nep-fdg New Economics Papers
on All new papers
Issue of 2014‒09‒08
five papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Endogenous Fluctuations in an Endogenous Growth Model with Ination Targeting By Rangan Gupta; Lardo Stander
  2. The nexus between foreign investment, domestic capital and economic growth: Empirical evidence from the MENA region By Anis Omri; Bassem kahouli
  3. Financial Development and Economic Growth: Evidence from Ten New EU Members By Caporale, Guglielmo Maria; Rault, Christophe; Sova, Robert; Sova, Anamaria
  4. The Electricity Consumption in a Rentier State: Do Institutions Matter ? By Jamal Bouoiyour; Refk Selmi; Muhammad Shahbaz
  5. Stimulus and Fiscal Consolidation: The Evidence and Implications By Dean Baker; David Rosnick

  1. By: Rangan Gupta; Lardo Stander
    Abstract: This paper develops a monetary endogenous growth overlapping generations model characterized by production lags - specically lagged capital inputs - and an in ation targeting monetary authority, and analyses the growth dynamics that emerge from this framework. The growth process is endogenized by allowing productive government ex- penditure on infrastructure, complementing the lagged private capital input. Following the extant literature, money is introduced by impos- ing a cash reserve requirement on an otherwise competitive banking sector. Given this framework, we show that multiple equilibria emerge along dierent growth paths, with the low-growth (high-growth) equi- librium being unstable (stable) and locally determinate (locally inde- terminate). In addition, we show that convergent or divergent endoge- nous uctuations and even topological chaos could emerge around the high-growth equilibrium in the growth path where the monetary au- thority follows a high in ation targeting regime. Conversely, when the monetary authority follows a low in ation targeting regime, oscillations do not occur around either the low-growth or high-growth equilibrium.
    Keywords: endogenous uctuations, in ation targeting, chaos, production lags, indeterminacy.
    JEL: C62 E32 O42
    Date: 2014–08–29
  2. By: Anis Omri; Bassem kahouli
    Abstract: The objective of this paper is to estimate an econometric model for analyzing the interrelationship between foreign direct investment, domestic capital and economic growth in 13 MENA countries by using a ‘growth model’ framework and simultaneous-equations models estimated by the Generalized Method of Moments (GMM) during the period 1990–2010. Our empirical results show that there is bi-directional causal relationship between foreign investment and economic growth, between domestic capital and economic growth, and there is uni-directional causal relationship from foreign direct investment to domestic capital for the region as a whole.
    Keywords: Foreign investment, Domestic capital, Economic growth, GMM-estimator.
    JEL: G20 O40 H54 C36
    Date: 2014–08–29
  3. By: Caporale, Guglielmo Maria (Brunel University); Rault, Christophe (University of Orléans); Sova, Robert (CREST & University of Paris 1 Panthéon-Sorbonne); Sova, Anamaria (E.B.R.C. Bucharest)
    Abstract: This paper reviews the main features of the banking and financial sector in ten new EU members, and then examines the relationship between financial development and economic growth in these countries by estimating a dynamic panel model over the period 1994-2007. The evidence suggests that the stock and credit markets are still underdeveloped in these economies, and that their contribution to economic growth is limited owing to a lack of financial depth. By contrast, a more efficient banking sector is found to have accelerated growth.
    Keywords: financial development, economic growth, transition economies
    JEL: E44 E58 F36 P26
    Date: 2014–08
  4. By: Jamal Bouoiyour; Refk Selmi; Muhammad Shahbaz
    Abstract: The core focus of this paper is to assess the relationship between the electricity consumption and institutions within rentierism phenomenon by incorporating economic growth, urbanization, trade openness and foreign direct investment in the case of Algeria. To this end, we have applied the ARDL bounds testing approach to cointegration and innovative accounting approach (variance decomposition and impulse response methods) over the period of 1971-2012. Our empirical results show that these variables are cointegrated in the long-run. We find that institutions play an important role to explain this cointegration. The response of electricity demand is increasingly negative due to the one standard deviation shock in institutions. This highlights an insightful evidence, providing that the poor governance drawbacks in a rentier state may affect directly electricity consumption or indirectly via urbanization and foreign direct investment. The contribution of economic growth to electricity consumption appears minor (the conservation hypothesis is limitedly supported), while that of trade openness seems insignificant.
    Keywords: Electricity consumption, institutions, rentier state.
    Date: 2014–08–29
  5. By: Dean Baker; David Rosnick
    Abstract: This paper examines the evidence on the impact of stimulus and fiscal consolidation in the context of a severe economic slump like the Great Recession. The first part reviews some of the major works on this topic in the last decade. It notes that the research clearly points in the direction of stimulus increasing growth during a prolonged slump. The second part examines the impact of changes in government consumption and investment on growth, using data from advanced countries since 1980. Consistent with most prior literature it finds that increases in government spending during downturns lead to increases in growth. It then constructs simulations for the period since the Great Recession showing multipliers in the neighborhood of 1.5. The third part notes new evidence suggesting that potential GDP appears to have fallensharply as a result of the downturn. A full model of the impact of stimulus would have to incorporate this effect which is likely to be large relative to the size of the stimulus.
    Date: 2014

This nep-fdg issue is ©2014 by Iulia Igescu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.