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on Financial Development and Growth |
| By: | Gertler, Mark; Kiyotaki, Nobuhiro; Prestipino, Andrea |
| Abstract: | This paper incorporates banks and banking panics within a conventional macroeconomic framework to analyze the dynamics of a financial crisis of the kind recently experienced. We are particularly interested in characterizing the sudden and discrete nature of the banking panics as well as the circumstances that makes an economy vulnerable to such panics in some instances but not in others. Having a conventional macroeconomic model allows us to study the channels by which the crisis affects real activity and the effects of policies in containing crises. |
| Keywords: | Bank Runs; Financial Crisis; New Keynesian DSGE |
| JEL: | E23 E32 E44 G01 G21 G33 |
| Date: | 2017–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1219&r=fdg |
| By: | Ohdoi, Ryoji |
| Abstract: | This study analyzes how financial shocks in one country transmit to another country through international trade. To this end, it develops a dynamic general equilibrium model of two-country Ricardian trade with a continuum of goods. Financial frictions exist in each country and the two countries can be asymmetric in terms of the degree of frictions, which can be a novel source of comparative advantage. In the case of a permanent credit crunch, we can analytically show that such a shock reduces the long-run investment, GDP, wage income, and aggregate income of heterogeneous entrepreneurs in both countries. We also numerically investigate the transitory responses to a temporal credit shock and show that such an internationally synchronized economic downturn is also observed during transition periods. |
| Keywords: | Financial Frictions, Dynamic Ricardian Trade with a Continuum of Goods, Heterogeneous Agents, Asymmetric Countries, Credit Crunch |
| JEL: | E22 E32 E44 F11 F44 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83286&r=fdg |
| By: | Shahbaz, Muhammad; Naeem, Muhammad; Ahad, Muhammad; Tahir, Iqbal |
| Abstract: | This paper investigates the stimulating role of natural resource abundance in financial development for the case of the USA over the period of 1960-2016. We included education, economic growth and capitalization as additional determinants of financial development in finance demand function. Thus, we applied traditional and recent unit root tests, accommodating unknown structural breaks in the series for examining the unit root properties of the variables. To examine cointegration between the variables, we apply the Bayer-Hanck cointegration approach. The robustness of cointegration relationship is tested by applying the bounds testing approach to cointegration. The empirical results show the presence of cointegration between financial development and its determinants. In the long run, we observe that natural resource abundance contributes to financial development. Education has a positive impact on financial development. A positive relationship exists between economic growth and financial development. Capitalization is inversely linked with financial development. The causality analysis reveals a feedback effect between natural resource abundance and financial development i.e. natural resource abundance causes financial development; in turn, financial development Granger causes natural resource abundance. This empirical evidence provides new insights for policy makers to use natural resource abundance as an economic tool to improve the performance of financial sector by considering the role of economic growth and education. |
| Keywords: | Natural Resources, Financial Development, USA |
| JEL: | A1 |
| Date: | 2017–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83280&r=fdg |
| By: | Stijn Claessens (Monetary and Economic Department, Bank for International Settlements; CEPR); M. Ayhan Kose (Development Prospects Group, World Bank; Brookings Institution; CEPR; CAMA) |
| Abstract: | This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance and is captured by financial accelerator-type mechanisms, describes how changes in borrowers’ balance sheets can affect their access to finance and thereby amplify and propagate economic and financial shocks. The second channel, which is associated with the supply side of finance, emphasizes the implications of changes in financial intermediaries’ balance sheets for the supply of credit, liquidity and asset prices, and, consequently, for macroeconomic outcomes. These channels have been shown to be important in explaining the linkages between the real economy and the financial sector. That said, many questions remain. |
| Keywords: | Asset prices, balance sheets, credit, financial accelerator, financial intermediation, financial linkages, international linkages, leverage, liquidity, macro-financial linkages, output, real-financial linkages. |
| JEL: | D53 E21 E32 E44 E51 F36 F44 G01 G10 G12 G14 G15 G21 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:1719&r=fdg |