nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒08‒30
three papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Social Cohesion and Economic Growth: Small States vs Large States By BRITO, JOÃO ANTONIO
  2. On the Relationship between Financial Integration, Financial Liberalization and Macroeconomic Volatility By Mirdala, Rajmund; Svrčeková, Aneta; Semančíková, Jozefína
  3. Are monetary unions more synchronous than non-monetary unions? By Crowley, Patrick; Trombley, Christopher

    Abstract: The purpose of this paper is to analyze empirically if the effect of social cohesion on economic growth is conditioned by country size. Two groups of countries, large and small, were set up, and by using the System-GMM estimator and panel data in a 5-year rolling window, from 1970 to 2010, the impact of civil war and ethnic tension on growth rate of GDP per capita of the two groups of states was estimated. Also, the difference between small and large states in terms of the impact of civil war and ethnic tension on β-convergence rate was analyzed. We conclude that the effects of social cohesion (measured by civil war) in economic growth and in β-convergence rate are influenced by country size, and the positive effect is higher in small states.
    Keywords: Country Size, Small States, Social Cohesion and Economic Growth
    JEL: O47 O57
    Date: 2015–07
  2. By: Mirdala, Rajmund; Svrčeková, Aneta; Semančíková, Jozefína
    Abstract: Effects of international financial integration on the volatility of the total output and its main components have been a subject of rigorous academic discussion for decades. Even nowadays recent empirical literature suggests that its long-term benefits on economic growth are associated with spurious and vague side effects in terms of macroeconomic volatility. This paper examines the relationship between international financial integration and output fluctuation. An analysis was conducted on a large sample of developed and developing countries over the past 40 years. We follow the approach employed by Kose et al. (2003) and use cross-sectional median of financial liberalization to subdivide developing economies into two groups: more financially liberalized (MFL) and less financially liberalized (LFL) economies. Our results indicate that while the volatility of output growth rates experienced a decreasing trend over time, financial integration had a significant contribution to output fluctuations. However, the relationship was stronger in developing countries.
    Keywords: financial integration, financial liberalization, output volatility, consumption volatility, capital flows
    JEL: E44 F36 F41 G15
    Date: 2015–04
  3. By: Crowley, Patrick (Texas A&M University - Corpus Christi); Trombley, Christopher (Texas A&M University - Corpus Christi)
    Abstract: Within currency unions, the conventional wisdom is that there should be a high degree of macroeconomic synchronicity between the constituent parts of the union. But this conjecture has never been formally tested by comparing sample of monetary unions with a control sample of countries that do not belong to a monetary union. In this paper we take euro area data, US State macro data, Canadian provincial data and Australian state data — namely real Gross Domestic Product (GDP) growth, the GDP deflator growth and unemployment rate data — and use techniques relating to recurrence plots to measure the degree of synchronicity in dynamics over time using a dissimilarity measure. The results show that for the most part monetary unions are more synchronous than non-monetary unions, but that this is not always the case and particularly in the case of real GDP growth. Furthermore, Australia is by far the most synchronous monetary union in our sample.
    Keywords: business cycles; growth cycles; frequency domain; optimal currency area; macroeconomic synchronization; monetary policy; single currency
    JEL: C49 E32 F44
    Date: 2015–07–31

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