nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒09‒04
four papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Financial Innovation and Economic Growth in the SADC By Alex Bara; Gift Mugano; Pierre Le Roux
  2. Explaining economic growth in developed economies after 1980 By Carlos Ballestero; Carlos E. Posada
  3. Human Capital, Public Debt, and Economic Growth: A Political Economy Analysis By Tetsuo Ono; Yuki Uchida
  4. Assessing the effects of unconventional monetary policy on pension funds risk incentives By Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos

  1. By: Alex Bara; Gift Mugano; Pierre Le Roux
    Abstract: The study empirically establishes the causal relationship between financial innovation and economic growth in SADC. Using an Autoregressive Distributed Lag (ARDL) Model, estimated by Pooled Mean Group and Dynamic Fixed Effects, the study finds that financial innovation has a positive relationship to economic growth in long run for SADC. The long run estimations, however, show existence of a weak relationship. Introducing a direct measure of financial innovation buttresses the role of financial innovation in growth in SADC. Panel Granger causality tests establish that there is no causality, in any direction, between financial innovation and growth both in the short and long run.
    Keywords: : Innovation, financial innovation, economic growth, SADC, Autoregressive Distributed Lag (ARDL)
    JEL: G21 G28 O31 O33
    Date: 2016–08
  2. By: Carlos Ballestero; Carlos E. Posada
    Abstract: We use the Aguion and Howitt (2009) theoretical model of endogenous economic growth to explain the declining economic growth in developed economies in the period 1981-2009. Aguion and Howitt theoretical framework combines Solownian and Schumpeterian elements in a single scenario, so that labor-augmenting technological progress and capital accumulation per efficiency unit of labor are both caused not only by exogenous changes in the investment rate but also by shocks to the degree of efficiency in the Research and Development (R&D) expenditure process. Empirical results revealed that per worker output growth rates and capital stock per efficiency unit of labor growth rates both have a common panel unit root. Since the panel cointegration tests and estimates revealed a statistical significant negative long-run relationship between per worker output growth rate and capital stock per efficiency unit of labor, the interpretation of the econometric results analized from the Aguion and Howitt ?s theoretical perspective is that labor-augmenting technological progress is endogenously falling over time mainly because of an exogenous deterioration of the environment conditions for the transformation of the investment rate and R&D expenditures in technological progress.
    Keywords: Economic growth, Solownian and Schumpeterian models of growth, investment rate, R&D expenditures, Capital stock per efficient unit of labor
    JEL: O11 O31 O33 O41 O47 O57
    Date: 2016–08–01
  3. By: Tetsuo Ono (Graduate School of Economics, Osaka University); Yuki Uchida (Graduate School of Economics, Osaka University)
    Abstract: This study considers public education policy and its impact on growth and wel- fare across generations. In particular, the study compares two scal perspectives| tax nance and debt nance|and shows that in a competitive equilibrium context, the growth and utility in the debt- nance case could be higher than those in the tax- nance case in the long run. However, the opposite occurs when the policy is shaped by politics. When the degree of parents' altruism is low, they choose debt nance in their voting, despite its long-run worse performance because a current generation can pass the cost of debt repayment to future generations.
    Keywords: Economic growth, Human capital, Public debt, Political equilib- rium
    JEL: D70 E24 H63
    Date: 2016–01
  4. By: Boubaker, Sabri; Gounopoulos, Dimitrios; Nguyen, Duc Khuong; Paltalidis, Nikos
    Abstract: US public pension funds deficits remain stubbornly high even though market conditions have improved in the post-crisis period. This article examines the role of lower short- and long-term interest rates imposed by the use of unconventional monetary policy on pension funds risk taking and asset allocation behavior. We quantify the effects of the Zero Lower Bound policy and the launch of unconventional monetary policy measures by using two structural Vector AutoRegression (VAR) models, a Bayesian VAR and a Markov switching-structural VAR. We provide the first comprehensive evidence showing that persistently low interest rates and falling Treasury yields cause a substantial increase in pension funds risk and portfolios beta. Additionally, we document that the severe funding shortfall in many pension schemes is, to a large extent, associated with and prompted by changes in the monetary policy framework.
    Keywords: Pension funds; Unconventional monetary policy; Asset allocation; Zero lower bound
    JEL: E52 G11 G23
    Date: 2015–05

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