nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2014‒06‒14
six papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Complex endogenous dynamics in a one-sector growth model with differential savings By Fabio Tramontana; Viktor Avrutin
  2. Financial liberalization, Foreign Direct investment (FDI) and Economic Growth: A Panel Dynamic Data Validation By SAIEF EDDINE, AYOUNI; FAKHRI, ISSAOUI; SALEM, BRAHIM
  3. A Politico-economic Approach on Public Debt in an Endogenous Growth Economy By Arai, Real; Naito, Katsuyuki
  4. Unionised Labour Market, Unemployment Allowances, Productive Public Expenditure and Endogenous Growth By Bhattacharyya, Chandril; Gupta, Manash Ranjan
  5. The environmental Kuznets curve in a public spending model of economic growth By Diallo, Ibrahima Amadou
  6. Monetary policy options for mitigating the impact of the global financial crisis on emerging market economies. By Dąbrowski, Marek A.; Śmiech, Sławomir; Papież, Monika

  1. By: Fabio Tramontana (Department of Economics and Management, University of Pavia); Viktor Avrutin (DESP, University of Urbino and IST, University of Stuttgart, Germany)
    Abstract: We show that cyclic and chaotic dynamics may emerge in a Kaldor-Pasinetti growth model with different saving propensities, Leontief technology and logistic labor force growth rate.
    Keywords: One-sector growth model; logistic population growth; growth cycles
    JEL: O4
    Date: 2014–05
    Abstract: The aim of this study is to show that financial liberalization, as a determinant of financial development, can stimulate the relationship between foreign direct investment (FDI) and economic growth. Two distinct components have been analyzed. The first one is a theoretical component in which we tried to treat the relationship between financial development, internal financial liberalization, and FDI using an endogenous growth model. The second component consists of an empirical study which tried using a panel data to validate the previously stated theoretical relationship. The survey, covering a sample of sixty nine developed and developing countries enabled us to reach three fundamental results. First, when financial systems are non-liberalized, we have noted that FDIs had a negative effect on GDP growth per capita. Second, when FDIs are implemented in countries characterized by their developed financial sector they generate positive effects on growth. This implies that the key variable which determines FDI efficiency is the degree of financial systems liberalization. Consequently, in non-liberalized financial systems FDIs effects on growth are challenged. Third, we showed that financial development level is a strategic variable which positively affects growth
    Keywords: financial liberalization, Foreign Direct investment, GMM system
    JEL: E61 F3 F37 G1
    Date: 2014–06–01
  3. By: Arai, Real; Naito, Katsuyuki
    Abstract: We consider an overlapping generations closed economy in which a government finances the cost of public good provision by labor income taxation and/or public debt issuance. The size of these public policies is determined in a repeated probabilistic voting game. We investigate the characteristics of a Markov perfect politico-economic equilibrium in which the size of public policies depends on both the stock of public debt and the level of physical capital, and show that individuals' stronger preferences for public good provision tighten fiscal discipline and promote economic growth.
    Keywords: public debt; probabilistic voting; Markov perfect equilibrium; economic growth
    JEL: D72 H41 H63 O43
    Date: 2014–05–27
  4. By: Bhattacharyya, Chandril; Gupta, Manash Ranjan
    Abstract: This paper develops a model of endogenous economic growth with special focus on the role of unionized labour market and on the interaction between the tax financed productive public expenditure and unemployment benefit policy of the government. We incorporate a ‘Managerial’ labour union in an otherwise identical Barro (1990) model; and use both ‘Efficient Bargaining’ model and ‘Right to Manage’ model to solve the negotiation problem between a labour union and an employers’ association. Properties of growth rate maximizing income tax policy are derived in the steady state equilibrium; and the effects of unionization are analysed on the level of employment, growth rate, welfare and on tax rate respectively. This growth rate maximizing income tax rate appears to be higher than (equal to) the competitive output share of public input in the presence (absence) of unemployment benefit. Unionisation may be good or bad for the economy in the case of Efficient bargaining model; and the nature of the effect depends on the orientation of the labour union. However, this is always bad for both employment and growth in the case of a ‘Right to Manage’ model.
    Keywords: Labour union; Income tax; Public expenditure; Unemployment benefit; Efficient bargaining; Right to manage; Steady-state equilibrium; Endogenous growth
    JEL: H21 H41 J51 J65 O41
    Date: 2014–06–06
  5. By: Diallo, Ibrahima Amadou
    Abstract: This paper theoretically analyzes the dynamics of economic growth and the environmental Kuznets curve. This curve states an inverse U-relationship between pollution and income. The presented model specifically shows how a dynamic environmental Kuznets curve can emerge by introducing pollution and abatement technology in a public spending model of endogenous economic growth. We also derive the turning point in function of the parameters of the model. The numerical section demonstrates that when taxes are below some threshold, the turning point decreases with taxes but it increases when taxes are above the threshold point given some explanations about an N-shaped Kuznets curve. Additionally, the simulations demonstrate that taxes reduce the level of pollution by pulling down the environmental Kuznets curve. Lastly the numerical exercises highlight that the pollution level of the social planner problem is less than that of the representative agent.
    Keywords: Abatement; Dynamic Optimization; Endogenous Growth Theory; Environmental Kuznets Curve; Numerical Simulations; Pollution; Public Spending; Taxes; Turning Point
    JEL: C61 C63 H23 H41 H54 H61 O41 O44
    Date: 2014–06–09
  6. By: Dąbrowski, Marek A.; Śmiech, Sławomir; Papież, Monika
    Abstract: Though the hypothesis that exchange rate regimes fully predetermine monetary policy in the face of external shocks hardly finds any advocates on theoretical ground it has crept in the most of empirical research. This study adopts a more discerning empirical approach that looks at monetary policy tools used in order to accommodate the recent financial crisis. We investigated the GDP growth in 45 emerging market economies in the most intense phase of the crisis and found out that there is no clear difference in the growth performance between countries at the opposite poles of the exchange rate regime spectrum. Depreciation cum international reserve depletion outperforms the other policy options, especially the rise in the interest rate spread. We discovered certain complementarities between the information on the policy option and on exchange rate regime. Taking into account non-Gaussian settings, we decided to use quantile regression, which provide in addition, more complete picture of relationship between the covariates and the distribution of the GDP growth.
    Keywords: Global financial crisis, Emerging market economies, Monetary policy, Exchange rate regime, Quantile regressions
    JEL: C21 E52 F31 F41
    Date: 2013–02–24

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