nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒03‒27
seven papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. The role of soft factors on economic growth By Bozena Kaderabkova; Klara Cermakova; Robert Holman
  2. Public spending on education and Economic Growth in Algeria: Causality Test By Yousra Mekdad; Aziz Dahmani; Monir Louadj
  3. "Financial System Development and Economic Growth in Transition Economies:New Empirical Evidence from the CEE and CIS Countries" By Laura Cojocaru; Evangelos M. Falaris; Saul Hoffman; Jeffrey B. Miller
  4. Public Debt and Economic Growth: A Two-Sided Story By Irina Bilan; Iulian Ihnatov
  5. Public Debt and Growth in Greece. An Empirical Approach. By Angelos Markou; Maria Karamitrou
  6. The Effects of Oil Price on Turkish Economic Growth By AyÅŸen Edirneligil; Mehmet Mucuk
  7. Disentangling Size and Efficiency Effects of Finance: New Evidence from Transition Countries By ayse demir

  1. By: Bozena Kaderabkova (University of Economics, Economic Faculty); Klara Cermakova (University of Economics, Economic Faculty); Robert Holman (University of Economics, Economic Faculty)
    Abstract: Former growth theories did not give a satisfactory answer to stimuli of economic growth and possibilities of sustainable growth. An important contribution to the economic growth theories was given by research in institutional economics. Today formal and informal institutions such as rule of law, habits, religion or corruption, are considered by many authors very significant for economic growth. This paper is based on findings of The Heritage Foundation and on Economic freedom index, which identifies four groups of institutional factors Rule of law (Property rights, Freedom from corruption), Limited government (Government spending, Fiscal freedom), Regulatory efficiency ( Business freedom, Labor freedom, Monetary freedom), Open markets( Ttrade freedom, Financial freedom, Investment freedom). This study is focused on the relationship between religion and economic growth. The impact of different religions is measured by regression and correlation analysis within each of the four groups.
    Keywords: economic growth, institutions, formal and informal factors of economic growth
    JEL: E02 O43
    Date: 2014–12
  2. By: Yousra Mekdad (University of Jijel); Aziz Dahmani (University of bechar); Monir Louadj (University of jijel)
    Abstract: In this article, we seek to study the relationship between education and economic growth.For this purpose, we studied multipleentrances(dimension ) information relating education and Economic Growth on theoretical and empirical background in the first, as the second part of study to analysis and examine the effect of Public spendingon education on economic growth in Algeria over the period 1974-2012. with the use of endogenous growth model. In this model, gross domestic product(GDP) is based on the Cobb Douglas form which is the function was adoptedwith five variables: Real Gross National Product (GDP), Capital (K), Labor (L), Expenditure on Education (SEDU). Two unit root tests (Philips-Perron Test) have been employed to test the integration order of the uses Ordinary Least Squares (OLS) and Johansen Co-integration test and Causality Test is as analytical techniques for this purpose. The empirical results support the main hypothesis of this study that Public spending on education affects positively economic growth in Algeria. Even though that the most important effect on economic growth is for education, the other three explanatory variables affect also, positively, the economic growth; yet their effect is relatively less important than the effect of education.
    Keywords: Economic Growth; Public spending on education; Co-integration Analysis; Causality Tests.
    JEL: A10 A20 C59
    Date: 2014–05
  3. By: Laura Cojocaru (Bankable Frontier Associates); Evangelos M. Falaris (Department of Economics, University of Delaware); Saul Hoffman (Department of Economics, University of Delaware); Jeffrey B. Miller (Department of Business, Gallaudet University)
    Abstract: We examine the role of financial development in economic growth in the former Communist countries of Central and Eastern Europe and the Commonwealth of Independent States during the first two decades since the beginning of transition. These countries, which had undeveloped financial systems under Communism, provide an interesting test of the relationship between financial development and growth. Our study is the broadest in terms of coverage and time period. We find that measures of financial market efficiency and competitiveness are more important than the size of the market in terms of promoting economic growth.
    Keywords: transition economies, CEE, CIS, financial sector development, economic growth
    JEL: O16 P27 P34
    Date: 2015
  4. By: Irina Bilan (\); Iulian Ihnatov (\)
    Abstract: The recent European sovereign debt crisis proved public debt issues should not be easily approached. While, prior to the crisis, public debt was of little concern in most of the developed European countries, as there had been no recent episodes of sovereign default, the crisis revived longtime forgotten memories. It once again proved that, although at different debt levels, just like the developing countries the developed ones should fear high public debts and that public debt is almost always a two-sided story: although public indebtedness can promote economic growth, especially when debt resources are used for financing public investment expenditure, when the debt is very high it can negatively affect economic growth.Against this background, in this paper we aim to study the relationship between public debt and economic growth for a panel of 33 European countries (28 European Union Member States and 5 candidate countries to European accession) over the period 1990-2011. More specifically, we investigate if there is evidence of a non-linear (quadratic) relationship, both for the entire European countries group and for the developed and developing countries subgroups. The main sources of data are World Bank’s World Development Indicators and International Monetary Fund’s World Economic Outlook and Historical Public Debt datasets.The results of our study confirm the existence of a „U inverted†relationship, with a maximum debt threshold of about 94% of GDP. After this threshold public debt is expected to negatively affect the economic growth rate, due to higher interest rates, fear of public debt unsustainability and severe budgetary consolidation measures. However, this threshold is found to be more than twice lower in developing European countries compared to the developed ones, as the former enjoy lower credibility, higher vulnerability to shocks and depend more on external capital transfers.
    Keywords: public debt, economic growth, public policy, developed European countries, developing European countries
    JEL: H63 E60 O40
    Date: 2014–12
  5. By: Angelos Markou (Technological Educational Institute of Western Macedonia); Maria Karamitrou (Technological Educational Institute of Western Macedonia)
    Abstract: On this paper is conducted a study on the impact that will have the public debt to the growth rate of Greece for the period 2014-2017. Along with the estimation, in order to be a comprehensive picture of public debt and growth in Greece we proceeded with a presentation of data for the period 1975-2012. The estimations were made, using econometric model for growth designed specifically to describe and estimate the growth rate, for this country. The estimations for public debt were made by using the standard type of debt to GDP ratio. In order to examine whether Greece’s public debt has positive impact or not on its growth, a linear model has been used for this relationship. The results of research showed a further decline of the Greek economy meaning the continuation of country’s recessionary path will and the public debt levels will remain high. Therefore the relationship between public debt and growth will be negative. In the end we make some useful conclusions on Greece’s public debt and growth, presenting reliable solutions in order to be avoided any further downturn of the economy.
    Keywords: Public debt, Growth rate, Greece, Public debt crisis
    JEL: C01 H63 O40
    Date: 2014–05
  6. By: AyÅŸen Edirneligil (Selcuk University); Mehmet Mucuk (Selcuk University)
    Abstract: Although the oil price is determined by demand and supply, it is also affected by lots of variables such as economic, political and technical conditions. On the other hand, fluctuations in oil price have also effect on macroeconomic stability. Oil price has an important role in Turkey, since Turkey is a country that has external dependency in energy sources. The purpose of this paper is to examine the effects of oil prices on Turkish economic growth. In this respect, the relationship between variables will be analyzed by using annual data between the years 1980-2013. For analyzing variables, it will be used Johansen Cointegration Test, Impulse-Response Function, and Variance Decomposition tests.
    Keywords: Oil price, Economic growth, Turkish Economy
    JEL: A10 E00 E21
    Date: 2014–10
  7. By: ayse demir (university of leicester)
    Abstract: This paper aims to shed light on the role of financial development on the growth dynamics of transition countries. Particularly, the impacts of several financial development indicators (in terms of size and efficiency) on the income level in 25 transition economies and two subgroups with varying intensities of socio-economic development are empirically examined. The countries of interest tend to have weaker financial system in comparison with the advanced markets. Subgroups are formed for 16 Central and Eastern Europe (CEE) transition economies and 9 former Soviet Union (CIS) members in order to conduct panel data estimations with a time period of 1990 - 2012. Findings, clearly suggest that, improvements in the financial system (size measurements) are highly associated with rising income levels for all country groups. Increase in liberalization of interest rates, private credit and banking lending affect the income level in the CEE lower than in the CIS. According to results, high interest rate spreads (efficiency indicator) negatively affect economic growth and remains statistically significant even if size measurements are included in the regression for both group of countries, indicating that an unsubstantial increase in the size of financial intermediation does not affect growth unless it is also followed by banking efficiency developments and rising competition in the banking sector.
    Keywords: economic growth, transition economies, panel data, financial development
    JEL: F39
    Date: 2014–10

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