Essays on financial development and economic growth

The last section will aim to summarize and propose suggestions for the amelioration of the economy and the promotion of growth, by focusing on the financial standpoint. He uses survey data of over 1, households and treat landowners as exogenous to outcomes derived from welfare.

Macro Economic Essays

The source is in two parts: The benefits and adverse affects of this type of model can be cyclical. Likewise, Mckinnon turned his attention to finance, as a mere automaton and a provisional integral of the funding for capital accumulation and growth in a positive documentation of theoretical research.

While firm and household-level data provide a closer analysis of the mechanisms through which financial development positively influences economic growth in firms and households, measuring this growth through GDP can also be very telling of fundamental fluctuations.

This implies that different government regulations, for instance, should regard in business cycle harmonization so as to promote financial reform and liberalisation among all different environments.

M is viewed as a household characteristic that is most unobservable the choice of a particular household to choose whether or not they want to access credit. The econometric model used in this: After accounting for all of these variables he came up with the following econometric model identifying the influence of economic development on financial growth from a household and home ownership standpoint: This paper will attempt to combine the previous conducted studies and examine the effects and possible influences of the financial system to economic growth.

The empirical results reveal that financial development decreases income inequality in China. By specifically stressing the role of the banking sector to the economy, he comes to a complete contradiction to Lucas who argued that the financial role is an overstressed factor.

In the third paper, I document that a combination of external shocks, weak institutional background and excessive bank lending contributed to the differential responses by countries to financial crisis. In contrary, even an advanced banking sector, has only a weak impact on growth.

Economic Growth and Financial Development Essay

The recognition of a positive relationship between financial development and economic growth dates back to Schumpeterwho sees the financial market sector as the accelerator of economic growth through its funding of productive investment.

Chapter 4 reconciles the difference between Chapter 2 and Chapter 3. As this metric measures GDP directly some theorist pose household incomes and outcomes as a source for measuring economic growth fluctuations. Download 1MB Preview Abstract A number of recent papers using a linear specification have indicated that private property institutions are a fundamental determinant of growth.

Using a Bayesian dynamic factor model, they extracted the unobserved common factors of trace global and regional economic episodes, concluding that financial development dynamics are driven more by country-specific and idiosyncratic factors, and therefore, income variations should be taken into account for any possible finance-growth interaction.

As Beck notes these institutions. Six years later, Levine illustrated how the financial sector can possibly influence the economy through two specific channels: Chapter 1 is a survey of the literature on the theoretical and empirical interactions among financial development, economic growth, and income inequality.

The fifth section covers specific methodology and reasoning behind the proposed econometric models. Market volatility exerts a significant negative influence. The following section includes the descriptive statistics analysis for the whole sample as well as the four quartile groups — categorised by their income onwhich is the initial year of this study and a correlation matrix analysis firstly for the whole data set and secondly, based on the years, and This paper will be split into six sections; in the form of literature review the following section will explain different perspectives of the existent literature, by comparing and contrasting different analyses.

In my first paper, I use a semi-nonparametric partially linear model to provide evidence against a linear specification and to support nonlinearities in the relationship.

In essence, what is meant to be answered here is whether financial development affects economic growth differently in developed and developing countries; according to different income levels.


By identifying, a non-linear relationship between finance and growth, they showed that the financial development is significant only in countries with higher income level. An effective econometric model used by Goldsmith was to show the empirical positive correlation between GDP per capita and financial development.

The error term is? We guarantee each customer confidentiality and prompt delivery. The Priori Expectations In sum, causality data analysis shows a long term relationship between financial development and growth rates.

All online essay examples are plagiarized. Therefore, channels such as savings, resource allocation, and corporate control exertion; easing of risk management and trading can enhance economic growth. In his econometric model he measures how household and village characteristic can influence demand for micro-credit and household outcomes.

For example, cases where farmers who own a certain set limit of land are eligible to borrow from financial institutions. To effectively make this connection, Goldsmith needed to take data on the assets of financial exchange intermediaries as they relate to GNP and data plus changes in loan GNP between and across 35 countries on the sum of net issues of securities and bonds.

Existing theoretical studies have identified a number of channels throughout economic growth can be promoted by integrating with finance. As is well known, provincial Gini coefficients are not available for a few provinces and for certain years. Chapter 3 empirically investigates the association between financial development and income inequality based on spatial data analysis.

Jude uses a panel dataset smooth-regression approach to identify whether finance affects growth. The s saw considerable economic turbulence due to varying degrees of financial crisis in many countries in Asia and Latin America.

These results are confirmed when using an appropriate parametric specification and estimation by GMM.The basic idea of financial development and economic growth was raised by Schumpeter () who argued that the ability of financial sector in financing the entrepreneur’s innovation will lead to growth.

A well-built financial sector has a strong impact on economic growth and financial sector development accelerates economic growth. There has been a comprehensive theoretical underpinning in relation to financial development and economic growth but without coming to an agreement on causal relationship between these two phenomena.

The Causal Relationship Between Financial Development and Economic Growth - In his paper, Jung conducts tests of causality based on Granger’s notion of causality between two time series, selecting 56 counties having at.

Published: Mon, 5 Dec Stock market development has an key role to play in economic development. Shahbaz, et al() argue that stock market development is an important wheel for economic growth as there is a long-run relationship between stock market development and economic growth.

essays on institutions, financial development, and economic growth Nandi, Nabanita Sukumar () ESSAYS ON INSTITUTIONS, FINANCIAL DEVELOPMENT, AND ECONOMIC GROWTH. Doctoral Dissertation, University of Pittsburgh. Abstract. This dissertation consists of three essays of original research.

Chapter 1 is a survey of the literature on the theoretical and empirical interactions among financial development, economic growth, and income inequality.

Essays on financial development and economic growth
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