nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2019‒04‒29
five papers chosen by
Georg Man

  1. How the Wealth Was Won: Factors Shares as Market Fundamentals By Daniel L. Greenwald; Martin Lettau; Sydney C. Ludvigson
  2. Dynamics between Financial development, Energy consumption and Economic growth in Sub-Saharan African countries: Evidence from an asymmetrical and nonlinear analysis By Kassi, Diby François; Sun, Gang; Gnangoin, Yobouet Thierry; Edjoukou, Akadje Jean Roland; Assamoi, Guy Roland
  3. Does International Financial Integration Increase the Standard of Living in Africa? A Frontier Approach By Gilles Dufrénot; Kimiko Sugimoto
  4. Leaning Against the Wind: Efectos de la Política Macroprudencial en el Crecimiento Sectorial By Valdivia Coria, Joab Dan; Valdivia Coria, Daney David
  5. Effects of foreign aid on the recipient country's economic growth By Pham, Ngoc-Sang; Pham, Thi Kim Cuong

  1. By: Daniel L. Greenwald; Martin Lettau; Sydney C. Ludvigson
    Abstract: We provide novel evidence on the driving forces behind the sharp increase in equity values over the post-war era. From the beginning of 1989 to the end of 2017, 23 trillion dollars of real equity wealth was created by the nonfinancial corporate sector. We estimate that 54% of this increase was attributable to a reallocation of rents to shareholders in a decelerating economy. Economic growth accounts for just 24%, followed by lower interest rates (11%) and a lower risk premium (11%). From 1952 to 1988 less than half as much wealth was created, but economic growth accounted for 92% of it.
    JEL: G0 G12 G17
    Date: 2019–04
  2. By: Kassi, Diby François; Sun, Gang; Gnangoin, Yobouet Thierry; Edjoukou, Akadje Jean Roland; Assamoi, Guy Roland
    Abstract: This paper analyzes the asymmetrical relationship between financial development, energy consumption and economic growth in twenty-one (21) sub-Saharan African (SSA) countries from 1990Q1 to 2014Q4. We used the nonlinear autoregressive distributed lag (NARDL) framework and asymmetrical causality tests to examine the relationship between the variables. First, the country-level analysis reveals that there is asymmetrical cointegration between the variables in some countries and mixed results of the causal effects of financial development and energy consumption on economic growth across countries. Second, the results of the panel data analysis confirm the asymmetrical cointegration in the SSA region, especially in lower-middle-income countries than in upper-middle-income countries. We find that positive changes in energy consumption significantly reduce economic growth, contrary to the negative changes in the long-term. Besides, positive shocks to financial development favor more economic growth than the adverse shocks in the long-term in the SSA region. However, financial development hurts economic growth, contrary to energy consumption in the short-term. Finally, the results show bidirectional causality between positive changes in energy consumption and economic growth, but unidirectional causality running from negative changes in energy consumption to economic growth in the SSA region. There is also bidirectional causality between positive and negative shocks to financial development and economic growth in SSA region, but mixed results across lower-income countries and upper-middle-income countries. Therefore, our study suggests that energy-saving policies such as renewable energies can be implemented in the SSA region to promote sustainable development. In addition, policy-makers should adopt an efficient allocation of the credits to the private sector supporting productive investments. They should also pay attention to the asymmetrical relationship between financial development, energy consumption and economic growth in most SSA countries in the conduct of economic policies.
    Keywords: Financial development; Energy use; Economic growth; NARDL; Sub-Saharan Africa.
    JEL: C13 G20 Q43
    Date: 2019–04–20
  3. By: Gilles Dufrénot (Aix-Marseille Univ. CNRS, EHESS, Centale Marseille, IRD, AMSE, Marseille, France & CEPII); Kimiko Sugimoto (Konan University (Hirao School of Management), Japan)
    Abstract: We investigate whether a higher financial integration with the rest of the world can help the African countries reduce their production inefficiency and/or push up their efficient frontier of production. We use two alternative empirical approaches based, respectively, on a stochastic frontier analysis and quantile regressions. We provide evidence of heterogeneous situations across countries and time. This paper proposes a new approach for defining, at the aggregate level, a link between financial openness and production efficiency. We show that one size does not fit all: international financial integration can increase or decrease African countries' standard of living.
    Keywords: African countries, financial openness, stochastic frontier, quantile regression
    JEL: F33 F34 F36 F41
    Date: 2019–04
  4. By: Valdivia Coria, Joab Dan; Valdivia Coria, Daney David
    Abstract: El uso de políticas macroprudenciales en los últimos años cobro relevancia en diferentes economías. A consecuencia de la crisis financiera de 2008, este instrumento fue de utilidad en economías emergentes para disminuir los efectos del adverso contexto internacional. La relación entre la intermediación financiera y el sector real es positiva, a 2016 la respuesta del crecimiento sectorial a shocks en el crédito productivo es de 0.15pp. Asimismo, la modificación de la tasa de encaje legal puede proveer o retirar liquidez del sistema financiero, en el primer caso, el objetivo es incrementar de colocación de cartera, lo cual repercute en los sectores productivos y su desenvolvimiento. Por lo tanto, surge la necesidad de evaluar el efecto de ese instrumento (encaje legal) en el crecimiento sectorial de Bolivia, contralado por el ciclo financiero porque episodios de Credit Crunch afectan al sector real (se amplifica el ciclo económico a la baja). Las metodologías empleadas fueron del Método de Efectos Fijos (EF), Aleatorios (EA) y Vectores Autoregresivos en panel (Panel-VAR) y versiones recursivas de los mismos. Las estimaciones muestran los efectos positivos de la política macroprudencial y cambios en la postura que tuvo este instrumento a lo largo del tiempo, en función al ciclo financiero, Leaning Against the Wind. Bajas en la tasa de encaje legal de moneda doméstica impactan positivamente en el crecimiento sectorial y se evidencia con las versiones recursivas efectos positivos e incrementos paulatinos del crédito hacia a la actividad sectorial.
    Keywords: Encaje Legal, tasas de interés, Efectos Fijos (EF), Efectos Aleatorios (EA), Panel VAR, Estimación Recursiva, Leaning Against the Wind.
    JEL: C5 E51 E52
    Date: 2018–01–31
  5. By: Pham, Ngoc-Sang; Pham, Thi Kim Cuong
    Abstract: We introduce an infinite-horizon endogenous growth framework for studying the effects of foreign aid on the economic growth in a recipient country. Aid is used to partially finance the recipient's public investment. We point out that the same rule of aid may have very different outcomes, depending on the recipient's circumstances in terms of development level, domestic investment, efficiency in the use of aid and in public investment, etc. Foreign aid may promote growth in the recipient country, but the global dynamics of equilibrium are complex (because of the non-monotonicity and steady state multiplicity). The economy may converge to a steady state or grow without bounds. Moreover, there are rooms for the divergence and a two-period cycle. We characterize conditions under which each scenario takes place. Our analysis contributes to the debate on the nexus between aid and economic growth and in particular on the conditionality of aid effects.
    Keywords: Aid effectiveness, economic growth, cycle, poverty trap, public investment, threshold.
    JEL: D9 H0 O1 O4
    Date: 2019–04–18

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