Economic Growth, Convergence Clubs, and the Role of Financial Development

Berthélemy, Jean‐Claude; Varoudakis, Aristomène

doi:10.1093/oxfordjournals.oep.a028570

Cited by 222 publications

(147 citation statements)

References 18 publications

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“…An expanding real sector provides the resources that the financial system needs for its own expansion. This eventually allows for financial economies of scale that in turn facilitate further economic development (e.g., Berthelemy and Varoudakis 1996). Finally, the fourth view is more skeptical about the finance-growth nexus: Finance and growth may also evolve independently of each other, so no causality (or insignificant causation) exists between them (Chandavarkar 1992).…”

Section: Literature Reviewmentioning

confidence: 99%

Institutional Quality, Trade Openness, and Financial Sector Development in Asia: An Empirical Investigation

Kim

Lee

2015

Emerging Markets Finance and Trade

167

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The views expressed in this paper are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. Terms of use: Documents inADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use.By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. Note: In this publication, "$" refers to US dollars.The ADB Economics Working Paper Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia's development and policy challenges; strengthen analytical rigor and quality of ADB's country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness.

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Section: Literature Reviewmentioning

confidence: 99%

Institutional Quality, Trade Openness, and Financial Sector Development in Asia: An Empirical Investigation

Kim

Lee

2015

Emerging Markets Finance and Trade

167

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“…Additionally, finance and growth may be mutually dependent. The real sector may provide the financial system with the funds necessary to enable financial deepening, eventually allowing for a capitalization on financial economies of scale which in turn facilitates economic development [9]. The latter hypothesis postulates bidirectional causality.…”

Section: Introductionmentioning

confidence: 99%

Causality between Financial Deepening and Economic Growth in Nigeria: Evidence from a Bootstrap Rolling Window Approach

Aye¹

2015

JOEBM

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Abstract-This paper investigates the role of financial development on economic growth in Nigeria. Since a causal link may evolve over time, a bootstrap rolling window approach is used to account for potential time variation in the relationship with annual Nigerian data on money supply as a ratio of nominal GDP and real GDP per capita from 1961-2012. Starting first with a full sample bootstrap Granger causality, the results indicate no causality between the two series. The relevant VAR is unstable for the full sample which undermines the confidence in the bootstrap full sample Granger causality tests. Therefore a bootstrap rolling window estimation was used to evaluate Granger causality between financial deepening and economic growth over different time periods. These tests reveal periods where financial deepening has predictive power for economic growth: 1973-1974 and 1976 as well as periods where economic growth has predictive power for financial deepening: 1980-1982, 1985-1986, 1995-1996, 1998, 2000, 2004 and 2008-2011. These results highlight the risk of misleading conclusions based on the standard Granger causality tests which neither accounts for structural breaks nor time variation in the relationship between financial deepening and economic growth.

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“…Loan market cannot function properly, thus increasing the cost of raising capital. Berthelemy and Varoudakis (1996) come up with the same conclusion by augmenting Aghion and Howitt (1992) model with a banking sector, which employs labor to raise loanable funds for R&D and intermediate sector. The arbitrage condition remains unchanged, but the resources devoted to securing more savings deplete R&D. However, if only R&D sector demands for funding, then the intermediation cost will affect the arbitrage equation, and his result will be similar to King and Levine (1993).…”

Section: The Modelmentioning

confidence: 64%

An R&D-based real business cycle model

2016

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The New Keynesian Real Business Cycle model with staggered price adjustment is augmented with a R&D producing sector. Two sources of economic shocks are considered, namely random participation (perturbances to value of alternative investment opportunities in another sector) and financial intermediation (shocks to the cost of raising capital in the financial intermediation market). We find that, when comparing to the baseline model, both models can explain pro-cyclical R&D spending. Additionally, the investment oversensitivity problem is corrected. However, only the financial intermediation model is consistent with the observed finding that volatility of R&D is larger than that of investment and output.

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Economic Growth, Convergence Clubs, and the Role of Financial Development

Cited by 222 publications

References 18 publications

Institutional Quality, Trade Openness, and Financial Sector Development in Asia: An Empirical Investigation

Institutional Quality, Trade Openness, and Financial Sector Development in Asia: An Empirical Investigation

Causality between Financial Deepening and Economic Growth in Nigeria: Evidence from a Bootstrap Rolling Window Approach

An R&D-based real business cycle model

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