nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒12‒12
eight papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Political Institutions, Technology and Growth: a dynamic panel approach By Zuazu Bermejo, Izaskun
  2. Effect of interest rate on economic performance: Evidences from Islamic and Non-Islamic Economies By Mushtaq, Saba; Siddiqui, Danish Ahmed
  3. Puerto Rico: Fiscal and economic growth challenges By Bustillo, Inés; Velloso, Helvia
  4. Economic growth and real volatility: The case of Latin America and the Caribbean By Cárcamo-Díaz, Rodrigo; Pineda Salazar, Ramón
  5. The new normal for the U.S. economy By Harker, Patrick T.
  6. Fiscal policy in Brazil: from counter-cyclical response to crisis By HOLLAND, Márcio
  7. Government quality and the economic returns of transport infrastructure investment in European regions. By Riccardo Crescenzi; Marco Di Cataldo; Andrés Rodríguez-Pose
  8. Total Factor Productivity and the Institutional Possibility Frontier: An Outline of a Link between Two Theoretical Perspectives on Institutions, Culture and Long Run Growth By Ilya Lokshin

  1. By: Zuazu Bermejo, Izaskun
    Abstract: This paper investigates whether the effect of political institutions on sectoral economic performance is determined by the level of technological development of industries. Building on previous studies on the linkages among political institutions, technology and economic growth, we employ the dynamic panel Generalized Method of Moments (GMM) estimator for a sample of 4,134 country-industries from 61 industries and 89 countries over the 1990-2010 period. Our main findings suggest that changes of political institutions towards higher levels of democracy, political rights and civil liberties enhance economic growth in technologically developed industries. On the contrary, the same institutional changes might retard economic growth of those industries that are below a technological development threshold. Overall, these results give evidence of a technologically conditioned nature of political institutions to be growth-promoting.
    Keywords: political, development, develogical, dynamic, panel, institutions, technological, data
    JEL: H70 O10 O43 P16 C23
    Date: 2015–10
  2. By: Mushtaq, Saba; Siddiqui, Danish Ahmed
    Abstract: Saving and investment are most important tools for economic growth and interest rate is the most important determinant of saving and investment according to classical, neo-classical and contemporary economists however in Islam riba or interest is considered forbidden, so the aim of this study is to know the effect of religious factor on financial decision of country’s population and its impact on economic growth. As interest rate is forbidden in Islam so country with majority Muslim population should not consider interest rate while saving and investing. We used Panel least square and fixed effect model separately for 57 non-Islamic and 17 Islamic countries from 2005 to 2013. Results suggested that in Islamic countries, people don’t care about interest rate while saving however growth in GDP per capita income seems to effect positively to the saving decision. However for non-Islamic economies GDP per capita growth as well as interest rate both has positive impact on saving. However in the case of investment, interest rate affects negatively while growth in GDP per capita affects positively for both Islamic and non-Islamic countries. Hence there seems to be a need of different policies for Muslim countries in order to increase economic growth as religious factor has effects on financial decisions.
    Keywords: Interest rate Economic performance Islamic Panel data
    JEL: E43 Z12
    Date: 2015–12–09
  3. By: Bustillo, Inés; Velloso, Helvia (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: The objective of this paper is to assess the challenges that Puerto Rico’s economy is currently facing. Puerto Rico’s development experience in the postwar period is briefly discussed in order to understand the nature of the island’s current situation. Puerto Rico’s recent economic performance, credit position, debt situation and fiscal conditions, including its complex capital structure and recently released fiscal and economic growth plan are also analyzed.
    Date: 2015–10
  4. By: Cárcamo-Díaz, Rodrigo; Pineda Salazar, Ramón (Comisión Económica para América Latina y el Caribe (CEPAL) United Nations)
    Abstract: Using a new database of quarterly data for 21 countries of Latin America and the Caribbean for the 1990-2012 period, this document shows that the duration of GDP contractions appears to be a rather robust indicator of real volatility, and is negatively correlated with long run growth in Latin America and the Caribbean during the period. These results are consistent with different theoretical hypotheses in the literature that relate the duration of GDP contractions with economic growth. They also show that the relationship between real volatility and economic growth in the region is robust to the inclusion of external variables that control for external uncertainty and volatility.
    Date: 2014–12
  5. By: Harker, Patrick T. (Federal Reserve Bank of Philadelphia)
    Abstract: President Patrick T. Harker gives opening remarks at the Bank’s 2015 Policy Forum: The New Normal for the U.S. Economy. He highlights how technology/innovation, social issues, and monetary policy all have important implications for policy over the long term. He also shares his own policy perspectives.
    Keywords: Technology; Innovation; Economy;
    Date: 2015–12–04
  6. By: HOLLAND, Márcio
    Abstract: The main goal of this article is to identify the dynamic effects of fiscal policy on output in Brazil from 1997 to 2014, and, more specifically, to estimate those effects when the output falls below its potential level. To do so, we estimate VAR (vector autoregressive) models to generate impulse-response functions and causality/endogeneity tests. Our most remarkable results indicate the following channel of economic policy in Brazil: to foster output, government spending increases causing increases in both tax rates and revenue and the short-term interest rate. A fiscal stimulus via spending seems efficient for economic performance as well as monetary policy; however, the latter operates pro-cyclically in the way we defined here, while the former is predominantly countercyclical. As the monetary shock had a negative effect on GDP growth and GDP growth responded positively to the fiscal shock, it seems that the economic policy has given poise to growth with one hand and taken it with the other one. The monetary policy is only reacting to the fiscal stimuli. We were not able to find any statistically significant response of the output to tax changes, but vice versa seems work in the Brazilian case.
    Date: 2015–11–27
  7. By: Riccardo Crescenzi; Marco Di Cataldo; Andrés Rodríguez-Pose
    Abstract: Transport infrastructure investment is a cornerstone of growth-promoting strategies. However, in the case of Europe the relevant literature is increasingly failing to find a clear link between infrastructure investment and economic performance. This may be a consequence of overlooking the role of government institutions. This paper assesses the connection between regional quality of government and the returns of different types of road infrastructure in EU regions during the period between 1995 and 2009. The results unveil a strong influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investments in motorways – the preferred option by local governments – yield significantly lower returns than the more humble but possibly more efficient secondary road. Government institutions also affect the returns of transport maintenance investment.
    Keywords: Transport infrastructure, Public capital investment, Economic growth, Institutions, Government quality, Regions, Europe.
    JEL: O43 R11 R40 R58
    Date: 2015–12
  8. By: Ilya Lokshin (National Research University Higher School of Economics)
    Abstract: The paper proposes an outline for the link between two theoretical perspectives on the prerequisites of high institutional quality and long run growth. One framework is based on the tradeoff between disorder and dictatorship and introduces the notion of the institutional possibility frontier, another perspective focuses upon the role of total factor productivity as a parameter underlying long run growth. The connection between these frameworks is proposed and elaborated. The paper sheds some light on the nature of total factor productivity and designates the directions for further research on fundamental conditions of high-quality development
    Keywords: total factor productivity, institutional possibility frontier, social capital
    JEL: E02 Y90
    Date: 2015

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