nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒03‒10
seven papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Causal Linkages between Financial Development, Trade Openness and Economic Growth: Fresh Evidence from Innovative Accounting Approach in Case of Bangladesh By Mohamed Arouri; Gazi Salah Uddin; Kishwar Nawaz; Muhammad Shahbaz; Frédéric Teulon
  2. Oil Price shocks and theirs consequences on Sudan’s GDP growth and unemployment rates By Elsiddig Rahma; Noel Perera; Kian Tan
  3. Public expenditure in time of crisis: are Italian policymakers choosing the right mix? By Maria Jennifer Grisorio; Francesco Prota
  4. Learning or Leaning: Persistent and Transitory Spillovers from FDI By Ronald B. Davies; Michael J. Lamla; Marc Schiffbauer
  5. The quest for status and R&D-based growth By Hof, Franz X.; Prettner, Klaus
  6. Interaction matrix selection in spatial econometrics with an application to growth theory By Nicolas Debarsy; Cem Ertur
  7. Effects of Monetary and Macroprudential Policies on Financial Conditions; Evidence from the United States By Aleksandra Zdzienicka; Sally Chen; Federico Diaz Kalan; Stefan Laseen; Katsiaryna Svirydzenka

  1. By: Mohamed Arouri; Gazi Salah Uddin; Kishwar Nawaz; Muhammad Shahbaz; Frédéric Teulon
    Date: 2016–02–18
  2. By: Elsiddig Rahma (Northumbria University at Newcastle upon Tyne); Noel Perera (Northumbria University); Kian Tan (Northumbria University)
    Abstract: Since the advent of oil production and export in late 1999, Sudan economy became more reliant on oil exports proceeds. This situation has exposed the economy to the negative effect of oil price fluctuations. In general, oil exporting countries exhibit positive impact on their economy to oil price increase, while oil importing economies suffer. Unlike developing economies, there is paucity of research in developing countries with regards to the relationship between macro-economy and oil price shocks. In this regard, Sudan has been neglected from serious studies related to oil price shocks. This research attempts to contribute towards filling this gap. In doing so, Vector Auto-Regression model is employed to investigate the impact of oil price shocks on the real GDP growth and unemployment rates over the period 2000 - 2014. The Granger causality test suggests that unemployment has statistically and significantly influenced real GDP growth. Results from the Impulse Response Functions and Forecast Error Variance Decomposition analysis suggest that decrease in oil price has a greater influence on GDP growth. Interestingly, oil price decrease has a significant positive impact on unemployment rate.
    Keywords: VAR model, GDP growth, Unemployment rate, Sudan.
    JEL: C32 E00 F43
  3. By: Maria Jennifer Grisorio; Francesco Prota
    Abstract: In the “austerity debate” a crucial issue is the composition of fiscal adjustment. This article provides empirical evidence on the relationship between economic crisis episodes and composition of public expenditure by examining the impact of economic crises on the share of different types of public spending in total public expenditure in the Italian regions. Our results suggest that fiscal consolidation strategies have not had growth-friendly composition.
    Keywords: Economic crisis, composition of government expenditure, panel data.
    JEL: C23 H12 H72
    Date: 2016–03
  4. By: Ronald B. Davies; Michael J. Lamla; Marc Schiffbauer
    Abstract: Using firm-level data for Jordan, we estimate the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases which evaporate following disinvestment). We find that they have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.
    Keywords: FDI; Spillovers
    JEL: F23 F16
    Date: 2016–02
  5. By: Hof, Franz X.; Prettner, Klaus
    Abstract: We analyze the impact of status preferences on technological progress and long-run economic growth. For this purpose, we extend the standard relative wealth approach by allowing the two components of the representative household's wealth, physical capital and shares, to differ with respect to their status relevance. Relative wealth preferences imply that the effective rate of return of saving in the form of a particular asset is the sum of its market rate of return and its status-related extra return. It is shown that the status relevance of shares is of crucial importance: First, an increase in the intensity of the quest for status raises the steady-state economic growth rate only if the status-related extra return of shares is strictly positive. Second, for any given degree of status consciousness, the long-run economic growth rate depends positively on the relative status relevance of shares. Third, while in the standard model the decentralized long-run economic growth rate is less than its socially optimal counterpart, the wealth externalities in our model counterbalance this distortion to some extent provided that shares matter for status.
    Keywords: status concerns,relative wealth,technological progress,long-run economic growth,social optimality
    JEL: D31 D62 O10 O30
    Date: 2016
  6. By: Nicolas Debarsy (Laboratoire d'Economie d'Orléans - LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique); Cem Ertur (Econométrie - LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The interaction matrix, or spatial weight matrix, is the fundamental tool to model cross-sectional interdependence between observations in spatial econometric models. However, it is most of the time not derived from theory, as it should be ideally, but chosen on an ad hoc basis. In this paper, we propose a modified version of the J test to formally select the interaction matrix. Our methodology is based on the application of the robust against unknown heteroskedasticity GMM estimation method, developed by Lin & Lee (2010). We then implement the testing procedure developed by Hagemann (2012) to overcome the decision problem inherent to non-nested models tests. An application is presented for the Schumpeterian growth model with worldwide interactions (Ertur & Koch 2011) using three different types of interaction matrix: genetic distance, linguistic distance and bilateral trade flows and we find that the interaction matrix based on trade flows is the most adequate. Furthermore, we propose a network based innovative representation of spatial econometric results.
    Keywords: Bootstrap,GMM,Interaction matrix,J tests,Non-nested models,Heteroscedasticity,Spatial autoregressive models
    Date: 2016–02–24
  7. By: Aleksandra Zdzienicka; Sally Chen; Federico Diaz Kalan; Stefan Laseen; Katsiaryna Svirydzenka
    Abstract: The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.
    Keywords: Financial stability;Monetary policy;Central banks and their policies;Financial crises;United States;Western Hemisphere;spillovers, international monetary fund, exchange rate, transmission mechanism, Monetary Policy (Targets, Instruments, and Effects), spillovers.,
    Date: 2015–12–31

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