nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒03‒06
six papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Eliciting GDP Forecasts from the FOMC’s Minutes Around the Financial Crisis By Ericsson, Neil R.
  2. Cross-Country Output Convergence and Growth: Evidence from Varying Coefficient Nonparametric Method By Li, Kui-Wai; Zhou, Xianbo; Pan, Zhewen
  3. Monetary Developments and Expansionary Fiscal Consolidations: Evidence from the EMU By António Afonso; Luis Martins
  4. The rise of a financial revolution in Republican China in 1900-1937: an institutional narrative By Debin Ma
  5. Banks, stock market development and economic growth in Kenya: an empirical investigation By Odhiambo, Nicholas. M; Nyasha, Sheilla
  6. A New Measure of the Canadian Effective Exchange Rate By Russell Barnett; Karyne B. Charbonneau; Guillaume Poulin-Bellisle

  1. By: Ericsson, Neil R. (Board of Governors of the Federal Reserve System (U.S.))
    Abstract: Stekler and Symington (2016) construct indexes that quantify the Federal Open Market Committee's views about the U.S. economy, as expressed in the minutes of the FOMC's meetings. These indexes provide insights on the FOMC's deliberations, especially at the onset of the Great Recession. The current paper complements Stekler and Symington's analysis by showing that their indexes reveal relatively minor bias in the FOMC's views when the indexes are reinterpreted as forecasts. Additionally, these indexes provide a proximate mechanism for inferring the Fed staff's Greenbook forecasts of the U.S. real GDP growth rate, years before the Greenbook's public release.
    Keywords: Autometrics; bias; Fed; financial crisis; FOMC; forecasts; GDP; Great Recession; Greenbook; impulse indicator saturation; projections; Tealbook; United States
    JEL: C53 E58
    Date: 2015–11–17
  2. By: Li, Kui-Wai; Zhou, Xianbo; Pan, Zhewen
    Abstract: This article uses a nonparametric varying coefficient panel data model to study the convergence of real GDP per capita among 120 world economies for the sample period of 1980-2010. The estimates show that the indirect contribution of initial income via the control variables is important. The mediating effect of control variables to affect growth is positive. The conditional speed of convergence is larger than the absolute counterpart at all levels of initial income. The convergence hypothesis does not hold for economies with extremely low level of development. The conclusion is robust for regional sub-samples of Europe, Asia, Latin America and Africa.
    Keywords: Convergence, growth, varying coefficient model, nonparametric
    JEL: O1 O11 O5 O57
    Date: 2016–02–03
  3. By: António Afonso; Luis Martins
    Abstract: We provide new insights into the existence of expansionary fiscal consolidations in the Economic and Monetary Union, using annual panel data from 14 European Union countries, over the period of 1970-2013. Different measures were calculated for assessing fiscal consolidations, based on the changes in the cyclically adjusted primary balance. A similar ad-hoc approach was used to compute monetary episodes. Panel estimations for private consumption show that, in some cases, when fiscal consolidations are coupled with monetary expansions, the traditional Keynesian signals are reversed for general government final consumption expenditure, social transfers and taxes. Keynesian effects prevail when fiscal consolidations are not matched by monetary easing. Panel probit estimations suggest that longer consolidations contribute positively to its success, whilst the opposite is the case for revenue-based ones.
    JEL: C23 E21 E5 E62 H5 H62
    Date: 2016
  4. By: Debin Ma
    Abstract: This paper surveys the phenomenal transformation of banking and finance, public debt and monetary regimes during 1900-1937, a period of great political instability in Chinese history. To understand why sectors which are often most vulnerable to the security of property rights and contract enforcement, have become the vanguard of growth in such an era of uncertainty, I highlight the role of institutions as seen in the form of a business dominated quasi-political structure that grew outside the formal political sphere. This structure rested on the institutional nexus of Western treaty ports (with Shanghai being the important) and China Maritime Customs service, a relatively autonomous tax bureaucracy. By ensuring the credibility of repayment of government bonds, this financial-fiscal mechanism laid the institutional foundation for the rise of modern Chinese banks, a viable market for public debt and increasing supply of reputable convertible bank notes during this era of national dis-integration. Our narrative carries far-reaching implications on the ongoing great divergence debate.
    Keywords: China; financial revolution; public debt; credible commitment
    JEL: N0
    Date: 2016–02
  5. By: Odhiambo, Nicholas. M; Nyasha, Sheilla
    Abstract: In this paper, we have examined the impact of both bank- and market-based financial development oneconomic growth in Kenya during the period 1980 to 2012, using the autoregressive distributed lagbounds testing approach. To capture as far as possible the breadth and depth of the Kenyan bank- andmarket-based financial systems, the study employs the method of means-removed average to constructboth bank- and market-based financial development indices from an array of banking sector and stockmarket variables. The empirical results of this study show that market-based financial development has apositive impact on economic growth in Kenya. However, the results have also shown that bank-basedfinancial development has no impact on economic growth in the study country. These results applyirrespective of whether the regression analysis is conducted in the long run or in the short run.
    Keywords: Kenya, Bank-Based Financial Development, Market-Based Financial Development,Economic Growth
    Date: 2015
  6. By: Russell Barnett; Karyne B. Charbonneau; Guillaume Poulin-Bellisle
    Abstract: Canada’s international competitiveness has received increasing attention in recent years as exports have fallen short of expectations and Canada has lost market share. This paper asks whether the Bank of Canada’s current effective exchange rate measure, the CERI, is still an accurate measure of Canada’s international competitiveness. Overall, while the CERI represented an improvement over previous measures when it was introduced, we find that it has several drawbacks that make it less well suited to address current competitiveness issues. To address these deficiencies, we develop a new Canadian effective exchange rate (CEER) index using a methodology based on current international best practices. The new index includes a broader set of countries and uses annually updated competition-based weights. These weights account for both Canada’s bilateral trade with another country and the competition Canada faces from that country on a product-by-product basis in third markets. We find that the CEER has depreciated less than the CERI in recent years, reflecting the greater importance of third-market competition from emerging-market economies in the CEER. This could help explain why Canada’s share of the U.S. import market has continued to decline despite the recent large depreciation of the Canadian dollar against the currencies of a number of advanced economies.
    Keywords: Exchange rates, International topics
    JEL: F1 F31
    Date: 2016

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