nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒10‒29
eight papers chosen by
Georg Man

  1. Développement financier et croissance économique. Le cas du Maroc By sekali, jamal
  2. Développement financier, flux financiers et croissance économique By Florent Deisting; Farid Makhlouf; Adil Naamane
  3. Corruption, Banking Stability and Economic Growth in the MENA Region By Fredj Fhima
  4. Bubble on Real Estate: The Role of Altruism and Fiscal Policy By Lise Clain-Chamosset-Yvrard; Thomas Seegmuller
  5. The Broad Consequences of Narrow Banking By Matheus R Grasselli; Alexander Lipton
  6. The impact of FDI on Poverty Reduction in North Africa By Marwa Lazreg; Ezzeddine Zouari
  7. Sectoral Booms and Misallocation of Managerial Talent: Evidence from the Chinese Real Estate Boom By Yu Shi
  8. The global effects of global risk and uncertainty By Bonciani, Dario; Ricci, Martino

  1. By: sekali, jamal
    Abstract: This article proposes to examine the relation between the development of financial intermediation and the economic growth of Morocco for the period 1980-2015. We use the autoregressive time-lag model to model the long-term and short-run dynamics of the impact of financial intermediation on Morocco's growth rate. Econometric estimates show that when measuring the financial development of the banking market by the following variable: bank credit (BC), one generally arrives at a positive and significant link between the financial development of the banking market and economic growth. Second, when we measure the financial development of the stock market by market capitalization (MC), we arrive at a positive link between the financial development of the stock market and economic growth.
    Keywords: Développement financier, croissance économique, cointégration, modèle ARDL.
    JEL: A10 C1 O16
    Date: 2018–10–12
  2. By: Florent Deisting (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Farid Makhlouf (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour); Adil Naamane (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: Dans ce papier, nous analysons la relation empirique entre le développement financier mesuré par les crédits et la croissance économique au Maroc, ainsi que les canaux de transmission entre les deux variables. En utilisant un modèle VAR pour des données annuelles (1975-2010,) nous avons trouvé qu'un choc positif du développement financier favorise la croissance économique. Cet effet passe plutôt par les transferts de fonds des migrants et les échanges commerciaux. This paper attempts to explore the empirical relationship between credit as proxy to financial development and economic growth in Morocco, and transmission channel between these two variables. We used annually data from 1975 to 2010 and VAR model to examine the impact of financial development on economic growth. We found that financial development induce economic growth via remittance and trade.
    Keywords: Financial development,Financial flows,Economic growth,VAR,Morocco
    Date: 2018–10–01
  3. By: Fredj Fhima (Institute of Higher Economic Studies ? University of Sousse)
    Abstract: The positive relationship between well-functioning banking systems and economic growth is both empirically evidenced and theoretically underpinned with advances in endogenous growth theory. This issue again attracts attention since the financial crisis of 2008. Recent works highlight that banking and financial performance does not depend only on factors specific to the financial system; it is also affected by the quality of institutions. As policy makers battle to establish the good institutional environment for stable banking activity providing more effective intermediation of capital, corruption may prove a major hindrance. It may drive some borrowers such as small firms without bank connections to drop investment with positive impact and thus reducing their growth, while borrowers with such ties may have easier access to funding. The supply of funds to banks? connected parties may be associated with higher default rates and lower average recovery rates than non-connected ones, which could therefore destabilize the banking system. In as much as the stability of the banking system is a basis of economic stability and an important pre-condition for sustained growth it is a core objective for economic regulators and supervisors. This paper explores the impact of corruption on the stability of the banking sector and thereby on economic growth, using an unbalanced panel of aggregate data from 17 countries in the Middle Est and North Africa (MENA) region over the period 2008-2015. This region proves relevant upon several grounds. In fact, the key anti-corruption indexes show very high corruption levels in many countries across the region compared to global averages. Furthermore, in 2011 some MENA countries experienced upheavals, the Arab Spring that was partially driven by the demand to stop corruption. However, interim governments, continuing conflict, prevailing nepotistic networks and uncertain political futures still characterize many of these countries; effects of the 2011 events on the scope and nature of corruption in this region are unclear, making very appealing the studies addressing corruption challenges in MENA countries in pursuit of stability and growth in this region. Estimating the various models with the three-stage least squares (3SLS) estimator assess for direct and indirect impact of corruption upon banking stability and economic growth, respectively. According to estimates, corruption favors the occurrence of non-performing loans and deteriorates the stability of banks. Corruption has an indirect and negative effect on economic growth: it harms economic growth by taxing private investment and encouraging the flow of capital towards non-productive uses.
    Keywords: Banking Stability; Corruption; Economic Growth; MENA Region; Non-Performing Loans
    JEL: D73 G21 O47
    Date: 2018–07
  4. By: Lise Clain-Chamosset-Yvrard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we are interested in the interplay between real estate bubble, aggregate capital accumulation and taxation in an overlapping generations economy with altruistic households. We consider a three-period overlapping generations model with three key elements: altruism, portfolio choice, and financial market imperfections. Households realise different investment decisions in terms of asset at different periods of life, face a binding borrowing constraint and leave bequests to their children. We show that altruism plays a key role on the existence of a productive real estate bubble, i.e. a bubble in real estate raising physical capital stock and aggregate output. The key mechanism relies on the fact that a real estate bubble raises income of retired households. Because of higher bequests, there children are able to invest more in productive capital. Introducing fiscal policy, we show that raising real estate taxation dampens capital accumulation.
    Keywords: bubble,altruism,real estate,credit,overlapping generations
    Date: 2018–09
  5. By: Matheus R Grasselli; Alexander Lipton
    Abstract: We investigate the macroeconomic consequences of narrow banking in the context of stock-flow consistent models. We begin with an extension of the Goodwin-Keen model incorporating time deposits, government bills, cash, and central bank reserves to the base model with loans and demand deposits and use it to describe a fractional reserve banking system. We then characterize narrow banking by a full reserve requirement on demand deposits and describe the resulting separation between the payment system and lending functions of the resulting banking sector. By way of numerical examples, we explore the properties of fractional and full reserve versions of the model and compare their asymptotic properties. We find that narrow banking does not lead to any loss in economic growth when the models converge to a finite equilibrium, while allowing for more direct monitoring and prevention of financial breakdowns in the case of explosive asymptotic behaviour.
    Date: 2018–10
  6. By: Marwa Lazreg (Université de Sousse, FSEG, CML); Ezzeddine Zouari
    Abstract: The aim of this paper is to study the impact of FDI on poverty in the case of the North African country during the period from 1985 to 2005. The sample used in this paper consists of 6 countries of North Africa during the period from 1985 to 2005. So we can use the cointegration test. For the cointegration test, we have certified the existence of a cointegration relationship between the different series studied in our paper. Indeed, the result of the null hypothesis test of no cointegration was rejected at the 5% threshold, which explains the presence of a cointegration relationship. Also, to test the effect of FDI on poverty in the countries of North Africa, we will perform a FMOLS estimate. Thus, for the short-term dynamics, we noticed that FDI have a positive and significant impact on a threshold of 1% on the GINI index for the case of the countries of North Africa and a significant negative a threshold of 1% for the other two indicators of poverty; LPOV1_91 $ and LPOV3_1 $. Then we found that is statistically significant and positive at a 1% level. The LIDE variable measuring foreign direct investment has a negative impact on the Gini index to a threshold of 5%.For the Granger causality test; we notice that there is a unidirectional relationship between the consumption of energy and poverty Granger. Only the GINI index can cause Granger consumption of energy.
    Keywords: IDF,poverty,North Africa,cointegration,FMOLS 2
    Date: 2018–04–02
  7. By: Yu Shi
    Abstract: This paper identifies a new mechanism leading to inefficiency in capital reallocation at the extensive margin when an economy experiences a sectoral boom. I argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent. Using comprehensive firm-level data from China, I first provide evidence that more productive firms reallocate capital to the booming real estate sector, and demonstrate that the pattern is likely driven by fewer financial constraints on these firms. I then use a structural estimation to verify the talent misallocation. Finally, I calibrate a dynamic model and find that the without the misallocation, the TFP growth in the manufacturing sector would have improved by 0.5% per year.
    Date: 2018–09–28
  8. By: Bonciani, Dario; Ricci, Martino
    Abstract: In this paper, we analyse the effects of a shock to global financial uncertainty and risk aversion on real economic activity. To this end, we extract a global factor, which explains approximately 40% of the variance of about 1000 risky asset returns from around the world. We then study how shocks to the factor affect economic activity in 36 advanced and emerging small open economies by estimating local projections in a panel regression framework. We find the output responses to be quite heterogeneous across countries but, in general, negative and persistent. Furthermore, the effects of shocks to the global factor are stronger in countries with a higher degree of trade and/or financial openness, as well as in countries with higher levels of external debt, less developed financial sectors, and higher risk rating. JEL Classification: C30, F41, E32, F65
    Keywords: global financial cycle, local projection, macroeconomic transmission, panel data
    Date: 2018–09

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