nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒02‒23
five papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Institutions and Development in MENA Region: Evidence from the Manufacturing Sector By Ali Fakih; Mahmoud Arayssi
  2. The growth trade-off between direct and indirect taxes in South Africa: Evidence from a STR model By Phiri, Andrew
  3. Deficit Rules and Monetization in a Growth Model with Multiplicity and Indeterminacy Deficit Rules and Monetization in a Growth Model with Multiplicity and Indeterminacy By Maxime Menuet; Alexandru Minea; Patrick Villieu
  4. Monetary policy during financial crises: Is the transmission mechanism impaired? By Jannsen, Nils; Potjagailo, Galina; Wolters, Maik H.
  5. The Effects of Money Laundering (ML) on Growth: Application to the Gulf Countries By Issaoui, Fakhri; WASSIM, TOUILI; HASSEN, TOUMI

  1. By: Ali Fakih; Mahmoud Arayssi
    Abstract: This paper examines the role of institutions (including civil law origin), financial deepening and degree of regime authority on growth rates in the Middle East and North Africa (MENA) region using panel data through a fixed effect model. The results reveal that English civil law origin and the establishment of the rule of law work with the development of financial institutions to increase economic growth in these economies; however, the democratization of the political institutions and foreign direct investment do not assist financial development in promoting economic growth. The findings emphasize the prominence of overcoming institutional weaknesses and establishing transparent public policy governing businesses as a pre-requisite for successful universal integration in developing countries.
    Keywords: Eonomic growth, institutional development, financial development, MENA region,
    JEL: G2 O16 P48
    Date: 2015–02–05
  2. By: Phiri, Andrew
    Abstract: The tax system forms the backbone to the functioning of the South African fiscal authorities and it is has been recently questioned whether alterations in the existing tax mix could promote economic growth. Using quarterly data from 1990:Q1 and 2015:Q2, this study investigated the effects of direct and indirect taxes on economic growth for South Africa using the recently developed smooth transition regression (STR) model. Our findings suggest an optimal tax of 10.27 percent on the indirect tax–growth ratio, of which below this rate indirect taxes are positively related with economic growth whereas direct taxes are negatively related with growth. Above the optimal tax rate, taxation bears no significant relationship with economic growth. We therefore suggest that policymakers place a greater burden on indirect taxes and yet ensure that the contribution of indirect taxes to economic growth does not exceed the threshold of 10.27 percent.
    Keywords: Direct taxes; Indirect taxes; optimal tax; VAT; Economic growth; South Africa; Smooth transition regression (STR) model.
    JEL: C22 C51 H21 H30 O40
    Date: 2016–02–01
  3. By: Maxime Menuet (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans); Alexandru Minea (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans, CERDI - Centre d'études et de recherches sur le developpement international - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique); Patrick Villieu (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans)
    Abstract: In response to the Great Recession, Central Banks around the world adopted " unconven-tional " monetary policies. In particular, the Fed, and more recently the ECB, launched massive debt monetization programs. In this paper, we develop a formal analysis of the short-and long-run consequences of deficit and debt monetization, through an endoge-nous growth model in which economic growth interacts with productive public expenditure. This interaction can generate two positive balanced growth paths (BGP) in the long-run: a high BGP and a low BGP, and further, depending on the form of the CIA constraint, possible multiplicity and indeterminacy. Thus, monetizing deficits is found to be remarkably powerful. First, a large dose of monetization might allow avoiding, whenever present, BGP indeterminacy. Second, monetization always allows increasing growth and welfare along the (high) BGP, by weakening the debt burden in the long-run. Third, with a CIA on consumption only, monetization provides a rationale for deficits in the long-run: for high degrees of monetization, the impact of deficits and debts on economic growth and welfare becomes positive in the steady-state.
    Keywords: great recession, Central Bank, monetary policies, deficit rules, Monetization, Growth Model
    Date: 2016–01–07
  4. By: Jannsen, Nils; Potjagailo, Galina; Wolters, Maik H.
    Abstract: We study the macroeconomic effects of monetary policy during financial crises using a Bayesian panel vector autoregressive (PVAR) model for 20 advanced economies. We interact all of the endogenous variables with financial crisis dummies, which are constructed using the narrative approach. We also distinguish between an acute initial phase of financial crises and a subsequent recovery phase. We show that an expansionary monetary policy shock has large positive effects on output and inflation during the acute phase of a financial crisis. These effects are larger than those during non-crisis periods. Decreased uncertainty as well as increases in consumer confidence and share prices explain these large effects, whereas these variables are much less relevant for monetary policy transmission outside financial crises. Counterfactual analysis shows that the transmission mechanism would be impaired without the effects of monetary policy on these variables, where credit would not react at all and the response of output would be substantially lower. During the recovery phase of a financial crisis, output and inflation are generally non-responsive to monetary policy shocks.
    Keywords: fiscal monetary policy transmission,financial crisis,financial stability,state-dependence,uncertainty,panel VAR
    JEL: C33 E52 E58 G01
    Date: 2015
  5. By: Issaoui, Fakhri; WASSIM, TOUILI; HASSEN, TOUMI
    Abstract: the strategic goal of this paper is to study the effects of the prevention policies against money laundering on growth in the gulf countries (Saudi Arabia, Kuwait, Qatar, Bahrain, UAE and Oman) from 1980 to 2014. Thus, the logistic regression (logit model) had given three fundamental results. The first had shown that the main policies in matter of fight against money laundering (anti money laundering law AMLL, suspicious transaction reporting STR, the criminalizing of terrorist financing CTF) have had positive effects on the increasing of probabilities to realize more growth. The second is that the said policies have had positive effects on the increasing of the degree of openness of the whole sample. The third is that the variable (proximity) had a positive and significant effect on anti-money laundering policies.
    Keywords: Money laundering, growth, efficiency, gulf countries
    JEL: G14 G15
    Date: 2016–02–12

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