nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2017‒04‒30
six papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Long Term Growth Perspectives in Japan and the Euro Area By Christian Dreger
  2. Inflation and Economic Growth By BLINOV, Sergey
  3. The transmission of monetary policy shocks By Miranda-Agrippino, Silvia; Ricco, Giovanni
  4. The effect of financial development on economic growth : a meta-analysis By M. Bijlsma; C.J.M. Kool; Marielle Non
  5. Politics, Not Economics, Ultimately Drives Inequality By Jon D. Wisman
  6. The Poverty-Economic Growth-Health Triangle By cyrine hannafi; Christophe Muller

  1. By: Christian Dreger
    Abstract: Euro area countries and Japan are confronted with similar challenges. Potential output is on a falling trend in the euro area, and the decrease started well before the financial crisis. In Japan, low output growth is a striking feature since many years, despite the unconventional monetary policy stance and massive fiscal stimulus programs provided by the government. According to a growth accounting exercise based on a Cobb-Douglas production function, the development in both economies can be traced to a weak evolution of TFP. Weak capital deepening is detected especially in the euro area. Driven by high uncertainty with regard to the business cycle, the willingness of firms to undertake investment is only modest and constitutes the achilles heel for a smooth recovery. Both economies are not well prepared to manage the demographic challenges caused by an elderly population. Given that debt-to-GDP ratios are already at record heights, the scope for further demand driven policies is rather limited, especially in Japan. Instead, structural reforms are on the agenda to promote long run growth and a smooth development of the global economy.
    Keywords: Long run growth, government debt, aging population
    JEL: O40 E60 J11
    Date: 2017
  2. By: BLINOV, Sergey
    Abstract: Attempts to establish a link between inflation and economic growth are made quite regularly. The aim of such attempts is not only to determine the impact of inflation on economic growth but also to assess efficiency of the inflation rein-in policy, for example, the policy of inflation targeting. This work reveals the nature of the inter-connection between inflation and economic growth and explains why this inter-connection cannot be sustainable without considering the third parameter, i.e. money supply.
    Keywords: Monetary Policy; Price Level; Inflation; Deflation; Economic Growth; Business Cycles;
    JEL: E30 E31 E32 E51 E52 E58 N10 O11 O40 O42
    Date: 2017–04–08
  3. By: Miranda-Agrippino, Silvia (Bank of England); Ricco, Giovanni (University of Warwick)
    Abstract: Despite years of research, there is still uncertainty around the effects of monetary policy shocks. We reassess the empirical evidence by combining a new identification that accounts for informational rigidities, with a flexible econometric method robust to misspecifications that bridges between VARs and Local Projections. We show that most of the lack of robustness of the results in the extant literature is due to compounding unrealistic assumptions of full information with the use of severely misspecified models. Using our novel methodology, we find that a monetary tightening is unequivocally contractionary, with no evidence of either price or output puzzles.
    Keywords: Monetary policy; local projections; VARs; expectations; information rigidity; survey forecasts; external instruments
    JEL: C11 C14 E52 G14
    Date: 2017–04–21
  4. By: M. Bijlsma; C.J.M. Kool; Marielle Non
    Abstract: Empirical studies on the finance-growth relationship show a wide range of estimated effects. We perform a meta-analysis on in total 551 estimates from 68 empirical studies that take private credit to GDP as a measure for financial development and distinguish between linear and logarithmic specifications. First, we find evidence of significantly positive publication bias in both the linear and log-linear specifications. This contrasts with findings in two other recent meta-studies, possibly due to a distortion introduced by their transformation procedure. Second, the logarithmic estimates give a robust significantly positive average effect of financial development on economic growth after correction for publication bias. In our preferred specification a 10 percent increase in credit to the private sector increases economic growth with 0.09 percentage points. For the linear estimates, no significant effect of credit to the private sector on economic growth is found on average. Over-all, the evidence points to a positive but decreasing effect of financial development on growth.
    Keywords: Financial development, economic growth, credit to the private sector, meta-analysis
    Date: 2017–01
  5. By: Jon D. Wisman
    Abstract: Over the past 40 years, inequality has exploded in the U.S. and significantly increased in virtually all nations. Why? The current debate typically identifies the causes as economic, due to some combination of technological change, globalization, inadequate education, demographics, and most recently, Piketty’s claim that it is the rate of return on capital exceeding the growth rate. But to the extent true, these are proximate causes. They all take place within a political framework in which they could in principle be neutralized or reversed. Indeed, this mistake is itself political. It masks the true cause of inequality and presents it as if natural, due to the forces of progress, just as in pre-modern times it was the will of gods. By examining three broad distributional changes in modern times, this article demonstrates the dynamics by which inequality is a political phenomenon through and through. It places special emphasis on the role played by ideology -- politics’ most powerful instrument -- in making inequality appear as necessary.
    Keywords: Political power; Distribution; Legitimation; Ideology
    JEL: D63 B00 Z18 N3
    Date: 2017
  6. By: cyrine hannafi; Christophe Muller
    Abstract: To identify the dynamic interactions existing between Poverty, Economic Growth and Health using country-level panel data from developing countries We treat endogeneity and the selectivity issues coming from unavailability of poverty indicators. We develop innovative econometric methods that we apply to an original set of indicators at country level. e find that the data generation through household surveys depends on crucial socio-economic factors and that our new method of selectivity correction has a massive impact on our estimation results casting doubt on previous findings in the literature and changing fundamentally the picture and the interpretation of development process.
    Keywords: Developing cotntries, Modeling: new developments, Macroeconometric modeling
    Date: 2016–07–04

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