nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2014‒12‒29
four papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Bubbles and unemployment in an endogenous growth model By Ken-ichi Hashimoto; Ryonfun Im
  2. Economic growth, human capital and structural change: an empirical analysis By Anabela Queirós; Aurora A.C. Teixeira
  3. Growth, Slowdowns, and Recoveries By Francesco Bianchi; Howard Kung
  4. Relationship between Remittance, Export, Foreign Direct Investment and Growth: A Panel Cointegration and Causal Analysis in South Asia By Shahzad, Syed Jawad Hussain; Rehman, Mobeen Ur; Abbasi, Faiza; Zakaria, Muhammad

  1. By: Ken-ichi Hashimoto (Graduate School of Economics, Kobe University); Ryonfun Im (Graduate School of Economics, Kobe University)
    Abstract: We construct a continuous-time overlapping-generations model with labor market friction in order to examine the relationship between bubbles, economic growth, and unemployment. We show that the existence of bubbles is contingent upon the equilibrium unemployment rate. Asset bubbles can (not) exist when unemployment is low (high), which leads to higher (lower) interest rates and economic growth through labor market efficiency. Hence, economic growth under the bubble regime where bubbles can exist is higher than that under the non-bubble regime where bubbles cannot exist. Furthermore, policy or parameter changes that have a positive effect on the labor market shift the economy from a non-bubble regime to a bubble regime.
    Keywords: overlapping generations, endogenous growth, labor market friction, unemployment
    JEL: J64 O41 O42
    Date: 2014–12
  2. By: Anabela Queirós (Faculdade de Economia do Porto); Aurora A.C. Teixeira (CEF.UP, Faculdade de Economia, Universidade do Porto; INESC TEC; OBEGEF)
    Abstract: Human capital is identified as one of the main determinants of economic growth and plays an important role in the technological progress of countries. Nevertheless, existing studies have to some extent neglected the importance of human capital on growth via the interaction it can have with a country’s industrial specialization. Additionally, the emphasis is mainly placed on supply-side determinants, being demand-side factors quite neglected, particularly the relevance of the processes of structural change. Thus, using a growth model which integrates variables from both the supply side and demand side, we assess the direct and indirect effects of human capital on economic growth, including in the latter the interaction of human capital with the industrial specialization of countries. Based on econometric panel data estimations involving a set of OCDE countries over 1960-2011, we found that the countries’ productive specialization dynamics is a crucial factor for economic growth. It is also shown that the interaction between human capital and structural change towards high knowledge-intensive industries impacts on the economic growth. However, the sign of this effect depends on the type of country and length of the period of analysis. Specifically, in the long term and in developed countries, where knowledge-intensive industries already account for a great share of the economy, the impact of the interaction between human capital and structural change is positive. In the case of less developed countries, and considering a shorter time period, the effect of human capital via specialization in high-tech and knowledge-intensive activities emerged as negative.
    Keywords: Economic Growth; Human Capital; Structural Change; Panel Data
    JEL: J24 O3 O4 O47
    Date: 2014–11
  3. By: Francesco Bianchi; Howard Kung
    Abstract: We construct and estimate a model that features endogenous growth and technology diffusion. The spillover effects from research and development provide a link between business cycle fluctuations and long-term growth. Therefore, productivity growth is related to the state of the economy. Shocks to the marginal efficiency of investment explain the bulk of the low-frequency variation in growth rates. Transitory inflationary shocks lead to persistent declines in economic growth. During the Great Recession, technology diffusion dropped sharply, while long-term growth was not significantly affected. The opposite occurred during the 2001 recession. The growth mechanism induces positive comovement between consumption and investment.
    JEL: C11 E3 O4
    Date: 2014–12
  4. By: Shahzad, Syed Jawad Hussain; Rehman, Mobeen Ur; Abbasi, Faiza; Zakaria, Muhammad
    Abstract: The relationship among remittances, foreign direct investments (FDI), exports and economic growth is known to have an important role in economic literature for countries suffering from technological distress and unemployment problems. This paper explores the long and short run relationship among remittances, exports, foreign direct investment and economic growth using data of South Asian countries. The study covers the period from 1989 to 2011. Stationarity of the variables have been examined through both first and second generation unit root tests to cater for Cross-section Dependence. After confirmation of panel cointegration, long term coefficients have been estimated by Fully Modified OLS (FMOLS) and Dynamic Ordinary Least Square (DOLS) models. Pooled Mean Group (PMG) methodology is applied to have an examination of the cause and effect relation among the associated variables. Results of the applied test suggest the presence of cointegration among the tested variables. FMOLS and DOLS estimation analysis reveals a positive impact of capital, remittances, exports, and FDI on economic growth whereas a negative impact of labor on growth is observed. The causality analysis confirms the presence of long term equilibrium relation among labor, economic growth, capital, remittances, exports, and foreign direct. In short run, exports Granger cause growth and FDI Granger cause exports. Feedback causality is also confirmed between remittances and capital in the South Asian countries.
    Keywords: Remittances, Exports, FDI, Economic Growth, South Asia
    JEL: E21 F43
    Date: 2014–11–29

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