A new theory of innovation and growth: the role of banking intermediation and corruption

2016 ◽  
Vol 33 (4) ◽  
pp. 488-500 ◽  
Author(s):  
João Tovar Jalles
Keyword(s):  
Endogenous Growth ◽  
Growth Model ◽  
Financial Sector ◽  
Equilibrium Analysis ◽  
Model Specification ◽  
Content Type ◽  
Financial Sector Development ◽  
Endogenous Growth Model ◽  
The Relationship

Purpose There has been an increased interest in the role of the financial sector and institutional quality in the development process. Design/methodology/approach This paper addresses the relationship between corruption and financial sector development by constructing a Schumpeterian endogenous growth model, allowing for the entry of competitive firms with an explicit role for politics and banking. Findings Assuming that technologically advanced firms are located in developed countries and backward firms in developing countries, the model in this study suggests that low corruption are more growth enhancing in the former group of countries. Better institutions stimulate entry by reducing banking screening costs and entry is more growth enhancing in sectors closer to the technological frontier. Research limitations/implications The model in this study is a partial equilibrium analysis and one should include a role for labour markets to address the household’s problem and enrich the model’s conclusions. Secondly, the model specification rests on the fact that the degree of corruption is correlated with the level of institutions. Even though this might be subject to some criticism, this is a common practice across the literature and so, it is clearly a matter of taste. Practical implications The main policy conclusion is that anti-corruption policy initiatives should prioritize corruption that distorts incentives with respect to productive investment that directly and negatively affects growth. Originality/value This paper addresses the relationship between corruption and financial sector development by constructing a Schumpeterian endogenous growth model, allowing for the entry of competitive firms with an explicit role for politics and banking.

Endogenous Growth Model for China's Green IT Based on Green Technology and Green Society

2012 ◽  
Vol 190-191 ◽  
pp. 83-87
Author(s):  
Feng Tao Liu
Keyword(s):  
Endogenous Growth ◽  
Growth Model ◽  
Control Method ◽  
Green Technology ◽  
Social Risk ◽  
Investment Efficiency ◽  
Green It ◽  
Transversality Conditions ◽  
Endogenous Growth Model ◽  
The Relationship

China's green IT development is faced with the unique “IT social risk”. Therefore, the endogenesis of China's green IT development has been challenged. Using the concept of “society greening”, we divide a green IT system into a technology greening sub-system and a society greening sub-system, based on which an endogenous growth model was built. Using an optimal control method to solve the model, we find the long-term equilibrium rate of economic growth, transversality conditions, the relationship between the output flexibilities of the input factors in the two sub-systems, the relationship among the elasticity coefficients of intertemporal substitution in consumption, as well as the optimal conditions for the whole system. The results show that to allow China's green IT to develop, the output elasticity of the society greening sub-system knowledge must be higher than that of the technology greening sub-system. This urgently requires government incentives and other public products to balance the investment efficiency in the two sub-systems.

scholarly journals The role of unions in an endogenous growth model with human capital

2002 ◽  
Vol 24 (2) ◽  
pp. 171-192 ◽  
Author(s):  
José Marı́a Ramos Parreño ◽  
Fernando Sánchez-Losada
Keyword(s):  
Human Capital ◽  
Endogenous Growth ◽  
Growth Model ◽  
Endogenous Growth Model

THE ROLE OF MONITORING OF CORRUPTION IN A SIMPLE ENDOGENOUS GROWTH MODEL

2013 ◽  
Vol 51 (4) ◽  
pp. 1972-1985 ◽  
Author(s):  
RAFFAELLA COPPIER ◽  
MAURO COSTANTINI ◽  
GUSTAVO PIGA
Keyword(s):  
Endogenous Growth ◽  
Growth Model ◽  
Endogenous Growth Model

scholarly journals Islamic finance and economic growth: the Turkish experiment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Ayoub Ledhem ◽  
Mohammed Mekidiche
Keyword(s):  
Economic Growth ◽  
Endogenous Growth ◽  
Growth Model ◽  
Financial Services ◽  
Banking Sector ◽  
Banking System ◽  
Global Market ◽  
Islamic Finance ◽  
Content Type ◽  
Endogenous Growth Model

PurposeThis study aims to empirically investigate the connection between Islamic finance and economic growth in Turkey using the endogenous growth model.Design/methodology/approachIt applies quantile regression with the Markov chain marginal bootstrap resampling technique by adopting total Islamic financing as the main exogenous explanatory factor in the endogenous growth model, while the gross domestic product (GDP) is employed as a measure of economic growth. The sample consists of all full-fledged participation (Islamic) banks operating in Turkey spanning from 2013Q4 until 2019Q4. The study uses academic literature, official financial reports from the Participation Banks Association of Turkey, REDmoney Group, Islamic Financial Services Board (IFSB) and the International Monetary Fund (IMF) database.FindingsThe results show that Islamic finance is promoting economic growth in Turkey, which mirrors the success of the New Turkish Economy Program (2019–2021) which aims at boosting economic growth by enhancing the Islamic finance share in the Turkish banking sector and the global market.Research limitations/implicationsTurkey has a dual banking system (conventional and participation (Islamic)) and both can influence the country's real economy. This study is limited to the influence of Islamic banking on Turkish economic growth. The study also restricts its size and coverage from 2013Q4 to 2019Q4, to cover the years over which data for all variables included in the research are available.Practical implicationsThis paper suggests the adoption of the Turkish successful experiment as a path to reach economic growth by increasing the Islamic finance share in the banking industry for countries that seek to promote economic growth by Islamic finance, as the findings of this paper support.Originality/valueThis study is the first that examines the influence of Islamic finance on economic growth under a new theoretical framework of the endogenous growth model in Turkey using a robust non-parametric approach.

Islamic finance and economic growth nexus: an empirical evidence from Southeast Asia using dynamic panel one-step system GMM analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohammed Ayoub Ledhem ◽  
Mohammed Mekidiche
Keyword(s):  
Economic Growth ◽  
Southeast Asia ◽  
Endogenous Growth ◽  
Growth Model ◽  
Islamic Finance ◽  
Dynamic Panel ◽  
System Gmm ◽  
Content Type ◽  
Endogenous Growth Model ◽  
One Step

Purpose This paper aims to empirically explore the nexus between Islamic finance and economic growth across Southeast Asia based on the perception of the endogenous growth model. Design/methodology/approach This paper applied the dynamic panel one-step system GMM as an optimum estimation approach to study the influence of Islamic finance on economic growth in Southeast Asia from 2013Q4 to 2019Q4. This paper used total Islamic financing as the major exogenous explanatory factor inside the endogenous growth model, whereas the gross domestic product was used as the measurement of economic growth. The sample consisted of all complete Islamic banks operating in Southeast Asia (Malaysia, Brunei Darussalam and Indonesia). Findings The findings demonstrated that Islamic finance is promoting economic growth in Southeast Asia, which reflects the weighty role of Islamic finance as an energetic contributor to economic growth. Practical implications This paper would enrich the literature by studying the nexus between Islamic finance and economic growth in Southeast Asia based on the perception of endogenous growth model, as the results of this paper assist as an attendant for financial scholars, decision-makers and policymakers to expand Islamic finance globally as an alternative funding source for the best involvement to economic growth. Originality/value Despite the existing studies on the nexus between Islamic finance and economic growth, this paper is the first that explores empirically the nexus between Islamic finance and economic growth in Southeast Asia based on the theoretical background of the endogenous growth model to obtain solid information on this nexus.

scholarly journals Factor accumulation and economic growth in Pakistan: incorporating human capital

2018 ◽  
Vol 45 (3) ◽  
pp. 480-491 ◽  
Author(s):  
Kashif Munir ◽  
Shahzad Arshad
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Human Capital ◽  
Endogenous Growth ◽  
Growth Model ◽  
Physical Capital ◽  
Content Type ◽  
Long Run ◽  
Endogenous Growth Model ◽  
Factor Accumulation

Purpose The purpose of this paper is to examine the long-run and short-run relationship between factor accumulation (i.e. physical capital and human capital) and economic growth by calculating the stocks of human capital and real physical capital. Design/methodology/approach The study uses endogenous growth model, where GDP per worker is the dependent variable and factor accumulation (real physical capital per worker and human capital) is the explanatory variable under the autoregressive distributive lag framework from 1973 to 2014 for Pakistan. Findings The results suggest that there is a long-run relationship between factor accumulation and GDP per worker in Pakistan. Findings of the study are consistent with the endogenous growth model suggesting that accumulation of human capital increases labor productivity, employment level and per capita income, and causes economic growth. Practical implications Developing countries like Pakistan should increase share of human capital for economic development. Government should invest in the education sector because investment in human capital has a large potential of productivity growth and welfare increase in developing countries. Originality/value This study challenges the notion of human capital and real physical capital stock used by different researchers. Considering human capital as a core factor of production, a series of human capital as average year of schooling is calculated by utilizing the perpetual inventory method.

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

2020 ◽  
Vol 28 (1) ◽  
pp. 47-62 ◽  
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.

The exports–exchange rate volatility nexus in Pakistan: do financial constraints and financial development matter?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdul Rashid ◽  
Ataullah Muneeb ◽  
Maria Karim
Keyword(s):  
Exchange Rate ◽  
Adverse Effects ◽  
Financial Development ◽  
Financial Constraints ◽  
Financial Sector ◽  
Real Effective Exchange Rate ◽  
Firm Level ◽  
Content Type ◽  
Financial Sector Development

PurposeThis paper first examines how changes in the real effective exchange rate and its volatility affect the exporting activities of firms. Next, it investigates whether exchange rate volatility (EXRV) affects the export behavior of financially constrained and unconstrained firms differently. Finally, it examines the role of financial development in mitigating the effects of EXRV and financial constraints on firms' exports.Design/methodology/approachThe empirical analysis of the paper is based on a wide panel of Pakistani nonfinancial firms listed at the Pakistan Stock Exchange during the period 2001–2016. To mitigate the problem of endogeneity and to take into account the dynamic nature of the empirical model, the authors apply the robust two-step system-GMM estimator developed by Blundell and Bond (1998). To examine the role of credit constraints, firm-year observations are sorted as financially constrained and unconstrained based on the median value of three alternative measures: the liquidity ratio, the dividend payout ratio and the Whited and Wu (WW) index.FindingsThe results reveal that an increase in the real effective exchange rate has a positive and significant impact on firms' exports. However, the results show that the EXRV is significantly and negatively related to exporting decisions, suggesting firms considerably decrease their exports during periods of increased unpredictable variations in exchange rates. The findings also suggest that compared to financially constrained firms, the adverse effect of EXRV on exports is weaker for financially unconstrained firms. This finding implies that firm-level financial constraints unfavorably impact exports by making exporting more sensitive to the EXRV. Finally, the findings indicate that financial development not only positively affects firms' exports but also plays a vital role in declining the adverse effects of EXRV on firm-level exports. Specifically, the results show that financial development decreases the negative impact of EXRV on exports for both financially constrained and unconstrained firms. However, the moderating role of financial sector development is higher for financially unconstrained firms.Research limitations/implicationsNotwithstanding that the authors present robust and strong empirical evidence of the effects of EXRV on exporting and on the role of both firm-level financial constraints and financial sector development in formulating these effects, there are some limitations of the study. The authors use a single proxy for measuring financial sector development. However, one may construct an index for the financial sector developed using principal component analysis (PCA) by considering different measures of financial development. The authors use three different measures of financial constraints. Nonetheless, more sophisticated techniques such as switching regression can be used to endogenously determine whether firms are financially constrained. Moreover, an examination of the asymmetric effects of EXRV on exporting across different industries would also be worthwhile.Practical implicationsFrom a policy point of view, the results suggest that the development of the financial sector and the strategies to lessen credit constraints faced by firms will help in mitigating the adverse effects of the EXRV on the exporting behavior of firms in Pakistan. The findings also suggest that managers in financially constrained firms should apply appropriate hedging strategies to hedge exchange rate risks. Finally, the findings suggest that investors should take into consideration exchange rate dynamics and firms' financial constraints while investing in exporting firms' stocks.Social implicationsSince the findings suggest that financially constrained firms' exports are more exposed to EXRV, managers of such exporting firms are suggested to apply effective and suitable currency risk-minimizing hedging instruments for enhancing their exports. The government should also implement economic and financial policies in such a way that they should help in reducing volatilities of exchange rates and in turn, encouraging firms to export more. Definitely, any policy, at both government and firm level, favoring exporting and export-oriented growth will not only help in overcoming the problem of a persistent and wide trade deficit but also help society by providing more employment and investment opportunities.Originality/valueRecently, Pakistan has experienced significant declines in foreign reserves, persistent political unrest and enlarged trade deficits. All these have increased the uncertainty about the exchange rate. Therefore, it is valuable to know the EXRV effects on firms' exporting activities. Second, Pakistani firms face more financial constraints, and thus, the influence of financial constraints in formulating the volatility effects on exporting would be worth exploring. Finally, no research has yet taken place to scrutinize the role of financial development in mitigating the adverse effects of EXRV and financial constraints on exporting activities. This paper provides firsthand empirical evidence on the role of financial constraints and financial sector development in formulating the EXRV impacts on firm-level exports in Pakistan.

Financial development, economic growth and millennium development goals in South Africa

2015 ◽  
Vol 42 (5) ◽  
pp. 459-479 ◽  
Author(s):  
Oludele Akinloye Akinboade ◽  
Emilie Chanceline Kinfack
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
Financial Development ◽  
Millennium Development Goals ◽  
Financial Sector ◽  
Development Economic ◽  
Content Type ◽  
Financial Sector Development ◽  
Development Goals ◽  
The Relationship

Purpose – The purpose of this paper is to empirically report the findings on the relationship between financial sector development, economic growth and of millennium development goals (MDGs) for poverty reduction, education and health development in South Africa. Design/methodology/approach – The autoregressive distributed lag bounds testing technique was applied to two indicators of financial development, economic growth and four indicators of MDGs. Findings – Economic growth and MDGs jointly cause financial development. Similarly, economic growth and financial sector development jointly cause the attainment of MDGs. The attainment of MDGs such as increased per capita expenditure on food and education as well as economic growth jointly cause financial development. Practical implications – The findings highlight the complexity of the relationship between financial development, economic growth and MDGs. It is essential that the government of South Africa pursue a three track strategy of promoting financial sector development, economic growth and MDGs. The development of one strategy causes and is caused by the development of the other two. Originality/value – Relationships between financial development, economic growth and MDG targets are unsettled in the literature. This paper studies the link between the three variables in South Africa. Hence, the contribution of this study is to enrich the understanding of this important field in the context of an important African country.

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

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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