nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2017‒05‒07
two papers chosen by
Georg Man

  1. Finance, Growth And Fragility By Panicos O. Demetriades; Peter L. Rousseau; Johan Rewilak
  2. Is globalization detrimental to financial development? Further evidence from a very large emerging economy with significant orientation towards policies By Shahbaz, Muhammad; Mallick, Hrushikesh; Kumar, Mantu; Hammoudeh, Shawkat

  1. By: Panicos O. Demetriades; Peter L. Rousseau; Johan Rewilak
    Abstract: We utilise a new international database of financial fragility indicators for 124 countries from 1998 to 2012 to investigate the effects of fragility on the finance-growth nexus. Cross-country growth regressions suggest that both financial fragility and private credit have negative effects on GDP growth over this period. The results are robust to controlling for systemic banking crises, confirming that financial fragility has additional negative effects on growth, even if a banking crisis is avoided. We also present results using interactions which suggest that (a) a large volume of impaired loans can amplify the negative effects of private credit on growth and (b) a sufficiently high z-score can eradicate the negative effects of private credit on growth.
    Date: 2017–05
  2. By: Shahbaz, Muhammad; Mallick, Hrushikesh; Kumar, Mantu; Hammoudeh, Shawkat
    Abstract: This study attempts to explore the relationship between globalization and financial development by endogenising economic growth, population density, inflation and institutional quality for India during the period from 1971-2013. Using the more conclusive Bayer-Hanck (2013) combined cointegration method, the study provides evidence of cointegration among these variables. The long run and short run estimates from the ARDL model and causality tests respectively suggest that globalization in its all forms (political, social and economic) and its overall measure as well as inflation are detrimental to financial development, while economic growth and population density both promote financial development. Further, the results also point out that institutional quality is not conducive to financial development in India, and there exists a feedback effect between financial development and inflation. Moreover, financial development is influenced by economic growth, institutional quality and population density.
    Keywords: Globalization, financial development, institutional quality, inflation, India
    JEL: C0
    Date: 2017–04–12

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