financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

debt and financial expectations an individual and household level analysis in this article we show that optimistic financial expectations impact positively on both the quantity of debt and the growth in debt at the individual and household levels our theoretical model shows that this association is predicted under a variety of plausible scenarios in the empirical analysis we explore the determinants of debt and of growth in debt using british data we find convincing support for our theoretical priors and show that it is optimistic financial expectations per se that are important in influencing debt rather than the accuracy of individuals predictions regarding their future financial situation jel d18 d84 d91

comment on cole the view that small rms face greater problems in obtaining credit thanlarge rms has a long history going back at least as far as the loan relationshipmodels of hodgeman 1961 and wood 1975 and the credit rationing work ofja ee and modigliani 1969 nevertheless there are few studies that provideor analyze direct evidence that credit is rationed with nonprice terms to rms at the macro level most empirical studies of business credit availability use in direct proxies ranging from early studies such as ja ee and modigliani 1969 who gauged availability by the share of small sized loans among all bank loans to more modern models that point to a role of cash ow as a determinant ofinvestment at the micro level empirical studies have indirectly tested forthe existence of credit rationing by assessing the behavior of loan pricing e g berger and udell 1992 1995 testing whether liquidity or cash owhas a greater impact on investment by smaller rms relative to larger rms e g fazzari et al 1988 or investigating whether smaller rms more heavilyuse expensive trade credit during periods of tight credit e g ja ee 1971 pe tersen and rajan 1994 cole 1998 lls a void in the literature on credit availability by testing how rm characteristics a ect a small rm s likelihood of experiencing a loan denialusing a unique cross section data set that provides direct evidence of nonpricecredit rationing this paper nds that preexisting nancial service relationshipswith a lender have a positive e ect on the probability of loan approvals con sistent with prior studies arguing that banks gain information about credit riskfrom monitoring borrower deposit activity e g black 1975 fama 1985 nakamura 1993 in addition results indicate that much of the e ect of

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

the impact of renewable energy consumption to economic growth a panel data application internationally the importance of renewable energy in the energy mix has been increasingly appreciated the advantages of the renewable energy usage for the world s energy security and the environment are indisputable and much discussed in the literature however its effects on the economic welfare of the countries are yet to be examined fully and described quantitatively the purpose of this paper is to estimate the impact of the renewable energy consumption to economic welfare by employing panel data techniques the results show that the influence of renewable energy consumption or its share to the total energy mix to economic growth is positive and statistically significant from a policy point of view promoting renewable energies bears benefits not only for the environment but also for the economic conditions of the countries

natural resources and sub national economic performance does sub national democracy matter abstract the differentiation in the impact of resources on economic growth is often explained by the specifics of institutional factors the aim of this paper is to investigate how sub national political differences influence the effect of natural resources on economic growth using a dataset of russian regions this paper demonstrates that sub national democratization influences the growth effects of resources and considers possible mechanisms for this influence the paper finds that in russia natural resources are only capable of promoting growth in the regions with non democratic political systems that at the same time have an efficient and non corrupt bureaucracy

money supply announcements and foreign exchange futures prices for five countries since the federal reserve began targeting money supply growth in october 1979 the effects of fed money supply announcements on financial markets have been intensively examined studies have considered the impacts on financial assets including yields on short term and long term treasury securities forward interest rates exchange rates stock prices and commodity prices these studies suggest that money supply announcements have had significant effects on all these financial assets the effects however have not been consistent across time assets or countries this study adds to the money supply announcement literature focusing on foreign exchange spot and currency future prices mussa 23 provides a justification for this approach he demonstrates that exchange rates move in accord with the efficient markets theory of asset price determination in addition he finds most exchange rate changes are unexpected thus exchange rate changes generally should be related to news since unexpected changes must be due to new information how exchange rates respond to news depends on how that information alters expectations those expectations however depend on economic agents historical experience and on policymakers anticipated reactions thus the effects may vary across countries and across policymaking regimes we believe this study makes four contributions to the money announcement literature first we develop a model of money announcements where expected announcements may be important even when markets are efficient while we consider money announcements in particular the model suggests a general result even expected announcements may affect financial market variables simply by confirming prior expectations second we extend and update the prior literature by examining whether recent money supply announcements have an impact on exchange rates and whether recent impacts differ from those found through 1985 the results suggest the impact of money announcements may have diminished marginally third we extend the analysis to exchange rate currency futures comparing the reactions of spot and futures rates yields further evidence on the policy anticipation versus the expected inflation effects and fourth most prior studies of unanticipated money growth do not distinguish between positive and negative surprises if positive and negative surprises influence market prices asymmetrically however

the big push natural resource booms and growth a simple application of big push reasoning suggests that natural resource booms can be important catalysts for development in poorer countries in this paper we present evidence from seven latin american countries that natural resource booms are sometimes accompa nied by declining per capita gdp we present a model with natural resources increasing returns in the spirit of big push models and expectations to clarify some of the reasons this may happen q 1999 elsevier science b v all rights reserved

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

borrowing constraints and credit demand in a developing economy summary this paper investigates the determinants of credit demand in the presence of borrowing constraints in a developing economy we model the determinants of observed debt for chilean households while accounting for selection bias and the endogeneity of their income and specific household assets using a novel chilean dataset we estimate the relationship between household characteristics and consumer and mortgage debt we find substantial differences in the nature of these relationships across the types of debt for example we find that the income elasticity for consumer debt is greater than 1 whereas for mortgage debt it is not the results suggest the increased availability of credit combined with the aging of the chilean population is likely to drastically change the distribution and level of chilean debt these findings are particularly relevant for other developing economies currently experiencing rapid income and debt growth copyright 2015 john wiley sons ltd

wealth and portfolio composition theory and evidence we examine a survey of 6010 u s households and estimate a model for household portfolio allocation we extend the conventional portfolio choice model in order to capture the observed incompleteness of household portfolios we show that the empirical specification of the joint discrete and continuous choice that characterizes household portfolio behavior is a switching regressions model with endogenous switching we go on to examine the impact of taxes on portfolio composition using detailed survey data to calculate precisely the marginal tax rate facing each household finally we estimate wealth elasticities of demand for a range of assets and liabilities

dutch disease effect of oil rents on agriculture value added in middle east and north african mena countries abstract this paper investigates the effect of oil rents on agriculture value added in oil producing middle east and north african mena countries annual data from 1970 to 2011 panel cointegration tests by pedroni 1999 long ran panel causality tests by canning and pedroni 2008 and two step system gmm by blundell and bond 1998 are used in this study we find a negative relationship between oil rents and agriculture value added in the long run with a rather slow rate of short run adjustment of agriculture value added back to equilibrium after a boom in oil rents these results indicate that an oil sector boom is associated with a contraction in the agriculture sectors of the countries in the panel in the long run this is probably attributable to a resource movement effect from other economic sectors to the booming oil sector in these countries this serves as evidence of a dutch disease effect of an oil sector boom on agriculture in the mena countries in this study

trickle down consumption financial deregulation inequality and indebtedness over the last thirty years the u s experienced a surge in income inequality coupled with increasing levels of borrowing we model an olg economy populated by two types of household that care about how their consumption compares to that of their peers in this framework individual debt to income ratios decrease with income increases in consumption of rich households lead to increases in consumption of the rest and aggregate borrowing increases with income inequality we calibrate our model to evaluate the welfare implications of the process of nancial liberalization that began in the 1980s our analysis suggests that some of the nancial developments that lead to the recent expansion of credit may have decreased rather than increased welfare

who is discouraged from applying for credit abstract this paper distinguishes between households who are discouraged from applying for credit from certain lenders and those who are not using data for the period 1990 1995 it is found that certain minorities are discouraged from applying for credit to certain lenders

natural resources and economic development new panel evidence the question as to whether natural resources are a curse on economic growth and development is subject to considerable debates and remains controversial using heterogeneous panel cointegration techniques this paper provides a fresh re examination of the resource curse while allowing for cross section heterogeneity and commonalities in the nexus between natural resource abundance and economic development it finds in a sample of developing countries that economies endowed with abundant natural resources tend to develop more slowly than countries with scarce resources natural resources are on average a curse however there is considerable heterogeneity in the effects of resource abundance on economic development across countries perhaps because of differences in the extent of government intervention access to sound money legal structures and the security of property rights the degree of globalization and or corruption

same financial development yet different economic growth why we re study the relationship between financial development and real gdp per capita growth in 48 countries what we find is an interesting evidence that only stock market development has positive effects on growth and that banking development has an unfavorable if not negative effect on growth we examine whether or not these impacts are a product of various financial and economic conditional variables our conditional variables consist of financial liberalization two sets of country development dummies crises in banking and currency dummies the creditor protection index as well as the anti director and corruption indices our results clearly show that the conditional variables of financial liberalization high income level and good shareholder protection mitigate the negative impacts of banking development on growth in contrast the conditional variables of middle income level regional latin american sub saharan african and east asian dummies banking and currency crises good creditor protection and higher corruption strengthen the negative impacts of banking development on growth next the conditional variables of middle income level latin american sub saharan african and east asian dummies strengthen the positive impacts of stock market development on growth whereas the conditional variables of financial liberalization mitigate the positive impacts of stock market development on growth last we find that the relationship between growth and bank development is better described as a weak inverse ushape this inverse u shape becomes stronger when additional stock market variables are squared thus financial development and growth may in fact be in a nonlinear form

is the relationship between financial development and economic growth monotonic evidence from a sample of middle income countries summary we revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980 2008 period using pooled mean group estimations in a dynamic heterogeneous panel setting we show that there is an inverted u shaped relationship between finance and growth in the long run in the short run the relationship is insignificant this suggests that too much finance can exert a negative influence on growth in middle income countries the finding of a non monotonic effect of financial development on growth is confirmed by estimating a threshold model

information and credit access using bankruptcy as a signal legally a bankruptcy flag can appear on an individual s credit report for up to 10 years after the filing the flag affects an individual s credit score and in turn an individual s access to credit in this article we investigate how the bankruptcy flag affects access to credit along three dimensions loan acceptance the price of the loan as is determined by the interest rate and the amount of credit the household receives using the panel study of income dynamics and the survey of consumer finances we estimate a series of two stage models corrected for sample selection and adjusted to account for the household s level of creditworthiness we find that the bankruptcy flag increases the probability of being denied access to a loan the flag also increases interest rates for unsecured loans and lowers the credit limits available to households the findings have important implications with respect to current bankruptcy code and the impact that information such as the bankruptcy flag can have on the e

current accounts and oil price fluctuations in oil exporting countries the role of financial development abstract oil exporting countries usually experience large current account improvements following a sharp increase in oil prices in this paper we investigate this oil price current account relationship on a sample of 27 oil exporting economies relying upon the estimation of panel smooth transition regression models over the 1980 2010 period we provide evidence that refines the traditional interpretation of oil price effects on current accounts while current accounts are positively affected by oil price variations this effect is nonlinear and depends critically on the degree of financial development of oil exporting economies more specifically oil price variations exert a stronger impact on the current account position for less financially developed countries this influence diminishing with financial deepness

does financial development increase energy consumption the role of industrialization and urbanization in tunisia this paper assesses the relationship among energy consumption financial development economic growth industrialization and urbanization in tunisia from 1971 to 2008 the autoregressive distributed lag bounds testing approach to cointegration and granger causality tests is employed for the analysis the result confirms the existence of long run relationship among energy consumption economic growth financial development industrialization and urbanization in tunisia long run bidirectional causalities are found between financial development and energy consumption financial development and industrialization and industrialization and energy consumption hence sound and developed financial system that can attract investors boost the stock market and improve the efficiency of economic activities should be encouraged in the country nevertheless promoting industrialization and urbanization can never be left out from the process of development we add light to policy makers with the role of financial development industrialization and urbanization in the process of economic development

stockholding behavior of u s households evidence from the 1983 1989 survey of consumer finances most households persistently invest in riskless assets but not stocks and may do so because they perceive information required for market participation to be costly relative to expected benefits in a consumption capital asset pricing model ccapm increased risk aversion income risk and lower resources reduce the information expense sufficient to deter stockholding bivariate probit analysis using the 1983 1989 survey of consumer finances shows that households with lower risk aversion higher education and greater wealth who were nonstockholders in 1983 had an increased conditional probability of entering by 1989 whereas 1983 stockholders with lower resources more limited education and greater risk aversion were more likely to be nonstockholders by 1989

the response of short term interest rates to weekly money announcements each friday at 4 10 p m est the federal reserve announces its estimate of the narrowly defined money stock for the statement week ending nine days previously these money announcements have become one of the main events in financial markcts if for no other reason than the fact that significant movements in interest rates have been associated with large unanticipated changes in the money stock moreover since the late 1970s interest rate fluctuations in response to money stock announcements have dramatically increased over the 1l 2 hour intervals spanning the weekly announcements for example the variance of the change in the threemonth treasury bill yield in the three years since october 1979 is more than thirty times larger than that of the previous two year period l two factors may account for a large portion of the increased volatility of shortterm interest rates first on october 6 1979 the federal reserve adopted a reserve aggregate approach to monetary control replacing a procedure that emphasized stability of short term yields second despite the greater emphasis placed on monetary control the variance of weekly announced changes in the money stock has risen by about 70 percent since late 1979 in turn if greater volatility of announced changes makes future changes more difficult to predict the volatility of unanticipated weekly changes in money would have also increased 2 thus if financial markets are efficient and if weekly money announcements contain relevant information larger unanticipated changes in money may have caused larger fluctuations in interest rates

sovereign stress and smes access to finance evidence from the ecb s safe survey abstract we study the effect of sovereign stress on smes capital structure using restricted access data from the european central bank we find that during the sovereign debt crisis and controlling for borrowers quality firms in stressed countries became more likely to be denied credit to be credit rationed and to face higher loan rates less creditworthy firms were not more likely to become credit constrained suggesting no flight to quality in lending we also find that in order to make up for the decline in bank credit firms in stressed countries began relying considerably more on retained earnings and government subsidies

do natural resource revenues hinder financial development the role of political institutions we hypothesize that natural resource revenues may deteriorate contract enforcement if political institutions are weak as poor contract enforcement leads to low financial development resource revenues may hinder financial development in countries with poor political institutions but not in countries with comparatively better political institutions we provide empirical support for this hypothesis based on within country variation in our sample covering the period 1970 2005 and 133 countries our results are robust to the use of additional control variables different samples and alternative measures of financial development and political institutions

natural resources and the quality of economic development abstract are natural resources a blessing or a curse for human development this article attempts to answer the question by distinguishing between a dependence on natural resources and an abundance of the same dependence is measured in terms of exports of metals and fuel while resource abundance is calculated on the basis of the subsoil assets per square kilometre and per capita results show the existence of a negative correlation between metals and ore exports and human development while subsoil assets measures are rather positively related these effects are particularly significant in countries with a comparatively lower institutional quality the cases of botswana the democratic republic of congo and equatorial guinea briefly examined suggest however that the effects of natural resources on human and economic development can be very different and strictly related to specific national political and institutional characteristics

personal bankruptcy and credit supply and demand this paper examines how personal bankruptcy and bankruptcy exemptions affect the supply and demand for credit while generous state level bankruptcy exemptions are probably viewed by most policy makers as benefiting less well off borrowers our results using data from the 1983 survey of consumer finances suggest that they increase the amount of credit held by high asset households and reduce the availability and amount of credit to low asset households conditioning on observable characteristics thus bankruptcy exemptions redistribute credit toward borrowers with high assets interest rates on automobile loans for low asset households also appear to be higher in high exemption states

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

the permanent income hypothesis estimation and testing by instrumental variables the permanent income hypothesis with rational expectation is restated estimated and tested by an instrumental variables technique on the postwar u s aggregate time series data the hypothesis is accepted on a consumption series which includes service flows from consumer durables if the consumption series is the one in the national income and product accounts the hypothesis is decisively rejected an explanation is suggested to reconcile the conflicting test results

cross border banking credit access and the financial crisis abstract we study the sensitivity of credit supply to bank financial conditions in 16 emerging european countries before and during the financial crisis we use survey data on 10 701 applicant and non applicant firms that enable us to disentangle effects driven by positive and negative shocks to the banking system from demand shocks that may vary across lenders we find strong evidence that firms access to credit was affected by changes in the financial conditions of their banks during the crisis firms were more credit constrained if they were dealing with banks that experienced a decline in equity and tier 1 capital as well as losses on financial assets we also find that access to credit reflects the balance sheet conditions of foreign parent banks the effect of positive and negative shocks to a bank is greater for riskier firms and firms with fewer tangible assets

renewable and non renewable energy consumption and economic activities further evidence from oecd countries this article examines the dynamic relationship between renewable and non renewable energy consumption and industrial output and gdp growth in oecd countries using data over the period of 1980 2011 the panel cointegration technique allowing structural breaks is used for empirical investigation the results show that there is a long term equilibrium relationship among non renewable and renewable energy sources industrial output and economic growth the panel causality analyses show bidirectional causality between industrial output and both renewable and non renewable energy consumption in the short and long run however there is evidence of bidirectional short run relationship between gdp growth and non renewable energy consumption while unidirectional causality between gdp growth and renewable energy consumption these results indicate that oecd economies still remain energy dependent for their industrial output as well as overall economic growth however expansion of renewable energy sources is a viable solution for addressing energy security and climate change issues and gradually substituting renewable to non renewable energy sources could enhance a sustainable energy economy

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

borrowing during unemployment unsecured debt as a safety net this paper examines whether unsecured credit markets help disadvantaged households supplement temporary shortfalls in earnings by investigating how unsecured debt responds to unemployment induced earnings losses results indicate that very low asset households those in the bottom decile of total assets do not borrow in response to these shortfalls however other low asset households do borrow increasing unsecured debt by more than 11 cents per dollar of earnings lost in contrast wealthy households do not increase unsecured debt during unemployment the evidence suggests that very low asset households do not have sufficient access to unsecured credit to smooth consumption over transitory unemployment spells

credit constraints their existence determinants and implications for u s farm and nonfarm sole proprietorships the objective of this study is to determine the effect of credit constraints on production for farm and nonfarm sole proprietorships a propensity score matching estimator is employed to provide unbiased estimates of the production impacts of being denied credit the empirical results demonstrate that the value of production is significantly lower for credit constrained sole proprietorships if this drop in the value of production is aggregated to a national level it constitutes only 3 and 13 of total value of production for farm and nonfarm sole proprietorships respectively copyright 2009 oxford university press

when arm s length is too far relationship banking over the credit cycle we conduct face to face interviews with bank ceos to classify 397 banks across 21 countries as either relationship or transaction lenders we then use the geographic coordinates of these banks branches and of 14 100 businesses to analyze how the lending techniques of banks in the vicinity of firms are related to credit constraints at two contrasting points of the credit cycle we find that while relationship lending is not associated with credit constraints during a credit boom it alleviates such constraints during a downturn this positive role of relationship lending is stronger for small and opaque firms and in regions with a more severe economic downturn moreover our evidence suggests thatrelationship lending mitigates the impact of a downturn on firm growth and does not constitute evergreening of loans

savings growth and the resource curse hypothesis an important connection between recent attempts to understand the determinants of economic growth and the measurement of sustainability is the finding of a negative and significant relationship between natural resource abundance and economic growth this is the so called resource curse hypothesis using cross country regressions we offer evidence that the curse may itself be a manifestation of the inability of governments to manage large resource revenues sustainably in particular these results offer another perspective on the resource curse hypothesis the countries where growth has lagged are those where the combination of natural resource macroeconomic and public expenditure policies have led to a low rate of genuine saving net saving adjusted for resource depletion

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

institutions and the resource curse countries rich in natural resources constitute both growth losers and growth winners we claim that the main reason for these diverging experiences is differences in the quality of institutions more natural resources push aggregate income down when institutions are grabber friendly while more resources raise income when institutions are producer friendly we test this theory building on sachs and warner s influential works on the resource curse our main hypothesis that institutions are decisive for the resource curse is confirmed our results contrast the claims of sachs and warner that institutions do not play a role

do smes benefit from unconventional monetary policy and how microevidence from the eurozone we study the impact of the announcement of the european central bank s ecb s outright monetary transactions program on small firms access to finance using a matched firm bank data set from eight eurozone countries we find that following the announcement credit access improved relatively more for firms borrowing from banks with high balance sheet exposures to impaired sovereign debt with such firms less likely to be refused a loan or to be price rationed loan terms also improved as manifested by lengthening of loan maturities unconventional monetary policy has a positive impact on firms investment and profitability while its effect on firm innovation is weaker

resource abundance and economic growth in the united states abstract it is a common assumption that regions within the same country converge to approximately the same steady state income levels the so called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions empirical data seem to support the absolute convergence hypothesis for us states but the data also show that natural resource abundance is a significant negative determinant of growth we find that natural resource abundance decreases investment schooling openness and r d expenditure and increases corruption and we show that these effects can fully explain the negative effect of natural resource abundance on growth

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

learning by doing and the dutch disease this paper develops a model of learning by doing and the dutch disease that extends the earlier literature in two ways first it is assumed that both the traded and the non traded sector can contribute to learning second it is assumed that there are learning spillovers between the sectors it is shown that within such a model a foreign exchange gift results in a real exchange rate depreciation in the long run due to a shift in the steady state relative productivity between the traded and the non traded sector in contrast to standard models of the dutch disease production and productivity in both sectors may go up or down the conditions for the different cases are worked out

fiscal policy with heterogeneous agents and incomplete markets i undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint temporary tax changes are found to have large real effects in the benchmark model a temporary tax cut increases aggregate consumption on impact by around 29 cents for every dollar of tax revenue lost comparing the benchmark incomplete markets model to a complete markets economy income tax cuts provide a larger boost to consumption and a smaller investment stimulus when asset markets are incomplete copyright 2005 wiley blackwell

the impact of oil price shocks on u s bond market returns abstract this paper examines the effect of the demand and supply shocks driving the global crude oil market on aggregate u s bond index real returns a positive oil market specific demand shock is associated with significant decreases in aggregate bond index real returns for 8 months following the shock a positive innovation in aggregate demand has a negative effect on real bond return that is statistically significant and becomes more adverse over 24 months structural shocks driving the global oil market jointly account for 27 1 of the variation in real bond returns at 24 month horizon a spillover index from rolling svar models is used to identify the interdependence between the oil market and bond returns the mean for this spillover index is 0 381 over 2001 01 2011 12 and 0 476 over september through december 2008 during the height of the global financial crisis

oil curse and finance growth nexus in malaysia the role of investment abstract we empirically examine the existence of an oil curse in the finance growth nexus in malaysia we provide new insights into the oil curse phenomenon in malaysia that challenges the conventional argument that malaysia is a counter example of an oil curse country we do not find any significant evidence of direct effects of financial development on tfp however there are direct and positive effects on the level of investment due to financial development and oil dependence while we do not find statistical evidence of a direct negative impact of oil rent on economic growth our results reveal that the symptoms of an oil curse exist specifically we find that oil rent has a weak indirect impact on the finance growth nexus through the quantitative channel or investment quantity the policy implications of our findings are that the financial sector should be more involved in productive investment activities that can strengthen its role in economic growth and that policymakers should reduce dependence on oil and promote economic diversification

the resource curse revisited a bayesian model averaging approach abstract the evidence for the effects of oil rents on growth is mixed a result which can be explained with model uncertainty we address the issue using bayesian model averaging techniques and an updated cross country data set for long term growth in the period 1970 2014 including 91 countries and 54 potential growth determinants we do not find empirical evidence for the existence of a natural resource curse in our sample on the contrary our results suggest a robust positive effect of oil rents on long term economic growth we then introduce interaction terms of oil rents with potential conditions under which oil dependency can lead to sub standard growth the results indicate that the positive effect of oil rents may be conditional on the quality of institutions we test the robustness of our results using a panel data set and find neither a curse nor a positive effect of oil rents on short to medium run growth

risk aversion and weekly money does the market expect the fed to offset large increase in m1 abstract the risk premium hypothesis suggests that absolute changes in short term interest rates will be larger if the unanticipated component of the federal reserve s weakly money supply announcement is positive statistical tests suggest however that the magnitude of interest rate changes is unrelated to the sign of monetary surprises

natural resource dependence human capital accumulation and economic growth a combined explanation for the resource curse and the resource blessing abstract in existing studies no consensus has been reached on the relationship between natural resource dependence and human capital accumulation to narrow the divergence this paper carries out a normative research to explain the co existence of the phenomena of the resource curse and the resource blessing based on an organic combination of conceptual and mathematical models it first establishes a conceptual model to analyse the potential effects of the government s policy preference and natural resource development activities on human capital accumulation and economic growth furthermore it develops an endogenous growth model to normatively illuminate the effects in the conceptual model and to explore the condition for the occurrence of the resource curse the conceptual model analysis indicates that the rate of return on education investment and government behaviours play the crucial role in promoting the formation of the economic virtuous circle at the micro level and macro level respectively while resource development activities exert dual impacts on the circle the main mechanisms in the conceptual model can be validated in the mathematical model the rise in the subjective discount rate the elasticity of intertemporal substitution and resource goods price are adverse to the economic virtuous circle while high quality education and the institutional environment giving priority to manufacturing can become the necessary condition and sufficient condition for forming the circle respectively the allocation efficiency of production factors plays a decisive role in whether the blessing occurs whereas sufficient human capital is an essential guarantee for evading the curse

natural resources a curse on education spending abstract in line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments this paper aims to address an important blind spot in our understanding of the resource curse by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices using a large panel dataset of 140 countries covering the period from 1995 to 2009 we find an adverse effect of resource dependence on public education expenditures relative to gdp that is robust to controlling for a range of additional covariates furthermore our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point source natural resources these results are of particular importance for the sustainable management of natural resource wealth in developing countries as they could achieve especially high returns by investing resource revenues in public goods such as education while this paper underlines the importance of institutions and government accountability our findings also raise questions on the role of the private sector as a partner in development as the extractives industry could consider increasing funding for education through corporate social responsibility csr initiatives

liquidity constraints with endogenous income i introduction the existence of liquidity constraints remains a significant issue within intertemporal models of household choice as hayashi 1985b cox and jappelli 1993 and other studies detail the notion that consumers may be unable to borrow all they desire to finance current consumption carries important implications pertaining to ricardian equivalence as well as the dynamic effects of government spending versus tax policies liquidity constraints have also been advanced as a primary reason for empirical rejections of the permanent income life cycle hypothesis as discussed in zeldes 1989 testing for the existence of debt constraints with micro data has generated mixed results 1 hall and mishkin 1982 mariger 1987 zeldes 1989 hayashi 1985a and duca and rosenthal 1994 argue for the significance of liquidity constraints jappelli 1990 and duca and rosenthal 1994 contend that a nontrivial segment of the population faces credit rationing based upon information from the survey of current finances on the other hand the findings of altonji and siow 1987 runkle 1991 mariger and shaw 1993 and attanasio and weber 1995 provide little evidence of liquidity constraints this article investigates liquidity constraints with endogenous income it centers around the household s intertemporal model with nonseparable consumption and leisure following the methodology of zeldes 1989 and runkle 1991 the formulation allows for an individual household at a point in time to either face binding or nonbinding liquidity constraints our model extends this work by considering labor supply within the family s choice set as recommended by hayashi 1985a and attanasio and weber 1995 it includes endogenous wage income in the minimum wealth constraint these features allow for consideration of work related decisions within household utility maximization under liquidity constraints for example a family may choose increased labor supply to remove themselves from a debt constraint or to enable them to apply for a larger loan this behavior may take the form of increased overtime finding a second job or having the spouse enter the labor market the model works toward remedying several difficulties associated with empirical testing for liquidity constraints following alessie melenberg and weber 1988 we derive from the euler equations an estimable equation for employed households the equation holds for both liquidity constrained families as well as households that do not face a binding debt constraint this result addresses a well known problem involved with the standard consumption based utility formulation as discussed by hayashi 1985b and others the inability to directly estimate the euler equation s for liquidity constrained households consequently work such as hayashi 1985a zeldes 1989 and runkle 1991 use an a priori criterion to split the sample into suspected liquidity constrained and non liquidity constrained groups their tests are based upon parameter estimates from the group not considered to be debt constrained given estimated structural parameters from the consumption leisure model we can obtain estimates related to the individual lagrange multipliers pertaining to the minimum wealth constraint these estimated data series enable us to test directly for the presence of credit constraints within the general population primarily due to the difficulty in estimating the lagrange multipliers indirect means have generally been used to test for debt constraints over a sample of households hall and mishkin 1982 base their inferences on the excess sensitivity of consumption forecast errors to income innovations mariger and shaw 1993 raise doubts regarding their findings showing that such tests of the permanent income life cycle hypothesis can be biased toward rejection zeldes 1989 and fissel and jappelli 1990 criticize the general method since it assumes a constant proportion of liquidity constrained households

financial development and economic growth views and agenda this critique argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive first order relationship between financial development and economic growth the body of work would push even most skeptics toward the belief that the development of financial markets and institutions is a critical and inextricable part of the growth process and away from the view that the financial system is an inconsequential sideshow responding passively to economic growth many gaps remain however and the paper highlights areas in acute need of additional research

economic freedom and productivity growth in resource rich economies summary the focus of this paper is to test whether free market institutions that protect property rights and support freedom of choice and voluntary exchange can change the curse of natural resources into a blessing to examine the above question this paper uses the fraser institute s economic freedom index and its five sub indices namely government size property rights access to sound money freedom to trade and setting proper regulations using data from 99 sample countries over the period 1970 2010 the system gmm estimates suggest that the negative growth effects of resource rents may turn positive in countries with greater economic freedom

some evidence on the empirical significance of credit rationing this paper examines the credit rationing debate using detailed contract information on over one million commercial bank loans from 1977 to 1988 while commercial loan rates are sticky consistent with rationing this stickiness varies with loan contract terms in ways that are not predicted by equilibrium credit rationing theory in addition the proportion of new loans issued under commitment does not increase significantly when credit markets are tight despite the fact that borrowers without commitments can be rationed whereas commitment borrowers are contractually insulated from rationing overall the data suggest that equilibrium rationing is not a significant macroeconomic phenomenon

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

the effect of borrowing constraints on consumer liabilities this paper explores the effects of liquidity constraints on consumer liabilities while much empirical evidence attests to the importance of liquidity constraints in the u s economy evidence about the effects of borrowing constraints on consumer balance sheets is scarce using the 1983 survey of consumer finances data we estimate desired borrowing for unconstrained households we then evaluate the gap between predicted and observed debt for the sample of liquidity constrained consumers predicted debt is 75 percent higher than actual debt in the liquidity constrained sample thus the effect of removing borrowing constraints has quantitatively important implications for the allocation of debt in the household portfolio the removal of borrowing constraints would raise aggregate household liabilities by 9 percent copyright 1993 by ohio state university press

natural resources democracy and corruption we study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions our game theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor but not otherwise we use panel data covering the period 1980 to 2004 and 124 countries to test this theoretical prediction our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions our main results hold when we control for the effects of income time varying common shocks regional fixed effects and various additional covariates they are also robust across different samples and to the use of various alternative measures of natural resources democracy and corruption

financial liberalization financial sector development and growth evidence from malaysia abstract the objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of malaysia using time series data from 1960 to 2001 we conduct cointegration and causality tests to assess the finance growth link by taking the real interest rate and financial repression into account the empirical evidence suggests that financial liberalization through removing the repressionist policies has a favorable effect in stimulating financial sector development financial depth and economic development are positively related but contrary to the conventional findings our results support robinson s view that output growth leads to higher financial depth in the long run

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

the demand for housing in spain an endogenous switching regression analysis housing demand in spain has been studied by using data disaggregated into primary and secondary housing demands it is found that demand for both types of housing area indeed related and that they are both considered necessities thus suggesting that their consumption ought to be modelled as a joint decision moreover it is found that traditional determinants of housing demand affect primary and secondary home demands differently these differences are attributable to the following economic rationales need for asset holdings diversifications relative high cost of home ownership versus rental in choice locations and differences in land demand intensity across regions in sum the findings suggest that policy makers in spain contrary to popular beliefs must consider secondary homes an integral part of households accommodation need

welfare implications of endogenous credit limits with bankruptcy this paper studies the aggregate welfare consequences of changes in the prescribed penalty for personal bankruptcy and in social insurance policies when borrowing limits may respond to these changes it uses a dynamic general equilibrium model of an exchange economy with incomplete markets and a continuum of agents the borrowing constraint and the risk of default are endogenous and the default penalty restricts an individual s access to the markets for a fixed period of time the effect on the stationary equilibrium of an exogenous reduction of 1 and 2 years in this exclusion period is explored quantitatively for comparison purposes the same experiment is carried out under the assumption made in related studies that the borrowing limit is fixed a small welfare loss follows in either case in contrast in a small open economy welfare may increase substantially but only if the borrowing constraint is endogenous similar results follow from an exogenous change in social policy that reduces individual income variability

natural resources and economic growth the role of investment is it possible that excessive reliance on natural resources affects saving and investment in a way that retards economic growth and thus in the long run the level of output per capita this paper reviews the literature explores the data and compares and contrasts the explanatory power and interplay of natural resources and civil liberties our proxy for institutional variables currently under scrutiny in the literature we propose that natural resource dependence may be viewed as an exogenous factor that impedes economic growth and investment as well as institutions even if we stress that natural resource abundance may be good for growth

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment

financial development and openness evidence from panel data abstract this paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development as well as its variation across countries in recent years utilising annual data from developing and industrialised countries and dynamic panel estimation techniques we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development our findings reveal that the marginal effects of trade financial openness are negatively related to the degree of financial trade openness indicating that relatively closed economies stand to benefit most from opening up their trade and or capital accounts although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts opening up one without the other could still generate gains in terms of banking sector development thus our findings provide only partial support to the well known rajan and zingales hypothesis which stipulates that both types of openness are necessary for financial development to take place