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on Financial Development and Growth |
| By: | Verona, Fabio |
| Abstract: | Despite an increase in research – motivated by the global financial crisis of 2007-08 – empirical studies on the financial cycle are rare compared to those on the business cycle. This paper adds some new evidence to this scarce literature by using a different empirical methodology – wavelet analysis – to extract financial cycles from the data. Our results confirm that the U.S. financial cycle is (much) longer than the business cycle, but we do not find strong evidence supporting the view that the financial cycle has lengthened during the Great Moderation period. |
| Keywords: | time-frequency estimation, wavelets, financial cycle, business cycle, credit, asset prices |
| JEL: | C49 E32 E44 |
| Date: | 2016–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2016_014&r=fdg |
| By: | Stolbov, Mikhail |
| Abstract: | Causality between the ratio of domestic private credit to GDP and growth in real GDP per capita is investigated in a country-by-country time-series framework for 24 OECD economies over the period 1980–2013. The proposed threefold methodology to test for causal linkages integrates (i) lag-augmented VAR Granger causality tests, (ii) Breitung-Candelon causality tests in the frequency domain, and (iii) testing for causal inference based on a fully modified OLS (FMOLS) approach. For 12 of 24 countries in the sample, the three tests yield uniform results in terms of causality presence (absence) and direction. Causality running from credit depth to economic growth is found for the UK, Australia, Switzerland, and Greece. The findings lend no support to the view that financial development shifts from a supply-leading to demand-following pattern as economic development proceeds. The aggregate results mesh well with the current discussion on “too much finance” and disintermediation effects. However, idiosyncratic country determinants also appear significant. |
| Keywords: | causality, economic growth, financial development, FMOLS, frequency domain |
| JEL: | C22 E44 G21 O16 |
| Date: | 2015–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2015_015&r=fdg |
| By: | Crowley, Patrick M.; Trombley, Christopher |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2015_011&r=fdg |
| By: | Masuch, Klaus; Moshammer, Edmund; Pierluigi, Beatrice |
| Abstract: | This paper provides empirical evidence in support of the view that the quality of institutions is an important determinant of long-term growth of European countries. When also taking into account the initial level of GDP per capita and government debt, cross-country institutional differences can explain to a great extent the relative long-term GDP performance of European countries. It also shows that an initial government debt level above a threshold (e.g. 60-70%) coupled with institutional quality below the EU average tends to be associated with particularly poor long-term real growth performance. Interestingly, the detrimental effect of high debt levels on long-term growth seems cushioned by the presence of very sound institutions. This might be because good institutions help to alleviate the debt problem in various ways, e.g. by ensuring sufficient fiscal consolidation in the longer-run, allowing for better use of government expenditures and promoting sustainable growth, social fairness and more efficient tax administration. The quality of national institutions seems to enhance the long-term GDP performance across a large sample of countries, also including OECD countries outside Europe. The paper offers some evidence that, in the presence of good institutions, conditions for catching-up seem generally good also for euro-area and fixed exchange rate countries. Looking at sub-groupings, it seems that sound institutions may be particularly important for long-term growth in the countries where the exchange rate tool is no longer available (and where also sovereign debt is high), and less so in the countries with flexible exchange rate regimes. However, this result is preliminary and requires further research. The empirical findings on the importance of institutions are robust to various measures of output growth, different measures of institutional indicators, different sample sizes, different country groupings and to the inclusion of additional control variables. Overall, the results tend to support the call for structural reforms in general and reforms enhancing the efficiency of public administration and regulation, the rule of law and the fight against rent-seeking and corruption in particular. |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:eps:cepswp:11482&r=fdg |
| By: | Dupaigne, Martial; Fève, Patrick |
| Abstract: | This paper inspects the mechanism shaping government spending multipliers in various smallscale DSGE setups with endogenous labor supply and capital accumulation. We analytically characterize the short-run investment multiplier, which in equilibrium can be either positive or negative. The investment multiplier increases with the persistence of the exogenous government spending process. The response of investment to government spending shocks strongly affects short-run multipliers on output and consumption. |
| Keywords: | Government Spending Multipliers, DSGE models, Capital Accumulation, Labor Supply, Market Imperfections. |
| JEL: | E32 E62 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:30483&r=fdg |
| By: | Cerqueti, Roy; Sabatini, Fabio; Ventura, Marco |
| Abstract: | We model the way the interplay between tax surveillance institutions and civic capital shapes taxpayers' support for welfare state. We show that, when tax surveillance is tight, rational civic-minded individuals express greater support for welfare spending than uncivic ones. We provide empirical evidence of these preferences using data from Italy, a country that has long posed a puzzle for public economists for its limited civic capital and large welfare state. |
| Keywords: | welfare state, redistribution, tax surveillance, social trust, civic capital, social capital |
| JEL: | D63 H10 H11 H5 H53 Z1 Z18 |
| Date: | 2016–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:71566&r=fdg |