nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒01‒31
seven papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Intergenerational Politics, Government Debt, and Economic Growth By Tetsuo Ono
  2. Globalization and Growth By Gene M. Grossman ; Elhanan Helpman
  3. Fertility rebound and economic growth. New evidence for 18 countries over the period 1970-2011 By Piotr Dominiak, ; Ewa Lechman ; Piotr Anna Okonowicz
  4. The time for austerity: Estimating the average treatment effect of fiscal policy By Jordà, Òscar ; Taylor, Alan M.
  5. Nominal Idiosyncratic Shocks and Optimal Monetary Policy By Eisei Ohtaki
  6. In brief: Business cycle blues By Femke De Keulenaer ; Jan-Emmanuel De Neve ; Georgios Kavetsos ; Michael I. Norton ; Bert Van Landeghem ; George W. Ward
  7. Secular Stagnation: The Long View By Barry Eichengreen

  1. By: Tetsuo Ono (Graduate School of Economics, Osaka University )
    Abstract: This study presents a two-period overlapping-generations model featuring en- dogenous growth and intergenerational conflict over fiscal policy. In particular, we characterize a Markov-perfect political equilibrium of the voting game between gen- erations, and show the following results. First, population aging incentivizes the government to invest more in capital for future public spending, and thus produces a positive effect on economic growth. Second, when the government finances its spending by issuing bonds, an introduction of a balanced budget rule results in a higher growth rate. Third, to obtain a normative implication of the political equi- librium, we compare it to an allocation chosen by a benevolent planner who takes care of all future generations. Here, we show that the political equilibrium attains a lower growth rate than that in the planner's allocation.
    Keywords: Economic Growth; Government Debt; Overlapping Generations; Pop- ulation Aging; Voting
    JEL: D72 D91 H63
    Date: 2014–06
  2. By: Gene M. Grossman ; Elhanan Helpman
    Date: 2014–01
  3. By: Piotr Dominiak, (Gdansk University of Technology, Poland ); Ewa Lechman (Gdansk University of Technology, Poland ); Piotr Anna Okonowicz (Gdansk University of Technology, Poland )
    Abstract: Long-run impact of economic growth on fertility trends is ambiguous and sensitive for in-time variations. Noticeably, over last decades, economic growth has led in many countries to significant falls in total fertility rates. However, recently, in high-income economies a kind of ‘fertility rebound’ emerged (Goldstein, 2009; Luci and Thevenon, 2011; Day, 2012), which supports the hypothesis that reversal trends in total fertility rates are mainly attributed to economic growth. The paper unveils the relationship between total fertility rate changes and economic growth in 18 selected countries with fertility rebound observed, over the period 1970-2011, and detects the GDP-threshold at which the fertility rebound emerged. To report on the relationship we deploy longitudinal data analysis assuming non-linearity between examined variables. Data applied are exclusive derived from World Development Indicators 2013. Our main findings support the hypothesis on U-shaped relationship between total fertility rate and economic growth in analyzed countries in 1970-2011. Along with the previous we project the minimum level of GDP per capita (GDP-threshold) when the fertility rebound takes place.
    Keywords: fertility rate, fertility rebound, economic growth, panel data analysis.
    JEL: J11 O10 C23
    Date: 2014–12
  4. By: Jordà, Òscar ; Taylor, Alan M.
    Abstract: After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This paper reconciles seemingly disparate estimates of multipliers within a unified and state-contingent framework. We achieve identification of causal effects with new propensity-score based methods for time series data. Using this novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a one percent of GDP fiscal consolidation translates into 4 percent lower real GDP after five years when implemented in the slump rather than the boom. We illustrate our findings with a counterfactual evaluation of the impact of the U.K. government's shift to austerity policies in 2010 on subsequent growth.
    Keywords: Rubin Causal Model,allocation bias,average treatment effect,booms,fiscal multipliers,identification,inverse probability weighting,local projection,matching,output fluctuations,propensity score,regression adjustment,slumps
    JEL: C54 C99 E32 E62 H20 H5 N10
    Date: 2014
  5. By: Eisei Ohtaki
    Abstract: This article considers an overlapping generations model with nominal idiosyncratic shocks. Such shocks are described as if they are exogenous nominal taxes/subsidies and cause nondegenerate ex-post distributions of money. We then show that the optimal money growth rate exists and is greater than one.
  6. By: Femke De Keulenaer ; Jan-Emmanuel De Neve ; Georgios Kavetsos ; Michael I. Norton ; Bert Van Landeghem ; George W. Ward
    Abstract: People do not psychologically benefit from economic expansions nearly as much as they suffer from recessions, according to research by JanEmmanuel De Neve and colleagues.
    Keywords: Economic growth, business cycles, subjective well-being, loss aversion
    JEL: D03 O11 D69 I39
    Date: 2015–01
  7. By: Barry Eichengreen
    Abstract: Four explanations for secular stagnation are distinguished: a rise in global saving, slow population growth that makes investment less attractive, averse trends in technology and productivity growth, and a decline in the relative price of investment goods. A long view from economic history is most supportive of the last of these four views.
    JEL: E00 N1
    Date: 2015–01

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