308 research outputs found
Does Financial Structure Matter?
We address the issue of whether financial structure influences economic growth. Three competing views of financial structure exist in the literature: the bank-based, the market-based and the financial services view. Recent empirical studies examine their relevance by utilizing panel and cross-section approaches. This paper, for the first time ever, utilizes time series data and methods, along with the Dynamic Heterogeneous Panel approach, on developing countries. We find significant cross-country heterogeneity in the dynamics of financial structure and economic growth, and conclude that it is invalid to pool data across our sample countries. We find significant effects of financial structure on real per capita output, which is in sharp contrast to some recent findings. Panel estimates, in most cases, do not correspond to country-specific estimates, and hence may proffer incorrect inferences for several countries of the panel.Financial Structure, Economic Development, Vector Error- Correction Model, Dynamic Heterogeneous Panels
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Stock Returns and Inflation: Some New Evidence
Using aggregate and industry-wise monthly UK data over a period of 44 years we
examine the long run relationship between stock return index (St) and retail price index
(Pt) in a VAR framework. Univariate tests confirm Pt as I(2); nevertheless pairs of St
and Pt are co-integrated and share common I(1) trend. There is no evidence of shared
I(2) trend. We find evidence of shifts in the co- integrating ranks and parameters, and
accounting for these shifts improved estimatesâ precision. The long run price elasticity
of return index is consistently above unity, a finding that stands in sharp contrast to the
existing ones. Overall our results suggest that tax-paying stock investors are fully
insulated against inflation in the long run
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Government solvency: revisiting some EMU countries
Corsetti and Roubini (1991) reported that the government finances of
Greece, Ireland, Italy and the Netherlands did not satisfy the intertemporal budget
constraint (IBC). We re-examine this issue by utilizing a new empirical approach and
extended data set. Structural shifts, an issue which Corsetti and Roubini were unable
to address due to the lack of suitable econometric methods, are tackled. We show that:
(i) government finances of all four countries satisfy the IBC and this finding is robust
to different time horizons; (ii) multiple structural shifts, most of which correspond to
important policy changes, did occur in the fiscal path of these countries; and (iii) the
overall effect of structural shifts has been to strengthen the evidence supporting IBC.
We also find a clear positive Maastricht effect on IBC
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The Dynamics of International R & D spillovers
Coe and Helpman (1995) among others report positive and equivalent R&D spillovers
across groups of countries. However, the nature of their econometric tests does not
address the heterogeneity of knowledge diffusion across countries. We empirically
examine these issues in a sample of 10 OECD countries by extending both the time
span and the coverage of R&D activities in the data set. We find that the elasticity of
total factor productivity with respect to domestic and foreign R&D stocks is
extremely heterogeneous across countries and that data cannot be pooled. Thus, panel
estimates conceal important cross-country differences. The US appears to be a net
loser in terms of international R&D spillovers. Our interpretation is that when
competitors âcatch-upâ technologically, they challenge US market shares and
investments worldwide. This has implications for US productivity
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Are international R&D spillovers costly for the US?
Coe and Helpman (1995) and others report positive and equivalent R&D
spillovers across G7 countries. We argue that their homogeneity constraint on
spillovers across G7 countries is inappropriate, and show that it is rejected by the data.
Extending the data set and applying new empirical approaches, we find: (i) R&D
spillovers are extremely heterogeneous across G7 countries; (ii) panel estimates do
not correspond to country specific estimates and conceal important cross-country
differences in knowledge diffusion; and (iii) the US is a net loser in terms of
international R&D spillovers. Our interpretation is that when competitors âcatch-upâ
technologically, they challenge US market shares and investments worldwide and this
has implications for US productivity
Examining Private Investment Heterogeneity: Evidence from a Dynamic Panel
domestic private investment, public investment, dynamic heterogeneity, endogeneity, Generalised Method of Moments
Government Solvency: Revisiting some EMU Countries
Corsetti and Roubini (1991) reported that the government finances of Greece, Ireland, Italy and the Netherlands (now all EMU countries) did not satisfy the intertemporal budget constraint (IBC). We re-examine this issue by utilizing a new empirical approach and extended data set. Structural shifts, an issue which Corsetti and Roubini were unable to address due to the lack of suitable econometric methods, are tackled. We find that: (i) multiple structural shifts, most of which correspond to important policy changes, did occur in the fiscal path of these countries; (ii) the effect of the majority of structural shifts has been to strengthen the evidence supporting IBC; and (iii) government finances of all four countries satisfy the IBC and this finding is robust to different time horizons. We also find a clear positive Maastricht effect on IBC for all countries.intertemporal budget constraints, strong and weak form sustainability, structural breaks
Financial Restraints in the South Korean Miracle
We provide novel empirical evidence on the effects of financial restraints on South Korean financial development. The evidence is linked to a simple model of the Korean banking system that encapsulates its cartelised nature, which predicts a positive association between financial development and (i) the degree of state control over the banking system, (ii) mild repression of lending rates. The model also predicts that in the presence of lending rate controls, increases in the level of the administered deposit rate are unlikely to influence financial deepening. We test the model empirically by constructing individual and summary measures of financial restraints. Our empirical findings are consistent with our theoretical predictions but contrast sharply with the predictions of earlier literature that postulates that interest rate ceilings and other financial restraints constitute sources of âfinancial repressionâ.Financial deepening; financial restraints
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