scholarly journals The Impact of Financialization and Income Inequality on Economic Growth, Investment Processes and Innovation

2018 ◽  
Vol 11 (6) ◽  
pp. 57-68 ◽  
Author(s):  
A. K. Karayev
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Wealth Distribution ◽  
Aggregate Demand ◽  
Bank Loans ◽  
Economic Agents ◽  
Education Levels ◽  
Skill Improvement ◽  
Household Incomes ◽  
The Impact

For the macroeconomic policy to be effective, macroeconomic models must take into account the interrelations between the financial and real sectors of the national economy. The subject of the research is the impact of financialization (expansion of the financial sector influence) and heterogeneity of investment decisions made by households and organizations on the inequality of income and wealth distribution as well as on household consumption and investment demand generated by organizations. The purpose of the research was to simulate the integrated influence and inter- influence of financialization of the economy leading to the following phenomena: an increase in the financial capabilities of economic agents, households and organizations and an increase in their debt; heterogeneity of decisions made by households (with account for different education levels) towards investment in their professional skill improvement, in particular through bank loans; heterogeneity of decisions made by organizations towards investment in expanding the existing production or mastering innovative product manufacturing; inequality in distribution of household incomes, components of aggregate demand in the economy, unemployment, etc. The research was carried out using an agent-oriented AB-SFC model with consistent flows and reserves that takes into account the specifics of investment behavior of economic agents (households and companies). The paper concludes that the financialization can contribute to the economic growth and the leverage and, accordingly, to the debt of economic agents and a higher volatility of macroeconomic aggregates such as aggregate demand components. The research finding also show that innovation and technological changes resulting from investment preferences of organizations and households can also, along with the financialization, aggravate the income inequality of households.

scholarly journals Evolution of views on the role of central bank policy: conclusions for Ukraine

2021 ◽  
Vol 2021 (4) ◽  
pp. 7-23
Author(s):  
Bohdan DANYLYSHYN ◽  
Ivan BOHDAN
Keyword(s):  
Economic Growth ◽  
Monetary Policy ◽  
Emerging Markets ◽  
Inflation Targeting ◽  
Financial Intermediation ◽  
Aggregate Demand ◽  
Economic Recovery ◽  
Economic Agents ◽  
The Interest Rate ◽  
The Impact

The effects of COVID-19 pandemic resulted in modification of the goals and instruments of central banks activities in the context of strengthening their responsibility for supporting aggregate demand, more effective financial intermediation, smooth functioning of financial markets and creating conditions for inclusive economic growth. The purpose of the article is to elaborate proposals for changing the priorities of monetary policy in an economy with emerging markets in the post-crisis economic recovery. The article criticizes the concept of money supply neutrality from the standpoint of its simplified interpretation of the impact of the interest rate on activities with different duration and complexity of the technological process, as well as its detachment from the principles of inclusive economic growth. The authors reveal the factors that reduce the effectiveness of the application of the monetary regime of inflation targeting in countries with emerging markets, which consist in the dominance of non-monetary inflation factors, high import dependence of the economy etc. Based on empirical data for 1990-2019, they prove that low inflation is not a sufficient and necessary prerequisite for achieving economic success by a country. Authors suggest that the share of components of the inflation basket in Ukraine with high non-monetary effects is 62%, which indicates the presence of high risks of failures of the monetary policy transmission mechanisms. They argue that under the Ukrainian conditions at the beginning of 2021 an increase in the central bank’s key rate will appear to be counterproductive: the access to critically needed borrowed resources will go down, economic agents will spend more of their savings, and the pace of economic recovery will slow down. The recommendations for improving the NBU policy have been devised; they consist in ensuring the flexibility of the monetary inflation targeting regime, introducing targeted refinancing instruments to increase the efficiency of the financial intermediation, developing effective coordination of monetary and fiscal policy, and implementing measures aimed at creating conditions for inclusive economic growth.

scholarly journals Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries

2021 ◽  
Vol 13 (4) ◽  
pp. 1780
Author(s):  
Chima M. Menyelim ◽  
Abiola A. Babajide ◽  
Alexander E. Omankhanlen ◽  
Benjamin I. Ehikioya
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Services ◽  
Sub Saharan Africa ◽  
Kuznets Curve ◽  
African Countries ◽  
Financial Access ◽  
Sub Saharan ◽  
Sustainable Economic Growth ◽  
The Impact

This study evaluates the relevance of inclusive financial access in moderating the effect of income inequality on economic growth in 48 countries in Sub-Saharan Africa (SSA) for the period 1995 to 2017. The findings using the Generalised Method of Moments (sys-GMM) technique show that inclusive financial access contributes to reducing inequality in the short run, contrary to the Kuznets curve. The result reveals a negative effect of financial access on the relationship between income inequality and economic growth. There is a positive net effect of inclusive financial access in moderating the impact of income inequality on economic growth. Given the need to achieve the Sustainable Development Targets in the sub-region, policymakers and other stakeholders of the economy must design policies and programmes that would enhance access to financial services as an essential mechanism to reduce income disparity and enhance sustainable economic growth.

Effects of zakat on the economic growth in selected Islamic countries: empirical evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Khoutem Ben Jedidia ◽  
khouloud Guerbouj
Keyword(s):  
Economic Growth ◽  
Growth Factor ◽  
Panel Data ◽  
Aggregate Demand ◽  
Empirical Support ◽  
Dynamic Panel Data ◽  
Content Type ◽  
Muslim Countries ◽  
The Government ◽  
The Impact

Purpose This study aims to examine the impact of zakat on the economic growth for a sample of Muslim countries. As a matter of fact, Zakat is a religious tax on wealth paid annually to specified recipients. As it leads to income redistribution and increases the aggregate demand, zakat can be a growth factor in the Islamic framework. Design/methodology/approach This paper is based on a dynamic panel data model for the purpose of investigating the role of zakat in the economic growth for a sample of eight Muslim countries during the period ranging from 2004 to 2017. The general method of moments is applied. Findings The findings provide evidence that zakat stimulates the country’s growth. Indeed, as zakat funds are directed to increase consumption, investment or government expenditure, they spur on the economic growth. Moreover, the authors come to the conclusion that more trade openness allows an increase in the real gross domestic product (GDP) per capita. However, the broad money to GDP and population growth rate seem insignificantly associated with the economic growth for the sample considered. Practical implications The findings have substantial implications for the economic policy in Muslim countries. Authorities may further rely on zakat to boost the economic growth. First, it is essential to improve the muzakki’s knowledge on zakat to increase their intention, and so their ability and willingness to pay zakat. Second, the government intervention in both zakat collect and distribution becomes mandatory. Therefore, the contribution of zakat to the economic growth will be higher. This requires better-quality services of zakat institutions. Originality/value A few studies have empirically looked into the impact of zakat on the economic growth, especially for panel data. Hence, the present study tries to enrich the literature on this topic. It creates significant evidence regarding the relevance of zakat in Muslim countries. The findings provide empirical support that zakat is an additional growth factor in the Islamic framework.

The impact of foreign direct investment on urban-rural income inequality

2016 ◽  
Vol 8 (3) ◽  
pp. 480-497 ◽  
Author(s):  
Chunlai Chen
Keyword(s):  
Economic Growth ◽  
International Trade ◽  
Income Inequality ◽  
Fixed Effects ◽  
Knowledge Spillovers ◽  
Employment Creation ◽  
Content Type ◽  
Rural Income ◽  
Urban Rural ◽  
The Impact

Purpose The purpose of this paper is to analyse the impact of foreign direct investment (FDI) on urban-rural income inequality in China. Design/methodology/approach This study uses the provincial-level panel data and employs the fixed-effects instrumental variable regression technique to investigate empirically the impact of FDI on urban-rural income inequality in China. Findings The study finds that while FDI has directly contributed to reducing urban-rural income inequality through employment creation, knowledge spillovers and contribution to economic growth, FDI has also contributed to increasing urban-rural income inequality through international trade. Practical implications The study has some policy implications. First, as the study finds that FDI not only contributes to reducing urban-rural income inequality through employment creation, knowledge spillovers and contribution to economic growth, but also contributes to increasing urban-rural income inequality through international trade, therefore, apart from improving local economic and technological conditions to attract more FDI inflows, China should re-design FDI policies by shifting away from encouraging export-oriented FDI to encouraging FDI flows into the industries and sectors in line with China’s overall economic structural adjustments and industrial upgrading. Second, policies should focus on increasing investment in infrastructure development and in public education, which not only can reduce urban-rural income inequality but also can attract more FDI inflows. And finally policies should be designed to accelerate urbanisation development by focusing on urban-rural integrated development, household registration system reform and proper settlement of rural migrants in urban areas, thus reducing urban-rural income inequality. Originality/value The paper makes two major contributions to the literature. First, the paper adopts the fixed-effects instrumental variable regression technique to deal with the endogeneity issues in estimating the impact of FDI on urban-rural income inequality, producing more consistent estimates. Second, the paper investigates not only the direct impact of FDI on urban-rural income inequality through the effects of employment creation, knowledge spillovers and contribution to economic growth, but also the indirect impact of FDI on urban-rural income inequality through its activities in international trade, adding new empirical evidence to the sparse literature on the impact of FDI on income inequality in China.

On the Impact of Government Institutions on Economic Growth and Income Inequality in Russia

2019 ◽  
Vol 7 (3) ◽  
pp. 14-17
Author(s):  
Леонид Басовский ◽  
Leonid Basovskiy ◽  
В. Бабанов ◽  
V. Babanov ◽  
Елена Басовская ◽  
...  
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Income Distribution ◽  
Local Governments ◽  
Positive Relationship ◽  
Negative Relationship ◽  
Government Officials ◽  
Government Institutions ◽  
State And Local ◽  
The Impact

In order to assess the extent to which the institutions of government in the current conditions in recent years in Russia — the activity of government officials and local governments affected economic growth, the correlation of the number of this category of workers with the growth rates of the economy was evaluated. The results show that by 2002 the positive correlation between the number of employees of state bodies and local self-government and the rate of economic growth was a negative one. The activities of employees of state and local governments began to slow down economic growth in the country. In order to assess how the change in the level of inequality of income distribution in modern Russia is due to the activities of employees of state-shock authorities and local self-government, its relation to the number of employees in this category of funds, which reflects the degree of income inequality, was evaluated. The results show that by 2011 the negative relationship between the number of employees of state bodies and local governments and the level of inequality of income distribution of growth replaced by a positive relationship. The activities of employees of state and local governments began to contribute to reducing the level of inequality of income distribution in the country.

scholarly journals Innovations in achieving sustainable economic performance under income inequality

2021 ◽  
Vol 5 (2) ◽  
pp. 146-154
Author(s):  
Inna Cabelkova ◽  
Manuela Tvaronaviciene ◽  
Wadim Strielkowski
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Income Inequality ◽  
Economic Performance ◽  
Financial Services ◽  
Developing Economies ◽  
Well Being ◽  
Middle Income ◽  
Middle Income Countries ◽  
The Impact

The negative effect of income inequality on economic growth represents a topic that constitutes a broad topic of research in the standard economic theory. One of the immediate consequences of income inequality is diminished consumption. Many «poor» customers cannot provide sufficient demand for the producers, causing overproduction that might lead to an economic crisis. It constitutes a problem because sustainable economic performance needs to be achieved under the conditions of income inequality. Reducing social and economic inequality in countries is an essential step towards ensuring that no one is left behind. It is also part of the 10th Sustainable Development Goal aimed to reduce it by 2030. Inequality is based on the income distribution between the top 1% and the bottom 99% of households in any given country. The degree of inequality could play a beneficial role if it is driven by market forces and is associated with incentives to increase growth. In developing and emerging countries, greater equality and improvements in living standards are needed to enable populations to flourish. Inequality reduction is one of the most critical steps a government could take to improve the well-being of its population. The income inequality growth increases human capital in poor countries and reduces it in high and middle-income countries. In poorer countries, it increases them, but in higher – and middle-income countries, it reduces them. Income inequality could be reduced by improving human capital and general skill levels, correcting labor-market policies, and making better use of financial services. In turn, sustainable economic growth could reverse the negative effects of inequality, reducing the need for high-wage and higher-earning households. Thus, it provides higher economic growth. This paper discusses three ways to circumvent the impact of decreasing consumption on economic growth adopted in developing economies over the last fifty years, such as increasing exports, providing loans for consumption, and printing new money. The findings showed that none of these methods seem to be sustainable in the long run. Thus novel and innovative mechanisms that would allow our economy to reduce inequality are necessary and need to be put into place.

MINIMUM CONSUMPTION REQUIREMENTS: THEORETICAL AND QUANTITATIVE IMPLICATIONS FOR GROWTH AND DISTRIBUTION

1999 ◽  
Vol 3 (4) ◽  
pp. 482-505 ◽  
Author(s):  
Satyajit Chatterjee ◽  
B. Ravikumar
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Steady State ◽  
Wealth Distribution ◽  
Household Wealth ◽  
Elasticity Of Substitution ◽  
Positive Dependence ◽  
Per Capita ◽  
State Growth ◽  
The Impact

We study the impact of a minimum consumption requirement on the rate of economic growth and the evolution of wealth distribution. The requirement introduces a positive dependence between the intertemporal elasticity of substitution and household wealth. This dependence implies a transition phase during which the growth rate of per-capita quantities rise toward their steady-state values and the distributions of wealth, consumption, and permanent income become more unequal. We calibrate the minimum consumption requirement to match estimates available for a sample of Indian villagers and find that these transitional effects are quantitatively significant and depend importantly on the economy's steady-state growth rate.

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