nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒03‒13
six papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Impact of public funding of education on economic growth in Macedonia By Bexheti, Abdylmenaf; Mustafi, Besime
  2. Revisiting Growth Empirics Based on IV Panel Quantile Regression By Lijuan Huo; Tae-Hwan Kim; Yunmi Kim
  3. The relevance of the EU banking sector to economic growth and the recent financial crisis By Cândida Ferreira
  4. Threshold and interaction effects in the trade, growth, and inequality relationship By Leyaro, Vincent
  5. Why does financial sector growth crowd out real economic growth? By Stephen G Cecchetti; Enisse Kharroubi
  6. Population Dynamics and Long-Run Economic Growth By Casey, Gregory; Galor, Oded

  1. By: Bexheti, Abdylmenaf; Mustafi, Besime
    Abstract: The main aim of this study is to investigate the relationship between public spending on education after the process of decentralization and economic growth in Macedonia as low income state. This paper do not have intention to make a picture of education system in Macedonia, how it functions or if education is open to all, but has the aim to measure the public spending on education as a determinant that has impact on economic growth even positive or negative. This paper raise the following important question: 'do all measures of public spending on education promote economic growth?' As a lack of data in developing countries like is Macedonia the specification of empirical models to test the causal effect on public spending on education and growth is paradox and this explain why the road through which public education expenditure affects economic growth is not yet well understood. The inter-relationships between government expenditure and education quality should be taken into account when formulating education policy to promote economic growth (Corray, 2000). The channels by which education can promote growth maybe do not lie to quantity of public spending but on quality of the policy that means where youth end after their education. We investigate the link between public spending on education and economic growth in Macedonia using Logarithmic Multiple Regression Model. We came in conclusion that the model is significant. The result shows negative effect on public spending on education and economic growth in the case of Macedonia. The results also raise another statement 'what exactly are the highly educated workers doing together (that is so sensitive to their being highly educated) if it does not involve things changing at the margin?' (Aghion, 2009). It ends with some key conclusions and recommendations that there has to be founded another channels to produce quality education - skilled labor by which will rise the productivity and economic growth.
    Keywords: public expenditures,education,economic growth,real GDP,public investment,skilled labor
    Date: 2015
  2. By: Lijuan Huo (Beijing Institute of Technology); Tae-Hwan Kim (Yonsei University); Yunmi Kim (University of Seoul)
    Abstract: We analyze the well-known issue of economic growth convergence using quantile regres- sion. Most previous studies have used a least squares (LS) method or variation, which focuses on the issue only at the mean of the growth rate. Therefore, such results cannot provide a satisfactory answer to what can happen if the growth rate is far from the conditional mean level. For example, we consider the following question: do we still have economic growth convergence or is the conver- gence speed changed in a low growth period such as the ?Great Recession,?that started in 2008? We propose using IV panel quantile regression to answer the question. Our empirical ?ndings demonstrate that economic growth convergence occurs at all quantiles over the entire conditional distribution, but that the convergence speed does depend on quantiles; the convergence speed is much higher when the GDP growth rate is at either high or low quantiles.
    Keywords: Quantile regression; panel data; endogeneity; growth convergence.
    JEL: O4 C2
    Date: 2014–12
  3. By: Cândida Ferreira
    Abstract: Using static and dynamic panel estimates in a sample including all 28 European Union countries during the last decade, this paper seeks to improve upon the existing literature with empirical evidence on the important role that well-functioning EU banking institutions can play in promoting economic growth. The banking sector performance is proxied by the evolution of some relevant financial ratios and economic growth is represented by the annual Gross Domestic Product growth rate. In order to analyse the possible differences arising after the outbreak of the recent international financial crisis, the estimations consider two panels: one for the time period 1998– 2012 and another for the subinterval 2007–2012. The results obtained allow us to draw conclusions not only on the importance of the variation of different operational, capital, liquidity and assets quality financial ratios to economic growth but also on some differences evidenced in the two considered panels, reflecting the consequences of the recent financial crisis and the correspondent reactions of the European banking institutions.
    Keywords: bank performance, economic growth, European Union, financial crisis, panel estimates
    JEL: G21 F43 F36 C23
    Date: 2015–02
  4. By: Leyaro, Vincent
    Abstract: This paper examines the relationship between trade (exports), growth, and inequality, using a panel of 100 countries over 30 years (1980 to 2010). As there is no clear theoretical relationship between trade (exports) and inequality, and as inequality can
    Keywords: trade, growth, inequality, threshold effects
    Date: 2015
  5. By: Stephen G Cecchetti; Enisse Kharroubi
    Abstract: In this paper we examine the negative relationship between the rate of growth of the financial sector and the rate of growth of total factor productivity. We begin by showing that by disproportionately benefiting high collateral/low productivity projects, an exogenous increase in finance reduces total factor productivity growth. Then, in a model with skilled workers and endogenous financial sector growth, we establish the possibility of multiple equilibria. In the equilibrium where skilled labour works in finance, the financial sector grows more quickly at the expense of the real economy. We go on to show that consistent with this theory, financial growth disproportionately harms financially dependent and R&D-intensive industries.
    Keywords: growth, financial development, credit booms, R&D intensity, financial dependence
    Date: 2015–02
  6. By: Casey, Gregory; Galor, Oded
    Abstract: This paper applies insights from theoretical and empirical research in economic growth to analyze the impacts of policies affecting fertility, migration and human capital accumulation on growth and poverty alleviation. It underlines the tradeoff between having more children and investing more resources in the human capital of each child as a critical force in devising policies that will alleviate hardship and generate long-term prosperity. In developing countries, policies increasing the return to education would trigger a virtuous cycle of fertility control, investment in education, poverty alleviation, and economic growth. Moreover, permitting migration of high skilled individuals to developed countries would mitigate the issues associated with aging populations in those societies, while encouraging human capital formation in developing countries.
    Keywords: Fertility, Demographic Structure, Unified Growth Theory, Migration
    JEL: J13 J16 J24 O15 O40
    Date: 2014–10

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