nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒04‒02
seven papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. The Asymmetric Experience of Positive and Negative Economic Growth: Global Evidence Using Subjective Well-Being Data By De Neve, Jan-Emmanuel; Ward, George W.; De Keulenaer, Femke; van Landeghem, Bert; Kavetsos, Georgios; Norton, Michael I.
  2. The Relationship between public spending on health and economic growth in Algeria: Testing for Cointegration and Causality By Fatima Boussalem; Zina Boussalem; Abdelaziz Taiba
  3. Heterogeneity in Institutional Effects on Economic Growth: Theory and Empirical Evidence By Tamilina, Larysa; Tamilina, Natalya
  5. Long-Run Growth Uncertainty By Pei Kuang; Kaushik Mitra
  6. Monitoring the world business cycle By Maximo Camacho; Jaime Martinez-Martin
  7. Does growth attract FDI? By Iamsiraroj, Sasi; Doucouliagos, Hristos

  1. By: De Neve, Jan-Emmanuel (University College London); Ward, George W. (CEP, London School of Economics); De Keulenaer, Femke (Ipsos); van Landeghem, Bert (University of Sheffield); Kavetsos, Georgios (London School of Economics); Norton, Michael I. (Harvard Business School)
    Abstract: Are individuals more sensitive to losses than gains in terms of economic growth? Using subjective well-being data, we observe an asymmetry in the way positive and negative economic growth are experienced. We find that measures of life satisfaction and affect are more than twice as sensitive to negative economic growth as compared to positive growth. We use Gallup World Poll data from over 150 countries, BRFSS data on 2.5 million US respondents, and Eurobarometer data that cover multiple business cycles over four decades. This research provides a new perspective on the welfare cost of business cycles and has implications for growth policy and our understanding of the long-run relationship between GDP and subjective well-being.
    Keywords: economic growth, business cycles, subjective well-being
    JEL: D03 O11 D69 I39
    Date: 2015–03
  2. By: Fatima Boussalem (University of Jijel); Zina Boussalem (university of jijel); Abdelaziz Taiba (university of chlef)
    Abstract: This paper investigated the causality and co-integration relationships between public health expenditure and economic growth in Algeria during 1974-2014 using annual data. This paper concentrated on time series co-integration and causality in VECM framework. The findings revealed that there is a long-run causality from public health expenditure to economic growth, while it is not observed any short-run causality from expenditure health to economic growth. The lack of strong link from health to economic growth is not necessarily a reason to reallocate health investment away from the health sector. The improvements in health status will be worth the effort even if they turn out to have little effect on growth.
    Keywords: public Health Expenditure, Economic Growth, Co-integration, Causality
    JEL: I18 I15 C10
    Date: 2014–05
  3. By: Tamilina, Larysa; Tamilina, Natalya
    Abstract: This article explains the peculiarities of institutional effects on growth rates in post-communist countries. By proposing a certain dependence of the institution-growth nexus on the nature of institutional emergence, the distinction between revolutionary and evolutionary processes of institution formation is introduced. Theoretical and empirical juxtapositions show that transition countries’ institutions which are constructed revolutionarily differ from those that emerge evolutionarily in a twofold manner in their relationship to growth. Growth rates of their economies are less likely to depend on the quality of economic institutions and are more likely to be a function of the maturity of political institutions. In addition, economic institutions in post-communist countries are a product of the quality of political bodies to a greater extent than their evolutionary alternatives.
    Keywords: Economic Growth, Formal Institutions, Institutional Formation, Institutional Change, Post-Communist Countries
    JEL: O17 O43 O57 P26 P37
    Date: 2014–06
  4. By: Mustafa Tahir Demirsel (Selcuk University); Adem Öğüt (Selcuk University); Mehmet Mucuk (Selcuk University)
    Abstract: In developing countries adequate and necessary investment cannot be realized since their domestic savings rate is low and foreign savings rate is very low. Here FDI helps diminish domestic and foreign savings deficits. Capital account liberalization in Turkey was initiated in conjunction with the process of economic and financial reforms that started in 1980, and was fully completed in 1989. In this paper, the objective is to analyze the relationship between FDI and economic growth in Turkey by using the data covering the time period between 2002:Q1 and 2014:Q1. For this purpose unit root test, Johansen cointegration test, and variance decomposition were applied. According to the findings there is no relationship between these variables in the long run.
    Keywords: Foreign Direct Investment, Economic Performance, Economic Growth
    JEL: A10 E00 F30
    Date: 2014–10
  5. By: Pei Kuang; Kaushik Mitra
    Abstract: A model of business cycles in which households do not have knowledge of the long-run growth of endogenous variables and continually learn about this growth is presented. The model features comovement and mutual reinforcement of households' growth expectations and market outcomes and suggests a critical role for shifting long-run growth expectations in business cycle fluctuations. There are important implications for estimating the output gap and the derived cyclically-adjusted fiscal budget balance computed by policy making institutions.
    Keywords: Trend, Expectations, Business Cycle, Output Gap, Cyclically-Adjusted Budget Balance
    JEL: E32 E62 D84
  6. By: Maximo Camacho (Universidad de Murcia); Jaime Martinez-Martin (Banco de España)
    Abstract: We propose a Markov-switching dynamic factor model to construct an index of global business cycle conditions, for performing short-term forecasts of quarterly world GDP growth in real time and computing real-time business cycle probabilities. To overcome the real-time forecasting challenges, the model takes into account mixed frequencies, asynchronous data publication and leading indicators. Our pseudo real-time results show that this approach provides reliable and timely inferences of quarterly world growth and of the state of the world business cycle on a monthly basis.
    Keywords: real-time forecasting, world economic indicators, business cycles, non-linear dynamic factor models
    JEL: E32 C22 E27
    Date: 2015–03
  7. By: Iamsiraroj, Sasi; Doucouliagos, Hristos
    Abstract: FDI is seen widely as a vital source of investment, technology transfer, and growth. The factors that attract FDI have been a longstanding source of debate. The authors present a comprehensive assessment of the accumulated evidence on one factor, the success of economic growth in attracting FDI. Meta-regression analysis is applied to 946 estimates from 140 empirical studies. The authors show that there is a robust positive correlation between growth and FDI. Significantly larger correlations are established for single country case studies than with cross-country analysis. It also appears that growth is slightly more correlated with FDI in developing countries.
    Keywords: economic growth,FDI,meta-regression analysis
    JEL: O24 F21
    Date: 2015

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