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on Financial Development and Growth |
| By: | Méndez, Lizethe; Ongena, Steven |
| Abstract: | We assess the relationship between finance and growth over the period 1980-2014. We estimate a cross-country growth regression for 48 countries during 20 periods of 15 years starting in 1980 (to 1995) and ending in 1999 (to 2014). We use OLS and IV estimations and we find that: 1) overall financial development had a positive effect on economic growth during all periods of our sample, i.e., we confirm that from 1980 to 2014 financial services provided by the various financial systems were significant (to various degrees) for firm creation, industrial expansion and economic growth; but that, 2) the structure of financial markets was particularly relevant for economic growth until the financial crisis; while 3) the structure of the banking sector played a major role since; and finally that, 4) the legal system is the primary determinant of the effectiveness of the overall financial system in facilitating innovation and growth in (almost) all of our sample period. Hence, overall our results suggest that the relationship between finance and growth matters but also that it varies over time in strength and in sector origination. |
| Keywords: | Financial Structure,Economic Growth,Financial Development |
| JEL: | O16 G20 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:604&r=fdg |
| By: | Naser, Hanan |
| Abstract: | This paper attempts to identify the relationship between energy consumption, oil prices, market shares, dividend yields and economic growth for the Kingdom of Bahrain from year 2006 to 2016. For this purpose, unit root test, Johansen cointegration techniques for analysing the long run relationship, and Vector Error Correction Model (VECM) are used. The key findings are summarized as follow: (i) long run relationship exists between the suggested variables. (ii) Both energy and financial markets are significant in the long run relationship, and positively affect the economic growth of Bahrain. (iii) According to the estimated ECM term, the model is stable in the short run. (iv) Decline in the international price of oil has negative significant drawback on the economic growth of Bahrain. Accordingly, it is recommended that policy makers in the Kingdom of Bahrain focuses on implement strong strategies that aim at encouraging investments in non-oil sectors and carbon emissions reduction policy in the long run without impeding energy sector or economic growth in order to move towards sustainability. |
| Keywords: | Oil prices; energy consumption; financial sector performance; economic growth; Bahrain. |
| JEL: | C51 C58 E61 G14 |
| Date: | 2018–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89743&r=fdg |
| By: | Roland Kangni KPODAR (International Monetary Fund (IMF)); Maëlan LE GOFF (CEPII); Raju Jan SINGH (Banque Mondiale) |
| Abstract: | This paper contributes to the literature by looking at the possible importance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock absorber, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock absorber nor a shock amplifier for most economies. These findings are robust across fixed effect, System GMM and local projection estimates. |
| Keywords: | Banks, stock markets, terms of trade, growth volatility |
| JEL: | F40 G20 O10 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:fdi:wpaper:4566&r=fdg |
| By: | Aghion, Philippe; Farhi, Emmanuel; Kharroubi, Enisse |
| Abstract: | In this paper we argue that monetary easing fosters growth more in more credit-constrained environments, and the more so the higher the degree of product market competition. Indeed when competition is low, large rents allow firms to stay on the market and reinvest optimally, no matter how funding conditions change with aggregate conditions. To test this prediction, we use industry-level and firm-level data from the Euro Area to look at the effects on sectoral growth and firm-level growth of the unexpected drop in long-term government bond yields following the announcement of the Outright Monetary Transactions program (OMT) by the ECB. We find that the monetary policy easing induced by OMT, contributed to raising sectoral (firm-level) growth more in more highly leveraged sectors (firms), and the more so the higher the degree of product market competition in the country (sector). |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13214&r=fdg |
| By: | Santos, Eleonora; Khan, Shahed |
| Abstract: | The dynamic effects of Foreign Direct Investment in Portugal allowed for a structural shift in exports towards technology-intensive activities. However, since 2000, several factors, largely triggered by the global financial crisis, led to a drop in industrial output along with a reduction in FDI attraction. This paper assesses the efficacy of the Investment Promoting policies to stimulate innovation and promote the absorptive capacity at national level, by analysing the relationship between FDI inward flows and a set of innovation and absorptive capacity indicators. Results show that the gap between Portugal and the EU-28 average is far from being closed. Rather than being an automatic process triggered by foreign presence, we suggest that the convergence based on the productivity, can be assisted by a reinforcement of supply-side measures, and the coordination between the industrial policy and the instruments of the Investment Promotion Policy, in strategic industries. |
| Keywords: | Industrial Policy, Productivity, Investment Promotion Policies, Innovation, Convergence, Technological Gap |
| JEL: | F15 F23 O11 O33 O40 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89738&r=fdg |
| By: | Antonio M. Conti (Bank of Italy); Andrea Nobili (Bank of Italy); Federico M. Signoretti (Bank of Italy) |
| Abstract: | We estimate a Bayesian VAR with a detailed characterization of the banking sector for Italy since the 1990s. We use conditional forecasting techniques to retrieve bank capital shocks related to regulatory and supervisory initiatives and quantify their impact on credit supply and economic activity. We study three episodes characterized by increased regulatory/supervisory pressure and large increases in the Tier 1 capital ratio (the discussion on the Basel III reform; the 2011 EBA stress test and capital exercise; and the ECB’s comprehensive assessment and the launch of the SSM). We find evidence of large and persistent shocks to bank capital in all three episodes, which had significant negative effects on loan supply and GDP. Our results are robust to taking account of possible instabilities in the estimated relationships. The analysis focuses on the potential short-run costs of the regulatory/supervisory initiatives and disregards the potentially much larger long-run benefits of high bank capitalization. |
| Keywords: | bank capital shocks, Bayesian VAR models, conditional forecasts, time variation |
| JEL: | C32 E32 F34 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1199_18&r=fdg |
| By: | Simplice Asongu (Yaoundé/Cameroon); Jacinta Nwachukwu (Preston,United Kingdom) |
| Abstract: | The overarching question tackled in this paper is: to what degree has financial development contributed to providing opportunities of human development for those on low-incomes and by what information technology mechanisms? We systematically review about 180 recently published papers to provide recent information technology advances in finance for inclusive development. Retained financial innovations are structured along three themes. They are: (i) the rural-urban divide, (ii) women empowerment and (iii) human capital in terms of skills and training. The financial instruments are articulated with case studies, innovations and investment strategies with particular emphasis, inter alia on: informal finance, microfinance, mobile banking, crowdfunding, microinsurance, Islamic finance, remittances, Payment for Environmental Services (PES) and the Diaspora Investment in Agriculture (DIA) initiative. |
| Keywords: | Finance; Inclusive Growth; Economic Development |
| JEL: | G20 I10 I20 I30 O10 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:18/040&r=fdg |
| By: | Allen, Franklin; Qian, Jun; Qian, Meijun |
| Abstract: | The spectacular economic growth in China in the past four decades has inspired a large strand of research to understand China's unconventional growth path. This paper focuses on the recent development of China's institutions, financial markets, innovations and government-business relations in the context of their roles in supporting China's growth. The government's role in finance and the economy has advantages and disadvantages as compared to developed markets in the West. Alternative financing channels and governance mechanisms, rather than the markets and banks, continue to promote growth in the most dynamic sectors of the economy, despite the fact that China has passed the early-development stage. More research is needed to understand the Chinese experience and see whether similar mechanisms are behind the growth in other economies. |
| Keywords: | alternative finance; government; Innovation; institutions; markets; Property rights |
| JEL: | G2 K0 O5 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13269&r=fdg |