nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2020‒05‒11
nine papers chosen by
Georg Man

  1. Financial development, remittances and economic growth: A threshold analysis By Peprah, James Atta; Ofori, Isaac Kwesi; Nyarko-Asomani, Abel
  2. The Kuznets curve of the Rich By Marwil J. Dávila-Fernández; Lionello F. Punzo
  3. The FinTech Dividend: How Much Money Is FinTech Likely to Mobilize for Sustainable Development? By Michael, Bryane
  4. Bubble on real estate: the role of altruism and fiscal policy By Lise Clain-Chamosset-Yvrard; Thomas Seegmuller
  5. The Interaction Between Credit Constraints and Uncertainty Shocks By Pratiti Chatterjee; David Gunawan; Robert Kohn
  6. Sowing the Seeds of Financial Imbalances: The Role of Macroeconomic Performance By Elena Afanasyeva; Sam Jerow; Seung Jung Lee; Michele Modugno
  7. New Productivity Drivers: Revisiting the Role of Digital Capital, FDI and Integration at Aggregate and Sectoral Levels By Amat Adarov; Robert Stehrer
  8. Foreign Direct Investment and Industrial Agglomeration: Evidence from China By Hsu, Wen-Tai; Lu, Yi; Luo, Xuan; Zhu, Lianming
  9. Saving for Multiple Financial Needs: Evidence from Lockboxes and Mobile Money in Malawi By Shilpa Aggarwal; Valentina Brailovskaya; Jonathan Robinson

  1. By: Peprah, James Atta; Ofori, Isaac Kwesi; Nyarko-Asomani, Abel
    Abstract: Sources of economic growth in Ghana have not been clear. Several studies have contributed to the finance and growth literature with little attention on remittances and the joint effect of financial sector development and remittances. This paper uses macrodata to examine the linkages between financial development, remittances and economic growth in Ghana. We estimate a dynamic heterogeneous Autoregressive Distributed Lag (ARDL) model to show that financial booms are not, in general, growth-enhancing, and a certain level of financial development can drag down economic growth in the long term and the combined effect of financial development and remittances should be of concern to policymakers.
    Keywords: Financial development; remittances; economic growth; Ghana
    JEL: F4 O1 O11 O4 O43 O47
    Date: 2019–07–10
  2. By: Marwil J. Dávila-Fernández; Lionello F. Punzo
    Abstract: A long-standing interest in the relationship between inequality and sustainable growth continues to fascinate economists among other social scientists. It must be noted, however, that most empirical efforts have been focused on the income-inequality-growth nexus, while studies on wealth inequality are much more scarce. In this article, it is our purpose to fill such a gap in the literature by assessing the correspondence between the top 1 percent wealth-share and economic growth. Making use of time-series cointegration techniques, we study the experience of France and the United States between 1950 and 2014. Our estimates suggest that the growth rate of output is an inverted-U shaped function of the wealth-share of the top 1 percent. The estimated relationship is robust to variations in control variables and estimation methods. We compute a sort of optimal wealth-share, understood as the share of wealth compatible with the maximum rate of growth, and show that France is growing close to its long-run potential while the United States is significantly below it.
    Keywords: Growth, wealth inequality, top wealth-shares, France, United States
    JEL: G01 C61 D84
    Date: 2020–04
  3. By: Michael, Bryane
    Abstract: FinTech offers a new way to mobilize resources for all kinds of uses – including for funding sustainable development. Roughly 3%-13% of funding required for the UN’s Sustainable Development Goals (SDGs)– or around $50 billion to $125 billion -- could come from a ‘FinTech Dividend.’ Such a dividend derives from the use of FinTech platforms to increase savings and investment (overall), channel resources into publicly funded as well as privately-funded SDG-related activities and policies, and encourage the use of internet platforms, which deliver novel goods and services that relate to the seventeen SDGs. Less than half of UN members have FinTech laws and policies – making FinTech a ripe area for right-regulating. Unfortunately, in areas like institutional reform – no amount of money can guarantee achieving the SDGs, without wider legal and administrative reforms. And no clear data about the exact policies needed to help grow an economy (or pay for SDG spending) serve as any guide. With total investment in FinTech stuck at around $150 billion to $200 billion – the hoped for deluge of FinTech dollars on SDG activities may remain a trickle for years to come.
    Keywords: FinTech Dividend,SDG funding,FinTech Law,#FinTech4SDGs
    JEL: G23 O16 F63
    Date: 2020
  4. By: Lise Clain-Chamosset-Yvrard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École 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: altruism,bubble,credit,overlapping generations,real estate
    Date: 2019–09
  5. By: Pratiti Chatterjee; David Gunawan; Robert Kohn
    Abstract: Can uncertainty about credit availability trigger a slowdown in real activity? This question is answered by using a novel method to identify shocks to uncertainty in access to credit. Time-variation in uncertainty about credit availability is estimated using particle Markov Chain Monte Carlo. We extract shocks to time-varying credit uncertainty and decompose it into two parts: the first captures the "pure" effect of a shock to the second moment; the second captures total effects of uncertainty including effects on the first moment. Using state-dependent local projections, we find that the "pure" effect by itself generates a sharp slowdown in real activity and the effects are largely countercyclical. We feed the estimated shocks into a flexible price real business cycle model with a collateral constraint and show that when the collateral constraint binds, an uncertainty shock about credit access is recessionary leading to a simultaneous decline in consumption, investment, and output.
    Date: 2020–04
  6. By: Elena Afanasyeva; Sam Jerow; Seung Jung Lee; Michele Modugno
    Abstract: The seeds of financial imbalances are sown in times of buoyant economic growth. We study the link between macroeconomic performance and financial imbalances, focusing on the experience of the United States since the 1960s. We first follow a narrative approach to review historical episodes of significant financial imbalances and find that the onset of financial disturbances typically occurs when the economy is running hot. We then look for evidence of a statistical link between measures of macroeconomic conditions and financial imbalances. In our in-sample analysis, we find that strong economic growth is followed by a build-up of financial imbalances across all dimensions of the National Financial Conditions Index. In our out-of-sample analysis, we find that the link between strong economic performance and increases in nonfinancial leverage is particularly strong and robust. Using a structural VAR identified with narrative sign restrictions, we also demonstrate that business cycle shocks are important drivers of non financial leverage.
    Keywords: Economic performance; Nonfinancial leverage; Financial imbalances; Financial stability; VARs; Sign restrictions; Narrative; Forecasting
    JEL: C32 G21 N22
    Date: 2020–04–07
  7. By: Amat Adarov (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: The paper studies the drivers of productivity at country and sectoral levels over the period 2000-2017 with the focus on the impact of capital accumulation and structure. The analysis confirms an especially important role of ICT and intangible digital capital for productivity growth, particularly in the manufacturing sectors. While backward global value chain participation and EU integration are also found to be instrumental for accelerating productivity growth, the impact of inward foreign direct investment is not robustly detected when the data is purged from the effects of special purpose entities and outlier countries.
    Keywords: Productivity, digitalisation, ICT, intangible capital, FDI, capital accumulation, global value chains
    JEL: F14 F15 F21 E22 O47
    Date: 2020–04
  8. By: Hsu, Wen-Tai (School of Economics, Singapore Management University); Lu, Yi (Tsinghua University); Luo, Xuan (INSEAD); Zhu, Lianming (Osaka University)
    Abstract: This paper studies the effect of foreign direct investment (FDI) on industrial ag-glomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI actually affects industrial agglomeration neg-atively. As FDI brings technological spillovers and various agglomeration benefits, other forces must be at work to drive our empirical finding. We propose a simple theory that FDI may discourage industrial agglomeration due to fiercer competition pressure. We find various evidence on this competition mechanism. We also examine an alternative theory based on spatial political competition, but find no evidence sup-porting it. On industrial growth, we find that FDI deregulation is conducive, but the dispersion induced by FDI deregulation reduces the positive effect of FDI on growth rate by 16 to 19%.
    Keywords: FDI; deregulation; industrial agglomeration; competition; industrial growth; WTO; China
    Date: 2020–04–01
  9. By: Shilpa Aggarwal; Valentina Brailovskaya; Jonathan Robinson
    Abstract: We test whether the provision of multiple labeled savings accounts affects savings and downstream outcomes in an experiment with 761 microentrepreneurs in urban Malawi. Treatment respondents received one or multiple savings accounts, in the form of lockboxes or mobile money. We find that while providing additional boxes increased savings by 40%, technical issues marred the efficacy of a second mobile money account. Both types of accounts had impacts on downstream outcomes, including farming decisions and credit extended to customers. We do not detect differential downstream effects by the number of accounts.
    JEL: D14 O12 O16
    Date: 2020–04

This nep-fdg issue is ©2020 by Georg Man. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.