Impact of Islamic banking development and major macroeconomic variables on economic growth for Islamic countries: Evidence from panel smooth transition models

This study examines the nonlinear relationship between Islamic banking development, major macroeconomic variables and economic growth in Islamic countries. Using the panel smooth transition model, the results show a positive nonlinear relationship between Islamic banking development and economic growth. Moreover, the relationship between the macroeconomic variables and economic growth is asymmetric and regime-dependent. Further, by using the dynamic panel quantile model, we show that for many cases the Islamic banking variables lead economic growth across the quantiles. More specifically, foreign direct investment, oil production and inflation have a positive impact on economic growth during the normal financial development state, while government consumption, one-lag economic growth, terms of trade and financial development have a negative impact on economic growth for this state. The human capital index, education and the rule of law have an insignificant impact, regardless of the prevailing regime. The results for the separated oil-importing and oil-exporting economies are generally consistent with the combined sample regarding the Islamic banking development variables. As for the macro variables, they have a positive and significant (insignificant) effect on EG for the oil-importing (oil-exporting) economies for almost all models.     

Interactions between financial constraints and economic growth

The financial economy and the real economy are interconnected through various, complex, and evolving transmission mechanisms, whose literary coverage is far from comprehensive. In this context, we wish to contribute to the literature on the interactions between financial constraints and economic growth. We introduce financial dynamics in the R&D-based growth literature, by bringing Bernanke, Gertler and Gilchrist’s (1999) informational asymmetries into Romer’s (1990) growth model. With the developed framework, our main goal is to examine if and how such asymmetries impact economic growth. We find that the overall impact of this form of financial constraints on long-term growth is negative.     

The relationship between trade,FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model

The relationship between foreign direct investment (FDI), trade openness and economic growth in host countries remains one of the most important issues in the economic literature and met with renewed interest in recent years mainly for countries suffering from unemployment problems and lack of technological progress. This paper examines this issue for Tunisia by applying the bounds testing (ARDL) approach to cointegration for the period from 1970 to 2008. The bounds tests suggest that the variables of interest are bound together in the long run when foreign direct investment is the dependent variable. The associated equilibrium correction is also significant, confirming the existence of a long-run relationship. The results also indicate that there is no significant Granger causality from FDI to economic growth, from economic growth to FDI, from trade to economic growth and from economic growth to trade in the short run. Even though there is a widespread belief that FDI can generate positive spillover externalities for the host country, our empirical results fail to confirm this belief for the case of Tunisia. They go against the generally accepted idea considering the positive impact of FDI on economic growth to be automatic. The results found for Tunisia can be generalized and compared to other developing countries which share a common experience in attracting FDI and trade liberalization.     

Individual new energy consumption and economic growth in China

We document the one-way relationship between individual new energy consumption and economic growth in China through the autoregressive distributed lag (ARDL) model from 2004 to 2017. Our results show that individual new energy consumption has a positive effect on economic growth. Moreover, the urbanization rate, import and export trade volume and foreign direct investment all affect the individual new energy consumption in the short run. The outcome of the causality test reveals a one-way Granger causal relationship from individual new energy consumption to economic growth, from the urbanization rate, and from the import and export trade volume to new energy consumption.     

The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries

Insurance is one of the key activities in a globalised financial and economic environment. Through its benefits, it offers income, life and property protection to the insured and their keens, as well as income accumulation that can be used at retirement to help preserve the desired lifestyle or living standards. Motivated by this end of insurance, the goal of this paper is to study the contribution of insurance growth to economic growth, by employing the benefit side of the insurance activity, next to the acquisition side that has already been considered. More precisely, the findings provide evidence that gross claims payments and gross operating expenses are significantly and positively related to economic growth. At the same time, the results confirm the findings of the existing literature that gross premia and insurance penetration are also significantly and positively related to economic growth. The outcomes hold true for total, life and non-life insurance, both during the pre- and post- 2008-crisis periods, even though less strong after the crisis. Furthermore, the positive and statistically significant impact of gross capital formation, government expenditure, secondary schooling, FDI inflows, trade openness and financial development is validated, in line with certain theoretical expectations.     

公共投资就业效应的一个解释——基于CES生产函数的分析及其检验

本文在分析CES生产函数过程中引入劳动力市场,探讨了公共投资与就业的联系.本文认为,公共投资是通过劳动工资弹性来影响就业的.公共投资增加会引起劳动需求的工资弹性提高,而公共投资的溢出效应则会导致企业实际工资支出水平降低,两方面原因的共同作用引起就业的增长.在此分析基础上,本文用ARDL方法构建了一个多方程模型,并用中国的数据进行了检验.为提高分析的有效性,我们用SUR方法对模型做了系统估计,并进一步通过方程转化对变量的短期波动和长期均衡关系进行了探讨.实证研究发现,中国的公共投资增长在短期减少就业,但长期内对就业有显著的正效应.     

Financial development and economic growth in a microfounded small open economy model

The global financial crisis since 2008 revived the debate on whether or not and to what extent financial development contributes to economic growth. This paper reviews different theoretical schools of thought and empirical findings on this nexus, building on which we aim to develop a unified, microfounded model in a small open economy setting to accommodate various theoretical possibilities and empirical observations. The model is then calibrated to match some well-documented stylized facts. Numerical simulations show that, in the long run, the welfare-maximizing level of financial develop is lower than the growth-maximizing level. In the short run, the price channel (through world interest rate) dominates the quantity-channel (through financial productivity), suggesting a vital role of international cooperation in tackling systemic risk of the global financial system.     

Exploring the linkage between human capital and economic growth: A look at 141 developing and developed countries

As a factor of production, human capital is defined both in its health and educational dimensions, incorporating qualitative and quantitative aspects. Using a panel of 141 countries (93 developing and 48 developed), we attempt to explore and compare the impact of human capital on economic growth at different development stages. For our estimation, we employ the System Generalized Methods of Moments (SGMM) for the period 1980–2008. Our findings reveal that all aspects of human capital positively influence growth in developing countries, especially life expectancy gain, which may be explained by the demographic transition these countries are going through. However, the scenario is different for developed countries, where increased life expectancy posits a drag on economic growth, probably because of the increasingly aging population and dependency ratio. Only when life expectancy is omitted does health expenditure, along with other educational measures of human capital, help sustain growth in developed countries.     

Public spending,public governance and economic growth at the Vietnamese provincial level: A disaggregate analysis

This study examines the role of economic governance in the relationship between public spending, private investment, and economic growth in Vietnam at the provincial level. The study data consist of sixty-two Vietnamese provinces for the period 2006–2015. Some notable results are attained by applying a sequential (two-stage) estimation. First, the marginal benefits to economic growth of increased Vietnamese provincial government expenditures may be constrained because of the inefficiency of expenditures on education, business services, and public administration. Second, public spending and private investment are found to be substitutes at the provincial level. Third, based on the Provincial Competitiveness Index (PCI) ranking, used as a proxy for provincial public governance in Vietnam, the significance of public governance can be observed. The study concludes that good governance, characterized by different attributes, such as lower informal charges, greater transparency, and unbiased policy, plays a critical role in improving the impact of government expenditure on economic growth in Vietnamese provinces, particularly through its interactions with private sector investment.     

Economic growth and inequality: The role of public investment

The relationship between growth and inequality is complex. After discussing some general background issues, motivated by extensive empirical evidence this paper focuses on public investment as a key determinant of the relationship. Two alternative frameworks, each offering sharply contrasting perspectives, are presented. The first employs the “representative consumer theory of distribution” where agent heterogeneity originates with wealth endowments. It yields an equilibrium in which aggregate dynamics drives distributional dynamics. In the second, agent heterogeneity arises from idiosyncratic productivity shocks and generates an equilibrium in which distributional dynamics drive growth. The impact of government investment on growth and inequality are shown to contrast sharply in the two approaches, thus illustrating the complexity of the growth-inequality relationship.     

The non-observed economy and economic growth: A meta-analysis

Academics, politicians, the public in general and researchers have great interest in the non-observed economy. However, there is divergence in its definition, accounting methodology and economic effects. In this paper we conduct a meta-analysis on the empirical literature that estimates the impact of the parallel economy on economic growth. We conclude that there is no publication bias and that the average effect of the parallel economy on economic growth is insignificant. However, the reported effects differ considerably with the type and number of countries included in the sample of primary studies, the structure of the data, the methodology used to measure the parallel economy, the number of citations of primary studies, and the year they were published.     

Market‐oriented institutions and policies and economic growth: A critical survey

Abstract.  This paper surveys recent evidence suggesting that market‐oriented institutions and policies are strongly related to economic growth, focusing on studies using the economic freedom (EF) indicator of the Fraser Institute. This index is critically discussed. Also various serious shortcomings of empirical studies using this index are identified. Nevertheless, there are strong indications that liberalization, i.e. an increase in the EF index, stimulates economic growth. This paper also reviews studies on the determinants of EF. Political liberalization is often found to enhance economic liberalization, whereas there is less evidence for causality running in the other direction.     

Addressing the growth failure of the oil economies: The role of financial development

The oil exporting countries have experienced a relatively continuous fall in GDP per capita over the last 30 years. This is in spite of benefiting from a more than average of the rest of the world investment rate. The findings of this paper, report a lower level of financial development for the oil economies when compared with the rest of the world. We will show in this paper that the higher rate of investment of the oil economies can be explained mainly by the oil revenues and surprisingly, financial development has a net dampening effect on investment for these economies. The paper also shows that the weakness of financial institutions, contributes to the poor performance of economic growth of the oil economies and the weakness of financial institutions might be associated with the dominant role of government in total investment and the weakness of private sector.     

The effects of age structure on economic growth: An application of probabilistic forecasting to India

During recent years there has been an increasing awareness of the explanatory power of population age structure variables in economic growth regressions. We estimate a new cross-country regression model of the effects of age structure change on economic growth. We use the new model and recent probabilistic demographic forecasts for India to derive the uncertainty of predicted economic growth rates caused by the uncertainty in demographic developments.     

Reassessing the dependence between economic growth and financial conditions since 1973

Adrian, Boyarchenko and Giannone ((2019), ABG) adapt quantile regression (QR) methods to examine the relationship between US economic growth and financial conditions. We confirm their empirical findings, using their methodology and their pre-2016 sample. Mindful of the importance of the Covid-19 pandemic, we extend the sample to 2021Q3 and find attenuation of the key estimated coefficients using ABG's empirical methods. Given the pandemic observations, we provide robust QR analysis of dependence based on ranked data and explain the relationship with extant copula modelling methods.     

The effect of economic growth on banking system performance: An interregional and comparative study of Sub-Saharan Africa and developed economies

As an important part of the financial sector, banking systems play a critical role in economic development as well as in improving the quality of life of the people of sub-Saharan Africa (SSA). However, little evidence exists in the literature about the performance of the banking systems in SSA compared with developed economies. This paper investigates the effects of economic development on banking performance across 23 SSA countries and 14 developed countries between 1981 and 2018. Using estimation models such as feasible general least squares, fixed-effects estimation with Driscoll-Kraay standard errors, and system and difference generalized method of moments, our findings show that in SSA as a whole, economic development has a positive impact on commercial bank lending, raises lending rates, increases the amount of domestic credit to the private sector (DCPS), and reduces the number of nonperforming loans (NPLs). In developed countries, economic development has a positive impact on lending rates, DCPS, and the number of NPLs. However, although economic development in developed economies has mostly positive effects on banking performance, SSA countries have more performance issues in banking as a whole and in regional pockets. A careful reassessment of SSA’s interregional banking system is therefore highly recommended. An increase in the number of NPLs in East and Southern Africa, a decline in deposit rates offered in Southern, West, and Central Africa, and increasing real interest rates in SSA despite economic growth are some of the concerns that require careful reassessment and policy adjustments.     

Entrepreneurship and economic growth: Evidence from emerging and developed countries

This paper presents an extension to the economic growth model developed by Wong, Ho, and Autio (2005 Autio, E. 2005. 2005 report on high-expectation entrepreneurship, Toronto: GEM Consortium.  [Google Scholar]), to reflect differences in the economic effects of opportunity and necessity-based entrepreneurship in both emerging and developed countries. Data from 44 countries for the years 2004 and 2005, as collected by Global Entrepreneurship Monitor (GEM) research and Global Competitiveness Report (GCR) research, are used to identify predictors of GDP growth for emerging and developed nations. The GEM data are used to determine the effect of different types of entrepreneurship on GDP growth. The GCR data operationalize additional control variables suggested by three economic growth theories: new economic geography, endogenous growth theory and national systems of innovation. This contribution to the literature suggests that, in developed countries, a significant portion of economic growth rates can be attributed to high-expectation entrepreneurs exploiting national investments in knowledge creation and regulatory freedom. However, in emerging countries this effect is absent. It is hypothesized that a threshold exists for entrepreneurs to gain access to the formal economy, below which entrepreneurial contributions act through informal mechanisms.     

On the path-dependence of economic growth

The cumulated growth of an economy during a period of time depends on the whole economical history during this period and not only of the situation at the beginning and at the end of the interval. However, if some constraint is made on the set of possible economies, this phenomenon of history-dependence may disappear. We give a simple necessary and sufficient condition on the constraint for this to happen, generalizing results of Samuelson–Swamy and Hulten. Our approach is different, based on differential and symplectic geometry. We also solve the same question for a subsector of the economy.     

Foreign capital inflows and economic growth of Pakistan

This study investigates the relationship of foreign capital inflows, namely foreign direct investment, workers’ remittances, and external debt with economic growth of Pakistan by employing time series data from 1976 to 2015. Cointegration results indicate that foreign capital inflows and economic growth have a significant relationship with economic growth in the long run. Ordinary least square results indicate foreign direct investment has a significant and negative effect on economic growth, whereas a significant positive effect of remittances and external debts on economic growth is found. Rolling windows analysis highlights the yearly effect of three different models. Two different sensitivity analyses confirmed that initial results are robust. The final section concludes the study and provides some policy implications.     

Financial Markets, Development and Economic Growth: Tales of Informational Asymmetries

Abstract.  The development of financial systems is very often characterised by the development of innovative financial contracts which allow a more efficient allocation of resources and a higher level of capital productivity and economic growth. By exploiting the microeconomic theory of the optimal financial contract under asymmetric information, economists have recently managed to shed new light on the well studied issue of the relationship between financial market development and economic growth. This paper reviews the most recent progress of this literature which shows that the amount of information asymmetry in the credit market and the degree of heterogeneity between borrowers (typically firms) and lenders (typically workers or savers) determine the nature of the financial system. Differences in endowments and in the level of information distribution can give rise to very different financial contracts which affect, and in turn are affected, by capital accumulation and growth.