nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒01‒09
five papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Following the Trend: Tracking GDP when Long-Run Growth is Uncertain By Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
  2. Understanding Differences in Growth Performance in Latin America and Developing Countries between the Asian and Global Financial Crises By Roberto Alvarez; Jose De Gregorio
  3. Paid Basic Income, Fertility Rates and Economic Growth By Elise S. Brezis
  4. FDI and Growth: Can different regional identities shape the returns to foreign capital investments? By Laura Resmini; Laura Casi
  5. Growth, Slowdowns, and Recoveries By Bianchi, Francesco; Kung, Howard

  1. By: Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
    Abstract: Using a Bayesian dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles, we document a significant decline in long-run growth in the United States and in other advanced economies. Our evidence supports the view that this slowdown started prior to the Great Recession. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner. Furthermore, taking into account the variation in long-run growth improves the short-run forecasts and "nowcasts" of US GDP typically produced using this class of models.
    Keywords: Bayesian methods; dynamic factor models; long-run growth; mixed frequencies; real-time forecasting
    JEL: C11 C38 C53 E37
    Date: 2014–11
  2. By: Roberto Alvarez (University of Chile); Jose De Gregorio (Peterson Institute for International Economics)
    Abstract: Latin American performance during the global financial crisis was unprecedented. Many developing and emerging countries successfully weathered the worst crisis since the Great Depression. Was it good luck? Was it good policies? In this paper we compare growth during the Asian and global financial crises and find that a looser monetary policy played an important role in mitigating crisis. We also find that higher private credit, more financial openness, less trade openness, and greater exchange rate intervention worsened economic performance. Our analysis of Latin American countries confirms that effective macroeconomic management was key to good economic performance. Finally, we present evidence from a sample of 31 emerging markets that high terms of trade had a positive impact on resilience.
    Keywords: Latin America, Emerging Markets, Developing Countries, Global Financial Crisis, Macroeconomic Policies
    JEL: E58 E63 F3
    Date: 2014–11
  3. By: Elise S. Brezis (Bar-Ilan University)
    Abstract: The purpose of this paper is to examine the effects of paid basic income on fertility rates in a model in which fertility rates are endogenous. I show that when child labor is not a crucial part of the income of the family, then paid basic income will lead to higher fertility rates. However, when child labor is a necessity, then in fact an increase in paid basic income will lead to a reduction in fertility rates.
    Keywords: basic income, fertility rates; economic growth; child labor; Sibship size effect
    JEL: B10 D10 J13
    Date: 2014–11
  4. By: Laura Resmini; Laura Casi
    Abstract: Do regional identities determine different levels of FDI-induced growth? This paper analyses the impact of FDI on the growth rates of European regions. In so doing, it discusses the role of different components of territorial capital in magnifying or daunting such an impact. The paper starts from a very simple theoretical framework that clarifies how territorial capital can shape the returns to foreign direct investments. The subsequent empirical analysis uses data from the European Value Study to identify 3 soft components of territorial capital that define the identity of a region and can be relevant in shaping the impact of foreign capital on local growth. Using data from Eurostat and FDIregio database, the paper studies the impact of FDI induced spillovers on regional growth in European regions, controlling for possible endogeneity. Results indicate that technological spillovers are an important source of regional growth, but they take place only if the level of trustworthiness/generalized morality is widespread in the region, supporting the idea that low free-riding attitudes increase efficiency of transaction and effectiveness of cooperation between multinational and the regional economic system. The effect of relational capital is more ambiguous. A more disaggregated analysis reveals that some effects vary depending on the origin (intra vs extra European FDI) and on the type of economic activity (manufacturing vs service FDI).
    Keywords: FDI; regional growth; territorial capital
    JEL: F23 O18 O52
    Date: 2014–11
  5. By: Bianchi, Francesco; Kung, Howard
    Abstract: We consider a network game with strategic complementarities where the individual reward or the strength of interactions is only partially known by the agents. Players receive different correlated signals and they make inferences about other players' information. We demonstrate that there exists a unique Bayesian-Nash equilibrium. We characterize the equilibrium by disentangling the information effects from the network effects and show that the equilibrium effort of each agent is a weighted combinations of different Katz-Bonacich centralities where the decay factors are the eigenvalues of the information matrix while the weights are its eigenvectors. We then study the impact of incomplete information on a network policy which aim is to target the most relevant agents in the network (key players). Compared to the complete information case, we show that the optimal targeting may be very different.
    Keywords: Bayesian methods; business cycles; DSGE model; endogenous growth; technology diffusion
    Date: 2014–12

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