nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒12‒03
nine papers chosen by
Georg Man

  2. Have FDI enhanced Growth in Egypt? By Soheir Tarek; Hebatallah Ghoneim
  3. Relevance of governance quality on the effect of foreign direct investment on economic growth: new evidence from African countries By Njangang, Henri; Nawo, Larissa
  4. How do shocks to bank capital affect lending and growth? By Tölö, Eero; Miettinen, Paavo
  5. Financialisation, financial development, and investment: evidence from European non-financial corporations By Tori, Daniele; Onaran, Özlem
  6. Financial and non-financial global stock market volatility shocks By Wensheng Kang; Ronald A. Ratti; Joaquin Vespignani
  7. Introduction to International Financial Markets and Banking Systems Crises By Raouf Boucekkine; Kazuo Nishimura; Alain Venditti
  8. Financial structure and income inequality By Michael Brei; Giovanni Ferri; Leonardo Gambacorta
  9. Financialization and Inequality in Coordinated and Liberal Market Economies By Evelyne Huber; Bilyana Petrova; John D. Stephens

    Abstract: The study examine the relationship between financial intermediation and economic growth in Nigeria after the consolidation of the banking sector reform in Nigeria. Augmented Dickey Fuller Unit root test was conducted as a pretest to avoid giving spurious results. Granger causality was also employed to look at the direction of relationship between the dependent variable and the independent variables, the result shows a bidirectional relationship between Money Supply (MoS) and Gross Domestic Product (GDP) while Credit to Private Sector (CPS) does not granger GDP and GDP does not granger cause CPS, a unidirectional relationship however exist between CPS and MoS all at 5% level of significance. The Ordinary least square (OLS) method of analysis with data spanning 13 years shows that the variables for financial intermediation significantly affect economic growth in Nigeria. CPS has a positive impact on economic growth and so does MoS even though MoS contributes more to GDP than CPS contributes to GDP. Thus the result provide evidence that financial intermediation role of Nigerian banks have increased during the period of study an indication that people are having increased confidence on Nigerian banks after the consolidation and hence depositing the money in the banks. The study therefore recommend increase in granting credit to the private sector, expansionary monetary policy and policies aimed at strengthening further the banks in Nigeria so that their intermediation function can improve hence economic growth.
    Keywords: Financial Intermediation, Economic Growth, Banks
    JEL: G21 G32 G34
    Date: 2018–11
  2. By: Soheir Tarek (Faculty of Management Technology, German University in Cairo); Hebatallah Ghoneim (Faculty of Management Technology, German University in Cairo)
    Abstract: Foreign Direct Investment (FDI) is usually considered an important catalyst for economic growth in developing countries. FDI plays an important role in transferring technology from developed to emerging economies, it also stimulates domestic investments and enhances human as well as physical capital in the host countries. This paper also aims at identifying the effect of FDI on the Egyptian economy. The analysis is carried out using an OLS regression model with three variables. Time series data for FDI inflows, gross capital formation (GCF) and labor force (LF) were gathered for Egypt over the period 1990-2014. After gathering the results of both the single and multiple regressions, some policy recommendations are suggested to enhance and maximize the effect of FDI on economic growth in Egypt.
    Keywords: Economic Growth, Egypt, Developing countries, Foreign Direct Investment
    JEL: F21 F43 O40 O55
    Date: 2018–09
  3. By: Njangang, Henri; Nawo, Larissa
    Abstract: Despite the large volume of studies on the direct impact of foreign direct investment on economic growth, the results remain inconclusive. This has led researchers to examine the channels through which FDI affects economic growth. Evidence suggests that institution quality can improve economic growth by increasing foreign direct investment in the host countries. As governance quality is improving in African countries during the last decade, the aim of this study is to investigate the relationship between foreign direct investment, governance quality and economic growth in 51 African countries over the period 1998-2015. The empirical evidence is based on Generalized Method of Moments. The following findings are established. First, there is an unconditional positive effect of foreign direct investment on economic growth in African countries. We also find a positive and significant relationship between governance quality and economic growth. Second, these findings are still robust when we use the composite governance quality indicators. Three, when regards at interaction terms between governance quality and foreign direct investment, we find a convincing evidence that governance quality moderate favorably the effect of FDI on economic growth. Four, the moderate effect of governance quality on foreign direct investment and growth nexus still robust with composite governance quality indicators. Overall this study has established net direct positive and significant effect of foreign direct investment on economic growth and that this effect is enhanced by good governance. The major implication from our study is that African countries should improve their governance quality to benefit more from FDI in terms of achieving better growth outcomes.
    Keywords: FDI, governance, economic growth, Africa, GMM
    JEL: F23 G30 O55
    Date: 2018–11–20
  4. By: Tölö, Eero; Miettinen, Paavo
    Abstract: We examine bank capital shocks using a recent new approach based on non-normal errors in vector autoregressive models. Using a sample of 14 European economies over January 2004 through March 2018 we identify two distinct classes of bank capital shocks, capital tightening shocks, and bank profitability shocks. We find that both bank capital shocks frequently lead to changes in lending volume and interest rates for new loans. In contrast to some recent similar studies, we find less evidence for impact on production. Bank capital shocks have further effects on the substitution between the bank and market-based financing and on credit allocation across different borrower sectors. Policymakers may find these results useful when considering counter-cyclical adjustments to the bank capital requirements.
    JEL: C11 C32 C54
    Date: 2018–11–28
  5. By: Tori, Daniele; Onaran, Özlem
    Keywords: financialisation; financial development; non-financial corporations; fixed investment; Europe
    JEL: E2 E21
    Date: 2018–11–09
  6. By: Wensheng Kang; Ronald A. Ratti; Joaquin Vespignani
    Abstract: We decompose global stock market volatility shocks into financial originated shocks and non-financial originated shocks. Global stock market volatility shocks arising from financial sources reduce substantially more global outputs and inflation than non-financial sources shocks. Financial stock market volatility shocks forecasts 16.85% and 16.88% of the variation in global growth and inflation, respectively. In contrast, the non-financial stock market volatility shocks forecasts only 8.0% and 2.19% of the variation in global growth and inflation. Beside this markable difference global interest/policy rate responds similarly to both shocks.
    Keywords: Global, Stock market volatility Shocks, Monetary Policy, FAVAR
    JEL: D80 E44 E66 G10
    Date: 2018–11
  7. By: Raouf Boucekkine (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE; Institute for Advanced Studies (Iméra) & Institut Universitaire de France (IUF)); Kazuo Nishimura (RIEB, Kobe University); Alain Venditti (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE & EDHEC Business School)
    Abstract: This note introduces to the literature streams explored in the special section on international financial markets and banking systems crises. All topics tackled are related to the Great Recession. A brief overview of the research questions and related literatures is provided.
    Keywords: financial frictions, financial instability, international transmission, credit crunch, banking and sovereign debt crisis
    Date: 2016–12
  8. By: Michael Brei; Giovanni Ferri; Leonardo Gambacorta
    Abstract: This paper empirically investigates the link between financial structure and income inequality. Using data for a panel of 97 economies over the period 1989-2012, we find that the relationship is not monotonic. Up to a point, more finance reduces income inequality. Beyond that point, inequality rises if finance is expanded via market-based financing, while it does not when finance grows via bank lending. These findings concur with a well-established literature indicating that deeper financial systems help reduce poverty and inequality in developing countries, but also with recent evidence of rising inequality in various financially advanced economies.
    Keywords: inequality, finance, banks, financial markets
    JEL: G10 G21 O15 D63
    Date: 2018–11
  9. By: Evelyne Huber; Bilyana Petrova; John D. Stephens
    Abstract: The last three decades have witnessed rising inequality and deepening financialization (however defined) in post-industrial democracies. A rapidly growing body of literature has linked the two phenomena (see e.g. Dünhaupt 2014, Godechot 2016, Flaherty 2015, Roberts and Kwon 2017). Contrary to existing scholarship, which has largely neglected the mediating effect of institutions, we argue that contextual differences play a crucial role in shaping the relationship between financialization and inequality. Drawing on the Varieties of Capitalism literature, we posit that a larger financial sector is associated with a more unequal distribution of income in liberal market economies, where the industry develops substantial autonomy from other actors. In contrast, the stronger position of labor in coordinated market economies is able to counteract the inequality-enhancing effects of financialization. We test these hypotheses with data on 18 and 21 post-industrial democracies between 1960 and 2013. Our analysis is largely consistent with our expectations.
    Date: 2018–09

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