1,720,982 research outputs found
Openness and the finance-growth nexus
No full textRajan and Zingales (2003) hypothesize that openness trade and financial is a crucial determinant of financial development. The main policy implication emerging from this hypothesis is that openness should be promoted as a means of facilitating economic growth through financial development. While subsequent research confirms that openness affects financial development, we study whether finance continues to be growth promoting as economies become increasingly open a key implicit assumption behind the policy recommendation. Using data from 78 economies for the period 1981-2006, we find that very high levels of financial openness generally erode the growth-promoting role of financial development while high trade openness strengthens it. These worldwide findings by and large hold for subsamples of Sub-Saharan African, Latin American and OECD economies. Notable exceptions are the invariance of the finance-growth (FG) nexus on trade openness in OECD economies and the positive effect of financial openness on the FG link in Latin American economies. (C) 2014 Elsevier B.V. All rights reserved
Determinants of the link between financial and economic development: Evidence from a functional coefficient model
No full textNoting that "one size does not fit all" in the case of the finance-development (FD) relationship, a growing body of literature has recently focused on uncovering economic conditions under which financial development could be beneficial (detrimental) to economic development. We look into these conditions by means of a flexible semiparametric approach that allows the long-run FD link to depend on measurable economic factors. Using annual data for 73 economies spanning the period 1975-2011, we find that the impact of finance on economic development is generally stronger in high-income than low-income economies. However, allowing for intra-group variations reveals the importance of other factor variables in explaining the FD link. For instance, increasing financial development strengthens the FD link while increasing government size weakens it. Moreover, the FD link could even be negative if low- and lower-middle-income economies have very large governments or are extremely open to international trade. (C) 2013 Elsevier B.V. All rights reserved
Do Rising Top Incomes Spur Economic Growth? Evidence From OECD Countries Based on a Novel Identification Strategy
No full textRevisiting the Finance–Growth Nexus in Sub‐Saharan Africa: Results from Error Correction‐based Panel Cointegration Tests
No full textThis paper re-examines the long-run finance-growth nexus in sub-Saharan Africa (SSA) using data from 17 countries over the period 1975-2005. We apply error correction-based panel cointegration tests that take into account cross-sectional dependence among countries. Our results-unlike a previous study using the same data-indicate the existence of a long-run relationship between financial and economic development in SSA countries. Moreover, our results clearly show that the long-run causality runs from financial to economic development, although a muted support for the reverse causal impact is observed when financial development is measured by the percentage of liquid liabilities in GDP. The estimated long-run parameters measuring the finance-growth link are positive and statistically significant. Therefore, our results strongly support policies aimed at developing the financial sector in SSA in order to promote long-run economic development
Heteroskedasticity Robust Panel Unit Root Testing Under Variance Breaks in Pooled Regressions
No full textNoting that many economic variables display occasional shifts in their second order moments, we investigate the performance of homogenous panel unit root tests in the presence of permanent volatility shifts. It is shown that in this case the test statistic proposed by Herwartz and Siedenburg (2008) is asymptotically standard Gaussian. By means of a simulation study we illustrate the performance of first and second generation panel unit root tests and undertake a more detailed comparison of the test in Herwartz and Siedenburg (2008) and its heteroskedasticity consistent Cauchy counterpart introduced in Demetrescu and Hanck (2012a). As an empirical illustration, we reassess evidence on the Fisher hypothesis with data from nine countries over the period 1961Q2-2011Q2. Empirical evidence supports panel stationarity of the real interest rate for the entire subperiod. With regard to the most recent two decades, the test results cast doubts on market integration, since the real interest rate is diagnosed nonstationary.German Research Foundation [HE 2188/3-2
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