nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2014‒11‒12
six papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. "Economic Growth and the Natural World" By Wesson, Joseph
  2. Capital Formation in Thailand: Its Importance and Determinants By Jiranyakul, Komain
  3. Temporal causal relationship between stock market capitalization, trade openness and real GDP: evidence from Thailand By Jiranyakul, Komain
  4. Does military spending stimulate growth? An empirical investigation in Italy By d'Agostino, Giorgio; Daddi, Pierluigi; Pieroni, Luca; Steinbrueck, Eric
  5. Explaining social capital effects on growth and property rights via trust-alternative variables By Ahmad, Mahyudin; Hall, Stephen G.
  6. Financial Integration and Economic Growth By Juraev, Nosirjon

  1. By: Wesson, Joseph
    Abstract: This is a survey of some ideas relating to the theory of economic growth and how economic growth impacts the natural world.
    Keywords: Growth environment population
    JEL: O1 O10 O3 O30 O33 O4 O47 Q01 Q56
    Date: 2014–10–20
  2. By: Jiranyakul, Komain
    Abstract: Using the dataset that comprises annual data during 1979 and 2012 and obtained from various sources, this study examines the importance of capital formation to Thai economy and what driving forces influence capital formation. The results show that real GDP and capital formation are cointegrated, and capital formation imposes a positive impact on real GDP in the long run. It is found that stock market liquidity measured by stock market capitalization rather than foreign direct investment plays important role in capital accumulation process. These findings give some policy implications.
    Keywords: Capital formation, economic growth, stock market capitalization, bounds testing.
    JEL: C22 O11
    Date: 2014–09
  3. By: Jiranyakul, Komain
    Abstract: This study examines both short-run and long-run causal relationship between stock market capitalization, trade openness and economic growth in Thailand. Quarterly data over the period from the first quarter of 1993 to the fourth quarter of 2013 are used in the analysis. The results from this study show that there exists a unidirectional long-run causality running from stock market capitalization and trade openness to real GDP. In the short run, an increase in stock market capitalization causes economic growth while an increase in trade openness decreases it and vice versa. Furthermore, there exist short-run bidirectional negative causations between economic growth and trade openness. However, the short-run phenomena are temporary. Based upon the results from this study, policymakers should pay attention to measures that are able to enhance stock market capitalization and trade openness if the long-run target is to achieve high economic growth rate.
    Keywords: Economic growth, market capitalization, trade openness, cointegration, causality
    JEL: C22 F41 O11
    Date: 2014–11
  4. By: d'Agostino, Giorgio; Daddi, Pierluigi; Pieroni, Luca; Steinbrueck, Eric
    Abstract: This paper investigates the effect of military burden on economic growth and extends previous works on the optimal size of government expenditure by exploring how external threat affects the preferences of the households and, in turn, economic growth. Post World War II Italian data are used to estimate non-linear growth models using time-series semi-parametric methods. The estimates show that total government and civilian burdens are productive, whereas military burden has significant effects on economic growth through the expenditure for peacekeeping missions which reduces the insecurity in the home country. This may justify economically the current not negligible budget devoted to peacekeeping and humanitarian missions.
    Keywords: Military burden, Italian defense sector, endogenous growth models, Non-linear time series
    JEL: H50 O41 O47
    Date: 2014–08–31
  5. By: Ahmad, Mahyudin; Hall, Stephen G.
    Abstract: In our previous paper “Can Trust Explain Social Capital Effect on Property Rights and Growth?†(Hall & Ahmad, 2013) we show that generalized trust data by the World Value Survey (WVS) are unable to yield sufficiently robust results in panel estimation due to missing observations problem. In this paper, we propose a number of trust-alternative variables to proxy for social capital and re-estimate its effect on growth and property rights. The results improve significantly and we are able to show that social capital is a deep determinant of growth and its effect on growth runs via the property rights channel. The findings also give supporting evidence to the primacy of informal rules and constraints as proposed by North (2005) over the political prominence theory by Acemoglu, Johnson, & Robinson (2005). The results partially confirm the findings by Williamson & Kerekes (2011) on the underlying determinants of property rights and provide empirical support to the Clague, Keefer, Knack, & Olson (1999)’s argument of a positive relationship between contract intensive money and property rights.
    Keywords: Social capital; growth; property rights; panel data analysis;
    JEL: O43
    Date: 2014–09–05
  6. By: Juraev, Nosirjon
    Abstract: The following paper studies possible impacts of financial integration under different economic conditions, such as financial and equity market development and trade openness. It applies mixture of models, namely General Methods of Moments (GMM), Ordinary Least Squares (OLS), two-staged OLS, transformed OLS, and Panel data approach with 14 financial integration measures, including three new ones over 217 countries between 1970 and 2012. The results confirm that countries with high current account surplus are better off under financial integration, particularly with less inflation and less strict rule-of-law. Financial development damages economic growth in financial repressed markets, unless financial integration measures are practiced simultaneously. Stock market, although its existence brings positive outcomes, its development decreases economic gains under financial integration. Trade openness and unemployment rates are positively associated with growth under FI. Foreign bank presence, although positively correlated with financial development, effects negatively on economic growth, particularly under higher financial openness. International organization (World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), and World Bank (WB)) membership presents negative relations to economic growth. We conjecture that organizational contracts once believed to give advantageous gains for both sides are no longer advantageous, because of the recent rapid developments in emerging and developing countries.
    Keywords: financial integration, financial liberalization, financial openness, capital market integration, economic growth, financial repression, financial autarky, economic slowdown
    JEL: F0 F20 F21 F30 F36
    Date: 2013–01–01

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