Venture Capital and the Macroeconomy

Abstract I develop a model of venture capital (VC) intermediation that quantitatively explains central empirical facts about VC activity and can evaluate its macroeconomic relevance. The impact of VC-backed innovations is significantly larger than suggested by observed aggregate venture exit valuations, even after accounting for large exposures to systematic and uninsurable idiosyncratic risks. The risk properties of venture capital play a quantitatively important role in both explaining empirical regularities and shaping the value of ventures’ contributions to economic growth. The model is analytically tractable and yields exact solutions, despite the presence of matching frictions, imperfect risk sharing, and endogenous growth. Received January 16, 2018; editorial decision November 7, 2018 by Editor Stijn Van Nieuwerburgh.

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Endogenous growth effects of environmental policies

Panoeconomicus ◽

10.2298/pan1505607a ◽

2015 ◽

Vol 62 (5) ◽

pp. 607-629

Author(s):

Oscar Afonso ◽

Ana Afonso

Keyword(s):

Economic Growth ◽

Steady State ◽

Endogenous Growth ◽

Environmental Policies ◽

Technological Knowledge ◽

Stable Steady State ◽

Scale Invariant ◽

Endogenous Growth Model ◽

State Growth ◽

The Impact

To analyse the impact of the environmental policies, we start by reviewing the literature on the environment, technological knowledge and economic growth. Then, we build a general equilibrium endogenous growth model where final goods are produced either in the skilled-labour intensive Clean sector or in the unskilled-labour intensive Unclean sector. By solving numerically transitional dynamics towards the unique and stable steady state, we observe that environmental policies encourage scale-invariant technological knowledge bias. This, in turn, promotes environmental quality, the skill premium and economic growth. Moreover, the impact of population growth on the steady-state growth rate is higher under strong households? environmental conscientiousness with future generations.

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Economic growth and financial performance of Islamic banks: a CAMELS approach

Islamic Economic Studies ◽

10.1108/ies-05-2020-0016 ◽

2020 ◽

Vol 28 (1) ◽

pp. 47-62 ◽

Cited By ~ 1

Author(s):

Mohammed Ayoub Ledhem ◽

Mohammed Mekidiche

Keyword(s):

Economic Growth ◽

Financial Performance ◽

Endogenous Growth ◽

Growth Model ◽

Islamic Finance ◽

Islamic Banks ◽

Model Framework ◽

Content Type ◽

Endogenous Growth Model ◽

The Impact

PurposeThe purpose of this paper is to investigate the link between the financial performance of Islamic finance and economic growth in all of Malaysia, Indonesia, Brunei, Turkey and Saudi Arabia within the endogenous growth model framework.Design/methodology/approachThis study applied dynamic panel system GMM to estimate the impact of the financial performance of Islamic finance on economic growth using quarterly data (2014:1-2018:4). CAMELS system parameters were employed as variables of the financial performance of Islamic finance and gross domestic product (GDP) as a proxy of economic growth. The sample contained all Islamic banks working in the five countries.FindingsThe findings demonstrated that the only significant factor of the financial performance of Islamic finance, which affects the endogenous economic growth, is profitability through return on equity (ROE). The experimental findings also indicated the necessity of stimulating other financial performance factors of Islamic finance to achieve a significant contribution to economic growth.Practical implicationsThe analysis in this paper would fill the literature gap by investigating the link between financial performance of Islamic finance and economic growth, as this study serves as a guide for the academians, researchers and decision-makers who want to achieve economic growth through stimulating Islamic finance in the banking sector. However, this study may well be extended to investigate the link between the financial performance of Islamic finance and economic growth over the Z-score model as another measure for the financial performance of Islamic finance.Originality/valueThis paper is the first that investigates the link between financial performance of Islamic finance and economic growth empirically using CAMELS parameters within the endogenous growth model to provide robust information about this link based on a sample of the top pioneer Islamic finance countries.

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Advances in the Study of Entrepreneurship, Innovation, and Economic Growth. Vol. 1: Entrepreneurship and Innovation: The Impact of Venture Capital in the Development of New Entreprise. Edited by Gary D. Libecap. Greenwich: JAI Press, 1986. Pp. xiii, 213. $28.25.

The Journal of Economic History ◽

10.1017/s0022050700004848 ◽

1988 ◽

Vol 48 (1) ◽

pp. 241-241

Author(s):

Thomas C. Cochran

Keyword(s):

Economic Growth ◽

Venture Capital ◽

The Impact

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The Impact of Tax Policies on Economic Growth: Evidence from South-Asian Economies.

The Pakistan Development Review ◽

10.30541/v48i4iipp.961-971 ◽

2009 ◽

Vol 48 (4II) ◽

pp. 961-971 ◽

Cited By ~ 4

Author(s):

Ihtsham ul Haq Padda ◽

Naeem Akram

Keyword(s):

Economic Growth ◽

Endogenous Growth ◽

Foreign Debt ◽

Policy Instruments ◽

Developed Countries ◽

Jel Classification ◽

Tax Policies ◽

Tax Rates ◽

Tax Rate ◽

The Impact

The public policy instruments, such as tax rate changes, have different implications in exogenous (neoclassical) and endogenous growth theories. The neoclassical theory predicts that changes in a country’s tax structure should have only transitory impact on its long-run economic growth while endogenous growth theory argues that such changes may have an effect impact on the growth. This study tests whether tax policies conducted by Pakistan, India and Sri Lanka have transitory or permanent effect on their economic growth. The study finds transitory and negative effect of tax rate on the growth only for short-term but has no effect in the long-term. The tax rates in all these countries are low as compared to developed countries. Due to low tax rates these countries heavily depend on bond financing and foreign debt. In view of the findings of this study most important policy implication of the study is that to finance the budget and most of their revenue requirements should be financed with tax increases and if necessary bond financing should be contingent providing a guard against transitory shocks to the budget. JEL classification: H10, E62, O40 Keywords: Neoclassical Growth; Endogenous Growth; Fiscal Policy; Tax Smoothing

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Institutions as the Driver of Economic Growth in Classic, Neoclasic and Endogenous Theory

Economic Themes ◽

10.2478/ethemes-2019-0007 ◽

2019 ◽

Vol 57 (1) ◽

pp. 111-125 ◽

Cited By ~ 1

Author(s):

Slobodan Cvetanović ◽

Uroš Mitrović ◽

Marko Jurakić

Keyword(s):

Economic Growth ◽

Endogenous Growth ◽

Theoretical Models ◽

Growth Theory ◽

Endogenous Growth Theory ◽

Economic Progress ◽

Production Factors ◽

Classical Economic ◽

The Impact ◽

Neoclassical Growth Theory

AbstractThe research in this paper focuses on the perception of institutions as the drivers of economic growth. A critical presentation of the views of classical, neoclassical and endogenous growth theorists on this issue is given. It was pointed out that the classical economic theory presented in the works of Smith, Ricardo and Malthus implies the importance of the existence of an appropriate institutional framework for initiating economic growth. The attitude of the classics is that the state can stimulate economic growth through various measures aimed at building quality institutions. On the contrary, the neoclassical growth theory has completely neglected the treatment of institutions in the analysis of economic growth. Institutions as drivers of economic growth are not taken into account in the Robert Solow’s model. However, broadly speaking, it can be assumed that the impact of institutions on the initiation of economic growth is embedded in the category of residuals and the premise of the existence of a high substitution of production factors. But, this fact, even from a distance, does not call into question the general conclusion about the unacceptable neglect of the importance of institutions in explaining the physiology of economic growth by neoclassicists. Finally, the paper emphasizes the fact that only with the emergence of an endogenous growth theory, the question of the underdevelopment of the institutions as an important model of slow economic progress of certain countries is explored. Unfortunately, the developed theoretical models of growth, which include institutions as a full concept, still do not exist in the endogenous theory of economic development.

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Advertising, Innovation, and Economic Growth

American Economic Journal Macroeconomics ◽

10.1257/mac.20180461 ◽

2021 ◽

Vol 13 (3) ◽

pp. 251-303

Author(s):

Laurent Cavenaile ◽

Pau Roldan-Blanco

Keyword(s):

Economic Growth ◽

Endogenous Growth ◽

Firm Size ◽

Firm Growth ◽

Firm Heterogeneity ◽

Negative Relationship ◽

Firm Dynamics ◽

Empirical Regularities

This paper analyzes the implications of advertising for firm dynamics and economic growth through its interaction with R&D. We develop a model of endogenous growth with firm heterogeneity that incorporates advertising decisions and calibrate it to match several empirical regularities across firm size. Our model provides microfoundations for the empirically observed negative relationship between both firm R&D intensity and growth and firm size. In the calibrated model, about half of the deviation from proportional firm growth is attributed to our novel advertising channel. In addition, R&D and advertising are substitutes, a prediction for which we find evidence in the data. (JEL D22, E23, H25, L25, M37, O32)

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Stock Markets

International Journal of Finance & Banking Studies (2147-4486) ◽

10.20525/ijfbs.v2i4.160 ◽

2013 ◽

Vol 2 (4) ◽

pp. 13-29

Author(s):

Najeb Masoub

Keyword(s):

Economic Growth ◽

Stock Market ◽

Endogenous Growth ◽

Risk Sharing ◽

Rapid Development ◽

Banking System ◽

Market Development ◽

Policy Makers ◽

Stock Market Development ◽

Endogenous Growth Theory

The stock market is a common feature of a current economy and it is reputed to achieve some necessary functions, which promote the growth and development of the economy. To achieve this objective, the endogenous growth literature and research, and recent theoretical studies have tried to provide a link between the literature of endogenous growth theory and financial markets. Providing evidence of stock market development will assist policy makers in designing reforms that do indeed promote the growth rate, enhancing stock market development as economic growth through to the banking system of financial sectors, and to the degree of investor’s right; furthermore, allowing risk sharing encourages speculative and productive investment (see, e.g. Greenwood and Jovanovic (1990) and Bencivenga and Smith (1991)). The results of the previous study, which established positive links between the stock market and economic growth, suggests the pursuit of policies geared towards rapid development of the stock market.

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Does Sukuk financing boost economic growth? Empirical evidence from Southeast Asia

PSU Research Review ◽

10.1108/prr-09-2020-0028 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mohammed Ayoub Ledhem

Keyword(s):

Economic Growth ◽

Southeast Asia ◽

Financial Markets ◽

Endogenous Growth ◽

Growth Model ◽

Generalized Method Of Moments ◽

Optimal Estimation ◽

Content Type ◽

Endogenous Growth Model ◽

The Impact

Purpose This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model. Design/methodology/approach This paper applied dynamic panel one-step system generalized method of moments as an optimal estimation approach to investigate the impact of Sukuk financing on economic growth in Southeast Asia spanning from 2013Q4–2019Q3. Sukuk financing was proxied by the total issued Sukuk holdings, while economic growth was proxied by gross domestic product. The sample covered all full-fledged Islamic financial institutions in the most developed Sukuk financial markets countries in Southeast Asia (Malaysia, Indonesia and Brunei). Findings The findings demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, which reflects the significant role of the Islamic financial markets of Sukuk as a vital contributor to economic growth. Practical implications This paper would fill the literature by investigating the link between Sukuk financing and economic growth in Southeast Asia within the framework of the endogenous growth model, as the outcome of this paper serves as a guide for financial researchers, decision-makers and policymakers to improve the Sukuk market globally as an alternative financing source for the best contribution to economic growth. Originality/value This paper is the first that investigates empirically the link between Sukuk financing and economic growth in Southeast Asia with a new theoretical context of the endogenous growth model to gain robust information about this link.

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Does a Venture Capital Market Exist in the Countries of Former Yugoslavia?

KnE Social Sciences ◽

10.18502/kss.v1i2.657 ◽

2017 ◽

Vol 1 (2) ◽

pp. 197

Author(s):

Marija Simic Saric

Keyword(s):

Economic Growth ◽

Venture Capital ◽

Capital Market ◽

Private Equity ◽

Free Market ◽

Former Yugoslavia ◽

Capital Investments ◽

The World ◽

The Impact ◽

Venture Capital Investments

Venture capital investments spread all over the world during the last few decades. Until then, they were considered only as an American phenomenon. Countries worldwide are interested in attracting venture capital investments because of their undisputable effects on the economy. The effects of the investments are visible through the impact on innovation, creation of new companies, jobs, economic growth, corporate governance and etc.Venture capital is a subset of Private equity focused on start-up companies and companies having difficulties in attracting necessary capital. It represents an equity investment made for the launch, early development, or expansion of a business.The countries of former Yugoslavia (Croatia, Bosnia and Herzegovina, Former Yugoslav Republic of Macedonia - FYROM, Montenegro, Slovenia and Serbia) are part of the Central and Eastern Europe countries and represent relatively a new market for venture capitalists. They moved from the planned economies to a free market system in the 90s of 20 century. As well as other countries in the World, these countries are also interested in attracting venture capital because of the proven impact on economic growth. Despite the presence of Venture capital and Private equity funds in this region for more than twenty years, the venture capital and private equity market in the countries of former Yugoslavia is underdeveloped compared to other countries of CEE. Indeed, the venture capital investments are so small for some countries of former Yugoslavia that the data about venture capital investment are published jointly. The objective of this paper is to examine and analyze the development of Venture Capital market in countries o former Yugoslavia. The research is both qualitative and quantitative, and involves an identification, analysis and comparison of PE/VC investments data for selected countries. The time frame for this research is between 2007 and 2014. The total volume of venture capital investments per year, the number of companies invested and the ratio of PE investments to the gross domestic product (GDP) will be used to demonstrate the existence of the venture capital market in countries of former Yugoslavia. The data necessary for the current research were taken from the yearbook of EVCA/PEREP Analytics for 2014 for Baltics and Ex-Y. „PEREP Analytics” is a centralized, non-commercial pan-European private equity database. The „PEREP Analytics” statistics platform monitors the development of private equity and venture capital in 25 European countries.

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