinal data analysis assuming non-linearity between variables. Our main findings support the hypothesis on U-shaped relationship between female labor force participation and economic growth, however high cross-country variability on the field is evident.
    Keywords: female labor force, women, economic growth, U-shaped curve, panel data
    JEL: J21 O10 O50
    Date: 2014–03
  5. By: Cole, Ismail M.
    Abstract: The perception of special interest groups as a serious threat to economic growth has strengthened over the years; however, the vast empirical literature surrounding this claim has produced mixed and inconclusive results. This study re-examines the issue incorporating a potentially important aspect that has generally been ignored by previous studies, namely, the implicit suggestion by some of the theoretical works that the extent and the intensity of the growth effects of special interest groups may differ significantly over different time frames. Specifically, this study uses dynamic panel error-correction methods (Pesaran, Shin, and Smith (1999)) to properly determine whether these effects, if they exist, occur mostly in the short run or the long run based on data from a panel of 48 U.S. states for the years 1975 – 2004. The joint Hausman-type test selected the preferred model, which controls for human capital achievement, initial income, income inequality, and the tax burden. This model produced results which are in sharp contrast to the simple linearly negative or positive findings reported in much of the literature by indicating that special interest groups have significant non-linearly inverted U-shaped long-run effects on growth, and that it takes time (about 8 years) for the full effects to become evident. The results provide evidence that U.S. states face a threshold point below which special interest groups’ lobbying and rent-seeking activities boost long-run growth performance but above which they have damaging effects on long-run growth effort. This is confirmed by the Lind and Mehlum (2010) u-test which also suggests that the threshold point is reached when the activities and strength of special interest groups (measured by the percentage of each state’s public and private non-agricultural wage and salary employees who are union members, and which varies from 3.8% to 38.7%)) is at the 15.8% level.
    Keywords: Special interest groups; economic growth; labor unions; rent-seeking/
    JEL: O1 O15 O4 O43
    Date: 2014–02–03
  6. By: Khieu Van, Hoang
    Abstract: This study empirically examines the nexus among budget deficit, money supply and inflation by using a monthly data set from January 1995 to December 2012 and a SVAR model with five endogenous variables, inflation, money growth, budget deficit growth, real GDP growth and interest rate. Since real GDP and budget deficit are unavailable on the monthly basis, we interpolate those series using Chow and Lin’s (1971) annualized approach from their annual series. Overall, we found that money growth has positive effects on inflation while budget deficit growth has no impact on money growth and therefore inflation. In addition, budget deficit is autonomous from shocks to other variables. The estimation results also reveal that the State Bank of Vietnam implemented tightening monetary policy in response to positive shocks to inflation by reducing money growth but the response was relatively slow because it took three months for the monetary authority to fully react to such shocks. Finally, interest rate was not an effective instrument for fighting inflation but it was significantly and positively influenced by inflation.
    Keywords: Inflation; Money Growth; Budget Deficit; Structural Vector Auto-regressive Model.
    JEL: E31 E58 E61
    Date: 2014–01–31
  7. By: durongkaveroj, wannaphong
    Abstract: The purposes of this study were to present the current situation of poverty, economic growth, and economic development for five selected countries in Latin America and to examine the relationship between poverty, economic growth, and economic development through traditional log-linear regression model for panel data analysis. The result from fixed effect model suggested that economic development is more effective and preferable than economic growth in eradicating of poverty. Policy issued aimed at raising citizen's living standard should shed on income, health, and education simultaneously instead of standard improvement in income level merely.
    Keywords: economic development, economic growth, poverty,
    JEL: C10 I32 O15 O20
    Date: 2014–03–15
  8. By: Cuong Le Van; Anh Ngoc Nguyen; Ngoc-Minh Nguyen
    Abstract: We study the impact of social capital in both simple theoretical and em- pirical model with the main assumption is the price of physical capital is a decreasing function of social capital. In our theoretical model, there exists a critical value such that ffrm will not invest in social capital if its saving is lower than the critical value and otherwise. Moreover, the output depends positively and non-linearly on the social capital. Our empirical model that captures the impact of physical capital, human capital, and social capital using the database from Survey of Small and Medium Scale Manufactur- ing Enterprises (SMEs) in Vietnam 2011, conffrms the conclusions of the theoretical model.
    Keywords: Social Capital, Optimal Growth Classification-JEL : Z1, E2, O00
    Date: 2014–02–25

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